updated 7/3/2008 10:55:02 AM ET 2008-07-03T14:55:02

Guest: Michael Smerconish, Tucker Carlson, Margaret Brennan, Steve McMahon, Ron Christie, Pat Buchanan, Michelle Bernard, Iris Burnett, Jonathan Martin, Susan Page, Perry Bacon

MICHAEL SMERCONISH, GUEST HOST:  All shook up, a change at the top of the McCain campaign.  Chris is off, and that means I get to say, Let‘s play HARDBALL.

Good evening.  I‘m Michael Smerconish, in tonight for Chris Matthews.  Welcome to HARDBALL.  It was exactly one year ago that John McCain laid off dozens of staff members and the media declared him all but dead.  Well, we certainly got that wrong.  Fast forward to today, when there was a change at the top of the McCain campaign.  It is not exactly a shake-up, but it could certainly suggest that one is coming.  The move comes amid increasing grumbling among Republicans that the McCain campaign lacks organization, a plan of attack or a coherent message.

Meanwhile, John McCain isn‘t the only candidate taking heat from supporters.  In case you haven‘t noticed, Barack Obama has moved towards the center on any number of issues, from courting evangelicals to softening his support for gun control.  Well, many liberals have noticed, and they‘re not happy.  Is Obama a traitor to his cause or just a smart politician who wants to win?

Plus, Southern strategy.  Obama is eying the South to pick up states that Democrats haven‘t won in decades.  But can a Democrat, any Democrat, really compete in the South?  We‘ll talk about the battle for the South with two political strategists.

Plus: Might we see an endorsement by Colin Powell in the near future?  We‘ll talk about that and more in the “Politics Fix.”  And in the HARDBALL “Sideshow,” the latest Barack Obama fist bump controversy.  Trust me, it‘s not what you think.

But first the shake-up in the McCain campaign.  Tucker Carlson is MSNBC‘s senior campaign correspondent.  Jonathan Martin first reported this story on “The Politico.”  Jonathan, why?  And why now?

JONATHAN MARTIN, POLITICO.COM:  I think that this is happening right now because the McCain campaign recognizes that time is a-wasting.  They have got to get a coherent message.  They‘ve got to get out there every day, not just define John McCain but really try and define Barack Obama.  If they can‘t define who Barack Obama is in these next few months, it‘s going to be very difficult to beat him in the fall.

They did not have a coherent message until very, very recently.  And so this is a recognition that they things have not been going like they should have been since McCain captured the nomination, and quite frankly, that he didn‘t use the past four months since he got the nomination as effectively as he should have been.  So major change today.

Steve Schmidt will, I think, put his imprint on the campaign very, very rapidly, you know, and he talked to quite a few Republicans today.  They‘re saying this is long overdue, A, but that, B, they‘re very hopeful this will sort of help right the ship.

SMERCONISH:  Hey, Tucker, has John McCain sufficiently defined himself and his message?

TUCKER CARLSON, MSNBC SENIOR CAMPAIGN CORRESPONDENT:  Well, I mean, he‘s been around since 1982 in public office.  He was famous even before that, of course, having been a POW.  It‘s not clear he can define himself any more.  His job is really clear, tear down Barack Obama.  This is a Democratic year.  There‘s no way McCain‘s going to win on his own message.  He‘s going to win by convincing people that Barack Obama is a risk, that he‘s scary.  And that is something that McCain is not constitutionally suited to do.  That‘s just not who McCain is.

That may be who Steve Schmidt is, and I say that with admiration.  I know Schmidt pretty well.  He‘s a tough guy.  He‘s a funny guy.  But you know, he‘s a hard-core political guy.  And if there‘s anybody who can convince McCain that they need to define Obama as a threat, it‘s Schmidt.

SMERCONISH:  Here‘s what Politico was reporting today, and this was before Steve Schmidt, the news broke.  Quote, “Top GOP officials, frustrated by what they view as inconsistent messaging, slugging fund-raising and an organization that is too slow to take shape, are growing increasingly uneasy about the direction of the McCain presidential campaign.”

Jonathan, I guess that sums it up.  It was borne out by the action that they took.

MARTIN:  That‘s exactly right.  And this was no surprise to a lot of folks who‘ve been watching this campaign closely.  It was not a matter of “if,” it was a matter of “when.”  And when quite candidly, Schmidt‘s not the only sort of change being made in the campaign.  They‘re bringing on more seasoned pros from the Bush-Cheney sort of campaign world, from the Bush White House to try and get this campaign more organized and disciplined.  And it wouldn‘t surprise me if there were more changes still to be had here.

It‘s important to remember that these changes were made in the campaign one year to the day after McCain‘s last campaign shake-up, and there was a lot of doubt that McCain could come back and win that primary.  He did so, proved the critics wrong, which is all to say, don‘t count out McCain yet.  This is a tough year for the GOP, but there‘s few politicians that are as resilient as John McCain, and there‘s plenty of time left.

SMERCONISH:  Men (ph), a lot‘s being made about the grumbling.  I‘ve got a theory on this.  In fact, Tucker, I‘ll offer it to you, and that is that, how many other Republican who were on that stage with John McCain—

I think the number was eight, so that‘s eight serious candidates, each with their own campaign manager.  Isn‘t it par for the course that at this part of the cycle, there‘s a lot of grumbling because they‘re all sitting back now in their Barcaloungers.  You know, there they are, and they‘re saying, Geez, I could be doing a better job, and their campaign managers are all calling one another or text messaging Blackberries and saying, Hell, we could be doing than this.

CARLSON:  Well, I think—I think you‘re exactly right.  And add to that the fact that the Republican establishment despises McCain.  I mean, they‘ve disliked him for a long time.

