updated 10/16/2008 12:15:49 PM ET 2008-10-16T16:15:49

HARDBALL

October 15, 2008

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

Guests: Roger Simon, David Axelrod, Mike DuHaime, Bob Herbert, Ron Brownstein, John Harris

CHRIS MATTHEWS, HOST: Tonight, the mystery on long island. Will McCain attack Obama?

Let's play HARDBALL.

Good evening. I'm Chris Matthews. Welcome to HARDBALL, from Hofstra University in New York, the site of the last presidential debate. It's the 40th debate of this election season and the last best chance, many people believe, for John McCain to try to pull himself out of a tailspin that has seen his numbers drop almost on a daily basis.

What can McCain do tonight? Does he go after Barack Obama's character and associations? Does he make some bold news-making proposal? Or does he go soft and try to rebuild his own brand? All this comes against the backdrop of another terrible day on Wall Street. The Dow Jones average dropped another 733 points today, the ninth worst loss ever on a percentage basis.

MSNBC will have live coverage and full coverage of the presidential debate tonight beginning at 9:00 Eastern. Then at 10:30, my colleague, David Gregory, joins me for complete post-debate analysis. At 11:00, it's "COUNTDOWN" with Keith Olbermann. And then at midnight, we're back for the best show around, the late night debate night edition of HARDBALL.

We begin with "Newsweek's" Howard Fineman, who's also an NBC News political analyst, and "The Politico's" Roger Simon. Let's take a look at the "New York Times" poll that just came out this morning. I haven't seen a poll like this in this election, Howard and Roger, 14-point spread, an amazing number, 53 to 39. The new Bloomberg number's got it up to 9. The average in Pollster.com is up to 8. But that brand-new number in "The New York Times"-how wide a chasm-it's the Grand Canyon that John McCain's got to hop across tonight.

HOWARD FINEMAN, "NEWSWEEK," MSNBC POLITICAL ANALYST: Well, I don't think "The Times" poll necessarily says where it is, but it affects the psychology. I was with a lot of Republicans last night at a famous restaurant called Elaine's in New York-a lot of Republicans there...

MATTHEWS: The literary crowd.

FINEMAN: ... a lot of Republicans there. They say, in their minds, they're selling the stock. They're selling the McCain stock. They're dumping the stock. And interestingly, Rudy Giuliani, who has been at other debates to do spin work in the spin room for John McCain, is not here tonight. Hillary Clinton's going to be here. Rudy's got other business. He's busy.

MATTHEWS: Why do you think Rudy...

(CROSSTALK)

MATTHEWS: Why isn't Giuliani coming tonight?

FINEMAN: Well, because I think they'd rather be elsewhere at this point. They're not sure what strategy McCain is going to pursue. He's being given conflicting advice. And New Yorkers like to be with the winner, and I don't see them flocking out here to this tonight for precisely that reason.

MATTHEWS: Hillary Clinton is in the winner's circle tonight, isn't she, Roger. The way I read her, I think she thinks he's going to win big.

ROGER SIMON, POLITICO.COM: Oh, Barack Obama's going to win big?

MATTHEWS: Yes.

SIMON: Yes. All signs point to yes. I mean, 14 points, even if it's just half right, it's good news for Obama. I mean, very few politicians can come back less than three weeks before an election with numbers like that.

And you know, good politicians are often lucky politicians. And when you look at all the good luck that Barack Obama has had-a financial crisis so bad that it appears to be trumping racism, the vice president of the United States...

MATTHEWS: That's well put.

SIMON: Well...

MATTHEWS: Bad news beats racism.

SIMON: The vice president of the United States, who is 8 years younger than the Republican nominee, is having heart problems and reminds everybody about the perils of getting older.

FINEMAN: Not to mention Sarah Palin.

SIMON: I'm getting there.

FINEMAN: Yes.

SIMON: The surge in Iraq, which should be good news for John McCain, nobody really cares about anymore. Sarah Palin is found to have abused her office. Wonkiness is in. Attacking is out. And Obama may have the best ground game in Democratic history.

MATTHEWS: Well, let me give you...

SIMON: That's not a bad hand to hold.

MATTHEWS: That's a hell of a rip (ph). But let me to back to New York baseball, LA baseball. When I look at the face of Joe Torre the other night after he loses to the Phillies in the 8th inning with that four-run hit of Spreeden (ph), I thought I was looking at John McCain. Good comeback year, but you're not going to win this year. That's what that face says to me. Joe Torre and John McCain-good comebacks, but you're not going to probably win this year.

FINEMAN: Well, as Roger was saying, all of the trends, all of the circumstances are against John McCain. And even today, with the drop in the stock market today being the surround of the story for tonight's debate, if he, McCain, is going to spend a lot of time talking about Chicago politicians and Tony Rezko...

MATTHEWS: Right.

FINEMAN: ... the corrupt guy, and Bill Ayers and whatnot, Barack Obama's big comeback, his easy comeback, is, Let's talk about what matters. Did you not hear the news today? Did you not hear about what happened to the stock market today?

MATTHEWS: Yes. How many people like here like John McCain for president?

(CHEERS, BOOS)

MATTHEWS: Was that a yes?

(LAUGHTER)

MATTHEWS: Well, that was a lot of noise for John McCain. Can I just hear it from the McCain people this time, just from the McCain people? How many like John McCain?

(CHEERS)

MATTHEWS: OK. How many like Obama?

(CHEERS)

MATTHEWS: OK.

(CROSSTALK)

SIMON: ... as scientific as most surveys.

MATTHEWS: Well, it's New York state, too.

FINEMAN: Yes. Can I say, by the way, Long Island, where we are, is one of the places where the modern Republican Party in New York state was built. Now, Roger and I are trying to be scientific, but even that noise is significant, given where we are. We're in the middle of what was a Republican bastion a few years ago.

MATTHEWS: Yes. Let me ask you about this-this fight tonight, and it is a fight. John McCain has sent signals that he's going to take a punch at the guy. He's going to bring up Barack Obama's association back in the '90s with Bill Ayers, who 26 years before, was involved in the Weathermen, right?

SIMON: Yes.

