updated 10/15/2008 10:36:22 AM ET 2008-10-15T14:36:22

Guest: Dylan Ratigan, Richard Wolffe, Steven Pearlstein, Jim Webb, Richard Burr, Michael Smerconish, Pat Buchanan, Steve McMahon, Michael Smerconish, Douglas Holtz-Eakin, Robert Reich

DAVID GREGORY, HOST:  Tonight, John McCain asks his supporters to stand up and fight.  His new game plan, make the debate over the economy about your taxes.  Is it enough to stop Barack Obama‘s momentum as key national and state polls break in favor of the Illinois senator? 

That and more as RACE FOR THE WHITE HOUSE rolls on. 

Just three weeks now, 21 days to go in the race for the White House.

Welcome to the program.  I‘m David Gregory.

The big headline tonight, “Restoring Confidence.”  That‘s the key. 

Both President Bush and Treasury Secretary Henry Paulson defended the $250 billion government investment in U.S. banks in what amounts to the partial nationalization of the American banking industry and the most sweeping intervention since the Great Depression. 

But questions remain about the future of the economy.  And that was front and center in Pennsylvania today, as Senator John McCain unveiled his proposals not only designed to jump-start the economy, but also to revive his campaign and attack his opponent, Barack Obama. 

Listen.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE:  You can look at the record of what he‘s done or you can just go with your gut.  But either way, you‘re left with the same collusion: Senator Obama is going to raise your taxes.  And in this economy, raising taxes is the surest way to turn a recession into a depression.

(APPLAUSE)

Stand up.  Stand up and fight.  America is worth fighting for. 

Nothing is inevitable. 

We never give up.  We never quit.  We never hide from history.  We make history. 

Now let‘s go win this election and get this country moving again. 

(END VIDEO CLIP)

GREGORY:  The debate over the economy is on. 

Joining me now, Dylan Ratigan, fresh off his program, “Fast Money,” over on CNBC, also anchor of “The Call” and “Closing Bell.”  Richard Wolffe, “Newsweek” senior White House correspondent, MSNBC political analyst, covers Obama full time.  And Steven Pearlstein, the Pulitzer Prize-winning columnist for “The Washington Post.”

Welcome, all of you.

Richard, first to you.  John McCain is telegraphing this clear.  Three weeks to go, he wants to make this about taxes when he debates the economy. 

RICHARD WOLFFE, MSNBC POLITCAL ANALYS:  Absolutely.  Taxes are the one character hit, if you will, on Barack Obama that also speaks to the economy, although I‘m sure we‘ll also hear about Bill Ayers in the debate tomorrow night. 

GREGORY:  Right.

WOLFFE:  And the interesting thing here was the fighting theme.  Remember, he still suffers an enthusiasm gap.  So firing up these crowds will help close this race.  And if he can generate a momentum-turning story, like the polls are closing, maybe that takes him to within striking distance. 

GREGORY:  Dylan and Steve, we‘re going to come back to some of the elements of this debate between Obama and McCain on the economy. 

But Dylan, first to you.  Hank Paulson is out there, the president is out there today saying this sort of completes their plan to restore confidence.  The big question though is, what is the big question for leaders in Washington and for the economy going forward? 

DYLAN RATIGAN, “FAST MONEY” ANCHOR:  And here is the big question.  If we take them at their face, David, that they‘ve put out the fire, let‘s accept that, that the tilt in the financial system can be untilted by virtue of doing this.  We now have a house that is partially burned down due to reckless policies of both leverage and credit, and it‘s unclear from either candidate, quite honestly, at this point how they intend to rebuild the house. 

And that will arguably be the most important set of questions we have to address as a country, certainly since the end of World War II.  How do you fix a broken system that will allow the innovative culture of capitalism to blossom once again, as opposed to the corrupt culture of capitalism that brought this system to the state that it is currently in?  That is the question. 

GREGORY:  And Steve, similar question to you, which is, you, in your column this morning, you gave credit to leaders in Washington for acting as leaders.  Where does it go from here?  Who leads us next if this next phase of the plan, an equity stake by the government in U.S. banks, actually works? 

STEVEN PEARLSTEIN, “THE WASHINGTON POST”:  Well, the point I wanted to make this morning was that we‘ve seen leadership from Washington.  We‘ve seen very little leadership from the private sector.  In particular, Wall Street.  I was looking at those nine bankers leaving the Treasury yesterday, and it reminded me of nothing more than a perp walk, you know, outside a courthouse after a trial. 

These guys have been nowhere for the last six months.  We haven‘t heard anything from them.  They haven‘t said “Please,” they haven‘t said “Thank you,” two words—some words that you would expect to hear from your children, and certainly well-mannered financiers. 

The country has come to their rescue and they really put nothing on the table.  They haven‘t said, we‘ll work for $1 a year, those of us at the top of the company.  Or we‘ll make sure that we are not going to cut back on our lending to our good borrowers who have never missed a payment. 

They haven‘t said we‘re going to cut our dividends.  They haven‘t said we‘re going to have more forbearance on foreclosures and give people time to rework these deals out.  So we haven‘t heard from them. 

