updated 9/22/2008 4:25:37 PM ET 2008-09-22T20:25:37

Guest: Steve McMahon; Pat Buchanan; Richard Wolffe, Bob Shrum, Mike Murphy, David Broder

DAVID GREGORY, MSNBC NEWS ANCHOR:  Tonight, money meltdown.  Obama and McCain face their real big test to respond to a real crisis in real-time.  So, which candidate‘s stock is on the rise when it comes to leadership on the economy?  The RACE FOR THE WHITE HOUSE rolls on. 

Forty-six days to go in the RACE FOR THE WHITE HOUSE.  Welcome to the program on a Friday night, I‘m David Gregory.  My headline tonight: 

Emergency Response.  President Bush appeared before the nation today to announce a bold plan to rescue floundering financial institutions, but get this, that cost taxpayers hundreds of billions of dollars. 

(BEGIN VIDEO CLIP)

GEORGE W BUSH, PRESIDENT OF THE UNITED STATES:  American‘s economy is facing unprecedented challenges and we‘re responding with unprecedented action. 

(END VIDEO CLIP)

GREGORY:  As the Bush administration performed triage on the market meltdown, this afternoon the presidential candidates engaged in a battle of rapid response.  We‘re going right to NBC NEWS political director Chuck Todd. 

And Chuck, we‘re going to talk about their response in just a minute.  Big picture though, what‘s the political impact? 

CHUCK TODD, NBC NEWS POLITICAL DIRECTOR:  Well, look.  You‘ve seen both candidates trying to figure out how to get their footing all week long and they were very much in reactive mode.  I think the amazing thing, David, is we have lived the adage that a week is a lifetime in politics.  Think about where we were last Friday.  We were talking about how is Obama getting Palin off the front pages?  How can he get his footing back?  What‘s he going to do about this problem of women flocking to Palin.  How‘s, you know, the Palin/McCain events are looking like Obama events, you know, and all of a sudden, bang, Monday happens and every day, we‘re seeing the McCain folks, in particular, really struggling to find their footing on this issue. 

GREGORY:  And it‘s interesting, the president today is talking about the need to avoid partisanship on this issue.  That‘s frankly impossible in the middle of a heated presidential campaign.  So, I mentioned just a minute ago, we heard from both candidates.  Let‘s listen to Senator McCain and then we‘ll hear from Obama, as well.  Listen to Senator McCain.

(BEGIN VIDEO CLIP)

JOHN MCCAIN ®, PRESIDENTIAL CANDIDATE:  The crisis on Wall Street, my friends, started in the Washington culture of lobbying and influence pedaling and he was right square in the middle of it.  My friends, this is the problem in Washington, people like Senator Obama have been too busy gaming the system and haven‘t ever done a thing to actually challenge the system.  That‘s not country first, that‘s Obama first. 

(APPLAUSE)

BARACK OBAMA (D), PRESIDENTIAL CANDIDATE:  McCain gave a speech in which his big solution to this worldwide economic crisis was to blame me for it.  I think it is clear Senator McCain is a little panicked right now. 

(APPLAUSE)

At this point, he seems to be willing to say anything or do anything or change any position or violate any principle to try win this election and I‘ve got to say it‘s kind of sad to see. 

(END VIDEO CLIP)

GREGORY:  All right, so after the speechifying today, where‘s the debate going on this issue? 

TODD:  Well interesting, just look at that body language a minute, David.  You see Obama confident in his attacks going after McCain.  You saw McCain looking down, looking down immediately, it‘s almost as if realizing, I‘ve to hit this sound bite, I‘ve got to hit Obama this, I‘ve got to come back, so I think that‘s been the struggle. 

Look, a week from today, we have the first presidential debate.  I think you have the weekend deal that‘s going to be made between the administration and Congress.  And I think the thing that if I were McCain and Obama, I would be nervous about is, what if Congress holds up some deal, here?  What if it is the Democrats trying to poison pill?  What if it‘s the House conservatives going, wait a minute, how much government regulation are we adding to this thing? 

You know, sort of the guys who are sitting there going, why aren‘t we letting the free market work?  You know, you can see how that could of a sudden put McCain in a box if the Democrats aren‘t going along with this that could put Obama in a box.  So, I think both campaigns have to sit back now and watch this deal get cut between Paulson and Congress. 

GREGORY:  Yeah, and take note of the fact that they are not the principles in driving the outcome here, they‘re on the outside.  All right, Chuck, our political director, Chuck, thanks very much. 

TODD:  All right, David.

GREGORY:  I want to bring in the rest of the panel, right now.  MSNBC, Pat Buchanan, political analyst, Richard Wolffe, senior correspondent for “Newsweek,” also an MSNBC political analyst, also here on his birthday. 

Happy birthday, pal. 

RICHARD WOLFFE, NEWSWEEK SR CORRESPONDENT:  Thank you, David. 

GREGORY:  And political—and Steve McMahon, Democratic strategist. 

Welcome all.

Pat, let me just start with you.  There is going to be a philosophical debate here about what the government is actually doing.  And yet, this is what President Bush is saying everybody has to keep in mind.  Watch. 