MATTHEWS: OK. What's he going to say about it? Is he going to tie it together with the Reverend Jeremiah Wright and suggest he doesn't have the right impulse of patriotism? He can't fall back on something weasely like his bad judgment, like you bought the wrong car or you bought the wrong (INAUDIBLE) Judgment doesn't tell you anything. Is he going to have to get personal and pointed in saying, You don't have the instinct of a patriot or you wouldn't be hanging around with a guy like Bill Ayers? Is that what he's going to have to say?

SIMON: There's one little guy on his shoulder saying, Be the fighter pilot you once were, let loose the cannons, drop the bombs, scorch the earth. Hit him for...

MATTHEWS: Who's saying to do that?

SIMON: ... hit him for being a domestic terrorist, like the vice president...

MATTHEWS: Yes. Well, that's what-that's what Sarah Palin suggested. And she's saying...

(CROSSTALK)

SIMON: ... little guy on McCain's shoulder saying, Look, there's something called getting out of this with dignity and honor...

MATTHEWS: OK. OK.

SIMON: ... or both of those intact. And if you want to scorch the earth, you're not going to have it.

MATTHEWS: OK. Sarah Palin says that Barack Obama pals around with terrorists because he thinks America is so imperfect.

SIMON: Right.

MATTHEWS: That's a pretty strong statement.

FINEMAN: He is going to talk about Barack Obama's judgment and he's going to talk about his candor because Barack Obama did say that Bill Ayers was "some guy in the neighborhood," or words to that effect, and Obama did know Bill Ayers better than that initial answer indicated.

MATTHEWS: OK.

FINEMAN: But that's a very thin reed to build upon when most people who look at Obama tell people who do polls that Obama seems to be a pretty...

MATTHEWS: Yes, one yesterday...

FINEMAN: ... straightforward guy overall.

MATTHEWS: Can Obama...

FINEMAN: So Obama has to-I mean, McCain has to try to-he thinks he's going to unmask him in one moment.

MATTHEWS: Right.

FINEMAN: It's difficult to do when Obama has built a year-and-a-half, spent a year-and-a-half slowly but surely building a fairly, in fact, quite positive image with the public.

MATTHEWS: What's Bob Schieffer's job tonight? I know Bob Schieffer. We all know him. He's puckish. He might go for the kill himself. He may try to throw the puck out there and hope there's a fight. Schieffer-is he going to say-suppose John McCain starts using words like "judgment," which are very soft. He says, Wait a minute. Wait a minute, Senator. You're implying something more than that here, aren't you, or else why are you talking about this in your advertisement and your vice presidential talking points. Everybody's talking about Bill Ayers. What are you getting at here? Can he push that?

SIMON: The moderator is always the wild card. But Barack Obama pretty much knows what McCain is going to say. McCain's going to...

MATTHEWS: That's what I think tonight.

(CROSSTALK)

MATTHEWS: The wild card tonight is Bob Schieffer.

SIMON: Nobody knows what Bob Schieffer's going to say.

MATTHEWS: Right.

SIMON: And if Jeremiah Wright comes up, I'll bet you it only comes up if Bob Schieffer raises it and not John McCain.

MATTHEWS: And what's John McCain-here's my idea of the dynamic tonight. Bob Schieffer brings up Bill Ayers. He brings up Jeremiah Wright. At that point, he's basically saying, Put up or shut up, to John McCain because if McCain doesn't take a shot at that, at that point, it doesn't mean anything. When he takes a shot at Obama, that's when Obama is in perfect position to what I call attacking from a defensive position, where you always look good-There you go again-that kind of thing, where Reagan hit him with a counterpunch.

FINEMAN: And also-and also, Barack Obama spent a lot of time building up the narrative that he is the calm one in demeanor and judgment and that McCain is the excitable, quote, "erratic" one.

MATTHEWS: Right.

FINEMAN: He also has that weapon on his side if McCain attacks.

MATTHEWS: OK.

FINEMAN: Obama can say, There you go again. Calm down, John.

MATTHEWS: Oh, no! Well, here's the...

FINEMAN: Calm down.

MATTHEWS: OK, last question. When you say the guy is lurching around the room like-I mean, that's...

(CROSSTALK)

MATTHEWS: ... Biden is saying he's lurching. The other guy-there's a British term when you say a politician in Britain is a drunk some night at a party, you say he was tired and irritable. That's a phrase for you. He was drunk as a skunk. When you say erratic, lurching around the room, are they saying he's too old to be president? Roger? Is that what they're really saying?

SIMON: Yes.

MATTHEWS: Yes. I like the-I like the statement.

SIMON: Sure. Sure. Obama...

MATTHEWS: Yes.

SIMON: ... brought it up in his acceptance speech.

MATTHEWS: Yes.

SIMON: He said, Look, this guy just doesn't get it. That was code for, This guy is 72 years old!

MATTHEWS: Also...

SIMON: You know...

MATTHEWS: ... I would love to debate over his temperament. Will we have a shot tonight at John McCain's temper?

SIMON: I mean, McCain has to do something, but debates are not like Lourdes. Miracles don't happen here. There's no healing water here.

FINEMAN: He has to be-but Obama has to-McCain has to be careful because Obama can do the patriotism-Don't question my patriotism, thing.

MATTHEWS: Oh, yes.

FINEMAN: And he could knock it out of the park if McCain isn't careful.

MATTHEWS: And he could use that as a blanket counterpunch to almost anything that's said.

FINEMAN: Right. That's right.

MATTHEWS: That's what I think, it's so dangerous. It's called the attack from a defensive position. It was used at Agincourt.

(LAUGHTER)

MATTHEWS: Anyway, Howard Fineman, Roger Simon.

Coming up: Heading into tonight's debate, there are plenty of signs the Republican Party is in near panic over the McCain campaign. MSNBC political analysts Pat Buchanan and Michelle Bernard will be with us to talk about the Republican fear that this race may be slipping away.

You're watching HARDBALL, live from Hofstra on the third and final debate night, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS: Welcome back to HARDBALL. The opinion polls show that Obama's lead over John McCain are widening with less than three weeks to go to the election day. And beyond that, some of the most stalwart voices of the right, columnists like William Kristol, Kathleen Parker (ph), even Christopher Buckley have criticized the McCain campaign, his running mate and the candidate himself. Is the Republican Party running scared right now?

