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September 14, 2008

Tony Knowles, Sean Parnell, Karl Rove, Roundtable

Fox News Sunday

CHRIS WALLACE, HOST: I'm Chris Wallace and this is "Fox News Sunday".

The Sarah Palin chronicles -- she is the political story now. But what's the real story about her record and her reformer credentials? We'll ask two Alaska insiders who know her well, former Democratic governor Tony Knowles, who Palin defeated, and the current Republican lieutenant governor, Sean Parnell.

Then, a slew of new polls show a shift toward McCain. Is this a convention bounce, or more? We'll ask Karl Rove, the strategist behind two presidential victories.

Plus, with 51 days left, the Obama-McCain ad wars get downright nasty.

(BEGIN VIDEO CLIP)

NARRATOR: He admits he still doesn't know how to use a computer, can't send an e-mail, still doesn't understand the economy.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

NARRATOR: They said she was doing what she was told, then desperately called Sarah Palin a liar. How disrespectful.

(END VIDEO CLIP)

WALLACE: We'll review them with our Sunday regulars -- Brit Hume, Mara Liasson, Bill Kristol and Juan Williams.

And our Power Player of the Week, the big brother behind the first major memorial to the victims of 9/11, all right now on "Fox News Sunday."

And hello again from Fox News in Washington. Well, the excitement and furor over John McCain's vice presidential pick is still at full force, so we decided to take a closer look at Sarah Palin's record in Alaska.

We spoke earlier with two men who know her well.

(BEGIN VIDEOTAPE)

WALLACE: We're joined now by Alaska's lieutenant governor Sean Parnell, who comes to us from Anchorage, and the former governor of Alaska, Democrat Tony Knowles, who Palin defeated two years ago, and he joins us from Seattle.

Gentlemen, let's start with the central question. Is Sarah Palin ready to be vice president and potentially president? Here's how she answered that question for Charlie Gibson on Thursday.

(BEGIN VIDEO CLIP)

GOV. SARAH H. PALIN, R-ALASKA: On January 20th, when John McCain and I are sworn in, if we are so privileged to be elected to serve this country, we'll be ready. I'm ready.

(END VIDEO CLIP)

WALLACE: Governor Knowles, two years ago when you were running against Palin, you campaigned against her as an untested mayor of a small town. The voters of Alaska didn't agree with you then. Why should the voters of America believe you now when you say she's not ready?

KNOWLES: Well, Chris, the McCain-Palin ticket has embraced the economics and foreign policy of George Bush. I believe that's the wrong direction of the country.

And when Senator McCain chose Governor Palin to be his running mate, it was on the basis that it was going to represent change. And he represented two specific areas that need to be reformed that he looked to Governor Palin to lead, and that was change in regards to wasteful spending and pork barrel, and also in terms of ethics.

But there are serious questions about the stand that Senator (sic) Palin has taken on so-called "Bridge to Nowhere," which she's always supported and which actually she still continues to support on...

WALLACE: Well, we're going to -- we're going to get into all of those specifics. But just real briefly, Governor Knowles, why is she not ready to be president?

KNOWLES: Well, the question, I think -- and most people feel that on the surface that there has been no vice president that is less prepared in modern history.

But we need to look at what a person does in office, not so -- not so much how long they hold an office. And despite the brief time, the case needs to be made on the issues.

WALLACE: All right. We're going to get to...

KNOWLES: And it's on the issues...

WALLACE: Governor Knowles, we're going to get to those in a minute, but let me bring in Lieutenant Governor Parnell.

It's obviously a big jump from mayor of Wasilla to governor. It's a much bigger jump from governor of Alaska to potential president. Governor Palin says she's never met a foreign leader. She seems not to have thought a great deal about foreign policy. Why do you think she's ready to be commander in chief in a time of war?

PARNELL: You know, Governor Palin is absolutely ready to lead. She's the only candidate who has executive branch experience.

She's the governor of the state that supplies 20 percent of America's oil. I mean, she knows what energy independence is all about, because we're working to provide oil and gas both here locally in Alaska as well as to the rest of the states. She's absolutely ready to lead.

WALLACE: Governor Knowles, one -- as you pointed out, one of the central reasons that John McCain picked Palin was because he said that she has a record as a reformer.

Now, I know you're an opponent, but doesn't she have quite a history of going up against the establishment of her own party and against the interests of the big oil lobby?

KNOWLES: Well, just let me just say, again, both McCain and Palin have endorsed the economics and foreign policy of George Bush. So how do they make themselves agents of change and reform?

And they point to Governor Palin's work in terms of not accepting money for the so-called "Bridges to Nowhere." First of all, to get the record straight on that, she did not turn back the money to it.

There were two "Bridges to Nowhere," and one of them, the largest project -- and regardless of the merits of the issue, regardless of the merits, she is continuing to support one of the so-called "Bridges to Nowhere," which is across from Anchorage to Point McKenzie.

So it's entirely false that she -- it's misrepresentation of the record.

Second of all, ethics was also a reform issue that she has been turned to, and yet we have a situation right now in Alaska where she is under the cloud of investigation for an ethics complaint that has been made...

WALLACE: Wait, wait. Governor Knowles, I don't mean to interrupt. I promised...

PARNELL: Let me -- can I jump in here?

