updated 10/8/2008 11:17:20 AM ET 2008-10-08T15:17:20

Guest: David Axelrod, Doug Holtz-Eakin, Roger Simon, Lynn Sweet, John Harris, Debbie Wasserman SchultzCHRIS MATTHEWS, HOST: Amid a 5,000 point (ph) in the Dow Jones averages, will John McCain try to change the subject?Let's play HARDBALL.Good evening. I'm Chris Matthews, live from Belmont University in Nashville, Tennessee, the site of the second presidential debate. Tonight's debate could be a last opportunity for John McCain to change the direction of the presidential race. McCain's poll numbers have been headed downward along with the economy, and he didn't get any help from Wall Street today. The Dow Jones fell more than 500 points today, bringing the total one-year decline to an awesome 5,000 points.The question is, what, if anything, can John McCain do or say tonight to turn his flagging fortunes around? What can Americans do to reverse the drop in the stock market?MSNBC will have full coverage of tonight's second presidential debate beginning at 9:00 Eastern. Then at 10:30, David Gregory joins me for post-debate analysis. At 11:00, it's "COUNTDOWN" with Keith Olbermann. Then at midnight, we're back with one of my favorite events, a late-night edition of HARDBALL.But we begin with tonight's debate and Obama campaign chief strategist David Axelrod. David, what's in and what's out? Is it fair game for John McCain and his people, including his running mate, to keep talking about Bill Ayers?DAVID AXELROD, OBAMA CAMPAIGN CHIEF STRATEGIST: Look, anything's fair game. It's an election campaign. They can say whatever they want. They said the other day that they don't want to talk about the economy. If they talk about the economy, they'll lose. So they want to change the subject.The problem is, most Americans don't have that luxury. Everybody's living with the impact of the stock market plunge that you just described. We heard today that pension funds may have lost as much as $2 trillion over the last 15 months. People are worried about their jobs and so many other things. And they're not in the mood for distractions. They want to talk about the fundamental issues facing this country. That's what Senator Obama came here to do.MATTHEWS: In the political life of your candidate, Barack Obama, what role did Bill Ayers play?AXELROD: Virtually none. Bill Ayers...MATTHEWS: He was a Weatherman back in the '60 and early '70s. He was involved in bombings and all kinds of anti-America activity. Why did Barack Obama consort with him politically?AXELROD: Well, "consort" is not the word I would use...MATTHEWS: Hang out with, pal around with...(CROSSTALK)AXELROD: Those are the words Governor Palin used, but they don't match the reality, and every news organization that's looked at it has come to the same conclusion. The fact is that Bill Ayers today is a professor of education in Chicago. He's an aide to the mayor on school reform, and that's how they came to meet. They served on two boards that they were both appointed to on...MATTHEWS: Was he rehabilitated?(CROSSTALK)AXELROD: ... those kinds of issues...MATTHEWS: Was he politically rehabilitated, in your eyes, by the time he met with your candidate?AXELROD: He wasn't making a political-when he served on these boards, he wasn't making a political judgment, Chris. They were working on some school reform issues. But the fundamental point here is, he doesn't -he has nothing to do with this campaign. He doesn't advise him. He's not involved with him politically. He won't be involved in the future.It's a complete distraction from some really fundamental issues that we're facing in this country. We're going to keep on talking about those, and if the McCain campaign wants to talk about the other, they do so, I think, at their own peril. I think the American people are very serious about this election, about what we're going to do about this economy, and that's what they want answers to.MATTHEWS: Do you have a sense they're trying to create a mystery, a shroud of mystery around Barack by bringing up Ayers, terrorists, having somebody in the crowd the other day say Barack Hussein Obama, this policeman in uniform-I predicted they'd start doing that within a week last-or last week, I said they'd start doing that-then saying they want to investigate your donor list, looking for foreign donors? Are they trying to create the man of mystery aspect to your candidate? What is their strategy, as you see it?AXELROD: Well, you know, you're asking the wrong person. You'll have to...(CROSSTALK)AXELROD: You have to-well, smell...MATTHEWS: You're a pro.AXELROD: "Smell" may be the right word, but I'm not going to respond to that. You ought to ask them what their strategy is. I can tell you what ours is. Ours is to change the policies of the last eight years and get this country moving again, get people back to wok, rebuild the middle class and get away from the policies that have been so disastrous for this country, that, frankly, Senator McCain has supported for the last eight years.There's a reason he doesn't want to talk about the economy, because the policies that he has supported and George Bush has offered has been a disaster for this country, and we're here to change them.MATTHEWS: Let me ask you about his demeanor in the last debate. A lot of us noticed that your candidate's opponent, John McCain, never looked at your candidate in 90 minutes. I don't think he hardly glanced at him. Do you think that sent a signal of crankiness or negativity on the part of John McCain? Did it hurt him?AXELROD: Well, I think we did very well in that debate. I think every of bit of indication after that debate was that we had done well in that debate. And I think It wasn't just that Senator Obama was looking at Senator McCain, but that he was looking at the American people and looking toward the future and pointing out how we can get out of the ditch that we've been put in by these policies. And I think that's what people want to know, and that's what Senator McCain didn't offer.So the problem isn't that he wasn't looking at Senator Obama. The problem is that he's looking backwards with his policies, and people don't want to go back.MATTHEWS: This is Adam Nagourney, a respected reporter, in today's "New York Times." Quote, "The message out of the Obama camp"-that's you -- "in advertisements, statements and remarks by surrogates was filled with language intended to underline Mr. McCain as hotheaded."Are you, fairly or not, offering up your rival as a man who's a hothead?AXELROD: Well, I'm not going to-I'm not going to characterize him here. I'll say this. I don't think he's...