Well, joining me right now is MSNBC political analysts Pat Buchanan and Michelle Bernard. Michelle and Pat, thank you for joining us. Pat first, then Michelle. What is going on out there? It looks to me like there's a lot of confusion on the ship. Is there a sense that the captain doesn't have the right course setting, Pat?

PAT BUCHANAN, MSNBC POLITICAL ANALYST: Yes, I think so, Chris. It's Churchill's famous phrase, Take away this pudding, it has no theme. One day, they're attacking Obama for his association with a domestic terrorist, the next day, McCain says, This is really a decent fellow and nobody needs to be afraid of him. It looks like McCain is taking advice from two or three or four different camps. And what he's got to do tonight, quite frankly, is very simple. He's got to come out consistently and say, We're in a crisis. I've got the judgment, experience, ability, knowledge to deal with it, and this fellow does not, and here's why and how. It's a difficult assignment because Barack Obama is not going to cooperate with him.

MATTHEWS: Right. That sounds, Michelle, like roller derby, like you're going to keep running around the track and knock the other guy off. Can he be that strong-armed and knock-because that's a dismissive role. Pat's basically saying, I can do this job, it's not a matter of degree, this guy shouldn't even be in the running. What do you think, Michelle? Can he be that tough?

MICHELLE BERNARD, MSNBC POLITICAL ANALYST: I-I mean, I think that...

MATTHEWS: He's 12 points back.

BERNARD: That-that...

MATTHEWS: Fourteen back.

BERNARD: That is the message that he has to take. He's got to get on course and stick with one message. There's almost a schizophrenic nature to what we see happening in the McCain campaign today. You saw earlier today, Chris, Nicole Wallace, McCain's strategist, said on another NBC program this morning that they don't know what to do, that it's, like, running against Barack Obama is like running against God. Of course, they blame it on the media and say that the media has put Barack Obama in the place that he's in.

But the bottom line is, it is the economy. The negative campaigning isn't working. The American public, I strongly believe, does not want to hear about William Ayers. They don't want to hear any more about Jeremiah Wright. They want to hear about who's going to get us out of this economic crisis that we're in...

MATTHEWS: Yes.

BERNARD: ... and which one of these candidates is the best to do it. And quite frankly, you know, we are beginning to see-the Republican Party united during the convention in August, and that unity is now falling apart. There have been so many things that have happened since August. And tonight is do or die for John McCain. He's got to put it all back together. He is losing his base. There are many, many conservative that are so angry that he voted in favor of the bail-out, for example, that he's got to come strong on the economy tonight and put his base back together while he reaches out to independents and Reagan Democrats, as well.

BUCHANAN: Chris, he may not be able to do it...

MATTHEWS: Pat, what do you think of-what...

BUCHANAN: He may not be able to do...

MATTHEWS: Well, what do you think of...

BUCHANAN: Look-look, Chris, we got a-we got a 4,000 or 5,000 points, whatever it is, $6 trillion or $7 trillion wiped out in four or five weeks. Now, before that, McCain-Palin and Obama-Biden were competitive. McCain was just a couple points ahead, and you're going down to a...

MATTHEWS: Right.

BUCHANAN: ... maybe to a real close race at the end, where McCain could win it. I think the country has decided. We don't-I mean, Obama seems acceptable and we got to get rid of what we got. And they're saying, What we got is the Republicans. Oddly enough, a Congress that is at 10 percent approval, Pelosi-Reid, are liable to see their numbers dramatically increased.

MATTHEWS: What do you think, Pat-I got to stick with you for a second, then back to Michelle. Do you think the Republican strategy, such as it is right now, to trash the media-fair enough. That's fair game. They attack the media as being pro-Obama. Fair game. Is that smart, or would it be smarter not to hold back, go out, put Palin out there on shows like this, give her a college tour, give her an hour with me, like all the other candidates, including McCain, have had, stop hiding her, McCain go on shows on NBC, all the other networks, take us on, fight with the people who've been critical of him-is that a smarter move, to be critical and tough with the press, or is it smarter to hold back and say, I'm not talking to those people, they don't like me? What's the smarter strategy?

BUCHANAN: The smartest thing, at this point, is to say to both of them, We're going to lose this election. We are losing it. We may not be able to win it. But go out everywhere and be yourselves. Say what's in your heart, what you believe. If you think this guy is too radical, doesn't have the judgment, say so and do it in public forums. Yes, that's exactly what I would do, Chris, if I were John McCain. Tell him, Look, go out as John McCain. John McCain is a fighter and a warrior. He doesn't back away. And be yourself. Get all the advice, consume it, and then tell the advisers, Now get lost. I'm deciding the final three-week strategy, and be consistent. And just do it.

MATTHEWS: Michelle, do you agree that they'd be smarter to go out and contest the fight with the media, in fact, some of the critical media-the media is supposed to be critical. Why don't they go on shows all over the place, every show, wherever they're critical or positive or whatever, make their fight? Why do they sit back and have Nicole Wallace come out and say, They're not being nice to me, therefore I'm not going to do the interview? It doesn't make-well, it doesn't make sense. Is that a smart strategy, play hard to get?

BERNARD: I mean, well, right now, I think that it's a strategy that is not winning. I have to think that if they keep going with the strategy, they must have a reason for doing so. But I think the American public wants to see John McCain. They want to see Sarah Palin.

MATTHEWS: Yes.

BERNARD: Unleash her. Let her sit down. Let her do interviews and really just be your authentic self. People-you know, she-people really, really enjoyed listening to her speak at the Republican convention. The same with McCain.

I have to say I disagree with Pat in the sense that I would not advise McCain to go out and say, We lost this thing. Anything could happen in 21 days. The election is not over.

(LAUGHTER)

BUCHANAN: I didn't say we should say we lost it.

MATTHEWS: Well, what I would do-Harry Truman...

BUCHANAN: I would-as an adviser, I would tell him, sir, we are not going to win if-unless we change strategy. And you have got to do it.

Obviously, you don't go out and say, we have lost it, but just act as though we have got to turn it around and win it, or we are going to lose if we continue doing the same thing.

MATTHEWS: Well, "Give 'em hell" Harry Truman would be on every television show he would go on. And he would box the ears off anybody who gave him a hard time. He would out there fighting on "MORNING JOE" right through the day.

Anyway, Pat Buchanan, Michelle Bernard.