WALLACE: We're going to get to all of that in a second. Let's deal with the "Bridge to Nowhere," because it is a big issue.

Governor Parnell, she did tell the Republican convention, you know, "Thanks, but no thanks," that that's what she had told Congress.

In fact, it turns out she was originally for it and pulled the plug on the bridge after Congress had already pulled the plug. And in fact, she kept the $223 million in federal taxpayer money for Alaska. So was she such a reformer on the "Bridge to Nowhere?"

PARNELL: Well, let me -- let me go back to your original question. Governor Palin was absolutely a reformer here in Alaska. She rooted out corruption even before she was elected. When she saw ethics breaches, she stood up to her own party chairman here in Alaska.

As governor of the state of Alaska, she's passed a significant ethics reform package to just close some ethics loopholes in our legislative and executive branches.

She demands the highest standards of ethical practices from her cabinet and from us who work with her and for her. When it comes to the bridge in Ketchikan, she was originally -- and has said that she would not stand in the way of infrastructure dollars coming our way to Alaska. But that was when that bridge was, what, $223 million.

When she got to be governor and found out that it became a $400 million bridge, she said, "No, not going to do that." Congress was the -- was the body that actually pulled the earmark language off of it, letting that money come to Alaska into our transportation formula funds, just like that money goes to other states' transportation formula funds.

WALLACE: But, Lieutenant Governor Parnell...

KNOWLES: But, but, but, Chris...

WALLACE: And if I may, Governor Knowles, Lieutenant Governor Parnell, let me follow up with you. The fact is when she originally represented to the Republican Party that she pulled the plug on the "Bridge to Nowhere," in fact, Congress pulled the plug.

And let's look at her record as a reformer -- and let's put it up on the screen. When it comes to earmarks, which are those small -- those sometimes not-so-small pork barrel projects that are snuck into big spending bills, as mayor of Wasilla, she hired a Washington lobbyist and got $27 million in earmarks, and as governor her administration asked for $453 million in earmarks the last two years, including $3.2 million to study the genetics of harbor seals and $2 million to study crab productivity.

Lieutenant Governor Parnell, it sure sounds like business as usual.

PARNELL: Oh, absolutely not. I mean, if you sit through her cabinet meetings, she's driving down the number of earmarks that Alaska is requesting.

The prior administration asked for about 63 earmarks when we came in. The requests are down to 31 earmarks this year. We're driving those numbers down, working to bring reform to Alaska.

This is not something you can just turn the switch on overnight and change. Change takes time, and our reformer is taking that step by step.

WALLACE: Governor Knowles, I mean, it...

KNOWLES: Chris...

WALLACE: ... is a fact that while Palin has not ended the practice, she has cut the number of earmarks that were in the pipeline from the former governor Murkowski dramatically.

KNOWLES: Well, Chris, let me just get a fact corrected here, or a fact presented, that everyone has been overlooking. There were two "Bridges to Nowhere." There was one so-called "Bridge to Nowhere" in Ketchikan, and there was another in Anchorage.

The one in Anchorage the governor continues to support. She never diverted any funds whatsoever. And so that's a question -- when she says the "Bridge to Nowhere," there were two bridges, and her position on the other one, which goes to an area which her hometown, Wasilla, is in -- that that is absolutely incorrect to say that she said no to the "Bridges to Nowhere."

WALLACE: All right. But what about this idea, Governor Knowles, that she really has cut back dramatically -- not ended, but cut back dramatically on the earmarks in Alaska?

KNOWLES: Well, the fact that in terms of business as usual and that she is going to be the reform on that issue is just not true.

There has been a reduction in the number of earmarks, but that has more to do with the fact of what Congress is putting out and the attitude that Americans have against special earmarks more than anything that she is doing for reform.

WALLACE: Gentlemen, let's turn to something that I know, Governor Knowles, you wanted to talk about earlier. That's the so- called "troopergate" case, the question of whether Governor Palin pressured the public safety commissioner to fire a state trooper who was her ex-brother- in-law and then fired the commissioner when he refused.

Here's how she explained it to Charlie Gibson.

(BEGIN VIDEO CLIP)

PALIN: Commissioner Monegan has said, "The governor never asked me to fire him. The governor's husband never asked me to fire him." And we never did. I never pressured him to hire or fire anybody.

(END VIDEO CLIP)

WALLACE: Lieutenant Governor Parnell, originally, Governor Palin said that she was going to cooperate with the legislative investigation. Now the lawmakers just yesterday issued 13 subpoenas. She has said that her lawyer is going to fight those subpoenas.

And she also has talked about wanting the state panel, the personnel board, which she appoints the members to, to take over this investigation. Whatever happened to open government?

PARNELL: Governor Palin practices open and transparent government. There's no question about it.

When this investigation first started, it appeared that it would be a fair fact-finding-type investigation. But since then, it's become a political circus.

The legislative committee, the judiciary committee that voted on the subpoenas yesterday, is chaired by Senator Hollis French. That senator is a Barack Obama supporter.

Everything now is tied to timing for this general election. It's not about finding the facts anymore. Instead, what the governor did is filed an ethics complaint against herself with the personnel board to open up a fair and impartial tribunal to review...

WALLACE: But, Governor Parnell, if I...

PARNELL: ... the charges that have been brought.

