A Time for Choosing - Ronald Reagan Oct 1964

A TIME FOR CHOOSING (The Speech – October 27, 1964)
(Video at Further Adventures of Indigo Red)

Thank you. Thank you very much. Thank you and good evening. The sponsor has been identified, but unlike most television programs, the performer hasn't been provided with a script. As a matter of fact, I have been permitted to choose my own words and discuss my own ideas regarding the choice that we face in the next few weeks.

I have spent most of my life as a Democrat. I recently have seen fit to follow another course. I believe that the issues confronting us cross party lines. Now, one side in this campaign has been telling us that the issues of this election are the maintenance of peace and prosperity. The line has been used, "We've never had it so good."

But I have an uncomfortable feeling that this prosperity isn't something on which we can base our hopes for the future. No nation in history has ever survived a tax burden that reached a third of its national income. Today, 37 cents out of every dollar earned in this country is the tax collector's share, and yet our government continues to spend 17 million dollars a day more than the government takes in. We haven't balanced our budget 28 out of the last 34 years. We've raised our debt limit three times in the last twelve months, and now our national debt is one and a half times bigger than all the combined debts of all the nations of the world. We have 15 billion dollars in gold in our treasury; we don't own an ounce. Foreign dollar claims are 27.3 billion dollars. And we've just had announced that the dollar of 1939 will now purchase 45 cents in its total value.

As for the peace that we would preserve, I wonder who among us would like to approach the wife or mother whose husband or son has died in South Vietnam and ask them if they think this is a peace that should be maintained indefinitely. Do they mean peace, or do they mean we just want to be left in peace? There can be no real peace while one American is dying some place in the world for the rest of us. We're at war with the most dangerous enemy that has ever faced mankind in his long climb from the swamp to the stars, and it's been said if we lose that war, and in so doing lose this way of freedom of ours, history will record with the greatest astonishment that those who had the most to lose did the least to prevent its happening. Well I think it's time we ask ourselves if we still know the freedoms that were intended for us by the Founding Fathers.

Not too long ago, two friends of mine were talking to a Cuban refugee, a businessman who had escaped from Castro, and in the midst of his story one of my friends turned to the other and said, "We don't know how lucky we are." And the Cuban stopped and said, "How lucky you are? I had someplace to escape to." And in that sentence he told us the entire story. If we lose freedom here, there's no place to escape to. This is the last stand on earth.

And this idea that government is beholden to the people, that it has no other source of power except the sovereign people, is still the newest and the most unique idea in all the long history of man's relation to man.

This is the issue of this election: Whether we believe in our capacity for self-government or whether we abandon the American revolution and confess that a little intellectual elite in a far-distant capitol can plan our lives for us better than we can plan them ourselves.

You and I are told increasingly we have to choose between a left or right. Well I'd like to suggest there is no such thing as a left or right. There's only an up or down—[up] man's old—old-aged dream, the ultimate in individual freedom consistent with law and order, or down to the ant heap of totalitarianism. And regardless of their sincerity, their humanitarian motives, those who would trade our freedom for security have embarked on this downward course.

In this vote-harvesting time, they use terms like the "Great Society," or as we were told a few days ago by the President, we must accept a greater government activity in the affairs of the people. But they've been a little more explicit in the past and among themselves; and all of the things I now will quote have appeared in print. These are not Republican accusations. For example, they have voices that say, "The cold war will end through our acceptance of a not undemocratic socialism." Another voice says, "The profit motive has become outmoded. It must be replaced by the incentives of the welfare state." Or, "Our traditional system of individual freedom is incapable of solving the complex problems of the 20th century." Senator Fullbright has said at Stanford University that the Constitution is outmoded. He referred to the President as "our moral teacher and our leader," and he says he is "hobbled in his task by the restrictions of power imposed on him by this antiquated document." He must "be freed," so that he "can do for us" what he knows "is best." And Senator Clark of Pennsylvania, another articulate spokesman, defines liberalism as "meeting the material needs of the masses through the full power of centralized government."

Well, I, for one, resent it when a representative of the people refers to you and me, the free men and women of this country, as "the masses." This is a term we haven't applied to ourselves in America. But beyond that, "the full power of centralized government"—this was the very thing the Founding Fathers sought to minimize. They knew that governments don't control things. A government can't control the economy without controlling people. And they know when a government sets out to do that, it must use force and coercion to achieve its purpose. They also knew, those Founding Fathers, that outside of its legitimate functions, government does nothing as well or as economically as the private sector of the economy.

Now, we have no better example of this than government's involvement in the farm economy over the last 30 years. Since 1955, the cost of this program has nearly doubled. One-fourth of farming in America is responsible for 85 percent of the farm surplus. Three-fourths of farming is out on the free market and has known a 21 percent increase in the per capita consumption of all its produce. You see, that one-fourth of farming—that's regulated and controlled by the federal government. In the last three years we've spent 43 dollars in the feed grain program for every dollar bushel of corn we don't grow.

Senator Humphrey last week charged that Barry Goldwater, as President, would seek to eliminate farmers. He should do his homework a little better, because he'll find out that we've had a decline of 5 million in the farm population under these government programs. He'll also find that the Democratic administration has sought to get from Congress [an] extension of the farm program to include that three-fourths that is now free. He'll find that they've also asked for the right to imprison farmers who wouldn't keep books as prescribed by the federal government. The Secretary of Agriculture asked for the right to seize farms through condemnation and resell them to other individuals. And contained in that same program was a provision that would have allowed the federal government to remove 2 million farmers from the soil.

At the same time, there's been an increase in the Department of Agriculture employees. There's now one for every 30 farms in the United States, and still they can't tell us how 66 shiploads of grain headed for Austria disappeared without a trace and Billie Sol Estes never left shore.

Every responsible farmer and farm organization has repeatedly asked the government to free the farm economy, but how—who are farmers to know what's best for them? The wheat farmers voted against a wheat program. The government passed it anyway. Now the price of bread goes up; the price of wheat to the farmer goes down.

Meanwhile, back in the city, under urban renewal the assault on freedom carries on. Private property rights [are] so diluted that public interest is almost anything a few government planners decide it should be. In a program that takes from the needy and gives to the greedy, we see such spectacles as in Cleveland, Ohio, a million-and-a-half-dollar building completed only three years ago must be destroyed to make way for what government officials call a "more compatible use of the land." The President tells us he's now going to start building public housing units in the thousands, where heretofore we've only built them in the hundreds. But FHA [Federal Housing Authority] and the Veterans Administration tell us they have 120,000 housing units they've taken back through mortgage foreclosure. For three decades, we've sought to solve the problems of unemployment through government planning, and the more the plans fail, the more the planners plan. The latest is the Area Redevelopment Agency.

They've just declared Rice County, Kansas, a depressed area. Rice County, Kansas, has two hundred oil wells, and the 14,000 people there have over 30 million dollars on deposit in personal savings in their banks. And when the government tells you you're depressed, lie down and be depressed.

We have so many people who can't see a fat man standing beside a thin one without coming to the conclusion the fat man got that way by taking advantage of the thin one. So they're going to solve all the problems of human misery through government and government planning. Well, now, if government planning and welfare had the answer—and they've had almost 30 years of it—shouldn't we expect government to read the score to us once in a while? Shouldn't they be telling us about the decline each year in the number of people needing help? The reduction in the need for public housing?

But the reverse is true. Each year the need grows greater; the program grows greater. We were told four years ago that 17 million people went to bed hungry each night. Well that was probably true. They were all on a diet. But now we're told that 9.3 million families in this country are poverty-stricken on the basis of earning less than 3,000 dollars a year. Welfare spending [is] 10 times greater than in the dark depths of the Depression. We're spending 45 billion dollars on welfare. Now do a little arithmetic, and you'll find that if we divided the 45 billion dollars up equally among those 9 million poor families, we'd be able to give each family 4,600 dollars a year. And this added to their present income should eliminate poverty. Direct aid to the poor, however, is only running only about 600 dollars per family. It would seem that someplace there must be some overhead.

Now—so now we declare "war on poverty," or "You, too, can be a Bobby Baker." Now do they honestly expect us to believe that if we add 1 billion dollars to the 45 billion we're spending, one more program to the 30-odd we have—and remember, this new program doesn't replace any, it just duplicates existing programs—do they believe that poverty is suddenly going to disappear by magic? Well, in all fairness I should explain there is one part of the new program that isn't duplicated. This is the youth feature. We're now going to solve the dropout problem, juvenile delinquency, by reinstituting something like the old CCC camps [Civilian Conservation Corps], and we're going to put our young people in these camps. But again we do some arithmetic, and we find that we're going to spend each year just on room and board for each young person we help 4,700 dollars a year. We can send them to Harvard for 2,700! Course, don't get me wrong. I'm not suggesting Harvard is the answer to juvenile delinquency.

But seriously, what are we doing to those we seek to help? Not too long ago, a judge called me here in Los Angeles. He told me of a young woman who'd come before him for a divorce. She had six children, was pregnant with her seventh. Under his questioning, she revealed her husband was a laborer earning 250 dollars a month. She wanted a divorce to get an 80 dollar raise. She's eligible for 330 dollars a month in the Aid to Dependent Children Program. She got the idea from two women in her neighborhood who'd already done that very thing.

Yet anytime you and I question the schemes of the do-gooders, we're denounced as being against their humanitarian goals. They say we're always "against" things—we're never "for" anything.

Well, the trouble with our liberal friends is not that they're ignorant; it's just that they know so much that isn't so.

Now—we're for a provision that destitution should not follow unemployment by reason of old age, and to that end we've accepted Social Security as a step toward meeting the problem.

But we're against those entrusted with this program when they practice deception regarding its fiscal shortcomings, when they charge that any criticism of the program means that we want to end payments to those people who depend on them for a livelihood. They've called it "insurance" to us in a hundred million pieces of literature. But then they appeared before the Supreme Court and they testified it was a welfare program. They only use the term "insurance" to sell it to the people. And they said Social Security dues are a tax for the general use of the government, and the government has used that tax. There is no fund, because Robert Byers, the actuarial head, appeared before a congressional committee and admitted that Social Security as of this moment is 298 billion dollars in the hole. But he said there should be no cause for worry because as long as they have the power to tax, they could always take away from the people whatever they needed to bail them out of trouble. And they're doing just that.

A young man, 21 years of age, working at an average salary—his Social Security contribution would, in the open market, buy him an insurance policy that would guarantee 220 dollars a month at age 65. The government promises 127. He could live it up until he's 31 and then take out a policy that would pay more than Social Security. Now are we so lacking in business sense that we can't put this program on a sound basis, so that people who do require those payments will find they can get them when they're due—that the cupboard isn't bare?

Barry Goldwater thinks we can.

At the same time, can't we introduce voluntary features that would permit a citizen who can do better on his own to be excused upon presentation of evidence that he had made provision for the non-earning years? Should we not allow a widow with children to work, and not lose the benefits supposedly paid for by her deceased husband? Shouldn't you and I be allowed to declare who our beneficiaries will be under this program, which we cannot do? I think we're for telling our senior citizens that no one in this country should be denied medical care because of a lack of funds. But I think we're against forcing all citizens, regardless of need, into a compulsory government program, especially when we have such examples, as was announced last week, when France admitted that their Medicare program is now bankrupt. They've come to the end of the road.

In addition, was Barry Goldwater so irresponsible when he suggested that our government give up its program of deliberate, planned inflation, so that when you do get your Social Security pension, a dollar will buy a dollar's worth, and not 45 cents worth?

I think we're for an international organization, where the nations of the world can seek peace. But I think we're against subordinating American interests to an organization that has become so structurally unsound that today you can muster a two-thirds vote on the floor of the General Assembly among nations that represent less than 10 percent of the world's population. I think we're against the hypocrisy of assailing our allies because here and there they cling to a colony, while we engage in a conspiracy of silence and never open our mouths about the millions of people enslaved in the Soviet colonies in the satellite nations.

I think we're for aiding our allies by sharing of our material blessings with those nations which share in our fundamental beliefs, but we're against doling out money government to government, creating bureaucracy, if not socialism, all over the world. We set out to help 19 countries. We're helping 107. We've spent 146 billion dollars. With that money, we bought a 2 million dollar yacht for Haile Selassie. We bought dress suits for Greek undertakers, extra wives for Kenya[n] government officials. We bought a thousand TV sets for a place where they have no electricity. In the last six years, 52 nations have bought 7 billion dollars worth of our gold, and all 52 are receiving foreign aid from this country.

No government ever voluntarily reduces itself in size. So governments' programs, once launched, never disappear.

Actually, a government bureau is the nearest thing to eternal life we'll ever see on this earth.

Federal employees—federal employees number two and a half million; and federal, state, and local, one out of six of the nation's work force employed by government. These proliferating bureaus with their thousands of regulations have cost us many of our constitutional safeguards. How many of us realize that today federal agents can invade a man's property without a warrant? They can impose a fine without a formal hearing, let alone a trial by jury? And they can seize and sell his property at auction to enforce the payment of that fine. In Chico County, Arkansas, James Wier over-planted his rice allotment. The government obtained a 17,000 dollar judgment. And a U.S. marshal sold his 960-acre farm at auction. The government said it was necessary as a warning to others to make the system work.

Last February 19th at the University of Minnesota, Norman Thomas, six-times candidate for President on the Socialist Party ticket, said, "If Barry Goldwater became President, he would stop the advance of socialism in the United States." I think that's exactly what he will do.

But as a former Democrat, I can tell you Norman Thomas isn't the only man who has drawn this parallel to socialism with the present administration, because back in 1936, Mr. Democrat himself, Al Smith, the great American, came before the American people and charged that the leadership of his Party was taking the Party of Jefferson, Jackson, and Cleveland down the road under the banners of Marx, Lenin, and Stalin. And he walked away from his Party, and he never returned til the day he died—because to this day, the leadership of that Party has been taking that Party, that honorable Party, down the road in the image of the labor Socialist Party of England.

Now it doesn't require expropriation or confiscation of private property or business to impose socialism on a people. What does it mean whether you hold the deed to the—or the title to your business or property if the government holds the power of life and death over that business or property? And such machinery already exists. The government can find some charge to bring against any concern it chooses to prosecute. Every businessman has his own tale of harassment. Somewhere a perversion has taken place. Our natural, unalienable rights are now considered to be a dispensation of government, and freedom has never been so fragile, so close to slipping from our grasp as it is at this moment.

Our Democratic opponents seem unwilling to debate these issues. They want to make you and I believe that this is a contest between two men—that we're to choose just between two personalities.

Well what of this man that they would destroy—and in destroying, they would destroy that which he represents, the ideas that you and I hold dear? Is he the brash and shallow and trigger-happy man they say he is? Well I've been privileged to know him "when." I knew him long before he ever dreamed of trying for high office, and I can tell you personally I've never known a man in my life I believed so incapable of doing a dishonest or dishonorable thing.

This is a man who, in his own business before he entered politics, instituted a profit-sharing plan before unions had ever thought of it. He put in health and medical insurance for all his employees. He took 50 percent of the profits before taxes and set up a retirement program, a pension plan for all his employees. He sent monthly checks for life to an employee who was ill and couldn't work. He provides nursing care for the children of mothers who work in the stores. When Mexico was ravaged by the floods in the Rio Grande, he climbed in his airplane and flew medicine and supplies down there.

An ex-GI told me how he met him. It was the week before Christmas during the Korean War, and he was at the Los Angeles airport trying to get a ride home to Arizona for Christmas. And he said that [there were] a lot of servicemen there and no seats available on the planes. And then a voice came over the loudspeaker and said, "Any men in uniform wanting a ride to Arizona, go to runway such-and-such," and they went down there, and there was a fellow named Barry Goldwater sitting in his plane. Every day in those weeks before Christmas, all day long, he'd load up the plane, fly it to Arizona, fly them to their homes, fly back over to get another load.

During the hectic split-second timing of a campaign, this is a man who took time out to sit beside an old friend who was dying of cancer. His campaign managers were understandably impatient, but he said, "There aren't many left who care what happens to her. I'd like her to know I care." This is a man who said to his 19-year-old son, "There is no foundation like the rock of honesty and fairness, and when you begin to build your life on that rock, with the cement of the faith in God that you have, then you have a real start." This is not a man who could carelessly send other people's sons to war. And that is the issue of this campaign that makes all the other problems I've discussed academic, unless we realize we're in a war that must be won.

Those who would trade our freedom for the soup kitchen of the welfare state have told us they have a utopian solution of peace without victory. They call their policy "accommodation." And they say if we'll only avoid any direct confrontation with the enemy, he'll forget his evil ways and learn to love us. All who oppose them are indicted as warmongers. They say we offer simple answers to complex problems. Well, perhaps there is a simple answer—not an easy answer—but simple: If you and I have the courage to tell our elected officials that we want our national policy based on what we know in our hearts is morally right.