(LAUGHTER)

CARLSON:  He dislikes them right back.  They shouldn‘t be grumbling at McCain, though.  This is all Bush‘s fault.  I mean, it‘s Bush‘s unpopularity that has dragged the party to the level it‘s at now.  It‘s Bush‘s unwillingness to pick a vice president who would succeed him that has left the party without an incumbent.  I mean, that‘s—you know, step back five steps.  Typically, you would have, in a situation with a two-term president, a vice president running for office.  You know, that has advantages.  Bush denied his party that advantage.  So everything you‘re seeing that‘s going wrong with the McCain campaign, almost all of it is traceable to Bush.

SMERCONISH:  Hey, Jonathan, you know, many are trying to draw a connection or make an analogy, I guess, is a more accurate way to say it, between that which happened in the Hillary campaign with Patti Solis Doyle.  In other words, the change in leadership, it was the beginning of the end. 

And anybody prognosticating that way for John McCain?

MARTIN:  No.  I think this is more a recognition of something that was long time coming, that was widely anticipated, frankly, and that also is being looked at, and quite frankly, spun by the McCain folks as a positive thing.  This is a step in the right direction, they‘re saying.  And if you talk to, as Tucker knows, any Republican operative in Washington, D.C., they‘re going to say that Steve Schmidt is one of the top guys in the business.  He‘s disciplined.  He‘s relentless, and he is very much on message.  And Barack Obama, I think now, is going to be, I think, challenged quite a bit more, day in, day out, than he was before Schmidt came on board.

SMERCONISH:  Listen, I‘d make the argument that Rick Davis not only isn‘t being pushed aside, he‘s taking on the more difficult responsibility.  Tucker, think of this.  If Rick Davis is now going to handle long-range planning and if that includes the Republican national convention in St.  Paul/Minneapolis, it would seem to me he‘s now the one who has to determine -- and you referenced President Bush—when does President Bush speak at that convention?  When does Dick Cheney speak at that...

MARTIN:  Yes.  Right.

SMERCONISH:  How do you orchestrate this convention?

CARLSON:  And if there‘s anybody who can do that, it‘s Rick Davis.  Rick is a diplomat.  He‘s very smooth.  He understands Washington.  He understands the people who run the Republican Party.  You got to have someone like that overseeing everything, and he is that guy, he and Charlie Black.  But I think, day to day—I think this is a clever, smart move for the McCain campaign.  Day to day, you got to have a brawler there.  You got to have someone who‘s genuinely tough.  And Schmidt—and I like Schmidt, so you know, this is not a criticism at all.  He‘s a tough guy for real, and I think that‘s good.

SMERCONISH:  Is John McCain...

MARTIN:  And Michael...

SMERCONISH:  Yes?

MARTIN:  Yes, I was just going to say I think Schmidt also has a keen appreciation for the news cycle, and you guys know what that means.  He understands how the new media looks, be it you guys on cable news, us who report on the Internet, papers, talk radio, what have you.  He really gets this is a 24/7 cycle and you constantly have to be playing offense.

SMERCONISH:  Well, I think that what they need to do is improve the staging of some of these events.  Maybe this is the old advance man, because I did advance...

CARLSON:  That won‘t be hard!

SMERCONISH:  I did advance for Bush 41.  Remember that night in New Orleans with the green backdrop?  And I think it was the very night that Barack Obama sewed up the Democratic—it looked like they‘d gone live to a wake.  I mean, they need some advance work.

(CROSSTALK)

CARLSON:  ... Islamic green, yes.

SMERCONISH:  Hey, guys...

MARTIN:  And he caught some serious flak for that.  But look, he‘s bringing in excellent advance guys, too, from Bushworld to help out on that front also, Michael.

SMERCONISH:  Hey, one other question for you, Tucker.

CARLSON:  Sure.

SMERCONISH:  Is it true that Senator McCain is in Colombia today because Barack Obama so far is ahead in Cartagena (ph), according a new Gallup survey?

(LAUGHTER)

SMERCONISH:  Why is he there?  What‘s behind this?

CARLSON:  Well, he picked a perfect day.  I mean, the FARC, the left-wing revolutionary group there, has just apparently given up involuntarily four hostages, including three Americans.  So it‘s actually perfect timing for McCain.  But look, he wants to emphasize the fact he understands the rest of the world and Barack Obama doesn‘t.  And he‘s got, you know, 40 years of experience dealing with other countries and Obama doesn‘t.  I mean, that may matter in the end.  We‘ll see.

SMERCONISH:  Hey, Jonathan Martin, I hope I‘m not catching you cold with this, but there was a story that broke just this afternoon which says that the Republican National Committee‘s independent expenditure unit is going to drop $3 million.  I don‘t know why they‘re dropping it on July 4th weekend.  What light can you shed on this?

MARTIN:  Sure.  The RNC has created a new arm that‘s going to be focused on spending money mostly on TV ads targeting Barack Obama.  It‘s being run by a guy who actually worked for Mitt Romney during the primaries.  They‘re going to be going up with a new ad on energy in four battleground states, including Michigan and Wisconsin and Ohio starting this weekend.

SMERCONISH:  And Pennsylvania.

MARTIN:  The ad will last for about two weeks.  And Pennsylvania. 

It‘s going to last for about two weeks, spend about 3 million bucks or so.  But this is just the beginning.  What‘s happening here is the RNC, a much better-funded organization than the DNC, is going to take an aggressive role on TV, trying to define Barack Obama.

SMERCONISH:  The part I don‘t like about this, Tucker, is it—to me, it points out—and maybe I can strike that libertarian chord in you—the whole sham that is this financing of our elections.  You know, it‘s not the RNC.  It‘s their—it‘s a unit of  the RNC.  It‘s not McCain, it‘s the RNC—I mean, you know, the whole thing is ridiculous, no?

