updated 11/12/2008 3:48:20 PM ET 2008-11-12T20:48:20

Guest: Robert Reich, Lois Romano, Michael Smerconish, Ron Christie, Ron Brownstein, Eugene Robinson

CHRIS MATTHEWS, HOST: Tonight: Even in bad times, happiness is a new president. Let's play HARDBALL.Good evening. I'm Chris Matthews. Welcome to HARDBALL on this Veterans Day. Leading off tonight, great expectations. With the economy in deep and troubled waters, millions of Americans have still great expectations for this new president. A new "USA Today"/Gallup poll out today shows that roughly two thirds of the Americans believe the country will be better off in four years, a number that far exceeds the level of optimism that greeted either President Bush or President Clinton. Will reality match the hope we have? And can President-elect Obama afford to wait for 70 days before his inauguration to get things started? Also, Sarah Palin on the loose. Sarah Palin's opening up to the media in a big way, giving two major TV interviews. Here she is last night, saying her religion-God-will be play a key role in helping her decide whether to run for president in 2012.

(BEGIN VIDEO CLIP)

GOV. SARAH PALIN (R-AK), FMR VICE PRESIDENTIAL CND: God-if there is an open door for me somewhere-this is what I always pray. I'm, like, Don't let me miss the open door. Show me where the open door is. And even if it's cracked open a little bit, maybe I'll plow right on through that, and maybe prematurely plow through it, but don't let me miss an open door.

(END VIDEO CLIP)

MATTHEWS: What? We'll have a lot more on Sarah Palin and what that's all about, including her interview with Matt Lauer. Is Sarah Palin the future of the Republican Party? Many conservatives love the idea of, at least, of that. They say the party failed because it betrayed its conservative values. Others insist she and her supporters are exactly what's wrong with the GOP, that the party needs to attract moderates. The battle for the soul of the Republican Party a little later. Also: The Democrats' hopes for 60 seats in the U.S. Senate are not dead as I speak tonight. We'll update you on three Senate races still to be decided, including that Al Franken race out in Minnesota. They're still up in the air and they're recounting. And in a couple other races, it could well go the other way. That's in the "Politics Fix" tonight. And the late-night comedians are having some fun with yesterday's meeting between the incoming and outgoing presidents at the White House.

(BEGIN VIDEO CLIP)

DAVID LETTERMAN, "LATE SHOW WITH DAVID LETTERMAN": There was confusion a little at the meeting there at the White House. When he was told-President Bush was told that Obama was coming, he said, Oh, you mean we caught him? So he doesn't quite know.

(END VIDEO CLIP)

MATTHEWS: More of that in the HARDBALL "Sideshow" tonight. But first: Barack Obama will inherit an economy in crisis. With us now, one of President-elect Obama's top economic advisers, former labor secretary Robert Reich. Mr. Secretary, it's an honor to have you on in your new garb as a man of the future, someone of the new breed, the arrivals, the new kids on the block, if I will say so-dare to say. Let me give you some numbers now that should breathe hope into every American. This is the hope that's being expressed in these Gallup poll numbers just coming out today. These are brand-new numbers. Sixty-eight percent have a favorable view of the new president. Sixty-five percent think the country will be better off in four years than it is now. How do you put those two numbers together, optimism and likability? Is it enough to get us out of this hole we're seemingly falling into?

ROBERT REICH, OBAMA ECONOMIC ADVISER: Well, Chris, the management of expectations is going to be one of the big challenges for our next president because you know as well as I do, it's very hard to get things done in Washington, even if you have a strong mandate, even if a lot of people want you to succeed, there's separation of powers. There are interest groups. I mean, the public has got to be fully behind this man. The public's got to take some responsibility in terms of mobilizing and being energized and pushing Congress. And even so, it's going to be hard to turn around something that actually eight years took to almost destroy.

MATTHEWS: Well, we have a need for demand. And you're a Keynesian, I think. I'm a Keynesian. I believe that what gets done in terms of economic action is spending. Somebody's got to spend, the consumer, the investor or the government. Somebody has to put money down. If they have to borrow it, they have to borrow it, but they've got to spend. They can't worrywart us into success. Warren Buffett said a couple weeks ago at a conference I was moderating out in California that the only person right now capable of investing, of really over leveraging the money they can borrow, is the federal government. They've got to be the ones to put people to work. Will that get done in the near future?

REICH: Well, Warren Buffett is exactly right. Over the next 10 weeks, though, Chris, George W. Bush is still president. It's going to be very hard to have a stimulus package that is up to what needs to be done because I don't think Bush is going to allow it. I think Bush will be vetoing it, our current president. So the likely outcome, it seems to me, is that Barack Obama's going to have his own-going to have to have his own stimulus package come after January 20. And that's going to have to be big enough. You're absolutely right. Consumers can't do it alone. Investment can't do it alone. That leaves government to sort of get the economy moving again in a very Keynesian kind of major, major way.

MATTHEWS: Well, is he Hoover 2 or Bush 43? I mean, do we have a President Hoover on our hands who's too stiff in his views to know that we need to get money spending?

REICH: Well, I'm not going to comment. You can make the commentary about our current president, if you want to. I'm just going to say that, look, if you've got an economy that has all this underutilized capacity, you've got-now it looks like not only almost 6.5 percent unemployment, but if you look at all the people who are underutilized, who are working part-time and would rather be working full-time, who are too discouraged even to look for work, you've got 12 percent, 13 percent of our workforce. And next year could be much worse. That means you've got to have major spending. And I'll tell you something, Chris. I don't think-and this is my view, it's not Obama's view or anybody else's view, it's my view. I don't think that all the bail-outs of Wall Street are the kind of spending that are going to get a lot of people...

