First Presidential Debate at the University of Denver 10/3/12

Author: Pres. Barack Obama / Gov. Mitt Romney / Jim Lehrer

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 2012presidential 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 formatdesigned by the commission. There will be six roughly 15-minute segments, withtwo-minute answers for the first question, then open discussion for theremainder of each segment.

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

The segments, as I announced in advance, will be three on the economy andone each on health care, the role of government, and governing, with anemphasis throughout on differences, specifics and choices. Both candidates willalso 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 allconcentrate on what the candidates have to say. There is a noise exceptionright now, though, as we welcome President Obama and Governor Romney. (Cheers,applause.)

Gentlemen, welcome to you both.

Let's start the economy, segment one. And let's begin with jobs. What arethe major differences between the two of you about how you would go aboutcreating new jobs? You have two minutes -- each of you havetwo minutes to start. The coin toss has determined, Mr. President, you go first.

PRESIDENT BARACK OBAMA: Well, thank you very much, Jim, forthis opportunity. I want to thank Governor Romney and the University of Denverfor your hospitality.

There are a lot of points that I want to make tonight, but the mostimportant one is that 20 years ago I became the luckiest man on earth becauseMichelle Obama agreed to marry me. (Laughter.) And soI just want to wish, Sweetie, you happy anniversary and let you know that ayear 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 sincethe Great Depression. Millions of jobs were lost. The auto industry was on thebrink of collapse. The financial system had frozen up. And because of theresilience and the determination of the American people, we've begun to fightour way back.

Over the last 30 months, we've seen 5 million jobs in the private sectorcreated. 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 questionhere tonight is not where we've been but where we're going. Governor Romney hasa perspective that says if we cut taxes, skewed towards the wealthy, and rollback regulations that we'll be better off.

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

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

MR. LEHRER: Governor Romney, two minutes.

MR. ROMNEY: Thank you, Jim. It's an honor to be here withyou, and I appreciate the chance to be with the president. I am pleased to beat the University of Denver, appreciatetheir welcome and also the presidential commission on these debates.

And congratulations to you, Mr. President, on youranniversary. I'm sure this was the most romantic place you could imaginehere -- here with me, so I -- (laughter) -- congratulations.

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

Ann yesterday was a rally in Denver, and a woman came up to her with a babyin 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 ourhome. 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 Americanenergy independent. That creates about four million jobs. Number two, open upmore trade, particularly in Latin America;crack down on Chinaif and when they cheat. Number three, make sure ourpeople have the skills they need to succeed and the best schools in the world.We're far away from that now. Number four, get us to abalanced budget. Number five, champion small business.

It's small business that creates the jobs in America. And over the last fouryears small-business people have decided that America may not be the place toopen a new business, because new business startups are down to a 30-year low. Iknow what it takes to get small business growing again, to hire people.

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 yearsago, that a bigger government, spending more, taxing more, regulating more --if you will, trickle-down government would work. That's not the right answerfor America.I'll restore the vitality that gets America working again.

Thank you.

MR. LEHRER: Mr. President, please respond directly to whatthe governor just said about trickle-down -- his trickle-down approach. He's --as he said yours is.

PRESIDENT OBAMA: Well, let me talk specifically about whatI think we need to do.

First, we've got to improve our education system. And we've made enormousprogress drawing on ideas both from Democrats and Republicans that are alreadystarting to show gains in some of the toughest-to- deal-with schools. We've gota program called Race to the Top that has prompted reforms in 46 states aroundthe country, raising standards, improving how we train teachers. So now I wantto hire another hundred thousand new math and science teachers and create 2million more slots in our community colleges so that people can get trained forthe jobs that are out there right now. And I want to make sure that we keeptuition low for our young people.

When it comes to our tax code, Governor Romney and I both agree that ourcorporate tax rate is too high. So I want to lower it, particularly formanufacturing, taking it down to 25 percent. But I also want to close thoseloopholes that are giving incentives for companies that are shipping jobsoverseas. I want to provide tax breaks for companies that are investing here inthe United States.

On energy, Governor Romney and I, we both agree that we've got to boostAmerican 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 source 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 toclose our deficit, and one of the things I'm sure we'll be discussing tonightis, how do we deal with our tax code, and how do we make sure that we arereducing spending in a responsible way, but also how do we have enough revenueto make those investments? And this is where there's a difference becauseGovernor Romney's central economic plan calls for a $5 trillion tax cut, on topof the extension of the Bush tax cuts, so that's another $2 trillion, and $2trillion 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 theinvestments that we need to make without dumping those costs on themiddle-class Americans I think is one of the central questions of thiscampaign.

MR. LEHRER: Both of you have spoken about a lot ofdifferent things, and we're going to try to get through them in as specific away as we possibly can.

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

MR. ROMNEY: Well, sure. I'd like to clear up the record andgo 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 weought to provide tax relief to people in the middle class. But I'm not going toreduce the share of taxes paid by high- income people. High-income people aredoing just fine in this economy. They'll do fine whether you're president or Iam.

The people who are having the hard time right now are middle- incomeAmericans. Under the president's policies, middle-income Americans have beenburied. They're -- they're just being crushed. Middle-income Americans haveseen their income come down by $4,300. This is a -- this is a tax in and ofitself. I'll call it the economy tax. It's been crushing. The same time,gasoline prices have doubled under the president, electric rates are up, foodprices 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 getthem going again, and I've described it. It's energyand trade, the right kind of training programs, balancing our budget andhelping small business. Those are the -- the cornerstones of my plan.

But the president mentioned a couple of other ideas, and I'll just note:first, education. I agree, education is key,particularly the future of our economy. But our training programs right now, wegot 47 of them housed in the federal government, reporting to eight differentagencies. Overhead is overwhelming. We got to get those dollars back to thestates and go to the workers so they can create their own pathways to gettingthe 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 tolose revenue, have the government run out of money, I also lower deductions andcredits and exemptions so that we keep taking in the same money when you alsoaccount for growth.

The third area: energy. Energy is critical, and the president pointed outcorrectly that production of oil and gas in the U.S. is up. Butnot due to his policies. In spite of his policies.Mr. President, all of the increase in natural gas and oil has happened onprivate land, not on government land. On government land, your administrationhas cut the number of permits and license in half. If I'm president, I'lldouble them. And also get the -- the oil from offshore and Alaska. And I'll bring that pipeline in fromCanada.

And by the way, I like coal. I'm going to make sure we continue to burnclean coal. People in the coal industry feel like it'sgetting 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 cutmassive taxes and to reduce the -- the revenues going to the government. My --my number one principle is there'll be no tax cut that adds to the deficit.

I want to underline that -- no tax cut that adds to the deficit. But I dowant to reduce the burden being paid by middle-income Americans. And I -- andto do that that also means that I cannot reduce the burden paid by high-incomeAmericans. So any -- any language to the contrary is simply not accurate.

MR. LEHRER: Mr. President.

PRESIDENT OBAMA: Well, I think -- let's talk about taxesbecause I think it's instructive. Now, four years ago when I stood on thisstage I said that I would cut taxes for middle-class families. And that'sexactly what I did. We cut taxes for middle-class families by about $3,600. Andthe reason is because I believe we do best when the middle class is doing well.

And by giving them those tax cuts, they had a little more money in theirpocket and so maybe they can buy a new car. They are certainly in a betterposition to weather the extraordinary recession that we went through. They canbuy a computer for their kid who's going off to college, which means they'respending more money, businesses have more customers, businessesmake more profits and then hire more workers.

Now, Governor Romney's proposal that he has been promoting for 18 monthscalls for a $5 trillion tax cut on top of $2 trillion of additional spendingfor our military. And he is saying that he is going to pay for it by closingloopholes and deductions. The problem is that he's been asked a -- over ahundred times how you would close those deductions and loopholes and he hasn'tbeen able to identify them.

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

MR. LEHRER: All right.

PRESIDENT OBAMA: When you add up all the loopholes anddeductions that upper income individuals can -- are currently taking advantageof -- if you take those all away -- you don't come close to paying for $5trillion in tax cuts and $2 trillion in additional military spending. Andthat's why independent studies looking at this said the only way to meetGovernor Romney's pledge of not reducing the deficit -- or -- or -- or notadding 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 lookedat this. And -- and that kind of top -- top-down economics, where folks at thetop are doing well so the average person making 3 million bucks is getting a$250,000 tax break while middle- class families are burdened further, that'snot what I believe is a recipe for economic growth.

MR. LEHRER: All right. What is the difference?

MR. ROMNEY: Well --

MR. LEHRER: Let's just stay on taxes for --

MR. ROMNEY: But I -- but I -- right, right.

MR. LEHRER: OK. Yeah, just -- let's just stay on taxes fora moment.

MR. ROMNEY: Yeah. Well, but -- but --

MR. LEHRER: What is the difference?

MR. ROMNEY: -- virtually every -- virtually everything hejust said about my tax plan is inaccurate.

MR. LEHRER: All right, go --

MR. ROMNEY: So -- so if -- if the tax plan he describedwere a tax plan I was asked to support, I'd say absolutely not. I'm not lookingfor a $5 trillion tax cut. What I've said is I won't put in place a tax cutthat adds to the deficit. That's part one. So there's no economist can say MittRomney's tax plan adds 5 trillion (dollars) if I say I will not add to thedeficit with my tax plan.

