updated 11/11/2008 10:12:52 AM ET 2008-11-11T15:12:52

Guests: John Harwood, Michelle Bernard, Lawrence O'Donnell, Evan Thomas, Gerald Seib, Ron Brownstein, Richard Haass, Rep. Marsha Blackburn

MIKA BRZEZINKSI, HOST: Tonight on 1600 PENNSYLVANIA AVENUE, we know who will be living there, but our country's future may depend on the team that will work there. New developments and names in what the Obama administration will look like.

Is the McCain campaign throwing Sarah Palin under the bus, revealing campaign secrets about the Alaska governor? And will she get the last laugh?

And call the White House doctor. Barney bites.

Straight ahead on 1600.

Seventy-five days to the inauguration of President-Elect Obama.

Welcome to the show. I'm Mika Brzezinski, in for David Gregory.

My headline tonight, well, "There's a New Chief in Town."

Chief of staff, that is. Determined to make a swift, effective transition to the White House with a team that will run like a machine from day one, President-Elect Obama has appointed Illinois Congressman and House Democratic Caucus Chairman Rahm Emanuel to serve as his White House chief of staff. Emanuel, who has been described as a formidable political pit bull, is no stranger to the ways of Washington or to the White House, having previously served as a senior adviser to President Clinton.

In a statement, Senator Obama expressed full faith in the man who is soon to be his right hand, saying, "No one I know is better at getting things done than Rahm Emanuel."

At a time that this nation faces unprecedented challenges, the success of the team may equal in large part to the success of the president. So we wait with much anticipation to see whom else he will call upon to serve in his administration.

Obama will meet with President Bush to begin the transition process next Monday. The president pledging today that he is committed to helping our next leader "hit the ground running."

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES OF AMERICA: And as January 20th draws near, some of you may be anxious about finding a new job or a new place to live. I know how you feel. But between now and then we must keep our attention on the task at hand. So over the next 75 days, all of us must ensure that the next president and his team can hit the ground running.

(END VIDEO CLIP)

BRZEZINKSI: Here with me now, NBC News Political Director Chuck Todd. It's been a long day. I think we talked about this, this morning.

CHUCK TODD, NBC NEWS POLITICAL DIRECTOR: Twelve hours ago.

BRZEZINKSI: Yes. And it has come to pass after some interesting sound bites along the way. You just spoke with him.

TODD: I did. It was a family consideration. He was really waiting. You know, it may be a little while before his family joins him, but he got it clear.

BRZEZINKSI: They live in Chicago, right?

TODD: They live in Chicago. And, you know, moving them here-he's got young children, three young children. So that's what took so long.

I know there were a lot of people wondering what was going on here. How is it that the first job offer from the president wasn't being accepted immediately? But there was that serious consideration.

BRZEZINKSI: But questions, I guess, that we were asking this morning because there was this sound bite from him in front of his house where he was hedging on it and talking about the issues he is dealing with. And in some ways you would think you would say nothing until you know you are taking it, or you let the new president move on to something else. But clearly there was a lag.

TODD: Well, I think there was-what happened was too much reporting got out in front of it. He had no choice but to address it, particularly I think when he was dealing with this behind the scenes. I mean, you know, we don't want to probe into somebody's family.

BRZEZINKSI: Yes.

TODD: But I think there was actual family considerations there. And here it is out in public.

BRZEZINKSI: Well, that's fair. And I like hearing a man having issues with that and pondering it, and having to really think about it. It sounds good to me.

Interesting reactions, Chuck, to this. I'm looking at John Boehner's reaction, House minority leader. "This is an ironic choice for a president-elect who has promised to change Washington and make politics more civil and govern from the center." Kind of a slam there.

TODD: It was a total slam. And this is obviously somebody, John Boehner, who has had to go up against Rahm Emanuel as part of the House Democratic leadership.

What's interesting is, after that release was sent, where there was the signal, Rahm had called both John Boehner, the leader of the House Republicans, and Mitch McConnell, the leader of the Senate Republicans, pledging to figure out how to work together, saying, hey-just doing, you know, we pledge to have a civil way of dealing with things. So it was sort of a way of not slapping back, but patting back.

BRZEZINKSI: Yes. I'm looking at-Lindsey Graham also responded. I'll read from it.

"Rahm understands the challenges facing our nation and we'll, consistent with the agenda set by President-Elect Obama, work to find common ground where it exists."

And boy, in some ways Obama is going to need help.

TODD: Two different reactions. I think this shows you where the Republican Party is right now.

You have Lindsey Graham, who just got out from under the McCain campaign, who did everything he could to help McCain. He is in conciliatory mode.

John Boehner, who, by the way, might get challenged as leader of the House Republicans. He is certainly seeing his deputies leaving left and right because they are all blaming each other about what's wrong with the Republican Party. He is having to be defiant.

This is the challenge now. This, to me, says more about what's going on in the Republican Party than any reaction to Rahm Emanuel.