He wouldn't be hiding in the corner and saying, they are not nice to me. I'm not playing with them anymore.

Up next, we will hear from the crowd out here at Hofstra to find out what they want to see in tonight's debate.

(CHEERING AND APPLAUSE)

MATTHEWS: You're watching HARDBALL, only on MSNBC.

(CHEERING AND APPLAUSE)

(COMMERCIAL BREAK)

MATTHEWS: We are back here with the crowd at Hofstra University...

(CHEERING AND APPLAUSE)

MATTHEWS: ... where we're about to have the big presidential debate tonight, sort of the fight at OK Corral.

And I want to bring in some of the students here.

We're going to show-as we have always done on HARDBALL, we go to the students to hear what they have to say.

You, sir, what does it mean to have Hofstra hosting the last big debate?

UNIDENTIFIED MALE: It's awesome. I mean, it's the greatest thing for Hofstra. It's probably the-it's-it's-I can't even describe it right now.

MATTHEWS: Righteous.

There we go. Next.

What do you think of-oh, you don't want to do it?

UNIDENTIFIED FEMALE: I think that it's nice. It's letting college students know that we are voting.

Obama for president, baby.

MATTHEWS: Are you going to vote?

(CHEERING AND APPLAUSE)

MATTHEWS: Are you going to vote?

UNIDENTIFIED FEMALE: Excuse me?

MATTHEWS: Are you going to vote?

UNIDENTIFIED FEMALE: Of course I'm going to vote.

MATTHEWS: Is everyone here registered to vote?

(CHEERING AND APPLAUSE)

MATTHEWS: What do you think about tonight's debate?

UNIDENTIFIED FEMALE: What do I think? Say it again.

MATTHEWS: What do you think about tonight's debate here at Hofstra University?

UNIDENTIFIED FEMALE: I want-I want Obama to take it to McCain.

(CHEERING AND APPLAUSE)

MATTHEWS: OK. Here we go.

UNIDENTIFIED MALE: This is some great exposure for Hofstra.

And McCain '08.

MATTHEWS: How much does it cost to go to this school, anyway, just...

UNIDENTIFIED FEMALE: Forty thousand.

(CROSSTALK)

UNIDENTIFIED FEMALE: A lot.

(LAUGHTER)

MATTHEWS: What do you think about tonight's debate?

UNIDENTIFIED FEMALE: I think it's the best thing ever. I'm glad I'm here. It's history in the making.

MATTHEWS: And what do you think tonight?

UNIDENTIFIED FEMALE: I think Obama is really going to show McCain who can...

(CROSSTALK)

MATTHEWS: Do we have-do we have a McCain guy here somewhere.

(CHEERING AND APPLAUSE)

MATTHEWS: Here. OK.

What do you think about tonight's debate?

UNIDENTIFIED MALE: You know, overall, I think McCain is going to go ahead and pull it through and he's going to make it happen. And, hopefully and, hopefully, it will work out really well.

MATTHEWS: Free speech. Free speech. Come on.

UNIDENTIFIED MALE: I'm outnumbered here. I'm totally outnumbered.

MATTHEWS: What is it like to be outnumbered on campus? Can you-do you eat alone at lunchtime?

UNIDENTIFIED MALE: You know what? I try not to, but I do have my supporters here, and we do the best we can.

MATTHEWS: Any other McCain person here? Any other McCain person here?

Oh, no McCain.

What do you think about tonight's debate?

UNIDENTIFIED FEMALE: I think it's going to be really exciting, and it's probably the biggest thing that's-to come to Hofstra yet. So, it's pretty exciting.

MATTHEWS: OK, great.

What do you think-is that B.C. High?

UNIDENTIFIED MALE: Yes.

MATTHEWS: Oh, God, an Eagle.

UNIDENTIFIED MALE: Yes.

MATTHEWS: A single Eagle.

UNIDENTIFIED MALE: Absolutely.

MATTHEWS: How come you didn't want to be a double Eagle?

UNIDENTIFIED MALE: Looking for something different.

MATTHEWS: B.C. high.

OK. We got the guy in the work shirt. I think I'm in the '60s here.

I think this guy escaped from the 1960s.

Who is going to win tonight?

UNIDENTIFIED MALE: McCain.

UNIDENTIFIED MALE: Obama!

UNIDENTIFIED MALE: John McCain! John McCain!

(CROSSTALK)

MATTHEWS: What do you...

UNIDENTIFIED MALE: John McCain!

MATTHEWS: Tell me about McCain. Tell me about Governor Palin and why you think she should be the next vice president?

UNIDENTIFIED MALE: I think Governor Palin should solve her problems first at home and then become the vice president.

MATTHEWS: Oh, God, there's a strong case.

We will be right back. We're going to more on the show tonight. We have the big debate here. A lot of people think John McCain has to carry the fight to Barack Obama, who is 14 points ahead in the national polling today.

We will be right back with more pregame in a minute.

(CHEERING AND APPLAUSE)

(COMMERCIAL BREAK)

JULIA BOORSTIN, CNBC CORRESPONDENT: I'm Julia Boorstin with your CNBC "Market Wrap."

Another major sell-off prompted by a series of bad economic news. The Dow Jones industrials plunged 733 points, this after Monday's record 936-point gain. The S&P 500 fell 90 points, and the Nasdaq dropped 150.

Stocks tumbled as retail plunged a much larger-than-expected 1.2 percent in September. That's the biggest drop in three years and the third straight monthly decline. Meantime, the Federal Reserve's latest Beige Book report shows, economic activity weakened across the country in September.

Fed Chairman Ben Bernanke also-also says an economic recovery will take some time. He spoke to the Economic Club of New York.

And oil prices dropped to a 13-month low, on concerns about the global economy. Crude fell $4.09, closing at $74.54 a barrel. Oil is now down almost 50 percent from July's record high above $147 a barrel.

That's it from CNBC, first in business worldwide-now back to

HARDBALL.

(BEGIN VIDEO CLIP)

SEN. JOSEPH BIDEN (D-DE), VICE PRESIDENTIAL NOMINEE: While the economy is going to hell in a handbasket, while people are losing their jobs, while things are going under, they are running the most scurrilous campaign in modern history, trying to tie a decent, honorable man, raised by his grandparents and his mother, who worked his way up, who fought in a way that few people have to fight to make something of himself.

