updated 10/6/2008 2:54:40 PM ET 2008-10-06T18:54:40

Guest: Steve King, Nancy Pfotenhauer, Jonathan Turley, Michael Dukakis

RACHEL MADDOW, HOST:  Thank you, Keith.  That was the funniest worst persons in the world I‘ve ever seen in my life.  I almost couldn‘t watch.  Thank you.

KEITH OLBERMANN, MSNBC ANCHOR:  Thank you.  Well, me, too.  Oh, you mean my version of it, I thought—OK, I gotcha.

MADDOW:  Thank you, Keith.

And thank you for staying with us for the next hour.

The House passed the bailout bill that John McCain endorsed but then suggested that President Bush ought to veto.  Not many House Republicans joined McCain in the bailout effort.  I spent way too much time pouring over last night‘s debate transcripts, and the McCain campaign finally agreed to let someone from that campaign come on this show.  A big night for us, tonight.

(voice over):  Sarah Palin‘s debate‘s debut.  Did she win?

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN, (R-AZ) PRESIDENTIAL CANDIDATE:  How about Sarah Palin last night, huh?

(APPLAUSE AND CHEERS)

MCCAIN:  Viva la barracuda.

(END VIDEO CLIP)

MADDOW:  The barracuda?  Well, the barracuda was repeatedly wrong on facts.

(BEGIN VIDEO CLIP)

GOV. SARAH PALIN, ® VICE PRESIDENTIAL CANDIDATE:  We‘re now down to pre-surge numbers in Iraq.  McClellan did not say definitely that the surge‘s principles would not work in Afghanistan.  Barack Obama even supported increasing taxes late of last year for those families making only $42,000 a year.

(END VIDEO CLIP)

MADDOW:  She was utterly faithful to the talking points.

(BEGIN VIDEO CLIP)

PALIN:  Mavericks.  Maverick.  A maverick reform.  Reform.  Reform. 

Even suspending his own campaign.

(END VIDEO CLIP)

MADDOW:  She was quick with the canned (ph) comeback.

(BEGIN VIDEO CLIP)

PALIN:  Say it ain‘t so, Joe.  There you go, again.  Your plan is a white flag of surrender.

(END VIDEO CLIP)

MADDOW:  She was fast, and loose, and occasionally weird with the Constitution.

(BEGIN VIDEO CLIP)

PALIN:  I‘m thankful that the Constitution would allow a bit more authority given to the vice president.

(END VIDEO CLIP)

MADDOW:  And she even winked.  Biden didn‘t wink.  So, is fact, substance, authenticity and some distance from Dick Cheney don‘t count, Sarah Palin clearly won the debate or won by a little or it could be argued that she didn‘t lose.  Only she winked.

The impact of the debate, plus, Jonathan Turley on that pesky constitutional limit to vice presidential power.

Hey, the big bailout passed.  You know, the one John McCain suspended his campaign to orchestrate, the one he suggested the president should veto?  Well, it passed and the stock market tumbled anyway.  Does this add up to even more political trouble for Senator McCain?  Congressman Steve King, a Republican opposed to John McCain on the bailout, joined us to talk about it.

And Barack Obama plays it cool in the face of persistent good news on the electoral map.  Is the Obama campaign ready for what‘s coming next?  The real slimy tactics of an opponent in trouble?  Mike Dukakis is here with the lessons of not fighting back.

And the McCain campaign, for the first time, makes a staffer available to this very grateful, very excited show.  You do not want to miss this.

THE RACHEL MADDOW SHOW starts now.

(on camera):  America awoke today to a few big pieces of news.  Number one, cookie televangelist, Pat Robertson, is predicting nuclear again.  OK.  Maybe that was just number one for me.  We‘ll have more on that later.

But also, America‘s unemployment rolls are melting down along with the financial system.  Last month was the worst in five years and we‘re approaching 1 million jobs lost since December.  More on that coming up as well, including what it means for John McCain‘s campaign already circling the drain.

We also awoke to the realization that the first and only vice presidential debate is over.  Nearly 70 million of us watched and to our significantly smaller, but on average, much better looking audience, I offered these three observations.  Number one, the McCain-Palin ticket has mastered the embarrassing science of misquoting historical figures.  Number two, Sarah Palin has folksy warmth, and that folksy is winky and seemingly rehearsed.  Also, number three, Sarah Palin either does not know or does not care about always getting stuff right.

First, let‘s talk about the misquoting business.

Governor Palin finished up the debate with what I thought was perhaps her strongest, most emotionally-effective, most eloquent moment of the night.

(BEGIN VIDEO CLIP)

PALIN:  It was Ronald Reagan who said that freedom is always just one generation away from extinction.  We don‘t pass it to our children in the bloodstream.  We have to fight for it, and protect it, and then, hand it to them so that they shall do the same, or we‘re going to find ourselves spending our sunset years telling our children and our children‘s children about a time in America, back in the day when men and women were free.

(END VIDEO CLIP)

MADDOW:  The threat to freedom Ronald Reagan was talking about, was that national defense or some competing ideology seeking global dominance.  Reagan was predicting what would happen in the 1960s, if we got Medicare.

(BEGIN AUDIO CLIP)

RONALD REAGAN, FORMER U.S. PRESIDENT:  And at the moment, the key issue is, we do not want socialized medicine.  This program, I promise you, will pass just as surely as the sun will come up tomorrow, and behind it will come other federal programs that will invade every area of freedom as we have known it in this country.