RATIGAN:  And  you know what else they haven‘t said?  They haven‘t said we‘re sorry we risked the entire system to the point that we put taxpayer money at risk and took hundreds of millions of dollars of bonuses along the way. 

And I think the reason that they are not saying the things that you want them to say, Steven, is in order for them to say what you want them to say, they have to say what I would like to hear, which is, we risked the system.  Any idiot can do that and bonus themselves on it as long as someone else foots the bill, which is where we find ourselves today, to the tune of $40 trillion and counting. 

GREGORY:  All right.  Let‘s talk about leadership now from the next president of the United States and the fact that there is a debate on, on the economy.  We‘re going to see it play out in this final debate tomorrow night.  And we have elements of new economic proposals from both candidates. 

Let‘s go through a bullet list here from Senator McCain and his economic plan and what he‘s talking about. 

He doesn‘t want to tax unemployment benefits.  He wants to get the economy going again. He wants to lower corporate tax rate.  He of course wants to make the Bush tax cuts permanent. 

He wants to refinance troubled mortgages, something that‘s been hit on both the left and the right.  He wants to lower taxes on seniors who are tapping into their retirement accounts.  And of course he wants to reduce the capital gains tax. 

Richard, where is the Obama campaign looking for on that list as a big target that they go after tomorrow night in the final three weeks? 

WOLFFE:  Well, actually, what they‘re really going after here is the rollout.  They‘re suggesting that this is another piece of erratic policymaking.  And I think what both campaigns really know at this late stage is the voters are not going to go point by point here comparing and contrasting. 

Maybe a slice of voters is going to look at individual things.  And

it‘s interesting that both campaigns are focusing on older voters,

retirees, also those at the lower end of the economic scale, because those

are the voters that are going to decide this race in the Rust Belt states -

older voters, working folks.  And that‘s the message they‘re trying to sort of micro-target here.  But overall, it‘s about character, leadership, and the response to this crisis. 

GREGORY:  Let me get to both points out from Senator Obama and then I‘ll get to Dylan and Steve, evaluating this a little bit. 

He‘s talking about middle class tax cuts or credits; a 90-day ban on foreclosures, of homes around the country; penalty-free access to retirement savings—that‘s been criticized by the McCain team.  And he wants to offer federal loans to state and local governments to help infrastructure, and $3,000 tax credits for new jobs. 

Dylan, first to you.  Out of either of those two plans, do you see elements that have an immediate effect? 

RATIGAN:  Well, sure.  But the first thing—and I‘ll answer your question, David—that you have to ask yourself when presented with any of these plans from any politician three weeks from an election is, how much will all this cost?  So there are a lot of things, honestly, in both of those plans that either make some sense or a lot of sense. 

Also, I can give you dinner for free for the rest of your life, and that would make a lot of sense to you as well.  Unless we have an honest conversation, David—and the beautiful thing about the free press is we have the opportunity to do that right here—about how much either plan will cost and where that money will come from, and are we going to be borrowing it from China, it‘s a lot of nonsense.  And the fact of the matter is, you‘re talking about trillions of dollars in additional expense at a time when, quite honestly, we cannot afford it. 

GREGORY:  Also, Steve, there has been criticism from Senator McCain of Obama‘s tax plan to this extent—he talked about it on the campaign trail today, this idea of redistribution of wealth. 

Let‘s listen to that.

(BEGIN VIDEO CLIP)

MCCAIN:  This weekend, a plumber concerned that Senator Obama was going to raise his taxes asked him directly about his plan.  The response was telling. 

Senator Obama explained to him that he was going to raise his taxes to “spread the wealth around.”  My plan isn‘t intended to force small businesses to cut jobs, to pay higher taxes so we can spread the wealth around.  My plan is intended to create jobs and increase the wealth of all Americans. 

(END VIDEO CLIP)

GREGORY:  You know, Steve, every time you saw McCain use the quote “spread the wealth around,” it was sort of a signal to say this is a huge philosophical disagreement between conservatives and liberals in this country as to what to do with tax policy. 

PEARLSTEIN:  Well, it is a big disagreement.  And Barack Obama wants to take money from very rich people and give it to everybody else.  He says the middle class, but it‘s really to everybody else.  And John McCain doesn‘t think that is the proper role of government. 

Of course, we do that all the time.  We have a progressive tax code. 

Mr. Obama just wants to do more of it. 

But let me just say that that has nothing to do with the response to the economic crisis.  OK?  That‘s something separate.  We can talk about that, but that doesn‘t have anything to do with the economic crisis. 

And frankly, for John McCain to say that raising taxes on the upper tax bracket by four percentage points is going to destroy job and is going to turn a recession into a depression is ridiculous exaggeration.  Tax policy is not what this is about.  If you care about trying to manage a recession, it‘s not through tax policy.  That‘s a sort of Republican knee-jerk answer.

GREGORY:  Final comment here, Richard?

WOLFFE:  Yes, look, the budget plans for both of these candidates are shot to pieces.  They‘re all going to be talking about tax stimulus before the end of the year.  And frankly, any proposals right now will be out of date by November, never mind by January. 

PEARLSTEIN:  That‘s right.

GREGORY:  All right.  We‘re going to leave it there. 

Coming next, which candidate would be best to lead the country out of the economic crisis?  Supporters from two key battleground states, Virginia and North Carolina, face off when THE RACE returns. 

