updated 7/16/2008 11:26:36 AM ET 2008-07-16T15:26:36

Guest: Michael Smerconish, John Harwood, Peter Beinart, Anne Kornblut

DAVID GREGORY, HOST:  Tonight, it‘s the economy, and President Bush‘s stewardship that is now a political issue in this campaign.  Will he make matters better or worse for the man vying to succeed him?

The RACE FOR THE WHITE HOUSE rolls on.

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

A pretty bumpy day today on Wall Street.  Anxious investors and big questions remain about the future of mortgage giants Fannie Mae and Freddie Mac, all leading President Bush to come before reporters this morning in an attempt to tamp down concerns.  Well, did it work? 

Also, Obama on the trail.  A long way on the trail, overseas.  But before he goes on his trip to the Middle East and Europe, a big speech today outlining his foreign policy vision:  Iraq, Iran, Afghanistan and more. 

In “Three Questions” tonight: Is Afghanistan the new central front on the war on terror, and was it ever anything but? 

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

And with us tonight, Anne Kornblut, national political reporter for “The Washington Post”, John Harwood, CNBC chief Washington correspondent and political writer for “”The New York Times”; Peter Beinart, senior fellow at the Council on Foreign Relations and a columnist for “TIME” magazine; and Michael Smerconish, radio talk show host on WPHT in Philadelphia and a columnist for both “The Philadelphia Inquirer” and “The Philadelphia Daily News.”

We begin as we do every night, with everyone‘s take on the most important political story of the day.  It is “The Headline.” 

Big headline tonight, “Driving Everything, it‘s the Bush Effect and the Economy.”

As voters watch the markets continue to plummet, bobbing around 11,000 points today, President Bush, once heralded as America‘s first MBA president, took to the podium to try to calm the nation‘s nerves. 

Watch.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES:  I understand there‘s a lot of nervousness, and—but the economy is growing.  Productivity is high.  Trade is up.  People are working. 

It‘s not as good as we‘d like, but—and to the extent we find weakness, we‘ll move.  That‘s one thing about this administration, we‘re not afraid of making tough decisions. 

(END VIDEO CLIP)

GREGORY:  But here‘s the real question tonight: Is Bush helping or hurting here?  the president even admitted he‘s no Wall Street expert with a magic wand. 

(BEGIN VIDEO CLIP)

BUSH:  I‘m not an economist, but I do believe that we‘re growing.  And I can remember, you know, this press conference here.  A lot of people yelling recession this, recession that, as if you‘re economists. 

And I‘m an optimist.  You know, I believe there‘s a lot of positive things for our economy. 

(END VIDEO CLIP)

GREGORY:  What does this mean for the campaigns?  Well, a new Quinnipiac poll shows this: 53 percent of Americans say that the single most important issue this November is not national security, but it‘s the economy, compared to 16 percent who said the war on Iraq, and 11 percent who say health care. 

And the president‘s rescue plan for the current mortgage crisis could not only be a threat to Bush‘s legacy, but to McCain‘s chance at winning the issues today.  This is how Reuters reported it today in an analysis piece: “How all of this plays out could not only affect Bush‘s legacy, already weighed down by the unpopular war in Iraq, but may also have implications for his party‘s bid to keep the White House in the November presidential election.” 

That‘s the backdrop.

John Harwood, you look at the Bush effect, you look at the economy, your headline on all of this tonight? 

JOHN HARWOOD, CNBC CHIEF WASHINGTON CORRESPONDENT:  David, I can‘t see President Bush helping John McCain very much with that.  Look, he spent a lot of that news conference today talking about all the things that he can‘t get done—the energy policy he has not been able to get through over seven years as president so far.  And all of that, I think, helps Democrats make that argument for change. 

You also heard a little hint, David, of the Phil Gramm argument.  He talked about problems in the oil—with oil pricing being partly psychological...

GREGORY:  Right.

HARWOOD:  ... and looking for a psychological outcome there.  So I don‘t think he did John McCain any favors with that news conference. 

GREGORY:  John, let me follow up with you on the issue of Fannie Mae and Freddie Mac.  We don‘t want to get too detailed on this, it‘s very complicated, but the issue of whether there has to be government intervention, whether taxpayers have to help these companies stay in business at any level by helping the lending and helping that flow of money go into these companies, it gets to the issue of bailouts. 

The president said he doesn‘t want to be in the business of bailouts, but how this goes will really be an important test of him and his party. 

HARWOOD:  Well, this is where he‘s on solid ground in the sense of having support from members of both parties.  You have had people like Chris Dodd on the left and John McCain on the right saying action was necessary to keep these two entities afloat. 

They‘ve got more than half the nation‘s mortgages, David.  They‘re central to the process of Americans‘ ability to continue buying homes. 

GREGORY:  Yes.

HARWOOD:  Not much doubt.  The question is, where do you draw the line now and what do you do for companies like General Motors that are having trouble?  The president tried to say, no, we‘re not going there. 

GREGORY:  Smerc, the Bush effect on the economy, how is it playing in the race? 