(CROSSTALK)MATTHEWS: ... you call him uneven.AXELROD: Well, "uneven," I think, is a fair characterization. Here's a guy who two weeks ago said our economy was fundamentally strong, and then hours later, he said we're in crisis. That's not exactly the kind of steady leadership that people want in a president, particularly when times are so hard.So we need consistency, and Barack Obama has been consistent for 20 months, talking about the need to change our economic policies, the need to change our foreign policy and get this country moving again. I think the American people are responding to that.MATTHEWS: Let's take two statements that Barack Obama made in his acceptance speech when he accepted the nomination out in Denver-when he accepted the nomination. One, he said he's going to make John McCain own the failures of the last seven or eight years. Are you doing that?AXELROD: Well, I think that...MATTHEWS: Is that working?AXELROD: Well, there's no question but that his fingerprints are all over the policies of the last eight years. He voted with George Bush 90 percent of the time. There's really not a dime's worth of difference between his economic policies and George Bush's economic policies, his tax policies, his health care policy. It's all the same-privatization of Social Security. It's all the same policy. So it's not very hard to link the two. They're running-they've worked hand in glove the last eight years, and he's not offered anything different.MATTHEWS: But there's certainly a difference in tone and attitude between George W. Bush, who's been an establishment Republican, and John McCain, who's attacked the greed on Wall Street, along with his running mate. They have a totally different point of view...AXELROD: Well, it's...MATTHEWS: ... in the way you listen to this campaign.AXELROD: Well, look...MATTHEWS: Don't you accept that?AXELROD: When you say in the last couple of weeks about attacking the greed on Wall Street doesn't square with a record of 26 years. I mean, he was on Wall Street in March, talking to "The Wall Street Journal," and he said, I am always for less regulation. He just said this month in a magazine story that he wanted to do for health care what that we had done for banking in the last 10 years and deregulate the health care industry. I don't think Americans can afford that kind of-of deregulation.MATTHEWS: OK, let me go back to what I think is your strategy, whether you're going to admit it right or not. During the campaign acceptance speech, again, Barack Obama said he welcomes a debate over temperament, as well as judgment-temperament. Aren't you out to make John McCain a kind of a Captain Queeg in "The Caine Mutiny," kind of a nervous captain, playing with the ball bearings, kind of a nervous guy? You call him uneven. It seems to me your ad campaign is to try to present him as...AXELROD: Look...MATTHEWS: According to "The New York Times" today, you're out to make him kind of cranky and intemperate.AXELROD: Look...MATTHEWS: You're not out to do that?AXELROD: I-here's what I believe. I think people watch these campaigns very closely. They get most of their information not from our ads but from what they see. Will the people...(CROSSTALK)MATTHEWS: What do they see when they see him not looking at your candidate? What would you see, as a voter?AXELROD: Well, I think that-we've heard from a lot of people that they weren't particularly-they thought that was an odd thing, that when one person was looking at the other and talking to him and the other person wasn't looking back. But that's a decision that Senator McCain...(CROSSTALK)MATTHEWS: ... think it's troll-like behavior by John McCain?AXELROD: I think I'm less concerned about his behavior than his policies. I think his policies are a disaster for this country. We've had them for eight years. We can't afford four more years of them. His personal, you know, behavior in debates and so on is another issue. People will make their own judgments.I don't think he's been particularly steady in this campaign, not in his message, not in his approach. You know, he ran for most of the campaign bragging about how strongly he supported George Bush's policies, and now in the last few weeks, he's tried to run away from them. He spent his whole career as a guy who wanted to deregulate business. That was his whole thrust. He's talked 20 times this year in different speeches about deregulating business.MATTHEWS: Who's going to win this presidential election?AXELROD: I think the American people are going to win. I think Barack Obama's is going to win. We're going to get change in this country.MATTHEWS: David Axelrod, thank you, sir.AXELROD: Thank you.MATTHEWS: Now the McCain campaign. Doug Holtz-Eakin is the McCain senior policy adviser. Doug, thank you very much for joining us. Let's get to that question of, Does your candidate deserve to own the economic failures of the last seven, eight years, or are you from some other-is he from some other political party?DOUG HOLTZ-EAKIN, MCCAIN CAMPAIGN SENIOR POLICY ADVISER: Well, look, I mean, you know, John McCain has done nothing but tangle with the Bush administration, whether it be climate change, torture, the existence of Guantanamo Bay. He voted against the prescription drug bill. He favors drug reimportation. It's a clever tactic. The Obama campaign wants to run against George Bush. They can beat George Bush, but they need to run against John McCain and...MATTHEWS: OK, where does he disagree on fiscal policy?HOLTZ-EAKIN: ... they consistently avoid it. How about...MATTHEWS: Where does he disagree on fiscal policy?HOLTZ-EAKIN: ... not spending money hand over fist...MATTHEWS: I understand John McCain supports...HOLTZ-EAKIN: Spending money hand over fist.