>> this is the christmas day >> this is the chris matthews show. >> [captioning made possible by nbc universal] >> who's paying for this stuff, fighting the world's wars? democrats say they have to pay a bigger share. republicans say read my limbs. ain't going to hafment but what's the right way, the fair way to pay the bills? defining the debate. it's not 2012, not yet. but this week the president set the terms. he wants to save medicare and wants to end the bush tax cuts for the well off. choose your sides. and finally, heaven. you deserve it. "time" magazine absolutes an evangelical leader who says there is no hell.

what's this tell us about the times? has the worst-case scenario lost its voice? hi, i'm chris matthews and welcome to the show. with us today, "time" magazine's joe klein, nba tv's norah o'donnell, nbc's becky quick and "the daily beast," andrew sullivan. why is taxing the rich so hard? americans know we're all going to feel the cuts and what our government can do, no matter what plan is signed. why is ending the bush tax cuts for the wealthy a stumbling block? ending the tax cuts would bring $700 billion over the next 10 years, that's substantial. roughly the same amount obama would get from all his domestic spending cuts. the top tax rate now is 35%. but back in the new deal in the 1930's, it was 79%. understand ike in the 1950's it was 91%. under richard nixon, the top rate was 70%. then things began to come down under reagan, when the top rate

was 50%. under george w. bush, down to 35%, where it is. becky, what is this historically low? why is it so hard for the congress, when they get together, to actually raise the top rates back up a bit for the rich? >> because the tax code is a mess right now. if you look at all the deductions that have been taken, if you look at all the loopholes that people and corporations can slide out of, it's a complete mess. chris: why do they need a lower rate besides? >> why not get rid of loopholes and create a rate? 47% of americans don't pay any income taxes at all. chris: the poor people? >> sometimes, yeah. but if you're looking at a system where half the people don't have any skin in the game, you're talking about -- chris: go ahead, joe. >> wait a second. you know, the big items in this budget are the entitlements like social security and medicare, and everybody pays those taxes. in fact, they are quite

regressive, because the poor pay the same rate as the rich. >> which i agree. but why don't they do means testing on that? >> means testing wouldn't be a bad idea. the thing is this -- no one ever paid 91% during eisenhower. there were always huge, huge loopholes the remember when you'd get reimbursed for sales taxes and things like that? i think that a good tax reform is due. we get them every 25 years. the last one was in 1986. chris: let's go back to when it became a hot issue. back under reagan he was the great fire breather. when he went into acting, he looked at his first check. it probably was $100,000. he was paying 90%. he didn't have all the loopholes and shelters, so he became a fire brand for lowering rates. now the republicans have big philosophical stakes here. what are the best republican arguments for lower tax rates for the rich? what's their case? >> simply because the less government takes, the more individuals have, and

individuals are better judges of how to spend their money than government. that's the core basic idea, and i agree with it. it so happens that when you have this kind of debt and deficits and you rule out any revenue increases, you make your cuts so much more draconian. in england, where the tories are doing a real spending cut package, they also have tax increases. they kept the top rate at 50%. these are people cutting more deeply than thatcher. for the republicans to moost entire question of taxes off the table is a than non-starter for most people. chris: we talk about the fact that a lot of the rich pay a lot of the taxes, they pay a bigger share. but we also see studies, norah, that there's a big gap in this country. the very wealthy are doing incredibly well, and the poor people are getting pushed down and pushed down. isn't that a case where a higher

rate and people make big money? >> america is drowning in debt, and everybody gets that. the key question now is not just cutting spending. paul ryan's proposal will not balance the budget until 2040. there has to be another part of this. 70% of americans, in the nbc news wall street journal poll support raising taxes for people above $250,000. chris: why don't they just do it? >> the point is this -- the president can propose doing that, and it is a splitly popular move for the president to do that among independents. it would also take a big chunk of the deficit. if you let all of the bush tax cuts expire, you would wipe out our debt in less than five years. >> tom coburn, a very conservative republican favors reforming taxes and raising

them. if you can bring rates down but still increase your revenues, and the republicans want to bring the rates down -- chris: he's willing to say let's bring up the overall revenues. >> i think he's a real conservative saying we've got to cut the debt. chris: i look at middle class guys like john boehner. most republicans are cloth-coat republicans, they're not rich. yet, they go out there like a religion. what's this fetish you wrote back? >> back in the 19 0's, daniel patrick moynihan used to say that the tax fetishism was about money they could spend, starve the beast. that's a good part of the rationale. the problem with it is that 80% of the american public loves medicare, 80% of the american public loves social security. chris: everyone who is on it loves it. >> they also had a president bush, who spent like crazy.