MICHAEL SMERCONISH, RADIO TALK SHOW HOST:  I believe that the public is not never going to be able to comprehend Secretary Paulson all of a sudden making what really is a monumental policy shift in saying that the federal government stands behind Fannie Mae and Freddie Mac.  But we do understand $4.26 for gas, which is what I‘m paying here in Philadelphia.

It all bodes poorly for John McCain because people will want change. 

McCain will be associated with Bush.  I think it‘s pretty fundamental.

GREGORY:  But Anne, if you talk about the psychology, as we‘ll do later on tonight, the psychology of drilling for more oil here, it‘s a level of activism on the part of the Republican Party right now.  John McCain is the new standard bearer of the party, and the president saying this could move markets if we just do something here.  They want to be the party of the doers right now, when people are looking to Washington for relief. 

ANNE KORNBLUT, “THE WASHINGTON POST”:  Well, that‘s right.  And that‘s why we heard him speak so carefully in the press today about market forces on any number of issues.  He was pressed about whether the markets can take care of the banking crisis.  He was asked about whether he shouldn‘t be telling people to conserve. 

And over and over again, he said, I have trust in the markets, I have trust in people to decide how much they should be conserving, because I think he‘s aware, obviously, there‘s so little he can do.  And the one thing he‘s talked about doing isn‘t particularly popular—the drilling, as you mentioned.

GREGORY:  Yes.

Peter, the question, as we debate the economy and the political effect, these decisions that are made about the economy right now, by these candidates, their course could be really what influences the economy in the first year in office.  They could have a profound effect.

Are voters getting a real glimpse at what these two candidates will do that will make a difference? 

PETER BEINART, “TIME”:  I think they are getting a glimpse on some of the differences.  You can see differences on trade, you can see differences on the tax cut.  But I think the reality is that it is very difficult for a president to affect the business cycle. 

The Fed has more influence than an administration does.  And so, ultimately, I think that whoever gets elected, they are not going to be the most important forces driving whether we get out of this—this economic slump quickly or not. 

GREGORY:  And what about the Bush effect?  He comes out there on a day when he wants to try to shore up confidence in Fannie Mae and Freddie Mac and the government‘s plan.  He‘s trying to deal with the oil markets, deal with the fact that drilling is a possibility that‘s being debated.  He wants to put his stamp on this debate right now at a time when John McCain may not exactly want his help. 

BEINART:  It‘s really pretty disastrous.  Every second-term president hurts the candidate of their own party who‘s running.  But when you have somebody who is as unpopular as George W. Bush is now, virtually every time he gets on the public stage and makes news, he hurts John McCain, and I think you see that again today. 

GREGORY:  All right.  We‘re going to take a break, we‘re going to come back, talk about Barack Obama. 

He‘s talking tough on Afghanistan today.  He‘s concerned about another terrorist attack, furious that Osama bin Laden is still on the loose, and wondering why so many more troops in Iraq exist than do in Afghanistan. 

Later in the show, your play date with the panel.  You know the number, 212-790-2299, or send us an e-mail as well. 

RACE FOR THE WHITE HOUSE will be right back.

(COMMERCIAL BREAK)

GREGORY:  We are back inside the “War Room,” here on RACE FOR THE WHITE HOUSE, breaking down Obama‘s speech on Iraq and national security today, where he outlined his five key goals as president.  Listen. 

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE:  I will focus the strategy on five goals essential to making America safer: ending the war in Iraq responsibly, finishing the fight against al Qaeda and the Taliban, securing all nuclear weapons and materials from terrorists and rogues states, achieving true energy security, and rebuilding our alliances to meet the challenges of the 21st century. 

(END VIDEO CLIP)

GREGORY:  So, how does the plan accomplish those goals?  And how is Camp McCain responding?  We‘ll find out. 

But first, back with us to discuss it all, Anne Kornblut, John Harwood, Peter Beinart and Michael Smerconish. 

OK.  First up, Obama lays out his strategic vision for success in Iraq specifically.  Listen to this. 

(BEGIN VIDEO CLIP)

OBAMA:  George Bush and John McCain don‘t have a strategy for success in Iraq.  They have a strategy for staying in Iraq.  They say we couldn‘t leave when violence was up, and they now say that we can‘t leave when violence is down. 

(END VIDEO CLIP)

GREGORY:  Here‘s the thing about this, Anne Kornblut.  It is sweet, it is simple to lay out a contrast.  He is for ending the war.  McCain and Bush want to have the war go on.  They want to stay, versus leaving.

It buys him a little bit of room that, now that Obama has gotten kind of twisted up a little bit in exactly how he would affect the withdrawal, that‘s what I heard out of that. 

KORNBLUT:  Absolutely.  Look, he‘s going on the trip to Iraq sometime in the days ahead, the next few weeks.  And we think, you know, also going to go to Europe.  And I‘m not sure he would have necessarily wanted to define the trip before he went.  But given that he did get twisted up, as you put it, in whether he was refining his strategy or not, this really gave him an opportunity to define his trip, define his policies before McCain could get in and do it. 

He was starting to lose some control over his own storyline when it came to Iraq, and he‘s really trying to reclaim it on his way out the door. 

GREGORY:  Harwood, does he have a clear storyline when it comes to how he would end the war in Iraq? 

