Second presidential debate (Part 1)

Presidential candidates John McCain and Barack Obama debated in Nashville, Tennessee, on Tuesday night. NBC's Tom Brokaw moderated the debate. Here is a transcript of that debate.

Brokaw: Good evening from Belmont University in Nashville, Tennessee. I'm Tom Brokaw of NBC News. And welcome to this second presidential debate, sponsored by the Commission on Presidential Debates.

Tonight's debate is the only one with a town hall format. The Gallup Organization chose 80 uncommitted voters from the Nashville area to be here with us tonight. And earlier today, each of them gave me a copy of their question for the candidates.

From all of these questions -- and from tens of thousands submitted online -- I have selected a long list of excellent questions on domestic and foreign policy.

Neither the commission nor the candidates have seen the questions. And although we won't be able to get to all of them tonight, we should have a wide-ranging discussion one month before the election.

Each candidate will have two minutes to respond to a common question, and there will be a one-minute follow-up. The audience here in the hall has agreed to be polite, and attentive, no cheering or outbursts. Those of you at home, of course, are not so constrained.

The only exception in the hall is right now, as it is my privilege to introduce the candidates, Sen. Barack Obama of Illinois and Sen. John McCain of Arizona.

Gentlemen?

Gentlemen, we want to get under way immediately, if we can. Since you last met at Ole Miss 12 days ago, the world has changed a great deal, and not for the better. We still don't know where the bottom is at this time.

As you might expect, many of the questions that we have from here in the hall tonight and from online have to do with the American economy and, in fact, with global economic conditions.

I understand that you flipped a coin.

And, Sen. Obama, you will begin tonight. And we're going to have our first question from over here in Section A from Allen Shaffer.

Allen?

Shaffer: With the economy on the downturn and retired and older citizens and workers losing their incomes, what's the fastest, most positive solution to bail these people out of the economic ruin?

Obama: Well, Alan (ph), thank you very much for the question. I want to first, obviously, thank Belmont University, Tom, thank you, and to all of you who are participating tonight and those of you who sent e-mail questions in.

I think everybody knows now we are in the worst financial crisis since the Great Depression. And a lot of you I think are worried about your jobs, your pensions, your retirement accounts, your ability to send your child or your grandchild to college.

And I believe this is a final verdict on the failed economic policies of the last eight years, strongly promoted by President Bush and supported by Sen. McCain, that essentially said that we should strip away regulations, consumer protections, let the market run wild, and prosperity would rain down on all of us.

It hasn't worked out that way. And so now we've got to take some decisive action.

Now, step one was a rescue package that was passed last week. We've got to make sure that works properly. And that means strong oversight, making sure that investors, taxpayers are getting their money back and treated as investors.

It means that we are cracking down on CEOs and making sure that they're not getting bonuses or golden parachutes as a consequence of this package. And, in fact, we just found out that AIG, a company that got a bailout, just a week after they got help went on a $400,000 junket.

And I'll tell you what, the Treasury should demand that money back and those executives should be fired. But that's only step one. The middle-class need a rescue package. And that means tax cuts for the middle-class.

It means help for homeowners so that they can stay in their homes. It means that we are helping state and local governments set up road projects and bridge projects that keep people in their jobs.

And then long-term we've got to fix our health care system, we've got to fix our energy system that is putting such an enormous burden on families. You need somebody working for you and you've got to have somebody in Washington who is thinking about the middle class and not just those who can afford to hire lobbyists.

Brokaw: Sen. McCain?

McCain: Well, thank you, Tom. Thank you, Belmont University. And Sen. Obama, it's good to be with you at a town hall meeting.

And, Alan (ph), thank you for your question. You go to the heart of America's worries tonight. Americans are angry, they're upset, and they're a little fearful. It's our job to fix the problem.

Now, I have a plan to fix this problem and it has got to do with energy independence. We've got to stop sending $700 billion a year to countries that don't want us very -- like us very much. We have to keep Americans' taxes low. All Americans' taxes low. Let's not raise taxes on anybody today.

