updated 9/16/2008 6:48:39 PM ET 2008-09-16T22:48:39

Guests: Chuck Todd, Sen. Charles Schumer, Nancy Pfotenhauer, Stephanie Cutter, Pat Buchanan, Chrystia Freeland

CHRIS MATTHEWS, HOST:  Why is John McCain talking like Herbert Hoover? 

Depression or just depressing?

Let‘s play HARDBALL.

Good evening.  I‘m Chris Matthews.  Leading off tonight, an SOS on Wall Street.  If anyone had any doubt that the economy would play a huge role in this campaign, this evening‘s headlines left no doubt: Lehman Brothers declares bankruptcy, Merrill Lynch is bought out.  The stock market closes down more than 500 points, and all the candidates are talking about—and nothing else—is the stock market.  The Republican candidate is bailing politically, the Democratic candidate is attacking.  Let‘s watch them both.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL NOMINEE:  The fundamentals of our economy are strong, but these are very, very difficult times.  And I promise you we will never put America in this position again.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL NOMINEE:  It‘s not that I think John McCain doesn‘t care what‘s going on in the lives of most Americans, I just think he doesn‘t know.  Why else would he say that we‘ve made great progress economically under George Bush?

(END VIDEO CLIP)

MATTHEWS:  Did John McCain really mean to say the fundamentals of the economy are strong?  Herbert Hoover, who presided over the Great Depression, said, quote, “The economy is fundamentally sound.”  So is it fundamentally good politics to say, with the stock market plunging, that things are hunky-dory?  Tonight we‘ll talk to both campaigns.

Also: How will today‘s terrible news on the economy affect the election?  As of today, this is no longer an election about lipstick on pigs, misleading ads or how many houses a candidate owns.  This is serious.  The economy is a real issue with real consequences.

And where does the election stand today?  The NBC New political unit has just put out its newest map of the battleground states.  It shows the race tightening not just in the popular vote but in the electoral vote.  In the “Politics Fix” tonight, we‘ll take a look at the latest polls and how they may shift one way or other as a result of today‘s economic turmoil.

And when it comes to political impressions, has anyone ever done it better than Tina Fey on “Saturday Night Live” with her take on Sarah Palin?

(BEGIN VIDEO CLIP)

AMY POEHLER, “HILLARY CLINTON“:  I believe global warming is caused by man.

TINA FEY, “SARAH PALIN”:  And I believe it‘s just God hugging us closer.

(LAUGHTER)

POEHLER:  I don‘t agree with the Bush doctrine.

FEY:  And I don‘t know what that is!

(LAUGHTER)

(END VIDEO CLIP)

MATTHEWS:  We‘ll have a lot more of that brilliant performance on the HARDBALL “Sideshow” tonight.  But first, the economy.  Senator Charles Schumer of New York is a member of the banking committee and the finance committee, and he supports Barack Obama for president.  We requested, by the way, someone from the McCain camp to respond to Senator Schumer tonight, but the campaign was unable to provide us with someone to do so.

Senator Schumer, I watched you on “Meet the Press” yesterday.  But first of all, let‘s look at John McCain and what he said about the economy because you‘re a student of politics, as well as the economy.  I wonder what you think of this comment.  Here he is, John McCain.

(BEGIN VIDEO CLIP)

MCCAIN:  Before I continue with too many of my remarks, you know that there‘s been tremendous turmoil in our financial markets and Wall Street, and it is—people are frightened by these events.  Our economy, I think, still, the fundamentals of our economy are strong.  But these are very, very difficult times.  And I promise you we will never put America in this position again.  We will clean up Wall Street.

(END VIDEO CLIP)

MATTHEWS:  You know, I‘ve never seen anything like that, using the word “we,” the sort of the plural personal pronoun, first person, actually, but saying we won‘t do it again.  His party did it.

SEN. CHARLES SCHUMER (D), NEW YORK:  Exactly.  You know, this is—just shows how out of touch John McCain is.  You‘re right to say Herbert Hoover.  Over the last eight years, the average middle class family has not had it good, they‘ve had it bad.  The average median income went down from $48,000 to $46,000 and buying power to $43,000.  Families all across America sit around the dinner table Friday night and figure out how they‘re going to pay the bills, and John McCain thinks things are just fine.

He‘s not talking to average folks.  He doesn‘t understand how average folks live in this economy.  And for today, to say that the fundamentals are strong when people far more knowledgeable than him or me are really truly worried about the economy just shows how out of touch he is.

MATTHEWS:  How do you get your candidate, Barack Obama, to talk more meat and potatoes?

SCHUMER:  Well, I think he understands it.  When you sit down and talk to Barack, he knows it.  And I think you‘re going to see a lot more of that because meat and potatoes it is.

Here‘s the fundamental question.  On the meat and potato issues—education, health care, energy, taxes—that affect our economy, John McCain is just about a carbon copy of George Bush.  And if people want the same thing again, they‘ll vote for him.  And that‘s what we have to hammer away at time in and time out.  And as you can see, Barack is doing that now.  Joe Biden is doing that.  The commercials are doing that.  And I think a week from now, you‘re going to find these polling numbers quite different than they are today.

MATTHEWS:  You know, even before today, Senator—you know about this

we had an unemployment rate spike to 6.1 percent.  I looked back at the number that it was back in the Kennedy/Nixon debate, when they had that great debate.  The unemployment rate was only 5.9 percent and Kennedy made it sound like it was the end of the world.

Why does your candidate not ring the alarm bell?  Why do we not hear a political code red out of him?  Why do we get this casual, almost Adlai Stevenson approach to the campaign from him?

SCHUMER:  Well, I think you‘re going to hear the campaign being a lot sharper.  I think in the last several days, it has been in every way, and it‘s going to continue to be.  You know, Barack Obama, to his credit, he‘d liked to debate the great issues, but the Republicans, they can‘t win on domestic policy.  They‘ve never been able to do that.  Now they can‘t win on foreign policy because Iraq is such a mess.  And they‘re just going to hit Barack Obama in the face every day, and he‘s going to respond.  He has to respond.  He has no choice but to respond.  He knows he must.  And that‘s what‘s going to happen, and you‘re going to see this thing turn around.

