updated 10/8/2008 11:29:23 AM ET 2008-10-08T15:29:23

Guest: Robert Gibbs, Mike DuHaime, Roger Simon, Pat Buchanan, Eugene

Robinson, John Heilemann, Jonathan Alter

CHRIS MATTHEWS, HOST: Well, the results are in. The viewers have spoken. Obama wins the debate.

(CHEERING AND APPLAUSE)

MATTHEWS: That makes it 3-0 for the Democrats.

Let's play HARDBALL.

(CHEERING AND APPLAUSE)

CROWD: Obama! Obama! Obama! Obama!

MATTHEWS: Good evening. I'm Chris Matthews.

And welcome to this late-night edition of HARDBALL, live, as you can see, from Belmont University in Nashville, Tennessee, the site of the second presidential debate.

By the way, these folks are out here in the rain watching us tonight.

(CHEERING AND APPLAUSE)

MATTHEWS: They are something.

And, tonight, John McCain fought for his political life in an attempt to stop Barack Obama's surge in the polls. Did he succeed? Was this debate a game-changer?

Well, not according to the viewers. According to a snap poll by CNN, Obama was seen as the winner by a huge margin, 54 percent to 30 percent. That's a 24-point edge for-in the CNN poll. And the CBS poll of uncommitted voters also scored it for Obama 39 percent for him, 27 percent for McCain, 35 percent saying it was a tie.

Let's bring in "Newsweek"'s Howard Fineman and "The Politico"'s Roger Simon, who is standing with me.

You know, I thought, tonight, there was some strange moments.

But, before I get to those very strange moments, what did you guys think of who won tonight, first, Roger, who is with me?

ROGER SIMON, CHIEF POLITICAL COLUMNIST, THEPOLITICO.COM: I thought, for once, the polls are correct, America is correct, because I agree with it that...

(LAUGHTER)

MATTHEWS: That's your standard, right?

SIMON: That is my standard.

MATTHEWS: OK.

SIMON: That McCain needed to change the trajectory. He needed to knock Obama out. He needed to score some solid punches, and he didn't do it. And, because McCain didn't win, he lost.

MATTHEWS: And because he didn't bring a foreign object into the ring...

SIMON: It might have helped.

MATTHEWS: ... he didn't bring in Bill Ayers with him, he didn't win.

Let's take it, Roger, your assessment of tonight's event?

Howard.

HOWARD FINEMAN, NBC CHIEF POLITICAL CORRESPONDENT: Chris, I want to apologize first for not walking over in the rain from the spin room to where you are. It was an act of cowardice on my part.

(LAUGHTER)

MATTHEWS: Well, you're not as hardy as the people there.

SIMON: Yes.

MATTHEWS: Look at these people.

(CHEERING AND APPLAUSE)

FINEMAN: OK, yes, there you go.

(CHEERING AND APPLAUSE)

(CROSSTALK)

MATTHEWS: ... these people.

(LAUGHTER)

CROWD: Obama! Obama! Obama!

MATTHEWS: Go ahead, Howard.

FINEMAN: Well, OK.

Yes, he had-McCain had to win tonight, and he didn't quite do it. I thought that that's as good as McCain could be on the economy. In other words, he was tacking-attacking forcefully and cleverly on the economy against Obama. And-and McCain had a new proposal with which he tried to make news about buying mortgages directly from the government and so on.

That's as good as he could package his economic stuff at a time when the country cares about it and everything seems to be falling apart. But it wasn't enough. It wasn't convincing enough, and he didn't knock Obama off his game there.

And there were several other moments where Obama, both stylistically and substantively, outperformed McCain. So, Roger's bottom line is right. McCain had to knock him out or change the game. That did not happen tonight.

MATTHEWS: Yes.

SIMON: Sure.

MATTHEWS: Roger, what do you think of the fact that, for four days now, we have had this sort of aerial bombardment of Barack Obama from the campaign of Sarah Palin on the issue of Bill Ayers and dubious figures in his past...

SIMON: Right.

MATTHEWS: ... particularly this Weatherman back in the '60s and '70s, who he met in the '90s? The fact that the candidate for president would not deliver the knockout blow, wouldn't bring up the name, what does it tell you?

SIMON: It tells me they don't want him to go there or he doesn't want to go there. He still has another chance to go there.

But, if he went there tonight, and on a day the Dow plunges, what, another 500 points, and people are saying...

MATTHEWS: Right.

SIMON: ... look, we don't want to hear about some bomber from the '60s, how are you going to save my kid's college fund...

MATTHEWS: Right.

SIMON: ... if that failed tonight, McCain would have had no recourse.

He's still got that in reserve.

MATTHEWS: OK.

SIMON: But, I mean, his whole thing, his whole shtick was steady hand on the tiller. He used that phrase twice. That's his game plan.

MATTHEWS: There's a great line in the movie...

FINEMAN: Yes. But, you know...

(CROSSTALK)

MATTHEWS: ... in the book by...

(CROSSTALK)

MATTHEWS: ... Scott Turow, Roger-or, Howard-it's called "Presumed Innocent"-where the prosecutor says, you have to point the finger at the accused and personally confront him, if you want a conviction.

FINEMAN: Right. Right.

MATTHEWS: How can the entire...

FINEMAN: Well, you're...

MATTHEWS: ... McCain campaign accuse Barack of a bad relationship back in the '90s, if he's not willing to deliver the indictment? How can they get away with it?

FINEMAN: Well, yes.

Also, they had tried to say it wasn't just about Bill Ayers, or even primarily about Bill Ayers. It was about Barack Obama's credibility, that he was lying about it, that he was covering up his associations and not being forthcoming. If it was an issue of character, they needed to make it.