(BEGIN VIDEO CLIP)

BUSH:  This is no time for partisanship.  We must join the move urgently need legislation as quickly as possible without adding controversial provisions that could delay action.  I‘ll work with Democrats and Republicans alike to steer our economy through these difficult times and get back to the path of long-term growth. 

(END VIDEO CLIP)

GREGORY:  And yet you know, Pat, both in the election, on the campaign trail, as well as in Congress, there‘s going to be a big debate about whether this is the wise thing for government to be doing.  To be intervening in the markets to the tune of hundreds of billions of dollars of taxpayers‘ money. 

PAT BUCHANAN, MSNBC POLITICAL ANALYST:  Well, it may be a philosophical debate, but I think it‘s going to be over very fast.  I don‘t think Congress is going to stand up in this hurricane.  The truth is the market has gained about $700 billion to $1 trillion in the last two days because of the Bush-Paulson bailout.  I think it‘s going to go through.  I do think this week was a tremendous week for Obama.  I mean, he was dealt four aces, if you will, McCain was wrong-footed on Monday with his Hoover-like statement, All the fundamentals in the economy are sound.  I think McCain is coming back somewhat, but I think, David, the real answer here is, I think both candidates are going to have to get behind this, as I think the Congress of the United States will, otherwise, if this thing is blocked somehow in Congress or stopped, I can see the market going down 1,000 point in a day. 

GREGORY:  Steve McMahon, what do you do if you‘re on the inside of a campaign, either Republican or Democrat and you realize you really can‘t drive this train, you are reacting to an event.  It‘s the biggest issue in this campaign, but it‘s unfolding in real-time right before you. 

STEVE MCMAHON, DEMOCRATIC STRATEGIST:  I think what you do is what Senator Obama did today, you basically get out of the way.  You say that this is a time for us to steady ourselves, it‘s not a time to panic, it‘s a time for leadership.  And in the context of a presidential campaign, it‘s probably inappropriate for a presidential candidate to offer a solution, and certainly inappropriate to do what John McCain did, which is to lecture his opponent after 26 years in Washington of doing nothing, except resisting responsible, reasonable regulation that might have prevented this from occurring. 

I think Senator Obama today demonstrated that he‘s ready to be president and Senator McCain today demonstrated again that he‘s a petulant, irritable grouch and he got it wrong four time this week, as Pat pointed out and the economy isn‘t as strong as he‘s admitted and he proves it again and again and again. 

GREGORY:  All right, Richard, let‘s listen to Senator Obama on the campaign trail today, trying—it‘s funny, President Bush said today:  the time to debate how we got here is not what we should be doing today.  We got to solve the problem.  Well, sorry, Mr.  President, but the candidates, that‘s what they want to do.  They want to debate how we got here and this is his take, today.  Watch.

(BEGIN VIDEO CLIP)

OBAMA:  We did not arrive at this crisis by some accident in history.  What led us to this point was years and years of a philosophy in Washington and on Wall Street that viewed even common sense regulation and oversight as unwise and unnecessary.  It shredded consumer protections, and loosened the rules of the road, CEOs and executives got reckless, lobbyists got what they wanted, and politicians in both parties looked the other way until it was too late. 

(END VIDEO CLIP)

GREGORY:  OK.  Here‘s my thing, Richard, as far as it goes, that may be sound analysis and by the way, there‘s not a lot of disagreement on the other side of the aisle here because John McCain is saying the same thing. 

But it doesn‘t seem like there‘s a lot of acknowledgment of the fact that this is a housing bubble.  Yeah, that they were lending money that they shouldn‘t have been lending money to people who shouldn‘t have qualified for it in the first place, but this was a bubble.  Is it all regulatory? 

WOLFFE:  Well, you don‘t have this kind of meltdown and the threat that it poses to the financial system just with the housing bubble.  What you‘ve obviously got are a number of errors, both the regulatory side of it, the kind of new derivative financial instruments that were issued around these fake housing loans, that were insecure housing loans, and now on top of that, you‘ve got credit agencies, risk agencies that were not doing their jobs. 

So, failure throughout the system is what leads you to a trillion dollar hole, which is what the federal government has just signed up to.  I think what was here in that the morning comparison between both candidates is yes, they tried to do that storytelling, how did we get into this mess, to show their expertise.  But the difference in tone is very strong when it came to the politics.  McCain really went after Obama this morning, Obama said, you know what?  I‘m not going to release my plan.  He actually sounded like President Bush, he said it was time for the parties to come together and he invited John McCain to do that.  Maybe disingenuous, maybe a ploy, but as a tone, much more, I think, trying to be presidential than what we saw from John McCain, which was campaigning mode. 

GREGORY:  Pat, is it hard for John McCain to try to thread the needle, here, to blame Wall Street, to say that this was government in action on one level, but the real villain are these corrupt guys on Wall Street who are just out for the money?  Can he do that?

BUCHANAN:  Well, he‘s doing it.  I mean, it‘s this populism he reverted to after the mistake of Monday, I don‘t know that it‘s playing out well.  We‘ve seen Obama gain something like seven points this week in the tracking polls.  And I think that‘s his best card, quite frankly, because this is Gordon Gekko capitalism, this isn‘t conservatism we‘ve had recently.  But, I think that‘s the card he‘s playing right now and go right down to the end of the game.  It is now a game again of where McCain is going to lose this election unless he can make Obama unacceptable, too risky, and it‘s going to go back to straight attacks on Obama... 

