updated 9/16/2008 6:48:02 PM ET 2008-09-16T22:48:02

Guests: John Harwood, Susan Molinari, Carly Fiorina, Eugene Robinson, Bill Richardson, David Wolfe, Michael Gerson

DAVID GREGORY, MSNBC NEWS ANCHOR:  Tonight, financial crisis on Wall Street.  What it mean for voter in this campaign.  Are the candidates providing the answers for what ails this economy? 

(BEGIN VIDEO CLIP)     

GREGORY:  The message out of both campaigns was clear.  No government bailout.  But, that‘s where the similarities ended.  McCain blamed poor regulation.  Obama blamed President Bush.  This hour, I‘ll go one-on-one with McCain economic advisor Carly Fiorina.  What she believes brought Wall Street to its knees and how the McCain administration might have been prevented it. 

And later, Obama supporter, Bill Richardson of New Mexico.  Obama is losing ground in the polls and on the map.  How can he get the upper hand over McCain-Palin? 

Plus, Governor Palin has energized seventh Christians and brought religion back into the race.  Rabbi David Wolfe and former presidential speech writer, Michael Gerson talk about the impact faith is playing in the race for the White House. 

(END VIDEO CLIP)

GREGORY:  Fifty days to go in the race for the White House.  Welcome to the program, I‘m David Gregory.  We start with the headlines.  Mine tonight, Wall Street‘s freefall today.  What‘s happening to America‘s leading investment banks could hurt your bank account, your stock portfolio, your ability to borrow money, the value of your home and on and on.  The Dow dropped more than 504 points today, closing below 11,000.  It is the biggest one day drop since the markets reopened after 9/11 in 2001. 

Today‘s extraordinary events on Wall Street threw the McCain and Obama campaigns into emergency response mode.  McCain praising the fed for refusing to throw taxpayer money at corporate problems and Obama criticizing Republican economic policies for the collapse. 

It is a reality check for a presidential race that spent much of the last week in the mud, trading barbs about computer illiteracy and lipstick.  The financial crisis presents opportunities for both candidates.  McCain‘s call for tougher regulation aligns him with the ordinary Americans and against big business and plays into his reputation as a reformer. 

For Obama, a chance to bring this campaign back to President Bush and make the election a referendum on the Bush years, not his own readiness to be president.  Treasury Secretary Henry Paulson briefed both senators McCain and Obama on the markets, today.  On the trail, both candidates expressed strong opinions about what caused the problems and what the solution should be. 

(BEGIN VIDEO CLIP)

JOHN MCCAIN ®, PRESIDENTIAL CANDIDATE:  The time has come and gone that the tax payer should be views as the solution to the problems that are not of their making and there too much debt and there‘s not enough regulation and not enough oversight.  And cronyism and the old boy network is going to come to a halt. 

BARACK OBAMA (D), PRESIDENTIAL CANDIDATE:  For eight years, we‘ve had policies that have shredded consumer, that have loosened oversight and regulation and encouraged outside bonuses to CEOs while ignoring middle class Americans.  The result is the most serious financial crisis since the Great Depression. 

(END VIDEO CLIP)

GREGORY:  All right.  John Harwood, CNBC political correspondent, political writer for the “New York Times,” bring this home to our viewers, a financial crisis on Wall Street that affects all of us.  How? 

JOHN HARWOOD, CNBC POLITICAL CORRESPONDENT:  Well, the way it affects all of us is that everybody has got investments, almost everybody, in 401(k)s or stocks of some kind and so when you see the market lose 500 points like it did today, that turbulence, that fear affects them. 

Secondly, the credit crisis that gets worse when you see major firms imploding makes it more difficult for people to borrow money to buy a house, buy a car, to pay through their credit cards.  So, all of those things ripple out into the main economy and make it more difficult for the economy to get going again. 

GREGORY:  We measure recession by the level of growth of the economy from quarter to quarter.  Whether we‘re in a recession or not probably doesn‘t matter to most people who are struggling, whether it‘s the gas pump or with their home value or college tuition.  But, the reality is that these campaigns duel on the economy, is that people who are inside the economy, people who work in financial services, people who work at the banks, people who work in the mortgages industry, don‘t really have a firm sense of where the bottom is.  True? 

HARWOOD:  Well, exactly.  And if this action with Hank Paulson, the treasury secretary, drawing a line today, saying no more federal money, worried about the moral hazard, if this proves to create bottom and we begin to march out of it, that‘s going to be a piece of good news for everybody.  But the truth is, as you just said, they don‘t know.  And they thought six months ago that we might have already seen the bottom.  That‘s what makes this very dangerous.  And a moment that potentially could it alter course of this campaign.

GREGORY:  What is the test for these candidates?  What is the big question they have to answer, because I listened to them today and here‘s what I come away with:  They both want stricter regulation and they both think the Bush administration fell down on the job.  That doesn‘t create a lot of contrast for me as a voter. 