(CROSSTALK)MATTHEWS: Where does he disagree...HOLTZ-EAKIN: With Barack Obama or with George Bush?MATTHEWS: With George Bush on fiscal policy.HOLTZ-EAKIN: On spending. I mean, look, this is a president that has never said no. They had an unfunded, huge expansion of entitlement programs. Discretionary spending has gone up. If we'd stuck to the Clinton era levels, it'd be $180 billion less every year.So you know, this is a president who has a very different vision than John McCain. John McCain believes that you need to use the taxpayers' money wisely. You oppose earmarks. You cut out waste, and you don't expand and spend money on things when you don't have the money.MATTHEWS: I'm sorry, I thought that John McCain supports the Bush tax policies. Am I wrong?HOLTZ-EAKIN: Fiscal policy is more than taxes. John McCain believes that you should keep taxes low. There's no question about that. He also believes that you need to cut taxes for the middle class. He's got a $5,000 health tax credit, something George Bush never pulled the trigger on. He's got a larger dependent exemption to take care of families that have children. He's actually (INAUDIBLE) more in the way of tax breaks for the middle class than Barack Obama is.So he's out there talking about John McCain's ideas. The Obama campaign wants to mischaracterize them. We've seen a consistent pattern of mischaracterizing his proposals. They also have a consistent pattern of mischaracterizing their own.And I think tonight is an important night because Barack Obama has the opportunity to tell the American people what he really believes in. Is he the guy who votes for higher taxes? He's going to raise taxes on some people. Wants to spend $860 billion on new programs, wants to have a big new health care program that looks like it'll cost $240 billion a year. He needs to come clean and say, you know, That's my vision for America. Can you afford Barack Obama?MATTHEWS: Let me ask you about the topic of tonight's debate. Do you believe that John McCain will do what his running mate, Governor Palin, has been doing for the last couple of days, focus on an association, whatever extent it exists, between Barack Obama and a guy named Bill Ayers in Chicago? Will he focus on that tonight as his running mate has been doing all week since Saturday, she started doing it?HOLTZ-EAKIN: You know, John McCain is going to talk to the American people tonight finally in a town hall with Barack Obama on the same stage, something that Obama has been unwilling to do. And he's going to talk to the American people about these important issues, this economy, which is in terrible shape, his vision for...MATTHEWS: Yes, but is he going to...HOLTZ-EAKIN: ... middle class tax relief...MATTHEWS: ... talk about Bill Ayers?HOLTZ-EAKIN: ... growing the economy-I think it's up to Barack Obama to explain that association, quite frankly. This is part of the Barack Obama...MATTHEWS: But I'm just asking you...HOLTZ-EAKIN: ... who not only-MATTHEWS: ... one question, Doug. Doug, you're kind enough to come on...(CROSSTALK)MATTHEWS: Will your candidate bring up the topic of Bill Ayers tonight?HOLTZ-EAKIN: He doesn't need to bring up Bill Ayers for the sake of bringing up Bill Ayers. That's Obama's problem. He's going to talk about the issues. If someone asks him, he'll answer.MATTHEWS: Let me ask you about the question-what's the most important question in this election, the policy issue or the person issue, the candidates?HOLTZ-EAKIN: I think the most important question in this election is the character of the person and the issue of who is the candidate who will actually in Washington reach across the aisle, get a government that will be responsive to the needs of the American people, make the tough decisions that aren't necessarily personally politically popular or even in the interests of your party's narrow short-term gains, but are the right thing for the American people. And that is the issue for the election, and that is why I believe John McCain is clearly the superior candidate.MATTHEWS: Let me read you something from "The Politico" today. It was written by Mike Allen. He wrote today, quote, "Now some advisers fear that he's becoming know for"-that's John McCain-"for being too cranky, acting out David Letterman's jokes about an old man shouting 'Get off my lawn.' In particular, some advisers say his harshly negative attacks on Obama do not fit the worrisome circumstances now facing the country. 'People do not want that. They're not going to put up with it,' a campaign official said. 'It will be in the advertising, but not from the man himself.'"Is that the campaign theme, that you'll attack Barack Obama but that John McCain will refrain from doing so personally?HOLTZ-EAKIN: We are simply defending ourselves as a campaign. Barack Obama has spent months attacking and mischaracterizing our positions. He's called John McCain a liar on numerous occasions. It's time to set the record straight. We will do that.John McCain doesn't need to do that. He can talk to the American people about his vision for the future. He's a guy who's comfortable on the stage, and you know, the attempts by the Obama campaign to characterize him with code words like "erratic" and "hotheaded," you know, that's not going to fool the American people. They want someone who, in a moment of crisis, like this financial crisis, doesn't just go to Miami and hold a graduate seminar with his advisers. He's someone who actually gets some work done. John McCain did that. He went to Washington. He got the Republicans engaged. He produced a bill...MATTHEWS: Would you, Doug...HOLTZ-EAKIN: ... Barack Obama-you know, he phoned it in.MATTHEWS: Would you accept a ground rule tonight in the debate that there'll be no personal references to someone else's long past associations, in other words, no mention tonight of Charles Keating, no mention tonight of Bill Ayers, no mention of the Jeremiah Wright-would you accept a ground rule on behalf of your candidate, no attacks on old associations, we'll only talk about the future? Would you accept that as a deal tonight?HOLTZ-EAKIN: Chris, sure. Look, we tried to get Barack Obama to do...MATTHEWS: Would you accept that as a deal...