John Heilman lays it all out in an excellent article:
What Schmidt and his associates have apparently concluded is that McCain’s weaknesses—on the election’s most salient issues and as a candidate—are so pronounced and Obama’s vulnerabilities so glaring that the low road is their guy’s best, and maybe only, route to the White House. They’ve concluded, in other words, that even if McCain may not be able to win the election in any affirmative sense, he might still wind up behind the big desk if he and his people can strip the bark off Obama with sufficiently vicious force.
If this sounds like an admission of a certain kind of defeat, that’s because it is. But in the prevailing political circumstances—the hunger for change in the electorate, the abject bankruptcy of the Republican brand, McCain’s positions on the wrong side of the public on the war and the economy, his age, and his pitiful performance skills—it may reflect a cold-eyed realism that’s an asset in any campaign. Moreover, at least in the short term, it actually seems to be working. Measured against the generic Democratic ballot, Obama continues to underperform dramatically. And since shifting to a more harshly negative posture, McCain has gained ground on Obama in Florida, Ohio, and Pennsylvania, according to recent Quinnipiac swing-state polls.
All of which, naturally, has more than a few Democrats in a state of mortal dread, although they tend not to be the types with GOT HOPE? bumper stickers on their Volvos. Making them all the more queasy is what they regard as Obama’s tepid and too-placid responses to the most scurrilous of McCain’s j’accuses. “Obama says he’s ‘disappointed’ in McCain when he charges him with near treason, patronizing him, as if he’s got a twenty-point lead with a week to go,” says one tough-minded organizer on the left. “It’s shades of Swift Boat.”
Ah, but see, in my opinion, the first paragraph negates the last sentence of that quote. What were the major issues of the 2004 election? Gay Marriage and Iraq. Neither Bush nor Kerry had much daylight between them on policy regarding either issue... Kerry supported the invasion(initially) and wanted to "stay the course" in Iraq, and neither supported Gay Marriage... except that Kerry represented the state whose liberal activist judges had just struck such a grievous blow against heterosexual marriage. People weren't happy with the economy, but it really wasn't that bad... not by today's standards anyway. So, despite the fact that people were pissed at Bush at how much he bungled the invasion of a country that wasn't even a threat, he could rely on the Republican brand on national security issues if he succeeded in tearing down Kerry... which he and his scum peddlers did... and there would be no other issue on which Kerry clearly came out on top.
And how does that compare to 2008? As Sullivan notes, Obama's European Adventure kicked McCain's foreign policy credentials so hard in the nuts that Paris Hilton is all they got. If Obama had left them any bit of daylight, do you think they would be trying to turn the fact that 200K Germans came to see him into some sort of Bizzaro negative? The only other option they had was to make up an outrageous lie that they've been repeatedly called on. Iraq and foreign policy was the last chance they had, and it's been clearly blown out of the water.
So, in the end, I have to ask those that think that a negative campaign is going to win it for McCain... how do scurrilous attacks against Obama make voters want to vote for McCain? It certainly makes for more "leaners" in the short term, but I just don't see how it makes people want to pull the lever for you. I'm sure you have a lot of people saying right now "I'm not sure about that Obama guy, maybe we should go with McCain because he seems like an honorable fella"... but I'll wager two things will happen in the next three months... the press is going to bail on McCain hard (presuming he keeps this up), and the American people are going to see Obama going toe to toe with McCain in the debates... thus erasing Obama's negatives and McCain's only remaining positive.
I won't argue that going negative was McCain's only possible course of action(other than losing gracefully)... but as his old buddy, John Weaver, said "This is not a cost-free exercise". Now he's going to get his clock cleaned at the polls and forever damage his reputation... not that I'm complaining. Go for it My Friend.