HARWOOD:  No, it doesn‘t.  But there is a greater opportunity here for Barack Obama if he can take advantage of it.  Remember, John McCain prospered in this race over the last couple of weeks when the agenda shifted more toward cultural issues with the selection of Sarah Palin, it‘s Barack Obama who wants this to get on the realm of big stakes, about changing the economy because he knows that it follows that the Democratic candidate, after eight years of a Republican president, stands to benefit. 

But, that only happens if Barack Obama can persuade people that he himself is competent to manage the economy.  He hasn‘t broken through on that issue as successfully as many Democrats think he should.  And that‘s the test for the next couple weeks of this moment with the 3:00 a.m.  phone call that Hillary Clinton used to talk about in the Democratic primaries. 

GREGORY:  All right John, stay where you are. 

Today‘s financial news comes as Team Obama is struggling to reclaim the narrative.  To take the upper has not in this campaign, respond to a week of attacks by the McCain campaign, today Team Obama put out a new ad called “Honor” claiming that Senator McCain is resorting to attacks because he has no answers on the economy.  Watch it. 

(BEGIN VIDEO CLIP)

MCCAIN:  I will not take the low road to the highest office in this land. 

ANNOUNCER:  What‘s happened to John McCain?  He‘s running the sleaziest ads ever, “truly vile,” “dishonest smears” that he repeats even after it‘s been exposed as a lie.  “Truth be damned.” A “disgraceful dishonorable campaign.”

After voting with Bush 90 percent of the time, purposing the same disastrous economic policies, it seems “deception” is all he has left. 

(END VIDEO CLIP)

GREGORY:  Susan Molinari, Republican strategist, former New York congresswoman.  Of course, Obama wants to make this a campaign about character.  He wants to make this a referendum, at some level, on McCain‘s character.  True? 

SUSAN MOLINARI, REPUBLICAN STRATEGIST:  Well, I think certainly what they‘re trying to do is push back on what has been a very aggressive few weeks on behalf of the McCain campaign starting from the celebrity ads, up until today.  And to a very large extent, Barack Obama, I think, showing sort of the—what‘s the word I‘m trying to think of?  Too much confidence in the way he was moving, didn‘t respond to any of these ads. 

Now all of a sudden, we‘re waking up, finding out, that the numbers are tied to the Electoral College is tight, that the generics even for the Republicans are three points down.  I mean, these are very damaging numbers. 

An NBC “Wall Street Journal” poll that was released last week, which should be very concerning, tying into you conversation with John Harwood, that the overwhelming number of people in this country think John McCain is ready to lead and more prepared and Barack Obama really hasn‘t broken 20 percent.  These can be very dangerous numbers, because to your point, even if this economy continues to trend downward and he tries to place the blame on President Bush, he has a very steep hill to climb to show that he can be prepared to lead us out of this. 

GREGORY:  All right.  Part of the Team Obama strategy, of course, reclaim the narrative, includes putting Joe Biden on the attack.  That was his original role, it was originally fashioned.  Today he was in Michigan, key state for the Democrats and Republicans and Senator Biden said that McCain would be another four years of President Bush.  Listen. 

(BEGIN VIDEO CLIP)

JOE BIDEN  (D), VICE PRESIDENTIAL CANDIDATE:  Just as George Herbert Walker Bush was nicknamed Bush 41, and his son was nicknamed Bush 43, John McCain could easily become known as Bush 44.  That‘s why John McCain could say with a straight face as recently as this morning, and this is a quote: 

“The fundamentals of the economy are strong.”

(END VIDEO CLIP)

GREGORY:  Gene Robinson, MSNBC political analyst, columnist and associated editor for the “Washington Post.” You get some idea here in how forceful this campaign wants to be by getting back to this comparison with George W Bush.  Is this really the prime target when they think about the voters they need to reach? 

EUGENE ROBINSON, WASHINGTON POST:  Oh, I think it is, actually.  I think to the extent to which Obama is able to tie McCain to Bush, clearly, Obama gains.  But, you know, as Biden just did, I mean, I frankly think the Obama campaign would be guilty of malpractice if they ever let voters forget that John McCain said “the fundamentals of the economy are strong.” I think most Americans don‘t believe that, that‘s not the experience that they‘re having and I think it creates an opening for Obama to exploit if he can present an alternative vision of the economy in simple, straightforward terms, that people can understand and that people can cling to. 

GREGORY:  Yeah, but here‘s a problem, John Harwood, just the way the debate was framed, today.  If you‘re a Democrat in this race, you want to show that you have empathy, you have energy, that you know people are hurting, you understand the complexities of the financial crisis.  I agree, there is a lot of room for Obama to seize now.  But, what McCain was able to gram was this reform mantle.  If you focus on this financial crisis being in a large sense of lack of regulation, may be though to understand, that‘s a prime argument.

