This is a rush transcript from "The Beltway Boys", October 25, 2008, that has been edited for clarity.

MORT KONDRACKE, CO-HOST: Coming up on "The Beltway Boys," Barack Obama sitting pretty in the polls right now but will he finish strong on election day. That's the worry among Democrats and John McCain's only hope.

FRED BARNES, CO-HOST: The first rule in picking a running mate, first, do no harm. We'll tell you if that applies to Sarah Palin and Joe Biden.

KONDRACKE: Will the next president inherit a recession? It's looking increasingly likely as the economy continues to falter.

BARNES: John Murtha steps in it big time. We'll tell you if his latest gaff could cost him his House seat.

KONDRACKE: All of that is coming up on "The Beltway Boys" right now.

BARNES: I'm Fred Barnes.

KONDRACKE: I'm Mort Kondracke. And we're "The Beltway Boys."

The first top story is almost over. That, of course, is the presidential election.

BARNES: I guessed as much.

KONDRACKE: The economy keeps getting worse and John McCain's fortunes are sinking with it. The latest FOX poll shows that Obama leads McCain by 9 points in a head-to-head matchup among likely voters. That's up from 7 points among registered voters two weeks ago. Obama also leads by 9 points among Independents.

If you look at the Electoral College scoreboard according to Real Clear Politics, it shows Obama 360 votes, 270 needed to elect, to McCain's 157. There are 75 tossup votes.

The latest polls from various states show swing states all moving in McCain — Obama's direction. So...

BARNES: Wait a minute, Mort. I wouldn't say almost over. I would say almost maybe over. And, look, if McCain suddenly got hot, which he's not right now, it wouldn't be unprecedented for him to have a huge momentum and still win this election. It wouldn't be unprecedented and it is conceivable, but with the stock market not working in his favor for sure. With the media being in, you know, breathlessly pro-Obama mood, and then the money advantage that Obama has which is really telling now, all that makes it very difficult. I'd say McCain's chances are slim.

KONDRACKE: Right. Last week we talked about how John McCain could get back into the game. So this week here's what we think that Barack Obama needs to do to bring it home on Election Day. Number one, make no major mistakes. I have to say that this has been next to a totally error- free campaign on Obama's part. The only mistake I can think that he made was that San Francisco fund-raiser where he said that rural voters are bitter and therefore they love their guns and go to church, which was an elitist kind of remark.

What he said to Joe the plumber that he wanted to spread the wealth around, McCain's trying to milk that every since. But nobody thinks that's a major gaff.

BARNES: Nobody?

KONDRACKE: Well, John McCain doesn't.

BARNES: Yeah. His campaign staff does because they've put together an ad on it. Watch.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN, (R), PRESIDENTIAL CANDIDATE: What are really skewed in all of this are my opponent's priorities.

(APPLAUSE)

He talks about our economy in a detached and academic way forgetting that the goal is not to redistribute wealth but to create it

(CHEERING)

(END VIDEO CLIP)

BARNES: If you notice, Mort, that was not an ad.

KONDRACKE: It was a speech.

BARNES: It's actually a speech. But, anyway, my point's the same. McCain at least has seized on that theme and I think it's a good one. I don't think that's going to catapult him to the White House but you're right about no major mistakes. I have never seen a candidate for president this disciplined. And, of course, Barack Obama's a rookie. But here's how he's lucky. You mentioned that San Francisco speech. You know why he's lucky, no video. If there had been video, McCain would have been talking about it this week and that would have hurt him badly. But turned out, no video.

KONDRACKE: Do you suppose an error-free campaign means an error-free presidency?

BARNES: I doubt it.

KONDRACKE: I pray so but I doubt it, too.

Number two, Obama has to turn out his new voters. And there are two very important voting groups that Obama has to get to the polls: young people and African-Americans. Right now Obama has a 25-point advantage over McCain in the youth vote in our latest FOX poll. In 2004, Kerry won that group by only nine points according to exit polls. When it comes to the black vote, Obama now leads McCain 87-7 in the FOX poll although I'm sure he'll go well over 90 percent. In 2004, Kerry won the black vote by about the same margin as the poll shows. I doubt McCain's going to get 11 percent of the African-American vote.

Bush beats Kerry by three million votes nationwide. If Obama is able to turn out 65 percent of younger people and 65 percent of blacks versus 50 percent and 55 percent in 2004, just those two groups will pick up seven million votes. You know, more than double what Bush won by.

BARNES: That's true. But, look. Here's another point that actually buttresses what you're saying. You remember in 2004, Kerry had a great ground gain himself, John Kerry did, where there were paid volunteers. He let those independent groups register and get Democrats to the polls, a great ground game, only topped by this army of volunteers that George W. Bush turned out. Money matters and I think Obama will be a better gain than John McCain did in 2004. The problem is McCain is not going to have the kind of ground game that George W. Bush had, so when you get to this turn out thing, it's all to Obama's advantage.