GREGORY:  There‘s another point here, Steve, too, which is just like when there‘s a heinous crime that‘s committed, there‘s a jury that‘s impaneled, somebody has to be held responsible for this.  So, for the American voter who‘s looking up today and saying, OK, I get it, I‘m being told it‘s going to cost hundred of billions of dollars of taxpayers‘ money to bail out Wall Street.  Who‘s going to have to pay for that?  I mean, who‘s going to be held responsible, is what I mean, pay for it literally? 

MCMAHON:  And I think Senator Obama today began to open that conversation.  You know, it was a bill that was written by John McCain‘s top economic adviser, then Senator Phil Gramm of Texas which blurred the lines in which these financial institutions could to these things.  I do think there is going to be a search for a villain and I think the search begins right now and I think this is a situation where the Republican brand of deregulation of keeping your hands off business, not regulating the financial markets, is actually going to hurt John McCain pretty significantly. 

I think President Bush, and I don‘t say this very often, you know, I think he came out today and he said the right thing and I think he is genuinely engage in the leading Congress to a solution that is going to occur quickly, as Oat points out, and I think it‘s going to occur on a nonpartisan basis and it has to occur.  But, it should include some relief for the homeowners and not just these people who made these bad investments and I hope that the Democrats will insist on that. 

GREGORY:  OK, got to take a break, here.  Interesting discussion.  Coming up next, we‘ll switch gears a little but.  She has been called the other side of Senator Obama‘s brain.  Obama confidante, senior adviser, Valerie Jarrett, joins me live here in Washington, coming up next. 

(COMMERCIAL BREAK)

      

GREGORY:  Coming up next, I go one-on-one with Valerie Jarrett, long-time friend of Barack and Michelle Obama and now a senior advisor to Obama‘s presidential campaign, when the race returns, right after this.

(COMMERCIAL BREAK)

GREGORY:  Senator Barack Obama has regained a slight lead in most of the national polls, but it‘s been a rough few weeks after the conventions.  Joining me now, one-on-one, Valerie Jarrett, senior adviser to the Obama campaign. 

And it‘s nice to see you here in Washington. 

VALERIE JARRETT, OBAMA SR ADVISOR:  It‘s a pleasure to be here.

GREGORY:  I made reference to the fact that in the national polls, he has now established that lead again, single digits, the economy is a big issue.  But, I don‘t have to tell you, after the conventions, you all were feeling very good, he came out with a lot of momentum, then the Palin pick, the race evened out, he got engaged in this back and forth with Sarah Palin, this issue of the lipstick on the pig all that got dragged into that.  And there was a lot of concern in the Democratic camp that he wasn‘t responding forcefully enough, that he seem kind of off message.  When all of that was going on, what did you tell him? 

JARRETT:  What I said to his is:  how are you feeling?  And he said: 

we‘re fine.  There‘s a long way until the election day and everyone needs to just calm down.  He reminded me that this time last year, he was down double digits in the national polls, same thing, everyone was feeling jittery.  And his message was what you would want from a president which is let‘s just take a deep breath and let‘s calm down and let‘s focus on the issues that are important to the American people, which is what he‘s been doing throughout the campaign. 

GREGORY:  So, what happened that would have evened up the race, do you think? 

JARRETT:  I think his message is getting through, people are beginning to pay more attention, now.  The Labor Day is behind us, kids are back to school. 

McCain‘s message, you mean.  In other words they were...

JARRETT:  Everyone‘s message, I think, is beginning to come through.  People are beginning to now focus, as we knew they would, in September, on the election.  It‘s now within the horizon and so the American people are paying attention and I think his message is coming through.  Barack‘s message. 

GREGORY:  One of the big issues, obviously, women voters.  It‘s important, we know, because the Democratic campaign gambles on the gender gap going up against the Republicans.  It‘s important this year all the more because you now have Sarah Palin on the ticket. 

These are the latest numbers coming from the Pew Research Poll, it shows among women, 50 percent for Obama, 40 percent for McCain.  So, the lead there.  But look at this, also in that new Pew poll among women, Hillary supporters 78 for Obama, but 22 percent saying at this stage, they‘re going to vote for John McCain. 

And I know, Hillary Clinton, according to her advisers, they‘re getting a conference call together to reach to her supporters, get them on Obama‘s side.  How big of a concern is it particularly with Sarah Palin in the race, that you‘re losing some of those Hillary Clinton supporters? 

JARRETT:  Well, we‘re going to work very hard until Election Day to win back Senator Clinton supporters, as well as he have one else.  The day that Senator Clinton endorsed Barack, I think her message was very good.  She said look, if you believe in my vision for the country, if you believe in everything I‘ve been fighting for throughout my career and to take our country in a new direction, you have no choice but to support Barack Obama. 