Number two, I will not reduce the share paid by high-income individuals. I-- I know that you and your running mate keep saying that, and I know it's apopular things to say with a lot of people, but it's just not the case. Look, Igot five boys. I'm used to people saying something that's not always true, butjust keep on repeating it and ultimately hoping I'll believe it -- (scatteredlaughter) -- but that -- that is not the case, all right? I will not reduce thetaxes paid by high-income Americans.

And number three, I will not, under any circumstances, raise taxes onmiddle-income families. I will lower taxes on middle-income families. Now, youcite a study. There are six other studies that looked at the study you describeand say it's completely wrong. I saw a study that came out today that saidyou're going to raise taxes by 3(,000 dollars) to$4,000 on -- on middle-income families. There are all these studies out there.

But let's get to the bottom line. That is, I want to bring down rates. Iwant to bring down the rates down, at the same time lower deductions andexemptions and credits and so forth so we keep getting the revenue we need.

And you think, well, then why lower the rates? And the reason is becausesmall business pays that individual rate. Fifty-four percent of America'sworkers work in businesses that are taxed not at the corporate tax rate but atthe individual tax rate. And if we lower that rate, they will be able to hiremore people.

For me, this is about jobs.

MR. LEHRER: All right. That's where we started.

MR. ROMNEY: This is about getting jobs for the Americanpeople.

MR. LEHRER: Yeah.

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

PRESIDENT OBAMA: Well, for 18 months he's been running onthis tax plan. And now, five weeks before the election, he's saying that hisbig, bold idea is “never mind.” And the fact is that if you are lowering therates the way you describe, Governor, then it is not possible to come up withenough deductions and loopholes that only affect high-income individuals toavoid 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 encouragingsmall-business growth. So at the same time that my tax plan has already loweredtaxes for 98 percent of families, I also lowered taxes for small businesses 18times. And what I want to do is continue the tax rates -- the tax cuts that weput into place for small businesses and families.

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

And the reason this is important is because by doing that, we can not onlyreduce the deficit, we can not only encourage job growth through smallbusinesses, but we're also able to make the investments that are necessary ineducation or in energy.

And we do have a difference, though, when it comes to definitions of smallbusiness. Now, under -- under my plan, 97 percent of small businesses would notsee 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 ofmillionaires and billionaires who are small businesses. Donald Trump is a smallbusiness. And I know Donald Trump doesn't like to think of himself as smallanything, but -- but that's how you define small businesses if you're gettingbusiness income. And that kind of approach, I believe, will not grow oureconomy because the only way to pay for it without either burdening the middle classor 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, allthe things that are helping America grow. And I think that would be a mistake.

MR. LEHRER: All right.

MR. ROMNEY: Jim, let me just come back on that -- on thatpoint.

MR. LEHRER: Just for the -- just for the record --

MR. ROMNEY: These small businesses we're talking about --

MR. LEHRER: Excuse me. Just so everybody understands --

MR. ROMNEY: Yeah.

MR. LEHRER: -- we're way over our first 15 minutes.

MR. ROMNEY: It's fun, isn't it?

MR. LEHRER: It's OK. It's great.

PRESIDENT OBAMA: That's OK.

MR. LEHRER: No problem. No, you don't have -- you don'thave a problem, I don't have a problem, because we're still on the economy, butwe're going to come back to taxes and we're going to move on to the deficit anda lot of other things, too.

OK, but go ahead, sir.

MR. ROMNEY: You bet.

Well, President, you're -- Mr. President, you're absolutely right, which isthat with regards to 97 percent of the businesses are not -- not taxed at the35 percent tax rate, they're taxed at a lower rate. But those businesses thatare in the last 3 percent of businesses happen to employ half -- half -- of allof the people who work in small business. Those are the businesses that employone quarter of all the workers in America. And your plan is take their tax ratefrom 35 percent to 40 percent.

Now, I talked to a guy who has a very small business. He's in the electronicsbusiness in -- in St. Louis. He has four employees.

He said he and his son calculated how much they pay in taxes. Federal incometax, federal payroll tax, state income tax, state sales tax, state propertytax, 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 35percent to 40 percent. The National Federation of Independent Businesses hassaid that will cost 700,000 jobs. I don't want to cost jobs. My priority isjobs. And so what I do is I bring down the tax rates, lower deductions andexemptions -- the same idea behind Bowles-Simpson, by the way. Get the ratesdown, lower deductions and exemptions to create more jobs, because there'snothing better for getting us to a balanced budget than having more peopleworking, earning more money, paying -- (chuckles) -- more taxes. That's by farthe most effective and efficient way to get this budget balanced.

PRESIDENT OBAMA: Jim, I -- you may want to move on to anothertopic, but I would just say this to the American people. If you believe that wecan cut taxes by $5 trillion and add $2 trillion in additional spending thatthe military is not asking for -- $7 trillion, just to give you a sense, over10 years that's more than our entire defense budget -- and you think that byclosing loopholes and deductions for the well-to-do, somehow you will not endup 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 recipefor job growth.

Look, we've tried this -- we've tried both approaches. The approach thatGovernor Romney's talking about is the same sales pitch that was made in 2001and 2003. And we ended up with the slowest job growth in 50 years. We ended upmoving from surplus to deficits. And it all culminated in the worst financialcrisis since the Great Depression.

Bill Clinton tried the approach that I'm talking about. We created 23million new jobs. We went from deficit to surplus, and businesses did verywell.

So in some ways, we've got some data on which approach is more likely tocreate jobs and opportunity for Americans, and I believe that the economy worksbest when middle-class families are getting tax breaks so that they've got somemoney in their pockets and those of us who have done extraordinarily wellbecause of this magnificent country that we live in, that we can afford to do alittle bit more to make sure we're not blowing up the deficit.

MR. LEHRER: OK. (Inaudible) --

MR. ROMNEY: Jim, the president began this segment, so Ithink I get the last word, so I'm going to take it. Allright? (Chuckles.)

MR. LEHRER: Well, you're going to get the first word in thenext segment.

MR. ROMNEY: Well, but -- but he gets the first word of thatsegment. I get the last word of that segment, I hope. Let me just make thiscomment.

PRESIDENT OBAMA: (Chuckles.) He can -- you can have it. Hecan --

MR. ROMNEY: First of all --

MR. LEHRER: That's not how it works.

MR. ROMNEY: Let me -- let me repeat -- let me repeat what Isaid -- (inaudible). I'm not in favor of a $5 trillion tax cut. That's not myplan. 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, butthat's not my plan.

PRESIDENT OBAMA: OK.

MR. ROMNEY: Number two, let's look at history. My plan isnot like anything that's been tried before. My plan is to bring down rates butalso bring down deductions and exemptions and credits at the same time so therevenue stays in, but that we bring down rates to get more people working. Mypriority is putting people back to work in America. They're suffering in thiscountry. And we talk about evidence -- look at the evidence of the last fouryears. It's absolutely extraordinary. We've got 23 million people out of workor stop looking for work in this country.

MR. LEHRER: All right.

MR. ROMNEY: It's just -- it's -- we've got -- we got --when the president took office, 32 million people on food stamps; 47 million onfood stamps today. Economic growth this year slower than lastyear, and last year slower than the year before. Going forward with thestatus quo is not going to cut it for the American people who are strugglingtoday.

MR. LEHRER: All right. Let's talk -- we're still on theeconomy. This is, theoretically now, a second segment still on the economy, andspecifically on what do about the federal deficit, the federal debt. And thequestion -- you each have two minutes on this -- and, Governor Romney you gofirst because the president went first on segment one. And the question isthis: What are the differences between the two of you as to how you would goabout tackling the deficit problem in this country?

MR. ROMNEY: Well, good. I'm glad you raised that. And it'sa -- it's a critical issue. I think it's not just an economic issue. I thinkit's a moral issue. I think it's, frankly, not moral for my generation to keepspending massively more than we take in, knowing those burdens are going to bepassed on to the next generation. And they're going to be paying the interestand the principle all their lives. And the amount of debt we're adding, at atrillion a year, is simply not moral.

So how do we deal with it? Well, mathematically there are -- there are threeways that you can cut a deficit. One, of course, is to raise taxes. Number twois to cut spending. And number three is to grow the economy because if morepeople work in a growing economy they're paying taxes and you can get the jobdone 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 youcould never quite get the job done. I want to lower spending and encourageeconomic growth at the same time.

What things would I cut from spending? Well, first of all, I will eliminateall programs by this test -- if they don't pass it: Is the program so criticalit's worth borrowing money from China to pay for it? And if not, I'll get ridof it. “Obamacare” is on my list. I apologize, Mr. President. I use that termwith all respect.

PRESIDENT OBAMA: I like it.

MR. ROMNEY: Good. OK, good. (Laughter.) 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. I actually likeyou too. But I'm not going to -- I'm not going to keep on spending money onthings to borrow money from China to pay for it. That's number one.

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

Number three, I'll make government more efficient, and to cut back thenumber of employees, combine some agencies and departments. My cutbacks will bedone 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. Thepresident's put it in place as much public debt -- almost as much debt held byby the public as all prior presidents combined.