We cannot buy our security, our freedom from the threat of the bomb by committing an immorality so great as saying to a billion human beings now enslaved behind the Iron Curtain, "Give up your dreams of freedom because to save our own skins, we're willing to make a deal with your slave masters." Alexander Hamilton said, "A nation which can prefer disgrace to danger is prepared for a master, and deserves one." Now let's set the record straight. There's no argument over the choice between peace and war, but there's only one guaranteed way you can have peace—and you can have it in the next second—surrender.

Admittedly, there's a risk in any course we follow other than this, but every lesson of history tells us that the greater risk lies in appeasement, and this is the specter our well-meaning liberal friends refuse to face—that their policy of accommodation is appeasement, and it gives no choice between peace and war, only between fight or surrender. If we continue to accommodate, continue to back and retreat, eventually we have to face the final demand—the ultimatum. And what then—when Nikita Khrushchev has told his people he knows what our answer will be? He has told them that we're retreating under the pressure of the Cold War, and someday when the time comes to deliver the final ultimatum, our surrender will be voluntary, because by that time we will have been weakened from within spiritually, morally, and economically. He believes this because from our side he's heard voices pleading for "peace at any price" or "better Red than dead," or as one commentator put it, he'd rather "live on his knees than die on his feet." And therein lies the road to war, because those voices don't speak for the rest of us.

You and I know and do not believe that life is so dear and peace so sweet as to be purchased at the price of chains and slavery. If nothing in life is worth dying for, when did this begin—just in the face of this enemy? Or should Moses have told the children of Israel to live in slavery under the pharaohs? Should Christ have refused the cross? Should the patriots at Concord Bridge have thrown down their guns and refused to fire the shot heard 'round the world? The martyrs of history were not fools, and our honored dead who gave their lives to stop the advance of the Nazis didn't die in vain. Where, then, is the road to peace? Well it's a simple answer after all.

You and I have the courage to say to our enemies, "There is a price we will not pay." "There is a point beyond which they must not advance." And this—this is the meaning in the phrase of Barry Goldwater's "peace through strength." Winston Churchill said, "The destiny of man is not measured by material computations. When great forces are on the move in the world, we learn we're spirits—not animals." And he said, "There's something going on in time and space, and beyond time and space, which, whether we like it or not, spells duty."

You and I have a rendezvous with destiny.

We'll preserve for our children this, the last best hope of man on earth, or we'll sentence them to take the last step into a thousand years of darkness.

We will keep in mind and remember that Barry Goldwater has faith in us. He has faith that you and I have the ability and the dignity and the right to make our own decisions and determine our own destiny.

Thank you very much.

Text of Obama in Portsmouth, NH Aug 11, 2009

Full text of Obama's Town Hall meeting provide by the White House. The full video (1hr, 19 mins) is linked to C-Span.
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THE BRIEFING ROOM


THE WHITE HOUSE

Office of the Press Secretary
___________________________________________________________________________
For Immediate Release August 11, 2009

REMARKS BY THE PRESIDENT
IN HEALTH INSURANCE REFORM TOWN HALL

Portsmouth High School
Portsmouth, New Hampshire

1:05 P.M. EDT

THE PRESIDENT: Hello, Portsmouth! Thank you. (Applause.) Thank you so much. Everybody have a seat. Oh, thank you so --

AUDIENCE MEMBER: We love you!

THE PRESIDENT: I love you back. Thank you. (Laughter.) It is great to be back in Portsmouth. (Applause.) It's great to be back in New Hampshire. I have to say, though, that most of my memories of this state are cold. (Laughter.) So it's good to be here in August.

There are a couple of people that I want to acknowledge who are here today, some special guests. First of all, I want to thank principal Jeffrey Collins, and the Portsmouth students and faculty and staff. (Applause.) Thank you -- our host for today. Your own outstanding governor, John Lynch is here. (Applause.) And his wonderful wife, Dr. Susan Lynch is here, the First Lady of New Hampshire. (Applause.) Your United States senator, doing a great job, Jeanne Shaheen is here. (Applause.) The governor of the great state of Maine, and we are glad he's here in New Hampshire today, John Baldacci is here. (Applause.)

Two of my favorite people, they are just taking Congress by storm, outstanding work -- Paul Hodes, Carol Shea-Porter -- give them a big round of applause. (Applause.) And we've got your own mayor, Tom Ferrini is here. Where's Tom? There he is. (Applause.)

Now, I want to thank more than anybody, Lori, for that introduction, and for sharing her story with the rest of us. (Applause.) Thank you, Lori. Lori's story is the same kind of story that I've read in letters, that I've heard in town hall meetings just like this one for the past five years. In fact, some of you were in that town hall -- those town hall meetings, as I was traveling all throughout New Hampshire. It's the story of hardworking Americans who are held hostage by health insurance companies that deny them coverage, or drop their coverage, or charge fees that they can't afford for care that they desperately need.

I believe it is wrong. It is bankrupting families and businesses, and that's why we are going to pass health insurance reform in 2009. (Applause.)

Now, this is obviously a tough time for families here in New Hampshire and all across America. Six months ago, we were in the middle of the worst recession of our lifetimes. I want you to remember what things were like in January and February. We were losing about 700,000 jobs per month. And economists of all stripes feared a second-coming of the Great Depression. That was only six months ago.

That's why we acted as fast as we could to pass a Recovery Act that would stop the freefall. And I want to make sure everybody understands what we did. One-third of the money in the Recovery Act went to tax cuts that have already started showing up in the paychecks of about 500,000 working families in New Hampshire -- (applause) -- 500,000 families in New Hampshire. We also cut taxes for small businesses on the investments that they make, and over 300 New Hampshire small businesses have qualified for new loans backed by the Recovery Act.

Now, that was a third -- that was a third of the Recovery Act. Another third of the money in the Recovery Act is for emergency relief for folks who've borne the brunt of this recession. So we've extended unemployment benefits for 20,000 New Hampshire residents. (Applause.) We've made health insurance 65 percent cheaper for families who rely on COBRA while they're looking for work. (Applause.) And for states that were facing historic budget shortfalls, we provided assistance that has saved the jobs of tens of thousands of workers who provided essential services -- like teachers and police officers. (Applause.) So it's prevented a lot of painful cuts in the state, but also a lot of painful state and local tax increases.

Now, the last third of the Recovery Act is for investments that are already putting people back to work. These are jobs refurbishing bridges and pavement on I-95; or jobs at the community health centers here in Portsmouth that will be able to add nurses, and extend hours, and serve up to 500 new patients. These are good jobs doing the work America needs done. And, by the way, most of the work is being done by private, local businesses, because that's how we're going to grow this economy again.

So there is no doubt that the Recovery Act has helped put the brakes on this recession. We just saw last Friday the job picture is beginning to turn. We're starting to see signs that business investment is coming back.

But, New Hampshire, that doesn't mean we're out of the woods, and you know that. It doesn't mean we can just sit back and do nothing while so many families are still struggling, because even before this recession hit we had an economy that was working pretty well for the wealthiest Americans, it was working pretty well for Wall Street bankers, it was working pretty well for big corporations, but it wasn't working so well for everybody else. It was an economy of bubbles and busts. And we can't go back to that kind of economy.

If we want this country to succeed in the 21st century -- and if we want our children to succeed in the 21st century -- then we're going to have to take the steps necessary to lay a new foundation for economic growth. We need to build an economy that works for everybody, and not just some people. (Applause.)

Now, health insurance reform is one of those pillars that we need to build up that new foundation. I don't have to explain to you that nearly 46 million Americans don't have health insurance coverage today. In the wealthiest nation on Earth, 46 million of our fellow citizens have no coverage. They are just vulnerable. If something happens, they go bankrupt, or they don't get the care they need.

But it's just as important that we accomplish health insurance reform for the Americans who do have health insurance -- (applause) -- because right now we have a health care system that too often works better for the insurance industry than it does for the American people. And we've got to change that. (Applause.)

Now, let me just start by setting the record straight on a few things I've been hearing out here -- (laughter) -- about reform. Under the reform we're proposing, if you like your doctor, you can keep your doctor. If you like your health care plan, you can keep your health care plan.

You will not be waiting in any lines. This is not about putting the government in charge of your health insurance. I don't believe anyone should be in charge of your health insurance decisions but you and your doctor. (Applause.) I don't think government bureaucrats should be meddling, but I also don't think insurance company bureaucrats should be meddling. That's the health care system I believe in. (Applause.)

Now, we just heard from Lori about how she can't find an insurance company that will cover her because of her medical condition. She's not alone. A recent report actually shows that in the past three years, over 12 million Americans were discriminated against by insurance companies because of a preexisting condition. Either the insurance company refused to cover the person, or they dropped their coverage when they got sick and they needed it most, or they refused to cover a specific illness or condition, or they charged higher premiums and out-of-pocket costs. No one holds these companies accountable for these practices.

And I have to say, this is personal for Lori but it's also personal for me. I talked about this when I was campaigning up here in New Hampshire. I will never forget my own mother, as she fought cancer in her final months, having to worry about whether her insurance would refuse to pay for her treatment. And by the way, this was because the insurance company was arguing that somehow she should have known that she had cancer when she took her new job -- even though it hadn't been diagnosed yet. So if it could happen to her, it could happen to any one of us.

And I've heard from so many Americans who have the same worries. One woman testified that an insurance company would not cover her internal organs because of an accident she had when she was five years old. Think about that -- that covers a lot of stuff. (Laughter.) They're only going to cover your skin. (Laughter.) Dermatology, that's covered; nothing else. (Laughter.)

Another lost his coverage in the middle of chemotherapy because the insurance company discovered he had gall stones that he hadn't known about when he applied for insurance. Now, that is wrong, and that will change when we pass health care reform. That is going to be a priority. (Applause.)

Under the reform we're proposing, insurance companies will be prohibited from denying coverage because of a person's medical history. Period. (Applause.) They will not be able to drop your coverage if you get sick. (Applause.) They will not be able to water down your coverage when you need it. (Applause.) Your health insurance should be there for you when it counts -- not just when you're paying premiums, but when you actually get sick. And it will be when we pass this plan. (Applause.)

Now, when we pass health insurance reform, insurance companies will no longer be able to place some arbitrary cap on the amount of coverage you can receive in a given year or a lifetime. And we will place a limit on how much you can be charged for out-of-pocket expenses, because no one in America should go broke because they get sick. (Applause.)

And finally -- this is important -- we will require insurance companies to cover routine checkups and preventive care, like mammograms and colonoscopies -- (applause) -- because there's no reason we shouldn't be catching diseases like breast cancer and prostate cancer on the front end. That makes sense, it saves lives; it also saves money -- and we need to save money in this health care system.

So this is what reform is about. For all the chatter and the yelling and the shouting and the noise, what you need to know is this: If you don't have health insurance, you will finally have quality, affordable options once we pass reform. (Applause.) If you do have health insurance, we will make sure that no insurance company or government bureaucrat gets between you and the care that you need. And we will do this without adding to our deficit over the next decade, largely by cutting out the waste and insurance company giveaways in Medicare that aren't making any of our seniors healthier. (Applause.) Right. (Laughter.)

Now, before I start taking questions, let me just say there's been a long and vigorous debate about this, and that's how it should be. That's what America is about, is we have a vigorous debate. That's why we have a democracy. But I do hope that we will talk with each other and not over each other -- (applause) -- because one of the objectives of democracy and debate is, is that we start refining our own views because maybe other people have different perspectives, things we didn't think of.

Where we do disagree, let's disagree over things that are real, not these wild misrepresentations that bear no resemblance to anything that's actually been proposed. (Applause.) Because the way politics works sometimes is that people who want to keep things the way they are will try to scare the heck out of folks and they'll create boogeymen out there that just aren't real. (Applause.)

So this is an important and complicated issue that deserves serious debate. And we have months to go before we're done, and years after that to phase in all these reforms and get them right. And I know this: Despite all the hand-wringing pundits and the best efforts of those who are profiting from the status quo, we are closer to achieving health insurance reform than we have ever been. We have the American Nurses Association supporting us. (Applause.) We have the American Medical Association on board. (Applause.)

America's doctors and nurses know firsthand how badly we need reform. We have broad agreement in Congress on about 80 percent of what we're trying to do. We have an agreement from the drug companies to make prescription drugs more affordable for seniors. We can cut the doughnut hole in half if we pass reform. (Applause.) We have the AARP on board because they know this is a good deal for our seniors. (Applause.)

But let's face it, now is the hard part -- because the history is clear -- every time we come close to passing health insurance reform, the special interests fight back with everything they've got. They use their influence. They use their political allies to scare and mislead the American people. They start running ads. This is what they always do.

We can't let them do it again. Not this time. Not now. (Applause.) Because for all the scare tactics out there, what is truly scary -- what is truly risky -- is if we do nothing. If we let this moment pass -- if we keep the system the way it is right now -- we will continue to see 14,000 Americans lose their health insurance every day. Your premiums will continue to skyrocket. They have gone up three times faster than your wages and they will keep on going up.

Our deficit will continue to grow because Medicare and Medicaid are on an unsustainable path. Medicare is slated to go into the red in about eight to 10 years. I don't know if people are aware of that. If I was a senior citizen, the thing I'd be worried about right now is Medicare starts running out of money because we haven't done anything to make sure that we're getting a good bang for our buck when it comes to health care. And insurance companies will continue to profit by discriminating against people for the simple crime of being sick. Now, that's not a future I want for my children. It's not a future that I want for the United States of America.

New Hampshire, I was up here campaigning a long time. (Laughter.) A lot of you guys came to my town hall events. Some of you voted for me, some of you didn't. But here's one thing I've got to say: I never said this was going to be easy. I never said change would be easy. If it were easy, it would have already been done. Change is hard. And it doesn't start in Washington. It begins in places like Portsmouth, with people like Lori, who have the courage to share their stories and fight for something better. (Applause.)

That's what we need to do right now. And I need your help. If you want a health care system that works for the American people -- (applause) -- as well as it works for the insurance companies, I need your help -- knocking on doors, talking to your neighbors. Spread the facts. Let's get this done. (Applause.)

Thank you. Thank you. (Applause.)

AUDIENCE: Yes we can! Yes we can! Yes we can!

THE PRESIDENT: Thank you. I remember that.

Everybody have a seat. All right, this is the fun part. (Laughter.) Now, first of all, by the way, let's thank the band -- I didn't see the band over here. Thank you, band. (Applause.) Great job.

All right, here's how we're going to do this. We do a lot of town hall meetings in New Hampshire, so everybody knows the basic outlines of this thing. If you have a question just raise your hand. There are people with microphones in the audience. I am going to try to go girl-boy-girl-boy, to make sure it's fair. (Laughter.) If I hear only from people who agree with me I'm going to actively ask some folks who are concerned about health care, give them a chance to ask their questions, because I think we've got to make sure that we get out -- surface some of the debates and concerns that people have. Some of them are legitimate. I'm going to try to get through as many questions as I can. But if you can keep your question or comment relatively brief, then I will try to keep my answers relatively brief, okay? (Laughter.)

All right, so we're just going to go around the room and I'm going to start with this gentleman right here, this gentleman right here. Please introduce yourself, if you don't mind.

Q Thank you, Mr. President. Welcome to Portsmouth and New Hampshire. My name is Peter Schmidt. I'm a state representative from Dover. I'm a senior citizen. I have a wonderful government-run health care plan called Medicare. I like it. It's affordable, it's reasonable, nobody tells me what I need to do. I just go to my doctor at the hospital, I get care.

Now, one of the things you've been doing in your campaign to change the situation is you've been striving for bipartisanship. I think it's a wonderful idea, but my question is, if the Republicans actively refuse to participate in a reasonable way with reasonable proposals, isn't it time to just say we're going to pass what the American people need and what they want, without the Republicans? (Applause.)

THE PRESIDENT: Well, let me make a couple of points. First of all, you make a point about Medicare that's very important. I've been getting a lot of letters, pro and con, for health care reform, and one of the letters I received recently, a woman was very exercised about what she had heard about my plan. She says, "I don't want government-run health care. I don't want you meddling in the private marketplace. And keep your hands off my Medicare." (Laughter.) True story.

And so I do think it's important for particularly seniors who currently receive Medicare to understand that if we're able to get something right like Medicare, then there should be a little more confidence that maybe the government can have a role -- not the dominant role, but a role -- in making sure the people are treated fairly when it comes to insurance. (Applause.)

Under our proposal, the majority of Americans will still be getting their health care from private insurers. All we want to do is just make sure that private insurers are treating you fairly so that you are not buying something where if you failed to read the fine print, next thing you know, when you actually get sick, you have no coverage.