HARWOOD:  Well, it is and you know, I wrote about this subject in the “New York Times” today, David.  The idea that there is actually some risk associated with the Obama campaign staking their campaign on linking McCain to Bush for this reason.  John McCain ran against George Bush in the 2000 primaries, there is some lingering memory of that.  And if John McCain, now that he‘s got cover from Sarah Palin on the right, decides to run more aggressively against George W. Bush, whether on the financial meltdown or on other issues, he might be able to get some traction with it. 

GREGORY:  He can do it.  He can do it.  Got to take a break, here.  Coming up next, McCain today called for greater regulation, as we‘ve just been talking about, on Wall Street, but what specifically would a McCain administration do to prevent another firm from going bust?  I go one-on-one with McCain‘s senior economic advisor, Carly Fiorina, when RACE FOR THE WHITE HOUSE returns.

(COMMERCIAL BREAK)

GREGORY:  Up next, how did John McCain‘s economic policies differ from that of President Bush?  I‘m going to go one-on-one with senior McCain economic advisor on the economy, Carly Fiorina, former CEO of Hewlett Packard.  the RACE will be back right after this.

(COMMERCIAL BREAK)

GREGORY:  Back now on RACE FOR THE WHITE HOUSE, the crisis on Wall Street has come front and center on the campaign trail.  Joining me now to go one-on-one is former Hewlett Packard CEO and senior economic adviser to Senator McCain, Carly Fiorina. 

Miss Fiorina, welcome. 

CARLY FIORINA, MCCAIN SR ECONOMIC ADVISOR:  Nice to be with you. 

Thanks for having me. 

GREGORY:  Senator McCain said today that “the fundamentals of the economy are strong.” What did he mean? 

FIORINA:  Well, you know, if you play the whole thing, instead of just the sound bite that the Obama campaign wants you to hear, he also said the economy is in crisis, he talked about the fact that this is a unprecedented occurrence on Wall Street and that Americans are worried about staying in their homes and keeping their jobs and paying for their food and fuel, but he also did say... 

GREGORY:  Well I understand that and we‘re actually going to play the whole sound bite.  But, what did he mean when he said the fundamentals are strong? 

FIORINA:  What he meant was that the fundamentals of the, what the American workers produce.  American workers remain the most productive in the world, the most innovative in the world, the most entrepreneurial in the world.  This is not the fault of the foundation of our economy, which is American workers and American families.  It is the fault of Wall Street‘s combination of lack of transparency and greed; it is the fault of regulators who didn‘t do their job in Washington and he called for fundamental reform.  And it is the job as well, or the fault as well of Congress who let Fannie Mae and Freddie Mac get totally out of control. 

GREGORY:  All right, I want to get to that.  But, is he suggesting that there is not anything to be concerned about for average Americans? 

FIORINA:  No, of course he‘s not—of course he‘s not suggesting that.  Which is why he began by saying, we‘re in a crisis mode and saying that he would put, as he has said, by the way, for the last eight months, that he would put getting the economy growing again as his highest priority, creating jobs as his highest priority.  And way back in February, he called for regulatory reform and improved and increased oversight on Wall Street and improved transparency in Wall Street. 

GREGORY:  Right.  Let‘s—I want to talk to you specifically about that, but first let me just, for the record be clear, how does he feel about the bailout, thus far, of Bear Stearns, the help for JPMorgan and Fannie Mae and Freddie Mac?  Does he support what the government‘s done? 

FIORINA:  Well, he has said that he has supported what the government has done, thus far.  He also supported the fact that the taxpayers didn‘t step to the plate for Lehman Brothers, today.  Because Lehman Brothers had a different set of tools and more time to deal with their house.  But he did say, the day Fannie and Freddie were announced, he said it is critically important that we reform Fannie and Freddie, we make them smaller, we make them more responsive, ultimately we make them go away.  And he also said that...

GREGORY:  But the point is he supported the federal bailout which would cost taxpayers a lot of money.  I mean, that is his position. 

FIORINA:  Well, he supported it because he felt that we need to step and prevent systemic risk.  Bears Stearns happened...

GREGORY:  Yeah, go ahead finish your thought.  I‘m sorry.

FIORINA:  He supported it.  But, he supported it by immediately then saying in the case of Fannie and Freddie, we can‘t just let it sit there, we now have to reform them, shrink them, ultimately privatize them. 

GREGORY:  Let‘s talk more specifically about what you brought up a couple times.  This is Senator McCain today talking about the difficulties in the economy.  Listen.

(BEGIN VIDEO CLIP)

MCCAIN:  These are very, very difficult time.  And I promise you, we will never put America in this position again.  We will clean up Wall Street, we will reform government.  And this is a failure. 

(END VIDEO CLIP)

GREGORY:  Who specifically, in the regulatory side, put America in this place? 