WALLACE: ... if I may, two points there. First of all, the fair and impartial tribunal is by the state personnel board, and she appoints the members to that board.

And secondly, you can talk -- and there certainly is some partisan aspects to this, and I'll ask Governor Knowles about it, but the fact is the person who broke the tie and voted for the 13 subpoenas was a Republican, not a Democrat. And in fact, it was the state senator from Wasilla.

PARNELL: And I'll just come back. The legislative tribunal is not the appropriate place for these charges to be heard. There's no question that politics are entering in during this time.

Secondly, the personnel board is the body created by the legislature to review these -- these kinds of charges and allegations, not the legislature.

WALLACE: Let me, Governor Knowles, bring you into this. Doesn't Palin -- and doesn't Lieutenant Governor Parnell have a point?

The fact is that several of the members of this legislative board are announced and public Obama supporters, including the Democrat Hollis French, who's running the investigation, who, in fact, has even talked about Palin is -- can look forward to an October surprise.

KNOWLES: Chris, this is a completely diversionary tactic. Let me just put it in the right context.

This is a very serious charge. In fact, when the legislature initiated the investigation, it's for the first time in the history of Alaska that the legislature has ever initiated a ethics investigation of a governor.

Second of all, as to whether it was partisan or not, it's a Republican-controlled legislature. And the committee that -- the committee that voted as to whether or not to hire an investigator was a bipartisan committee of 12 House and Senate members, and they unanimously voted to do it. So that's how serious it is.

Now, the question in terms of what was the supposed crime on that, it is -- again, it's an abuse of power and possibly an illegal action by a governor to direct a commissioner to take an illegal action in firing of someone -- of personnel for a personal agenda -- very serious.

You would hope that the American people would have the chance to find out what happened in this particular case...

WALLACE: Gentlemen, we're beginning -- Governor Knowles, I...

KNOWLES: ... before an election.

WALLACE: I understand, and we are about to run out of time. And I want to ask you both -- we've got about a minute left, and I'd like you each to take 30 seconds -- from your unique perspective of having dealt with Governor Palin in a way the rest of us haven't.

And let me start first of all with you, Governor Knowles. Tell us what you think is the single most important thing about Sarah Palin that we don't know yet.

KNOWLES: Well, it's not a question of what we don't know. It's what we do know. And that's why the cover-up that is taking place in terms of this ethics investigation is a very serious matter. But in a broader scale, the McCain-Palin ticket has embraced -- and they're more of the same. They've embraced the George Bush economics and foreign policy.

WALLACE: All right. Let me...

KNOWLES: The American people are hungry for change, and that's why the serious subjects of change that Barack Obama's put forth is why it's the right direction for the country.

WALLACE: All right.

And, Lieutenant Governor Parnell, same question, 30 seconds.

PARNELL: You bet. I think the people of America need to know that Governor Palin is eminently trustworthy. She looks out for everyday people here in Alaska. She roots out corruption. She's a reformer here.

She's got 80 percent approval ratings from the citizens she serves, and she's maintained that for the last two years. That's nothing that any former governor has done. She's done that because she's maintained the trust of Alaskans.

I think she's going to maintain the trust of Americans as well as our vice president.

WALLACE: All right.

Gentlemen, we're going to have to leave it there. Lieutenant Governor Parnell, Governor Knowles, I want to thank you both so much for talking with us today.

PARNELL: You bet. Thank you so much.

KNOWLES: Thank you, Chris.

(END VIDEOTAPE)

WALLACE: Coming up, the electoral landscape seven weeks out. Has McCain gained the upper hand in the race for the White House? And what can Obama do about it? We'll get an insider's look from super strategist Karl Rove right after the break.

(COMMERCIAL BREAK)

WALLACE: A number of new polls came out this week that seemed to show the presidential race has turned, at least for now, in John McCain's favor.

Here to make sense of it all and to discuss what both sides should do next is master political strategist and Fox News contributor Karl Rove.

And, Karl, welcome back to "Fox News Sunday."

ROVE: Great, thank you.

WALLACE: Well, great excitement, because we have a new Rove electoral map out today, and let's put it up on the screen.

For the first time since May, you now have McCain leading Obama. He's ahead. McCain is ahead in states with 227 electoral votes, while Obama leads in states with 215. Where has the movement been this last week?

ROVE: We've had several states fall from undecided into the McCain camp. We've had Montana and North Dakota, Florida. That means a total of 33 electoral votes moved into McCain's camp from that angle.

We've also had several states fall into the toss-up category that were once Obama -- Washington state, and then Pennsylvania and Michigan are now up for grabs.

This has been offset by some gain -- by one gain for Obama, and that is the recent polls in New Hampshire have moved that state's three electoral votes into his column.

WALLACE: Let me just say at this point I'm very impressed at your abilities on the Telestrator, and if this politics thing doesn't work out for you, I think the NFL could use you.

ROVE: Well, there we go. There we go. Would you like me to spotlight some for you?

WALLACE: No, no, let's not -- don't drive me crazy here.

But I do want to go back to the map, because Obama's effort to turn -- to expand the battleground seems to have failed with states like -- at least for now, with states like North Carolina and Georgia; as you point out, Montana and North Dakota all going back into the red column.

ROVE: Right. Right.