MR. LEHRER: Mr. President. twominutes.

PRESIDENT OBAMA: When I walked in the Oval Office, I hadmore than a trillion dollar deficit greeting me, and we know where it camefrom. 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 werenot paid for. And then a massive economic crisis.

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

So, 77 government programs -- everything from aircrafts that the Air Forcehad ordered but weren't working very well. Eighteen government-- 18 government programs for education that were well- intentioned but weren'thelping kids learn. We went after medical fraud in Medicare and Medicaid veryaggressively -- more aggressively than ever before, and have saved tens ofbillions of dollars. Fifty billion dollars of waste taken outof the system.

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

Now, we all know that we've got to do more. And so I've put forward aspecific $4 trillion deficit-reduction plan.

It's on a website. You can look at all the numbers, what cuts we make andwhat revenue we raise.

And the way we do it is $2.50 for every cut, we ask for a dollar ofadditional revenue, paid for, as I indicated earlier, by asking those of us whohave done very well in this country to contribute a little bit more to reducethe deficit.

And Governor Romney earlier mentioned the Bowles-Simpson commission. Well,that's how the commission -- bipartisan commission that talked about how weshould move forward suggested we have to do it -- in a balanced way with somerevenue and some spending cuts. And this is a major difference that GovernorRomney and I have.

Let -- let me just finish this point because you're looking for contrast.You know, when Governor Romney stood on a stage with other Republicancandidates for the nomination, and he was asked, would you take $10 of spendingcuts for just $1 of revenue, and he said no. Now, if you take such anunbalanced approach, then that means you are going to be gutting ourinvestments in schools and education. It means that -- Governor Romney talkedabout Medicaid and how we could send it back to the states, but effectivelythis means a 30 percent cut in the primary program we help for seniors who arein nursing homes, for kids who are with disabilities --

MR. LEHRER: Mr. President, I'm sorry --

PRESIDENT OBAMA: And that is not a right strategy for us tomove forward.

MR. LEHRER: Way over the two minutes.

PRESIDENT OBAMA: Sorry.

MR. LEHRER: Governor, what about Simpson-Bowles. Will yousupport Simpson-Bowles?

MR. ROMNEY: Simpson-Bowles, the president should havegrabbed that.

MR. LEHRER: No, I mean do you support Simpson-Bowles?

MR. ROMNEY: I have my own plan. It's not the same asSimpson- Bowles. But in my view, the president should have grabbed it. If youwanted to make some adjustments to it, take it, go to Congress, fight for it.

PRESIDENT OBAMA: That's what we've done, made someadjustments to it; and we're putting it forward before Congress right now, a $4trillion plan, (a balanced ?) --

MR. ROMNEY: But you've been -- but you've been presidentfour years. You've been president four years. You said you'd cut the deficit inhalf. 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 fouryears. If you're re-elected, we'll get to a trillion-dollar debt. You have saidbefore you'd cut the deficit in half. And this four -- I love this idea of 4trillion (dollars) in cuts. You've found $4 trillion of ways to reduce or toget closer to a balanced budget, except we still show trillion dollar deficitsevery year. That doesn't get the job done.

Let me come back and say, why is that I don't want to raise taxes? Why don'tI want to raise taxes on people? And actually, you said it back in 2010. Yousaid, look, I'm going to extend the tax policies that we have. Now, I'm notgoing to raise taxes on anyone because when the economy's growing slow likethis, 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 growingmuch more slowly now than when you made that statement. And so if you believethe same thing, you just don't want to raise taxes on people. And the realityis it's not just wealthy people -- you mentioned Donald Trump -- it's not justDonald Trump you're taxing; it's all those businesses that employ one-quarterof the workers in America. These small businesses that aretaxed as individuals. You raise taxes and you kill jobs. That's why theNational Federation of Independent Businesses said your plan will kill 700,000jobs. I don't want to kill jobs in this environment.

Let me make one more point. And that's -- and that --

MR. LEHRER: Let's let him answer the taxes thing for amoment, OK?

MR. ROMNEY: OK.

MR. LEHRER: Mr. President.

PRESIDENT OBAMA: Well, we've had this discussion before.

MR. LEHRER: No, about the idea that in order to reduce thedeficit there has to be revenue in addition to cuts.

PRESIDENT OBAMA: There has to be revenue in addition tocuts. Now, Governor Romney has ruled out revenue. He's -- he's ruled outrevenue.

MR. LEHRER: That's true, right?

MR. ROMNEY: Absolutely.

PRESIDENT OBAMA: OK, so --

MR. LEHRER: Completely?

MR. ROMNEY: I -- look, the revenue I get is by more peopleworking, getting higher pay, paying more taxes. That's how we get growth andhow we balance the budget. But the idea of taxing people more, putting morepeople out of work -- you'll never get there. You never balance the budget byraising taxes.

Spain -- Spain spends 42 percent of their total economy on government. We'renow 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 ofgrowth that puts Americans to work, with more money coming in because they'reworking.

MR. LEHRER: Yeah.

But Mr. President, you're saying in order to get it -- the job done, it'sgot to be balanced. You've got to have --

PRESIDENT OBAMA: If we're serious, we've got to take abalanced, responsible approach. And by the way, this is not just when it comesto 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-- 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 moneywhen they're making money every time you go to the pump? Why wouldn't we wantto eliminate that?

Why wouldn't we eliminate tax breaks for corporate jets? My attitude is ifyou got a corporate jet, you can probably afford to pay full freight, not get aspecial break for it.

When it comes to corporate taxes, Governor Romney has said he wants to, in arevenue-neutral way, close loopholes, deductions -- he hasn't identified whichones they are -- but thereby bring down the corporate rate. Well, I want to dothe 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 areshipping jobs overseas. Right now you can actually take a deduction for movinga plant overseas. I think most Americans would say that doesn't make sense. Andall that raises revenue.

And so if we take a balanced approach, what that then allows us to do isalso 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 thatI met in Las Vegas, wonderful young lady, who describes to me -- she's got 42kids in her class.

The first two weeks, she's got them -- some of them sitting on the flooruntil finally they get reassigned. They're using textbooks that are 10 yearsold. 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 somedecisions. And if we're asking for no revenue, then that means that we've gotto get rid of a whole bunch of stuff, and the magnitude of the tax cuts thatyou're talking about, Governor, would end up resulting in severe hardship forpeople, 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 -- a 30 -- a 30 percent cut in Medicaid overtime. Now, you know, that may not seem like a big deal when it just is -- youknow, numbers on a sheet of paper, but if we're talking about a family who'sgot 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 creativeenough to make up for 30 percent of revenue on something like Medicaid. Whatends up happening is some people end up not getting help.

MR. ROMNEY: Jim, let's -- we -- we've gone on a lot oftopics there, and -- so I've got to take -- it's going to take a minute to gofrom Medicaid to schools to --

PRESIDENT OBAMA: (Inaudible.)

MR. LEHRER: Come back to Medicaid, here, yeah, yeah, right.

MR. ROMNEY: -- oil to tax breaks and companies overseas. Solet's go through them one by one. First of all, the Department of Energy hassaid the tax break for oil companies is $2.8 billion a year. And it's actuallyan accounting treatment, as you know, that's been in place for a hundred years.Now --

PRESIDENT OBAMA: It's time to end it.

MR. ROMNEY: And -- and in one year, you provided $90billion 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 sayExxon 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'sprobably not going to survive, you get that rate downto 25 percent.

But -- but don't forget, you put $90 billion -- like 50 years worth ofbreaks -- into solar and wind, to -- to Solyndra and Fisker and Tesla andEner1. I mean, I -- I had a friend who said, you don't just pick the winnersand losers; you pick the losers. All right? So -- sothis is not -- this is not the kind of policy you want to have if you want toget America energy-secure.

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

MR. LEHRER: Let's --

MR. ROMNEY: But the -- the idea that you get a break forshipping jobs overseas is simply not the case.

MR. LEHRER: Let's have --

MR. ROMNEY: What we do have right now is a setting --

MR. LEHRER: Excuse me.

MR. ROMNEY: -- where I'd like to bring money from overseasback 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 tostates and say to a state, you're going to get what you got last year plusinflation -- inflation -- plus 1 percent. And then you're going to manage yourcare 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 cancare for our own poor in so much better and more effective a way than havingthe federal government tell us how to care for our poor.

So let states -- one of the magnificent things about this country is thewhole idea that states are the laboratories of democracy. Don't have the federalgovernment tell everybody what kind of training programs they have to have andwhat kind of Medicaid they have to have. Let states do this.

And by the way, if a states get -- gets in trouble,why, we could step in and see if we could find a way to help them. But --

MR. LEHRER: Let's go.

MR. ROMNEY: But -- but the right -- the right approach isone which relies on the brilliance --

MR. LEHRER: Two seconds.

MR. ROMNEY: -- of our people and states, not the federalgovernment.

MR. LEHRER: Two seconds and we're going on, still on theeconomy on another -- but another part of it.

PRESIDENT OBAMA: OK.

MR. LEHRER: All right? All right, this is this is segmentthree, the economy, entitlements.