CARLSON:  Well, it‘s ludicrous and it‘s untenable.  And if Barack Obama has done one good thing for American politics and American life, it‘s destroying the campaign finance system, which he has done by opting out, being the first candidate ever to do that since Watergate.  He showed the whole thing is ridiculous.  And you got a constitutional right to support a candidate with your money.  I mean, you have a right to do that!  And hopefully, we‘ll all come to our senses after this election is over and think of a system that allows people to express their preference...

(CROSSTALK)

SMERCONISH:  I have it.  It is spend whatever you want to spend.  Take money from whomever you‘d like.  Just disclose everything.  And you can do it via the Internet.

CARLSON:  And then we‘ll get there.

SMERCONISH:  All right, great job...

(CROSSTALK)

MARTIN:  ... send all the e-mail to Tucker and Michael.

(LAUGHTER)

SMERCONISH:  Thank you, Tucker Carlson and Jonathan Martin.

CARLSON:  Thanks, Michael.

SMERCONISH:  Coming up: Barack Obama moves to the center.  Is that smart politics, or will he alienate his core supporters?

You‘re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

SMERCONISH:  Welcome back to HARDBALL.  In the past weeks, on issues ranging from wiretapping to gun laws, Barack Obama appears to be tacking to the center.  Is this smart politics or selling out?  I‘m joined by “USA Today‘s” Susan Page and “The Washington Post‘s” Perry Bacon.

I‘d love to start by showing each of you something that appeared in a different newspaper, not “USA Today” and not “The Post,” but “The Wall Street Journal.”  Lead editorial today has this.  “We‘re beginning to understand why Barack Obama keeps protesting so vigorously against the prospect of George Bush‘s third term.  Maybe he‘s worried that someone will notice that he‘s the candidate who‘s running for it.  Most presidential candidates adapt their message after they win their party nomination, but Mr. Obama isn‘t merely running to the center, he‘s fleeing from many of his primary position so markedly and so rapidly that he‘s embracing a sizable chunk of President Bush‘s policy.”

Susan, fair comment, fair observation of what‘s going on?

SUSAN PAGE, “USA TODAY”:  I think that goes pretty far.  I mean, if you look at the core issues, which would be on the economy and on the Iraq war, I don‘t know that you see this big transition to new positions.  It‘s on some other issues, like campaign finance and gun control and the FISA law that Congress just passed, on which we‘ve seen I think some movement by Barack Obama to try to appeal to voters in the middle.

SMERCONISH:  Anything...

PAGE:  But not on the fundamental things...

(CROSSTALK)

SMERCONISH:  ... or does it happen every four years?  I mean, it‘s being made out in many quarters to be a remarkable development.  Or is it the same old, same old?

PERRY BACON, “WASHINGTON POST”:  This same thing does happen every four years.  John Kerry made some similar moves in 2004.  He started talking about reducing the deficit more once he had won the nomination.  Some of this happens every four years, that‘s true.  Obama has said he‘s a different kind of politician, though, so there is something to be said for him acting like politicians typically do.

SMERCONISH:  Perry, does he run the risk—I mean, my view is that each one of these is a calculated decision by the Obama campaign that they can go so far, anger their core constituency, but not go such a distance that those folks don‘t come out to vote for Senator Obama.  To what extent is he running that risk now, given that which has occurred, FISA, NAFTA, maybe Iraq, and the other things that have been written about in “The Journal”?

BACON:  I don‘t think he‘s sort of alienated the core of his constituency so far.  I think—you look at Iraq, for example, before he was saying, I‘ll withdraw one troop brigade a month, and now he‘s saying, Well, I‘ll probably still do that, but I‘ll think about it more and make sure I consult with the generals first.  I still think, you know, if you‘re voting for the candidate who‘s going to withdraw troops faster, it‘s probably Obama and not Senator McCain.  I haven‘t seen a lot of evidence.  There is on this particular—this FISA issue sort of (INAUDIBLE) because he has irritated some of his supporters who have actually—on his Web site, complaining about it.  But it is sort of a small group of people at this point still.

SMERCONISH:  Susan...

PAGE:  You know, I...

(CROSSTALK)

SMERCONISH:  ... of the issues we‘ve identified, which one carries the greatest risk for Senator Obama?

PAGE:  I think I would just disagree a little bit with Perry.  I think there has been some erosion of the aura of excitement about a different kind of politician that Barack—they really fueled Barack Obama‘s rise.  It‘s helped him with fund-raising, given him these huge crowd events at events.  I‘ve been talking to voters this past week for a story I‘m working on, and I‘ve had some people, young people who felt that Obama was the candidate of a generation, saying they‘re distressed by some of the standard political moves that they‘re seeing now.

SMERCONISH:  Which one?  Which of the issues that we‘re describing has the greatest risk for Senator Obama as he pivots to the right?

PAGE:  Well, I think campaign finance reform is a big risk because it was, of these issues, the one that was most at the core of his campaign.  He has a long record of supporting campaign finance reform.  And he‘s tried to kind of drape his decision to break with the system as a principled one, but in fact, I think it‘s a very calculated political one.  He‘s got a big money advantage and that‘s going to help him in the campaign.

SMERCONISH:  Perry how does...

PAGE:  I think that‘s...

SMERCONISH:  Perry, how does John McCain capitalize on these so-called pivots, the word of the ‘08 cycle so far?

BACON:  I think he‘s making that exact case that Susan was talking about, that Barack Obama is a very typical politician.  And I think that, you know, he‘s trying to undermine Obama‘s brand as this different kind of person.  So that‘s the sort of case McCain was making so far.  It‘s a little early to tell if that‘s working, but that‘s definitely the case he‘s going to make.