TODD: Absolutely. And the Republican Party itself is something we'll be talking about later in the show and where they need to go. The contenders though for the Obama administration, Chuck, in our final moments here, because this team, I think it is very clear, given the crisis this country faces will need to hit the ground running and will need to be a team, who are the key people? I'm looking at some names here: Kerry, Lugar, Richardson-secretary of state, potentially?

TODD: Well, the big thing is going to be Treasury first.

BRZEZINKSI: Treasury.

TODD: They have to deal with that. You will have the economy as front and center tomorrow, right before he does his first news conference tomorrow afternoon.

And the question is, is it going to be Larry Summers, the former Clinton treasury secretary, the second term treasury secretary? You have a gentleman at the Federal Reserve, Tim Geithner, who a lot of people like.

Both of them more academic types. You have some Wall Street types being thrown around there, including the governor of New Jersey, Jon Corzine. But there's going to be a hesitancy I think by Obama of bringing in one Wall Street guy to replace the one that is there now, Hank Paulson. And so you've got to assume the two academics, Summers and Geithner, are going to be the frontrunners here.

BRZEZINKSI: All right. Chuck Todd, NBC News political director, we will see what happens.

TODD: OK.

BRZEZINKSI: Thanks very much. I'll see you probably pretty early in the morning.

Thank you, Chuck.

We turn now to our esteemed panel. And we'll talk about this issue, continue with it.

Joining me now, John Harwood, CNBC's chief Washington correspondent who had that Emanuel story early on today, and a political writer at "The New York Times." Michelle Bernard is president of the Independent Women's Forum. And Lawrence O'Donnell, former chief of staff to the Senate Finance Committee.

Both Michelle and Lawrence are MSNBC political analysts.

Well, John Harwood, let's talk about the other contenders here. You have certainly sources that are giving you good information here.

And Treasury, what are you hearing? I mean, we've got names-Rubin, Volcker, Buffett, Summers, Geithner. And, I mean, the potentials here are incredibly important to the problems that we face.

JOHN HARWOOD, CNBC CHIEF WASHINGTON CORRESPONDENT: Well, I agree with Chuck that Larry Summers and Tim Geithner may be the frontrunners, but I wouldn't rule out a throwback pick to select Paul Volcker, the former head of the Federal Reserve.

You know, one of the things that Barack Obama has been good at throughout this campaign, Mika, is reassuring the American people, evoking an image of steadiness and control. Paul Volcker has been by his side for some of these media events with his economic team during the campaign. He'll be there tomorrow. And I think Paul Volcker is somebody who is an option for Barack Obama in the treasury post.

BRZEZINKSI: How important, Michelle Bernard, will it be for maybe some Republicans to be in this administration? I'm thinking there are potentials there for secretary of state. And there are other-you know, perhaps even secretary of education in Colin Powell potentially.

MICHELLE BERNARD, MSNBC POLITCAL ANALYST: Absolutely. We've heard Colin Powell's name maybe, you know, as secretary of defense. Richard Lugar, Chuck Hagel. I think it's going to be very important.

We've seen a lot of Republicans, or Obamacans, as they were called, prior to November 4th that support Barack Obama, really believed in his candidacy and believe in him as the wave of the future for our government. And I think if Barack Obama is going to be true to his word, it will be very important to reach out to really highly respected Republicans. Not Republicans who are looked at as part of the problem within the party, but Republicans who are moderates, who are forward-thinking, and are also willing to engage in what we are now calling this era of transpartisan politics.

And I would venture to guess that we will see very significant Republican leadership posts within the Obama administration.

BRZEZINKSI: Lawrence O'Donnell, what do you make of the importance for a diverse cabinet, a team of rivals, even? And also, thoughts on treasury secretary?

LAWRENCE O'DONNELL, MSNBC POLITCAL ANALYS: Well, I think the team of rivals concept can be taken too far in our current politics.

Treasury secretary, I think Larry Summers is ahead in the sweepstakes. He has been confirmed twice, you know, for treasury, and the second time to be secretary of the treasury. So, he is, in effect, pre-confirmed. You just run him right through.

He has been thorough all the background checks, all that stuff. In his time out of government he was in academia, where you don't get in trouble as a lobbyist does with conflict of interest issues. So I think...

HARWOOD: Although he might get in trouble over those remarks at Harvard about women in math and science.

BRZEZINKSI: Yes. There is that.

BERNARD: He's got a reputation of being very difficult to work with.

O'DONNELL: No he doesn't. Not as treasury secretary.

He is a prickly kind of guy in certain settings, but I can tell you, I ran his first confirmation hearings of the Senate Finance Committee, and he learned exactly how to operate. He was very successful as treasury secretary. And there is no reason to think he wouldn't be again.

And in terms of the political correctness issues that he bumped into at Harvard, you have to stop and think exactly who on the Senate Finance Committee is going to be asking him hard questions about that in terms of how he would run the treasury. So I don't think that's a big problem.

BRZEZINKSI: Michelle?

BERNARD: I would say to our male colleagues on the panel tonight that I guarantee you that Kim Gandy at the National Organization for Women will be right down at the Senate to make sure that those questions are raised. I frankly don't care about the questions-I don't care about-let me just finish, please.

