updated 7/8/2008 11:12:42 AM ET 2008-07-08T15:12:42

Guest: John Harwood, Mark Green, Michelle Bernard, Dana Milbank

DAVID GREGORY, HOST:  Tonight, after the fourth, what is the state of the presidential campaigns?  And will Obama find an edge in the great outdoors?

The RACE FOR THE WHITE HOUSE rolls on.

Welcome to THE RACE.  I‘m David Gregory.  Good to be back.  Good to have you here, your stop for the fast-paced, the bottom line and every point of view in the room. 

Americans returning from their vacations last week are coming back to the grim reality of the sorry state of economy as both campaigns now turn their attention to the issue that promises to define this race.  We‘ll talk about it tonight. 

Also, we‘ll go inside the war room of the Democratic Convention and take a look at some big changes that Obama has got in store for that show. 

In “Vetting the Veeps” tonight, a prominent Democratic name taken off the table.  Who is left on it? 

Tonight, the bedrock of our program, a panel that always comes to play. 

And with us, for the first time, Mark Green, president of Air America Radio and author of “Losing Our Democracy”; Dana Milbank, national political reporter for “The Washington Post”; Michelle Bernard, president of the Independent Women‘s Forum.  Dana and Michelle, both MSNBC political analysts.  And John Harwood is here, CNBC‘s chief Washington correspondent, and a political writer for “The New York Times.” 

We begin as we do every night to get you caught up on everyone‘s take of the most important political story of the day.  It is “The Headline.” 

John Harwood, get us started here tonight.  Your headline is looking at McCain‘s economic message today.  Take it away. 

JOHN HARWOOD, WASHINGTON BUREAU CHIEF, CNBC:  David, my headline is, “Who‘s Flip-Flop?”

John McCain has been making fun of Barack Obama for changing his positions on some issues since locking up the Democratic nomination, and using them to argue his Democratic opponent doesn‘t talk straight.  Well, today, John McCain made a big shift of his own.  He‘s been pledging to balance the budget by the end of his second term, including balance for the hugely expensive Medicare and Social Security programs.  Now, as he battles Obama for control of the economic debate, he proposes balance by the end of his first term, but without fixing Medicare and Social Security. 

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE:  American workers and families pay their bills and balance their budgets.  And I‘ll demand the same thing of our government, which you‘re not getting now. 

(END VIDEO CLIP)

HARWOOD:  And of course, no one argues with that sentiment.  With this McCain shift today, Obama just acquired a little protection from the next time Republicans accuse him of blowing with the political winds—David. 

GREGORY:  There‘s the flip-flop, but there‘s also the issue of whether he‘s feeling the voters‘ pain on the economy, John.  Is he getting closer to that with that speech today? 

HARWOOD:  I‘m not sure this speech was a huge step in that direction.  I do think that the energy policy that he‘s outlined over the last few weeks which is debatable on its merits substantively, drilling more nuclear power, several other steps, including the gas tax holiday, has succeeded in convincing some voters that John McCain wants to act and maybe abandon some of his past positions to do something about the $4-a-gallon gas. 

GREGORY:  Mark Green, welcome.  You‘ve got a thought and a headline tonight on McCain‘s economic policy. 

MARK GREEN, PRESIDENT, AIR AMERICA:  Well, David, my headline was going to be, “Mark Green Invited on ‘RACE FOR THE WHITE HOUSE.‘”  I was then gently told it was a little too self-referential.

So option two is “McCain‘s Much Touted Economic Tour.”  It‘s good politics, dangerous policy. 

Look, because the economy is by far the number one issue, because McCain charmingly admitted he‘s not a good economic student, the more he can ardently, frequently, empathetically talk about the economy and to working families, the better for him.  Two problems. 

One, a bad economy is associated with Bush, his president who‘s supporting him.  And two, conservatism has its charms.  But having specific answers to unemployment, lack of insurance, losing your home or losing your equity, often looks to government.  And conservatives don‘t have a governmental answer to working families‘ needs. 

GREGORY:  The question is whether Barack Obama has a more detailed answer to an economy on the verge of recession—it depends on how you define it—that may not have hit a bottom yet and is complicated by a housing bubble where we don‘t know which way is up, which way is down, and where the exit sign is for that particular issue.

We‘re going to come back to this issue as we go forward. 

Michelle Bernard, you‘re looking tonight at a headline, big plans for the big show in Denver.  Your headline tonight? 

MICHELLE BERNARD, MSNBC POLITICAL ANALYST:  Absolutely, David.  My headline is “Obama Conjures John Elway and John McCain is Sitting on the Sidelines.”

As you know, Senator Obama has decided to buck traditional Democratic Party strategy, and he‘s going to move his acceptance speech of the Democratic nomination to Denver, Colorado‘s Invesco Field, home of the Denver Broncos, home of John Elway.  Now, the Democrats will tell us that this is binging the convention and the acceptance speech to as many Democrats and to as many Americans as possible that want to be there and witness history, but it‘s even more than that. 

