This is a rush transcript from "FOX News Watch," April 5, 2008. This copy may not be in its final form and may be updated.

JON SCOTT, FOX NEWS ANCHOR: This week John McCain hits the road to tell America his story. How is it playing?

It is 3:00 a.m. all over again. Why does that phone keep ringing in the White House?

Depression fears. Why this newspaper isn't the only one twisting the truth about the economy.

Did the press ignore Obama's comments on abortion?

And more charges are dropped in the Haditha investigation. Did "The New York Times" and others ignore what should be big news?

First the headlines, then us.

(FOX NEWS BREAK)

SCOTT: On our "News Watch" panel this week, Jane Hall of the American University, Nicholas Wopshott from "New York Sun" contributing editor and columnist, and John Fund of the "Wall Street Journal," a columnist as well.

I'm Jon Scott. "FOX News Watch" is on right now.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN, (R), PRESIDENTIAL CANDIDATE: I'm the son and grandson of admirals. My grandfather, an aviator, my father, a submariner. They were my first heroes. Their respect for me is one of the most lasting ambitions of my life.

(END VIDEO CLIP)

SCOTT: That's John McCain taking a trip down memory lane this week, visiting all of the places that have been important in his — informing him, I should say, to be the candidate that he is to become.

I guess, Jane, the question is, has the media done its part to push along this tour?

JANE HALL, AMERICAN UNIVERSITY: Well, I think the media are certainly covering this. And I think there is a question, why does somebody have to be reintroduced, except that, to a lot of young people, his heroism in the Vietnam War may seem like ancient history. I think they covered it. He went on some comedy showings. Made fun of David Letterman. He is trying to introduce himself and obviously to link his heroism to "I am the guy you trust with national security." I don't think the media said that does that follow. No one is willing to touch that. That's the third rail.

SCOTT: When the Democrats are beating up on each other, there has been speculation about how does John McCain keep his name in the headlines and stay relevant? Is this it?

NICHOLAS WAPSHOTT, CONTRIBUTING EDITOR & COLUMNIST, THE NEW YORK SUN: It is a good way to try it. A cheap way to try it. Because ad ran in New Mexico, and New Mexico is a small media market, but the result of that he has a lot of national publicity.

And it is a great story, by the way. The John McCain story, if you never heard it, is stunning thing from beginning to end. It's full of heroism and full of real live pictures of him, moving pictures as a prisoner of war and so on. It's a great story.

SCOTT: Yes, I can't imagine...

WAPSHOTT: It's one the few things you can really do to counter the real slugfest on the other side of the ledger.

SCOTT: I can't imagine, John, that the North Vietnamese propagandists ever thought that footage they shot of this pilot recovering in a North Vietnamese hospital would be used in a U.S. presidential campaign ad.

JOHN FUND, COLUMNIST, WALL STREET JOURNAL: The law of unintended consequences. The media has been favorable to John McCain. A lot have forgotten that, as Jane says, there are a lot of people who don't remember the last time he ran for president in 2000, and the biographical details he had this time, I think, the media is having a bit of push back. They have been so easy own McCain for so long, they are resisting of little of his propaganda effort.

I think what they are trying to say it, yes, John McCain has this history but they are adding in the fact of his age, which is 72, one of the oldest people ever to run for president.

It is a mixed message biographical message McCain is getting out.

SCOTT: Are you saying the media is complicit in going along with what amounts to a free promotional campaign?

FUND: Until this week, I think the media is favorable to McCain. This time, when he was pushing forward his biography, is the number one thing to talk about his candidacy, I think there was push back. We are not going to take everything and swallow it.

HALL: The timing is off. We shouldn't be arguing with his heroism. But I agree with you. The Straight Talk Express, the access he gave, he has been given a ride that really people haven't spoken about as much as Obama. But he has had favorable coverage. And a lot of Americans are saying they wouldn't necessarily vote for a guy that old and that's not — that's new to talk about.

SCOTT: Let's talk about something he said though that Barack Obama seized upon — the 100-years in Iraq comment.

Have the media done what they should, Nicholas, to sort of therein United States what was said and hold Obama's feet to the fire when he uses that is quote?

WAPSHOTT: No. The fact is that, again, Obama is being given a pretty free ride on this.

SCOTT: Again?

WAPSHOTT: Again. Because I think Obama and McCain have been given an easy time I think in this election so far.

In this case, he was asked by George W. Bush, saying he was prepared to be there for 50 years, and he said why not 100 years. He said there are other ways to look at this. The way Obama exploited it assumed that people don't know the history of American occupation of countries, like Germany since the Second World War and Japan since the Second World War.

SCOTT: Obama takes that remark on the road, Jane, and says McCain want us in Iraq for 100 had you years.