(CROSSTALK)MATTHEWS: ... only talking about the future?HOLTZ-EAKIN: Yes.MATTHEWS: Would you accept that as a deal...HOLTZ-EAKIN: Yes.MATTHEWS: ... just talk about the future tonight?HOLTZ-EAKIN: Absolutely. Look, we're just happy to finally get the guy to show up.MATTHEWS: OK, Doug, I hope you're speaking to your candidate because then we'll have a candidate debate tonight about what's good for America's economic future, not for who was hanging out with somebody 10, 20 years ago. Anyway, thank you very much, Doug Holtz-Eakin, speaking for...HOLTZ-EAKIN: Thank you.MATTHEWS: ... John McCain.Coming up, much more from Nashville. New polls show McCain trailing Obama. And with only two debates left, one tonight, to change things around, can McCain try to fight his way back starting tonight?You're watching HARDBALL's coverage of the second presidential debate, only on MSNBC.(COMMERCIAL BREAK)MATTHEWS: Welcome back to HARDBALL. Joining us right now is "Newsweek's" senior Washington correspondent and MSNBC political analyst, my friend, Howard Fineman. You and I have been together for 400 years.(LAUGHTER)MATTHEWS: And chief political columnist for "The Politico," which is a brand-new hot political organ in this world-do you like that word, "organ"?(CROSSTALK)MATTHEWS: It's really a great political organ.(LAUGHTER)MATTHEWS: It's made a lot of noise this election, Roger Simon, who's a pro, who's written fabulous books like "Showtime" and-God, I love those books.ROGER SIMON, POLITICO.COM: Thank you. You're the one who remembers...MATTHEWS: These new battleground states poll-before we get to all this battleground state stuff, I want to get to one simple number here. According to our latest poll out this morning, Barack Obama 49, John McCain 43. Is that a solid lead? I mean, I've seen presidential elections like 2000, I guess other years, '76, '60, that have been really close. Last time around was pretty close. Is that a solid lead, 6 points? Howard first.HOWARD FINEMAN, NEWSWEEK: Well, it's not insurmountable by any means because the Obama candidacy is so new and different. We're in different territory here. We don't know if the young people are going to turn out. We don't know if people are fully telling the truth to the pollsters. We're in new territory. That's what makes Obama's candidacy so interesting and so exciting. But it's also what makes it hard to predict. And I don't think it's insurmountable by any means. But the fact that he has been in the lead consistently for months and months and months, anywhere from 3 points to 6 or 7 points, that shows that it is a lead. And were the election to be held today, this minute, he would probably win. MATTHEWS: Roger, what do you make of this lead? Is this a solid lead that we can look at and say-because history shows that a month before an election you can generally say who is winning. ROGER SIMON, POLITICO.COM: It's a good lead, and he would rather be leading than be the guy who is not leading. But we don't know this time what the race factor will do. Is the race factor 6 percent? Is it double that? (CROSSTALK) MATTHEWS: . race factor, where you harbor a racial attitude, you hide it with pollsters. SIMON: Absolutely. And how much will it influence people who don't really think in their hearts they're racist, but when they get into the voting booth they say, well, I don't really trust that guy for whatever reasons. The number that is really impressive, however, that really makes the Obama people far more confident than they want to admit to, is the Electoral College. MATTHEWS: OK. Let's take a look. Let's run this, and you respond. These are numbers that have to impress people who have paid attention to politics over the years. These are red states right now that voted last time for President Bush. Look at this, Ohio is now Barack 50 to 47, in other words, he has got enough votes to win-of course, starting with Florida-well, I don't know why we're starting with Florida, but we're starting with Florida. We're looking at Obama is up by 2 points in Florida. Let's take a look at some-that's the Mason-Dixon poll. We have a CNN poll in Ohio, Obama ahead by McCain-ahead of McCain by 3. In north Carolina Obama and McCain are tied. Take a look at that one. And we also have in Indiana, McCain up by 5. That's amazing. FINEMAN: Right. What's significant.MATTHEWS: Roger-I want Roger first. That is an amazing thing to have a Democrat leading in Indiana at any time. SIMON: Well, if you go through the list of red states that Barack Obama can flip to blue, you can come up with a comfortable number of states. You can come up with Iowa, you can come up with Florida, you can come up with Virginia, you can come up with Colorado. You could go on and on. When you look at the reverse and say, which states that were blue is John McCain going to switch to red? You say, well, maybe New Hampshire. And then the list peters out. FINEMAN: Yes, but the point is that this battle in the Electoral College is being fought on John McCain's turf. In other words, Barack is taking it to McCain. If you look at the list of toss-up states, whether it's Virginia, North Carolina, Colorado, Nevada, Indiana, and Ohio, Florida, those are toss-up states that all have been for the most part Republican states. And the fact that they're toss-ups now means that the battle is being waged by Barack Obama on the other side of the 50-yard line. MATTHEWS: OK. I want to get back to what-if you're John McCain tonight at this debate, you have to begin to roll back these aggressions by Barack Obama. And what you do, I think, is raise doubts about it. If all it takes about a person is to go-an older voter, for example, I don't know about this guy's middle name Hussein. I don't know about him hanging around with that terrorist back in the '90s. I don't know about these foreign contributions. Just put it together. Make him a little foreign. You don't think that's what they're doing? SIMON: I think that's what the campaign is doing. I thin that's what Sarah Palin will continue doing. I think that's what the commercials will continue doing. I think it's crazy for John McCain to go out and be an attack dog tonight. I think people are panicked about this economy. They don't want to see an attack. I think it's the wrong venue. It's a town hall. It's disrespectful to the audience. People want to see some leadership tonight. They want to see the John McCain.