First answer goes to you. It's two minutes. Mr.President, do you see a major difference between the two of you on SocialSecurity?

PRESIDENT OBAMA: You know, Isuspect that on Social Security, we've got a somewhat similar position. SocialSecurity is structurally sound. It's going to have to be tweaked the way it wasby 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 behindSocial Security and Medicare and then talk about Medicare, because that's thebig driver --

MR. LEHRER: Sure -- it -- you bet.

PRESIDENT OBAMA: -- of our deficits right now.

You know, my grandmother, some of you know, helped to raise me. Mygrandparents did. My grandfather died awhile back. My grandmother died threedays before I was elected president. And she was fiercely independent. Sheworked her way up, only had a high school education, startedas a secretary, ended up being the vice president of a local bank. And sheended up living alone by choice. And the reason she could be independent wasbecause of Social Security and Medicare. She had worked all her life, put inthis money and understood that there was a basic guarantee, a floor under whichshe could not go.

And that's the perspective I bring when I think about what's calledentitlements. You know, the name itself implies some sense of dependency on thepart 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 longterm? And in Medicare, what we did was we said, we aregoing 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 is going.Seven hundred and sixteen billion dollars we were able to save from theMedicare program by no longer overpaying insurance companies, by making surethat we weren't overpaying providers.

And using that money, we were actually able to lower prescription drug costsfor seniors by an average of $600, and we were also able to make a -- make asignificant dent in providing them the kind of preventive care that willultimately save money through the -- throughout the system.

So the way for us to deal with Medicare in particular is to lower healthcare costs. But when it comes to Social Security, as I said, you don't need amajor structural change in order to make sure that Social Security is there forthe future.

MR. LEHRER: We'll follow up on this.

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

MR. ROMNEY: Well, Jim, our seniors depend on theseprograms. And I know any time we talk about entitlements, people becomeconcerned that something's going to happen that's going to change their lifefor the worst, and the answer is, neither the president nor I are proposing anychanges for any current retirees or near retirees, either to Social Security orMedicare. So if you're 60 or around 60 or older, you don'tneed to listen any further.

But for younger people, we need to talk about what changes are going to beoccurring.

Oh, I just thought about one, and that is in fact I was wrong when I saidthe president isn't proposing any changes for current retirees. In fact, he ison Medicare. On Social Security, he's not.

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

We also have 50 percent of doctors who say they won't take more Medicarepatients. This -- we have 4 million people on Medicare Advantage that will loseMedicare Advantage because of those $716 billion in cuts. I can't understandhow 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 abetter prescription program. That's one -- that's $1 for every 15 (dollars)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, butthe idea of cutting $716 billion from Medicare to be able to balance theadditional cost of “Obamacare” is, in my opinion, a mistake. And with regardsto young people coming along, I've got proposals to make sure Medicare andSocial Security are there for them without any question.

MR. LEHRER: Mr. President.

PRESIDENT OBAMA: First of all, I think it's important forGovernor Romney to present this plan that he says will only affect folks in thefuture. And the essence of the plan is that he would turn Medicare into avoucher program. It's called premium support, but it's understood to be a voucherprogram. His running mate --

MR. LEHRER: And you -- and you don't support that?

PRESIDENT OBAMA: I don't. And -- and let me explain why.

MR. ROMNEY: Again, that's for future people --

PRESIDENT OBAMA: I understand.

MR. ROMNEY: -- right, not for current retirees.

PRESIDENT OBAMA: For -- for -- so if you're -- if you --you're 54 or 55, you might want to listen, because this -- this will affectyou. The idea, which was originally presented by Congressman Ryan, your runningmate, is that we would give a voucher to seniors, and they could go out in theprivate marketplace and buy their own health insurance. The problem is thatbecause the voucher wouldn't necessarily keep up with health care inflation, itwas estimated that this would cost the average senior about $6,000 a year.

Now, in fairness, what Governor Romney has now said is he'll maintaintraditional Medicare alongside it. But there's still a problem, because whathappens is those insurance companies are pretty clever at figuring out who arethe younger and healthier seniors.

They recruit them leaving the older, sicker seniors in Medicare. And everyhealth care economist who looks at it says over time what'll happen is thetraditional Medicare system will collapse. And then what you've got is folkslike my grandmother at the mercy of the private insurance system, precisely atthe time when they are most in need of decent health care.

So I don't think vouchers are the right way to go. And this is not my own --only my opinion. AARP thinks that the -- the savings that we obtained fromMedicare bolster the system, lengthen the Medicare trust fund by 8 years.Benefits were not affected at all and ironically if you repeal “Obamacare” --and I have become fond of this term, “Obamacare” -- (laughter) -- if you repealit, what happens is those seniors right away are going to be paying $600 morein prescription care. They're now going to have to be paying copays for basiccheck-ups that can keep them healthier.

And the primary beneficiary of that repeal areinsurance companies that are estimated to gain billions of dollars back whenthey aren't making seniors any healthier. And I -- I don't think that's rightapproach when it comes to making sure that Medicare is stronger over the longterm.

MR. LEHRER: We'll talk about -- specifically about healthcare in a moment, but what is -- do you support the voucher system, Governor?

MR. ROMNEY: What I support is no change for currentretirees and near-retirees to Medicare and the president supports taking $716billion out of that program.

MR. LEHRER: What about the vouchers?

MR. ROMNEY: So that's -- that's number one.

MR. LEHRER: OK. All right.

MR. ROMNEY: Number two is for people coming along that areyoung. What I'd do to make sure that we can keep Medicare in place for them isto allow them either to choose the current Medicare program or a private plan-- their choice. They get to -- and they'll have at least two plans that willbe entirely at no cost to them. So they don't have to pay additional money, no additional$6,000. That's not going to happen.

They'll have at least two plans.

And by the way, if the government can be as efficient as the private sectorand offer premiums that are as low as the private sector, people will be happyto get traditional Medicare, or they'll be able to get a private plan. I knowmy own view is I'd rather have a private plan. I -- I'd just as soon not havethe government telling me what kind of health care I get. I'd rather be able tohave an insurance company. If I don't like them, I can get rid of them and finda different insurance company. But people will make their own choice.

The other thing we have to do to save Medicare, we have to have the benefitshigh for those that are low-income, but for higher-income people, we're goingto have to lower some of the benefits. We have to make sure this program isthere for the long term. That's the plan that I've put forward.

And by the way, the idea came not even from Paul Ryan or -- or SenatorWyden, who's a co-author of the bill with -- with Paul Ryan in the Senate, butalso it came from Bill Clinton's -- Bill Clinton's chief of staff. This is anidea that's been around a long time, which is saying, hey,let's see if we can't get competition into the Medicare world so that peoplecan get the choice of different plans at lower cost, better quality. I believein competition.

PRESIDENT OBAMA: Jim, if I -- if I can just respond veryquickly, first of all, every study has shown that Medicare has loweradministrative cost than private insurance does, which is why seniors aregenerally pretty happy with it. And private insurers have to make a profit. Nothing wrong with that; that's what they do. And so you'vegot higher administrative costs, plus profit on top of that, and if you are goingto save any money through what Governor Romney's proposing, what has to happenis is that the money has to come from somewhere.

And when you move to a voucher system, you are putting seniors at the mercyof those insurance companies. And over time, if traditional Medicare hasdecayed or fallen apart, then they're stuck. And this is the reason why AARPhas said that your plan would weaken Medicare substantially, and that's whythey were supportive of the approach that we took.

One last point I want to make. We do have to lower the cost of health care.Not just in Medicare and --

MR. LEHRER: We'll talk about that in a minute.

PRESIDENT OBAMA: -- but -- but overall.

MR. LEHRER: Go. OK.

PRESIDENT OBAMA: And so --

MR. ROMNEY: That's -- that's a big topic. Could we -- couldwe stay on Medicare?

PRESIDENT OBAMA: Is that a -- is that a separate topic? I'msorry.

MR. LEHRER: Yeah, we're going to -- yeah. I want to get toit, but all I want to do is very quickly --

MR. ROMNEY: Let's get back to Medicare.

MR. LEHRER: -- before we leave the economy --

MR. ROMNEY: Let's get back to Medicare.

MR. LEHRER: No, no, no, no --

MR. ROMNEY: The president said that the government canprovide the service at lower --

MR. LEHRER: No.

MR. ROMNEY: -- cost and without a profit.

MR. LEHRER: All right.

MR. ROMNEY: If that's the case, then it will always be thebest product that people can purchase. But my experience --

MR. LEHRER: Wait a minute, Governor.

MR. ROMNEY: My experience is the private sector typicallyis able to provide a better product at a lower cost.

MR. LEHRER: Can we -- can the two of you agree that thevoters have a choice, a clear choice between the two of you --

MR. ROMNEY: Absolutely.

PRESIDENT OBAMA: Yes.

MR. LEHRER: -- on Medicare?

MR. ROMNEY: Absolutely.

MR. LEHRER: All right. So, to finish quickly, briefly, onthe economy, what is your view about the level of federal regulation of theeconomy right now? Is there too much, and in your case, Mr. President, is there-- should there be more? Beginning with you -- this is not a new two-minutesegment -- to start, and we'll go for a few minutes and then we're going to goto health care. OK?

