it everythg morning. >> i'm monica novotny. >> and i'm dad shuster. >> tamrons off today but she's next week. >> up ne, "hardball" starts right now. this w it. michaes last dance. let's play "hardball." good evening. i'm chuck todd at t white house in for chris matthews who is out of the count but not in honduras, i promise you that. leading off tonight, what happened to thekid. we'll get to the full y in poti. first, t latest in the michael jackson story or saa. today, a bombell. jacksos form wi, deb we told our los anles affiliate, knbc, that she wants custody of th two chiren he with jackson. t will jackson wanted the kids to go to his mother or if she couldn't care for him, diana

ross. whatappene now? earlier today presidobama spoke plicly for te first time abouthe king of pop. >> i think that michael jackson is -- will go dn in history as one of our greatest entertainers >> and late this afternoon vid jackson rehearsing for his planned this is i tour was reased. we'lshow you more of the video and have much more of the evolving jackson saga in a moment. and talk about stories that keep on giv three mo. there are more in-fighting on sarah palin' campaign staff cong to light. w e-mails show palin bangg ads with t campaign aeds over how to handle her husband, todd's one-time membership in group that wted lkto secede from the u. on eail from campaign chief steve sma myth has,quote, the statemt you are suestinge reased would be inaccurate. thenaccuracy would bing greater dia attention to this tter and be a distraction. more on that ming up. as we he into the fourth of july holidaynd this

mioint of this nonpolitical year, we're going to look ahead at what we might expect in next year'smidter elections. these campaigns reallyo get kicked offn a couple of weeks. are the democrats rey toury the republicans? or is the gop poise for a comeback? 'll look at some of most intriguing races. rtainly one of the things that would help put republicans back in power is if the economy continues to struggle. 467,000 jobs were lost last month as unemployment rose to 5%. a 26-year high. we'll talk t the white house's austan goolsbee later in the show. and finally, who is the best of all time, koe, micel,no, not thatichael, or neither? prident obama weighed in on that today as well. we'll have that answer in the "hardball sideow." but we begin wh the latest on michael jackson's dea and deie rowe's decision to fight r custody of the who oldest chdren. gloria allred is a family law attoey who has filedwith the

child proctive services after dangled his third baby from a hotel window and after heold an interviewer had children his bed. tae is an msnbc contributor. we have debb rowe saying she s going to fight fohe children b she had sign papers and had relinquished custody of her childreno michael, so what legal standing would she have if she chooses to fight? >> well, aer the attempted relinquishment, e argu that, infact, she had relinquished herarent rights. after aong legal battle the court appeals in california decided thatin fact, she had not properly relinquished and, therefore,till retaineder parental rights. therefor she is still as a matter of law the parend the only surviving parentf the two older of the children by michael jackson and debe rowe. law so if she is -- you say she

incorrectly tried to relinquish. what does thatme? dishe just file the wrong paperwork or wt did s do? >> we, for one thing, f example, no attorney had been appoind toeprese the children. i'm not saying she incorrectly did it, but there was an incorrect process, and because no attorney s representing the terests at the timehat this particular parent attempted to relinqui relinquish, there was no relinquishment. now, the significance of that is she fights for stody now, she does haven advantage over the proposed ardian,atherine jackson, t grandmother of the three children, becse as a parent it isresumed that she's acting in the best intests of the children. what katherine jackson i going to have to sw is th i would be detrimenl to the two older chdren to be placed with teir mother, debbie rowe. >> now, to go -- i want to go t that a little bit mo because -- t children, the oldest child i believe is 12.

you kn, there are a lot of courts thato take into account, you know,hat the children -- the relatiohip, if the child doesn't have any relationship with that part, is that goin to matter? will a court listen to that? does that have any legal standing? >> yes, it will, and that's a really good point. the 11-year-old and the 12r-old will be able to indicate to theourt what their preference is in termsof who should be their guardian or their rent, but that will not be bindg on the cour mirly, michael jackson in his will indicated that he was nomiting his mother, kathine ckson, to be the guardian of his chdren, and at will be given great weight by the urt. but, again, it will not be bindinon the court because the court has act in the best interests of the children. so there'sgoing to be an evaluation once she files. the urt will order what's called a 730 evaluation, and at will be a psychological evaluationy someone appointed by the court to evaate the children, the proposed guardian,