HARWOOD:  I think it‘s relatively clear.  He says as soon as he goes in, he‘s going to give the commanders a new mission.  That is, to end the war. 

He‘s got a timetable.  He says he might change the timetable, or refine it, to use his term, once he gets on the trip. 

You know, you‘ve got John McCain trying to get him coming or going.  McCain says, well, he ought to go so he can learn something on the ground...

GREGORY:  Yes.

HARWOOD:  ... but he shouldn‘t take a position before he goes.  It‘s a little—he says it‘s backwards. 

GREGORY:  Next up, Obama‘s second mission, more resources to fight the war in Afghanistan.  Listen to this. 

(BEGIN VIDEO CLIP)

OBAMA:  It should have been apparent to President Bush and Senator McCain.  The central front in the war on terror is not Iraq, and it never was.  And that‘s why the second goal of my new strategy will be taking the fight to al Qaeda in Afghanistan and Pakistan. 

(END VIDEO CLIP)

GREGORY:  Peter, I think this is a very interesting point, the notion of Afghanistan being the central front and not Iraq that Obama is talking about has been something that Democrats have argued for some period of time, but it‘s never really taken hold.  What would make it take hold now in the Americans‘ minds? 

BEINART:  Well, for one thing, ironically, the success of the surge has made it much harder to argue that there‘s a likelihood that al Qaeda is going to take over even any portion of Iraq because they have been thrown out of the Sunni areas of Iraq.  So that argument, which was a kind of Bush/Republican talking point, now doesn‘t make as much sense. 

Plus, there‘s a rising awareness.  The fact that the death tolls in Afghanistan of American troops are now exceeding month to month those in Iraq, I think it‘s finally leading the media to turn its attention more to Afghanistan in a way that it hasn‘t recently. 

GREGORY:  Yes.

Smerc, I mean, this is—you‘ve talked about this in recent days.  If you‘re Barack Obama, you want to focus on where the threat is at the moment and try to focus people‘s attention on the fact that Osama bin Laden is still missing, there‘s huge problems on the border between Pakistan and Afghanistan.

SMERCONISH:  David, I‘ve not only talked about it on your program, I‘ve written about it and interviewed both candidates on this issue. 

Here‘s my pet peeve.  It‘s not Afghanistan, it‘s Pakistan.  This country, our country, lacks a comprehensive plan to deal with al Qaeda in Pakistan.  That‘s not me speaking, that‘s the General Accountability Office. 

We‘ve paid $10 billion and we have Pakisourced (ph).  We have outsourced the hunt for bin Laden and Ayman al-Zawahiri.

And as between the two of them—and I listened intently and I read the transcripts today—it‘s Barack Obama who spoke with more specificity on that issue.  John McCain stood up and he said in that crowd, “I‘m not going to offer bluster,” and then he said, “But I‘ll go get bin Laden.”  And everybody stood and they applauded.

Really?  Tell us how, because we‘ve been waiting seven years. 

GREGORY:  Right.

All right.  Well, Peter, why not listen to John McCain when he said, as he did today—we showed the pictures just a minute ago—saying, look, I have the judgment here.  I know how to win wars.  I was behind the surge when other people weren‘t.  There‘s been a reduction of violence in Iraq that is actually measurable.

Why shouldn‘t he win a contest of ideas about how to turn Afghanistan around? 

BEINART:  Well, I think partly because there is a zero sum situation between Afghanistan and Iraq.  Most people agree that we don‘t have enough troops in Afghanistan, partly because of Iraq.  So it‘s hard to say that you‘re going to win both of them at the same time without making a priority choice, which Obama is willing to do. 

The other thing is that the surge is now a backward-looking debate in some ways.  I think one of the important things Obama did in that speech was acknowledge the surge has b3een more successful than many people imagined.  That puts him in touch with reality, but he pivots from there. 

I mean, the fundamental problem, to go to the Pakistan problem, is it‘s very hard to acknowledge.  The reason that Afghanistan and Pakistan fundamentally are a bigger problem than Iraq is because the Pakistani military and intelligence services are up to their eyeballs in jihadist terrorism.  That‘s why it‘s such a difficult nut to crack.

GREGORY:  Finally, Senator McCain stressing the success of the surge today, as we‘ve been talking about, saying that Obama‘s strategy for success is actually flawed.  Listen. 

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE:  He‘s speaking today about his plans for Iraq and Afghanistan before he‘s even left, before he talked to General Petraeus, before he‘s seen the progress in Iraq, and before he‘s set foot in Afghanistan for the first time.  In my experience, fact-finding missions usually work best the other way around.  First, you assess the facts on the ground, then you present a new strategy. 

(END VIDEO CLIP)

GREGORY:  John, you‘re right.  He‘s getting it coming and going. 

But I think this is a potentially very effective line of attack for McCain, to say this guy‘s staging a photo-op here, even though he‘s the one who goaded him into making the trip in the first place.  He‘s staging a photo-op here.  It reinforces McCain‘s real familiarity with these issues over time. 

HARWOOD:  Yes.  And you can bet that John McCain is going to attack Barack Obama for flip-flopping if he does say he learned something from David Petraeus that causes him to change his policies. 

