This is a rush transcript of "Special Report With Brit Hume" from September 8, 2008. This copy may not be in its final form and may be updated.


UNIDENTIFIED MALE: He took on the drug industry. She took on big oil. He battled Republicans and reformed Washington. She battled Republicans and reformed Alaska.

They'll make history. They'll change Washington. McCain-Palin — real change.

UNIDENTIFIED MALE: They call themselves mavericks. Whoa. Truth is, they are anything but. John McCain is hardly a maverick.


JIM ANGLE, GUEST HOST: Dueling ads today as we get lots of new poll results, giving the latest snapshot of the race. And it's now clear this race is very tight, and that McCain has been surging in recent days.

In a brand-new FOX News-Rasmussen poll of five key battle ground states McCain is viewed more favorably in all five, he is trusted more than Obama in all five. But in the horse race numbers, they split the states, with McCain ahead in two. In one of them, Ohio, he leads 51 percent to 44 percent.

They are even in Florida, and Obama is ahead in two others by three points or less.

There is also another poll out today from USA Today, Gallup showing McCain ahead with likely voters by 54 percent to 44 percent.

Let's put all this to our panel — Fred Barnes, executive editor of The Weekly Standard, Mara Liasson, national political correspondent of National Public Radio, and syndicated columnist Charles Krauthammer, FOX News contributors all.

What is going on here? Is this just a convention bounce or something more — Charles?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: I think it's the Sarah surge. I think what's really happened here is you had McCain as a candidate who, unusually among candidates or parties, was sort of grudgingly accepted, had very little support and no enthusiasm in the base.

He basically was an accidental candidate who lucked out in the — in the earlier elections because his rivals knocked each other out in sequence, so it worked out for him.

But the designation of Palin had an electric effect, as we saw in the convention. And I think it explains in part the rise in the polls, and that is there are a lot of Republicans who are either disaffected or soft Republicans who, I think, are saying "yes" on the McCain ticket now who would have said a week or two ago "no" or "undecided."

Also, she has remarkable appeal in the sense that. unusually for a candidate who energizes the base, she also has an appeal in the center, and that is the Reagan Democrats who are attracted to a moose hunting, god- fearing, tax-cutting mother of five. She has a cultural affinity with them in a way that a lot of other candidates don't.

So she appeals right and center, again unusual, and I think it's responsible for the surge here.

ANGLE: Mara, you know it was interesting in talking to a lot of people at the Republican convention. One woman told me, "You know, McCain is a maverick and that's a good thing, but we never quite know where he is going to come out except on military matters."

And for some reason, they found great reassurance in Sarah Palin.

LIASSON: Sarah Palin is a lot more doctrinaire, and culturally she is a lot more in sync with a lot of the base of the Republican Party, and certainly the Republicans who were in St. Paul.

I am not convinced yet — I don't know yet whether this is a bounce or this is a real surge. Bounces usually dissipate, and I think in about a week we'll know that.

What we do know s she energized the base. That was something that he had to do. Usually candidates do it before the convention, but at least he got that done. And now he has a chance to go after those independents. I haven't seen evidence that she is helping him appeal to independents yet.

But her potential is there. Certainly all those Wal-Mart moms, you would think she would be tailor-made for them. But I think that McCain now has, maybe, if he wants to, some running room to move back to the center, where independents can be appealed to, to beef up his economic message, which I would say is almost nonexistent at this point.

I'm surprised he has done so well without one. That's one of the things that puzzles me.

But I do also think, in terms of these polls today, especially the "USA today-Gallup," we have seen this before. They have one of the tightest screens for likely voters. McCain has done better in that poll than almost any other one.

But it certainly was eye popping to see him 10 points ahead with likely voters.

ANGLE: Fred, one interesting thing is that obviously it is true that McCain cannot win with just Republicans. But he certainly couldn't win if he didn't get all the Republicans, and eventually picked Sarah Palin. That was the case.

FRED BARNES, EXECUTIVE EDITOR, THE WEEKLY STANDARD: He can't run a campaign relying on his base, but he has to have his base. The base is a little smaller. The Republicans have shrunk since 2004.

You know what I think. I'll bet Obama and his strategists are sitting around somewhere saying "Should have taken Hillary." Biden has given them nothing whatsoever.

Look, I don't know whether Sarah Palin and Republicans should be confident about the debate on October 2 between Biden and her, but they are not worried at all about it, and I think they'll do fine. And I think they will do fine.

