This is a rush transcript from "The O'Reilly Factor," July 2, 2008. This copy may not be in its final form and may be updated.

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JOHN KASICH, GUEST HOST: Today's Gallup daily tracking poll shows Senator John McCain statistically tied with Senator Barack Obama. However, most of the other polls still show Obama with a five-point lead.

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Meantime, Obama is under attack from many on the left who don't like his move to the middle. With us now with his expert analysis is political analyst Dick Morris, the author of the number two ranked "New York Times" bestseller "Fleeced."

Dick, congratulations.

DICK MORRIS, AUTHOR OF "FLEECED": We beat out Scott McClellan. He's number three.

KASICH: You're moving up well.

MORRIS: Yes, that's right.

KASICH: Another big hit. All right, let's talk about the polls. Some show him behind by five, but the latest Gallup daily tracking says it's about two.

MORRIS: Well, the important thing is to compare the same poll's data on different days, because if they're making a sampling error, they at least make the same one each day.

So what happened was it was a tied race. And then you had the Unity, New Hampshire event. And Obama went out to a five-point lead. And then Wesley Clark put his foot in it. And now it's a two-point lead.

The important point is all of this is happening with no contribution from John McCain. He is somewhere in the middle of South America. I don't know if anyone has told the good senator that Brazil and Mexico and Colombia don't have any electoral votes. And that he — I don't know what he's doing there. This campaign is — he's sleep walking through this race.

KASICH: Well, Dick, it's a thing that's...

MORRIS: He's not - you know, he's not being aggressive on anything.

KASICH: It's been surprising because every day, there seems to be a new initiative from Obama. Yesterday it was the faith-based initiative.

MORRIS: Right.

KASICH: Today, you know, a new ad comes out. Every day, there's a new policy statement. You know, and some of it is — reflects a movement to the right. We haven't heard much from John McCain.

MORRIS: You know...

KASICH: Why? Is it maybe because they're waiting?

MORRIS: I don't know. He has an opening right now today, tonight. And if any of you from the McCain campaign are listening, pay attention, Obama just put an ad on television where he basically takes credit for welfare reform. He said in the Illinois legislature he sponsored a bill...

KASICH: Right.

MORRIS: ...to move people from welfare to work.

Well, the fact of the matter is...

KASICH: Right.

MORRIS: ...that he opposed the Bill Clinton welfare reform bill.

KASICH: Right.

MORRIS: I know. I was instrumental in his signing it. And Obama opposed the welfare reform bill...

KASICH: Right.

MORRIS: ...in the — when he was a state senator from Illinois.

KASICH: We're going to get to that ad, Dick, actually...

MORRIS: McCain needs to jump in tomorrow morning...

KASICH: Yes.

MORRIS: ...in 18 states where Obama is on...

KASICH: Yes.

MORRIS: ...with an ad that shows what a lie that is and uses it to rip apart Obama's credibility.

KASICH: Well, we're going to show that ad in the next segment.

MORRIS: Good.

KASICH: I want you to comment on it, take a look at it. Let's talk about Wes Clark for a second, because what you said is Wes Clark stepped in — on Obama's progress and kind of blew up the campaign and reversed things a little bit. Tell us about Wes Clark.

MORRIS: That's a blip that will be gone in a few days. The Republican party has an instinct for the cape as opposed to the matador. And so they have the cape.

KASICH: I have noticed it lately.

MORRIS: Reverend Wright...

KASICH: Yes.

MORRIS: ...that's a cape. Michelle Obama, that's a cape. Wesley Clark, that's a cape. The matador is Obama. And that's why in this book "Fleeced," we lay out what he'll do to cover illegal immigrants for health insurance. That issue alone could win McCain the election.

The tax increases he's going to propose, the weakening of the Patriot Act. And you look at the specifics of what Obama proposes, and what he's going to do, and you have enough to defeat this guy, but nobody's doing it.

And I think what Obama's doing is just what I used to do when I worked for Clinton. I used Hillary as my cape. I would put Hillary out there and would say come on, come on, go after her. She thinks that stay at home others just bake cookies and serve tea. Come on, come on.

