updated 2/22/2008 11:43:32 AM ET 2008-02-22T16:43:32

CHRIS MATTHEWS, HOST: Well, Clinton and Obama hooking horns in Texas.

Let’s play HARDBALL.

Good evening. I’m Chris Matthews.

And welcome to this late-night edition of HARDBALL.

Well, Hillary Clinton and Barack Obama faced off in a debate in Austin, Texas, tonight, less than two weeks now before the March 4 primaries.  They sparred over health care. Senator Clinton charged that Obama had Xeroxed part of another politician’s speeches, her charge that the voting and excitement about Obama is a departure from reality, and, of course, over Iraq.

Let’s take a look.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: On what I believe was the single most important foreign policy decision of this generation, whether or not to go to war in Iraq, I believe I showed the judgment of a commander in chief. And I think that Senator Clinton was wrong in her judgments on that.

SEN. HILLARY RODHAM CLINTON (D-NY), PRESIDENTIAL CANDIDATE: I believe that I am prepared and ready on day one to be commander in chief, to be the president, to turn our economy around, and to begin making a lot of these very difficult decisions that we will inherit from George Bush.  And that is what I am putting forth to the voters.

(CHEERING AND APPLAUSE)

(END VIDEO CLIP)

MATTHEWS: Well, did Senator Clinton make tonight a game-changer in this campaign, or did Obama end what had been Senator Clinton’s edge in all these debates? In a political sense, in terms of who is trying to do what, here’s the question: Who won tonight?

We will also take a look at the controversial “New York Times” story today linking John McCain to a female lobbyist.

But first, the debate.

Let’s bring in MSNBC political analyst Howard Fineman, Chrystia Freeland of “The Financial Times of London,” and—I love that.

(LAUGHTER)

MATTHEWS: And “Newsweek”’s Jonathan Alter.

Jonathan, it’s good other have you.

Let me start with Howard and then run through everybody here.

Your overall view. The question is not exactly even in this sense. One person had to change things tonight. Another person had to neutralize things from happening. What happened tonight?

HOWARD FINEMAN, NBC CHIEF POLITICAL CORRESPONDENT: Hillary didn’t change the dynamics of the race. I thought she did well. She did well in debating points. Obama parried most of her thrusts. Hillary had a beautiful close, in which she, I thought, indirectly, by reaching across the table to Obama and said—saying, it’s an honor to be on the stage with Barack Obama, whatever happens, I think was preparing herself, if not her supporters, for the eventual end of her race.

MATTHEWS: It was so classy.

Let’s go to Chrystia Freeland.

Same question to you, overall look at the night.

CHRYSTIA FREELAND, “THE FINANCIAL TIMES”: I agree with Howard.

I think the close was the best moment for Senator Clinton. What I think was important for Senator Obama was actually the health care debate and the point that Senator Clinton and her campaign has been trying to make, that he offers speeches, not solutions.

I think that health care exchange was really good for him, because he got involved in the detail and he was able to say: Look, Senator Clinton and I disagree, but I do have command of the detail. I do have command of policy.

So, I think that was a really important, detailed moment for him. I don’t think she managed to change things, and I think he managed to hold off that allegation that he’s only about eloquence.

MATTHEWS: Well, there’s nothing wrong with eloquence, as Jon Alter’s book will tell us, about the first 100 days of the Roosevelt administration.

JONATHAN ALTER, SENIOR EDITOR, “NEWSWEEK”: Thanks for the plug.

MATTHEWS: I think words do better. I think we would agree about that, you and I, Jon.

ALTER: Yes.

MATTHEWS: Who won tonight?

ALTER: Well, I think Obama won, because she wasn’t able to change this race. And he is showing increasing mastery as these things go on.

You know, he had one arrogant moment where he talked about how his speeches were good. And he needs to watch that. But, overall, he did quite well.

Her ending was terrific, but it had a valedictory feel. And I thought it gave you a sense that, if they lose Texas, she will be out on March 5.  And there’s even a slight chance, Chris—and I got this sense—that, if she wants to really go out classy, she will do what John Edwards did, who withdrew before Super Tuesday. And if this—the polls come out in the next couple days, and show that she hasn’t been able to regain some momentum, it’s conceivable that, playing for the long term, she could even get out sooner. And then that would be a shocker, and it would do her a tremendous amount of good in terms of her long...

MATTHEWS: Amazing, amazing assessment...

ALTER: ... in terms of her long-term viability.

MATTHEWS: ... from you, Jon. Would Bill Clinton, the former president, go along with a withdrawal in the near future? Would he put up with that?

(CROSSTALK)

ALTER: That’s the thing that is so fascinating about this is, they never quit. That’s their trademark, right?

MATTHEWS: Right.

ALTER: It’s like—it’s like the gun control, the anti-gun control people. You know, they say, I will give up my gun when you peel it from my cold, dead hands, you know? That’s the way the Clintons have been, and in everything they have done in politics. So, this would be a huge departure for her to do this. But, if she did...

MATTHEWS: But you predict it’s happening or it’s in the works?

ALTER: No, I’m not predicting it’s going to happen.

MATTHEWS: Right.

ALTER: I am saying that there was something in her tone that showed me that it’s at least conceivable, because the upside would be so huge. It would be such a shocker and it would serve her very well.

MATTHEWS: OK. Here’s what Jon is talking about, Jonathan Alter.

Here’s your view here. You think it might be valedictory. And

everyone judge for yourself. Here’s how Senator Clinton closed the debate tonight.

(BEGIN VIDEO CLIP)

CLINTON: No matter what happens in this contest—and I am honored, I am honored to be here with Barack Obama. I am absolutely honored.

(APPLAUSE)

CLINTON: Whatever happens, we’re going to be fine. You know, we have strong support from our families and our friends. I just hope that we will be able to say the same thing about the American people, and that’s what this election should be about.