MATTHEWS: I'm with you. By the way...

REICH: ... you know, out to work.

MATTHEWS: ... writing hot checks to Wall Street doesn't make much sense. That's all transfer of payments anyway. I'm talking about actual spending-road projects, bridge projects...

REICH: (INAUDIBLE) absolutely. Absolutely.

MATTHEWS: ... putting people to work, doing things physically that builds things.

REICH: And the good thing about those kinds of infrastructure projects, roads and bridges and levees and rapid transit and everything else, is it not only gives people work, but it also builds the economy for the future because our infrastructure...

MATTHEWS: I agree with you.

REICH: ... is crumbling. We have...

MATTHEWS: OK...

(CROSSTALK)

MATTHEWS: Let's talk about the economy of the past, which unfortunately, in many cases, involves decisions being made in Detroit and elsewhere by the U.S. auto industry. The industry has not kept up. It has not kept up with the green revolution. It has not kept up with the marketing potential of the American consumer, what people want to buy. Cars are not being bought because they're too fuel-inefficient, they're too expensive to drive. People can't spend their whole paychecks buying gas. Now the question, should we bail out an auto industry that has refused to catch up with the times? They can't keep up with American-produced cars built by Japanese companies here in this country.

REICH: Well, again, this is my view. You've got 2.5 to 4 million people who are directly dependent for their paychecks on what happens in Detroit, or indirectly. They're parts suppliers. So you can't just let it fall. I mean, it's very, very different. If you're talking about a financial company that has a lot of employees, that's one thing. But if you're talking about Detroit and Michigan and the entire industrial Midwest and 3.5 million people, that's something else entirely. Now, the question, though, is, what kind of conditions do you put on that bail-out? Remember, Chris, we had a Chrysler bail-out in the early 1980s, and there were some conditions put on that. Everybody-creditors and shareholders, other investors, executives, the UAW-everybody had to sacrifice something, but even so, Chrysler shed during the course of that bail-out about a third of its workers. Now, we want a bail-out-if there's going to be any kind of auto bail-out, we want to make sure that the automobile industry is poised for the future, that it is fuel-efficient, that it keeps most of its workers in place. But there is going to have to be sacrifice from all the stakeholders.

MATTHEWS: Well, name a hot American car you'd like to buy, that's fuel-efficient and smart to buy right now, a car you'd like to drive. Name one.

REICH: OK. Let me think for a second. I-I like-I like Fords. But I have to confess something to you now. You know, in the confines of this conversation, not to go beyond, I have a Mini-Cooper.

MATTHEWS: OK. But is the Ford (SIC) Volt...

REICH: And it's very-it's very...

MATTHEWS: ... going to make it up the hill?

REICH: It's very fuel-efficient...

MATTHEWS: Is the Ford going to make it up the hill...

REICH: It's very fuel-efficient...

MATTHEWS: ... with the new car?

REICH: ... and it fits only me. I mean, I'm the only one...

(CROSSTALK)

MATTHEWS: GM Volt, I mean. Is the GM Volt going to make it? I got my automakers mixed up there. Big mistake. I'll pay for that one.

REICH: Chris, I think GM and the automakers are in very, very dire straits right now. I've looked at the-you know, and heard about their most recent quarterly losses. They're very, very large.

MATTHEWS: Yes.

REICH: At any point now-at any point-particularly with GM, at any point, creditors could pull the string and basically force it into a kind of bankruptcy reorganization. Now, bankruptcy reorganization is not the end of the world because you can still keep on going through bankruptcy reorganization, but you're going to lose a lot of people.

MATTHEWS: OK.

REICH: You're going to lose a lot of employment.

MATTHEWS: OK.

REICH: You're going to have a lot of negative consequences.

MATTHEWS: Well, yes or no, Robert Reich. You're a part of the new team. Do you think that Barack Obama-I don't know if you can speak out of school, but is he going to support a bail-out of the big three?

REICH: Well, I can just-I'm not going to speak out of school, obviously, but he is leaning in that direction. I mean, he understands that something quite serious needs to be done. In his discussions with President Bush yesterday, a lot of that discussion centered, apparently, on whether President Bush...

MATTHEWS: OK.

REICH: ... was going to allow some of that $700 billion, that big Wall Street bail-out, to be used for Main Street, as well.

MATTHEWS: Well, I guess the big problem is marketing. And we believe in America that what's good for America-good for GM is good for America. The question is, is what GM's doing good for America? Can they sell cars people want to buy and get a decent mileage out of? You know, it's about tonnage, too. A lot of these cars are too heavy. Look, it's a problem. We've got to fix it. And maybe the crunch now will force the auto industry to get its head around the fact...

REICH: Yes, I think-Chris, I think...

MATTHEWS: ... that things are changing and they got to change.

REICH: I think you're absolutely right. I mean, every crisis is an opportunity for something new. GM and the other automakers in the United States-U.S. automakers, not the Japanese automakers in the United States the U.S. automakers have been producing these big SUVs and these trucks...

MATTHEWS: OK.

REICH: ... things that are not fuel-efficient. The business model doesn't work. Young people are not buying American cars any longer. They've got to change and they've got to change radically.

MATTHEWS: Well, let's keep the 3 million people working that are working in the auto industry. Thank you very much, Robert Reich.

REICH: Thanks, Chris.

MATTHEWS: Coming up: Sarah Palin does a couple of high-profile interviews, hoping to set the record straight and gussy up her image. Well, the big question is, is she going to run in 2012? Is this already starting? Is she already dressed for success? We'll be back with HARDBALL.But first, here's President Bush on board the USS Intrepid commemorating today, November 11, Armistice Day, Veterans Day.