and the rt, and ch side can so hire their own experts, and there wl be a full legal battle. >>nd let's ta about timing in her and how long that this could take. so, you've got -- if she files -- shehas yet to file any suitcorrect? >> exact. she hasn't iled. the reports e her attorney is going to attend on moay, b nothing has been filed ye so this is a assuming th she decides that she in a sense- well, that she wants stody, and then she willtake whatever legal steps are necessary for her to take to bome part of thisction. >>nd how quickly does lifornia's family cots wk in case like is? >> well, this is a ce at's raer unusual. but it really depends. there's a temporary guardiansh and temporary custody tpe of proceeding going on, a then there's the effort thave permanent ardianship or permanent custody. so i think whoever has temporar

custody or guardiahip may not be theltimat onewho has permanent custody or guardiansh or they may be. we'lhave to se the court is going to have to look at a lot of facto. theyill have to look at t bonding at the chin have with whomevers tryi to have custody or guardianship of them, and they're going to have to look at theomes that wld be provid and a home study will have to be de. quite ait has to go on before the cour makes its ulmate and final decision, not st a temporary e. >> t surprising allhiges michl jackson has always involved a lot of lawyersnd a t of potenalourtros. taure, i want tgo to you minute. we got this video of michael jackson. i want tshow about an hour ago at 4:00 p.m eastern,all three cable news channels we playi it at the me time. it was one of these like collecve cultural moments and i kno that erybody has been seeing it over and over again. you know, aure, yohave been watching this as b a fan, an

interested observer. what was just that collective mome like for youto seehis video of michael? >> i don't know. i didn't really see e moment. i was in a car gng home fom being on msnbc. i want to go bckto the debbie rowe point. it mak me think of king solomon and wh the two women come to him a he sa if i can't dcide whose baby it is, will just lit the baby in half. suddenly the real mother stands and says i would rther not have this baby th have it be killed. then you see a mother's real loves selfless. debbie rowe seems completely selfish in this situation. she doesn't reall knothe chdren. michael clearly made it clear he doesn't want her toe the ther of these children or raising these children. why is sh n steppg up? is it becaus she wants money perhaps. you know, one child that she doesn't real have a conneion to, so ll they be separated now? you know, it doesn't seem at all

to be what kin solomon would choo to give the babies t her. us, you're going totake the children away from katherine jackson, who knew michael, already knows theschildren. i mean, i seemsquite obvious what should real happen here. >> wel, i'm no michael jackson expert, but the idea that people around this miael jackson saga are tryingo make ney doesn't seem like that mu of surprise. but toure, i want to g back to that video. the omoter talkedbout i think they have 100 hours is. can you at all put a pri tag on what this footage isoing to mean? i mean, look at miael in this footage. didn't seem to be overly sick. he looked ke he was certainly to be in time on rhythm. you can't sit here and say he must have been onrugs or something. oks like this dress rehearsal was fairly successful. that's going to make this vio very, very valuable going foard, is it not? i think the video is gng to be valuable. not re where we're going to see it in a special dvd, perhaps a speci pformance on tv. maybe e of these sort of

movies sort ofhing where they create where you he to go to see a theater to see it. that cld be interesting. ihink the live recordi of the rehearsals where you finly get michael jackson live album is where you might see rl moneyecause that could sell for years and ars and years, michael jackson one of th greatest live performers of all time it would bereat to s what his vou sounds like at this vanced age. that cld be the real gold mine here. >> may i say mething about advanced age issu because the adnced age issue also brings us to katherine jacks, who is 79 years old, and that is -- you know, if aven forbid, she doesn't have a long life, we all hope she will have a long li, but, you know, wha if she should pass away, you know, not long after she gts these two children or a few years later? how traumatic will tt be for them to have second primary caretaker pass away and -- >>actually, gloria, i want --