SMERCONISH:  There‘s a new Gallup tracking poll that‘s out today that shows Obama up by 2.  He had been up by 5.  Maybe it‘s a lot of splitting hairs and so forth because it‘s just a couple of points.  But I guess my question is this, and I‘ll put it to you, Susan.  It seems like these candidates are just sort of plodding along. and that nobody is breaking out of the pack.  How do you interpret the data?

PAGE:  Well, I think there‘s is a question in some Democrats‘ minds that Barack Obama has huge advantages in this election—he‘s the candidate of change, George Bush is so unpopular, unpopular war, people think the country‘s going in the wrong direction.  Why hasn‘t he opened up a bigger lead over John McCain?  And that may be one of the things involved in the calculation of Obama‘s campaign that he needs to move to the center, introduce himself and bolster his standing with voters in the middle.

SMERCONISH:  Well, and I guess the corollary of that might be that John McCain didn‘t capitalize on what was supposedly a bloodbath between Hillary and Barack.  I always maintained that he was out of sight, out of mind, and that it boded poorly for him the longer that those two were duking it out.  And I think, Perry, that‘s being shown in the numbers.

BACON:  I think, you know, we have two things going on.  You know, John McCain today just sort of reassigned his campaign.  It was a shaking of his campaign.  They didn‘t do well in that three-month period.  Obama, like Susan says, probably, you know, is—considering how anti-Republican and anti-incumbent the year is, Obama could be leading by more points.  And you see him, right now he‘s giving a speech about national service.  Gave a speech yesterday about faith-based—you know, faith-based initiatives.  He‘s trying to move to the center, introduce himself to voters some more.  So they‘re both, you know, sort of grappling with things.  They both want to do better in the campaign.  They both are grappling somewhat with some of their problems.

SMERCONISH:  Is John McCain making a pivot to the left to the extent that Senator Obama is making a pivot to the right, Susan?

PAGE:  You know, I think the strange thing is that John McCain seems to be pivoting to his right.  I mean, you see him on tax cuts, on off-shore oil drilling, on some of these other issues.  He seems to be trying to bolster his conservative win, which is not what winning candidates usually do when they turn to the general election.  He still seems to see—feel he has some vulnerability among those core Republican voters, and that is not a good sign for his campaign.

SMERCONISH:  But maybe—maybe the answer is that each believes their base is intact.  They—they may get hot during the summer months.  They may be upset, for example, relative to Senator Obama with the telecom folks.  Maybe on the right, the GOP doesn‘t like what John McCain had to say about global warming. 

But, in the end, everybody comes home to their normal base, and the fight is in the middle.  And that‘s what they‘re both going after right now. 

BACON:  I‘m not sure that is true.  I think what Susan said is right, is that Obama is not going to make a whole lot more moves to the left, I don‘t think, the rest of the year.  But McCain seems to be in this zigzag mood.  Some days, he‘s centrist.  Some days, he‘s more conservative. 

And it is unclear.  And their campaign is acting as if they‘re not sure they have the conservative base consolidated, while Obama is acting very confident that all the liberals will vote for him.  So, I think we are seeing—in this election, McCain should be irritating his party more than Obama has to, because McCain needs to gain a lot of independents and Democrats to win the election. 

SMERCONISH:  I want to show you one more thing before we have to shut this down.  Arianna Huffington wrote this about Senator Obama‘s tack to the center—quote—“I looked at the Obama campaign not through the prism of my own progressive views and beliefs but through the prism of a cold-eyed campaign strategist who has no principles except winning.  From that point of view, and taking nothing else into consideration, I can unequivocally say, the Obama campaign is making a very serious mistake.  Tacking to the center is a losing strategy.”

Susan Page, you buy into what Arianna Huffington blogged? 

PAGE:  You know, Barack Obama has to get votes in the middle if he is going to win.

On the other hand, he also needs to keep his—I guess you would call his brand as a different kind of politician.  That‘s what has fueled his campaign so far.  He has a line to walk here.  He needs to get votes from both those camps. 

SMERCONISH:  Perry, you buying into what Arianna Huffington blogged? 

BACON:  I‘m not.  I just—I have got to see more evidence that a lot of liberals are concerned about—beyond sort of Arianna Huffington, sort of more elites, and sort of more sort of mainstream voters.  I think Obama has a lot of support among core Democrats at this point. 

SMERCONISH:  I think what it is doing is reinforcing a lot of pre-held conceptions about both the candidates.  That‘s my own two cents.  Anyway, thank you very much, Susan Page and Perry Bacon.

Up next: the HARDBALL “Sideshow.”  Did Barack Obama snub a supporter by not bumping fists? 

Plus, a closer look at the fabulous life of Cindy McCain.  You‘re watching HARDBALL, only on MSNBC.  

(COMMERCIAL BREAK)

SMERCONISH:  Welcome back to HARDBALL.

Time now for the HARDBALL “Sideshow.”

Forget high-fives.  Right now, it is all about the fist bump.  Remember this classic moment when Senator Obama wrapped up the nomination last month?  Well, while campaigning in Ohio yesterday, a number of news outlets reported that Obama fist-snubbed a young supporter.  That is, he refused to do the fist bump with him.  But a close inspection of the tape shows a different story.  Take a look. 

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE:  Oh, if I start that well, mom may not be happy when she comes home. 

(END VIDEO CLIP)

SMERCONISH:  We are Zaprudering the film right before your eyes.  The kid was asking Obama to sign his hand, not to do the fist bump.  No snub involved. 

It looks like Cindy McCain is doing her part to get the economy going again.  The potential first lady is reportedly worth over $100 million.  And, well, her lifestyle is not exactly frugal.  “The Politico” reports that, since 2004, Cindy McCain and her children have spent $11 million on five condos.  In 2007, the McCain family spent $273,000 on household employees. 

And, this year, Cindy McCain charged $750,000 on credit cards, and that is in a single month. 

