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Presidential Debate Transcript: Romney Wins First Presidential Debate

President Barack Obama and former Massachusetts Governor Mitt Romney faced off in their highly anticipated first presidential debate on Wednesday night in Denver. For 90 minutes, Obama and Romney debated domestic policy, and spoke much on health care, taxes, the economy, and the candidates' lofty but probably unrealistic plans for fixing all of them in no time. This debate was the first real chance for Romney to make a dent in the polls, which indicate that he is in a bad way against the president, as he trails in the big swing of Ohio, Virginia, Florida, and Pennsylvania. This, despite the fact that the unemployment rate currently stands at 8.1%. I live-blogged it all from a bar while playing PolicyMic's official presidential debate drinking game. (Unfortunately, due to an oversight, the live blog is no longer available.)

As a former constituent of Mitt Romney's in Massachusetts, it pains me to say that he won tongiht's debate. That's not to say that Obama's performance was poor (it wasn't), but Romney seemed confident, and his responses were fluid. Obama's responses to the questions were tempered and deliberate, a la his Democratic National Convention speech. They lacked passion and flair, and he seemed to be of the mindset that he had to defend himself (which he did have to) rather than go on offense. That would make sense, given that it was his record that was in question tonight. Romney played offense much better than Obama played defense. For Obama to be successful in these debates, he needs to lay out just how bad of a shape the country was in when he took office. 

The truth is, you can never learn too much about the policy prescriptions of candidates in presidential debates. They are too short and too cursory. They are geared more toward ascertaining a general idea of where the candidates stand, rather than understanding the details of their policies. Presidential debates are about style and personality, and Obama should have flourished tonight, given his reputation for his cool persona, but he did not. Somehow, Romney managed to come across as the cool one, while spouting lines geared toward appeasing that 47% he knocked in that now-infamous video taken at a private fundraiser.

FULL DEBATE TRANSCRIPT

21:01:40: JIM LEHRER: Good evening from the Magness Arena at the University of Denver in Denver, Colorado. I'm Jim Lehrer of the "PBS NewsHour," and I welcome you to the first of the 2012 presidential debates between President Barack Obama, the Democratic nominee, and former Massachusetts Governor Mitt Romney, the Republican nominee.

This debate and the next three -- two presidential, one vice presidential -- are sponsored by the Commission on Presidential Debates. Tonight's 90 minutes will be about domestic issues and will follow a format designed by the commission. There will be six roughly 15-minute segments with two-minute answers for the first question, then open discussion for the remainder of each segment.

Thousands of people offered suggestions on segment subjects or questions via the Internet and other means, but I made the final selections. And for the record, they were not submitted for approval to the commission or the candidates.

The segments as I announced in advance will be three on the economy and one each on health care, the role of government and governing, with an emphasis throughout on differences, specifics and choices. Both candidates will also have two-minute closing statements.

The audience here in the hall has promised to remain silent -- no cheers, applause, boos, hisses, among other noisy distracting things, so we may all concentrate on what the candidates have to say. There is a noise exception right now, though, as we welcome President Obama and Governor Romney.

(APPLAUSE)

Gentlemen, welcome to you both. Let's start the economy, segment one, and let's begin with jobs. What are the major differences between the two of you about how you would go about creating new jobs?

You have two minutes. Each of you have two minutes to start. A coin toss has determined, Mr. President, you go first.

21:04:24: PRESIDENT BARACK OBAMA: Well, thank you very much, Jim, for this opportunity. I want to thank Governor Romney and the University of Denver for your hospitality.

There are a lot of points I want to make tonight, but the most important one is that 20 years ago I became the luckiest man on Earth because Michelle Obama agreed to marry me.

And so I just want to wish, Sweetie, you happy anniversary and let you know that a year from now we will not be celebrating it in front of 40 million people.

(LAUGHTER)

You know, four years ago we went through the worst financial crisis since the Great Depression. Millions of jobs were lost, the auto industry was on the brink of collapse. The financial system had frozen up.

And because of the resilience and the determination of the American people, we've begun to fight our way back. Over the last 30 months, we've seen 5 million jobs in the private sector created. The auto industry has come roaring back. And housing has begun to rise.

But we all know that we've still got a lot of work to do. And so the question here tonight is not where we've been, but where we're going.

Governor Romney has a perspective that says if we cut taxes, skewed towards the wealthy, and roll back regulations, that we'll be better off. I've got a different view.

I think we've got to invest in education and training. I think it's important for us to develop new sources of energy here in America, that we change our tax code to make sure that we're helping small businesses and companies that are investing here in the United States, that we take some of the money that we're saving as we wind down two wars to rebuild America and that we reduce our deficit in a balanced way that allows us to make these critical investments.

Now, it ultimately is going to be up to the voters -- to you -- which path we should take. Are we going to double on top-down economic policies that helped to get us into this mess or do we embrace a new economic patriotism that says America does best when the middle class does best? And I'm looking forward to having that debate.

