The following is a partial transcript of the Oct. 12, 2008, edition of "FOX News Sunday With Chris Wallace":

"FOX NEWS SUNDAY" HOST CHRIS WALLACE: With just 23 days to go, how has the financial crisis changed the state of the race in key battleground states?

For answers, we turn to two leading governors — from Pennsylvania, Democrat Governor Ed Rendell, who backs Obama, and from Minnesota, Republican Tim Pawlenty, who supports McCain.

Governor Rendell, the latest RealClearPolitics average of recent polls in Pennsylvania — and let's put it up on the screen — shows Obama leading McCain by more than 13 points.

You said yesterday that McCain's campaign strategy is, to use your word, dumb. Explain.

PENNSYLVANIA GOV. ED RENDELL: Well, I think the message in Pennsylvania — and I think it's a national message — should be to the McCain campaign, "Look, before the economic crisis, this was a two-point race in Pennsylvania. Since the economic crisis has happened, it's blown out to 13 points."

Now, Chris, I don't believe it's a 13-point race. I believe it's tighter than that. But certainly, Senator Obama has lengthened his lead, and that should be a clear message to the McCain campaign that these personal attacks that — he's trying to describe Senator Obama as risky, or we don't know enough about him, or whatever it is — they are not working, because when the economy's in crisis, people want real answers.

Mr. Davis once said about a month ago that this campaign isn't about issues. Well, maybe that was the case before the economic meltdown. But now with the economic meltdown, it is about issues, and people want to hear what the candidates are doing.

And Senator Obama has performed far better than Senator McCain the last five weeks.

WALLACE: Governor Pawlenty, let's take a look at the RealClearPolitics average of recent state polls in your state of Minnesota, which shows a slightly closer race, Obama up by more than eight points, but that lead has lengthened in Obama's favor in the last couple of weeks.

Is that because Obama's — or rather, McCain's strategy of personal attacks going after Obama's character has backfired, or is it simply the fact that in an economic crisis, people are looking to the party that's out, and in this case that's the Democrats?

MINNESOTA GOVERNOR TIM PAWLENTY: Well, I think, Chris, Minnesota is always a state that in presidential elections leans a little Democrat. It's not impossible for a Republican to win here, and Senator McCain I think is going to close that gap, really for two reasons.

One is the point you made before the break. When people realize if they elect Barack Obama, they're going to have the entire nation run, imbalanced and without a check, by the Democrats — and I think people like balance, particularly in places like Minnesota.

And number two, when — if you're going to, you know, play the Super Bowl, you don't put a rookie in who hasn't played in the league before. John McCain has the experience, and the judgment, and the wisdom, and the maturity and the courage to lead this nation forward in the economic areas as well as the national security areas.

I think people are going to come back to that reality as they get closer to the election.

WALLACE: All right. Let's talk about this question of divided government, because I did some research on it.

Nineteen of the 31 elections since World War II have either produced or maintained a split government in the sense that the White House and at least one of the chambers of Congress have been occupied by different parties.

And voters seem to like that agreement, which raises the question, Governor Pawlenty, instead of going after Obama on William Ayres or ACORN, the left-wing voter registration group, would McCain be better advised to go after Obama and his links to Nancy Pelosi and Harry Reid and the idea that if they all get elected they'll pursue a left-wing agenda for this country?

PAWLENTY: Well, I think it is a fair question, Chris, to look at not only his associations, as it's been called, with people like William Ayres and others, but, you know, is he being forthcoming about the depth and scope of those relationships. And that's not the — you know, that's not the point that's been featured in these discussions.

You know, the fact of the matter is Barack Obama's political campaign in Illinois appears to have been launched in Bill Ayres' living room. And so has he been truthful about that? Has he been forthcoming about that?

But beyond all of that, to the point you raise, I don't think the country is going to like the Democratic Party running the table on taxes, on education, on health care, and have kind of the liberal unchecked imbalanced approach to all of those issues. It's going to be bad for the country.

I think having John McCain as president to balance that out and be able to work across the aisle, as he has throughout his career, to get things done would be a good compromise, a good balance.

WALLACE: Governor Rendell, don't middle-of-the-road swing voters have legitimate reason to worry about where an Obama White House and a Pelosi House and a Harry Reid Senate, possibly with a veto-proof majority, would take the country?

RENDELL: No, I don't think so, Chris, at all, and let me tell you why. I think Americans know we need our government to respond and respond quickly to the challenges we're facing, like the economy, like what's happening abroad, like the health care crisis in this country.

And I think they see the opportunity for a cohesive government to do something about that.

Let me tell you what a divided government does. Governor Pawlenty and I were the chairman and vice chairman of the National Governors Association together, and Tim was the chair and I was the vice chair.

We were trying to get the Congress to override the president's veto of the extension of the Children's Health Care Program. We couldn't get the override done, and as a result, 9 million children in this country are not going to get health care unless we can reverse that decision.