We also want to make sure that everybody has some options. So there's been talk about this public option. This is where a lot of the idea of government takeover of health care comes from. All we want to do is set up a set of options so that if you don't have health insurance or you're underinsured you can have the same deal that members of Congress have, which is they can look at a menu of options -- we're calling it an exchange, but it’s basically just a menu of different health care plans -- and you will be able to select the one that suits your family best.

And I do think that having a public option as part of that would keep the insurance companies honest, because if they've got a public plan out there that they've got to compete against, as long as it's not being subsidized by taxpayers, then that will give you some sense of what -- sort of a good bargain for what basic health care would be. (Applause.)

Now, I think that there are some of my Republican friends on Capitol Hill who are sincerely trying to figure out if they can find a health care bill that works -- Chuck Grassley of Iowa, Mike Enzi of Wyoming, Olympia Snowe from Maine have been -- (applause) -- yes, I got to admit I like Olympia, too. (Laughter.) They are diligently working to see if they can come up with a plan that could get both Republican and Democratic support.

But I have to tell you, when I listen to folks like Lori and families all across America who are just getting pounded by the current health care system, and when I look at the federal budget and realize that if we don't control costs on health care, there is no way for us to close the budget deficit -- it will just keep on skyrocketing -- when I look at those two things, I say we have to get it done. And my hope is we can do it in a bipartisan fashion, but the most important thing is getting it done for the American people. (Applause.)

All right. Let's -- this young lady right here. All right, this young lady right here. She's still enjoying her summer. When do you go back to school?

Q I go back to school September 3rd.

THE PRESIDENT: September 3rd, okay. What's your name?

Q Julia Hall from Malden, Massachusetts.

THE PRESIDENT: Nice to meet you, Julia. (Applause.)

Q I saw -- as I was walking in, I saw a lot of signs outside saying mean things about reforming health care. How do kids know what is true, and why do people want a new system that can -- that help more of us?

THE PRESIDENT: Well, the -- I've seen some of those signs. (Laughter.) Let me just be specific about some things that I've been hearing lately that we just need to dispose of here. The rumor that's been circulating a lot lately is this idea that somehow the House of Representatives voted for "death panels" that will basically pull the plug on grandma because we've decided that we don't -- it's too expensive to let her live anymore. (Laughter.) And there are various -- there are some variations on this theme.

It turns out that I guess this arose out of a provision in one of the House bills that allowed Medicare to reimburse people for consultations about end-of-life care, setting up living wills, the availability of hospice, et cetera. So the intention of the members of Congress was to give people more information so that they could handle issues of end-of-life care when they're ready, on their own terms. It wasn't forcing anybody to do anything. This is I guess where the rumor came from.

The irony is that actually one of the chief sponsors of this bill originally was a Republican -- then House member, now senator, named Johnny Isakson from Georgia -- who very sensibly thought this is something that would expand people's options. And somehow it's gotten spun into this idea of "death panels." I am not in favor of that. So just I want to -- (applause.) I want to clear the air here.

Now, in fairness, the underlying argument I think has to be addressed, and that is people's concern that if we are reforming the health care system to make it more efficient, which I think we have to do, the concern is that somehow that will mean rationing of care, right? -- that somehow some government bureaucrat out there will be saying, well, you can't have this test or you can't have this procedure because some bean-counter decides that this is not a good way to use our health care dollars. And this is a legitimate concern, so I just want to address this.

We do think that systems like Medicare are very inefficient right now, but it has nothing to do at the moment with issues of benefits. The inefficiencies all come from things like paying $177 billion to insurance companies in subsidies for something called Medicare Advantage that is not competitively bid, so insurance companies basically get a $177 billion of taxpayer money to provide services that Medicare already provides. And it's no better -- it doesn't result in better health care for seniors. It is a giveaway of $177 billion.

Now, think about what we could do with $177 billion over 10 years. I don't think that's a good use of money. I would rather spend that money on making sure that Lori can have coverage, making sure that people who don't have health insurance get some subsidies, than I would want to be subsidizing insurance companies. (Applause.)

Another way of putting this is right now insurance companies are rationing care. They are basically telling you what's covered and what's not. They're telling you: We'll cover this drug, but we won't cover that drug; you can have this procedure, or, you can't have that procedure. So why is it that people would prefer having insurance companies make those decisions, rather than medical experts and doctors figuring out what are good deals for care and providing that information to you as a consumer and your doctor so you can make the decisions?

So I just want to be very clear about this. I recognize there is an underlying fear here that people somehow won't get the care they need. You will have not only the care you need, but also the care that right now is being denied to you -- only if we get health care reform. That's what we're fighting for. (Applause.)

All right. Gentleman back here, with the baseball cap. Right there.

Q Good afternoon, Mr. President. Bill Anderson from New Hampshire. In reference to what you just said -- I'm presently under the New Hampshire Medicaid system and I have to take a drug called Lipitor. When I got onto this program they said, no, we're not going to cover Lipitor -- even though I'd been on that pill for probably 10 years, based on the information my doctor feels is right for me. And I had to go through two different trials of other kinds of drugs before it was finally deemed that I was able to go back on the Lipitor through the New Hampshire Medicaid system. So here it is, the Medicaid that you guys are administering and you're telling me that it's good -- but in essence, I'm dealing with the same thing, and you're telling me the insurance companies are doing. Thank you.

THE PRESIDENT: Well, I think that's a legitimate point. I don't know all the details, but it sounds to me like they were probably trying to have you take a generic as opposed to a brand name. Is that right? And it turned out that you did not have as good of a reaction under the generic as the brand name, and then they put you back on the brand name. Is that what happened?

Q Correct, to save money.

THE PRESIDENT: Well -- right. Look, there may be -- in nine out of 10 cases, the generic might work as well or better than the brand name. And we don't want to just subsidize the drug companies if you've got one that works just as well as another.

The important thing about the story that you just told me was -- is that once it was determined that, in fact, you needed the brand name, you were able to get the brand name. Now, I want to be absolutely clear here: There are going to be instances where if there is really strong scientific evidence that the generic and the brand name work just as well, and the brand name costs twice as much, that the taxpayer should try to get the best deal possible, as long as if it turns out that the generic doesn't work as well, you're able to get the brand name.

So the basic principle that we want to set up here is that -- if you're in private insurance, first of all, your private insurance can do whatever you want. If you're under a government program, then it makes sense for us to make sure that we're getting the best deal possible and not just giving drug makers or insurers more money than they should be getting. But ultimately, you've got to be able to get the best care based on what the doctor says.

And it sounds like that is eventually what happened. It may be that it wasn't as efficient -- it wasn't as smooth as it should have been, but that result is actually a good one. And you think about all the situations where a generic actually would have worked -- in fact, one of the things I want to do is to speed up generics getting introduced to the marketplace, because right now drug companies -- (applause) -- right now drug companies are fighting so that they can keep essentially their patents on their brand-name drugs a lot longer. And if we can make those patents a little bit shorter, generics get on the market sooner, ultimately you as consumers will save money. All right? But it was an excellent question, so thank you.

All right, it's a young woman's turn -- or a lady's turn. Right here. Yes, you.

Q Good afternoon, Mr. President. I'm Jackie Millet (phonetic) and I'm from Wells, Maine, and my question is, I am presently on Medicare and I do have a supplement. But if something happens to my husband, I lose the supplement. And what will happen? I take a lot of medications. I need a lot -- I've had a lot of procedures. And how will Medicare under the new proposal help people who are going to need things like this?

THE PRESIDENT: Well, first of all, another myth that we've been hearing about is this notion that somehow we're going to be cutting your Medicare benefits. We are not. AARP would not be endorsing a bill if it was undermining Medicare, okay? So I just want seniors to be clear about this, because if you look at the polling, it turns out seniors are the ones who are most worried about health care reform. And that's understandable, because they use a lot of care, they've got Medicare, and it's already hard for a lot of people even on Medicare because of the supplements and all the other costs out of pocket that they're still paying.

So I just want to assure we're not talking about cutting Medicare benefits. We are talking about making Medicare more efficient, eliminating the insurance subsidies, working with hospitals so that they are changing some of the reimbursement practices.

Right now hospitals, they are not penalized if there are constant readmission rates from patients that have gone through the hospital. If you go to a -- if you go to a car company or a auto shop, if you say, "Can I have my car repaired?", you get your car repaired -- if two weeks later it's broken down again, if you take it back, hopefully they're not going to charge you again for repairing the car. You want them to do it right the first time. And too often we're not seeing the best practices in some of these hospitals to prevent people from being readmitted. That costs a lot of money. So those are the kinds of changes we're talking about.

Now, in terms of savings for you as a Medicare recipient, the biggest one is on prescription drugs, because the prescription drug companies have already said that they would be willing to put up $80 billion in rebates for prescription drugs as part of a health care reform package.

Now, we may be able to get even more than that. But think about it. When the prescription drug plan was passed, Medicare Part D, they decided they weren't going to negotiate with the drug companies for the cheapest available price on drugs. And as a consequence, seniors are way over-paying -- there's that big doughnut hole that forces them to go out of pocket. You say you take a lot of medications; that means that doughnut hole is always something that's looming out there for you. If we can cut that doughnut hole in half, that's money directly out of your pocket. And that's one of the reasons that AARP is so supportive, because they see this as a way of potentially saving seniors a lot of money on prescription drugs. Okay?

All right. The gentleman right here in the white shirt.

Q Good afternoon, Mr. President. My name is Ben Hershinson (ph). I'm from Ogunquit, Maine, and also Florida. And I'm a Republican -- I don't know what I'm doing here, but I'm here. (Laughter.)

THE PRESIDENT: We're happy to have you. We're happy to have you. (Applause.)

Q Mr. President, you've been quoted over the years -- when you were a senator and perhaps even before then -- that you were essentially a supporter of a universal plan. I'm beginning to see that you're changing that. Do you honestly believe that? Because that is my concern. I'm on Medicare, but I still worry that if we go to a public option, period, that the private companies, the insurance companies, rather than competing -- because who can compete with the government; the answer is nobody. So my question is do you still -- as yourself, now -- support a universal plan? Or are you open to the private industry still being maintained?

THE PRESIDENT: Well, I think it's an excellent question, so I appreciate the chance to respond. First of all, I want to make a distinction between a universal plan versus a single-payer plan, because those are two different things.

A single-payer plan would be a plan like Medicare for all, or the kind of plan that they have in Canada, where basically government is the only person -- is the only entity that pays for all health care. Everybody has a government-paid-for plan, even though in, depending on which country, the doctors are still private or the hospitals might still be private. In some countries, the doctors work for the government and the hospitals are owned by the government. But the point is, is that government pays for everything, like Medicare for all. That is a single-payer plan.

I have not said that I was a single-payer supporter because, frankly, we historically have had a employer-based system in this country with private insurers, and for us to transition to a system like that I believe would be too disruptive. So what would end up happening would be, a lot of people who currently have employer-based health care would suddenly find themselves dropped, and they would have to go into an entirely new system that had not been fully set up yet. And I would be concerned about the potential destructiveness of that kind of transition. All right? So I'm not promoting a single-payer plan.

I am promoting a plan that will assure that every single person is able to get health insurance at an affordable price, and that if they have health insurance they are getting a good deal from the insurance companies. That's what I'm fighting for. (Applause.)

Now, the way we have approached it, is that if you've got health care under a private plan, if your employer provides you health care or you buy your own health care and you're happy with it, you won't have to change.

What we're saying is, if you don't have health care, then you will be able to go to an exchange similar to the menu of options that I used to have as a member of Congress, and I can look and see what are these various private health care plans offering, what's a good deal, and I'll be able to buy insurance from that exchange. And because it's a big pool, I'll be able to drive down costs, I'll get a better deal than if I was trying to get health insurance on my own.

This is true, by the way, for small businesses, as well. A lot of small businesses, they end up paying a lot more than large businesses per person for health care, because they've got no bargaining power, they've got no leverage. So we wanted small businesses to be able to buy into this big pool, okay?

Now, the only thing that I have said is that having a public option in that menu would provide competition for insurance companies to keep them honest.

Now, I recognize, though, you make a legitimate -- you raise a legitimate concern. People say, well, how can a private company compete against the government? And my answer is that if the private insurance companies are providing a good bargain, and if the public option has to be self-sustaining -- meaning taxpayers aren't subsidizing it, but it has to run on charging premiums and providing good services and a good network of doctors, just like any other private insurer would do -- then I think private insurers should be able to compete. They do it all the time. (Applause.)

I mean, if you think about -- if you think about it, UPS and FedEx are doing just fine, right? No, they are. It's the Post Office that's always having problems. (Laughter.)

So right now you've got private insurers who are out there competing effectively, even though a lot of people get their care through Medicare or Medicaid or VA. So there's nothing inevitable about this somehow destroying the private marketplace, as long as -- and this is a legitimate point that you're raising -- that it's not set up where the government is basically being subsidized by the taxpayers, so that even if they're not providing a good deal, we keep on having to pony out more and more money. And I've already said that can't be the way the public option is set up. It has to be self-sustaining.

Does that answer your question? Okay, thank you. (Applause.)

All right, right there. Go ahead.

Q Hello, Mr. President. My name is Linda Becher (ph). I'm from Portsmouth and I have proudly taught at this high school for 37 years.

THE PRESIDENT: Well, congratulations.

Q Thank you. (Applause.)

THE PRESIDENT: What do you teach?

Q I teach English and Journalism.

THE PRESIDENT: Excellent.

Q Yes, thank you.

THE PRESIDENT: Sure.

Q And in those 37 years, I've been lucky enough to have very good health care coverage and my concerns currently are for those who do not. And I guess my question is if every American who needed it has access to good mental health care, what do you think the impact would be on our society?

THE PRESIDENT: Well, you raise the -- (applause) -- you know, mental health has always been undervalued in the health insurance market. And what we now know is, is that somebody who has severe depression has a more debilitating and dangerous illness than somebody who's got a broken leg. But a broken leg, nobody argues that's covered. Severe depression, unfortunately, oftentimes isn't even under existing insurance policies.

So I think -- I've been a strong believer in mental health parity, recognizing that those are serious illnesses. (Applause.) And I would like to see a mental health component as part of a package that people are covered under, under our plan. Okay? (Applause.)

All right. This gentleman right here.

Q Hello, Mr. President. I'm Justin Higgins from Stratham, New Hampshire.

THE PRESIDENT: How are you, Justin?

Q Fine, thank you. There's a lot of misinformation about how we're going to pay for this health care plan. And I'm wondering how we're going to do this without raising the taxes on the middle class, because I don't want the burden to fall on my parents, and also I'm a college student so --

THE PRESIDENT: They've already got enough problems paying your college tuition. (Laughter.)

Q Exactly. Exactly.

THE PRESIDENT: I hear you.

Q Also I'm looking towards my future with career options and opportunities and I don't want inflation to skyrocket by just adding this to the national debt. So I'm wondering how we can avoid both of those scenarios. (Applause.)

THE PRESIDENT: Right, it's a great question. First of all, I said I won't sign a bill that adds to the deficit or the national debt. Okay? So this will have to be paid for. That, by the way, is in contrast to the prescription drug bill that was passed that cost hundreds of billions of dollars, by the previous administration and previous Congress, that was not paid for at all, and that was a major contributor to our current national debt.

That's why you will forgive me if sometimes I chuckle a little bit when I hear all these folks saying, "oh, big-spending Obama" -- when I'm proposing something that will be paid for and they signed into law something that wasn't, and they had no problem with it. Same people, same folks. And they say with a straight face how we've got to be fiscally responsible. (Applause.)

Now, having said that, paying for it is not simple. I don't want to pretend that it is. By definition, if we're helping people who currently don't have health insurance, that's going to cost some money. It's been estimated to cost somewhere between, let's say, $800 billion and a trillion dollars over 10 years. Now, it's important that we're talking about over 10 years because sometimes the number "trillion" gets thrown out there and everybody think it's a trillion dollars a year -- gosh, that -- how are we going to do that? So it's about a hundred billion dollars a year to cover everybody and to implement some of the insurance reforms that we're talking about.

About two-thirds of those costs we can cover by eliminating the inefficiencies that I already mentioned. So I already talked about $177 billion worth of subsidies to the insurance companies. Let's take that money, let's put it in the kitty. There's about $500 billion to $600 billion over 10 years that can be saved without cutting benefits for people who are currently receiving Medicare, actually making the system more efficient over time.

That does still leave, though, anywhere from $300 billion to $400 billion over 10 years, or $30 billion to $40 billion a year. That does have to be paid for, and we will need new sources of revenue to pay for it. And I've made a proposal that would -- I want to just be very clear -- the proposal, my preferred approach to this would have been to take people like myself who make more than $250,000 a year, and limit the itemized deductions that we can take to the same level as middle-class folks can take them. (Applause.)

