updated 10/7/2008 12:17:02 PM ET 2008-10-07T16:17:02

Guests: Bill Richardson, Paul Krugman, Kent Jones

RACHEL MADDOW, HOST: Thanks, Keith. And thanks to you for staying with us for the next hour.

We, too, have plenty to report about Sarah Palin in attack mode and John McCain trying to turn the page on the economic crisis. It seems like somebody forget to tell the economic crisis it wasn't important anymore.

(voice over): Bailout or no bailout, the stock market plunges again, dropping below 10,000 for the first time in four years.For the McCain campaign, still struggling to find an economic message other than "I don't get it," the persistence of kitchen table issues in this election has driven them to break out the kitchen sink.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN, (R-AZ) PRESIDENTIAL CANDIDATE: All people want to know is what has this man ever actually accomplished in government? What does he plan for America? Who is the real Barack Obama?

GOV. SARAH PALIN, ® VICE PRESIDENTIAL CANDIDATE: I'm afraid this is someone who sees America as imperfect enough to work with a former domestic terrorist.

(END VIDEO CLIP)

MADDOW: If you can't beat Obama on the issues, beat him up as a terrorism-loving, scary guy. Governor Bill Richardson of New Mexico joins us on the McCain-Palin effort to turn a page that doesn't want turning.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA, (D-IL) PRESIDENTIAL CANDIDATE: Senator McCain and his operatives are gambling that they can distract you with smears rather than talk to you about substance.

(END VIDEO CLIP)

MADDOW: Americans never say they want shenanigans and smear tactics, but sometimes they work nonetheless. Will having Sarah Palin deliver the attacks on Barack Obama turn her back into an asset for the McCain-Palin campaign? Pat Buchanan and I will undoubtedly not see eye-to-eye on that. On the economy, Talk Me Down. The market dove 700 points when Congress didn't pass the bailout, then the whole world went into the tank when they did pass it. How steep is this downward plight and where does it bottomed out? Paul Krugman of the "New York Times" gives us the disconsolate truth. And, perhaps the most bewildering political move of this bewildering political season with the economy in free fall-and his poll numbers doing the same, McCain apparently decides to commit political suicide, by grabbing the most shocking of all third rails in American public policy. He's promising to cut what? It's not an accusation being made against him, it's what he's promising? Florida Congresswoman Debbie Wasserman Schultz joins us to explain McCain's most inexplicable political gamble yet and which state this gamble may cost him.

THE RACHEL MADDOW SHOW starts now.

(on camera): Today, Wall Street gave its initial vote on the $700 billion financial bailout bill and it was not pretty. By closing, the stock market plunged 369 points, which actually was a relief after the Dow had spilled 800 points onto the floor by midday.

(INAUDIBLE) rescue plans? The bailout was supposed to improve confidence in the market. And you can see how well that's going. We were told this was our shoot the moon strategy that Wall Street needed this to function, right? Well, the reaction today on the first full day of trading after it passed was about as alarming as the reaction last week to it not passing, with world markets joining in the fall down the proverbial stairs. And nearly 60 percent of Americans now saying the economy is their most important issue, the McCain campaign has turned to a new strategy-denial. Just don't talk about it. Just don't talk about the economy and it won't be everyone's big issue anymore? One McCain advisor said before today's bad news in the markets, quote, "We are looking forward to turning a page on this financial crisis." Another top McCain strategist putting it in more dire terms, quote, "If we keep talking about the economic crisis, we're going to lose." In other words, instead of talking about the most important issue for Americans right now, let's instead unleash 1,000 non-issue-related attacks at Senator Obama and hope something sticks. Campaigning in New Mexico today, Senator McCain launched his new strategy.

(BEGIN VIDEO CLIP)

MCCAIN: For a guy who's already authored two memoirs, he's not exactly an open book. What does he plan for America? In short, who is the real Barack Obama?

(END VIDEO CLIP)

MADDOW: Now, what you may or may not have heard there was an audience member responding to Senator McCain's question of who is the real Barack Obama with his answer-a terrorist. Check it out again.

(BEGIN VIDEO CLIP)

MCCAIN: What does he plan for America? In short, who is the real Barack Obama?

UNIDENTIFIED MALE: Terrorist.

(END VIDEO CLIP)

MADDOW: That disturbing comment was perhaps outdone at Governor Palin's rally this afternoon in Clearwater, Florida. The "Washington Post" reports an audience member interrupted her rant to get Senator Obama's alleged ties to 1960's radical William Ayers by screaming, quote, "Kill him." It's not clear whether the "him" there referred to Senator Obama or William Ayers, by the mere mention of killing someone at a political rally is not the way it's supposed to work in this country. It's horrific. And nobody is suggesting Senator McCain and Governor Palin should be held responsible for audience outburst like that, but those incidents seem to be a by-product of a new shift in McCain campaign's strategy, an attempt to throw the kitchen sink at Senator Obama. To move this campaign back towards "lipstick on a pig" and away from things like, say, the economy or healthcare. What does it look like to throw the kitchen sink at this point in the campaign? Well, start by sending Governor Palin to accuse Obama of, quote, "palling around with terrorists"-a reference again to Bill Ayers. Have her use terms like "fearful" and "afraid" when talking about Obama and then have one of your Florida supporters introducing Palin refer to Obama this way.