WALLACE: As you look at the yellow states, the seven states that you still regard as toss-ups, who has the clearer path to the magic number of 270?

ROVE: Well, look. If you take the undecided states, the toss-up states, and put them into the camp of whoever leads, give the states where even it's within the majority of error, Obama leads, he gets 273 electoral votes and McCain gets 265. So the advantage is still with Obama.

What happens is -- I don't know if you want to go to the map.

WALLACE: Real quick.

ROVE: Yeah, here. Nevada goes to McCain, Washington state goes to Obama, Colorado goes to Obama, Ohio goes to McCain, Virginia goes to McCain, Pennsylvania goes to Obama, Michigan goes to Obama. And that ends up giving you a race that gets settled to Obama's satisfaction.

WALLACE: All right. Let's take a look at the national polls, which seem, to my reading at least, to show a clear swing toward McCain from before the conventions until now. And let's take a look at them.

In the Washington Post poll back in mid-august, Obama was leading 49- 45. Now McCain is ahead 49-47. And when you look at the internals of the poll, the shift is even more dramatic. White women -- last month Obama led by eight points. Now he trails by 12 points.

Who would do more to bring change to Washington? They're fighting over the change mantle. In June, Obama led by 32 points. Take a look at this. Now he leads by just 12.

Karl, what's happened to the race? How significant is the change? And does McCain -- even if it's narrow, does he clearly have an upper hand at this point?

ROVE: Yes, he does. McCain does have the upper hand now. The interesting thing is how volatile this election is. If you take the seven national polls that were run just before the Democratic convention, it averages out to an Obama lead of plus three.

If you look at those polls after the Republican convention in the last week, it is a McCain advantage of 2.8, which means that we've gone from being -- we've got a six-point shift toward McCain. That means -- in fact, it's even more dramatic than that.

If you look at the polls in between, if you look at the ones right after the Democratic convention, the lead for Obama is nine. So it goes plus three to plus nine for Obama to plus three for McCain, which means that we've had a -- basically, a 12-point swing in the base in just over a week.

WALLACE: How do you account for it? What's happened and how much of it do you attribute to Sarah Palin?

ROVE: Well, we have a very volatile electorate. We have a bunch of people who like both of these candidates. They have strong positives and relatively low negatives for this point in a presidential campaign, and they're weakly linked to their choice.

And so things like the choice of Sarah Palin or an international incident, or something else -- the performance in the debate -- all of these things will have a big impact on the vote.

WALLACE: How has Sarah Palin affected it? In other words, how has she bolstered McCain and hurt Obama?

ROVE: Her positives are almost as high as Obama and McCain, both of whom who have been on the national stage a long time. And she has the lowest negatives of any of the four candidates for president or vice president.

So she's a breath of fresh air. People like her. They're responding well to her. And again, I wrote this in the Wall Street Journal on Thursday. This may be the first election since 1960 in which a vice presidential candidate affects the outcome.

WALLACE: And you're talking about Lyndon Johnson...

ROVE: Lyndon Johnson.

WALLACE: ... who helped in one state, Texas.

ROVE: Right.

WALLACE: But do you expecting the Sarah Palin phenomenon to last for the next seven weeks?

ROVE: I don't. But that's -- the other question is do I expect the impact of Sarah Palin to have more durability, and the answer to that may be yes. It may be that people have an attitude about her that lasts long after the, you know, sort of celebrity focus of the media has dissipated.

WALLACE: All right. I want to put you in charge of the Obama campaign. This will come as a distinct shock to David Axelrod, but just for the purposes of this exercise you're in charge of the Obama campaign.

He has lost some steam. McCain has a lead -- certainly not an overwhelming or clinching lead, but has got a lead. What should Obama do? How does he turn things back around?

ROVE: Well, I'd have two pieces of advice, one of which I wrote about Thursday in the Wall Street Journal, which was to stop attacking Palin. It doesn't do him any good. It diminishes Obama.

Now, they may actually be taking that advice. They may have come into it on their own. I'm sure they did, because the morning papers are filled with stories in which Obama's operatives say he's going to stop talking about Palin and focus instead on McCain.

The second thing, though, is one that I think is difficult for them to do, given the mindset of where they are, and that is they ought to stop attacking McCain. This is not about McCain. This is about reassuring the American people that Barack Obama's up to the job.

The people want change. There's a Democratic tide running this year. And if he were to focus instead upon, you know, defending, where necessary, himself, but putting his main emphasis on trying to get a message through - - I'm up to the job and I've got a vision for the future for the next four years that you, the American voter, will find attractive -- I think he'd be better served.

WALLACE: Now, we do have news. I got an e-mail from the Obama campaign just this morning in which they announced that in August they raised $66 million, 500,000 new donors -- the biggest fundraising month they've had of the entire campaign -- previous high was $55 million. This is $66 million.

How big a weapon is his financial advantage over McCain?

ROVE: Well, it's big. It's allowed him to try and expand the playing board. Now, look. They've wasted -- you know, like in Georgia they spent, by one report, $1.5 million on television. They've opened up a bunch of offices.

In Montana, they've been running unanswered television ads for two months, opened up 13 offices. They've fallen 13 -- or 11 points behind. So it -- but it does allow him to try and expand it, the playing field.