(APPLAUSE)

(END VIDEO CLIP)

MATTHEWS: Well, it’s hard to argue with such warm words.

Let’s go right now and choose a point in the debate that did not work so well for Senator Clinton. Here’s where we took a shot, basically. Here’s a contentious moment, of course, in the debate, and actually what we used to call in the movie business a clinker.

(LAUGHTER)

MATTHEWS: Here’s Senator Clinton going after Barack Obama, her rival, on his use of other people’s words in his speeches.

(BEGIN VIDEO CLIP)

OBAMA: First of all, it’s not a lot of speeches. There are two lines in speeches that I have been giving over the last couple of weeks.

And the notion that I had plagiarized from somebody who was one of my national co-chairs...

(APPLAUSE)

OBAMA: ... who gave me the line and suggested that I use it, I think, is silly, and...

(APPLAUSE)

OBAMA: ... you know, this is where we start getting into silly season, in politics, and I think people start getting discouraged about it.

CLINTON: I think that if your candidacy is going to be about words, then they should be your own words. That’s, I think, a very simple proposition.

(APPLAUSE)

CLINTON: And, you know, lifting whole passages from someone else’s speeches is not change you can believe in, it’s change you can Xerox.  And I just don’t think...

OBAMA: Come on. That’s not what happened there.

CLINTON: No—but, you know, but, Barack, it is, because, you know, if you look...

(BOOING)

CLINTON: ... if you look—if you look at the YouTube of these videos, it does raise questions.

(END VIDEO CLIP)

MATTHEWS: Well, they didn’t throw tomatoes, but you could hear the angry crowd out, Chrystia, out there.

I guess Democrats, who do like these two folks together, like them both, to some extent, don’t like the cheap shot, or, in this case, a confected cheap shot.

FREELAND: Yes, I—I think that’s absolutely right.

And I think what played particularly badly was for Senator Clinton to say, words do matter. You have to use your own words, and then to roll out this Xerox line, which sounded...

MATTHEWS: Which somebody wrote, obviously.

FREELAND: ... so much like someone else wrote and sounded so rehearsed.

MATTHEWS: Yes.

FREELAND: And that’s what I think made it sound so hollow.

The—the other thing is, I think that Senator Obama really played it quite well, saying, you know, this is really silly. It’s not important, and also pointing out, look, it was my friend who suggested that I use this approach.

And I think that’s pretty convincing to a lot of people.

MATTHEWS: You know, Howard, the etiquette of these things is so fascinating, because it grows and grows. You never know what is going to work.

I’m sure, in a different environment, maybe a little more Northern environment, where people are a little grittier, maybe in Philly, they might have liked that line.

(LAUGHTER)

FINEMAN: Yes, but it wasn’t—what she said wasn’t convincing. Not only was it canned and starchy and, obviously, something she didn’t come up with, but it didn’t really make that much sense. It really didn’t.

(CROSSTALK)

MATTHEWS: ... Xerox is not change?

FINEMAN: Well, no, but what—I know, but—but—but she hadn’t made the case that the words that he’s uttered have not been inspirational to people and are not an instrument of leadership.

MATTHEWS: We’re leading into this right now, Howard.

FINEMAN: Yes.

MATTHEWS: Because this is where he turns the table on her and say...

FINEMAN: Yes.

MATTHEWS: ... you aren’t accusing me of being unreal.

FINEMAN: Right.

MATTHEWS: You are accusing the people of being so stupid as to be duped and delusional.

FINEMAN: Yes, exactly.

MATTHEWS: Here he is.

FINEMAN: And that was brilliant, brilliant.

MATTHEWS: That was a way of turning her shot at him as—and portraying it as her shot against the people.

FINEMAN: Exactly.

MATTHEWS: Here’s—the Democratic voters—here’s what Senator Obama said about Senator Clinton’s “get real” rift that she’s been using.

(BEGIN VIDEO CLIP)

OBAMA: Senator Clinton of late has said: Let’s get real. The implication is that the people who have been voting for me or involved in my campaign are somehow delusional.

(LAUGHTER)

OBAMA: And that, you know, the 20 million people who have been paying attention to 19 debates and the editorial boards all across the country at newspapers who have given me endorsements, including every major newspaper here in the state of Texas.

(CHEERING AND APPLAUSE)

OBAMA: You know, the thinking is that somehow, they’re being duped, and eventually they’re going to see the reality of things.

Well, I think they perceive reality of what’s going on in Washington very clearly.

(END VIDEO CLIP)

MATTHEWS: I love this stuff.

Was she, Senator Clinton there—looking at him when he did that great parody there of saying, “You knocking the people?” was she charmingly saying, God, you’re good?

FINEMAN: I think so, yes.

MATTHEWS: I thought it was a nice touche.

(CROSSTALK)

FINEMAN: To me, I thought the debate—I thought the debate was over right there, in strategic terms.

MATTHEWS: Yes.

FINEMAN: The mask fell away from Hillary Clinton, the canned lines and all that stuff.

MATTHEWS: It’s charming stuff, I have got to admit.

FINEMAN: She smiled a genuine smile, yes, saying, damn, you’re good.

MATTHEWS: I’m not going to say I got a thrill, because people get mad at me.

FINEMAN: Yes.

MATTHEWS: But I’m so proud of this country when I see this kind of debate.

Jonathan, your thoughts.

(CROSSTALK)

MATTHEWS: You aren’t supposed to, in this business, as pundits, to say you feel something when you see something. We’re all supposed to just be listeners and viewers. But I do feel something when something happens that’s good in this business. So much of it is just not good, unfortunately.

(CROSSTALK)

ALTER: See, the question about Barack Obama has always been his learning curve, right? He’s a rookie.