21: 06:31: LEHRER: Governor Romney, two minutes.

21:06:32: FORMER GOV. MITT ROMNEY: Thank you, Jim. It's an honor to be here with you, and I appreciate the chance to be with the president. I'm pleased to be at the University of Denver, appreciate their welcome, and also the Presidential Commission on these debates.

And congratulations to you, Mr. President, on your anniversary. I'm sure this was the most romantic place you could imagine, here -- here with me. So I...

(LAUGHTER)

Congratulations.

This is obviously a very tender topic. I've had the occasion over the last couple of years of meeting people across the country. I was in Dayton, Ohio, and a woman grabbed my arm and she said, "I've been out of work since May. Can you help me?"

Ann yesterday was at a rally in Denver and a woman came up to her with a baby in her arms and said, "Ann, my husband has had four jobs in three years, part-time jobs. He's lost his most recent job and we've now just lost our home. Can you help us?"

And the answer is, yes, we can help, but it's going to take a different path. Not the one we've been on, not the one the president describes as a top-down, cut taxes for the rich. That's not what I'm going to do.

My plan has five basic parts. One, get us energy independent, North American energy independent. That creates about 4 million jobs.

Number two, open up more trade, particularly in Latin America. Crack down on China, if and when they cheat.

Number three, make sure our people have the skills they need to succeed and the best schools in the world. We're far away from that now.

Number four, get to us a balanced budget.

Number five, champion small business. It's small business that creates the jobs in America, and over the last four years, small business people have decided that America may not be the place to open a new business because new business startups are down to a 30-year low.

Now, I'm concerned that the path that we're on has just been unsuccessful. The president has a view very similar to the view he had when he ran four years, that a bigger government, spending more, taxing more, regulating more -- if you will, trickle-down government -- would work.

That's not the right answer for America. I'll restore the vitality that gets America working again. Thank you.

21:08:40: LEHRER: Mr. President, please respond directly to what the governor just said about trickle-down -- his trick-down approach, as he said yours is.

21:08:50: OBAMA: Well, let me talk specifically about what I think we need to do. First, we've got to improve our education system and we've made enormous progress drawing on ideas both from Democrats and Republicans that are already starting to show gains in some of the toughest to deal with schools. We've got a program called Race to the Top that has prompted reforms in 46 states around the country, raising standards, improving how we train teachers.

So now I want to hire another 100,000 new math and science teachers, and create 2 million more slots in our community colleges so that people can get trained for the jobs that are out there right now. And I want to make sure that we keep tuition low for our young people.

When it comes to our tax code, Governor Romney and I both agree that our corporate tax rate is too high, so I want to lower it, particularly for manufacturing, taking it down to 25 percent. But I also want to close those loopholes that are giving incentives for companies that are shipping jobs overseas. I want to provide tax breaks for companies that are investing here in the United States.

On energy, Governor Romney and I, we both agree that we've got to boost American energy production, and oil and natural gas production are higher than they've been in years. But I also believe that we've got to look at the energy sources of the future, like wind and solar and biofuels, and make those investments.

So all of this is possible. Now, in order for us to do it, we do have to close our deficit, and one of the things I'm sure we'll be discussing tonight is, how do we deal with our tax code? And how do we make sure that we are reducing spending in a responsible way, but also, how do we have enough revenue to make those investments?

And this is where there's a difference, because Governor Romney's central economic plan calls for a $5 trillion tax cut -- on top of the extension of the Bush tax cuts -- that's another trillion dollars -- and $2 trillion in additional military spending that the military hasn't asked for. That's $8 trillion. How we pay for that, reduce the deficit, and make the investments that we need to make, without dumping those costs onto middle-class Americans, I think is one of the central questions of this campaign.

21:11:03: LEHRER: Both of you have spoken about a lot of different things, and we're going to try to get through them in as specific a way as we possibly can.

But, first, Governor Romney, do you have a question that you'd like to ask the president directly about something he just said?

21:11:03: ROMNEY: Well, sure. I'd like to clear up the record and go through it piece by piece.

First of all, I don't have a $5 trillion tax cut. I don't have a tax cut of a scale that you're talking about. My view is that we ought to provide tax relief to people in the middle class. But I'm not going to reduce the share of taxes paid by high-income people. High-income people are doing just fine in this economy. They'll do fine whether you're president or I am.

The people who are having the hard time right now are middle- income Americans. Under the president's policies, middle-income Americans have been buried. They're just being crushed. Middle- income Americans have seen their income come down by $4,300. This is a -- this is a tax in and of itself. I'll call it the economy tax. It's been crushing.

At the same time, gasoline prices have doubled under the president. Electric rates are up. Food prices are up. Health care costs have gone up by $2,500 a family. Middle-income families are being crushed.

