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MATTHEWS: Welcome back to HARDBALL. The U.S. attorney firing scandal continues to plague the Bush administration. Will the president`s top political kid, Karl Rove, have to testify before Congress? Will Attorney General Alberto Gonzales end up resigning? HARDBALL`s David Shuster has the report.

(BEGIN VIDEOTAPE)

DAVID SHUSTER, HARDBALL CORRESPONDENT (voice-over): As White House officials considered today whether to let Karl Rove and former White House counsel Harriet Miers cooperate with the congressional probe into the firing of federal prosecutors, Democrats stood firm, demanding public testimony under oath and answers by Tuesday. Congress could order the testimony, but the White House could then try to assert executive privilege. This weekend, the Senate Judiciary Committee chairman declared he is running out of patience.

SEN. PAT LEAHY (D), VERMONT: I`ve reached the point where I`m not here to negotiate, I want the answers. They can either supply the answers voluntarily or we`ll subpoena them. It`s as simple as that.

SHUSTER: The key issue is the firing of these U.S. attorneys, who were leading federal prosecution efforts in eight districts. Earlier this year, Attorney General Albert Gonzales told Congress the dismissals were performance-related, not based on political considerations. But e-mails released last week between the White House and Justice Department contradicted Gonzales, forcing him to apologize and prompting calls for his resignation.

ALBERTO GONZALES, ATTORNEY GENERAL: I acknowledge that mistakes were made here. I accept that responsibility. And my pledge to the American people is to find out what went wrong here.

SHUSTER: Some of the e-mails indicate that Karl Rove inquired about replacing all U.S. attorneys in January 2005. That was a month before Gonzales became attorney general. The e-mails also show Rove worked with Miers and former Gonzales chief of staff Kyle Sampson to get some of the prosecutors dismissed. Sampson has now offered to tell Congress everything.

SEN. CHUCK SCHUMER (D), NEW YORK: Just last night, we heard from his attorney that Kyle Sampson, Mr. Gonzales`s chief of staff, is -- really wants to come forward. It`s a real possibility that he will voluntarily testify. He has said that he wants to do that, and I think that`s a very likely possibility.

SHUSTER: Democrats say they are increasingly interested in the firing of U.S. attorney Bud Cummins in Little Rock, Arkansas, who was going to be replaced by Tim Griffin, a Karl Rove White House aide. Griffin has almost no courtroom experience, but did opposition research for the Republican Party. Democrats are also increasingly focused on the circumstances that led to the dismissal of Carol Lam, the U.S. attorney in San Diego. Last year, after investigating Republican congressman Duke Cunningham and prompting him to resign and plead guilty to bribery charges, Lam notified the Justice Department her investigation was expanding. On May 10, she told the Justice Department about search warrants for Republican defense contractor Brent Wilkes and a close friend of his, CIA official Dusty Foggo. The next day, May 11, Gonzales chief of staff Sampson sent an e-mail to the White House counsel`s office and referred to, quote, "the real problem we have right now with Carol Lam." In December, the Justice Department dismissed Lam with no explanation. Democrats now say it`s clear the firing was pure politics and that Lam had become a thorn in the Republicans` side. Meanwhile, amidst continued calls by Democrats and some Republicans for Attorney General Gonzales to step down, presidential press secretary Tony Snow said today that Gonzales has not offered his resignation and that White House officials hope he will stay.

TONY SNOW, WHITE HOUSE PRESS SECRETARY: The reason I said we hope so is we hope so. He has the confidence of the president.

SHUSTER: Democrats, however, predict Gonzales will not last.

SCHUMER: I think it`s highly unlikely he survives. I wouldn`t be surprised if a week from now, he`s no longer attorney general.

SHUSTER (on camera): Even congressional Republicans who used to defend the Bush administration are staying silent or they`re accusing Gonzales of mishandling things. This evening, Congress is receiving thousands of additional documents related to Gonzales and Rove as part of the ongoing investigation. I`m David Shuster for HARDBALL in Washington.

(END VIDEOTAPE)

MATTHEWS: Thank you, David Shuster. We go now to "New York Times columnist Paul Krugman and "Newsweek`s" chief political correspondent, Howard Fineman. Paul, you know, sometimes when I listen to this administration, I think of the old "Mission Impossible," where the tape burns itself up after you get your mission. I mean, are these guys told what to do and then they get total deniable -- plausible deniability from above, whether it`s Abu Ghraib or it`s the leak of the CIA identity or it`s this thing with the attorney generals -- or the U.S. attorneys?

PAUL KRUGMAN, "NEW YORK TIMES" COLUMNIST: Oh, and many others. I mean, talk about Halliburton. Talk about -- you know, this has been the administration -- somebody said the "frozen" scandal, where, you know, it`s clear something`s gone wrong, but they just -- you know, they put a layer of ice on top it and it just goes away. But all that changed last November.

MATTHEWS: Well, they all -- the people who work for the president, Howard, seem to know what they`re supposed to do -- behave politically in the naming of U.S. attorneys, which doesn`t shock me, beat the hell out of prisoners and get some information out of them because we`re in a war -- basically, a war against the other side, screw anybody that challenges the administration, like Joe Wilson, but, Don`t ask me for -- say I sent you on that mission. But make sure you do it.

KRUGMAN: Yes, I...

MATTHEWS: And then when you get caught -- let me let Howard answer this. And then when you get caught, I don`t know anything about it, but I`ll sympathize with you. And by the way, I hope you set up a defense fund.

HOWARD FINEMAN, "NEWSWEEK," MSNBC CONTRIBUTOR: Well, George Bush was frosty, to use Paul`s terminology there, in the extreme in explaining what Alberto Gonzales`s mistakes were.

MATTHEWS: Yes.