(BEGIN VIDEO CLIP)

GEORGE WALKER BUSH, PRESIDENT OF THE UNITED STATES: Let me send a clear message to all who have worn the uniform. Thank you for your courage. Thank you for your sacrifice. And thank you for standing up when your nation needed you most.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

PALIN: We are going to have a 2012. I don't know who's going to be a part of it. You know, I have-faith is a very big part of my life and putting my life in my creator's hands. This is what I always do. I'm, like, OK, God, if there is an open door for me somewhere-this is what I always pray-I'm, like, Don't let me miss the open door. And if there is an open door in '12 or four years later and if it's something that is going to be good for my family, for my state, for my nation, an opportunity for me, then I'll plow through that door.

(END VIDEO CLIP)

MATTHEWS: Welcome back to HARDBALL. That was, of course, Governor Sarah Palin addressing the prospects of her running for president four years from now. Palin's hitting back at her critics in interviews. And tomorrow, she's set to deliver a big speech at the Republican Governors Association meeting down in Miami. Well, is she rehabilitating her image? According to the polls, she took a hit during the campaign. Is she emerging as a new leader, a possible Republican candidate come the next time? NBC's Kelly O'Donnell covered the McCain campaign. She's in the know. And Lois Romano, my pal, is also always in the know, knows everything about these kinds of things, which is anything really deeply interesting personally. Let's go to Kelly. Kelly, what's up here? Is this commentary about theocracy and going to God for approval-we've been through that with President Bush, who said he didn't take advice from his father, he got it from another father. And we've been through this sort of Joan of Arc period. Are we going to get another piece of this, where God's leading candidates to run for president? I mean, that sort of keeps us out of the conversation, doesn't it?

KELLY O'DONNELL, NBC CORRESPONDENT: Well, she...

MATTHEWS: I mean, seriously. I mean, God is telling her to run...

O'DONNELL: Yes, I understand.

MATTHEWS: ... and she's saying it openly on a secular television show? This isn't the religious hour.

O'DONNELL: Well, she is a person of faith and she talks about that, but...

MATTHEWS: Well, who ain't?

O'DONNELL: ... having covered-well, but this is something she feels comfortable talking about.

MATTHEWS: Yes.

O'DONNELL: Many people are much more private about their faith...

MATTHEWS: Yes.

O'DONNELL: ... John McCain being one of them. So she did not talk about matters of church and faith very much on the campaign trail. This answer, I think, reflects how she views her life, that religious influences, her faith, her church, the sense of family might have a lot to do with what she does down the road. But I think it's important to remember these candidates are human beings...

MATTHEWS: Yes.

O'DONNELL: ... and when a big campaign ends, it ends very abruptly and that can be uncomfortable, especially for someone who's not been on the national stage. So she's talking a lot. She's doing a lot of interviews and she is trying to rehabilitate her image. And you know, that's part of what I think we expect to see from her. She doesn't have a lot of handlers. Remember that. And she feels very confident about her ability to connect with people, especially one on one. And in an interview with Greta Van Susteren, that clip that you showed, she felt very at ease with her. And I believe Greta interviewed her a couple of times along the way. So remember the setting she was in there, as well. And I think that Governor Palin is certainly trying to give people a new look at her after the campaign, getting a chance to stress all of the things that she believes in, but also trying to reconnect with the likability that she's been accustomed to being praised for...

MATTHEWS: Yes.

O'DONNELL: ... certainly at home in Alaska, and in the early part of this campaign. People really responded to her in that way. And she took a lot of hits and a lot of bruising toward the end.

MATTHEWS: Well, talking to Matt Lauer and talking to Greta Van Susteren is not keeping it to yourself, Lois. It's going national. She's running a campaign right now. And this campaign has nothing to do with 2008, it has to do with 2012. What do you think? And talking about God in a political setting is troubling to a lot of people. If you're talking about the big tent, this looks more like the church tent, not the big tent.

LOIS ROMANO, "WASHINGTON POST": Well, Chris, I do think she's playing to her base. She knows that's where her strength is. And the base is very comfortable talking about God and having God guide them through these kinds of things. So she's doing a little bit of that. But she's also not going away. I mean, she basically thinks she took a serious hit. I mean, she was called a diva and a wacko and a hillbilly. And obviously, some of the Republicans thought she would be gone and they could get away with this. But she's coming back and saying, No, I'm pretty she's-as we know, she's opportunistic. She's taken every opportunity that's come her way in her career.

MATTHEWS: Yes.

ROMANO: And so she's saying, I'm going to be back. Now, that being said, you know, stating, I'm going to be back, and doing all this elite media tour that she's doing is one thing, but she does have a lot of other work to do over the next four years if she wants to be a player. She has to do very well in her state, and she has to, you know, get a little more facile on the issues. You know, she can defend herself and say she didn't say this and she knew where Africa was, but the truth is, she did not show the American people a depth of knowledge on policy and issues.

MATTHEWS: Yes.

ROMANO: And she's going to need to come back and do that.

MATTHEWS: Well, let's go back to...

(CROSSTALK)

MATTHEWS: I'm sorry, Kelly. Let's take a look at her interview with our colleague, Matt Lauer, where she talked about wanting to deliver her own concession speech the night of the defeat. Are we going to look at that now or...

(END VIDEO CLIP)

PALIN: My concern has been the atrocities there in Darfur. And the relevance to me with that issue as we spoke about Africa and some of the countries there that were kind of-the people succumbing to the dictators and some corruption of some collapsed governments on the continent-the relevance was Alaska's investment in Darfur with some of our Permanent Fund dollars. I wanted to make sure that didn't happen anymore. Never, ever did I talk about, Well, gee, is a country or is it a continent, I just don't know about this issue. So I don't know how they took our one discussion on Africa and turned that into what they turned it into.