MR. ROMNEY: Regulation is essential. You can't have a freemarket work if you don't have regulation. As a business person, I had to have-- I needed to know the regulations. I needed them there. You couldn't havepeople opening up banks in their -- in their garage and making loans. I mean,you have to have regulations so that you can have an economy work. Every freeeconomy has good regulation.

At the same time, regulation can become excessive.

MR. LEHRER: Is it excessive now, do you think?

MR. ROMNEY: In some places, yes, in other places, no.

MR. LEHRER: Like where?

MR. ROMNEY: It can become out of date. And what's happenedin -- with some of the legislation that's been passed during the president'sterm, you've seen regulation become excessive and it's hurt the -- it's hurtthe economy. Let me give you an example. Dodd- Frank was passed, and it includeswithin it a number of provisions that I think have some unintended consequencesthat are harmful to the economy. One is it designates a number of banks as toobig to fail, and they're effectively guaranteed by the federal government.

This is the biggest kiss that's been given to -- to New York banks I've everseen. This is an enormous boon for them. There's been -- 122 community andsmall banks have closed since Dodd-Frank. So there's one example.

Here's another. In Dodd-Frank, it says that --

MR. LEHRER: You want to repeal Dodd-Frank?

MR. ROMNEY: Well, I would repeal it and replace it. You --we're not going to get rid of all regulation. You have to have regulation. And there's some parts of Dodd-Frank that make all the sense inthe world. You need transparency, you need to haveleverage limits for institutes --

MR. LEHRER: Well, here's a specific -- let's -- excuse me--

MR. ROMNEY: Let me mention the other one. Let's talk the --

MR. LEHRER: No, no, let's do -- right now, let's not. Let'slet him respond.

MR. ROMNEY: OK.

MR. LEHRER: Let's let him respond to this specific onDodd-Frank and what the governor just said.

PRESIDENT OBAMA: Well, I think this is a great example. Thereason we have been in such a enormous economic crisiswas prompted by reckless behavior across the board. Now, it wasn't just on WallStreet. You had -- loan officers were -- they were giving loans and mortgagesthat really shouldn't have been given, because they're -- the folks didn'tqualify. You had people who were borrowing money to buy a house that theycouldn't afford. You had credit agencies that were stamping these as A-1 (ph)great investments when they weren't. But you also had banks making moneyhand-over-fist, churning out products that the bankers themselves didn't evenunderstand in order to make big profits, but knowing that it made the entiresystem vulnerable.

So what did we do? We stepped in and had the toughest reforms on Wall Streetsince the 1930s. We said you've got -- banks, you've got to raise your capitalrequirements. You can't engage in some of this risky behavior that is puttingMain Street at risk. We're going to make sure that you've got to have a livingwill, so -- so we can know how you're going to wind things down if you make abad bet so we don't have other taxpayer bailouts.

In the meantime, by the way, we also made sure that all the help that weprovided those banks was paid back, every single dime, with interest.

Now, Governor Romney has said he wants to repeal Dodd-Frank, and, you know,I appreciate, and it appears we've got some agreement that a marketplace towork has to have some regulation, but in the past, Governor Romney has said hejust wants to repeal Dodd-Frank, roll it back. And so the question is doesanybody out there think that the big problem we had is that there was too muchoversight and regulation of Wall Street? Because if you do,then Governor Romney is your candidate. But that's not what I believe.

MR. ROMNEY: (Inaudible) -- sorry, Jim. That -- that's justnot -- that's just not the facts. Look, we have to have regulation of WallStreet.

PRESIDENT OBAMA: Yeah.

MR. ROMNEY: That -- that's why I'd have regulation. But Iwouldn't designate five banks as too big to fail and give them a blank check.That's one of the unintended consequences of Dodd-Frank. It wasn't thoughtthrough properly. We need to get rid of that provision, because it's killingregional and small banks. They're getting hurt.

Let me mention another regulation of Dodd-Frank. You say we were givingmortgages to people who weren't qualified. That's exactly right. It's one ofthe reasons for the great financial calamity we had. And so Dodd-Frankcorrectly says we need to --

MR. LEHRER: All right.

MR. ROMNEY: -- have qualified mortgages, and if you give amortgage that's not qualified, there are big penalties. Exceptthey didn't ever go on to define what a qualified mortgage was.

MR. LEHRER: All right.

MR. ROMNEY: It's been two years. We don't know what aqualified mortgage is yet. So banks are reluctant to make loans, mortgages. Tryand get a mortgage these days. It's hurt the housing market --

MR. LEHRER: All right --

MR. ROMNEY: -- because Dodd-Frank didn't anticipate puttingin place the kinds of regulations you have to have. It's not that Dodd- Frankalways was wrong with too much regulation. Sometimes they didn't come out witha clear regulation.

MR. LEHRER: OK.

MR. ROMNEY: I will make sure we don't hurt the functioningof our -- of our marketplace and our businesses, because I want to bring backhousing and get good jobs.

MR. LEHRER: All right, I think we have another cleardifference between the two of you. Now let's move to health care, where I knowthere is a clear difference -- (laughter) -- and that has to do with theAffordable Care Act, “Obamacare.”

And it's a two-minute new segment, and it's -- that means two minutes each.And you go first, Governor Romney. You wanted repeal. You want the AffordableCare Act repealed. Why?

MR. ROMNEY: I sure do. Well, in part, it comes, again, frommy experience. I was in New Hampshire. A woman came to me, and she said, look,I can't afford insurance for myself or my son. I met a couple in Appleton,Wisconsin, and they said, we're thinking of dropping our insurance; we can'tafford it. And the number of small businesses I'vegone to that are saying they're dropping insurance because they can't afford it-- the cost of health care is just prohibitive. And -- and we've got to dealwith cost.

And unfortunately, when -- when you look at “Obamacare,” the CongressionalBudget Office has said it will cost $2,500 a year more than traditionalinsurance. So it's adding to cost. And as a matter of fact, when the presidentran for office, he said that by this year he would have brought down the costof insurance for each family by $2,500 a family. Instead, it's gone up by thatamount. So it's expensive. Expensive things hurt families. Sothat's one reason I don't want it.

Second reason, it cuts $716 billion from Medicare to pay for it. I want toput that money back in Medicare for our seniors.

Number three, it puts in place an unelected board that's going to tellpeople, ultimately, what kind of treatments they can have. I don't like thatidea.

Fourth, there was a survey done of small businesses across the country. Itsaid, what's been the effect of “Obamacare” on your hiring plans? Andthree-quarters of them said, it makes us less likelyto hire people. I just don't know how the president could have come intooffice, facing 23 million people out of work, rising unemployment, an economiccrisis at the -- at the kitchen table and spent his energy and passion for twoyears fighting for “Obamacare” instead of fighting for jobs for the Americanpeople.

It has killed jobs. And the best course for health care is to do what we didin my state, craft a plan at the state level that fits the needs of the state.And then let's focus on getting the costs down for people rather than raisingit with the $2,500 additional premium.

MR. LEHRER: Mr. President, the argument against repeal.

PRESIDENT OBAMA: Well, four years ago when I was runningfor office I was traveling around and having those same conversations thatGovernor Romney talks about. And it wasn't just that small businesses wereseeing costs skyrocket and they couldn't get affordable coverage even if theywanted to provide it to their employees; it wasn't just that this was thebiggest driver of our federal deficit, our overall health care costs. But itwas families who were worried about going bankrupt if they got sick -- millionsof families, all across the country.

If they had a pre-existing condition they might not be able to get coverageat all. If they did have coverage, insurance companies might impose anarbitrary limit. And so as a consequence, they're paying their premiums,somebody gets really sick, lo and behold they don't have enough money to paythe bills because the insurance companies say that they've hit the limit. So wedid work on this alongside working on jobs, because this is part of making surethat middle-class families are secure in this country.

And let me tell you exactly what “Obamacare” did. Number one, if you've gothealth insurance it doesn't mean a government takeover. You keep your own insurance. You keep your own doctor. But it does sayinsurance companies can't jerk you around. They can't impose arbitrary lifetimelimits. They have to let you keep your kid on their insurance -- your insurance plan till you're 26 years old. And it also saysthat they're -- you're going to have to get rebates if insurance companies arespending more on administrative costs and profits than they are on actual care.

Number two, if you don't have health insurance, we're essentially setting upa group plan that allows you to benefit from group rates that are typically 18percent lower than if you're out there trying to get insurance on theindividual market.

Now, the last point I'd make before --

MR. LEHRER: Two minutes --

PRESIDENT OBAMA: -- before --

MR. LEHRER: Two minutes is up, sir.

PRESIDENT OBAMA: No, I -- I think I've -- I had fiveseconds before you interrupted me -- was -- (laughter) -- that the irony isthat we've seen this model work really well in Massachusetts, because GovernorRomney did a good thing, working with Democrats in the state to set up what isessentially the identical model. And as a consequence, people are coveredthere. It hasn't destroyed jobs. And as a consequence, we now have a system inwhich we have the opportunity to start bringing down cost, as opposed to just--

MR. LEHRER: Your five --

PRESIDENT OBAMA: -- leaving millions of people out in thecold.