And, last summer, the fund-raising people, they came to him, and they said, why are you getting clocked in these debates with Hillary Clinton?  And he said to them, look, I will bring it in the fourth quarter. Don’t worry about me.

MATTHEWS: Whoa.

ALTER: He had a sense of pacing, what was said about Franklin Roosevelt, a long-headedness, that he knew he could bring it when it counted. And he showed it tonight, that he stepped up his game when it really mattered.

You know, those—those early debates over the summer, they didn’t matter. Hillary won them one after another.

MATTHEWS: Yes.

ALTER: And it really didn’t do her that much good.

MATTHEWS: Well, Jon, you may be right about the fourth quarter, but his worry now is the overtime.

(LAUGHTER)

ALTER: Yes.

MATTHEWS: What happens after all these primaries and caucuses are over and the big boys...

(CROSSTALK)

ALTER: Yes.

MATTHEWS: But they are now calling them—Senator Clinton’s campaign are now calling the automatic delegates, not superdelegates. What happens when they start voting?

(CROSSTALK)

ALTER: No, no, that’s—that’s irrelevant. The supers are irrelevant.

FINEMAN: Jon is right, though, because he—the learning curve is astonishing.

MATTHEWS: It is, yes.

FINEMAN: And we’re starting a whole new ball game. It’s not just overtime. And he will probably stumble at the beginning, if he gets the chance to be the nominee.

MATTHEWS: Yes.

FINEMAN: But the guy has shown no—no limit yet.

MATTHEWS: No, I’m worrying about whether this gets past the superdelegates...

(CROSSTALK)

ALTER: No, no, no. The superdelegates are irrelevant.

FINEMAN: Hillary gave up on that.

ALTER: The superdelegates are over. Yes, Hillary threw in the towel on that.

FINEMAN: Hillary gave up on that tonight.

ALTER: Yes.

MATTHEWS: She did throw in the towel? They are going to vote with the masses, huh?

ALTER: Absolutely.

(CROSSTALK)

MATTHEWS: Chrystia, is that your assessment?

FREELAND: I think it’s a little too early to write her off, actually.

ALTER: No, no, I’m not writing her off.

(CROSSTALK)

ALTER: I’m talking about on the superdelegates. Not writing her off.

(CROSSTALK)

MATTHEWS: Chrystia, give your view, as it is, as...

(CROSSTALK)

FREELAND: No.

I mean, I agree that there was a valedictory tone to the conclusion of the debate. And I thought that was the best moment for Senator Clinton.  But I think we have to be a little bit careful to...

MATTHEWS: OK.

FREELAND: ... conclude that, because she ended on such a soft note, she’s going to be ready to give up.

MATTHEWS: Could—now we’re going to back into the problem area for me.

(CROSSTALK)

ALTER: Yes.

MATTHEWS: Could it be that she’s being strategic in showing a kind of softness and even a plaintive quality that might elicit support...

ALTER: Absolutely.

MATTHEWS: ... of a sympathetic kind?

FREELAND: Absolutely. Remember New Hampshire.

(CROSSTALK)

MATTHEWS: OK. I’m just asking. New Hampshire. I’m asking her...

(CROSSTALK)

MATTHEWS: ... very wittily to 1998 tonight.

Jonathan, you take over for me. This is danger area for me. You do this analysis right now.

(CROSSTALK)

ALTER: I think you are absolutely right.

They are going to try and see if that wonderful, very genuine quality she had at the end works. All I’m saying is, if it doesn’t work, then what do they do then? Because they have already decided not to go nuclear, you know, beyond the silliness with the plagiarism on other issues.

MATTHEWS: Yes.

ALTER: They aren’t going crazy with negative ads.

And this whole superdelegate thing is now basically irrelevant. She has acknowledged that, whoever the people have chosen at the end of regulation time, the end of the primaries, that person is going to be the nominee. The superdelegates are not going to decide this thing. They might come in at the end to get whoever the winner is over the top.

MATTHEWS: Yes.

ALTER: But she’s not going to try to reverse the will of the people.

So, we can stop talking about the superdelegates as this huge factor. I think tonight ended that.

MATTHEWS: Let’s ask about the delegate situation.

If this race continues the way it seems to be going, which is, I think it’s fair to say, Senator Clinton could hold on and win in Ohio, for a lot of reasons.

ALTER: Yes. Yes.

MATTHEWS: She could lose in Texas for what looks to be some sort of trend down there. If that’s a split decision—you first, Howard, and then everybody—where does that take us? Does that take us on to Pennsylvania for another final round of this thing that seems to be never-ending, or does it sort of end it, if it’s a split?

FINEMAN: Well, I think—I think, if she wins one of them, she will continue. I think she will.

But the numbers will matter. And I thought the key moment tonight, in tactical terms, is that she didn’t really engage in a discussion about the superdelegates. She basically said, you know, that will take care of itself.

And on the current numbers, with Obama way ahead in superdelegates—in regular delegates, in automatic pledged delegates, she was, I thought, basically preparing the ground for saying, you know, I am not going to fight that tooth and nail on the superdelegate front.

MATTHEWS: Yes.

FINEMAN: She’s got to win it...

MATTHEWS: She will go with the vote.

FINEMAN: She will go with the vote.

ALTER: Yes.

FINEMAN: And, right now, the vote is going in Obama’s direction.

MATTHEWS: Your assessment—your assessment, Chrystia Freeland. Do you believe that this the—that, if this a split on March 4, that she will continue on as a candidate?

FREELAND: Well, I think—I think...

MATTHEWS: With...

(CROSSTALK)

MATTHEWS: ... numbers obviously going for her?

FREELAND: ... Howard’s point that the margin of victory in both places is really, really significant.