(END VIDEO CLIP)

MATTHEWS: What's the reporting available on that, Kelly O'Donnell? You were with the McCain campaign all these months. Is there any real reporting that you can share with us that said that she was unaware that Africa is a continent and not a country?

O'DONNELL: Well, I will tell you that I was told that by aides. I spent many, many months on the road with this campaign, know people close to the governor, close to Senator McCain. And I was told a lot of things over the couple of months that she was on the ticket. Many of them were not flattering things about her. But, in the end, many of these same aides who are describing these sorts of circumstances, confusion about geography, a lack of depth on policy, also give her credit for being smart and hardworking. It was interesting to hear the kind of feedback that was coming out of the campaign that, in the one sense, was quite critical, even harsh, but also, surprisingly, giving her a lot of chops for the things that she did well. What I was told is that they recognized that she had limitations on her policy knowledge. What they were surprised by was that, as a sitting governor, as a person with aspirations, that she had not done more homework herself...

MATTHEWS: Yes.

O'DONNELL: ... to be familiar with the Iraq war and some of the issues of the day. They knew that a governor, especially a governor who had a lot of different kinds of concerns on her plate every day...

MATTHEWS: Right.

O'DONNELL: ... wouldn't be an expert on these things. But there was surprise about the-the lack of curiosity prior to joining the ticket.

MATTHEWS: Yes.

(LAUGHTER)

O'DONNELL: That was something that...

MATTHEWS: What does this sound like? It sounds-Lois, it sounds exactly like our president, George W. Bush, no lack of native intelligence, but a lack of curiosity, a lack of curiosity about the most basic things that young people learn because they want to learn. And she apparently didn't want to learn about the globe, the map, where we are in the world, who we are. I mean, this is the evidence we're getting here from the reporting.

ROMANO: Well, I mean, she's done everything in her life through force of personality. And she's had enormous success doing that. And, so, I guess, when she was named, she just figured she could continue to do that. Now, we have to give her some credit. First of all, I want to say that probably half the governors in this country don't know a lot about some of the policy issues that are going on.

O'DONNELL: You're right about that. You're right.

ROMANO: And-and, secondly, you know, let's remember that McCain was in the tank when she was named.

MATTHEWS: Yes.

ROMANO: And he went up six points in the polls. So, she clearly makes the connection with people. But I think Kelly's totally right before this curiosity issue and being interested and interesting. And I think she's going to have to overcome that. She can't, you know, go-get any further-I don't think she can get any further on the national stage unless she does that.

MATTHEWS: Well, let's take a look at her admissions here.

(CROSSTALK)

O'DONNELL: ... what the advisers did not say...

MATTHEWS: Yes, I'm sorry. Go ahead, Kelly.

O'DONNELL: Just, the advisers did not say that she did not have the capacity to learn these things, but that she had not brought that knowledge to the table. So, they were willing to give her plenty of compliments for being willing to spend 10, 11 hours a day in these briefings with her foreign policy advisers to get ready for interviews and the debate and so forth. But, when candidates are on the national stage for any length of time, they already know a lot of these things. And that's what she didn't bring.

MATTHEWS: That's right. Well, let's take a look at what she did bring, which is ambition, which is probably the primary prerequisite for running for president, is to run for president. And she looks quite competent and has the capacity here. Here is a comment she made to Matt Lauer about her intention to give a concession speech before John McCain made his on election night.

(BEGIN VIDEO CLIP, "THE TODAY SHOW")

PALIN: Well, I had a speech that, yes, I was going to give that we had worked on for about a week. And the speech was...

MATT LAUER, CO-HOST, "THE TODAY SHOW": Had you cleared it with anyone? Had anyone said, it might be an opportunity for you to speak?

PALIN: Oh, certainly. The speech was written in-in cooperation and conjunction with a couple of the speechwriters in the campaign, and had written that as an introduction to this great American hero.

And, of course, we had two speeches in our back pocket.

LAUER: Right.

PALIN: One was a concession speech that would introduce him. And it would do what John McCain just can't seem to do for himself-bless his heart-because he's just not that kind of man, where I was going to brag him up. All I could think of was, well, even if it were unprecedented-and I haven't research to see if other V.P. candidates had done such an introduction of their presidential candidate.

LAUER: Right.

PALIN: But, you know, I thought, even if it was unprecedented, so what? You know, geez, let's do something a little bit out of the box there.

(END VIDEO CLIP)

MATTHEWS: Is that for real, Kelly, that personality display we just saw? Is it really a gee whiz personality there we're looking at, or is it someone who is brilliant at portraying that gee whiz personality?

O'DONNELL: Well, I think it's a little of both. And the account she just gave totally matches what advisers were telling me on Tuesday and Wednesday of last week...

MATTHEWS: Yes.

O'DONNELL: ... about having two speeches and what she wanted to do. They were a bit firm with her to say: No, you can't. This night belongs to John McCain. And, so, there was tension over that. Also, that tension really also swept up the emotion of the night, of losing, and losing big. That was a tough, tough night for them. The personality-in all of the times that I was around her, I did find her to have that engaging quality. And, as Lois pointed out, that has been such a tool of her success, incredible confidence, poise, an ability to connect one to one. She would work a rope line, which is greeting those people who come out to events, for such a long time, it could throw the schedule off, because she was good at it. People waited and wanted to see her. There was genuine excitement about her. So, whatever she has in terms of this "aw shucks" sort of quality, she has used it effectively. Is it part of her public faces that she maybe uses a bit more than she might otherwise? That's hard to know. But that was certainly the person that we would see and the person that she showed us. And she did often speak about John McCain in ways that he wouldn't talk about himself. So, I think her intent for that concession night was probably fairly genuine.

