Bob Schieffer (Moderator) – Good evening and welcome to the third and last Presidential Debate of 2008 sponsored by The Commission of Presidential Debates, I’m Bob Schieffer of CBS News. The rules tonight are simple. The subject is domestic policy. I will divide the next hour and a half into 9 minute segments. I will ask a question at the beginning of each segment. Each candidate will then have two minutes to respond, and then we’ll have a discussion. I’ll encourage them to have follow-up questions of each other, if they do not, I will. The audience behind me has promised to be quiet, except at this moment when we welcome Barack Obama and John McCain.

(applause, candidates greet each other)

Bob Schieffer – Gentlemen, welcome. By now, we’ve heard all the talking points. So let’s try to tell the people tonight some things that they, they haven’t heard. Let’s get to it. Another very bad day on Wall Street, as both of you know. Both of you proposed new plans, this week, to address the, uh, economic crisis. Senator McCain, you proposed a $52 billion plan, and it includes new tax cuts on capital gains, tax breaks for seniors, write-offs for stock losses, among other things. Senator Obama, you proposed $60 billion in tax cuts for middle income and lower income people, more tax breaks to create jobs, new spending for public works projects to create jobs. I will ask both of you why your plan is better than his. Senator McCain, you go first.

John McCain – Well, let me say, Bob, thank you, and thanks to Hofstra. And by the way, our beloved Nancy Reagan is in the hospital tonight, so our thoughts and prayers are going with you. It’s good to see you again Senator Obama. Uh, Americans are hurting right now, and their angry. They’re hurting and their angry. Their innocent victims of greed and excess on Wall Street and as well as Washington D.C., and their angry. And they have every reason to be angry. And they wants this country to go in a new direction. And there are elements of my proposal you just outlined, which I won’t repeat. But, we also have to have a short term fix, in my view, and long term fixes. Let me just talk to you about one of the short term fixes. The catalyst for this housing crisis was the Fannie and Freddie Mae that caused the subprime lending situation, that now caused the housing market in America to collapse. I am convinced that until we reverse this continued decline in home ownership, and put a floor under it, and so that people have, not only the hope and belief they can stay in their homes and realize the American dream, but that value will come up. Now, we have allocated $750 billion. Let’s take 300 of that billion and go in and buy those home loan mortgages, and negotiate with those people in their homes, 11 million homes or more, so that they can afford to pay the mortgage to stay in their home. Now I know the criticism of this, well what about the citizen that stayed in their homes, that, that uh, uh, that paid their mortgage payments. It doesn’t help that person in their home if the, if the next door neighbor’s house is abandoned. And so, we’ve got to reverse this. We ought to put the home owners first. And I am disappointed that Secretary Paulson and others have not made that their first priority.

Bob Schieffer – Aright, Senator Obama.

Barack Obama – Well, uh, first of all I wanna thank Hof-, Hofstra University, and uh, the people of New York for hosting us tonight, ‘nd it’s wonderful to join Senator McCain again, ‘nd thank you Bob. Uh, I think everybody understands, at this point, that we, uh, are experiencing the worst financial crisis since The Great Depression. And, uh, the financial rescue plan that Senator McCain I have supported, uh, is a important first step. Uh, and I pushed for some core principles, making sure the tax payers can get their money back, uh, if their putting money up, making sure that CEOs are not enriching themselves, uh, through this process. Uh, and I think that it’s gonna take some time, uh, to work itself out. But, what we haven’t yet seen, is a rescue package for the middle class, because the fundamentals of the economy were weak even before, uh, this latest crisis. So, I proposed four…specific things that I think can help. Number one, let’s focus on jobs. I wanna end the tax breaks for companies that are shipping jobs oversees and provide a tax credit for every company that’s creating a job right here in America. Number two, let’s help families right away, uh, by providing them a tax cut, a middle class tax cut for people making less than $200,000, and let’s allow them to access their IRA accounts without penalty if they’re experiencing a crisis. Uh, now, Senator McCain I agree, uh, with your idea that we’ve gotta help home owners. That’s why we included, in the financial package, uh, a proposal to get, uh, home owners in a position were they can renegotiate their mortgages. I disagree with Senator McCain in how to do it, because the way Senator McCain has designed his plan, it could be a giveaway to banks, it, for buying full price for mortgages that, now, are worth a lot less, and we don’t wanna waste tax payer money. And we’ve gotta get the financial, uh, s-, uh, package working much quicker than its been working. Last point I wanna make though, uh, we’ve got some long term challenges in this economy that have to be dealt with. We’ve gotta fix our energy policy that’s giving our wealth away. We’ve got to fix our health care system, and we’ve gotta invest in our education system for every young person to be able to learn.