Until one day, as Norman Thomas said, we will awake to find that we have socialism, and if you don‘t do this and if I don‘t do it, one of these days, you and I are going to spend our sunset years telling our children and our children‘s children what it once was like in America when men were free.

(END AUDIO CLIP)

MADDOW:  Before Medicare.

I have to admit, I am slightly less moved by the Reagan quote now that I know it was supposed to make me fear the idea of old people getting healthcare.  Does Sarah Palin agree?

The same thing happened actually with was one of her most effective lines in her nominating speech from Saint Paul.

(BEGIN VIDEO CLIP)

PALIN:  A writer observed, we grow good people in our small town with honesty, and sincerity, and dignity.  And I know just the kind of people that writer had in mind.

(END VIDEO CLIP)

MADDOW:  It‘s a neat quote, right?  I love that quote.  The issue is that the writer who said that was a man named Westbrook Pegler.  Westbrook Pegler was an American pseudo-fascist who called for the assassination of both FDR and Robert Kennedy.  He was a right-wing columnist so extreme he was kicked out of the John Birch Society for alleged anti-Semitism.

Now, wait.  I‘m on a roll here.  Do you want another?

In her recent interview with Katie Couric, in a rambling non-response to a question about the separation of church and state, Governor Palin brought up a folksy quote from a guy who wrote that old Constitution thing back in the olden days.

(BEGIN VIDEO CLIP, “CBS EVENING NEWS WITH KATIE COURIC”)

PALIN:  Thomas Jefferson also said, “Never underestimate the wisdom of the people.”

(END VIDEO CLIP)

MADDOW:  I admittedly do not know every word ever spoken by Thomas Jefferson, but I don‘t think he‘s on record ever saying that.  Regarding that separation of church and state or at any other topic, in Palin‘s defense, somebody famous once said something almost like that.  It was H.L.  Mencken, who said, “Nobody ever went broke underestimating the taste of the American public.”

We contacted the McCain campaign today to ask what Palin was talking with this supposed Jefferson quote; they said they will get back to us.  I don‘t mean to believe it at this point here, but when you found a pattern, you sometimes start to wonder how far it goes.  So, can I bring John McCain in on this, too?

At the debate last Friday, McCain described two letters authored by General Eisenhower the night before the Normandy invasion.  As McCain told it, one letter was authored in the event that the D-day invasion was a success.  The other.

(BEGIN VIDEO CLIP)

MCCAIN:  He wrote out another letter, and that was a letter of resignation from the United States Army for the failure of the landings at Normandy.  And the other a letter of resignation from the Army in case it had failed, taking full responsibility.

(END VIDEO CLIP)

MADDOW:  Except, according to the National Archives, that‘s not true.  Eisenhower did scribble a second note, taking full blame in the event the effort failed, but he never mentioned resigning.

Maybe John McCain should try blinding audiences with darn right‘s (ph) and doggone it‘s, so we media elites don‘t imagine the facts behind his charming historical anecdotes.

(BEGIN VIDEO CLIP)

PALIN:  Just everyday, American people, “Joe Six Pack,” hockey moms across the nation.  I may not answer the questions the way that you did the moderator you want to hear.  Darn right, it was the predator lenders.  Yes, it‘s so obvious I‘m a Washington outsider and someone who‘s not used the way you guys operate.

Bless their hearts, they are doing what they need to do as corporate CEOs but they‘re not my biggest fans.  The chant is, drill, baby, drill.

Say it ain‘t so, Joe, there you go again.  We have an opportunity to learn a heck of a lot of good lessons through this.

Now, a doggone it.

Here‘s a shout out to all those third-graders at Gladys Wood Elementary School, you get extra credit for watching this debate.  And I‘m betcha.

(END VIDEO CLIP)

MADDOW:  Governor Palin‘s folksiness last night brings us to my second debate observation.  The all shockiness (ph) sometimes doesn‘t ring true.  And for political purposes, for us assessing Governor Palin‘s skills as a politician, that all shockiness (ph) really needs to ring true.

Consider the moment after Joe Biden choked up at the memory of losing his wife and a child in a car accident, in which his sons were also critically-injured.  The reaction from folksy Governor Palin from up there in Alaska?  Check it out.

(BEGIN VIDEO CLIP)

SEN. JOE BIDEN, (D) VICE PRESIDENTIAL CANDIDATE:  The notion that somehow because I‘m a man I don‘t know what it‘s like to raise two kids alone.  I know what it‘s like to have a child you‘re not sure is going to make it.  I understand.  I understand, as well as, with all due respect to the governor or anybody else what it‘s like for those people sitting around that kitchen table.  And guess what?  They‘re looking for help.  They‘re looking for help.  They‘re not looking for more of the same.

GWEN IFILL, DEBATE MODERATOR:  Governor?

PALIN:  People aren‘t looking for more of the same.  They are looking for a change.  And John McCain has been the consummate maverick in the Senate over all these years.

(END VIDEO CLIP)

MADDOW:  I‘m sorry.  But that moment spoils every other attempt to make me believe all the “Oh, shocks, I‘m just a regular, nice lady” business.

The political importance of folksiness, it‘s not just style.  It‘s supposed to be a measure of authenticity, of real human connectedness and sensitivity.  One harsh show of callousness can undo many hours under the life saying doggone—which brings me to observation number three.