Thanks to the panel.

(COMMERCIAL BREAK)

GREGORY:  Back now on RACE FOR THE WHITE HOUSE.

If you want to know how voters are feeling about the current state of the country, just take a look at this.  The latest “New York Times”/CBS News poll finds just 7 percent say that America is moving in the right direction.  Just 7 percent, while 89 percent say it is on the wrong track. 

New polling information coming out just moments ago.

But which candidate is showing the kind of leadership that can get the country back on track?  Voters in two key battleground states are split on who they want in the White House. 

In Virginia, the Mason-Dixon poll shows McCain, 48 percent; Obama, 45 percent, within the margin of error.  And in North Carolina, a solidly Republican state, a WSOCTV poll shows McCain at 48 percent; Obama at 46 percent.  That‘s also within the margin of error. 

Joining me now for a “Face-Off,” are two senators from these hotly contested battleground states, Jim Webb, Democratic senator from Virginia, and an Obama supporter, and Richard Burr, Republican senator from North Carolina and a McCain supporter. 

Senators, welcome both. 

SEN. RICHARD BURR ®, NORTH CAROLINA:  Great, David.  Nice to be with you.

SEN. JIM WEBB (D), VIRGINIA:  Thank you.

GREGORY:  Senator Webb, let me start with you.  The key question now about the economy is who has got the leadership and the ideas to manage what is going to be an awfully difficult problem, even after all the work of this administration to shore up this financial crisis. 

Make the case as you see it for Obama to lead the country out of what could be a fairly deep recession. 

WEBB:  Well, I think that listening to the discussion you had before we came on, the key indicators for the future aren‘t whether one plan or the other is better, but how we‘re going to deal with the situation at large.  What we need to do given the legislation that was just voted out of the Congress recently is to make sure we have oversight over the secretary of the treasury, to make sure that we have caps on executive compensation, to make sure we reregulate an economy that was dramatically deregulated, and to make sure we have an upside for the American taxpayer with any of these programs that go forward. 

And if you look at those criteria, I think it‘s pretty clear that Senator Obama would be the one to bring it about. 

GREGORY:  And Senator Burr, make the case for John McCain on the economy. 

BURR:  David, it‘s simple.  If you raise taxes on the most likely in the United States to create jobs, they‘re not going to create jobs.  And we‘re not going to come out of a recession. 

John McCain has got the right formula, and that‘s to either keep taxes where they are, or make reductions where it really fuels investment and job creation.  I‘m convinced that we‘ve got a very distinct choice in November as to whether we want to come out of recession or not. 

GREGORY:  And you really think that by increasing the marginal tax rates on those who pay the most taxes, to do that, which is what Obama is suggesting, that‘s actually going to kill job creation?  It‘s going to deepen the recession? 

BURR:  David, included in that 5 percent that Senator Obama talks about is a majority of small business in this country.  If you want to discourage them from growing and making money, tell them if they crossed the $250,000 threshold that you‘re going to severely tax them so you can redistribute that money to somebody that wasn‘t as successful.  It‘s really small business in this country that creates a majority of our jobs and will fuel our exit from recession. 

GREGORY:  Senator Webb, let me ask you—this is a question for both of you on different sides of the aisle.  But it is striking.

Here we are in this election cycle in 2008, where Virginia, a state that has not gone for a Democrat since 1964, and North Carolina, which George Bush won by double digits in the last two cycles, are now battleground states.  How did we get to this point in this cycle where they are both hotly contested states? 

Senator Webb? 

WEBB:  Well, first of all, we have a lot of demographic shifts in Virginia with—in migration in northern Virginia, which is very high-tech and a lot of people from outside the region coming in.  We have a lot of people who become very excited and animated during this election cycle and are going to be voting for the first time.  We‘ve got a candidate, I believe, in Barack Obama who has shown the leadership and the temperament that people are looking for in this period which is going to be very difficult for us both in terms of foreign policy and also economic policy. 

So if you take that combination together, Virginia is demographically sort of a microcosm of the country.  And if Barack Obama does well down in south central and Southside, Virginia, which has lost such a high number of manufacturing jobs over the last eight years, you‘re going to see Barack Obama win Virginia. 

GREGORY:  And Senator Burr, what has happened in North Carolina that it would be so close? 

BURR:  Well, David, if John Kerry spent $30 million in North Carolina, George Bush wouldn‘t have won by 12 points.  And Barack Obama is more liberal than John Kerry. 

I think this is going to change in the 20 days going up to this election, and you‘re going to see North Carolinians firm up their support for John McCain based upon how we have historically done.  I remind you, Senator Helms never won a race by more than a point and a half in North Carolina.  So I would always expect a race where somebody spends that type of money to be competitive. 

GREGORY:  Let me ask you about the issue of race and what impact it‘s going to have on voters in both these states. 

Karen Tumulty reported in “TIME” magazine this week that Virginia Republican chairman Jeffrey Frederick told volunteers to compare Barack Obama to Osama bin Laden.  He told them this—that he “... climbed atop a folding chair to give 30 campaign volunteers—this is how it was reported in “TIME” magazine—who were about to go canvassing door to door their talking points—for instance, the connection between Barack Obama and Osama bin Laden: ‘Both have friends that bombed the Pentagon,‘ he said. 