HALL: There was historically a 100-year war. The "Columbia Journalism Review" did a really good piece, saying he should be called out on this. Having people in a country after a war is not the same as saying we will be there forever.

I went back and looked at everything John McCain said. It is ambiguous. Someone finally said are you talking an open-ended commitment? He said yes. So there is room for interpretation.

SCOTT: The problem is the "Columbia Journalism Review" doesn't plop on people's door steps, most people in America.

FUND: Life is unfair. John McCain got himself into this because he used the term 100 years next to the word Iraq. No matter what the context, that is not good because you have to spend a lot of time explaining it.

The media's job, yes, is to put things in context but they can't be given the major role of explaining why a candidate spoke clumsily. That's what McCain did.

WAPSHOTT: The fact is both Mr. Obama and Mrs. Clinton said they would have to stay longer than they would like and they have to have a permanent presence.

(CROSSTALK)

FUND: ... have none of that.

WAPSHOTT: You've got it. It is hypocrisy.

FUND: Obama now says we could have up to 60,000 troops in Iraq even after withdrawal. That's not what voters voted for in 2006 or people who support Obama think.

SCOTT: We will have to take a break. We will be back with this.

ANNOUNCER: The phone in the White House hasn't stopped ringing.

(BEGIN VIDEO CLIP)

AD NARRATOR: It is 3:00 a.m.

(END VIDEO CLIP)

ANNOUNCER: Is the 3:00 a.m. ad the real star of the campaign season?

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

(BEGIN VIDEO CLIP)

AD NARRATOR: It's 3:00 a.m. and your children are safe and asleep. But there is a phone ringing in the White House and this time the crisis is economic — home foreclosures mounting, markets teetering. John McCain just said the government shouldn't take action in the housing crisis.

(END VIDEO CLIP)

SCOTT: That was Hillary Clinton's latest version of the 3:00 a.m. ad that began airing in Pennsylvania Wednesday.

Sensing an opportunity to poke fun at her, candidate John McCain quickly created his own version, which appeared on Thursday morning. Take a look.

(BEGIN VIDEO CLIP)

AD NARRATOR: It is 3:00 a.m. and your children are safe and asleep. But there is a phone ringing in the White House and this time the crisis is economic — home foreclosures mounting, markets teetering. Hillary Clinton and Barack Obama just said they would solve the problem by raising your taxes.

(END VIDEO CLIP)

SCOTT: Seems like it is 3:00 a.m. an awful lot. I rarely see the clock at that hour.

Jane, what is going on with this ad? It has taken on a life of its own.

HALL: It is one of those things that becomes a symbol. It is not as nasty as Willie Horton in previous campaigns. Even "Saturday Night Live," I think, helped make it by having Barack calling, it's 3:00 a.m. Hillary, what do I do. What do I do? What do I do?

FUND: I think it is an iconic ad similar to the Harry and Louis ad for the health care debate in the 1990's. That defined the issue. I think the issue of whether or not somebody is ready to be president is all talked about in the context of 3:00 a.m. I think it will carry on through the campaign as a watch word.

SCOTT: I wonder if it works. Whether people instinctively tune out the ad as soon as they hear the opening salvo because they have heard it before and don't know which candidate it is for — Nicholas?

WAPSHOTT: It is true. You wouldn't know whether it was a parody or spoof or genuine article, which, of course, is the great success of the ad. And I agree with you. I think when it comes to the general election in November, we will still hearing about 3:00 a.m. telephone calls.

FUND: The fact that we are talking about it means the ad, in all its incarnations, is a success.

SCOTT: Jane, the clever thing McCain did is put that ad together. But it is not an ad. It is an Internet posting. We pick it up and run with it. Other media has done the same. Hasn't cost him a dime to get the publicity.

HALL: My students have told me the term is mash-up. Remember the ad that took the Nike thing where she was made to look like a heroin of 1984. A lot of that stuff will go on. I think the McCain girls and the Obama girls, that also was a very interesting Internet-driven ad.

SCOTT: It is almost like you don't need to spend money to run for president these days, although Mr. Obama seems to be able to raise a heck of a lot of money.

WAPSHOTT: It turns out his TV ads don't work as effective as they might. When it comes to Ohio and Texas. He outspent Hillary two or three times and it didn't do the trick.

FUND: I think it is a safe bet the consultants will always find a way for candidates to spend money somehow.

HALL: We haven't seen — we haven't seen the negative ads, from the special interests and the PACS. This has been a campaign that's been fairly restrained, believe it or not. I think it will get ugly in the general.

SCOTT: But is this 3:00 a.m. ad, is this the real star of the campaign so far?