MATTHEWS:  Let‘s talk about reality.  You get in the White House—if the Democrats win the presidency this time—and it‘s a 50/50 bet right now.  You get in the White House January 20, what‘s going to change?  Is there going to be a different fiscal policy, different monetary policy, different Fed chairman, a different budget?  Tell me how it‘s actually going to shift...

SCHUMER:  Well, let me give you...

MATTHEWS:  ... in policy toward a better economy.

SCHUMER:  Let me give you two quick examples that relate to today.  First, what caused this housing crisis to begin with?  The fact that mortgage brokers and mortgage lenders who were not banks had no regulations on them.  And that was the Bush view, don‘t regulate anybody.  And they came in and they took huge advantage, created bad mortgages that then went through the system.

Second, when we began to learn the economy was bad, we Democrats

started talking about doing something about the housing market because it‘s

the housing market fundamentally—the housing market, the mortgage funds

that are driving everything down.  They said no for a year and then came out with very weak stuff.

It‘s my personal view that some of the people in the administration, the less ideological ones, were pushing them to do more early on in the Treasury Department and elsewhere, but they kept saying no because they‘re ideologues.  And that‘s how we fell so far behind in this housing crisis.  It could have been contained in housing.  Instead, it‘s spread to the whole economy because of their basic hands-off attitude.

And John McCain basically has the same one.  He said he‘s not going to let this happen again, and then he talks about having less regulation.  Well, those don‘t add up.

MATTHEWS:  Are you going to make him pay for intervening with regulators on behalf of Charles Keating?  I mean, that was one of the most infamous cases.  We had five U.S. senators sitting down on behalf of a lobbyist, a guy who wanted lobbying on his behalf and he found U.S.  senators to do it for him.  Isn‘t part of the problem—or is it, you tell me—senators influencing regulators?  Or not?  Is that—the S&L industry was the first crisis like this.

SCHUMER:  Yes, in the last few—in the S&L crisis, I think that is what happened.  I was very much one of the people who wrote the reform legislation to change it.  But it‘s not true in this crisis.  In this crisis, what we had was sort of a laissez faire attitude reminiscent of the 1920s.  They have an appointee on the SEC who doesn‘t even believe in regulation, wants to go back to the 1920s, 1890s...

MATTHEWS:  Yes.

SCHUMER:  ... and that let very bad people—not the majority of those in these areas, but the bad people have free rein and take the economy down the drain.

We will not let that happen because we don‘t have this sort of attitude, Whatever any businessperson wants to do, whatever any leader of any of these in these areas want to do is OK.  There should be some protection for people and the economy.  That‘s what history has taught us, and these ideologues want to go back to the old way.

MATTHEWS:  OK.  I just study politics.  I don‘t practice it.  I look at these unemployment rates.  It was 4.2 percent when President Bush took office.  It‘s now 6.1 percent.  The federal surplus—we had a surplus, everybody remembers, $281 billion surplus when he came in, it‘s now $357 billion in deficit a year.  We had a national debt of about 5.  Now it‘s about 10.  It‘s doubled.  We had the price of gas was $1.50, now it‘s about $4.

SCHUMER:  You bet.

MATTHEWS:  Every one of these numbers says your crowd should be coming in about 2 to 1.

SCHUMER:  Right.

MATTHEWS:  Why are the polls even?

SCHUMER:  I think the polls are even—you know, there‘s some bounce.  There‘s excitement about Sarah Palin being the first woman nominee for the Republican Party.  But ultimately, their campaign is founded on a fundamental mistruth.  They say they‘re the change candidacy, and yet 95 percent of the time, whether it‘s foreign policy or domestic, the economy, they agree with George Bush.

That is going to catch up with them.  It is the job of our campaign to keep pointing that out...

MATTHEWS:  Yes.

SCHUMER:  ... over and over.  And it‘s going to sink in as people, many people, many voters are focusing for the first time now at the conventions.  I‘d say one more thing, Chris.  There was a question that a great Republican asked in 1980 at the debates.  He asked it of Jimmy Carter.  He asked it of the American people, debating Jimmy Carter.  Are you better off than you were four years ago?  We are going to ask that question of the American people now.  Are you better off than you were eight years ago?  Well, if you‘re not—and most people would say they‘re not—you have to vote for change, you have to vote for Barack Obama and Joe Biden.

MATTHEWS:  Let‘s take a look at—hear the other side.  Here‘s Governor Palin of Alaska—you just mentioned.  Here she is, talking today about the Wall Street meltdown, which cost the Dow 500 points today.

(BEGIN VIDEO CLIP)

GOV. SARAH PALIN (R-AK), VICE PRESIDENTIAL NOMINEE:  So John McCain and I, we‘re going to put an end to the mismanagement and abuses in Washington and on Wall Street that have resulted in this financial crisis.

(CHEERS)

PALIN:  We‘re going to reform the way Wall Street does business and stop multi-million-dollar payouts and golden parachutes to CEOs who break the public trust.

(CHEERS)

(END VIDEO CLIP)

MATTHEWS:  These people all supported President Bush.  They have a phone they could pick up right now and tell him what to do.  They can call up members of Congress in their party and tell them what to do.  They‘re acting like they‘re you, Senator, like they‘re a Democrat running against a Republican administration.  This is a switcharoo like I‘ve never seen, if it works.

SCHUMER:  Right.  But you know, it‘s not going to work.  Sarah Palin -

sooner or later, someone‘s going to force her to answer questions.  And then when they ask her, What are you going to do, let‘s see what she says.

John McCain—when many of us, mostly Democrats, a few Republicans but mostly Democrats, were pushing George Bush to do more on housing early, John McCain said no, he didn‘t want to get involved.  So the record is clear, and we just have to bring that record out.

I don‘t think they can get away with this.  Sarah Palin and John McCain cannot get away with sounding like Democrats and then having a policy that‘s exactly like Republicans.  And they know it.  I think, you know, the pundits are going to look back a month-and-a-half from now and they‘re going to say the fundamental mistake of the McCain/Palin campaign was making change the issue because they can‘t win when change is the issue.

MATTHEWS:  Right.  I think you‘re right.

SCHUMER:  And we are going to win.  That‘s what‘s going to happen...

MATTHEWS:  We pundits are wrong all the time.  I thought it was going to be Rudy against Hillary last—this year.  I didn‘t get it right.  I thought Hillary‘d beat everybody and Rudy would be the Republican.  So I don‘t know.