Schieffer – Alright, eh, would you like to ask him a question?

McCain – Uh, no! I would like to mention that a couple of days ago Senator Obama was out in Ohio and he had an encounter with a guy who’s a plumber, name is Joe Wurzelberger (Wurzelbacher), uh, Joe wants to buy the business that he’s been in for all these years. Worked ten, twelve hours a day, and he wanted to buy the business, but he looked at your tax plan and he saw that he was gonna pay much higher taxes. You were gonna put him in a higher tax bracket, which was gonna increase his taxes, which was going to cause him to not be able to employ people, which, Joe was trying to realize the American dream. Now, Senator Obama talks about the very, very rich. Joe, I wanna tell you, I’ll not only help, that, you buy that business that you worked your whole life for, and be able, and I’ll keep your taxes low, and I’ll provide available and affordable healthcare for you and your employees, and I will not have, I will not stand for a, a tax increase on small business income. Fifty percent of small business income tax is, taxes are paid by small businesses, that’s 16 million jobs in America, and what you wanna do, to Joe the plumber and millions more like him, is have their taxes increased and not be able to realize The American Dream of owning their own business.

Schieffer – Is that what you wanna do?

Obama – It’s not what I want to do.

McCain – It is.

Obama - The, he’s been watching some ads of, uh, Senator McCain’s. Let me tell you what I’m actually gonna do. Um, uh, I think tax policy is a major difference between Senator McCain and myself. Uh, and we both wanna cut taxes. The difference is who are we wanna cut taxes for. Uh, now Senator McCain, the centerpiece of his economic proposal is to provide $200 billion in additional tax breaks to some of the wealthiest corporations in America. Uh, ExxonMobile and other oil companies, for example, would get an additional $4 billion in tax breaks. What I’ve said is, I wanna provide a tax cut for 95% of working Americans, 95%. If you make more, i’, if you make less than a quarter million dollars then your will not see your income tax go up, your capital gains tax go up, your payroll tax, not one dime. And 95% of working families, 95% of ya out there will get a tax cut. In fact, uh, i’, independent studies have looked at our respective plans and have concluded that I provide three times the amount of tax relief to middle class families than Senator McCain does. Now, the conversation that I had with Joe the plumber, uh, what I essentially said to him was, 5 years ago, when you weren’t in a position to buy your business, you needed a tax cut then. And what I wanna do is make sure that the plumber, the nurse, the fire fighter, the teacher, the young entrepreneur who doesn’t yet have money, I wanna give them a tax break now. And that requires us to make some important choices. Last point I’ll make about small businesses, not only, uh, do 98% of small business make less than $250,000, but I also wanna give them additional tax breaks because they are the drivers of the economy, they produce the most jobs.

McCain – You know what Senator Obama ended up his conversation with Joe the plumber, “we need to spread the wealth around”. In other words, we’re gonna take Joe’s money, give it to Senator Obama and let him spread the wealth around. I want Joe the plumber to spread that wealth around.

Obama -(Obama shaking his head) uh, i-

McCain - You told him you want to spread the wealth around. The whole premise behind Senator Obama’s plans are class warfare, “Let’s spread the wealth around”. I want small businesses, and by the way, the small businesses that we’re talking about would receive an increase in their taxes. Right now, who, why would you want to increase anybody’s taxes right now? Why would you wanna do that? Anyone? Anyone in America, when we have such a tough time, when these small business people like Joe the plumber are gonna create jobs? Unless, you take that money from him and spread the wealth around.

Obama – can, uh, i-, Joe, i-, i- , if I can…

McCain – We’re not gonna do that in my administration.

Obama – i-, i-, if I can answer the question. Uh, number one, uh, I wanna cut taxes for 95% of Americans. Now, it is true that my friend and supporter Warren Buffett, for example, could afford….to pay…a little more in taxes.

McCain – We’re talking about Joe the plumber. (laughing)

Obama – In order, in order to give, in order to give additional tax cuts to Joe the plumber before he was at the point where he could make $250,000. I thin’, ExxonMobile, which made $12 billion, record profits over the last several quarters, they can afford to pay a little more so that ordinary families, who are hurting out there, they, their trying to figure out how their gonna afford food, i-, h-, how their gonna save for their kids college education, they need a break. So, the’, i-, i-, look, n-, nobody likes taxes. I would prefer, uh, that none of us had to play (pay) taxes, including myself. But, ultimately we’ve got to pay for the core investments that make this economy strong and somebody’s gotta do it.

McCain – Nobody like taxes, let’s not raise anybody’s taxes, ok?.

Obama – Well, I don’t mind paying a little more.