(BEGIN VIDEO CLIP)

MIKE COUNTY, LEE COUNTY, FLORIDA SHERIFF: On November 4th, let's leave Barack Hussein Obama wondering what happened.

(APPLAUSE)

(END VIDEO CLIP)

MADDOW: Mismatch (ph), right? Also, rely on conservative columnist, Bill Kristol to raise the Jeremiah Wright issue for you-no way. Totally, didn't see that coming. Have the Republican National Committee asked for an auditable, the donations the Obama campaign has received. Have Senator McCain's brother, mocked Obama's supporters in Virginia as communists. And release a new TV ad called "Dangerous," attacking Senator Obama for dishonoring American troops after he characterized, a year ago, the fight in Afghanistan in almost exactly the same as the way of the U.S. commanding general there.

(BEGIN VIDEO CLIP, MCCAIN CAMPAIGN AD)

NARRATOR: Who is Barack Obama? He says our troop in Afghanistan are.

SEN. BARACK OBAMA, (D-IL) PRESIDENTIAL CANDIDATE: Just air raiding villages and killing civilians.

NARRATOR: How dishonorable.

(END VIDEO CLIP)

MADDOW: All of this from the same candidate who claimed to have an optimistic refreshing outlook on the race just five months ago.

(BEGIN VIDEO CLIP, FOX NEWS, APRIL 24)

MCCAIN: Americans want a respectful campaign.

UNIDENTIFIED MALE: Sure.

MCCAIN: They do, they want it. Now, people say, well, negative ads move numbers, they may. But do we have to go to the lowest common denominator? I don't think so. We want this race decided on issues.

(END VIDEO CLIP)

MADDOW: Or you mean issues like pastors, middle names, communists and the '60s? Those sorts of issues? On the same day the stock market closed at its worst mark in almost four years, really? Those are your issues?Joining us now is New Mexico governor, Bill Richardson, a former Democratic presidential candidate. Governor Richardson, thanks for joining us tonight.

GOV. BILL RICHARDSON, (D) MEXICO: Thank you, Rachel. Thanks for having me.

MADDOW: Senator McCain campaigned today in your home state of New Mexico, trying to raise fears about Senator Obama, do you think Senator Obama is at this point still so new and unfamiliar to the American public that these types of "who is this guy attacks," those types of attacks will work?

RICHARDSON: No, because what you have is basically desperation, I think, more than anything. Senator McCain and Governor Palin are looking at poll numbers in battleground states like New Mexico because McCain came here very unexpectedly after finding out he was several points behind after being ahead. And, I think, if you look at Ohio, you look at Florida, you look at Pennsylvania, you look at a number of battleground states where this race is going to be decided, ever since Senator McCain's erratic behavior on the financial crisis and now Governor Palin's apparent liberation after the debate, their strategy, obviously, is throw the kitchen sink on character, on nasty stuff, hope something sticks. That's the new strategy. And I'm sorry that it was unveiled in my state.

MADDOW: You know, the ironic point here maybe that the attacks from the McCain campaign have obvious rejoinders. I mean, they say William Ayers, you could say J. Gordon Liddy, they say Jeremiah Wright, you could say Pastor John Hague. They could say Obama supporters are communists and then rejoinder it with Todd Palin wanting to succeed from the United States for hanging with the Alaska Independence Party. These things could be fought back, tit-for-tat, fire for fire. Should Senator Obama punch back like that or should he just stay above the attacks?

RICHARDSON: No, he should stay above the attacks. Barack Obama is appealing to the American people. I see this every day because he is staying above the fray, because he's a positive candidate, because he wants us to bring back together, he wants the country to heal. He wants bipartisanship. He's inspiring young people. He should not get into this. Obviously, you have to respond to ridiculous attacks like Ayers and the terrorist attack, Obama was eight years old when Ayers was running around with a Weatherman or whoever he was. So, you got to point out facts. But I believe that Obama's appeal, and it gets stronger everyday, is because the voters see him as somebody that can change the country, that can bring bipartisanship. They see all these issues that we're not dealing with, healthcare, immigration, the war, the financial crisis, now that is not resulting in much. And they see somebody that maybe can bring people together to fix it. I think that's his appeal. So, I would advise him not to get in the gutter like the McCain campaign has.