MATTHEWS: Yes.

O'DONNELL: They just didn't-they didn't want her on the stage doing anything more than smiling and waving.

MATTHEWS: Well...

(CROSSTALK)

ROMANO: Well, I'm not sure any vice president has ever spoken.

MATTHEWS: Right.

ROMANO: I was thinking back. And it's usually just not a forum for the vice president. So, I'm not sure how they got to the point where she shows up with a speech, because you would have thought that that would have been resolved, you know, a week before. And she's saying she was working with people. So, there's, like, a lot of stuff that is not jibing here, you know, including the stuff about the clothes. She now says she never stepped foot in her life in a Neiman's and a Saks. And they're saying she went with a credit card. So, I think this-if this woman keeps escalating on the national stage, I think you are going to see a lot more reporting on her to clarify some of these issues.

MATTHEWS: Yes. Well, she's winning already one battle. We're talking about her.

(LAUGHTER)

(CROSSTALK)

MATTHEWS: And I also remind myself every moment of my life we don't pick presidents. They pick themselves. And then we choose among those who pick themselves.

(LAUGHTER)

MATTHEWS: We don't call them out of the wilderness. They come out of the wilderness. And I think she has got that credential down.

(LAUGHTER)

MATTHEWS: She has the ambition. I would like to meet her. I think she's a very interesting character.

But I do believe there's certain information you ought to have to run for public office at any level.

Anyway, thank you, Kelly O'Donnell.

Thank you, Lois Romano.

ROMANO: Thanks, Chris.

MATTHEWS: Up next: when Barack met George. This is going to be funny now-a lot of jokes about what really happened behind those closed doors at the White House. We are going to hear from Letterman and Jay Leno, our buddy, all kinds of stuff about what happened behind closed doors, or may have happened, or we would like to think happened.

That's next in the "Sideshow."

By the way, I think we just had one.

You're watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS: Back to HARDBALL. Time for the "Sideshow."

By the way, we have got to get Cheney off that merry-go-round one of these days.

Anyway, with just 70 days to go in the Bush presidency, the late-night comics are showing no signs of letting up.

(BEGIN VIDEO CLIP, "THE TONIGHT SHOW WITH JAY LENO")

JAY LENO, HOST, "THE TONIGHT SHOW WITH JAY LENO": Today was another historic day. President Bush took president-elect Barack Obama on a tour of the White House. At one point, Barack opened a closet. Bush said, "Oh, don't open that." And a huge stack of unread intelligence memos fell out.

(LAUGHTER)

LENO: Yes.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP, "THE LATE SHOW WITH DAVID LETTERMAN")

DAVID LETTERMAN, HOST, "THE LATE SHOW WITH DAVID LETTERMAN": There was a little confusion at the meeting there at the White House. When-when he was told, President Bush, was told that Obama was coming, he said, "Oh, you mean we caught him?"

(LAUGHTER)

LETTERMAN: So, it was...

(END VIDEO CLIP)

MATTHEWS: By the way, John McCain gives his first post-election interview to NBC's Jay Leno tonight.

Next, it was just last week that Barack Obama laid out one of the more dogged issues of his transition, the selection of the first pooch.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D-IL), PRESIDENT-ELECT: We have-we have two criteria that have to be reconciled. One is that Malia is allergic, so it has to be hypoallergenic. There are a number of breeds that are hypoallergenic.

On the other hand, our preference would be to get a shelter dog, but, obviously, a lot of shelter dogs are mutts, like me.

(END VIDEO CLIP)

MATTHEWS: I think Governor Granholm, in the background, gets this guy's sense of humor.

Anyway, well, the word has gone forth, and the answer has come back. Peruvians yesterday sent a letter to the U.S. Embassy down there offering up this puppy, part of Peru's hairless breed, as a near-as an ideal hypoallergenic match for the Obama family. And, oh, yes, if the incoming first family does accept this dog, the Peruvians requested that its official name be Machu Picchu.

Try calling out the backdoor, "Here, Machu Picchu!"

Speaking of transition preparations, the hottest ticket in town is the Obama inaugural tickets, which are supposed to be handed out free from Congress. They're now going for more than tens of thousands of dollars on eBay and craigslist. Well, Washington stepped into the bidding wars yesterday.

It turns out Senator Dianne Feinstein of California is drafting a bill that would outlaw, criminalize the sale of tickets to Obama's swearing-in.

Time now for the "Big Number" tonight.

A lot of people don't know this Veterans Day is observed on November 11, kids, because it was on this day 90 years ago that the armistice ending World War I was signed. How many veterans from that war are still alive? Now, this will get to you-one -- 107-year-old Frank Woodruff Buckles of Charleston, West Virginia.

Tonight's "Big Number," just one, one U.S. veteran of World War I is still among us.

Sir, HARDBALL salutes you, and, by the way, seriously, not just you, sir, but everyone, man and woman, who have served this country, and especially, not just the veterans, but to those who are now standing duty, standing post right now in tedious and in sometimes very dangerous duties.

Up next: the battle for the heart and soul of the Republican Party. The election rendered Republicans little more than a regional party, by the way, in Appalachia and the South pretty much now, and party bitterly divided between staunch cultural conservatives and reformers who want to win in the suburbs.

So, which way does the party go to get back on track, to back to when it can win a national election? And is Sarah Palin now the life of the party? Maybe.