Look, one of the problems is there is a lot of photo-op in this.  I was talking earlier today on MSNBC with Senator Jim Webb, an Obama supporter, who said you don‘t really need to go over there to adjust your military policy, you have got plenty of experts you can talk about.  So I said, “Is it just politics?”  And he said, “Well, you know, we do have an election coming up.”

(LAUGHTER)

GREGORY:  All right.

Up next, reality check.  Half the country supports Barack Obama‘s plan for withdrawing troops from Iran, but almost three-quarters actually think John McCain would make a better commander in chief.  That‘s what we were getting at.

What‘s the makeup all about?  We‘re going to show you some new polls when we come back in our “Smart Takes” segment coming up. 

(COMMERCIAL BREAK)

GREGORY:  We‘re back on THE RACE.  “Smart Take” time.  A little reality check, taking the pulse of the country and learning where voters stand when it comes to confidence in the candidates and their plans for handling the war in Iraq. 

Here again, Anne, John, Peter and Michael.

All right.  First up, the major difference between Obama and McCain on Iraq is a timetable for withdrawal.  A new “Washington Post”/ABC News poll found that the public is sharply divided about that.  Fifty percent support a timeline for troop withdrawal, 49 percent oppose it. 

Pretty interesting numbers there, Peter, given where the cycle has been and how much criticism there‘s been of the war.  The timetable question, I sense a lot more patience among the American people for this. 

BEINART:  That‘s true, but remember, it‘s still split.  And the larger reality is also that foreign policy is not dominating this election nearly as much as it did in 2004. 

In 2004, if you totaled up the number of people who said Iraq and the number of people who said terrorism were the number one issues...

GREGORY:  Right.

BEINART:  ... it vastly exceeded the economy.  Today, it‘s totally different.  So, if Barack Obama holds his own on this and has a big advantage on the economy, he‘s in decent shape. 

GREGORY:  Yes.

Next, who do you trust to lead the war?  When asked who they trusted more to handle Iraq, respondents also virtually tied -- 47 percent said they trust McCain more, 45 percent said the tryst Obama more.  But when you ask if the candidates would be a good commander in chief for the U.S.  military, 72 percent said McCain would be good, while only 48 percent said the same about Obama, with an equal amount saying Obama would not be a good leader for the military. 

Anne, reaction there from inside Obama world on that one. 

KORNBLUT:  Look, this is why you see Obama going out so aggressively today, making the speech on Iraq and Afghanistan, and also going up on the air with a new ad where he cites his work with Senator Lugar, the top Republican on the Foreign Relations Committee, what they‘ve done on nonproliferation there. 

Not taking this lying down.  I suspect they are seeing the same numbers in their own internal polling.  And although, as Peter says, it‘s not a major weakness for him, it‘s not going to lose him the election, it‘s one of the chinks in his armor.  That‘s why they‘re going after it. 

GREGORY:  Smerc, when you look at this number, who best to handle the war going forward, McCain, Obama, and it‘s basically everyone.  If I‘m Barack Obama, you know, I essentially like those numbers, given I don‘t have all the military experience, given I didn‘t call for the troop surge the way John McCain did. 

How do you read that?

SMERCONISH:  You know, all the polling that we‘ve looked at thus far on the show, David, suggests that terrorism is the strong suit for John McCain.  So, if I‘m Senator Obama, and I‘m looking at that number, I‘m pleased with the result.

The disconnect in those three questions in total is that you‘ve got a significant number of people who disagree with John McCain, relative to Iraq, but nevertheless, believe he‘d be a better commander in chief.  That‘s the challenge for the Obama campaign, to reach those 20 percent that are in that margin. 

GREGORY:  Well...

HARWOOD:  And David, I totally agree with that point.  And I would make this point about the Iraq numbers: the Iraq opinion is extremely partisanized.  So you really get that as a proxy for Democrat and Republican positions. 

But on the personal dimension that Smerc was just talking about, John McCain has a big advantage.  And here‘s where I disagree with my friend Anne Kornblut.  I think it could cost Obama the election if he is not able to satisfy core voters in the middle, swing voters, people he needs to get that he‘s capable of sitting in that Oval Office. 

They accept that about John McCain.  Barack Obama still has to prove it. 

GREGORY:  And you know, Peter, what‘s interesting is, you‘re talking to the Obama people, they say, look, we‘re not going to outdo McCain on this question, on the commander in chief question.  We can‘t exceed him in terms of confidence levels.  We can simply be good enough.  And that‘s the threshold question. 

BEINART:  I think that‘s exactly right.  They don‘t have—they just have to pass the threshold. 

Look, commander in chief is the president as military leader, the president as relating to the military.  John McCain has spent much of his life in the military.  But there are also other aspects of being president on which Barack Obama would have a huge advantage—someone who understands the problems that you face in your daily life, for instance. 

And what‘s different so far about this election, compared to 2004, is that fewer people seem to be going—likely to go to the polls voting for the president as commander in chief, and more people likely to be going to the polls voting for him in these other capacities. 

GREGORY:  Finally, a broader view of the war in Iraq.  Asked if the Iraq war was worth fighting, 63 percent said no, 36 percent said yes.  And when asked if winning in Iraq is necessary to winning the war on terror, only about a third, or 34 percent, say yes.  By comparison, more than 51 percent say the U.S. must win in Afghanistan. 

