updated 10/24/2008 11:33:54 AM ET 2008-10-24T15:33:54

RACE FOR THE WHITEHOUSE

October 23, 2008

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

Guests: Joe Scarborough, Richard Wolffe, Michelle Bernard, Eugene Robinson, Bob Ehrlich, Rob Portman, Bob Casey

DAVID GREGORY, HOST: Tonight, McCain's big break from Bush. Battered in the polls because of his association with the unpopular president, the Arizona senator lets loose today, faulting Mr. Bush for Iraq, spending, the environment, and more.

Is it too late for McCain to look for running room from the White House now? One Bush insider lashes back, telling McCain to stop pointing fingers and focus on a strong finish.

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

Twelve days to go in the race for the White House.

Welcome to the program. I'm David Gregory.

My headline tonight, "Searching for Sunshine."

Senator McCain went all in on Florida today, embarking on a cross-state "Joe the Plumber" bus tour aimed at keeping the Sunshine State from shifting to blue status. He put forth his homestretch effort. His new polls provide an increasingly gloomy forecast elsewhere.

Look at the new polls. New polls released today from the University of Wisconsin show Senator Obama with double-digit leads in Indiana, Iowa, Michigan, Minnesota, Ohio, Pennsylvania, Wisconsin, and of course not surprisingly, his own state of Illinois.

And the bad news numbers don't stop for McCain there. New Quinnipiac polls shows Obama up in Ohio, Pennsylvania, and reveal he has got a five-point lead in Florida.

Stop for just a second and take all of this in. Obama at this point is either tied or ahead in at least 10 states that President Bush won back in 2004. That's the state of the race.

While speaking to a crowd in Ormond Beach, McCain caused Senator Obama of "saying anything to get elected" and continued to hammer him over VP nominee Joe Biden's prediction that if elected, Obama would face a test in the form of an international crisis shortly upon assuming the presidency.

Listen.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: Yesterday, Senator Obama tried to explain away this by warning-by saying that his running mate sometimes engages in rhetorical flourishes. Really? Really?

(LAUGHTER)

MCCAIN: That's another way of saying that he accidentally delivered some straight talk to America. I will not be a president that needs to be tested. I have been tested. Senator Obama has not been tested, and it shows.

(END VIDEO CLIP)

GREGORY: Obama wasn't the only one who got a lashing from McCain today. He gave President Bush yet another verbal beating as he continues to sprint away from the one guy other than Obama, who might actually defeat him in this race.

Meanwhile, Obama doing all he can to keep the two tied together, saying this at a Rust Belt stop in Indianapolis today...

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: Just yesterday John McCain strongly defended the Bush policy of lavishing tax cuts on corporations, including those that shift American jobs overseas. More tax cuts for jobs outsourcing, that's what Senator McCain proposed as his answer to outsourcing. He said that's "simple fundamental economics."

We've tried it George Bush's way, and we're here to say, enough is enough. We can't afford four more years of their fundamental economics.

(END VIDEO CLIP)

GREGORY: As the candidates battle through these final days, we can't help but wonder if their destinies are really in their hands. Will there be an October surprise? Some counterterrorism experts believe Osama bin Laden is preparing to make his voice heard before the election. We'll talk about that a little bit later on in the program.

Joining me now, Joe Scarborough, the host of MSNBC's "MORNING JOE."

Joe, good to see you on both ends of the clock.

JOE SCARBOROUGH, HOST, "MORNING JOE": Thank you so much, David.

GREGORY: All right. Let's counter some of the conventional wisdom here, Joe. And I want to ask you, what is the basis of a McCain comeback at this stage?

SCARBOROUGH: Well, the basis is a couple things working in John McCain's favor. First of all, the fact that McCain always finishes strongly. The second thing is that he's got to make sure that he keeps on a consistent message.

He has been all over the place. Obviously he is now sticking to an economic message that you talked about earlier. That's critically important for John McCain.

But you know what his biggest problem, David, is? We've talked about this before. It's the fact that for every commercial John McCain's putting on the air in these swing states, Barack Obama is putting on four, five, 10.

Of course you and I both saw the Politico study that showed that in northern Virginia last week, for every one ad that McCain was putting on, Obama was putting on 100 to 150. You know, in most campaigns, a 2-1 advantage is devastating. Here, the 4-1 or 5-1 advantage is almost insurmountable.

GREGORY: Right. It's shock and awe.

All right. Let's talk about the president, because we said this just a minute ago. The other guy besides Obama who could beat him is, in fact, President Bush. Twenty-seven percent approval rating, and the fact that nearly 6 in 10 voters think that McCain would simply be more of Bush.

Well, McCain really went on offense against the president in an interview with "The Washington Times." We actually have an audio clip of those areas that he finds fault with the president.

Listen to this.

