This is a rush transcript from "Hannity & Colmes," July 2, 2008. This copy may not be in its final form and may be updated.

MICHAEL STEELE, GUEST CO-HOST: It has been 20 years since Michael Dukakis was the Democratic nominee for president since finishing his term as governor of Massachusetts. He's taken a break from the political spotlight and now serves as a visiting professor of Northeastern University's Political Science Department.

Governor Dukakis joins us tonight from Boston.

Governor Dukakis, it is a real pleasure to see you, sir. How are you doing?

MICHAEL DUKAKIS, FMR. PRESIDENTIAL NOMINEE: Thank you.

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STEELE: Great to have you here.

DUKAKIS: I'm doing fine, but I'm not a visiting professor, I've been a full professor there for past 17 years.

STEELE: Well.

DUKAKIS: I want you to know I work very hard and take my responsibilities for teaching seriously and love teaching young people and encouraging them to go into public service.

So life is good these days.

STEELE: I stand corrected, and you're absolutely right.

DUKAKIS: It's OK.

STEELE: You've done a tremendous service both as — in the private sector and the public sector.

I want to ask you a quick question now. Barack Obama is concerned about this labeling, this liberal labeling. Why is he running away from being a liberal?

DUKAKIS: Well, I really don't know what the definition is these days. I mean we've got a guy who calls himself a conservative in the White House who's probably run the most fiscally irresponsible administration in history.

There's nothing conservative about invading Iraq, whatever you think of it, and I don't think very much of it. So I'm not sure these definitions make an awful lot of sense.

I think what the candidates have to do, and I include John McCain as well as Barack Obama, is focus on the real issues. And I think we know what they are. It's the war, it's the economy, it's health care, it's our physical infrastructure, which is falling apart, it's global warming. I mean those are the issues. It's the future of the American people and particularly the middle class.

So I hope that's what the candidates are going to focus on, and this label stuff better be tossed out...

STEELE: Well, I agree.

DUKAKIS: ...because I don't think it makes — I don't think it really means anything anymore.

STEELE: Well, I agree with you, Governor, but unfortunately the reality of politics is that labels like associations do matter. And I think that, in this race, to have a candidate who holds some of the views that he has, who certainly ran to the left in the Democratic primary, to now shift as he's doing and trying to avoid this labeling — my — I guess my question boils down to...

DUKAKIS: Let me stop you for a second.

STEELE: ...where does Obama begin to talk about the compromise he's going to make were conservatives in the United States Senate and the United States House and across the country?

DUKAKIS: I don't think it's a question of compromise. I think he's somebody who's got to bring people together. I think he has the ability to do that.

Look, we have 47 million Americans, most of them working or members of working families that don't have a dime of health insurance. I don't know of anyone in this country — Republican, Democrat, liberal, conservative — who thinks that's acceptable, do you?

STEELE: No, I don't think.

DUKAKIS: And I think that's unacceptable but.

STEELE: But the labels speak to a lot more than just what you see on the paper, and I think it goes to philosophy, it goes attitude, it goes to approach in government, the view of government.

So my — I guess like so many conservatives out here and many Americans, we want to get a sense of what kind of liberal is Barack Obama?

DUKAKIS: Well, when it comes to foreign policy, he's a lot more conservative than John McCain. Can we agree? I'm serious?

COLMES: He's talking about McCain. I just can't say...

(CROSSTALK)

STEELE: I love talking about McCain, but I wouldn't go there.

DUKAKIS: No, no, no.

Obama's — why is it that people like Ron Paul and Pat Buchanan so strongly oppose the Iraq war?

ALAN COLMES, CO-HOST: Yes, that's true.

DUKAKIS: Because they're genuine conservatives.

COLMES: Hey, Governor.

DUKAKIS: Something John McCain is not. I mean, so let's get off the labels, and let's see if we can focus on what these candidates really stand for and what kind of leadership they'll bring to the White House if they're elected. I think that's what's important.

COLMES: Governor, it's Alan Colmes. Good to have you back on "Hannity & Colmes". It's been a while. Good to see you, sir.