Let me ask you this.  When is—and this must be frustrating to people in your party.  I keep waiting to see the big campaign.  I keep waiting to see Bill Clinton, one of the great politicians in history, up there campaigning in states like Ohio and Pennsylvania and Michigan, almost like a buddy film, with Senator Obama, your other colleague.  I can see them campaigning together, having a good time, hitting the road together.  I can see Hillary Clinton doing the same thing in places like Scranton, where she did so well, and Youngstown, Ohio.

Why—is there a job action going on?  Why aren‘t they—why do they keep talking about when they‘re going to campaign?  She went down to Florida, which is a reach to begin with.  Why isn‘t she in the states that they can win?  I don‘t get it.

SCHUMER:  Well, I think she was in Ohio yesterday.  She was one of the battleground states yesterday.

MATTHEWS:  Yes?

SCHUMER:  And she is going to be out there.  He is going to be out there.  You know, everyone before the convention said, Well, when are they going to do the job?  And boy, did they.  His speech, her speech were great.

MATTHEWS:  They were great.

SCHUMER:  Unified Democrats.  You watch.

MATTHEWS:  OK.

SCHUMER:  You will not be saying that three, four weeks from now.

MATTHEWS:  OK.

SCHUMER:  They will be out there in their great way and helping rally the cause.  I‘ll tell you why—and I talk to both of them quite a bit—because they care so much about the country.  They know that McCain/Palin is sort of—their rhetoric at the moment is sort of fundamentally at odds with their beliefs, with their policies.

MATTHEWS:  OK.

SCHUMER:  And that—they‘re going to help expose that.

MATTHEWS:  Just don‘t let the cavalry attack you after the massacre.

I just hope they get there in time.

SCHUMER:  They‘ll be there.

MATTHEWS:  And by the way, I agree with you.  I thought Senator Clinton‘s speech at the convention was exuberantly, unbelievably wonderful.  What a great speech that was.

SCHUMER:  There you go.

MATTHEWS:  Amazing speech.  Anyway, thank you, Senator Charles Schumer of New York.

SCHUMER:  Good to talk to you, Chris.

MATTHEWS:  The senior senator from New York.

Coming up, much more on how today‘s 500-point loss in the Dow on Wall Street could change this presidential election.  Does John McCain‘s statement that the fundamentals of the economy are strong—he said that today, which is almost exactly what Herbert Hoover said back in the ‘30s, that the fundamental of the economy—the economy is fundamentally strong, sounds so much like it.  Why did he say it?  And did he give Obama an opening to say that John McCain is out of touch?  Well, let‘s watch how they do this.  It seems like one of these sides has got to learn how to play politics.

You‘re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL.  Is the latest “Wall Street Journal” (SIC) meltdown and economic crisis a real world game changer for the presidential race of 2008?  And what did John McCain mean when he said the fundamentals of our economy are strong?

Nancy Pfotenhauer is a senior adviser to McCain‘s campaign.  Nancy, that‘s a strange comment, if you know any history, because that‘s what Herbert Hoover, of all people, said back in the ‘30s, that the economy is fundamentally sound.  Why choose the word “fundamental” knowing that it‘s become almost radioactive over all these years?

NANCY PFOTENHAUER, MCCAIN CAMPAIGN SR. POLICY ADVISER:  Well, Chris, I don‘t think it has.  And I think what‘s clear, if you look at the entire quote that Senator McCain gave—he began with, The financial markets are in turmoil, and he ended with, This is very, very difficult time.  But he was reassuring the American people that things like the ingenuity of the American worker, the resilience, the work ethic, the productivity of our workers and our entrepreneurs are fundamentally strong.

Main street hasn‘t failed us.  It‘s Wall Street and Washington that have, and that‘s why people like Mayor Bloomberg also echoed his sentiments.  And you have to be very careful at a time like this, that when there is a financial meltdown in place, that you don‘t throw fuel on the fire.  That‘s irresponsible, and that‘s something that...

MATTHEWS:  What did I...

PFOTENHAUER:  ... people need to pay attention to.

MATTHEWS:  What‘s irresponsible about recognizing reality?  Let me give you some numbers.  You say...

PFOTENHAUER:  There are others—nothing—nothing...

MATTHEWS:  ... fundamentally sound...

PFOTENHAUER:  Nothing...

MATTHEWS:  No.  No.

PFOTENHAUER:  ... irresponsible—nothing irresponsible...

MATTHEWS:  You say they‘re fundamentally sound.

PFOTENHAUER:  ... about recognizing reality.

MATTHEWS:  Let me challenge...

PFOTENHAUER:  OK.

MATTHEWS:  Let me challenge you on the “fundamentally sound” argument. 

The unemployment rate is 6.1 percent and rising.  That‘s high.

PFOTENHAUER:  Right.

MATTHEWS:  It was 4.2 percent earlier this year.  It‘s gotten higher.  You can‘t blame it on 9/11, though 9/11 had a big impact, because five years ago, it was much lower.  The federal deficit is 357.  The debt is about almost $10 trillion, the national debt.  It‘s a big chunk of the international economy, our debt right now we‘re holding.

I think you could argue that our debt has a role—as it rises, has a role in this financial crisis.

PFOTENHAUER:  Well, I...

MATTHEWS:  Gasoline—no, just a minute.  In every area where we‘re competing with stronger economies around the world that are challenging us for resources, we have to pay a lot more for commodities like gas, oil, than we‘ve ever had before.  But if you look at all the fundamentals—the unemployment rate, the debt, the deficit, the price of things—why do you say it‘s fundamentally sound?  Why is it?

PFOTENHAUER:  Well...

MATTHEWS:  It looks to me like it‘s getting worse.

PFOTENHAUER:  Well, first of all, the problems that you identify are real, and they‘re challenges that Senator McCain talks about every single day on the campaign trail, Chris, so you can‘t ignore that.

And, by the way, the last thing you do in an economic downturn is increase taxes, which is what Barack Obama proposes to do in this economic downturn.  He‘s gotten such pushback, that now he‘s on his third version of his economic plan.  So, econ 101, you don‘t raise taxes in an economic downturn.  That‘s a mistake.

And what—the fundamentals that Senator McCain was referring to this morning is the fact that we have the most productive workers in the world.  We have the best work ethic.  We have tremendous ingenuity.  We have tremendous natural resources. 