So, if it’s a truly split vote, then, yes, I think she goes on. I think what we did see tonight is, if there is overwhelming Obama momentum, there isn’t going to be a sort of pathetic...

MATTHEWS: Sure.

FREELAND: ... Clinton push to overwhelm that.

MATTHEWS: Yes, OK.

FREELAND: But, if it’s close to a tie, I—I think that we shouldn’t rule Senator Clinton out.

MATTHEWS: OK.

FREELAND: And we should also look to Michigan and Florida.

ALTER: You know, I—Chris, I think there’s a possibility we could see, strange as it sounds, Hillary Huckabee, where she stays in the race, but she doesn’t really try to, you know, bite Obama, and she—you know, she continues on through Pennsylvania...

MATTHEWS: Yes.

ALTER: ... but in order to really prepare for the possibility that, if Obama were to lose to McCain, she wants to be viable in 2012, the same way Mike Huckabee does.

MATTHEWS: Well, Mike Huckabee must have noticed “The New York Times” story this morning. We will get to that later, because that was one reason why he might want to stay in this race, more than technically.

All of our guests are staying with us with much more about the debate and what happens now.

Our special late night edition of HARDBALL returns after this.

(BEGIN VIDEO CLIP)

OBAMA: John McCain says, he doesn’t really understand the economy that well. It is clear from his embrace of George Bush’s policies that he doesn’t.

CLINTON: The wealthy and the well-connected have had a president the last seven years, and I think it’s time that the rest of America had a president to work for you every single day.

(CHEERING AND APPLAUSE)

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

CLINTON: Well, I think everybody here knows I have lived through some crises and some challenging moments in my life.

(CHEERING AND APPLAUSE)

CLINTON: And...

(END VIDEO CLIP)

MATTHEWS: Wow.

Anyway, welcome back to this late edition of HARDBALL.

With me is “Newsweek”’s Howard Fineman, Chrystia Freeland of “The Financial Times of London,” and another “Newsweek” fellow, Jonathan Alter.

Let’s go through the numbers right now, the latest. In a new ABC News/”Washington Post” poll of Ohio, Hillary Clinton still has a seven-point lead over Barack Obama. The lead was much larger than that just recently.

Down in Texas—this is very fascinating—where they had the debate tonight—look at that—dead, almost dead even. And that was 20 points apart.

So, there is clearly movement, Howard, as I said, in Texas. And the other state is closing, but perhaps won’t close enough, which leads me to the question, what happens when we split?

FINEMAN: Yes.

Well, let’s look at the states, just briefly. I think Texas is moving more quickly because there are fewer of the old Reagan Democrats in Texas. They have all long since become Republicans. What you have in Texas in the Democratic Party is, you have a lot of African-Americans in places like Houston. You have Hispanics who I think are less tethered to tradition who are moving quickly in Obama’s direction right now, I think, despite Hillary’s efforts in—in the south of the state.

Ohio, there’s still a lot of those old working-class Democrats left.  That’s still Hillary’s constituency, though shrinking. In Ohio, things move more slowly. Also, Ohio—Richard Nixon used to say it’s always about Ohio. Ohio is split. It is always split. It always moves slowly, glacially, and ends up somewhere in the middle at the end.

MATTHEWS: I just wonder about this whole thing, the ethnicity involved in this race, the gender involved in this race. It’s such an anthropological question, how people are more ready for Barack than perhaps for Hillary, or the personalities are just different. They’re so different.

FINEMAN: Well, Barack—Barack Obama alluded to it tonight. He said:

I’m the one who can bridge the racial, religious, and regional...

MATTHEWS: We have heard him say that before.

FINEMAN: ... divisions, the three R’s, the racial, religious and regional divisions. He said that explicitly...

FREELAND: He didn’t mention gender, which was interesting.

FINEMAN: ... saying, I’m the one who can bridge those. But I thought that was interesting.

MATTHEWS: Chrystia, explain that.

FREELAND: Well, I...

MATTHEWS: What is going on in those two states in regard to both gender and ethnicity, race, if you will?

FREELAND: Well, I thought that that comment that Barack Obama made was really interesting, and it was one of the first moments that he has explicitly alluded specifically to race and to his ability to bridge that racial divide.

It was interesting to me that he didn’t refer to gender, which I think is tricky, when he is sitting on stage with the first woman who could become president of the United States. And he also didn’t refer to the socioeconomic divide, which is another one of the really interesting demographic splits that we’re seeing.

And we are seeing, although it is changing, that white working-class people are one of those Hillary Clinton constituencies, although we have seen, in some states, that that is starting to move towards Barack Obama.

(CROSSTALK)

MATTHEWS: Is this a technical point, Jonathan, that he’s saying, I can’t bridge the gender gap because I’m only one gender, where I come from both communities on the ethnic issue?

I mean, I’m just asking if it’s a technical point.

ALTER: Yes.

MATTHEWS: I don’t want to judge the guy that he skipped gender because he’s being illiberal on that point.

ALTER: Well, you know, on the gender issue, the Democrats have a huge gender gap.

And, so, in some ways, as long as he keeps it fairly close, he doesn’t need women right now. He doesn’t need to win among women in order to keep them in November, or most of them.

I thought what was even more interesting than that was that he’s become, in some ways, a more constituency-group-pandering politician than he had been in the past. You know, he is—he is getting good at ticking off different constituencies.

MATTHEWS: Ah.

ALTER: So, he talked about how, you know, veterans down on the border have to drive 200 miles to get to a VA hospital, ticking off those veterans, same with Fort Hood.

FINEMAN: What a revolting development that is.

MATTHEWS: What a revolting development.

ALTER: He slips that in.

MATTHEWS: You know, I have to take issue a little bit. I agree they were both playing, obviously, very liberal on the issue of immigration in a state that a third of the people are Mexican-American, perhaps.

