Newsweek special report on U.S. elections 2008 (must read)

An aide approached McAuliffe and said the president wanted to see him. McAuliffe was escorted to the Clintons’ suite by a Secret Service agent. He found Bill Clinton watching a bowl game on TV. The ex-president seemed perfectly relaxed and jovial. “Sir,” said McAuliffe, “have you heard the news?” “What news?” Clinton asked. “We’re going to get killed,” said McAuliffe.

“What!” exclaimed Clinton, who then called out in a loud voice, “Hillary!”

Hillary emerged from the bedroom. McAuliffe recalled: “Nobody had told them. He thought he was going to have a beer with me and watch the game.” Suddenly there was pandemonium. Grunwald and Penn appeared, then Solis Doyle and Wolfson and Neera Tanden, the policy director. “How did this happen?” the Clintons demanded. A squabble broke out when Grunwald showed some negative ads on her laptop that had been made—but never aired. Penn insisted that the argument—that Obama had overstated his antiwar credentials—had tested well; it was the ads themselves, made by Grunwald, that were no good. Now President Clinton wanted to run the ads. “Let’s go,” he said, giving a thumbs-up. But Hillary asked, “Where are we going? It’s just throwing stuff against the wall.”

The plane flight back to Manchester after midnight was grim. “Mark, we lost women,” McAuliffe said. Penn just shrugged his shoulders. At a senior staff teleconference in the morning, Hillary, who had slept no more than an hour, asked for ideas. There was an awkward silence. So she held for a bit, then asked for input. Again, silence. “Well, I want to thank you all,” she said. “It’s been really great talking to myself.” Then she hung up.

Less than 24 hours before the New Hampshire polls opened on Tuesday, Jan. 8, she was sitting in a strip-mall coffee shop in Manchester, talking to about 16 voters, when someone asked, “My question is very personal: How do you do it? How do you do … how do you keep upbeat and so wonderful?” Hillary answered, “It’s not easy, it’s not easy, and I couldn’t do it if I just didn’t passionately believe it was the right thing to do. I have so many opportunities from this country …” Her voice cracked. “I just don’t want to see us fall backwards. You know, this is very personal for me …”

In the bus afterward, she ranted at one of her aides, “We never should have gone to Iowa. I knew it. I knew we never should have gone.” Now she fretted that she had doomed herself with a “Muskie moment,” referring to the late Ed Muskie, the once front-running senator from Maine who had doomed his 1972 presidential campaign by welling up at a campaign event in New Hampshire. Penn had warned her not to show vulnerability. “I’ve been so wound up in doing the commander-in-chief thing,” she said. Later that afternoon she stopped in at her Manchester campaign headquarters, where staffers were buzzing about how she had become choked up at a coffee shop. It played well, they assured her. Hillary thanked them. “Don’t expect that too often,” she said dryly.

Obama’s strategist David Axelrod was on the campaign bus when word came that Clinton had teared up, experienced some sort of breakdown. Some of Obama’s aides began chortling about an Ed Muskie moment, but when Axelrod went online and saw a video feed of the incident, he had an uneasy feeling. “Everybody said, ‘Oh, Ed Muskie and all that’,” Axelrod later recalled. “But it didn’t come across that way to me at all. It came across as a moment of humanity from someone who badly needed to show one.”

Obama was making a triumphal march across the state. The press (once so sure of Clinton’s “inevitability”) sensed History in the Making, the first black presidential nominee. Several journalists brought their families to Obama campaign rallies to bear witness. But on Jan. 5, at the last debate, Hillary was asked why voters felt that Obama was a more likable figure. “Well, that hurts my feelings,” she responded. “But I’ll try to go on. He’s very likable. I agree with that. I don’t think I’m that bad.” Obama, barely looking up while he took a note, remarked, “You’re likable enough, Hillary.”

On Election Day, undecided women voters broke almost entirely Clinton’s way. That night, in the press-filing center, New Yorker writer Ryan Lizza was putting the finishing touches on a 10,000-word story on Rocket Ship Obama. “I think I’m f–––ed,” he said. “I have to write a completely different story.”

Obama was sitting in a coach’s office in a high-school gym when the results came in. Axelrod knocked on the door, and Obama stepped outside into the hallway. “It doesn’t look like it’s going to happen,” said Axelrod. Obama closed his eyes and leaned against the wall. He inhaled, exhaled. “This is going to take a while, isn’t it?” he asked.

“I think so,” Axelrod answered.

Next: McCain, adrift if not sinking, finds a new narrative: the comeback.

[Click here for Part 2]