(BEGIN AUDIO CLIP)

MCCAIN: Spending, spending; the conduct of the war in Iraq for years; growth in the size of government, larger than any time since the Great Society; laying a $10 trillion debt on future generations of America; owing $500 billion to China. Obviously failure to both enforce and modernize the regulatory agencies that were designed for the 1930s and certainly not for the 21st century.

(END AUDIO CLIP)

GREGORY: Now, there was a response that Politico got a hold of from a GOP strategist close to the White House which said this: "Lashing out at past Republican Congresses instead of Pelosi and Reid, and echoing your attacks on you instead of attacking your opponent, and spending 150,000 hard dollars on designer clothes"-that's talking about Sarah Palin-

"while congressional Republicans are struggling for money, and when your senior campaign staff are blaming each other for the loss in 'The New York Times' magazine 10 days before the election, you're not doing much to energize your supporters. The fact is, when you're the party standard-bearer, you have an obligation to fight to the finish."

What do you make of all of this?

SCARBOROUGH: It's ugly. I mean, it is ugly.

You remember when Jenna Bush was asked about five, six months ago who she was going to be voting for, and she said she wasn't really sure yet, she hadn't made up her mind?

GREGORY: Right.

SCARBOROUGH: They asked Laura Bush later, and she said, well, you know, I always vote for the Republican. Couldn't even mention John McCain by name.

The McCains and the Bushes don't like each other an awful lot. But David, I can tell you, this strategy never works. I know.

1994, I was running against an opponent, a Democratic opponent, that was trying to run as far away from Bill Clinton as possible. And when you have them in that position, when you have a member of a party running against the president, the top of that party, it is so easy to pick them off.

John McCain is in a no-win situation here. The harder he lashes out at George Bush, the more he depresses his own base.

What is George Bush's approval rating among Republicans? Isn't it like 75 percent, 78 percent?

GREGORY: Right.

SCARBOROUGH: So he's offending three out of four Republican voters that he wants to get out to the polls. He's in a terrible, terrible situation right now-David.

GREGORY: Let's take a look at what's going on-there's no state you know better than your own state of Florida politically. So a couple of polls tell us different things.

It's a tight race, that's the bottom line. It's a battleground, a state that a lot of Republicans and Democrats didn't think would be a battleground.

Mason-Dixon shows a slight edge here for John McCain. And you look at the Quinnipiac number, that actually gives an edge to Obama. We know that McCain is spending a lot of time-he's got this bus tour down in Florida now.

What has happened in Florida, Joe? And do you think that Obama's got a real shot to pick it off?

SCARBOROUGH: Florida is not a grassroots state. It's not Iowa, it's not New Hampshire.

You win statewide in Florida with-what, 20 million, 23 million people there-you win by running 30-second ads. That's what Barack Obama has been done. Again, he's outspending 4-1, 5-1, in some places 10-1. So obviously Obama has a huge advantage there.

I will say this though, and it's a word of warning, of course, that Tom Brokaw gave all of us after New Hampshire, you have to wait until the voters vote. I can tell you, 12 days before the Florida primary, we were certain Mitt Romney was going to win. All the polls suggested that he had all the momentum in his corner. We thought that was going to be John McCain's Waterloo, but Florida voters rose up, they supported this man, they liked him.

GREGORY: Right.

SCARBOROUGH: You know, think about all the military voters you have in Florida, all the retired military voters you have in Florida, an aging population. These are all groups that came out and supported McCain instead of letting him go up in smoke. We'll see whether they do that again.

But I guess that is the warning that we need to send up. Florida is a state McCain should win in most years.

GREGORY: Right. All right.

Joe Scarborough of "MORNING JOE."

Thanks very much for coming back in, Joe. I appreciate it.

SCARBOROUGH: Thank you, David.

GREGORY: And coming next, how McCain could still pull out a win. One of the his former strategists has some surprising advice for his old boos.

RACE FOR THE WHITE HOUSE returns after this.

(COMMERCIAL BREAK)

GREGORY: Senator John McCain is in Florida tonight. Is the Arizona senator delivering the right messages? And what can he do to level the playing field at this point, at least in the polls and on the electoral map between now and November the 4th?

Joining me now to go inside the McCain war room, the all-star panel tonight: Michelle Bernard, president of the Independent Womens Forum;

Richard Wolffe, "Newsweek" senior White House correspondent who covers Obama; Eugene Robinson, columnist and associate editor at "The Washington Post." All three are MSNBC political analysts. In fact, I'm the only one who's not.

And McCain supporter and former Maryland governor, Bob Ehrlich.

Bog, good to see you as well.

BOB EHRLICH ®, FMR. MARYLAND GOVERNOR: Thank you, David.

GREGORY: OK.

Richard, let me start with you on this point. And I want to talk about what McCain is doing here as a closing argument on the campaign trail. Both he and his running mate talking about taxes. An ideological argument on taxes.

This was Sarah Palin on the campaign trail today.