(CROSSTALK) MATTHEWS: You're saying that the context of living in an environment where we lost 5,000 points in a year on the Dow Jones, 500 points again today, we're like one of those frogs in a pot where the heat keeps going up to boil him, another 5 points, another 5 points. And also, as you point out, also, in a room where there is a lot of voters-independent voters who may not have decided where they stand, they don't like negative politics. SIMON: They don't-he doesn't want to get booed on-stage tonight. People want to see the McCain they liked in 2000. He was authentic, he was likeable.MATTHEWS: Is he running? SIMON: And he was not excessively partisan.MATTHEWS: Is that guy running? SIMON: We haven't seen him lately. MATTHEWS: Yes. Howard, is that guy still running? FINEMAN: Well, the thing is, let's put it in context here. The Dow Jones dropped another 500 points today, 5 or 6 or 7 percent. The new deficit figures came out for the federal government from Senator Kent Conrad, we're talking about $500 billion, setting a record. It's as though we're a ship on a stormy sea and we don't want to see the officers fighting with each other on deck. We want to see somebody who is calm and in control. Now, the difference is McCain is saying, I will steer the ship pretty much the way George Bush did it in terms of basic philosophy. What you heard David Axelrod say here is, that method, that route is not going to work anymore. We need the change. The question is whether people are going to want to go for this relatively inexperienced guy. So the only option that the McCain campaign has, even if-and I agree with Roger, McCain himself doesn't directly do it in the debate tonight, is to try to raise doubts about turning over the conversation to Obama. That's the whole campaign. That's the whole campaign.MATTHEWS: OK. We should be worried about what's going on in our economy. And 10 more years of this and we're in Zimbabwe, I mean, the way it's going. SIMON: The economy is taking away the biggest talking point a Republican has, that Republicans are good stewards of the economy. How do you make that case to the American people tonight? MATTHEWS: What does he say? I don't know George Bush? SIMON: He's going to have to say, I'm a genuine change agent. I will depart from this policy that hasn't worked. You know, I will not keep heaping vast benefits on the rich, I will help the middle class. He has got to mention the middle class once or twice... (CROSSTALK) FINEMAN: By the way, the way for him to do it also.MATTHEWS: And he didn't do it last time. FINEMAN: Yes. The way for him to do it is to go after the Democratic Congress. That he can do. He can say, you can't elect Barack Obama. He might be a great guy. You can't elect him because he will be in cahoots with the Democratic Congress that will allow spending to get out of control. One thing you can say about me-John McCain can say about himself, is that I can try, I have a record of trying to control spending. That's the best argument he has to make, maybe the only argument and it's the best one. (CROSSTALK) MATTHEWS: . hey, in bad times like this, it may be a little too subtle. Anyway, thank you, Howard Fineman. Thank you, Roger Simon. Up next, we're going to hear from the crowd. Look at them out there at Belmont University in Nashville. (CHEERING AND APPLAUSE) MATTHEWS: We're going to find out what they are looking for, what they want to hear tonight in the debate. You're watching HARDBALL from Nashville, only on MSNBC.(COMMERCIAL BREAK) MATTHEWS: We're in a serious economic time in this country. Anybody who paid attention today knows the stock market dropped 500 points today, it has dropped 5,000 points in a loss of about $7 trillion in the last year. We're in a serious economic bind in this country. I want to ask the people in that context what they want to hear this presidential debate to focus on tonight. Sir, you're with the Steelworkers. UNIDENTIFIED MALE: Yes, Chris. I'd like to see candidates focus on the economy, how they're going to turn around this debacle. The world is at risk and not just America. And we need to turn it around as soon as possible. MATTHEWS: Madam, what do you want to hear today? UNIDENTIFIED FEMALE: I want to look at long-term future for my daughter, health care, education, things that are going to impact her. MATTHEWS: Thank you. Sir? You're with the Steelworkers as well.(CROSSTALK) UNIDENTIFIED MALE: I want to see us restore the middle class, find some ways to do that, rebuild our infrastructure here and find a global labor movement that will resurrect the middle class. MATTHEWS: OK. Let's get down here. Madam, what do you want to hear tonight? UNIDENTIFIED FEMALE: I'd like to hear that we are going to join with other countries in the world to develop a more peaceful world. MATTHEWS: You must be a sophisticated person. UNIDENTIFIED FEMALE: She is. UNIDENTIFIED FEMALE: Well, I.MATTHEWS: I mean, compared to what I hear from some of the politicians today. (LAUGHTER)UNIDENTIFIED FEMALE: Thank you. MATTHEWS: You mean we've got to get along with the rest of the world? UNIDENTIFIED MALE: If you want to define unity, look what this crowd looks like. And that is what should be represented in 2008 from here on in. Isn't this gorgeous out here? It's absolutely beautiful. It looks like America should look like. (CHEERING AND APPLAUSE) MATTHEWS: Wow. The many faces of Benetton. How did you like that? You don't think that-always like that politically? UNIDENTIFIED MALE: Absolutely not. It wasn't like this the past eight years. It has been very divisive. But