Transcript: Sen. Obama, Part 1

On Wednesday, September 17, 2008, 60 Minutes correspondent Steve Kroft interviewed Senator Barack Obama in Elko, Nevada. Below is a transcript of that interview. A transcript of Scott Pelley's interview of Senator John McCain is also available on this Web site.

STEVE KROFT: What do you think the biggest problem is right now facing this country?

SENATOR BARACK OBAMA: Well, I think the most immediate is the financial crisis, but the underlying problem is our economy, which, for the last eight years, has been managed under a theory the Bush administration, shared by John McCain, that you give more and more to those with the most, and that somehow it's gonna trickle down on everybody else. That you are anti-regulation, just as an ideological matter, whether it makes sense or not. And the result has been declining wages and incomes. Rises in price. Tougher for people to save, though tougher for people to retire or send their kids to college. We've seen 600,000 jobs lost so far this year. So the biggest challenge, I think, for the next president is to get our financial system on firmer footing. And then move to the underlying problems that are facing the economy that have prevented ordinary Americans from living up to that American promise that that they hold so dearly.

KROFT: This is the biggest financial crisis this country has had, a lot of people say, since the Great Depression.

OBAMA: Right.

KROFT: What caused it? Who's to blame?

OBAMA: Hey look, there were a lot of factors involved. But I think there is no doubt that if we had had a regulatory system that had kept pace with the changes in the financial system, that would have had an enormous impact in containing some of the problems that are out there. I mean, you've got greedy CEOs and investors who are taking too much risk. But that's why we set up rules of the road to prevent that from spreading into the system as a whole. And, unfortunately, we had a lot of deregulation. And instead of modifying the rules of this new economy, we just eliminated them. And that made it easier for people to engage in wild speculation, enjoy huge profits on the up sides. But then asking, now, taxpayers to bail them out when things go south. So we've got to change our regulatory system. But the Steve, there's a bigger problem. And that is that the economy has not been working for ordinary Americans. Since George Bush came into office, the average income of a family in America has gone down $2,000. That's in contrast to when Bill Clinton was president, when it went up $7,500. And that reduced purchasing power means that, not only are families scrimping when it comes to groceries and gas and trying to figure out how to pay their mortgage, they're falling into debt. They're taking out more credit card loans. They are more reliant on home equity and refinancing. And all those things contributed to some of the problems that we have right now. If we don't help create jobs, make sure that people's incomes are going up, revitalizing our economy with innovations in investment in infrastructure, creating a green economy, a clean economy so that we're no longer dependant on Middle Eastern oil. Unless we take some of those structural steps over the next few years we're gonna keep on slipping behind.

KROFT: On the question of the financial crisis, Senator McCain made some of the same noises this week, mentioning some of the same things that you did just now -- you know, blaming Wall Street greed, promising reform and oversight, and new regulations to protect investors. What's the difference between the two of you?

OBAMA: Well, the difference is, I think, that I've got a track record of actually believing in this stuff. You know, I wrote a letter to Chairman Bernanke at the Federal Reserve and Secretary of Treasury Paulson over a year and a half ago, suggesting that we've got to get a handle on this subprime lending crisis. I gave a speech after the Bear Sterns incident indicating how we have to create a better regulatory structure so that taxpayers aren't ending up footing up the bill. But we're also stabilizing and creating transparency for investors. And, you know, Senator McCain, fairly recently, said, "I'm a deregulator." One of his top chief economic advisors was Phil Gramm, who was one of the architects of deregulation in this sector. And he's always taken great pride in believing that we have to eliminate regulations. So if, in fact, he's recognized that this is an area where we've got to tighten things up, I'm glad. But I don't think that Senator McCain can claim that he's got great credentials on this area.

KROFT: In some ways, this past week has been historic.

OBAMA: Absolutely.

KROFT: In the sense you've had a number of failures. Sales of distressed investment houses. Federal government taking over Fannie Mae and Freddie Mac, plus the largest insurance company in the country. Do you think do you think that was the right path? Do you do you think that Secretary of Treasury Paulson has done the right thing?

OBAMA: I think by the time Secretary Paulson and the Federal Reserve Chairman Bernanke were looking at these problems, they had no good options left. You know, let's take the example of AIG. There's no doubt that, had they simply stood back and allowed AIG to go into bankruptcy, that there would have been enormous ripple effects all throughout the economy, and some that we could not predict and would present huge risks. Not just to Wall Street, but to Main Street. So they didn't have a lot of good options. My point is that, as president, I want to avoid us getting into the situation where we just have bad options. We could have anticipated some of these problems by having more serious regulatory structures that are updated for the 21st century that the regulations we have now are still based in the 1930s and the Depression. Now, that's why we provide FDIC insurance protecting depositors in banks. But we don't have those same kinds of requirements in terms of capital requirements and liquidity requirements when it comes to some of these other instruments in investment banks and hedge funds. So we've gotta update all that. But, again, there is an underlying problem that has been taking place in communities all across the country, wherever I go. You talk to folks on farms, in factories in diners, VFW halls. What you hear from them is, "My wages and my income have not gone up in years. But my costs of everything from health care to prescription drugs to sending my kid to college have all skyrocketed." And that shows an underlying weakness in our economy, even when it was growing. We were seeing flat lining or declining wages in incomes. And I think that it's very important for the next president to get that economy back on track. And that's why I've put together very specific plans for how to do that.