(BEGIN VIDEO CLIP)

GOV. SARAH PALIN (R-AK), VICE PRESIDENTIAL CANDIDATE: Our opponent is not being candid with you about his tax plans. The government takes your money away from you and gives it away to someone else according to a politician's priorities. We are for a real tax cut, and that's when government just takes less of your earnings in the first place.

(END VIDEO CLIP)

GREGORY: All right. Two questions.

One, is she right? Two, why is this the right strategy for McCain in the final days to frame the election this way? Karl Rove wrote about this in "The Wall Street Journal" today, saying if you're in an economic downturn, you don't raise taxes.

RICHARD WOLFFE, MSNBC POLITCAL ANALYST: Well, that's true. And it's the best argument they have on the economy right now, so it's understandable why they would do it.

The problem is that the other side disputes vehemently that anyone but the top 5 percent would get any raise in taxes. So you're lost in the weeds here of whatever he said versus she said. And the problem as well is that you're not really speaking to the economic pain that people are feeling.

So the question is, are they framing this election in terms that voters can relate to, rather than just saying there's a fear card? Which is what they're doing.

GREGORY: Right.

Yes. Bob Ehrlich, if you compare this to 2004, a race Richard and I both covered, remember well, the difference here is that John McCain doesn't seem to have a very simple message about what he is for and what Obama is against. In other words, that contrast. In 2004, it was all about the war on terror, who's going to be tougher on bin Laden.

Are you satisfied that McCain has a frame around Obama that voters can identify and then vote for McCain based upon?

EHRLICH: Well, David, they're taking advantage of the mistrust a lot of people have with respect to Senator Obama and the economy and economics, and his voting record, which is obviously a philosophical, very liberal voting record. And it's really the Joe the plumber-ization of the campaign.

GREGORY: Right.

EHRLICH: Joe the plumber struck a chord, there's no doubt about that. The small business community is powerful in this country. Senator Obama's record with respect to small business is dismal. Everybody knows it.

So really, you use what's working. Clearly right now, Joe the plumber is working, and now you see the expansion of Joe the plumber in these very important swing states such as Florida, such as Pennsylvania, such as Ohio.

GREGORY: But where is the traction, Bob? But where is the traction at this point with that? In our poll, McCain is losing the argument about taxes, in terms of who you trust on taxes. You know, where is Joe the plumber translating into something in the grassroots?

EHRLICH: It's more we're losing because of Wall Street-we're losing the argument, the macro-argument because of Wall Street, the mortgage meltdown, and all that, which I have a real problem with on substance. We can talk about that another day. But I think on the fundamental issue such as taxation, support for small business, entrepreneurism and all that, Senator Obama's record compared to Senator McCain's works, and that's why they're using it.

GREGORY: Let's talk-Gene and Michelle, try this on for size. Mike Murphy, who's on the program often, who used to be a strategist for McCain, is now an analyst with us. He suggests on his blog that McCain should do something different here.

This is what he writes: "McCain has to go global with a big closing message... strip down the state-by-state media budget and use the money to follow Obama's lead with a prime-time 30-minute TV address. McCain direct to camera. And for God's sake, don't make it another raging attack on Obama."

"Instead, offer a mini mea culpa for the negative tone of the last three months. Then pitch the strong bipartisan sheriff of Washington argument: a non-tax and spend liberal plan to fix the economy. Offer hope and leadership."

Michelle, is that more up his alley?

MICHELLE BERNARD, MSNBC POLITCAL ANALSYT: It could be more up his alley. I mean, I have so much respect for Mike Murphy, and I think that if he were working for McCain today, rather than being an analyst with us here at NBC, that's exactly what he would be telling him face to face.

Senator McCain needs one message, and he needs a way to get that message across to Independents, to Reagan Democrats. He needs a way to get that image across in a very broad fashion. And I think that Mike could be on the right track.

Like you were just saying a moment ago, the message of lower taxes versus the tax-and-spend strategy of the Obama campaign is not yet resonating with voters. We've only got a few days left to the election, and this might be Senator McCain's best hope for pulling things out on November 4th.

GREGORY: Gene, it seems to me that really the most effective argument it could be about hope, it could be about leadership, as Mike suggests -that's an important part of it-but if you don't do something to disqualify your opponent at this stage, you're in real trouble, because there's this comfort level among the voters that is starting to sink in about Obama as a commander in chief, as a leader in an economic crisis, on temperament, on the issues, issue by issue.

If you don't start to define this guy as somehow out of the mainstream and I guess the tax policy is part of that argument, that who would raise taxes on the upper 5 percent in the middle of an economic downturn, but unless you can really make these things stick, you're not likely to slow him down.

EUGENE ROBINSON, MSNBC POLITCAL ANALYST: I can see why McCain wants to do that, and that would make sense. The problem is that as he's tried to define the Obama through the Paris Hilton celebrity ad, and a variety of ways he's tried to define Obama as unacceptable, people have gotten more comfortable with Obama and less comfortable with McCain, particularly Independents.