But I agree with Roger. McCain was in a tough spot here. People wanted to hear about the economy tonight. The whole surround, the whole...

MATTHEWS: OK.

FINEMAN: ... scene, the whole world is focussed on that issue.

And, by the way, I thought, on the steady hand on the tiller part of it, that was one of Obama's strongest moments, when he said, you're supposed to have the steady hand on the tiller. You say I'm green behind the ears, but you're the guy who sang "Bomb, bomb, bomb Iran," and you're the one who said...

MATTHEWS: OK.

FINEMAN: ... let's obliterate North Korea, et cetera.

I thought that was one of Obama's strongest moments.

MATTHEWS: OK.

Well, let's work our way up to that strongest moment by Obama. But let's watch what I consider some of the strangest moments of the evening, which will be talked about until doomsday perhaps.

(LAUGHTER)

MATTHEWS: Here's an awkward moment between John McCain and the moderator of the debate.

(BEGIN VIDEO CLIP)

TOM BROKAW, MODERATOR: Obviously the powers of the treasury secretary have been greatly expanded. The most powerful officer in the cabinet now. Hank Paulson says he won't stay on. Who do you have in mind to appoint to that very important post?

Senator McCain?

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL NOMINEE: Not you, Tom.

(LAUGHTER)

BROKAW: No, with good reason.

(LAUGHTER)

(END VIDEO CLIP)

MATTHEWS: What are we to take of that, Howard Fineman, "Not you, Tom"?

FINEMAN: Oh, he was just...

MATTHEWS: I don't think Tom was putting his name in nomination, so why was it withdrawn is what I want to know?

(CROSSTALK)

FINEMAN: Well, it was just McCain trying to indulge in a towel-snapping moment that didn't quite fit the circumstance.

(LAUGHTER)

FINEMAN: I mean, he was-he was just going for a joke, and it was not-it was just not a very good joke. You know, there's nothing more you can say about it than that.

(CROSSTALK)

MATTHEWS: Well, I don't know. I just thought it was really a full-mooner.

What did you make of it?

SIMON: Yes. It's also McCain saying, hey, wait a second. This is supposed to be a town hall. Tom, you're supposed to be a potted plant here.

MATTHEWS: Why are you asking questions? That's what I thought it was.

SIMON: Yes, what are you doing asking questions?

MATTHEWS: I thought it was him saying, I thought you were just going to watch this whole thing. You got a roll here? I didn't know that.

SIMON: Yes, right.

(LAUGHTER)

MATTHEWS: Let's take-let's take a look at another moment which has caused some eyebrows to be raised. This is where McCain referred to the Democratic nominee for the presidency of the United States as "that one."

(LAUGHTER)

MATTHEWS: Let's-let's watch this reference.

(BEGIN VIDEO CLIP)

MCCAIN: By the way, my friends, I know you grow a little weary with this back-and-forth. It was an energy bill on the floor of the Senate loaded down with goodies, billions for the oil companies, and it was sponsored by Bush and Cheney.

You know who voted for it? You might never know. That one. You know who voted against it? Me.

(END VIDEO CLIP)

(LAUGHTER)

MATTHEWS: That is something. I'm sorry. I am sorry. That is the most amazing statement I have ever seen.

FINEMAN: Yes. Yes.

MATTHEWS: Roger, I don't know what-where-in what idiom do we refer to our main rival in the universe as "that one"?

SIMON: No-no good idiom.

MATTHEWS: It's not even a personal pronoun.

SIMON: No.

MATTHEWS: It's "one." It's not "him."

SIMON: Right, especially when your opponent is an African-American, and there's some sensitivity there of being dismissed as an object and not a human being.

And the Obama campaign immediately-immediately sent out an e-mail to the press corps...

(CROSSTALK)

MATTHEWS: I didn't catch that-that big part of it. But...

SIMON: ... saying, John McCain called him "that one."

(CROSSTALK)

MATTHEWS: Howard, "that one," what do you make of "that one"?

(CROSSTALK)

FINEMAN: Yes. Well, I-I got some of those e-mails and some exploratory e-mails, because the Obama campaign was trying to test how upset people were about it.

I don't think it was a racial thing at all. I think it was just a case of McCain acting like an old guy. I mean, it was like something your grandfather would say. It was like hey, what about that grandchild over there? What about that one? You know, it's just...

(LAUGHTER)

(CROSSTALK)

MATTHEWS: Yes. I was thinking of the old Irish expression, see, you're one of the smart ones.

FINEMAN: Yes. Right.

MATTHEWS: You know, some old Irish expression.

(CROSSTALK)

MATTHEWS: I have no idea where it came from.

(CROSSTALK)

(LAUGHTER)

MATTHEWS: OK, now to your golden oldie, your favorite, Howard, the Beach Boys song. Let's hear it again.

FINEMAN: Yes.

MATTHEWS: Here's that great shot from Barack Obama at his rival. And he remembered, by the way, the entire stack of golden oldies. He remembered every one of the shots that McCain had made.

FINEMAN: Yes.

MATTHEWS: Here he is reminding-reminding us of them.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL NOMINEE: Now, Senator McCain suggests that somehow, you know, I'm green behind the ears and, you know, I'm just spouting off, and he's somber and responsible.

I...

MCCAIN: Thank you very much.

OBAMA: Senator McCain, this is the guy who sang "Bomb, bomb, bomb Iran," who called for the annihilation of North Korea. That I don't think is an example of "speaking softly."

This is the person who, after we had-we hadn't even finished Afghanistan, where he said, "Next up, Baghdad."

(END VIDEO CLIP)

(LAUGHTER)

MATTHEWS: This is like an argument with your spouse when they remember everything you have ever done wrong, and they remind you of it when you get into a fight.