FIORINA:  Well, I think there are a couple things.  First, you have a regulatory regime that is very old, 60 plus years, it‘s a patchwork.  I would say, I would argue that the SEC, in particular, bears a heavy responsibility, here, both in the short-term for not dealing with short sellers, but also in the longer term for not demanding more transparency from Wall Street.  So yes, Washington has played a role.  The oversight of Fannie and Freddie has been woefully inadequate over the years.  We‘ve seen a series of frauds and abuses coming out of Fannie and Freddie.  And I would say, more importantly, John McCain would say, that Wall Street bears a large share of the burden, as well. 

GREGORY:  Let‘s talk about Lehman Brothers.  Let‘s talk about subprime lending and Lehman Brothers and the fact that these banks were heavily leveraged that they were offering products to people who didn‘t—really couldn‘t afford them.  They were securitizing loans that left them heavily exposed.  So, let‘s talk about what a McCain administration would do.  Does Senator McCain believe there ought to be capital requirements for these banks?  So, in other words, excess cash to keep on hand in case the market hits you like it has been hitting now? 

FIORINA:  Yes.  He believes these institutions were over levered, but he believes, very importantly, that they were insufficiently transparent and what he means by that is you had all those complex financial instruments you just described, but a whole bunch of them were off balance sheet.  So, you had, not only was risk poorly priced, but people couldn‘t see it in all cases, they couldn‘t understand it in all cases and then on top of that, you had financial products that were pushed onto people, in some cases, who shouldn‘t ever have agreed to sign up for them. 

GREGORY:  All right, but let me just—I want to try to understand the consistency and I the argument here, which is that John McCain believes in free markets and market forces and yet he‘s talking about, he believes in a federal taxpayer bailout of some of these companies and he believes on the kind of strict regulation that amounts to a bad bet by these companies when the market slams them by people defaulting on mortgages and by the mortgage market collapsing.  So, is it inconsistent to say that he believes in more regulation and federal bailout and still talk about belief in free markets?

FIORINA:  No, I don‘t think so.  But, I think you are confusing John McCain‘s position by painting it as hands-off, free market laissez-faire.  I think that has been perhaps true of the Bush administration in the last few years in term of the wild, Wild West in terms of no regulation, but it is definitely not what John McCain believes. 

I think the better model for John McCain is Teddy Roosevelt who believed that there was a robust role for government.  And John McCain has consistently believed there is a role for government.  A role for government is to make sure that institutions are accountable and transparent, but he also has said that Fannie and Freddie, frankly, shouldn‘t exist as government entities, that the role to support the mortgage market is not something that the federal government and the American taxpayer should guarantee. 

GREGORY:  But just finally, he talked about more transparency, but I just want to be clear about this, does Senator McCain believe there ought to be capital requirements for these banks, going forward? 

FIORINA:  Yes.  But, I think what you‘re going to find is there will be a lot of agreement that one of the sources of this problem was overleveraged organizations, and insufficient equity or capital.  And if you go back and look at a speech John McCain gave way back in February, he said that he thought it was important, not only for the individual homeowner to have a better asset base, or more equity in their home, but that it was important as well for financial institutions to have a solid foundation of capital, assets, equity. 

GREGORY:  All right, a lot more on this to come.  Carly Fiorina, thanks very much for you views.

FIORINA:  Thanks David.

GREGORY:  We‘ll be right back. 

And coming up next, Obama‘s record-setting fundraising month.  How is his war chest now compared to McCain‘s?  When the RACE returns, right after this.

(COMMERCIAL BREAK)

GREGORY:  We are back now with a look at what‘s on the RACE‘s radar.  Today, it‘s all about the money.  Senator Obama‘s campaign raised $66 million in August, more than any presidential campaign has ever raised in a one-month period.  Obama also saw 500,000 new contributors. 

Senator McCain helped by the addition of Sarah Palin to the ticket raised $47 million in August.  McCain also received $85 million in public financing when he accepted his party‘s bid.  Obama turned all of that public financing down. 

To our segment here, coming next, the new battleground map.  Where is Governor Sarah Palin helping McCain gain ground?  And will Palin‘s impact on the ticket have long-lasting effects?  Morning Joe is here, Joe Scarborough and the “Washington Post‘s” Eugene Robinson will join me. 

Later on, I go one-on-one with Obama supporter, governor of New Mexico, Bill Richardson, so stay tuned, the back half of RACE FOR THE WHITE HOUSE after this break. 

(COMMERCIAL BREAK)

GREGORY:  Back for the back half now on RACE FOR THE WHITE HOUSE.  I‘m David Gregory, happy to have you here.  The latest numbers show the race is tightening up between these candidates.  Governor Sarah Palin‘s entrance into the race has energized the Republican base.  We‘ve talked about that.  How much of the McCain bounce is due to Governor Palin.  Will they be able to keep the momentum going all the way to November. 

Joining me from the war room, two guests; Joe Scarborough, host of MSNBC‘s “MORNING JOE,” working the evening shift for us tonight, and MSNBC political analyst Eugene Robinson.  Gene, also a columnist and associated editor for the “Washington Post.”  Joe, thanks for being here, first of all.  Let me show you a couple polls out of the Midwest that are interesting.  The “Minnesota Star Tribune” poll, Obama 45, McCain 45.  A dead heat there in a state that I don‘t think Republicans would really think that McCain is going to be very competitive in. 