‘That is scary.‘” 

Are tactics like that, Senator Burr, likely to have an impact on white voters in your state and in Virginia when it come to evaluating Senator Obama?  Is there a connection between what they‘re talking about, William Ayers, and Osama bin Laden, making that connection that ultimately leads people to, you know, make a racist judgment about Barack Obama and not vote for him? 

BURR:  Well, David, I‘ll let Jim Webb talk about Virginia and anybody in Virginia. 

North Carolina, that‘s not happening.  John McCain is up in the polls because his vision of where he wants to take the country is more consistent with the conservative views of North Carolinians.  And that‘s not just Republicans, it‘s Democrats and Independents.

GREGORY:  Senator Webb?

WEBB:  I think these types of attacks are a reason that people are going to gravitate towards Senator Obama, not because of the racist nature of them, but because they‘ve become comfortable with the way that Senator Obama has handled them.  He has shown a pretty even keel over the past 19 months when people have said those sorts of things about him.  And I think that sort of temperament and judgment is what people are looking for. 

And that‘s the greatest contrast between Barack Obama and John McCain, who is a longtime friend of mine.  I think if you look at his sense of judgment, all you have to do is examine the person that he has chosen for his vice presidential candidate, and the process that he went through, compared to what Senator Obama went through, to get a candidate that we can all be comfortable with as vice president, who might be able to step in and fill the shoes of the president. 

GREGORY:  All right.  I‘m going to leave it there. 

Senator Jim Webb of Virginia, Senator Richard Burr of North Carolina...

WEBB:  Thanks, David.

GREGORY:  ... really appreciate your time from both of you tonight. 

BURR:  Thank you.

GREGORY:  Coming next, Alaska‘s biggest newspaper publishes a sharp critique today of Governor Sarah Palin.  It‘s on THE RACE‘s radar tonight.  We‘re going to share it with you when we come back right after this.

(COMMERCIAL BREAK)

GREGORY:  Back now with “Smart Takes” on RACE FOR THE WHITE HOUSE.

Governor Sarah Palin says the Troopergate report showed she did nothing “unlawful or unethical” when she fired a public safety commissioner for not firing her estranged brother-in—law.  Today, “The Anchorage Daily News” published a scathing editorial about Governor Palin‘s response to the report.

“Sarah Palin‘s reaction to the legislature‘s Troopergate report is an embarrassment to Alaskans and the nation.  She claims the report vindicates here.  Is what she did indictable?  No, but it wasn‘t appropriate, especially for someone elected as an ethical reformer, and Orwellian claims of vindication make the blemish on her record even worse.”

“You asked us to hold you accountable, Governor Palin.  Did you mean it?  Bottom line, Governor Palin, read the report.  It says you violated the ethics law.”

Let me bring in Michael Smerconish to comment on this, Philadelphia radio talk show host and columnist for “The Philadelphia Inquirer” and “The Philadelphia Daily News.” 

Smerc, what do you make of it? 

MICHAEL SMERCONISH, RADIO TALK SHOW HOST:  Her intervention was unethical, but her firing of this public safety commissioner was not unlawful.  And it sounds like a contradiction in terms, but here‘s the bottom line, David. 

This fellow was an at-will employee.  He served at the will of the governor.  It means that absent a discriminatory purpose, she literally could fire him if she didn‘t like the shoes that he would wear.  For any reason whatsoever he (sic) could terminate her (sic). 

GREGORY:  But to read that report, Smerc—but to read the report and then tell reporters, as she did this week, that “there was nothing unethical about what I did,” does that pass muster? 

SMERCONISH:  It doesn‘t pass my muster.  I, too, read the report.  At a minimum she acted—and frankly, the first dude acted in an unethical manner.  That‘s what the report said. 

GREGORY:  All right.  Going to take another break here.  We‘re going to go inside the war room with a look at the latest round of battleground polls.  Smerc will be back with us in just a minute.

Has the McCain/Palin strategy in this campaign helped them?  We‘re going to look at that when THE RACE returns right after this.   

(COMMERCIAL BREAK)

GREGORY:  Back on “RACE FOR THE WHITE HOUSE” the back-half.  I‘m David Gregory.

Time now to go inside “The War Room.”  Today McCain and Palin barnstorm at separate events in Pennsylvania State that narrowly went for John Kerry in ‘04 and at the latest poll show Obama with a double-digit lead.  A new round of polls out today from Quinnipiac shows McCain has an uphill climb in some blue other states as well.

Quinnipiac has Obama up by 11 points in Minnesota; that‘s one the McCain camp would like to turn red.  16 points in Michigan, even though they‘ve pulled out the advertising there McCain doesn‘t really think he has a shot.  And 17 points in Wisconsin, a state McCain spent two days in last week.

Now that we‘re just 21 days away from the election, what is the end game strategy that McCain will be following?  Should be following?

Joining me now to talk about all of it: Pat Buchanan, MSNBC political analyst; Steve McMahon, Democratic strategist and back with us Michael Smerconish.

Pat let me start with you.  This was, Senator McCain on the campaign trail today raising another theme that I think we‘re going to hear a lot of in the final three weeks.