look at this crowd. It doesn't look like the others for some strange reason, but this looks well-represented. It looks like us. MATTHEWS: Well, it looks like a Democratic Convention to me. (CHEERING AND APPLAUSE) MATTHEWS: I think it is. Do we have any Republicans here? Let's get us some Republicans. No, no. We've got to get us some Republicans. Come up, madam. I've got to reach deep into the-I'm sorry, I want diversity of opinion here too. Madam, what do you want to hear about in the debate tonight? UNIDENTIFIED FEMALE: Well, I want to hear Obama say.MATTHEWS: Well, what are you doing with a McCain sign there? No, no, no. Oh that's right-well, where's the McCain guy in here? (CROSSTALK) MATTHEWS: I'm sorry. (INAUDIBLE). What do you think? What do you want to hear tonight? I'm sorry, I've got to mix it up here. What do you want to hear tonight?UNIDENTIFIED FEMALE: I want to hear McCain say he is going to win for our country and he's going to get our soldiers back into our country and that he is a strong Christian that is going to do the right thing. MATTHEWS: OK. Thank you very much. We'll be right back with more HARDBALL. We've got a whole show coming up. We'll be right back from Nashville.(CHEERING AND APPLAUSE) (COMMERCIAL BREAK) (NEWSBREAK)(CHEERING AND APPLAUSE) MATTHEWS: Welcome back to HARDBALL. We're at Belmont University in Nashville where the second presidential debate is set to take place just hours from now. So what do each of the candidates need to do tonight? Well, Chuck Todd is NBC's chief political director. And Susan Page is with the USA Today newspaper. I want to ask first up, let's start with Susan. Tonight is an interesting night. It's a town meeting style, a lot of give and take with the audience in the midst of a terrible economic challenge facing the country like we've not seen since the '30s. What does it all add up to in terms of what we're going to see tonight? SUSAN PAGE, USA TODAY: See both of these candidates try to show empathy with this audience. You know, I expect there not to be a wide range of questions. I think we're going to see a lot of questions from people concerned about what they see happening in the markets, what they're worried about with their mortgage, with sending their kids to college. And you know, Barack Obama can sometimes seem kind of cerebral, he will need to feel like-they'll need to get a sense of him as empathetic. John McCain has been on the attack against Barack Obama. I don't think that's what works tonight in this kind of format and with this kind of economic climate. He'll need to also be focused on what's happening with the economy and what I can do to get us out of this mess. MATTHEWS: Well, let me go to those two questions with Chuck. First of all, it's harder, isn't it, to attack someone personally with people watching? CHUCK TODD, NBC POLITICAL DIRECTOR: It is. It's not just the 70 million TV camera-folks through the TV camera, but seeing those undecided voters sitting out there and knowing they could ask you a question that could shape-absolutely, I just think the body language.MATTHEWS: And undecided voters almost define people that don't like rough and tumble politics. TODD: Right. They're the ones that always tell voters they don't like negative ads, they don't like this, they don't like that. They are the-they are usually the-they are the swing voters, they're not quite sure where they want to go, or at least they want to say to themselves they're not sure where they want to go. They may always end up voting the same way if you ever looked at their history of voting. And that has always been my instinct on this, is that swing voters swing between voting and not voting. But they don't want the negative give and take. MATTHEWS: Let me ask you, Susan, about the moderator's role, Tom Brokaw of NBC, sort of our great guy here at our network is doing this tonight here. How does he play a role? Gwen Ifill last week was-I don't know what it was, but a lot of people would say watching that debate last week that Sarah Palin was able to go all over the place and basically define the scope of every question her way. Does the town meeting make it harder to get away from the questioner? In other words, if a person in the audience asks a question, can they say, damn it, answer my question, stop giving speeches? Can they do that tonight?PAGE: Well, you know, there are rules that is going to make that harder to do. Once one of the questioners is asked the question, they're going to turn off his or her mike, so they won't be able to ask a follow up. But I do think it's harder for a candidate to talk about what they want to talk about and not seem responsive, when the person is right there. That's the person they're talking to. I think there's a greater imperative on the candidate's part to be responsive to what they're asking. Tom Brokaw I think also has a limited ability under the rules that were negotiated between the two campaigns to force them to stay on track. It's really going to be the power of individual Americans asking questions that may force them to be responsive to individual questions. MATTHEWS: What do you think, Chuck? Can a viewer out there, an independent person who asks a tough question-for example, if I'm out there and I'm picked to ask a question tonight, I'll ask something about retirement, something about 401(k). I don't want some speechifying. I want to know what that means to my 401(k), what they're talking about. TODD: Right. I think a viewer watching the debate will punish one of these candidates more if they avoid a question from a peer, another voter, than they would if it's from the moderator. They don't care if a politician ducks Tom's question or Jim Lehrer or Gwen Ifill. They are offended if they somehow duck a question from another undecided voter. I think that's why you will see a little more direct answers. You will see the eye contact. I mean, remember, why did Bill Clinton win the first town meeting debate? It was Bill Clinton, George Bush, Ross Perot. Why did Bill Clinton win those debates? He always looked the person in the eye. He always