updated 11/13/2007 12:24:58 PM ET 2007-11-13T17:24:58

Guests: Bob Baer, Robin Wright, Ron Brownstein

CHRIS MATTHEWS, HOST:  Pakistan‘s on fire.  The stock market‘s going nuts.  Bush is practically at Nixon level of public approval.  Boy, do we need an election.

Let‘s play HARDBALL.

Good evening.  I‘m Chris Matthews.  Welcome to HARDBALL.  Big news out of Pakistan today.  Former premier Benazir Bhutto spent most of the day under house arrest by the Pakistani government after trying to lead a rally against President Pervez Musharraf.  The arrest order was lifted late in the day, but her movements are still restricted.

It comes after Musharraf declared a state of emergency, suspending the constitution, imposing media restrictions and dismissing the country‘s chief justice.  Musharraf, who serves not only as president but as army chief, has said that he‘ll give up the army post only after the court validates his election victory.

Given the Bush administration‘s staunch support of President Musharraf and his country, What does this power grab mean to American foreign policy?  And what does it mean to President Bush‘s vow to spread democracy?  We‘ll take you to Pakistan in just a moment.

Plus: Polls show that John McCain could be having a second wind.  Can he turn around his campaign in time?  And does he have the cash to go the distance?  We‘ll talk to John McCain himself, plus his mother, Roberta.

And at 7:00 Eastern, don‘t miss the HARDBALL “Power Rankings” right here.  I‘m going to give you the complete look at who I think now has the best chance from either party of winning the presidency next year.

We begin tonight with NBC‘s Richard Engel, reporting from Islamabad.

(BEGIN VIDEOTAPE)

RICHARD ENGEL, NBC CORRESPONDENT:  Chris, the security forces of President Pervez Musharraf today crushed an attempt by the opposition leader Benazir Bhutto to lead massive protests against the government.

(voice-over):  When Bhutto woke up this morning, she found hundreds of riot police stationed in front of her home here in Islamabad.  The idea?  Keep her locked in her house under house arrest.

Benazir Bhutto‘s supporters started to arrive at the home.  Quickly, they were arrested by plainclothes police officers.  I saw it happen dozens of times.  As they came, many of them members of parliament, many women, the police quickly lifted them off their feet into waiting police vans.  Many of them were kicking and screaming.  They did not go quietly.

But the most dramatic event happened when Benazir Bhutto herself and a small group of followers got into an armored SUV and decided to rush the police lines, driving through a chicane at high speed.  (INAUDIBLE) her supporters then got out of the car, tried to cut through the barbed wire barrier with knives, some of them pushing the wire back.

Benazir Bhutto was able to get out of the car and address the journalists that were assembled there, giving a small press conference, saying that General Musharraf must end this state of emergency, hold elections very soon and step down as army chief.  She concluded with a threat, saying that she will continue these demonstrations unless her demands are met.

(on camera):  Chris, it was political theater today but actions that appear to have damaged Musharraf‘s reputation—Chris.

(END VIDEOTAPE)

MATTHEWS:  Wow.  Thank you, Richard Engel, for that amazing report.

Robin Wright is “The Washington Post‘s” diplomatic correspondent, and on the phone is Bob Baer, a former CIA officer and now a Time.com intelligence columnist.

Let me go now to Robin Wright.  Robin, what is going on over there?  Most people pay little attention to Pakistan except when something goes wrong over there.  What‘s going wrong right now?

ROBIN WRIGHT, “WASHINGTON POST”:  Almost everything.  This is the greatest threat since Musharraf led his military coup in 1999.  This is a moment also that‘s a challenge for the United States.  There‘s so much at stake for both leaders.  The fact is, the United States counts on Musharraf to lead the counterterrorism campaign against al Qaeda and its affiliates in the tribal areas along the Pakistan/Afghan border, and this kind of destabilization, this diversion, political diversion, this political crisis distracts everyone from that task.

MATTHEWS:  Well, this is the question I have.  Musharraf, is he going to be our guy, or is Benazir Bhutto going to be our woman?  Who‘s the American ally in that fight?  Who are we banking on?  Who are we going to put our money on?  Who do we hope is running that place a year from now?

WRIGHT:  Well, up until this crisis began, the United States was counting on the two of them to come together and form a kind of coalition government with Benazir Bhutto, hopefully, emerging as prime minister in January elections and Musharraf retaining the presidency, but that clearly is now in doubt.  The fact is that Bhutto is emerging as an opposition figure to Musharraf.  That throws out the American plan, and they‘re really starting from scratch.

In the meantime, there‘s concern about whether Musharraf can even survive this crisis.  The United States for now is saying that they believe he can weather the storm and they‘re sticking with him.  But I would not be surprised to see a senior American official head to the region some time within the next couple of weeks.

And in the meantime, the American ambassador in Islamabad is reaching out to a lot of generals, a lot of civil society leaders, a host of people because the greatest thing the U.S. fears is not the loss of Musharraf but a political vacuum that would lead to internal chaos and uncertainty about who leads that country.

MATTHEWS:  OK, let me go to Bob Baer, who‘s on the phone right now.  Bob, who do you think is going to win this fight, and who should we be rooting for?

BOB BAER, TIME.COM, FORMER CIA OFFICER:  I think very selfishly we have to root for the army.  Pakistan is essentially an artificial country run by military dictators and has been for years, and we depend upon the military in our counterterrorism fight.

Yes, we‘d like have democracy.  Yes, we‘d like to have a strong government and the rest of it . But at the end of the day, it‘s a counterterrorism fight.  It was Musharraf who captured Abu Zubayda, Khalid Sheikh Mohammed and the rest of them.  What I‘m scared about is that this artificial country breaks up into pieces and that there‘s some sort of dissent in the military.  Then you have generals picking sides, maybe Bhutto, maybe somebody else.  It doesn‘t really matter.  So what we really have to watch for is the military holding.