Look, if she has got the money, she has certainly got the right to spend it how she would like.  But Republicans may want to rethink who they brand elitist. 

Next, it looks like Senator Obama is not the only one having trouble keeping his surrogates on message.  Rudy Giuliani was on CNN yesterday, supposedly to make the case for John McCain.  But, well, take a listen. 

(BEGIN VIDEO CLIP)

RUDOLPH GIULIANI ®, FORMER NEW YORK MAYOR:  I have had a good deal of foreign policy experience.  But, if you‘re asking me, “Has John?” John has had just about the most of anyone who has ever run for president. 

JOHN ROBERTS, CNN:  Do you think he is more qualified to be president than you are? 

GIULIANI:  Do I think he‘s...

ROBERTS:  Or were?

GIULIANI:  No.  I thought I was the best qualified to be president. 

(END VIDEO CLIP)

SMERCONISH:  That‘s Mayor Giuliani, maybe with some lingering thoughts from the primary loss. 

Now it is time for “Name That Veep.” 

“U.S. News” profiles a potential V.P. pick that one key GOP strategist calls—quote—“the one we‘re most afraid of.”  This former congressman ran twice for president, enjoyed strong support among organized labor and blue-collar workers each time.  He has got deep ties to the Democratic establishment, and might be just what Obama needs to ensure the base turns out in full force this fall. 

So, who is it?  Former House Majority Leader Dick Gephardt. 

And now for tonight‘s “Big Number.” 

Conservative radio host Rush Limbaugh made headlines this year for Operation Chaos, his call on Republicans to re-register as Democrats and vote for Hillary Clinton, apparently to prolong the primaries and weaken Obama as the nominee. 

Whether or not Limbaugh achieved his goal, my fellow radio talk show host has an estimated 14 million weekly listeners and has been America‘s top-rated radio host for years.  Now “The New York Times” is reporting that Limbaugh is on the verge of signing a record deal that will keep him on the air through 2016. 

So, just how much would Limbaugh be making over the next eight years?  How about $400 million?  Clear Channel and Premiere Radio think that Limbaugh is worth over $400 million for the next eight years. 

Limbaugh‘s record-shattering $400 million deal—tonight‘s “Big Number.” 

And being a radio host myself, I am calling my agent. 

(LAUGHTER)

SMERCONISH:  Up next, there has been a lot of talk that Barack Obama can expand the map for the Democrats.  When we return, we will take a closer look at the battle for the Southern states.

You‘re watching HARDBALL, only on MSNBC.  

(COMMERCIAL BREAK)

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

The Dow and the Nasdaq closing in bear market territory, meaning that they have dropped 20 percent from their most recent highs last October, the Dow falling 166 points today, the S&P 500 losing more than 23, the Nasdaq dropping by 53.5. 

Stocks tumbled, as oil topped $144 a barrel for the first time—that following a bigger-than-expected drop in U.S. inventories last week.  Crude settled at a record closing high of $143.57 a barrel.  That‘s up $2.60 for the day. 

General Motors‘ shares plunged after Merrill Lynch said that GM faces the possibility of bankruptcy, or at least it can‘t be ruled out at this point.  GM shares fell 14 percent to their lowest level since 1954. 

And “The Wall Street Journal” reports that Microsoft is positioning itself for yet another run at Yahoo! by talking to other media companies about joining in a deal.  Talk of this potential takeover simply just won‘t go away.  Yahoo!~ shares rose today, while Microsoft shares fell. 

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

HARDBALL. 

SMERCONISH:  Welcome back to HARDBALL. 

The Obama campaign believes it can turn the South into battleground territory, in part by running up African-American turnout in those states.  But take a look at pollster.com‘s latest poll average of some Southern states.  In Georgia, McCain beats Obama by seven points, 50-43.  In North Carolina, McCain is ahead of Obama by three points, with Bob Barr taking 5 percent of that vote.  Florida neck and neck, with McCain at 45 and Obama at 44.  But, in Virginia, Obama pulls ahead of McCain 47-45. 

Can an increase in African-American turnout translate into Southern victories for Barack Obama?  Can he put the South in play? 

Ron Christie is a Republican consultant.  He also served as a special assistant to President Bush.  And Steve McMahon is a Democratic media consultant. 

Steve, fact or fiction that the South is really in play? 

STEVE MCMAHON, DEMOCRATIC STRATEGIST:  Fact, fact.  Take it to the bank. 

You know, it doesn‘t take very many Southern state to change the map.  If you look at—if you look at the states that George W. Bush carried last cycle, in 2004, and you look at where they stand today, states like Nevada and New Mexico, states like—like Virginia, where Barack Obama is ahead, it is—it‘s clear that Barack Obama is in play or ahead in places that the Republicans have taken for granted in the past. 

And that fact alone is going to give him a big advantage.  And there‘s other big fact that‘s going to give him an advantage.  And that is his financial advantage.  He may have four or five time more money than John McCain.  And by spreading the playing field, he makes it more difficult for John McCain to defend in all the places he has to defend this year that the president didn‘t have to defend really in 2004. 

SMERCONISH:  In other words, what—what you‘re saying—and I believe this—and, Ron, I will let you respond to it—what really might be going on here is that John McCain gets forced to spend a lot of time and a lot of money in a part of the country where he otherwise would have been able to take it for granted because the Obama campaign had so much dough that they can run a 50-state campaign. 

RON CHRISTIE, FORMER SPECIAL ASSISTANT TO PRESIDENT BUSH:  I think that‘s right.

But, of course, I think Senator Obama will not run a 50-state campaign.  I think he will run a 15-, perhaps 20-state campaign.  And he is able to look at states like Virginia, that has traditionally been a Republican state.  Now I think people are calling it a purple state.  But Senator Obama has certainly put a lot of resources into Virginia. 