>> but then ao i meanf the youngest cld is 7, what kind of energy does a 79-year-old woman have to deal with a 7-ye-old and even when he's 12 she'que advanced a, you know, it takes a lot of ergy toeal with 12, 11, 7. >> actually, gloria, i want to to one other issue back on the children again. will the courts take into account the ide of separating the two oldest children from the third ild since that'sll debbie rowe asking for is potentlly custody of the two children that she has a biological connection to? you know, wi the cour say, you knowhat, splitting these three children up isoo detrimentadespitedebbie rowe'slaims? >> actuallye don't exactl at she will do, whether she will only seek custody of her two children that e legay her childrenecause they werrn to her in the marriage with chael jackson or whether she ll seek gudiansh of the third child who, of course, was not born of

their rriage and we don't know who that mother is. u know, theourt is going to have a choice. mae the court will decideo grant guardianship to katherine jackson of the youngest child, but the custody to themother, deb bri rowe, of the two older children. that's a possibility. >> family court nightmare. toure, i want you touily commt on -- here is presiden obama talking for e first time about michaejackson in an interview with the assocted press. here is what he id. >> i think that micel jackson is -- will go down in history a one of our greatest tertainers. i grp on his music. still have all his stuff on my od. you know, i think that his brilliance as a pformer also was paired wth a tragic and, you know, in my ways sad

rsonal life, but, you kno i'm glad to see that he is being membered primari for the great joy th he brough to a lot of ople through his extraordinary gifts as an entertainer. >> toure, tt last pot i heard you making thiser and over lt night, tha you wand to see more people taing about hi musicegacy rather than, frankl t much negative legacyver the last 15 years. re is the president saying that. >> well, i men, the first thing that jps out there is the president talking about loving michael jackson throuout his life, lisning to his music on s pod. he's a rl man of the people, a gur person. i don't think geor bush would ha been able to have that direct cultural connectiolike that. ju another way at i feel better about obama a aman that way. yeah, of course, michael jackson had a curious endf life, a

cus last act in h life, and, you know -- >> one way to put i >> you now, you have to mention that at some pointin telli the story,ut as we've said that among the people, you know, the music a the joy and the cultural impornce of michl s been libated from the discussion of the eccentricities which ishat the med and a lot of regulareople o have focused on in the decade or so. >> may i say we weren't just talkg about eccentcities for the last5 years or so. what youall curiosity other people call accusations of child molestatio. let's call it -- >> now is thetime, is it appropriate now -- >> wait a second. i didn't talk ove you. didn't talk over you, sir. let me just belear abouthis point. he was -- hesettledvil lawsuit against h reportedly for $20 million, okay. that's not just a curiosity. if that's true that that w the amount, it wasconfidential, but that's what it was repted, then that morehan nuisance

value on a serio claim o child sxual abuse by a child and yet anoth child, of cose, was the alleged victim in the crinal case. he was acquitted, but those were serious accusations, too. so let callt what it i and nocall it acuriosity. >> gloria allred, toure, thiss the ttured legacy at's michael jason. i think this debatesn't going to b solved right here. i thank you bothor coming on antalking about this. it's very complicatedtory to talk about sometimes. thk you both. >> thank you. we'll have muc more on the jackn story plus some clips from jermaine jackson's interview with matt lauer toght on nbc special coverage, inside neverland." up nex we go back to politics promi you. after a no sotty vanity fair article about sarah palin sparked circular firing squad among republicans, y another report ows more sing that to pce during the actl campaign. steve schmidt and palin herself getting in on t act. "the politics x" is next.

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comingngup,ig e electio year politics. it 2010. arare the mocrats poised to strengthen theheir power or wil reblics stop the slide? ardball" returns after this. ♪ i don't know much ♪ but t i kn iove you ♪ and t tmay be ♪ all i need ♪ to know (announr)r) customers lovge aircraft engines almostst as muchs we love making em. innovatition tdadafor america'totoow. the clock k isicicki. hehe2 hour sale is on. wwitzero percent apr foror22 mmonss oselect '0'0chchevmodels. includidingsisilvado xfe. with an epa estititeted 21 mpg highwaway that's beerer than toyotottutuna.