Barack Obama will accept the Democratic nomination on the 45th anniversary of Martin Luther King‘s “I Have a Dream” speech.  He will be in his element.  He will give an incredible speech.  And as we will talk about later in the program tonight, the big question for John McCain is, how does he respond to this? 

GREGORY:  And the fact that this is going to be done in Colorado, a crucial state for pickup for Barack Obama given his electoral map.  You put it outside like that, the potential for a huge audience that draws from, really, from the rest of the state.  It becomes an amazing practice of retail politics in a state where he needs it. 

BERNARD:  Absolutely.  Absolutely.  And the Republican convention is only one week later, so this could be difficult even just for optical reasons for Senator McCain. 

GREGORY:  All right.

Dana Milbank, your headline takes a look at a change in schedule for Obama today.  A little scary times aboard the press charter. 

DANA MILBANK, MSNBC POLITICAL ANALYST:  Yes, I have an aviation headline.  “Obama‘s Emergency Landing Sets off a Metaphor Alert.”

In our business, those red lights were flashing.  He took off from Chicago, bound for Charlotte, but had to land in his Midwest Airlines jet in St. Louis because an emergency slide had deployed. 

So, you can use whatever metaphor you want about losing altitude, or whatnot, but this may be no great harm done.  Everybody is fine.  McCain (sic) had to do his speech in front of a blue curtain instead of a live audience. 

GREGORY:  Obama did.

MILBANK:  Yes, I‘m sorry.  Yes.

And it may be a useful time, however, to sit back and say—at this point in the race, a lot of people have been saying Obama is running away with it and it‘s—he‘s got this substantial six-point lead in the polls.  Carly Fiorina, one of McCain‘s chief advisers, this morning was at a breakfast actually answering the question, should we just call the race over? 

Well, the truth is, unexpected things happen.  Whether it‘s the deployment of the emergency slide or far more serious things.  So we should probably take a deep break and say we don‘t know what‘s going to happen. 

GREGORY:  The bottom line, we‘ve got both campaigns who have came back from this  holiday week, holiday weekend, and said it‘s all eyes, complete focus on the economy as a determinative factor in this race. 

MILBANK:  Yes, absolutely.  And that‘s because everybody, when they go to their home districts, or wherever they are in this country, is getting a complete earful from people. 

Now, of course, there‘s not much anybody in politics can do about gas prices or the economy.  But they have to sort of outdo the other guy.  I‘m reminded of the—“Something About Mary,” the movie where they come up with seven-minute abs, which is fine unless somebody comes out with six-minute abs. 

GREGORY:  Exactly.

We‘re going to take a break, we‘re going to come back, go inside the War Room, talk about the Democratic Convention, the plans that are shaping up, the upsides for Barack Obama, the downsides for the party. 

And oh, by the way, what about Bill‘s role, the former president?  There‘s been a conversation between these two preparing for the summit.  Later on, your turn to play with the panel.  Call us at 212-790-2299, or e-mail us, race08@msnbc.com. 

RACE FOR THE WHITE HOUSE will come right back.

(COMMERCIAL BREAK)

GREGORY:  We are back on THE RACE, heading inside the War Room now.  Strategy session time as we head into the DNC war room, thinking about the Democratic Convention. 

Back with us, Mark Green, Dana Milbank, Michelle Bernard and John Harwood.

OK.  Topic number one, we talked about it in the headlines, Obama is now going to accept his nomination at a new venue.  He‘s going to take it all outside in Denver to Invesco Field, where the Broncos play, 76,000 people.  You remember that rally he had back in Oregon where he had 70,000 people there?  There‘s a difference between the original venue where the rest of the convention will be and then taking it outside. 

Dana Milbank, what does this do for Obama? 

MILBANK:  Well, it‘s really what it does for television. 

GREGORY:  Yes.

MILBANK:  It‘s not about who‘s in the crowd, it‘s about how it looks to people at home.  And these conventions have become—there‘s really no element of surprise in it anymore. 

There needs to be some new form of virtual fireworks in each one to keep the interest of David Gregory and lesser figures in the press corps.  This is one way to do it.  And it seems to have thrown McCain back on his heels a bit. 

They are not quite sure how to respond to it.  On the other hand, it does carry certain risks of grandstanding and showboating. 

GREGORY:  Well, I wonder though, John, how much of this is how it looks on TV, how the rest of the country sees it?  How important though is it on the ground in Colorado, where people are going to come from all around the state and say, hey, we got a chance to see this up close? 

HARWOOD:  Well, one of the things we have seen throughout the campaign is Obama has used his crowd-building capacity as an organizational tool.  And so, as they‘ve drawn big crowds throughout the primary process, they have signed up those people and deployed them in the campaign. 

I do think there‘s some risk associated with this, though.  You know, how does it really look when you get inside this cavernous stadium?  I‘m sure Barack Obama will be able to fill it.  We‘ve seen he‘s demonstrated the capacity to do that. 

But you know, you get the feeling inside a convention arena of a big crowd even without having to address the logistics and acoustics and the complications of being in a football stadium.  I think this is somewhat of a risk on their part. 

GREGORY:  All right.