Let‘s listen.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN, ® PRESIDENTIAL NOMINEE:  Were my opponent elected with a Democratic Congress in power, not only would there be no check on my opponent‘s reckless economic policies, there would be considerable pressure on him to tax and spend even more.

(END VIDEO CLIP)

GREGORY:  You know, this is back to basics, Pat.  What are we going to see from John McCain?  If he wants to go straight up on Obama on the economy, he wants to make it about tax cuts and raising the concerns just like Bush did in ‘04 of all these Democrats in Washington.

PAT BUCHANAN, MSNBC POLITICAL ANALYST:  I‘m sure he‘s going to will do that.  But I don‘t know that it‘s going to work at this point.  I mean, McCain is—what‘s happened to McCain is this Pearl Harbor in the economy or the financial community where he was running even in all those states, and all of the—four of those Democratic states were toss-ups.  They‘re all as of now, gone.

He needs a lot of good news on Wall Street; a lot of good news coming in the stock market.  And I think he needs basically, he needs something new and different to turn this around.  I don‘t think the traditional tax and spend and earmark approach is going to do it.

GREGORY:  You know we‘ve got a new poll out from CBS News/”New York times” tonight; the head to head number—striking if you look at it—

53-39; a 14-point advantage, Steve McMahon, for Barack Obama.  We saw ABC/”Washington Post” had it at ten points coming out.  These are striking numbers.

STEVE MCMAHON, DEMOCRATIC STRATEGIST:  Yes.  I think this thing is pulling away from Senator McCain.  At the same time, it is getting more difficult for him.  His campaign seem to be lurching from the message of one day of character and questioning Barack Obama and who is Barack Obama, to an entirely different message the next day and yet a different message on a third day.

And I don‘t think that that is a way for them to put any of these blue states back in play.  I think what you may be seeing here is the bottom falling out of the McCain campaign.  And more and more of these states are getting not just to the point where they favor Senator Obama but to the point where Senator Obama has a significant lead which is going to start to affect all the down ballot races; the senate races, house races all across the country are starting to move in Democrats‘ direction.

You may have a situation where 60 senators in the senate, and there is another 20 or 30 or 40 members of the House on the Democratic side.  And you have a veto-proof, filibuster-proof United States Senate and House that will let Senator Obama pretty much do whatever he would like to do.

GREGORY:  Again, a campaign alert.  You see it on the bottom of your screen.  New poll from CBS News/New York Times; a 14-point advantage, 53-39 in favor of Senator Obama.

So Smerc, if we look toward tomorrow night‘s debate, if you are Senator McCain, you look at the polling.  You have lost these debates according to these polls.  The advantage has clearly been for Obama.  But he wants to go head on for the economy.  He can‘t ignore it.  He wants to turn it into a tax debate.

What do we see?  Is it a character attack or does he try to make it about tax policy?

MICHAEL SMERCONISH, MSNBC:  I think the character attack has been attempted and has failed.  And I think that it has had a boomerang effect on moderates and independents who haven‘t liked him continuing to go back to the well for some of the antics taken place at those McCain/Palin rallies where there have been outbursts, and some folks who have had to be reigned in.

David, if you look at the internals, it is older white folks who are abandoning John McCain and moving toward Barack Obama; I think it‘s fairly straightforward.  Their retirements are now in jeopardy so they‘re putting aside the social wish list and they‘re focused on their wallet.

GREGORY:  You know Pat, if you look at the math here, we can look at the head to head numbers nationally.

I talked to McCain advisers who say look, the key right now for us—we want to try to contest states like Pennsylvania.  But we‘ve got to hold on to some big five states.  You‘re talking about Missouri, Indiana, North Carolina, and Virginia and Florida.  That‘s how McCain gets to 260 and he gets within striking distance of peeling off a couple other states.  That is still the game plan.

BUCHANAN:  Well, the Republican base is in peril.  You‘ve got five or six major states in real jeopardy.  And all the Democratic states are solidifying.  And Obama is ahead in a number of big red states.  If these polls, 11, 14 points, anywhere near accurate, you‘re talking about almost a Reagan style, 1980 victory.

It is very hard for me to see how McCain turns around.  I think Smerc‘s made a very good point; older folks are deeply concerned about their retirement, what has happened to 401(k)s.  And Obama in those two debates, I don‘t know that he won them but what did accomplish was what he had to do which was give people reassurance that he is not the caricature of the Republican and right wing presentation, that he is not a dangerous figure.

And I think that—I don‘t know that McCain can do that himself.  Start down that road because I think he wants to run the final days basically as he is all out, he‘s a fighting warrior, a happy warrior.  He has come from behind before.  He‘s going after Obama.  He knows better how to deal with it.  I think that would be a better approach than going after Bill Ayers.

GREGORY:  Steve McMahon, I want to pressure on this point.  The easy

thing to do is to look at these numbers, too look at the trends and say,

this is such a clear cut advantage for Obama.  But McCain has been in this

position before.  And Obama has been in a position where he was right on

the precipice of grabbing victory, only to see him in the estimation of

some kind of coast at the end of the primary season here.  We have the

potential for a lot of late deciders in some of these battleground states -

Number one.

