The following is a partial transcript of the April 13, 2008, edition of "FOX News Sunday With Chris Wallace":

"FOX NEWS SUNDAY" HOST CHRIS WALLACE: Here to discuss it is former Senate Majority Leader Tom Daschle, national co-chair of the Obama campaign, and Philadelphia Mayor Michael Nutter, a Clinton supporter from joins us from his city.

Well, gentlemen, let's start with the latest controversy over comments that Barack Obama made last Sunday at a California fundraiser, where he talked about small towns in Pennsylvania that have lost jobs and that he says Washington has failed. Here they are.

(BEGIN AUDIO CLIP)

SEN. BARACK OBAMA, D-ILL.: It's not surprising, then, that they get bitter — they cling to guns, or religion, or antipathy toward people who aren't like them, or anti-immigrant sentiment, or antitrade sentiment as a way to explain their frustrations.

(END AUDIO CLIP)

WALLACE: Mayor Nutter, Barack Obama now says that he regrets not the remarks, but the way that he phrased them. How damaging is this whole controversy in Pennsylvania?

PHILADELPHIA MAYOR MICHAEL NUTTER: Well, it's hard to completely assess the damage. Of course, that will be left to the voters. But certainly, it seems damaging to the campaign.

I'm certainly saddened to hear those kinds of comments. I've lived in Philadelphia and, of course, Pennsylvania for almost 51 years. They don't represent the thoughts of people throughout this great commonwealth.

And I don't understand why Senator Obama would make such comments. I'm sure he can explain them for himself.

WALLACE: But, Mayor, specifically what do you find objectionable?

NUTTER: Well, they don't represent the views of small-town America or certainly even folks here in Philadelphia or in our nearby suburbs.

People are optimistic about the future. They have a lot to look forward to. They're energized about this campaign. They're looking for and want to support a candidate who supports their issues and concerns.

I've talked about this urban agenda and urban conversation. So it just demonstrates a complete misunderstanding of what small-town America is about.

WALLACE: Senator Daschle, Hillary Clinton, not surprisingly, went after Obama big time this weekend already. She said that these comments were elitist and out of touch. Let's watch.

(BEGIN VIDEO CLIP)

SEN. HILLARY RODHAM CLINTON, D-N.Y.: The people of faith whom I know don't cling to religion because they're bitter. In fact, they embrace their faith because it gives them so much in return.

(END VIDEO CLIP)

WALLACE: Obama says that he regrets the phrases he used, that his words were ill-chosen.

But let's talk about the deeper meaning there. Does he believe that people in small towns and depressed areas turn to guns or turn to religion out of frustration?

FORMER SEN. TOM DASCHLE, D-S.D.: Well, Chris, first of all, you've got to remember that this is a man who was raised by a single mother, who chose — who volunteered to work in one of the poorest neighborhoods of Chicago, who spent his whole life working with the disenfranchised.

This is a man who understands when you go into an emergency room and you see people lined up in the hallways, there's something wrong, who understands that we've got 80 percent unemployment on reservations, who understands that 81 percent of the American people think we're on the wrong track.

So there may be some optimistic people out there like Mayor Nutter suggests, but I will tell you the vast majority of the people in this country want to see change. They think that Washington is out of sync with their lives, who want to see...

WALLACE: I understand the economic frustration, but what about this comment that people turn to guns and to religion out of frustration? I mean, don't people turn to guns and religion because they mean something to them?

DASCHLE: Well, what he was saying is that there are those who use guns and religion, use faith and guns, as a divisive issue.

And when you're angry, when you feel disenfranchised, you're more susceptible to those kinds of divisive politics, that those who thrive on that divisive nature of these emotional issues really are the ones that he was faulting here, not the people that hear this.

But there is a great deal of anger out there, a great deal of sentiment that we've got to see change in this country, and that unless Washington breaks with its past and accepts the fact that this sentiment is really deep-seated, it's palpable, we're not going to see the change we need in this country.

WALLACE: Mayor Nutter, does that explain it to you?

NUTTER: No. And as a matter of fact, I've not heard any of that kind of conversation during the course of this campaign here in Pennsylvania. I mean, that's not what people are talking about.

People are talking about, whether in small-town Pennsylvania or some of the larger cities like Philadelphia and Pittsburgh — we're talking about real issues and real concerns.

They're concerned about public safety. They worry about their education of their children. They want to see who has ideas about jobs and economic development to bring our economy back and turn our big cities and small towns around, going in a positive direction.

So I don't know where this is coming from. I don't know what would possess Senator Obama to say this, because you won't see it, you don't hear it, in the course of dialogue of real people in these cities.

I know he took a six-day bus tour, but clearly he does not understand what's going on here in Pennsylvania and expressing the concerns of real people on the ground.

WALLACE: Senator Daschle, Obama already had a problem reaching out to white working-class Democrats, the so-called Reagan Democrats. Aren't these comments going to make it even harder?