I really didn't care about the questions that he raised about women in math and science at Harvard. I think an interesting question to pose though is what it says about the administration.

You know, we've got Rahm Emanuel, who I have a lot of respect for even though his nickname I believe is Rahmbo. And should he select Larry Summers, what is the message that he is sending to the country? And also, frankly, to some members of the liberal left who might get angered if Barack Obama goes to the center, as we strongly suspect and hope he will do, in governing the country?

O'DONNELL: Well, there has never been a liberal left treasury secretary and there is never going to be.

BERNARD: That's my point.

O'DONNELL: It's also very unlikely-well, there isn't going to be. So those people live in a dream world if that's what they are holding out for.

And it's very unlikely that you would get a liberal left White House chief of staff. I can't think of anyone who's had that position who would really fit that description.

It's a job where you have to be able to reach out to all sides. I think Rahm Emanuel is a good selection for that.

You've got to remember that the House of Representatives has a huge body of new members there who owe, to some extent, their election to Rahm Emanuel. So one of the things that I think is signaled in this is President-Elect Obama knows that one of his major problems is going to be dealing with his own party in the House of Representatives.

HARWOOD: Exactly.

BERNARD: And that's the point I was trying to make.

O'DONNELL: And Emanuel can do that.

BRZEZINKSI: John Harwood, go ahead.

HARWOOD: Mika, that's exactly right. And it's why the statement by John Boehner was pure politics, because I was talking privately to a top Republican in the Congress who said Rahm Emanuel is the kind of guy who can do what Obama needs, which is prevent the party from going too far to the left.

Remember, when he was running the Democratic Congressional Campaign Committee, Rahm Emanuel was trying to recruit more moderate Democratic candidates to run some of those red districts. He is-you know, one of the charges against Barack Obama during the campaign was he never stands up to his own party. Rahm Emanuel can do that, and would do that as White House chief of staff.

BRZEZINKSI: All right. Our panel stays.

Thanks very much.

Up next, this is incredible. The untold story of the race for the White House. One angry McCain aide said about Governor Sarah Palin's shopping spree and much more. And what insiders now say about her foreign policy knowledge.

1600 PENNSYLVANIA AVENUE will be right back.

(COMMERCIAL BREAK)

BRZEZINKSI: Welcome back.

If you have been following the presidential campaign for the past 22 months like we have, you may think there is nothing you don't know about this race. Well, think again.

"Newsweek" has compiled an extraordinary seven-part "How He Did It" series that chronicles the untold story of the '08 race culled from private conversations with key players able to be published only after this was a winner.

Joining me now is "Newsweek" Editor-at-Large Evan Thomas.

Evan, thanks very much for joining me.

EVAN THOMAS, EDITOR-AT-LARGE, "NEWSWEEK": Hi, Mika.

BRZEZINKSI: This is fascinating. Hi.

Let's start with-well, I've got to start with the Sarah Palin stuff, because it appalls me on a number of levels, and maybe not in the way that you would think.

I'm going to read from "Newsweek" the untold story here.

Palin's shopping spree: "One senior aide said that Nicolle Wallace had told Palin to buy three suits for the convention and hire a hair stylist.

But instead, the vice presidential nominee began buying for herself and her family. An angry aide characterized the shopping spree as 'Wasilla hillbillies looting Neiman Marcus from coast to coast,' and said, 'The truth will eventually come out when the Republican Party audits its books.'"

And, you know, this, of course, is based on the eight weeks of shopping and $150,000, potentially more, spent on clothing, et cetera, et cetera, for Sarah Palin. That got out, made her look back, definitely went against her message of being a Wal-Mart mom.

But now you've got campaign aides saying it was all her. And I'm just curious, first of all, how they're at this point feeling OK about leaking this information about her. I mean, did they not have her under control, or what was the story there?

THOMAS: Well, they definitely didn't have her under control, and that's why they were leaking. They were just fed up with it.

They couldn't control her. They gave her handlers, and she listened for a while, and then she stopped listening.

She rebelled against Nicolle Wallace, who was her chief handler, and wouldn't be prepped by Nicolle for the Katie Couric interview, the aides say. That's why the results were disastrous. So they just got fed up.

Now, she may have-you know, there are two sides of the story, of course. She might be fed up with them. But they were definitely fed up with her.

BRZEZINKSI: I'm very much looking forward to hearing from her about these comments coming out from different campaign aides. I'm sure there are a lot of people who are pretty sore today after losing the election.

I'm still trying to figure this out. And I'm getting to something here. But let me play for our viewers, Evan, if I could, a FOX reporter, Carl Cameron, who is reporting on information he got from the campaign about Sarah Palin.

Take a listen. And this is FOX.

(BEGIN VIDEO CLIP)

CARL CAMERON, FOX NEWS CHIEF POLITICAL CORRESPONDENT: She didn't know the nations involved in the North American Free Trade Agreement, we're told. Those, of course, being the U.S., Canada and Mexico. NAFTA, a major campaign issue, that would have been something of a deficit.