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>>on the heels of vaninity fair'sunflatattering aicle outovernor palin, we have uneartrthed a war of words betwn the to strategist andteve schmidt. here is roger smon and mi allen. sisimon an allen from politico. used to be another tv show,w, mon and simon, ight? >> i i like that. >> let mee go throughhe e-mls quickly. onctober 15th, 2008,, governor palin firedff ane mail t schmidt mccain camampaign m man ri dafers and nicolle walallace. it aid, pleaease get in fronon that rididiculou issue that's cropped up allll y todaday. two reporters aree a proeser's

sign and many shutouts all clming todd's involvementnt in the anti-american party. 's bull and i don't w want to have to keeep reactinto it.t. pleaease have statemementiven o this so it's 3u9 to bed. schmidt repld andaid ignore it. he wasas a membe of the aip. my undetanding is yes he e s. that is rt of their platform. do n engage the protests. if a a report asks, say it's ridicuculous, todd loves americ >> palin didn't lilike tha answr and said thahat's not part off their plplatformnd he was ononla memberer becau independent alasns too often check that aska independedent box on voter registrations thinking i it jus means nonrtisan. he caught his error when chchangingur address and checked the ght box. i still want itt fixed. > schmidt wasn't done. in a very steve schmi way he sasaid, secessioion, period. it is their entntire ason for existence. at's the stated goall on the front page of t the website. r records indicate e todd was a memember f seven yeyears.

if t this is incorrect,hen we need t understand the discrepancncy. the statement you arare suggestg be reased would be inaccate. thee inaccura would bring grgreater mea attentntion to th maer and be a distraction. according to y your staff there have been no media inqries intoto this and you receiveddno quesons about it during your interviews. roger simon, iish iould have done steveschmidt's sergeant schultz vovoice stice, but, god that e-mail sound just likeke his voice. >> i'm sure se's glad she did by e-mail and not facto fa. i think smidtas right. at this point in the campapaign john mccaiain had mu more too worrybout thanhat sarah h palin's husband -- what parties belonged to andhat he didn't belong to. on the other hand, s sarah pan was a fit-timer. shshe had ner campaigneddn a national campaigignbeforere. she e was ov reactining, and i s almost traditional foror losing vivice predents to f feelhat theyave not been tated well by the top of the tiket. you know,dwards complained

aboutkerry. lieberman complainedabout gore. in the long -- the bigger questition to me is whos the real drag on the tickcket? was it mccainn was it palin? i thinthere's aody of evidence, at l least republican feel, that mccai washe drag on the ticket, nothe bevior of h vice presidenent. >> in fact, mike, i want to o g to that. we're seeing some reports of alst thisis backsh hping pan amonong even repubublican elites. here i mark salter, who w a senior adviserr to the mcain campaign, and he goes she's a fine pson with u unique and unachable political skskills. m sure she has a future if s wants oone. we'ree seeing moreepublicans trying to defend her publicly, almost feeling as if this stufu is going foo tar. e you hearingg tt? > no, ihink that's art. looking at e-mail, looking at the blogs, it looks like there is a rallying aroundnd goverr palin anand a recognition t tha lot of whatent wrong f for her had to d do with t the press an

campaign t that was cused on a lo of other thingshat todd purdumum in th article said was aermuda triangngle of that campaign. itulls back the curtains onon the campaiaign inn amazizing wy. see the candite clrly lashing out in frrustratio why is the n number two candida hahaving plead toget a pres relee put outut by e-mail. scotott ron conroy, the t talen reporter who unearthehed this y astututely poied out as the e-mails went ong, governonor palin keptpt adding more peoeopo them trying to r rally hertroro. ststeve schmt was giviving her good advice here, and she wn't taking it. we'ree seeing a micrcrocosm ho this smallll part of a big probm kept unraveng. >> andnd roger,, yointed out the fact t the vice presint, presidential candidadates nk below campaigngn mananagers. joe biden wawas frustrated tat vid plouffe and david axelrod

had morere influence on the mpaign than he did. t i want to go t to something. if sarah palilin cannotot take direction from aampaign manager, doesn't thahat make i impossssible for her to havave national futurure franankly? >> no. you know, it's ndidates who areupposed to run cacampaign not t campaign manager. she was the number t twon the ticket.. in 2012hould she c choose to run, things will bebe different. i thinkf you'rere still inn th party day you'reooking at three orour things. rah palin did everyththingthat wawas ask for heer. she energided base and gave goodspeeches.. she hd her own against joe bide did at leastst as w well asas j cain did a against bararack oba. thre she had a terrible intervie with katie e couric b when you g go bac and looook at someme of gege -- is or ildren learni bush'h's inteterviews i2000 she didn't do that badly. and, finally, you have toay no matter what sararah palin s sai didn't say, didid or dn't do, ne of it compared withinhe

rst economic crisis since the depresession theop of the t tict ying that the ecomy was n his stronong suit. ininhe enend wch really lost the ticket moree votes? >> unbelievable. roger s simon sys john mccccain drag on the john main ticket can'n't waitor mark salter' e-mail to you. roger simon and mike allen, thank you boththery much. up next, speaking of the mccain campaign, joe the plumber, remember hm? talked to o god abthether or not joe ould runn for congress. we've e gotgod's answer xt in thesideshow." you're watching g "hardbl" only onon msnbc. (announcer) eak car.