KONDRACKE: And Obama's got lots of volunteers. A lot of those people are not paid, most of them, in fact.

BARNES: Money will get millions of people to the polls.

KONDRACKE: Yes.

Third, Obama needs to stay on message. Right now it's the economy. Here's Obama this week.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA, (D), PRESIDENTIAL CANDIDATE: The change we need won't come easy. It won't come quick. They've dug a deep hole for us. We're going to have to work our way through a lot of these problems.

This country and the dream it represents, what that flag represents, it's being tested in a way we haven't seen in nearly a century. Future generations will judge us how we responded to this test.

(END VIDEO CLIP)

BARNES: He is a very disciplined guy. Once again, he's good staying on issue and good staying on issue while being very vague about it. That's sort of his trademark, being vague on all these issues but you know which side he's on.

Look, the economy, he doesn't need to harp on the economy. The bad economy is driving people to him anyway. That's the way it happens. If the economy's bad, if the stock market's in trouble, if unemployment is rising, if we're heading into a recession or may already be there, I mean, it helps the out party. He's the presidential candidate of the out party.

It doesn't mean, however, that these voters who might be flocking that way are endorsing the liberal agenda. That may be how the next Congress interprets it and maybe Obama as well. It doesn't mean that. It doesn't mean there is a mandate.

KONDRACKE: Look, what we saw there is what I think the end game is going to be like, is the uplift. We can conquer this problem. We're all in this together, et cetera, et cetera. The negative message, which he's sticking on, is that John McCain equals George Bush's third term. And nobody wants that. John McCain doesn't even want that. He's been out thrashing George Bush as well.

BARNES: I'd like to see Bush's first term again.

KONDRACKE: And, lastly, Obama has to finish strong. Not exactly his strong suit if you look at the performance during the primary season against Hillary Clinton. Here's Obama warning his supporters. Watch.

(BEGIN VIDEO CLIP)

OBAMA: For those who are getting a little cocky, I just want to remind you Democrats have a way of stamping defeat from the jaws of victory. I remember what it felt like with al the polls I was going to win in New Hampshire, and I lost. We got to keep making the case for change. We've got to keep fighting for every vote. We have to keep running through that finish line.

(END VIDEO CLIP)

BARNES: He did have trouble in the finish like against Hillary Clinton in the late primaries. Look at the excite polls. When you get particularly to the last three days, particularly voters that defied it on Election Day, primary day, they increasingly went for Hillary Clinton and against Barack Obama. Obviously, there were doubts about Obama as the newcomer, and so on and maybe being too liberal that led them to vote for Hillary Clinton.

The other thing is that undecided, contrary to what a lot of people in journalism think, don't necessarily go with the challenge, the person in the out party at the end of the campaign in the last week. It's the candidate that has the momentum that will get these undecided votes. I'm not sure how many undecideds will be left then, but there will be some millions. So if John McCain has momentum, he can get them. Right now he does not have momentum.

KONDRACKE: He does not have momentum. I talked to somebody who was one of the top coordinators for the New Hampshire campaign, that Obama thought he was going to win and then lost by 2 percent. You know what the difference was? Young people, especially college students, who showed up at all that's rallies and cheered Obama did not show up to vote, which is why they've got to deliver them.

BARNES: It was all those Dartmouth students, right? It was those Dartmouth students among them.

KONDRACKE: Coming up, who's the biggest drag on the ticket, Sarah Palin on John McCain, or Joe Biden on Obama? Fred and I will duke it out next.

(COMMERCIAL BREAK)

(FOX NEWS BREAK)

BARNES: Welcome back to "The Beltway Boys."

Hot story number two, double trouble. Mort, Joe Biden, obviously Barack Obama's running mate, set a record for whoppers and inaccuracies in his debate with Sarah Palin back on October 7th. And now he has said — and this is the gaff maybe because it's true but a gaff anyway — Biden has said if Barack Obama's elected president, he will be tested, tested by some adversary of the United States provoking an international crisis. This is already prompted a response in an ad by John McCain. I think this really is an ad this time.

(BEGIN VIDEO CLIP)

AD NARRATOR: Listen to Joe Biden talking about what electing Barack Obama will mean.

SEN. JOE BIDEN, (D), VICE PRESIDENTIAL CANDIDATE: Mark my words, it will not be six months before the world tests Barack Obama. The world's looking for an international crisis to test the mettle of this guy. I guarantee you it's going to happen.

AD NARRATOR: It doesn't have to happen. Vote McCain.

(END VIDEO CLIP)

BARNES: It doesn't have to happen. You know, this was a problem for Barack Obama. And he was forced to respond to it lamely. Watch.