(APPLAUSE)

(END VIDEO CLIP)

(CHEERING AND APPLAUSE)

MATTHEWS: We are out here in the middle of that crowd here at Hofstra University.

Welcome back.

(CHEERING AND APPLAUSE)

MATTHEWS: As I said, we are at Hofstra University outside New York, on Long Island, where the candidates are gearing up for their final debate.

So, what does McCain need to do in his last stand? Will he get tough tonight and go after Obama for his association with William Ayers back in the '90s?

Bob Herbert is a "New York Times" columnist. Ron Brownstein is with "The Atlantic Media" political-he's their political director. And John Harris is with "The Politico."

There we go. Let me ask you. You start with this, Bob Herbert. Does Barack Obama have to get tough tonight, or does he just play it sort of cool again, like he has done the first two debates?

BOB HERBERT, COLUMNIST, "THE NEW YORK TIMES": No, I think he should stay cool.

You know, it's interesting. Early in the campaign, I thought that Obama could use a little more energy on the-on the stump. I thought he should hit some of the issues harder and fight a little more.

It turns out that, with this economic crisis, it seems that his sort of steady-as-she-goes, cool demeanor is exactly what's needed at the moment, and it's working very well for him. And I don't see any reason for him to change that now.

MATTHEWS: Well, what happens-what happens, Ron, if John McCain takes a slug at him? Is it OK, with the white male voters out there he's trying to reach, and keep, actually, for him to just be very calm and almost passive about it? Will that pass muster with the undecided voter?

RON BROWNSTEIN, POLITICAL DIRECTOR, "ATLANTIC MEDIA": Well, you certainly want to look strong.

But Obama, I think-I agree with Bob that Obama has benefited over the last month. John McCain's core advantage in this campaign was the argument that he was better prepared to be president. Obama, in many ways, has seemed steadier and more presidential since the financial crisis began.

The challenge for McCain, though, I think, is more complex, Chris. As you have suggested, you have a lot of Republican who want him to go after Obama much harder than he's done so far. But two numbers in the Pew poll that came out today, the Pew Research Center, offer a different perspective.

Forty-eight percent of Americans say he has been too critical of Obama. Only 29 percent said he has done a good or excellent job of explaining how he would respond to the economic crisis. If those numbers look the same a few days from now as a result of this debate as they do today, this will not have been a good debate for John McCain, no matter what else happens.

MATTHEWS: Well, do you agree with that? He shouldn't go after him, Mike (sic)?

JOHN HARRIS, EDITOR IN CHIEF, POLITICO.COM: He-what John McCain has to do tonight-and it's his last chance to do it-is not land zingers against Obama with-you know, with a new attack on Reverend Wright or Ayers or something like that.

He has got to seem credible on the issue of the moment, which is economy. Just like the last presidential debate, this night comes on a night when the Dow has plummeted, down 700-plus points. He has got to seem credible on that.

I think what he wants to do is take an economic message and merge that with his attacks. And we saw some of that on his-you know, his team had a conference call today where they said, Obama's plan would push the economy, the world into global depression.

It wouldn't surprise me if we heard that line again tonight.

MATTHEWS: Do you believe-you believe, Bob, that he will try that route, to stay on the economy? I wonder whether he has anybody's ear on the economy, if anybody is listening to John McCain with his five-point program and everything, if anybody is even listening to him.

HERBERT: Well, I don't know who is listening, but I don't think he has got any choice, because the economy is the only thing that is on the minds of the voters at the moment.

So, you know, I do expect Senator McCain to be aggressive. And I-I agree that he should be aggressive on the economy. But one of the things that John McCain has done, which I think has hurt him in this campaign, is, he hasn't come on as just aggressive. He has come on as angry. He has come on at times as mean. And he has been bouncing all over the place, as though he doesn't really have a fixed strategy to follow.

So, he needs to calm down. I do think he has no choice but to focus on the economy. If he wants to be aggressive, that makes sense, because he is behind, but he has also got to be careful as to just not be-be perceived as this mean, angry guy.

MATTHEWS: Well, what happens when Bob Schieffer waves that red cape in front of him and dares him to charge?

I mean, what happens, Mike (sic), if Schieffer says, being the old pro that he is, but a bit puckish, as we know, he might just say, you have been taking shots at this guy. Your running mate has been taking shots at him. Your advertisements are taking shots at him. You are implying there is something disloyal about this guy. You keep talking about him palling around with terrorists. You keep saying all this terrible stuff about him in your ads. Stand up and say it to his face.

Suppose Schieffer just says that to him. Why wouldn't he?

HARRIS: He might well say that. Typically, what happens in these exchanges is, nobody wants to get personal in front of 50, 60, 70 million Americans.

MATTHEWS: Yes, but Schieffer wants a fight, doesn't he?

HARRIS: So, he will probably say something like, look, I respect Barack Obama. I just question his judgment.

(CROSSTALK)

MATTHEWS: Oh, come on. That is-do you think, Rod-Rob-Bob Herbert, that he can get away with that weasel language, I'm just trusting a judgment, like he bought the wrong car?

HERBERT: Well, I don't know.

MATTHEWS: Well, what do you mean by-judgment is the biggest chicken comment in the world.

You-you question a guy's commitment to the country, his impulsive patriotism. You question why he would hang out with terrorists. You bring up all this stuff all these months now. And, then, when they ask you what is the problem with the guy, you say, all I did was question his judgment?

HERBERT: Well, that's a problem.

MATTHEWS: That's going to sound like weasel words.

(LAUGHTER)

HERBERT: It's a problem for McCain now...

MATTHEWS: Isn't it?

HERBERT: ... because he has dug this hole, where he has in fact essentially questioned Obama's patriotism, suggested he is running around with terrorists, you know, and almost painted a portrait, so that some voters could, you know, wonder whether there is not some kind of terror angle as far as Obama himself is concerned.

But what I think McCain should have done throughout the campaign-and he has no choice but to try it now-is to say, listen, I do think Obama is a loyal American, and I think that it's wrong to question the man's loyalty, but I think that he has been wrong on this issue, A, rMD-BO_B, C, and D. And I'm right. And here's why I'm right.

(CROSSTALK)

HERBERT: And he also should have been making a distinction between himself and the Bush administration up to this point. And he has not effectively made that case-case either. I think he could have.