DUKAKIS: Alan, good to talk with you.

COLMES: You know you're one of the few people who's been a nominee of a major political party, it's a very rarefied club.

What advice, having been there, do you have for Barack Obama?

DUKAKIS: Well, I'd say two things based on some very serious mistakes I made 20 years ago, Alan.

First, expect the attack campaign to begin. It already has. And it's going to be a daily thing, and you've got to be ready for it. It's something, which as you know, I failed to do very well.

And secondly, this party of mine, not just Barack Obama, but this party of mine, has got to organize every single one of the 200,000 precincts in the United States of America. Forget about this red, blue nonsense. And get out there and get organized at the precinct level.

Now we have the ability to do that, the process had begun, but I think it is very, very important. This thing is not going to be won on television. It's going to be won in precincts and neighborhoods.

He has the capacity to do that. He's got tremendously enthusiastic folks who want to work for him, and we've got to do that and do it fast. I mean time's a wasting and we've got to get that organization set up and moving.

If we do both of those things, then Barack Obama is going to be the next president of the United States. I don't have any doubt about it.

COLMES: It's interesting, I've talked to you a couple of times since your run for the presidency, and you've always had a very, kind of ironic look at what happened. You're very forthcoming about mistake you've made.

Do you replay that a lot in your mind? Or — it's got to be.

DUKAKIS: No, I don't.

COLMES: Yes.

DUKAKIS: Alan, I'm not one of those guys that replays stuff, but I want Senator Obama to win this election. I think we desperately need new leadership of the kind that he can provide.

Now how do you do that?

Well, one of the things, as the Greeks say, you know, we got our old saying, (speaking in Greek), you're supposed to learn from your experiences, and unfortunately both I and John Kerry had some tough experiences, and we lost.

Now there's no sense in repeating that kind of thing. We know the Republican attack machine is already doing its thing, and I don't think there's any question that the Obama campaign and the candidate himself understands that and they're going to be ready for it.

But the second thing, and I can't emphasize it enough, is organizing at the grass roots. We've got to do that. This is something where real Americans got to be out in the street, in their neighborhoods, knocking on their neighborhood's — neighbor's doors in a very serious way.

COLMES: Yes.

DUKAKIS: And if we do that in every single state in the country, we're going to win this one.

COLMES: We're going to pick it up in just a moment with Michael Dukakis right after the break.

(COMMERCIAL BREAK)

COLMES: And we now continue with the former presidential nominee of the Democratic Party, Michael Dukakis.

Governor, we're going to talk in just a moment about vice presidential choices. What do you think Obama should do?

DUKAKIS: Well, he's got to go through a very careful process. I made a lot of mistakes in 1988. I think one of the things I did best was to pick my running mate when I picked Senator Bentsen. And frankly, if I'd run a better national campaign, he could have made the difference.

But you've got to go through a very careful process. I mean it's hard to describe. But let me tell you, you've got to do that. You've got to look at lots and lots of people, you've got to invite suggestions from anywhere and everywhere, and you gradually begin to winnow that list down.

COLMES: Yes.

DUKAKIS: In my case we winnowed it down to four, then we put together investigating teams on each one of these four people. Every one of them would have been a fine running mate.

COLMES: Is there anybody who stands out now that you think would be a great choice?

DUKAKIS: No — I wouldn't even begin to venture there, not because I don't want to, but because I think this has to be a decision which the candidate makes after a lot of thought, a lot investigation, a lot of work, and then you make a decision.

And all I can tell you is this: if you do the process right, you'll pick the right person.

COLMES: Where's McCain most vulnerable?

DUKAKIS: Well, I think there isn't much about John McCain which suggests that we're going to get any significant change from what we've gotten from the past years under George Bush, and I think that's where he's vulnerable.

McCain, eight or nine years ago, was a guy that was independent. He broke with the administration on a number of things. These days his policies, his positions are almost indistinguishable from the Bush administration.

And I don't see how you're going to win with that kind of approach to the presidency and to the campaign. So I think that's where he's principally vulnerable.

