The following is a transcribed excerpt from 'FOX News Sunday,' September 5, 2004:

CHRIS WALLACE, FOX NEWS: Now that the conventions are over, we're in the final sprint to the November elections. Here to discuss where the campaigns go from here are Matthew Dowd, chief strategist for the Bush-Cheney campaign, and Tad Devine, senior adviser to the Kerry-Edwards campaign.

Gentlemen, thanks for coming in today.

DEVINE: Glad to be here.

WALLACE: We've been talking about the new polls this morning which show the president with an 11-point lead, but I want to talk to the two of you about some of the internal numbers in those polls.

According to Newsweek, Mr. Bush now leads Kerry on leadership qualities 65 to 47. Shares their values, the president now leads 54 to 42, and that used to be an area of strength for Kerry. On issues, voters think Mr. Bush would do a better job in Iraq, 55 to 37. Even on handling the economy, which used to be a Kerry strength, voters now prefer the president 49 to 43.

Tad Devine, what has happened the last few weeks?

DEVINE: Well, the president's got a bounce out of his convention, Chris. I don't think that's a surprise. That's what happened. Incumbent presidents typically get a bounce eight points or more. Incumbent presidents typically reach their high point in terms of horse race in the general election in the aftermath of their convention.

So I expect this race will, you know, soon return to where it's been for a long time: a tight horse race, which will be decided by swing voters, who right now are heavily disposed against the president.

WALLACE: Matthew Dowd, why do you think there's been such a change in the month of August, really, since the Democratic Convention?

DOWD: It started in the aftermath of the Democratic Convention, the Kerry campaign got a smaller and less-lasting bounce than any other candidate in a long time. And I think what happened was, since they didn't talk about his record in the Senate and what he would do on public policy and his vision, I think voters were left wanting.

And then they came into our convention, which, speakers talked about our record, talked about contrasts and the choice that was going to be made, and then talked about what we wanted to do both domestically and in the war on terror.

A combination of that, which has never happened in a Newsweek poll, was that the incumbent had a larger bounce than the challenger. And that has never happened in a Newsweek poll ever in the history of this country.

WALLACE: Tad, we've got to talk about the Swift Boat controversy, because it seems to have been the dominant -- really, the only big news event in the month of August.

How much damage do you think that did to John Kerry?

And, looking back, and you're a veteran of Massachusetts politics, Vietnam has been an issue in almost every campaign that John Kerry has run. Why didn't he handle it faster and better?

DEVINE: Well, Chris, I think when you're hit like that with lies and distortions, you know, you have to make a tough decision. If you decide that you're going to elevate this to the national level, you're going to bring tremendous attention.

Obviously, it had attention beforehand. I know on Fox it got an awful lot of attention, and other networks it got attention, as well, on cable. Once we decided to engage, it was going to bring it on the large stage.

We wanted to make sure that people knew two things before we did that: One, that these charges were false, they were a pack of lies. Two, that there was a web of connections between the Bush campaign and the people making these charges. We did that. I think we got it out in a coordinated way.

But it's true, you know, our message couldn't get through the way we wanted to in August. Another reason for that is we decided -- and this was another choice strategically -- not to have our campaign pay media in the month of August.

We're back now with our paid media. We're going to be able talk about issues like jobs and health care and the fact that John Kerry wants to take this nation in a new direction. And I think that is a very powerful message if we're able to deliver it. And I think he's going to win the election because he's right on the issues and he has a very powerful message.

WALLACE: You know, let's look at history. I know both of are going to say, well, the race is going to tighten up, we've got two months to go, all of this is going to go on.

But if you look back historically, Matthew, how many times since 1948 has a person who has been behind on Labor Day come back to win an election?

DOWD: It's very hard to think of many. There's never been a challenger that has come back after being down double digits after the convention, after their incumbent's convention. That's never happened.

I do think the race will tighten up. But I do also think there's been a shift in this race to now it leans in our direction, as opposed to the equilibrium of this race was tied.

And I think the result of that was because voters tuned into both conventions. They were left wanting at the Democratic Convention, and they heard a lot of substance and a record and a vision at our convention. And I think that's the difference.

Now, will this race begin to turn back to much closer? Yes, it will. By the time we get to debates, this race will be much closer. But I do think there's been a fundamental shift.

It's going to be hard. If they're going to have to defy history in order to win, is it possible? Yes. But I think it's much more difficult now.

