It doesn’t help that you have sys.setdefaultencoding('utf-8'), which is confusing things further – It’s a nasty hack and you need to remove it from your code. See https://stackoverflow.com/a/34378962/1554386 for more information
The error is happening because line is a string and you’re calling encode(). encode() only makes sense if the string is a Unicode, so Python tries to convert it Unicode first using the default encoding, which in your case is UTF-8, but should be ASCII. Either way, 0x80 is not valid ASCII or UTF-8 so fails.
0x80 is valid in some characters sets. In windows-1252/cp1252 it’s €.
The trick here is to understand the encoding of your data all the way through your code. At the moment, you’re leaving too much up to chance. Unicode String types are a handy Python feature that allows you to decode encoded Strings and forget about the encoding until you need to write or transmit the data.
Use the io module to open the file in text mode and decode the file as it goes – no more .decode()! You need to make sure the encoding of your incoming data is consistent. You can either re-encode it externally or change the encoding in your script. Here’s I’ve set the encoding to windows-1252.
with io.open(file_name, 'r', encoding='windows-1252') as twitter_file:
for line in twitter_file:
# line is now a <type 'unicode'>
tweet = json.loads(line)
The io module also provide Universal Newlines. This means \r\n are detected as newlines, so you don’t have to watch for them.