BROWNSTEIN: Chris...

MATTHEWS: Ron Brownstein, it seems to me the political reporters covering this tonight will score it on one basis.

BROWNSTEIN: Well...

MATTHEWS: Did John McCain go for the roundhouse punch, the Sunday punch? Will he take a slug at the guy, or won't he? And if he doesn't take a slug at him, a lot of people will say, the election is over.

That's my thought. What's yours, Ron?

(CROSSTALK)

BROWNSTEIN: Well, one thing we have learned is that the score of the political reporters has not been particularly relevant to the voter reaction in the first two debates.

The interaction between McCain and Obama has not been the most significant interaction in these first two debates. It has been between Obama and the viewers. With 70 percent presidential disapproval, 80 percent wrong track, there a lot of Americans out there who are inclined to vote for change. And they have been-the challenge for Obama has been to reassure them that he is an acceptable vessel for that change.

And, in many ways, what he has-his ability to demonstrate fluency and command of the issues to the voter has been more important than any exchange with McCain. And just keep in mind that tonight is going to be-theoretically, at least-on the broad range of domestic issues, things like health care and education, as well as the economy, where John McCain simply has spent less time and has less command than he does on national security or political reform issues, through his Senate career.

So, if the challenge-if the fundamental challenge here is-I think is primarily about Obama reassuring voters who are inclined to change that they can vote for him, this is on terrain that may be more favorable for him than the other two debates, which-in which he was pretty successful to begin with in making that sale.

MATTHEWS: OK.

John, Bob, and Ron, thank you.

It seems like your common advice-I wouldn't call it advice, but assessment-is, the smart move for Barack Obama is to stay cool tonight.

Up next: What are the campaigns planning for tonight? We will get to the insiders in a moment. We have got some strategists from both the Obama and McCain camps. Obama campaign chief strategist David Axelrod is coming here.

And McCain...

(CHEERING AND APPLAUSE)

MATTHEWS: And McCain campaign political director Mike DuHaime is coming.

This is HARDBALL, live at Hofstra, for the third and final presidential debate.

(CHEERING AND APPLAUSE)

(COMMERCIAL BREAK)

MATTHEWS: We are back.

(CHEERING AND APPLAUSE)

MATTHEWS: We're back on the campus of Hofstra University. These students are pretty lively here. One reason they're lively is not only because we are here tonight with a big debate, the last presidential debate, because tonight could be the big one.

David Axelrod is the chief strategist for the Obama campaign. Will we hear the name "Bill Ayers" tonight in the debate for 90 minutes?

DAVID AXELROD, CHIEF STRATEGIST, OBAMA CAMPAIGN: Gee, I don't know, Chris. I really don't know. I mean, whatever comes up, Senator Obama is eager to talk about, but here's the thing.

We are meeting on a day when the stock market went down another 730 points and they are big problems in this country. I hope that we spend the bulk of the time talking about what's going on in the lives of the people of this country and talking about how we're going to get out of the ditch we are in. And that's really fundamental and that's what he is coming to talk about.

MATTHEWS: You are up 14 points today in The New York Times poll. Does that force your opponent to take the fight to you tonight? I mean, just looking it as a competitor, don't you think he has to come out, your guy, to take him down tonight?

AXELROD: First of all, Chris, I remember when we were 30 points down in The New York Times poll when we were running for the nomination. So we don't-we take every day as it comes and we're not accepting the premises that we are 14 points ahead.

What he does, I don't know. I mean, that's-you know, he has had a different strategy from day to day and I don't know what strategy he is going to will employ tonight. All I can tell you is what Senator Obama is going to do. And he is going to come and talk about those problems I mentioned before, and all of the challenges facing this country right now.

MATTHEWS: Every once in a while a candidate says something, you wonder what the hell they said because it sounds unusual. Sarah Palin-

Governor Palin said the other day, she has nothing to lose yesterday in taking on your guy. What do you think she means by that? I've got nothing to lose, she told Rush Limbaugh.

AXELROD: You know, I don't know. But I know this, the American people have a lot to lose in this election. There is a lot on the line for this country. And I think that's the way you have to look at it, not in terms of what you personally as a candidate have to lose, but what-where are we going to go as a country and what can you contribute?

And that's what you ought to be fighting for. So you will have to ask her. I'm sure she will come on your and talk to you about it.

MATTHEWS: What do you believe is important in the fact that the legislative commission up in Alaska has ruled that she abused her power in that case involving her ex-brother-in-law? Is that something you guys want to talk about or you are staying off that issue?

AXELROD: Well, look, I think it's-it obviously-abuse of power is something we have seen in Washington in the last eight years, it's not the philosophy we want to bring to the White House. But it's not-that's not our focus. Our focus is, how are going to get this economy moving again? How are we going to get people to work? How are we going to raise incomes in this country? That's what we are talking about.

And I think that if-to the extent that we are doing well, it's because Senator Obama is addressing the need for change and the concerns that people have in their lives.

MATTHEWS: Will you use that in your advertising in the closing days of this campaign? Will you go after Governor Palin for being found guilty of abusing her power? Will you use that?

AXELROD: I think there are so many important things to talk about, Chris, that are-and that story has been publicized. People know about it.

MATTHEWS: Well, the report just came out late Friday, though.

AXELROD: Yes. But I think people know about that. I think what we want to talk about is how we're going to change the policies that have gotten us into the mess we are in.

MATTHEWS: OK. Let's talk about the contest tonight. You are doing what I think he is going to do tonight-your candidate, which is what Dean Smith calls the "Four Corner" offense. You are going to move the ball around tonight. You're not going to get caught with the ball. You're not going to get hurt tonight.

You're going to slow the game down because you don't want an all out duke out tonight whereas McCain wants one. In other words, you're going to -- if McCain takes a hard shot at your candidate, is he going to like lighten it up after he takes the shot or will he hit him back with a hard counterpunch?

AXELROD: Well, I think we are going to make a very aggressive case for change. And we're going to make it clear who represents change, just as he has in the other debates.

We have not been the ones who have changed the-our message from debate to debate, day to day. But you are going to see the same Barack Obama you saw in the first two debates because his message is a consistent message. It's the one he has been running on for 20 months. We need change in this country. And we need it now. And he is going to make the case for change.