Right now, the average person -- the average middle-class family, they're in the 28-percent tax bracket, and so they basically can itemize, take a deduction that is about 28 percent. I can take -- since I'm in a much higher tax bracket, I can take a much bigger deduction. And so as a consequence, if I give a charitable gift, I get a bigger break from Uncle Sam than you do.

So what I've said is let's just even it out. That would actually raise sufficient money. Now, that was my preferred way of paying for it. Members of Congress have had different ideas. And we are still exploring these ideas.

By the time that we actually have a bill that is set, that is reconciled between House and Senate and is voted on, it will be very clear what those ideas are. My belief is, is that it should not burden people who make $250,000 a year or less.

And I think that's the commitment that I made, the pledge that I made when I was up here running in New Hampshire, folks. So I don't want anybody saying somehow that I'm pulling the bait- and-switch here. I said very specifically I thought we should roll back Bush tax cuts and use them to pay for health insurance. That's what I'm intending to do. All right? (Applause.)

Okay, I've only got time for a couple more questions. Somebody here who has a concern about health care that has not been raised, or is skeptical and suspicious and wants to make sure that -- because I don't want people thinking I just have a bunch of plants in here. All right, so I've got one right here -- and then I'll ask the guy with two hands up because he must really have a burning question. (Laughter.)

All right, go ahead.

Q Thank you, Mr. President. I've worked in the medical field for about 18 years and seen a lot of changes over those 18 years. I currently work here at the high school as a paraprofessional. I have a little, you know, couple questions about the universal insurance program, which, if I understand you correctly, President Obama, you seek to cover 50 million new people over and above the amount of people that are currently getting health care at this moment.

THE PRESIDENT: It will probably -- I just want to be honest here. There are about 46 million people who are uninsured. And under the proposals that we have, even if you have an individual mandate, probably only about 37-38 million, so somewhere in that ballpark.

Q Okay, I'm off a little bit. (Laughter.)

THE PRESIDENT: No, no, I just wanted to make sure I wasn't over-selling my plan here.

Q That's okay, Mr. President. (Laughter.)

THE PRESIDENT: She's okay --

Q He winked at me. (Laughter.) My concern is for where are we going to get the doctors and nurses to cover these? Right now I know that there's a really -- people are not going to school to become teachers to teach the nursing staffs. Doctors have huge capacities; some of them are leaving private to go to administrative positions because of the caseload that they're being made to hold. I really do feel that there will be more demand with this universal health care and no added supply. I also understand that it was to be taken from Medicare, about $500 billion -- correct me if I'm wrong on that.

THE PRESIDENT: I just said that.

Q Okay. Also, you know, I'm very, very concerned about the elderly. I don't know if this is also correct, but I understand that a federal health board will sit in judgment of medical procedures and protocols to impose guidelines on all providers -- when to withhold certain types of care -- like, what is the point you get to when we say, I'm sorry that this cannot happen. Thank you very much for letting me ask those questions, Mr. President.

THE PRESIDENT: Of course. Well, first of all, I already mentioned that we would be taking savings out of Medicare that are currently going to insurance subsidies, for example. So that is absolutely true.

I just want to be clear, again: Seniors who are listening here, this does not affect your benefits. This is not money going to you to pay for your benefits; this is money that is subsidizing folks who don't need it. So that's point number one.

Point number two: In terms of these expert health panels -- well, this goes to the point about "death panels" -- that's what folks are calling them. The idea is actually pretty straightforward, which is if we've got a panel of experts, health experts, doctors, who can provide guidelines to doctors and patients about what procedures work best in what situations, and find ways to reduce, for example, the number of tests that people take -- these aren't going to be forced on people, but they will help guide how the delivery system works so that you are getting higher-quality care. And it turns out that oftentimes higher-quality care actually costs less.

So let me just take the example of testing. Right now, a lot of Medicare patients -- you have something wrong with you, you go to your doctor, doctor checks up on you, maybe he takes -- has a test, he administers a test. You go back home, you get the results, the doctor calls you and says, okay, now you got to go to this specialist. Then you have to take another trip to the specialist. The specialist doesn't have the first test, so he does his own test. Then maybe you've got to, when you go to the hospital, you've got to take a third test.

Now, each time taxpayers, under Medicare, are paying for that test. So for a panel of experts to say, why don't we have all the specialists and the doctors communicating after the first test and let's have electronic medical records so that we can forward the results of that first test to the others -- (applause) -- that's a sensible thing to do. That is a sensible thing to do.

So we want -- if I'm a customer, if I'm a consumer and I know that I'm overpaying $6,000 for anything else, I would immediately want the best deal. But for some reason, in health care, we continue to put up with getting a bad deal. We’re paying $6,000 more than any other advanced country and we're not healthier for it -- $6,000 per person more, per year. That doesn’t make any sense. So there's got to be a lot of waste in the system. And the idea is to have doctors, nurses, medical experts look for it.

Now, the last question that you asked is very important and I don't have a simple solution to this. If you look at the makeup of the medical profession right now, we have constant nurses shortages and we have severe shortages of primary care physicians. Primary care physicians, ideally family physicians, they should be the front lines of the medical profession in encouraging prevention and wellness. (Applause.) But the problem is, is that primary care physicians, they make a lot less money than specialists --

AUDIENCE MEMBER: And nurse practitioners.

THE PRESIDENT: And nurse practitioners, too. (Applause.) And nurses, you've got a whole other issue which you already raised, which is the fact that not only are nurses not paid as well as they should, but you also have -- nursing professors are paid even worse than nurses. So as a consequence, you don't have enough professors to teach nursing, which means that's part of the reason why you've got such a shortage of nurses.

So we are going to be taking steps, as part of reform, to deal with expanding primary care physicians and our nursing corps. On the doctors' front, one of the things we can do is to reimburse doctors who are providing preventive care and not just the surgeon who provides care after somebody is sick. (Applause.) Nothing against surgeons. I want surgeons -- I don't want to be getting a bunch of letters from surgeons now. I'm not dissing surgeons here. (Laughter.)

All I'm saying is let's take the example of something like diabetes, one of --- a disease that's skyrocketing, partly because of obesity, partly because it's not treated as effectively as it could be. Right now if we paid a family -- if a family care physician works with his or her patient to help them lose weight, modify diet, monitors whether they're taking their medications in a timely fashion, they might get reimbursed a pittance. But if that same diabetic ends up getting their foot amputated, that's $30,000, $40,000, $50,000 -- immediately the surgeon is reimbursed. Well, why not make sure that we're also reimbursing the care that prevents the amputation, right? That will save us money. (Applause.)

So changing reimbursement rates will help. The other thing that will really help both nurses and doctors, helping pay for medical education for those who are willing to go into primary care. And that's something that we already started to do under the Recovery Act, and we want to do more of that under health care reform. (Applause.)

All right, last question, last question right here. This is a skeptic, right?

Q I am a skeptic.

THE PRESIDENT: Good.

Q Thank you, Mr. President, for coming to Portsmouth. My name is Michael Layon (ph). I'm from Derry, New Hampshire, District 1 in the congressional district. I'm one of the people that turned myself in on the White House Web page the other day for being a skeptic of this bill. I'm proud to have done so.

THE PRESIDENT: Before you ask this question, just because you referred to it, can I just say this is another example of how the media ends up just completing distorting what's taken place. What we've said is that if somebody has -- if you get an e-mail from somebody that says, for example, "Obamacare is creating a death panel," forward us the e-mail and we will answer the question that's raised in the e-mail. Suddenly, on some of these news outlets, this is being portrayed as "Obama collecting an enemies list." (Laughter.)

Now, come on, guys. You know, here I am trying to be responsive to questions that are being raised out there --

Q And appreciate it. (Applause.)

THE PRESIDENT: And I just want to be clear that all we're trying to do is answer questions.

All right, go ahead.

Q So my question is for you, and I know in the White House the stand which you're on has often been referred to as the bully pulpit. Why have you not used the bully pulpit to chastise Congress for having two systems of health care -- one for all of us, and one for them? (Applause.)

THE PRESIDENT: Well, look, first of all, if we don't have health care reform, the gap between what Congress gets and what ordinary Americans get will continue to be as wide as it is right now. And you are absolutely right -- I don't think Carol or Paul would deny they've got a pretty good deal. They've got a pretty good deal. I mean, the fact is, is that they are part -- by the way, I want you to know, though, their deal is no better than the janitor who cleans their offices; because they are part of a federal health care employee plan, it is a huge pool. So you've got millions of people who are part of the pool, which means they've got enormous leverage with the insurance companies, right? So they can negotiate the same way that a big Fortune 500 company can negotiate, and that drives down their costs -- they get a better deal.

Now, what happens is, those members of Congress -- and when I was a senator, same situation -- I could, at the beginning of the year, look at a menu of a variety of different health care options, most of them -- these are all private plans or they could be non-for-profit, Blue Cross Blue Shield, or Aetna, or what have you -- they would have these plans that were offered. And then we would then select what plan worked best for us.

But there were certain requirements -- if you wanted to sell insurance to federal employees there were certain things you had to do. You had to cover certain illnesses. You couldn't exclude for preexisting conditions. I mean, there were a lot of rules that had been negotiated by the federal government for those workers.

Now, guess what. That's exactly what we want to do with health care reform. (Applause.) We want to make sure that you are getting that same kind of option. That's what the health exchange is all about, is that you -- just like a member of Congress -- can go and choose the plan that's right for you. You don't have to. If you've got health care that you like, you don't have to use it.

So for example, for a while, Michelle, my wife, worked at the University of Chicago Hospital. She really liked her coverage that she was getting through the University of Chicago Hospital, so I did not have to use the federal employee plan. But I had that option available.

The same is true for you. Nobody is going to force you to be part of that plan. But if you look at it and you say, you know what, this is a good deal and I've got more leverage because maybe I'm a small business or maybe I'm self-employed, or maybe I'm like Lori and nobody will take me because of a preexisting condition, and now suddenly got these rules set up -- why wouldn't I want to take advantage of that?

Now, there are legitimate concerns about the cost of the program, so I understand if you just think no matter what, no matter how good the program is, you don't think that we should be paying at all for additional people to be covered, then you're probably going to be against health care reform and I can't persuade you. There are legitimate concerns about the public option -- the gentleman who raised his hand. I think it's a good idea, but I understand some people just philosophically think that if you set up a public option, that that will drive public insurance out -- or private insurers out. I think that's a legitimate concern. I disagree with it, but that's a legitimate debate to have.

But I want everybody to understand, though, the status quo is not working for you. (Applause.) The status quo is not working for you. And if we can set up a system, which I believe we can, that gives you options, just like members of Congress has options; that gives a little bit of help to people who currently are working hard every day but they don't have health care insurance on the job; and most importantly, if we can make sure that you, all of you who have insurance, which is probably 80 or 90 percent of you, that you are not going to be dropped because of a preexisting condition, or because you lose your job, or because you change your job -- that you're actually going to get what you paid for, that you're not going to find out when you're sick that you got cheated, that you're not going to hit a lifetime cap where you thought you were paying for insurance but after a certain amount suddenly you're paying out of pocket and bankrupting yourself and your family -- if we can set up a system that gives you some security, that's worth a lot.

And this is the best chance we've ever had to do that. But we're all going to have to come together, we're going to have to make it happen. I am confident we can do so, but I'm going to need your help, New Hampshire.

Thank you very much, everybody. God bless you. (Applause.)

END
2:15 P.M. EDT

First Presidential Debate 2008 - Video and Transcript

John McCain (R) and Barack Obama (D) debate at the first 2008 Presidential Debate, from the University of Mississippi in Oxford, Miss., courtesy of HULU.com.





The following is the John McCain/ Barack Obama First Presidential Debate transcript from The International Herald Tribune.

Saturday, September 27, 2008

Following is a transcript of the first presidential debate between Senators John McCain and Barack Obama in Oxford, Miss., as recorded by CQ Transcriptions:

LEHRER: Good evening from the Ford Center for the Performing Arts at the University of Mississippi in Oxford. I'm Jim Lehrer of the NewsHour on PBS, and I welcome you to the first of the 2008 presidential debates between the Republican nominee, Senator John McCain of Arizona, and the Democratic nominee, Senator Barack Obama of Illinois.

The Commission on Presidential Debates is the sponsor of this event and the three other presidential and vice presidential debates coming in October.

Tonight's will primarily be about foreign policy and national security, which, by definition, includes the global financial crisis. It will be divided roughly into nine-minute segments.

Direct exchanges between the candidates and moderator follow-ups are permitted after each candidate has two minutes to answer the lead question in an order determined by a coin toss.

The specific subjects and questions were chosen by me. They have not been shared or cleared with anyone.

The audience here in the hall has promised to remain silent, no cheers, no applause, no noise of any kind, except right now, as we welcome Senators Obama and McCain.

(APPLAUSE)

Let me begin with something General Eisenhower said in his 1952 presidential campaign. Quote, "We must achieve both security and solvency. In fact, the foundation of military strength is economic strength," end quote.

With that in mind, the first lead question.

Gentlemen, at this very moment tonight, where do you stand on the financial recovery plan?

First response to you, Senator Obama. You have two minutes.

OBAMA: Well, thank you very much, Jim, and thanks to the commission and the University of Mississippi, Ole Miss, for hosting us tonight. I can't think of a more important time for us to talk about the future of the country.

You know, we are at a defining moment in our history. Our nation is involved in two wars, and we are going through the worst financial crisis since the Great Depression.

And although we've heard a lot about Wall Street, those of you on Main Street I think have been struggling for a while, and you recognize that this could have an impact on all sectors of the economy.

And you're wondering, how's it going to affect me? How's it going to affect my job? How's it going to affect my house? How's it going to affect my retirement savings or my ability to send my children to college?

So we have to move swiftly, and we have to move wisely. And I've put forward a series of proposals that make sure that we protect taxpayers as we engage in this important rescue effort.

Number one, we've got to make sure that we've got oversight over this whole process; $700 billion, potentially, is a lot of money.

Number two, we've got to make sure that taxpayers, when they are putting their money at risk, have the possibility of getting that money back and gains, if the market -- and when the market returns.

Number three, we've got to make sure that none of that money is going to pad CEO bank accounts or to promote golden parachutes.

And, number four, we've got to make sure that we're helping homeowners, because the root problem here has to do with the foreclosures that are taking place all across the country.

Now, we also have to recognize that this is a final verdict on eight years of failed economic policies promoted by George Bush, supported by Senator McCain, a theory that basically says that we can shred regulations and consumer protections and give more and more to the most, and somehow prosperity will trickle down.

It hasn't worked. And I think that the fundamentals of the economy have to be measured by whether or not the middle class is getting a fair shake. That's why I'm running for president, and that's what I hope we're going to be talking about tonight.

LEHRER: Senator McCain, two minutes.

MCCAIN: Well, thank you, Jim. And thanks to everybody.

And I do have a sad note tonight. Senator Kennedy is in the hospital. He's a dear and beloved friend to all of us. Our thoughts and prayers go out to the lion of the Senate.

I also want to thank the University of Mississippi for hosting us tonight.

And, Jim, I -- I've been not feeling too great about a lot of things lately. So have a lot of Americans who are facing challenges. But I'm feeling a little better tonight, and I'll tell you why.

Because as we're here tonight in this debate, we are seeing, for the first time in a long time, Republicans and Democrats together, sitting down, trying to work out a solution to this fiscal crisis that we're in.

And have no doubt about the magnitude of this crisis. And we're not talking about failure of institutions on Wall Street. We're talking about failures on Main Street, and people who will lose their jobs, and their credits, and their homes, if we don't fix the greatest fiscal crisis, probably in -- certainly in our time, and I've been around a little while. But the point is -- the point is, we have finally seen Republicans and Democrats sitting down and negotiating together and coming up with a package.

This package has transparency in it. It has to have accountability and oversight. It has to have options for loans to failing businesses, rather than the government taking over those loans. We have to -- it has to have a package with a number of other essential elements to it.

And, yes, I went back to Washington, and I met with my Republicans in the House of Representatives. And they weren't part of the negotiations, and I understand that. And it was the House Republicans that decided that they would be part of the solution to this problem.

But I want to emphasize one point to all Americans tonight. This isn't the beginning of the end of this crisis. This is the end of the beginning, if we come out with a package that will keep these institutions stable.

And we've got a lot of work to do. And we've got to create jobs. And one of the areas, of course, is to eliminate our dependence on foreign oil.

LEHRER: All right, let's go back to my question. How do you all stand on the recovery plan? And talk to each other about it. We've got five minutes. We can negotiate a deal right here.

But, I mean, are you -- do you favor this plan, Senator Obama, and you, Senator McCain? Do you -- are you in favor of this plan?