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visit actonenecom to find out ho the allicece f better bonhealth may be able toto help. back to "hardball." feels like the carous should have a b of the michael ckson characters onthere. but time for the "sidesho" first up, how is this for dine inteention? 2008's most famous camp

prop, joe the plumber, s asked by t website orldneaily whether he wld run for public anticipate. his answer, quote, i hope not. you know, i talked tood about that, and he was like no, no. however, added that he's keeping the or open in case god call on him at a later date. next up michael jordan or kobe bryant? who is the best player in baskball. it's a question confronted all basketball fans and today it was pod to the first fan of basketba, the president mself. here isisanswer. >> michael. kobe is terrific, don't get me wron but i haven't seen anybody match up with joan yet. >> well, let's remember the president has got too with the hometown chicago bulls. here is anotherne for the sports fans out there guess has got a new ad for nike? seven-time tour derance champion lan armstrong, a guy who s long been rumor to be doping, and he's apparently not afraid too here in this new ad. >> the critics say i'm arrogant

a doper. th can say whaver they want. i'm not back on my bike for them. >> wow. have we crossed a culturalal line there? we have a pitchman bg being overcoming steidallegations. perhaps that explains the buzz over tomorrow's return of manny ramirez tothe los angeles dodgers and judging fom the crowds around his stintin the minor leags, you'dnever know that he was there because of a spension back in mayfor evidence osteroid ue. unbelievable it is, but, hey, m a dodger fan and i'm loking forward toim getting bk in the lineup. > time for the big number. times are tough. evyone is tightening their belts, espially in terms of trav. everyone except membersf how much money didhey spend o overse tripsast year? >> i cording "the wall street journal," $13 million. that's a 50%ncrease in jt

the pas two years since democrats took control so there you have it, members o congress areet setting to the tune of $13 miion. tonight's big number. up nex2010. it's president a's firs big political test. n the democrats pick up seats or are the publicans ready to stop the bleeding? we'll look at the early line for the midtms next. you're watching "hardball" oy on msnbc. y for summer. choose one appetizer to share antwo entrees for just 20 buck start with one of your favites, like our s spinach and artichokoke p.p. then bite into ourur new california shrimp lala or o classic seven ounchouse sirloin. applebee's 2 for $20. it's real food at the right price, and it's got what it takes for a real summer night out. for $20. only at applee's. it's a who new neighborhood. ♪

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miami ke huckman with your cnbc wp. stocks tumbling tday on a worst than expected jobs report. it was the worst tding day leading into the furth of july weekd in htory. the dow closing down re than 223 pounds.

the sm 50 losing 26. the nasdaq finishing me than 49oints loyer. investors were shaken by the june jobs report. employers cut 467,000jobs bringing the unemployment rate to a 26-year hgh of 9. a the port says those who have bs are workingfewer hours for less money. good ns though in e manufacturing sector as factory orders rose 1.2% in may beating analysts' expectations. th's the largest increase in more than e ar. and johnson & johnson shores slidumber 2% after announcing it was investing $1billion in the irish drugmer elan. elan does research o alzheimer's drugs and its stock rose almost 9.. that it from cnb first in business worldwide. w, back to "hardball."