Governor Palin either does not have accurate information a lot of the time or she doesn‘t care about it.  Examples, she got the number of troops in Iraq wrong.  She called the top general in Afghanistan, McClellan, and misstated General McKiernan‘s position on an Afghanistan surge.

She claimed Barack Obama voted to raise taxes on families making only $42,000 a year.  She claimed Obama voted against troop funding.  She said McCain wants to let bankruptcy judges rewrite mortgages.  He does not, neither does she.  The campaign did have to correct that one today.

What are these observations—these three observations lead me conclude about the debate last night?  It leads to me to conclude that there isn‘t much left in the McCain-Palin political arsenal.  If you can‘t win on the facts or on expertise, or on personally connecting with voters, how do you win?  I‘m expecting some hard negative politics just around the bend.

We‘re joined now by Michael Dukakis, who is the former governor of Massachusetts, and, of course, the 1988 Democratic presidential nominee.

Governor Dukakis, thank you so much for joining us.

MICHAEL DUKAKIS, 1988 DEMOCRATIC PRESIDENTIAL NOMINEE:  Rachel, good to be with you.

MADDOW:  Talking Points Memo Web site today reported that John McCain‘s ad spending is almost exclusively now on negative ads.  From your experience in electoral politics, how do you think that the Obama campaign and Barack Obama, personally, should respond to what, I think, is going to be an exclusively negative campaign for the next month?

DUKAKIS:  Well, it‘s been and almost exclusively negative campaign for the last several weeks, Rachel.  But I don‘t think Barack Obama is going to make the same mistake Mike Dukakis made in 1988, and, unfortunately, John Kerry made in 2004.  They expected this.  They‘ve anticipated it and they don‘t sit around silently when these attack ads are run, particularly states where it‘s being seen most of the time.

So, I don‘t think you have to worry about the Obama campaign.  They know what‘s coming.  They will be throwing the kitchen sink at them, but it will be heavy, negative stuff.  But I‘m very impressed with the fact that Barack Obama and the people around them are ready for it, they respond to it very, very quickly.  And at the same time, he‘s managed to maintain a very positive tone on his campaign.  And I think it‘s quite impressive.

MADDOW:  When you said that you don‘t believe that Obama and Biden will make the same mistake that you made in 1988, that John Kerry in 2004, I know that the biggest picture, a way to describe that is about fighting back.  But what do you think, specifically it means?  Do you think that fighting back should come in the form of Barack Obama, himself, rebutting things forcefully, should it be his surrogate, should it be his campaign, should he fight fire with fire?

DUKAKIS:  All of the above.  I mean, it depends.  You may recall back in 1992, after my demise, and Bill Clinton was running, he actually had a unit of about 10 people in his campaign who called themselves the “defense department,” and all they did was deal with the Bush attack campaign which is just as tough on Clinton in 1992 as it was on me in 1988.  But Clinton didn‘t make the mistake I made of essentially deciding that he wasn‘t going to respond to the attack campaign.  And that unit of people in his campaign were on those attacks all the time.

Now, sometimes he responded, sometimes they responded with response ads, sometimes it was surrogates, credible other folks who were called in to respond.  It‘s got to be a full court press and you really can‘t let these attacks go unanswered longer than about three hours, these days.

But I—there‘s no question, if you remember, Obama‘s speech, after the North Carolina primary, which effectively clinched the nomination for him, he was very, very clear.  He said, “Look, this is the kind of campaign that we‘re going to face.  They‘re going to be attacking me.  They‘re going to be trying to tell you things that aren‘t true.  And we‘ve got to be ready for it.”

And I must say, so far, and I assume this is going to continue for the last month of the campaign, they‘ve done a terrific job.

MADDOW:  Do you think the Lee Atwater Republican playbook from 1988 looks all that much different than the Karl Rove Republican playbook from 2008?

DUKAKIS:  Look—Rove was a protege of Atwater.  And Schmidt is a protege of Rove.  And I think one of the saddest things, Rachel, frankly, about the John McCain of today as opposed to the John McCain of eight or 10 years ago, is that a guy who was absolutely savaged by Rove and Bush in South Carolina in a despicable campaign in 2000, has now stooped to the point where he‘s hired a Rove protege to run his campaign.  And I think that‘s kind of sad.

I don‘t think the McCain of eight or 10 years ago, would have done that.  But, you know, he‘s getting up there.  And this is his last shot.   And maybe he‘s decided that that‘s what you got to do to win.  But it doesn‘t say much for him and, frankly, it‘s a long way from the guy that a lot of us, even if we didn‘t agree with him, admired maybe six or eight or 10 years ago, before he started this campaign.

MADDOW:  Governor, I know that presidential campaigns don‘t often turn on the vice presidential nominee, but Sarah Palin has gotten so much attention this year, I think, in part, because Senator McCain is well very known to the American people, Governor Palin is new, interesting.  She‘s very entertaining persona.  Do you see anything new, or weird, or worrying in the repeated misstatements we‘ve seen from her including in the debate last night?

DUKAKIS:  Look, I think, I don‘t know Sarah Palin.  I mean, it‘s the first time I‘ve really had a chance to seen her in action along with, I think, the vast majority of Americans.  She strikes me as being somebody who‘s probably a pretty good governor in a state which, incidentally, has fewer people than Barack Obama‘s State Senate district in Illinois.  But I don‘t put her down for that.  I mean, my sense is that she‘s done some interesting things.