But the question here is, can Senator Obama connect with rural voters?  Can he connect with people and constituencies that question some of the flap that we have heard about patriotism, of wearing flag pins, and, of course, his stance on Reverend Wright.  Reverend Wright, I think, is a sleeper issue that is going to come back to haunt Senator Obama this fall, because Senator Obama was in the pews of a church, where he is going to states where people focus on traditional family values.

And this man had such terrible things to say about the United States and such terrible things to say in the pews, that a lot of people can‘t believe that Senator Obama had never heard of these. 

(CROSSTALK)

CHRISTIE:  So, from a values perspective, I think he is in a lot of trouble.  And he‘s really going to have to make up some ground.

SMERCONISH:  I want to focus on Mississippi for just a moment.  And I hope that this is not like an SAT question. 

(LAUGHTER)

SMERCONISH:  But let me explain it as follows.

Obama strategists have suggested that increased African-American turnout could yield him victories in the South.  But Thomas Schaller—and he‘s the guy who wrote the book “Whistling Past Dixie: How Democrats Can Win Without the South.”

He looked at Mississippi.  And, specifically, he explained that, even if Obama could increase African-American turnout by 5 percent—quote—

“The black vote would yield Mr. Obama 37 percent of Mississippi‘s statewide votes.  To get the last 13 percent he needs for a majority, Mr. Obama would need to persuade a mere 21 percent of white voters in Mississippi to support him,” which sounds easy, right?  “But only 14 percent of white voters in the state supported Mr. Kerry.  Mr. Obama would need to increase that number by 7 percentage points, a 50 percent increase.”

Steve, how is he going to get that done in Mississippi? 

MCMAHON:  Well, the way he gets it done in Mississippi is by changing the equation, by increasing the African-American turnout.  And it‘s also by registering and turning out more young voters, because Senator Obama has a big lead among young voters. 

And I will remind that, you know, 21 percent is a number that—that was thrown out there.  Bill Clinton got 36 percent on the average throughout the Deep South.  But, listen, I agree that—that Mississippi is a little bit of a stretch. 

But what isn‘t a stretch is Virginia.  What isn‘t a stretch is North Carolina.  In Georgia, where he is very close right now, Bob Barr is from Georgia.  And Bob Barr is going to cost John McCain a lot of votes in Georgia.  So, there are three Southern states right there that, if we change the dynamic in even one, it becomes almost impossible for Senator McCain, unless he can flip some states that John Kerry and Al Gore won, to become president. 

SMERCONISH:  Ron Christie, Thomas Schaller yesterday in the “New York Times”—I took notes—he tried to dispel some what he says are urban legends about Southern voting patterns.

He says: “African-American turnout is not so low.  And the Democrats don‘t do better in Southern states with a large number of African-Americans.”

Your thoughts on that. 

CHRISTIE:  I think that‘s right. 

And I think that this is one of the travesties that we have seen in the political process, that Senator Obama assumes, just because he is African-American, that he will automatically generate high numbers of African-Americans going to the polls. 

There is no question that Senator Obama has a wide appeal to the African-American community.  But this is the mistake and the trap that the Democrats could fall in of taking a constituency that they have taken for granted for decades. 

Senator Obama has got to go out and make his case of why he is the proper candidate, not that, “Hey, I‘m black; you‘re black; we all vote together,” because we don‘t.  And that‘s a danger and a monolithic thought that the Democrats have had. 

I think Senator Obama, again, is going to have a far more difficult time than his campaign appears to believe, because people in the South question some of the comments that he has made, his positions on religion and patriotism.  And Reverend Wright really could come back to haunt him again. 

SMERCONISH:  But why—why would people in the South question those positions any more than people in the Northeast or in the Southwest? 

CHRISTIE:  Because I think you saw the slide in Senator Obama‘s campaign take place when he made those comments where he was talking about people clinging to their guns or clinging their religion.  That might sound fine in my beloved home state of California, but there are a lot of people in rural communities, in the communities across this country, who take their religion, their love of America, and, of course, their ability to practice their religion very seriously. 

MCMAHON:  Mike, Mike...

SMERCONISH:  He actually—he actually said it about my home state of Pennsylvania. 

Yes, go ahead, Steve.

MCMAHON:  Listen, I think Ron is doing a very effective job here for his side.  But at the end of the day, these are distractions.  What is going to matter to people is what this race is about.  Do we want to get out of Iraq in the first 100 days or do we want to stay for as long as 100 years?  Do we want to continue the Bush economic policies or do we want to go in a new direction?  Do we think that everybody should have health insurance?  Do we think people should be on their own?  Those are the issues that people are going to make this decision on.  Do we think that oil companies are making too little money, or do we think we should let them make more? 

SMERCONISH:  It‘s the script.  I just don‘t want Ron now to responsible in kind with his GOP talking points. 

MCMAHON:  Michael, it is not the script.  It is not.  Hold on.  It‘s not.  It‘s people‘s lives.  It‘s people‘s lives.  It‘s not a script. 

CHRISTIE:  Those are the talking points.  The important thing—

SMERCONISH:  Time out.  I want to ask you both this question; the most perhaps important state electorally speaking in the south, although it is of it as being in the northeast, not really being in the south, Florida.  Ron Christie, you go first.  Who wins Florida as things stand today, as we begin the month of July? 

CHRISTIE:  Senator McCain will win in Florida.  Senator McCain has been widely viewed as having a slightly independent view from the Republican party on immigration.  He is very popular in Hispanic communities, not only in Florida, but across the country.  I think Senator McCain‘s message resonates in Florida and the pan handle with some of the people who are very comfortable with his military background, as well as Miami-Dade and Broward Counties, who have high concentrations of Hispanic voters.  I think that is Senator McCain‘s state that he will put in the Republican column. 