MADDOW: What's your reaction to the statement from two senior McCain advisors this weekend saying, "We need to turn the page on the economy," that they want to actively avoid talking about the economy. On a one hand, it's a remarkable statement for the campaign to admit. On the other hand, it seems like the McCain campaign is now leaking as much as Hillary Clinton's campaign was when their fortunes took a downturn. Do you think this might reflect some sort of problems, close to home problems, on the campaign for Senator McCain?

RICHARDSON: Well, it obviously isn't a disciplined campaign because these leaks come out all the time. But, those leaks, basically, make sense. Right now, the economy is the number one issue. Senator Obama has looked presidential in handling the financial crisis. What he wanted in the package is in there-the oversight, the transparency, get the CEOs not to get their big bonuses, homeowner protection, taxpayer protection.Yet, John McCain was running around trying to intervene, meeting with House Republicans who had problem with the package. And, obviously, things have not worked. The package went down. And so, I sense that maybe the McCain campaign sees the writing on the wall and tactically saying, if they discuss the economy, it's always going to bound back against them because-the reality is, Senator McCain was chairman of the Senate Commerce Committee that were supposed to do the oversight for many years on this financial institutions. And he supported President Bush over 90 percent of the time on all his votes, his deregulatory attitude, the war. You know, so, he's really in a box and when you're in a box, you got to throw the long bomb and hope that it sticks. Unfortunately, this long bomb is a negative one; it's nasty; it's below. Senator McCain's dignity as a political leader, which he has been, you know, it's just not the McCain that I've known for many years. It's an erratic campaign, all the way.

MADDOW: One last question for you, governor. There's plenty of tape out there and we played some of it in the intro here, of Senator McCain pledging to run a respectful campaign. Even Cindy McCain is saying the negative attacks aren't going to come from their side in this election season. Is their any potential for this McCain strategy, as you described it, as I agree, this sort of a kitchen sink strategy-is there a potential for there will be blowback against him for campaign that way or is that a political science myth?

RICHARDSON: No, I think there is blowback. I think that he's already going down in the polls. I think, sizably, almost with every economic ethnic group, with women, with people that had some reservations about Senator Obama. The contrast with Obama, Obama being presidential during this financial crisis; McCain being topsy turvy, changing his mind, has had an effect and unfortunately, it seems that McCain has decided in the next 30 days to continue this.And Governor Palin, this attack on Senator Obama on the terrorism connection, which is so absurd, it's not going to stick. It's not going to help. I think you're going to see those poll numbers, the margin for Obama increased. And I think you're going to see that happening, especially after the debate on Tuesday, where I expect Senator McCain will continue being negative and Senator Obama, if he asks for my advice, be positive about the country, be presidential.

MADDOW: New Mexico Governor Bill Richardson, thank you for your time tonight. It's nice for you to join us.

RICHARDSON: Thank you.

MADDOW: Turn the page on the economy, Senator McCain? I'm not quite ready to turn the page. In fact, I'm kind of freaked out about the economy. Wasn't the bailout supposed to make everything better, at least, for a day or two? So, why did the market dropped scarily today?

Up next: "New York Times" columnist, Paul Krugman tries to Talk Me Down. And later: Sarah Palin was also in full on page-turning mode today, hurling slims so old that had fermented out on the campaign trail.My fake uncle, Pat Buchanan, will be along later on the show to tell me that, really, Sarah Palin was a great choice for vice president-really. Or, maybe Pat will come to his senses during the commercial break and will agree. But first, one more thing about the McCain campaign "kitchen sink" style attack strategy and how it's playing where it matters. The voters in the very important swing state of Virginia, the northern part of which John McCain's brother, Joe, has deemed communist are putting Obama first when asked for a preference. In the new Survey USA Poll, Obama is 10 points ahead of McCain in Virginia. And the latest Suffolk Virginia Poll shows Obama winning there by 12 points. Keep in mind here, the last time Virginia voted for a Democrat for president, Lyndon Johnson over Barry Goldwater in the first election of Barack Obama's lifetime. In case the McCain camp is tracking these things, I have a feeling they worry about the economy in the red states, too.

(COMMERCIAL BREAK)

MADDOW: This weekend, Sarah Palin made a last-minute, hastily added campaign stop in Nebraska. Why, you may ask, in the homestretch of the campaign would the Republican ticket spend time in fire engine red Nebraska, a place that hasn't gone Democratic since 1964? Ask Sarah Palin.

(BEGIN VIDEO CLIP, SUNDAY)

PALIN: I'm going to Nebraska because I want to go to Nebraska.

(END VIDEO CLIP)

MADDOW: Visiting the Kool-Aid museum in Hastings, a downtown Omaha night life? Maybe. But the more likely motive is that McCain-Palin can't afford not to visit the state. Nebraska is one of only two states whose electoral votes can be split with an individual vote going to the winner of each congressional district. Barack Obama has made a push into the state's second district and if things are close, that one district could make all the difference. When it's this late in the game and the Republican nominee or his running mate are shoring up Nebraska? That campaign might soon need a second kitchen sink to throw.