But when she gets into the national security and foreign policy area, Rachel, she‘s just lost.  And I think it‘s one of the reasons why she‘s really dropping in public esteem and why a lot of people have been turned off to the selection of her.  And it doesn‘t say anything about her role or performance as governor, but she‘s just absolutely out of her league when it comes to these national security and foreign policy issues and it showed last night and showed in the limited number of interviews that she‘s already had.

And I think that‘s the thing that really has turned a lot of people off to her and to the guy that picked her.  Because, you know, I mean, I made a ton of mistakes in 1988.  One of the things I did right, I think, was to pick my running mate.  And the single most important factor in picking a running mate has to be whether or not that person can be an excellent president if, God forbid, something happens to you.  And by that criterion, this is just a pathetically-poor selection in my judgment.

MADDOW:  Governor Michael Dukakis, a man who ran for president what turned out to be sort of the beginning of an economic downturn, on the hills of two terms of Republican administration, well-suited to give advice tonight.  We really appreciate your joining us on the show tonight.  Governor, thank you.

DUKAKIS:  Thanks for having me, appreciate it.

MADDOW:  Because of all the terrifying winking and you betchas, and doggone it, it‘s easy to overlook the fact that there was some actual news made last night during the vice presidential debate.  Governor Palin, who‘s only criticism of Dick Cheney‘s tenure as vice president, so far, has been that maybe he shouldn‘t have shot that guy in the face.  She proposed last night that if she were elected to Cheney‘s job she would seek even more than Cheney sees for himself as vice president.

Is that even possible?  Could that happen?

Constitutional law scholar, Jonathan Turley, will be here to Talk Me Down, next.

(COMMERCIAL BREAK)

MADDOW:  Worried about what kind of vice president Sarah Palin would be?  Polls suggest you probably are.  But the big worry might not be her level of experience, knowledge, or verbal acuity.  It might be her wildly troubling Dick Cheney tendencies.

At last night‘s debate, Governor Palin made jaw-dropping proposal, suggesting that the powers of the vice presidency ought to be expanded.  Expanded from what Dick Cheney made them?

(BEGIN VIDEO CLIP)

PALIN:  I‘m thankful that the Constitution would allow a bit more authority given to the vice president, also if the vice president so chose to exert it in working with the Senate.  Our founding fathers were very wise there in allowing through the Constitution much flexibility there in the office of the vice president.

(END VIDEO CLIP)

MADDOW:  More power?  Much flexibility?  As most folks read it, there‘s precisely one constitutional duty that comes with the office you seek, governor, and it is to serve as president of the Senate.  That‘s it.  It‘s in ink, on parchment.  All 1787 styli (ph).

No matter what Dick Cheney says about belonging neither fully in the executive nor the legislative branch, see, Governor Palin, that was Cheney‘s ploy to avoid investigations and oversights.  Stuff, you maybe also, like to avoid.

This is genuinely scary stuff to me.  But, maybe, it‘s just me?

Joining us now to try to Talk Me Down on this is Jonathan Turley. 

He‘s a professor of law at George Washington University.

Professor Turley, thank you for your time tonight.

JONATHAN TURLEY, GEORGE WASHINGTON UNIV. LAW SCHOOL:  Hi, Rachel.

MADDOW:  Here‘s your chance to try to Talk Me Down on this.  Tell me it is not possible for a Palin vice presidency to take on a larger ramet (ph) than the Cheney vice presidency.

TURLEY:  Well, it ruins a perfectly good job.  You know, in the Constitution, this is a great job.  No work, big house, big salary.  I don‘t know why she wants to ruin it with actual work.

But you‘re correct, the only duties of a vice president, if you really get down to the concrete aspects is to break ties in the Senate.  Other than that, it‘s a pretty slim portfolio.

Now, taking the best possible reading of the first statement, she may have been suggesting that a vice president has powers derive from the president and the president can give them essentially a portfolio of duties to do.  In fact, she says that she‘s an energy expert, much like the man she wants to replace.  And I expect she would claim the same energy portfolio.

But some of her statements are obviously just simply wrong.  I mean, the framers that she referred to, did not want to create sort “Night at the Improv” where everyone is allowed to reinvent themselves.  To the contrary, they were sticklers in terms of people staying within the lines of their defined duties.  They viewed it as very dangerous when people try to reinvent themselves.

That‘s the whole point of the system they created of the separation of powers and checks and balances.  You know, this is a system that‘s idiot-proof.  And we‘ve tested that.  But the only rule that can‘t be broken is you can‘t really break the rules.  You can‘t go outside those lines, you stay within the lines, you stay doing your duties and it‘s a system that works pretty darn well.

MADDOW:  When she says that she wants to exercise a bit more authority, is it possible that she means something specifically about the way she would preside in the Senate?  Is it possible, is there a legislative wish-list that even Cheney‘s office hasn‘t been able to redeem, at this point?

TURLEY:  Well, she does seem to believe that she can continue this effort by Dick Cheney to reinvent his office.  But, the interesting thing is that Dick Cheney didn‘t reinvent his office.  Courts have routinely ruled against him and the president in all of their improvisational efforts with the Constitution.  What Dick Cheney was doing was asserting the maximum amount of authority he could have while denying all the responsibilities that he has on the statutes.  The courts did not allow that.

And so, there‘s a bit of a disconnect in what you hear from Governor Palin, is that if she‘s not aware that the courts really swatted back these efforts, and have, in fact, reinforced the constitutional limits on that office.