(CROSSTALK)

MATTHEWS: And that's another thing. And remember that time and remember that time? Remember that time?

(CROSSTALK)

MATTHEWS: Howard, it was like a fight with a spouse that remembers everything.

FINEMAN: Oh, no, actually, I thought it was like a prizefight in the 13th round, where McCain had been throwing punch after punch after punch, and then McCain walked right into that one.

Obama said, you know, he's portraying me as green behind the ears and he's the somber one.

And then McCain said, "Thank you." And, then, bam, Obama hit him with that whole long list of things. And Obama walked out into the middle of the stage. He played to the TV audience and to the audience in the hall. I thought, both in terms of style and substance, that was one of Obama's strongest moments of the night, and I think is the moment that, if there was any doubt, he won that debate.

MATTHEWS: I think that was by...

(CHEERING AND APPLAUSE)

MATTHEWS: By the way, by Howard Fineman, you didn't hear it, but that was homage. That was an homage to Pittsburgh Billy Conn trying to knock out Joe Louis in the 13th round...

(LAUGHTER)

MATTHEWS: ... when he had him on points and tried to take out the Brown Bomber.

FINEMAN: Yes, it didn't work out for Billy Conn there.

MATTHEWS: And the Brown Bomber knocked him out.

FINEMAN: Right. Right.

(CROSSTALK)

MATTHEWS: You are a Pittsburgher to the end.

FINEMAN: Yes, there you go.

(LAUGHTER)

MATTHEWS: Howard Fineman, I know your thinking process.

Thank you, Roger Simon.

We have so much fun. We know each other like, I don't know, two old guys on a bench in Florida.

(LAUGHTER)

MATTHEWS: Coming up: reaction from the McCain and the Obama campaigns. Was the debate a game-changer? Will we see the shift in polls by the end of the week? Well, we will see. But we're already seeing who won the snap polls. Obama won.

And, later, we have learned what some of the polls have shown tonight. We will have the results of our own focus group tonight of voters up in Philadelphia, in the suburbs.

You're watching HARDBALL, live from Nashville, of the site of the second presidential debate, only on MSNBC.

CROWD: Obama! Obama! Obama!

(BEGIN VIDEO CLIP)

MCCAIN: You know, he said some time ago, he said he would forgo his tax increases if the economy was bad.

I have got some news, Senator Obama. The news is bad.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: You need somebody working for you and you've got to have somebody in Washington who is thinking about the middle class and not just those who can afford to hire lobbyists.

(END VIDEO CLIP)

(CHEERING AND APPLAUSE)

MATTHEWS: Welcome back. We're out here in the rain in Nashville watching this, with all the people here watching it with us.

Welcome back to HARDBALL.

In just a few minutes, our focus group of voters up in suburban Philadelphia will join us to tell us who they think won tonight, and why.

But, right now, let's hear it from the campaigns, starting with the McCain campaign's political director, Mike DuHaime.

Mike, thank you for joining us.

MIKE DUHAIME, MCCAIN CAMPAIGN MANAGER POLITICAL DIRECTOR: Thanks, Chris.

MATTHEWS: I have got to ask you about some oddities tonight. And call me strange, but I-I thought it odd that your candidate, John McCain, when asked who he might name as his secretary of the treasury, on a matter of tremendous national import, said, "Not you, Tom," to Tom Brokaw.

What did he mean by that?

DUHAIME: Chris, I think it was-it was a moment of levity.

I would never call you strange, Chris. I think it was a moment of levity in the campaign. You know, he obviously went on to answer that question very substantively and talking about Warren Buffett and other-other potential folks, Meg Whitman. So, he answered the question very substantively. I think a moment of levity, and I think you-I think it would better to focus on the substance of the answer.

MATTHEWS: So, he wasn't upset that he was being asked that-he wasn't upset, Mike, he wasn't upset that he was being asked that question?

DUHAIME: No, not at all, Chris. Not at all, Chris. Come on. You know that.

MATTHEWS: It wasn't a little moment of-it wasn't a tiff?

No, I don't know, no, because I thought he was upset.

DUHAIME: No, Chris. Come on. You know. Come on. You know.

(CROSSTALK)

MATTHEWS: No, that's what I thought.

DUHAIME: Of course not, Chris. Come on.

MATTHEWS: Are you a mind-reader, Mike DuHaime, or just a flack?

(CROSSTALK)

DUHAIME: I-no, I can just read your mind Chris. That's all.

MATTHEWS: OK. Well, maybe we shouldn't go on with the questions.

Ask what-tell me what my next question is, then.

DUHAIME: I will just wait. Sure. Chris, I'm just saying we should talk about the substantive answers.

(CROSSTALK)

MATTHEWS: What did you make of-what did you make of John McCain calling Senator Obama "that one"?

DUHAIME: Well, Chris, there, this is what I'm talking about.

I should have read your mind on that. I mean, we have had a debate here, 90 minutes, with a lot of substance. That was an answer about tax policy and where Senator Obama voted and where Senator McCain voted.

You're going to try to out like parse like one or two words here or there, rather than talk about the real substance. You're talking about the appointment of a treasury secretary and talking about a serious discussion on taxes. You're going to find one word here or there in order to distract people from the substance of it.

I mean, I don't know what-I heard you talking about it before. Clearly, it's what you're going to talk about all night. But you had a really substantive debate. You want to parse out one or two words, you know, I just-I don't think that's a realistic discussion of what happened tonight.

MATTHEWS: Well, let me ask you about something that wasn't mentioned tonight. That is the attack that your campaign has launched against Barack Obama for his association with Bill Ayers. That's gone on now since Saturday. Why did your candidate not address it?