There are very real challenges.  And that‘s why his economic plan is designed to make jobs.  Barack Obama is a job-killer and it‘s a recipe for a recession.  Don‘t ask me.  Ask 21 out of 29 economists will tell you that. 

MATTHEWS:  But I don‘t understand.  You‘re running—John McCain is the nominee of the Republican Party. 

PFOTENHAUER:  Yes. 

MATTHEWS:  He‘s going to stand in that debate next Friday night, on the 26th, because he‘s the nominee of the Republican Party.  That‘s why he has a 50/50 chance of winning this election, because he‘s the nominee of the Republican Party, and the other guy is the nominee, Barack Obama, of the Democratic Party. 

How can you run away from the party whose platform you‘re running on?  I don‘t understand how you can deny that you‘re the in-party, you‘re the incumbent party. 

(CROSSTALK)

PFOTENHAUER:  Chris, look at the policies that—that have caused the problem.  Increased spending is probably the single most important one that Washington can control.  Who‘s midwifed that?  Democrats, as well as Republicans.  Look at Barack Obama‘s record, almost $1 billion.

MATTHEWS:  But the Republicans have controlled the Congress for three

but the Republicans have controlled the Congress since 2001, since the election of 2000.  What are you talking about? 

(CROSSTALK)

MATTHEWS:  They‘ve run the Congress three-quarters of those years.

PFOTENHAUER:  What I‘m talking about is the fact that the—the spending that was running amuck, Barack Obama not only blessed, but he took part in, whereas you had Senator McCain, who tried to stop it and who stood on the floor and fought his own party, as well as the Democrats, as well as the Democrats.

MATTHEWS:  Nancy, I‘m not blaming you.  I‘m not blaming you, Ms.  Pfotenhauer.  You weren‘t there.  You weren‘t there.  But the Republicans controlled the Congress in every year you‘re complaining about it.  Every year you‘re complaining about, they controlled the Congress. 

PFOTENHAUER:  No, that‘s not true. 

(CROSSTALK)

MATTHEWS:  Which year are you talking about? 

PFOTENHAUER:  Well, it‘s—the increased spending has continued even now.  I mean, it‘s just ridiculous.  But let‘s go back, even, and talk about...

MATTHEWS:  You mean the Democrats are as bad as the Republicans? 

PFOTENHAUER:  Yes, the Democrats are worse than the Republicans. 

But if you go back, and let‘s talk about the housing crisis, since I have the interesting experience of listening...

MATTHEWS:  Yes. 

PFOTENHAUER:  ... to your conversation with Senator Schumer. 

His—his description of what occurred was simply false.  And if you get any honest reporters who paid attention to what‘s gone on with Fannie and Freddie over the last however many years, you know that the Democrats were in the pockets of Fannie and Freddie. 

And you basically had Barney Frank, who is...

MATTHEWS:  OK. 

PFOTENHAUER:  ... whose nickname is the patron saint of the GSEs...

MATTHEWS:  OK. 

PFOTENHAUER:  ... and you had Sarbanes stop it, with a few Republicans who were peeled off and who helped stop real reform. 

MATTHEWS:  Was it...

PFOTENHAUER:  But that was done by the Democrats, primarily. 

And—but, anyway, it‘s not—the point should be on how do we solve the problem.  And Senator McCain has been perfectly clear. 

MATTHEWS:  No, the point is, who‘s responsible for the problem?  The point is, who‘s responsible?  And those responsible play defense and those who are not responsible play offense.  That‘s how politics works. 

Let me ask you this.  Look at these numbers and ask yourself the Ronald Reagan question.  Unemployment rate when your party came into power, 4.2 percent.  Unemployment rate today, 6.1 percent.  Fiscal situation when your party came into power, $281 billion surplus.  Situation now, $357 billion deficit. 

Situation when your party came into power, $5.7 trillion national debt, today $9.7 trillion.  Situation when your party came into power, gas price about $1.46.  Now they‘re about $4.  How can you answer the question we‘re better off now than we were seven years ago?  How can you answer it positively? 

PFOTENHAUER:  I think—I think you say, what policies will get us where we need to be?  And they‘re not Barack Obama‘s, that raise taxes in an economic downturn...

MATTHEWS:  Yes. 

PFOTENHAUER:  ... and propose almost a billion dollars in new spending over the next four years. 

MATTHEWS:  OK. 

PFOTENHAUER:  Again, you have increased taxes, increased spending, and you add to that mix that nasty cocktail, if you will, protectionism. 

MATTHEWS:  OK. 

PFOTENHAUER:  And, again, it‘s a job-killing machine.  That approach doesn‘t work in this country.  It doesn‘t work in other countries where it‘s.... 

(CROSSTALK)

MATTHEWS:  So, it‘s scare?  So, scare.  So, you‘re trying to scare the voters they‘re going from the frying pan into the fire?

PFOTENHAUER:  Do you know what, Chris?  That‘s really over the top, Chris. 

(CROSSTALK)

MATTHEWS:  Well, what are you doing, then?  What are you doing?

PFOTENHAUER:  It‘s not scare. 

(CROSSTALK)

MATTHEWS:  Are the defending the policies—I just want to ask you, did you vote Republican the last time in 2004?  Did you vote for Bush and Cheney? 

PFOTENHAUER:  What did you vote?  What did you vote? 

MATTHEWS:  No, I—I‘m not—I‘m asking you because you‘re defending the policies of the administration. 

PFOTENHAUER:  Well, yes, I will ask you, too. 

(CROSSTALK)

MATTHEWS:  I‘m asking—you‘re on as a surrogate for this administration.

PFOTENHAUER:  I‘m defending...

(CROSSTALK)

MATTHEWS:  If you‘re not happy to defend this administration, fine.  You don‘t have to answer any political question.  I thought you were on as a Republican spokesperson.  If you‘re not, fine. 

PFOTENHAUER:  You know what, Chris?  I‘m here as a McCain spokesman.

MATTHEWS:  Oh.

PFOTENHAUER:  And why don‘t we focus on that?

MATTHEWS:  OK.  So, take off the party uniforms.

PFOTENHAUER:  And what I‘m doing is advocating Senator McCain‘s proposal.

(CROSSTALK)

MATTHEWS:  I have never heard anything like this. 

PFOTENHAUER:  Why don‘t you let me finish? 

What I‘m advocating is Senator McCain‘s proposals, which will bring economic growth and job creation. 