MR. LEHRER: Your five seconds went away a long time ago. (Laughter.)

PRESIDENT OBAMA: That --

MR. LEHRER: All right, Governor. Governor, tell the -- tellthe president directly why you think what he just said is wrong about“Obamacare.”

MR. ROMNEY: Well, I did with my first statement.

PRESIDENT OBAMA: You did.

MR. ROMNEY: But I'll go on.

PRESIDENT OBAMA: Please elaborate.

MR. ROMNEY: I'll elaborate.

Exactly right.

First of all, I like the way we did it in Massachusetts. I like the factthat in my state, we had Republicans and Democrats come together and worktogether. What you did instead was to push through a plan without a singleRepublican vote. As a matter of fact, when Massachusetts did something quiteextraordinary, elected a Republican senator to stop “Obamacare,” you pushed itthrough anyway. So entirely on a partisan basis, instead of bringing Americatogether and having a discussion on this important topic, you pushed throughsomething that you and Nancy Pelosi and Harry Reid thought was the best answerand drove it through.

What we did, in a legislature 87 percent Democrat, we worked together. Twohundred legislators in my legislature -- only two voted against the plan by thetime we were finished.

What were some differences?

We didn't raise taxes. You've raised them by a trillion dollars under“Obamacare.” We didn't cut Medicare. Of course, we don't have Medicare, but wedidn't cut Medicare by $716 billion. We didn't put in place a board that cantell people ultimately what treatments they're going to receive.

We didn't -- we didn't also do something that I think a number of peopleacross this country recognize, which is put -- put people in a position wherethey're going to lose the insurance they had and they wanted. Right now, theCBO says up to 20 million people will lose their insurance as “Obamacare” goesinto effect next year. And likewise, a study by McKinsey & Company ofAmerican businesses said 30 percent of them are anticipating dropping peoplefrom coverage. So for those reasons, for the tax, for Medicare, for this boardand for people losing their insurance, this is why the American people don'twant -- don't want “Obamacare.” It's why Republicans said, do not do this.

And the Republicans had a -- had a plan. They put a plan out. They put out aplan, a bipartisan plan. It was swept aside. I think something this big, thisimportant has to be done in a bipartisan basis. And we have to have a presidentwho can reach across the aisle and fashion important legislation with the inputfrom both parties.

PRESIDENT OBAMA: Governor Romney said this has to be doneon a bipartisan basis. This was a bipartisan idea. In fact, it was a Republicanidea.

And Governor Romney, at the beginning of this debate, wrote and said, whatwe did in Massachusetts could be a model for the nation. And I agree that theDemocratic legislators in Massachusetts might have given some advice toRepublicans in Congress about how to cooperate, but the fact of the matter is,we used the same advisers, and they say it's the same plan.

It -- when Governor Romney talks about this board, for example -- unelectedboard that we've created -- what this is, is a group of health care experts,doctors, et cetera, to figure out how can we reduce the cost of care in thesystem overall, because the -- there are two ways of dealing with our healthcare crisis.

One is to simply leave a whole bunch of people uninsured and let them fendfor themselves, to let businesses figure out how longthey can continue to pay premiums until finally they just give up and theirworkers are no longer getting insured, and that's been the trend line. Or,alternatively, we can figure out how do we make thecost of care more effective. And there are ways of doing it.

So at -- at Cleveland Clinic, one of the best health care systems in theworld, they actually provide great care cheaper than average. And the reasonthey do is because they do some smart things. They -- they say, if a patient'scoming in, let's get all the doctors together at once, do one test instead ofhaving the patient run around with 10 tests. Let's make sure that we'reproviding preventive care so we're catching the onset of something likediabetes. Let's -- let's pay providers on the basis of performance as opposedto on the basis of how many procedures they've -- they've engaged in. Now, sowhat this board does is basically identifies best practices and says, let's usethe purchasing power of Medicare and Medicaid to help to institutionalize allthese good things that we do.

And the fact of the matter is that when “Obamacare” is fully implemented,we're going to be in a position to show that costs are going down. And over thelast two years, health care premiums have gone up, it's true, but they've goneup slower than any time in the last 50 years. So we're already beginning to seeprogress. In the meantime, folks out there with insurance, you're alreadygetting a rebate.

Let me make one last point. Governor Romney says we should replace it. I'mjust going to repeal it, but we can replace it with something. But the problemis he hasn't described what exactly we'd replace it with other than sayingwe're going to leave it to the states.

But the fact of the matter is that some of the prescriptions that he'soffered, like letting you buy insurance across state lines, there's noindication that that somehow is going to help somebody who's got a pre-existingcondition be able to finally buy insurance. In fact, it's estimated that byrepealing “Obamacare,” you're looking at 50 million people losing healthinsurance at a time when it's vitally important.

MR. LEHRER: Let's let the governor explain what you woulddo if “Obamacare” is repealed. How would you replace it? What do you have inmind?

MR. ROMNEY: Let -- well, actually -- actually it's -- it's-- it's a lengthy description, but number one, pre-existing conditions arecovered under my plan. Number two, young people areable to stay on their family plan. That's already offered in the privatemarketplace; you don't have -- have the government mandate that for that tooccur.

But let's come back to something the president -- I agree on, which is the-- the key task we have in health care is to get the costs down so it's moreaffordable for families, and -- and then he has as a model for doing that aboard of people at the government, an unelected board, appointed board, who aregoing to decide what kind of treatment you ought to have.

PRESIDENT OBAMA: No, it isn't.

MR. ROMNEY: In my opinion, the government is not effectivein -- in bringing down the cost of almost anything. As a matter of fact, freepeople and free enterprises trying to find ways to do things better are able tobe more effective in bringing down the costs than the government will ever be.Your example of the Cleveland clinic is my case in point, along with severalothers I could describe. This is the private market. These are small -- theseare enterprises competing with each other, learning how to do better and betterjobs.

I used to consult to businesses -- excuse me, to hospitals and to healthcare providers. I was astonished at the creativity and innovation that existsin the American people. In order to bring the cost of health care down, we don'tneed to have a -- an -- a board of 15 people telling us what kinds oftreatments we should have. We instead need to put insurance plans, providers,hospitals, doctors on targets such that they have an incentive, as you say,performance pay, for doing an excellent job, for keeping costs down, and that'shappening.

Intermountain Health Care does it superbly well.

PRESIDENT OBAMA: They do.

MR. ROMNEY: Mayo Clinic is doing it superbly well,Cleveland Clinic, others. But the right answer is not to have the federalgovernment take over health care and start mandating to the providers acrossAmerica, telling a patient and a doctor what kind of treatment they can have.That's the wrong way to go. The private market and individual responsibilityalways work best.

PRESIDENT OBAMA: Let me just point out, first of all, thisboard that we're talking about can't make decisions about what treatments aregiven. That's explicitly prohibited in the law.

But let's go back to what Governor Romney indicated,that under his plan he would be able to cover people with pre-existingconditions. Well, actually, Governor, that isn't what your plan does. What yourplan does is to duplicate what's already the law, which says if you are out ofhealth insurance for three months then you can end up getting continuouscoverage and an insurance company can't deny you if you've -- if it's beenunder 90 days.

But that's already the law. And that doesn't help the millions of people outthere with pre-existing conditions. There's a reason why Governor Romney set upthe plan that he did in Massachusetts. It wasn't a government takeover ofhealth care. It was the largest expansion of private insurance. But what itdoes say is that insurers, you've got to take everybody. Now, that also means thatyou've got more customers.

But when Governor Romney says that he'll replace it with something but can'tdetail how it will be in fact replaced, and the reason he set up the system hedid in Massachusetts is because there isn't a better way of dealing with thepre-existing conditions problem, it -- it just reminds me of -- you know, hesays that he's going to close deductions and loopholes for his tax plan.

That's how it's going to be paid for. But we don't know the details. He saysthat he's going to replace Dodd-Frank, Wall Street reform. But we don't knowexactly which ones. He won't tell us. He now says hes going to replace“Obamacare” and assure that all the good things that are in it are going to bein there and you don't have to worry.

And at some point, I think the American people have to ask themselves, isthe reason that Governor Romney is keeping all these plans to replace secretbecause they're too good? Is -- is it because that somehow middle-classfamilies are going to benefit too much from them? No, the -- the reason isbecause when we reform Wall Street, when we tackle the problem of pre-existingconditions, then, you know, these are tough problems, and we've got to makechoices. And the choices we've made have been ones that ultimately arebenefiting middle-class families all across the country.

MR. LEHRER: All right, we're going to move to a --

MR. ROMNEY: No, I -- I have to respond to that --

MR. LEHRER: No, but --

MR. ROMNEY: -- which is -- which is my experience as agovernor is if I come in and -- and lay down a piece of legislation and sayit's my way or the highway, I don't get a lot done.What I do is the same way that Tip O'Neill and Ronald Reagan worked togethersome years ago. When Ronald Reagan ran for office, he laid out the principlesthat he was going to foster. He said he was going to lower tax rates. He saidhe was going to broaden the base. You've said the same thing: You're going tosimplify the tax code, broaden the base. Those are my principles.