Mark, take this the other way.  Talk about how McCain responds to all this as they plan the RNC convention.  It comes right after the Democrats. 

This was interesting.  It was reported by “The New York Times.”  Mark Salter, who is a top adviser to McCain, said the following—again, from “The New York Times.”

“Mr. McCain and his advisers seem to be trying to present him as a kind of anti-Obama whose weaknesses as a political performer underscore his accessibility to regular voters.  ‘John doesn‘t ever want to be something  that he is not,‘ Mr. Salter said, ‘including trying to pass himself off as a larger-than-life figure on stage.  There‘s nothing there about him that wants to be rarefied.‘”  Can he outdo Obama on this score? 

GREEN:  I don‘t see how.  I don‘t know how you counter-program.

Does McCain give his acceptance speech in a small kitchen so he really connects to people and it looks very busy?  Does he do a Libby Dole and walk around the convention floor, which actually would be more creative?

Look, next to Barack and Hillary coming together in Unity, New Hampshire, this is a—kind of creative symbolic idea.  A candidate of change has changed the look.  And my guess is, since there‘s a rumor he gives a pretty good speech, that this will look good.  It will be exciting, inclusive, populist. 

You know, we still talk about Jimmy Carter walking up Pennsylvania Avenue after his swearing in.  Or Andrew Jackson letting the people in.  People remember these symbolic moves. 

GREGORY:  Well, so, Michelle, what does John McCain do to capture a bit of his own symbolism?  He‘s certainly got a biography to work off of.  He is a known political figure.  But he—and while he doesn‘t give up this idea of being a candidate of change, he‘s not going to be able to run equal to Barack Obama at this stage on that particular issue. 

So, what does he present as he immediately follows an act like this? 

BERNARD:  You know, he‘s—I think John McCain is going to have to stick with what is best for John McCain, which is telling his story.  Either telling his story as an American hero himself, using a lot of videotape and having other people tell his story for him.  And I think one of the most important things that‘s going to happen to John McCain during the Republican Convention is he‘s got to have a very exciting vice president standing with him on that podium...

GREGORY:  Right.

BERNARD:  ... giving his acceptance speech so he can engender some sort of excitement during the Republican Convention.  Because really, you know, when we hear John McCain speak, he just does not have Barack Obama oratory skills.  And at this point, he shouldn‘t even try to pretend to do so.  He‘s just got to find a different way to excite his base.

GREGORY:  All right.

HARWOOD:  And David, I think this move by Barack Obama increases the chances that John McCain will drop that vice presidential choice on Friday, right after the Democratic Convention, take some of that bounce off as he heads to his convention. 

GREGORY:  All right.

Let‘s talk about what else is going on inside the Democratic Party and the run-up to their convention.  As reported over the weekend, missteps leading up to this convention.  And the question, is the party up to the task?

Evidence of convention mismanagement mounting.  A few of the troubles they have had, reportedly: use of expensive office space.  The DNC rented offices in downtown Denver at $100,000 a month.  They ended up needing less than half that space. 

Donor contributions are not tax exempt.  The Denver host committee told donors that the contributions were not tax deductible, rather than to encourage donations by saying that the tax exempt application was pending. 

They are trying to turn the convention green, and turning the event green has only backfired, because three states, full delegations, have agreed—only three states have agreed to participate in the program. 

They planned to relocate protesters next to the media tent.  Proposals to locate the demonstrators with their loud gatherings right next to the media, not a great idea. 

And then there‘s the food.  A 28-page contract requested by Denver organizers that caters provide food in at least three of the following five colors: red, green, yellow, blue, purple and white.  Organic and locally-grown foods were mandated, and each plate had to be 50 percent fruits and vegetables.  Caterers are now shying away.

Dana, you know, these may seem picayune, but what is going on? 

MILBANK:  Well, you know, it‘s the old joke about, you know, everybody says, well, the Democrats are back if the event starts late.  So it‘s an old sort of standard thing.  And they tried to be a bit too cute by half, and, you know, picturing just how much blue food you can get on the plate there. 

Barack Obama has made, rightfully, a big point about how efficiently he has run his campaign.  I think he‘d like to say that he‘s not really the guy in charge of what‘s been happening out there in Denver. 

GREGORY:  Right.

MILBANK:  I do look forward to having the protesters next to the media tent though.  It‘s hard to tell us apart, really. 

GREGORY:  Mark, but talk about the larger point here, the larger symbolism.  We‘ve had this debate about whether these conventions really matter anymore.  They almost mattered on the Democratic side if Hillary Clinton didn‘t get out of the race. 

But what do they mean symbolically?  And then, therefore, how important is it that they come off well, that they are managed well by the parties as evidence of how they run something large? 

GREGORY:  As to your list of problems, there‘s speed bumps, but not a cliff.  So long as the Democrats perform, as the parent of MSNBC would tell us, for that one hour of primetime television well, Obama will be fine. 

It‘s all about not the atmospherics leading up to whether Hillary speaks or Bill speaks.  But his speech.  Of course he gives good speeches.  And if that‘s choreographed well, all these other things actually don‘t matter that much. 