(COMMERCIAL BREAK)

MADDOW: For the last three weeks, Treasury Secretary Henry Paulson and others have warned that if Congress didn't pass that $700 billion bailout, we would have an economic disaster on our hands. So the rescue bailout thing passed. The president scribbled it into law on Friday afternoon. And then, it's not like things got a whole heck of a lot better. On Friday, after the bailout was signed into law, the Dow dropped 157 points. Today, the Dow dropped 370 points, bringing the index below 10,000 for the first time in four years. It could have been worse. At one point today, the Dow was down as much as 800 points. Banks are still not lending to banks. That is prompting the world's central banks to pour massive amounts of money into a number of countries' financial systems. There's also a pressure on the Federal Reserve and other major central banks to consider interest rate cuts. That deep sigh of relief on Friday afternoon due to Congress' actions, in other words-it's given way again to more wobbly (ph) need dread about what happens next. Tonight, I play proxy for everyone I know or know about. And here to try to talk me and the rest of us down is Paul Krugman, a "New York Times" columnist, professor of economics at the Woodrow Wilson School at Princeton.

Paul Krugman, thanks for joining us, again.

PAUL KRUGMAN, NEW YORK TIMES: Good to be on, Rachel.

MADDOW: Do we look at today's market and say the bailout didn't work or do we look at it and say, wow, it would have been so much worse without that bailout?

KRUGMAN: You know, it could be both. But, you know, look-a lot of people are looking at the Dow and that gets them really scared. But the professionals are looking at the credit markets and that have them even more scared. The truth is, what happens to the stock market is not that important. It's just kind of an imperfect reflection of the platonic truth of what's really going on in the credit markets which is really bad. They are completely frozen. The passing of the bailout didn't do anything.

MADDOW: How do we, as non-economist but concerned citizens with or without money, how do we monitor what's going on in the credit markets? What are the things that we should be paying attention to in order to know what the real indicators are?

KRUGMAN: Well, you know, there are-it's getting a little-we're all kind of scrambling now because it's hard. These are-we're not used to tracking this stuff. I look a lot at the interest rates on short term U.S. government debt-one month, three month treasury bills. The lower they are, the worse things are. If people are piling into these things because nothing else looks safe to them, that's a bad sign. And they are very low. They are about as low as they were, you know, in the worst of the crisis last week. So, naturally they're really bad. You will get-I'm going to get too technical here, but, you know, there are a bunch of indicators and they all failed to approve after the bailout was passed.

So, I thought we would be back at the drawing board in a couple months I'm now wondering if that's more like a couple weeks or maybe a couple days.

MADDOW: Should the bailout have imparted new confidence to the credit market? Should the bailout have helped more than it did?

KRUGMAN: Well, the trouble with the bailout plan was it never really made sense. And they never explained why it would work. But the story was, well, you know, this is-trust us, this will work and people will believe in it. And it will be kind of a self-fulfilling prophesy. And none of that happened. Some kind of bailout is needed. I think what they really need to do is go back to the drawing board. But this is a bad scheme. And, you know I'm pretty angry because it was clear from day one, when this started being discussed, that they did not have a clear view of why this thing was supposed to help and they stuck us with it. It would have been very dangerous not to pass it on Friday because who knew what would have happened. But it was the wrong bill.

MADDOW: If there is to be a new bailout, if one is needed.

KRUGMAN: Yes.

MADDOW: How would it be different? What would be bailed out differently than what has already passed and apparently not worked?

KRUGMAN: Well, this will have (ph), this was-we're going to buy some of these toxic wastes off the banks and that's how it's going to solve the problem. It wasn't clear why that would help. What we really need is we need-well, capital, the banks-we need to put money into system. And in effect, what always happens of a financial crisis is a partial nationalization-partial and temporary nationalization of the financial system. And that is, you know, I predict almost 100 percent confidence, that's how it will end. But, you know, the Paulson treasury wasn't willing to talk about that. So that-something which puts money in. Something where the U.S. government is providing cash and it's taking partial ownership shares in return. It is the way it's going to have to go. And the question is: How long before they are willing to do that? And at the rate things are going, it might not be very long.

MADDOW: And how long-yes, how long before the political reality catches up with what is the economic historical reality, I guess, is the situation?

KRUGMAN: You know, I'm having fantasies right now that as soon as the election is over, we're going to have to have, you know, we can't wait until January 20th. We may have to have, in effect, the incoming Obama team move into the treasury and start coordinating the rescue because this is going to be a very, very bad transition period, if we don't do anything until we actually have a new administration.

MADDOW: "New York Times" columnist Paul Krugman, you have completely not gotten anywhere near Talking Me Down. But, thank you for joining us.

KRUGMAN: Sorry.

MADDOW: I appreciate it.

KRUGMAN: Thanks a lot.