(BEGIN VIDEO CLIP)

OBAMA: I think that Joe sometimes engages in rhetorical flourishes. But I think that his core point was that the next administration is going to be tested regardless of who it is.

(END VIDEO CLIP)

KONDRACKE: Rhetorical remark. That was...

BARNES: Weak.

KONDRACKE: No, that means, Joe, shut up.

The new FOX poll shows that more people view Sarah Palin unfavorably, now 44 percent. That's up 17 points since the beginning of September. And that's compared to 57 percent who view Joe Biden in a positive light.

Now, you know, I once said that if John McCain got elected president I would pray every day for his health because of Sarah Palin. I now say the same thing to you about Obama and — with Joe Biden.

You know, I have two litmus tests for foreign policy unreliability historically. If you were in favor of the nuclear freeze which would have left the Soviets dominate with nuclear missiles in Europe, then you're unreliable. If you voted against the first Gulf War, which had a U.N. mandate and everything else, you're unreliable. Joe Biden did both of those things.

I think frankly if he were president, it would be dangerous for America.

But Sarah Palin on the other hand is not qualified either. I mean, she's tough, she's smart. She might be qualified some day but she ain't qualified now. And the idea of her wearing $150,000 worth of dresses, outfits from Saks Fifth Avenue and Neiman Marcus, it makes a laughing stock of the idea she's some kind of hockey mom populous. It makes her look like a phony. The next thing you expect is Joe the plumber to be outfitted in Armani.

(CROSSTALK)

KONDRACKE: First of all, it's low grade by comparison to Sak's Fifth Avenue.

BARNES: Let me tell you the truth about the so called shopping spree by Sarah Palin. She didn't go buy those clothes.

(CROSSTALK)

BARNES: Wait a minute! Wait a minute, Mort. Mort, will you let me finish.

KONDRACKE: Well — I will.

BARNES: She didn't go shopping. She's never set foot ever in her life in a sax or Neiman Marcus, which of course you have, probably frequently.

KONDRACKE: No, not frequently.

BARNES: She didn't ask anybody to go out and buy these clothes. She sent most of them back already and the rest will be given to charity. So the notion that Sarah Palin went on some shopping spree — they bought these while she was at the convention. Somebody else went out and bought them for her. She didn't ask them to do that.

KONDRACKE: She looked at the labels and saw Oscar de la Renta and she said that's not me? I don't think so.

BARNES: She sent a lot back, Mort. What was she supposed to do? She hadn't brought her whole wardrobe from Alaska.

KONDRACKE: She could have gone to Target.

BARNES: That's where she shops. That's the kind of issue that would appeal to you. And I'll explain why exactly why it appeals to you because I'm going to make a distinction here that I want you to — and I'll start with this. Sarah Palin, last Saturday was on "Saturday Night Live." Loren Michael is the long time executive producer of that show. Here's what he said afterwards.

"I think Palin will continue to be underestimated for a while. I watched the way she connected with people and she's powerful. Her politics aren't my politics but you can see she is a very powerful, very disciplined, incredibly gracious woman. This was her first time out and she's had a huge impact. People connect to her."

Everybody I know, who has met with her, interviewed her as I have for several hours, who's talked with her, who's worked with her in Alaska, Republicans who have worked with her on this campaign, they all say the same thing, that she's one of the most capable people, one of the smartest, one of the savviest that they've ever met, that she's fully qualified to be vice president. She can make up this knowledge gap she has. At least the things she will find out to be true unlike most of the things Joe Biden said. So there are all those people. Then there are the people who have never spoken a word to her. People like you, for instance.

KONDRACKE: I have...

BARNES: Or David Brooks. You never...

(CROSSTALK)

KONDRACKE: Whoa, whoa. I confess I have never met the lady...

(CROSSTALK)

KONDRACKE: However — just a minute — however, I have also said that she is tough — I never said she ruthless but I think she is ruthless and smart. And she's the future of the Republican Party.

BARNES: No, she's the future of — it's going to be hard from Alaska as vice president, she certainly would be.

All right. Mort lost that argument.

Coming up, Democrat John Murtha's an Obama supporter but his comments redneck Pennsylvania could help McCain in that swing state. We'll tell you how, next.

(COMMERCIAL BREAK)

KONDRACKE: back to "The Beltway Boys." It's time for the "Ups and Downs."

Up, a second stimulus package. with markets continuing in free fall and the economy diving into recession, momentum building on both sides of the aisle for a second stimulus package, especially after these remarks from Fed Chairman Ben Bernanke. Watch.

(BEGIN VIDEO CLIP)

BEN BERNANKE, CHAIRMAN, FEDERAL RESERVE: With the economy likely to be weak for several quarters and some risk of a protracted slowdown, consideration of a fiscal package by the Congress at this juncture seems appropriate.