MATTHEWS: Do you believe that John McCain is a successor politically and ideologically to George Bush? Do you believe he is George Bush's guy?

AXELROD: I think John McCain has embraced the policies of George Bush. And if you look at his economic policies, there is really not a dime's worth of difference between the policies that he is promoting and the policies we have in place now. So in that sense I think a vote for him is a vote for the continuation of the policies we have, absolutely.

MATTHEWS: And you believe that this is another term for Bush?

AXELROD: You know.

MATTHEWS: I mean, I wonder how far you're willing to go with this charge?

AXELROD: No, I believe that it's another term for Bush's economic policies, because I haven't heard anything different from Senator McCain. You know, when you say what we need is another $300 billion in tax cuts, $200 billion for corporations, $100 billion for the wealthiest Americans, and 100 million Americans don't get any tax relief, that is more of the same policy. That is not we need.

We've tried this. The old trickle-down theory doesn't work. When you say, I am a deregulator, which is what he said until three weeks ago, I believe in less regulation in almost every instance, that is how we got into the problem we have on Wall Street. So I believe in many ways he is running on the same philosophy. And that's a philosophy that has failed us.

MATTHEWS: OK. Let's talk about code. You know, the British press, when they refer to a politician being drunk at some event, they refer to him as being "tired and irritable" OK? You guys are using terms like-similar terms with regard to John McCain. Not that he is drunk or anything, but that he is old. You use terms like "erratic," "lurching."

Joe Biden refers to the-John McCain "lurching around the room"-I mean, "lurching," "erratic," it's like he is physically out of control. What are you working on here?

AXELROD: No, look, Chris.

MATTHEWS: Aren't you suggesting he has gotten a late in life here?

AXELROD: No, not at all. Not at all. Because I don't think you have to be erratic in your policies doesn't.

MATTHEWS: How about "lurching"?

AXELROD: Doesn't connote...

MATTHEWS: Lurching.

AXELROD: You can lurch from policy to policy, it doesn't connote age, it just connotes that you're lurching. And that's what has happened here. When you say, on one day-when you say one morning when this crisis on Wall Streets erupts that the fundamentals of our economy are strong, and then a few hours later you say we are in crisis, and you suggest idea after idea, some in conflict with each other, that is erratic, that is lurching. That's what we're talking about.

We are not trying to color the thing, we are just commenting on it.

MATTHEWS: So John McCain is of healthy and sound mind? Are you willing to say that?

AXELROD: Oh, I absolutely believe he's of healthy and sound mind. I just think he is of wrong mind on these policies. I mean, you can be healthy and sound and come to the wrong conclusion. So, no, I'm not going to associate my.

(CROSSTALK)

MATTHEWS: So he is not-he is lurching and erratic but only in his policies, not in his mind?

AXELROD: Yes. I would say that that's right. But the point is, when you're president of the United States, the policies are important. If you're lurching and erratic with your policies at a time when this country needs strong, steady leadership, that's a problem.

MATTHEWS: Does your candidate still want a debate over temperament? Is John McCain's temperament at issue here? He said it was in your acceptance speech out in Denver. He said the temperament of John McCain is at issue here. What do you mean by that?

AXELROD: Well, I just said that I think that it's important.

MATTHEWS: Temperament, lurching, erratic. You're not putting-I mean, most people are putting all of this together and saying, you're going after the guy's state.

AXELROD: No. What we're going after is erratic policies that we've seen over the last three weeks.

MATTHEWS: How about temperament?

AXELROD: Well, I mean, that's your temperament as a leader. When you offer conflicting policies from day to day, that's problematical. I think it troubles people.

MATTHEWS: OK. Thank you, David Axelrod.

AXELROD: OK.

MATTHEWS: As cool as his candidate, David Axelrod, chief strategist for Barack Obama. When we come back, we'll hear from the McCain camp, his political director, Mike DuHaime is going to join us. We'll be back from Hofstra University. You're watching HARDBALL, only on MSNBC.

(CHEERING AND APPLAUSE)

MATTHEWS: Ha! Ha!

(COMMERCIAL BREAK)

(CHEERING AND APPLAUSE)

MATTHEWS: Welcome back to HARDBALL. By the way, take a look at this great ice sculpture somebody did of me. I guess that's me there, as done by Ice Sculpture Designs of Long Island for-I want to thank them for the great work they've done here today. We're joined right now by Mike DuHaime, who is chief political director for the McCain campaign.

It seems to me your guy has got to knock his block off tonight.

MIKE DUHAIME, POLITICAL DIRECTOR, MCCAIN CAMPAIGN: Well, I don't think, you know, expectations like that about knocking a block off. I think Senator McCain has got to go out and speak to his issues in terms of where he wants to take the economy. And I think there will be a healthy debate between the two of them.

MATTHEWS: OK. OK. You talk about the economy and yet you-for weeks now, your campaign has been talking about-Sarah Palin, quote: "He has been palling around with terrorists." You're not going to say that tonight? I mean, what does that mean, first of all, "palling around with terrorists"?

DUHAIME: We'll see what Bob Schieffer asks in terms of the questions and whether or not that comes up. But I'm certain that...

MATTHEWS: Let me just tell you something, Bob Schieffer will bring it up, OK? What is your guy going to say?

DUHAIME: Well, I'll see what he says. But in terms of what I'll say, I do think it is an issue that people can talk about. Senator Obama has never.

MATTHEWS: What does this say about Obama?

DUHAIME: I think when he needed Bill Ayers, when he was running for state senate, when he needed his support, he was willing to be in his living room, have his support, because that's what he needed at the time.

Now that he's running for president, Bill Ayers is a problem, he casts him aside. Unfortunately, he has got a history of doing that. He does what he needs to do to win elections.

MATTHEWS: What does it say that he attends school board meetings in Chicago, good government meetings when Bill Ayers is the president at them, and he associates with him politically, what does that tell you about him?

DUHAIME: I think it tells you that he didn't find out enough about the guy or that he didn't think it mattered, what he had done in the past.

MATTHEWS: Well, what does it tell you about him?

DUHAIME: It tells me that I think you have to question kind of his motives and his thoughts. He needed him to get ahead politically.

MATTHEWS: Wait a minute, whose motives? Whose motives?