all it does is it gives the government the ability to borrow the money. chris: if you starve the government by not taxing people, they'll spends less. you made a good point and i do agree with it. the best government is not just we want to screw the rich, but in you don't tax the rich -- if you don't tax the rich, you've got to cut medicare. no one wants to give up medicare, which they fought so hard to get it for old people. >> cameron has exempted all health care spending. in other words, he'd rather raise taxes and preserve health care than do the opposite. chris: do you think it's the best democrat argument for raising taxes for the rich and otherwise you have to cut health care? >> how much of the problem is the situation we've just come through a massive recession and receipts are down across the board both from corporations and individuals. >> that's $500 billion a year of the problem. another $500 billion per year

are the bush tax cuts. a decade ago we were running surpluses. >> but could the president go ahead and let the bush tax cuts expire or is that politically too dangerous? >> absolutely. chris: let me ask you about wall street and its clout. i have a suspicion that the "wall street journal" op-ed page is under the mentality of that mentality that we have to salute the wealthy and everyone else is a parasite. that whole mentality you read in the pages of the "wall street journal," is that more potent as an argument to the congress than the average guy out there, woman out there, who says, look, give me a break, i need my medicare. >> i don't think that argument appeals to a broad base across the country. chris: does wall street have clout in this debate? >> yes, they do. they have clout because they are the people who are running businesses that are employing so many people across the country and hiring -- >> well, wall street.

they're not heroes. they're producing nothing. >> that's not true. it's not a parasite class. they're people who are financing everything else. >> they're not actually creating good. >> yes, the finance comes to a point where, if you're a company and you want to hire people, you have to go to wall street to make sure you can get the loan to do it. >> the person that rand would support would be the -- >> they have a lot of clout because they're hiring. we're in a terrible situation where we have 9% unemployment. chris: we put it to the matthews meter. will the deal involve repeal of the tax cut? many of them say the deal will raise taxes only for people making over $1 million a year. one says no because there will be no deal. norah, andrew and joe, you all say there's going to be a deal. so will there be a deal and it's going to involve some kinds of raising taxes for the wealthy, but for those over a million. >> it's more likely to be a deal if it's more likely obama will be re-elected come next fall.

>> chris: will the deal come after the election? >> if there's a deal before the election, only if obama looks like he's going to get re-elected. >> nancy pelosi wants to make it so it would be raising taxes over $1 million. put republicans in a box. they want to cut medicare and give tax breaks to million airs. that's the political argument. milk republicans say, yes, i'm for tax cuts for millionaires. chris: don't try to win the fiscal argument, win the political argument. that doesn't bring in a lot of money. you've got to go to people that make $200,000, $300,000. that's where the money is. >> the sad thing is is that in this debate, while there are often bold aggressive proposals being made, they're not coming together and finding a way to deal with this budget deficit. optimistically it's great that everyone has proposals out there, but i have yet to see boehner and the president sit down and craft some sort of deal that could really solve what is

a serious problem. chris: looks like a lot of political positioning for next year. before we break, richard nixon was the first president to release his personal 1040 tax returns. he did it under pressure when leagues showed that he claimed a huge charitable deduction for donating his vice-presidential papers. as the watergate investigation grew, even his past returns were scrutinized. all fodder for johnny carson. >> did you read why nixon didn't pay income taxes in 1970 and 1971? that's true. the salary of the the president is what, $200,000 a year and he didn't make out a tax return. he just sent a note to the i.r.s. and said, "trust me." [laughter] well, i supposed a lot of deductions, didn't he? there were a lot of expenses this past year. no, if you have enough expenses, they will offset your tax, right? and i want to tell you, the price of a plumber these days,

don't you? chris: everybody president complied after that. jimmy carter didn't owe any taxes for 1976. he had a modest income from his peanut farm and business deductions that wiped out his small tax bill. when it was time to file that return, and he was in the white house. carter volunteered to pay a 15% tax anyway. here's johnny. >> i cannot get over the fact tt president wants to pay the i.r.s., the government, taxes, when he owes them nothing. i think what it is, he's trying to give -- he wants to tip the country because we gave him a good seat. chris: carson found material in the reagan returns nearly every april 15. here he is in 1997. >> he paid about $125,000 in taxes with a refunds of around $31,000 as a loss. he claimed the second term as a loss. [laughter] no, he got an exemption for each

contra. also said in the paper that reagan filled out the box where you claim the exemption for age 65 and over. under age nancy reagan wrote "say no to 65." chris: all the kings of late night have continued the carson tradition. hear's one from bill maher ripping george w. bush. >> president bush filed. he's paying $207-k. wow. of course, president bush's tax return different. he claims the christian rights as dependents. he declared the 2000 election as a gift. [laughter] chris: a little more bite there, wasn't there? when we come back, enough about taxes. let's turn to debt. there's a hot debate among young evangelicals right now. is there a hell? what if there is no hell? plus, scoops and predictions. be right back.