SMERCONISH:  Steve, I imagine you will tell me that Senator Obama will win Florida.  I want to ask you that question and one other, which is why is that so tight?  Why is Florida so competitive right now? 

MCMAHON:  First of all, I‘ll tell you, I don‘t think it matters whether Senator Obama wins Florida, because he has Georgia and North Carolina and Virginia in play.  He has Nevada, New Mexico and Colorado in play.  Every electoral vote counts exactly the same.  If he wins Florida, it is impossible for John McCain to become president.  There are a number of ways for him to become president that don‘t include Florida. 

I think he‘ll win Florida because I think people in Florida are as tired of the war and the economy and gas prices as they are anywhere else in the country.  That‘s why I think he‘ll win.  I don‘t think they‘ll be distracted by Reverend Wright or by a flag pin or by a pledge of allegiance or by any of those ridiculous things that the Republicans are trying to drag in to this. 

This will be decided on issues and on people‘s lives.  And on those things, the Democrats have a great big advantage.  So does Barack Obama. 

SMERCONISH:  I‘m sorry.  We‘re out of time. 

CHRISTIE:  Not a distraction, patriotic values. 

SMERCONISH:  Many thanks to Ron Christie and to Steve McMahon.  Up next, the politics fix.  Is it smart strategy for Barack Obama to move to the middle?  This is HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

SMERCONISH:  Welcome back to HARDBALL and the politics fix.  Tonight‘s round table, MSNBC political analysts Michelle Bernard and Pat Buchanan, and Iris Burnett, author of the book, “So You Think You Can Be President?”  I book title I think written with Buchanan in mind.  That was my attempt at levity, everybody.  It gets no better.   

IRIS BURNETT, AUTHOR, “SO YOU THINK YOU CAN BE PRESIDENT”:  Yes it was.  It was specifically written for Pat.

SMERCONISH:  I interviewed Bob Novak today in a different setting.  And Bob Novak said to me that he thinks it is inevitable, I‘m paraphrasing, that Colin Powell is going to endorse Barack Obama.  Pat Buchanan, what will be the significance of that if it happens? 

PAT BUCHANAN, MSNBC POLITICAL ANALYST:  I think it will be significant.  Colin Powell is very well respected in Republican circle.  I also think it is not unpredictable for the reason, I think Colin Powell feels, Michael, he was very badly used by this administration, which used up his credibility on, frankly, that phony speech up at the U.N., which made all these charges about what Saddam Hussein had that he really didn‘t have.  It would not surprise me. 

SMERCONISH:  You think that he feel like he got duped, and McCain is close to the administration.  He is not going to let it happen again? 

BUCHANAN:  I think he feels used, first, and secondly, Colin Powell on social and cultural and moral issues has always been off the Republican reservation.  Third, he is part African-American.  And I think Colin Powell feel a certain support for the challenge of this young guy.  So it wouldn‘t surprise me for those three reasons, Michael. 

SMERCONISH:  Michelle Bernard, there‘s a patriotism gap that is showing in a survey that CNN just did; 25 percent think Barack Obama lacks patriotism.  I can‘t understand it, but that‘s according to this new CNN poll.  Only 75 percent said differently, of registered voters, believe he is patriotic.  McCain gets a resounding 90 percent.  Is this all tied to that Internet lure, those urban legends, all that phony stuff circulating online? 

MICHELLE BERNARD, MSNBC POLITICAL ANALYST:  I would venture to guess that a lot of it has to do with Reverend Wright as well as all the Internet rumors about his wife and some of the comments that his wife has made, questions about the—whether or not he wears a lapel pin and when he wears a flag pin on his lapel.  And also, just questions about whether or not he truly loves his country, simply because his middle name is Hussein.  People keep asking, is he a Muslim?  Is he a jihadist?  Is he really a Christian?  I think all of that plays into it.

Because we have those visuals all the time of Senator McCain as a prisoner of war, and people constantly talking about his military service, that automatically equates into people believing that Senator McCain is more patriotic than Senator Obama. 

SMERCONISH:  Iris, there is not a day that goes by without my in bin, you‘ve got mail, with some crap about Barack Obama that is unfounded.  At some point, I think it may back fire.  I don‘t know who these mischievous individuals are out in there cyberspace, and I don‘t think they‘re affiliated in any way with the McCain campaign.  If they keep it up, I‘m convinced they will end up helping Barack Obama.  Your thoughts?   

BURNETT:  I think that‘s right.  I think at some point, it is going to back fire.  It is interesting, the name thing is really interesting.  Hussein as Obama‘s middle name.  Sydney is McCain‘s middle name.  And I‘m not sure that that passes the laugh test either. 

SMERCONISH:  Pat Buchanan, I have in my hands today‘s “Washington Post.”  On A-3, I‘ll hold it up, “Obama got discount on home loan.”  I don‘t know if you can see.  That here‘s my question, Pat, on what page does this story belong? 

BUCHANAN:  That he got a discount on the home loan?  Because of Countrywide and all these senators and whatever that fellow, friends of Anthony, I guess it was, who got them, it probably—I think it belongs in the paper.  I‘m not sure it is page one, unless he got some enormous discount.  A lot of folks who are very well off and got connection do very well on these thing.  And as long as it wasn‘t huge, I don‘t think it is a big problem. 

SMERCONISH:  Michelle Bernard, reaction on that?  I hope I‘m not catching you cold on the story. 

BERNARD:  No, you‘re not.  I actually read the story.  I completely agree with Pat.  If you look at the story in great detail, the discount that he got was really not significant.  It maybe saved him I think either 300 dollars a month or 300 dollars a year.  Because of the big upsurge of income of both he and his wife when the loan was taken out, it appears that he might have been part of some private banking group.  He didn‘t have a prior relationship with them.  It‘s no big deal.  I think the only reason it‘s in the “Washington Post”—and it really didn‘t belong on the front page.  It belonged exactly where they put—is because of the Countrywide scandal. 