We obviously have to stop this spending spree that's going on in Washington. Do you know that we've laid a $10 trillion debt on these young Americans who are here with us tonight, $500 billion of it we owe to China?

We've got to have a package of reforms and it has got to lead to reform prosperity and peace in the world. And I think that this problem has become so severe, as you know, that we're going to have to do something about home values.

You know that home values of retirees continues to decline and people are no longer able to afford their mortgage payments. As president of the United States, Alan, I would order the secretary of the treasury to immediately buy up the bad home loan mortgages in America and renegotiate at the new value of those homes -- at the diminished value of those homes and let people be able to make those -- be able to make those payments and stay in their homes.

Is it expensive? Yes. But we all know, my friends, until we stabilize home values in America, we're never going to start turning around and creating jobs and fixing our economy. And we've got to give some trust and confidence back to America.

I know how the do that, my friends. And it's my proposal, it's not Sen. Obama's proposal, it's not President Bush's proposal. But I know how to get America working again, restore our economy and take care of working Americans. Thank you.

Brokaw: Senator, we have one minute for a discussion here. Obviously the powers of the treasury secretary have been greatly expanded. The most powerful officer in the cabinet now. Hank Paulson says he won't stay on. Who do you have in mind to appoint to that very important post?

Sen. McCain?

McCain: Not you, Tom.

Brokaw: No, with good reason.

McCain: You know, that's a tough question and there's a lot of qualified Americans. But I think the first criteria, Tom, would have to be somebody who immediately Americans identify with, immediately say, we can trust that individual.

A supporter of Sen. Obama's is Warren Buffett [chairman of Berkshire Hathaway]. He has already weighed in and helped stabilize some of the difficulties in the markets and with companies and corporations, institutions today.

I like Meg Whitman [former CEO of eBay and current McCain campaign adviser], she knows what it's like to be out there in the marketplace. She knows how to create jobs. Meg Whitman was CEO of a company that started with 12 people and is now 1.3 million people in America make their living off eBay. Maybe somebody here has done a little business with them.

But the point is it's going to have to be somebody who inspires trust and confidence. Because the problem in America today to a large extent, Tom, is that we don't have trust and confidence in our institutions because of the corruption on Wall Street and the greed and excess and the cronyism in Washington, D.C.

Brokaw: All right. Sen. McCain -- Sen. Obama, who do you have in mind for treasury secretary?

Obama: Well, Warren would be a pretty good choice -- Warren Buffett, and I'm pleased to have his support. But there are other folks out there. The key is making sure that the next treasury secretary understands that it's not enough just to help those at the top.

Prosperity is not just going to trickle down. We've got to help the middle class.

And we've -- you know, Sen. McCain and I have some fundamental disagreements on the economy, starting with Sen. McCain's statement earlier that he thought the fundamentals of the economy were sound.

Part of the problem here is that for many of you, wages and incomes have flat-lined. For many of you, it is getting harder and harder to save, harder and harder to retire.

And that's why, for example, on tax policy, what I want to do is provide a middle class tax cut to 95 percent of working Americans, those who are working two jobs, people who are not spending enough time with their kids, because they are struggling to make ends meet.

Sen. McCain is right that we've got to stabilize housing prices. But underlying that is loss of jobs and loss of income. That's something that the next treasury secretary is going to have to work on.

Brokaw: Sen. Obama, thank you very much.

May I remind both of you, if I can, that we're operating under rules that you signed off on and when we have a discussion, it really is to be confined within about a minute or so.

We're going to go now, Sen. McCain, to the next question from you from the hall here, and it comes from Oliver Clark, who is over here in section F.

Oliver?

Clark: Well, Senators, through this economic crisis, most of the people that I know have had a difficult time. And through this bailout package, I was wondering what it is that's going to actually help those people out.

McCain: Well, thank you, Oliver, and that's an excellent question, because as you just described it, bailout, when I believe that it's rescue, because -- because of the greed and excess in Washington and Wall Street, Main Street was paying a very heavy price, and we know that.