DASCHLE: Just the opposite, Chris. I really think Mayor Nutter ought to go to his own emergency room. He ought to go to the unemployment lines today in Philadelphia where people are standing in line without the hope of a good job.

They ought to worry about the jobs being displaced and being sent overseas. You know, obviously, people are — want to be hopeful, and that's really the message of the Obama campaign, why the Obama campaign has such traction, because he talks about hope.

But you know, if things are so rosy, why change? Let's just have a third Bush administration. That's really what...

WALLACE: Mayor Nutter, I want to bring something else...

NUTTER: Chris, with every respect...

WALLACE: Mayor Nutter?

NUTTER: Yes, sir. Go ahead.

WALLACE: Mayor Nutter, may I please ask — bring something else into this? Because one of the issues I think you would agree that a lot of workers in Pennsylvania and across the country are worried about is trade.

Now, Senator Clinton says that she's against the trade deal with Colombia, but her chief strategist, Mark Penn, was actually working for the deal, helping Colombia, when he was still working with the campaign, which he still is, at the same time that he was advising Clinton.

We now find out that former President Clinton got paid $800,000 by a Colombia group to support and promote the free trade deal. So Senator Clinton doesn't exactly have clean hands on these issues either, does she?

NUTTER: Well, first, I would say Senator Clinton is an independent person. She'll exercise independent judgment. Mr. Penn — I think that issue has been dealt with.

Senator Clinton stands on her own as an independent person, and so her position on these issues is very clear. She's talked about fair trade, that NAFTA needs to be renegotiated. And so her position I think goes without question.

But I would go back again and say, with every respect to Senator Daschle, I've been to a few emergency rooms. I've walked the streets of Philadelphia. And just because people are having problems doesn't mean, as Senator Obama has articulated, that they're turning to their religion or to guns as a means of expressing something.

There's a rich history of sportsmanship and legal gun use all across Pennsylvania. People support their religion because of deep faith. And so there is a complete disconnect here, with every respect to Senator Daschle, who I've admired for a long time.

WALLACE: They clearly feel that they have got the hammer in their hands on this one. You can hear it from Senator Clinton. You can hear it from Mayor Nutter. I mean, this is a problem for the Obama campaign.

DASCHLE: Well, Chris, of course, you can distort what Senator Obama said, and that's really what we're hearing again this morning. That isn't what Senator Obama said.

What Senator Obama said is that faith and guns are very important. He has talked about that for the entire campaign. He has spoken specifically to his own faith and how important it is to him. He understands that.

But what he's saying is that there are those who use these issues as very, very divisive issues to try to disenfranchise further the people that are susceptible to that.

I can see why Mayor Nutter would change the subject on Colombia. People don't like to be misled. They don't like it when they're not told the truth. I mean, the fact is that Hillary Clinton has a questionable record with regard to Colombia.

Her own top adviser, Mark Penn, was fired recently for advocating for Colombia. So you've got her adviser advocating for Colombia, Hillary Clinton saying that she supports the effort not to pass the Colombian free trade agreement.

I think the people of Pennsylvania, the people of the country, really deserve a better explanation than the one we've gotten.

WALLACE: All right. We've got a little bit more than a minute left, and let me get you both to do a little forecasting.

Mayor Nutter, the RealClearPolitics average of recent polls — and let's put it up on the screen. The most recent average shows that the race had, at least before this latest controversy, tightened.

Obama was closing the gap with Clinton, who once led by double digits, and now, according to the most recent polls, which predate this controversy, she now leads by seven points.

Your sense: Is the race tightening? Does Clinton have a safe lead? What do you think this is going to do, this latest controversy, to the primary in Pennsylvania?

NUTTER: Well, people will continue to assess that during the course of the week. You always expect these races, especially in Pennsylvania, to tighten.

But the reason Senator Clinton is doing very well in Pennsylvania is, one, because she understands the state; two, she was here the other day talking about issues of substance that people really care about — public safety, and urban economic issues. She understands it.

And as I've said on T.V., she gets it. She knows what really is going on all across the state.

WALLACE: Mayor, let me bring in Senator Daschle for one — basically, to get him to respond to that.

If Obama loses Pennsylvania after losing Ohio, and if again he shows weakness among white working-class Democrats, especially after this latest controversy, isn't that serious trouble?

DASCHLE: Chris, he's won the popular vote. He's won by far the vast majority of the states all across this country. Look. Pennsylvania is Hillary Clinton's second state. She's lived there for virtually her whole life in and out.

So we've always known this is a very, very heavy lift.

WALLACE: Pennsylvania is her second — I thought Arkansas was her second state.

DASCHLE: Well, she's had a lot of second states. She's claiming it as her second state these days.

NUTTER: I can see why Senator Daschle might want to use that as the excuse.

WALLACE: All right. In any case, we're going to have to leave it there.

Mayor Nutter, Senator Daschle, thank you so much, both of you, for talking with us today.

NUTTER: Thank you.

DASCHLE: Thank you, Chris.