And you don‘t want him to give a speech at 2:00 a.m. like George McGovern.

GREGORY:  Right.

GREEN:  And ideally, you don‘t want to have a police riot like in 1968.  If you avoid not a vegetable is the wrong color, but avoid those things, and Obama rises to the occasion as expected, I don‘t think this is a problem. 

GREGORY:  And to find a place for Bill Clinton, which they are in the course of doing.  Obama and Clinton have talked.  They are trying to set up a face-to-face meeting.  There will be some negotiation after about his role as well. 

All right.  We‘re going to take a break here, come back, do a mini veepstakes here as we “Vet the Veeps.”  Talking about Evan Bayh tonight from Indiana.  Also, a name that‘s been taken off the list that might be a bit of a surprise when we come back on RACE FOR THE WHITE HOUSE. 

(COMMERCIAL BREAK)

GREGORY:  We‘re back on RACE FOR THE WHITE HOUSE.

“Vetting the Veeps”—who‘s on the short list or, as in today‘s case, who‘s no longer on that short list? 

Here again, Mark, Dana, Michelle and John.

First up, Virginia Senator Jim Webb, believed by many to be at the top of Barack Obama‘s short list, says no thank you officially.  Webb, in a statement released today says, “Last week I communicated to Senator Obama and his presidential campaign my firm intention to remain in the United States Senate, where I believe I am best equipped to serve the people of Virginia and this country.  Under no circumstances will I be a candidate for vice president.”

This came after it has been reported the Obama team sent out some feelers to Webb and others saying this is information the campaign would need for the vetting process to continue under Caroline Kennedy and Eric Holder.  Now, this official announcement. 

Was it that Webb didn‘t want to go through the riggers of all of this scrutiny after he had done that running for Senate?

So, that‘s just one name off the list. 

Another Democratic heavyweight who is still in the running is Indiana Senator Evan Bayh.  When asked if he is interested in being the vice president, Bayh answered this way to his home state paper...

“You ask it that way, the answer would be no.  I like serving the people of Indiana.  But if someone who might be president asked me to help, of course I would be willing to say yes.  I don‘t think you refuse someone who may be leading the country if they ask for your help in meeting the challenges we face.”

So, have a look at Evan Bayh‘s resume.  He‘s serving his second Senate term from Indiana.  He served two terms as governor of Indiana.  Supported Hillary Clinton‘s presidential bid.  Indiana being a key state in this election season.

John Harwood, let me start with Jim Webb, because he‘s an increasingly influential voice in the Democratic Party.  You write about him in your new book, which everybody in the country knows about. 

But as an important voice.  And we also should remember that Dick Cheney, back in 2000, took himself out of the running.  He said, no, no, I don‘t really want to go back to Washington.  Don‘t consider me.  And of course he ends up running the process and becoming the VP. 

How significant is it that Webb is out of the running? 

HARWOOD:  Well, first of all, I never take candidates too seriously when they say they don‘t want to be vice president or they take themselves out of the running, because at the end of the day, the answers pretty much always end up where Evan Bayh‘s answer is, which is yes. 

But I do think in Jim Webb‘s case, it could be partly about vetting, but also about the fact I think that at the end of the day, Barack Obama was not likely to pick Jim Webb.  And here‘s why. 

He‘s somebody who, when I talk to Democratic strategists and they say what Barack Obama needs to do above all else, in a race that he‘s leading and has many advantages, is not make a mistake, pick somebody that you can count on, who‘s been elected over and over again and who‘s shown they won‘t make big mistakes.  Jim Webb simply doesn‘t have that much of a track record.  You have to wonder whether he‘d be able to stay on message time after time.

He‘s a very independent sort of guy.  And Evan Bayh, the other guy that you just talked about, is somebody who fits that description to a T, somebody who would say on message 

GREGORY:  To a T.  He does.

And Marc Green, he‘s from Indiana.  He may not be a dynamic campaigner, but you don‘t need that if you‘re Barack Obama.  You need somebody with some chops.

Can you really be a candidate of change, however, if you pick a fellow senator? 

GREEN:  Maybe not.  It depends on the senator.  But Obama doesn‘t need much more change to look like the change candidate after Bush and against McCain. 

Now, Bayh, of course, is appealing.  For someone to win four elections, a Democrat, in a red state, is extremely appealing.  But I‘m not sure he has the foreign policy, national security cred that Barack Obama might need. 

As for Webb, liberals loved him because he was an economic populist, and conservatives because he was Reagan‘s guy.

GREGORY:  Right.

GREEN:  But I didn‘t think he would do it or be it because Democrats risk losing that seat permanently.  And when you‘re trying to get 58 to 60 votes in the Senate, a President Obama hypothetically doesn‘t want—also, Obama may be egotistically anxious about having two brilliant writers on one ticket. 

GREGORY:  Right.  All right.  I‘ve got to take a break here. 

We‘re going to come back, look at the state of the race in our second War Room tonight, as we come back from the holiday.  Where are things?  And what about those Hillary Clinton supporters?  Are they writing a check to Barack Obama as well, the Hill-raisers?