I left my campaign and suspended it to go back to Washington to make sure that there were additional protections for the taxpayer in the form of good oversight, in the form of taxpayers being the first to be paid back when our economy recovers -- and it will recover -- and a number of other measures.

But you know, one of the real catalysts, really the match that lit this fire was Fannie Mae and Freddie Mac. I'll bet you, you may never even have heard of them before this crisis.

But you know, they're the ones that, with the encouragement of Sen. Obama and his cronies and his friends in Washington, that went out and made all these risky loans, gave them to people that could never afford to pay back.

And you know, there were some of us that stood up two years ago and said we've got to enact legislation to fix this. We've got to stop this greed and excess.

Meanwhile, the Democrats in the Senate and some -- and some members of Congress defended what Fannie and Freddie were doing. They resisted any change.

Meanwhile, they were getting all kinds of money in campaign contributions. Sen. Obama was the second highest recipient of Fannie Mae and Freddie Mac money in history -- in history.

So this rescue package means that we will stabilize markets, we will shore up these institutions. But it's not enough. That's why we're going to have to go out into the housing market and we're going to have to buy up these bad loans and we're going to have to stabilize home values, and that way, Americans, like Alan, can realize the American dream and stay in their home.

But Fannie and Freddie were the catalysts, the match that started this forest fire. There were some of us -- there were some of us that stood up against it. There were others who took a hike.

Brokaw: Sen. Obama?

Obama: Well, Oliver, first, let me tell you what's in the rescue package for you. Right now, the credit markets are frozen up and what that means, as a practical matter, is that small businesses and some large businesses just can't get loans.

If they can't get a loan, that means that they can't make payroll. If they can't make payroll, then they may end up having to shut their doors and lay people off.

And if you imagine just one company trying to deal with that, now imagine a million companies all across the country.

So it could end up having an adverse effect on everybody, and that's why we had to take action. But we shouldn't have been there in the first place.

Now, I've got to correct a little bit of Sen. McCain's history, not surprisingly. Let's, first of all, understand that the biggest problem in this whole process was the deregulation of the financial system.

Sen. McCain, as recently as March, bragged about the fact that he is a deregulator. On the other hand, two years ago, I said that we've got a sub-prime lending crisis that has to be dealt with.

I wrote to Secretary Paulson, I wrote to Federal Reserve Chairman [Ben] Bernanke, and told them this is something we have to deal with, and nobody did anything about it.

A year ago, I went to Wall Street and said we've got to reregulate, and nothing happened.

And Sen. McCain during that period said that we should keep on deregulating because that's how the free enterprise system works.

Now, with respect to Fannie Mae, what Sen. McCain didn't mention is the fact that this bill that he talked about wasn't his own bill. He jumped on it a year after it had been introduced and it never got passed.

And I never promoted Fannie Mae. In fact, Sen. McCain's campaign chairman's firm was a lobbyist on behalf of Fannie Mae, not me.

So -- but, look, you're not interested in hearing politicians pointing fingers. What you're interested in is trying to figure out, how is this going to impact you?

This is not the end of the process; this is the beginning of the process. And that's why it's going to be so important for us to work with homeowners to make sure that they can stay in their homes.

The secretary already has the power to do that in the rescue package, but it hasn't been exercised yet. And the next president has to make sure that the next Treasury secretary is thinking about how to strengthen you as a home buyer, you as a homeowner, and not simply think about bailing out banks on Wall Street.

Brokaw: Sen. Obama, time for a discussion. I'm going to begin with you. Are you saying to Mr. Clark (ph) and to the other members of the American television audience that the American economy is going to get much worse before it gets better and they ought to be prepared for that?

Obama: No, I am confident about the American economy. But we are going to have to have some leadership from Washington that not only sets out much better regulations for the financial system.

The problem is we still have a archaic, 20th-century regulatory system for 21st-century financial markets. We're going to have to coordinate with other countries to make sure that whatever actions we take work.

But most importantly, we're going to have to help ordinary families be able to stay in their homes, make sure that they can pay their bills, deal with critical issues like health care and energy, and we're going to have to change the culture in Washington so that lobbyists and special interests aren't driving the process and your voices aren't being drowned out.