GREGORY: Yes.

ROBINSON: I think Michelle is absolutely right, and Mike Murphy is absolutely right. The battleground is for Independents right now, and McCain's strategy now, going after philosophy on taxation, seems to appeal to the Republican base, but...

GREGORY: All right. Well, Governor...

ROBINSON: ... that sort of attack on Obama isn't doing much for Independents. And I think he's going to continue to lose ground.

GREGORY: OK. So Governor Ehrlich, what's it going to be down the stretch here? Because McCain is now starting to lose his calling card, those Independent voters.

So, he's playing to the base on tax policy, on tax cuts. I get it. I get Governor Palin as a real attractive feature of the ticket to get the base out.

Are there enough Republicans who are going to turn out to vote? Are they enthusiastic enough to overturn the performance we're seeing from Obama?

EHRLICH: Look, Obama has been very solid, and Obama's been very solid with respect to his real voting record and this more moderate message he's been able to convey during the course of the general election campaign, despite the fact he has moderated change. In some cases, wholesale change his position over the course of the last couple months.

It has to be a disciplined approach. I agree with the Murphy approach to what he needs to do, but the polls are also all over a bit.

I believe in polls, I believe in scientifically-taken polls. Clearly Obama has the lead. But I awakened yesterday to the AP poll yesterday. I have the headlines right here-"McCain, Obama All Even in Home Stretch."

I look at Ohio. I look at Florida. I look at Pennsylvania. End everybody is talking about Pennsylvania.

According to the national polls, Obama has a pretty comfortable lead. According to the folks I talk to in the McCain campaign, Pennsylvania is in play. And there's a reason, David, McCain is there, there's a reason the dollars are being spent there, there's a reason the appearances are occurring there. And there's a reason, by the way, that Senator Clinton beat Obama so badly in Pennsylvania.

Clearly, they're looking at Pennsylvania to offset maybe a loss of Virginia, for example.

GREGORY: OK.

Well, panel, stick around. We're going to come back to you later in the hour.

Thank you for that.

Going to take a break here. Coming next, a "Smart Take" about campaign promises versus presidential policy. The lessons voters can learn from Kennedy, Nixon, even President Bush on foreign policy. Something we want to share with you when THE RACE returns after this.

(COMMERCIAL BREAK)

GREGORY: "Smart Takes" time here on RACE FOR THE WHITE HOUSE.

Today's comes from David Sanger, my old colleague at the White House, in "The New York Times," who warns us not to read too much or too far into the candidates' campaign promises or lack thereof when it comes to foreign policy.

He writes this: "It is worth remembering that presidential campaigns are usually terrible predictors of presidential decision-making"-in foreign affairs he's talking about. "John F. Kennedy said virtually nothing about building up troops in Vietnam in 1960, nor did Richard M. Nixon talk in 1968 about engineering an opening to China. George W. Bush, in an interview at his ranch 10 days before his first inaugural in 2001, lamented that sanctions against Saddam Hussein looked like Swiss cheese, but did not appear at that time to be heading toward a military confrontation with him."

And still with me, Eugene Robinson of "The Washington Post."

Gene, it's such an important reminder that the debates on the campaign trail may have nothing to do with what the next president faces on foreign affairs.

ROBINSON: David Sanger is absolutely right. The chief culprit is events.

We have no idea what's going to happen in Iran. We don't know what's going to happen in an unstable place like Pakistan. We don't know what Osama bin Laden's going to do or try to do.

So, yes, he's absolutely right. We don't know what either a President Obama or a President McCain would do internationally. And I should add, by the way, domestic policy we also don't know because they had all these promises, but the economy is in such a situation, is there going to be any money to fix health care, do all the things that Obama and McCain said they would like to do?

GREGORY: Well, that's exactly right given the situation with the economy.

OK, Gene. Thanks very much. Come back in just a minute.

Up next, top McCain and Obama supporters talk about the situation on the ground in two very important battlegrounds. I'm going to talk to former Bush budget director Rob Portman in Ohio, and Senator Bob Casey in Pennsylvania about the race in their states right after this.

(COMMERCIAL BREAK)

GREGORY: McCain's narrow victory strategy runs right through Pennsylvania, where Governor Sarah Palin is campaigning tonight, but only if he can hold on to Ohio and Florida. But McCain's biggest challenge, getting distance from President Bush. All that plus the new warning about Osama bin Laden tonight, as THE RACE continues.

Welcome back. Governor Sarah Palin campaigned in Ohio today, where she emphasized the need for tax cuts to help Ohioans in this economy, such as Toledo area resident Joe the plumber. A new Quinnipiac poll, out today, shows Obama at 52 percent, McCain at 38 percent in Ohio, the state that decided the 2004 election.