MATTHEWS:  Well, let me ask you about this.  Why do we keep telling Musharraf to take off his uniform?  The minute he takes off his uniform, he‘s no longer head of the army.  He‘s of no power in that country.  Why are we asking—making a demand of a guy that means to eliminate him, basically, politically, if not personally eliminate him?

BAER:  Well, Chris, it‘s dishonest foreign policy in a way because the last time we...

MATTHEWS:  It seems like it.

BAER:  We called for democracy in Gaza and we got Hamas, and we don‘t know what to do about it.  And apparently, we haven‘t learned our lesson.  We could get the same sort of government in Pakistan, or parts of it, at the very least, where you have something much worse than Musharraf.  But this administration, since it‘s failed in Iraq, is still holding onto this notion that the Middle East can magically turn into countries of democracies.

MATTHEWS:  Let me go back to Robin Wright.  Robin, you‘ve been—I‘ve been following your career as a journalist for forever, and I just want to know your estimate of this situation.  You know, for years we wanted countries to just hold the line, keep charge of things, reduce the banditry and leave their neighbors alone.  That was our dream.  Now we‘ve got this new neoconservative philosophy, which is go into these countries at gunpoint, hold elections and hope that somehow they‘re going to vote American, or pro-American or whatever.

What is—what is your thinking as an analyst of this region as to the advisability of telling Musharraf to give up the power he has as commander of the army?

WRIGHT:  Well, I think that‘s really the only alternative.  The fact is, he‘s an unpopular leader, and to try to retain all the powers of both the military and the executive branch of government is just not viable.  And I think that you‘ve seen that in the challenges from the supreme court.  He really has to find some means of returning to the path that had been charted.

It‘s going to be unstable for the foreseeable future, but the question is how much instability.  I think Bob Baer is right that the military holds many of the cards.  I think if Musharraf goes too far, then one of the many options that are out there is that his deputy or another military general tries to step in.  The tragedy is, of course, that that then is another military coup, and that long-term is not a solution, either.

MATTHEWS:  Well, people have been telling me today—the people I‘ve been able to get ahold of—that Bhutto, Benazir Bhutto, is our person out there.  Is that your reading, Robin, she‘s our girl, if you will?

WRIGHT:  Well, she‘s clearly the most pro-American politician.  But after all, Musharraf has been a close ally since 9/11.  I think they‘re both America‘s players, and I think in some ways, that‘s what makes them unpopular.

MATTHEWS:  Let me ask the same question to Bob Baer.  Is Benazir Bhutto our girl, our person in Pakistan, in Islamabad?

BAER:  I think absolutely.  She‘s reasonable.  She‘s secular.  But can she withhold the chaos in that country?  That‘s the question.

MATTHEWS:  Could she ride the tiger?

BAER:  She‘s on the tiger now, and I don‘t think she‘s going to survive it.

MATTHEWS:  OK.  Let‘s take a look at her—we had her on HARDBALL a couple years ago, and I asked her about democracy in that region of the world by raising the issue of our success—or let me president it this way, our difficulties with success in Iraq.

(BEGIN VIDEOTAPE)

MATTHEWS:  Is that true, that you can‘t deliver democracy by paratrooper, we can‘t drop into Baghdad and say, Here, we got some books on democracy, we want you to turn into a democratic country?  Is that a feasible scenario, that we could deliver democracy by force?

BENAZIR BHUTTO, FORMER PAKISTANI PREMIER:  Democracy cannot be delivered by force, but I would like to say that people inside countries are hostages to authoritarian regimes.  And if they‘re asked, they want democracy.  People in Pakistan want democracy, and I know that people all over the Muslim world would like to see gender equality.  They‘d like to see free competition.  They‘d like to decide the future of their own nations.

(END VIDEO CLIP)

MATTHEWS:  So Robin, can this woman we‘re listening to here on that old tape, can she be the democratic leader of a democratic Pakistan without succumbing to the real radical elements like al Qaeda?

WRIGHT:  Look, I‘m not sure she has the electoral strength to be the leader of the country in democratic elections.  I‘m not sure that she is going to get power any other way.  And so I think she‘s a significant player.  Her position may be strengthened by being seen today as the opposition to Musharraf and the only one who‘s home to do that.  Other key leaders are outside the country.  So she‘s going to be a player for a while, but it‘s just a degree of how much—I doubt that she can succeed Musharraf.

MATTHEWS:  You know, for years, Robin and Bob, I‘d listen to the BBC on the radio when I was over in Africa, and I used to hear report after report of the British Broadcasting Corporation, the sort of neo-colonial mentality, Well, conditions are in stable in the Lebanon.  Conditions are stable in the Argentine.  Do we hope now, basically, as an older country, as we‘ve become an older country, we simply want stability in that region?  Or are we still aiming for some sort of democratization of that part of the world, Robin?

WRIGHT:  There‘s no issue that challenges us more in facing the issue of stability versus democracy than in Pakistan.  The reality is we would like to see democracy, but what we really need stability.

MATTHEWS:  Your thought on that, Bob?  Is stability our goal?  Have we become an old power and we‘d just like things to settle down?

BAER:  I agree with Robin.  We want things to settle down first. 

Democracy comes later.  It can‘t come first right now.

MATTHEWS:  OK, thank you, both of you, the experts.  Thank you, Robin Wright.  Thank you, Bob Baer.

Coming up tonight at 7:00 Eastern, the HARDBALL “Power Rankings,” the final week, by the way—the last of the week, I should say.  And tonight we‘re putting it all together to figure out—I‘ve done it—who‘s got the best shot at the White House—the White House right now.

It‘s a lot easier to figure this out, David, than it is to figure out Pakistan...

(LAUGHTER)

MATTHEWS:  ... because at least we know who the candidates are and we know that one of them‘s going to win.  That is a fairly good estimate.   One of the people we talked about all week—Hillary, Obama, Giuliani, Romney, Edwards—one of those people is probably going to win next time.