We're told that she didn't actually-she wasn't actually able to name all the countries in North America as part of that debate. And she didn't understand, McCain aides told me today, that Africa was a continent and not a country. And actually asked them, they argue, they say, if South Africa wasn't just part of the country, as opposed to a country in the continent.

(END VIDEO CLIP)

BRZEZINKSI: OK. I'm not going to ask you what aides are talking to Carl Cameron, but I will ask about the aides talking to "Newsweek" and giving this information, which I'm sure you checked over several times, and "Newsweek" reporters did as well.

Are they high up in the campaign?

THOMAS: Yes.

BRZEZINKSI: OK.

So Evan, here is my question, because it seems to me when I hear this stuff, especially after the story broke and the sound bites broke with Nicolas Sarkozy-actually, it was a Canadian radio station claiming to be the president of France, then duped Sarah Palin and taped it, and that got out. I've got a question, because I feel like this doesn't reflect on Sarah Palin so much as it reflects on the idiot aides or the idiot advisers who hired her and didn't know these things, if they happen to indeed be true.

THOMAS: It reflects on a campaign that was melting down at the end. I mean, I think McCain himself today had a pretty savvy comment, which is that campaigns that win are always run by geniuses, and campaigns that lose are always run by idiots. And there is always backbiting in a losing campaign. It's an incredibly high stress environment. And as the ship goes down, people are going to start to point fingers.

(CROSSTALK)

BRZEZINKSI: But you remember, Evan, the narrative here about how she was chosen, the one meeting with John McCain. And they claimed, I mean, heatedly, really, to us that they did vet her, that their vetting process was solid, it was sound. And I'm sorry, this reporting is fascinating and these stories are interesting, but they say more to me about the campaign aides talking and the people who advised McCain to go with her as opposed to really anything about her.

Does that make sense to you?

THOMAS: On the vetting, I do wonder. I mean, our reporting showed that as late as-she was chosen on a Friday-or announced on a Friday.

BRZEZINKSI: Yes. I remember.

THOMAS: As late as Wednesday, he was still talking about Joe Lieberman. So there was a kind of last-minute quality to this.

Now, they insist, as you say, that she was thoroughly visited. I have my doubts. But part of this was-the background here is that they wanted to do something really different.

BRZEZINKSI: Yes.

THOMAS: Bold. Steve Schmidt, the chief strategist, was pushing Palin. Other people were not.

There was division within the campaign. Salter, who's the other top aide, was pushing Pawlenty. Now, Rick Davis was for Palin. But there was I think serious division within the campaign, and I think that within the campaign, McCain himself wanted to do something bold.

He is a radical. He is a rebel. He likes to take chances. And this is definitely a chance.

BRZEZINKSI: But what is the story here? What is the story we'll be looking back on? You know, the nightmare diva vice presidential candidate who went wild and bought clothes for herself and took advantage of a situation? Or is she someone who was taken advantage of by a campaign and a party?

THOMAS: Well, both. I think she was a diva. But the larger story, and I think this is what you are getting at, is that the campaign was a mess.

I think at the real root of this, John McCain is impossible to manage himself. He's never belonged to an organization that he didn't try to subvert. I mean, whether it was the U.S. Naval Academy or the U.S. Senate, he is a rebellious teenager in some ways. I know that sounds weird, but he is a rebel himself.

He's not an organization guy. And he subverts his own organizations, his own campaigns. It's kind of who he is. I think we learned that about him during the campaign. You know, he's a noble, heroic figure, but he's not an organization guy. He works against his own organization and it creates chaos.

BRZEZINKSI: Yes. Well, it's fascinating reporting, and I still don't think we have seen the last of her. I really don't.

THOMAS: Oh, I don't think so.

BRZEZINKSI: I don't underestimate that woman at all.

Evan Thomas, thank you very much.

THOMAS: Thank you.

BRZEZINKSI: I appreciate your insight. Great reporting by "Newsweek." And we'll talk to you again soon, I hope.

THOMAS: Thanks, Mika.

BRZEZINKSI: All right.

Up next, one in, one out. Democrats picked up another Senate seat today, but Joe Lieberman could be on his way to the dog house with Democratic leadership. And speaking of a dog house, why first dog Barney might be there tonight.

We're going to get you up to speed on everything else you need to know coming up next in the briefing room.

(COMMERCIAL BREAK)

BRZEZINKSI: We're back with a look at what's going on inside the briefing room.

Senators Joe Lieberman and Harry Reid met behind closed doors today to discuss Lieberman's role in the Senate following his vigorous campaigning against Barack Obama.

Here is what Senator Lieberman had to say immediately following the meeting.

(BEGIN VIDEO CLIP)

SEN. JOE LIEBERMAN (I), CONNECTICUT: We have just finished an historic election. As you know, I decided in that election that partisanship should take a back seat to doing what in this case I believed was best for our country.

I want to spend some time in the next few days thinking about what Senator Reid and I discussed and what my options are at this point. And he promised me that he would do the same.