We‘ll get into that when we return.

(COMMERCIAL BREAK)

(NEWS BREAK)

GREGORY:  Welcome back to RACE FOR THE WHITE HOUSE.  I‘m David Gregory.  Time now for the back half.  We‘re going back inside the war room.  Now the big picture, the state of the campaign; some retooling on both ends, criticism of both campaigns, both candidates now.  How do they retool after July Fourth as we head into the big stretch over the summer time? 

Back with us, for the first time, Mark Green, president of Air America Radio and author of “Losing Our Democracy,” Dana Milbank, national political reporter for the “Washington Post,” Michelle Bernard, president of the Independent Women‘s Forum—Dana and Michelle both MSNBC political analysts—also John Harwood, cNBC‘s chief Washington correspondent and a political writer for the “New York Times.” 

OK, again, big picture here.  We talk about Obama and the flak that he has been taking for tacking to the center.  Is he selling out some of the brand that is Obama-mania here, this promise for change?  This is how Frank Rich took him to task on the op ed page of the “New York Times” just yesterday on Sunday; he writes this, “For all the hyperventilation on the left about Mr. Obama‘s rush to the center, some warranted, some not, what‘s more alarming is how small bore and defensive his campaign has become.  He‘s drifting away from the leadership he promised, and into the focus group tested calculation patented by Mark Penn and his disastrous campaign for Hillary Clinton.”

John Harwood, how much is too much when it comes to getting himself towards the center here for a general election campaign? 

HARWOOD:  I think too much for Barack Obama is going to be if he fundamentally shifts on the Iraq war.  That‘s his calling card in this race.  I haven‘t seen it yet.  I must say, I think there‘s a little bit of hyperventilation going on about the extent to which he has shifted to the center.  He sent signals that he‘s not going to be in a box on the far left.  But he hasn‘t definitively shifted too many positions, except for what he did on campaign finance.  I don‘t think he‘s in big trouble yet.  We‘ll have to see what he does on Iraq though. 

GREGORY:  Michelle, it‘s very interesting.  On the one hand, you have his liberal base that gets worried about this, will criticize him for it, on the other hand, the Obama campaign will argue to you that when it comes to the fight for independent voters, a lot of independent have moved out of that status.  They are basically prepared to vote as Democrats now.  Those who are independents are really soft affiliated Republicans.  A lot of this tacking a little bit to the right, more toward the center could help them there. 

BERNARD:  Absolutely, and we are seeing with the Obama campaign is he talks about a 50 state strategy and expanding the electoral map.  Democrats are going to vote for Democrats; Republicans are going to vote for Republicans.  John McCain and Senator Obama are going after the independent voter.  A lot of those people are Reagan Democrats.  A lot of them are right of center independents, people who consider themselves Obamacans and what not.  If he‘s going to capture that vote, we are going to have to continue to see more of what Senator Obama doing, for example, talking about his faith, talking about expanding President Bush‘s faith based initiative.  That‘s what he needs to go after those independent voters. 

I don‘t think that much harm is going to be done for people on the far left.  I don‘t think he‘s going to lose his base because of the necessity of reaching out to independent voters. 

GREGORY:  Moving on, Obama and the Clintons; the “Wall Street Journal” has reported this, that some leading Clinton supporters are starting new websites or political action committees aimed at prodding Senator Obama on issues, or pressuring him to give Senator Clinton a big role in the general election campaign.  People familiar with the matter say the effort involves dozen of the roughly 300 Clinton Hill Raisers, individuals who raised at least 100,000 a piece for her campaign.  The Clinton hold outs are typically most angry about what they was the media‘s sexist treatment of Senator Clinton during the campaign.  Though few if any blame Senator Obama directly, they fault the Illinois senator and other party leaders for what they say was failing to do enough to stop it. 

Mark Green, how big of a problem?  How long will it take Obama to get the rest of Hillary Clinton‘s army out there behind him? 

GREEN:  At the end of the day, I really don‘t think it‘s going to be a problem.  I agree with what Michelle just said, that Obama and McCain will each get towards 90 percent of their base.  The problem—the trick is the Democratic base now is 40 percent of America.  The Republican base is under 30 percent of America.  Obama‘s strength is not simply winning his team or even winning independents, but expanding his base.  So he has to be careful not to diminish his authenticity, his audacity by going too far so called to the center. 

He‘s not even close to doing it yet.  John is right, it turns on Iraq.  His use of the word refine, it was inoffensive to people who are tired of Bush‘s stubbornness, irrespective of facts.  I can‘t imagine Obama shifting substantially from his pledge to end the war within 16 months fundamentally. 

GREGORY:  We‘re going to take on that issue in our next segment on the three questions, the whole Iraq debate.  Dana, let‘s talk about McCain.  He‘s retooled message.  He‘s shaken up the staff.  You‘ve got Steve Schmidt head of day-to-day operations.  A lot of speculation about whether Mike Murphy might be coming into the fold.  Has he succeed at arguing a central theme to his candidacy and does he need that if he‘s not going to consider the past few months when he wraps up the nomination wasted time? 