DAVID SHUSTER, HARDBALL CORRESPONDENT (voice-over):  Yes, but Chris, I like this night—this 7:00 o‘clock—better than any other this week because for the first time, you‘re taking the two conferences, the Democrats, Republicans, you‘re putting them together and you‘re having to make a decision, would Hillary beat Rudy Giuliani?  Would John Edwards beat Rudy Giuliani?  There‘s an argument to be made that the Republicans, that the wind is against them, and yet Giuliani remains very popular and Hillary Clinton can‘t somehow get above 50 percent in likability.  So to list all the candidates from both the Republicans and the Democrats, put them together—this one is going to be great.  I just wish we had a camera in your office...

(CROSSTALK)

MATTHEWS:  ... Muhammad Ali, like—you‘re a kid from the ghetto, but you got to do this.  Now, you‘re telling me I have to pick this tonight, right?

SHUSTER:  You have to pick...

(CROSSTALK)

MATTHEWS:  You advised me...

SHUSTER:  And I wish we‘d had a camera in your office today for the two hours when we were arguing over this because there are so many great arguments.  And the other thing about it, Chris, is...

MATTHEWS:  And by the way, do you sense something changing, or do you go with what‘s going on right now that you can feel, or do you go with what you think might be going on, like, over the weekend, into next week?  I think I‘m going to go with what I see tangibly now tonight and what I can look at and defend and say, This is hard evidence of what‘s going on.

SHUSTER:  It‘s hard evidence now, and I think that‘s why it is smart for us to be doing it again on Monday at 7:00 because things are going to change pretty quickly.  We‘re now just 55 days until Iowa.  There‘s a huge Jefferson and Jackson dinner in Iowa this weekend.  Barack Obama is on “Meet the Press.”  There‘s a set of new New Hampshire polls that are coming out.  John McCain is starting to stick it to Rudy Giuliani.  All of this becomes even more fluid, and to take all of that and try to make sense for the general election, that‘s where it gets...

MATTHEWS:  I heard about a poll—I got word on a poll today that I can‘t even talk about until Sunday, so we‘re going to have to use that on Monday.  But there‘s lot of fire aimed at Hillary Clinton right now from both sides of the political wars, and there‘s a lot of pressure on her to do well at that J.J. dinner tomorrow night in Iowa.  She‘s under fire.  This campaign has begun.  It is hot right now, and she‘s the one right at ground zero.  Nobody‘s going to take hot—heat more than she‘s going to take it in the next couple of weeks.

David Shuster, you got that Christmas morning look on your face.

(LAUGHTER)

MATTHEWS:  I love it.  Anyway, tune in at 7:00 Eastern for the HARDBALL “Power Rankings,” the complete “Power Rankings” as we put together and tell you who has the best shot to win the White House right now.

Up next, one of the top Republican candidates for president, Senator John McCain, is coming here.  And he‘s bringing his mom, Roberta.  You know, what an interesting alliance this is going to be.  Anyway, the McCains—there they are!  Isn‘t this great?

You‘re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL.  Republican presidential candidate and U.S. senator from Arizona John McCain has been hitting the campaign trail up in New Hampshire with a new ally, his 95-year-old mother, Roberta.  Welcome to both of you McCains.  Senator, thank you for joining us.  I want you to talk about New Hampshire and why it‘s important to your campaign.

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE:  Well, thanks for having us on.  And I did finally have to roll out the secret weapon here on my right, and there‘s no doubt now of our chances of success.  Any questions about my genes or my age certainly ought to be dispelled.

(LAUGHTER)

MATTHEWS:  OK.  You‘ve raised the issue.  You‘ve raised the issue, Senator.  I want to ask your mother, Roberta—Mrs. McCain, Roberta—who has—which genes does your son hold, yours or your late husband‘s?  Which genes are predominant with this gentleman, this young fellow to your right?

ROBERTA MCCAIN, SEN. MCCAIN‘S MOTHER:  Well, you can answer your own question.  You can look at me and find out.

MATTHEWS:  What do you think?  He looks like you.  Doesn‘t he?

ROBERTA MCCAIN:  Unfortunately.

(LAUGHTER)

ROBERTA MCCAIN:  I think—I don‘t know where those genes come from.

SEN. JOHN MCCAIN:  But my grandfather, my mother‘s father, he was—how old was he?

ROBERTA MCCAIN:  Ninety-eight, I think.

SEN. JOHN MCCAIN:  Ninety-eight.  And so there‘s a long line there.  But my mom is very vigorous.  She spends 16-hour days with us.  She shakes hands.  She does a great job.  And you know, my friend, Tom Ridge, was campaigning with me this morning and she wore him out and he had to leave.

(LAUGHTER)

SEN. JOHN MCCAIN:  Anyway, we‘re doing fine.  Our—in New Hampshire, Chris, we‘re seeing an increase in enthusiasm, the town hall meetings.  People are paying attention.  We‘ve got a long way to go.  There‘s a lot of work to do, but I‘m pleased with where we are and kind of a solid second place in the last four national polls, and we are coming up here in New Hampshire.

I think you know very well that the people in New Hampshire want to examine the candidates and just buying media doesn‘t get it.  And is New Hampshire important?  Of course.  Since 1980, whoever has won two of the three of the first three—Iowa, South Carolina and New Hampshire—has been the nominee of the party.  And I don‘t see that being any different in this election, particularly the fact that it‘s so crowded into such an early stage that the earned media from those three states I think has a significant impact.

MATTHEWS:  Well, let me—I think, down the road, your good gene pool probably suggests that, if worse comes to worst in this race, you get to be the next Carl Hayden. 

(LAUGHTER)

MATTHEWS:  And you get to be senator for life, for a long life, from Arizona.  I think he served until he was 90, didn‘t he, that guy?  Something like that. 

J. MCCAIN:   I think he was...

MATTHEWS:  Let me ask you about...

J. MCCAIN:  Yes.  Yes. 

MATTHEWS:  Yes. 