And then you look at Iowa.  The “Des Moines Register” poll has Obama pretty handsomely up there, 12 points.  That could be a key pick-up for Obama over the 2004 map.  How do you see the race rolling out right now particularly with the impact of Sarah Palin? 

JOE SCARBOROUGH, MSNBC ANCHOR:  As long as the Obama campaign, or the Obama supporters continue talking about Sarah Palin, that is a loss for Barack Obama, a win for John McCain.  If you look at the polls over the last four or five days, you do see Minnesota tightening up.  You see Ohio, Ohio, Ohio, actually breaking John McCain‘s way.  Three polls have come out since Friday.  All of them have McCain four or five points ahead.  Missouri seems to be going McCain‘s way four or five points.  Florida getting comfortably in the McCain camp. 

So it‘s a big win for McCain.  Like you said, Iowa breaks Obama‘s way.  Washington and Oregon breaking Obama‘s way.  What we‘re looking at here is the map breaking up into this red state, blue state divide.  And I don‘t think Barack Obama or John McCain are going to make significant gains over what their party did in 2004 or 2000. 

GREGORY:  Gene, let‘s look at the electoral map, this battleground map.  First look at it from last week and look who had the advantage there.  Obama over McCain in terms of likely and lean.  But what has changed as we look at the new map is that Florida now moves to McCain, according to our political unit, and New Mexico moves pretty comfortably to Obama.  If that‘s the case, you have a couple of factors.  One is that Obama has been spending a lot of money in Florida without much effect at this stage.  Are they going to keep the ground game operating there?  New Mexico is one of those states that if they can get New Mexico and Iowa into the Democratic column, he doesn‘t get to 270, but it gets him a lot closer. 

EUGENE ROBINSON, “THE WASHINGTON POST”:  It does get him closer.  The Obama people have always talked about redrawing the map and going after states that are not traditionally thought of as Democratic states.  You saw Colorado is a toss-up still.  Colorado has been thought of as a pretty solidly Republican state.  The Obama people think they can take it. 

But I do agree with Joe that the Obama people have to—something is not clicking quite the way they would like it with the message.  Maybe it is the economy after the events today and maybe they can hone an economic message that will start moving the needle.  You can‘t write off Ohio.  You can‘t do it. 

GREGORY:  Let‘s talk about Sarah Palin.  And today at a rally in Golden, Colorado, she played up the home town appeal, taking a pretty subtle swipe here at the media as well. 

(BEGIN VIDEO CLIP)

GOV. SARAH PALIN, VICE PRESIDENTIAL CANDIDATE:  It is no secret that I‘m not part of that Washington elite.  You probably got a little hint of that reading stories in the press lately.  I‘m just no a part of that. 

(END VIDEO CLIP)

GREGORY:  We‘ve seen this arch, Joe—we‘ve seen the arch of her support.  Where there has been kind of a personality around her.  She clearly connects.  She‘s energizing the Republican base.  Is there going to be a settling out for her, where she certainly is going to get more scrutiny, her record, her decision making, her knowledge of the world and domestic affairs, what kind decision maker she will be?  How does that affect her? 

SCARBOROUGH:  No.  No.  If Barack Obama is lucky, no.  I heard Paul Begala this past weekend saying, for god‘s sake, stop talking about Sarah Palin.  It doesn‘t matter whether you beat her or not.  And I was laughing listening to Sarah Palin.  If I were a Democrat like Begala or Carville, and knew how to win in swing states, I would consider jumping off a bridge right now.  Because this past weekend, the media has called Sarah Palin ignorant,  They‘ve—today, it was Eliza Dolittle.  Joe Biden was introduced at a rally with an Obama supporter calling her a bucket of fluff. 

They need to leave her alone.  What happens, David, is when they attack her, when they vilify her, it is the Obi Wan Kenobi theory in politics.  When they strike her down, when the mainstream media strikes her down, they only make her stronger.  Leave her alone.  There is so much to attack John McCain and the Republican party over these past eight years.  They need to leave her alone.  That‘s in the best interests of Barack Obama. 

GREGORY:  Gene, playing the home town girl has left Palin open for attacks on experience.  That‘s obviously happened.  An opening which Tina Fey and Amy Poehler they took full advantage of that on “S&L,” the premier last night.  Let‘s watch and I have a question about it. 

(BEGIN VIDEO CLIP)

TINA FEY, “SATURDAY NIGHT LIVE”:  You know, Hillary and I don‘t agree on everything. 

AMY POEHLER, “SATURDAY NIGHT LIVE”:  Anything. 

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

FEY:  And I can see Russia from my house. 