DUHAIME: Well, I think the questions tonight from Tom Brokaw, there were no questions on that issue tonight. And I think Senator McCain tried to answer the questions that came across tonight.

I think it's a fair point of discussion, but it was not one that was asked by either the moderator or anybody else, in terms of the e-mail questions or the town hall questions.

MATTHEWS: Right.

DUHAIME: So, it clearly wasn't something that came up. Hopefully, it would be something that Senator Obama or Senator Obama perhaps can discuss in the future.

MATTHEWS: Let's take a look at this back-and-forth. It's to do with a lot of issues, but it's packed into this exchange now, Mike, between-it starts off with Barack Obama, and then it has a retort, sort of, from John McCain. Let's watch this part of the debate.

DUHAIME: OK.

MATTHEWS: It's not quite ready.

What did you think about the whole tenor of the debate? Well, we got a minute here. What do you-do you think that it was a good debate tonight, a substantive debate?

DUHAIME: I thought it was a good-I thought it was a substantive debate.

I think both candidates, you know, tried to lay out-lay out some facts and issues. They both had some barbs towards each other. I thought Senator McCain was more substantive. That was certainly my opinion, in terms of some of the answers, the specific answers. Certainly, talking about homeownership and laying out that new proposal tonight, I think, was very substantive.

So, I think, overall, it was a good debate. I hope voters learned a lot from it.

MATTHEWS: Let's take a look-Mike, let's take at a big chunk of it now, both sides, first Barack, and then John McCain.

(BEGIN VIDEO CLIP)

OBAMA: When George Bush came into office, we had surpluses. And now we have half-a-trillion-dollar deficit annually.

When George Bush came into office, our debt-national debt was around $5 trillion. It's now over $10 trillion. We've almost doubled it.

And so while it's true that nobody's completely innocent here, we have had over the last eight years the biggest increases in deficit spending and national debt in our history. And Senator McCain voted for four out of five of those George Bush budgets.

MCCAIN: This is the most liberal big-spending record in the United States Senate. I have fought against excessive spending and outrages. I have fought to reduce the earmarks and eliminate them.

Do you know that Senator Obama has voted for-is proposing $860 billion of new spending now? New spending. Do you know that he voted for every increase in spending that I saw come across the floor of the United States Senate while we were working to eliminate these pork barrel earmarks?

He voted for nearly a billion dollars in pork barrel earmark projects,

(END VIDEO CLIP)

MATTHEWS: What do you make of that exchange, Mike?

DUHAIME: Well, I think, clearly, Barack Obama is running against George Bush, not John McCain. And John McCain, I think, pointed out a serious part of Senator Obama's record. He's voted 97 percent of the time with the Democrat Party. He's never bucked his party on any major piece of legislation.

I have never seen him make a vote that was against what was the most politically expedient vote he could make. I have never seen him go against public opinion on any vote that he could make. John McCain has always gone against-he's always done what he thinks is right, whether public opinion is with him or not.

I think Barack Obama wants to talk about the past and talk about George Bush. I think Senator McCain's comments speak for themselves. They're about Senator Obama's record.

MATTHEWS: OK, Mike, it's great having you on.

By the way, Mike, just to keep friendly with you...

DUHAIME: Thanks, Chris. Yes.

MATTHEWS: ... I really do think that your candidate was upset with Tom for asking that question. That's really what I thought. So, we will have to talk about it later.

Mike DuHaime, thanks for joining us.

DUHAIME: All right. We will disagree. Thanks, Chris.

MATTHEWS: It was an interesting debate. It was an interesting debate tonight, Mike DuHaime joining us.

We're going to have-in a minute, we're going to hear from Robert Gibbs, who, of course, is one of the top spokesman-in fact, he is the top spokesman for Barack Obama.

Once again, however, perhaps you can't go by these things, but we have to go by them, the initial snap polls by CNN, and also by CBS. And their poll was of independent voters. They both found, again, that Barack Obama won the debate, as they did the first time around, and as they did, the same pollsters, when-when Sarah Palin had to debate with Joe Biden. They found for Joe Biden.

Maybe it's the tenor of the times, maybe it's the economy, but the people keep saying the Democrats are winning these polls. Right now-these debates.

Right now, let's go to the Obama campaign. We're going to hear from Robert Gibbs.

Robert?

ROBERT GIBBS, OBAMA CAMPAIGN COMMUNICATIONS DIRECTOR: Chris, how are you?

MATTHEWS: Robert, did you take any offense, as a spokesman for Barack Obama, from the reference by McCain to your candidate as "that one"?

GIBBS: Well, look, Chris, I thought it was one of the stranger moments in the debate.

I think, throughout both of these debates, John McCain has looked angry and agitated. I think that's why he hasn't really addressed the issues as well as Barack has. And I think that's why a focus group and-and the polling has shown that Barack Obama has been the clear winner in these first two debates.

MATTHEWS: Well, let me show you the beginning part.

I thought this part was your candidate's strongest moment, and probably good for him it was right up front and probably helped him. It was right off the bat.

Here he is talking about AIG and that junket they all polled out in California.

(BEGIN VIDEO CLIP)

OBAMA: It means that we are cracking down on CEOs and making sure that they're not getting bonuses or golden parachutes as a consequence of this package. And, in fact, we just found out that AIG, a company that got a bailout, just a week after they got help went on a $400,000 junket.

And I will tell you what, the Treasury should demand that money back and those executives should be fired. But that's only step one.

(END VIDEO CLIP)

MATTHEWS: Is he going to make a legislative move to have that happen? Is Barack Obama going to push a bill through the Congress to make sure that $400,000 is repaid to the Treasury?

GIBBS: Chris, if that's what it takes to get that money back for the taxpayers...

