RACHEL MADDOW: Joining us now is White House senior adviser Valerie Jarrett. Ms. Jarrett, thanks very much for taking time to talk with us. Really appreciate it.

VALERIE JARRETT, WHITE HOUSE SENIOR ADVISER: Oh, my pleasure, Rachel.

How‘re you doing this evening?

MADDOW: I‘m great. Thank you. I love State of the Union night.

(LAUGHTER)

MADDOW: Let me get very specific right off the bat. On health care, when the president tonight welcomed anyone from either party bringing him what he described as new approaches for reaching the goals of health reform, was he saying that he wants to start over? Was he reopening the can of worms?

JARRETT: No, not at all start over. Look, we‘ve made an enormous amount of progress. What he did was remind the American people and Congress why he fought so hard for health care. And he talked about the people who have preexisting conditions that should be covered. He talked about the costs and the premiums that are-and the out-of-pocket expenses going out of kilter and are breaking the backs of hard-working American families who are trying to make ends meet and small businesses who are having to pick between hiring new employees and paying the cost of health care.

He talked about how we really do need insurance reforms and so we have insurance companies that are working for the American people again. And he talked about how we need to make sure that all Americans are insured and that we can provide affordable health coverage to those folks, as well.

And so when he-what he really wanted to do was to remind everybody about what we were fighting so hard for, and what he said is, Look, if you have a way of achieving all those objectives and bringing down our deficit, then we welcome those ideas. But I also think it reflected the spirit of how far we have come and how much progress we have made. And Rachel, what he said is, I‘m not going to give up on this. The American people deserve a health insurance program that really works for them.

MADDOW: Welcoming new ideas at this point in the process, though, does raise the prospect of where he‘s coming down on the different strategic sides of the debate about whether or not the House should pass the Senate bill, pass whatever changes they need to pass to the Senate bill in order for them to feel comfortable with it and move on, or whether or not it is time to reopen the policy of health reform, start bringing forward new legislation to be passed for the first time.

And just to be clear, you‘re not that saying he‘s suggesting that we start new health reform legislation.

JARRETT: No, no. Look, we‘ve come so far. We‘re so close, Rachel. We‘re right on the brink. But I think it‘s also recognizing that the political landscape has changed as a result of the Massachusetts election. But on the other hand, Massachusetts has health insurance. Scott Brown voted for that health insurance when he was there. He even said he wouldn‘t vote to repeal it now.

And so with him coming to Washington and working with a spirit of cooperation, maybe we can take this over the finish line. We‘re on the two-yard line, and the president said, Let‘s not give up now. Let‘s fight on behalf of this issue for the American people because in these economic times, most importantly, we have got to figure out how to help reduce some of those costs that are on the American family.

They‘re sitting around the kitchen table, Rachel. You know this. They‘re trying to figure out how to make ends meet. Their health care costs adds to that burden. It adds to the burden of the small businesses. It adds to the burden of the large businesses. And it certainly adds to the burden of our federal government. So let‘s not give up now. That was his message this evening.

MADDOW: On the subject of the political climate, which you referenced there, the list of specific proposals the president made tonight, a lot of them very conservative ideas, ideas that have been-that have been sort of auditioned politically in recent years by Republican politicians, things like off-shore drilling, capital gains cuts, business tax cuts, the spending freeze, so-called "clean coal," which is terminology that just makes me cringe, singling out earmarks, as if earmarks really have a significant impact on our overall fiscal health. The number of things like that, that seem like conservative ideas to me, made me feel like I have to ask you if the president is just sort of fed up with the Democratic base and is more interested in winning over conservatives now.

JARRETT: No, no. Of course not. I think what the president was focusing on is in this very tough economic time, the federal government needs to tighten its belt, just like hard-working families are having do. Everyday people are going to have to make tough decisions about how to make ends meet. And what he‘s saying is that we have to rebuild the public trust in the federal government, and one way of doing that is living within our means.

It doesn‘t mean that we don‘t invest in what‘s important. Jobs and the economy were a huge part of his message this evening. And he was a strong advocate for investing in infrastructure and small businesses and green jobs, the jobs of the future. We have to do what government can do to jump-start our economy.