(END VIDEO CLIP)

GREGORY:  Quick comment, though, Gene, and I think Joe alludes to this; a lot of people, a lot of critics, a lot of Democrats comfort themselves thinking that George W. Bush wasn‘t experienced.  George W.  Bush, a lot of them felt, wasn‘t very bright.  Guess what, he won and he won again.  Is there a danger for the opposition here? 

ROBINSON:  Well, look, it would be insane for the Obama campaign to under-estimate that sort of, you know, like to have a beer that guy or gal factor in American politics, and to underestimate the kind of popular appeal that Sarah Palin has.  Look, the Democrats can‘t do anything about the fact that we in the elite media are going to be finding out about Sarah Palin and finding out about her record.  It is kind of our job.  So more stuff will come out. 

I do think that Joe was right though, that the Democrats really should focus on the economy.  After today, I would do that like a laser beam. 

SCARBOROUGH:  And David, if I could just briefly say, the Democrats make the same mistake.  Some of their activists make the same mistake.  Think about it, in 2000, George Bush was too dumb to be elected president.  In 2004, he was too dumb.  In 1980, go back and look at the skits about Ronald Reagan on “Saturday Night Live.”  And even that show, “Fridays” that was on for a while.  Reagan was too stupid to be in the White House.  He beat them. 

Then go all way back to Dwight Eisenhower in ‘52 and ‘56.  He was a dope, a guy that hobbled around on the golf course, was disconnected, didn‘t know what he was doing.  You‘re exactly right.  Democratic activists comfort themselves every four years saying their opponent is too dumb, too stupid, not sophisticated enough to be commander-in-chief.  And every four years, it seems, they lose.  It is a losing tactic. 

GREGORY:  All right, we‘ll leave it there.  Thanks very much, “MORNING JOE,” Joe Scarborough, Gene Robinson.  Going to take a break here.  Coming up next, new polls show McCain and Palin have virtually erased Obama‘s lead.  Does he have enough fight in him to win this election?  I go one-on-one with Obama supporter and New Mexico Governor Bill Richardson when THE RACE returns. 

(COMMERCIAL BREAK)

GREGORY:  Change, it is not just Barack Obama‘s campaign slogan.  These days, it also what we are seeing happening in the polls, as Senator McCain is wiping out Senator Obama‘s one-time double digit lead.  The two are now running neck in neck just 50 days from election day.  Can Senator Obama regain the upper hand?  If so, how is he going to do it?  Joining me now, Obama supporter, former presidential candidate himself and the Governor of New Mexico, Bill Richardson.  Governor, thanks for being here. 

GOV. BILL RICHARDSON (D), NEW MEXICO:  Thank you very much, David. 

GREGORY:  Let‘s start with the big headline of the day and what‘s happening on the economy.  There seems to be on the campaign trail, a fair amount of over-simplification on both sides in terms of what‘s causing the panic in the markets, what is happening to a lot of these investment banks and the mortgage crisis.  Is this really a matter of blaming the administration for the state of affairs that we‘re in? 

RICHARDSON:  Here‘s what is troubling: Senator McCain today has said that the fundamentals of the economy are strong.  You know, I was in Las Vegas yesterday, which was one of the fastest growing cities economically in the country, highest rate of foreclosures in the country.  Tourism down.  The economy down there, jobs—you know, the issue here—then you have Main Street hurting and now Wall Street is falling apart.  Yet, you have Senator McCain basically saying, whether you‘re blaming the Bush administration or not, the fundamentals of the economy are strong. 

The fundamentals in terms of job losses, in terms of unemployment, the highest in five years, in terms of the businesses going bankrupt, people losing their home, jobs going overseas.  I think that is the issue.  It‘s the perception that with Senator McCain, you‘re going to get four more years of the same policies. 

GREGORY:  Fair enough.  So specific question then.  If we look at what‘s happening on Wall Street right now, you have these investment banks who are too heavily leveraged.  They were loaning money to people who really shouldn‘t have got it in the first place in the sub prime loans, these interest-free loans.  And they were so heavily leveraged.  If anything like this happened, where the mortgage market went south, they didn‘t have anyway to recoup those losses.  They‘re out of money.  They can‘t get any more money. 

What specifically would Senator Obama do to more tightly regulate the banking industry to head off a problem like this? 

RICHARDSON:  Well, this is something that in his platform, he has said that we need a stronger oversight.  We need a stronger SEC, a Securities and Exchange Commission.  We need to find ways to tighten the laws, so you don‘t have these unprecedented foreclosures.  It is a matter of oversight.  The Republican view has been, David, that the economy and the fundamentals are fine, so let the market dictate what‘s happening. 

GREGORY:  Let‘s be clear.  Senator McCain is calling for the same oversight.  He is blaming Washington, saying that there was not adequate oversight by the SEC or the administration generally.  On this point, it seems that there is agreement. 