Second of all, it will give the Democrats for at least the second presidential election in a row a financial advantage in the fall campaign. Last time around, it was about a $121-million advantage over the combined spending of the Republicans.

I suspect it won't be large this time around, but it will be approaching the $100 million mark.

WALLACE: You say that Obama shouldn't attack McCain, but I want to play a clip for you this week of Obama ridiculing McCain's claim that he is the agent of change. Take a look.

(BEGIN VIDEO CLIP)

OBAMA: John McCain says he's about change, too. And so I guess his whole angle is, "Watch out, George Bush, except for economic policy, health care policy, tax policy, education policy, foreign policy, and Karl Rove- style politics, we're really going to shake things up in Washington."

(END VIDEO CLIP)

WALLACE: When Obama and his camp talks about Karl Rove-style politics, they mention things like the McCain effort this week to make a big deal about lipstick on a pig, and to say that Obama was smearing Palin. They say it's diversionary tactics.

First of all, are you complimented or insulted by the reference to Karl Rove-style politics? And secondly, do you have any problem with what the McCain people are doing?

ROVE: Look, I demand a royalty every time they mention my name. When John Kerry stood up at the Democratic convention and used my name four times, I ought to get a small royalty, maybe 25 cents per mention, a buck per mention. I mean, please, it's my name. You know, stop using it without my permission.

WALLACE: I think you're a public figure.

But in any case, do you have any problem with what McCain is doing by, for instance, saying -- which a lot of people thought was kind of made up - - that Obama was smearing Palin?

ROVE: Yeah. Well, first of all, I do think that the lipstick remark was an inappropriate -- and maybe it was unconscious, but it was a deliberate slap at Governor Palin.

The only time this word has intruded in recent months in the campaign was in her, you know, self-deprecating remark at the convention. So for him to use the lipstick remark less than two weeks after she used it struck me as too much of a coincidence not to have been a deliberate attack.

But look. Both campaigns are making a mistake, and that is they are taking whatever their attacks are and going one step too far. We saw this this week, for example, in the Obama ad where he makes the point, a legitimate point, that John McCain came to the United States Congress in 1982 and that he has been a longtime Washington insider.

But they then say he doesn't even know how to use a -- you know, doesn't send e-mail. Well, this is because his war injuries keep him from being able to use a keyboard. He can't type. You know, it's like saying he can't do jumping jacks.

Well, there's a reason why he can't raise his arms above his head. There's a reason why he doesn't have the nimbleness in his fingers.

WALLACE: All right, and for fair game, what is McCain doing that goes a step too far?

ROVE: Well, McCain has gone in some of his ads -- similarly gone one step too far, and sort of attributing to Obama things that are, you know, beyond the 100-percent-truth test.

They don't need to attack each other in this way. They have legitimate points to make about each other that are beyond, you know, the...

WALLACE: Real quick question -- 30 seconds. Do they need to be 100 percent passing the truth? Just, in other words, when you were running Bush's campaign, did you care whether some fact-check organization...

ROVE: No, and look, you can't trust the fact-check organizations, with all due respect. They're human beings. They're individuals. They've got their own biases built in there.

But both campaigns ought to be careful about it. They ought to -- there ought to be an adult who says, "Do we really need to go that far in this ad? Don't we make our point and won't we get broader acceptance and deny the opposition an opportunity to attack us if we don't include that one little last tweak in the ad?"

WALLACE: Karl Rove, thanks for coming in. Talk to you soon.

ROVE: Great.

WALLACE: Up next, Sarah Palin has her first major interview and lives to tell the story. Our Sunday regulars review how she did and how she continues to reshape this campaign. Back in a moment.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

PALIN: You have to be wired in a way of being so committed to the mission, the mission that we're on, reform of this country and victory in the war, you can't blink. So I didn't blink then, even, when asked to run as his running mate.

(END VIDEO CLIP)

WALLACE: That, of course, was Sarah Palin getting what many had been clamoring for ever since she became the vice presidential nominee, a tough interview.

And it's time now for our Sunday group -- Brit Hume, Washington managing editor of Fox News, and Fox News contributors Mara Liasson of National Public Radio, Bill Kristol of The Weekly Standard, and Juan Williams, also from National Public Radio.

So, Brit, how did Palin do in the interview or, more precisely, series of interviews she did with Charlie Gibson and how much credit does she deserve for McCain's improved political position?

HUME: Well, two very different questions. She did fine in the interview, and she was probably helped by the fact that I think the ABC News crew shot the interview in such a way that made my dear friend Charlie look sort of unflatteringly like an old school master looking down his -- you know, down his nose at her, which I don't -- knowing Charlie, that's obviously not what he would intend.

And I think his research team let him down on a couple of the facts in the questions, too, and gave her -- made her -- you know, in retrospect, we look back at her answer when, for example, she was asked about the Bush doctrine, and -- as if there was one tenet to it, and she responded by asking the question, "In what respect?"

Now that further explorations of the Bush doctrine have been read, it turns out that there are several elements of the Bush doctrine, and "in what respect," was an entirely proper retort.

As for the effect that she's had on the McCain campaign, it's the biggest I've ever seen. I mean, you talk about being wrong about something. I thought that the least interesting element of this whole two- week marathon of conventions and vice presidential selections was going to be the Republican vice presidential choice, which turned out to be about as wrong as you could be.