Brokaw: Sen. McCain, in all candor, do you think the economy is going to get worse before it gets better?

McCain: I think it depends on what we do. I think if we act effectively, if we stabilize the housing market -- which I believe we can, if we go out and buy up these bad loans, so that people can have a new mortgage at the new value of their home -- I think if we get rid of the cronyism and special interest influence in Washington so we can act more effectively.

My friend, I'd like you to see the letter that a group of senators and I wrote warning exactly of this crisis. Sen. Obama's name was not on that letter.

The point is -- the point is that we can fix our economy. Americans' workers are the best in the world. They're the fundamental aspect of America's economy.

They're the most innovative. They're the best -- they're most -- have best -- we're the best exporters. We're the best importers. They're most effective. They are the best workers in the world.

And we've got to give them a chance. They've got -- we've got to give them a chance to do their best again. And they are the innocent bystanders here in what is the biggest financial crisis and challenge of our time. We can do it.

Brokaw: Thank you, Sen. McCain.

We're going to continue over in Section F, as it turns out.

Sen. Obama, this is a question from you from Teresa Finch.

Teresa?

Finch: How can we trust either of you with our money when both parties got -- got us into this global economic crisis?

Obama: Well, look, I understand your frustration and your cynicism, because while you've been carrying out your responsibilities -- most of the people here, you've got a family budget. If less money is coming in, you end up making cuts. Maybe you don't go out to dinner as much. Maybe you put off buying a new car.

That's not what happens in Washington. And you're right. There is a lot of blame to go around.

But I think it's important just to remember a little bit of history. When George Bush came into office, we had surpluses. And now we have half-a-trillion-dollar deficit annually.

When George Bush came into office, our debt -- national debt was around $5 trillion. It's now over $10 trillion. We've almost doubled it.

And so while it's true that nobody's completely innocent here, we have had over the last eight years the biggest increases in deficit spending and national debt in our history. And Sen. McCain voted for four out of five of those George Bush budgets.

So here's what I would do. I'm going to spend some money on the key issues that we've got to work on.

You know, you may have seen your health care premiums go up. We've got to reform health care to help you and your budget.

We are going to have to deal with energy because we can't keep on borrowing from the Chinese and sending money to Saudi Arabia. We are mortgaging our children's future. We've got to have a different energy plan.

We've got to invest in college affordability. So we're going to have to make some investments, but we've also got to make spending cuts. And what I've proposed, you'll hear Sen. McCain say, well, he's proposing a whole bunch of new spending, but actually I'm cutting more than I'm spending so that it will be a net spending cut.

The key is whether or not we've got priorities that are working for you as opposed to those who have been dictating the policy in Washington lately, and that's mostly lobbyists and special interests. We've got to put an end to that.

Brokaw: Sen. McCain?

McCain: Well, Theresa (ph), thank you. And I can see why you feel that cynicism and mistrust, because the system in Washington is broken. And I have been a consistent reformer.

I have advocated and taken on the special interests, whether they be the big money people by reaching across the aisle and working with Sen. [Russ] Feingold [D-Wisconsin] on campaign finance reform, whether it being a variety of other issues, working with Sen. Lieberman on trying to address climate change.

I have a clear record of bipartisanship. The situation today cries out for bipartisanship. Sen. Obama has never taken on his leaders of his party on a single issue. And we need to reform.

And so let's look at our records as well as our rhetoric. That's really part of your mistrust here. And now I suggest that maybe you go to some of these organizations that are the watchdogs of what we do, like the Citizens Against Government Waste or the National Taxpayers Union or these other organizations that watch us all the time.

I don't expect you to watch every vote. And you know what you'll find? This is the most liberal big-spending record in the United States Senate. I have fought against excessive spending and outrages. I have fought to reduce the earmarks and eliminate them.

Do you know that Sen. Obama has voted for -- is proposing $860 billion of new spending now? New spending. Do you know that he voted for every increase in spending that I saw come across the floor of the United States Senate while we were working to eliminate these pork barrel earmarks?