Let me ask you about the tough fight, getting serious here.  It seems to me that, if you look at this campaign, the shape of the race, it‘s you against Giuliani in New Hampshire, because, if he gets in your way, and you can‘t get at least get second up there, it‘s tough for you from then on.

If, however, you can beat Giuliani in New Hampshire, getting a first or a strong second, you can move on to South Carolina and win another one.  So, it seems to me that like the gunfight at the OK Corral is going to be up where you‘re at right now. 

J. MCCAIN:  I—I think that‘s probably true. 

We—we‘re working hard in Iowa as well and—and in South Carolina.  But don‘t forget that Governor Romney has had a lot of money spent on television advertising.  And he‘s got a good organization here.  I see that Fred Thompson still has some popularity. 

One—one thing I really get from this situation is that a lot of people, not unlike previous elections, have still not made up their minds yet.  And you could see swings one way or the other here as late as the beginning of January. 

MATTHEWS:  Let me ask Mrs.—Mrs. McCain what your feelings are about this race. 

Your son, as you know, won the New Hampshire primary back in 2000, which is seven years ago, which is a lifetime.  And now he‘s come back, after a lot of action the last seven years politically, a—an alliance with the president, who he beat up there.  And now he has got to go back and replace Bush as the next president. 

What do you feel about this election? 

R. MCCAIN:  I think he‘s going to win it.  And the main reason he‘s going to win it is, he‘s the only qualified candidate in the entire lot. 

You consider over 20 years in the military, four years in Congress, and over 20 years in the Senate.  Compare that record of serving his country as the records of the other people, and it‘s no—it‘s not even to be discussed. 

(LAUGHTER)

MATTHEWS:  So, you don‘t think Romney has done...

J. MCCAIN:  You see that, Chris?  Have you got that?

MATTHEWS:  You don‘t think Romney has done—I heard it all. 

You don‘t think Romney has done much heavy lifting for America, then? 

R. MCCAIN:  No, I don‘t. 

I think being senator—a congressman, a senator, whatever it was—a governor for four years, and as far as the Salt Lake City thing, he‘s a Mormon.  And the more Mormons of Salt Lake City had caused that scandal.  And to clean that up, I—it‘s not even—again, it‘s not a subject. 

J. MCCAIN:  The views of my mother are not necessarily the views of mine. 

(LAUGHTER)

MATTHEWS:  Now that you have raised the religious issue...

R. MCCAIN:  Well, that‘s my view.  And you asked me.

MATTHEWS:  Look, what about Giuliani?  And what do you think of Giuliani and his judgment of people, Mrs. McCain? 

R. MCCAIN:  I‘m not judging Giuliani. 

I am studying very carefully his background and what he‘s accomplished.  And I think it‘s very little, compared to the great accomplishments that my son has given to this country. 

MATTHEWS:  Senator McCain, what do you think of Giuliani‘s judgment in regard to Bernie Kerik, the man he put up for homeland secretary? 

J. MCCAIN:  Well, Chris, the only—my only comment is that I went to Baghdad shortly after the successful invasion and met with Bremer and Sanchez and—and Bernie Kerik.  He was over there to—to build the Iraqi police.  He stayed for a couple of months and—and abruptly left. 

That‘s—that‘s not—and, of course, as you know, the effort to build the police in Iraq at that time failed completely.  As Tom Ridge said this morning, as he was with me, he said that that—that‘s not the person that he would have recommended to be head of the Department of Homeland Security. 

MATTHEWS:  You know, everybody agrees, when you look at the situation in Iraq, that we should have had a bigger army over there once we went in.  If we were going to go in, we should have gone in stronger, like you advised and—all along—and Colin Powell always advised with regard to overwhelming force—but that the police situation is the worst.  It‘s the most corrupt.  It‘s an absolute failure for so many years now. 

Is Bernie Kerik responsible for that, the failure to—I mean, the fact that he bugged out?

J. MCCAIN:  No.

But he had a job to do, and, obviously, that—that he didn‘t do it.  But I can‘t blame it all on him.  I think the whole scenario was badly broken.  It was badly carried out.  Look, books have been written, like “Cobra II” and “Fiasco” and others, that are—that chronicle all these failures.

But one of the failures that not—it wasn‘t just the Iraqi army, but the Iraqi police as well.  And, frankly, the national police today are probably one of our largest challenges because of the infiltration of Shiite militias. 

So, you can‘t blame it—blame it on Bernie Kerik.  I think it‘s a succession of failures.  But, clearly, he had a job over there and decided to leave. 

MATTHEWS:  OK.

We will be right back with Senator John McCain and his mother, Roberta McCain. 

And later:  Bill Clinton defends Hillary against Barack Obama‘s charge that she‘s hung up in the 1960s.  He doesn‘t like boomers, I guess. 

You‘re watching HARDBALL, only on MSNBC.  

(BEGIN VIDEO CLIP)

BILL CLINTON, FORMER PRESIDENT OF THE UNITED STATES:  Hillary and I, maybe we‘re just artifacts.  Sometimes, I hear some of these other candidates talking, and it‘s like they make me feel like I‘m a mummy. 

(LAUGHTER)

CLINTON:  I mean, I‘m only 61.  I don‘t think I have got a leg in the grave yet. 

(END VIDEO CLIP)

(COMMERCIAL BREAK)

MATTHEWS:  We‘re back with Senator John McCain, out on the campaign trail with his mother, Roberta McCain.

MATTHEWS:  Mrs. McCain, what do you think drives your husband (sic), why he tries so hard to lead the country?

R. MCCAIN:  Are you speaking of my son or my husband?

MATTHEWS:  I‘m talking to you, Mrs. McCain.

J. MCCAIN:  She‘s talking about me.

MATTHEWS:  I think he wants to serve.  I think he sees an important role that he can play to help this country.  And I think we need a strong leader who—he‘s always followed every principle that is important.  And I just think that he feels it‘s—well, put it this way.  I think he really wants to serve God and his country, and that‘s all he wants or needs or is looking for.

MATTHEWS:  Well, that‘s a good thing to say.