MILBANK:  Well, David, like what you were discussing on the Obama side, McCain has a delicate dance here.  I think you could safely interpret what‘s going on as bringing in both Bush people and a Bush way of running the campaign.  That is hammering away at the message, making sure you drive up enthusiasm among your base.  But it is somewhat perilous for McCain because does he cease to be McCain?  Does he cease to be anything like that maverick that used to bring independents to him. 

Both McCain and Obama have basically a parallel problem here because they are seen as atypical politicians.  Both of them right now are following very typical political courses, which is bound to alienate some of each of their core supporters. 

GREGORY:  John, what do you say is McCain‘s biggest problem right now? 

HARWOOD:  Well, I think McCain‘s biggest is himself.  I tend to think that the staff around these candidates, their role gets somewhat exaggerated.  John McCain is somebody who‘s hard to peg.  He‘s somebody who has difficulty staying on message.  It‘s probably sensible to have Steve Schmidt, who is a message guy, running the campaign.  But John McCain is what he is.  He is somebody who has been on the right on some things, in the center on other things.  How you, at a time when your base has shrunk, as Mark Green just said a moment ago—how you both energize that base and reach out to the middle, it‘s very hard for anybody; it‘s going to be especially hard for John McCain. 

GREGORY:  Go ahead Mark.

GREEN:  Just two quick comments on what John said.  John McCain got where he is, in part, by being so funny and flip and charming with the press and in town meetings.  It‘s counter-intuitive for him to suddenly be scripted on message.  Second, and this is not an ideological comment, on so many issues—McCain is authentically pro-life, for tax cuts for big business, for example, for the Iraq war—these are all minority popular issues.  The great majority of this country have views that are antithetical to what helped McCain get the nomination. 

To straddle that with a message a day is not going to be easy to be that popular in the general election. 

GREGORY:  I have to take a break here.  We‘ll come back with three questions, the big picture of this campaign, the war in Iraq and a growing state of tension between Israel and Iran.  These are campaign issues.  How big will they become?  Are they at the core of their campaigns between Obama and McCain?  THE RACE FOR THE WHITE HOUSE returns. 

(COMMERCIAL BREAK)

GREGORY:  Time for three questions in the RACE FOR THE WHITE HOUSE 2008.  Back with us here again tonight, the panel, Mark Green, Dana Milbank, Michelle Bernard and John Harwood.  OK, topic number one, Iraq;

“USA Today” reports the following successes in the war: four of the five extra brigades sent to Iraq last year have left the country.  The last unit is preparing to leave this month.  Average numbers of weekly attacks in Iraq dropped to 200, an 80 percent reduction since June of 2007, according to Multinational Force Iraq.  U.S. and Iraqi casualties have also dropped significantly.  The State Department said in a recent report that Iraq has met 15 of 18 Congressional benchmarks designed to measure progress in the war. 

First question, does this kind of progress in Iraq mean that Senator McCain‘s gamble on the surge ultimately paid off for him?  John Harwood, is it a compelling case or have the voters simply tuned it out? 

HARWOOD:  Yes, it means that John McCain‘s gamble did pay off.  The question is how much will it pay off for him politically?  Barack Obama is going to do the same thing George W. Bush said in 2004, which is whether I was right or wrong, what are we going to do now?  What are we going to do next?  When you do that, the American people want to get the troops out.  They are tired of the war.  So even if Barack Obama has to say, yes, violence is down, then the question arises, what does that lead to and when can our troops come back.  That‘s where John McCain is on the short side. 

GREGORY:  If John McCain says to the voters, looks, this is a judgment question on foreign policy.  If I made the right judgment, as evidenced by the progress in Iraq—I wanted more troops initially.  I disagreed with President Bush on that point.  I would have executed the war differently.  You should trust me on these matters.  Just look at my record when it came to how I stood up to the war when it was initially executed and for the surge when it was unpopular. 

GREEN:  You‘re right that militarily his bet on the surge worked because violence is down.  There‘s a debate and the GAO has a different point of view on whether it has politically worked.  As for judgment, if that‘s the test David, yesterday, Senator John Kerry said that McCain shouldn‘t be elected because while he‘s experienced, militarily, of course, he has bad judgment, because he was with Bush when the colossal catastrophe and debacle occurred. 

I think the jury of voters has come to a verdict on the war.  It‘s against the war.  So, at best, McCain can mute the criticism of a war that he supported. 

GREGORY:  That‘s the question Dana Milbank, is the public tuned in to this?  In other words, are they going to break up the debate about the war into who was for the surge, did the surge pay off, or have they basically tuned out the war completely and said, we‘ve rendered judgment on that as a country; it‘s time to move on; he who can best move us on is the winner? 

MILBANK:  That‘s right.  I think Mark is right that a judgment has already been reached.  McCain wouldn‘t be here, wouldn‘t have won the primaries if the surge hadn‘t work.  It got him that far.  But look where the headlines are now.  It‘s about Afghanistan again.  It‘s about Iran.  And whatever is happening in Iraq does not seem to be benefiting McCain at this point.  You even have the prime minister in Iraq today talking about the need for a timetable for troop withdrawals.  That‘s not going to help him too much. 