It's made an immense difference in the near term. How long it will last, only -- no one knows. Only we'll find out over time.

But I am bound to say that it galvanized his base. It threw the opponent's camp into disarray for a time. It turned the media into an ugly horde feeding frenzy atmosphere, which I think ended up backfiring on the media and helping McCain and Palin.

They're using that issue now as a way to kind of inoculate her by attacking anything they can attack as a -- and claiming it's an attack on her. It's been an amazing thing.

WALLACE: Let me -- before we get to you, Mara, I mean, one of the other things is this astonishing political and cultural phenomenon, and case in point, the opening segment from the opening season premiere of "Saturday Night Live." Let's watch.

(BEGIN VIDEO CLIP)

TINA FEY: Good evening, my fellow Americans.

(LAUGHTER)

I was so excited when I was told Senator Clinton and I would be addressing you tonight.

(LAUGHTER)

AMY POEHLER: And I was told I would be addressing you alone.

(LAUGHTER)

(END VIDEO CLIP)

WALLACE: Now, I am duty-bound to say, because the impersonation was so dead-on, that is not Sarah Palin. That is the comedienne Tina Fey as Sarah Palin. But the Palin factor just keeps on rolling.

LIASSON: It's really unbelievable. I think she is the exception that proves the rule, the rule being vice presidents don't matter. This one certainly has mattered a lot so far.

I mean, she could fade into obscurity again, maybe, in the remaining weeks, or implode, but for now she's having an incredible effect.

And the sleeping giant that she awoke, in addition to this incredible cultural curiosity about her and her hairdo, and her shoes, and her clothes, and every -- and her lipstick, is the sleeping giant of moms, kind of conservative working moms, stay-at-home moms, the kind of people you encounter at the McCain-Palin rallies.

I went to the one in Fairfax. And I thought I'd find a lot of people there out of curiosity -- just, you know, independents or even Democrats, just out of curiosity for the celebrity factor. No. What I found were women who were incredibly jazzed, people who said, "I could have watched him on T.V. I would have stayed home to watch McCain. But for her, I'm willing to stand in line for three hours."

WALLACE: Can the Democrats counter Palin in a lot of cases by pointing out where she stands on issues? And some of the women who may be -- not all; obviously, a lot of women support her on the issues.

But some of the women who are fascinated by her as a working mom and as somebody who very much comes from their life, maybe when they hear where she stands on some of the issues, they'll be turned off.

KRISTOL: Senators Obama and Biden want to -- they say they want to get back to the issues, as they understand the issues. They certainly refuse to talk about Palin now. I think they realize they made a mistake, especially with Obama engaging Palin.

And we had about three or four days of a presidential candidate debating the vice presidential candidate of the other party, which is generally not a good idea, and voters probably decided, "You know, they're both a little bit inexperienced." But it's a little more serious when you're the presidential candidate.

The media, on the other hand, is really helping Sarah Palin. I mean, Mara mentioned that she could fade into obscurity, but she won't. She's on the front page of both the New York Times and the Washington Post today. Both have sent teams of reporters to Alaska, and they've decided, "You know what? She was really a bad mayor of Wasilla, and she's really a bad governor of Alaska."

She was reelected as mayor of Wasilla. She was -- she defeated an incumbent governor and then defeated Tony Knowles, who was on this show, and is a very popular governor of Alaska. But what do the citizens of Alaska know? They just live there, you know?

These New York Times reporters and Washington Post reporters have been there four days, and they've found five people who don't like her, and they're going to tell all of us that she's really -- wasn't good even at being a mayor of a small town. As long as the media keeps that up, she's in good shape.

WILLIAMS: Well, I mean, I think the experience thing is a very real issue, and I think that's what the reporters are doing there, is trying to, I think, puncture some of this image that she was this grand reformer, that she, in fact, was this massive opponent of the "Bridge to Nowhere," when, in fact, as we know, she initially was a supporter.

But I mean, what struck me this week is that, you know, the McCain campaign's on the offensive, and yet they play victim when things like this, especially with regard to the media -- they play against anger at the media.

But there's no getting around the question Charlie Gibson asked her right off the top, "Can you look the American people in the eye and say that you have the experience, the ability, the judgment to be president, vice president of the United States," and she, without a doubt, says, "Absolutely, ready to go, no blinking."

Where's the humility? Where's the sense of, "My God, this is a tremendous leap for someone?"

HUME: What did you want her to say, Juan, "No?"

WILLIAMS: No, I would like her to say, "You know what? I am getting up to speed to handle this job, and I believe I have the ability."

But you know what? There's -- it's just beyond, you know, credulity to say, "Oh, yeah, Sarah Palin is ready to be president of the United States of America."

HUME: Well, hold on a second, Juan. Hold on a second.

WILLIAMS: Or when she says on something like Israel, you know, what - - "Israel can do whatever they want to do," I mean, people are...

HUME: She did not say that.

WILLIAMS: Yes, she did.

HUME: No, she did not.

WILLIAMS: "Israel is our friend and they should do whatever -- we shouldn't second-guess whatever they need to do to defend themselves."

HUME: Do in their own self-defense.

WILLIAMS: Yes.

HUME: That's basically...

WILLIAMS: "So let them do what they want to do."

HUME: That's administration foreign policy.