MADDOW: I think it's becoming a habit. We are a month into the Palin epoch and here's what the latest poll numbers say. People find here feisty, and mavericky, and nice, and not remotely capable of being the president of the United States. In a little while, Pat Buchanan defends Sarah Palin. We give him the tough jobs because we know he can handle it.

(COMMERCIAL BREAK)

MADDOW: The "united states of John McCain" just keep getting fewer and fewer. Last week, slumping poll numbers prompted McCain to pull resources from Michigan. The latest poll suggests he's behind in Florida as well. Do you think his mavericky new healthcare idea to slash Medicare will attract or repel voters in, say, Broward County? Palm Beach anyone? In a moment, I will ask Congresswoman Debbie Wasserman Schultz about McCain's truly unknowable strategy in the Sunshine State. First though, it's time for a few underreported holy mackerel stories in today's news. Today was the deadline for new voters to register in a whole bunch of battleground states, including Florida, Ohio, Pennsylvania, and Colorado. The "Washington Post" and the "L.A. Times" have crunched the numbers and in many of those battlegrounds, Democrats are leaving Republicans in the dust in terms of signing people up to vote. New voter registrations in North Carolina are six to one, Democratic over Republican. In Colorado and Nevada, new registrations are four to one in the Democrat's favor. Now, a note of caution in translating voter registration into actual votes, last time around, Democrats had hundreds of thousands more registered voters in Florida than the Republicans did but Bush did still beat Kerry there by a healthy margin. Still though, if the Obama and Democratic field operations are as good at getting their people to the polls on November 4th, as they have been at registering them to vote, November 4th will shape to be a very deep shade of blue. The U.S. Military today unveiled a new stability operations field manual. Huh? Translation for civilians - there's a major new American military doctrine in effect, one that formalizes and finalizes the death of this old idea.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, UNITED STATES PRESIDENT: I think what we need to do is convince people that live in the lands they live in to build the nations. Maybe I'm missing something here. Are we going to have a nation-building corps from America? Absolutely not. Our military is meant to fight and win war. That's what it's meant to do.

(END VIDEO CLIP)

MADDOW: Not anymore. The new field manual and the operations directive that goes along with it put nation-building on par with regular old shooting and bombing conventional warfare. The army's announcement of the new report describes its new goals as providing humanitarian aid to the suffering, promoting participation in government, spurring economic development, addressing the root causes of conflict among disenfranchised populations of the world. So the military is now the Peace Corps? When national security geeks talk about hard power versus soft power, the idea is that we need means other than guns and tanks to pursue American interests around the world. After all these years in Iraq and Afghanistan, the Pentagon now apparently agrees. Somewhere, though, someone is missing the point. We are supposed to have a government that does that stuff so we don't use the military for everything, right? And finally, the farmer's almanac is forecasting a, quote, "numbing winter" this year with below average temperatures and above-normal snowfalls. Great news for wool socks salesmen, bad news for city and town budgets. Last years' top winter forced cities to dip into their reserves of road salt for keeping byways safe in snowy and icy conditions. This year, demand is high, supply is low and the cost of trucking salt from place to place has spiked as much as the cost trucking anything has. The result? Road salt shortages across the country and prices that have doubled and or even tripled in some areas. In Oak Park Village, Illinois, a ton of salt that cost $40 is going for $140 this year. Move over oil barrels. This winter, the salt of the earth may be the hot commodity, if you will. Wow, that is my lamest pun, ever.

(COMMERCIAL BREAK)

MADDOW: If Americans wonder whether the multibillion dollar economic bailout we just bought ourselves is a dud, it turns out the McCain campaign is undergoing its own political bailout as in bailing out of Michigan and its 17 electoral votes. The latest NBC news map has Obama with a lead of almost 100 electoral votes today. The four states moving from toss-up to lean Obama are New Hampshire, Pennsylvania, Wisconsin and Michigan. Of the six remaining toss-up states, Obama is up five points in New Mexico, seven points in Ohio and 12 points in Virginia. But Sen. McCain's most precarious swing state might be Florida. Remember Florida? Twenty-seven electoral votes. Florida - can't without Florida, Florida, Florida. Florida, Florida, Florida? According to "The Washington Post," Democrats in the Sunshine State have registered more than twice the number of new voters that Republicans have. Four polls released in the past week show Obama leading McCain in Florida as well. For her part, Gov. Palin does not seem worried.

(BEGIN VIDEO CLIP)

GOV. SARAH PALIN (R-AK), VICE PRESIDENTIAL CANDIDATE: I love Florida. I love the sunshine. I love how warm it is. The last time our campaign came to Florida, it was up in the villages, and it was so much fun. Thousands of people up there. Golf carts everywhere. We got such a kick out of that. That was cool. Thousands of people out there to hear our message of reform and positive change.