Number two, it is possible that if a bottom has fallen out on this financial crisis, that the state, the economy may be in dire straits, but the crisis aspect, and feel, the anxiety may not be at the level, the depth that it‘s at today, three week from now.

MCMAHON:  You know, it is interesting, David because the anxiety as you mentioned is very, very profound today.  And normally, that cuts against the person who is new, the person who is not somebody who has been there a long time, the person who is not well known and perceived to be steady and reliable.

And in this instance, it is cutting against the person who has been in Washington for 26 years, the person who is from a party that on finances, usually has an advantage over Democrats.  Everything is a little bit upside down here.

What voters seem to want very clearly is change; they‘ve made a decision about a third Bush term.  The McCain campaign unfortunately for them has been defined as presenting four more years over the last eight.  And one thing people have made a judgment on even before they made a judgment about Barack Obama or John McCain is that that is not what they want.

I will say this, though, I‘ll give McCain some credit for one thing.  I believe that his advisers came to him and said that the way to beat Barack Obama is to go harder down this Bill Ayers path.  And I suspect some of them said let‘s go back to Reverend Wright.  I believe that John McCain stood up and said, I would rather lose an election than try to win one that way.  I have to give him credit for that because I think that was a decision that he made that reflects the John McCain that a lot of people felt like they knew and they sort of lost touch with in the last several months.  Good for him. 

GREGORY:  Smerc, I want to spend a few seconds here going over a new union mailer, Mark Ambinder on his atlantic.com site reported on this earlier.  These are from the AFL-CIO.  These are Obama mailers going out in states Pennsylvania, Wisconsin and Ohio.  And you see the picture of it here, “I want to protect two things, my job and my gun.  That‘s why I‘m supporting Barack Obama.”

There has been a lot of discussion and reporting that I‘ve seen among union organizers for Obama, who are out there taking on those people in states like Pennsylvania who may not be inclined to vote for Obama; might be racial attitudes, maybe other things, but they are taking this head on and trying to deal with the racism among some of their ranks, or let‘s not just say it‘s racism.  Other cultural aspects that may make people comfortable with Barack Obama like a position on guns for instance.

SMERCONISH:  I know that it is going on in Pennsylvania because the head of the Electricians‘ Union in these parts is someone who‘s told me that he is doing exactly that; going out and having direct communications with his membership just to try and allay any of those fears.

Last Friday, I had the opportunity to say to Barack Obama, I keep firearms in my home.  I bought them lawfully.  I‘ve had a carry permit.  Do I need to be threatened by an Obama administration?  His answer was no, you don‘t.  The NRA didn‘t like hearing that answer.

GREGORY:  All right, I have got to take a break here.

Smerc, I just want to thank you for not bringing up the Dodger loss last night which I am in denial about and I‘m just going to keep on moving on.  Thank you guys very much.

Coming next, with just three weeks to go until Election Day, Senators McCain and Obama are scrambling to convince Americans, they have the plan that will bring the most economic relief in the middle of this financial crisis.  We‘re going to be taking an in-depth look at what exactly they are planning and promising what impact it‘s going to have when we come back here on the program right after this.

(COMMERCIAL BREAK)

GREGORY:  Coming next, McCain and Obama have unveiled vastly different economic plans but which one is the best prescription for the current crisis.  I‘ll talk with an economic expert from each side when “RACE FOR THE WHITE HOUSE” returns after this short break.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

MCCAIN:  We cannot spend the next four years as we‘ve spent much of the last eight waiting for our luck to change. 

(END VIDEO CLIP)

GREGORY:  Back now on the “RACE,” Senators McCain and Obama have dramatically different economic recovery plans.  Here with me to argue the pros and cons of each, two top economists.  Obama supporter Robert Reich, Secretary of Labor under President Clinton and professor of public policy at UC Berkeley and author of “Supercapitalism, the Transformation of Business, Democracy and Everyday Life.”  And Douglas Holtz-Eakin, senior economic advisor to the McCain campaign.

Doug, let me start with you.  When Senator McCain says we cannot spend the next four years as we‘ve spent much of the last eight, waiting for our luck to change, what is he talking about?

DOUG HOLTZ-EAKIN, MCCAIN SENIOR ECONOMIC ADVISOR:  We have to take control of Washington.  We have to control spending.  It has been out of control for the last eight years.  And we have to have no more failure of oversight.  We have to clean up Wall Street.  We can‘t go on having large government-backed mortgage giants like Fannie Mae and Freddie Mac pushing these risky subprime mortgages.

There‘s a lot of work to be done.  And John McCain believes that he should go to Washington and take on these interests, take on the failures of the past and build a path to the future, which involves creating jobs for Americans, taking control of the energy future. 

GREGORY:  Pretty clear swipe at the Bush administration.  Is it not?

HOLTZ-EAKIN:  Well, there are some failures that are in the record.  This is about the record of John McCain; it‘s about the needs of the American people, and having a government that is responsive to those needs.

And he has laid out a clear agenda of controlling spending so we can have low taxes, of opening trade so we can sell to the 95 percent of the consumers who are outside these borders, of having a health care policy that actually gets people in insurance and control costs.  Those are the items that the American people care about.  That‘s what the campaign is about.