FINEMAN: They were that he didn`t give the proper spin to the Congress about what he was doing.

(LAUGHTER)

FINEMAN: It wasn`t about the underlying behavior, which by implication he approved of, even while he was denying that he did it.

MATTHEWS: It was messing up the...

(CROSSTALK)

FINEMAN: It wasn`t clean. It wasn`t cleanly done.

MATTHEWS: Go ahead, Paul.

KRUGMAN: You know, all of this is -- these apologies, such as they are, are like somebody not actually apologizing for what they do but saying, I`m sorry that you feel that way. I mean, it`s -- it`s like -- it`s like...

MATTHEWS: If I offended anybody, I`m sorry. You know, this story in Iraq, I guess it`s the bug I come back with. I had a nice week in Mexico to think about this. I do not accept the idea that the American people were snookered into Iraq. I know it`s a comfortable argument to make that we were all tricked into it, but back when we went into the war in 2001, I came across -- or 2002, it was in the summer of 2002, the year before we went to war, the American people were asked whether they supported the war, and they said by 55 percent of so they were for the -- or 57 percent, they were for the war. But then asked if there were significant casualties involved, Are you still for the war, and a majority came out against the war. Well, who the hell thought there wouldn`t be casualties?

KRUGMAN: Oh, look...

MATTHEWS: I just wonder what we`re thinking out there. Are the American people rational? You can`t blame everything on Bush. So he doesn`t know what`s going on over there, but at some point, the people have to say, Wait a minute, I had to go along with the war, the people. It wasn`t the president took us to war, the people went along with him. Why did they think we could take over an Arab country, run the place, kick the hell out of the place, tell everybody what to do and nobody would shoot back? What were we thinking?

KRUGMAN: Chris, you`ve cut out the middleman there. There were a lot of people in the news media telling them that it was going to be great. I mean, it was...

MATTHEWS: Not me, buster.

KRUGMAN: I`m sorry? Not you.

MATTHEWS: Not me.

KRUGMAN: Not you. But a lot of people were. I mean, they -- all the -- every -- all the selling was saying that this was going to be like the first Gulf war. It was going to be, you know, a few -- we`ll honor the...

MATTHEWS: We didn`t invade Iraq...

KRUGMAN: I know that.

MATTHEWS: ... in the first Gulf war.

KRUGMAN: Yes, but, you know, most people just thought it was going to be the same thing. And look, this is -- it`s a hard thing for people to -- we -- I knew it wasn`t going to be easy. You knew it wasn`t going to be easy.

MATTHEWS: Well, the Iraqi people -- look, anybody who`s ever been in the Peace Corps knows this, Howard. People don`t like being taken over. If you ask any African country, no matter how tough it`s been since independence, Would you rather the white guys come back and run this place, they might run it a little bit better, maybe, maybe, maybe, they`d say, To hell with that idea! We want to run our own country. Nobody likes to be invaded. I think the president even said that a while back. He must have known it intellectually, but he didn`t act on it.

FINEMAN: One of the problems here, and there were many, is that we, including the media, didn`t define what victory really meant. And we still don`t know. The American people haven`t given up on the idea totally that we can, quote, "win" in Iraq, but they don`t define what winning is because most of the American people have already concluded that going there made us less safe. So even if we were able to achieve some kind of military victory, we didn`t look long-term...

(CROSSTALK)

FINEMAN: We didn`t look long-term at what the consequences of it would be.

MATTHEWS: Any president with a military background -- Paul, I don`t know you as well as I know Howard, but I`m going to try this on you. Do you think General Eisenhower would have taken us into Iraq and taken over the country?

KRUGMAN: I think -- no. I mean, look, the fact of the matter is, we actually know the military`s top brass thought this was a terrible idea. That`s what Shinseki was trying to tell us when he said we needed several hundred thousand troops. Nobody who -- you know, this was -- this was a war of the armchair warriors, the people who thought it was all going to be, you know, video games.

MATTHEWS: But why? Paul, I got to interrupt you. The president of the United States had one thing going for him, the reason a lot of people voted for him. He didn`t trust intellectuals. He didn`t trust the guys he met at Yale. He had a resentment towards them. Why did he, once he got in office, start trusting intellectuals, the civilians at the Defense Department, the theocrats, the ideologues? Why did he all of a sudden try theorists who write magazine and journal articles and believe in their thinking, instead of the real world he grew up in?

KRUGMAN: That`s going to be one of the great mysteries. But I think part of it was that they -- they basically told him, You can be a hero. You can be a hero. You can be better than your father. Let`s not skip that. You know, it was -- it was sold as...

MATTHEWS: You mean they played Kissinger to him?

KRUGMAN: Yes. And you know, this -- (INAUDIBLE) a fourth-rate power. This looked like a pushover, except if you knew something about war.

FINEMAN: Or if you knew something about the region.

KRUGMAN: That`s right.

FINEMAN: And the fact is that we didn`t -- those who knew about the region at the State Department and the CIA were shut out of the process. Now, a lot of us...

MATTHEWS: He didn`t know that the Islamic and Arab world resented invasion?

FINEMAN: I don`t -- well, probably...

(CROSSTALK)

FINEMAN: ... having covered him for a long time, the answer is probably not. And he was told -- the wells were poisoned for him by his insiders telling him, Don`t listen to what the State Department says, don`t listen to what the CIA says because they`re spinning you, sir, and we`re telling you the truth. And he didn`t have enough independent knowledge to tell the difference.

MATTHEWS: OK. Paul Krugman, thanks for coming on the show. I love your columns. Thank you, Howard. I always love your columns, and being here. Up next, "Newsweek`s" Jonathan Alter with a special report about the questionable deaths of Iraq war veterans at a VA hospital in LA. This is HARDBALL, only on MSNBC.

Originally broadcast, 3.19.07