Joining me is McCain supporter, Ambassador Rob Portman. He's a trade rep for President Bush, also the budget director, former congressman, the list goes on and on and on, and, of course, a member of President Bush's cabinet, Congressman from Ohio. That's a long title there, Rob. Good to see you back here on the program.

ROB PORTMAN, FMR. OHIO CONGRESSMAN: Great to be with you.

GREGORY: Let's talk about the polling in Ohio. Obama has a lead there. We talked about the importance of Ohio from the 2004 race. In Ohio and beyond, if you look at this Bush map from 2004, Mr. Portman, Obama is either tied or winning in ten of those states. Why is he ahead?

PORTMAN: First of all, the polls are all over the place. David, as you know, if you look at the polls in the last week, there are three polls actually showing John McCain up, just slightly, within the margin of error. If you look at the two week average, the sort of Real Clear Politics average, it's just outside the margin of error. So the polls are very close.

There was one two days ago showing us up two, for instance. I'm not sure what's going on, because the polls have been pretty consistent until recently. I was in Greene, Ohio yesterday. I don't know where you were. Brian was there. Brian Williams was representing your network. But, you know, the intensity is amazing. I was in six counties for the past 24 hours, all the way from Cincinnati through Columbus, up to the Akron area. I've never seen anything like it. We had a pretty good ground game in 2004. It was considered to be unprecedented at the time. We have made more phone calls as of a week ago than we had made in the entire 2004 campaign. Yard signs are going out the door.

I was in a small county near the rally yesterday, Wayne County, where they say they've had more yard signs go out than ever before. So there's something going on. The ground game is moving and the polls are going to go back and forth. But the question is intensity. Are your people going to get out to vote.

GREGORY: But Rob, the reality is you don't dispute the notion that Obama is ahead in the polls throughout these battleground states and that Senator McCain is on the defensive here. It's one thing to say that there may be some tightening in the polls, but the notion that the polls are all over the place I don't think is quite accurate. Even the candidate admits that he's behind.

PORTMAN: Well, there was an AP poll yesterday showing us down one. So the reason I say the polls are over the place is we haven't seen any polls with the kind of margin you talked about a moment ago until the last couple days. On the other hand, we've seen some polls with us up. So there seems to be something going on where the polls are not as consistent as they have been.

My point is that, you know, the polls will move back and forth over this next 12 days, but what really will matter is the ground game.

GREGORY: So what does it come down to? If the economy is the over-riding message, then what is the closing argument? What does John McCain want voters to be thinking about as they go to the polls?

PORTMAN: He wants them to think about the economy. Let me tell you why. I think he has a big advantage here, and I think he's starting to take advantage of it. That is that these undecided voters tend to be fiscal conservatives. That's certainly true in Ohio and Pennsylvania and around the country.

And Senator Obama is talking about raising taxes. He's talking about raising taxes on the very small businesses that are out there creating jobs. He's also talking about a lot more spending. One thing, David, that might be interesting is to go back and look another his votes for the budget. As you know, the budget that he voted for this year two times did raise taxes on someone making as little as 42,000 bucks a year, because of what it says about the future.

It's likely there will be a Democrat House, with strength in numbers. There will be a Democratic Senate, with strength in numbers. This is their blueprint. This is their vision for the future. And this is what Senator Obama has supported. So it's about his record, in terms of rhetoric versus record, but it's also about where he's going in the future with a stronger Democratic Congress.

GREGORY: Let's talk about the president you worked for, George W. Bush. McCain is coming out hard today, criticizing the president. He needs distance from him politically, if you look at the polling that shows that they're still closely linked in voters' minds. Are McCain supporters, are Republicans prepared to go to the polls and cast a vote, in effect, against President Bush?

PORTMAN: Well, I think what voters are prepared to do is support the more fiscally conservative position. Talk about the undecided voters, those who have heard a lot and they haven't yet figured out which way they're going to go. So I don't think that will be the issue in their minds. The issue will be which candidate gives me more sense of security about the economy going forward and what my family and I are going to be able to do.

I will also say, David, and you and I have talked about this before, Senator McCain does have a new direction. His health care plan is a not George Bush's health care plan. It's a new idea. It's far more generous. It has a refundable tax credit. His energy plan is more aggressive. His tax plan is different. He's talking about giving a tax break to let keep companies here that George Bush did not propose. He has a middle-class tax cut that George Bush did not propose.

So if you look down the list, he actually does have a new direction and changes that people on the Republican side have been happy to support over the last several months.

GREGORY: Rob Portman from Ohio tonight, Rob thanks for coming on.

PORTMAN: Thanks, David.

GREGORY: Turning to another key state tonight, Pennsylvania. New poll from Quinnipiac shows Obama 53 percent, McCain at 40 percent in Pennsylvania. But Governor Sarah Palin is there in Pennsylvania tonight in Western Pennsylvania, working class, culturally conservative area, one of those areas that Hillary Clinton carried rather strongly. Joining me now, Obama supporter, Senator Bob Casey. He is in Philadelphia tonight. Senator, good to see you.