(END VIDEO CLIP)

BARNES: Yeah. Look, he was way — Ben Bernanke was way out of line. She should have been stepping in there, endorsing a Democrat so-called stimulus package. I agreed to have an up arrow because it's probably going to happen. We're probably going to get one, but experience should mean something, Mort. We had a stimulus package earlier this year. Its impact was minimal. People got checks and they mostly didn't spend them. This one is even bigger, will be even more designed to please every Democratic special interest group.

And, Mort, we know how to stimulate the economy. What do you need when the economy's slow, when it's in recession? You need one thing. You need to provide incentives for more investment. Investment dries up. That why you have recessions. There's nothing, nothing in this bill as drafted now by Democrats that would spur incentives, provide more incentive and spur the economy to grow, to spur investment.

KONDRACKE: If I remember correct, growth was not negative at the time — in the quarters after the stimulus package. It did have an uplifting effect.

BARNES: But the estimate was it was tiny. It's been examined very closely. We know the results of that.

KONDRACKE: Did you hear Bernanke say protracted? I talked to big time investment...

BARNES: Protracted incentives. What's that?

KONDRACKE: Exactly, infrastructure. You've been saying that infrastructure takes too long to get started. If it's a protracted one to two-year recession that — infrastructure, roads, bridges and schools and that stuff is investment. Now, do I think that it ought to be...

BARNES: Stop it, Mort.

KONDRACKE: It is investment. It's called public investment.

BARNES: Oh, please, Mort.

KONDRACKE: It does put people to work.

BARNES: Has it ever worked ever?

KONDRACKE: Of course, it works. Of course it's working.

BARNES: In a recession?

KONDRACKE: And if you want tax cuts, that's something for George Bush to bargain for with congress. He's still in office, you know.

BARNES: All right. Down, John Murtha. The Pennsylvania congressman and Obama supporter is trying to redeem himself after calling people in his district racists. Murtha, who's Democratic seat it in real danger, tried to, quote, unquote, "clarify" those remarks by saying this, quote, "There's still folks that have a problem voting for someone because they are black. This whole area years ago was really redneck."

KONDRACKE: Murtha has always been ethically challenged, you know, ABSAM and all that stuff. He used to be a congressional heavy weight. Now he's become nothing but an embarrassment. But I have to say, McCain went through a Freudian moment, Freudian slip moment when he started talking about Murtha. Watch this.

(BEGIN VIDEO CLIP)

MCCAIN: Senator Obama supporters have been saying pretty nasty things about western Pennsylvania lately.

(BOOING)

You know, I couldn't agree with him more.

(END VIDEO CLIP)

KONDRACKE: Oops, oops. There was a big long silence and he got around to saying I disagree with him.

BARNES: Mort, what was the purpose of showing that?

KONDRACKE: The purpose? I think McCain, you know, thinks he's got to rely on some of that, what Murtha was talking about.

BARNES: A little slip of the tongue.

KONDRACKE: A Freudian slip.

BARNES: Please, that was nothing.

Look, the thing about Murtha that I remember is, you know, the Haditha slayings in Iraq, which he said 15 Marines had committed cold blooded murder, fourteen have had the charges dropped. One is actually suing him. This guy is reckless among other things.

Hang on to your seats. "The Buzz" is coming up next.

(COMMERCIAL BREAK)

BARNES: Mort, what's "The Buzz?

KONDRACKE: You know, Rush Limbaugh said that Colin Powell's endorsement of Barack Obama was based on race and race alone? That's just baloney. I've talked to Powell over time and I know that he thought that Barack Obama would improve America's relations with the world, but that he wasn't sure if Obama was ready to be president and he would wait to see whether he was. And he finally decided that he was and he finally endorsed him. It's got nothing to do with race.

BARNES: Mort, one of your heroes, New York City Mayor Michael Bloomberg, got the city council to return that limit on his term so he can run for a third term now. The voters, fortunately in New York, are a little wary of that. And you know why? You know why term limits are so valuable? Because politicians may think they're indispensable but they aren't. I'm for more terms limits, including in New York City.

All right, that's all for "The Beltway Boys" this week. Join us next week when the boys will be back in town.

Watch "The Beltway Boys" Saturday at 6 p.m. ET and Sunday at 1 and 6 a.m. ET

Content and Programming Copyright 2008 Fox News Network, LLC. ALL RIGHTS RESERVED. Transcription Copyright 2008 ASC LLC (www.ascllc.net), which takes sole responsibility for the accuracy of the transcription. ALL RIGHTS RESERVED. No license is granted to the user of this material except for the user's personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon Fox News Network, LLC'S and ASC LLC's copyrights or other proprietary rights or interests in the material. This is not a legal transcript for purposes of litigation.