GREGORY:  This is also what senator McCain said today in terms of tax policy.  Let‘s play that.

(BEGIN VIDEO CLIP)

MCCAIN:  You can look at the record of what he‘s done or you can just go with your gut but either way, you‘re left with the same conclusion.  Senator Obama is going to raise your taxes and this economy, raising taxes is the surest way to turn a recession into at a depression.

(END VIDEO CLIP)

GREGORY:  A couple point on this, Doug.  First, does the senator believe we‘re in a recession now?

HOLTZ-EAKIN:  We‘re clearly contracting; this economy is in bad shape and raising tax is a bad idea.

Senator Obama has two big problems.  Number one, he is promising 95 percent of Americans a tax cut when under 50 percent are paying the income tax to begin with.  The arithmetic doesn‘t add up.

He is also promising to spend $860 billion and how he would finance that he‘s never been cheer.  And both of those claims, the claim for lower taxes and controlling spending are at odds with his record.  He‘s the most liberal senator in the U.S. Senate.  He has voted for higher taxes 94 times.  So he‘s got real problems with credibility on the tax fund and even what he is promising is bad for the economy.

GREGORY:  On tax policy, we have Steve Pearlstein a columnist with the “Washington Post” on earlier who said this.  He said John McCain is raising taxes on the upper 4 percent tax bracket, he‘s going to destroy jobs and turn a recession into a depression is ridiculous exaggeration.  Tax policy not what this is about.  If you care about trying to manage a recession, it is not through tax policy, that sort of Republican knee-jerk answer.”

Response?

HOLTZ-EAKIN:  Well, Steve has got a point in that it not just tax policy.  But tax policy is important.  And the ideological drive to raise those top tax breaks are catches in the cross hairs, the small businesses that in this economy, a very weak and damaged economy have created 331,000 jobs this year.

Those top two tax rates hit the companies that create 56 percent of small business income, 84 percent of American work in small businesses.  Why would you have the judgment to attack the one strong point in the U.S.  economy?  That‘s the question Barack Obama needs to answer.

GREGORY:  All right Douglas Holtz-Eakin.  Thanks very much from headquarters out there with McCain/Palin in North Virginia.

Now joining us to talk about the Obama campaign, a view from the other side; Obama supporter, Robert Reich.  Secretary Reich, always good to see you. 

ROBERT REICH, OBAMA SUPPORTER, FORMER SECRETARY OF LABOR:  Hi, David. 

GREGORY:  Let me pick up at this point about tax policy in this debate.  You heard John McCain say today that to raise tax is a way to turn a recession into a depression.  Is that an exaggeration on his part?  Is that not really the way to deal with getting the economy moving again?

REICH:  Well, it is an exaggeration.  And there‘s also, George Orwell once talked about the big lie.  If you repeat it enough, people start believing it.  Barack Obama is not going to raise taxes; 95 percent of Americans are going to get a tax cut.  It has been well documented.  The Nonpartisan Tax Policy Center has shown that, and very, very clearly shown that Barack Obama‘s plan will cut taxes for 95 percent of Americans and cut taxes three times more than just John McCain‘s plan.

But beyond that, Barack Obama wants to do a lot of other things that are going will help the middle class, not just give tax breaks to the rich but provide also more stability, a better health care.  He unveiled plans for a new jobs tax credit that will help small businesses and grow new jobs because as Douglas Holtz-Eakin just said, small businesses are the generator of new jobs.

GREGORY:  Let me ask you about the bailout plan and the new wrinkle in which is that the government will take over U.S. banks in a kind of private nationalization by taking equity stakes in U.S. banks.  If you‘re sitting at home and then all of us are watching all of this, worried about all of this, what now?  That‘s the question.  How do you answer it?

REICH:  It is a big question.  This is uncharted terrain, David.  We don‘t know exactly where we are.

Wall Street has been on kind of a rip for years without adequate regulation.  Again John McCain is the big deregulator.  Barack Obama was saying two years ago, three years ago, we need to regulate, we need to make sure that these bankers know what they are doing.  Not just pushing money out the door.

Now Hank Paulson, our Treasury Secretary has authority to actually take over some of the shares of stock and provide liquidity to these banks.  What Barack Obama says is, okay, as long as number one, taxpayers are not hurt.  Taxpayers get shares of stock so on the upside those taxpayers can be repaid.  The government can be repaid when profits return.

And number two as a quid pro quo, as a condition, we‘ve got to make sure that there is a moratorium on foreclosures.  You can‘t have big banks getting all of these public benefits and allow them to continue to foreclose. 

GREGORY:  This may be a larger question than the time I have left.  But there‘s so much talk about saving the taxpayer and forgetting about the shareholder when the shareholder and not just the fat cats on Wall Street but there are people who own shares of 401(k)s.  There are parents out there, people saving up for their college education.  Are they being overlooked in all this?

REICH:  No.  They‘re not being overlooked.  I think one of the big, big problems that people have is they can‘t take money out have their 401(k)s.  That‘s why Barack Obama today announced his proposal to do it as fast as possible; allow people to take out up to $10,000 from their 401(k)s.

If you were 20 years from retirement, David, I would advise personally, just keep all of your shares of stock there.  Don‘t take anything out if you can avoid it.  But a lot of people need that money.  And they should not be penalized.