OBAMA: We haven't seen the language yet. And I do think that there's constructive work being done out there. So, for the viewers who are watching, I am optimistic about the capacity of us to come together with a plan.

The question, I think, that we have to ask ourselves is, how did we get into this situation in the first place?

Two years ago, I warned that, because of the subprime lending mess, because of the lax regulation, that we were potentially going to have a problem and tried to stop some of the abuses in mortgages that were taking place at the time.

Last year, I wrote to the secretary of the Treasury to make sure that he understood the magnitude of this problem and to call on him to bring all the stakeholders together to try to deal with it.

So -- so the question, I think, that we've got to ask ourselves is, yes, we've got to solve this problem short term. And we are going to have to intervene; there's no doubt about that.

But we're also going to have to look at, how is it that we shredded so many regulations? We did not set up a 21st-century regulatory framework to deal with these problems. And that in part has to do with an economic philosophy that says that regulation is always bad.

LEHRER: Are you going to vote for the plan, Senator McCain?

MCCAIN: I -- I hope so. And I...

LEHRER: As a United States senator...

MCCAIN: Sure.

LEHRER: ... you're going to vote for the plan?

MCCAIN: Sure. But -- but let me -- let me point out, I also warned about Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) and warned about corporate greed and excess, and CEO pay, and all that. A lot of us saw this train wreck coming.

But there's also the issue of responsibility. You've mentioned President Dwight David Eisenhower. President Eisenhower, on the night before the Normandy invasion, went into his room, and he wrote out two letters.

One of them was a letter congratulating the great members of the military and allies that had conducted and succeeded in the greatest invasion in history, still to this day, and forever.

And he wrote out another letter, and that was a letter of resignation from the United States Army for the failure of the landings at Normandy.

Somehow we've lost that accountability. I've been heavily criticized because I called for the resignation of the chairman of the Securities and Exchange Commission. We've got to start also holding people accountable, and we've got to reward people who succeed.

But somehow in Washington today -- and I'm afraid on Wall Street -- greed is rewarded, excess is rewarded, and corruption -- or certainly failure to carry out our responsibility is rewarded.

As president of the United States, people are going to be held accountable in my administration. And I promise you that that will happen.

LEHRER: Do you have something directly to say, Senator Obama, to Senator McCain about what he just said?

OBAMA: Well, I think Senator McCain's absolutely right that we need more responsibility, but we need it not just when there's a crisis. I mean, we've had years in which the reigning economic ideology has been what's good for Wall Street, but not what's good for Main Street.

And there are folks out there who've been struggling before this crisis took place. And that's why it's so important, as we solve this short-term problem, that we look at some of the underlying issues that have led to wages and incomes for ordinary Americans to go down, the -- a health care system that is broken, energy policies that are not working, because, you know, 10 days ago, John said that the fundamentals of the economy are sound.

LEHRER: Say it directly to him.

OBAMA: I do not think that they are.

LEHRER: Say it directly to him.

OBAMA: Well, the -- John, 10 days ago, you said that the fundamentals of the economy are sound. And...

MCCAIN: Are you afraid I couldn't hear him?

(LAUGHTER)

LEHRER: I'm just determined to get you all to talk to each other. I'm going to try.

OBAMA: The -- and I just fundamentally disagree. And unless we are holding ourselves accountable day in, day out, not just when there's a crisis for folks who have power and influence and can hire lobbyists, but for the nurse, the teacher, the police officer, who, frankly, at the end of each month, they've got a little financial crisis going on.

They're having to take out extra debt just to make their mortgage payments. We haven't been paying attention to them. And if you look at our tax policies, it's a classic example.

LEHRER: So, Senator McCain, do you agree with what Senator Obama just said? And, if you don't, tell him what you disagree with.

MCCAIN: No, I -- look, we've got to fix the system. We've got fundamental problems in the system. And Main Street is paying a penalty for the excesses and greed in Washington, D.C., and in the Wall Street.

So there's no doubt that we have a long way to go. And, obviously, stricter interpretation and consolidation of the various regulatory agencies that weren't doing their job, that has brought on this crisis.

But I have a fundamental belief in the goodness and strength of the American worker. And the American worker is the most productive, the most innovative. America is still the greatest producer, exporter and importer.

But we've got to get through these times, but I have a fundamental belief in the United States of America. And I still believe, under the right leadership, our best days are ahead of us.

LEHRER: All right, let's go to the next lead question, which is essentially following up on this same subject.

And you get two minutes to begin with, Senator McCain. And using your word "fundamental," are there fundamental differences between your approach and Senator Obama's approach to what you would do as president to lead this country out of the financial crisis?

MCCAIN: Well, the first thing we have to do is get spending under control in Washington. It's completely out of control. It's gone -- we have now presided over the largest increase in the size of government since the Great Society.

We Republicans came to power to change government, and government changed us. And the -- the worst symptom on this disease is what my friend, Tom Coburn, calls earmarking as a gateway drug, because it's a gateway. It's a gateway to out-of-control spending and corruption.

And we have former members of Congress now residing in federal prison because of the evils of this earmarking and pork-barrel spending.

You know, we spent $3 million to study the DNA of bears in Montana. I don't know if that was a criminal issue or a paternal issue, but the fact is that it was $3 million of our taxpayers' money. And it has got to be brought under control.

As president of the United States, I want to assure you, I've got a pen. This one's kind of old. I've got a pen, and I'm going to veto every single spending bill that comes across my desk. I will make them famous. You will know their names.

Now, Senator Obama, you wanted to know one of the differences. He has asked for $932 million of earmark pork-barrel spending, nearly a million dollars for every day that he's been in the United States Senate.

I suggest that people go up on the Web site of Citizens Against Government Waste, and they'll look at those projects.

That kind of thing is not the way to rein in runaway spending in Washington, D.C. That's one of the fundamental differences that Senator Obama and I have.

LEHRER: Senator Obama, two minutes.

OBAMA: Well, Senator McCain is absolutely right that the earmarks process has been abused, which is why I suspended any requests for my home state, whether it was for senior centers or what have you, until we cleaned it up.

And he's also right that oftentimes lobbyists and special interests are the ones that are introducing these kinds of requests, although that wasn't the case with me.

But let's be clear: Earmarks account for $18 billion in last year's budget. Senator McCain is proposing -- and this is a fundamental difference between us -- $300 billion in tax cuts to some of the wealthiest corporations and individuals in the country, $300 billion.

Now, $18 billion is important; $300 billion is really important. And in his tax plan, you would have CEOs of Fortune 500 companies getting an average of $700,000 in reduced taxes, while leaving 100 million Americans out.

So my attitude is, we've got to grow the economy from the bottom up. What I've called for is a tax cut for 95 percent of working families, 95 percent.

And that means that the ordinary American out there who's collecting a paycheck every day, they've got a little extra money to be able to buy a computer for their kid, to fill up on this gas that is killing them.

And over time, that, I think, is going to be a better recipe for economic growth than the -- the policies of President Bush that John McCain wants to -- wants to follow.

LEHRER: Senator McCain?

MCCAIN: Well, again, I don't mean to go back and forth, but he...

(CROSSTALK)

LEHRER: No, that's fine.

MCCAIN: Senator Obama suspended those requests for pork-barrel projects after he was running for president of the United States. He didn't happen to see that light during the first three years as a member of the United States Senate, $932 million in requests.

Maybe to Senator Obama it's not a lot of money. But the point is that -- you see, I hear this all the time. "It's only $18 billion." Do you know that it's tripled in the last five years? Do you know that it's gone completely out of control to the point where it corrupts people? It corrupts people.

That's why we have, as I said, people under federal indictment and charges. It's a system that's got to be cleaned up.

I have fought against it my career. I have fought against it. I was called the sheriff, by the -- one of the senior members of the Appropriations Committee. I didn't win Miss Congeniality in the United States Senate.

Now, Senator Obama didn't mention that, along with his tax cuts, he is also proposing some $800 billion in new spending on new programs.

Now, that's a fundamental difference between myself and Senator Obama. I want to cut spending. I want to keep taxes low. The worst thing we could do in this economic climate is to raise people's taxes.

OBAMA: I -- I don't know where John is getting his figures. Let's just be clear. What I do is I close corporate loopholes, stop providing tax cuts to corporations that are shipping jobs overseas so that we're giving tax breaks to companies that are investing here in the United States. I make sure that we have a health care system that allows for everyone to have basic coverage.

I think those are pretty important priorities. And I pay for every dime of it.

But let's go back to the original point. John, nobody is denying that $18 billion is important. And, absolutely, we need earmark reform. And when I'm president, I will go line by line to make sure that we are not spending money unwisely.

But the fact is that eliminating earmarks alone is not a recipe for how we're going to get the middle class back on track.

OBAMA: And when you look at your tax policies that are directed primarily at those who are doing well, and you are neglecting people who are really struggling right now, I think that is a continuation of the last eight years, and we can't afford another four.

LEHRER: Respond directly to him about that, to Senator Obama about that, about the -- he's made it twice now, about your tax -- your policies about tax cuts.

MCCAIN: Well -- well, let me give you an example of what Senator Obama finds objectionable, the business tax.

Right now, the United States of American business (OOTC:ARBU) pays the second-highest business taxes in the world, 35 percent. Ireland pays 11 percent.

Now, if you're a business person, and you can locate any place in the world, then, obviously, if you go to the country where it's 11 percent tax versus 35 percent, you're going to be able to create jobs, increase your business, make more investment, et cetera.

I want to cut that business tax. I want to cut it so that businesses will remain in -- in the United States of America and create jobs.

But, again, I want to return. It's a lot more than $18 billion in pork-barrel spending. I can tell you, it's rife. It's throughout.

The United States Senate will take up a continuing resolution tomorrow or the next day, sometime next week, with 2,000 -- 2,000 -- look at them, my friends. Look at them. You'll be appalled.

And Senator Obama is a recent convert, after requesting $932 million worth of pork-barrel spending projects.

So the point is, I want people to have tax cuts. I want every family to have a $5,000 refundable tax credit so they can go out and purchase their own health care. I want to double the dividend from $3,500 to $7,000 for every dependent child in America.

I know that the worst thing we could possibly do is to raise taxes on anybody, and a lot of people might be interested in Senator Obama's definition of "rich."

LEHRER: Senator Obama, you have a question for Senator McCain on that? OBAMA: Well, let me just make a couple of points.

LEHRER: All right.

OBAMA: My definition -- here's what I can tell the American people: 95 percent of you will get a tax cut. And if you make less than $250,000, less than a quarter-million dollars a year, then you will not see one dime's worth of tax increase.

Now, John mentioned the fact that business taxes on paper are high in this country, and he's absolutely right. Here's the problem: There are so many loopholes that have been written into the tax code, oftentimes with support of Senator McCain, that we actually see our businesses pay effectively one of the lowest tax rates in the world.

And what that means, then, is that there are people out there who are working every day, who are not getting a tax cut, and you want to give them more.

It's not like you want to close the loopholes. You just want to add an additional tax cut over the loopholes. And that's a problem.

Just one last point I want to make, since Senator McCain talked about providing a $5,000 health credit. Now, what he doesn't tell you is that he intends to, for the first time in history, tax health benefits.

So you may end up getting a $5,000 tax credit. Here's the only problem: Your employer now has to pay taxes on the health care that you're getting from your employer. And if you end up losing your health care from your employer, you've got to go out on the open market and try to buy it.

It is not a good deal for the American people. But it's an example of this notion that the market can always solve everything and that the less regulation we have, the better off we're going to be.

MCCAIN: Well, you know, let me just...

LEHRER: We've got to go to another lead question.

MCCAIN: I know we have to, but this is a classic example of walking the walk and talking the talk.

We had an energy bill before the United States Senate. It was festooned with Christmas tree ornaments. It had all kinds of breaks for the oil companies, I mean, billions of dollars worth. I voted against it; Senator Obama voted for it.

OBAMA: John, you want to give oil companies another $4 billion.

MCCAIN: You've got to look at our record. You've got to look at our records. That's the important thing.

Who fought against wasteful and earmark spending? Who has been the person who has tried to keep spending under control? Who's the person who has believed that the best thing for America is -- is to have a tax system that is fundamentally fair? And I've fought to simplify it, and I have proposals to simplify it.

Let's give every American a choice: two tax brackets, generous dividends, and, two -- and let Americans choose whether they want the -- the existing tax code or they want a new tax code.

And so, again, look at the record, particularly the energy bill. But, again, Senator Obama has shifted on a number of occasions. He has voted in the United States Senate to increase taxes on people who make as low as $42,000 a year.

OBAMA: That's not true, John. That's not true.

MCCAIN: And that's just a fact. Again, you can look it up.

OBAMA: Look, it's just not true. And if we want to talk about oil company profits, under your tax plan, John -- this is undeniable -- oil companies would get an additional $4 billion in tax breaks.

Now, look, we all would love to lower taxes on everybody. But here's the problem: If we are giving them to oil companies, then that means that there are those who are not going to be getting them. And...

MCCAIN: With all due respect, you already gave them to the oil companies.

OBAMA: No, but, John, the fact of the matter is, is that I was opposed to those tax breaks, tried to strip them out. We've got an emergency bill on the Senate floor right now that contains some good stuff, some stuff you want, including drilling off-shore, but you're opposed to it because it would strip away those tax breaks that have gone to oil companies.

LEHRER: All right. All right, speaking of things that both of you want, another lead question, and it has to do with the rescue -- the financial rescue thing that we started -- started asking about.

And what -- and the first answer is to you, Senator Obama. As president, as a result of whatever financial rescue plan comes about and the billion, $700 billion, whatever it is it's going to cost, what are you going to have to give up, in terms of the priorities that you would bring as president of the United States, as a result of having to pay for the financial rescue plan?

OBAMA: Well, there are a range of things that are probably going to have to be delayed. We don't yet know what our tax revenues are going to be. The economy is slowing down, so it's hard to anticipate right now what the budget is going to look like next year.

But there's no doubt that we're not going to be able to do everything that I think needs to be done. There are some things that I think have to be done. We have to have energy independence, so I've put forward a plan to make sure that, in 10 years' time, we have freed ourselves from dependence on Middle Eastern oil by increasing production at home, but most importantly by starting to invest in alternative energy (OOTC:AEGC) , solar, wind, biodiesel, making sure that we're developing the fuel-efficient cars of the future right here in the United States, in Ohio and Michigan, instead of Japan and South Korea.

We have to fix our health care system, which is putting an enormous burden on families. Just -- a report just came out that the average deductible went up 30 percent on American families.

They are getting crushed, and many of them are going bankrupt as a consequence of health care. I'm meeting folks all over the country. We have to do that now, because it will actually make our businesses and our families better off.

The third thing we have to do is we've got to make sure that we're competing in education. We've got to invest in science and technology. China had a space launch and a space walk. We've got to make sure that our children are keeping pace in math and in science.

And one of the things I think we have to do is make sure that college is affordable for every young person in America.

And I also think that we're going to have to rebuild our infrastructure, which is falling behind, our roads, our bridges, but also broadband lines that reach into rural communities.

Also, making sure that we have a new electricity grid to get the alternative energy to population centers that are using them.

So there are some -- some things that we've got to do structurally to make sure that we can compete in this global economy. We can't shortchange those things. We've got to eliminate programs that don't work, and we've got to make sure that the programs that we do have are more efficient and cost less.

LEHRER: Are you -- what priorities would you adjust, as president, Senator McCain, because of the -- because of the financial bailout cost?

MCCAIN: Look, we, no matter what, we've got to cut spending. We have -- as I said, we've let government get completely out of control.

Senator Obama has the most liberal voting record in the United States Senate. It's hard to reach across the aisle from that far to the left.

The point -- the point is -- the point is, we need to examine every agency of government.

First of all, by the way, I'd eliminate ethanol subsidies. I oppose ethanol subsidies.

I think that we have to return -- particularly in defense spending, which is the largest part of our appropriations -- we have to do away with cost-plus contracts. We now have defense systems that the costs are completely out of control.

We tried to build a little ship called the Littoral Combat Ship that was supposed to cost $140 million, ended up costing $400 million, and we still haven't done it.

So we need to have fixed-cost contracts. We need very badly to understand that defense spending is very important and vital, particularly in the new challenges we face in the world, but we have to get a lot of the cost overruns under control.

I know how to do that.

MCCAIN: I saved the taxpayers $6.8 billion by fighting a contract that was negotiated between Boeing and DOD that was completely wrong. And we fixed it and we killed it and the people ended up in federal prison so I know how to do this because I've been involved these issues for many, many years. But I think that we have to examine every agency of government and find out those that are doing their job and keep them and find out those that aren't and eliminate them and we'll have to scrub every agency of government.