But you know what? You know what? I thought they were very tough on defending the need for a unifying language in this country...

ALTER: Yes.

MATTHEWS: ... not because it is English—that would be ethnocentric—but because English is the unifying language in our country historically.

And without coming out for the official nature of a language, which may strike people as somewhat ethnocentric, it’s a simple statement, if we all speak one language, it’s good.

ALTER: Yes.

MATTHEWS: That’s a good.

ALTER: But, Chris...

(CROSSTALK)

MATTHEWS: And that—and that—and the guy who was one of the moderators was almost push-polling there for making this into a bilingual country. I think he was pushing a case there.

And I thought it was very strong that neither one of these candidates, who would dearly like to get more Hispanic votes, Latino votes, wouldn’t play with him.

(CROSSTALK)

ALTER: Well, the reason is because, if you go back to Iowa, both of them had a huge applause line when they said that you must learn English. And everybody always clapped on cue when they said that.

So, both know that, in a general election, you have got to stand up for English. And they didn’t want to get in trouble for the general.

MATTHEWS: Right.

Well, we all live very close to Canada, a country I like very much, which has been divided over language since the beginning. And it’s certainly not a role model. You need to have one language.

Anyway, that’s an argument. Let me go to...

(CROSSTALK)

FREELAND: Chris, I’m Canadian. I have to defend Canada here.

MATTHEWS: Well, you don’t have to defend—if you defend bilingualism, you’re—well, that’s an argument.

FREELAND: I’m—I’m prepared to do that.

MATTHEWS: Oh, what’s the case for bilingualism in America, in the United States?

ALTER: Well, you attacked Canada. So, I’m going to defend the Canadian model.

MATTHEWS: No, I said I dearly love it. I can’t do better than that.

MATTHEWS: Let me ask you, Chrystia—you first—about this question of pandering.

I thought, on the issue of borders and on terms of employer sanctions, I did think Senator Obama was tough to say, we need to have a strong border protection and we need to sanction employers who hire and exploit illegal workers.

That was a tough statement in that crowd, I thought. And he did deliver.  He didn’t say, I’m for doing nothing. He said he’s for doing something about illegal immigration, I thought.

FREELAND: Yes. No, no, he was.

And I think that Jonathan is right that both Senator Obama and Senator Clinton were being quite careful not to make any remarks that might play well to that particular auditorium, but could be used against them in the general election.

MATTHEWS: Yes.

FREELAND: The real general election point that I thought was interesting was Senator Obama on the war in Iraq.

And I thought he made a very strong point about how his initial opposition to the war in the first place would put him in the better position to oppose John McCain.

MATTHEWS: Yes.

FREELAND: I thought that was sort of the most interesting looking-ahead-to-the-general-election moment.

MATTHEWS: Jon, is that—is that his sort of hammer that he saves to the last bout?

ALTER: Yes. Yes. Well, he’s used that all along very skillfully.

And I thought he was terrific tonight in talking about that rifle platoon in Afghanistan. He showed a command of how it wasn’t just that the Iraqi war has cost a lot of lives and treasure, that it has distracted us from getting al Qaeda. And that is a critical point.

MATTHEWS: It’s also us from Afghanistan as well.

ALTER: Yes. It’s a critical—a critical point that he’s going to need to make with McCain. And he rehearsed it tonight.

(CROSSTALK)

FINEMAN: Can I say, he also outdid Hillary by mentioning Fort Hood in Texas?

ALTER: Yes.

MATTHEWS: Bring it home.

(CROSSTALK)

FINEMAN: You could see that Hillary was going, darn, I wish I had mentioned Fort Hood.

(CROSSTALK)

MATTHEWS: That is so good.

(CROSSTALK)

FREELAND: And there was an applause line there.

FINEMAN: It was an applause line.

(CROSSTALK)

FINEMAN: Also, he walked himself back on meetings with dictators, to some degree. Now he’s talking about preparation.

MATTHEWS: What is that thing in your car that tells you were to go, don’t get lost?

(CROSSTALK)

FINEMAN: ... the GPS. He’s got GPS on...

MATTHEWS: NeverLost.

FINEMAN: But he’s got to—he walked that back just a little bit.

MATTHEWS: Yes, I know.

(CROSSTALK)

FINEMAN: ... no preconditions, but he’s going to have lots of preparations.

ALTER: Right.

FINEMAN: At some point, preparations and preconditions are going to overlap.

(CROSSTALK)

FINEMAN: They’re going to overlap.

MATTHEWS: Here’s Senator Obama and Senator Clinton.

ALTER: Howard, did you notice that she was preparing to sandbag him on that...

FINEMAN: Right. Right.

ALTER: ... because she had the quote from JFK on preparations.

MATTHEWS: I know.

FINEMAN: She was ready.

ALTER: But he had already mentioned preparations.

FINEMAN: Yes.

ALTER: So, she lost her knockout punch with JFK.

(CROSSTALK)

MATTHEWS: It’s become a fine rivalry here.

(LAUGHTER)

MATTHEWS: Let’s take a look at both candidates tonight on the issue of whether they are ready, individually or as rivals, to be commander in chief.

(BEGIN VIDEO CLIP)

OBAMA: On what I believe was the single most important foreign policy decision of this generation, whether or not to go to war in Iraq, I believe I showed the judgment of a commander in chief. And I think that Senator Clinton was wrong in her judgments on that.

(APPLAUSE)

Obama Now, that has consequences—that has significant consequences, because it has diverted attention from Afghanistan where al Qaeda, that killed 3,000 Americans, are stronger now than at any time since 2001.