welcome bk to "haball." with just 488 days unl election day 2010,nd frankly only about a month or t until candidates really have to get into the races, it never to early to get ead. i'll talk to brian switzer chairman of the democratic -- joining me a tom davis, former chrman of the national republican conditiingal committee and even though he has a republican hatn most of the time, the y is really goo at breaking down these races. he will give more nonpartisan answers than we will partisan answers,m i right m? >> i'l give you the rig answeri hope. >> the right answers. we'll let people determi which right we mean. let's look at t map o key races, where republicans currently holds the seats. kentucky, no, new hampshire, nortcarolina, arizona, and

texas because we're probably going to see a special election for that senate at the in the middle of between. andhen we we look at the decratic seats we think will be in pla and they include connecti nevada, colorado, illiis, pennsylvania, delaware, and mybe even california. these are all races we think at least are somewhat in pl. so biggest thing hurting the republicans right now, congressman davis, besidesheir brand ise is the facthey're playing more defense than ofns is that the rst thing you see here >> yeah. the senateis a tough lineup. you have more republica seats up tn demoatic seats. th have five vacancies and lnerabilities, but understand that the midterm elections are lessbout the republicans than they are about the democrats. vote won't be hiring t republicans to run the untry. they may be voting reblican to put some collecti on obama. so they don't have quite the burden they would if they re running for presiden so -- but, look, it's a tough

senate lineup at this pot try to getnder 60. i think they cano it, but the atspherics need to change a little bit to dothat. >> erybody is going tbe lookg for way to interpret 2010 and what it means for the president and 2012. i want to singl out two states, miouri senate, ohio senate. en republicanseats. george voinovich retirg an we've got kit bond retiring. the fas these were o obama carried, one mccain carried. if either partyweeps those two, that's who gets dlared ote, unquote, the winner of the midterms. is that fai >> i tin that's a very fair coent. missouri in particula is a trend state, although obama lost it. it was vey, very cse. mccaskill came in on a democratic tie in a more republican t these artrd tates. they're large states. it's harder to persolize th, and incumbentsan become vulnerable to national ends in those stat in particu >> one other story line tat i

think i'm follong to see what's going on inside th republican party areow sious are thesedeological fights inside the party? florida sticksut to me. charlie crist, the popular derate republican governor who appeared with the president and endorsed the smulus package back a few months ago and a rising sr down there, markow rubio, whoisn't gointo have the mone is endorsed though by the economic sort of conservative wingf the party, club for grth. how important thatrimary to tell you how quickly the republan par with heal itself going into 2012. >> well, it'simportant. it's like pesylvania where tu mi chances of winning are much, much lower th the republicans uld have been had he stayed a republican. but, ok, the fda case is a ca in int where crist is the most popul pitician in the state, but you get him into a republican primary and his pport for thetimulus package, a the republican rty has declined, th base has become more conservative.

it's become a little more vehement, and it's ltlless treach. the questi for the republican partis are they going to be a private club with andmissions st to get in or are they gng to be a political party whh means a coalition to win elections? and florida will be front and center of tht. all right. quickl i want to talk about -- i want t talk aboutanada recruiting in this ti of year. the nmbers aren't great for the republican brand. has that -- from what you have seen with candide recruiting, partularly in the house level, how are the republicans doi? do they have enough playin place to t advantage things go south on theemocrats in 2010? >> well, you know, they've had a good recruiting year. they haven had the kind of cruiting year they need take back the house, t you still have anothix monts do that. if you lookat some of he democrats who won in 2006, some of themre latecomers, they were second tier but they could ist up their sail and catch the wave. i thk that's what the republicans have to be ab to do. you not be able to get your best candidate in, but you nd

to get aandide that's a esentable cdidate if u catch thatave. i think the republicane poised to ckup seats in the house. it'sust way too earl to tell what the atmospherics will be a year fro now. when one part controls the presidency and bot houses of coress, the losses are usually exaggerated er the convenonal wdom, and you back t'94, back to '06, '78, '56. >> very fair point. setting th typef expectation bar that tse guys in the white house would love to have set for them. historically impossible for them to bre even. i will becking in with you lot as the campaign year begins. thank you, sir. oining us mao, monta governor, ia schweitzer. you' a sitting governor. before i get iohe nuts an bolts of what's going on in campaign 2010, talk abt this crishat many states are facing right now, this fiscal crisis. california is writing ious, but

they're not alon what's going on in your state in montana and what aryou hearing from governors you talk to about what they're cing right now, frankly, in a lot of states? >> well, i hate t admit our situation in montana where w have the largest cash reserve in e history of the ste. we have $400 million in the bank and normally we run about $20 millioor $30 million. we have been able to lower taxes for montanans and still grow the econom but we're the analy. look, i think 45 stat are upside down right now. of ourse, in states we actuay ve to run govement. you educa, you medicate, and u incarcerate. that's 85% of our budgets. in congress they get to debate, th g to philosophize. we actually have to keep the trains on time. >> should the fedal government being more of a burden on this or have they done the -- has the president sent the right amount of money to the states to fill thesegaps? >> well, 've been partners for