(END VIDEO CLIP)

MADDOW: Actually, that message might be a problem, particularly in Florida. The McCain has bumbled its way into a big, big message problem, a big policy problem. Knowingly or not, they have grabbed hold of one of the most shocking third rails in American public policy, a thing you cannot threaten or even be credibly accused of threatening if you want to win a national election if common political wisdom is to be believed. Believe it or not, in "The Wall Street Journal" today, McCain's economic advisor says that McCain plans to pay for his healthcare plan by cutting Medicare and Medicaid, by independent estimates, cuts of over $1 trillion. McCain's senior economic advisor Douglas Holtz-Eakin told "The Wall Street Journal" that quote, "The savings would come from eliminating Medicare and by reforming payment policies to lower the overall cost of care. Saving $1.3 trillion in Medicare fraud? Does that pass the old campaign year smell test? Do you think the senior citizens of America will think so or anyone who ever hopes and wants to become a senior citizen? John McCain thinks that Medicare and Medicaid can spare $1 trillion in cuts. Case closed. The Obama campaign, at this point, presumably cannot believe its luck. They have just dropped mailers assailing the plan. And they are presumably looking into book by TV ad rates in Florida where McCain's poll numbers are slipping anyway and where millions of voters depend on Medicare and Medicaid. Joining us now, Florida Democratic Congresswoman and Obama supporter, Debbie Wasserman Schultz. Congresswoman Wasserman-Schultz, thank you for joining us. Appreciate it.

REP. DEBBIE WASSERMAN-SCHULTZ (D-FL): Great to be with you, Rachel.

Thank you.

MADDOW: Is this what your constituents who may be on the fence about this election have been waiting to hear, McCain wants to slash $1 trillion out of Medicare?

SCHULTZ: Well, you are so right when you say that the third rail of Florida politics certainly - and politics naturally among senior citizens is Medicare and social security. And John McCain and Sarah Palin are shockingly wrong on both those issues. And it's bad enough that he clearly and consistently supported privatizing social security, professionally given that this morning, the stock market was down almost 797 points at one point. And he thinks we should be inducting. But the best thing to do is invest people's social security funds in the stock market. That's a really good idea, especially right now. But then, on top of that, he goes so far to say that in order to cover about 5 million more people out of the 47 million that don't have health insurance, his plan is to cut Medicare, $1.3 trillion. Now, there are 3.2 million Floridians that are covered by Medicare. We have the second highest number of Medicare recipients in the country, and a higher percentage even than California of our population. And I can tell you, I represented a district in south Florida for 16 years between the legislature and Congress and there's no way that my senior citizens and constituents are going to (UNINTELLIGIBLE) supporting John McCain. They are really concerned about two things, making sure they don't have their safety net yanked out from under them and making sure that they have their healthcare that they have fought for and earned in the golden years of their retirement.

MADDOW: Can you recall a presidential candidate or a serious statewide candidate ever campaigning in Florida on a premise to cut Medicare? I mean, even if you are an ideologically committed conservative who hates government programs, particularly one that works. It seems like you would know enough to stay away from this issue.

SCHULTZ: It's mind boggling that they would even go there. I mean - and the ways in which you would have to do it. John McCain would have to raise the age of eligibility for Medicare. That's one way he could do it. I mean, that's absolutely a third rail. I mean, we have people who are moving to Florida who are in their golden years of retirement, who have paid into Medicare for years and years. And whoever earned that safety net to make sure when they are struggling to maintain their health. And then we need focus on prevention in Medicare and keeping people healthy. The last thing we need to do in order to get people who are younger healthcare is to balance that on the backs of our senior citizens in this country. That's a backwards way of expanding access to healthcare. And then, to make matters worse - I mean, as close as his proposal comes to expanding the access to care is 5 million people. Barack Obama's plan covers at least 34 to 40 million people of the 47 million people.

MADDOW: Reportedly, the McCain campaign is pulling out of Michigan in part to be able to make a bigger investment in your home state of Florida. So far, as we have been discussing, that includes promising to cut Medicare which seems to be an incredibly not-genius move. But what else are you seeing in-state in terms of renewed focus whenever Gov. Palin has been in Clearwater, for example.

SCHULTZ: Well, what we're seeing is there are really acts of desperation in the last several days. I mean, they have really tried to move from the dire shape that the economy is in to the politics of distraction. I mean, Sarah Palin has started spewing this awful lies, and that's exactly what they have. You have to call them what they are because if they stick to the issues, Rachel, if they focus on the economy, if they focus on healthcare, if they focus on the war in Iraq or alternative energy, then American people can clearly see that Barack Obama and Joe Biden would move the country in a new direction which people desperately want to see happen. And John McCain would just offer more of the same. And you know, Sarah Palin was real cute in the way she was speaking about how excited she was to be in Florida. But I'll tell you, just knowing Florida as well as I do, they are only sending her to the most conservative Republican communities. The villages she that referred to is a huge retirement community that votes overwhelmingly Republican - Lee County, Florida which includes the city of Ft. Myers, very, very Republican county. Almost every elected official in that community is a Republican. They consistently vote for the Republican presidential candidate. So they are playing it very safe. They are certainly not sending her anywhere where she might actually try to - she's got no appeal to the average swing voter. So they've just got to keep her in the safe places. And quite honestly, we have 150,000 newly registered Democrats in Florida. There are now 500,000 more registered Democrats in Florida than there are Republicans. We are so excited about the opportunity to win our state. Barack Obama, in one of the polls, one of the credible polls is up nine points in Florida, anywhere from five to nine points. The momentum is going our way and we're really excited about it.