You're watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MARGARET BRENNAN, CNBC CORRESPONDENT: I'm Margaret Brennan with your CNBC "Market Wrap."

Stocks fell amid further signals that the economic slump may worsen. The Dow Jones industrial average fell 176 points, the S&P 500 down 20, and the Nasdaq lower by about 36 points.

Fannie Mae, Freddie Mac and some major banks unveiled a sweeping new effort to limit foreclosures. They announced a new loan modification program designed to cut monthly payments for struggling homeowners.

General Motors' shares, though, continued to fall, dropping to a 65-year low.

Meantime, House Speaker Nancy Pelosi said she will push for emergency legislation to help the struggling auto industry during a lame duck session of Congress next week. We are told that President Bush and president-elect Barack Obama discussed that issue when they met yesterday.

And oil prices continued to slide-crude oil falling $3.08, closing at $59.33 a barrel. That's the lowest level in 20 months.

That's it from CNBC, first in business worldwide-now back to Chris and HARDBALL.

MATTHEWS: Welcome back to HARDBALL.

Following the Democratic victories last week, the Republican Party will be regrouping and planning its return to power. But who will emerge as the leader of the party? And which Republican philosophy will prevail?

Joining me now is strategist and former aide to Vice President Cheney Ron Christie, and MSNBC-MSNBC radio talk show host Michael Smerconish.

Gentlemen, thank you both for joining us.

Let's take a look, by the way, at-David Brooks the other day in his column-actually, in today's "New York Times"-made the case that the Republican Party is split between those who are on the cultural right, the ideological purists, who want to take the party back to its pure roots of orthodoxy, no deficits, a tough foreign policy, et cetera, et cetera, very religious in its orientation, and those who say, no, it has got to be less cultural, less orthodox, and it's got to open to all kinds of views within the center-right coalition.

Let me ask you, Michael Smerconish, what's the right way to go to regain power?

MICHAEL SMERCONISH, RADIO TALK SHOW HOST: The right way to go is-is more big-tent focus and to lose the litmus tests.

I mean, the Democrats don't have any litmus tests. And they are exclusionary for us. What I agree with is Brooks' conclusion. In that final paragraph, he said, the Republicans probably will continue to veer toward a conservative doctrine, and will take it on the chin. And then they will moderate their views.

Well, I would rather get to the end sooner. Let's moderate now on those social issues.

MATTHEWS: Ron Christie, your view? Should it go right or go center?

RON CHRISTIE, FORMER ADVISER TO VICE PRESIDENT DICK CHENEY: Well, Chris, in order for us to get back to power, and looking forward to the future, I think we need to take a very honest look at where we are as a party and decide what is the best course for us to move forward.

I think there are certain core principles. Republicans have long stood low taxes and for a strong national defense. But I agree with what Michael had to say. We need more cultural diversity in the Republican Party. We need more people like Chris Shays, the moderate who just lost from Connecticut.

We need people who are pro-choice. We need people who are pro-life. We need people from my the Northeast, from my home state of California. We need to be as broad in coalition as possible, but still hold true to certain principles. Otherwise, we're going to get another spanking, like we saw the other week.

MATTHEWS: Well, it seems-do you disagree or not? I'm trying to figure you out.

And let me just talk to you about a map that-that stuns me. The only part of the United States where the Republicans did better in this election than they did before, back in 2004, is that sort of Appalachian part of the country, that moves back from sort of southwestern Pennsylvania, sort of, and then goes southwestern direction across the-through the mountains, through the Appalachians, down through the Ozarks. It ends up somewhere around Oklahoma.

That is the only part of the country that has gotten more conservative, or more Republican, in its electoral successes. What do you make of that, Ron Christie? If that's the party that's growing and the rest of the country is shrinking as a Republican base, what does that tell you?

CHRISTIE: I think what that tells me is that we're not getting our message out, and we're not taking our case to the American people.

MATTHEWS: Oh, you're getting a message out. You're winning in a certain part of the country. Why are you winning there is the question.

CHRISTIE: Hear me out, Chris. We're not getting the full message out of who we are as a party. I think the Republicans have been caricatured as being a white, southern religious party. We're more than that. But clearly we did not get our message out. As I said before, we have got to diversify. We've got to open our constituencies and say that if you're Republican and you hold true to certain principles, we want you to be part of our party. That's got to be more racial minorities. It's got to be more people from a wide variety of backgrounds. Otherwise, you'll see that blue map that you just put up there.

MATTHEWS: I think that's happy talk, Michael, because basically, the Republican party did succeed in this certain part of the country in getting its message across. It was anti-Barack Obama. That message went very well in southwestern Pennsylvania. Sarah Palin did very well in southwestern Pennsylvania, very well in West Virginia, Kentucky, Tennessee, Arkansas, Oklahoma, in that stretch of the map, through the mountains, through the more conservative part of the country culturally, the Republican party built strength. So they did get a message across.

The question tonight, I'll stick to it, is that the right message?

SMERCONISH: No, it's not the right message. Look, the right wing of the Republican party always viewed this as a referendum on Barack Obama. This is why I always believe that the Palin pick was a mistaken pick, because it was a pick designed to placate the base. The vote of the base was never in doubt. It's the middle. That's where John McCain lost this election. The reason that map shows growth in Appalachia is that Appalachia responded to what they were receiving in the waning days of the campaign. Chris, what they were getting was Bill Ayers, ACORN and socialism. That may have rung a bell in that part of the world, but it cost votes in suburbia.

It's that Rovian notion of banging the drum for the base by taking it out on same-sex relationships, or talking about abortion. That may bring folks out in that territory, but in the rest of the country it costs you. It's a net negative.