LEHRER: But if I hear the two of you correctly neither one of you is suggesting any major changes in what you want to do as president as a result of the financial bailout? Is that what you're saying?

OBAMA: No. As I said before, Jim, there are going to be things that end up having to be ...

LEHRER: Like what?

OBAMA: ... deferred and delayed. Well, look, I want to make sure that we are investing in energy in order to free ourselves from the dependence on foreign oil. That is a big project. That is a multi-year project.

LEHRER: Not willing to give that up?

OBAMA: Not willing to give up the need to do it but there may be individual components that we can't do. But John is right we have to make cuts. We right now give $15 billion every year as subsidies to private insurers under the Medicare system. Doesn't work any better through the private insurers. They just skim off $15 billion. That was a give away and part of the reason is because lobbyists are able to shape how Medicare works.

They did it on the Medicaid prescription drug bill and we have to change the culture. Tom -- or John mentioned me being wildly liberal. Mostly that's just me opposing George Bush's wrong headed policies since I've been in Congress but I think it is that it is also important to recognize I work with Tom Coburn, the most conservative, one of the most conservative Republicans who John already mentioned to set up what we call a Google for government saying we'll list every dollar of federal spending to make sure that the taxpayer can take a look and see who, in fact, is promoting some of these spending projects that John's been railing about.

LEHRER: What I'm trying to get at this is this. Excuse me if I may, senator. Trying to get at that you all -- one of you is going to be the president of the United States come January. At the -- in the middle of a huge financial crisis that is yet to be resolved. And what I'm trying to get at is how this is going to affect you not in very specific -- small ways but in major ways and the approach to take as to the presidency.

MCCAIN: How about a spending freeze on everything but defense, veteran affairs and entitlement programs.

LEHRER: Spending freeze?

MCCAIN: I think we ought to seriously consider with the exceptions the caring of veterans national defense and several other vital issues.

LEHRER: Would you go for that?

OBAMA: The problem with a spending freeze is you're using a hatchet where you need a scalpel. There are some programs that are very important that are under funded. I went to increase early childhood education and the notion that we should freeze that when there may be, for example, this Medicare subsidy doesn't make sense.

Let me tell you another place to look for some savings. We are currently spending $10 billion a month in Iraq when they have a $79 billion surplus. It seems to me that if we're going to be strong at home as well as strong abroad, that we have to look at bringing that war to a close.

MCCAIN: Look, we are sending $700 billion a year overseas to countries that don't like us very much. Some of that money ends up in the hands of terrorist organizations. We have to have wind, tide, solar, natural gas, flex fuel cars and all that but we also have to have offshore drilling and we also have to have nuclear power.

Senator Obama opposes both storing and reprocessing of spent nuclear fuel. You can't get there from here and the fact is that we can create 700,000 jobs by building constructing 45 new nuclear power plants by the year 2030. Nuclear power is not only important as far as eliminating our dependence on foreign oil but it's also responsibility as far as climate change is concerned and the issue I have been involved in for many, many years and I'm proud of the work of the work that I've done there along with President Clinton.

LEHRER: Before we go to another lead question. Let me figure out a way to ask the same question in a slightly different way here. Are you -- are you willing to acknowledge both of you that this financial crisis is going to affect the way you rule the country as president of the United States beyond the kinds of things that you have already -- I mean, is it a major move? Is it going to have a major affect?

OBAMA: There's no doubt it will affect our budgets. There is no doubt about it. Not only -- Even if we get all $700 billion back, let's assume the markets recover, we' holding assets long enough that eventually taxpayers get it back and that happened during the Great Depression when Roosevelt purchased a whole bunch of homes, over time, home values went back up and in fact government made a profit. If we're lucky and do it right, that could potentially happen but in the short term there's an outlay and we may not see that money for a while.

And because of the economy's slowing down, I think we can also expect less tax revenue so there's no doubt that as president I'm go doing have to make some tough decision.

The only point I want to make is this, that in order to make the tough decisions we have to know what our values are and who we're fighting for and our priorities and if we are spending $300 billion on tax cuts for people who don't need them and weren't even asking for them, and we are leaving out health care which is crushing on people all across the country, then I think we have made a bad decision and I want to make sure we're not shortchanging our long term priorities.

MCCAIN: Well, I want to make sure we're not handing the health care system over to the federal government which is basically what would ultimately happen with Senator Obama's health care plan. I want the families to make decisions between themselves and their doctors. Not the federal government. Look. We have to obviously cut spending. I have fought to cut spending. Senator Obama has $800 billion in new spending programs. I would suggest he start by canceling some of those new spending program that he has.

We can't I think adjust spending around to take care of the very much needed programs, including taking care of our veterans but I also want to say again a healthy economy with low taxes would not raising anyone's taxes is probably the best recipe for eventually having our economy recover.

And spending restraint has got to be a vital part of that. And the reason, one of the major reasons why we're in the difficulties we are in today is because spending got out of control. We owe China $500 billion. And spending, I know, can be brought under control because I have fought against excessive spending my entire career. And I got plans to reduce and eliminate unnecessary and wasteful spending and if there's anybody here who thinks there aren't agencies of government where spending can be cut and their budgets slashed they have not spent a lot of time in Washington.

OBAMA: I just want to make this point, Jim. John, it's been your president who you said you agreed with 90 percent of the time who presided over this increase in spending. This orgy of spending and enormous deficits you voted for almost all of his budgets. So to stand here and after eight years and say that you're going to lead on controlling spending and, you know, balancing our tax cuts so that they help middle class families when over the last eight years that hasn't happened I think just is, you know, kind of hard to swallow.

LEHRER: Quick response to Senator Obama.

MCCAIN: It's well-known that I have not been elected Miss Congeniality in the United States Senate nor with the administration. I have opposed the president on spending, on climate change, on torture of prisoner, on - on Guantanamo Bay. On a -- on the way that the Iraq War was conducted. I have a long record and the American people know me very well and that is independent and a maverick of the Senate and I'm happy to say that I've got a partner that's a good maverick along with me now.

LEHRER: All right. Let's go another subject. Lead question, two minutes to you, senator McCain. Much has been said about the lessons of Vietnam. What do you see as the lessons of Iraq?

MCCAIN: I think the lessons of Iraq are very clear that you cannot have a failed strategy that will then cause you to nearly lose a conflict. Our initial military success, we went in to Baghdad and everybody celebrated. And then the war was very badly mishandled. I went to Iraq in 2003 and came back and said, we've got to change this strategy. This strategy requires additional troops, it requires a fundamental change in strategy and I fought for it. And finally, we came up with a great general and a strategy that has succeeded.

This strategy has succeeded. And we are winning in Iraq. And we will come home with victory and with honor. And that withdrawal is the result of every counterinsurgency that succeeds.

MCCAIN: And I want to tell you that now that we will succeed and our troops will come home, and not in defeat, that we will see a stable ally in the region and a fledgling democracy.

The consequences of defeat would have been increased Iranian influence. It would have been increase in sectarian violence. It would have been a wider war, which the United States of America might have had to come back.

So there was a lot at stake there. And thanks to this great general, David Petraeus, and the troops who serve under him, they have succeeded. And we are winning in Iraq, and we will come home. And we will come home as we have when we have won other wars and not in defeat.

LEHRER: Two minutes, how you see the lessons of Iraq, Senator Obama.

OBAMA: Well, this is an area where Senator McCain and I have a fundamental difference because I think the first question is whether we should have gone into the war in the first place.

Now six years ago, I stood up and opposed this war at a time when it was politically risky to do so because I said that not only did we not know how much it was going to cost, what our exit strategy might be, how it would affect our relationships around the world, and whether our intelligence was sound, but also because we hadn't finished the job in Afghanistan.

We hadn't caught bin Laden. We hadn't put al Qaeda to rest, and as a consequence, I thought that it was going to be a distraction. Now Senator McCain and President Bush had a very different judgment.

And I wish I had been wrong for the sake of the country and they had been right, but that's not the case. We've spent over $600 billion so far, soon to be $1 trillion. We have lost over 4,000 lives. We have seen 30,000 wounded, and most importantly, from a strategic national security perspective, al Qaeda is resurgent, stronger now than at any time since 2001.

We took our eye off the ball. And not to mention that we are still spending $10 billion a month, when they have a $79 billion surplus, at a time when we are in great distress here at home, and we just talked about the fact that our budget is way overstretched and we are borrowing money from overseas to try to finance just some of the basic functions of our government. So I think the lesson to be drawn is that we should never hesitate to use military force, and I will not, as president, in order to keep the American people safe. But we have to use our military wisely. And we did not use our military wisely in Iraq.

LEHRER: Do you agree with that, the lesson of Iraq?

MCCAIN: The next president of the United States is not going to have to address the issue as to whether we went into Iraq or not. The next president of the United States is going to have to decide how we leave, when we leave, and what we leave behind. That's the decision of the next president of the United States.

Senator Obama said the surge could not work, said it would increase sectarian violence, said it was doomed to failure. Recently on a television program, he said it exceed our wildest expectations.

But yet, after conceding that, he still says that he would oppose the surge if he had to decide that again today. Incredibly, incredibly Senator Obama didn't go to Iraq for 900 days and never asked for a meeting with General Petraeus.

LEHRER: Well, let's go at some of these things...

MCCAIN: Senator Obama is the chairperson of a committee that oversights NATO that's in Afghanistan. To this day, he has never had a hearing.

LEHRER: What about that point?

MCCAIN: I mean, it's remarkable.

LEHRER: All right. What about that point?

OBAMA: Which point? He raised a whole bunch of them.

LEHRER: I know, OK, let's go to the latter point and we'll back up. The point about your not having been...

OBAMA: Look, I'm very proud of my vice presidential selection, Joe Biden, who is the chairman of the Senate Foreign Relations Committee, and as he explains, and as John well knows, the issues of Afghanistan, the issues of Iraq, critical issues like that, don't go through my subcommittee because they're done as a committee as a whole.

But that's Senate inside baseball. But let's get back to the core issue here. Senator McCain is absolutely right that the violence has been reduced as a consequence of the extraordinary sacrifice of our troops and our military families.

They have done a brilliant job, and General Petraeus has done a brilliant job. But understand, that was a tactic designed to contain the damage of the previous four years of mismanagement of this war.

And so John likes -- John, you like to pretend like the war started in 2007. You talk about the surge. The war started in 2003, and at the time when the war started, you said it was going to be quick and easy. You said we knew where the weapons of mass destruction were. You were wrong.

You said that we were going to be greeted as liberators. You were wrong. You said that there was no history of violence between Shia and Sunni. And you were wrong. And so my question is...

(CROSSTALK)

LEHRER: Senator Obama...

OBAMA: ... of judgment, of whether or not -- of whether or not -- if the question is who is best-equipped as the next president to make good decisions about how we use our military, how we make sure that we are prepared and ready for the next conflict, then I think we can take a look at our judgment.

LEHRER: I have got a lot on the plate here...

MCCAIN: I'm afraid Senator Obama doesn't understand the difference between a tactic and a strategy. But the important -- I'd like to tell you, two Fourths of July ago I was in Baghdad. General Petraeus invited Senator Lindsey Graham and me to attend a ceremony where 688 brave young Americans, whose enlistment had expired, were reenlisting to stay and fight for Iraqi freedom and American freedom.

I was honored to be there. I was honored to speak to those troops. And you know, afterwards, we spent a lot of time with them. And you know what they said to us? They said, let us win. They said, let us win. We don't want our kids coming back here.

And this strategy, and this general, they are winning. Senator Obama refuses to acknowledge that we are winning in Iraq.

OBAMA: That's not true.

MCCAIN: They just passed an electoral...

OBAMA: That's not true.

MCCAIN: An election law just in the last few days. There is social, economic progress, and a strategy, a strategy of going into an area, clearing and holding, and the people of the country then become allied with you. They inform on the bad guys. And peace comes to the country, and prosperity.

That's what's happening in Iraq, and it wasn't a tactic.

LEHRER: Let me see...

OBAMA: Jim, Jim, this is a big...

MCCAIN: It was a stratagem. And that same strategy will be employed in Afghanistan by this great general. And Senator Obama, who after promising not to vote to cut off funds for the troops, did the incredible thing of voting to cut off the funds for the troops in Iraq and Afghanistan.

OBAMA: Jim, there are a whole bunch of things we have got to answer. First of all, let's talk about this troop funding issue because John always brings this up. Senator McCain cut -- Senator McCain opposed funding for troops in legislation that had a timetable, because he didn't believe in a timetable.

I opposed funding a mission that had no timetable, and was open- ended, giving a blank check to George Bush. We had a difference on the timetable. We didn't have a difference on whether or not we were going to be funding troops.

We had a legitimate difference, and I absolutely understand the difference between tactics and strategy. And the strategic question that the president has to ask is not whether or not we are employing a particular approach in the country once we have made the decision to be there.

The question is, was this wise? We have seen Afghanistan worsen, deteriorate. We need more troops there. We need more resources there. Senator McCain, in the rush to go into Iraq, said, you know what? We've been successful in Afghanistan. There is nobody who can pose a threat to us there.

This is a time when bin Laden was still out, and now they've reconstituted themselves. Secretary of Defense Robert Gates himself acknowledges the war on terrorism started in Afghanistan and it needs to end there.

But we can't do it if we are not willing to give Iraq back its country. Now, what I've said is we should end this war responsibly. We should do it in phases. But in 16 months we should be able to reduce our combat troops, put -- provide some relief to military families and our troops and bolster our efforts in Afghanistan so that we can capture and kill bin Laden and crush al Qaeda.

And right now, the commanders in Afghanistan, as well as Admiral Mullen, have acknowledged that we don't have enough troops to deal with Afghanistan because we still have more troops in Iraq than we did before the surge.

MCCAIN: Admiral Mullen suggests that Senator Obama's plan is dangerous for America.

OBAMA: That's not the case.

MCCAIN: That's what ...

OBAMA: What he said was a precipitous...

MCCAIN: That's what Admiral Mullen said.

OBAMA: ... withdrawal would be dangerous. He did not say that. That's not true.

MCCAIN: And also General Petraeus said the same thing. Osama bin Laden and General Petraeus have one thing in common that I know of, they both said that Iraq is the central battleground.

Now General Petraeus has praised the successes, but he said those successes are fragile and if we set a specific date for withdrawal -- and by the way, Senator Obama's original plan, they would have been out last spring before the surge ever had a chance to succeed.

And I'm -- I'm -- understand why Senator Obama was surprised and said that the surge succeeded beyond his wildest expectations.

MCCAIN: It didn't exceed beyond mine, because I know that that's a strategy that has worked and can succeed. But if we snatch defeat from the jaws of victory and adopt Senator Obama's plan, then we will have a wider war and it will make things more complicated throughout the region, including in Afghanistan.

LEHRER: Afghanistan, lead -- a new -- a new lead question. Now, having resolved Iraq, we'll move to Afghanistan.

(LAUGHTER)

And it goes to you, Senator Obama, and it's a -- it picks up on a point that's already been made. Do you think more troops -- more U.S. troops should be sent to Afghanistan, how many, and when?

OBAMA: Yes, I think we need more troops. I've been saying that for over a year now.

And I think that we have to do it as quickly as possible, because it's been acknowledged by the commanders on the ground the situation is getting worse, not better.

We had the highest fatalities among U.S. troops this past year than at any time since 2002. And we are seeing a major offensive taking place -- Al Qaida and Taliban crossing the border and attacking our troops in a brazen fashion. They are feeling emboldened.

And we cannot separate Afghanistan from Iraq, because what our commanders have said is we don't have the troops right now to deal with Afghanistan.

So I would send two to three additional brigades to Afghanistan. Now, keep in mind that we have four times the number of troops in Iraq, where nobody had anything to do with 9/11 before we went in, where, in fact, there was no Al Qaida before we went in, but we have four times more troops there than we do in Afghanistan.

And that is a strategic mistake, because every intelligence agency will acknowledge that Al Qaida is the greatest threat against the United States and that Secretary of Defense Gates acknowledged the central front -- that the place where we have to deal with these folks is going to be in Afghanistan and in Pakistan.

So here's what we have to do comprehensively, though. It's not just more troops. We have to press the Afghan government to make certain that they are actually working for their people. And I've said this to President Karzai.

Number two, we've got to deal with a growing poppy trade that has exploded over the last several years.

Number three, we've got to deal with Pakistan, because Al Qaida and the Taliban have safe havens in Pakistan, across the border in the northwest regions, and although, you know, under George Bush, with the support of Senator McCain, we've been giving them $10 billion over the last seven years, they have not done what needs to be done to get rid of those safe havens.

And until we do, Americans here at home are not going to be safe.

LEHRER: Afghanistan, Senator McCain?