A bit of a change there, Anne.  Although, in those “worth it” numbers, is the war worth it, it‘s always a tricky question, because it‘s a question, essentially, is it worth losing life on a scale that‘s been lost for a war?  And that becomes a tricky question for many people. 

KORNBLUT:  Right.  But nonetheless, I think those numbers do bode well for Obama, that he‘s able to—there‘s still a significant portion of the electorate who feel it wasn‘t worth it.  I think the Afghanistan numbers might be perplexing somewhat, that there‘s still the 50 percent, the half, who think it wasn‘t worth it despite 9/11. 

GREGORY:  Right.

KORNBLUT:  But to get back to the earlier point, I think it‘s worth remembering that Senator Clinton, Hillary Clinton, ran against Obama as a stronger commander in chief in the minds of a lot of Democrats who wanted to win the White House for a long time.  And he was able to make up the gap there.  I think we see them trying to make up that gap in a similar way here with Obama now. 

GREGORY:  All right.  We‘re going to take another break here.

When we come back, President Bush admits he‘s no expert on the economy.  And John McCain made the same admission more than once.  Not the sorts of things that voters want to hear from their president or potential future president.

How, if at all, is President Bush hurting McCain‘s chances of winning in November when it comes to the economy? 

When we come back.

(COMMERCIAL BREAK)

(NEWS BREAK)

GREGORY:  Back now on RACE FOR THE WHITE HOUSE.  I‘m David Gregory, happy to have you here.  Now, it‘s time for the biggest questions coming out of the 2008 race.  Still with us, Anne Kornblut, national political reporter for the “Washington Post,” John Harwood, cNBC‘s chief correspondent and political writer for the “New York Times,” Peter Beinart, at the Council on Foreign Relations and a columnist for “Time Magazine,” and Michael Smerconish, radio talk show host on WPHT in Philadelphia and a columnist for both the “Philadelphia Inquirer” and the “Philadelphia Daily News.”

First up, President Bush held a news conference today using the opportunity to try to ease anxiety about Fannie Mae and Freddie Mac, the mortgage giants, rising gas prices and the threat of a recession.  Listen. 

He talked about the need to keep a psychological benefit to the economy by adding more emphasis on oil drilling as well.  He said there‘s no magic wand to wave for the economy, that he‘s not an economist, and he‘s sorry that the economy is not growing at the pace it should. 

First question then tonight, is President Bush helping or hurting McCain on the economy?  The add on to that question, John Harwood, is what are voters looking to Washington to accomplish on the economy right now?  

HARWOOD:  At minimum, they are looking at them to keep the flow of mortgage money coming.  That‘s one thing that the president and treasury secretary have done with this bail out of Fannie Mae and Freddie Mac.  I think people want real progress on the issues affecting their daily lives.  This is what they are not getting from Washington right now.  You have to wonder how effective it is for John McCain to have the president come out there and say a bunch of you reporters, you told me earlier this year we were in recession; we‘re not in recession.  We‘re actually growing.  I see good things in the economy.  I‘m an optimist.

The American people are not optimists right now and that‘s the problem. 

GREGORY:  Yes, Anne, there‘s a test here in terms of what the president does and tries to accomplish, for instance on Fannie and Freddie, and trying to shore up those companies‘ finances, keep the lending going.  While all of that is happening, the government gets involved, if it doesn‘t work, it really does create a consequence for John McCain. 

KORNBLUT:  Right.  It‘s going to create a consequence either way.  You need look no further than John McCain‘s appearance today, where it looked like he was going to join the economy.  Then, shortly after President Bush did that at his own press conference, John McCain started talking about Afghanistan.  We have seen him running away from the president on numerous issues or trying to get ahead of him and unable to.  Again today, trying to keep on a separate subject.  I think we know he‘s not helping him at this point. 

GREGORY:  Peter, we have debated this question in the last couple of days here, which is: if you‘re Barack Obama, do you want to own the economy issue by getting out there every day, talking about it, talking specifically about your plans for it?  Do you never let a speech go by without really dwelling on the economy, or do you simply stand back and say, this is the reality; If you want more of the same, vote for McCain.  If you want a different course, choose me.  All he really has to do is argue against the status quo as being the problem. 

BEINART:  No, I think he needs to jump on the issue.  I think there‘s an analogy to 1992, when the economy was bad and it was wrapped around the Republican‘s neck.  But it was Bill Clinton‘s sense of his energy, his interest, his deep interest in these economic issues, in comparison to George Bush‘s father, who seemed kind of disconnected from them.  It made people think, well, maybe this guy can do something. 

HARWOOD:  David, that‘s some of what he did in that speech today on Iraq and Afghanistan.  He said, here are the things we did over the last several years.  Here‘s what we might have done.  He ticked off some of his economic priorities.  That‘s the kind of connecting the foreign policy with the domestic policy message that I think you‘re going to see more of from him.  