And what concerns me most, Rachel, is that, you know, Governor Palin is refusing to comply with a subpoena issued by her state legislature in the so-called troopergate scandal.  And I have very little interest in the scandal.

What I have interest in is the simple fact that you have a legitimately issued subpoena that a court, just shortly before the debate, said was a valid exercise of the legislative branch in her state.  She has simply refused to comply.  Even her husband, who doesn‘t hold an official position, has refused to comply with the subpoena.

I know of no case in the history of this republic when a president

or a vice presidential candidate has sought the office while refusing to

comply with a constitutionally issued subpoena.  It‘s a very frightful

thing.  And it‘s something that Governor Palin is going to have to deal

with.  She now has a judge who says that‘s a valid subpoena.  And -

MADDOW:  We called a number of reporters today in Alaska who have been covering her tenure in Alaska and several of them suggested when we asked the question, have you seen anything Cheney-esque in the way Palin has behaved in Alaska, several of them suggested, well, she did try to shield her e-mails from scrutiny by calling an executive privilege and she is defying these subpoenas to hear her say that she wants an even bigger job as vice president than Cheney has taken is chilling.

You have definitely not Talked Me Down about her ambitions.  All though, her ability to pull it off may still leave me with some comfort.

Jonathan Turley, thank you so much for joining us.

TURLEY:  Thanks a lot, Rachel.

MADDOW:  Professor Turley is at George Washington University, in the law school there.

This morning, the Labor Department announced that unemployment is now at its highest level in five years.  Faced with this mounting economic crisis, John McCain said he wants to clean up, quote, “the mess created by greed and crony capitalism of Fannie Mae and Freddie Mac.”

OK.  A noble pursuit.  But that‘s sort of the mortgage mess.  This is the job‘s—it‘s a different thing (ph).  And we got a campaign alert.  A senior advisor for the McCain campaign is actually going to be on this show.  We had to get a new blinking alert just to call (ph) about the fact that our persistence has finally paid off.

(COMMERCIAL BREAK)

RACHEL MADDOW, HOST:  If you withdraw your campaign from a battleground state that your candidate said, quote, “will determine who the next president of the United States is,” does that mean you conceded the battle?

Team McCain bails on Michigan.  How does the campaign explain that?  Well, in a RACHEL MADDOW SHOW first, a representative of the McCain campaign joins to talk about it.  Hooray. 

First though, it‘s time for a special Friday edition of underreported, holy mackerel stories in today‘s news.  Old reliable Pat Robertson has made another grim prediction, this time, it‘s a war in the Middle East leading to nuclear strikes against coastal cities in the United States.  And he says it will all happen between Election Day and the inauguration.  Really?

In a prophecy posted on his Web site, Robertson says he believes Israel will bomb Iranian nuclear sites.  Iran and possibly Syria will respond, then Russia will be involved.  And then, we get the nuclear strikes against U.S. coastal cities.  Robertson is demanding fervent prayer to avert this catastrophe. 

The good news here is that Robertson predicted that we‘d get nuked two and a half years ago, too.  He also predicted Bush‘s second term would be, quote, “victory after victory.”  He predicted a Russian invasion of Israel way back in 1982 - actually scratch that.  He didn‘t predict that, he guaranteed that. 

Robertson said that Ariel Sharon had a stroke because of God‘s policy on Israel.  He said Hurricane Katrina hit New Orleans because of abortion.  He agreed with Jerry Falwell that 9/11 happened because of ACLU.  Pat Robertson claims to base all of this on biblical prophecy.  When he said in January 2007 that we‘d be hit by that nuclear attack that would kill millions, and that didn‘t happen, Robertson‘s explanation was this, quote, “Did I miss it?  Possibly?  Or did God avert it?  Possibly.  But whatever, it didn‘t happen, so we can all rejoice.” end quote. 

And finally, last night, during the vice presidential debate after Joe Biden quoted the top general in Afghanistan saying an Iraq-style surge strategy would not work there, Sarah Palin tried to rebut that claim. 

(BEGIN VIDEO CLIP)

GOV. SARAH PALIN (R-AK), VICE PRESIDENTIAL CANDIDATE:  Well, first, McClellan did not say definitively that the surge principles would not work in Afghanistan.  The counterinsurgency principles also could work in Afghanistan.  McClellan didn‘t say anything opposite of that. 

(END VIDEO CLIP)

MADDOW:  OK.  A couple problems.  The general said very much the opposite of that - Biden was right, Palin was wrong.  And also, the commanding general of U.S. forces in Afghanistan is David McKiernan.  Gen. McClellan was commander of the Union Army during the Civil War until President Lincoln fired him.  McKiernan, McClellan - not a shining moment for Sarah Palin. 

But slack is granted for what amounts to a verbal typo.  As for spouting utter falsity about what McKiernan said about what would work in Afghanistan and what wouldn‘t, no slack there.  Sorry, no slack at all. 

(COMMERCIAL BREAK)

MADDOW:  The bad news about the American economy recently has also been bad news about John McCain‘s presidential bid.  And now, on the heels of the $700-billion rescue plan he supported, McCain may find himself with a new vulnerability on the subject on his right flank.  How did he get here? 

Well, back in the days of somewhat straighter straight talk from the senator, McCain freely and repeatedly announced his lack of understanding about the economy.  He told “The Wall Street Journal” editorial board in 2005, quote, “I‘m going to be honest.  I know less about economics than I do about military and foreign policy issues.  I still need to be educated.” 