MATTHEWS:  Right. 

PFOTENHAUER:  You name me one professional economist who tells you that it‘s smart to raise taxes in an economic downturn.  Name one, because it‘s just not.  That‘s not Republican.  That‘s not Democrat.  That‘s not Republican.  That‘s not Democrat.

MATTHEWS:  You tell me one voter who‘s ever been told to stick with the same party—to stick with the same party when things aren‘t going well. 

PFOTENHAUER:  That‘s not Republican.  It‘s..

MATTHEWS:  Have you ever voted for the same party when they have blown it?  Have you ever done that? 

PFOTENHAUER:  Do you know what?  Do you know what, Chris?

MATTHEWS:  Have you ever voted for a party that‘s blown it economically after they have blown it?  Most people say, let‘s try something else, don‘t they? 

PFOTENHAUER:  Chris—Chris, most people are smart enough to listen to what the candidates are proposing. 

MATTHEWS:  Right. 

PFOTENHAUER:  And Senator Obama is proposing massive—a massive increase in the...

MATTHEWS:  OK.  OK.

PFOTENHAUER:  ... size of government and massive tax increases.  At the same time, he‘s advocating protectionism, which closes our export markets.

MATTHEWS:  OK. 

PFOTENHAUER:  The two things that have propelled us and kept us going during this economic downturn have been small businesses and exports.  His policies will hurt both. 

MATTHEWS:  OK.  Thank you for coming on.  It‘s a very tough time for your party to defend itself.  I appreciate you coming on.

PFOTENHAUER:  It‘s a tough time for yours, too.

MATTHEWS:  But you‘re to have to put that uniform on sooner or later. 

Right next to his name is Republican. 

Thank you very much, Nancy Pfotenhauer, Republican spokesman for John McCain, who says she won‘t tell me how she votes. 

Anyway, Stephanie Cutter is a senior adviser for the Obama—and you are a Democrat, right, Stephanie? 

STEPHANIE CUTTER, DEMOCRATIC STRATEGIST:  I am. 

MATTHEWS:  Stephanie?

CUTTER:  And I‘m not afraid to say it.

MATTHEWS:  And you‘re speaking on behalf of the Democratic Party, which is trying to regain control of the White House, right, just so we get the uniforms straight here?  You can‘t tell the players without a scorecard around here.

CUTTER:  Yes, Barack Obama is running to be president. 

MATTHEWS:  OK. 

Just to be fair now, Ms. Pfotenhauer just stuck your party with a couple sticks.  Let‘s go through them.

CUTTER:  Mm-hmm.  OK.

MATTHEWS:  Are you guys going to raise taxes?  Everybody says you‘re going to raise taxes.  You‘re going to raise them on capital gains.  You‘re going to raise them on the higher-income people.  You‘re going to raise them a little bit on everybody on the upper-middle-class, right?  Isn‘t that fair? 

CUTTER:  Well, we‘re going to...

MATTHEWS:  You‘re going to do that.

CUTTER:  We‘re going to restore the tax rate—well, let me finish.  We‘re going to restore the tax rate for those that are making over $250,000 to where it was in the Clinton era. 

Overall, if you look at all of the tax policies of Barack Obama, it‘s

the lowest tax rate since Ronald Reagan, in a generation.  You know, we do

cut taxes for the middle class.  Ninety-five percent of working Americans -

Americans are going to get a tax cut.  We have a tax cut for small businesses, something that...

(CROSSTALK)

MATTHEWS:  How about stockholders?  What are you going to do to the stock market?

CUTTER:  We‘re going to create a stronger economy.

MATTHEWS:  I mean, raising capital gains is going to help the stock market?

CUTTER:  And we‘re going to regulate it, and remove—remove—remove the abuse that‘s happening on Wall Street. 

MATTHEWS:  OK.

CUTTER:  You know, Chris, I don‘t think anybody could argue that the economy was pretty strong in the 1990s.  And we need to get back there.  We haven‘t had it over the last eight years.  John McCain has been marching in lockstep with—with George Bush, as I just heard you talk about with Nancy, over the past eight years, and created this economy. 

It was interesting to say that Nancy was trying to spin John McCain‘s comments about the fundamentals of the economy being strong as that Main Street is strong.  Unfortunately, John McCain‘s policies and George Bush‘s policies have left Main Street high and dry.  This is an example of where the problems of Main Street have trickled up to Wall Street. 

MATTHEWS:  OK.  You know, I... 

CUTTER:  They have done nothing for the American worker.  If you want to talk about job-killers, talk about the Bush economic policy. 

MATTHEWS:  OK. 

CUTTER:  Talk about the McCain economic policy, because they‘re one in the same. 

MATTHEWS:  OK, let me ask you a question. 

CUTTER:  Are you there?

MATTHEWS:  During the stock market...

(LAUGHTER)

MATTHEWS:  Oh, I‘m listening to every word.  I just can‘t get in here. 

Anyway, you—I think I do something to people.  They talk as fast as I do when they get on television.

Look, let me ask you this question.  In the stock market crisis, like we have today, with a 500-point drop—and who knows what‘s coming tomorrow...

CUTTER:  Mm-hmm. 

MATTHEWS:  ... is it smart policy to advocate a higher tax on stock?  I mean, is it common sense to make it harder to invest and less lucrative to invest at a time when people are pulling their money out of the market?  Common sense says, make it easier to invest, doesn‘t it? 

CUTTER:  Well—well, of course we‘re making it easier to invest. 

You know...

MATTHEWS:  You‘re raising the price on investments. 

CUTTER:  ... who we‘re trying to make it easier to invest for?  The middle class.  The middle class.  We are trying to make it easier to invest for the middle class. 

MATTHEWS:  OK.

CUTTER:  They don‘t have money to invest in the stock market. 

MATTHEWS:  At what level of income is a person...

(CROSSTALK)

CUTTER:  The money that they have, they have seen wiped away today. 

MATTHEWS:  OK. 

At what level of income is a person safe from your tax increase? 

(LAUGHTER)

MATTHEWS:  At what level of income can you make it...

CUTTER:  You know what?  Everybody—everybody...

MATTHEWS:  At what level of income can I be and avoid an Obama tax increase?  What level can I make safely before I get hit by the axe?

CUTTER:  You know what?  Even—Chris, even you will get a tax benefit from the Barack Obama... 