So, we‘re confident she is on the campaign trail.  He delivered a major speech today to women talking about how he compares his track record to that of John McCain.  How he has been fighting for working women his entire career, supported legislation for equal pay, John McCain has not supported free choice, John McCain has not.  I think as women begin to focus on issues that are important to them, they will select Barack Obama.  They‘re just now paying attention, we‘re coming into the final stretch. 

And I am completely confident we will win their support. 

GREGORY:  All right, let‘s talk about Bill Clinton and some of his analysis of particularly Governor Sarah Palin.  He gave an interview to CNBC and this is what he said about her.  Let‘s watch will. 

(BEGIN VIDEO CLIP)

BILL CLINTON (D), FMR U.S. PRESIDENT:  She is an instinctively effective candidate and with a compelling story.  I get why she has done so well.  She‘s—it‘s a mistake to underestimate her.  She‘s got good—her intuitive skills are... 

(END VIDEO CLIP)

GREGORY:  Here‘s what I think is incredible about that.  Is that that is the same former president Clinton who said the same things about George W. Bush at a time when a lot of Liberal critics said oh, George W.  Bush he‘s not bright enough, nobody‘s going to buy what he‘s selling.  And he‘s recognizing in Sarah Palin some of that intuitive skill, some of that ability to connect that‘s real. 

JARRETT:  She is very talented, but she is not running for president and I think in the final analysis, people vote for the person who‘s running for president.  That‘s John McCain.  And so, I don‘t think we can get too distracted by the Sarah Palin phenomenon and her life story, which is an intriguing story.  She‘s not the person that we need to focus.  We need to keep in touch with what‘s important to the American people and need to continue to challenge John McCain‘s record. 

GREGORY:  Fair point.  Fair point, but she‘s trying to exploit what has been recognized as an issue, even within the campaign, is that sometimes Senator Obama is more cerebral than he is emotional.  It goes to the point how well he is connecting with the voters.  This is attack line that governor Palin is using with regard to that and with regard to some issues.  Watch.

(BEGIN VIDEO CLIP)

SARAH PALIN ®, VICE PRESIDENTIAL CANDIDATE:  And maybe if he had been the governor of an energy rich state, maybe he‘d get it.  More importantly, maybe if he‘d been on the front lines of securing our nation and securing our nation‘s energy independence, then he‘d understand. 

(END VIDEO CLIP)

GREGORY:  Comment, when you see that? 

JARRETT:  You know, of course she is doing what the Republicans always do.  I mean, in a sense that‘s their party line.  That‘s the reason why Barack is in this race, is that, what he‘s saying is look, let‘s not get distracted by all that, let‘s focus on the issues that are important to the American people.  No.  1, economy.  Barack Obama has been extraordinarily well this week as we‘ve watched what‘s happening as the global markets have crumbled.  He‘s assembled a team with advisers, he‘s been thoughtful, he‘s been thought provoking, he supported what Secretary Paulson and Chairman Bernanke did with this bipartisan effort to let‘s look at how we can have a short-term solution and a long-term fix.  He is focusing on the American people, whether it is universal healthcare, where it‘s making sure we don‘t ship jobs overseas, whether it‘s figuring out what we can do to stabilize the housing crisis.  That‘s where Senator Obama is focused and he go sales a distraction. 

GREGORY:  Here is your friend Michelle Obama talking about what matters in this race.  Watch. 

(BEGIN VIDEO CLIP)

MICHELLE OBAMA, PRESIDENTIAL CANDIDATE‘S WIFE:  We may decide to do something that is different from Barack Obama, but we should decide that based on our self-interests and what we think is best.  People shouldn‘t make a decision this time based on, I like that guy.  Or, you know, she‘s cute. 

(END VIDEO CLIP)

GREGORY:  She talking about Palin, there? 

JARRETT:  I think she was talking about herself, Michelle being cute. 

(LAUGHTER)

GREGORY:  Come on, come one, she was talking about Palin. 

JARRETT:  No, I don‘t think so.  But you know, listen, I think Michelle‘s point is a good one, the stakes are so high in this election.  We have our planet in peril, we have been at war, we have now a domestic crisis, we have an economic crisis.  We really encourage the American people to do what they‘re doing, which is to get engaged and really look at the issues and how the candidate matched up and who has the leadership qualities, the temperament, the stability, the foresight, the judgment, and all the qualities that are required to lead our country at this unique moment in history.  That was Michelle‘s message. 

GREGORY:  All right, we‘ll leave it there.  Valerie Jarrett, always great to have you.  Great to see you in person, here in Washington. 

JARRETT:  Terrific to be here.  Thank you for inviting me on.  Have a great weekend. 

GREGORY:  Thanks very much. 

Coming up next, the Clintons will return to the race in a big way next week.  It‘s on the RACE‘s radar tonight, we‘ll tell you about it right after this.

(COMMERCIAL BREAK)

GREGORY:  We‘re back now on RACE FOR THE WHITE HOUSE with a look at what is on the RACE‘s radar, tonight.  The Clintons return to the race in a big way, Senator Hillary Clinton stepping up her efforts now to help Senator Obama.  Today Clinton launched a new campaign called “Hillary Sent Me,” calling on her supporters to campaign for Obama.  Clinton‘s aides say it is her first explicit pitch to get her supporters to work for Obama. 