was empathetic, where Bush would sometimes look at the camera. Perot would look at the moderator, struggle looking at the actual questioner. So I think watching-they're going to have to look the questioner in the eye. MATTHEWS: What about the questions that are going to come up because they've been coming up now for four days, the attacks on Barack Obama from Governor Palin about his association, whatever it was, with this Weatherman back in the '90s? Will the audience in this case boo that? TODD: I think they would boo that. I would be shocked if a question like that came up. Put it this way-they know 70 million people are watching them, OK. It's just like when a pollster goes up and calls says, what is the most important issue to you? Somebody always says education, because they think that's the correct answer. These folks on television tonight, do you think they want to be known as the person that asked diamonds or pearls? Or do they want to be known as the person who asked, tell me about my 401(k)? I think the pressure is actually on the questioner. You're not going to see a Bill Ayers question. You're not going to see a race question. I just would be stunned, because I think these viewers know they're on television. MATTHEWS: I'm asking what kind of a role would the audience play tonight in basically vetting the questions, saying that's out of bounds? The personal stuff? Will they do it? PAGE: I agree with Chuck that those aren't going to be the questions. But here's the issue: will John McCain or Barack Obama bring up some of these issues in their answers? Will they-for instance, will John McCain use a question to talk about trustworthiness or judgment and use that as an opening? Because John McCain is a little bit of a box here. He is lagging in national and key battleground polls. He needs things to change. He needs to stop Barack Obama's momentum. And negative attacks is one way to do that. Will he risk bringing those up when the questioner does not? MATTHEWS: Let's take a look at Governor Palin, what she said about Obama today. (BEGIN VIDEO CLIP)GOV. SARAH PALIN ®, VICE PRESIDENTIAL CANDIDATE: Now, our opponent's campaign is claiming that for the first time Barack Obama wasn't aware of Ayers' radical background. Barack recently remembered him as just a guy in the neighborhood. But, wait a minute there. You mean to tell me that he didn't know that he had launched his own political career in the living room of a domestic terrorist? (END VIDEO CLIP)MATTHEWS: Well, fair or not, that's Governor Palin playing the normal role played by vice presidential running mate, attack dog. TODD: I think that is going to stay her role. When you look at our NBC/"Wall Street Journal" poll and you see she has a net positive personal rating, a net negative qualification rating. Do you want her pitching your economic plan on the negative qualification rating or do you want her pitching your message against your opponent? I think they're using her in the best way they can use her, because she does it with flare, with a wink and a smile. MATTHEWS: I wonder how long she will remain attractive if her role is this somewhat unattractive job. TODD: I think with the base, she's going to remain a very popular figure, because she's doing what they want McCain to be doing more. MATTHEWS: OK, thanks very much, Chuck Todd as always. Thank you, Susan Page. Up next, Barack Obama has been on a roll in the polls. Can John McCain slow him down starting tonight? Our coverage of the second presidential debate continues from Belmont University in Nashville right after this. (COMMERCIAL BREAK)MATTHEWS: Welcome back. We're back at Belmont University. Tonight, the presidential candidates will be having their second debate. The format is the town hall meeting, moderated by Tom Brokaw. Here to give us a preview of the debate is Lynn Sweet of the "Chicago Sun Times," and the Politico's John Harris. John, thank you. Let me start with Lynn. What do you know about the format tonight, the role Brokaw is going to play, the role everybody is playing. Give me the pregame on this. LYNN SWEET, "THE CHICAGO SUN TIMES": The pregame is that the questions are pre-screened by Brokaw. He got to pick them from many, many, many submitted by people through the Internet and from people. He's been working with the audience, who will be, as I said, pre-screened. They'll pick them. They'll ask, Chris. No reaction shots. No follow-ups in the format. MATTHEWS: What about follow-ups by the people? SWEET: No, no. The people asking the questions are not supposed to be allowed to do follow-ups and-MATTHEWS: How do they force the candidates to answer the damn question?SWEET: I don't know. There are 31 pages of rules that govern all the four debates going on. I think Brokaw is a master of these things. MATTHEWS: Let me go to John about that. It seem to me, one of the concerns people have about anything they see on television, whether it is a Sunday program or it's a weekday night cable program, they want politicians to tabs questions. Are we going to get the questions of the people answered tonight? JOHN HARRIS, POLITICO: I do think that will fall to Tom Brokaw, who I think is the kind of a person with enough poise and stature, frankly, that if he sees them evading it, he is certainly free and I hope that he would follow-up and make sure that the questions get answered. There has been a sense, at least I've had it, these first two debates, the moderators have done fine jobs. But the format has been awfully subdued and there have been lots of loose threads hanging out there, just begging to be yanked and followed up on. I do hope we have follow-up. MATTHEWS: Last week, for example, the governor of Alaska was asked about what good does this show us about the U.S. Congress and American politicians, the handling of the bailout and what bad does it show us. And she starts talking about Joe Six Pack and Soccer Moms and all over the place. And somebody pointed out in the "New York Times," a college professor, you can't get away with that in an average conversation. You can't be talking to somebody and they