Is McCain Back? The Underdog Fights On

John McCain has been campaigning in New Hampshire for months, but when he took the stage last week at a town-hall meeting in Keene, it felt like a reunion tour. Journey's "Don't Stop Believin'" pumped on the sound system, and when the onetime GOP presidential front runner arrived, many of the 200 people packed in the room leapt to their feet, cheering. McCain railed against partisanship in Washington and attacked the free-spending ways of his own party. "It's getting harder to do the work of the Lord in the city of Satan," he said, prompting laugher and applause. A few feet away, a handmade campaign sign hung on the wall: THE MAC IS BACK!

That's the message McCain's supporters are pushing after his campaign's near collapse. After spending several years remaking his image—from maverick insurgent into establishment GOPer friendly with the conservative base—McCain raised less money than his opponents and spent more. He ended the first six months of the campaign with less than $500,000 available for the primary—a number so dismal, even Ron Paul had more cash. That led to a nasty split with campaign manager Terry Nelson and longtime strategist friend John Weaver. More than 80 staffers were let go and dozens of others resigned; last week veteran admen Fred Davis, Russ Schriefer and Stuart Stevens bolted. The departures put Washington on a deathwatch. "It's effectively over," predicted election expert Charlie Cook. "The physicians have left the hospital room, and it's the executors of the estate that are taking over."

Yet McCain seems oddly upbeat. A friend, who declined to be named while discussing private conversations, says the senator is in "better spirits than I have seen in months." The scrappy war vet was never very convincing as the Anointed One anyway. Now he's reverting to the formula that helped him win New Hampshire in 2000: a lean, insurgent candidacy heavy on retail politics and promises to take on Washington. (It's the same underdog storyline the media, which McCain used to call "his base," once found so appealing.) He's left the pricey Straight Talk Express bus at home. And when he flies, he's going commercial. "I'm starting from scratch," McCain tells NEWSWEEK. "But I believe we can do what we were able to do in 2000."

McCain's aides are citing a different moment in history. A memo recently sent to staff and supporters likened McCain's predicament to Ronald Reagan's 1980 campaign, in which the "Gipper" nearly lost the GOP nomination because of weak fund-raising and internal disputes. Like McCain, Reagan fired his top staff in a bid to re-invigorate his candidacy. Yet the story is not without irony: one of the advisers Reagan fired is Charlie Black, who McCain has now made his top strategist. Black, a lobbyist who is helping McCain free of charge, says it was his idea to make the analogy between Reagan and McCain. "Our infighting throughout that campaign was 10 times as bad as any of this," Black tells NEWSWEEK. "You could argue that we did everything we could to drag Reagan down and he still came back to be president. There's no reason you can't make the same case for McCain."

Yet McCain has problems Reagan didn't, namely a lack of credibility with the GOP base. While Reagan was in line with party values, McCain continues to embrace policies abhorred by many Republicans, like immigration reform. And his strong support of the Iraq War threatens to undermine his standing with independents, a crucial bloc in New Hampshire. When a man asked him last week why he talks about issues that voters don't like, like the war, McCain replied, "I know what's best for America."

There are many reasons why McCain can't be written off, aides argue. For one, some of the millions McCain burned through went toward building teams in Iowa, New Hampshire and South Carolina—organizations that his staff says remain largely intact. His finance team has organized more than a dozen fund-raisers for McCain heading into August, a slow month for donations. And in spite of the negative buzz surrounding his campaign, and his unpopular positions on the war and immigration, McCain's polling numbers have remained largely steady. The latest Gallup poll found that McCain ranked at 16 percent among likely GOP voters—behind Rudy Giuliani and in a dead heat with Fred Thompson, who is expected to enter the race this summer. McCain's campaign also likes the look of the new front runner. According to a recent Associated Press poll, the new leader of pack for the GOP nomination is "none of the above."