RICHARDSON:  Well, yes, but Senator McCain was in the Senate.  He‘s been there the last 26 years.  He‘s in a committee that could deal with this issue, the Senate Commerce Committee, I believe.  So what has he done on the economy?  What has he done to keep an eye on this imbalance on Wall Street?  What has he done to create new jobs?  All his solution is more tax cuts, continued deficit spending.  It is basically, more of the same of the Bush years. 

That‘s the difference between Obama and Senator McCain.  Obama would bring people together.  He would give a tax cut to 85 percent of the American people.  Yet, Senator McCain is saying that Obama is taxing the American people.  That -- 85 percent of all working families under the Obama plan get a tax cut. 

GREGORY:  Is it smart to call for tax cuts if you‘re Senator Obama?  Those tax credits for the middle class when we have a budget deficit that is going to approach over 400 billion dollars, when there may be a disinclination in Congress to vote for additional tax hike?  They may just vote for his tax cuts.  Is that unsound for the economy? 

RICHARDSON:  No.  Because what they are, David, is tax cuts for working people who will spend more.  Senator Obama wants to see a stimulus package also, 1,000 dollars per family.  But at the same time, he takes dramatic steps to rein in the deficit. 

Here‘s what Senator McCain wants to do.  More tax cuts for corporations.  More tax cuts for oil companies.  More individual tax cuts.  Make the Bush tax cuts permanent.  You heard Alan Greenspan saying, that‘s what is making the economy so high in deficit spending.  That‘s what is hurting our economy today. 

GREGORY:  Let me move on to talk of politics.  We‘ve seen a big switch here among women, which are very important for a Democrat who wants to beat a Republican where they don‘t do as well with white men or men generally.  They like to have that gender gap.  With Sarah Palin now on the ticket, governor of Alaska, that has now evened out.  Did Senator Obama make a mistake, in your judgment, not choosing Hillary Clinton? 

RICHARDSON:  No.  No.  I think Senator Biden, who gave a great speech today on the difference between Obama and McCain, is a sound choice because of his foreign policy background, which, with all due respect, Governor Palin does not have.  Senator Clinton is out campaigning very strongly for Senator Obama, as is a number of women Democratic governors, like Governors Napolitano, Sebelius.  I think you‘re going to see that gap come back to Senator Obama. 

My main concern is the west.  I believe that Nevada, New Mexico, Colorado are going to be the key to Senator Obama‘s victory.  The Hispanic vote is moving very much with Senator Obama. 

GREGORY:  So there‘s hand ringing in the Democratic party about how Senator Obama has been campaigning in recent weeks since Governor Palin joined the ticket.  He‘s trained some of his fire her rather than McCain.  There is a concern among Democrats that he is not fighting back hard enough.  Yet, for now the third or fourth time dating back to the primaries, the Obama campaign says OK, now we‘re going to start take a harder edge.  We‘re going to fight back.  Does he not have enough fight in him? 

RICHARDSON:  No, he has plenty of fight in him.  We have to remember, Senator Obama is a positive candidate.  He wants to bring people together, Republicans, independents.  He wants to bridge the differences we have as a country.  This country needs some healing.  His appeal is to stay positive, to stay above the fray, to bring people together. 

Here you have Senator McCain and the campaign that is full of distortions, misstatements.  The ads, almost every day, need responses because they‘re totally unfactual.  Now, what we need to do is, yes, respond.  But not take the negative side as the McCain campaign has done. 

GREGORY:  Really quick, how does New Mexico look?  It is going to be a key pick-off opportunity for Barack Obama. 

RICHARDSON:  It will be very close.  I predict that we will win New Mexico.  Senator Obama will be here Thursday.  The Hispanic northern part of the state will go with Obama, Albuquerque, the central part of the state, Narrowly  Obama.  The southern part, we cut our losses.  Our job is to keep the Republican base from coming out strong in New Mexico.  I believe we‘re going to win narrowly. 

GREGORY:  Finally, of course, the most important question he will face when he gets to New Mexico, green or red, right? 

RICHARDSON:  Green.  I‘ll tell him green chili is the most vote getting chill that he can pick. 

GREGORY:  Just wanted to remind people that I‘ve actually lived there

and covered news there.  Governor, always good to see you.  Thanks for

coming on

RICHARDSON:  Thank you. 

GREGORY:  Back live now, looking at pictures from a Change We Need rally at the Colorado State Fairgrounds in Pueblo, Colorado.  Part of the western swing for Barack Obama.  He is addressing the economy in a part of this country that will be so important this fall.  When THE RACE returns,  the intersection of religion and politics.  What role is faith playing in this race, when we return. 

(COMMERCIAL BREAK)

GREGORY:  Back now on RACE FOR THE WHITE HOUSE.  Separation of church and state; it may be the law, but in politics, a candidate‘s religious beliefs are certainly part of the debate.  To what extent does that matter to the voters?  Joining me now to discuss faith and the race is Michael Gerson, “Washington Post” columnist and author of “Heroic Conservatism.  Why Republicans Need to Embrace America‘s Ideals and Why They Deserve to Fail If They Don‘t,” which is now out in paper back, and Rabbi David Wolfe.  He is the rabbi of Sinai Temple in Los Angeles.  Rabbi Wolfe is also the of a brand new book, an important one, “Why Faith Matters.”  It hits book stores to tomorrow.  Welcome to both of you.