MADDOW: Well, people have taken comfort in years past in the number of Democratic voter registration, new applications being higher than they were for Republicans. And it has not always turned out that way. It's all going to come down on Election Day to getting out the vote.

SCHULTZ: Turn out, turn out, turn out.

MADDOW: That's exactly right. Congresswoman Debbie Wasserman Schultz of Florida, thanks for joining us.

SCHULTZ: Thanks for having me. It's great to be here.

MADDOW: There is a person, a real person who remains convinced of the wisdom of John McCain's choice of Sarah Palin as his vice presidential nominee. Don't look at me, it's your friend and mine, Pat Buchanan. Here to refute gigantic dump truck-full of evidence that things are not going well for the McCain-Palin ticket and that the Palin half isn't helping. But first, one more thing - John McCain has more to worry about than bad poll numbers in Michigan. After his campaign spread the word that he would be retreating from what was recently a battleground state, one Republican county chairman fired off an angry E-mail demanding that McCain apologize. Here's a sample from that message. We turned it into a PG version, quote, "I've been involved in county party politics and organization fro 40 years, and this is the biggest dumb (EXPLETIVE DELETED) stunt I have ever seen. He has given up on our state? What a total and complete crock of (EXPLETIVE DELETED).

You want straight talk? I guess that's some straight talk.

(COMMERCIAL BREAK)

MADDOW: We have new insight into Sarah Palin's political philosophy today and new evidence the governor of Alaska is a world-class doodler. "The New Republic's" Noam Scheiber was reporting from Alaska when he found these notes scribbled on the back of a page from a Wasilla city budget. Palin appears to be testing out some slogans for her mayoral run. "You will be my boss," for example. She also sort of sketched out her resume. Wasilla Assembly of God does make the list. And judging from the check mark under her big cursive name, she's practicing voting for herself.

(COMMERCIAL BREAK)

MADDOW: Sarah Palin has now had one convention speech, less than a handful of TV interviews, one debate with Joe Biden and three days in full-on attack mode. How is that going for the Republican ticket? To the polls. The latest NBC-Wall Street Journal poll says only 41 percent of Americans think Sarah Palin is qualified to be president; 50 percent say she is not, those numbers virtually identical to last month which means the debate and those interviews did not help her much. On the debate, specifically, Palin did beat the very low expectations set by her cringe-worthy air time with Katie Couric and Charles Gibson. But then again, beating expectations that low is the political equivalent of getting a contact-high in Snoop Dogg's van. Sort of hard to avoid. That said, beating low expectations and beating Joe Biden don't appear to have been the same thing. In the post-debate CNN poll, voters said Palin lost to Biden by 15 points. A post-debate CBS poll of uncommitted voters showed Palin losing by 25 points. Comparing debate to debate, John McCain did less bad. He only lost to Obama by 13 points in the CNN poll and by 15 points in the CBS poll of undecideds. On the positive side for Gov. Palin, "Saturday Night Live" is turning out to be really, really good this season.

(BEGIN VIDEO CLIP)

TINA FEY, ACTRESS: We are not afraid to get mavericky in there and ruffle feathers and not got to allow that and also, too, the great Ronald Reagan.

(END VIDEO CLIP)

MADDOW: Am I missing something about the political assets of Sarah Palin? Does anybody still think the governor is working out well as John McCain's running mate? There are a few, only a few people in this country who are up to the task of arguing difficult positions like this. But we have a friend who is always game and really good at it. Pat Buchanan, MSNBC analyst joins us now. Pat, thank you for being here.

PAT BUCHANAN, MSNBC ANALYST: Delighted.

MADDOW: John McCain knew he had a weak spot on the economy. He has admitted such. But he chose someone who has less experience and less standing on that issue than even he does. Then the economy melted down and his poll numbers did, too. You have to admit Sarah Palin is starting to look like a bad pick, isn't she?

BUCHANAN: No, that's a foolish analysis, Rachel. The night that you were out there, I think, with us in Denver when Barack Obama gave that excellent speech, he moved eight points ahead of John McCain. The next morning, Sarah Palin was picked and within a week, John McCain had gained 10 points and was two points ahead of Barack Obama. When have you ever seen a vice presidential nominee give that kind of energetic boost to a presidential candidate?