Showed you that poll last segment, 22 percent saying in the Pew poll, they‘d voted for McCain.  But also today, the Obama campaign announced that Mrs.  Clinton will go to Michigan, a key battleground state, one the Democrats have to hold onto to stump for Senator Obama next Saturday, that‘s the day after the first presidential debate.  Pretty key appearance, there. 

Also, former president Bill Clinton will be out next week making the TV rounds.  He‘s going to be on “The View,” Monday, the “Daily Show with Jon Stewart,” Tuesday.  This comes on the heels of his interview that we showed you a bit from last segment with CNBC‘s Maria Bartiromo, last night. 

A lot going on.  The campaign heats up.  Coming up next, which candidate has the vision to get the economy back on track?  The RACE returns with that discussion, after this.

(COMMERCIAL BREAK)

GREGORY:  We‘re back now, finally, once and for all on RACE FOR THE WHITE HOUSE.  I‘m David Gregory.  Presidential test; the candidates respond to Wall Street crisis and today‘s unprecedented federal bailout.  Who has the best plan to get the economy back on track?  Who has the vision to lead the country through the next four years? 

Welcome back to the program here.  We‘re going to get to that issue.  The question today in the typically conservative “Wall Street Journal” editorial board, is that it criticized John McCain for his response to the economic crisis, particularly McCain‘s call yesterday to fire SEC Chairman Christopher Cox.  It editorialized today, “Mr. McCain is sounding like a candidate searching for a political foil, rather than a genuine solution.  He‘ll never beat Mr. Obama by running as an angry populist like Al Gore circa 2000.”

Let‘s bring our panel back in now, MSNBC‘s Pat Buchanan, political analyst Richard Wolffe, senior White House correspondent for “Newsweek,” and also an MSNBC political analyst, also Steve McMahon is here, Democratic strategist.

Let me first play a little sound.  The general question here that I want to get to is what are we learning about leadership styles here from these two candidates in the middle of a crisis?  First, some reaction to all this and how it has unfolded from both candidates.  Watch. 

(BEGIN VIDEO CLIP)

OBAMA:  Given the gravity of this situation, and based on conversations I‘ve had with both Secretary Paulson and Chairman Bernanke, I will refrain from presenting a more detailed blueprint. 

MCCAIN:  This morning, I laid out my plan to solve these problems and grow our economy.  About the same time Senator Obama said that he isn‘t going to offer a plan.  We‘ve seen him play this game before, my friends. 

(END VIDEO CLIP)

GREGORY:  Pat Buchanan, your take on all that. 

BUCHANAN:  Well, John McCain is in candidate mode.  He is on the offensive.  He is attacking Obama.  Obama realizes with a disaster, a near catastrophe about to happen, the government move is probably a good thing.  He has played sort of the quasi statesman role all week, but going after the Republicans for their philosophy as being responsible for this, their ideology, the McCain-Bush thing.  He was dealt a tremendous hand this week.  And he has played it exceedingly well. 

GREGORY:  Richard, what is your take on what they‘re demonstrating to voters?  What voters should be taking away or learning from how they‘re responding to an unfolding crisis? 

WOLFFE:  Well, what I think McCain is trying to put out here is that he is a man of action.  That‘s what lies behind the whole fire Chris Cox idea.  And he was kind of weird this morning.  He said that Cox was a good man, but still, he is trying to look like he is decisive and intervening in some way.  The problem is, he is just a candidate.  And there is only so much intervention you can do. 

Clearly for Obama, he‘s been talking to Hank Paulson, treasury secretary, all week.  These kinds of presidential style consultations are aimed at being a reassuring presence, adding some gravitas to him.  It‘s very weird.  If you step back here, you‘re looking at a guy who is new to the national stage, who is trying to portray himself as the calm in the storm, and someone who has been in Washington for a very long time, who is looking much more edgy, much more active, and saying, I can shake things up. 

The question is, what are voters looking for right now?  If you‘re a nervous investor, do you want someone to shake things up, shake Washington up, or calm things down Obama-style?  That‘s what people are being faced with right now. 

GREGORY:  Here‘s the problem, Steven.  I realize you have a Democratic perspective on this.  For any candidate whose party is the incumbent party, the difficulty is trying to find a lane to travel where you can sort of rage against the incumbent without it reflecting on you.  That‘s sort of the test for John McCain now.  Who does he go after that doesn‘t, you know, end up splashing back on him? 

MCMAHON:  Well, the funny thing is I think he is actually probably playing all that in his head as he reacts to this.  What he really ought to do is step back and act presidential.  He really could learn a little bit from Senator Obama here, who, for all the talk about him not spending much time in Washington, actually is acting far more presidential right now than Senator McCain. 

Look what he did.  He came out and said this is very serious crisis.  He said this is not the kind of crisis that we cannot meet because we‘re America and we can do anything that we set our minds to.  I‘m going to step aside right now for the time being and let Congress and the president and the people who are the financial experts do their job.  And I‘ll have more to say later.  That‘s, frankly, what President Bush is doing, too. 