chris: welcome back. this week's "time" magazine has this cover. "what if there's no hell?" it talks about a michigan minister, a pastor, who rocked evangelicals with a best-selling book. pastor bell argues there is no hell, thank god is a forgiving god. here's the video talking about why the traditional roots to salvation may not be necessary. >> you need to be initiated or baptized or take a class or converted or being born again? how does one become one of these few? the center of the gospel of jesus is that god is going to send you to hell unless you believe in jesus. and so what gets subtly sort of caught and taught is that jesus rescues you from god. how could that ever be good

news? chris: well, of course, good news is the gospel. but you're smiling. this is the strangest topic we've ever dealt with on this sunday show. it is, of course, palm sunday. let me ask you your thoughts about that. is this a minister trying to appeal to a larger flock, is it a new revelation? what is it? >> he's addressing the rather old-fashioned idea that god is the kind of punisher and rewarder, rather like an english nanny who's going to rap you on the fingers. whereas in fact hell is, in orthodox terms, is simply our refusal to accept the love of god, our inability to accept it. and that exists on earth as it does after death. we can be living in hell right now if we do not accept the love that is openly given us by god, the father and the son. that is what hell is. heaven is simply the ability to let go of your pride and let god in. chris: is this an after-life discussion or is this a current

life? >> it's both. it's both. if you believe that our souls are eternal, then obviously the souls still exist on earth. but our time orte is the ability on moment of choice whether to be loved or whether to say we do not deserve to be loved. chris: don't hold back, kids. >> i'm there with him. chris: go ahead. >> you know, i'm the jew on the panel with four catholics, i think, but doesn't the list proclaim the mysteries of faith? celebrate the mysteries. these are mysteries. and as john kennedy said here on earth, god's work is truly our own. we create our own heavens and our own hells. chris: let me try the commercial idea. could this be commercialism, like you deserve it, everything has to be good news. >> meaning heaven, you deserve it. chris: yes. >> i think hell has always been something, and certainly growing up as a catholic, it's something that keeps you on the straight and narrow. reading about daunte's seven

rings in hell. don't act this way or you'll end up in hell. it's keeping a check on your behaviors. and the idea of heaven is the positive way to look at that. the way we behave and love and teach others, there is a great after-life, where you can be with others who behaved and acted morally in love. chris: is that why everybody buys gold, as a hedge? [laughter] >> but the idea of heaven and hell, this is something that new testament preaches, not the old testament. it's been a long, long-running debate. i went back and looked at a lot of oldtime covers, where this has been debated and played out. i do think that right now the message of heaven and embracing god and god will forgive you, that sells right now, and that's important for churches when you look at the decline in the numbers. chris: why does the right wing like the old testament so much? they love the old testament. >> they like revelations better than that. >> that's because jesus loved the poor. they thought they were better than the rich.

chris: you always have a big sale with these. these of the kind of things people think about, and happy palm sunday everyone of christian faith. when we come back, scoops and predictionings. tell me so [ asst mgr ] what are you doing? fixing the name.

it's fiber none. looks like one. well, i know. i put an "n" there. ah! fiber one honey clusters cereal! that's really good! it tastes good, so there can't be fiber in it! it's actually got about half a day's worth of fiber. [ asst mgr ] it says so right on the box. [ fiber seeker ] really? try it. [ mr. mehta ] honey, touch of brown sugar, crunchy clusters -- any cardboard? cardboard no, delicious yes. so where's the fiber? maybe it's in the honey clusters. [ male announcer ] fiber one. cardboard no, delicious yes.

chris: welcome back. joe, tell me something i don't know. >> the israelis met with the new

egyptian government for the first time two weeks ago and the egyptians read them the riot act. they said mubarak gave you a free ride. we can't afford to do that with our population. we don't even want to talk about a peace process. we want you to get a peace settlement now and we're going to go public. chris: will they recognize the palestinian state this fall? >> i imagine they would. chris: norah? >> the 2012 presidential campaign is heating up. there's a lot of buzz about tim polenty, staff moves he's making. this week he'll announce key moves and we've got a republican debate coming up in may that should be fascinating to watch. huckabee is not in. >> tomorrow's tax day. do you know how many americans admit to cheating on their taxes? 15%. they admit that they cheat on their taxes. chris: but they're not actually cheating. >> do you know how big the tax gap is? $350 million. chris: there's a special on cnbc sunday night on that topic. >> in an undernoticed event, the

u.s. catholic bishops essentially put obama against paul ryan in terms of the budget in saying that you cannot, to coin a phrase, balance a budget on the backs of the poor. george w. bush said that. chris: you've got big news yourself. >> this is a green card. it's actually green and i got it in the mail this week. chris: what's it do for you >> it means i can stay in america permanently. chris: welcome. >> i am indefinitely going to remain. chris: the big question this week -- president obama has always been lucky in his opponents. is there a republican out there that could end that string of good luck? [ male announcer ] 95% of all americans aren't getting enough whole grain.

but actually, it's easier than you think, because general mills big g line of cereals is america's number one source of whole grain at breakfast. there's whole grain in every box... ♪ ...from chex... to cheerios... to lucky charms. so you can get the whole grain you want with the taste y le. get started on the whole grain you're missing with your favorite big g cereals. make sure to look for the white check. chris: president obama's been lucky in his opponents from his earliest campaigns to illinois to his race against john mccain

last time. most think he's still lucky. looking at the g.o.p. field right now this year, this week's big question -- is there a potential 2012 rival out there who could end obama's string of good luck? joe klein. >> jeb bush. chris: norah. >> jeb bush. i was going to say jeb bush. chris: three out of four. >> but he won't, because he can't, so it's hopeless. chris: that's a great roundtable. that's the show. thanks for watching. we'll see you here next week. captioned by the national captioning institute captioned by the national captioning institute --www.ncicap.org--

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