(END VIDEO CLIP)

BRZEZINKSI: Huh. Interesting.

Senator Reid issued this statement after the meeting as well: "Today Senator Lieberman and I had the first of what I expect to be several conversations. No decisions have been made. While I understand that Senator Lieberman has voted with Democrats a majority of the time, his comments and actions have raised serious concerns among many in our caucus."

And the Democrats picked up another Senate seat today in Oregon. Jeff Merkley defeated Republican incumbent Gordon Smith, giving the Dems a 57-40 advantage over the Republicans.

And finally, in lighter news, woof woof, first dog Barney got a little fresh today, biting the finger of Reuters political reporter John Decker (ph). Decker was treated with antibiotics and sent back to work with a Band-Aid, but apparently he is supposed to head back to the White House doctor tomorrow for a tetanus shot.

Has Barney gotten all of his shots? Hmm.

The first lady's press secretary says she thinks this was Barney's way of letting us know he is "done with the paparazzi."

Obama's victory got bigger today. Up next, we're going deeper inside the exit polls to look at how he won.

And reading the warning signs for the future of the Republican Party.

(COMMERCIAL BREAK)

BRZEZINSKI: Tonight, a bluer America. North Carolina is added to Obama's column, the ninth state won by President Bush in 2004 that Obama flipped. New data tonight about how he did it and new questions as to whether the Democrats can hold on to that support once they start governing. And how the defeated GOP will get its groove back.

Plus, as if there wasn't enough trouble at home, a stark reminder of what America faces abroad in Mahmoud Ahmadinejad's letter to the president-elect. It is all happening on 1600 PENNSYLVANIA AVENUE right now.

Welcome back to 1600 PENNSYLVANIA AVENUE. Today, Obama's victory got a little bigger, with NBC News projecting Obama as the apparent winner in North Carolina. This is the 2008 map that will go down in history. Obama picking up nine states that voted for President Bush in 2004. In the west, Nevada, New Mexico, Colorado. In the Midwest, Indiana, Iowa and Ohio. In the southeast, Virginia, North Carolina and Florida.

Joining me now for more on how he did it, Ron Brownstein, political director for Atlantic Media, and author of "The Second Civil War, How Extreme Partisanship Has Paralyzed Washington and Polarized America," now in paperback. John Harwood is cNBC's Washington chief correspondent and a political writer for the "New York Times." And Gerald Seib, executive Washington editor of the "Wall Street Journal," joins us tonight. John and Gerry are the authors of "Pennsylvania Avenue, Profiles in Backroom Power." Gentlemen, great panel tonight. Thanks for joining me.

Ron, let's start with some of your reporting here, because we want to look at some of these results, what we learn about what they mean, about where the country is right now exactly. Warning signals; according to the exit poll-this is what you write-"McCain beat Obama among non-college whites, 58 percent to 40 percent. Obama's showing among those voters represented just a slight improvement over Kerry's meager 38 percent and only equaled the 40 percent that Al Gore attracted in 2000. But these working class whites represent a declining asset for the GOP. According to the exit poll, they cast jut 39 percent of the vote, down from 54 percent in 1988 and 46 percent as recently as 2000."

Ron, Obama also did well, very interesting to me, in suburban melting pots, as you write, affluent, well-educated and diverse counties.

RON BROWNSTEIN, ATLANTIC MEDIA: Right, the most ominous sign for the Republicans in this result, and the promising aspect of it for Barack Obama is that he did best in many cases among the groups that are growing in the electorate. I call his coalition a the coalition of ascendant, young people, minorities, upper middle class white professionals. If you look at Hispanics, he ran at two thirds. If you look at voters under 30, he ran at two thirds. He won 47 percent of whites with a college education or more, the best showing for a Democrat in recent times.

And all of these come together, Mika, as you suggest, in some of these white-collar suburbs, some that were predominantly white, like of Philadelphia, where he ran up enormous margins. He beat Bush by 200,000 in the suburban counties outside of Philadelphia. What is even more striking, perhaps, is the way he consolidated and expanded the Democratic advantage in these what I call-others have called suburban melting pots, counties that are both white collar and diverse, Fairfax County, Virginia, Mecklenberg, North Carolina, Wake North Carolina, Arrapaho (ph), outside Denver. Big margins in all these places, extending the Democratic gains in these upper middle class suburbs that they get in the Northeast and the West coast in the '90s, now spreading into the outer south and the Mountain West. A dangerous trend for Republicans.

BRZEZINSKI: Gerry Seib, talk a little bit, if you could, about what happened here. Here is what you write about the new political power bases:

"even more than changing America, the election showed how much America has been changing. For years, the country's economic power has been shifting to states such as Colorado, North Carolina, Virginia and Nevada. Now, as a result of election 2008, its political power is shifting in that direction as well. On Tuesday night, it was clear that Mr. Obama had won when he captured the traditional Midwestern industrial powerhouses of Pennsylvania and Ohio. But in reality, he could have lost either of them. It was nice to have the traditional battlegrounds, but not necessary."