I want to bring down the tax burden on middle-income families. And I'm goingto work together with Congress to say, OK, what are the various ways we couldbring down deductions, for instance? One way, for instance, would be to have asingle number. Make up a number -- 25,000 (dollars), $50,000. Anybody can havedeductions up to that amount. And then that number disappears for high-incomepeople. That's one way one could do it. One could follow Bowles-Simpson as amodel and take deduction by deduction and make differences that way.

There are alternatives to accomplish the objective I have, which is to bringdown rates, broaden the base, simplify the code and create incentives forgrowth.

And with regards to health care, you had remarkable details with regards tomy pre-existing condition plan. You obviously studied up on -- on my plan. Infact, I do have a plan that deals with people with pre-existing conditions.That's part of my health care plan. And what we did in Massachusetts is a modelfor the nation, state by state. And I said that at that time. The federalgovernment taking over health care for the entire nation and whisking aside the10th Amendment, which gives states the rights for these kinds of things, is notthe course for America to have a stronger, more vibrant economy.

MR. LEHRER: That is a terrific segueto our next segment, and is the role of government. And let's see, role ofgovernment and it is -- you are first on this, Mr. President. The question isthis. Do you believe -- both of you -- but you have the first two minutes onthis, Mr. President -- do you believe there's a fundamental difference betweenthe two of you as to how you view the mission of the federal government?

PRESIDENT OBAMA: Well, I definitely think there aredifferences.

MR. LEHRER: And -- yeah.

PRESIDENT OBAMA: The first role of the federal governmentis to keep the American people safe. That's its most basic function. And ascommander in chief, that is something that I've worked on and thought aboutevery single day that I've been in the Oval Office.

But I also believe that government has the capacity -- the federalgovernment has the capacity to help open up opportunity and create ladders ofopportunity and to create frameworks where the American people can succeed.Look, the genius of America is the free enterprise system, and freedom, and thefact that people can go out there and start a business, work on an idea, make their own decisions.

But as Abraham Lincoln understood, there are also some things we do bettertogether.

So in the middle of the Civil War, Abraham Lincoln said, let's help tofinance the Transcontinental Railroad. Let's start the National Academy ofSciences. Let's start land grant colleges, because we want to give thesegateways of opportunity for all Americans, because if all Americans are gettingopportunity, we're all going to be better off. That doesn't restrict people'sfreedom; that enhances it.

And so what I've tried to do as president is to apply those same principles.And when it comes to education, what I've said is we've got to reform schoolsthat are not working. We use something called Race to the Top. Wasn't atop-down approach, Governor. What we've said is tostates, we'll give you more money if you initiate reforms. And as aconsequence, you had 46 states around the country whohave made a real difference.

But what I've also said is let's hire another hundred thousand math andscience teachers to make sure we maintain our technological lead and our peopleare skilled and able to succeed. And hard-pressed states right now can't all dothat. In fact, we've seen layoffs of hundreds of thousands of teachers over thelast several years, and Governor Romney doesn't think we need more teachers. Ido, because I think that that is the kind of investment where the federalgovernment can help. It can't do it all, but it can make a difference, and as aconsequence, we'll have a better-trained workforce, and that will create jobs,because companies want to locate in places where we've got a skilled workforce.

MR. LEHRER: Two minutes, Governor, on the role ofgovernment, your view.

MR. ROMNEY: Well, first, I love great schools.Massachusetts, our schools are ranked number one of all 50 states. And the keyto great schools: great teachers. So I reject the idea that I don't believe ingreat teachers or more teachers. Every school district, every state should makethat decision on their own.

The role of government -- look behind us: the Constitution and theDeclaration of Independence.

The role of government is to promote and protect the principles of thosedocuments. First, life and liberty. We have aresponsibility to protect the lives and liberties of our people, and that meansthe military, second to none. I do not believe in cutting our military. Ibelieve in maintaining the strength of America's military.

Second, in that line that says, we are endowed by our Creator with ourrights -- I believe we must maintain our commitment to religious tolerance andfreedom in this country. That statement also says that we are endowed by ourCreator with the right to pursue happiness as we choose. I interpret that as,one, making sure that those people who are less fortunate and can't care forthemselves are cared by -- by one another.

We're a nation that believes we're all children of the same God. And we carefor those that have difficulties -- those that are elderly and have problemsand challenges, those that disabled, we care for them. And we look fordiscovery and innovation, all these thing desired outof the American heart to provide the pursuit of happiness for our citizens.

But we also believe in maintaining for individuals the right to pursue theirdreams, and not to have the government substituteitself for the rights of free individuals. And what we're seeing right now is,in my view, a -- a trickle-down government approach which has governmentthinking it can do a better job than free people pursuing their dreams. Andit's not working.

And the proof of that is 23 million people out ofwork. The proof of that is one out of six people inpoverty. The proof of that is we've gone from 32 million on food stamps to 47million on food stamps. The proof of that is that 50 percent of collegegraduates this year can't find work.

PRESIDENT OBAMA: (Inaudible) --

MR. ROMNEY: We know that the path we're taking is notworking. It's time for a new path.

MR. LEHRER: All right, let's go through some specifics interms of what -- how each of you views the role of government. How do --education. Does the federal government have a responsibility to improve thequality of public education in America?

MR. ROMNEY: Well, the primary responsibility for educationis -- is of course at the state and local level. But the federal governmentalso can play a very important role. And I -- and I agree with Secretary ArneDuncan. He's -- there's some ideas he's put forward on Race to the Top -- notall of them but some of them I agree with, and congratulate him for pursuingthat. The federal government can get local and -- and state schools to do abetter job.

My own view, by the way, is I've added to that. I happen to believe -- Iwant the kids that are getting federal dollars from IDEA or -- or Title I --these are disabled kids or -- or poor kids or -- or lower-income kids, rather.I want them to be able to go to the school of their choice. So all federalfunds, instead of going to the -- to the state or to the school district, I'dhave go -- if you will, follow the child and let the parent and the childdecide where to send their -- their -- their student.

MR. LEHRER: How do you see the federal government'sresponsibility to -- as I say, to improve the quality of public education inthis country?

PRESIDENT OBAMA: Well, as I've indicated, I think that ithas a significant role to play. Through our Race to the Top program, we'veworked with Republican and Democratic governors to initiate major reforms, andthey're having an impact right now.

MR. LEHRER: Do you think you have a difference with yourviews and those of Governor Romney on -- about education and the federalgovernment?

PRESIDENT OBAMA: You know, this iswhere budgets matter because budgets reflect choices. So when Governor Romneyindicates that he wants to cut taxes and potentially benefit folks like me andhim, and to pay for it, we're having to initiatesignificant cuts in federal support for education, that makes a difference.

You know, his running mate, Congressman Ryan, put forward a budget thatreflects many of the principles that Governor Romney's talked about. And itwasn't very detailed. This seems to be a trend. But -- but what it did do is to-- if you extrapolated how much money we're talking about, you'd look atcutting the education budget by up to 20 percent.

When it comes to community colleges, we are seeing great work done out thereall over the country because we have the opportunity to train people for jobsthat exist right now. And one of the things I suspect Governor Romney and Iprobably agree on is getting businesses to work with community colleges so thatthey're setting up their training programs --

MR. LEHRER: Do you agree, Governor?

PRESIDENT OBAMA: Let -- let -- let me just finish thepoint.

MR. ROMNEY: Oh, yeah. Oh, yeah.

PRESIDENT OBAMA: I suspect it'll be a small agreement.

MR. ROMNEY: It's going over well in my state, by the way,yeah.

PRESIDENT OBAMA: The -- where their partnering so that --they're designing training programs, and people who are going through them knowthat there's a job waiting for them if they complete them. That makes a bigdifference. But that requires some federal support.

Let me just say one final example. When it comes to making collegeaffordable -- whether it's two-year or four-year -- one of the things that Idid as president was we were sending $60 billion to banks and lenders as middlemen for the student loan program, even though the loans were guaranteed. Sothere was no risk for the banks or the lenders but they were taking billionsout of the system.

And we said, why not cut out the middle man? And as a consequence, whatwe've been able to do is to provide millions more studentsassistance, lower or keep low interest rates on student loans. And this is anexample of where our priorities make a difference. Governor Romney, I genuinelybelieve, cares about education. But when he tells a student that, you know, youshould borrow money from your parents to go to college, you know, thatindicates the degree to which, you know, there may not be as much of a focus onthe fact that folks like myself, folks like Michelle, kids probably who attendUniversity of Denver just don't have that option.

And for us to be able to make sure that they've got that opportunity andthey can walk through that door, that is vitally important -- not just to thosekids. It's how we're going to grow this economy over the long term.

MR. LEHRER: We're running out of time.

MR. ROMNEY: Jim, Jim --

MR. LEHRER: I'm certainly going give you a chance torespond to that. Yes, sir, Governor.

MR. ROMNEY: Mr. -- Mr. President, you're entitled, as thepresident, to your own airplane and to your own house, but not to your ownfacts -- (laughter) -- all right? I'm -- I'm not going to cut educationfunding. I don't have any plan to cut education funding and grants that go topeople going to college. I'm planning on continuing to grow, so I'm notplanning on making changes there.