MATTHEWS: Ron?

CHRISTIE: Michael, I couldn't disagree with you more. I think Governor Palin's selection was the wisest choice Senator McCain could have done. There were a lot of conservatives around the country that questioned the senator's conservative credentials. She is a bona fide conservative. She's popular in very the state of Alaska. She clearly articulates her message to constituents. McCain thought it's best for me to bring in a maverick, someone who is not perceived as being part of the Washington establishment to be my running mate and to kick-start thing.

I'm not going to sit and say Rovian principles and what not. Republicans have long stood for lower taxes, a strong national defense and trying to keep the deficits low. In order for us to get back in power, we need to look to the future and look at attracting as many people to the party as possible. I'm not going to sit here and say, oh, we're only playing one message to one part of the country because that's not true.

MATTHEWS: What state did Sarah Palin win for John McCain? Ron, we're doing political analysis here, not right and wrong, political analysis. Which state of the 22 states that the ticket picked up, the Republican ticket won of the 50, which of those states would John McCain have lost without Palin, if he had pick a more moderate running mate? Which would he have lost? It seems he would have gained states.

CHRISTIE: Again, I think for example-

MATTHEWS: Name a state.

CHRISTIE: I'm going to put it this way.

MATTHEWS: I'm asking a question. Name a state she gave him.

CHRISTIE: Chris, I'm not going to give you that answer because I'm going to look at it from the perspective of Palin allowed us to be competitive in certain states where we would have lost otherwise.

MATTHEWS: Name one.

CHRISTIE: Or close to losing.

MATTHEWS: Name one.

CHRISTIE: Virginia. The Commonwealth of Virginia is a state that has traditionally been a Republican ticket. We were able to mobilize our base with her being on the ticket.

MATTHEWS: Who won Virginia?

CHRISTIE: Barack Obama won Virginia.

MATTHEWS: Who won North Carolina?

CHRISTIE: Chris, what I'm saying is that her presence on the ticket allowed the Republicans to be a lot more competitive. In my view, we didn't have the right person at the top of the ticket. Trying to blame it on Sarah Palin I think is a mistake.

MATTHEWS: Michael, you're hearing it there. There it is. He's nailed it. Ron has called it. The problem was you had a moderate at the top of the Republican ticket.

CHRISTIE: No, Chris, I'm saying that we didn't have a moderate. I'm saying we had the wrong candidate. We had a candidate who did not articulate a clear vision-

MATTHEWS: Who could have beaten Barack?

CHRISTIE: I think given where we were, if we had known the economy was going to be where it is today, if we would have had Mitt Romney at the head of the ticket, it would have been a far different result.

MATTHEWS: Mitt Romney would have beaten Barack Obama? Your thoughts on that, Michael. You know the suburbs. Would Mitt have won in the suburbs over Barack?

SMERCONISH: The Mitt Romney who had been a governor, not the Mitt Romney who had run for the president. This gets back to the fundamental issue of who do the Republicans need to be? Because it seems like those who succeed as moderates take a strong deviation toward the right. My friend Rudy did the same thing when he was running for president. Mitt Romney did that. And that may win you a primary, but in the end it makes you a loser in the election. How in the world can you take a look at Tom Ridge on paper against Sarah Palin and say, we're going to reject a guy who went to Harvard, lived in public housing, was in Congress, a two-term governor in a swing state. Instead, we're going to take an unknown from Alaska, because she placates the base? That's lunacy to me. I said it then. This is not me Monday morning quarter backing.

MATTHEWS: Let me ask Ron a final question. Sarah Palin tonight, in her interview with Greta Van Susteran last night-we're actually watching it tonight on HARDBALL, before you came on. She said she was waiting to get the OK from god. Now, I have nothing wrong with prayer. I pray all the time. But to talk about that in a secular environment, to talk about that in a country which is so broad in its different views of Jesus, in fact, is that a good political move to talk about god and whether you should run, getting the OK from him? Didn't we have enough of that in the last eight years, god leading our politics?

CHRISTIE: I didn't hear that particular clip. What I did hear was that there was an opening for her to get involved in the leadership of the party, that she was going to run through some sort of door or run through the process.

MATTHEWS: She said, if god gave her the OK, she would make a run for it. She would plow right through it.

CHRISTIE: Whether the almighty gives her the green light or whether that's a decision that she makes, Chris, I think she has a seat at the table, and I think she will be a strong part of the Republican future, regardless of whether she said something in an interview related to her faith in god or not.

MATTHEWS: No, Michael, what do you make of that? I'm not talking about faith. I'm talking using it politically and talking about it this way, as if that's a determinant. God's on our side kind of talk is very dangerous in the world, because a lot of our enemies talk like that. I just think it's a dangerous way to talk. Just a thought.

CHRISTIE: Chris, can I just say one last thing to that? Again, everyone jumps on Governor Palin, oh, my goodness, she mentions god in a decision. If you go back and look at some of the blunders that Joe Biden said during the campaign, no one ever criticized him. No one ever-

MATTHEWS: It's all we talked about. I didn't even know about it because-Joe Biden took more hits from the media than anybody for the last 30 years. He's been paying for-

(CROSS TALK)

CHRISTIE: Chris, not in this election cycle. Chris, you've nailed him a couple of times in your show with me. But in general, the media gave him a pass.

MATTHEWS: We nail everybody. Hey, Ron, we even nail you.

CHRISTIE: Every once in a while, Chris. You've got to keep me on my toes.