MADDOW: But he's now worse off than before he picked her.

BUCHANAN: Well, look, something has happened in the last three weeks called by our friend out there in Omaha - called the Pearl Harbor in the financial markets. Nothing can overcome that. But you overlooked or deliberately left out tonight's news on "Drudge", the CBS poll says after Palin's vice presidential debate, the nine-point deficit McCain had is now down to four points in registered voters and three points in likely voters. Now, I don't doubt that the Republican ticket could very well go down. I don't know how you overcome something like what happened in the last three weeks. But to deny that Sarah Palin has been the sensation of this season is to deny the evidence of your eyes, Rachel.

MADDOW: But, Pat, the big political issue here - you could have seen it coming like a Mack truck through a tunnel - is this economic crisis. And one might expect that if he had picked somebody who had any economic expertise or standing whatsoever, especially given that he knew he had none, he might be doing slightly better than pulling out of Michigan now, don't you think?

BUCHANAN: No, Rachel. If we had seen it coming, I wouldn't have been holding on to Lehman Brothers three weeks ago.

MADDOW: I'm sorry.

BUCHANAN: I didn't know this was actually coming. But look, take a look at what she's accomplished. I'll admit the Katie Couric thing was a minor disaster. But where do you know that anyone who could get 20,000 people out to see John McCain who was getting 200 and 300? She's got groups of people coming out to rival Barack Obama's. Seventy million showed up at the vice presidential debate. It was a tremendously enjoyable interesting debate. Even old David Broder said, "Why didn't they unleash this woman earlier?" Is she enough to override these last three weeks when 82 percent of the country thinks we're in the wrong direction? We've had a crash and Bush is at 22 percent, maybe not. But to deny that she's a good pick, I think, really, this is an ideological obsession, Rachel, that you've got to get over.

MADDOW: I don't have an ideological obsession with anything this small.

BUCHANAN: You've got some kind of obsession.

MADDOW: It's coming out of that debate -

BUCHANAN: This is a Lawrence Harvey thing and enough human bondage.

MADDOW: I know that you really want Sarah Palin to have been a good choice. But I feel like the objective evidence here disproves it totally. Forty-one percent of Americans think that she could be president coming out of - she's qualified to be president coming out of that poll, coming out of that debate. Fifty percent of Americans say no way. She's not going to get another crack at 70 million Americans.

BUCHANAN: I understand that. I understand that. But if John McCain and I doubt it - but if he is down to four points behind Obama, who alone is responsible for it? Why isn't he 25 behind given that what's happening in this economy, people's nest eggs are gone, jobs are being lost, companies can't borrow, it's a disaster. Bush is unpopular and he's still hanging in there. I think one reason is clearly the tremendous excitement and attraction of this woman who's getting crowds of 20,000, 30,000. When have you ever seen a vice president (UNINTELLIGIBLE) can do that? Can she do everything? Maybe not.

MADDOW: She only got 4,500 today, I will say. But ultimately, it's the legacy -

BUCHANAN: 4,500? When did you ever have 4,500 speaking? I don't

recall -

MADDOW: If the legacy of Sarah Palin recently is that she has him lose by five points instead of 25, then we can agree to disagree on this and both get our way. It is very kind of you to be on the show. Thank you for joining us. Thanks, Pat.

BUCHANAN: Right. You've got to be nicer. Get out of that dump truck you were talking about earlier.

MADDOW: Nicer - a specialty right here. Coming up next, I'm going to get just enough pop culture from my pal, Kent Jones, who is apparently, really, truly going to bring up Kenny Loggins. Kenny Loggins - really.

(COMMERCIAL BREAK)

MADDOW: Now it's time for "Just Enough" with my friend Kent Jones.

Hey, Kent, what have you got?

KENT JONES, POP CULTURIST: Thank you, Rachel. So what kind of theme music is John McCain using to fire up the crowds nowadays? Here he is in New Mexico this morning. Oh, you hear that? It's "Highway to the Danger Zone" by Kenny Loggins. Apparently lying in bed with his aviator shades on apparently puts Kenny in a danger zone. Of course, "Danger Zone" is the theme song from the 1986 movie "Top Gun" starring Tom Cruise who plays a character named Maverick. And the dots connect. Remember 1986, Bartels and James pushing their sleeves up on their jackets. Well, let's go back to that. Finally, the Ford Company wants to teen-proof your car. Many of their 2010 models will contain a computer chip in a key that can limit teen drivers to 80 miles per hour. Parents will also be able to program the key to limit the volume of audio system and sound continuous alerts if the driver is not wearing a seat belt. They're experimenting with names but for now, they're calling it the "Ford Buzz Kill."

MADDOW: Thank you, Kent. And thank you for watching tonight. "COUNTDOWN WITH KEITH OLBERMANN" starts right now. Good night.

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