SEN. BOB CASEY (D), PENNSYLVANIA: David, great to be with you. Thank you.

GREGORY: Why is the governor of your state worried, and why does he want Obama back in Pennsylvania and fast?

CASEY: We always want to have Senator Obama coming back to the state in the closing days, but I think the concern that everyone has is that the history shows that it's very difficult for any candidate to get to 51. It's a very close state. We're just guardedly optimistic right now. I do think that the poll that came out today, the Quinnipiac poll, has a substantial amount of good news in it.

For example, even though Senator Obama is ahead by double figures, that's good news, but the internal numbers are even better, that he's ahead among older voters by a double digit margin, that he's doing extraordinarily well with independent voters. And on the question of when they ask the voters, despite how you vote, whom do you trust to manage the economy, he's ahead by 18 points in this poll. That's good news for the number one issue that Pennsylvanians are worried about.

GREGORY: So where does John McCain strike best in your state? Is it going to be the working class voters, working class women who supported Hillary Clinton, or does he have to win the Philly suburbs?

CASEY: David, I think unfortunately what Senator McCain has been doing and his campaign has been doing is they haven't been focusing on the economy. We just got information today about the foreclosure rate in Pennsylvania, third quarter this years versus third quarter last year, up 73 percent. The jobless numbers are going up. He hasn't talked much about the economy. He's done a lot of fear and smear, trying to make the race about personalities or about his opponent, instead of talking about the economy.

The reason why Senator Obama is doing better in Pennsylvania today is because he's focussed on the economy, and people saw someone who has steady judgment in the eye of the financial storm that we've been living through. They saw that in the debates. And people in Pennsylvania are responding to that.

GREGORY: What do you see in your part of the state, western Pennsylvania? Is Sarah Palin helping or hurting McCain there?

CASEY: Well, the data today in the Quinnipiac poll is showing that she's hurting him very badly. She's has a higher negative now in Pennsylvania than either Senator Obama or Senator McCain, a much higher negative, almost 50 percent unfavorable rating with both women voters in Pennsylvania and independents. You can't win in Pennsylvania if you're not connecting with that segment of the population.

One of the reasons why Senator Obama is doing so much better now is people see him as someone who has not only talked about the economy, but has strategies to lead us out of the ditch that the Bush/Cheney/McCain economy has put our economy in.

GREGORY: Senator Bob Casey in Philadelphia tonight, always good to have you on.

CASEY: Thank you, David.

GREGORY: Coming next, McCain's biggest problem is the president he's trying to succeed. How McCain will try to convince voters who are angry with the current administration that he won't be more of the same. THE RACE returns right after this,

(COMMERCIAL BREAK)

GREGORY: Back now on RACE FOR THE WHITE HOUSE. Senator McCain is fighting hard to be the next president, but much of the campaign has hinged on not mentioning the current president. That changed today, when he went on the offense and criticized him. But it's a feat that's becoming easier as President Bush has started sliding underneath that political radar.

(BEGIN VIDEO CLIP)

GREGORY (voice-over): Rallying Republicans in New Hampshire, John McCain was running away from the one guy other than Obama who might defeat him.

MCCAIN: I'm not George Bush. If Senator Obama wants to run against George Bush, he should have run for president four years ago.

GREGORY: Back in March, President Bush warmly endorsed the Republican nominee.

MCCAIN: I intend to have as much possible campaigning events and together as in is in keeping with the president's heavy schedule.

GREGORY: Since then, the number of public campaign events they have held together, zero.

PETER HART, NBC NEWS/DEMOCRATIC POLLSTER: Never has there been an incumbent that is this much of a negative.

GREGORY: With an approval rating at 27 percent, President Bush is viewed as a political kiss of death. While he still meets publicly with foreign leaders, of the 46 GOP fund raisers he's done this year, all but four have been behind closed doors.

The president spoke to the Republican convention, yes, but via satellite from the White House. And when Mr. Bush briefly returned to the stage at the onset of the economic crisis-

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I wish I could snap my fingers and make what happened stop, but that's not the way it works.

GREGORY: -- it only made matters worse. The administration's trillion dollar economic bailout has put another huge dent in the GOP brand and hurt McCain's prospects further. The latest NBC News/"Wall Street Journal" poll shows that nearly six in 10 voters think McCain's agenda would mirror Bush's.

RON BROWNSTEIN, ATLANTIC MEDIA POLITICAL DIRECTOR: Almost always, when an out-going president has been as unpopular as Bush is today, his party has lost the election to succeed him.

GREGORY: The years have certainly taken their toll on the president, who will leave to his successor a jam packed inbox of problems, ranging from the financial meltdown to the increasingly troublesome war in Afghanistan. Challenges so big the new president, McCain or Obama, will have instant influence, even before he takes office.