sometime. you look athe medicaid program, it wasn't the states th created these programs, i was congressandey knew ey coul't deliver health ce in the states,nd so they built this partnership, the federal government sends about 80% of the money and the stes put i ab20%, and rn the programs and that's true ina lot the programs tha we have. so it is a partnership, and when revenues aecreasing in states, the federal government hasent counter cyclical payments in the past anthat's what they' done this time. when you look at these governors rac you're dealing with and frank all these races, but partilarly e vernors and candidates you're trying to get t run, the economy is going to pl a huge role, probably mre so with governors than wth anybody running, andhat -- you know, is that the biggest thg you're worried about, that your founes really are tiedmore to jo lossesnd job gains like the numbers w got today than they are in how good a candida is and how good of a campaigner eyre? >> it's great time t recruit democratic candidateright now. the brand name for republicans polls a littleower than the

belly of a snak there's abouha the publican party whoould like to join the wg party. democrats have bn there before, but the republicans have to figure out who they are. they sd that th were the party of fisca rponsibility and they spent money like drunken sailors. theyaid they were the party of mily values, nd, well, you know what came out there. jo governor, ve ickly do you regret endorsing in the virginia gornor's race this year? did you make aistake gein involved in that primary with terry ak l life? >> i don't know. i think a governor no one has everard of fom a ate they've probably never been t probably doesn't. >> reporte why did you do ? di he offerny quid pro quo or anytng? was he going to help you run for office? >>this business you got to ask, and terry aed. >> fair enough governor schwtzer, we'll be checking in with you as the campaign gets heat up. anks very much. > comingup, unemployment hits a 26-year high.

president obama says he's dply concerned. what can he do to bring the skyrting jobless rateac down t t earth? you're watchg hale"hardball," on on msnbc. the great amican holiday is he. and here's somhing the pontiac 72-hour sale. you only have hours to declaryo independence frfromnterest payments fofo6 full years, wi 0% apr financing for r months on all l 0909 pontiac models... . 0% apr foror 7momont going ononowow..

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my annuity from fidelityeans my retirement come is safe. it's guarantd, no matter what hpens. if guaranteed income fife sounds gootoou, do what i did -- let fidelity be your guide. call fidelity at... for details about guaranteed income for life. welcome back to "hardba." new uneloyment numbers out toy, and is a 26-year high 9.5%. another 467,000 jobs wer lost in june.

austan goolsbee a member of the white use council of econic advisers, a bi part of the president's economic team. all right, are these really green shoots? it's anoer unemployment rate up, more job loes. n we still classify green shoots? >> we, look, we've alwayseen saying the job market is the lasthing to turnround. you ve to turn the economy around first. th jobarket comes after that. this is not a green shoot. every job lost is a tragic situation, and sin the recession beganin december '07, we'vlost morthan 6 million. this js report, a lile worse than expected. last month a little better. >> right. >> overallyou know, when the president comes into office, we're losing 0-plus thousand bs a month. it's better th tha but,ou know, the president --9.5% unemployment is not acceptable and he wants to push the recovery package. robert gibbs andhe president bothave sa the recoveryct is working. givee two or three bult points to sayo the viewer, th is how it's rkg.

i know it doesn't feel like it's working, but trust us workg, but trust us. >> two or three dferent was. one when private ecomists have gone and looked a what has the impact been, they bieve, like mark zandy, a guy that people respect, that the unemployment rate would be two points higher. >> you saying it would be, a lot ofrepublicans are sing we coulhave grown ouof this over time,ufred through you're sing without it, 115%? >> well, look, what i'm saying is, overall, this stimulus im, for a counter factual, it's hard toick exact numbers, but mark san saying over the course of this, the stimulus has had this impac csistent with at we think. second about $20 illion, teachers in a bunch of

hard-pressed numbers. >> those numbers were down, too, the nstruction job numbers. is that the first number we should see posive? >> becse of construction jobs? th hard thing with any these job numbers is we're dng this in the face of the steepest doturn since 1929, so t all economy is bad. there's not any qestion about that. the question is, what can we do to fight against that tide? and if u look at infrastrre spending,th's no ramping up. if you look at money that's ing tohe states, you've got literally thousas of pple who e able to ke their jobs as teachers ubs as policemen, firemen, becauseheir states gomoney from the federal government. >> we just had governor siteser on, most states, unlike his, without the reserve, have a problem. is that the kind of stimulus u may have to consider toigure the gaps?

