This is a rush transcript from "Hannity & Colmes," July 23, 2007. This copy may not be in its final form and may be updated

ALAN COLMES, CO-HOST: The Democratic presidential candidates just finished their first YouTube debate. And here with reaction, the author of "Outrage" — bestseller — former Clinton adviser Dick Morris. By the way, you can view Dick's latest columns at DickMorris.com.

Bestseller, because it's fair and balanced. Anyway...

DICK MORRIS, POLITICAL STRATEGIST: Yes, it is, it hates both parties equally.

COLMES: ... let me ask you about this debate and this format. Let's just talk about the format for a second. Who got to choose the questions, if it's a cable network that chooses it, versus the people who voted for it on YouTube or the ones that got the most views on YouTube? Who gets to be the arbiter here?

MORRIS: I thought the format was really good, and I thought that CNN has at last solved its big problem, which is really boring anchors.

COLMES: That's very interesting. But, again, should it be the most viewed on YouTube versus CNN's saying...

MORRIS: No, I thought they were very good questions.

COLMES: I thought they were very good questions, too.

MORRIS: But I think that the really significant thing about this debate is that I think Obama really got his act together. And I think that what's going on here isn't that Hillary was a lot worse than she's ever been or that Obama was a lot better than he's ever been. It's that the effect of seeing a woman holding her own, addressing issues, being articulate, what Hillary calls in her memoir "the talking dog syndrome," which is it isn't that the dog talks well, it's that the dog talks at all, that that is now wearing off.

And Obama, who's an ingenue, is finally learning how to use a debate to project issues. When he turned to her and said, "I'm the only candidate not taking special interest money," or when he was aggressive with her in confronting her on the special interests in the health care industry, when you have Michael Moore's movie on that, I thought that that was excellent. I think he's finally learning to get his act together.

COLMES: What do you think about Carl Cameron's interesting point, which is that, when asked about meeting with foreign dictators, and Hillary Clinton said, "I'm going to wait and see, I'm not going to offer that carrot up front," and Obama says, "Yes, sure, I'll do it in the first year," does that show greater sophistication on the part of Hillary Clinton than Barack Obama?

MORRIS: No, it showed greater smarts on behalf of Barack Obama, because all the insiders in Washington say, "Oh, that was a faux pas. You've got to feel them out first. We know that." But all the people in America say, "Hey, what's the matter with sitting down with the guy?"

COLMES: And, by the way, we're sitting down with Iran today in Baghdad.

MORRIS: Yes, sit down and talk to them. Now, I don't personally think we should, because I think that we should isolate Iran. But I think that Obama was very effective. And I think Hillary has just been inside for too long, and Obama really showed that he was an outsider.

SEAN HANNITY, CO-HOST: Hey, Dick, you love polls and focus groups. I was very, very impressed with Frank Luntz's focus group there, with their honesty, but all the people that went in initially supporting Hillary, Obama turned the room around.

MORRIS: You know what really got to me when I watched that? Here he's got a focus group with a bunch of many white people from South Carolina, and they're saying that Obama did better. Thank God. Boy, has America changed.

HANNITY: Do you think this can actually have an impact...

MORRIS: God bless this country.

HANNITY: Can he take the nomination from her, now?

MORRIS: I think that it's just one debate, but I think that, if Obama learns to shape issues — look, there's a huge difference between them. She takes special interests, political PAC contributions. He's raised his money from 268,000 small contributions online. Eighty percent of Hillary's money comes in large contributions; Obama gets a majority of his in small contributions. He could make that issue. And then when he came out and he said, when Hillary gave that pre-canned line about how I asked the Defense Department for their plans to withdraw, and Obama said, "Well, you should have asked them before you voted for the war," that was pretty cool, I thought.

HANNITY: We're going to go back to Frank, because we're putting the dials together, and that is, as the specific answers were coming in, the focus group literally was judging what they were saying. But on those — he turned to her on two specific occasions, and I thought those were the most effective moments for him. Do you agree?

MORRIS: They were wonderful. Yes, it's fascinating, because in Luntz's previous focus groups, he said that nobody liked it when you attacked a fellow Democrat and you fell. And that had a paralyzing effect on the insurgent candidates, the challenging candidates, because that became the conventional wisdom. In this debate, Obama learned how to get away with attacking Hillary and doing it in a way where it's a sufficiently glancing and positive blow, a statement of his own position.

HANNITY: But not perceived as mean.

MORRIS: So it's not perceived as negative and it works with the focus groups.

HANNITY: One of the things overwhelmingly in that room with Frank, people want them to team up. Now, I have thought for the longest time that that will ultimately happen.

MORRIS: I think it has to happen. But, you know, if I were running the Obama campaign, I would have had Hillary stand in for Hillary and Obama, and I would test in front of focus groups 20 different ways of attacking Hillary and seeing what's the one that works the best with the focus groups, and then have him do it. And I'll bet that's what David Axelrod, who is the media guy for Obama, did.