What do you make of what is happening? Let's make it clear, this wasn't a landslide.

GERALD SEIB, "THE WALL STREET JOURNAL": No, it wasn't. He is going to probably win by five percentage points. It will be an electoral college landslide, but not a popular vote landslide in the way people thing of it. The thing is that he won in the places that campaign managers of the future will spend a lot more time worrying about. As I said, the power of the economy has moved out of those traditional battleground states. We all get excited about Ohio and Pennsylvania. I think people are going to get more excited about Virginia, about Colorado, about Arizona, about Nevada.

After the next census, there's going to be a little bit more of a shift of electoral votes in that direction. I think the battlegrounds will just look differently from now on. This campaign proved it. It wasn't just that Obama won there, it's that both campaigns knew they had to compete in these places hard, and as long and with as much money as they traditionally competed in the Ohios of the world.

BRZEZINSKI: John Harwood, clearly the campaign was tapped into how the country is changing. How will Washington change now?

JOHN HARWOOD, "THE NEW YORK TIMES": Well, Washington is going to change because we have an entirely new agenda by Barack Obama. I want to make one quick point, quickly, Mika, about some of the upscale whites that we were just talking about. That is one of the reasons why-you heard our colleague David Brooks write a column during the fall campaign calling Sarah Palin a fatal cancer on the Republican party. The reason is that David Brooks is speaking for some of those well-educated Republicans who think this cultural populism that Sarah Palin was representing, which in some ways was not the most sophisticated kind of politics, is not promising for their future. It adds to the burdens that Republicans have in trying to figure out where they are going to go from here.

But in terms of Washington's agenda, Barack Obama is trying to advance a universal agenda for the middle class; those refundable tax cuts for working class voters and middle class voters, and a health care agenda which goes across racial lines. It appeals to that racially diverse coalition that he put together, but it's not exclusively targeted to any one group.

BRZEZINSKI: Yes-

BROWNSTEIN: Mika, can I just jump in with one quick point?

BRZEZINSKI: Go ahead.

BROWNSTEIN: What's really striking about this, if you look at where Obama expanded the map, the two biggest concentrations from where it was in the '90s and the two Bush elections was he reached out into the outer south, Virginia, North Carolina, and from the other end, Florida. And then the Mountain West, where he captured Colorado, Nevada and New Mexico.

What is striking is that Democrats also made Congressional and Senate level gains in those states. They won Senate seats in Colorado and New Mexico. They won House seats in Colorado and New Mexico, Nevada and Arizona, as well as the Senate seats in Virginia and North Carolina and House seats in the Orlando area, where Obama Romped, another one of those suburban melting pots in Florida. So what you see is a consolidating at the Congressional and the presidential level, and an integrated challenge for Republicans, as John said, in crossing the cultural barrier in these somewhat more cosmopolitan areas.

Is that cultural populism-Sarah Palin drew a line in the sand, saying she is for the pro-America parts of the country. There are a lot of people who put themselves on the other side of that divide that she drew, and Republicans have to figure out how to recover there.

BRZEZINSKI: Ron, you bring me to my next point beautifully, because I'm curious. Gerry and John, chime in here. Gerry, you first. Sarah Palin, have we seen the last of her? I'm envisioning a special election in Alaska that actually makes her senator. I think she has been poorly handled and badly treated, but seems like an ambitious, tough woman. What are your thoughts.

SEIB: Yes. No, you have absolutely not seen the last of her. I think she is ambitious and she is tough. Those are the two right words to use. I think there is a great debate breaking out now about whether she should, in fact, try to seek that Senate seat, if that's what happens. Ted Stevens is ahead by a few thousand votes. If he gets that seat and the Senate kicks him out, essentially, the seat will be open. She could run in a special election in Alaska, and come to Washington.

The argument for doing that, if she is interested in a political future in the Republican party, and clearly she is, is it's hard to be a big figure in the party from many thousands of miles and many time zones away. Let's face it, Alaska is just that.

The reverse argument is, if you are running a state, you are in charge of something, if you're in Washington, you are one more junior senator. You know what, Barack Obama was just one more junior senator, and that worked out pretty well for him.

BRZEZINSKI: It sure did.

HARWOOD: Mika, I think that would be awfully dangerous for Sarah Palin to do that. If you take the bruising that she got in this campaign for lack of knowledge-and we have been talking about it some on this show tonight-and add to that the specter of hyper ambition, in which you are the governor of the state, you arrange for yourself to get appointed to seat. I think it would be-she would be better served politically by trying to have a successful governorship, maybe doing a little remedial geography and other things in the quiet of Alaska.

She has the star power that she needs. She demonstrated that on the trail. And I think she would have plenty of time to get back on the national scene, without taking that step, which would be awfully fast.

BRZEZINSKI: I have to tell you, at some point though, if you have been beaten down enough-and it seems like she has been beaten up a little, maybe of her own responsibility-I'm not sure though. I've got to let this story play out. Ron Brownstein, final thoughts. Do you think we've seen the last of Sarah Palin?