Look, it is very difficult for the Obama people to break the idea that McCain is a maverick. This is an image that has been, I think, deeply rooted over the years. It's one the media has bought. Now it's one that he's trying to sell. I think it is very hard to uproot that now, very difficult.

ANGLE: OK. When we come back, we're going to look at the number one issue in this election, that is the economy, and figure out whether McCain is making a dent in Obama's advantage on that issue. We'll talk about that when we come back.



SEN. BARACK OBAMA, PRESIDENTIAL CANDIDATE: I think we have got to take a look and see where the economy is. I mean, the economy is weak right now. I want to accelerate those tax cuts through a second stimulus package, get more money into the pockets of ordinary Americans, see if we can stabilize the housing market.

And then we're going to have to reevaluate at the beginning of the year to see what kind of hole we're in.


ANGLE: OK, there is Barack Obama suggesting he might not raise taxes after all if we were in a recession were he to take office in January.

And back with our panel now. The most forceful argument McCain has made against raising taxes, the one that appeals to the most people, is that it would hurt if we were in a recession.

Fred, is Barack Obama having second thoughts about raising taxes?

BARNES: Well, I think so. Look, the economy is weak. You don't have to be Milton Friedman to know that if it's weak, you don't raise taxes and have more protectionism. And that seems to be his economic plan at the moment.

What you do is you cut taxes and you have more trade. Right now we have a weak economy. What is really holding it up more than anything else? Exports — a great amount of trade. Doing away with that would be crazy.

Look, from any economic standpoint, if you want to stimulate the economy, what he has talked about so far wouldn't do it. No wonder he is backing away.

ANGLE: Mara?

LIASSON: No, look, I think that Obama has a whole array of middle-class tax cuts — a lot of them, a lot more than John McCain.

What I'm surprised at is that it took him so long to kind of back off from the tax hikes on the higher income Americans, because the one potential kind of problem for him in a downturn, usually Democrats benefit across the board, but the one potential downturn is calling for tack hikes in a bad economy.

And I think he's smart to do that. I'm surprised he didn't do it earlier. I think he also needs to beef up his economic message.

I think it's an amazing election where the number one issue is the economy and neither candidate has yet really connected with the economic pain of working families. The fact that it's still a jump ball surprises me.

ANGLE: Charles, before I ask for your answer, let me show you some numbers from the "USA Today-Gallup" poll which showed that in their last poll, 55 percent said Obama was the better person on the economy, only 36 percent McCain. That was a 19-point difference. That gap is now down to three points.

Has McCain said anything different about the economy? What accounts for the fact that you suddenly get a poll that has that much movement on the question of who would be better on the economy?

KRAUTHAMMER: It's entirely inexplicable, and it tells you that all of these so-called "internals" are largely worthless. McCain said nothing in his speech at the convention of any interest or specifics having to do with the economy. He was not persuasive. If anything, Obama, who had certain elements of cuts in his — in his speech, had the more attractive package.

So it wasn't the programs as laid out over the last two weeks. This is simply a generalized effect. People liked what they saw at the convention, McCain and Palin. And this is a lifting all boats. On all issues, if you like your guy, you will say he is OK on the economy, he's OK on foreign affairs, he is OK on global warming. It doesn't matter.

They like the ticket, and that's what's happening.

And on the Obama retreat on taxes, I think it's an acknowledgment of reality. But he still has the argument that ultimately he will repeal the cuts for the wealthy, as he puts it, but it's simply a matter of timing, whereas McCain has waited to a retention of those new brackets which Bush had instituted, and I think it's still a strong element of his campaign.

ANGLE: What do you think, Mara, just warm and fuzzy feelings about Palin?

LIASSON: I think one of the other problems is if you get rid of your tax hikes, how are you going to pay for all the other stuff? I don't think he was taxing the wealthy because he liked to do it. I think he was trying to pay for all those other programs.

ANGLE: But in a campaign, you can abandon all that.

BARNES: Many of his tax cuts are actually checks being mailed out. He calls them tax cuts. They are really payments to people.

Here is the problem with raising taxes on the rich. How do you really get out of recessions and weak economies? You increase investment. Investment comes — sorry, folks — it comes from the wealthier people in this country. You raise their taxes, you are going to get less investment. That's not a good policy.

LIASSON: On those polls, in terms of the internals, I think a post-convention poll that is basically measuring a bounce is not that reliable for all these internals.

ANGLE: And, as you said, we'll know next week.

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