(CROSS TALK)

GREGORY:  Michael, let me start with you.  To what extent does it matter to voters that our candidates are people of faith?  In your political experience, does it matter differently?  Is it a different priority for conservatives versus liberals, Republicans, Democrats? 

MICHAEL GERSON, “THE WASHINGTON POST: If you look historically, it‘s really not a different priority.  You know, you look at Williams Jennings Bryant, who was a great Democratic leader, was also the most prominent evangelical in America.  Or Martin Luther king, who was certainly on the left side of American politics, very much informed by his faith.  But this has increasingly become true in the last few decades in the Republican party.  And we‘re seeing an election where both sides are trying to compete more for that vote, rather than exclude the religious vote.  I think that‘s been Obama‘s attempt. 

GREGORY:  Rabbi, we heard from Governor Sarah Palin last week—it came to light last week when she was talking about the war in Iraq, where her son is on his way to serve.  She described the war as a task from god.  Some people took exception to that and questioned whether it is appropriate to think of god being on our side or not.  Go ahead. 

RABBI DAVID WOLFE, SINAI TEMPLE, LOS ANGELES:  One of the thing that we‘ve discovered is that separation of church and state is not the same as the separation of a soul and state.  That is, every politician, every person is going to be informed by their beliefs.  You can‘t sever that link.  The difference is that whatever you believe, you have to defend it in terms that the whole polity can share.  I may think it is god‘s will, for example, to help hurricane victims.  But I have to make that case in terms of the expenditure of public money and public compassion and so on. 

So we shouldn‘t, I think, feel uncomfortable that politicians believe certain things, as long as they‘re able to frame the consequences of that belief in terms that everyone can debate about and decide about. 

GREGORY:  Michael, do you have an opinion about her expressing her faith that way?

GERSON:  Well, I mean, millions of people in churches and other religious communities every week pray that god will guide their leaders into the ways of justice and truth.  And, you know, I don‘t think there is any problem with that.  Franklin Roosevelt prayed for victory on D-Day in the address to the nation. 

I do have a little problem with that.  I think that it is wrong to kind of say that god is on America‘s side.  But it is a great American tradition to say that god is on the side of justice and the rights of the individual, and to pray that our leaders respect those basic beliefs, which often come in American history, you know, motivated by faith. 

GREGORY:  To both of you, the question of what is the distinction between talking about our faith publicly, and whether when politicians talk openly and express their faith, versus trying to impose their faith on Americans.  And I actually spoke to President Bush about this in January of this year in Jerusalem.  I sat down.  We talked about this.  This is a portion of the interview that ran on the Today program.  I asked him whether people misunderstood what his faith meant to him.  Whether it created a certain rigidity in his thinking?  Here is his response. 

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES:  Who aren‘t faith-filled people, who are suspicious of those who are, because I guess they believe that one, I may think I‘m better than them.  Or two, that somehow, you know, I don‘t make rational decisions from their perspective, but they‘re decisions based on some metaphysical presence.  I tell people that my is a personal journey, that it helps me find calm in the midst of the storm. 

(END VIDEO CLIP)

GREGORY:  Michael, you know the president well, obviously.  Where is the line between imposing one‘s faith as a leader and expressing it in a way that people can identify with?  

GERSON:  I think the line is pretty clear.  If you‘re talking about your beliefs about salvation or the way the church should be organized or the end of history, those thing don‘t have much public consequence.  In all of American history, and western history, your anthropology, your belief about human beings, their rights and destiny, has always had a public consequence.  It was the foundation of the abolition movement.  Many of those people were religious people.  They had a passionate commitment to individual rights and dignity.  It was the foundation of the Civil Rights Movement. 

You can‘t separate that belief, that belief in divinely given human rights and dignity from the progress of justice in American history.  And I don‘t think we should try. 

GREGORY:  Rabbi?  A quick comment? 

WOLFE:  Well, I think that‘s essentially true.  It all depends in what you believe god has sent you to do, and in what way god sends you to do those things.  A story that I always tell our children in religious school is about the kid who looks up at the heavens and says god, there‘s so much pain and anguish and suffering in this world, why don‘t you send help?  And god says I did send help.  I sent you.  If we can translate that into a sense of mobilization of public policy, because of the combination of humility and purpose, then our faith really matters. 

GREGORY:  We‘ll leave it there.  Rabbi David Wolfe in Los Angeles, thank you very much, and Michael Gerson as well.  That is going to do it for our program tonight.  I‘m David Gregory in Washington.  Thank you very much for watching.  Be back here tomorrow night, 6:00 Eastern on MSNBC.

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

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