DEVINE: Chris, I think what they heard at the Republican Convention -- we've actually documented it, 143 lies and distortions, OK? And the problem with lying to people is that the truth catches up to you. And I think that's what's going to happen here.

I mean, for example, the president, on Thursday night in his acceptance speech, said we owe a moral obligation to our seniors. And the next day his administration leveled the largest Medicare premium increase in our nation's history.

I mean, and that's the truth of this election, that this administration has failed the American people on jobs, on health care, on energy independence. And that truth is catching up to the president.

WALLACE: I want to talk to you about domestic policy, but let me just go back to this history of the polls, because we did some research of the Gallup poll since 1948, and frankly it surprised us. Take a look, if you will.

In 1960, Kennedy trailed Nixon by one point in the first September poll of 1960 and went on to win. In 1980, Reagan was tied with Carter and went on to win. In 2000, Bush was already up one by September. Now, there were some polls in which, in the course of September, he was behind, but of course he went on to win. And, contrary to what we thought, Truman was already ahead of Dewey by eight points in the first September Gallup poll in 1948.

I guess the point of all this, Tad, is, no -- neither incumbent or challenger -- no one has ever come from as far back as John Kerry is now.

DEVINE: Chris, and no one has ever had a convention as late as the president. Obviously, this timetable is pushed back a little bit.

And I'm very confident that this race is going to be won by John Kerry, because the fundamentals of the race, the fact that this nation -- most people believe we're going in the wrong track. There will be a little bounce for that in the president, but I think it's going to be where it's been for months.

The fact that most people don't think the president's done a good job. The fact that the economic reality of America is that middle- class families are feeling squeezed, that we found out a couple of weeks ago from the Census Bureau, a million more Americans, now 45 million Americans without health insurance, a million more Americans last year thrown into poverty.

These are the consequences of the policies of George Bush and his administration. And his platform for the future is simply the failed promises of four years ago.

So I think this debate will be very good for us, and I believe John Kerry will prevail.

WALLACE: All right. Matthew Dowd, I'm going to give you a chance to respond, but first let's look at some ads, clips of ads that both of you have started running this weekend. Let's take a look at them.

(BEGIN VIDEO CLIP)

ANNOUNCER: Four years ago, George Bush came to Cleveland promising for a family without health insurance we must help. Four years later, 5 million more people without health insurance.

BUSH: During the next four years, we'll spread ownership and opportunity. We're going to make our economy more job-friendly to keep American jobs here in America.

(END VIDEO CLIP)

WALLACE: Matthew Dowd, why domestic issues at this point, and not continuing to hit national security?

DOWD: I think there's two big issues involved in this country today, which is national security and the war on terror, and domestic policy. And we thought it appropriate, coming out of our convention, every single ad we're running today is positive, talking about the president's agenda, the president's plan, what he wants to do.

And I think that's the big difference today. They're still running attack ads. They ran attack ads throughout the entire month of August, $48 million. They outspent us in August, the DNC and the other folks.

I think the question today is, if they think the economy is so bad, and the American public hates the economy so much, why do the public trust the president more on the economy than they do John Kerry? Why is our unemployment rate the exact same as it was for Bill Clinton in 1996? Why is it that we've had more homeownership in this country than ever before?

I think the public knows that this is a growing economy. It's not where it needs to be. We want to continue to do it more.

But the question is, what's the alternative? Is the alternative tax increases? Will that solve the problem? Will that provide people jobs? Will that provide people more homes? Or to continue the president's policies and do what he wants to do?

DEVINE: Chris...

WALLACE: You get a chance to answer the question.

DEVINE: Yes, the alternative is whether or not we want to go in a new direction or continue the failed policies of George Bush.

Today this country is spending $200 billion in Iraq. And that's why we can't begin to address the domestic agenda that the president puts forth in his ads. Until we stop spending $200 billion there of taxpayers' money, we won't be able to address the problems here at home.

WALLACE: Gentlemen, we're going to have to leave it there. To be continued. Thank you both very much.

DEVINE: Thank you.

DOWD: Glad to be here.

WALLACE: Next up, stories you won't find on any other Sunday show, and has international terrorism taken a deadly new turn? We'll ask our panel: Brit Hume, Mara Liasson, Bill Kristol and Juan Williams. Stay tuned.