Let's start with the chairman of Republican National Committee, Michael Steele. Mr. Steele, thank you for joining us.

MICHAEL STEELE, RNC CHAIRMAN: Hey, Chris.

MATTHEWS: I'm going to warm you up with some accolades, first of all. Two great candidates in terms of the way they ran their race, Virginia and New Jersey, positive candidates. They didn't run to the far right. They ran to the center right. They knew what they were doing. Their opponents ran negative campaigns, fearful campaigns. And your side won.

Will that be the mode for next year's elections? Are you going to run down the center right, rather than the hard right?

STEELE: Well, we're going to run, Chris, where our candidates find themselves. I mean, what you saw in Virginia and New Jersey are two candidates who translated throughout their state. They reflected the communities they come from. And it's the new frontier, really, for the RNC right now. As we embark upon the elections in 2010, we have an opportunity to run and win in areas that we haven't traditionally run or won, if we get candidates who come from those communities. And I think that's what you saw in those two instances. They're conservatives who translated the conservative principles and message in terms of the policies and the issues that they're going to encounter and deal with as governor. So you know, I was very happy last night. It was a great night.

MATTHEWS: Yes, except...

STEELE: Except what?

MATTHEWS: Upstate New York. Let me ask you about it...

STEELE: What was...

MATTHEWS: If Bernie Sanders, the socialist independent from Vermont, tried running in Utah, he'd get his butt handed to him. If these wingnuts start running around the country like this person who knocked off your candidate in upstate New York, in the 23rd, this Doug Hoffman-you start getting a lot of candidates like that coming out of the woodwork, you're going to lose a lot of elections, aren't you?

STEELE: Hey, Chris, what kind of hangover did you have last night, man?

MATTHEWS: Well, I'm asking you. You had Doug Hoffman. He beat your candidate, then got beaten by a Democrat in a district that's always voted Republican.

STEELE: Well, look, what you're looking at in...

MATTHEWS: You were smart. You picked the right candidate maybe.

STEELE: Well...

MATTHEWS: But you know, the other side...

STEELE: Well, wait a minute.

MATTHEWS: ... the right-wingers, blew it.

STEELE: Well, no. I-no, Chris, I'm not going to go there on that because let me tell you what the problem was in 23. It was a flawed process. You had individuals who hand-picked this candidate. She did not go through a process.

MATTHEWS: Well, you were part of the hand-picking. You endorsed her.

STEELE: No, I was not. No, that's-that, again, is a wonderful Democrat talking point.

MATTHEWS: Well, wait a minute. You didn't endorse the Republican candidate in the 23rd?

STEELE: Well, no, no, no. There is a difference between supporting the nominee of the party and hand-picking that nominee.

MATTHEWS: Oh, I see.

STEELE: All right? So...

MATTHEWS: Well, that's timing. In other words, once she was hand-picked, then you endorsed her.

STEELE: Well, I...

MATTHEWS: Come on! That's laughable!

STEELE: Chris...

MATTHEWS: You endorsed the hand-picked candidate.

STEELE: Chris-OK, Chris...

MATTHEWS: You mocked the system...

STEELE: Chris...

MATTHEWS: ... and then you supported it!

STEELE: Chris, do you understand how politics works in this country? People make their choices. Party bosses no longer do that, and this is an example of what happens...

MATTHEWS: But you're a party boss.

STEELE: ... when they try to do that. And we did not...

MATTHEWS: You're a party boss.

STEELE: Chris, I'm not a-I'm the chairman of the party.

MATTHEWS: You just endorsed the candidate backed by the bosses in upstate New York...

STEELE: OK...

MATTHEWS: ... and you got beaten.

STEELE: Chris, do you want to listen to what I'm telling you?

MATTHEWS: I'm trying to communicate with you.

STEELE: OK. OK. So just chill for a second.

MATTHEWS: No, you...

STEELE: Let me explain to you...

MATTHEWS: I think you're trying to chill...

STEELE: ... what happened to...

MATTHEWS: ... the viewers out of knowledge here.

STEELE: No, I'm not! Let me tell you what happened.

MATTHEWS: OK.

STEELE: The local party selected her. They have their process. They didn't run the primary. They had their process. She became the nominee through that process that they chose.

MATTHEWS: And at the bottom end of that process, the Democrat won.

So what's wrong?

STEELE: It was a flawed process because she didn't reflect the community...

MATTHEWS: OK.

STEELE: ... in which she was running. And the people there spoke and you saw that primary played out.

MATTHEWS: OK.

STEELE: Will not happen when we take the seat back in 2010.

MATTHEWS: I'm not blaming you. It was hand-picking (INAUDIBLE) New York state system. But let me ask you this. If you have a lot of wingnuts coming in from the far right...

STEELE: Why do you keep calling...

MATTHEWS: ... knocking off establishment...

STEELE: ... my people wingnuts?

MATTHEWS: Doug Hoffman coming in from outside the district-you were the one that knocked people for coming in from outside a district.