And so the question is how to get them going again. And I've described it. It's energy and trade, the right kind of training programs, balancing our budget and helping small business. Those are the -- the cornerstones of my plan.

But the president mentioned a couple of other ideas I'll just note. First, education. I agree: Education is key, particularly the future of our economy. But our training programs right now, we've got 47 of them, housed in the federal government, reporting to eight different agencies. Overhead is overwhelming. We've got to get those dollars back to the states and go to the workers so they can create their own pathways to get in the training they need for jobs that will really help them.

The second area, taxation, we agree, we ought to bring the tax rates down. And I do, both for corporations and for individuals. But in order for us not to lose revenue, have the government run out of money, I also lower deductions and credits and exemptions, so that we keep taking in the same money when you also account for growth.

The third area, energy. Energy is critical, and the president pointed out correctly that production of oil and gas in the U.S. is up. But not due to his policies. In spite of his policies.

Mr. President, all of the increase in natural gas and oil has happened on private land, not on government land. On government land, your administration has cut the number of permits and licenses in half. If I'm president, I'll double them, and also get the -- the oil from offshore and Alaska. And I'll bring that pipeline in from Canada.

And, by the way, I like coal. I'm going to make sure we can continue to burn clean coal. People in the coal industry feel like it's getting crushed by your policies. I want to get America and North America energy independent so we can create those jobs.

And finally, with regards to that tax cut, look, I'm not looking to cut massive taxes and to reduce the -- the revenues going to the government. My -- my number-one principal is, there will be no tax cut that adds to the deficit. I want to underline that: no tax cut that adds to the deficit.

But I do want to reduce the burden being paid by middle-income Americans. And I -- and to do that, that also means I cannot reduce the burden paid by high-income Americans. So any -- any language to the contrary is simply not accurate. LEHRER: Mr. President?

21:14:22: OBAMA: Well, I think -- let's talk about taxes, because I think it's instructive. Now, four years ago, when I stood on this stage, I said that I would cut taxes for middle-class families. And that's exactly what I did. We cut taxes for middle-class families by about $3,600.

And the reason is, because I believe that we do best when the middle class is doing well. And by giving them those tax cuts, they had a little more money in their pocket, and so maybe they can buy a new car. They are certainly in a better position to weather the extraordinary recession that we went through. They can buy a computer for their kid who's going off to college, which means they're spending more money, businesses have more customers, businesses make more profits, and then hire more workers.

Now, Governor Romney's proposal that he has been promoting for 18 months calls for a $5 trillion tax cut, on top of $2 trillion of additional spending for our military. And he is saying that he is going to pay for it by closing loopholes and deductions. The problem is that he's been asked over 100 times how you would close those deductions and loopholes, and he hasn't been able to identify them.

But I'm going to make an important point here, Jim.

21:16:34: LEHRER: All right.

21:16:36: OBAMA: When you add up all the loopholes and deductions that upper-income individuals can -- are currently taking advantage of, you take those all away, you don't come close to paying for $5 trillion in tax cuts and $2 trillion in additional military spending.

OBAMA: And that's why independent studies looking at this said the only way to meet Governor Romney's pledge of not reducing the deficit or -- or -- or not adding to the deficit is by burdening middle-class families. The average middle-class family with children would pay about $2,000 more.

Now, that's not my analysis. That's the analysis of economists who have looked at this. And -- and that kind of top -- top-down economics, where folks at the top are doing well, so the average person making $3 million is getting a $250,000 tax break, while middle-class families are burdened further, that's not what I believe is a recipe for economic growth.

21:16:37: LEHRER: All right. What is the difference? Let's just stay on taxes.

(CROSSTALK)

LEHRER: Just -- let's just stay on taxes for (inaudible).

(CROSSTALK)

LEHRER: What is the difference...

21:16:42: ROMNEY: Well, but -- but virtually -- virtually everything he just said about my tax plan is inaccurate.

21:16:43: LEHRER: All right.

21:16:44: ROMNEY: So if the tax plan he described were a tax plan I was asked to support, I'd say absolutely not. I'm not looking for a $5 trillion tax cut. What I've said is I won't put in place a tax cut that adds to the deficit. That's part one. So there's no economist that can say Mitt Romney's tax plan adds $5 trillion if I say I will not add to the deficit with my tax plan.

Number two, I will not reduce the share paid by high-income individuals. I know that you and your running mate keep saying that and I know it's a popular thing to say with a lot of people, but it's just not the case. Look, I've got five boys. I'm used to people saying something that's not always true, but just keep on repeating it and ultimately hoping I'll believe it. But that -- that is not the case. All right? I will not reduce the taxes paid by high-income Americans.

And number three, I will not under any circumstances raise taxes on middle-income families. I will lower taxes on middle-income families. Now, you cite a study. There are six other studies that looked at the study you describe and say it's completely wrong. I saw a study that came out today that said you're going to raise taxes by $3,000 to $4,000 on middle-income families.