MCCAIN: First of all, I won't repeat the mistake that I regret enormously, and that is, after we were able to help the Afghan freedom fighters and drive the Russians out of Afghanistan, we basically washed our hands of the region.

And the result over time was the Taliban, Al Qaida, and a lot of the difficulties we are facing today. So we can't ignore those lessons of history.

Now, on this issue of aiding Pakistan, if you're going to aim a gun at somebody, George Shultz, our great secretary of state, told me once, you'd better be prepared to pull the trigger.

I'm not prepared at this time to cut off aid to Pakistan. So I'm not prepared to threaten it, as Senator Obama apparently wants to do, as he has said that he would announce military strikes into Pakistan.

We've got to get the support of the people of -- of Pakistan. He said that he would launch military strikes into Pakistan.

Now, you don't do that. You don't say that out loud. If you have to do things, you have to do things, and you work with the Pakistani government.

Now, the new president of Pakistan, Kardari (sic), has got his hands full. And this area on the border has not been governed since the days of Alexander the Great.

I've been to Waziristan. I can see how tough that terrain is. It's ruled by a handful of tribes.

And, yes, Senator Obama calls for more troops, but what he doesn't understand, it's got to be a new strategy, the same strategy that he condemned in Iraq. It's going to have to be employed in Afghanistan.

And we're going to have to help the Pakistanis go into these areas and obtain the allegiance of the people. And it's going to be tough. They've intermarried with Al Qaida and the Taliban. And it's going to be tough. But we have to get the cooperation of the people in those areas.

And the Pakistanis are going to have to understand that that bombing in the Marriott Hotel in Islamabad was a signal from the terrorists that they don't want that government to cooperate with us in combating the Taliban and jihadist elements.

So we've got a lot of work to do in Afghanistan. But I'm confident, now that General Petraeus is in the new position of command, that we will employ a strategy which not only means additional troops -- and, by the way, there have been 20,000 additional troops, from 32,000 to 53,000, and there needs to be more.

So it's not just the addition of troops that matters. It's a strategy that will succeed. And Pakistan is a very important element in this. And I know how to work with him. And I guarantee you I would not publicly state that I'm going to attack them.

OBAMA: Nobody talked about attacking Pakistan. Here's what I said.

And if John wants to disagree with this, he can let me know, that, if the United States has Al Qaida, bin Laden, top-level lieutenants in our sights, and Pakistan is unable or unwilling to act, then we should take them out.

Now, I think that's the right strategy; I think that's the right policy.

And, John, I -- you're absolutely right that presidents have to be prudent in what they say. But, you know, coming from you, who, you know, in the past has threatened extinction for North Korea and, you know, sung songs about bombing Iran, I don't know, you know, how credible that is. I think this is the right strategy.

Now, Senator McCain is also right that it's difficult. This is not an easy situation. You've got cross-border attacks against U.S. troops.

And we've got a choice. We could allow our troops to just be on the defensive and absorb those blows again and again and again, if Pakistan is unwilling to cooperate, or we have to start making some decisions.

And the problem, John, with the strategy that's been pursued was that, for 10 years, we coddled Musharraf, we alienated the Pakistani population, because we were anti-democratic. We had a 20th-century mindset that basically said, "Well, you know, he may be a dictator, but he's our dictator."

And as a consequence, we lost legitimacy in Pakistan. We spent $10 billion. And in the meantime, they weren't going after Al Qaida, and they are more powerful now than at any time since we began the war in Afghanistan.

That's going to change when I'm president of the United States.

MCCAIN: I -- I don't think that Senator Obama understands that there was a failed state in Pakistan when Musharraf came to power. Everybody who was around then, and had been there, and knew about it knew that it was a failed state.

But let me tell you, you know, this business about bombing Iran and all that, let me tell you my record.

Back in 1983, when I was a brand-new United States congressman, the one -- the person I admired the most and still admire the most, Ronald Reagan, wanted to send Marines into Lebanon.

And I saw that, and I saw the situation, and I stood up, and I voted against that, because I was afraid that they couldn't make peace in a place where 300 or 400 or several hundred Marines would make a difference. Tragically, I was right: Nearly 300 Marines lost their lives in the bombing of the barracks.

And then we had Somalia -- then we had the first Gulf War. I supported -- I supported that.

I supported us going into Bosnia, when a number of my own party and colleagues was against that operation in Bosnia. That was the right thing to do, to stop genocide and to preserve what was necessary inside of Europe.

I supported what we did in Kosovo. I supported it because ethnic cleansing and genocide was taking place there.

And I have a record -- and Somalia, I opposed that we should turn -- turn the force in Somalia from a peacekeeping force into a peacemaking force, which they were not capable of.

So I have a record. I have a record of being involved in these national security issues, which involve the highest responsibility and the toughest decisions that any president can make, and that is to send our young men and women into harm's way.

And I'll tell you, I had a town hall meeting in Wolfeboro, New Hampshire, and a woman stood up and she said, "Senator McCain, I want you to do me the honor of wearing a bracelet with my son's name on it."

He was 22 years old and he was killed in combat outside of Baghdad, Matthew Stanley, before Christmas last year. This was last August, a year ago. And I said, "I will -- I will wear his bracelet with honor."

And this was August, a year ago. And then she said, "But, Senator McCain, I want you to do everything -- promise me one thing, that you'll do everything in your power to make sure that my son's death was not in vain."

That means that that mission succeeds, just like those young people who re-enlisted in Baghdad, just like the mother I met at the airport the other day whose son was killed. And they all say to me that we don't want defeat.

MCCAIN: A war that I was in, where we had an Army, that it wasn't through any fault of their own, but they were defeated. And I know how hard it is for that -- for an Army and a military to recover from that. And it did and we will win this one and we won't come home in defeat and dishonor and probably have to go back if we fail.

OBAMA: Jim, let me just make a point. I've got a bracelet, too, from Sergeant - from the mother of Sergeant Ryan David Jopeck (ph), given to me ingrain bin green bay. She asked me, can you please make sure another mother is not going through what I'm going through.

No U.S. soldier ever dies in vain because they're carrying out the missions of their commander in chief. And we honor all the service that they've provided. Our troops have performed brilliantly. The question is for the next president, are we making good judgments about how to keep America safe precisely because sending our military into battle is such an enormous step.

And the point that I originally made is that we took our eye off Afghanistan, we took our eye off the folks who perpetrated 9/11, they are still sending out videotapes and Senator McCain, nobody is talking about defeat in Iraq, but I have to say we are having enormous problems in Afghanistan because of that decision.

And it is not true you have consistently been concerned about what happened in Afghanistan. At one point, while you were focused on Iraq, you said well, we can "muddle through" Afghanistan. You don't muddle through the central front on terror and you don't muddle through going after bin Laden. You don't muddle through stamping out the Taliban.

I think that is something we have to take seriously. And when I'm president, I will.

LEHRER: New ...

MCCAIN: You might think that with that kind of concern that Senator Obama would have gone to Afghanistan, particularly given his responsibilities as a subcommittee chairman. By the way, when I'm subcommittee chairman, we take up the issues under my subcommittee. But the important thing is -- the important thing is I visited Afghanistan and I traveled to Waziristan and I traveled to these places and I know what our security requirements are. I know what our needs are. So the point is that we will prevail in Afghanistan, but we need the new strategy and we need it to succeed. But the important thing is, if we suffer defeat in Iraq, which General Petraeus predicts we will, if we adopted Senator Obama's set date for withdrawal, then that will have a calamitous effect in Afghanistan and American national security interests in the region. Senator Obama doesn't seem to understand there is a connected between the two.

LEHRER: I have some good news and bad news for the two of you. You all are even on time, which is remarkable, considering we've been going at it ...

OBAMA: A testimony to you, Jim.

LEHRER: I don't know about that. But the bad news is all my little five minute things have run over, so, anyhow, we'll adjust as we get there. But the amount of time is even.

New lead question. And it goes two minutes to you, Senator McCain, what is your reading on the threat to Iran right now to the security of the United States?

MCCAIN: My reading of the threat from Iran is that if Iran acquires nuclear weapons, it is an existential threat to the State of Israel and to other countries in the region because the other countries in the region will feel compelling requirement to acquire nuclear weapons as well.

Now we cannot a second Holocaust. Let's just make that very clear. What I have proposed for a long time, and I've had conversation with foreign leaders about forming a league of democracies, let's be clear and let's have some straight talk. The Russians are preventing significant action in the United Nations Security Council.

I have proposed a league of democracies, a group of people - a group of countries that share common interests, common values, common ideals, they also control a lot of the world's economic power. We could impose significant meaningful, painful sanctions on the Iranians that I think could have a beneficial effect.

The Iranians have a lousy government, so therefore their economy is lousy, even though they have significant oil revenues. So I am convinced that together, we can, with the French, with the British, with the Germans and other countries, democracies around the world, we can affect Iranian behavior.

But have no doubt, but have no doubt that the Iranians continue on the path to the acquisition of a nuclear weapon as we speak tonight. And it is a threat not only in this region but around the world.

What I'd also like to point out the Iranians are putting the most lethal IEDs into Iraq which are killing young Americans, there are special groups in Iran coming into Iraq and are being trained in Iran. There is the Republican Guard in Iran, which Senator Kyl had an amendment in order to declare them a sponsor of terror. Senator Obama said that would be provocative.

So this is a serious threat. This is a serious threat to security in the world, and I believe we can act and we can act with our friends and allies and reduce that threat as quickly as possible, but have no doubt about the ultimate result of them acquiring nuclear weapons.

LEHRER: Two minutes on Iran, Senator Obama.

OBAMA: Well, let me just correct something very quickly. I believe the Republican Guard of Iran is a terrorist organization. I've consistently said so. What Senator McCain refers to is a measure in the Senate that would try to broaden the mandate inside of Iraq. To deal with Iran.

And ironically, the single thing that has strengthened Iran over the last several years has been the war in Iraq. Iraq was Iran's mortal enemy. That was cleared away. And what we've seen over the last several years is Iran's influence grow. They have funded Hezbollah, they have funded Hamas, they have gone from zero centrifuges to 4,000 centrifuges to develop a nuclear weapon.

So obviously, our policy over the last eight years has not worked. Senator McCain is absolutely right, we cannot tolerate a nuclear Iran. It would be a game changer. Not only would it threaten Israel, a country that is our stalwart ally, but it would also create an environment in which you could set off an arms race in this Middle East.

Now here's what we need to do. We do need tougher sanctions. I do not agree with Senator McCain that we're going to be able to execute the kind of sanctions we need without some cooperation with some countries like Russia and China that are, I think Senator McCain would agree, not democracies, but have extensive trade with Iran but potentially have an interest in making sure Iran doesn't have a nuclear weapon.

But we are also going to have to, I believe, engage in tough direct diplomacy with Iran and this is a major difference I have with Senator McCain, this notion by not talking to people we are punishing them has not worked. It has not worked in Iran, it has not worked in North Korea. In each instance, our efforts of isolation have actually accelerated their efforts to get nuclear weapons. That will change when I'm president of the United States.

LEHRER: Senator, what about talking?

MCCAIN: Senator Obama twice said in debates he would sit down with Ahmadinejad, Chavez and Raul Castro without precondition. Without precondition. Here is Ahmadinenene (ph), Ahmadinejad, who is, Ahmadinejad, who is now in New York, talking about the extermination of the State of Israel, of wiping Israel off the map, and we're going to sit down, without precondition, across the table, to legitimize and give a propaganda platform to a person that is espousing the extermination of the state of Israel, and therefore then giving them more credence in the world arena and therefore saying, they've probably been doing the right thing, because you will sit down across the table from them and that will legitimize their illegal behavior.

The point is that throughout history, whether it be Ronald Reagan, who wouldn't sit down with Brezhnev, Andropov or Chernenko until Gorbachev was ready with glasnost and perestroika.

Or whether it be Nixon's trip to China, which was preceded by Henry Kissinger, many times before he went. Look, I'll sit down with anybody, but there's got to be pre-conditions. Those pre-conditions would apply that we wouldn't legitimize with a face to face meeting, a person like Ahmadinejad. Now, Senator Obama said, without preconditions.

OBAMA: So let's talk about this. First of all, Ahmadinejad is not the most powerful person in Iran. So he may not be the right person to talk to. But I reserve the right, as president of the United States to meet with anybody at a time and place of my choosing if I think it's going to keep America safe.

And I'm glad that Senator McCain brought up the history, the bipartisan history of us engaging in direct diplomacy.

OBAMA: Senator McCain mentioned Henry Kissinger, who's one of his advisers, who, along with five recent secretaries of state, just said that we should meet with Iran -- guess what -- without precondition. This is one of your own advisers.

Now, understand what this means "without preconditions." It doesn't mean that you invite them over for tea one day. What it means is that we don't do what we've been doing, which is to say, "Until you agree to do exactly what we say, we won't have direct contacts with you."

There's a difference between preconditions and preparation. Of course we've got to do preparations, starting with low-level diplomatic talks, and it may not work, because Iran is a rogue regime.

But I will point out that I was called naive when I suggested that we need to look at exploring contacts with Iran. And you know what? President Bush recently sent a senior ambassador, Bill Burns, to participate in talks with the Europeans around the issue of nuclear weapons.

Again, it may not work, but if it doesn't work, then we have strengthened our ability to form alliances to impose the tough sanctions that Senator McCain just mentioned.

And when we haven't done it, as in North Korea -- let me just take one more example -- in North Korea, we cut off talks. They're a member of the axis of evil. We can't deal with them.

And you know what happened? They went -- they quadrupled their nuclear capacity. They tested a nuke. They tested missiles. They pulled out of the nonproliferation agreement. And they sent nuclear secrets, potentially, to countries like Syria.

When we re-engaged -- because, again, the Bush administration reversed course on this -- then we have at least made some progress, although right now, because of the problems in North Korea, we are seeing it on shaky ground.

And -- and I just -- so I just have to make this general point that the Bush administration, some of Senator McCain's own advisers all think this is important, and Senator McCain appears resistant.

He even said the other day that he would not meet potentially with the prime minister of Spain, because he -- you know, he wasn't sure whether they were aligned with us. I mean, Spain? Spain is a NATO ally.

MCCAIN: Of course.

OBAMA: If we can't meet with our friends, I don't know how we're going to lead the world in terms of dealing with critical issues like terrorism.

MCCAIN: I'm not going to set the White House visitors schedule before I'm president of the United States. I don't even have a seal yet.

Look, Dr. Kissinger did not say that he would approve of face-to- face meetings between the president of the United States and the president -- and Ahmadinejad. He did not say that.

OBAMA: Of course not.

MCCAIN: He said that there could be secretary-level and lower level meetings. I've always encouraged them. The Iranians have met with Ambassador Crocker in Baghdad.

What Senator Obama doesn't seem to understand that if without precondition you sit down across the table from someone who has called Israel a "stinking corpse," and wants to destroy that country and wipe it off the map, you legitimize those comments.

This is dangerous. It isn't just naive; it's dangerous. And so we just have a fundamental difference of opinion.

As far as North Korea is concerned, our secretary of state, Madeleine Albright, went to North Korea. By the way, North Korea, most repressive and brutal regime probably on Earth. The average South Korean is three inches taller than the average North Korean, a huge gulag.

We don't know what the status of the dear leader's health is today, but we know this, that the North Koreans have broken every agreement that they've entered into.

And we ought to go back to a little bit of Ronald Reagan's "trust, but verify," and certainly not sit down across the table from -- without precondition, as Senator Obama said he did twice, I mean, it's just dangerous.

OBAMA: Look, I mean, Senator McCain keeps on using this example that suddenly the president would just meet with somebody without doing any preparation, without having low-level talks. Nobody's been talking about that, and Senator McCain knows it. This is a mischaracterization of my position.

When we talk about preconditions -- and Henry Kissinger did say we should have contacts without preconditions -- the idea is that we do not expect to solve every problem before we initiate talks.

And, you know, the Bush administration has come to recognize that it hasn't worked, this notion that we are simply silent when it comes to our enemies. And the notion that we would sit with Ahmadinejad and not say anything while he's spewing his nonsense and his vile comments is ridiculous. Nobody is even talking about that.

MCCAIN: So let me get this right. We sit down with Ahmadinejad, and he says, "We're going to wipe Israel off the face of the Earth," and we say, "No, you're not"? Oh, please.

OBAMA: No, let me tell...

(CROSSTALK)

MCCAIN: By the way, my friend, Dr. Kissinger, who's been my friend for 35 years, would be interested to hear this conversation and Senator Obama's depiction of his -- of his positions on the issue. I've known him for 35 years.

OBAMA: We will take a look.

MCCAIN: And I guarantee you he would not -- he would not say that presidential top level.

OBAMA: Nobody's talking about that.

MCCAIN: Of course he encourages and other people encourage contacts, and negotiations, and all other things. We do that all the time.