CLINTON: When you think about everything that is going to happen, what we can predict and what we cannot predict, I believe that I am prepared and ready on day one to be commander in chief, to be the president, to turn our economy around, and to begin making a lot of these very difficult decisions that we will inherit from George Bush. And that is what I am putting forth to the voters.

(CHEERING AND APPLAUSE)

(END VIDEO CLIP)

MATTHEWS: Chrystia Freeland, what is this “day one” significance? I know “I’m prepared to be president, but what is “day one,” like he’s going to be in a learning curve, he’s going to have on-the-job training? What is the punchline? What is that about, ready on day one? What does it mean?

FREELAND: Well, I think that that is a holdover from the fall, when we had this: Hillary Clinton is the inevitable candidate. She has experience. She’s really the only person we can count on to be an efficient, competent, reliable president.

MATTHEWS: Right.

(CROSSTALK)

FREELAND: And I think that we saw tonight that that line isn’t working that well, and, you know, Senator Obama is learning how to respond to it. It’s part of the reason that some of his detailed responses were important tonight, that talking about, you know, those platoons was important, that the detail in health care, that the strategic points on Iraq were effective for him.

MATTHEWS: Well, Jonathan, it was great having you.

(CROSSTALK)

MATTHEWS: We’re going to call it over right now.

Chrystia Freeland, Jonathan Alter, Howard Fineman, one of the great panels we have ever had, I must say, tonight. I mean it. And everybody should be, at this point, lacking in intellectual rigor, but it was wonderful.

(LAUGHTER)

MATTHEWS: And up next: “American Idol,” he’s not, but Ted Kennedy—this is someone else for people who love watching the Kennedys—he traveled to Texas to sing for Obama, and he did it in some kind of Spanish, I think.

(LAUGHTER)

MATTHEWS: You don’t want to miss this one. This is something.

And, by the way, you want to know where the Clinton money has been going in this campaign? Is it glazed or powdered? We are going to talk about the sweet tooth of this campaign—a lot of money going to doughnuts.

You’re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS: Welcome back to HARDBALL. So what else is new out there in politics? Well, China versus Spielberg. Last week we reported that movie director Steven Spielberg was pulling out of the Olympics because of the Chinese government’s part in the genocide in Darfur. Well, here’s how the communist government responded in its press. The People’s Daily newspaper wrote: “A certain Western director was very naive and made an unreasonable move toward the issue of the Beijing Olympics. This is perhaps because of his unique Hollywood characteristics.”

The China Youth Daily said: “This renowned film director is famous for his science fiction. But now it seems he lives in the world of science fiction and he can’t distinguish a dream from realty.” Well, with lines like those, maybe China needs a writers strike.

Anyway, and now we head down to Texas. When Ted Kennedy campaigns for you, he really campaigns for you. Take a look at this show-stopping performance of an Obama crowd of Latinos down in Laredo.

(BEGIN VIDEO CLIP)

SEN. EDWARD KENNEDY (D), MASSACHUSETTS: (singing in Spanish)

Laredo, will you help us out? Will you vote for Barack Obama?

(END VIDEO CLIP)

MATTHEWS: And as you know, here on HARDBALL, we’ve been giving you all the highlights of President Bush’s big Africa trip this week. It has been a treasure trove for us of good material, which is why we now present you with part four.

President Bush and the first lady watching a Rwandan skit on abstinence.  You can just feel the awkwardness jumping out of that picture, can’t you? Anyway, it’s still somewhat charming, I guess. President Bush may not get much love around the world but they certainly like him over in Africa. Maybe it’s the foreign aid, maybe it’s the good dancing. Here he is in Liberia alongside that country’s president. Isn’t that the sort of thing that Prince Charles likes to do?

Anyway, and now its’ time for the HARDBALL “Big Number” tonight. There he is. Get a new one for tonight. We’ve got a new one for tonight.  Senator Hillary Clinton has a well-known problem with campaign money this year. She had to lend the campaign some cash with interest, of course, and has pretty much spent all the money she started the year with. Now comes a big expense item that explains perhaps the problem.  According to her financial reports, the Clinton for President campaign just paid Dunkin Donuts a bill for $1,300. That’s the most expensive baker’s dozen I’ve seen, $1,300 for a month of glazed donuts and great coffee. Tonight’s “Big Number.” That’s where the money is going, ladies and gentlemen.

Coming up, former McCain senior strategist Mike Murphy on today’s front page New York Times depressing story implying that John McCain had an improper relationship with a female lobbyist. You’re watching HARDBALL, late night, only on MSNBC.

(COMMERCIAL BREAK)

(NEWSBREAK)

MATTHEWS: Welcome back to this late night edition of HARDBALL. Today’s New York Times front page report on Senator John McCain reads: “A female lobbyist had been turning up with him,” that’s Senator McCain, “at fundraisers, visiting his offices and accompanying him on a client’s corporate jet. Convinced the relationship had become romantic, some of his top advisers intervened to protect the candidate from himself, instructing staff members to block the woman’s access, privately warning her away and repeatedly confronting him, several people involved in the campaign said on the condition of anonymity.”

Well, this story clearly implies that Senator McCain had an affair with a lobbyist and then did favors for her. Here’s Senator McCain responding to this story today.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: Obviously I am very disappointed in the article. It’s not true. As has been pointed out, I have served this nation honorably for more than a half a century. When I was 17, I raised my hand and supported—said I would support and defend this nation, and I’ve had the honor of serving it ever since.

At no time have I ever done anything that would betray the public trust nor make a decision which in any way would not be in the public interest and would favor anyone or any organization.

(END VIDEO CLIP)

MATTHEWS: What a sad day in American politics. Anyway, Mike Murphy is a Republican strategist who has worked for Senator McCain in the past and is supporting him today.

Mike, what did you make of the story? Go at it.