All right.  Robert Reich thank you as always.  Good to have you on. 

REICH:  Thanks David.

GREGORY:  And coming next, NBC political director Chuck Todd is going to take us through the latest battleground map and strategies.

Also we‘ll talk about some of this new polling that has broken this hour.  That‘s Chuck Todd right after this on “RACE FOR THE WHITE HOUSE.”

(COMMERCIAL BREAK)

GREGORY:  Back now on the “RACE”.

A CBS News/”New York Times” poll out tonight shows Obama has opened up a 14-point lead over McCain; it‘s Obama, 53 percent, McCain, 39 percent.  CBS News/”New York Time” poll from just two weeks ago showed them in a statistical tie.

All of the new polls out today showed Obama gaining ground in some key battleground states.  I want to bring in NBC political director, Chuck Todd.

Chuck, this coming out this hour.  What do you make of it?  This is certainly beyond the averages we‘ve seen, beyond the spread we‘ve seen.

CHUCK TODD, NBC POLITICAL DIRECTOR:  It is.  Now the CBS/”New York Times” poll has a history of showing wider fluctuations in enthusiasm.  Part of that is sometime their party ID gets a little out of whack.  The enthusiasm for the Democrats has a big high.  It can over-report a number for Obama.  I think everybody agrees Obama is ahead and ahead by more than five points.

I think it would be hard pressed to find anybody who thought even at this point, if the election were held today, he would win by double digits.

GREGORY:  How does all this affect what we‘re going to see tomorrow night?

TODD:  Well, I think what it affects is it affects the way people watch the debate.  And it‘s going to affect not just the media but you‘re going to have the viewers.

They‘re going to sit there and watch the debate and say John McCain is behind.  What is he going to do?  What‘s he going to say?  How is he going to react?

That‘s a tough place for McCain to be.  It was never going to be an easy place for him to be in but he‘s going to be in a very tough place because suddenly everybody is looking to him.  How are you going to catch up?

The front page of the “New York Times,” not any newspaper in the country, David, but the “New York Times” is going to say you‘re behind by 14 points.  What are you going to do?

GREGORY:  And there‘s a couple of other numbers here.  I‘ve been talking to our pollsters this week.  And a couple of other numbers stand out here that some of these new, some of them not new.

Obama and McCain are tied among men.  When Bush beat Kerry by 11 appoints, and Gore by 11 points, the number in terms of being tied to George Bush, which is a big part of the Obama strategy.  In our last poll back in September, 61 percent still thought McCain was more of Bush.  Those are two pillars that could be the basis of an Obama victory if McCain doesn‘t change those.

TODD:  John McCain is running against two people.  Barack Obama and this gigantic financial juggernaut, by the way we‘re seeing play out on the battle ground states and George Bush.  And by the way, George Bush isn‘t going away quietly anymore because he‘s being forced to become a public face because of the role government has to play right now in this economic crisis.

There is now almost an hourly reminder to voters, that George Bush is president.  And when his ratings are so low, it is a negative reinforcement right now that McCain cannot afford.

GREGORY:  What stands out to you as you look at your magic map there tonight? 

TODD:  I‘ll say this.  It would be this one thing.  McCain‘s economic proposal; totally focused on seniors.  And you know who the five oldest states are, Pennsylvania, Florida, Iowa, Maine, and, I believe the fifth one is West Virginia.  Well, that‘s where his number have slipped.

And you look at those places, and if he can‘t win—seniors have always been the last voting bloc—white seniors that Obama has been able to win oh.  They have moved.  You talk about men, seniors is the other one that moved most recently to Obama.  That‘s the one that McCain has to pull back.  These are the five states.

If you want to look at state polls to see if McCain makes any progress in the next week on this new proposal, they‘re focusing on seniors, these are the five states to look at.

GREGORY:  All right Chuck.  And Joe Biden, talking about the potential of them winning West Virginia.  I also know that The McCain campaign is not talking about pulling back and just trying to defend those Bush states.  He still wants to contest in Pennsylvania. 

TODD:  They do.  And also that Maine seat, they are going to go back there.  And they still haven‘t given up on Wisconsin.  However, keep an eye on Wisconsin over the next few days.  There could be a Michigan thing going on there. 

GREGORY:  All right, Chuck Todd, our political director.  A great way to end, Chuck.  Thanks as always. 

TODD:  All right, David.

GREGORY:  That‘s “RACE FOR THE WHITE HOUSE” for you tonight. 

Quick programming note before we go here.  Be sure to tune to MSNBC, it‘s tomorrow night when John McCain and Barack Obama face off at Hofstra University; their third and final debate before Election Day.  I‘ll be bringing you live coverage of the debate, 9:00 p.m. Eastern time.  I‘ll have coverage on the other side after the debate as well.

Stay where you are.

“Hardball” with Chris Matthews coming right up.

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

END   

Transcription Copyright 2008 ASC LLC  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 NBC and ASC LLC‘s copyright or other proprietary rights or

interests in the material. This is not a legal transcript for purposes of

litigation.>

Watch Race for the White House each weeknight at 6 p.m. ET

Discuss:

Discussion comments

,