KRISTOL: Well, and it's Barack Obama's foreign policy. He said virtually the same sentence when asked about what would you do in the case of an Israeli attack on Iran, just like on...

WILLIAMS: Even President Bush...

KRISTOL: ... NATO. On NATO, everyone said, "Ooh, she's so warlike," when Obama and Biden support admitting Georgia and Ukraine to there. She took totally conventional positions, frankly, on foreign policy, and they're in such a "gotcha" mode that they're pretending there's something there when there isn't.

WILLIAMS: No, I think people are so quick to defend Sarah Palin because they realize what a weakness she has here. Sarah Palin basically was very well media-trained for this interview. She kept repeating the same lines time and again.

But look. I'm not here to condemn Sarah Palin. She may be someone who is extraordinary. But I am saying to you...

WALLACE: I'm not here to condemn her, I'm here to praise her.

WILLIAMS: But I am here to say, "Let's be realistic. Let's be honest with each other." Sarah Palin is not somebody you can say, "Oh, yeah, she is exactly primed and ready to be president of the United States."

HUME: Well, if you think it's an issue -- do you think that's an issue that only helps Obama, given the fact that his resume is so very thin? He spent most of his time as a senator running for president.

WILLIAMS: Right.

HUME: He doesn't have a record of achievement and no executive experience. I don't mean no achievement, but on major issues, nothing major.

So is it helpful to the Obama campaign to have Sarah Palin's alleged inexperience become the issue when Obama himself has a rather thin resume?

WILLIAMS: No, it's like a chess game. Bill and I had this conversation off camera one day. I think it's like a chess game and the Obamas have fallen for this -- for the gambit, because to discuss experience is to discuss Barack Obama's weakness in this campaign.

Nonetheless, you can't get away from the fact Sarah Palin...

WALLACE: All right.

WILLIAMS: ... is not ready for prime time, and Barack Obama has run an extraordinary campaign.

HUME: That's true.

WALLACE: We have to take a break here, but when we come back, the campaign ad wars return with a vengeance, with accusations of lies and smears coming from both sides. What's behind the latest battle? We'll ask our panel after the break.

(COMMERCIAL BREAK)

WALLACE: On this day in 1814, Francis Scott Key wrote the words to "The Star Spangled Banner" after the British attack on Fort McHenry. He wrote our national anthem after seeing that the U.S. flag survived the assault.

Stay tuned for more from our panel and our Power Player of the Week.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

NARRATOR: He was the world's biggest celebrity, but his star is fading, so they lashed out at Sarah Palin.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

NARRATOR: He favors $200 billion in new tax cuts for corporations but almost nothing for the middle class. After one president who was out of touch, we just can't afford more of the same.

(END VIDEO CLIP)

WALLACE: Well, there you have it. Fifty-one days until the election and the campaign ad wars are taking on a new edge.

And we're back now with Brit, Mara, Bill and Juan.

Brit, let's talk about the commercials this week, because they seem to say something about the larger state of the campaign. The Obama camp talked about a new ferocity in their ads. There certainly seemed to be a new edge both on the stump and in the ad we saw there.

On the other hand, it does still seem as if the McCain ads are driving the debate and keeping McCain (sic) on the offensive.

HUME: McCain seems to be punching and the Obama campaign seems to be defending, and it's -- I don't know whether it has to do with the new cycle or the timing of the ads, but that has been the pattern.

Now, that doesn't mean that can't change, and it also depends to a great extent on how effectively you reply to this sort of stuff. But I think the -- you can see a new toughness in the Obama ads, which may mean that the campaign is now entering a new phase. We'll see.

So far, at least for the past six weeks and more, the McCain ads have hit hard, hurt Obama. They hurt him before the convention, and they seem to have continued to hurt him afterwards.

WALLACE: Mara, for the Democrats you talk to around town, how worried -- and I'm not talking about people in the Obama camp, but the permanent Democratic class here in Washington. How worried are they that this is deja-vu all over again and, like Dukakis and Gore and Kerry, here's another Democratic nominee who somehow doesn't seem to be able to fight back effectively?

LIASSON: There's a lot of worry. I mean, Democrats are prone to worry. I mean, we should state that. Republicans kind of hunker down and keep on walking into the wind. Democrats flip out.

But they are worried, and the Obama campaign has been remarkably unflappable and steady throughout and have always said that they don't listen to those chattering Democrats who are wringing their hands at every step.

And they certainly adjusted themselves this week. They had a hard time figuring out how to respond to Palin. But now, as you said, they are punching back hard, and Democrats are worried.

I've been told that Palin has not made it any harder to raise money for Obama, but it hasn't made it any easier. In other words, that's also a struggle for them, which they didn't expect.

But in terms of -- in terms of the state of the race, I think what McCain has proven adept at again and again and again is tactics. These ads -- some of them aren't even real ads. He doesn't even pay to put them up on T.V.

He sends out a press release and puts them on the Web, like the lipstick on a pig ad, and roils the race, and it means that that's all that the media is talking about, instead of the economic message that Obama wants to get out that day. So he's been very good at kind of day-to-day control of the debate.

But you know, Obama's firing back now. This race has gotten a lot more conventional. These guys are not up on the mountain top with a different kind of politics anymore. They're hammering McCain for his lobbyist ties. There's going to be more of that.