MATTHEWS: And, if so, why not?

GIBBS: If that's what it takes to get the money back for the taxpayers, that's what we will do.

I mean, it's simply outrageous that, just a few days after the taxpayers of this country reach out to help a major insurer from going under, their executives are off, out bathing in the sun. It's unacceptable. We won't-we will make sure that it doesn't happen, on behalf of the taxpayers of this country. And, if it takes legislation, that's what we will do.

MATTHEWS: Do you think it's wrong of the executives of AIG to get expensive $3-a-minute massages out of the money they got from the federal government, basically?

GIBBS: I think it's unfair. And I bet each and every one of your listeners thinks it's unfair.

The-the money that-that Congress appropriated to help this economy was not to go to CEOs and golden parachutes, as Senator Obama succinctly said. It's to help this country get its economy back on track, so that we can create jobs again.

There's absolutely no excuse what those executives did. They should be fired, and their money should be-that money should be returned to the Treasury and the taxpayers of the United States.

MATTHEWS: OK. Thank you very much, Robert Gibbs, for the Barack Obama campaign.

GIBBS: Thanks, Chris.

MATTHEWS: Up next, Norah O'Donnell and our focus groups of voters up in King of Prussia above Philadelphia. And what do they think about who won tonight's debate? They're all there with their joy buzzers telling us what they liked about each answer or didn't like. We will be with them next.

You're watching HARDBALL, live in Belmont University in Nashville, only on MSNBC.

(BEGIN VIDEO CLIP)

MCCAIN: Nailing down Senator Obama's various tax proposals is like nailing Jell-O to the wall. There has been five or six of them. And, if you wait long enough, there will probably be another one. But he wants to raise taxes.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

CROWD: Obama! Obama! Obama! Obama!

MATTHEWS: Welcome back to our special late-night edition of HARDBALL.

For tonight's debate, we assembled a group of voters up in suburban Philadelphia.

Let's hear what they thought of the debate.

MSNBC's Norah O'Donnell joins us now from King of Prussia, Pennsylvania.

Norah, you got them to hang around. That's great.

(LAUGHTER)

MATTHEWS: Tell us what they're-well, go ahead. Take over.

(LAUGHTER)

NORAH O'DONNELL, NBC CHIEF WASHINGTON CORRESPONDENT: Absolutely.

Well, it was fascinating. By 60 percent to 40 percent, these voters from here, just in the suburbs of Philadelphia, thought Obama won the debate. And we use these things, dial-testers, to see how they viewed certain things. Really interesting.

Want to play for you a sound bite from McCain on the economy. He was asked by Tom Brokaw, would you give Congress a date certain to reform Social Security and Medicare? McCain answered by talking about taxes and attacking Obama.

Watch the lines in response on this.

(BEGIN VIDEO CLIP)

MCCAIN: Senator Obama has voted 94 times to either increase your taxes or against tax cuts. That's his record.

When he ran for the United States Senate from Illinois, he said he would have a middle-income tax cut. You know he came to the Senate and never once proposed legislation to do that?

So let's look at our record. I have fought higher taxes. I have fought excess spending. I have fought to reform government.

Let's look at our records, my friends, and then listen to my vision for the future of America.

(END VIDEO CLIP)

O'DONNELL: Really interesting, Chris. That was one of the more significant drops we saw for McCain.

Heather is a Democrat.

Why did your numbers go down on McCain for that?

UNIDENTIFIED FEMALE: I think his tone throughout the whole thing was very condescending. It was almost like he was kind of talking down to everyone, especially the middle class. There's just something about it, that I didn't like the way he was answering the questions.

O'DONNELL: Chris, it was really interesting. On a couple of the times when McCain either made jokes, independents actually dipped a great deal. They didn't-they scored, generally speaking, Obama a lot higher.

Want to play for you Obama talking specifically about Iraq. And watch how even Republicans responded when Obama talked about Iraq.

Listen.

(BEGIN VIDEO CLIP)

OBAMA: Senator McCain, in the last debate and today, again, suggested that I don't understand.

It's true. There are some things I don't understand. I don't

understand how we

NORAH O'DONNELL, MSNBC CORRESPONDENT: . when Obama talked about Iraq.

Listen.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D), PRESIDENTIAL NOMINEE: Senator McCain in the last debate, and today again, suggested that I don't understand. It's true, there's some things I don't understand. I don't understand how we ended up invading a country that had nothing to do with 9/11 while Osama bin Laden and al Qaeda are setting up base camps and safe havens to train terrorists to attack us.

That was Senator McCain's judgment. And it was the wrong judgment. When Senator McCain was cheerleading the president to go into Iraq, he suggested it was going to be quick and easy. We'd be greeted as liberators. That was the wrong judgment.

(END VIDEO CLIP)

O'DONNELL: As you see, "cheerleading the president," that green line independents, really peaked right there.

And Neil, you're an independent. Tell me why.

NEIL, INDEPENDENT VOTER: Well, I think part of the reason why, you know, Obama seemed to address, you know, more of what we're looking for as far as an answer. If you're hearing him talk, he was answering the question directly.

And I think that seemed to, you know-especially from my perspective, from an economy perspective, he really handled the questions much more thoroughly than John McCain did.

O'DONNELL: Chris, you have some questions for the voters here?

MATTHEWS: Well, I want to ask them about that very question. Do you all really pay attention, when you hear these questions in this debate, and really clock the candidate and want them to answer a particular question? Does it bother you when they go off and digress and give their speeches?

Does it bother you?

O'DONNELL: Theresa?

THERESA, VOTER: Yes, they keep evading the issue. I think that we should go after bin Laden. I don't care where he is, if he's in Afghanistan, Pakistan or Qatar, it doesn't matter. Go get him and kill him. Thank you.