BROWNSTEIN: Well, 60 percent of voters in the exit poll said she was not qualified to be president. I don't think we have seen the last of Sarah Palin. I think her future is a component of a larger debate among Republicans about they recover. The dominant voices that are left after this pasting are conservatives who will want the party to be more sharply drawn, more conservative, and she will be a leader in that.

The problem is that there are very few people left in the counsels of Republican party, certainly in the caucus in the House and the Senate, who represent those places that we are talking about, where they are in retreat, these kind of socially moderate suburbs on the east and west coast, now spreading into the outer south and the mountain west. Ultimately, there is no path back to Republicans without restoring competitiveness in those areas. I don't think she is the voice that has the ear for those kinds of voters.

HARWOOD: Mika, I'll tell you who might be able to be that voice, Mitt Romney. I think he has woken up right now as the early line front-runner for the Republican nomination in the next election.

BROWNSTEIN: Next election?

SEIB: Bobby Jindal from Louisiana is in a good place as well. I agree with John on Mitt Romney. I really do think he is the logical leader of the party right now. We'll see how far that takes him and how long that lasts.

BRZEZINSKI: Well, we have at least four years, maybe two.

BROWNSTEIN: John, go home and wash out your mouth with soap. The next election?

BRZEZINSKI: I'll tell you this, though, my gut is some new stars will emerge. We'll see some of these same names. But I think the Republican party will have a rebirth and we'll see some old ideas and some new stars coming back much stronger than they've ever been before. Gentlemen, thank you very much. Great conversation. Hope you come back.

Up next, what the president of Iran demanded in a letter to the new president-elect. How will the Obama administration handle Iran and the other foreign policy challenges America faces? I'll talk to expert Richard Haass right after this.

(COMMERCIAL BREAK)

BRZEZINSKI: Welcome back. The president-elect will take office at a time of unprecedented foreign policy challenges: two intractable wars abroad, the growing threat of a nuclear Iran, escalating tension with Russia, an international economic crisis. Barack Obama was reminded of this daunting agenda today by a letter of congratulations from Iranian President Mahmoud Ahmadinejad.

Joining us to talk about what lies ahead for an Obama administration, the president of the Council on Foreign Relations, Richard Haass. Richard, thanks for joining me this evening.

RICHARD HAASS, COUNCIL ON FOREIGN RELATIONS: Thanks for having me, Mika.

BRZEZINSKI: It's great to have you. You wrote this incredible article for "Newsweek" recently, to whoever the next president would be. It is now going to be President Obama when he is inaugurated. You say this, among many other things: "America does not have the ability to transform the world. Nor do we have the luxury. We need to focus more on what countries do than on what they are. Bush was right when he called for a humble foreign policy. You should practice what he preached."

I guess, first of all, was that not practiced, is it fair to say? And what exactly does Barack Obama need to do as president to move forward? Because we are looking at a country that's going to, our country, depend on economic co-dependence around the world, as well as trying to revive its foreign policy reputation. Correct?

HAASS: Sure. The Bush administration wasn't humble in two ways. It wasn't humble in what it tried to do. When you set out to transform the Middle East, that's many things. Humble is not among them.

Secondly, Mika, it wasn't humble in any way in how it went about it.

The United States was quite unilateral at times. It was quite insistent. Basically, you are either with us or against us. So there is very little about the Bush administration that was humble, despite what at that point President-Elect Bush said eight years ago.

For the Obama administration, there is a case to be humble in part because of realities. There is very little in the world the United States can accomplish on its own. But also, as you said in your own setup, he has two wars. We've got an economic crisis the likes we haven't seen for decades. So it's that combination of challenges and constraints that ought to sober up not just President-Elect Obama but really any American people. This is going to be a tough four years.

BRZEZINSKI: So, Richard, you listed-and that is not even all the crises that we face and all of the issues globally that we face, and it involves the economy, the global economic crisis, as well as foreign policy. How do you prioritize this as president? Where would you even address first?

HAASS: I think it is a great question. First is the economy, to address it domestically as well as internationally. That is the foundation for so much else. In terms of particular crises, I would say, interestingly enough not Iraq. That is not going to dominate going forward the way it has. But instead Iran, to make sure or try to make sure they don't proceed continuing to advance down the path of getting a nuclear capability. Also, obviously, Afghanistan and Pakistan.

Those are the particular challenges that face the new president. Beyond that, it's more the global issues. They may not seem as urgent, but in the long run they might be important. Building a real relationship with China, doing something about international economic architecture, doing more to stop the spread of nuclear weapons; that is the sort of stuff that will ultimately define, give the character of the 21st century. So that's what Barack Obama has to make sure he doesn't lose attention on, while he focuses on the stuff that is jamming his in box.

BRZEZINSKI: What may not be in the national consciousness when you think about, and when Americans think about foreign policy-I think they do think about Iran. I think do they think about Iraq, maybe even Pakistan, but not so much Afghanistan. My father has expressed concern about the potentials there and how things could unfold. Why Afghanistan, why is that a priority?

