This is a rush transcript of "Special Report With Brit Hume" from October 24, 2008. This copy may not be in its final form and may be updated.


MICHELE OBAMA, SEN. BARACK OBAMA'S WIFE: It will be close. Don't be fooled. We do not look at the polls. We don't listen to anything. We know that every moment counts. We take nothing for granted.

What I know is that Barack Obama will be the underdog until the day he is sitting in the oval office.

CINDY MCCAIN, SEN. JOHN MCCAIN'S WIFE: I rea lly think we're going to win this. I feel really good.

John and I have been able to gauge a lot of things through the years, and what we see is what's in the crowds. We can tell in states, in places that we weren't doing very well, but we could see it and feel it. But we have had phenomenal outpouring of people. I mean, they're really excited.


BRET BAIER, HOST: There you see the wives of the presidential candidates today — Cindy McCain in an interview with Carl Cameron and Michelle Obama in Ohio.

As we look at the race, the polls are all over the place. The Gallup daily tracking poll came out 50-42, that's an eight-point spread. It was seven just yesterday. Associated Press poll, the most recent one, 44-43. That's a one-point spread, obviously.

CBS news / New York Times, poll, 52-39, huge spread there. And then the average, the Real Clear Politics average, 50.2 to 42.8.

So what about all of these polls, the state of the race, and the developments this week? Some analytical observations from Fred Barnes Executive Editor of The Weekly Standard, Mort Kondracke, Executive Editor of Roll Call, and syndicated columnist Charles Krauthammer, FOX News contributors all.

Fred, polls obviously at the end of races, throughout races, often are all over the place. You look at the average for where most of them are. What do you think explains some of these variations from one point to 14 in the CBS / New York Times poll?

FRED BARNES, EXECUTIVE EDITOR, THE WEEKLY STANDARD: Well, you get different samples depending on who is doing the polling. Some pollsters wait, you know, decide, well, we don't have enough Democrats in here. We have to give a greater weight to that.

And then you just have the normal thing, Bret, where you will get — if a candidate is really about five or six points ahead, the way I suspect Obama is, you will get some below that and some above that. And it's really quite normal.

You wouldn't expect every poll — now we know there are dozens of them now, many by polling outfits we don't know whether they know the time of day about campaigns. But, in any case, they come up with numbers.

In any case, I think we can safely say that Obama is ahead by five, six, seven points. I certainly believe that.

And then there was a time when people covered campaigns when you didn't have all these polls and you got a feel for a campaign. And if you're good at covering politics, I think you could get a fairly accurate feel. And certainly this feels like an Obama lead.

BAIER: Mort, we saw today Michele Obama again urging caution. We heard that from Barack Obama earlier this week and the campaign.

But today David Plouffe, the campaign manager, had a conference call which he talked about confidence in the different states. Take a listen.


UNIDENTIFIED MALE: It's just cold hard numbers. In order for McCain to win Pennsylvania, he is going to have to win at least 15 percent of the Democratic vote, 95 percent of the Republican vote, and 60 percent of the Independent vote.

And we believe McCain is losing independents by about 20 points right now in Pennsylvania. So he would need a 40-point swing.

BAIER: Mort, do you buy those numbers?

MORT KONDRACKE, EXECUTIVE EDITOR, ROLL CALL: Every poll conducted in Pennsylvania shows a significant Obama lead. McCain has been going there, and it is rated as solid for Obama.

McCain has been going there, and it's rated as solid for Obama, McCain has been going there hoping to steal it away. I don't know on what basis, but presumably there is some internal polling in the Republican side that shows that they have a chance there.

But, look, if you take the Real Clear Politics averages of the state polls, McCain is 113 electoral votes short of 270. He is going to have to take all the tossup states, all the states that are leaning in Obama's direction, and he'd have to run the table on all of it. I mean, Ohio, Florida, Virginia, Colorado, New Mexico, and just take them all.

And the chances of doing that-in a lot of those states, Obama is not yet over 50 percent even though he is leading McCain. But, again, as I say, he would have to win everywhere. And I just don't see how he puts it together.

BAIER: Charles, what about the developments this week? We heard Joe Biden earlier in the week, Sunday, talking about the possible crisis in the first six months of an Obama presidency. Now it is a part of a McCain campaign ad.

Did that shake things up at all? What about the developments this week?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: I don't know if it shook up things, but it sure gave McCain his only real opening. His only real opening is that at the last moment people will step in the booth and they'll think twice about electing a newcomer. That's McCain's only hope.

And the reason why Obama is ahead is because in the four and a half hours of debates. He stood up there and looked fluid and comfortable, presidential, and he overcame a lot of that, perhaps all of it.

But I think McCain has to keep harping on the question is he ready, is he prepared. And when you get Biden himself saying that he is young and inexperienced, Obama, and thus that in and of itself will provoke a crisis, you have an opening.

I just don't want to add that after hearing Michelle Obama say we don't look at the polls, and seeing Cindy McCain saying I think we're going to win, you wonder if after 20 months of this campaign, is anyone able to tell the truth anymore? Even the wives, apparently, can't.

It's quite remarkable. It's hard to see, if you look at the map of McCain, all you can say is that if he closes three or four points nationally by harping in on the issue of say, preparedness, or perhaps taxes and spending, or his liberalism, then it will tighten everywhere.