So in a funny way, Barack Obama is acting more like a president than Senator McCain.  And I think it is because Senator McCain knows that he has been here for 26 years, knows that his party has been in charge for most of the last 12 years, at least, and that his party is philosophically against regulating financial markets.  So he is in a tough spot.  He could have done himself a lot of good by acting a little more mature and a little less edgy. 

BUCHANAN:  What I think Obama has going for him is, look, the crisis is unfolding.  It was a disaster earlier in the week.  You have 500, 400 point drops.  It is a crisis of the administration, of the government of the United States.  Barack Obama is benefiting from it.  And now the president comes forward with a plan, and he is sort of very conservatively standing direct with and behind the president.  Let‘s solve this because the unfolding events are working to his benefit. 

That‘s why you see a certain franticness on the part of McCain, who is going after him and is now getting into the Fannie Mae, Freddie Mac contributions and all the rest of it.  He has to go after Obama.  It is a very tough needle to thread. 

GREGORY:  Do we want to hear a sense from both candidates to help the voter here.  You have a crisis that is unfolding on Wall Street that Washington has to respond to, the tax payers have to respond to.  But we can hear from both candidates now in terms of their argument for what the choice is in this campaign on the economy. 

(BEGIN VIDEO CLIP)

MCCAIN:  A vote for Senator Obama will guarantee higher taxes, fewer jobs and an even bigger federal government.  These policies will deepen our recession.  A vote for me will guarantee that the forces that have brought down our economy will be out of business. 

OBAMA:  We can‘t keep on having drivers who are going to drive us into a ditch.  We have to have somebody with a clear sense of direction about where we need to take the country. 

(END VIDEO CLIP)

GREGORY:  And yet, Richard Wolffe, for all the rhetoric on the campaign trail, the Earth is actually moving underneath their feet.  The reality is that with a projected budget deficit of 480 billion dollars, now with this federal bailout in place, it could have a real impact on what their agenda is when they get into office, particularly on the issue of tax cuts. 

WOLFFE:  Yes.  You go through these campaigns and you wonder why anyone wants to run for president.  In this case, would you want to be president in this scenario?  Their spending plans are shot to pieces.  They have two wars, unlimited liability.  Frankly, if we knew what the scale of this liability was with this bailout, then the markets would know what the scale of the problem is.  We don‘t know what it is.  Let‘s just say it is a trillion dollars right there. 

There is no money to do what they want to do, whether it is taxing, spending.  Everything is up in the air.  On the situation they face next year, it is even more dramatic turn-around than what we saw in 2000, where  President Bush—Governor Bush thought he had three trillion dollars of surplus to spend with.  And then there was 9/11 and everything frittered away. 

So you don‘t have any kind of basis to make any promises that voters can take to the bank. 

BUCHANAN:  Let me say this.  I think that Barack Obama would be well advised, given that he is following the ball here, he is following the president, to say, look, given the situation, the crisis, trillion dollar bailout and things like that, everything is on the table.  I do believe we have to have these tax increases for the two percent, but I certainly would not raise taxes if there is a recession and it is deepening.  You don‘t do that.  To get him to show the kind of flexibility that I think he really needs right now, because that‘s the one case McCain has for him.  This guy is going to raise taxes, capital gains, higher incomes in the middle of a recession, which is disastrous. 

I think if he showed flexibility on that, he would really help himself. 

GREGORY:  Steve, finally here, look at the “New York Times” poll this week.  The question, who is prepared to be president.  McCain still has a big advantage, 71 percent to 48 percent.  How does Obama use the economy as an issue, and as a particular crisis to close that gap? 

MCMAHON:  It is interesting.  I think the Obama campaign might have been looking at these number when they made the judgment to do what they did today.  If you think about what Senator Obama did, and if you look at these poll number, he is trying demonstrate to the American people, by the way he behaves, by his tone, by his demeanor, and by his approach to this crisis, that he is prepared to lead, that is ready to take over the reins, and that he can deal with this crisis. 

And I think if you asked a focus group, who appeared more presidential in the last 24 hours, Senator Obama would have won.  That‘s not withstanding all of the other things that happened this week that made Senator Obama look much more mature, responsible, and ready, and made Senator McCain, frankly, when he is calling the economy fundamentally sound, when he saying we shouldn‘t bail out, then we should bail out—he is the person who doesn‘t really look very presidential right now.  And I think Senator Obama‘s numbers on this particular measure will be different next week than they are right now. 

GREGORY:  We‘ll take a break here.  Coming right back on RACE FOR THE WHITE HOUSE after this. 

(COMMERCIAL BREAK)

GREGORY:  Back now on RACE FOR THE WHITE HOUSE.  The candidates are locked in a virtual dead heat.  How can either Senators McCain or Obama break out of it?  We‘ll go inside the war room now with Mike Murphy, NBC News analyst and Republican strategist, as well as Bob Shrum, Democratic strategist.  Gentlemen, welcome to you both. 

BOB SHRUM, DEMOCRATIC STRATEGIST:  Happy to be here. 

MIKE MURPHY, NBC NEWS POLITICAL ANALYST:  Hi. 

GREGORY:  Mike, let me start with you.  Here we are, head to head match-up here from the “New York Times,” Obama 48 percent, McCain 43 percent.  Mike, what has happened in this race?  It was dead even.  Now you see Obama back with a single digit lead.  What has changed? 