O'DONNELL: Chris, another question?

MATTHEWS: I guess that's an answer to my question. But I-just generally, does anybody have an idea, because last week Sarah Palin basically gave speeches, very nicely, very well spoken, obviously, but she would ignore the question.

I just wondered if it bothered people when they saw that last week, if they saw that debate, because that was a big issue last week.

O'DONNELL: Chris-Chris, we have another Chris here who's a Republican.

What about that?

CHRIS, REPUBLICAN VOTER: I can't stand when they go off on a tangent. In fact, when they went off on a tangent tonight in the debate, especially with the taxes, both with Obama and McCain, I voted greatly against it.

I actually want them just to address the questions, address the issues, and give us some more specifics and McCain didn't really do that. Obama did it with some of the issues but not everything as well. They both need to work on it.

O'DONNELL: Chris?

MATTHEWS: What did they-what they did think of the tone of the two candidates? Did they have a sense that McCain was angry? Did they have a sense that Barack had a better light heartedness? In other words, their bearing as individual people?

Did that affect their thinking about the candidates tonight-not their words but their manner?

MARY ANN, VOTER: Hi, Chris. Mary Ann. Yes, I thought McCain's jokes fell flat. I think with so many important issues facing the country today, that they must stay on issue, forget the jokes, and let us know, in simple terms, how they're going to fix the ills facing this country.

O'DONNELL: Well, there you have it, Chris. A good cross section here, as you know, of-this is swing county and Pennsylvania may decide this election. This is a state McCain has been spending a lot of time in, but Obama has the advantage in terms of registration, spending money here and the latest poll average show him up about 11 points. Chris?

MATTHEWS: OK. You know it's great to have you. It's a great service for us to learn from you. Thank you for all for doing this for us. Thank you for helping us understand your thinking. And, well, it's nice to get a different perspective that we've never had before. Thank you so much.

Norah, of course, it was great working with you again. Thank you for everybody up there in King of Prussia up in Pennsylvania.

When we return, reaction to tonight's debate from MSNBC's Rachel Maddow, Patrick Buchanan and the "Washington Post's" Eugene Robinson.

We're live in Belmont University in Nashville, Tennessee only on MSNBC.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN ®, PRESIDENTIAL NOMINEE: The fundamental difference between myself and Senator Obama, as you noticed he starts talking about government. He's talked about government will do this, government will do that, and then government will, and he'll impose mandates.

If you're a small business person and you don't insure your employees, Senator Obama will fine you. Will fine you. That's remarkable.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(NEWSBREAK)

(BEGIN VIDEO CLIP)

OBAMA: That is a fundamental difference I have with Senator McCain. He believes in deregulation in every circumstance. That's what we've been going through for the last eight years. It hasn't worked and we need fundamental change.

(END VIDEO CLIP)

MATTHEWS: Welcome back to this special late night edition of HARDBALL live from Belmont University in Nashville, Tennessee, where Barack Obama and John McCain held their second debate tonight.

Let's bring in MSNBC political analyst Pat Buchanan and Eugene Robinson, along with Rachel Maddow, host of "THE RACHEL MADDOW SHOW" which airs every night at 9 o'clock Eastern on MSNBC.

Gentleman and lady, I have to tell you, I was looking at this tonight as a series of concentric circles, the widest circle being the terrible state of our economy right now. A 5,000 point loss in the Dow over the last year, $8 trillion of wealth just disappearing in front of our eyes.

In a smaller circle, within that, this presidential debate and the smallest circle right in the middle being the debate tonight, in the midst of the campaign and I looked at a number of factors and it seems to me that if people are going to look back on this campaign 10, 20 years from now, they're going to say one of the reasons or two of the reasons we elected the first African-American president was the state of the economy.

The second reason was the debonair manner in which he conducted this debate against a man who seemed a bit tight, a bit angry.

I want Pat Buchanan to respond to that possibility. The manner, the tone, the charm, if you will, of the Democratic nominee, against that of the Republican nominee in the midst of a bad economy, manner and context helping him, ethnicity, obviously, still being a barrier he has to overcome.

Pat Buchanan?

PAT BUCHANAN, MSNBC POLITICAL ANALYST: Chris, I think there's a lot of truth in what you said. There's no question that the economy has driven McCain out of the lead. He had gained two weeks after his nomination and the selection of Palin.

And the economy has driven him down any number of points, I don't know whether he's three behind, four behind, or nine behind. So he came in tonight against Barack Obama. I think he's getting advice from two sides. One side is saying, John, you've got to peel the hide off this guy or we're done. The other side is saying, if we're going to win, we've got to get the old McCain of 2000 the media fell in love with.

And I think he was doing both things and I think he won on points but I agree with the Billy (INAUDIBLE)/Joe Lewis analogy. Barack Obama got in the one solid haymaker punch, which really landed. He was unflumexed(ph). Barack Obama was-you know he was not flustered.

And I think basically because he did not lose, he won the debate. And McCain is going to have to pick up a different strategy for the next one, because what he's done these last two, and this one was better than the last one, is not working.

MATTHEWS: And the haymaker referred to the fact he couldn't understand how he ended up in Iraq after not being attacked by Iraq.

BUCHANAN: The haymaker was when Barack Obama stepped in and said, he meant wet behind the ears, he said maybe you think I'm green behind the ears, but I'm not the guy, you know, that wanted to annihilate North Korea.

MATTHEWS: Right.

BUCHANAN: . and I'm not the guy who went into Iraq.

MATTHEWS: Right.

BUCHANAN: . before we had done the job there. And I didn't do the "bomb, bomb, bomb, bomb, bomb Iran" number, that was you.