(CROSSTALK)

MATTHEWS:  I ain‘t complaining.  I never complain about my life. 

But let me ask you this question.  At what level of income are you safe from an Obama tax increase?  Can you tell me?  You‘re on as a spokesman for him.

CUTTER:  If you are in the top 2 percent—if you are in the top 2 percent of wealthy Americans, top 2 percent, then your tax rate is going to go back to where it was in the 1990s. 

MATTHEWS:  OK. 

CUTTER:  You know, things were pretty good in the 1990s.  We were still—we had record economic...

(CROSSTALK)

MATTHEWS:  I‘m looking at the numbers.

CUTTER:  ... growth, the largest economic expansion, 20 million new jobs.

MATTHEWS:  I have been bragging about your numbers here all night here. 

Yes.  OK.  Everybody out there, make sure you‘re not in the top 2 percent. 

CUTTER:  So, I think that...

I‘m not—what is the top 2 percent, anyway?  What is the top two? 

How much is that a year...

CUTTER:  Over $250,000. 

MATTHEWS:  ... that makes you safe from an Obama tax increase? 

OK, $250,000.  So if you make under $250,000, you‘re safe.

CUTTER:  But, overall, Chris, the one—the one last point I want to make on this...

MATTHEWS:  Yes. 

CUTTER:  ... is that everybody will benefit from the tax plan of Barack Obama, overall, lower taxes for everybody. 

The John...

MATTHEWS:  OK. 

CUTTER:  The McCain campaign has one talking point, that Democrats are going to raise taxes.  When you get them off that talking point, they have no place else to go.  And when you look at...

(CROSSTALK)

CUTTER:  ... really look at...

MATTHEWS:  Well, let me tell you, that talking point has given them half the members of Congress for the last 100 years.  It‘s a good talking point.  And they‘re not going to change it.

CUTTER:  Well, you know what?  Then—then talk—talk to Alan Greenspan.  Greenspan said two important things over the past couple of days. 

MATTHEWS:  OK. 

CUTTER:  One, this is a—the most incredible financial crisis in a generation.

MATTHEWS:  OK, we have to go.  I‘m sorry.  We can‘t quote Alan Greenspan here.

CUTTER:  And, two, John McCain‘s economic plan is not going to work.

MATTHEWS:  Hey, thank you, Stephanie, for coming on and putting up with this. 

(LAUGHTER)

MATTHEWS:  It‘s a hot day.  It‘s a terrible day for the market.

Up next:  Does it get any better than the great Tina Fey?  We‘re going to show you her Sarah Palin.  It‘s almost impossible not to tell her voice apart from Governor Palin‘s.  She has figured out that Alaskan accent.  It is so good. 

In case you missed “Saturday Night Live,” watch this.

(BEGIN VIDEO CLIP, “SATURDAY NIGHT LIVE”)   

(LAUGHTER)

AMY POEHLER, ACTRESS:  I believe that diplomacy should be the cornerstone of any foreign policy. 

TINA FEY, ACTRESS: And I can see Russia from my house. 

(LAUGHTER)

(CHEERING AND APPLAUSE) 

(END VIDEO CLIP)

(COMMERCIAL BREAK)

MATTHEWS:  Back to HARDBALL. 

And time for the “Sideshow.”  I thought they looked alike.  This weekend, “Saturday Night Live” came flying out through the gate with a cold open featuring Tina Fey as—we all guessed it—Governor Sarah Palin. 

(BEGIN VIDEO CLIP)

FEY:  You know, Hillary and I don‘t agree on everything. 

POEHLER:  Anything. 

(LAUGHTER)

POEHLER:  I believe that diplomacy should be the cornerstone of any foreign policy. 

FEY:  And I can see Russia from my house. 

(LAUGHTER)

(CHEERING AND APPLAUSE) 

POEHLER:  I believe global warming is caused by man. 

FEY:  And I believe it‘s just God hugging us closer. 

(LAUGHTER)

(APPLAUSE)

POEHLER:  I don‘t agree with the Bush doctrine. 

FEY:  And I don‘t know what that is. 

(LAUGHTER)

(APPLAUSE)

(END VIDEO CLIP)

MATTHEWS:  A campaign aide says that Governor Palin hers found that skit quite funny. 

Now, for tonight‘s “Big Number.”  The fight for the White House is all shook up, and the online traders over the Ireland-based Intrade.com are taking notice.  Who is their new favorite?  John McCain, with a 52 percent shot to go all the way.  For now, at least, he‘s at 52 percent—tonight‘s “Big Number”—in the betting. 

Up next, the race to 2007 -- or, rather, the race to 270.  That‘s the electoral vote you need to win.  Which states are now going to McCain, and which are sticking with Obama?  We will check in with the NBC News political director himself, Chuck Todd, and his new Electoral College map, which shows how the election would go today.

You‘re watching HARDBALL, only on MSNBC. 

(COMMERCIAL BREAK)

JULIA BOORSTIN, CNBC CORRESPONDENT:  I‘m Julia Boorstin with your CNBC “Market Wrap.”

A major sell-off after Lehman Brothers filed for bankruptcy.  Merrill Lynch sold itself to Bank of America.  And insurance giant AIG sought emergency funding.

The Dow plunged 504 points, its biggest one-day percentage loss in over six years.  The S&P fell 58, and the Nasdaq dropped 81. 

But, despite the turmoil, the Fed is not expected to cut interest rates when it meets tomorrow. 

That‘s it from CNBC, first in business worldwide—back to HARDBALL. 

MATTHEWS:  Welcome back to HARDBALL. 

We have got a look now at the new presidential race as it shaped up this weekend in the key battleground states.  Joining me, the expert, the NBC News political director Chuck Todd with the latest shifts in that map.  Chuck, thank you.

CHUCK TODD, NBC NEWS POLITICAL DIRECTOR:  Chris, let‘s look at it.  Here‘s where we were last week: Obama 228, McCain 200.  Here are the changes, Florida was a state we shouldn‘t—needs to go back in the McCain column, lean McCain.  Palin bump we‘ve seen there.  All the polls showing five plus.  You see that moves him up to 227. 

A state that we moved in the Obama column is New Mexico.  It‘s probably a state we should have had in the Obama column a while ago.  But that moves his number to 233.  That‘s where we are.  It is dead even. 