But you make a very good point, which is that the -- the place you put yourmoney makes a pretty clear indication of where your heart is. You put $90billion into -- into green jobs. And -- and I -- look, I'm all in favor ofgreen energy. Ninety billion (dollars) -- that -- that would have -- that wouldhave hired 2 million teachers. Ninety billion dollars.And these businesses -- many of them have gone out of business. I think abouthalf of them, of the ones have been invested in,they've gone out of business. A number of them happened to be owned by -- bypeople who were contributors to your campaigns.

Look, the right course for -- for America's government -- we were talkingabout the role of government -- is not to become the economic player pickingwinners and losers, telling people what kind of health treatment they canreceive, taking over the health care system that -- that has existed in thiscountry for -- for a long, long time and has produced the best health recordsin the world. The right answer for government is to say, how do we make theprivate sector become more efficient and more effective?

How do we get schools to be more competitive? Let's grade them. I propose wegrade our schools so parents know which schools are succeeding and failing, sothey can take their child to a -- to a school that's being more successful. Idon't -- I don't want to cut our commitment to education; I wanted to make itmore effective and efficient.

And by the way, I've had that experience. I don't just talk about it. I'vebeen there. Massachusetts schools are ranked number one in the nation. This isnot because I didn't have commitment to education. It's because I care abouteducation for all of our kids.

MR. LEHRER: All right, gentlemen, look --

PRESIDENT OBAMA: Jim, I -- (inaudible) --

MR. LEHRER: Excuse me, one sec -- excuse, me sir. (Laughter.) We've got -- we've got -- barely have threeminutes left. I'm not going to grade the two of you and say you've -- youranswers have been too long or I've done a poor job --

PRESIDENT OBAMA: You've done a great job, Jim.

MR. LEHRER: Oh, well, no. But the fact is, government --the role of government and governing, we've lost a (pod ?), in other words, sowe only have three minutes left in the -- in the debate before we go to yourclosing statements. And so I want to ask finally here -- and remember, we'vegot three minutes total time here.

And the question is this: Many of the legislative functions of the federalgovernment right now are in a state of paralysis as a result of partisangridlock. If elected in your case, if re-elected in your case, what would youdo about that?

Governor?

MR. ROMNEY: Jim, I had the great experience -- it didn'tseem like it at the time -- of being elected in a state where my legislaturewas 87 percent Democrat, and that meant I figured outfrom day one I had to get along and I had to work across the aisle to getanything done. We drove our schools to be number one in the nation. We cuttaxes 19 times.

MR. LEHRER: Well, what would you do as president?

MR. ROMNEY: We -- as president, I will sit down on day one-- actually the day after I get elected, I'll sit down with leaders -- theDemocratic leaders as well as Republican leaders and -- as we did in my state.We met every Monday for a couple hours, talked about the issues and thechallenges in the -- in the -- in our state, in that case. We have to work on acollaborative basis -- not because we're going to compromise our principle(s),but because there's common ground.

And the challenges America faces right now -- look, the reason I'm in thisrace is there are people that are really hurting today in this country, and weface -- this deficit could crush the future generations. What's happening inthe Middle East? There are developments around the world that are of realconcern. And Republicans and Democrats both love America, but we need to haveleadership -- leadership in Washington that will actually bring people togetherand get the job done and could not care less if it's a Republican or aDemocrat. I've done it before. I'll do it again.

MR. LEHRER: Mr. President.

PRESIDENT OBAMA: Well, first of all, I think GovernorRomney's going to have a busy first day, because he's also going to repeal“Obamacare,” which will not be very popular among Democrats as you're sittingdown with them.

(Laughter.)

But look, my philosophy has been I will take ideas from anybody, Democrat orRepublican, as long as they're advancing the cause of making middle-classfamilies stronger and giving ladders of opportunity into the middle class.That's how we cut taxes for middle-class families and small businesses. That'show we cut a trillion dollars of spending that wasn't advancing that cause.That's how we signed three trade deals into law that are helping us to doubleour exports and sell more American products around the world. That's how werepealed “don't ask, don't tell.” That's how we ended the war in Iraq, as Ipromised, and that's how we're going to wind down the war in Afghanistan.That's how we went after al-Qaida and bin Laden.

So we've -- we've seen progress even under Republican control of the Houseor Representatives. But ultimately, part of being principled, part of being a leaderis, A, being able to describe exactly what it is thatyou intend to do, not just saying, I'll sit down, but you have to have a plan.

Number two, what's important is occasionally you've got to say now to -- to-- to folks both in your own party and in the other party. And you know, yes,have we had some fights between me and the Republicans when they fought backagainst us, reining in the excesses of Wall Street? Absolutely,because that was a fight that needed to be had. When -- when we werefighting about whether or not we were going to make sure that Americans hadmore security with their health insurance and they said no, yes, that was afight that we needed to have. And so part of leadership and governing is bothsaying what it is that you are for, but also being willing to say no to somethings.

And I've got to tell you, Governor Romney, when it comes to his own partyduring the course of this campaign, has not displayed that willingness to sayno to some of the more extreme parts of his party.

MR. LEHRER: That brings us to closing statements. There wasa coin toss. Governor Romney, you won the toss, and you elected to go last.

So you have a closing two minutes, Mr. President.

PRESIDENT OBAMA: Well, Jim, I want to thank you and I wantto thank Governor Romney, because I think this was a terrific debate and I verymuch appreciate it.

And I want to thank the University of Denver.

You know, four years ago we were going through a major crisis, and yet myfaith and confidence in the American future is undiminished. And the reason isbecause of its people. Because of the woman I met in North Carolina who decidedat 55 to go back to school because she wanted to inspire her daughter, and nowhas a new job from that new training that she's gotten. Because of the companyin Minnesota who was willing to give up salaries and perks for their executivesto make sure that they didn't lay off workers during a recession. The autoworkers that you meet in Toledo or Detroit take such pride in building the bestcars in the world -- not just because of a paycheck, but because it gives themthat sense of pride, that they're helping to build America.

And so the question now is, how do we build on those strengths? Andeverything that I've tried to do and everything that I'm now proposing for thenext four years in terms of improving our education system, or developingAmerican energy, or making sure that we're closing loopholes for companies thatare shipping jobs overseas and focusing on small businesses and companies thatare creating jobs here in the United States, or -- or closing our deficit in aresponsible, balanced way that allows us to invest in our future -- all thosethings are designed to make sure that the American people, their genius, theirgrit, their determination is -- is channeled, and -- and -- and they have anopportunity to succeed.

And everybody's getting a fair shot and everybody's getting a fair share.Everybody's doing a fair share and everybody's playing by the same rules.

You know, four years ago I said that I'm not a perfect man and I wouldn't bea perfect president. And that's probably a promise that Governor Romney thinksI've kept. But I also promised that I'd fight every single day on behalf of theAmerican people and the middle class and all those who are striving to get inthe middle class.

I've kept that promise and if you'll vote for me, then I promise I'll fightjust as hard in a second term.

MR. LEHRER: Governor Romney, your two-minute closing.

MR. ROMNEY: Thank you, Jim and Mr. President. And thank youfor tuning in this evening. This is a -- this is an important election. And I'mconcerned about America. I'm concerned about the direction America has beentaking over the last four years. I know this is bigger than election about thetwo of us as individuals. It's bigger than our respective parties. It's anelection about the course of America -- what kind of America do you want tohave for yourself and for your children.

And there really are two very different paths that we began speaking aboutthis evening. And over the course of this month we're going to have two morepresidential debates and vice presidential debate. We'll talk about those twopaths. But they lead in very different directions. And it's not just looking toour words that you have to take in evidence of where they go; you can look atthe record.

There's no question in my mind that if the president were to be re-electedyou'll continue to see a middle-class squeeze with incomes going down andprices going up. I'll get incomes up again. You'll see chronic unemployment.We've had 43 straight months with unemployment above 8 percent. If I'mpresident, I will create -- help create 12 million new jobs in this countrywith rising incomes.

If the president's re-elected, “Obamacare” will be fully installed. In myview, that's going to mean a whole different way of life for people who countedon the insurance plan they had in the past. Many will lose it. You're going tosee health premiums go up by some $2,500 per -- per family. If I'm elected, wewon't have “Obamacare.” We'll put in place the kind of principles that I put inplace in my own state and allow each state to craft their own programs to getpeople insured. And we'll focus on getting the cost of health care down.

If the president were to be re-elected, you're going to see a $716 billioncut to Medicare. You'll have 4 million people who will lose Medicare advantage.You'll have hospitals and providers that'll no longer accept Medicare patients.

I'll restore that $716 billion to Medicare.

And finally, military. If the president'sre-elected, you'll see dramatic cuts to our military. The secretary of defensehas said these would be even devastating. I will not cut our commitment to ourmilitary. I will keep Americastrong and get America'smiddle class working again.

Thank you, Jim.

MR. LEHRER: Thank you, Governor.

Thank you, Mr. President.

The next debate will be the vice presidential event on Thursday, October11th at Center College in Danville, Kentucky.For now, from the University of Denver, I'm JimLehrer. Thank you, and good night. (Cheers, applause.)

DMU Timestamp: October 12, 2012 12:55

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