GREGORY:  Which would be the easiest course of all, if the Iraqis said, as a condition for a security agreement with America, you have to have your troops out by a date certain.  Ultimately, we‘re there at the pleasure of Iraqis.  Even the Bush administration has said that.

Let‘s look at this from a different perspective.  Question number two, will Republicans successfully label Obama as a flip-flopper on Iraq?  Michelle, this has to do with the fact that Obama has begun to tack toward the center on this issue as well, saying that he would refine his policy towards Iraq.  He would get his generals in there, the Joint Chiefs in there on day one in the White House.  He would say I want to end this war.  Let‘s do it responsibly. 

I‘ve always argued that I think, analytically, if you look at this, that it will be very difficult to maintain his campaign promise of a date certain or even regiment for withdrawals depending on how things look.  I think he would get into office and get the current picture of what‘s happening on the ground and make decisions then. 

BERNARD:  Absolutely.  I completely agree with you.  I think a lot of Republicans might go after Senator Obama, continue to call him a flip-flopper on the issue of Iraq.  But the bottom line is that I think most of the American public will realize that currently Senator Obama‘s position on Iraq and Senator McCain‘s position are not that different.  People always expected him to have to go back to the center and be a little bit more responsible about how to get our troops out of the country, when we do it.  People would expect that whoever the next commander in chief is, that they are going to listen to the people on the ground, who are fighting the war, and trying to get us out of the country safely. 

GREGORY:  But is that really the issue, Mark?  Do you think Americans are going to look at the two candidates and say well, their positions on Iraq are really not that much different, other than one was for it initially and one didn‘t have to cast a vote and opposed it initially.  These are big issues, including Iraq and national security.  Are voters going to accept—are Democrats going to accept that there‘s not a lot of difference between the two? 

GREEN:  They will not accept that because it‘s not true, in my view.  There‘s a tremendous difference.  If they have been inching towards each other, it‘s in part because McCain sloppily said we may stay 100 years, then he said probably out by 2013.  So he‘s moving toward we can‘t stay there forever as a permanent occupying force.  Now, Democrats wouldn‘t, I don‘t think, tolerate it or independent.  Remember, the two-thirds of the country who think it was a mistake to go in and we should get out carefully is not going to change, I don‘t think, by the election.  It‘s probably a tremendous asset for Obama.

One other thing, when Obama said look, I‘m going to consider the facts on the ground, should I be president, and some people jumped up and down, he then said, for a commander in chief not to look at the facts on the ground and speak to his commanders would be pretty irresponsible.  That‘s something that Bush did, which is I‘m pushing this war, no matter what happens.  So I don‘t think he‘s at a risk there. 

GREGORY:  Here‘s what I think is interesting; I think this will ultimately be a debate about the pace of withdrawal, but I don‘t think a complete withdrawal will ever really be on the table.  There will be some number of troops that remain.  That will be the big subject of debate as we move forward. 

Let me get to question number three.  Obama will visit Israel in a couple of weeks, stirring debate about how the US should engage a defiant Iran and if Israel should get the green light to attack Iran should it be provoked?  Senators Jack Reed and Joe Lieberman debated this over the weekend.  Watch.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE:  Should the U.S. put up a yellow light or a red light and say, Israel, don‘t act? 

SEN. JACK REED (D), RHODE ISLAND:  I can tell you what; from the military commanders I have spoken to, the yellow lights are blinking very, very quickly.  In fact, I think even there might be a flashing red, because the consequences in the region would be significant.  They would be region wide. 

SEN JOE LIEBERMAN (I), CONNECTICUT:  The Europeans negotiated for two years with the Iranians.   We have just made them an offer to begin negotiations again, if they will not stop permanently, but temporarily suspend their uranium enrichment program as a sign of good faith.  The Iranians have consistently said no.

REED:  They say they won‘t.  So should Israel attack?

LIEBERMAN:  That‘s up to Israel, obviously.  I would say that obviously Israel is first in the line of Iranian fire and it represents an existential threat to Israel. 

(END VIDEO CLIP)

GREGORY:  Question number three, is the debate over Israel and Iran actually a big disagreement between Obama and McCain?  You had surrogates for the campaign debating it out right there.  This is a big issue domestically in states like Florida, where Jewish voters are watching this issue very carefully, Dana. 

MILBANK:  Yes, it seems to me that it‘s not a substantive debate, so much as a stylistic one.  Both sides here know that the United States is strapped militarily and can‘t very well get involved.  They also know that if Israel does launch this strike and Iran moves to cut off the Straight of Hormuz, there‘s no choice but the United States is in a conflict.  So it‘s really this bluffing game going on here, and which side is willing to do the stronger bluffing at this point.  Even as Jack Reed said there, well, maybe a flashing red light.  Nobody on either side is saying Israel must not do this.  They are scared to death of saying that. 

GREGORY:  Right.  John, what‘s your take? 

