Oct. 4 (Bloomberg) -- Senator John McCain's once front- running presidential campaign, which has been battered by plunging polls, defecting donors and staff turmoil, is showing signs of a rebound in New Hampshire.

McCain, whose bid for the Republican nomination has been hurt by conservatives' hostility to his pro-immigration views and independents' ire over his support for the Iraq war, has refocused his efforts on New Hampshire, site of the nation's first primary. McCain has risen 10 percentage points since July in one new poll and 5 in another.

``You have McCain, I think, making a comeback with almost no money,'' former President Bill Clinton, who knows something about New Hampshire comebacks from his 1992 campaign, said in a Sept. 27 interview. ``He deserves to be a major candidate.''

New Hampshire, the site of McCain's greatest triumph over George W. Bush in his 2000 bid for the nomination, ``is our strategic state,'' said Mark Salter, a senior McCain aide.

At the heart of McCain's strategy is a massive campaign of town-hall meetings and house parties, where he mixes blunt answers and wisecracks -- a blend of gravitas and Groucho Marx.

At a Sept. 29 event on the manicured lawn of an oceanfront compound in Rye, McCain referred to the setting as a ``modest, middle-income tract home,'' offered brief remarks and invited ``questions, comments and insults.''

Grasping the Problem

Working an audience of about 60, he singled out two young people wearing ``Stop Global Warming'' stickers and launched into a soliloquy about the environment. McCain said he knew little about climate change in 2000 but after traveling around the world -- ``mostly at your expense'' -- he grasped the problem and sponsored legislation with Democratic Senator Joe Lieberman of Connecticut to curb greenhouse-gas emissions.

On immigration, McCain said, he learned another lesson: The public doesn't trust Washington's promise to effectively police the borders while dangling potential citizenship before 12 million illegal aliens.

``I got the message,'' McCain said. He said still believes the status of undocumented workers must be addressed -- but only after governors certify that their borders are secure.

He called health care the top domestic issue in the campaign and promised a major address on the subject. The solution, McCain said, isn't Democratic Senator Hillary Clinton's proposal to mandate universal coverage, which he described as ``putting lipstick on a pig,'' but a market-based plan based on private insurance.

Bringing Up Iraq

As he does at every stop, McCain brought up Iraq, justifying his support for continued U.S. involvement while criticizing the Bush administration's conduct of the war. ``I've been hurt by this issue, and I understand that,'' he said.

Later, at a backyard gathering in Exeter, he criticized calls for an early withdrawal of U.S. troops, warning that ``we'll pay a heavy price'' for the ensuing chaos.

As he worked his way through the crowd of 250, Maureen Barrows, a Rockingham County commissioner, pronounced herself delighted by the candidate's performance.

``This was the way things were going in 2000'' when McCain beat then-Texas Governor Bush by 18 percentage points, she said.

Campaign veterans say that even if he manages a New Hampshire victory, McCain is so cash-starved that he may be unable to follow up in later contests in South Carolina, Florida and beyond. At the end of the second quarter, he had just $3.2 million on hand and was almost $2 million in debt. Former New York Mayor Rudy Giuliani and ex-Massachusetts Governor Mitt Romney each had more than $12 million in the bank.

`An Open Question'

``McCain has a good track record in New Hampshire,'' said Republican strategist John Feehery. ``It's still an open question if he can translate success there to the nomination.''

Others say McCain can overcome money woes. ``McCain will need to ride the free media,'' said Republican strategist Scott Reed. ``A sharp, well-executed daily message can counter the lack of paid TV and radio resources.''

A late-September New Hampshire poll by Manchester-based American Research Group, which earlier in the summer showed McCain with 10 percent, now shows him tied for second with Giuliani at 20 percent; Romney leads with 24 percent.

McCain's supporters said they aren't surprised by his improved fortunes. ``Immigration hurt us a lot,'' said Peter Spaulding, his New Hampshire chairman, referring to the Senate's failed attempt in June to grant undocumented workers a path to citizenship. With the bill off the table, McCain is now freer to court conservatives.

The candidate himself says he's pleased with his progress. ``We're gaining some traction, and we're having a lot of fun,'' McCain said.

To contact the reporter on this story: Edwin Chen in Washington at echen32@bloomberg.net

Last Updated: October 4, 2007 00:12 EDT