There are all these studies out there. But let's get at the bottom line. That is, I want to bring down rates. I want to bring the rates down, at the same time lower deductions and exemptions and credits and so forth, so we keep getting the revenue we need. And you'd think, well, then why lower the rates.

And the reason is because small business pays that individual rate; 54 percent of America's workers work in businesses that are taxed not at the corporate tax rate, but at the individual tax rate. And if we lower that rate, they will be able to hire more people. For me, this is about jobs. This is about getting jobs for the American people.

(CROSSTALK)

21:18:30: LEHRER: That's where we started. Yeah.

Do you challenge what the governor just said about his own plan?

21:18:34: OBAMA: Well, for 18 months he's been running on this tax plan. And now, five weeks before the election, he's saying that his big, bold idea is, "Never mind."

And the fact is that if you are lowering the rates the way you described, Governor, then it is not possible to come up with enough deductions and loopholes that only affect high-income individuals to avoid either raising the deficit or burdening the middle class. It's -- it's math. It's arithmetic.

Now, Governor Romney and I do share a deep interest in encouraging small-business growth. So at the same time that my tax plan has already lowered taxes for 98 percent of families, I also lowered taxes for small businesses 18 times. And what I want to do is continue the tax rates -- the tax cuts that we put into place for small businesses and families.

But I have said that for incomes over $250,000 a year, that we should go back to the rates that we had when Bill Clinton was president, when we created 23 million new jobs, went from deficit to surplus, and created a whole lot of millionaires to boot.

And the reason this is important is because by doing that, we cannot only reduce the deficit, we cannot only encourage job growth through small businesses, but we're also able to make the investments that are necessary in education or in energy.

And we do have a difference, though, when it comes to definitions of small business. Under -- under my plan, 97 percent of small businesses would not see their income taxes go up. Governor Romney says, well, those top 3 percent, they're the job creators, they'd be burdened.

But under Governor Romney's definition, there are a whole bunch of millionaires and billionaires who are small businesses. Donald Trump is a small business. Now, I know Donald Trump doesn't like to think of himself as small anything, but -- but that's how you define small businesses if you're getting business income.

And that kind of approach, I believe, will not grow our economy, because the only way to pay for it without either burdening the middle class or blowing up our deficit is to make drastic cuts in things like education, making sure that we are continuing to invest in basic science and research, all the things that are helping America grow. And I think that would be a mistake.

21:21:01: LEHRER: All right.

21:21:03: ROMNEY: Jim, let me just come back on that -- on that point, which is these...

21:21:04: LEHRER: Just for the -- just for record...

(CROSSTALK)

21:21:07: ROMNEY: ... the small businesses we're talking about...

21:21:09: LEHRER: Excuse me. Excuse me. Just so everybody understands, we're way over our first 15 minutes.

21:21:10: ROMNEY: It's fun, isn't it?

21:21:11: LEHRER: It's OK, it's great. No problem. Well, you all don't have -- you don't have a problem, I don't have a problem, because we're still on the economy. We're going to come back to taxes. I want move on to the deficit and a lot of other things, too.

OK, but go ahead, sir.

21:21:38: ROMNEY: You bet. Well, President, you're -- Mr. President, you're absolutely right, which is that, with regards to 97 percent of the businesses are not -- not taxed at the 35 percent tax rate, they're taxed at a lower rate. But those businesses that are in the last 3 percent of businesses happen to employ half -- half of all the people who work in small business. Those are the businesses that employ one-quarter of all the workers in America. And your plan is to take their tax rate from 35 percent to 40 percent.

Now, and -- and I've talked to a guy who has a very small business. He's in the electronics business in -- in St. Louis. He has four employees. He said he and his son calculated how much they pay in taxes, federal income tax, federal payroll tax, state income tax, state sales tax, state property tax, gasoline tax. It added up to well over 50 percent of what they earned. And your plan is to take the tax rate on successful small businesses from 35 percent to 40 percent. The National Federation of Independent Businesses has said that will cost 700,000 jobs.

I don't want to cost jobs. My priority is jobs. And so what I do is I bring down the tax rates, lower deductions and exemptions, the same idea behind Bowles-Simpson, by the way, get the rates down, lower deductions and exemptions, to create more jobs, because there's nothing better for getting us to a balanced budget than having more people working, earning more money, paying more taxes. That's by far the most effective and efficient way to get this budget balanced.

21:22:58: OBAMA: Jim, I -- you may want to move onto another topic, but I -- I would just say this to the American people. If you believe that we can cut taxes by $5 trillion and add $2 trillion in additional spending that the military is not asking for, $7 trillion -- just to give you a sense, over 10 years, that's more than our entire defense budget -- and you think that by closing loopholes and deductions for the well-to-do, somehow you will not end up picking up the tab, then Governor Romney's plan may work for you.