completely ignore your existence and talk about something else. SWEET: That's why today's format is very different. It is one thing for Governor Palin to say during a debate, I'm not going to show the moderator and my opponent wants to hear. You can't say that, Chris, looking someone in the eye who just asked you a question. It is going to be much harder. I don't think McCain would go that route, and certainly, not Obama. It is not their thing. I think they've been in town hall formats. They will try to deal with the person. MATTHEWS: Let's talk about-the first question is will they answer the questions tonight. The second question is, John, will they try sneak in, particularly the candidate who is running behind, John McCain, will he try sneak in the shiv? Will he answer a question and then stick in it on something in the past that may be not relevant to the question? HARRIS: Another thing about this format that typically has not-MATTHEWS: That's the question I'm putting to you. HARRIS: I don't think that he will, just because the format does not lend itself to that. I would also say, even more, the moment does not really lend itself to that. The Dow off another 500 points today. I can't think of a debate that's occurred, at least certainly not in recent cycles, with quite this sense of crisis and contemporary crisis and urgency going on. I think that is going to seem very misplaced and out of context if he starts getting into Bill Ayers and that sort of thing. I would be surprised. MATTHEWS: It would seem like the candidate is thinking, we're all in the boat. The water lines coming up and somebody is arguing about who has the right to be in first class or not? That would seem to be the conversation.SWEET: It is high stakes thought. That's why I think I wouldn't rule out that Bill Ayers and Charles Keating come up tonight. I wouldn't rule it out. It is a high stake gamble. MATTHEWS: You think they will bring it up. SWEET: I'm not ruling it out. I think they have to see how it goes. I think it certainly is going to be an arrow in the quiver tonight. But both McCain and Obama, in the first debate, basically talked over the whole economic crisis that even then was pretty bad. It is worse now. I don't think they connected at all with the people listening at home who said, what are you going to do to help me out right now if my business can't get a lone, if my home -- MATTHEWS: I think if they're smart, they will talk like they're on cNBC tonight. SWEET: They have to talk in a way that somebody can connect on.MATTHEWS: Thank you, Lynn Sweet, as always. Thank you, John Harris of the Politico. Much more from Nashville. Coming back, you're watching HARDBALL's live coverage. We're pre-gaming it tonight of the second presidential debate from here at Belmont, University in Nashville, on MSNBC.(COMMERCIAL BREAK)MATTHEWS: Look at that camera angle, as they come through the trees. It's great. We're coming through the trees. I love it. Welcome back to HARDBALL. Beautiful camera work there as you see all the people here. For some reason, all we have are Democrats here. I have no idea. It's not what we planned. I am going to look for Republicans the next chance we're back in Nashville for the second presidential debate. We're joined right now by an Obama supporter, a great U.S. Congresswoman from Florida, one of our favorites, Debbie Wasserman Schultz of Florida. Let's just talk about the politics of this thing. It seem to me there are two states being targeted, Pennsylvania and Florida. And the way that the Republicans, which is behind right now, is targeting is creating a kind mystery around Barack Obama. Who are his friends? What is this with his middle name? Did he get money from overseas? Mystery, shrouding-He's been around for two years. All we've done is look at the guy. What do you think of that strategy? Can it work? REP. DEBBIE WASSERMAN SCHULTZ (D), FLORIDA: I think it's insidious and I don't think it will work. I think people have seen Barack Obama for the last two years. I think they understand that this is the politics of distraction. Voters want the candidates to talk about the issues that matter to them right now. We need to bring our troops home from this war that we're hopelessly mired in. We need to have universal health care. We need to have alternative energy.And talking about who the candidates are friends with and what they did yesterday or three days ago, that's not what voters-MATTHEWS: Are the grand kids really coming down to south Florida to talk their grandparents into voting for Barack? Is that really happening?SCHULTZ: It's really happening. MATTHEWS: Sarah Silverman is such a cutie and she's been pushing this. Is it working? SCHULTZ: It is, because that generation, the generation of my grandparents, is really respecting accepting the opinion of their grandchildren. It's so important to young people. MATTHEWS: They spend zillions of dollars educating the kids and the grand kids. They ought to listen to them once in a while. What do you think? SCHULTZ: Absolutely. They really want to see the next generation help this country move in a new direction. I think they're going to go to the polls. MATTHEWS: Who is going to win Florida come November 4th? SCHULTZ: Barack Obama and Joe Biden. MATTHEWS: If they win Florida-we'll see. Thank you very much, Debbie Wasserman Schultz of Florida. Thank you very much, congressman. Join us again in one hour for more HARDBALL. We'll have a totally new show at 7:00 eastern. At 9:00 eastern, we have the whole debate coming up. It is time for the RACE FOR THE WHITE HOUSE with David Gregory.THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.END www.ascllc.net ) ALL RIGHTS RESERVED. No license is granted to the user of this material other than for research. User may not reproduce or redistribute the material except for user's personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon MSNBC and ASC LLC's copyright or other proprietary rights or interests in the material. This is not a legal transcript for purposes of litigation.>

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