This past December on the campaign trail, he said, quote, “The issue of economics is not something I understand as well as I should.  I‘ve got Greenspan‘s book.” 

Even more recently, as the economy has been swirling around the toilet, he‘s let the sad truth be known about his economic understanding in other ways. 

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE:  Now, I‘m not an expert on Wall Street.  I‘m not an expert on some of this stuff.  I don‘t believe we‘re headed into a recession.  I believe the fundamentals of this economy are strong and I believe they will remain strong.  But I want to convince you of my belief and my firm conviction that America‘s economy - the fundamentals of it are strong.  Our economy, I think, still - the fundamentals are strong. 

(END VIDEO CLIP)

MADDOW:  That last insight came 18 days ago and may have marked moment zero of McCain‘s political downfall surrounding this issue.  The initial response from McCain campaign to their political troubles about the economy was to attack Barack Obama for having caused the financial crisis somehow, trying to link Obama to troubled mortgage institutions Freddie Mac and Fannie Mae. 

That sort of blew up in the McCain campaign‘s face because of continuing revelations about John McCain‘s campaign manager having been on the payroll of Freddie Mac, not to mention his Senate chief of staff.  Now, the McCain stance on the economy has descended into frank incoherence.  McCain‘s running mate, Sarah Palin, is not helping. 

(BEGIN VIDEO CLIP)

PALIN:  But ultimately, what the bailout does is help those who are concerned about the healthcare reform that is needed to help shore up our economy.  Helping - oh, it‘s got to be about job creation, too, shoring up our economy and putting it back on the right track.  So healthcare reform and reducing taxes and reining in spending has got to accompany tax reductions. 

(END VIDEO CLIP)

MADDOW:  Logically, reducing taxes does have to accompany tax reductions for the healthcare reform job bailout thing.  Sen. McCain‘s written response to today‘s horrendous jobs report honestly made just as little sense as that statement from Sarah Palin.  The statement reacting to the news that the economy lost another 159,000 jobs last month said this, quote, “I will reverse out-of-control spending, end the wasteful and corrupting practice of earmarks and get the budget back to balance.” 

Earmarks and spending are causing unemployment?  Really?  And McCain

is going to balance the budget?  Is that before or after the extra

trillions he‘s planning in red ink with tax cuts and -

If you want incoherence, how about McCain voting for the bailout bill then suggesting the next day that it should be vetoed by the president?  A majority of House Republicans today still voted against the bailout bill, effectively voting against John McCain on this issue. 

Out of this mess and morass that John McCain is in on the economy, will the most important political outcome of all this be a revolt against him from the right within his own party?

Joining us now is one of the House Republicans who voted against the bailout bill is Rep. Steve King of Iowa. 

Congressman King, we‘re really happy to have you on the show tonight. 

Thank you for joining us. 

REP. STEVE KING (R-IA), VOTED AGAINST THE BAILOUT BILL:  Well, thanks for having me.  I appreciate it.

MADDOW:  President Bush and John McCain and your party leader in the House, John Boehner, all called on you and other House Republicans to vote yes on this bailout bill.  Why did you vote no?

KING:  My convictions are on the side of free markets.  It‘s $700 billion.  It looks to me like it‘s a leverage buyout of toxic debt off Wall Street as engineered by Henry Paulson.  And I don‘t have the confidence in Paulson that he can spend our taxpayer dollars and turn it into a profit for the government.  It is a nationalization of some of that debt.  This is the Rubicon for which we might cross. 

Once we go this far and start buying up these toxic debt, now we have taken a stand that will put us in a position where we can‘t say no to any business that‘s too big to be allowed to fail.  That‘s where I draw the line and that‘s where most of my Republican colleagues drew the line today. 

MADDOW:  Did Sen. McCain try to get you to switch your vote?

KING:  No, I didn‘t hear from him.  I didn‘t hear from his lobbying or his whip team.  But then, I took a pretty strong stand early and people know that I‘m not one of those negotiable votes when you get down to the ends so, they don‘t work me very hard.  There‘s lower fruit to be harvested when it comes time to get those votes. 

MADDOW:  When you campaign this fall, do you expect to campaign in part on your vote against the bailout?

KING:  All right.  The message is out across everywhere and people are talking about it in the streets.  So, yes, I will stand on this vote.  I‘m one of those members, one of 11 that voted no on the Katrina funding, the $51.8 billion to Katrina.  That was the best vote I put up in Congress in six years. 

This vote is also a good vote.  It‘s a free enterprise vote.  It‘s a fiscal responsibility vote.  And I‘ve introduced a bill today, that all the pieces I was seeking to get negotiated into this bill to get a vote on.  It‘s a private sector solution.  It suspends capital gains taxes on rescue capital that would replace the taxpayer dollars and also capital gains on the $12 trillion that potentially could be attracted back to the United States - that‘s U.S. capital and foreign investments.  Those are two big things.

And also the reform for the Community Reinvestment Act and Fannie Mae and Freddie Mac.  We have done nothing on this legislation to reform the underlying problem.  I think it‘s irresponsible.  And I think we won‘t see the political climate again that would have let us do that.  So that‘s another reason to be a no, Rachel.

MADDOW:  Even though you come from a completely different place in the political spectrum than somebody like Dennis Kucinich.  When I spoke with him about his no vote on this bill, he said a lot of the same things. 