Senator McCain, you are a very young man, I think, and your genetic disposition here is very impressive.  It looks to me like you have many years ahead of you as a healthy American.  And I guess this is the point you want to make.

Let me ask you this.  Do you have to do well in New Hampshire?

J. MCCAIN:  Yes, I do. 

And could I just reemphasize one quick point?

MATTHEWS:  Sure.

J. MCCAIN:  I think that Mormons are great people.  I think that is should no way be a factor in consideration of lack of consideration for Governor Romney.  I think that it should never be a consideration.  And I know that he will be judged on his record.  He‘s a fine and decent man and a fine family man.

I think New Hampshire is very important.  I could draw you a scenario, Chris, where we could win Iowa and South Carolina.  But as we said at the beginning of the program, the one who has won two out of the three since 1980, of the first three, has been the nominee of the party.  And I don‘t see that being any different this time. 

I know New Hampshire.  we have been working hard in Iowa.  I just came from Iowa and I will continue to work hard there.

But we also have a lot of friends here in New Hampshire, as well as South Carolina. 

It‘s going to be hard work, and I don‘t know how all this scenario stacks up, because a lot of it out of Iowa is the expectations game, as you know.

MATTHEWS:  Well, I hope anybody out in Utah doesn‘t take any offense to what Mrs. McCain said.  I think she was just looking out for her husband, and I take it with a good heart.  And I think the Olympics were screwed up before that guy took charge of them.

Anyway, thank you very much, Senator John McCain. 

And thank you, Mrs. Roberta McCain.

Up next: the back-and-forth between the Barack Obama and the Clinton camp rages on.  This is the real fight here right now.

Here is Barack Obama firing back at former President Clinton. 

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE:  We‘re focused on trying to deliver a message of the kind of president I would be and why I think I would be the best nominee for the Democratic Party. 

UNIDENTIFIED MALE:  Thank you. 

OBAMA:  And, you know, my understanding is, President Clinton is not on the ballot. 

(END VIDEO CLIP)

MATTHEWS:  We will get into that fight.  I can‘t wait to see this.  He‘s not only going after Hillary.  He‘s going after Bill.  And he‘s going to—we‘re going to tell you what‘s new out there.

You‘re watching HARDBALL, only on MSNBC.  

(COMMERCIAL BREAK)

MARGARET BRENNAN, CNBC CORRESPONDENT:  I am Margaret Brennan with your CNBC “Market Wrap.”

Another sell-off on Wall Street Friday.  The Dow Jones industrial average plunged 223 points.  For the week now, the Dow was down more than 550.  The S&P 500 fell 21 points today.  The Nasdaq dropped 68. 

The selling started when Wachovia announced it suffered a $1.1 billion loss in October from subprime mortgages.  J.P. Morgan also warned of more write-downs.  And Bank of America warned about fourth-quarter earnings.

Meantime, cell phone chipmaker Qualcomm triggered the sell-off in tech stocks by cutting its earnings forecast.  That helped drag down Google, Apple, and BlackBerry-maker Research In Motion.

Oil gained 86 cents in New York‘s trading session, closing at $96.32 a barrel. 

And Merck agreed to pay nearly $5 billion to end thousands of lawsuits over its painkiller Vioxx.  Merck shares rose 2 percent in trading today.

That‘s it from CNBC, America‘s business channel—now back to

HARDBALL. 

MATTHEWS:  Welcome back to HARDBALL. 

So, what else is new out there?     

Well, is Bill Clinton trying to run his—to ruin his wife?  First, he said she was getting swift-boated.  Now he‘s reminding everybody of their joint disaster. 

(BEGIN VIDEO CLIP)

CLINTON:  She has taken the rap for some of the problems we had with health care last time.  They were far more my fault than hers. 

(END VIDEO CLIP)

MATTHEWS:  Mr. President, do you think it makes your wife look like commander in chief to have you come, time and again, to her rescue?  It doesn‘t.

You know, movie buffs can tell the class horror movies from the low-rent horror movies.  In the class horror movies, the female under threat gets herself out of trouble.  In the B-movies, some guy always comes along to rescue her. 

What kind of a story is Bill Clinton trying to tell?  Interesting. 

Better she should look out for herself. 

Anyway, if she does caught by Barack, how can she catch bin Laden? 

Bill Clinton also gave a new opening to Barack Obama himself today, who has been suggesting that Hillary is from the wrong generation, i.e., she is too old. 

(BEGIN VIDEO CLIP)

CLINTON:  Hillary and I, maybe we‘re just artifacts.  Sometimes, I hear some of these other candidates talking, and it‘s like they make me feel like I‘m a mummy. 

(LAUGHTER)

CLINTON:  I mean, I‘m only 61.  I don‘t think I have got a leg in the grave yet. 

(END VIDEO CLIP)

MATTHEWS:  What‘s with the George Burns imitation?

(LAUGHTER)

MATTHEWS:  Anyway, it gets better.

Here‘s Obama hitting Clinton back, Bill Clinton. 

(BEGIN VIDEO CLIP)

OBAMA:  We‘re focused on trying to deliver a message of the kind of president I would be and why I think I would be the best nominee for the Democratic Party. 

UNIDENTIFIED MALE:  Thank you. 

OBAMA:  And, you know, my understanding is, President Clinton is not on the ballot. 

(END VIDEO CLIP)

MATTHEWS:  Well, this is something I thought he ought to do, which I to take on Bill himself.  You know, you always win by fighting up.  And taking on the former president is definitely fighting up in the Democratic Party.

So now to our roundtable to chew over some of this.  David Gregory, of course, is chief White House correspondent for NBC News.  Ron Brownstein is a columnist with “The National Journal” and he is the author of the new book “The Second Civil War: How Extreme Partisanship Has Paralyzed Washington and Polarized America,” and a columnist for “The National Journal.”  And Anne Kornblut joins us from the “Washington Post” newsroom. 

I have always said, by the way, that you, sir, are the best print political guy in the country right now. 