OBAMA: The next administration is going to be inheriting a whole host of really big problems. So the president's going to be tested.

GREGORY: As for this president, the times are too serious to let up. But he still occasionally let slip a subtle sign of relief that it's almost over.

BUSH: You guys may be back next year, but not me.

(END VIDEO CLIP)

GREGORY: Back with the panel now. Joining me again, Michelle Bernard, president of the Independent Women's Forum, Richard Wolffe from "Newsweek Magazine," Gene Robinson from the "Washington Post," all three, of course, MSNBC political analysts. Also joining us, McCain supporter and former Maryland Governor Bob Ehrlich.

Governor Ehrlich, let me start with you. With 12 days to go in this campaign, can McCain effectively break away from Bush, and is it the right thing to do?

EHRLICH: In my view, you have to split the difference here. You have to take the good, the tax cuts, the judges and not ignore the fact that a significant part of the Republican base likes President Bush and is supporting him. Distinguish that from where Republicans got off track, the spending, some of the scandals, particularly the failure to veto the appropriations bills. That can be done, has to be delivered in a very up-front way, the maverick way. Look, I agree with that. I disagree with that.

I just find it fascinating in watching the last few minutes-it's just fascinating and maybe it's predictable, because Republicans have been in charge of the Executive Branch, that-I was on the House Banking Committee in the mid-1990s-that the Republican party and McCain candidacy has taken such a hit for a problem, a meltdown, a leveraged problem that House Democrats particularly brought against banks, and then again with Fannie Mae and Freddie Mac and the GSEs. For the Republicans to take this hit when the facts are so counter to what occurred and the people associated with President Bush, cabinet secretaries, and particularly Senator McCain, were out there three, four years ago screaming about what Fannie Mae had become.

For this now to be such a bottom-line issue hurting Senator McCain is pretty ironic.

GREGORY: Gene, what do you think?

ROBINSON: I think this is very difficult for John McCain. I don't see how you can do an a la cart position vis a vis President Bush if you're John McCain. It's very difficult to get the message that I agree with some of the things he did, but strongly disagree with all these other things that he did. Indeed, I think he hasn't been getting that message across. I think the Obama campaign has hammered away with the John McCain is George Bush, John McCain is George Bush. They've been doing for some time. It's been a consistent message. Fair or not, I think it has gained a lot of traction, as that 58 percent figure from the poll indicates.

EHRLICH: It worked in 2006 certainly.

GREGORY: It worked in 2006, but there's evidence here that he can't break away. Your argument just a minute ago notwithstanding, he's not breaking away from Bush, despite his history, despite everything else. He's still closely linked with the president. Richard Wolffe, let me bring you in on this. What McCain is doing in this criticism in the "Washington Times" today, he's running to the right of Bush on fiscal conservatism. It goes back to the point we discussed before, this is the argument that he wants to close on, that he's a fiscal conservative, an ideological argument here, as the contrast to Obama.

WOLFFE: If you're going to break with President Bush-there's nothing wrong with running to the conservative side of President Bush, but if you're going to break with him, if you're going to send that signal to independents, why do it in the "Washington Times?" And really, if you are going to break from the incumbent, do it earlier, do it once you've clinched the nomination.

The problems McCain is facing is not about President Bush. It's that we won the primary contest in a weakened state. He still had to prove himself to his base. That leads you to Sarah Palin. That leads you to him really giving up on the independent message he had during the summer that was his core brand. And it's just too little too late right now. It would have been fine earlier. At this point, it's just a mixed message.

GREGORY: Final word, Michelle?

BERNARD: The final word is the reason that he's having such a difficult time separating himself from President Bush is simply because the underlying theme between the two of them is that he's a Republican. And many independents, many Reagan Democrats, and a large majority of the country right now are very unhappy with the Republican party. That is the problem that Senator McCain faces.

He wrote that op ed. He is running to the right of President Bush because that is the only way he can appeal to fiscal conservatives in the party. That is not a message for independents. His message to independents, for example, is more along the lines when he says, why isn't Hank Paulson out there buying up all the failed mortgages within the country. That's a give away. It's a populist message. It's a mixed message. It's more difficulty for McCain.

GREGORY: Thanks to all of you. Coming next, is Osama bin Laden looking to make his voice heard in this election? An October surprise perhaps? That's coming up next when THE RACE returns.

(COMMERCIAL BREAK)

GREGORY: Back now. In the remaining 12 days of THE RACE, the candidates will do everything in their power to steer fate in their favor, but could we all be in for an October surprise? Los Angeles police chief Bill Bratton and former NSC director of counter-terrorism R.P. Eddy issued a grim warning in the "New York Daily News" today, writing this: "This is a critical election for al Qaeda. Put simply, bin Laden probably realizes it could become markedly more difficult to paint the United States as the great Satan with a new president who is admired internationally. The remaining days before the election should be seen as a time of high threat. State and local police should be on high alert. With so much at stake in these elections, bin Laden will probably attempt to make his opinion count."