COLMES: We're going to pick it up here with Dick Morris. More with Dick right after the break.

(COMMERCIAL BREAK)

HANNITY: And we continue now with Dick Morris.

All right, if you're a Republican, if you're Rudy Giuliani, Mitt Romney, Fred Thompson, and you're watching the debate, what do you get out of this in terms of strategic planning?

MORRIS: I say that there was a six-letter word that was not mentioned: terror. I didn't hear that word once in the entire debate. They talked about Iraq. They talked about gay marriage. They talked about everything, but nobody mentioned the Patriot Act, nobody mentioned wiretapping. We're sitting here two weeks after the city of London was almost blown up, and nobody mentions the word "terror." That's what I'd take out of it.

HANNITY: That's a great point. By the way, I think my favorite moment in the debate was when they were asked the question, how many of you flew here on a private jet, when they're talking about global warming?

MORRIS: That's right. But, you know, the other thing that needed to happen, I almost ripped the TV set apart when Anderson Cooper had that question about the No Child Left Behind act, and he doesn't ask Hillary. It's her bill! The No Child Left Behind act is essentially Hillary's Arkansas program applied to the nation. And I was just dying to see if Hillary would pander the audience and say it shouldn't be renewed.

HANNITY: Let me ask you this. They've now had a couple of these Democratic debates. What questions haven't been asked that need to be asked, in terms of what the American voters need to learn about these candidates?

MORRIS: Mrs. Clinton, you have proposed having troops stay in Iraq to man the border, hunt out Al Qaeda, and provide logistical intelligence, air and training support to the Iraqi army. How many troops will that take, and how long will you keep them there? That's one question.

Second question would be, Mrs. Clinton, when your husband ran for president, he refused to take special interest political action committee money. Senator Obama, for example, is hewing to your husband's policy. Why are you differing from your husband's policy and taking that money?

HANNITY: I think you've got a journalistic future here, Dick.

MORRIS: And, you know, I think there's one other thing. In baseball, when you see a pitcher for the second time, you finally learn how to hit him. I think that people are now seeing Hillary for the second and third time and they're seeing that — if she says one more time, "I fought for health care, and I have the scars to prove it," she says that every debate. "I can hit the ground running." She says that every time she opens her mouth. People are getting tired of that.

COLMES: You're upset, or upset is the wrong word, but you point out that there's not a lot of talk in this debate about terror as it relates to what happened on 9/11, which changed the world, but wasn't this really a YouTube-directed debate? This is what people are asking about. The things people are asking aren't the Patriot Act. They want to know about Iraq, they want to know about health care, they want to know about the economy, they want to know about ecology, education, and this is what people ask about.

MORRIS: I would seriously doubt that, even with a Democratic audience, you didn't get a single question on terror. I would somehow doubt that. I see the fine hand of the edit...

COLMES: This is the YouTube audience that asked the question.

MORRIS: Yes, I know. By the way, I just want to mention, I know you're talking about the debate, but my wife and I have a column in The New York Post today — you can get it online at DickMorris.com — that talks about Fred Thompson's son having a no-show job at his political action committee for which he was paid $175,000. And that's a real bombshell, and it's the same stuff we write about in "Outrage."

COLMES: That's a good point.

MORRIS: And it is an outrage.

COLMES: We didn't talk about other candidates. Everybody is focused on Hillary and Obama tonight. What does this say about John Edwards, who was for a long time considered a top tier candidate?

MORRIS: I think Edwards — people are just seeing the snake oil salesman. I mean, that's why they're...

COLMES: Why would you call him a snake oil salesman?

MORRIS: Well, he was a trial lawyer. He's coming onto the jury. He talks about...

COLMES: He took individual cases, not group cases.

MORRIS: Yes, but he took a third of the fee. He talks about poverty, and he has a house that you can't find your way around. He talks about...

COLMES: Wait a minute. Since when do Republicans not like people who have money and are wealthy and live well?

MORRIS: You asked about Democrats. You asked about Democrats.

COLMES: Go ahead.

MORRIS: Come on, he attacks hedge funds, and he works for one. He ran in 2000, and poverty wasn't his issue. Now, in '04 it is.

COLMES: Sure it was his issue. It was his issue...

(CROSSTALK)

MORRIS: In '04, he was a moderate. Now he's a leftist. The guy who I think is just incredible in these debates — and I love him — is Joe Biden. When he got up there and he said, "Why did you vote to make these poor troops not have a v-shaped thing under their vehicles so the IEDs don't kill them"...

(CROSSTALK)

COLMES: Could he be a president?

MORRIS: Well, yes, he could, but basically what's going to happen here is that Hillary, if she's the nominee, is going to have to put Obama on the ticket, because the black community will demand it.

HANNITY: I thought that was Biden's best answer, by the way, about the — you know, saying...

MORRIS: His Darfur answer was terrific. Yes, send 2,500 American troops. These kids will be dead by the time diplomacy works.

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