MIKE MURPHY, FMR. MCCAIN SR. STRATEGIST: Well, I couldn’t believe it was in The New York Times. I mean, it’s all—you know, secret sources from the shadows. Nothing for attribution. Denied by the senator. Denied by the woman they make this horrible allegation about.

And the stuff about favors is a rehash of a nothing-burger from—on Paxson broadcasting from eight years ago. I think it’s more of an embarrassment to The New York Times than John McCain. And I don’t know how their system broke down to get such a weakly reported story with no real factual anything in it out there to smear the guy. It’s an outrage.

MATTHEWS: Bill Keller says the story speaks for itself. What does that mean to you? It speaks for itself.

MURPHY: Well, yes, it speaks but it speaks of—a very a loud voice about an unprofessional story from The New York Times about suspicious timing, about bad journalism. Look, I know that The Times is a liberal paper, I just never thought they were an unprofessional paper. But this story, relying as it does on secret sources, I’m stunned by it.

MATTHEWS: OK. Let’s talk the politics of this. Who has got to make the next step? Does The New York Times have to back up its story with on the record sources of an actual affair or can it get away with saying something in the middle like, well, there were concerns by the staffers, that’s all we reported; when, in fact, you and I know they reported, in a sense, a lot more than that?

MURPHY: Yes, I think The New York Times, for its own sake, better get out of the innuendo business. If they don’t have named sources then they ought to get out of this story because they’re going to damage their own reputation. Look, I was at that McCain campaign in ‘99 and 2000.

There was very little going on there I didn’t know about. I was a senior

strategist. And I was never in a meeting where there was any discussion

of this. In fact, you could have put a gun to my head in the New

Hampshire Primary eight years ago and asked me that woman’s name and I

wouldn’t have recognized it. I mean, and so I…

(CROSSTALK)

MATTHEWS: Who are these staffers—who are these former associates, they are identified as, who were pushing this story to The New York Times and maybe some other places that they had to go or someone had to go to John McCain and warn him about this relationship? Who are these people?

MURPHY: Well, I don’t believe—the senator denied it and I believe him. And let me tell you, speaking for everybody who worked for Senator McCain in the 2000 campaign, I think I can it, I’d love to know because this is a smear and untrue.

All I can think is you have got a disgruntled junior staffer somewhere.

And I’m guessing here, I don’t know, but I think you have got some angry

lobbyists who don’t like McCain because he’s the sheriff. He’s the

opposite of a guy lobbyists push around. And so…

(CROSSTALK)

MATTHEWS: Well, you know, the word “associates” is so wild. It could mean Democratic staffers on the other side of the committee staff who don’t like his policies and don’t like his politics and don’t like his party. It could mean, you’re right, a disgruntled worker. But I guess the facts of the case are this—in dispute. Did he or did he not have an affair with this woman? You believe he didn’t.

MURPHY: Yes, totally, I believe him and I was there.

MATTHEWS: You never heard of this woman?

MURPHY: So, no, I don’t think he had—no, no.

MATTHEWS: You never heard of her?

MURPHY: No affair. I don’t believe it. Yes. I think it’s ludicrous.

MATTHEWS: And then it seems to me that the troubling part of this is if The Times can prove any encounter with her of an intimate nature, any favor he did for her officially, I think it’s a bad deal for—I mean, I think it’s a deal-breaker for him if the story is true, don’t you?

MURPHY: Well, yes, but…

(CROSSTALK)

MATTHEWS: Or don’t you want to speculate? I mean, if it’s true, it’s a deal-breaker.

MURPHY: Look, I think it’s a fantasy. So it’s a hypothetical to say if it were true. I don’t even like to really speculate. Let’s see a named source, let’s see a fact.

MATTHEWS: I don’t blame you. You don’t have to.

(CROSSTALK)

MATTHEWS: OK. Some time in the morning we’re going to get the paper. I’m going to go home and try to get it online. It seems to me that you and I are on the same page. The New York Times is going to have to come out with real sources on the record or else pull back.

MURPHY: I agree.

MATTHEWS: And they are going to have to, to me, justify the implication of that, as you call it, the innuendo, of an affair. They can’t simply pull back and say, all we were saying was there were concerns of public relations that might look like something.

Let me ask you about this race right now. Obama—who do you think the Democrats are going to nominate right now the way this thing is going after tonight’s debate? Which way is this going?

MURPHY: You know, well, more from luck than brains, I have been predicting Obama for over a year. And I’m sticking with it. I think he’s in a commanding position. I heard about three-quarters of the debate. I didn’t see the entire thing. But I don’t think anything changed. I think Obama is a better debater than he was and I think he’s in a very powerful position.

He has changed. She has not. He has the energy, she has got problems. So I think it’s down to a 90/10 percent chance deal and I think things are really rough for her.

MATTHEWS: Why do you think she has jumped on this plagiarism charge when he clearly has admitted now that he got the lines and the idea of the lines and the lines themselves from his pal who is his national co-chair, Governor Deval Patrick?

MURPHY: Yes, it’s weird. She’s out looking for an alleged plagiarism crime with no victim here. The victim is on the side of Obama. So I can’t believe that is weak gruel is all they got. I thought health care was their bigger mallet.

But look, I think you can smell a sense of desperation from the Clinton campaign. The numbers are going wrong. The money numbers are going wrong. The great fortress of Texas and Ohio, in Texas now an even race.  It’s the Titanic and water is coming in fast. And I think they are in a really tough position.

MATTHEWS: I wonder, I wonder, I wonder, I wonder. Anyway, thank you, Mike Murphy. It’s great to have you on, as always. I have great respect for Mike Murphy.

MURPHY: Thank you, Chris.