But he also said very clearly, Rachel, that the private sector is where the long-term sustainable jobs come from and we have to be cognizant of it. So I think his message was one that will resonate broadly with the American people, and it‘s one that requires a different tone. It requires the Republicans to come to the table in good faith and not just obstruct legislation because they want to obstruct legislation.

I mean, we had instances where they‘ve actually sponsored legislation and then voted against it-voted for it, but voted to delay it. So ultimately, they voted for it 90 to 10. And so he‘s saying, Come on, everybody, the stakes are too high for the businesses as usual in Washington. He was elected on a momentum of change. He intends to bring that change.

You mentioned earmarks. The public has a right to know how earmarks are being spent. He thinks that we should be transparent. He thinks that we need to add a level of cognizance of how taxpayer dollars are being used so that there‘s some accountability and that we can begin to rebuild the trust that has been suffering over the course, really, of the last decade.

MADDOW: I think you know-I know we don‘t have a lot of time. I think you know that I‘ve expressed-or you may know that I‘ve expressed a real disagreement with the idea that government needs to tighten its belt because the American people are tightening their belt. I think that does poll well. I think it‘s actually factually macroeconomically incorrect. I think when consumers aren‘t spending, when businesses aren‘t spending, we‘re in this kind of a downturn, there actually does need to be a political argument that the government does need to spend. The spending freeze that the president has proposed is teaching the country bad macroeconomics, ceding to Republicans their false claim about how macroeconomics works.

I think maybe losing the long-term argument about the role of government in favor of some short-term well-polling phrase that I don‘t think actually makes very much factual sense.

JARRETT: But you know, Rachel, I love you, but let me just take you back a bit just to refresh your memory. President Obama passed the largest stimulus bill in our nation‘s history, nearly $800 billion, shortly after he was elected president for just the reason that you mentioned, because he knew it was important for the federal government to jumpstart the economy. In his current budget that he‘ll unveil next week, he will have in there very concrete spending proposals that again, strategically, will help jumpstart our economy.

Whether it‘s for infrastructure or small businesses or green jobs of the future, he does believe that government needs to spend, but it needs to be strategic and there needs to be a discipline and there needs to be accountability.

And we also need to tighten our belts, and we need to get rid of programs that are not working. We cannot be afraid to say, OK, you know what? We tried this and it was a good idea, but it didn‘t work, and take those resources, Rachel, and put them into programs that will work. And we do have to be sensitive to the deficit. And I think for just the macroeconomic reasons that you set forth a minute ago, that‘s why he pushed for the stimulus bill and that‘s why he‘s not saying dramatically tighten our belts right now. He is saying, Let‘s be prudent and let‘s be cognizant of the fact these are taxpayer dollars and we need to send them-we need to spend them strategically and sensibly.

So I don‘t think that we‘re actually on a different page here, Rachel.

I think we‘re on the same page.

MADDOW: Let me ask you one last question. I know your time is very short. When will "Don‘t ask, don‘t tell" be repealed? And what specifically will the president do in order to get it repealed?

JARRETT: Well, I think he was very clear this evening that he intends to do it. He has said it-he said it in the campaign. He said it very clearly throughout the year. And he‘s going to begin a process starting right away to move forward with that. And in the days and weeks ahead, he will outline that for you and for the general public specifically how he‘ll do that.

I was very heartened to see the level of applause in the chamber tonight behind that. I think that the time has certainly come for the repeal, and I think that the president made it very clear tonight that he‘s committed to getting it done.

MADDOW: Senior White House adviser Valerie Jarrett, very generous with your time and for joining us tonight.

JARRETT: Oh, my pleasure.

MADDOW: Really appreciate it. Thank you very much.

JARRETT: All right, Rachel.

MADDOW: Thanks.

JARRETT: You take care.

MADDOW: Will do.

JARRETT: Bye-bye.

MADDOW: Joining us now is Democratic senator Sherrod Brown of Ohio.

Senator Brown, thank you so much for sticking around to talk to us tonight.

Really appreciate it, especially at this late hour.