But I think math, common sense, and our history shows us that's not a recipe for job growth. Look, we've tried this. We've tried both approaches. The approach that Governor Romney's talking about is the same sales pitch that was made in 2001 and 2003, and we ended up with the slowest job growth in 50 years, we ended up moving from surplus to deficits, and it all culminated in the worst financial crisis since the Great Depression.

Bill Clinton tried the approach that I'm talking about. We created 23 million new jobs. We went from deficit to surplus. And businesses did very well. So, in some ways, we've got some data on which approach is more likely to create jobs and opportunity for Americans and I believe that the economy works best when middle-class families are getting tax breaks so that they've got some money in their pockets, and those of us who have done extraordinarily well because of this magnificent country that we live in, that we can afford to do a little bit more to make sure we're not blowing up the deficit.

21:24:40: ROMNEY: Jim, the president began this segment, so I think I get the last word.

(CROSSTALK)

21:24:42: LEHRER: Well, you're going to get the first word in the next segment.

21:24:48: ROMNEY: All right. Well, but he gets the first word of that segment. I get the last word (inaudible) I hope. Let me just make this comment.

(CROSSTALK)

21:24:50: ROMNEY: I think first of all, let me -- let me repeat -- let me repeat what I said. I'm not in favor of a $5 trillion tax cut. That's not my plan. My plan is not to put in place any tax cut that will add to the deficit. That's point one.

So you may keep referring to it as a $5 trillion tax cut, but that's not my plan.

Number two, let's look at history. My plan is not like anything that's been tried before. My plan is to bring down rates, but also bring down deductions and exemptions and credits at the same time so the revenue stays in, but that we bring down rates to get more people working.

My priority is putting people back to work in America. They're suffering in this country. And we talk about evidence. Look at the evidence of the last four years. It's absolutely extraordinary. We've got 23 million people out of work or stopped looking for work in this country. It's just -- it's -- we've got -- when the president took office, 32 million people on food stamps; 47 million on food stamps today; economic growth this year slower than last year, and last year slower than the year before.

Going forward with the status quo is not going to cut it for the American people who are struggling today.

21:26:01: LEHRER: All right. Let's talk -- we're still on the economy. This is, theoretically now, a second segment still on the economy, and specifically on what to do about the federal deficit, the federal debt.

And the question, you each have two minutes on this, and Governor Romney, you -- you go first because the president went first on segment one. And the question is this, what are the differences between the two of you as to how you would go about tackling the deficit problem in this country?

21:26:31: ROMNEY: Good. I'm glad you raised that, and it's a -- it's a critical issue. I think it's not just an economic issue, I think it's a moral issue. I think it's, frankly, not moral for my generation to keep spending massively more than we take in, knowing those burdens are going to be passed on to the next generation and they're going to be paying the interest and the principal all their lives.

And the amount of debt we're adding, at a trillion a year, is simply not moral.

So how do we deal with it? Well, mathematically, there are three ways that you can cut a deficit. One, of course, is to raise taxes. Number two is to cut spending. And number is to grow the economy, because if more people work in a growing economy, they're paying taxes, and you can get the job done that way.

The presidents would -- president would prefer raising taxes. I understand. The problem with raising taxes is that it slows down the rate of growth. And you could never quite get the job done. I want to lower spending and encourage economic growth at the same time.

What things would I cut from spending? Well, first of all, I will eliminate all programs by this test, if they don't pass it: Is the program so critical it's worth borrowing money from China to pay for it? And if not, I'll get rid of it. Obamacare's on my list.

I apologize, Mr. President. I use that term with all respect, by the way.

OBAMA: I like it.

ROMNEY: Good. OK, good. So I'll get rid of that.

I'm sorry, Jim, I'm going to stop the subsidy to PBS. I'm going to stop other things. I like PBS, I love Big Bird. Actually like you, too. But I'm not going to -- I'm not going to keep on spending money on things to borrow money from China to pay for. That's number one.

Number two, I'll take programs that are currently good programs but I think could be run more efficiently at the state level and send them to the state.

Number three, I'll make government more efficient and to cut back the number of employees, combine some agencies and departments. My cutbacks will be done through attrition, by the way.

This is the approach we have to take to get America to a balanced budget.

The president said he'd cut the deficit in half. Unfortunately, he doubled it. Trillion-dollar deficits for the last four years. The president's put it in place as much public debt -- almost as much debt held by the public as al prior presidents combined.

21:28:35: LEHRER: Mr. President, two minutes.

21:28:37: OBAMA: When I walked into the Oval Office, I had more than a trillion-dollar deficit greeting me. And we know where it came from: two wars that were paid for on a credit card; two tax cuts that were not paid for; and a whole bunch of programs that were not paid for; and then a massive economic crisis.

And despite that, what we've said is, yes, we had to take some initial emergency measures to make sure we didn't slip into a Great Depression, but what we've also said is, let's make sure that we are cutting out those things that are not helping us grow.