DUHAIME: Senator Obama's. He needed to get.

MATTHEWS: OK. What does it tell you-what does it say about Obama that he has associated with Bill Ayers at all?

DUHAIME: When he needed Bill Ayers, when he needed his support.

MATTHEWS: No, but what does it say that he did associate with him?

DUHAIME: What it says to me about his association with him, he is willing to look past terrible thing that Bill Ayers did. I mean, Bill Ayers did terrible things. I mean, they bombed the Pentagon, bombed the Capitol...

MATTHEWS: Right. So what does that tell you.

DUHAIME: . killed people.

MATTHEWS: . about Barack Obama?

DUHAIME: Barack Obama is willing to look past that when he needs his support.

MATTHEWS: So what does that tell you about him? Give us the bottom line. What is the point of all of this.

(CROSSTALK)

DUHAIME: The bottom line is that.

MATTHEWS: Why are we talking about Bill Ayers, Bill Ayers, Bill Ayers.

DUHAIME: The bottom line.

MATTHEWS: Tell me what it means?

DUHAIME: Because Barack Obama will say what he needs to do to get elected. And then he will go back on that. Look at what he said this week in terms of the home foreclosure crisis. He.

MATTHEWS: But I'm still not getting-suppose I'm an old-suppose I'm 90 years old. I'm barely aware of what is going on politically. And somebody keeps saying Bill Ayers, Bill Ayers, Bill Ayers to me. Tell me why I should think about Bill Ayers. Just tell me why it's important?

Remember Denzel Washington in "Philadelphia"? He said, explain it to my grandmother. Explain to me why I should give a thought to Bill Ayers. Please tell me why.

DUHAIME: Because the fact that Senator Obama will go into Bill Ayers' living room when he needed his political support, knowing exactly what this guy was about, and what he did, and the things he did to this country, the fact that he would go in there, I think is a great question about...

MATTHEWS: Tells you what?

DUHAIME: . his judgment.

MATTHEWS: What does it tell you? Help us here. Help the old person here.

DUHAIME: This ambition-you're not that old, Chris.

MATTHEWS: Well, tell me what it means.

DUHAIME: His ambition made him look past these things. And I think you have to question...

MATTHEWS: And therefore?

DUHAIME: And therefore, therefore I don't know that I can believe what he says on certain issues, big issues. Look at what talked about yesterday, a moratorium on the home-on the home foreclosures.

MATTHEWS: Well, wait a minute, you're skipping off this thing. Why do you keep going away from Bill Ayers?

DUHAIME: No, no, no, I'm not.

MATTHEWS: You bring it up, then you run away from it.

DUHAIME: Because I think it goes to a bigger issue. I think it goes to a bigger issue.

MATTHEWS: OK. What is the issue?

DUHAIME: I'll give you another example. Two days ago when Senator Obama came out with his economic package, one of the things he talked about, moratorium on home foreclosures. Hillary Clinton proposed the same thing in the primary and Senator Obama's campaign lambasted them.

My point is, he is-to me, is a creature of political convenience.

He will say what he has to when it's time to get elected.

MATTHEWS: OK. OK. What I think you're at here, and you're not going to say it, but I think I know what you're up to. You are suggesting over and over again that Barack Obama lacks the patriotic impulse.

DUHAIME: No.

(CROSSTALK) .

MATTHEWS: Because the person-the patriotic impulse.

DUHAIME: No, no, I don't want.

MATTHEWS: . wouldn't hang around with a Bill Ayers.

DUHAIME: Why can't we-why don't we have a legitimate-why can't we have-it is a legitimate discussion.

MATTHEWS: I just want to go why it is an issue.

DUHAIME: We never questioned his patriotism, Chris. I know you want to bring that-we do not question his patriotism.

MATTHEWS: No. I just want to know why Bill Ayers is an issue. And I'm still not getting the answer. But we'll move on.

DUHAIME: Bill Ayers is an issue. Tony Rezko is an issue.

MATTHEWS: Will you bring up Jeremiah Wright tonight?

DUHAIME: I don't believe that will come up.

MATTHEWS: You won't bring him up? You will bring up Bill Ayers.

DUHAIME: I'm not saying what's going to come up or what's not. We'll ask Bob Schieffer.

MATTHEWS: OK. Is Barack Obama a good guy?

DUHAIME: I think Senator Obama is a good person who is trying hard to do what he thinks is right for the country.

MATTHEWS: Is he a good American?

DUHAIME: I believe he is a good American. I believe we have-

Senator McCain and he have differences of opinions on that. I'm not going to ever say that Barack Obama is not a good American. Anybody who puts himself on the line to try to better the country deserves respect.

MATTHEWS: Is there a character issue in this campaign?

DUHAIME: I think there is a judgment issue.

MATTHEWS: Is there a character issue?

DUHAIME: I think people-when they look at the-when they look who they want to be president, they will look at character, they will look at judgment.

MATTHEWS: Well, what is the character issue here? I'm trying to get at why you guys keep talking about these things.

DUHAIME: I think we-we do not know what this country is going to face. In 2000, nobody knew what was going to happen in 2001. There are a lot of crises that we're talking about right now, the economic crises. We do not know what's going to face us in the next four to eight years.

I think you would look at the facts (ph) on somebody, their judgments, what they have tried to do with their lives, the issue positions they've taken, the times they may have, you know, taken positions counter. Any time they've tried to move ahead-excuse me, to do things for political expedience, I think that goes to somebody's character and judgment. I think when people.

MATTHEWS: So it's character.

DUHAIME: I think that's part of it.

MATTHEWS: OK. Thank you.

DUHAIME: Thanks, Chris.

MATTHEWS: Thank you, Mike DuHaime.

DUHAIME: See you, buddy.

MATTHEWS: The issue tonight is character and the economy. Join us again in one hour for another live edition of HARDBALL. I think that's what the debate is going to be about tonight for an hour-and-a-half. It is going to be about character, it is going to be about the economy, both. I think Mike has got it.

And then at 9:00 Eastern, the third and final presidential debate.

(CHEERING AND APPLAUSE)

MATTHEWS: . from Hofstra University in New York, 9:00 Eastern.

Right now it is time for "RACE FOR THE WHITE HOUSE WITH DAVID

GREGORY."

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

END

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