MATTHEWS: Up next, the late night edition of the “Politics Fix” is coming at you. Did tonight’s debate change the game? A lot of people thought that Senator Clinton had the goal tonight of changing the game, ending these trend lines, sending them in another direction, taking this guy on. Did she do it? Did she change the name of the game? We’ll ask the roundtable.

And right now you are looking at live pictures of Barack Obama speaking in Austin, Texas. Senator Clinton spoke there about an hour ago. This is HARDBALL only on MSNBC.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: It is a city that is aspirational and believes that anybody can make it if they’re willing to put in enough hard work and effort. But it’s also a city that understands it’s a community.

(COMMERCIAL BREAK)

MATTHEWS: Welcome back to this late night edition of HARDBALL. Let’s

bring in our roundtable for the “Politics Fix.” John Ruskin—Riskind…

JONATHAN RISKIND, THE COLUMBUS DISPATCH: Riskind.

MATTHEWS: … is the Washington bureau chief of The Columbus Dispatch;

Nancy Giles is a social commentator; and Newsweek’s Jonathan Alter is an historian, journalist, columnist and all points covered here.

Jon, let me start with you, Jon, about this. Let’s take—I give you the first crack at this poll. In a new ABC News/Washington Post poll of Ohio, Senator Hillary Clinton has a 7-point lead over Barack Obama, way down from what it was. Down in Texas way, Clinton’s lead is down to practically nothing, a point, and that’s disappearing.

What does this tell you about two weeks hence minus one day?

JONATHAN ALTER, NEWSWEEK: Well, a lot can change in two weeks. But the thing is the math is just relentless. And she doesn’t just need to win both these states, she needs to win by huge margins, something like 60/40. And she didn’t do that—she didn’t take any steps toward doing that tonight. She didn’t change the dynamic of the race.

So I think it’s too soon, Chris, to stick a fork in her. I think you can stick a spoon in her. She’s in serious trouble now, and she’s in Hail Mary pass territory.

MATTHEWS: Let me go to Jonathan first. Then I go to Nancy. Jonathan, let’s talk about Ohio. It seems to me that looking at those numbers, that could be a switcheroo. Barack Obama could win Texas. But Ohio still seems like a climb for him. Can he—is he headed towards victory there with the close number there of 7 points now?

RISKIND: Seven points is a scary number for Hillary Clinton. Our Dispatch poll had her up 23 points a couple of weeks ago. Another poll had her up 21 points. That’s a huge move in just a couple of weeks. And Barack Obama still has another week to go in campaigning in Ohio.

You know, he hit the ground running in Ohio with four separate TV ads right the day after the Wisconsin Primary. He has got mailings going out attacking Hillary Clinton on NAFTA, which is a huge issue in Ohio. So a 7-point lead for Hillary Clinton has got to scare the heck out of her right now.

MATTHEWS: Give us your thoughts on the same question, Nancy Giles, these movements in the polls in the two big states coming up.

NANCY GILES, SOCIAL COMMENTATOR: Well, I agree with everything that Jonathan said. And what’s funny is, I don’t understand why Hillary hasn’t changed that rhetoric of, I’m ready to be president on day one.

I mean, she talks a really good game but the bottom line is without the support of the House and the Senate, you know, talk is cheap. I mean, a person can say just about anything to hopefully get elected. But the real experience you have in being president is being president.

And the other thing that I think is so interesting is, if we just look at how Hillary and Obama both manage their campaigns, I mean, this is a guy that was not expected to really be in the running and he has raised incredible amounts of money, small donors. I think he’s up to almost a million of those.

And state by state where he was considered sort of down and out, he has continued to build this coalition. And he has got this like camp of people continuing to get the word out and get those votes out. And he has just done amazing things with voter turnout. And you know, I mean, I think that says something.

Hillary, the sort of anointed one, her campaign was prepared until Super Tuesday and they had no plan B. And that’s crazy. That’s not running something well.

MATTHEWS: You know, this reminds me—Nancy, what you are saying reminds me, Jonathan, of what—Jonathan Alter, of what they said about Lincoln. He wasn’t running for president back in 1860 the regular way.  He wasn’t hitting the establishment watering spots. He was sort of going around the country giving speeches. I mean, I’m amazed that every time there’s a caucus, like in Hawaii, how did Barack Obama tie up Hawaii?  How did he lock it up through overwhelming—to almost like a 30-some point advantage on average in all of these states now, 10 in a row?

ALTER: Well, you know, Hawaii is where he’s from. So you can set that aside. But look at Nebraska, all of these states—all these caucus states, winning one after another by over 20 points. He was organized there. He has just run so much of a better campaign than she has.

She has been a better candidate than a lot of people expected. But he has run a much, much better campaign. In fact, I think her campaign is one of the worst in recent political history.

MATTHEWS: Well, there he is.

ALTER: When you talk about that strategy, that day one—ready from day one, you know, Chris, the other night when you had that famous exchange with Kirk Watson that was, you know, mentioned again by Hillary Clinton tonight, what didn’t get noticed was your other guest, Stephanie Tubbs Jones, a terrific congresswoman from Ohio.

And you said to her, why Hillary Clinton? And she said, because she would be the best on health care. Now imagine if—rewind the clock a year, if instead of running as the incumbent, ready on day one, experience, all these things that don’t work, if Hillary Clinton had run a really energetic campaign saying, I’m going to get health care done, I’m going to be your health care president, with a different theme, something might have worked for her differently. She has just not run the right kind of campaign from day one.

MATTHEWS: Well, it great to see Hillary Clinton making full use of HARDBALL moments. It was great. Anyway, I do like to provide useful information for the public. Anyway, thank you, Jon, very much. Jon Riskind, Nancy Giles, and Jonathan Alter.

Join us again tomorrow night at 5:00 and 7:00 Eastern for more HARDBALL.

“COUNTDOWN” with Keith Olbermann is coming up next.

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