We can play on the margins here, the Pacific Northwest, thanks to Sarah Palin, we‘ve seen suddenly Obama‘s lead went from double digits to single digits.  We‘re seeing the same thing happening in Minnesota, didn‘t see it in Iowa, but seeing it in other states. 

Meanwhile, you have McCain here, who was able to solidify some of these states, Georgia, now in a solid category, North Dakota, South Dakota, both solid red.  So the Palin effect has done this, Chris, it has solidified these red states.  Missouri, remember last week we moved it from toss-up to lean.  Indiana, it‘s like we‘re not quite there putting it in the solid category, but that seems like one.  North Carolina, we‘re still not solid, but it looks safer for McCain today than it did two weeks ago. 

Meanwhile, it‘s Obama state that‘s are just—he‘s still ahead.  He‘s not going to lose Oregon.  He‘s not going to lose Washington state.  But he‘s not going to win them by 15 points either. 

MATTHEWS:  Are we watching here a national trend downward for Barack and upward for McCain?  Or are we looking at regional developments here?

TODD:  What it is you‘re seeing upward for McCain.  You‘re not really seeing downward for Obama because, look, his numbers are still very strong out west.  If anything, our NBC/”Wall Street Journal” poll, his numbers stayed solid in the west.  That‘s why we went ahead and moved New Mexico.  Nevada of still a toss-up, and it‘s a state that you talk to Republicans.  They say this voter registration advantage that the Democrats have, they don‘t know if they can overcome it. 

Colorado, that‘s where Obama is today making multiple stops.  So be

curious to see if there‘s any Palin effect now that—already she‘s been

to Colorado twice.  We‘re seeing, by the way, that Colorado is turning into

if we‘re trying to figure out one of the three or four states that are going to be, you know, the famous Tim phrase, Florida, Florida, Florida or Ohio, Ohio, Ohio; Colorado is one of those, Colorado, Colorado, Colorado. 

MATTHEWS:  Is it possible—it‘s all new here—that the Obama people know something we don‘t know, that they‘re huge financial advantages, they‘re not constrained by federal spending limits.  They‘ve got their own money.  They‘ve just raised that 66 million this month.  They‘ve got this incredible registration drive, this get out the vote campaign.  They‘ve got like 300 people in Ohio.  I talked to Senator Glenn the other day, 300 people, and usually there‘s 30 people in those kind of states, paid field workers.  Can they generate a surprising turnout that will throw these numbers off? 

It will throw off all the polling we‘ve ever done? 

TODD:  Two states that I would be concerned about, as someone just analyzing these things, as far on the Obama side, where we could be not measuring Obama gains, and that is in Ohio and Virginia.  Everything you‘re hearing, the registration numbers went through roof in both of those places.  So the question is, are pollsters using census data, using other ways, are they measuring, are they getting the new voters involved?  We‘re talking hundreds of thousands of new registrants, not just tens of thousands. 

Because of that, those would be two states I‘d be concerned about on the Obama side of the ledger, where he could be under-polling.  Let‘s go on the other side of that.  There are two states where I think that McCain could be under polling because of an undecided issue.  That is Wisconsin and Michigan.  Obama is sitting at that 45, 46, 47 margin in both states.  If these late deciders don‘t break for him, if he doesn‘t even split them, and it‘s unlikely he‘s going to split them.  I think he only gets three in 10; that could be where this hidden race factor could be hiding.  It‘s Wisconsin and Michigan that you could see where McCain could pull surprises, where this blue collar, the white working class voter who‘s sitting there voting Democrat for Senate, voting Democrat for Congress, voting Democrat for state legislature, may not be ready to pull the lever for Obama. 

MATTHEWS:  Do we know if the Clintons can pull him over?  Do we know if it would work?  I keep assuming it would.  If they went there to Michigan, Ohio, Pennsylvania and just devoted the last month of this campaign to vigorous campaigning for this guy, threw everything they had into it?  Would that work or would that simply remind people they wish they had voted for Hillary? 

TODD:  Why do it with the Clintons?  Why aren‘t Obama and Biden—we show the power of McCain and Palin campaigning together.  Why isn‘t Obama using Biden to campaign with him?  If one of these issues is that he‘s struggling to cross this color barrier with folks in places like Wisconsin or McComb County, Michigan, or in the U of Ohio, why isn‘t he using Biden as his validator on the stump with them?  I know, on the one hand, the campaign likes to split these guys up, because they want to touch as many had states as possible. 

MATTHEWS:  Great question.  Why don‘t they run as buddy film?  By the way, we‘re used to buddy films.  We love them.  We love when two guys get together and campaign together.  It‘s Butch Cassidy stuff.  Thank you. 

TODD:  We haven‘t seen them together. 

MATTHEWS:  But the other side is running as a couple very effectively. 

TODD:  They‘re doing a tandem. 

MATTHEWS:  They‘re running as a duet.  Thanks very much, Chuck Todd, the expert. 

Up next, the politics fix.  How will the turmoil on Wall Street affect this race potentially.  It seems to me economics drives politics.  We‘ll see if it does this year.  And the economics are working for the Democrats.  Unfortunately, for the country right now, bad news is good news for the Dems and bad news for the Republicans.  Who‘s got the right plan to exploit this thing, in other words, win this election?  This is HARDBALL, only on MSNBC. 

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL and the politics fix.  Lots of politics today because of lots of economic news.  Our round table tonight, MSNBC political analyst Patrick J. Buchanan and Chrystia Freeland of the “Financial Times.” 

Pat, I want to start with you.  You‘ve been in campaigns.  The economy; the economy, stupid.  Are you better off than you were four years ago?  It‘s The bread and butter of American politics.  And yet, I haven‘t heard Barack Obama come through with a right cross, a hay maker and say, you guys blew it. 

PAT BUCHANAN, MSNBC POLITICAL ANALYST:  We just 500 billion dollars today, the American people did, 500 billion on the market.  Naturally, this should go to the Democrats, because the Republicans are in, except for two problems, Chris.  One is they look at Barack Obama and say, is a community organizer the guy to handle this.  Secondly, he has to get off that, I‘m going to increase your capital gains taxes.  We‘re going to raise taxes.  Nobody raises taxes at a time like this. 