And the Republican bull every time would charge at Hillary and leave Bill alone. And in the '92 Republican convention, they spent four days denouncing Hillary, and they didn't gain a point. And I think that whereas the Wesley Clark thing is giving him a short-term gain, this is the time that Obama is redefining himself, trying to move to the center. And McCain has got...

KASICH: McCain...

MORRIS: ...to tear him up hard.

KASICH: Let's talk about the left for a second, because I've been reading these blogs about actually Obama moving towards the center on...

MORRIS: Yes.

KASICH: ...you know, three or four different things. Guns.

MORRIS: Try seven or eight.

KASICH: Yes. I mean, and he's making it...

MORRIS: You have guns.

KASICH: Right.

MORRIS: You have faith-based initiatives.

KASICH: Right, you got the Feisel (ph) law, the eavesdropping.

MORRIS: He's backing away on his Social Security tax increase.

KASICH: Exactly.

MORRIS: He's moving to the center on everything he could find.

KASICH: So — but the people that gave him the rocket fuel to move forward were the left. And you read the blogs today and it's amazing.

MORRIS: Sure.

KASICH: They're attacking him, questioning him. None of them are saying they're against him.

MORRIS: Right.

KASICH: They're just saying well, we're just not as enthusiastic. How serious is this problem with the left?

MORRIS: Well, it could get very serious because you have Ralph Nader out there. And he's going to be the true believer on all of this stuff. And it looks like he's getting on the ballot all over the place. And I don't worry much about Bob Barr, the Republican, libertarian.

KASICH: Right.

MORRIS: Because just like Pat Buchanan who didn't amount to much in 2000, I don't think Barr will in '08. But Nader cost Gore the election. You got to take him seriously. And if Obama moves too far to the center, he's going to really empower Nader.

The key question is going to come when John McCain, if he ever wakes up, turns to Barack Obama and says OK, you're going to pull out of Iraq, OK? Let's say the troops are all gone now. All right, what are you going to do if al Qaeda takes over? What are you going to do if Iran takes over? What are you going to do if they blow up the oil wells, if they kill 100,000 Iraqis, anyone who is pro-American? And Obama will say I'll do diplomacy.

And then you come back and you say well, what if it doesn't work? And at that point, he really then has to in effect say I'd go back in. I'd leave that option open. And that means Nader can then run as the only anti-war candidate.

Now there's one other move that is far-fetched, but you can't dismiss it from your mind. Remember, I said Hillary is suspended and...

KASICH: You're saying perhaps the left starts paying and Hillary...

MORRIS: ...circling slowly overhead waiting for something to happen downstairs. And you can't discount the possibility that if he moves too quickly to the center and too far, there might be some rumblings from that quarter.

KASICH: All right, well, talking about the Clintons, all right, so there's the big phone call yesterday between Barack Obama and Bill Clinton. You didn't listen in, OK?

MORRIS: Bill Clinton is one of those capes.

KASICH: OK. What do you think they talked about?

MORRIS: I think...

KASICH: Well, you know Bill Clinton as well as anybody. What's going on?

MORRIS: I think what's happening is the Clintons have a joint political career on the one hand and a joint checking account on the other. And I think for the political career, Hillary is talking about how much she loves Obama because she's got to get well with her African-American and young people base, which got very mad at her for the racially tinged campaign that she ran.

Bill Clinton is the stay at home mom who is worried about the checkbook. And he's out $11 million. Do you know how many sheiks he had to appease to get $11 million, how many trips he has to make to Dubai to do that?

KASICH: He's got $100 million, though, Dick.

MORRIS: Well, we didn't know what he's got.

KASICH: Yes.

MORRIS: But $11 million is not something to sneeze at.

KASICH: Yes, that's right.

MORRIS: I think what he's doing is he's sulking in his tent until he sees some of those deposit slips from the Obama campaign.

KASICH: He doesn't also want to be on the outs, though, does he? I mean, Bill Clinton doesn't want to be like yesterday's news. He wants a way to stay relevant, doesn't he? I think he desperately wants that.

MORRIS: He does, but at the moment his focus is on $11 million because after the Democratic convention, Hillary cannot repay herself. It's illegal. At that point , Hillary has to make $11 million new or Bill has to make it. You can't use campaign contributions after the convention to repay a debt to a candidate. You can pay your vendors, but not the candidate.

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