GREGORY:  Next up, could off shore drilling ease gas price and America‘s anxiety?  Obama opposes drilling because it won‘t help consumers now, he argues.  He‘s right according to surveys.  An independent report by the US Department of Energy in 2007 says this, “production wouldn‘t even start until 2017, with no significant domestic crude oil production until 2030.  Drill in ANWR, Alaska, would add less than two percent to the world‘s oil supply, and reduce the price of oil by one to two percent.” 

The financial impact for you?  The report concludes “that translates to a savings of just a couple of pennies per gallon at the pump in 2025.”  It won‘t help you at the pump, at least not in this decade, the argument the goes.  But McCain and President Bush say lifting the ban on domestic drilling would have a, quote, positive psychological effect. 

The question then, what‘s the psychological effect of drilling?  Smerc, here‘s the thing, Bush can make the argument that yes, this is a long term proposition and I raised it with the American people and with Congress when I came into office.  There was no action.  If we don‘t really take steps now that are long term, we‘re going to keep fighting these short term battles with very little effect. 

SMERCONISH:  Let me join John McCain and President Bush by saying I‘m no economist, but it seems to me that this is a in best case scenario far less than what we need.  What surprised about, David, is that neither of these candidates has taken hold of the energy independence issue and talked along the lines of what T Boone Pickens is running the commercials during the course of your show. 

That‘s where they need to be on this.  It sounds a little gimmicky, because I don‘t think the American people believe that the 4.26 a gallon is going to come down all of a sudden because of the psychological impact of ten years from now, bring more crude online. 

GREGORY:  John Harwood, when you look at this in your work at CNBC and your colleagues there, how much of the energy piece is driving this economic downturn that we‘re in?  How much more of it is the mortgage crisis, the lending crisis, the credit crisis that has some real anxiety about the future of the financial markets. 

HARWOOD:  I think the short term, the housing and mortgage crisis is probably having the greater effect.  Energy is a long term problem.  In the short term, it‘s a problem with inflation, because it‘s helping drive those inflation numbers up.  We‘re getting into a situation that we haven‘t seen in awhile in this country, David, where we‘re concerned about slow growth and recession at the same time were worried about resurgent inflation. 

Long term, of course, everybody knows we have to break that addiction to oil to get our economy on sounder footing and get our national security policy on sounder footing as well. 

GREGORY:  Finally, both McCain and Obama pledged today to send more U.S. troops to Afghanistan, just two days after nine US soldiers were killed in an ambush there, the deadliest attack on US troops in Afghanistan in more than three years.  Obama said that he would send two brigades, about 10,000 troops, while McCain committed to at least three.  But the candidates presented sharply different views of the impact the Iraq war has had in Afghanistan.   

(BEGIN VIDEO CLIP)

OBAMA:  Senator McCain said just months ago that Afghanistan is not in trouble because of our diversion to Iraq.  I could not disagree more.  We lack the resources to finish the job because of our commitment to Iraq. 

MCCAIN:  Senator Obama will tell you we can‘t win in Afghanistan without losing in Iraq.  In fact, he has it exactly backwards.  It‘s precisely the success of the surge in Iraq that shows us the way to succeed in Afghanistan. 

(END VIDEO CLIP)

GREGORY:  Peter, who has the best point so far? 

BEINART:  I think, in general, probably Obama does.  I think it‘s important to remember when you talk about Obama‘s plan, although it has gotten so much attention, he‘s not only talking about sending more military troops there.  He‘s also talking about ratcheting up our economic development effort there.  Ultimately, the war in Afghanistan is not going to be solved primarily militarily.  It‘s going to be solved by giving people in the southern part of Afghanistan, where the Taliban and al Qaeda still have a presence, a sense that they are actually benefiting from western connections to their country.  That‘s a very important part of what Obama said in his speech that hasn‘t gotten as much attention. 

GREGORY:  But Obama, of course, Anne, is focussed on the fact that this was an area of neglect by the Bush administration, going into Iraq, focusing on Iraq.  This became an area of neglect that has been created, a larger problem for a future administration in the years to come. 

KORNBLUT:  Right.  You‘ve identified the only real difference between the two of them here.  They are actually rather similar on Afghanistan.  They both would send more troops.  The difference is, can you do both things at the same time or not.  Obama, of course, is saying that you can‘t. 

I think it‘s interesting what we‘ve seen today, followed both of these speeches is Democrats immediately pouncing on McCain and saying, look, he just said a few months ago, as Obama said today, that we didn‘t need more troop ins Afghanistan.  Now, he‘s flip-flopping.  He‘d send in three brigades.  I think we‘re going to see more charges of the flip-flopping here following these two speeches today. 

GREGORY:  All right, we‘re going to take a break here.  Coming up, John McCain cracks a joke about Mitt Romney and his campaigning, a sign of love in the air or a sign that they really just can‘t get along and they wouldn‘t make sense together on a ticket.  We‘ll do a little VP stakes in a special war room coming up.

(COMMERCIAL BREAK)

GREGORY:  We‘re back on the war room here, looking inside the tactics of both these campaigns, what‘s working, what isn‘t.  First up, tonight; team Obama rolls out a new ad on national security set to air in 18 battleground states.  Here‘s a clip of it.  Watch.