LEHRER: We're going to go to a new...

(CROSSTALK)

MCCAIN: And Senator Obama is parsing words when he says precondition means preparation.

OBAMA: I am not parsing words.

MCCAIN: He's parsing words, my friends.

OBAMA: I'm using the same words that your advisers use.

Please, go ahead.

LEHRER: New lead question.

Russia, goes to you, two minutes, Senator Obama. How do you see the relationship with Russia? Do you see them as a competitor? Do you see them as an enemy? Do you see them as a potential partner?

OBAMA: Well, I think that, given what's happened over the last several weeks and months, our entire Russian approach has to be evaluated, because a resurgent and very aggressive Russia is a threat to the peace and stability of the region.

Their actions in Georgia were unacceptable. They were unwarranted. And at this point, it is absolutely critical for the next president to make clear that we have to follow through on our six-party -- or the six-point cease-fire. They have to remove themselves from South Ossetia and Abkhazia.

It is absolutely important that we have a unified alliance and that we explain to the Russians that you cannot be a 21st-century superpower, or power, and act like a 20th-century dictatorship.

And we also have to affirm all the fledgling democracies in that region, you know, the Estonians, the Lithuanians, the Latvians, the Poles, the Czechs, that we are, in fact, going to be supportive and in solidarity with them in their efforts. They are members of NATO.

And to countries like Georgia and the Ukraine, I think we have to insist that they are free to join NATO if they meet the requirements, and they should have a membership action plan immediately to start bringing them in.

Now, we also can't return to a Cold War posture with respect to Russia. It's important that we recognize there are going to be some areas of common interest. One is nuclear proliferation.

They have not only 15,000 nuclear warheads, but they've got enough to make another 40,000, and some of those loose nukes could fall into the hands of Al Qaida.

This is an area where I've led on in the Senate, working with a Republican ranking member of the Senate Foreign Relations Committee, Dick Lugar, to deal with the proliferation of loose nuclear weapons. That's an area where we're going to have to work with Russia.

But we have to have a president who is clear that you don't deal with Russia based on staring into his eyes and seeing his soul. You deal with Russia based on, what are your -- what are the national security interests of the United States of America?

And we have to recognize that the way they've been behaving lately demands a sharp response from the international community and our allies.

LEHRER: Two minutes on Russia, Senator McCain.

MCCAIN: Well, I was interested in Senator Obama's reaction to the Russian aggression against Georgia. His first statement was, "Both sides ought to show restraint."

Again, a little bit of naivete there. He doesn't understand that Russia committed serious aggression against Georgia. And Russia has now become a nation fueled by petro-dollars that is basically a KGB apparatchik-run government.

I looked into Mr. Putin's eyes, and I saw three letters, a "K," a "G," and a "B." And their aggression in Georgia is not acceptable behavior.

I don't believe we're going to go back to the Cold War. I am sure that that will not happen. But I do believe that we need to bolster our friends and allies. And that wasn't just about a problem between Georgia and Russia. It had everything to do with energy. There's a pipeline that runs from the Caspian through Georgia through Turkey. And, of course, we know that the Russians control other sources of energy into Europe, which they have used from time to time.

It's not accidental that the presidents of Latvia, Estonia, Lithuania, Poland, and Ukraine flew to Georgia, flew to Tbilisi, where I have spent significant amount of time with a great young president, Misha Saakashvili.

MCCAIN: And they showed solidarity with them, but, also, they are very concerned about the Russian threats to regain their status of the old Russian to regain their status of the old Russian empire.

Now, I think the Russians ought to understand that we will support -- we, the United States -- will support the inclusion of Georgia and Ukraine in the natural process, inclusion into NATO.

We also ought to make it very clear that the Russians are in violation of their cease-fire agreement. They have stationed additional troops in Abkhazia and South Ossetia.

By the way, I went there once, and we went inside and drove in, and there was a huge poster. And this is -- this is Georgian territory. And there was a huge poster of Vladimir Putin, and it said, "Vladimir Putin, our president."

It was very clear, the Russian intentions towards Georgia. They were just waiting to seize the opportunity.

So, this is a very difficult situation. We want to work with the Russians. But we also have every right to expect the Russians to behave in a fashion and keeping with a -- with a -- with a country who respects international boundaries and the norms of international behavior.

And watch Ukraine. This whole thing has got a lot to do with Ukraine, Crimea, the base of the Russian fleet in Sevastopol. And the breakdown of the political process in Ukraine between Tymoshenko and Yushchenko is a very serious problem.

So watch Ukraine, and let's make sure that we -- that the Ukrainians understand that we are their friend and ally.

LEHRER: You see any -- do you have a major difference with what he just said?

OBAMA: No, actually, I think Senator McCain and I agree for the most part on these issues. Obviously, I disagree with this notion that somehow we did not forcefully object to Russians going into Georgia.

I immediately said that this was illegal and objectionable. And, absolutely, I wanted a cessation of the violence, because it put an enormous strain on Georgia, and that's why I was the first to say that we have to rebuild the Georgian economy and called for a billion dollars that has now gone in to help them rebuild.

Because part of Russia's intentions here was to weaken the economy to the point where President Saakashvili was so weakened that he might be replaced by somebody that Putin favored more.

Two points I think are important to think about when it comes to Russia.

Number one is we have to have foresight and anticipate some of these problems. So back in April, I warned the administration that you had Russian peacekeepers in Georgian territory. That made no sense whatsoever.

And what we needed to do was replace them with international peacekeepers and a special envoy to resolve the crisis before it boiled over.

That wasn't done. But had it been done, it's possible we could have avoided the issue.

The second point I want to make is -- is the issue of energy. Russia is in part resurgent and Putin is feeling powerful because of petro-dollars, as Senator McCain mentioned.

That means that we, as one of the biggest consumers of oil -- 25 percent of the world's oil -- have to have an energy strategy not just to deal with Russia, but to deal with many of the rogue states we've talked about, Iran, Venezuela.

And that means, yes, increasing domestic production and off-shore drilling, but we only have 3 percent of the world's oil supplies and we use 25 percent of the world's oil. So we can't simply drill our way out of the problem.

What we're going to have to do is to approach it through alternative energy, like solar, and wind, and biodiesel, and, yes, nuclear energy, clean-coal technology. And, you know, I've got a plan for us to make a significant investment over the next 10 years to do that.

And I have to say, Senator McCain and I, I think agree on the importance of energy, but Senator McCain mentioned earlier the importance of looking at a record.

Over 26 years, Senator McCain voted 23 times against alternative energy, like solar, and wind, and biodiesel.

And so we -- we -- we've got to walk the walk and not just talk the talk when it comes to energy independence, because this is probably going to be just as vital for our economy and the pain that people are feeling at the pump -- and, you know, winter's coming and home heating oil -- as it is our national security and the issue of climate change that's so important.

LEHRER: We've got time for one more lead question segment. We're way out of... (CROSSTALK)

LEHRER: Quick response and then...

(CROSSTALK)

MCCAIN: No one from Arizona is against solar. And Senator Obama says he's for nuclear, but he's against reprocessing and he's against storing. So...

OBAMA: That's just not true, John. John, I'm sorry, but that's not true.

MCCAIN: ... it's hard to get there from here. And off-shore drilling is also something that is very important and it is a bridge.

And we know that, if we drill off-shore and exploit a lot of these reserves, it will help, at temporarily, relieve our energy requirements. And it will have, I think, an important effect on the price of a barrel of oil.

OBAMA: I just have to respond very quickly, just to correct -- just to correct the record.

MCCAIN: So I want to say that, with the Nunn-Lugar thing...

LEHRER: Excuse me, Senator.

OBAMA: John?

MCCAIN: ... I supported Nunn-Lugar back in the early 1990s when a lot of my colleagues didn't. That was the key legislation at the time and put us on the road to eliminating this issue of nuclear waste and the nuclear fuel that has to be taken care of.

OBAMA: I -- I just have to correct the record here. I have never said that I object to nuclear waste. What I've said is that we have to store it safely.

And, Senator McCain, he says -- he talks about Arizona.

LEHRER: All right.

OBAMA: I've got to make this point, Jim.

LEHRER: OK.

OBAMA: He objects...

MCCAIN: I have voted for alternate fuel all of my time...

OBAMA: He -- he -- he objects...

(CROSSTALK)

LEHRER: One at a time, please. OBAMA: He objected...

LEHRER: One at a time.

MCCAIN: No one can be opposed to alternate energy.

OBAMA: All right, fair enough. Let's move on. You've got one more energy -- you've got one more question.

LEHRER: This is the last -- last lead question. You have two minutes each. And the question is this, beginning with you, Senator McCain.

What do you think the likelihood is that there would be another 9/11-type attack on the continental United States?

MCCAIN: I think it's much less than it was the day after 9/11. I think it -- that we have a safer nation, but we are a long way from safe.

And I want to tell you that one of the things I'm most proud of, among others, because I have worked across the aisle. I have a long record on that, on a long series of reforms.

But after 9/11, Senator Joe Lieberman and I decided that we needed a commission, and that was a commission to investigate 9/11, and find out what happened, and fix it.

And we were -- we were opposed by the administration, another area where I differed with this administration. And we were stymied until the families of 9/11 came, and they descended on Washington, and we got that legislation passed.

And there were a series of recommendations, as I recall, more than 40. And I'm happy to say that we've gotten written into law most of those reforms recommended by that commission. I'm proud of that work, again, bipartisan, reaching across the aisle, working together, Democrat and Republican alike.

So we have a long way to go in our intelligence services. We have to do a better job in human intelligence. And we've got to -- to make sure that we have people who are trained interrogators so that we don't ever torture a prisoner ever again.

We have to make sure that our technological and intelligence capabilities are better. We have to work more closely with our allies. I know our allies, and I can work much more closely with them.

But I can tell you that I think America is safer today than it was on 9/11. But that doesn't mean that we don't have a long way to go.

And I'd like to remind you, also, as a result of those recommendations, we've probably had the largest reorganization of government since we established the Defense Department. And I think that those men and women in those agencies are doing a great job.

But we still have a long way to go before we can declare America safe, and that means doing a better job along our borders, as well.

LEHRER: Two minutes, Senator Obama.

OBAMA: Well, first of all, I think that we are safer in some ways. Obviously, we've poured billions of dollars into airport security. We have done some work in terms of securing potential targets, but we still have a long way to go.

We've got to make sure that we're hardening our chemical sites. We haven't done enough in terms of transit; we haven't done enough in terms of ports.

And the biggest threat that we face right now is not a nuclear missile coming over the skies. It's in a suitcase.

This is why the issue of nuclear proliferation is so important. It is the -- the biggest threat to the United States is a terrorist getting their hands on nuclear weapons.

And we -- we are spending billions of dollars on missile defense. And I actually believe that we need missile defense, because of Iran and North Korea and the potential for them to obtain or to launch nuclear weapons, but I also believe that, when we are only spending a few hundred million dollars on nuclear proliferation, then we're making a mistake.

The other thing that we have to focus on, though, is Al Qaida. They are now operating in 60 countries. We can't simply be focused on Iraq. We have to go to the root cause, and that is in Afghanistan and Pakistan. That's going to be critical. We are going to need more cooperation with our allies.

And one last point I want to make. It is important for us to understand that the way we are perceived in the world is going to make a difference, in terms of our capacity to get cooperation and root out terrorism.

And one of the things that I intend to do as president is to restore America's standing in the world. We are less respected now than we were eight years ago or even four years ago.

OBAMA: And this is the greatest country on Earth. But because of some of the mistakes that have been made -- and I give Senator McCain great credit on the torture issue, for having identified that as something that undermines our long-term security -- because of those things, we, I think, are going to have a lot of work to do in the next administration to restore that sense that America is that shining beacon on a hill.

LEHRER: Do you agree there's much to be done in a new administration to restore...

(CROSSTALK)

MCCAIN: But in the case of missile defense, Senator Obama said it had to be, quote, "proven." That wasn't proven when Ronald Reagan said we would do SDI, which is missile defense. And it was major -- a major factor in bringing about the end of the Cold War.

We seem to come full circle again. Senator Obama still doesn't quite understand -- or doesn't get it -- that if we fail in Iraq, it encourages Al Qaida. They would establish a base in Iraq.

The consequences of defeat, which would result from his plan of withdrawal and according to date certain, regardless of conditions, according to our military leaders, according to every expert, would lead to defeat -- possible defeat, loss of all the fragile sacrifice that we've made of American blood and treasure, which grieves us all.

All of that would be lost if we followed Senator Obama's plan to have specific dates with withdrawal, regardless of conditions on the ground.

And General Petraeus says we have had great success, but it's very fragile. And we can't do what Senator Obama wants to do.

That is the central issue of our time. And I think Americans will judge very seriously as to whether that's the right path or the wrong path and who should be the next president of the United States.

LEHRER: You see the same connections that Senator McCain does?

OBAMA: Oh, there's no doubt. Look, over the last eight years, this administration, along with Senator McCain, have been solely focused on Iraq. That has been their priority. That has been where all our resources have gone.

In the meantime, bin Laden is still out there. He is not captured. He is not killed. Al Qaida is resurgent.

In the meantime, we've got challenges, for example, with China, where we are borrowing billions of dollars. They now hold a trillion dollars' worth of our debt. And they are active in countries like -- in regions like Latin America, and Asia, and Africa. They are -- the conspicuousness of their presence is only matched by our absence, because we've been focused on Iraq.

We have weakened our capacity to project power around the world because we have viewed everything through this single lens, not to mention, look at our economy. We are now spending $10 billion or more every month.

And that means we can't provide health care to people who need it. We can't invest in science and technology, which will determine whether or not we are going to be competitive in the long term.

There has never been a country on Earth that saw its economy decline and yet maintained its military superiority. So this is a national security issue.

We haven't adequately funded veterans' care. I sit on the Veterans Affairs Committee, and we've got -- I meet veterans all across the country who are trying to figure out, "How can I get disability payments? I've got post-traumatic stress disorder, and yet I can't get treatment."

So we have put all chips in, right there, and nobody is talking about losing this war. What we are talking about is recognizing that the next president has to have a broader strategic vision about all the challenges that we face.

That's been missing over the last eight years. That sense is something that I want to restore.

MCCAIN: I've been involved, as I mentioned to you before, in virtually every major national security challenge we've faced in the last 20-some years. There are some advantages to experience, and knowledge, and judgment.

And I -- and I honestly don't believe that Senator Obama has the knowledge or experience and has made the wrong judgments in a number of areas, including his initial reaction to Russian invasion -- aggression in Georgia, to his -- you know, we've seen this stubbornness before in this administration to cling to a belief that somehow the surge has not succeeded and failing to acknowledge that he was wrong about the surge is -- shows to me that we -- that -- that we need more flexibility in a president of the United States than that.

As far as our other issues that he brought up are concerned, I know the veterans. I know them well. And I know that they know that I'll take care of them. And I've been proud of their support and their recognition of my service to the veterans.

And I love them. And I'll take care of them. And they know that I'll take care of them. And that's going to be my job. But, also, I have the ability, and the knowledge, and the background to make the right judgments, to keep this country safe and secure.

Reform, prosperity, and peace, these are major challenges to the United States of America. I don't think I need any on-the-job training. I'm ready to go at it right now.

OBAMA: Well, let me just make a closing point. You know, my father came from Kenya. That's where I get my name.

And in the '60s, he wrote letter after letter to come to college here in the United States because the notion was that there was no other country on Earth where you could make it if you tried. The ideals and the values of the United States inspired the entire world.

I don't think any of us can say that our standing in the world now, the way children around the world look at the United States, is the same.

And part of what we need to do, what the next president has to do -- and this is part of our judgment, this is part of how we're going to keep America safe -- is to -- to send a message to the world that we are going to invest in issues like education, we are going to invest in issues that -- that relate to how ordinary people are able to live out their dreams.

And that is something that I'm going to be committed to as president of the United States.

LEHRER: Few seconds. We're almost finished.

MCCAIN: Jim, when I came home from prison, I saw our veterans being very badly treated, and it made me sad. And I embarked on an effort to resolve the POW-MIA issue, which we did in a bipartisan fashion, and then I worked on normalization of relations between our two countries so that our veterans could come all the way home.

I guarantee you, as president of the United States, I know how to heal the wounds of war, I know how to deal with our adversaries, and I know how to deal with our friends.

LEHRER: And that ends this debate tonight.

On October 2nd, next Thursday, also at 9:00 p.m. Eastern time, the two vice presidential candidates will debate at Washington University in St. Louis. My PBS colleague, Gwen Ifill, will be the moderator.

For now, from Oxford, Mississippi, thank you, senators, both. I'm Jim Lehrer. Thank you, and good night.

(APPLAUSE)

END