I will say though in terms of the political import of this bill - not just the policy import, but the political import.  It seems from the outside like the Republican Party has a very deep division on this issue. 

And I‘m struck by the fact the RNC is planning a multimillion-dollar ad buy for an ad that attacks Barack Obama for supporting the bailout.  That is effectively an ad against John McCain.  Do you think that they are hoping that no one will know that there is a divide in the Republican Party and that McCain supported it, too? 

KING:  There is a divide in the Republican Party.  There‘s a divide among Democrats, too.  But what I saw happen on the floor on Monday was the defeated leadership on both sides of the aisle and the White House and the Senate and the Senate leadership when we voted the bill down on Monday.  That is a phenomenal thing to see Democrats and Republicans come together. 

Steve King and Dennis Kucinich vote together on something like that.

And I can write the ads for Democrats or Republicans for or against, Rachel.

MADDOW:  I‘m sorry to interrupt.  I do think we should be clear that a majority of Republicans in the House voted against their leadership.  A majority of Democrats voted with their leadership even though there is this dissent.  And I get - I just want to know if John McCain is going to be vulnerable here.  Essentially, you are going to be campaigning against him every time you go out in a stump in Iowa this fall. 

KING:  Oh, I‘m going to stand on fiscal responsibility.  I don‘t want to campaign against John McCain.  I see big differences there than I could give you that commercial.  But it‘s going to be hard for Democrats to attack John McCain for this position when their presidential candidate Obama has taken the same position. 

So I think the same problems there exist on either side of this argument.  But today, the American people were opposed to the bailout. 

They got a bailout anyway.  We‘ll see how these markets turn.  I mean, it

could be a huge shift one way or the other between now and the fourth of

November. 

I don‘t think anybody knows, but I can tell you there are very many nervous legislators, those who voted yes and those who voted no.  To me, I‘m confident today and I‘m comfortable with my vote.  And I‘m going to stand with John McCain for a lot of other reasons as well. 

MADDOW:  Congressman Steve King of Iowa, this is going to be fun to watch. 

Thanks for coming on the show.  Have a good weekend. 

KING:  Thank you, Rachel.  Appreciate it. 

MADDOW:  Now, this RACHEL MADDOW SHOW campaign alert.  The blinking thing is back.  A programming bulletin for you.  This just in.  Our persistence has paid off.  A senior McCain campaign advisor is going to be here next to talk to us here on this show for real.  Coming up. 

(COMMERCIAL BREAK)

MADDOW:  Our pure quantitative political measures.  It has been a rough couple of weeks for the McCain campaign.  On September 14th, the day before Lehman Brothers went bankrupt, Sen. McCain led Barack Obama by two points in Gallup‘s Daily national tracking poll. 

Today, Sen. McCain trails in that same poll by seven points.  That is a nine-point switcheroo.  Along with the trouble in Wall Street and other really scary money meltdown prospects, the McCain camp‘s political slide tracks almost exactly our time on the air here at this show.  

As a result, since this show started, we have been talking a lot about what‘s going wrong with the McCain campaign and what they the candidate could do about it. 

But we have yet to have the benefit of hearing directly from anyone in the McCain campaign to share with us their view of the state of the race.  That all changes tonight, and I could not be happier about it. 

In a bit of MADDOW SHOW breaking news, I‘m very pleased to welcome to the show, from the McCain, senior policy advisor Nancy Pfotenhauer.  Before joining the campaign, she was president of the Independent Women‘s Forum. 

Ms. Pfotenhauer, thank you so much for joining us tonight. 

NANCY PFOTENHAUER, MCCAIN SENIOR POLICY ADVISOR:  I‘m delighted to be here, Rachel.

MADDOW:  Your campaign this week unexpectedly pulled out of Michigan, a state in which you have spent millions on TV ads and which the senator spent a lot of time campaigning.  Is this a minor adjustment or does this reflect a big strategic change?

PFOTENHAUER:  Well, you know, Rachel, that‘s not my area of expertise but the folks who do this for a living tell me this is a normal act for this stage in the process where you‘re running up against the clock and you just have to make really good decisions about where you allocate your resources. 

And frankly, the Obama campaign has also pulled out of states.  And you just have to get very, very serious about your path to the electoral vote count.  And so I think that by listening to the experts we can get to 260 votes pretty well and the question is, how do you get from 260 to 270.  So I‘m sure the Obama campaign has done and will do similar adjustments.

But this is one that we just needed to do at this time. 

MADDOW:  Do Gov. Palin and Sen. McCain disagree about Michigan?  I was surprised ...

PFOTENHAUER:  I know.

MADDOW:  ... that she told fox she‘d like to keep campaigning there. 

PFOTENHAUER:  She‘s got a lot of - she‘s very feisty.  She‘s obviously a great competitor.  I think you could tell last night.  I was watching her and I could tell why she was such a great athlete because, I‘ll tell you what, she relaxed and smiled into the fight.  She just - she really relaxed into the argument.  And there - you know, that level of willingness to fight for every vote, I think, speaks very well for Gov. Palin.  But first, she was ready to get on the plane and go there today, wasn‘t she?

MADDOW:  You could safely say that she‘s being overruled.  She‘s not going to be allowed to carry on in Michigan on her own, is she?

PFOTENHAUER:  I haven‘t seen an official schedule change.  Let‘s put it that way.