(BEGIN VIDEO CLIP)

OBAMA:  We are a beacon of light around the world.  At least, that‘s what we can be again.  That‘s what we should be again. 

The single most important national security threat that we face is nuclear weapons falling into the hands of terrorists.  What I did was reach out to Senator Dick Lugar, a Republican, to help lock down lose nuclear weapons.  We have to lead the entire world to reduce that threat. 

We can restore America‘s leadership in the world. 

I‘m Barack Obama and I approve this message. 

(END VIDEO CLIP)

GREGORY:  Anne, here‘s what‘s interesting to me about this ad, a couple things; he wants to show some experience on an area of foreign policy that may matter, that may shore up the inexperience question.  He also is hitting at something else, which is America‘s image around the world.  Americans don‘t like the Bush years in the respect that they don‘t like to be disliked around the world in familiar places, places that they may visit on their holiday vacation, like Europe.  They don‘t like to get that sense.  They want to feel that they are working in concert with the world, even if they disrespect some international organizations like the UN.  It seems to me, that‘s really what he‘s speaking to there. 

KORNBLUT:  That‘s right.  This is his diplomat in chief ad.  This is also why we‘re going to see him go not just to the Middle East, Afghanistan and Iraq, but also to Germany, France and Great Britain.  When he‘s on his trip—He has picked an issue here, nuclear proliferation, that is a good bipartisan issue.  It allows him to talk about his work with Lugar, who has not disavowed the ad, and to talk about being bipartisan all at once.  So he‘s picked kind of a silver bullet foreign policy issue.

GREGORY:  Peter, it‘s not very controversial here.  It‘s not much of a contrast with McCain.  Who‘s not for stopping the spread of nuclear weapons from falling into the hands of terrorists? 

BEINART:  No, it‘s true.  It‘s not very controversial, but you can argue that, in fact, the Bush administration was slow to recognize the enormous significance of this issue after 9/11.  There was a period there right at the beginning where they actually tried to cut funding for the Nunn/Lugar, the program to lock up nuclear material.  I think it‘s a good meat and potatoes foreign policy issue for Obama. 

GREGORY:  Next up, Obama makes a veiled reference to Reverend Jesse Jackson‘s remarks about him, saying that he won‘t stop talking about personal responsibility.  He spoke at the NAACP convention last night.  Listen to this. 

(BEGIN VIDEO CLIP)

OBAMA:  I know there are some who have been saying I‘ve been too tough, talking about responsibility.  NAACP, I‘m here to report, I‘m not going to stop talking about it, because as much as I‘m out there fighting to make sure government is doing its job and the marketplace is doing its job, none of it will make a difference, at least not enough of a difference, if we, also, at the same time, don‘t seize more responsibility in our own lives. 

GREGORY:  Smerc, if there‘s an issue that he wants to own with the African American community, if it‘s personal responsibility, that seems to me it‘s got to be a winner to play both inside and outside of the community for Barack Obama, to make that a central issue, take on Reverend Jackson in the process. 

SMERCONISH:  The African American vote is the most secure vote, by demographic, in this election.  The NAACP was not the intended audience of that speech.  I think the intended audience were white folks who are listening to those remarks and are saying boy, that resonates with me and giving kudos to Barack Obama. 

GREGORY:  John, as he talks about his base, and he deals with his base, African-Americans are not going to be a trouble spot for him.  Winning those independent voters who can see an African American candidate say to them, you may not know a lot about me, but I have a such a broad agenda when it comes to what I want to be elected on, and to the extent that I‘m speaking to my community in way that everybody‘s listening, I‘m talking personal responsibility here.  It‘s a break from a lot of other African-Americans who have run for president. 

HARWOOD:  Yes, and this is one presidential candidate who has absolutely no problem in the African-American community.  Pollsters reporting as close as you get with any constituency to unanimous support for Barack Obama.  As Mike Smerconish just said, this is Barack Obama making the case, I‘m not backing down.  I don‘t care if Jesse Jackson doesn‘t like my talk about parental responsibility.  He can do that before that audience, because he knows it‘s popular with them, too. 

GREGORY:  Right.  Moving on, is the Democratic honeymoon officially over?  “The Hill” reports today that congressional black caucus members are getting impatient with Team Obama, according to the Politico, quote, “some Capital Hill Democrats have begun to complain privately that Barack Obama‘s presidential campaign is insular, uncooperative, inattentive to their hopes for a broad Democratic victory in November.” 

According to the “Wall Street Journal,” some Democrats facing reelection are even saying Obama‘s weakness among the white working class vote is a political liability for them, among them, Tim Mahoney of Florida, Mississippi‘s Travis Childers, and Maryland‘s Christopher Van Hollen. 

It is an interesting question here, Peter, but the base itself, the fact there are people on the left who are criticizing Obama, in and of itself, doesn‘t seem to be a major issue for him.  It‘s weather it translates into something larger that forcing him or causes him to lose some of his luster, to lose his brand as somebody who is really bringing change to Washington. 