RON BROWNSTEIN, THE NATIONAL JOURNAL”:  Thank you.  Thank you. 

MATTHEWS:  You‘re the smartest guy around.  And it‘s great to finally have you on. 

I know how to get you on, have you write a book.  And here‘s your book.  It‘s called “The Second Civil War.”  And we will talk about that in a minute.  

Let‘s talk about this interesting thing.  I have been hoping that these guys would get at it.  They‘re getting at it.  Hillary, Bill and Obama are all going at it. 

BROWNSTEIN:  First of all, I love your Jamie Lee Curtis theory of presidential politics from “Halloween.”

(LAUGHTER)

MATTHEWS:  Well, it‘s true.

(CROSSTALK)

BROWNSTEIN:  She‘s the embodiment of—isn‘t the—there it is.

MATTHEWS:  It absolutely is true.

If the girl or a woman saves herself from the bad guy...

BROWNSTEIN:  That‘s a class movie. 

MATTHEWS:  ... it‘s a class movie.  If some guy has got to come along and save her, it‘s a cheapo. 

BROWNSTEIN:  Sarah Michelle Gellar and Jamie Lee Curtis.

MATTHEWS:  OK.  

BROWNSTEIN:  All right. 

So, look, the gong has gone off.  I think we have reached—clearly, in that debate, the Democratic debate, we reached the moment...

MATTHEWS:  In Philly. 

BROWNSTEIN:  In Philly.

It was kind of the speak now or forever hold your piece moment for the other candidates.  Hillary Clinton has amassed a big lead in the national polls, in the early New Hampshire polls, not so much in Iowa.  And the moment had come for the candidates to begin to engage with her.  And they have. 

They‘re making some difference.  And now we will see.  She has run a very good campaign up until now, but she really hasn‘t been tested.  This is the moment. 

MATTHEWS:  Remember the legacy—none of you guys are old enough to remember.

But, David Gregory, there was in fact that case in the 1972 campaign when Ed Muskie cried.  David Broder said he cried.  All of a sudden, all the old stories about Muskie maybe drinking too much, having a temper problem, all of sudden, they came to fruition.  Muskie has got a problem. 

Hillary‘s waffling on all those issues, not just the driver‘s license issue, but all those issues, like Social Security, Iraq, Iran, which have been shown in freeze-frame in all these debate—in all these campaign ads and YouTubes, is that her moment, where she showed something that didn‘t look good? 

DAVID GREGORY, NBC WHITE HOUSE CORRESPONDENT:  Well, it clearly pointed up what is a negative for her and that what people are noticing is that she‘s evasive, that she‘s cautious. 

In the end, is that really going to matter?  I don‘t know.  I still think that this is an election about strength and toughness.  And I think Democrats, while still fighting the last war, fighting the last election, she understands that that‘s how she has to position herself in an election that is still about security.  But the point about Bill Clinton I think is significant, in that he is becoming an equal in this race.  He‘s becoming a principal.  He does not want to become a principal. 

MATTHEWS:  Why is he talking so much? 

GREGORY:  Because I think he doesn‘t know how not to.  He‘s so good.  He‘s so effective.  He can be such a strong advocate.  Very difficult for a political mind like that to stay silent.  He may see utility in saying, no, really it was me.  It was not her.  But, again, he can‘t become a principal or else people are going to start to say, we are getting two for one again.  Is that what we want to return to. 

MATTHEWS:  The loyal Democrats—Let me go to Ann Kornblut.  You‘ve been out there covering these people.  Loyal Democrats, I mean the people who will vote for Hillary, no matter what happens throughout this primary season, do they want them back together?  Are we making an assumption that they don‘t want a Bill and Hillary presidency, or a Hill and Billary (sic) presidency?

KORNBLUT:  That‘s exactly right.  That‘s the other side of the same coin, is that during a Democratic primary, when the campaigning is tough in Iowa, having Bill Clinton out there is in no way a negative for her.  The question is, is it going to remain a positive during a general election?  And does, as you were saying earlier, it give her rivals, especially Barack Obama, an opening to go after both of them, to aim upward, as you said.  It seems, at this point, that he already has begun to, for one on health care. 

We didn‘t play this clip yet, but Obama said that if Hillary is going to take credit for having the scars for having fought health care, well then she has to have the scars.  It can‘t be that Bill Clinton—it‘s really his fault and he‘s coming in to rescue her. 

MATTHEWS:  Are people going to root for Barack because he‘s getting double teamed here? 

BROWNSTEIN:  In a Democratic primary it is complicated, because, on the one hand, as David said, by and large—

MATTHEWS:  Pakistan is complicated.  We can figure this out. 

BROWNSTEIN:  Democrats are—Democrats are clearly positive toward the Clinton years.  And in fact, the country; he left with a 60 percent approval rating.  That doesn‘t mean people want to resume and start running through all of the controversies again. And that‘s a thin line she has to walk, because if people feel like that‘s what they‘re getting again, that‘s not going to be very popular. 

MATTHEWS:  Every night we get this bad news on the stock market.  People are thinking, hey, let‘s go back to the ‘90‘s.  I think it looks like a soft situation to go back to the ‘90‘s now, a market that was going up. 

GREGORY:  Right.  You raise the right point, which is, it‘s not that people aren‘t saying, hey that makes sense to go back to the ‘90‘s.  It‘s why feed Obama the narrative that he wants to sell, which is that it‘s time to turn the page, not return these guys, especially since they‘re both going to be running it at once.  Now, of course, that‘s not true.  But Hillary Clinton has all the capacity to run this by herself.  She is tough as they come, as prepared as they come, as strong as they come.  I separate the two out, strength and toughness. 

She can handle all this, despite a hiccup in that last election (ph). 

She should let herself rip. 