So 77 government programs, everything from aircrafts that the Air Force had ordered but weren't working very well, 18 government -- 18 government programs for education that were well-intentioned, not weren't helping kids learn, we went after medical fraud in Medicare and Medicaid very aggressively, more aggressively than ever before, and have saved tens of billions of dollars, $50 billion of waste taken out of the system.

And I worked with Democrats and Republicans to cut a trillion dollars out of our discretionary domestic budget. That's the largest cut in the discretionary domestic budget since Dwight Eisenhower.

Now, we all know that we've got to do more. And so I've put forward a specific $4 trillion deficit reduction plan. It's on a website. You can look at all the numbers, what cuts we make and what revenue we raise.

And the way we do it is $2.50 for every cut, we ask for $1 of additional revenue, paid for, as I indicated earlier, by asking those of us who have done very well in this country to contribute a little bit more to reduce the deficit. Governor Romney earlier mentioned the Bowles-Simpson commission. Well, that's how the commission -- bipartisan commission that talked about how we should move forward suggested we have to do it, in a balanced way with some revenue and some spending cuts. And this is a major difference that Governor Romney and I have.

Let -- let me just finish their point, because you're looking for contrast. You know, when Governor Romney stood on a stage with other Republican candidates for the nomination and he was asked, would you take $10 of spending cuts for just $1 of revenue? And he said no.

Now, if you take such an unbalanced approach, then that means you are going to be gutting our investments in schools and education. It means that Governor Romney...

(CROSSTALK)

21:31:15: OBAMA: ... talked about Medicaid and how we could send it back to the states, but effectively this means a 30 percent cut in the primary program we help for seniors who are in nursing homes, for kids who are with disabilities.

21:31:22: LEHRER: Mr. President, I'm sorry.

21:31:26: OBAMA: And -- and that is not a right strategy for us to move forward.

21:31:28: LEHRER: Way over the two minutes.

21:31:28: OBAMA: Sorry.

21:31:34: LEHRER: Governor, what about Simpson-Bowles? Do you support Simpson-Bowles?

21:31:34: ROMNEY: Simpson-Bowles, the president should have grabbed that.

21:31:35: LEHRER: No, I mean, do you support Simpson-Bowles?

21:31:36: ROMNEY: I have my own plan. It's not the same as Simpson- Bowles. But in my view, the president should have grabbed it. If you wanted to make some adjustments to it, take it, go to Congress, fight for it.

21:31:48: OBAMA: That's what we've done, made some adjustments to it, and we're putting it forward before Congress right now, a $4 trillion plan...

ROMNEY: But you've been -- but you've been president four years...

(CROSSTALK)

21:31:54: ROMNEY: You've been president four years. You said you'd cut the deficit in half. It's now four years later. We still have trillion-dollar deficits. The CBO says we'll have a trillion-dollar deficit each of the next four years. If you're re-elected, we'll get to a trillion-dollar debt.

I mean, you have said before you'd cut the deficit in half. And this -- I love this idea of $4 trillion in cuts. You found $4 trillion of ways to reduce or to get closer to a balanced budget, except we still show trillion-dollar deficits every year. That doesn't get the job done.

Let me come back and say, why is it that I don't want to raise taxes? Why don't I want to raise taxes on people? And actually, you said it back in 2010. You said, "Look, I'm going to extend the tax policies that we have now; I'm not going to raise taxes on anyone, because when the economy is growing slow like this, when we're in recession, you shouldn't raise taxes on anyone."

Well, the economy is still growing slow. As a matter of fact, it's growing much more slowly now than when you made that statement. And so if you believe the same thing, you just don't want to raise taxes on people. And the reality is it's not just wealthy people -- you mentioned Donald Trump. It's not just Donald Trump you're taxing. It's all those businesses that employ one-quarter of the workers in America; these small businesses that are taxed as individuals.

You raise taxes and you kill jobs. That's why the National Federation of Independent Businesses said your plan will kill 700,000 jobs. I don't want to kill jobs in this environment.

I'll make one more point.

(CROSSTALK)

21:33:21: LEHRER: (inaudible) answer the taxes thing for a moment.

21:33:22: ROMNEY: OK.

21:33:23: LEHRER: Mr. President?

21:33:24: OBAMA: Well, we've had this discussion before.

21:33:26: LEHRER: About the idea that in order to reduce the deficit, there has to be revenue in addition to cuts.

21:33:30: OBAMA: There has to be revenue in addition to cuts. Now, Governor Romney has ruled out revenue. He's ruled out revenue.

(CROSSTALK)

21:33:31: ROMNEY: Absolutely. (CROSSTALK)

21:33:30: ROMNEY: Look, the revenue I get is by more people working, getting higher pay, paying more taxes. That's how we get growth and how we balance the budget. But the idea of taxing people more, putting more people out of work, you'll never get there. You'll never balance the budget by raising taxes.