Joining me to weigh in on the bin lading factor in all of this, NBC terrorism analyst Roger Cressey. Roger, good to see you. We remember 2004, about this time, with just days to go before the election, Osama bin Laden put out a tape, and it did have an impact on the race, if you hear Senator Kerry look back on it, and a very definite impact on the polls. Operationally, organizationally, what kind of capability does al Qaeda have to do that and inclination to do that right now?

ROGER CRESSEY, NBC TERRORISM ANALYST: I think in the best of all worlds, al Qaeda would love to conduct another attack, but they don't plan their attacks on calendars. They base it operational capability and the ability to execute. So I don't think this period is particularly high in terms of threat. But like you said, al Qaeda and bin Laden are opportunistic. If they can, they'll certainly issue new tapes.

We've already seen new tapes from Adam Gadahn and Ayman al Zawahiri, bin Laden's number two. So you've got to expect something else is going to come down the pike in the next couple weeks.

GREGORY: Some kind of statement about the election.

CRESSEY: Right, a reminder. A reminder that I'm still out there, a reminder that this war against the United States is still going on, probably references to Iraq, maybe to Afghanistan, because that's gotten so bad lately. But whether or not they attack, I think we simply don't know right now.

GREGORY: It's interesting, though, the difference between now and 2004. The question in 2004 was who's tough enough to get this guy, to stand up to al Qaeda? Even now, our latest poll shows a huge advantage for McCain on this. Who is better at catching bin Laden, McCain 39 percent, Obama 19 percent. Still a question of toughness here. McCain says he would follow bin Laden to the gates of hell, but he's been on the loose for a long time. Should he make his presence felt, do you think the country would view that sort of tape, that sort of threat the same way they did four years ago?

CRESSEY: No, I don't think so, because so much has changed. In 2004, it was a reminder that bin Laden was still out there, and the level of fear was much different in the country then. That probably did force some people to look at the president in a different light. Now, if he comes out, I think a lot of people are going to say, seven years after 9/11, bid Laden is still on the loose, al Qaeda has reconstituted, operational command and control, and inside that safe haven in Pakistan, they're plodding and planning right now. So it's going to be different, I believe.

GREGORY: What about Biden's warning-Senator Biden's warning that an al Qaeda-he didn't say that specifically, but he said that Obama will be specifically tested in his first six months in office as a new leader. He's giving voice to what could be a real threat. Why he did it seems like something he may not have wanted to do. How real is that threat?

CRESSEY: I think every new president gets tested.

GREGORY: Does it matter?

CRESSEY: It really doesn't matter. Think 1993, Bill Clinton comes in, Ramzi Yousef tries to blow up the World Trade Center. 2001, George Bush comes in and then we had 9/11. So you can go through the campaign season and articulate a foreign policy agenda. Something always happens in the first year that changes that agenda.

GREGORY: And what is different about al Qaeda today than it was when Bush came into office?

CRESSEY: You have the worst of both worlds. You have an al Qaeda organization that's reconstituted its capability, and you have a movement that's very strong throughout the Middle East, Africa and also in Europe. So when I look at what the big issue is going to be from a terrorism perspective, it probably is going to be Pakistan. That will be the real wild card for the next president.

GREGORY: Do they have an ability at this point to look at what's happening in the global marketplace, in the global economy, and recognize that the ability to do further economic harm to the United States and the rest of the world is maybe as important as inflicting another kind of terror?

CRESSEY: Absolutely. As I said, they're opportunistic. If al Qaeda had the capability to attack right now, from a perspective of our economy and how unstable it is, it would be perfect for them. But the question is, do they have that capability? We still see a high operational tempo by the United States against al Qaeda's presence in Pakistan and Afghanistan. Another senior al Qaeda operative was killed in Pakistan the other day. If they could attack us right now, David, they certainly would. But it's not going to triggered towards the election. It's going to be triggered on when they actually have the operational capability.

GREGORY: In the counter-terrorism community, is the premium still on getting bin Laden himself?

CRESSEY: I think there's one component. You want to kill bin Laden, because it brings to a closure a part of 9/11. But if you kill him, that doesn't eliminate the threat. The organization will still survive and this movement, on a global basis, will still grow and has been very strong. So Bin Laden is only one part of it right now.

GREGORY: OK, a lot to think about in the closing days of this race.

Roger Cressey, thanks, good to have you here.

CRESSEY: You bet, David.

GREGORY: That's the program for tonight, for RACE FOR THE WHITE HOUSE. Just 12 days to go before election day. I'm David Gregory. Thank you for watching. "HARDBALL" with Chris Matthews coming up next right here on MSNBC, your place for politics. Have a good night.

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

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