HARWOOD:  Well, I sort of agree with Dana.  I think John McCain is going to try to drive this issue to exacerbate some of the doubts that Jewish voters have about Barack Obama.  The tight rope that Obama has to walk is to maintain this idea that he‘s going to bring a new approach, more diplomacy here, but also convince Israel and Jewish voters that he‘s going to be tough on their behalf. 

GREGORY:  All right, we‘re going to take a break here, come back in our remaining moments.  Your play date with the panel, your calls and emails, when RACE FOR THE WHITE HOUSE returns.

(COMMERCIAL BREAK)

GREGORY:  Welcome back to THE RACE.  Your time now, your play date with the panel.  Back with us, tonight‘s panel, Mark, Dana, Michelle and John.  First up, Mike in Washington writes this: “the mood of the country and, it seems, the world currently seems to be leading more towards Obama” an unscientific sample—“I‘m a Baby Boomer.  Does it seem like this election really is the younger generation against the old?”

What‘s interesting about that question to me, John Harwood, is the question of whether younger voters are going to supplant older voters as a dominant voting bloc, and whether this generation change really will mean something this race. 

HARWOOD:  I wouldn‘t bet on it.  I think they will turn out in high numbers for young voters.  I think the people 50 and over are going to dominate this electorate.  Right now, Barack Obama is doing OK.  John McCain leads among people 65 and over.  Hillary Clinton did very well with seniors during the Democratic primaries.  Overall, the caller is right, or the writer is correct that this does look to be a Barack Obama election at this point. 

GREGORY:  All right, next, JB in Illinois writes this: “One would think that in light of the Iraq war and the economy in recession”—although that‘s a debatable point and it has not been in recession—

“Barack Obama would be at least 20 points ahead in the polls.  Does the panel think the close numbers in Michigan, Ohio, Pennsylvania and McCain‘s lead in Florida should worry the Democratic party?” 

Mark, what do you say? 

GREEN:  Everything should worry the Democratic party.  The stakes are very high.  Because Obama is less deeply well known than McCain, because he had a very tough and tense fight with Hillary Clinton for the nomination, I think this will settle out and sort out after the conventions in September. 

GREGORY:  Yes, but, you know, you can argue that both ways.  Dana, the reality is that if those circumstances agree, if it‘s such a change election, then why don‘t you see a bigger spread now, if John McCain can‘t measure up, as some people think he can not, to Barack Obama? 

MILBANK:  That‘s right.  You do see this huge spread when you look at Democrats and Republicans running for Congress, a mammoth advantage for Democrats.  John McCain has been able to narrow that because he‘s a shape shifter who still has that residual appeal to the independents. 

GREGORY:  I also think, Michelle—I think for a lot of voters, independent and others, they are still looking at Obama and saying, where‘s our comfort zone with this candidate?  Does he meet the threshold, whether it‘s national security, foreign affairs generally?  Do we know enough about this guy?  McCain does not have that problem.  He may have other difficulties, but he doesn‘t have that problem.  A lot of voters are making that calculation with Obama. 

BERNARD:  Exactly.  The American electorate is really just now getting to know Barack Obama.  There was a very prolonged Democratic battle, as we all know.  That‘s why I think you saw Senator Obama going out with his first national advertising campaign that started on July 1st.  He‘s telling his story.  He‘s telling the American public about who he is, what he stands for, and really trying to give this impression that we are all one and why he would be good for the nation.  If he is able to successfully do that, we might see the numbers changing.  But also, it is possible, despite all of the gloom and doom that has surrounded the McCain campaign, it is plausible that Senator McCain is over-performing and doing a little bit better than people would have expected him to be doing, given the fact that people are so unhappy with how the Bush administration has performed over the last eight years. 

GREGORY:  Dave in Washington asks this, “If Senator McCain really wants a gas tax holiday, why hasn‘t he proposed a bill in the Senate?”

John, how come?

HARWOOD:  He knows it wouldn‘t go anywhere, first of all.  This is an idea that‘s been talked about for the last couple of elections.  It‘s not taken seriously on Capital Hill.  They‘re not going to try to move it.  Of course, he knows Democrats are not going to move his bill anyway, so I think it would be a pointless exercise at this point. 

GREGORY:  Even in the House, we know Pelosi has come out against it as well.  This really is argument without a whole lot of punch to it. 

HARWOOD:  It definitely doesn‘t have a lot of punch to it.  I don‘t think the Bush White House is that into it either.  It‘s one of those things that is a rhetorical bit for him on the stump, but not much else. 

GREGORY:  We‘re going to leave it there.  Thanks very much to a great panel tonight.  You can play with the panel every week night here on MSNBC.  Just e-mail us, RACE08@MSNBC.com.  You can call us too.  Leave us a good voicemail, 212-790-2299.  That‘s going to do it for THE RACE for tonight.  I‘m David Gregory.  Thanks to our panel and thanks to you for watching.  We‘ll see you back here tomorrow night, same time, 6:00 p.m. Eastern, only on MSNBC.  Don‘t go away, coming up next, it‘s “HARDBALL” with Chris Matthews.  It starts in just a few seconds.

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

END   

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