MATTHEWS:  Suppose they had come out of the Philadelphia debate a week ago, with Tim moderating and Brian moderating—instead of immediately issuing some papal bull to Drudge, how they had to blame the moderator—then they had to blame the other panel—the other candidates.  Then they had to blame Swift Boating.  Instead of acting like they had just been destroyed and needed to blame somebody, suppose they had just come out and said, we‘ll dust ourselves off.  Hillary can handle this.  She‘s back in the fight tomorrow. 

BROWNSTEIN:  Much better. 

MATTHEWS:  Why she just do that?

BROWNSTEIN:  Probably they haven‘t had a bad—I said before, they really haven‘t had a bad day in this campaign until then.  I think their reflexes and their muscles weren‘t really developed for dealing with it.  Look, this is now going to be a race.  She‘s not going to have a coronation.  She‘s going to have a fight for the next three months, and we will see whether she is as tough and prepared and resilient a candidate as she has seemed to be at times. 

MATTHEWS:  Did you want to say something, Ann?  I heard you there.

KORNBLUT:  Yes, I would say it‘s really remarkable that more than a week and half after that last debate we‘re still talking about that last debate. 

MATTHEWS:  Because of the Clintons. 

KORNBLUT:  And because of their inability to really manage the story line, as they have been able to do.  It wasn‘t much of a tough hit.  I think we saw in the “Des Moines Register” this week a story about if this is piling on, she better get ready.  This wasn‘t much of an attack on her.  And yet, going into the next debate, we‘re still talking about it.  I think it‘s pretty remarkable. 

MATTHEWS:  OK, I think it‘s like one of those fouls in basketball, where the guy acts like he was hit and he was hit.  Anyway, we‘ll be right back with the round table.  This is HARDBALL, only on MSNBC.  We‘ll talk about the Republicans when we get back here. 

(COMMERCIAL BREAK)

MATTHEWS:  We‘re back with the round table.  Let‘s talk—we‘ve got Ron Brownstein here, who has written this amazing book that everybody is talking about in politics, “The Second Civil War.”  It‘s about the polarization of this country politically.  When you look at Barack Obama, who‘s this young pup politically, brand new, no scar tissue, sort of a young Jack Kennedy, can he unite the country any better than Hillary can? 

BROWNSTEIN:  Isn‘t it one of the fascinating things in this campaign; eight years after Bush ran as a uniter, not a divider, we have Democrats and, for that matter, some Republicans arguing about who can bring the country together, an extraordinary for the candidates to be debating.  Obama basically argues that he‘s a fresh face.  He‘s not coming in with all the baggage, all the scars of the—

MATTHEWS:  No ‘60s stuff. 

BROWNSTEIN:  No ‘60s stuff.  But, in a strange way, I look at him and Hillary Clinton as almost inverse sides of the coin.  His advantage, in terms of trying to bring the country together after Bush, is precisely that; he doesn‘t have baggage.  He‘s fresh.  Her advantage is she has the experience of being through the wars and having some ideas about how to avoid them.  And I look at her health care plan, Chris, which I thought was very adroitly drawn to try to neutralize the biggest sources of opposition she faced last time, the insurance industry, the small business lobby. 

So, in some ways, she has an advantage.  And I think she has kind of an understanding of where things went off the rails and how we‘ve gotten so polarized.  His advantage is that he doesn‘t come in with—if he does come in—with 48 percent of the country having a deep, strong view about him. 

MATTHEWS:  You know this, the Clintons—Hillary Clinton has this number I just looked at the other day, we all saw it.  Fifty five percent of married men in the country say they‘ll never vote for her under any circumstances.  Doesn‘t she walk into the White House really a pariah amongst so many people? 

GREGORY:  Well, and polarized—and at a time when Americans are debating about why we didn‘t have a debate, you know, in this country about war and other things. 

MATTHEWS:  She was one of the people who didn‘t need a debate. 

GREGORY:  Right.  I think what Ron writes about, the hyper partisanship, we‘re going to get into a new era of this.  But at the same time, this is the argument for engagement on the part of the public.  If you step back and allow others to be engaged, there are so many forces at work, entrenched interests, as John Edwards might say, that they will decide this process for you.  It will be a totally partisan, divided process. 

We have so many issues, whether it‘s the environment or war, other things, that call for—

BROWNSTEIN:  We‘re not going to—

(CROSS TALK)

MATTHEWS:  You know, Ann, on this network, I just look at this thing -

I look at O‘Reilly.  I look at Keith.  Everybody is choosing up sides.  I mean viewership.  You find—This show is somewhat vague on issues, not that vague.  But, you know, most people are looking for absolute—they want the Blue Plate Special on the left, and they want the Blue Plate Special on the right.  They want it all, on the courts, on abortion, on gay rights, on the war.  They want it all to conform to their thinking or they won‘t watch the show. 

KORNBLUT:  Look, it is true on the television ratings.  It‘s true for the most—it‘s true for the most sold on the book list.  People have tended toward the polarization at this point.  To your earlier point about Hillary Clinton, she actually, it seems to me, gets it both coming and going.  To the partisans on the left, she‘s been too conservative.  She voted for the war in Iraq.  She is now seen as hawkish on Iran.  When it comes to her health care plan, as Ron was saying, she is either able to compromise with the insurance industries and the drug companies in a way that would help actually get it into effect, or she‘s compromising her ideals.  So she gets—

MATTHEWS:  Did something happen—Ann, did something happen during that debate in Philly last week, whereby somebody said, whether it was one of the smart guys, Mark Penn or Mandy Grunder (ph), one of the sharp people in the campaign—did they decide based upon some sort of meter of a voter/viewer reaction to that debate that she had made a big mistake that night, and they had to come out of there blaming everybody, from the moderator to the other candidates, to the Swift Boaters?  Why did they come out in such an attack mode? 

KORNBLUT:  Well, I will say, they didn‘t let me in the room for that secret session.  But it‘s an old political trick, right, to come out of a debate like that not wanting to talk about what they‘re talking about and to go on the offense.  And, in their view, they felt that women were going to relate to her as having been a victim.  The fact that this has not turned out, I don‘t think, the way they wanted.  We are talking—

MATTHEWS:  But that‘s the hole card.  That‘s the ace in the hole.  The one you go to after it gets close in the end.  You don‘t go to the women card now.   