MATTHEWS: OK, great.

Let me go to Rachel on that same question. I'd like you to address the context of the debate within the campaign which is itself within this terrible economic context.

RACHEL MADDOW, HOST, "THE RACHEL MADDOW SHOW": I think that McCain needs to figure out how he's going to get out of this trajectory. He's either going to get out of it by coming up with something that changes American's minds about him on the economy or he's going to have to try to destroy Barack Obama.

His campaign is doing one thing, he's doing another. His campaign is

trying to destroy Barack Obama. We're seeing Sarah Palin do that, we're

seeing that with the ads that are coming out. We're seeing that with leaks

presumably authorized leaks-from the campaign saying they want to do that.

But face to face, in the same room with Barack Obama tonight, instead, McCain decided to go the other way and try to come up with a new economic message, essentially, doubling down on a bailout idea that's already going to cost him the economic conservatives in his base.

He never once said the phrase "middle class" tonight. Never once. That means two straight debates without saying the phrase "middle class." You can't win a debate, you can't win a presidency in a country concerned about the economy if you can't even bring yourself to articulate the phrase at the center of it.

MATTHEWS: Gene?

EUGENE ROBINSON, MSNBC POLITICAL ANALYST: Well, Chris, you know, I think if John McCain wins this election, it will be in spite of the presidential debates and not because of any presidential debates. So, you know, I don't think the next debate is-shaping up as any sort of potential turning point because I think this forum, with these two men, is fundamentally unkind to John McCain.

It's kind of what you were driving at first, I think. Obama, A, comes across as presidential, at least as a plausible president, which was one of McCain's arguments that he wasn't. And second, the contrast between the two men, you know, their age, their bearing. Obama has a certain courtliness about him that plays against McCain's grumpiness.

It's just sending the wrong kind of messages to voters for McCain at least. And I think that's what, you know, part of what gets reflected every time we have one of these. And, you know, I think it's not realistic to expect that it would change substantially in the next debate. So if McCain is going to win, it's not going to be on debate night.

BUCHANAN: Chris, can I follow up on that briefly?

MATTHEWS: Well, let me go back to Pat. Sure. Sure.

BUCHANAN: I think Gene is dead on in this sense. What you-for the Republicans to win this year, you've got to raise these doubts about Barack Obama, that he's radical, that he's associated with these dreadful people, that he's flaky and that his ideas are very liberal in all there is to it.

Every time he gets on the stage in front of 50 or 60 million people there, by his demeanor, by his handling of himself, he contradicts that fundamental rough Republican message.

MATTHEWS: Exactly.

BUCHANAN: So I think Gene is right. If Barack Obama stays on course with what he's doing, he's going to come out next week and more people are going to say, you know, he doesn't look like such a dangerous person to me. And if he does that it's a reassurance.

MATTHEWS: But what about the grumpiness? What about the grumpy issue? And I want you to back me up on this, because you're Irish like me and I think you understand this point.

Was he taking a shot back at Brokaw tonight when he said to him, "not you, Tom?" What in the world motivated that tort, that shot?

Pat, you know that these things aren't accidental and they're not fun. So why did he do it?

BUCHANAN: I-you know, I-I'm afraid I went with you. I said to myself, I was in there with (INAUDIBLE), I said, what was that about? You know? What was that sucker punch about? What did Tom do? You know? And I don't know-then I thought maybe it was an unfunny joke and I didn't-wasn't able to figure it out.

MATTHEWS: No, it was a sucker punch. You got it right the first time.

Rachel, what did you make of that shot, "not you, Tom"? I think it was so bizarre. What do you make of it.

MADDOW: I think he was trying to make fun of himself being a grumpy old man by being an ostentatiously grumpy old man, and it just didn't seem funny because everybody was still reacting to the narrative and not the (INAUDIBLE) narrative.

But he kept going after Brokaw a lot. Just wave at me and then I'll know how to stop, you know. I mean he went back to Brokaw over and over and over again in a way that Brokaw, frankly, seemed uncomfortable about. I'm sure we can ask him. He's our colleague at NBC News. But he didn't seem to quite know what to make of it.

Barack Obama just let John McCain do his thing there because it seem so weird. And the audience sat stony faced through all of it, having no idea what John McCain was on about.

MATTHEWS: I know.

ROBINSON: You know, Chris.

MATTHEWS: There was an aspect of Jack Nicholson as the Joker in some of this, life has been good to me, you know, with that painted on smile.

We got to go right now. This is too much fun.

Pat Buchanan, Eugene Robinson, Rachel Maddow. Up next, much more from Nashville, including the results of our text message survey on which candidate did more to help himself.

Tonight our coverage of the second presidential debate between Barack Obama and John McCain continues after this.

(COMMERCIAL BREAK)

MATTHEWS: We're back in Nashville with John Heilemann writes for "New York" magazine, Jonathan Alter for "Newsweek."

I have to tell you, I'm-I want to talk about the guy who looks like he's at the losing end of the event tonight, that's John McCain. On a couple of points tonight, he was very good. He talked about his experience with Beirut, how he opposed the U.S. occupation there, bringing in the Marines and how that ended in disaster.

He talked about the problems in Somalia, when you go in with a good purpose but you don't go in with the right deployment. You go from being a peacekeeper to being a peacemaker and chasing down some warlord, you know?

He showed a lot of history tonight, especially on the need to deal with Medicare and Social Security in different ways. A lot of vintage experience there. But yet it didn't seem to carry the night.

John Heilemann?

JOHN HEILEMANN, NEW YORK MAGAZINE: I don't think it carried the night at all. And I-thought, you know, Chris, you've been on the point of McCain looking grumpy tonight. I actually thought he looked a little less angry than he did in the first debate. But I thought he looked a lot.