MATTHEW:  Yes, I think that‘s the problem.  Let me go to Chrystia with the “Financial Times.”  You know economics and politics Chrystia.  They come together when times are bad.  In terms of journalism, bad news is big news.  We‘ve got big news today and tomorrow, 500 point drop.  It may get worse.  Why isn‘t this moving the electoral map? 

CHRYSTIA FREELAND, “THE FINANCIAL TIMES”:  Well, I think maybe the events over the weekend and today could finally be enough for the Wall Street crisis to become main street politics.  I think part of the problem has been that until today, the problem seemed a little esoteric to the ordinary American voter.  These are institutions that people didn‘t have a lot of daily could not tack with.  Lehman, Bear Stearns.  It was about a credit crunch that seemed to be affecting Wall Street bankers.  How many ordinary Americans have a lot of deep emotional sympathy for that particular breed.

But I think when we see Merrill Lynch, which is a really historic American institution that‘s on a lot of main streets, having to put its hands up and say, please buy us, Bank of America; that makes clear to people this is a Wall Street crisis that is really reshaping the country. 

MATTHEW:  Back in the campaign of lore, the ‘60 campaign, Dick Nixon, a million jobs lost in the lest three months of the general election, right in front of him.  And you know a million votes right in front of you.  Right now, we have a higher unemployment rate than it was back then.  It doesn‘t seem to bite as much; 6.1 percent.  It is spiking.  It‘s gone up from what it was, 4.2 percent when this crowd came in. 

How come it is not biting people?  Why aren‘t they saying, yow, I don‘t like this crowd.  I‘m voting Democrat?

(CROSS TALK)

MATTHEW:  Let Pat, because he was there, Chrystia.  I want to go to a guy who was there in ‘60. 

BUCHANAN:  It‘s for the same reason—look, 80 percent say we‘re on the wrong course.  Bush is at 30 percent.  Why is McCain moving into the lead?  It‘s because the campaign, Chris, is about Barack Obama.  A generic Democrat now who is a good campaigner. 

(CROSS TALK)

BUCHANAN:  A Hubert Humphrey would win.  Look at Carville in 1992.  We tried to get him off that on to the cultural social issues where we could beat him.  And Carville says it is the economy.  Stay with it.  Do not let him drag us off it. 

MATTHEW:  It‘s what Reagan did in ‘80, by the way here, just to flip the deck here.  Reagan in ‘80 kept saying, are you better off than you were four years ago?  My dad called me up and said, that‘s a great question. 

BUCHANAN:  Sure.  You know, we had 21 percent interest rates, 13 percent inflation, seven percent unemployment. 

MATTHEW:  Do you want a misery index?  The unemployment has gone from 4.2 to 6.1.  The surplus of 281 has gone to a deficit of 357.  The national debt has gone from five to ten.  Gas prices have gone from 1.5 to 4 dollars.  Look at everything, it‘s has gotten worse.  We‘ll be back with the round table.  The numbers talk.  You‘re watching HARDBALL.

(COMMERCIAL BREAK)

MATTHEW:  We‘re back with the round table and more of the politics fix.  Chrystia, you first this time.  We have a presidential debate coming up the Friday after next.  If tradition holds, the polling will begin to freeze now.  People tend to wait for that first one-on-one encounter.  Are we going to see—I know it is supposedly about foreign policy.  I can‘t believe that they‘re going to resist talking about the economy.  How does this thing look to you as a fight coming up? 

FREELAND:  I think you‘re absolutely right.  I think, particularly for Barack Obama, that debate could be his opportunity to frame his economic message in a succinct way that gets across to voters.  I think in an earlier segment, Pat was absolutely right to say the problem for the Democrats is they haven‘t found a clear, simple way of getting across their economic message. 

You‘ll remember, Chris, that several weeks ago, Barack Obama had an economic summit for some of the top CEOs and economic thinkers.  One of the people who was there said to me that he asked Senator Obama during that sum, OK, what is your three-sentence economic message?  And he talked for five minutes.  I think that‘s the problem.  They need some pithy economic one liners.  I think they need to start by saying the Wall Street meltdown is the fault of the Bush administration. 

BUCHANAN:  I think Chris that this is going to be Lamada Robinson (ph), if it goes foreign policy. 

MATTHEW:  Sugar Ray Robinson, who won that fight? 

BUCHANAN:  I think Lamada won.  Robinson never did win the light heavyweight championship. 

MATTHEW:  I was a Bubba Olson fan.  I don‘t know.

BUCHANAN:  He was a great one.  Took out Gavel (ph), didn‘t he.  What I‘m saying is, what McCain will do if it is foreign policy or economic—especially foreign policy, he will crowd him and jam him and punch him.  He will be assertive and tough, like he was at Rick Warren.  And can Obama handle that kind of battle on a stage, because McCain won that thing just by being assertive.  What he said—he would say, look, that guy, at least you know where he stands.  He thinks he knows what he‘s talking about.  He‘s got humor and toughness.

And Obama is too much of a dilettante up there.  That‘s what I‘m going to be looking at in that first debate, if they don‘t get on the economics.  Even on the economics—

MATTHEW:  Every candidate for president in our lifetime has had a very succinct message if he won the presidency.  Get this country moving again, Jack Kennedy.  It‘s the economy, stupid.  Are you better off than you were four years ago.  I can‘t think of the line from Obama yet.  Do you think of it?  Chrystia?   

FREELAND:  They broke it, I‘ll fix it? 

BUCHANAN:  We can‘t stand four more years of what we had the last eight years. 

MATTHEW:  Do you feel like four more years of this?  That‘s what I‘d four more years of this? 

(CROSS TALK)

MATTHEW:  I would go to the number.  I would read the numbers every night.  Every time the president—the senator from Arizona spoke, I would say, let me read those number to you, John McCain.  You have a tough act to defend here and you have to defend it, because you‘re the Republican candidate.  That‘s why you‘re standing here.  You have unemployment rate that‘s spiking.  You‘ve got a debt that‘s growing.  You‘ve got a surplus that has disappeared into a deficit.  And you‘ve got gas prices at four bucks. 

Your side has blown it.  Don‘t ask for four more years.  Anyway, Pat Buchanan, Chrystia Freeland.  By the way, I think we do it better here than they do.  Join us again tomorrow night—Chrystia, thank you.  You do too. 

at 5:00 and 7:00 Eastern.  More on HARDBALL tomorrow night.  Right now, it is time for RACE FOR THE WHITE HOUSE with David Gregory.

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