MURPHY:  Well, I think the Sarah Palin mania has kind of subsided.  The convention bump from both candidates is gone.  First Obama‘s, then McCain‘s.  Now we‘re in an economic race, which generically is a bit of an advantage—economic pain race—to the Democrats, which is why you see both candidates kind of grappling now to frame this their way, particularly the McCain campaign on the offense.  They want to box in Obama as a tax and spender, because they don‘t want a pure economic race in bad times.  That favors the Democrats.  I think this data shows it.

GREGORY:  The other question, Bob, is how does McCain find some room to run here?  He is a Republican.  He wants to find a way to separate from George Bush, although President Bush is in the middle of bringing both parties together to solve a huge problem.  So he wants to attack Wall Street, corruption, greed, and yet not have his party‘s economic philosophy generally wash over him. 

SHRUM:  He may have decided to attack Bush at the one time when it would have been good, or separate himself at the one time it would have been good for him to be standing there in a statesman like way, supporting what Bush and Paulson and Bernanke are trying to do.  Mike said this several months ago.  I think it is coming home to roost now.  That McCain‘s real problem was the failure to lay down a positive strategy.  They‘ve had a strategy of tactics, from Sarah Palin to lipstick on a pig.  That‘s what they‘ve done this week.  He‘s lurched from saying he was against the AIG bailout to saying he was for it, to saying he was against bail outs, from saying the economy is fundamentally strong, to saying we‘re in an economic crisis. 

And then today, absurdly, trying to blame this on Barack Obama, who has been in Washington, as he used to remind us, for three and a half years and is certainly not responsible for this crisis.  So I don‘t think McCain has found a way out of this.  And I think continuing to throw spit balls and mud and wild charges and flailing around isn‘t going to get him where he needs to go. 

GREGORY:  Mike, did President Bush in some way hurt McCain by coming out today?  Not that there was any choice.  He‘s the president of the United States.  He has to deal with it. 

MURPHY:  Absolutely.  I think what Bernanke and the team are doing is appropriate.  I think in a time of crisis, you want the president to step up and be presidential.  I do think it is in McCain‘s interests, as long as he watches the tone of it, to go on the ideological offense on Obama.  The truth is Barack Obama is a new fresh voice in politics.  He is also a tax and spend liberal.  In an economic fight, the Republicans can box in Obama as a big taxer, as a big spender, which is historically the side of the party he‘s been on, that will slow Obama‘s progress down.  And they ought to be doing it. 

I think the fact the McCain guys are going on the offense there, tone has to be watched.  I understand why they‘re doing it.  I think it‘s right.

GREGORY:  You also have the issue of this question of risk.  Who do you trust to handle a crisis?  We‘ve talked a lot about this in terms of foreign affairs.  Our latest poll, NBC News/”Wall Street Journal” has Obama as a riskier choice, 48 to 41 percent.  Is that not a liability here? 

SHRUM:  Sure.  It is interesting because this first debate that‘s coming is about foreign policy.  In some ways, McCain may like that because it is a circuit breaker on this economic discussion.  On the other hand, if Obama goes into that debate and comes out of it in a very strong way, that is going to hurt McCain, because McCain‘s only high card left is national security.  If that‘s taken away, he‘s done for.

I like Murphy‘s analysis a lot more than I like his spin.  The truth is that McCain‘s tone is off key.  He sounds frantic.  He sounds angry.  He sounds like he is lurching from one argument to another.  He looks anything but presidential right now. 

GREGORY:  Mike? 

MURPHY: The big advantage though McCain has is that the extent the economic crisis is a crisis, McCain‘s experience edge is paying off for him.  You see it in the public polling.  People have doubts about Barack Obama being up to handling a real crisis.  Is he too young?  Is he too inexperienced.  I think the crisis side of an economic crisis debate does accrue well to McCain.  He has to watch the tone and stay presidential.  But I think some offense is indeed appropriate. 

GREGORY:  Here‘s my question to both of you.  You have both run big time presidential campaigns.  The reality is that the ground is shifting every day.  This is a crisis that is unfolding.  There will be a big hit for the taxpayer.  We don‘t know the full extent of that.  It is also a crisis that is going to go under the radar here at some point, where it is not going to seem quite as urgent.  We‘ll probably still have weeks to go before election day.  And your target, and these campaigns on both sides, is the independent voter. 

In the minds of the campaigns, where is the focus right now?  What is the message?  Where does the debate go?  Mike, you start. 

MURPHY:  Well, McCain wants to own change and clean up Washington.  He is not going to cede that ground as a long time reformer to Obama.  I think they see a ray of hope in an economic crisis, to the extent anybody can see hope and anything in it, is that a strong guy like McCain who is ready to take on the entrenched special interests could be seen as having an advantage by those independents.  I think if McCain can get back to his narrative as the bipartisan, clean up the mess kind of guy, he can make some real progress here. 

If he boxes himself in this election years in a pure partisan box, he has a problem.  It is not a Republican year.  It‘s not a Republican year.  He has to be Republican plus.  I think you have to hear more problem solving, more bipartisan.  But he‘s got the credentials as a reformer. 