WALLACE: Bill, I mean, let me step back and ask you the big overarching question that I asked Karl Rove. Where is this race now?

KRISTOL: McCain's up by a couple of points, I would say, nationally. And if you take only the polls that have been conducted since the convention and you just give every state to whoever's ahead, even if it's by one point, it's McCain 270, Obama 268. So let's just say it's an even race.

Karl's...

WALLACE: Had it slightly the other way.

KRISTOL: He had it five votes the other way because he was including some votes before the convention.

It's an even race with slight momentum to McCain. I don't agree -- the media is obsessing about these ads. The campaigns are sending out 86 e-mails a day about them. There's no evidence that people are being affected by them.

If you look at the favorable-unfavorable rating, they both have a high favorable rating. It's about plus 20. McCain, it's about 57-37, Obama is 56-38, just a tiny bit worse -- much higher than Bush and Gore -- Bush and Kerry in 2004...

WALLACE: The interesting thing is that...

KRISTOL: ... higher than Bush and Kerry, and it's gone up a little. Voters are not looking at McCain or Obama and saying, "Yuck." They are looking -- a lot of -- some voters are clearly looking at both of them and saying, "We approve of them." They're both above 50 considerably.

WALLACE: The interesting thing is that Rove said that the fact that they like them both makes the race even more volatile, because people aren't hunkered in. They're willing still to keep going back and forth.

KRISTOL: Which means that the debates are crucial. I think we have another 10 weeks of -- 10 days of Palin mania. And I think it will continue through this week.

But then the first presidential debate is a week from Friday night. There are a lot of undecided voters. There are a lot of voters who respect and like both McCain and Obama and who are conflicted.

I think the debates become key. And I think what the McCain campaign is going to do in the next 10 days before the debate is go a little more positive and really try to focus on their economic message.

The Obama campaign is convinced, "We win economics." The McCain campaign doesn't think that. They think they can say, "Barack Obama says he wants to cut your taxes, but let's look at his record. He's not been a tax cutter in Illinois. He's not been a tax cutter in the Congress. And John McCain has the program that will help provide jobs and growth for the middle class."

I think you'll see more -- the McCain camp is going to try to lay the groundwork for the debates, but the debates become very important.

WILLIAMS: Yeah, I think that when we talk about the large number of undecided voters -- of course, you have these huge bases that, you know, dwarf any undecided voters.

But the undecided voters are the ones who are going to determine the outcome of the election, and they're a large swath, and their concern is the economy. That's the number one issue.

So McCain has to redefine his stand on tax policy, because Obama says he's going to give a tax cut to 95 percent of the American people, and especially to that middle class that's so concerned about making it day to day. So here comes John McCain, and I think he's got to make it clear that he's not just standing in for the rich guys of the world, the people who make $5 million and more. He's got to do something for people who are having everyday situations.

Now, the other part of this, though, is when you see those ads that you were running, things about the lipstick on a pig or Obama's for giving kindergarteners sex ed, you just have to shake your head.

I mean, yeah, okay, so Steve Schmidt and the Republicans are tough guys. They walk into the wind, Bill, and they don't blink, but it's somewhat dishonest, don't you think?

And I mean, at some point you have to say, "Is this in fitting with the John McCain that people admire, the guy that was the straight talker?" I mean, what kind of ads are these to be putting on the air?

HUME: This is bare knuckled, hardball politics. And some of it is unfair.

WILLIAMS: Yes.

HUME: Certainly, the lipstick ad was -- you know, based on Obama's exact words was unfair.

These ads get out there and they force a response. The test for Obama is in the response. I mean, after all, if we're going to get into this question of dishonesty, I mean, Obama goes around claiming he's going to cut taxes of 95 percent of the public, which is literally impossible.

The reason it's impossible is that 40 percent of American taxpayers don't pay any income tax and therefore can't get a tax cut. What they're going to get is a subsidy. It's hardly a tax cut. It's, in fact, spending.

Now, that's -- but you know, within the -- within the realm of sort of normal exaggeration and hyperbole which campaigns have always involved, I don't think any of this stuff has been too far out of bounds so far.

And I also think this, Juan, that in the end, the gravity in this election still favors the out party.

WILLIAMS: Sure.

HUME: And McCain is not Bush. I think a lot of people see that.

But nonetheless, people vote to change the -- things as much as they can in an election where people are dissatisfied. All the numbers we have indicate public dissatisfaction with things as they have been running, and that is...

WILLIAMS: There is no doubt that...

HUME: ... that is probably more important than any of the rest of this.

WILLIAMS: ... the ground favors the Democrats here.

HUME: Exactly. Exactly.

WILLIAMS: I'm just saying that McCain running these kinds of hostile ads -- he said, "We're going to run a different kind of campaign." So did Obama. But this is not a different kind of campaign...

HUME: No kidding.

WILLIAMS: .. when you see these scurrilous ads.

And I understand now that the people who ran the swift boat ads are going to get in in a major way. Previously, they weren't excited. Apparently Palin has jazzed them up, to pick Mara's language out.

LIASSON: Look, and Obama will finally have to accede to the third- party groups who are going to do things on his behalf, even though he didn't want them to.

WALLACE: Oh, good. It's going to get uglier and meaner in the remaining seven weeks.

Thank you. And we'll be there for every step of the way.

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