And that was because we had a divided government with two different philosophical views of things which couldn't mesh. You can talk about reaching across the aisle all you want, but on that, it was pure philosophy.

I want to say two things, if I can, about what Tim said. Number one, he called Senator Obama a rookie. I think you'll agree, Chris, that in those two debates with Senator McCain, Senator Obama looked anything but a rookie.

And then secondly, Tim talked about taxes. Well, the American people are finally getting the truth about taxes, and that is if you're a family that earns less than $250,000, not only is Senator Obama not going to raise your taxes, he's going to give you a bigger tax cut than Senator McCain will.

WALLACE: All right. Let's talk about the financial crisis, the market crisis, that we're in right now.

Governor Pawlenty, at the debate this week, McCain announced a new $300 billion bailout that would buy up all the bad mortgages, renegotiate them at lower prices, with taxpayers, not lenders, footing the bill.

Not only has this been hammered by Obama, but also from some staunch conservatives. For instance, Dan Mitchell of the Cato Institute said, "It puts McCain to the left of Obama. It just rewards people who were speculative and irresponsible and punishes people who were prudent."

As a fiscal conservative, Governor, can you explain why the taxpayers should end up footing all the bill for this $300 billion bailout, and the predatory lenders should basically come out even?

PAWLENTY: Well, Chris, first of all, on the proposal that you've referenced, Senator McCain believes that the money that the federal government is already going to be committed to spend shouldn't all go to bankers, and Wall Street types, and hedge fund managers and others, that some of it, a good portion of it, should go to Main Street America and rank and file Americans who are suffering.

So it's an effort to bring some balance to the package and the dispersion of the funds that already are going to be spent to Main Street rather than to just Wall Street.

He also realizes that if we don't do something to get at the root of this cause, which is declining home values, he believes that the problem is going to continue to spiral downward. So he's trying to get at the root cause, which is home values and bad mortgages.

If I could jump back to one thing Senator — or Governor Rendell said earlier, you know, in that divided government scenario, he and I were trying to deal with the children's health care issue, but it actually worked in the sense that Republicans were against tax increases, for the most part.

I, for one, and others, said, "You know, the president shouldn't be expected to sign those tax increases into law." And the benefits in that program were being extended to people who could make as much as $800,000 under — or, excuse me, $80,000 under certain scenarios.

So bringing some balance to that issue is important. We all are in favor of preserving those programs, but bringing some balance to how you do that — and had the Democrats been in complete control, there would have been imbalance. So that's a perfect example of trying to keep it in check, keep it in balance.

WALLACE: Governor Rendell, we've only got a couple of minutes left and I want to change subjects on you. No matter what Obama's lead is in this race, some analysts suggest that there is going to be a race factor, a racial factor, on Election Day, that some people who say that they're going to vote for Obama will not do so when they're in the privacy of the voting booth.

Now, during the Pennsylvania primary, you had this to say, "You've got conservative whites here, and I think there are some whites who are probably not ready to vote for an African American candidate."

You said that in your race two years ago against Lynn Swann, who's an African American, you felt that it probably cost him five points in the polls.

Are we talking about that big a factor, five points, that secretly is going to be lost in Obama's standing in the polls?

RENDELL: No, I don't — I don't think so, Chris, because the economic crisis has thrown all that out the window.

If you're drowning, and you're in the middle of the river, and you see a guy on the riverbank, and he's got a coil of rope, you don't care whether he's black, white, green, purple. All you care about — whether he has a strong enough arm to get that rope out to you in the middle of the river.

Barack Obama's got that strong arm. He's got a great plan to grow our way out of this crisis, with investments in infrastructure, investments in renewable energy, investments in life sciences, cutting taxes for the middle class, cutting health care premiums.

Those are the things that are going to turn this economy around, not what we do on Wall Street, but what we do in people's home towns. He's got a great plan.

PAWLENTY: Chris, I think on...

RENDELL: That's all — that's all people are interested in.

WALLACE: All right.

Governor Pawlenty, real quick, please.

PAWLENTY: Well, you want somebody who's going to throw the rope who's actually practiced it and done it before. Barack Obama hasn't led the nation on one issue of national significance. John McCain has.

You want the seasoned veteran, the grizzly, courageous, honorable, patriotic...

RENDELL: Hey, Tim...

PAWLENTY: ... person in there who's done this before. And Barack Obama has a lot of talent, but he's a rookie. He has not been in the big leagues in terms of leading the nation on national issues. And this is not a time to put the rookie in the game right on the day before the Super Bowl.

RENDELL: Hey, Chris, I have to do a little bragging on the Philadelphia Phillies.

Ryan Howard was a rookie, and I notice he hit the most home runs in the National League, more than a lot of those grizzly veterans, Tim.

WALLACE: All right.

Governor Pawlenty, Governor Rendell — and somehow I knew, Governor Rendell, you were going to get the Phillies into this discussion.

Thank you both. Thanks for talking with us. Both of you, please come back.

PAWLENTY: All right. Thanks, Chris.