SMERCONISH:  Here‘s something else I have my mind on.  It‘s the discontent among some of the Obama supporters relative to FISA and the whole telecom issue.  Iris, I‘ll put this to you.  I‘m not sure if you‘re aware of it, but online, on his website, they are beefing about his change of heart on that issue, which I think presents a very interesting question: should the Obama campaign delete and take down the discontent and alienate those folks further or just let it ride? 

BURNETT:  I think you do what you feel is right.  If they want to have it up on the website, I think that‘s fine.  A bigger question is this question of change. 

SMERCONISH:  Yes. 

BURNETT:  And, you know, people think that Obama is moving to the center and that‘s a danger because he‘s moving away from his base.  Your base is your base.  Your base isn‘t going anywhere.  So it‘s not your regular base you need to be worried about.  It‘s your free basers or maybe that‘s the wrong word. 

BERNARD:  It definitely is the wrong word. 

BURNETT:  All right.  I write comedy.  Your first baser.  Those are the people that made the commitment to the campaign for change.  If he‘s moving away from change, and you see Madeline Albright back on the foreign policy committee, people are going to think maybe this isn‘t real. 

BERNARD:  Michael, can I add, when you talk about change here, you know, I would say that this is not a change for Barack Obama.  He‘s always campaigned as somebody who‘s going to reach out to independents.  He‘s going to reach out to moderate Republicans.  He‘s going to reach across.  He believes in trans-partisan politics.  Maybe this isn‘t necessarily a change.  I think we can always say that Barack Obama was never your cookie cutter Democrat.  Maybe this really is him showing the American public that he is an agent of change. 

BUCHANAN:  I think he‘s really got a problem now.  I think it‘s developing.  He has the most liberal record in the United States Senate or second or third.  He comes out this last week, he endorses the Scalia position on the death penalty for child rapists, the Scalia position on owning a handgun in your home.  He changes on campaign finance reform.  He throws Samantha Power, his foreign policy gal, under the bus, throws Reverend Wright under the bus, throws grandma under the bus, and he throws his church under the bus and abandons that.  He‘s moving to the center.  It‘s too big and too fast to strip tease. 

SMERCONISH:  Patrick, I agree.  Take some shine off the apple.  Hang on one second, because we‘re coming back with the full round table for more of the politics fix.  You are watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

SMERCONISH:  We‘re back with the round table for more of the politics fix.  Michelle, I‘m a knuckle head when it comes to the market indices relative to the economy.  You talk to me about the consumer price index, my eyes glaze over.  But—

BERNARD:  I‘m with you. 

SMERCONISH:  This comes from a Duncan Doughnuts guy.  But you tell me that Starbucks is closing 600 stores across the country, all of a sudden I say, there really is a problem with the economy.  What‘s the Starbucks factor? 

BERNARD:  Absolutely.  All along, we‘ve been questioning the reasoning behind why people will spend five dollars for a cup of coffee at Starbucks, but start complaining when gas gets to four dollars a gallon and maybe even creep up to five dollars a gallon.  That really is the fear factor that we‘re looking at.  If Starbucks has to close 600 stores around the nation, and who knows how many employees are going to lay off, what‘s that say about what‘s going to happen to gas prices?  What does it say about what‘s going to happen to food prices.  Pocket book issues are going to haunt both Senator McCain and Senator Obama all the way through this election.  I venture to guess that with the closing of more Starbucks stores, we‘ll begin to see other things like this happen with other franchises.  Americans are going to pay very close attention to the economy. 

SMERCONISH:  Pat Buchanan, you don‘t strike me as Mochacino kind of a guy.  Isn‘t this a pretty significant sign?  It got more press than the downward spiral of auto sales in certain newspapers today. 

BUCHANAN:  I think it is a sign.  Quite frankly, Starbucks is over built.  They went into area‘s where they can‘t afford four dollar, five dollar coffee.  That‘s 12,000 jobs gone.  I‘ll tell you what‘s going to alarm a lot of folks, when you hear today that someone suggested General Motors might be headed for Chapter 11.  The mighty auto industry, the greatest on Earth, is tanking.  Ford lost 26 percent of sales year over year in May.  When you take a look at these things, Michael, we are headed into real trouble. 

The reason neither person is breaking out is nobody thinks either of them has a real economic solution.  Barack is for higher taxes.  McCain, what is he for, more free trade?  That‘s what destroyed the auto industry. 

SMERCONISH:  Iris, we only have a minute left, but I think it‘s an accurate observation that Pat makes, which is that economics isn‘t the strong suit of either of these candidate.  I don‘t know who benefits from a bad economy.  I guess the Democrat because McCain would be tied to the current administration. 

BURNETT:  I can‘t believe anybody benefits from a bad economy.  I don‘t think people need a sign like Starbucks closing to understand that the economy is in trouble.  They can‘t feed their kids and they can‘t afford gas.  We don‘t need to be looking for signs. 

SMERCONISH:  I don‘t know that‘s indicative.  I may sound naive when I say this.  I recognize gas prices are high.  I spent 87 dollars yesterday in Philadelphia to fill my tank.  That could be isolated.  The facts say otherwise. 

BURNETT:  Well, it‘s certainly not isolated. 

BUCHANAN:  Try filling a Navigator, Michael, like I do. 

SMERCONISH:  I was filling an F-150, my friend. 

We‘re out of time.  Pat Buchanan, Iris Burnett—Join us again tomorrow night for more HARDBALL.  Right now, it‘s time for RACE FOR THE WHITE HOUSE.

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

END   

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