SEN. SHERROD BROWN (D), OHIO: Thank you, Rachel. It‘s good to be with you, whatever time it is.

(LAUGHTER)

MADDOW: That‘s very kind of you. I know you just heard Valerie Jarrett say that the president is not trying to start from scratch on health reform, that he thinks that these efforts are on the two-yard line. Do you agree with her that you‘re on the two-yard line? Do you think it is going to pass?

BROWN: Yes, I do. I think we‘re going to use reconciliation and blend it with the-or basically, use reconciliation to add some things and fix some things that were in the Senate bill. And then I think the House will pass the Senate bill. It‘s obviously easier said than done. The president needs to weigh in. The House doesn‘t much trust the Senate because of the Senate Finance Committee‘s slow walk all last summer that really cost us getting this bill by August or September. We would have been done with it if the Senate had moved faster, but that committee decided not to, so-with the whole bipartisan exercise that really was sort of a fool‘s errand.

SO-but-but because the House doesn‘t totally trust the Senate in doing this right, we have to move on reconciliation. Then I think the House will pass our version. I would imagine it‘ll be in the next two or three weeks. I‘m not speaking for Harry Reid, but-we can‘t-we can‘t start pulling it apart and passing little things because it has to go together.

And the country wants this. It was one election in one state. Granted, people are upset, but they‘re upset because this bill‘s been hanging out there so long and we‘re not doing other things. We got to focus on jobs now. In the next two or three weeks, pass the health care bill. Move on once the public-once this bill‘s passed, the public‘s going to see the sky‘s not falling and they‘re going to begin to hear the good things in this bill, to-that women are no longer going to pay more for the same health care, that pre-existing condition will be eliminated. People won‘t lose their insurance because it was-because they got sick. We‘ll have tax breaks for small businesses so they can do what they want, and that is cover their employees, all of those things. The public‘s going to like this bill once it‘s out there and enacted.

MADDOW: On four occasions tonight, I noticed that the president mentioned legislation that has already passed the House but has yet to pass the Senate. A lot of the political stuff in tonight‘s speech was about the Senate. He talked about the jobs bill, financial reform, climate change, legislation on community colleges all having passed the House, not having passed the Senate, urging the Senate to follow suit and pass these bills, too, also urging the Senate to pass pay-go.

Is the Senate in any position to follow through on that stuff, or is there a real structural problem in terms of getting stuff through your chamber of Congress right now?

BROWN: Well, look, yes, it‘s a structural problem because we‘re the only democracy in the world that requires 60 votes to-requires a supermajority to do much of anything. I saw you last night interview Tom Udall and some of the plans he has. That‘s not going to happen for another year, if it happens at all. And I like what he‘s-what-he‘s a very good man and I like what he‘s trying to do with making the Senate more democratic-with a small D.

But the point is, I think to close the loop on what you said, Rachel, is-is the president at the end said to Republicans, If you block everything, then, you know, you‘re responsible here for this. And I can‘t believe they Republicans are going to stop the U.S. government in its tracks from being able to deal-to answer any of the problems we have in this country. If they‘re going to block a jobs bill, they‘re going to block-on behalf of their interest groups-they tried to block health reform because of their-their obedience to their insurance paymasters.

They‘re trying to block-they blocked the jobs bill and the banking reform because they‘re so close to the bankers and the bankers give them so much money.

If they do all that, the American people are going to lose their patience. So they‘ve got to play ball in this. And for them, bipartisanship means doing it their way. More tax cuts for the rich, more deregulation, more budget deficits, more wars without end that our children pay for, our grandchildren pay for, our great grandchildren pay for.

Those days are over. The public doesn‘t want that. They rejected that in ‘06. They want a new direction. And they‘ve got to begin to play bipartisanly with us, not have us give away our principles to play the way they want when it clearly betrayed the country.

RACHEL MADDOW, HOST: Senator Sherrod Brown of Ohio, thank you for joining us tonight.

BROWN: Thanks.

MADDOW: Thank you for watching the show last night and for saying here that you did as well. I‘m very flattered.

BROWN: I did. I usually do. Thanks.

MADDOW: Appreciate it, sir. Thanks very much.