MATTHEWS: I was talking about your magazine article.

HEILEMANN: I thought he looked a lot older in this debate. And I thought.

MATTHEWS: You did?

HEILEMANN: I thought that the-format did not favor him. I thought that Obama's physicality.

MATTHEWS: Oh yes.

HEILEMANN: You know his languor out there. He looked athletic in the middle of the arena. And McCain, partly because of his war injuries and partly just because of his age, he looked a little bit like a little frailer, I thought, and kind of like he was wandering around the stage and seeming a little lost to me, especially in the first half of the debate.

MATTHEWS: Well, that was-it wasn't exactly a town meeting, first of all.

JONATHAN ALTER, NEWSWEEK: Sure.

MATTHEWS: A town meeting is when people get to raise their hands and jumped up and down and get involved and there's a lot of animation and kinetic. This was a bunch of people sitting there waiting to be called upon with questions that had been prearranged and-you know.

ALTER: Yes.

MATTHEWS: . pre-accepted. This wasn't a town meeting.

ALTER: Look, the overall point is-you talked about him talking about history. You and I love history.

MATTHEWS: Right.

ALTER: The point is, this was a 20th century candidate running against a 21st century candidate. That was the overall impression that you got. One guy was about the past, who's talking about Ronald Reagan, Lebanon. Most people don't remember Lebanon.

HEILEMANN: Yes. Teddy Roosevelt.

ALTER: He's talking about the KGB. The other candidate was talking more about the future. So while we might like the historical sensibility there, that doesn't help him. That doesn't project into the future.

The one really good moment, I thought, that John McCain had was at the top when he came through with a new proposal on doing something about preventing people from being thrown out of their homes.

And Obama didn't have a good response on that. He didn't have his own, you know, home mortgage proposal handy or at least he didn't bring it up. And that helped McCain.

MATTHEWS: What is it about the conservative candidates in both cases Governor Palin and Senator McCain, they come out and the first thing they do is scribble down all their notes.

I mean the idea of these debates is you come in without notes. They break the spirit of that by, honestly, memorizing a bunch of stuff, holding it in their head desperately, just long enough to get to that lectern, and they start scribbling down all these notes they're not supposed to have.

What is that about? Can't they respond to the questions? Why do they have to have this brief they bring with them?

HEILEMANN: I think there might be a little difference between Palin and McCain.

MATTHEWS: Well, they both.

HEILEMANN: In Palin's case, I think it may be that. In McCain's case, I think it's like give him something to do so he doesn't have to look at Obama. Because when he looks at Obama, he looks unhappy. So he just stares-he stares stairs at the notebook.

MATTHEWS: Oh you're crazy. No.

HEILEMANN: . and he takes.

MATTHEWS: Come on. You said he started to scribble like mad. You're great.

HEILEMANN: He gives him an excuse to not look at Obama.

MATTHEWS: That is the most psycho babbling thing I've ever heard of.

ALTER: (INAUDIBLE) a lefty. McCain is a lefty. Obama is a lefty.

MATTHEWS: Bill Clinton is a lefty, too.

ALTER: George H.W. Bush was a left. That's a lot of lefty.

MATTHEWS: Well, they didn't go to Catholic school. They didn't get beaten out of them.

Anyway, Jonathan Alter and John Heilemann are staying with us. They'll be back.

You're watching HARDBALL. The old days, I should say.

(COMMERCIAL BREAK)

MATTHEWS: We're back from Nashville with John Heilemann and Jonathan Alter.

First off, before I forget to do it, I want to thank this amazing crowd out here.

(CHEERS)

MATTHEWS: Good job. This amazing crowd. This rain has been pouring down here. I know they need rain in Tennessee and they've been getting it tonight. They got rain tonight. It was a monsoon here tonight.

Anyway, thank you all for staying.

John Heilemann.

HEILEMANN: Yes.

MATTHEWS: Is it already set? Is this campaign gelled tonight? The guy, McCain, with all his grumpiness, Barack Obama with all his charm and style and brains and all the good things, and terrible economy, are all the ingredients in this cake baked?

HEILEMANN: I have thought this-for a long time I've thought that McCain bore distinct resemblance to Bob Dole and there was a moment in 1996 right around this time we all looked up and said, absent some event that we can't imagine, this race is over, Bill Clinton is going to win. I think we're pretty close to that point right now if we have an early cast.

MATTHEWS: But absent events and we cannot predict events.

HEILEMANN: Absent it on predictable events.

MATTHEWS: Events come from everywhere.

HEILEMANN: And outside of John McCain's control largely, I think.

MATTHEWS: Well, Osama bin Laden, by the way, as he was addressed tonight as the enemy, so appropriately, sits out there as a true enemy. He is alive. He's kicking and he must have some power. He's evaded our capture.

ALTER: But Obama said something very smart, which John Kerry didn't do, which is to inoculate himself on that, to some degree, by talking a lot about how we haven't caught bin Laden. He was very hawkish tonight. He was the most.

MATTHEWS: Does that protect him against an October event?

ALTER: It at least gives him a fighting chance-he was the most hawkish Democrat since John.

MATTHEWS: Yes. And who knows who the bad guys want to win this election.

We've never been able to figure that out. We know.

ALTER: The other wild card is race. We don't know about how's that going to play.

MATTHEWS: I don't think we know yet and - (INAUDIBLE).

Thank you, John Heilemann. Thank you, Jonathan Alter.

Join us again tomorrow night at 5:00 and 7:00 Eastern for more HARDBALL.

Right now, if you missed it earlier, stay tuned for the presidential debate in its entirety between Barack Obama and John McCain.

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

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