GREGORY:  And finally, Bob, I don‘t have to remind you of the 2004 race, where Karl Rove said, if the topic is the war on terror, George Bush wins.  It was ultimately the case.  Does that mean, in this case, for Barack Obama, the economy is always the topic here between now and election day? 

SHRUM:  I think Obama has been very smart to stay on the economy all through these weeks of Palin mania, when, frankly, Palin, in my view, was a Hail Mary pass.  Most Hail Mary passes don‘t make it to the end zone.  The campaign was bound to come back to the real ground of decision here, and that is the economy, for example, health care, these real issues.  And I think Obama stayed there, put up with the fact that he wasn‘t dominating the headlines.  And events brought the whole campaign back to him. 

But if Murphy were running McCain‘s campaign, I think we might see a campaign from McCain like the one Murphy is defending, where he sounds bipartisan, where he looks presidential.  Instead, we‘re seeing him as bitter, partisan, angry, hurling charges no one believes.  For heaven‘s sakes, getting attacked by the “Wall Street Journal” for the cheap ploy of saying Chris Cox, who is the chairman of the SEC, ought to be fired because he was looking for a quick fix way to separate himself from Bush.  That‘s not how you get elected president. 

GREGORY:  I‘m going to leave it there.  That‘s going to have to be the last word.  Mike Murphy, Bob Shrum, thanks to both of you.  I really appreciate you being here. 

Going to take a break here.  Coming you, David Broder from the “Washington Post.”  His analysis on this very important week when THE RACE returns.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

CLINTON:  What typically happens in these elections, if you look throughout American history, when the country is in a fix and you know where we‘re going is not sustainable, then there is typically a breakthrough.  The biggest example of that was in 1860, when Abraham Lincoln was elected. 

(END VIDEO CLIP)

GREGORY:  Welcome back.  That, of course, former President Bill Clinton sharing his thoughts on the state of the race in an interview last night with cNBC‘s Maria Barteroma.  I‘m please to be joined now by David Broder of the “Washington Post.”  David, that‘s the former president making the case that if the country is in a mess, they‘re looking for change.  That‘s what Barack Obama is counting on.  Look where we are at the end of this week.  The state of the race has changed yet again. 

DAVID BRODER, “THE WASHINGTON POST”:  Totally from where we were a week ago.  And this probably won‘t be the last such outside event that tosses everything up for grabs again.  I was listening to the discussion you just had with Murphy and Shrum.  I think that the McCain people have a point.  If it is seen as a real crisis, then they might very well turn to him. 

But this is not the crisis that he wanted to deal with.  He is much more comfortable dealing with an international situation than this economic problem, which is huge here at home. 

GREGORY:  Is it a case of how you define what the crisis is?  In other words, taxpayers are going to be hit with a huge bill for this bailout.  It is easy to see who some of the culprits are.  You can blame an administration for not regulating enough.  You can blame the greed on Wall Street.  You can blame, you know, CEOs and risk management officers in big investment banks, who didn‘t understand that they were so heavily leveraged that if this went south, their companies were going to go south as well.  Is that the ray of hope for him? 

BRODER:  I don‘t see that as the ray of hope for him.  I was talking to a couple members of Congress who were briefed on this situation.  I have never heard politicians as shaken and sobered as these people were by the news that they got from the secretary of Treasury and the head of the head of the Federal Reserve Board.  They know that this is not a game at this point, that the country really is at risk.  And I think anybody who is trying to make a partisan issue out of this is probably a mistake. 

GREGORY:  Let‘s talk about the consequences, and the consequences for the next president after the campaign.  This is what you wrote this week:

“the next president, whoever he is, will probably inherit a budget that is at least 500 billion out of balance.  That‘s at least, if you look at the numbers today of what this may cost, a record sum that will limit his ability to do any of the wonderful things being promised daily in the upbeat rhetoric of the campaign.  The last thing candidates want to admit is that if they win, they will be unable to deliver the goodies they have promised the voters.” 

I read that, and what was so striking about that is isn‘t that all the more the case here?  They‘re both talking about tax cuts at some level.  Senator McCain is talking about private accounts for Social Security that would depend on investments.  So much of what they‘re talking about may have to be thrown out the window. 

BRODER:  Exactly.  And, David, I think both these men know that.  And what is going to be interesting to see when they are together on stage in those three debates, will we get any hint from them that they are living in the real world?  Or will we hear regurgitated campaign rhetoric? 

GREGORY:  We‘ll be watching.  Thanks so very much for coming in.  Really appreciate it.  A quick programming note before we go.  Be sure to tune in to MSNBC tomorrow night, 7:00 p.m. Eastern time, for the premier of “The Candidates.”  Joe Biden, part of our Decision ‘08 series looking into each of the four candidates in THE RACE FOR THE WHITE HOUSE. 

Also, mark your calendars.  Turn to MSNBC for the very first presidential debate that David and I were just discussing.  That‘s next Friday, September 26th, at 9:00 pm Eastern time.  I‘ll be bringing you our special coverage of the debate all night.  That is our program here on THE RACE.  Have a peaceful Friday night and stay tuned for “HARDBALL” coming up right now. 

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

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