STEELE: Excuse me. What about the left-wing nuts who won't let the president get his agenda through? What about all the left-wing nuts are the reason why we don't have health care right now? You've got 60 votes in the Senate. You've got a 78-seat majority in the House. And I don't see anyone talking about the left-wing nuts who are stifling the health care for my mother, my family and my community.

MATTHEWS: Wow!

STEELE: So don't give me the name calling here.

MATTHEWS: So-so...

STEELE: That was a political process. Now we're talking real things here, when you talk about the fact that...

MATTHEWS: Yes.

STEELE: ... in the Democratic Party, the division is real because we don't have health care. The division is real because we still have unemployment climbing.

(CROSSTALK)

MATTHEWS: ... is so interesting.

STEELE: ... because they're not solving the problems.

MATTHEWS: So the president would be better off if he didn't have a left and he could push a more moderate health care bill.

STEELE: I don't know. That's a choice...

MATTHEWS: That's what you're saying.

STEELE: ... the Democrats have to make.

MATTHEWS: Yes, but you're making it for them, aren't you.

STEELE: I'm embracing my-I'm embracing my party. I'm embracing...

MATTHEWS: No, and you're saying something really smart. You're saying that the president of the United States has to make a tough, discerning decision to find the kind of bill that will pass and pass it, instead of being hung up by his far left.

STEELE: And you've got-and that is the challenge for both parties in these times, is to bring within their own before they can reach out and bring others in, the consensus around certain value and core principles. What are the core principles and values of the Democratic Party when it comes to the agenda on health care, the economy and government involvement in my life and my business? Is it a left-wing agenda? Answer the question.

MATTHEWS: What about-OK, look, I accept the fact that the Democratic Party is hung up by people on the far left in many cases, especially in the health care. I can accept that. But in your party, since you're the party spokesman and leader, let me ask you, are you happy with what happened in upstate New York, where people came in like Sarah Palin and Dick Armey and Rick Santorum, came in from outside and got involved in the process? I understand you've been quoted as saying that was wrong.

STEELE: No, it is-it is-it is wrong if they get into the process before the nominee is selected. Once the nominee is selected, they have-they're free-they're Americans. It's still America, right? We can express our opinion. So if they have a view...

MATTHEWS: OK.

STEELE: ... or a point of view that, you know, is contrary to those in the community, people need to fully understand they don't live there.

(CROSSTALK)

MATTHEWS: Mr. Chairman, let's check in with what you said today about that 23rd district. Let's listen.

STEELE: Sure.

(BEGIN VIDEO CLIP)

STEELE: If you don't live in the district, you don't vote there, your opinion really doesn't matter much.

(END VIDEO CLIP)

MATTHEWS: "Your opinion doesn't really matter much."

STEELE: True!

MATTHEWS: You're saying-you just said you welcome them to come in after the nominee's been picked...

STEELE: Well, wait a minute. Wait a minute.

MATTHEWS: ... and now you're saying...

STEELE: Chris...

MATTHEWS: ... in that quote, you said, Drop dead, basically, for coming in.

STEELE: Wait a minute, Chris. It doesn't matter because you have no vote in the district. You can express your opinion. That's the freedom part that America and the Constitution allows you to do.

MATTHEWS: Right.

STEELE: So yes, if they have an opinion as political figures, as leaders, or whatever, that's fine. But it doesn't-it doesn't shape the process...

MATTHEWS: Yes.

STEELE: ... to the point where you're going to-the outcome determinative.

MATTHEWS: Is there room in the Republican Party for the far right, yes or no? Far right.

STEELE: There's room in the Republican Party for anyone who wants to be a part of the values that we espouse when it comes to the role of government, free enterprise, free markets.

MATTHEWS: OK.

STEELE: I-look, Chris, I'm in the business of multiplication and addition, not division and subtraction. So my job as the national chairman...

MATTHEWS: OK.

STEELE: ... is to make us a governing-to build us a governing majority with the leadership in the House and the Senate...

MATTHEWS: Big tent.

STEELE: ... and our Republican governors.

MATTHEWS: Big tent. Thank you very much, Michael Steele.

STEELE: You got it.

MATTHEWS: The big tent, sir. Thank you, chairman of the Republican National Committee. Thanks for joining us.

STEELE: All righty.

MATTHEWS: Robert Gibbs is White House press secretary. Robert, every election result seems to have a certain odor, a smell even. Last night, I smelled populism, anti-elite, anti-Wall Street, the slow-small vote for Bloomberg in New York, the blowout of Corzine. People don't like Goldman Sachs. They don't like these bail-outs. Is that hurting the president?

ROBERT GIBBS WHITE HOUSE PRESS SECRETARY: Well, look, there's no doubt that there's discontent about our economy in this country. And I think if you asked the president if he was discontent about what's going on in this economy, he'd certainly say yes. The president is focused each and every day on trying to get this economy turned around and put people back to work. That's what he's focused on. That's what these elections showed, and that's what he'll continue to do.