MADDOW:  I hear you.  Now, “The Washington Post” today had a story about Sen. McCain‘s chief of staff in the Senate who apparently previously worked as a lobbyist for Freddie Mac.  Coupled with your campaign manager Rick Davis‘ past associations with Freddie Mac and Fannie Mae, is this going to end the McCain campaign‘s efforts to try to say that it‘s Barack Obama who has the worrying associations with those institutions?

PFOTENHAUER:  Well, you know, Rachel, I think everybody has plenty of associations to point out and point to, rather.  And that‘s part of - it‘s almost emblematic of the problem that occurred.  I mean, Freddie and Fannie were government-sponsored enterprises as you know.  They were basically given a leg up by the government and allowed to grow way out of control.  I mean, I think the most important thing is that when this was flat, when this became known back in 2005, Sen. McCain was one of the original co-sponsors out, there calling for a bank style regulator. 

What that meant is he said, “Forget about this Freddie and Fannie being able to ride the escalator up with no oversight.”  He wanted somebody - a regulator who would have the ability to come in and inspect the books, offer cease and desist orders, inspect programs and report on progress and have minimal capital requirements.  This was basic good government. 

And this was happening, remember, at the time when there had been a huge light shown on the fact that they were manipulating the balance sheets in order to trigger incentive pay.  You also had fed Chairman Greenspan at the time coming out, saying if they were not reformed, they could eventually cause systemic financial risk, something we‘ve been dealing with a lot in the past couple of weeks. 

So I think the most important thing is who did the right thing when, you know, the canary was singing in the coal mine.  And that was John McCain.  And frankly, Barack Obama was just silent on the issue, Rachel.  He didn‘t offer his own bill.  He didn‘t co-sponsor.  He just, as we said, voted present. 

MADDOW:  Well, the issue that you‘re talking about, the Fannie and Freddie regulation bill, was put forward by Chuck Hagel.  Sen. McCain didn‘t come on as a co-sponsor for that until a year after the bill had been filed.  And it is the idea that he was sort of taking on these institutions I think, and I think in a lot of people‘s eyes, is really undercut by the fact that the institutions set up by Fannie and Freddie to lobby for them having less regulation was headed up by the campaign manager for your campaign. 

And his chief of staff in the senate was lobbying for Freddie Mac up to 2004.  It‘s hard to describe him as an anti-Fannie-Freddie crusader given those things. 

PFOTENHAUER:  Rachel, be fair.  Be fair.

MADDOW:  Sure. 

PFOTENHAUER:  You‘ve got Franklin Raines.  You‘ve got Jim Johnson.  You‘ve got an Obama campaign that will not release their list of advisers.  

(CROSS TALK)

MADDOW:  But can I talk about Franklin Raines for a second?  Franklin Raines said he never advised the Obama campaign on housing issues ever.  The Obama campaign said the same thing.  The quote that you guys have used for your ad on that subject is from the style section in “The Washington Post” and is denied by all the parties involved.  I‘m not sure that Franklin Raines is a great peg for you guys to hang the Fannie-Freddie association on him. 

PFOTENHAUER:  Yes.  He said it and it was reported.  He said it publicly and privately.  OK.  So let‘s talk about Jim Johnson, then, the better.  But to get to the substantive issue because that‘s more my bailiwick.  John McCain actually went out there and sponsored a bill in 2003 calling for a regulatory body that would be housed at treasury to come in and have oversight over Freddie and Fannie.  He was really out there even ahead of 2005. 

So I don‘t think it‘s fair to try to portray that he wasn‘t active.  He was active.  And remember, this was taking place - it was ex-committee, if you will, meaning it was not even one of his principal committees.  And plenty of people did the wrong thing on this or were silent, like Barack Obama. 

So I think if you use that lens, then you‘ve got to be able to use it fairly and focus on his efforts.  Sen. McCain, although he‘s a strong proponent of the free market, he has never endorsed the concept of unbridled market, whether it‘s pharmaceutical industry, the tobacco industry, sponsoring legislation to fight corporate corruption, instituting higher penalties for that. 

MADDOW:  Can I ask -

PFOTENHAUER:  He‘s worked with Sen. Levin on corporate compensation and making sure those things were overt when stock options were being hidden from the shareholders.  I mean, he‘s just had a career of doing what he thinks is the right thing and he‘s never been afraid to step in when he thinks government oversight is warranted. 

MADDOW:  I do think, just to be fair, and I do so appreciate you coming on the show and talking with us about this, Nancy.  I think to be fair, I think, the problem that Sen. McCain is going to have in making that case is the amount of tape there is of him proclaiming himself as a deregulator. 

And that‘s - and I think political fortunes have changed and the interpretation of the record is going to look different depending on which side you look at it from.  But that‘s going to be the fight he is fighting.  Nancy Pfotenhauer, I‘m so grateful you took the time to meet with us. 

Thank you for joining us.

PFOTENHAUER:  Thanks, Rachel.  

MADDOW:  We‘ll be right back.

(COMMERCIAL BREAK)

MADDOW:  Thank you for watching tonight.  We did not have time for “Just Enough” with Kent Jones.  But we‘ll have that for you Monday.  We‘ll see you back here then. 

You can also hear my radio show 6:00 p.m. Eastern coast to coast on

Air America Radio.  “COUNTDOWN WITH KEITH OLBERMANN” starts right now. 

Have a great weekend.  

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