HALL: I think so. I think the Harry and Louis is a good example because it creates fictional characters to deal with an issue. John McCain's first speech on the economy was criticized by a lot of people. So she was picking on his vulnerability and he said, oh yes, the Democrats are going to raise your taxes.

FUND: Just remember, there will be Jeremiah Wright ads in the Clinton campaign too.

HALL: Exactly. Absolutely.

SCOTT: Oh, you think so?

HALL: Absolutely.

(CROSSTALK)

FUND: Third-party innocent groups that have nothing to do with the campaign groups.

HALL: Yes. Nothing dirty going on.

SCOTT: The interesting thing about the 3:00 a.m. ad, is when you think you know which direction it will go, it takes a 90-degree or even a 180-degree turn.

WAPSHOTT: That's why it gets the attention.

SCOTT: And it does make people think, oh, maybe I should rethink what I have thought up until now.

WAPSHOTT: Yes. I think it will go into the sort of common vocabulary now. Husbands will say to wives and vice versa, what if there is a 3:00 a.m. call, will you have done the thing I asked you to do.

FUND: It's 3:00 a.m. ad number nine. Collect them all.

(LAUGHTER)

SCOTT: For sure. The bobble-head doll coming next.

If your doctor tells you, you are sick, you probably believe him. What happens when the media proclaim a recession or worse?

ANNOUNCER: Depression? Don't believe everything you read or see. Wait until you see how this paper twisted the truth this week, next on "News Watch."

(COMMERCIAL BREAK)

SCOTT: USA 2008, the Great Depression. That was quite a headline from the British newspaper "The Independent." And how about the cover photo? Doesn't that look like a bread line?

It turns out, the people in line are waiting to get coats during a coat drive or give away in New York City. Now that was not even a recent coat drive. No. The photo for this 2008 story was taken in 2005.

So, Nicholas, how does a British newspaper get away with using a three-year-old photo to illustrate depression in America?

WAPSHOTT: That's a good question. "The Independent" is a paper which is a tabloid, but it is a serious-minded newspaper and operates more like a magazine on its front page. What it does is puts an image and then — serious news images. What it does is creating like a magazine image, something to make a point. So they have sort of shock image.

FUND: It is really cheeky for a British paper to do this. When the unemployment rate in Britain is significantly higher than the unemployment rate in the United States is a bit much.

I think there's been a lot of envy in Europe about the strength of the U.S. economy in recent years and I think they will seize any bit of bad news and blow it out of proportion to make America look bad.

SCOTT: So it makes them feel better to see Americans in what appears to be a bread line?

FUND: Misery loves company.

SCOTT: I was wondering if they thought maybe because it was printed in Britain, nobody would notice.

FUND: They wanted attention for that here and they got it. It is a home run for them.

JANE: Yes. They are read online. There is a very interesting thing that's going on now. The head of the Fed used the "R" word in Congress this week — recession, two consecutive quarters of negative growth, I believe it is. To call it the Great Depression and use that, as a number of people in the media have done, is a question of whether we are scaring people to death.

SCOTT: Two-thirds of the economy built on consumer spending, right, John? If you tell consumers a recession is coming and drumbeat that often enough, a self-fulfilling prophecy?

FUND: Yes, absolutely.

WAPSHOTT: You are talking yourself into that. It's the same way they did the housing bubble. It's the same way they did the high-tech bubble. If you talk about it, inevitably it comes about.

SCOTT: Big headline in the "USA Today," about three week ago, said two out of three Americans expect a recession. If you read that and it is going across the country, soon enough you will have one, aren't you?

HALL: Let me say in defense of journalism, I think we can thank government regulation and deregulation and the banks for doing bad loans. There is — it is true that not since the Great Depression have we had such a drop I believe in housing prices. So to use that is factually true.

FUNDS: After the largest increase in housing prices of any decade ever.

HALL: OK, I would fault reporters for not knowing how — where to put a decimal point, much less really know how to report on what is going on.

SCOTT: All right, there is that criticism to be handed out.

Let's move to this topic now.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA, (D), PRESIDENTIAL CANDIDATE: I have got two daughters, 9 years old and 6 years old. I am going to teach them, first of all, about values and morals. But, if they make a mistake, I don't want them punished with a baby.

(END VIDEO CLIP)

SCOTT: Pretty startling words for a presidential candidate.

Nicholas, you are shaking your head. Did that get the coverage it deserved?

WAPSHOTT: It did not. There are few examples — Andrea Mitchell on MSNBC did well and pushed the point and got a lot of flak on the blogosphere. But I can't see this means anything else other that, if my daughters make a mistake, I don't want to either have an option of abortion or force them to have a baby to grow up. I think that's unambiguous what he is saying. It is amazingly inflammatory to a large number of people who are against abortion. And yet, if any other candidate said it, I think it would have been blown up considerably.