BROWNSTEIN:  I want to go back to David‘s point, when he was saying—no matter who the nominees are, we‘re going to have a hyper partisan election.  As I write about in the book, the forces that are driving this election are pretty powerful.  But I disagree with one thing.  Even though the ratings and best seller lists are choosing up sides, I think most Americans still would prefer a different kind of politics that allowed for more consensus and allowed us to move forward on—

MATTHEWS:  The young kids fall into the category? 

BROWNSTEIN:  No, none do.  And so the opportunity is probably not there in the election.  It‘s there though for the next election. 

MATTHEWS:  This book is an analytical book. 

BROWNSTEIN:  We‘ll find out. 

MATTHEWS:  I‘ve had some experience in that department.  Let me tell you, if you‘re not left or right, it‘s tough. 

BROWNSTEIN:  I don‘t think everybody has to choose sides between Michael Moore or Ann Coulter.  I think a lot of people are looking for a politics that‘s more reasonable.  Because, look, we are not able to resolve, whether it‘s immigration, education, environment, energy, health.  We‘re not able to resolve them in this kind of divisive politics we are in.  We‘ll need something different if we are going to get progress.  I think that‘s the task for whoever wins.

MATTHEWS:  We‘ll start with Dave when we come back.  We‘ve got a few more minutes on HARDBALL tonight.  Let‘s get back.  We‘re talking about this very turbulent week in politics.  Back with HARDBALL in a moment.

(COMMERCIAL BREAK)

MATTHEWS:  I want to get a little bit to the Republican side here, because it is more murky than the Democratic side right now.  Hillary is clearly in the advantage on the Democratic side.  On the Republican side, Romney has this great strength in Iowa and perhaps in New Hampshire.  But I‘m looking at this thing.  It looks to me, having had John McCain on tonight with his mother, that John McCain knows he has to beat Rudy Giuliani in New Hampshire to have a chance at being president of the United States, a job in which he has set his heart.  He has to beat Giuliani in New Hampshire, right? 

BROWNSTEIN:  I think he has to win New Hampshire.  Look—

MATTHEWS:  So is he willing to take out the butcher knife on Rudy Giuliani on Bernie Kerik, on these judgment calls by the former mayor. 

BROWNSTEIN:  My head has been swivelling all week, because every Republican has been attacking every other Republican in every other possible combination.  Unlike the Democratic race, which has a sun around which everything revolves, you know, so it‘s in or out, the Republican race is omni-directional because it‘s so fragmented. 

People are endorsing all over the place.  In mid-April, in Gallup polling, Hillary Clinton and Rudy Giuliani were both about 37 percent.  She‘s gone up to 50, which is a point which Walter Mondale and Ronald Reagan never got to.  Rudy has gone down to the low 30s.  The Republican race is fragmented.  That is the dominant reality.  There is no front runner.  So you have this kind of drive by shootings by all of the candidates against everybody else.  It‘s Hobbsian. 

MATTHEWS:  They‘re also in the same situation as the Democrats.  Everybody now knows this is game time.  Rudy has to fight to hold his position.  McCain has to regain his position.  And Romney has to keep spending money. 

GREGORY:  Right, and Rudy has to root for the guys who take down Romney, in that Rudy is the unique candidate in this race.  What he hopes is that all of Romney‘s strength is deluded by Fred Thompson, by Mike Huckabee.   

BROWNSTEIN:  But not too fast. 

GREGORY:  But, ultimately, that all that anti-Rudy vote gets cannibalized, so that he can come out of the ashes of a fractured race.  That‘s what he‘s rooting for. 

MATTHEWS:  Ann Kornblut, I want to ask you the toughest question of the night.  Do you think the Republicans may not get somebody to 50 percent, that we may have to go all the way to a convention to broker this thing? 

KORNBLUT:  I know that‘s what probably all of us sitting here would like to see, because it‘s a more exciting alternative.  At this point, it‘s hard to say.  I will say, it‘s interesting to see Rudy Giuliani—well all of the Republicans, certainly—but on campaign trail this week, Giuliani going after the Clintons, too.  Even in a fragmented race on the Republican side, as we‘re discussing, the one sure thing is that they‘re still also running against Hillary Clinton. 

MATTHEWS:  Can she take the heat, David?  If she gets hit day after day, starting now, going to next November, that‘s what I feared.  I fear it because this could be just a nasty process.  Hillary Clinton gets nominated early; she faces 11 months of fire.  The Republicans dick around all the way to St. Paul.  They don‘t have anybody to be shot at.  They don‘t have a clear cut ticket. 

GREGORY:  She‘s got all the preparation and toughness and experience to wither that.  Think about how far advanced she is as a candidate, compared to say George Bush in 2000.  She‘s got the goods to do it, if they don‘t make tactical mistakes along the way. 

BROWNSTEIN:  I‘m guessing, if it‘s Barack Obama or John Edwards, the Republicans don‘t spend nine months offering cotton candy.  Look, whoever is going to be the president in this hyper partisan environment is going to get there with a lot of scars.  And the opportunity to bring together the country is only going to come after they‘re elected.  It‘s hard to see it next year. 

MATTHEWS:  Jimmy Carter once said of the rabbi, who said, he who gave me burdens also gave me shoulders.  Perhaps we should end on that this Friday night.  Hillary can take it and so can womanhood.  Anyway, Ann Kornblut, thanks for joining us.  David Gregory and Ron Brownstein—the book is called “The Second Civil War.”  This is going to be a big one, even though it‘s nuanced and intelligent.  It can beat out those left wing and right wing screams. 

Join us again an hour from now at 7:00.  We‘ll have the complete HARDBALL power rankings.  We‘ve been working on them all week.  I blame some of this on Shuster.  But it‘s really my call.  Right now it‘s time for “TUCKER.”

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

END   

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