He voted for nearly a billion dollars in pork barrel earmark projects, including, by the way, $3 million for an overhead projector at a planetarium in Chicago, Illinois. My friends, do we need to spend that kind of money?

I think you have to look at my record and you have to look at his. Then you have to look at our proposals for our economy, not $860 billion in new spending, but for the kinds of reforms that keep people in their jobs, get middle-income Americans working again, and getting our economy moving again.

You're going to be examining our proposals tonight and in the future, and energy independence is a way to do that, is one of them. And drilling offshore and nuclear power are two vital elements of that. And I've been supporting those and I know how to fix this economy, and eliminate our dependence on foreign oil, and stop sending $700 billion a year overseas.

Brokaw: We've run out of time. We have this one-minute discussion period going on here.

There are new economic realities out there that everyone in this hall and across this country understands that there are going to have to be some choices made. Health policies, energy policies, and entitlement reform, what are going to be your priorities in what order? Which of those will be your highest priority your first year in office and which will follow in sequence?

Sen. McCain?

McCain: The three priorities were health...

Brokaw: The three -- health care, energy, and entitlement reform: Social Security and Medicare. In what order would you put them in terms of priorities?

McCain: I think you can work on all three at once, Tom. I think it's very important that reform our entitlement programs.

My friends, we are not going to be able to provide the same benefit for present-day workers that we are going -- that present-day retirees have today. We're going to have to sit down across the table, Republican and Democrat, as we did in 1983 between Ronald Reagan and Tip O'Neill.

I know how to do that. I have a clear record of reaching across the aisle, whether it be Joe Lieberman or Russ Feingold or Ted Kennedy or others. That's my clear record.

We can work on nuclear power plants. Build a whole bunch of them, create millions of new jobs. We have to have all of the above, alternative fuels, wind, tide, solar, natural gas, clean coal technology. All of these things we can do as Americans and we can take on this mission and we can overcome it.

My friends, some of this $700 billion ends up in the hands of terrorist organizations.

As far as health care is concerned, obviously, everyone is struggling to make sure that they can afford their premiums and that they can have affordable and available health care. That's the next issue.

But we can do them all at once. There's no -- and we have to do them all at once. All three you mentioned are compelling national security requirements.

Brokaw: I'm trying to play by the rules that you all established. One minute for discussion.

Sen. Obama, if you would give us your list of priorities, there are some real questions about whether everything can be done at once.

Obama: We're going to have to prioritize, just like a family has to prioritize. Now, I've listed the things that I think have to be at the top of the list.

Energy we have to deal with today, because you're paying $3.80 here in Nashville for gasoline, and it could go up. And it's a strain on your family budget, but it's also bad for our national security, because countries like Russia and Venezuela and, you know, in some cases, countries like Iran, are benefiting from higher oil prices.

So we've got to deal with that right away. That's why I've called for an investment of $15 billion a year over 10 years. Our goal should be, in 10 year's time, we are free of dependence on Middle Eastern oil.

And we can do it. Now, when JFK said we're going to the Moon in 10 years, nobody was sure how to do it, but we understood that, if the American people make a decision to do something, it gets done. So that would be priority number one.

Health care is priority number two, because that broken health care system is bad not only for families, but it's making our businesses less competitive.

And, number three, we've got to deal with education so that our young people are competitive in a global economy.

But just one point I want to make, Tom. Sen. McCain mentioned looking at our records. We do need to look at our records.

Sen. McCain likes to talk about earmarks a lot. And that's important. I want to go line by line through every item in the federal budget and eliminate programs that don't work and make sure that those that do work, work better and cheaper.

But understand this: We also have to look at where some of our tax revenues are going. So when Sen. McCain proposes a $300 billion tax cut, a continuation not only of the Bush tax cuts, but an additional $200 billion that he's going to give to big corporations, including big oil companies, $4 billion worth, that's money out of the system.

And so we've got to prioritize both our spending side and our tax policies to make sure that they're working for you. That's what I'm going to do as president of the United States.

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