But it has to be a real shift in momentum, and it's hard to see how it's generated internally in the absence of remarkable external events.

BARNES: There is one thing that is very telling today. There is one candidate who is visiting his grandmother in Hawaii, and there's another candidate who's out campaigning madly.

Now, obviously the one visiting his grandmother thinks he's ahead and is going to cruise to victory. That's Barack Obama. So, despite what his wife said, if he thought that his election were really in great jeopardy, he wouldn't be visiting his grandmother in Hawaii, which is a safely Democratic state.

KONDRACKE: The Obama people are haunted by the example of New Hampshire, where everyone said that he was going to beat Hillary Clinton, and he ended up losing by two points. They do not want people to get complacent.

KRAUTHAMMER: Sarah Palin has to shed a tear in a coffee shop somewhere.

BAIER: Had to get the last word in there.

Another rough week in economic news. Will the massive rescue plan kick in? What about a second stimulus package? We will talk about all that with the panel when we come back.



DANA PERINO, WHITE HOUSE SPOKESWOMAN: We did today receive a bit of good news in the housing sector. We're not out of the woods yet by any means when it comes to falling house prices and our fundamental problem of an oversupply of homes but we're getting nearer to the bottom every day.

And so we just can't make any promises, but we do think that we have the right tools in place to help get this back to a place where we need it to be.


BAIER: The good news today was sales of existing homes went up the largest amount in five years, 5.5 percent. Analysts say not to read too much into that because it comes after this big downturn in the economy.

That was Dana Perino today. Yesterday she talked a little bit about the gross domestic product from a White House that has been loath to talk about a possible recession.


PERINO: We're in for a rocky road on the employment front, and we expect our GDP next week not to be a good one, and the next quarter could probably be tough as well.


BAIER: So, some tough words from the White House. What about the rescue package and how long it's taken to get into effect and what may be on the agenda now?

Mort, is it happening fast enough for this market? We saw the market down about 300 today.

KONDRACKE: Yes, well, the futures market this morning suggested that it was going to be down, you know, at least 500, and they even stopped trading on the futures market. So I was expecting 1,000 points today. So 300 is good by comparison.

But, look, I was having lunch with a private equity — big private equity firm, and the gloom and doom was incredible. They were predicting one to two years of negative growth, two to four percent. You know, that's a lot longer recession, deeper recession than Dana Perino is talking about. She's talking about maybe next year coming out.

So what's happened is that the credit markets have freed up a little bit, so there is a little bit of interbank lending and that kind of thing going on, but they haven't really yet put a bottom under housing prices.

And we've got a recession going, and there's a panic underway. And everyone thinks that everyone else is going to sell, so they sell. And until we hit bottom and begin coming up, and lord knows when that's going to be, things are going to be grim.

BAIER: Charles?

KRAUTHAMMER: I think you have two kinds of gloom and doom.

A month ago, it was the worry about the existence of the system itself. People were worried there would be a freezing up of the credit markets. You weren't sure if the bank you were lending to would be around in the morning, and if you could trust a counter party in any transaction.

There was a sense of the system crashing around you. The money market funds you might have had weren't safe, nothing was safe.

All of that is a result of the government intervention, the massive intervention, and the guaranteeing of the money markets, of bank deposits, the banks, and of the insurers now. It's given a sense that the market and the system will be there in the morning.

The gloom that you have is a response to real economic news, and it's traditional. If the economic news is lousy, earnings will be low, and then shares will drop.

So at least it's sort of a rational reaction to what Mort is talking about, a prolonged recession. But it isn't a panic that everything will be gone, nothing is safe, and everything you own will be worthless in the morning. I think it's a different feel. It's gloom, but it's not a panic as we had a month ago.

BAIER: Fred, Democrats up on Capitol Hill are really pushing for this second economic stimulus package that may be huge, even holding a hearing today. Take a listen.


REP. GEORGE MILLER, (D) CALIFORNIA: It is urgent that we prepare now to take the next steps to rescue the economy by creating jobs, providing for immediate relief to the states and small businesses, and make real investments in energy, technology, and education.


BAIER: That was Representative George Miller.

We also heard today from Representative Barney Frank, the Chairman of the House Financial Services Committee. He called for infrastructure projects, healthcare expenses, food stamps, extended unemployment benefits.

And he told the editorial board of the Standard Times that he is also calling for a 25 percent cut in military spending, saying, also, that taxpayers are going to see an increase in what they're asked to pay, quoting here, "We'll have to raise taxes ultimately. Not now, but eventually."

A lot of talk about this second package and what is going to come possibly in a lame duck congress.

BARNES: Well, you hear the stuff they're talking about, and it deals with the symptoms and not with the problem.

And the idea of more food stamps and extending unemployment benefits and aid to the states because they have spent too much and they have deficits and so on, that's not going to help.

Mort's a big believer in infrastructure. Remember the New Deal? You know what happened. They built infrastructure and built all those great highways along the coast of California that are wonderful. In the New Deal, the economy was worse in the late '30's than it was in the beginning.

So that's stuff is not going to work. Only one thing works, and that is you increase incentives for investment, you get more investment, and then you can get out of a recession. It doesn't look like any of that is in this package.

BAIER: That's it for the panel.

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