MATTHEWS: But if you get hit from the independent voter the way you got hit yesterday, with 60 percent in Jersey, for example, voting for the Republican candidate, that's a weird thing. Why are Democrats being put in the position of being seen as the pro-Wall Street party? Why are you getting hit that direction and also getting hit from the people who don't like big government, don't like the push on health care? It seems like you're getting hit from the populists in both directions.

GIBBS: Well, look, obviously, you had some unique characteristics for certain candidates that you mentioned. But I got to tell you, the bottom line, Chris, is I don't see how you could read into what voters did in local elections like the New Jersey governor's race into how that impacts the president. The voters in New Jersey certainly didn't in the exit polls, and I don't know why anybody else would, either.

MATTHEWS: Well, let's talk about the voters who show up. It seems to me that the-you know, when I go to baseball parks lately, I'm kind of amazed it seems to become (ph) in terms of audience. It's very much a white sport in terms of the audience. I wonder whether the elections in off years are getting that way. What happened to the base vote of the Democratic Party, young people and minorities, yesterday?

GIBBS: Well, look, there's no doubt that an off-year election has a different electorate make-up than either a congressional election would or a national presidential election. I think you'll see that change a bit in 2010 because it'll be a big election about the direction of the president's agenda and it will talk about whether or not we're going to make progress on health care and energy and all the things that the president has talked about.

MATTHEWS: You're a communications expert. I'm just going to-I know it's tough to have to defend the White House and speak the complete truth, but let me try some things by you.

(LAUGHTER)

GIBBS: I'll try.

MATTHEWS: It seems like this president has had to go to a lot of fund-raisers lately. He's played a lot of golf lately. He's hung around with Geithner and Summers and the Paulson crowd, the whole New York rich guy scene. He's beginning to look like a Clinton. He looks like a typical Democrat now, hanging out, playing golf, going to rich people's parties, bringing people into the White House to go bowling. I mean, this whole thing begins to smell like the Clinton era. What happened to the change we believed in? I'm asking.

GIBBS: Chris, was that a question or a speech? I haven't-I don't...

MATTHEWS: It was a speech requiring a response.

GIBBS: I will look at the transcript sometime later to see where the question was. The president has been focused on the job that he has, which is to repair our image in the world...

MATTHEWS: Yes.

GIBBS: ... to get our economy moving again. I think if you look at any of those two measures, right, you look at our relationships with other countries in the world and the progress that's been made, you look at the financial disaster that we had the day we inherited office, tell me that we haven't changed things for the better...

MATTHEWS: OK.

GIBBS: ... on of those both accounts coming in. Does the president tend to play golf when the weather's nice on Sunday? Sure. I don't think that's indicative of a previous administration.

MATTHEWS: OK. You don't...

GIBBS: The president likes to play golf.

MATTHEWS: You don't see any problem with the imagery of hanging around all the fund-raisers, doing all the stuff that seems like a typical Clinton Democrat, just typical of the way things were before he got in.

GIBBS: Well, but again, understand, the president-look, the president has to raise money for the national party. That's what fund-raising is all about.

MATTHEWS: Yes.

GIBBS: Nobody likes it, but obviously, you can't buy commercials on MSNBC for nothing.

MATTHEWS: I know. He even went to Martha's Vineyard this summer. It just seems like the Clinton crowd.

(CROSSTALK)

GIBBS: Chris, hold on. Chris, hold on. The president was vacationing at Martha's Vineyard a long time before he became president of the United States.

MATTHEWS: OK.

GIBBS: That's just where he likes to go in the summer.

MATTHEWS: OK. OK. Now the serious question. Harry Reid is saying no deadlines for health care. We thought the president had a deadline. You folks had a deadline. Get it done this year, in the inaugural year.

Is that still your goal?

GIBBS: It's still our goal, and quite frankly, Chris, I think that's still the goal of the United States Senate. We've seen progress made on both sides of the aisle. We're waiting on some budget scores for the Senate bill. But we know the House is going to move pretty quickly on voting on this. This is going to get to the president's desk before the end of the year. And I tell you, if you want change you can believe in, it's going to be health care reform in 2009.

MATTHEWS: So we're going to get 60 votes in the Senate for change?

GIBBS: You're going to get-you're going to get health care reform. I don't know what the final vote will be, but you're going to get health care reform that does three things. It will cover-it will provide universal coverage for people in this country that haven't been able to afford insurance.

MATTHEWS: Right.

GIBBS: It's going to cut costs for the millions of people that have insurance but struggling with the high cost of rising premiums. And lastly, we're going to have some key insurance reforms that won't allow insurance companies to discriminate against people that have preexisting conditions or drop their coverage when they get sick. The Republicans plans, they don't offer anything to do anything about any of those issues, cost, coverage or insurance reforms.

MATTHEWS: Well, the imagery isn't so great, but the substance sounds great. Robert Gibbs, good luck with the program. Robert Gibbs, White House press secretary, thank you, sir.

GIBBS: Thanks, Chris.