Spain -- Spain spends 42 percent of their total economy on government. We're now spending 42 percent of our economy on government. I don't want to go down the path to Spain. I want to go down the path of growth that puts Americans to work with more money coming in because they're working.

21:34:11: LEHRER: But -- but Mr. President, you're saying in order to -- to get the job done, it's got to be balanced. You've got to have...

(CROSSTALK)

21:34:16: OBAMA: If -- if we're serious, we've got to take a balanced, responsible approach. And by the way, this is not just when it comes to individual taxes. Let's talk about corporate taxes.

Now, I've identified areas where we can, right away, make a change that I believe would actually help the economy.

The oil industry gets $4 billion a year in corporate welfare. Basically, they get deductions that those small businesses that Governor Romney refers to, they don't get.

Now, does anybody think that ExxonMobil needs some extra money, when they're making money every time you go to the pump? Why wouldn't we want to eliminate that? Why wouldn't we eliminate tax breaks for corporate jets? My attitude is, if you got a corporate jet, you can probably afford to pay full freight, not get a special break for it.

When it comes to corporate taxes, Governor Romney has said he wants to, in a revenue neutral way, close loopholes, deductions -- he hasn't identified which ones they are -- but that thereby bring down the corporate rate.

Well, I want to do the same thing, but I've actually identified how we can do that. And part of the way to do it is to not give tax breaks to companies that are shipping jobs overseas.

Right now, you can actually take a deduction for moving a plant overseas. I think most Americans would say that doesn't make sense. And all that raises revenue.

And so if we take a balanced approach, what that then allows us to do is also to help young people, the way we already have during my administration, make sure that they can afford to go to college.

It means that the teacher that I met in Las Vegas, a wonderful young lady, who describes to me -- she's got 42 kids in her class. The first two weeks she's got them, some of them sitting on the floor until finally they get reassigned. They're using text books that are 10 years old.

That is not a recipe for growth. That's not how America was built. And so budgets reflect choices.

Ultimately, we're going to have to make some decisions. And if we're asking for no revenue, then that means that we've got to get rid of a whole bunch of stuff.

And the magnitude of the tax cuts that you're talking about, Governor, would end up resulting in severe hardship for people, but more importantly, would not help us grow.

As I indicated before, when you talk about shifting Medicaid to states, we're talking about potentially a 30 -- a 30 percent cut in Medicaid over time.

Now, you know, that may not seem like a big deal when it just is, you know, numbers on a sheet of paper, but if we're talking about a family who's got an autistic kid and is depending on that Medicaid, that's a big problem.

And governors are creative. There's no doubt about it. But they're not creative enough to make up for 30 percent of revenue on something like Medicaid. What ends up happening is some people end up not getting help.

21:37:19: ROMNEY: Jim, let's -- we've gone on a lot of topics there, and so it's going to take a minute to go from Medicaid to schools...

21:37:22: LEHRER: Come back to...

(CROSSTALK)

21:37:25: ROMNEY: ... to oil, to tax breaks, then companies going overseas. So let's go through them one by one.

First of all, the Department of Energy has said the tax break for oil companies is $2.8 billion a year. And it's actually an accounting treatment, as you know, that's been in place for a hundred years. Now...

OBAMA: It's time to end it.

ROMNEY: And in one year, you provided $90 billion in breaks to the green energy world.

Now, I like green energy as well, but that's about 50 years' worth of what oil and gas receives. And you say Exxon and Mobil. Actually, this $2.8 billion goes largely to small companies, to drilling operators and so forth.

But, you know, if we get that tax rate from 35 percent down to 25 percent, why that $2.8 billion is on the table. Of course it's on the table. That's probably not going to survive you get that rate down to 25 percent.

But don't forget, you put $90 billion, like 50 years' worth of breaks, into -- into solar and wind, to Solyndra and Fisker and Tester and Ener1. I mean, I had a friend who said you don't just pick the winners and losers, you pick the losers, all right? So this -- this is not -- this is not the kind of policy you want to have if you want to get America energy secure.

The second topic, which is you said you get a deduction for taking a plant overseas. Look, I've been in business for 25 years. I have no idea what you're talking about. I maybe need to get a new accountant.

LEHRER: Let's...

ROMNEY: But -- but the idea that you get a break for shipping jobs overseas is simply not the case.

(CROSSTALK)

ROMNEY: What we do have right now is a setting where I'd like to bring money from overseas back to this country.

And, finally, Medicaid to states? I'm not quite sure where that came in, except this, which is, I would like to take the Medicaid dollars that go to states and say to a state, you're going to get what you got last year, plus inflation, plus 1 percent, and then you're going to manage your care for your poor in the way you think best.

And I remember, as a governor, when this idea was floated by Tommy Thompson, the governors -- Republican and Democrats -- said, please let us do that. We can care for our own poor in so much better and more effective a way than having the federal government tell us how to care for our poor.