the issue inhe states is problematic. t just right now -- >> but therecovery. >> it is pulling the covery down. i't goingto say iwould destroy the recovy, but it's certainly anegative. that's why it's imptant to get the biggest stimulus eve out into the system. only the first bit o that, first 10%has gone out so far. we need to keep essing on the rest of this big pacge. i think it'say premature to be thking about a second stimulus. it depends on the conditions, but certainly we can be talki about that. >> i'mmpssed you did not use too much enomist talk. you brought it dow to someing so somne like me can undersnd. >> you're going to be an honorary accountant. >> i'm scared of that moments. the politics fix an big question heading into the fou of jy weekend, will governor is notford resign? you're watchchg "hardbabaonly

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w wcocomeback. roger son and a a new prtrtr for ththis simon a a mmon that's "e e shington post's" il ckcker il, i want to startith you. govevern sanford'd'sii today issued a s stement that reaeadsn farther,r,uouote- there is no question thatmark's behavivi is excusable, actions havee nsequences, and hehe will b b dealing with thosese conququces for a a lo w whi.

trust has been brorokenndnd wil need to be rebubuilt. mark will neded to eaa back thht usust,irst and foremost wiwith his familyly,, a also wit the pepeop of south carolina. she sounds ke the two sesenato alst saying, uu know,w,hhk ououyour cononququens and think about your job. yoyou d a s sto today saygg lottorore essure on him to sisign but he was digging i i his heels. ishahawhat you're getting today? >> yeah,, hee sure is. heaught a lkyky breakak. the stata law enforcement agagcy that had beenn investstiginingh travel record determinedhehe di no misuse anytatate funds to the e trs to new yoyo a and sosoh america tovivisit his mistress f from argenennana. so cleaearly sign orereli for the sanfordclans. acacally they're going dodowno floridida to end the holidid weweend with his wife, jey. >> therere shod d some fifirerks. does thepepubcan party needed them toresign,n, o after a w wk orso, w wil thh sort of dippear,ndnd he can ay downn

there in south carolinana and ty weweeps under the rug inn 2010? >> you knonow, it's hard to say. if yu u d asked me yesterday, ,i woululsasayhe guy isis on his w out, but p phiisis rht. thoughght t waa quickie ininvestatatn, in saying he cocoitted for cmes, he paid back the stete $3,300, w whi i a deal a a l of people would like to o tt after thehey've doe something wrg. tthe thing aututananfo iss that t the a aret least two things he neeeedstoto zip up,a one e of tmm ishis lis. he'scting like a a guynn group therapy and we're theououp. wewe've toknknow every w wanane got t second baa thth, but didn't cross e sex line with, ase calls it, bfore he s senent ti w wh his soul mate.e. you know, thatt esn't help him. we don't neeed to heararll this ststuf the biest thiningelping hihim, maybe,e,ss that the state legiatatyur doesesn' meetgain ununtil januarary, soalall the ingriven is driven by

sanford himself. > oe of theemarkable thingss about this story, a a i k know e demomoataticarty is not thatt big, but youou he e noheard a people from any imagigineemocrat south cacaroli.. they a are stick to go their gu thther are they hopopinhehe s sts in office at this pot?t? >> it'sinteresting, thehe first day or so after ththe fafair wa admitted, see democrats lled fohim to resign, and sncnc then have e be q qui. so ihink they rtrt of see t this as a win-win e eheher way, whetr he staysysrr ggoe that t thell have a c chancinin010. roger? >> therere i one ottheinal that he not addresseded, the newspaper in s soh carolina revevealedlala ye he l lef the mansion withouout his s secutyt tail, 38 times.s. thiseear the fiitt 24 weeks,ee left without them 3 39 ttim. >> i'm gining to have to --