SCOTT: Jane?

HALL: I agree. I read the whole thing. The people who defending him said he was talking about sex education and sexually transmitted diseases. I don't think there is any way to look at it other than that.

Michael Gerson did a piece in "The Post" about it. Few people picked up. And I do think, in the interest of fairness, he should be asked about it.

I did a poll with my student on the WashingtonPost.com. And we found abortion was a voting issue for about 20 percent of a large national sample of young people. This is an issue that's going to come out, I think.

SCOTT: Let's move to another topic. All charges dropped last week against Lance Corporal Steven Tatum, one of four Marines accused of killing innocent civilians in the Iraqi town of Haditha. Tatum, the third enlisted man to be cleared of charges in that case. The story, front-page news in 2006, when "Time" magazine offered a special report on Haditha. "Newsweek" called it a bloodbath, describing how Marines in November of 2005 allegedly went on a rampage, murdering innocent civilians in that Iraqi town as pay back over the death of one of their own.

Two years later, the news about Tatum, buried inside "The New York Times," barely noticed by many other media outlets. Why?

FUND: Jon, there is a media cliche, "The cover up is worse than the crime." But there is another corollary. The exoneration almost always gets no coverage.

You have the cover story on Haditha. You've had three Marines now who have been exonerated, charges dropped. And you will not read about this.

The enduring impression, because of the power of the visual image and the indirect relationship to Abu Ghraib, which was a real scandal, those peoples' reputations are going to be ruined.

SCOTT: Doesn't "The New York Times," for instance, owe those Marines a front-page headline that says charges dropped?

FUND: The message would be you can write a letter to the editor.

HALL: I remember the "Time" magazine story and the front page stories. And if these men were exonerated, I think that the correction is supposed to bear some connection to the splashiness of the other piece.

SCOTT: What about Congressman John Murtha, a former Marine. He called a big news conference, talked about blood thirsty Marines and used it to sort of amplify his position that the war in Iraq was wrong. Now the pedestal is being kicked out from under him.

WAPSHOTT: I am not sure how many was wrong and how much could be proven here. In a way, what you would expect, or hope for, is for journalist to go back in and look at this. The women and children who were murdered in this incident did not commit suicide. They were killed by American troops. The fact that no one is held responsible is embarrassing all around.

SCOTT: We have to take one more break. If you want to take a peak behind the scenes at what we argue about here on the set during our commercial breaks, go to our web site, foxnews.com/foxnewswatch.

We will be back in a couple minutes to battle over this.

ANNOUNCER: Does this tape show Obama getting fussy by a fan in Philly? Or is this more to the story? The answer is next on "News Watch."

(COMMERCIAL BREAK)

SCOTT: The 2008 rivalry campaign has been chronicled by the press and citizens alike. By now, we have seen it all. This week, a tape surfaced of what appears to be Barack getting testy on the campaign trail with a fan. But is there more to the story? Let's have a look.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: It is not — can you — my camera.

OBAMA: Just take it — I won't be smiling because you have been wearing me out.

UNIDENTIFIED MALE: No, no, Senator Obama.

OBAMA: Just take a picture. Take a shot, just because you've been rude. Go ahead.

(END VIDEO CLIP)

SCOTT: Just because you've been rude. The Obama campaign says the guy we just saw actually was trying to sell the candidate's autograph on eBay. He wanted that picture with the candidate to prove the authenticity of Obama's signature.

I guess you got to sometimes know the back story, Jane, to figure out what is going on some of these campaign appearances.

HALL: It is true. I think the first wave of people talking about it, you thought Obama was being really rude. You need to be told. Pictures do lie. Who knew that eBay was a factor in the election. I thought I was hip. I didn't know eBay selling your signature was part of what was going on.

FUND: This guy is a commercial vulture. He's trying to make money, fine. I think it is miraculous that candidates who meet obnoxious people on the campaign trail, I think it is remarkable how cool under fire they are.

SCOTT: That Obama didn't turn around and deck the guy.

FUND: Or didn't call him a name. He said I am not going to smile and you were a little rude. That's a fair statement of the facts at a minimum.

SCOTT: You are constantly in a bubble on the campaign trail.

WAPSHOTT: You are. Remember, Bill O'Reilly famously also stalked Obama and heckled him and so on, and used that footage to great effect. Maybe Mr. O'Reilly was also trying to sell it on eBay.

SCOTT: Maybe he just wanted his picture.

That's going to do it for us this week.

Thanks to Jane Hall, John Fund and Nicholas Wapshott.

I'm Jon Scott. Thanks for watching. Keep it here on FOX News Channel. The "FOX Report," up next.

For more information and exclusive content related to "FOX News Watch" go to www.foxnews.com/foxnewswatch

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