So -- so let's state -- one of the magnificent things about this country is the whole idea that states are the laboratories of democracy. Don't have the federal government tell everybody what kind of training programs they have to have and what kind of Medicaid they have to have. Let states do this.

And, by the way, if a state gets in trouble, well, we can step in and see if we can find a way to help them.

21:39:49: LEHRER: Let's go.

21:39:48: ROMNEY: But -- but the right -- the right approach is one which relies on the brilliance of our people and states, not the federal government.

21:39:52: LEHRER: (inaudible) and we're going on -- still on the economy, on another -- but another part of it...

OBAMA: OK.

21:39:56: LEHRER: All right? All right. This is segment three, the economy. Entitlements. First -- first answer goes to you, two minutes, Mr. President. Do you see a major difference between the two of you on Social Security?

21:40:15: OBAMA: You know, I suspect that, on Social Security, we've got a somewhat similar position. Social Security is structurally sound. It's going to have to be tweaked the way it was by Ronald Reagan and Speaker -- Democratic Speaker Tip O'Neill. But it is -- the basic structure is sound.

But -- but I want to talk about the values behind Social Security and Medicare, and then talk about Medicare, because that's the big driver of our deficits right now.

You know, my grandmother -- some of you know -- helped to raise me. My grandparents did. My grandfather died a while back. My grandmother died three days before I was elected president. And she was fiercely independent. She worked her way up, only had a high school education, started as a secretary, ended up being the vice president of a local bank. And she ended up living alone by choice.

And the reason she could be independent was because of Social Security and Medicare. She had worked all her life, put in this money, and understood that there was a basic guarantee, a floor under which she could not go.

And that's the perspective I bring when I think about what's called entitlements. You know, the name itself implies some sense of dependency on the part of these folks. These are folks who've worked hard, like my grandmother, and there are millions of people out there who are counting on this.

So my approach is to say, how do we strengthen the system over the long term? And in Medicare, what we did was we said, we are going to have to bring down the costs if we're going to deal with our long-term deficits, but to do that, let's look where some of the money's going.

$716 billion we were able to save from the Medicare program by no longer overpaying insurance companies by making sure that we weren't overpaying providers. And using that money, we were actually able to lower prescription drug costs for seniors by an average of $600, and we were also able to make a -- make a significant dent in providing them the kind of preventive care that will ultimately save money through the -- throughout the system.

So the way for us to deal with Medicare in particular is to lower health care costs. When it comes to Social Security, as I said, you don't need a major structural change in order to make sure that Social Security is there for the future.

21:42:38: LEHRER: We'll follow up on this.

First, Governor Romney, you have two minutes on Social Security and entitlements.

21:42:41: ROMNEY: Well, Jim, our seniors depend on these programs, and I know anytime we talk about entitlements, people become concerned that something's going to happen that's going to change their life for the worse.

And the answer is neither the president nor I are proposing any changes for any current retirees or near retirees, either to Social Security or Medicare. So if you're 60 or around 60 or older, you don't need to listen any further.

But for younger people, we need to talk about what changes are going to be occurring. Oh, I just thought about one. And that is, in fact, I was wrong when I said the president isn't proposing any changes for current retirees. In fact he is on Medicare. On Social Security he's not.

But on Medicare, for current retirees, he's cutting $716 billion from the program. Now, he says by not overpaying hospitals and providers. Actually just going to them and saying, "We're going to reduce the rates you get paid across the board, everybody's going to get a lower rate." That's not just going after places where there's abuse. That's saying we're cutting the rates. Some 15 percent of hospitals and nursing homes say they won't take anymore Medicare patients under that scenario.

We also have 50 percent of doctors who say they won't take more Medicare patients.

This -- we have 4 million people on Medicare Advantage that will lose Medicare Advantage because of those $716 billion in cuts. I can't understand how you can cut Medicare $716 billion for current recipients of Medicare.

Now, you point out, well, we're putting some back. We're going to give a better prescription program. That's $1 -- that's $1 for every $15 you've cut. They're smart enough to know that's not a good trade.

I want to take that $716 billion you've cut and put it back into Medicare. By the way, we can include a prescription program if we need to improve it.

But the idea of cutting $716 billion from Medicare to be able to balance the additional cost of Obamacare is, in my opinion, a mistake.

And with regards to young people coming along, I've got proposals to make sure Medicare and Social Security are there for them without any question.

21:44:43: LEHRER: Mr. President?

21:44:44: OBAMA: First of all, I think it's important for Governor Romney to present this plan that he says will only affect folks in the future.

And the essence of the plan is that you would turn Medicare into a voucher program. It's called premium support, but it's understood to be a voucher program. His running mate...

21:45:05: LEHRER: And you don't support that?

21:45:07: OBAMA: I don't. And let me explain why.

21:45:08: ROMNEY: Again, that's for future...

21:45:09: OBAMA: I understand.

21:45:10: ROMNEY: ... people, right, not for current retirees.

PART 2

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