BEINART:  I think that‘s absolutely right.  The most important thing for Obama is that he not start to seem like just another ordinary Washington politician.  When you look at what hurt John Kerry and Al Gore, in 2000, 2004, it wasn‘t primarily because they were considered too liberal.  It was primarily because Republicans succeeded as painting them as opportunistic flip-floppers with no moral compass at all.  Bush said, again and again, you may not always agree with me, but at least you know where I stand.  I think the Obama campaign recognizes that and I think they‘ve been pretty shrewd in trying to hedge that on at the pass.   

GREGORY:  Anne, how much concern is there within Team Obama about some of the shots they are taking from the left? 

KORNBLUT:  Look, they knew they were going to take them once they moved into the general election.  I think the problem with the left are probably more significant in this moment than they are with some of these down ticket races in more conservative areas, over issues like the warrantless wiretapping, over his speech about faith and government.  They are really getting a lot of complaining, especially from the blogosphere and some of his initial supporters.  He‘s tacking to the center for the general.  They hope that will help in some of these down ticket races as the months go on, especially as we get past Labor Day. 

GREGORY:  Let‘s move on to Veep stakes here.  John McCain cracked this joke about former rival Mitt Romney, quote, “I‘m appreciative every time I see Mitt on television on my behalf.  He does a better job for me than he did for himself, as a matter of fact.”

Does it mean Romney is off McCain‘s short list for VP?  NBC‘s First Read says maybe not, quote, if McCain can start joking about someone, you know they have made it into his mental inner circle.  Romney may very well be higher on the short list than anyone realizes.  The biggest roadblock for many in picturing a McCain/Romney ticket is McCain getting over his personal reservations about him.  But joking about him might be a start.” 

John, how do you read this? 

HARWOOD:  Every feeler I have put out with Republicans, including those within the McCain campaign, tells me Mitt Romney is very high up on that short list, very much in the hunt for that job.  This is why I love John McCain.  The guy is hilarious.  Under any circumstance, he‘s going to come up with a line that‘s a great one about Mitt Romney. 

GREGORY:  Right.  A quick note here, be sure to go to Veep stakes at MSNBC.com and play the Veep Stakes.  NBC News political director Chuck Todd and I handicap the match ups and you get to make your picks.  I got to tell you, you guys have been awesome on this.  I am in discussion with management, however, about why Chuck Todd is the only one with his picture up on the website.  Who will be Obama‘s number two?  It‘s down to Hillary Clinton and Joe Biden.  Tell us who‘s the better fit.  After you cast your vote, come back often to see how the odds change.  Check back next Tuesday, July 22, to see who won.  We‘ve got a great track record on this thing. 

Again, VeepStakes.MSNBC.com.  Coming up next, our remaining moments here, your play date with the panel.  Don‘t go away.

(COMMERCIAL BREAK)

GREGORY:  In our remaining moments here, the play date with the panel and some food for thought here.  A piece in the “New York Times” getting us thinking here, as we‘re back with the panel today, Anne, John, Peter and Michael.  It had to do with Barack Obama.  Why is it so hard for late night comics and others to find the humor in Barack Obama?  When there is an attempt at satire, as was the case this week by “the New Yorker Magazine,” it seemed to fall flat, or engender a whole new debate about whether this was a lack of class going over the line.  John Harwood, why is there no humor in Obama?  Or are Democrats just wound a little too tight?

HARWOOD:  Well, I think a lot of it is that we‘re talking about shows that—

(INAUDIBLE)

BEINART:  I think a lot of it is because none of those talk show hosts are themselves black.  Imagine if Chris Rock had a show.  He would be making jokes about Barack Obama and his race constantly.  But I think Smerc is right.  We have an environment, for worse but also really for better, where we are cautious about white people making jokes about black people because we have a pretty nasty history about that in this country.  I think, actually, if there was more diversity on some of the nightly shows, then you would in fact find more opening up of jokes about Barack Obama. 

GREGORY:  How much, Smerc, is this a question about race or is the opportunity to criticize Obama, who‘s often heralded as being a post racial politician—a lot of this humor could have absolutely nothing to do with the fact he‘s an African-American. 

SMERCONISH:  I don‘t think it takes much to poke fun at somebody.  Somebody offered the opinion in Bill Carter‘s piece that Obama doesn‘t give you much to work with.  I don‘t buy into that.  Look, Bernie Mac, last weekend in Chicago, did indeed do a humor skit at Obama‘s expense.  In the end, Obama took it well and apparently it went over well with the audience.  I think there‘s a difference.  It depends on who‘s offering the punch line. 

HARWOOD:  David, let‘s don‘t forget, SNL did a pretty funny skit with Barack Obama, playing on his inexperience, calling Hillary Clinton at 3:00 a.m., asking for advice.  Of course, they got some flak for their portrayal of Barack Obama because the actor they selected to do that was not African-American. 

GREGORY:  Exactly right.  All right, we‘re going to leave it there.  You can play with the panel every week night here on MSNBC.  Email us at RACE08@MSNBC.com.  You can also call us at 212-790-2299.  That does it for THE RACE tonight.  I‘m David Gregory.  Thanks to a great panel, thanks to you for watching.  We‘ll be back here tomorrow night, same time, 6:00 p.m.  Eastern, right here on MSNBC, the place for politics.  Stay where you are, “HARDBALL” with Chris Matthews starts right now.

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

END   

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