HAASS: Afghanistan is a priority because it was the place that essentially hatched or launched 9/11. You have to think of Afghanistan and Pakistan as increasingly the same place, because people are going across that border with impunity. That means, now, you've got a place that is the home to the world's leading terrorists. You've got a Pakistan that has several dozen nuclear weapons. We don't want to lose a place and turn it into a terrorist sanctuary again. So, for all those reasons, it has taken on tremendous importance.

BRZEZINSKI: And the team that he builds in the coming weeks will be grappling with these, an effective team, a bipartisan team. Are there-I guess, is there a makeup that you see that would be more important, a team of rivals, perhaps, for this president?

HAASS: I think you have the operative word that is so important, Mika, which is team. You don't have the luxury of choosing a secretary of state and then a secretary of defense and then a national security adviser in isolation. You have to think, what do you bring to the job? What does your vice president bring to the job. And then, what is it you then need? So you really have to make your appointments, if you will, as a whole, rather than in the individual parts, to make sure that you have various points of view represented, and to also make sure that you've got people who can actually work together.

BRZEZINSKI: That's so true. Richard Haass, I know you are on the run to an event. I thank you so much for helping us this evening. Richard Haass, the president of the Council on Foreign Relations. Thank you.

HAASS: Thank you, Mika.

BRZEZINSKI: Up next, how can the GOP get its groove back. Republican voters are split about who should lead the party, Mitt Romney, Sarah Palin? We will talk about that with a top House Republican when 1600 PENNSYLVANIA AVENUE returns.

(COMMERCIAL BREAK)

BRZEZINSKI: Welcome back. The Republican party has certainly found itself some pretty dire straits. It has lost the White House, several Congressional seats and holds fewer than half of this nation's governorships. It faces an electorate with little faith in its ability to solve our country's biggest problems, and has yet to coalesce around its leadership. So how can and should it regroup?

Joining me now with her thoughts on how to put the grand back in Grand Old Party is Republican Congresswoman from Tennessee Marsha Blackburn. Thank you very much, Congresswoman, for joining me.

REP. MARSHA BLACKBURN ®, TENNESSEE: Good to be with you, Mika.

Thank you.

BRZEZINSKI: It's really good to have you. I think there is a lot of opportunity here for the Republicans. Let me get your thoughts here in black and white. "Conservatives and Republicans must admit their focus, message and methods have erred. We grew content and reliant with Ronald Reagan's words, yet failed to exercise the energy required to preserve the freedom his revolution earned from one generation to the next. Committed Republican leaders must reassert the relevance of our party to a generation of voters born after 1988. Rather than focus on branding our cause, let us simply pursue it. In that pursuit, we will rebuild trust and regain purpose."

If I could add to that, because sometimes a little time-out doesn't hurt, perhaps a kind of a sway back ultimately to true conservatism? Do you see that happening?

BLACKBURN: You know, one of the things I think the American people are hungry for is for us to articulate who we are and what we are about, and to do that clearly. And the quote that you just read from the article I posted on Real Clear Politics today, I think what people want to see is action. They want us to pursue being the party of Lincoln, where we talk about self-reliance, where we talk about national unity and freedom.

Or Ronald Reagan; when we talk about lower taxes, less regulation, individual freedom, strong defense, and then bring that in to how it addresses the problems before us today. Can we do that absolutely. Has our nation been strengthened by the two-party process? Yes, indeed, it has. Has freedom been strengthened by that? Absolutely, it has.

Mika, that is what people repeatedly have said to us as I've been on the campaign trail for Senator McCain. Let the left lay out its stance on an issue. Let the right lay out their stance. And then we want you to define the problem, say this is how we are going to take action, and then solve the problem. The American people are hungry for that type of leadership.

BRZEZINSKI: Representative Blackburn, I wonder who you see at this point-and anything can happen in a couple years' time. Who are the stars out there? Who do you see leading? Is it Mitt Romney? Is it Mike Huckabee? Is it Sarah Palin, perhaps? Who do you galvanizing the party and getting the country around the Republican agenda again?

BLACKBURN: You know, the nice thing is the Republican party has a deep bench. Just as with Sarah Palin being pulled from Alaska to come in on the VP ticket, there are lots of Republicans across the country that can energize bases, and energize individuals in their area of the country. We're going to see that. It may be a Fred Thompson. It may be Senator McCain coming back and bringing some of the energy that was there from his campaign.

BRZEZINSKI: Interesting.

BLACKBURN: You're right, it could be Governor Palin. It could be Governor Pawlenty. It could be Governor Sanford.

BRZEZINSKI: I do not underestimate Sarah Palin, for sure. Representative Marsha Blackburn, thank you very much for joining me tonight.

BLACKBURN: Thank you very much for being-having me on. Bye-bye.

BRZEZINSKI: That does it for 1600 PENNSYLVANIA AVENUE tonight. I'm Mika Brzezinski, in for David. I'll be back tomorrow night, plus early tomorrow morning on "MORNING JOE." Have a great evening. "HARDBALL" now.

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

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