MATTHEWS: It's great to have you on. Ron Christie taking the conservative view and Michael Smerconish taking the suburban view. Up next, the politics fix. Today in Chicago, President Elect Barack Obama laid a wreath-this is good stuff. We should all be doing this-at the soldiers memorial outside of Soldier Field, the football field. He's accompanied by the Illinois Veterans Affairs Director, Tammy Duckworth, who lost her legs in combat over in Iraq.

(COMMERCIAL BREAK)

MATTHEWS: Welcome back to HARDBALL and the politics fix. I'm joined by two pros now, Ron Brownstein of the "National Journal" and Eugene Robinson of the "Washington Post." We thought the race was over, guys. It ain't over yet. There are three more seats to be decided in the US Senate race, and still the possibly of the Dems winning 60 seats and thereby being able to off-set a filibuster.

Let's take a look at Minnesota. Ron, you first. Look, we got 206 votes separating these two candidates. There's Al Franken against the incumbent, Norm Coleman. What's up, Ron?

RON BROWNSTEIN, "THE NATIONAL JOURNAL": Well, we are heading toward a recount there. Previous recounts have certainly-when you get up toward 1,000 or more than a 1,000 vote margin, it is hard to see how a recount can reverse it. But when you're talking about 206 votes, anything can happen. This race is still very much alive. It narrowed significantly this week from about 700 to about 200 votes. It's going to take a while, but it is certainly one that is within reach for Democrats, given the overall numbers we're looking at.

MATTHEWS: Any reason to believe that it will be reversed, that 206? Is there something in the number of provisional votes and the places they were cast that will suggest the likelihood or the plausibility of a reversal in that number and Al Franken winning?

BROWNSTEIN: I don't know the analysis of where the votes are coming from. When you look at sort of the overall trajectory of the state-this a state that Obama won comfortably, that Democrats won the Senate seat comfortably in 2006. It is certainly within reach for Al Franken, and a source of great frustration for the Republicans that they can't put this one to bed.

MATTHEWS: Gene, this question, of course. Al Franken is very well known in the country. He's a comedian on "Saturday Night Live" all those years. Any reason why you would think this would be reversed? Teddy White, years ago, when he wrote "The Making of The President," back in '60, said that Minnesota, unlike some other states, if they have a count, you can count on it. They're very organized, Scandinavians, perhaps, whatever ethnic analysis you want to do here. Very organized people, very lickity split. What do you think?

EUGENE ROBINSON, "THE WASHINGTON POST": I think if you had to put money down, you would bet money on it not being reversed. Two hundred votes is within reach. It could be reversed in a recount, but recounts usually go the way the initial tally went. In a state like Minnesota, I would bet a small amount of money that it doesn't get reversed. But you never know. They have to go through that process and they haven't done it yet. We'll have to wait and find out.

MATTHEWS: Let's go north to Alaska. Alaska is becoming a state of almost unknown values and quantities. We know so little about that state. That election up there is amazing. The guy got reelected after being convicted of several felonies. We have him up by about 3,000 votes right now, 90,000 ballots yet to be counted in Alaska. These were ballots cast in advance of the election, absentees. That's a lot of action, 90,000. Again, Ron Brownstein.

BROWNSTEIN: Waiting for the spring thaw? We haven't hit the winter freeze yet. Look, 3,000 votes is a substantial number, but 90,000 is an incredible number. So this certainly is wide open. The reverse of Minnesota, this is a source of frustration for the Democrats, who really can't imagine that they are in a position of difficulty with a candidate who was convicted of felony counts. But, again, no one, I think-

MATTHEWS: I can tell you, if Stevens wins, Palin may be on the trail of a Senate seat. We'll be right back to talk about Georgia and the whole question of whether the Senate race will be resolved. Will they get to 60? We'll be back in a minute. You're watching HARDBALL, only on MSNBC

(COMMERCIAL BREAK)

MATTHEWS: We're back with Ron Brownstein and Eugene Robinson for the politics fix. Let's finish this up now in Georgia. I'm getting word that through a number of sources that the Obama people are heading down, trying to help former State Senator Martin beat Saxby Chambliss down there in that runoff down there. Ron?

BROWNSTEIN: That's a tough one. He benefited from enormous black turnout for Obama in the election last week. It will be hard to replicate that in a special --

MATTHEWS: Weren't there 80,000 under-votes, people that voted for the presidential line, presumably African-Americans who could be encouraged to go back and vote in the runoff?

ROBINSON: I think that's what they're going to try to encourage that vote. The reason nobody got a majority is that there was a libertarian candidate. You can argue that both ways. On the one hand, the libertarian views might be closer to those of Saxby Chambliss than Jim Martin.

MATTHEWS: Do you know a lot of African-American libertarians? There are all kinds of socio-metric overlays in this country, but I'm not sure I've met that character yet.

BROWNSTEIN: Chris, quick point. The 60 number is a little bit illusionary in the sense that not every Democrat is going to vote with Obama on every filibuster and not every Republican will vote against it. Whether he's at 57, 58, 59, he is still going to have to build a coalition to get past the resistance.

MATTHEWS: I'm going to hear tonight from 10,000 African-American libertarians by nightfall. Anyway, thank you very much Ron Brownstein and Eugene Robinson. And by the way, more thanks to the veterans than we can give you. Thank you, ladies and gentlemen. Right now, it is time for "1600 PENNSYLVANIA AVENUE."

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

END

www.ascllc.net ) ALL RIGHTS RESERVED. No license is granted to the user of this material other than for research. User may not reproduce or redistribute the material except for user's personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon MSNBC and ASC LLC's copyright or other proprietary rights or interests in the material. This is not a legal transcript for purposes of litigation.>

Watch Hardball each weeknight at 5 & 7 p.m. ET

Discuss:

Discussion comments

,