On the other hand, let me tell you something and nobody knows this better than I do. These poll numbers are absolutely worthless at this point. This is going to take work, it's going to take effort, it's going to take the most intensive grass roots effort Democrats have ever, ever attempted.

If we do it, we're going to win, but.

COLMES: Yes, you.

DUKAKIS: . nobody's going to hand this thing to Barack Obama in a silver platter. And he knows it.

COLMES: You have humbly mentioned a couple of times tonight your mistakes.

What can Democrats, and specifically Barack Obama, learn from mistakes that you feel could be of value to this.

DUKAKIS: Well, I've mentioned one of them, and that was a deliberate decision I made, as you remember, not to respond to the attack campaign. You just can't do that. And it's pretty clear he's not going to do that.

STEELE: Governor, this is Michael Steele here.

DUKAKIS: Yes.

STEELE: I really appreciate what I've seen from the Democrats over the past six or so years. They've really learned their lesson from 1994. They've found what I call Trojan horses, Democrats who are, you know, almost like conservatives in many respects. You look at Virginia and Pennsylvania and the elections they've had there.

How does this new Democrat approach square with Barack Obama's certainly more liberal and — as you know, considered the most liberal member in the Senate? How does that line up? How do those blue dogs work with, you know, a dog like Obama, a lead dog like Obama?

DUKAKIS: Michael, you can't get off that label.

STEELE: No, I think it's important. Labels mean things.

DUKAKIS: No, but wait a second. Look at the country's fiscal condition today. When Bill Clinton left office, we were on our way to the elimination of the national debt. Remember?

STEELE: I do.

DUKAKIS: Now we have a national debt which is double what it was when George Bush took office, and it's going to be our kids and grandkids that have to pay it off.

But what is conservative about that?

Now Obama is a guy who believes you've got to pay your bills. I happen to believe you got to pay your bills.

STEELE: Yes, but he — yes, he wants to pay everybody else's bills with my money.

DUKAKIS: I think that's a rather conservative position. But don't tell me — of course it's our money. But it's also our Social Security, it's also on the roads, it's also our house.

STEELE: No, it's my money. It's not our money. It's my money.

DUKAKIS: Well, it's your money, but it's also your country.

STEELE: That's right.

DUKAKIS: It's your kids and it's your grandkids.

STEELE: That's right.

DUKAKIS: And everything I've seen about McCain's approach to this suggests that if anything he's going to increase the national debt.

STEELE: No.

DUKAKIS: Now what's conservative about that?

STEELE: There's a lot there in the.

DUKAKIS: So I think we got to get off the labels. Take a good hard look at what these are really talking about. If we do that, Obama's going to win this election because the overwhelmingly majority of the American people are with Obama when it comes to his approach to this, not McCain.

STEELE: But let me ask you, Governor, I'm really intrigued by this idea that all of the sudden labels don't matter because, you know, the left didn't seem to have a problem throwing around right wing conservatives, you know, conservatism as a pejorative term, taking out of context the quotes of Republican leaders, and you know, painting images of them and labeling them as racists, you know, turning back the clock on civil rights.

So why now all of the sudden doesn't that matter? Why don't these labels matter all of the sudden now that you've got a way left of center candidate leading the Democratic Party?

DUKAKIS: Who's a way left of center candidate?

STEELE: Mr. Obama.

DUKAKIS: I think you're delusional.

STEELE: So most.

DUKAKIS: I think you're delusional.

STEELE: Well, then, let me ask you then why is he identified as the most liberal member of the United States Senate?

COLMES: By one group.

STEELE: By one — well, they're 92 percent.

(CROSSTALK)

DUKAKIS: This was the one guy I know running for the presidency who strongly opposed this stupid war.

STEELE: Yes, we can have that discussion later.

DUKAKIS: Is that liberal? No, no. I don't think — well, ask the American people what they think about this war. But he was somebody who strongly opposed it. That was a very conservative response to what I think was a very dumb decision.

STEELE: I appreciate that, Governor. We've got to move on to some other stuff.

It's good to have you with us.

DUKAKIS: OK.

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