KROFT: Should the government be bailing out all of these banks and insurance companies? And we're talking about hundreds and hundreds of billions of dollars.

OBAMA: I think that our basic principle has to be that you don't bail out shareholders. You don't bail out CEOs who are getting golden parachutes and $100 million bonuses. That you are doing everything you can to protect taxpayers. When it comes to Fannie Mae, Freddie Mac -- making sure that people are able to stay in their homes, and that their mortgages don't go overboard because of bad decisions that other people make, there may be a case for intervention. But I think the general principle is that what we don't want to do is to allow these folks to run up these big risks, and nobody's paying attention. Nobody's minding the store. And then we end up inheriting the bill. And that is preventable. That's a failure of oversight on the part of this administration. And it's something that I intend to change when I'm president.

KROFT: What would you have done differently? And what would you be doing now if you were in the White House?

OBAMA: Well, as I said before, what I'd be doing is making sure we didn't get into this fix to start with. We saw a lot of this coming. As I said, I write a letter to the treasury secretary and the chairman of the Federal Reserve board a year and a half ago saying, "We need to start dealing with this issue." Even after the Bear Sterns incident had taken place. That could have been a time where we had moved a little more aggressively and boldly. Now I look, hindsight is 20/20. I'm more interested in what we need to do moving forward. And I think the steps that we've gotta take number one, we've gotta stabilize the housing market. And you know, I want to pull together all the stakeholders involved. The financial institutions borrowers. Let's get a fix on what home values are. And try to stabilize the market so that it does not continue to drag down the rest of the economy. And the second thing we need to do is stabilize the financial market with the regulations that we're talking about. Then we can start moving on the big structural problems of our economy. Energy. Making sure that we're no longer entirely dependant on Middle Eastern oil. Making sure that we've got a health care system that's not a drag on the economy, and giving people what they need in terms of high quality health care at an affordable price. Education. Making sure that our kids are not just getting a high quality secondary education, but are going on to college. We're producing more scientists, more engineers. And investing in the kind of infrastructure that will help our economy grow over the long term. The fact that we're spending $10 billion a month in Iraq at a time when they're running a $79 billion surplus, I think, has a lot of people steamed, and rightly so. Because we've got investments to make here in broadband so that, in a rural community, like the one we're sitting in, a company that wants to locate here knows it can get direct high speed internet service. That could make a difference in terms of creating employment opportunities in rural communities all across America.

KROFT: How serious is the financial situation?

OBAMA: Oh, I think it's very serious. I think this is as serious a financial problem that we've had since the Great Depression. Now, our economy is more diversified. It is stronger than it was back in the 30s. And I am absolutely confident that we are gonna be able to get back on track and grow. But it's gonna require some sensible steps. And it's gonna require a president who, I think, is committed to a different economic philosophy than the one that we've seen over the last eight years.

KROFT: Do you think we're in a recession?

OBAMA: Oh, I think there's no doubt that we're gonna see, when the numbers come out, that we are officially in recession. I think, for a lot of people, they've been feeling like we've been in a recession for years now. When their wages and incomes don't go up, and the cost of gas and groceries and home heating oil and prescription drugs are all going up, that feels awfully like a recession to them.

KROFT: I think one of the things that people are thinking is: are we headed for 1929? Are we headed for another depression?

OBAMA: No. We've got some structures in place, like the Federal Reserve Board. And you know, FDIC insurance is gonna protect depositors. It's gonna protect a lot of smaller investors. But what we do have is a big structural problem in a global economy that the Administration does not yet have a handle on, and we don't have the regulatory tools and place to manage. And so you know, the next president, I think, is gonna have to recognize that the economy has changed. Wall Street has now fundamentally changed. And government has to change with it. Now, in order for that to happen, we're gonna have to blow through the special interests, the lobbyists, the banks, the insurance companies, the financial institutions that have consistently blocked efforts at increased regulation and transparency. And, you know, during boom times, you know, they could argue, "Look, the market's working fine. Why do you guys want to meddle with success?" Well, part of it is to prevent situations like we have right now. I am a strong believer in the free market. We've got some of the best capital markets in the world. That's always been a strength of ours. But it works only if investors know what they're investing in. If regulators are able to look at the books and make sure that people aren't cooking those books. And we have not done enough of that in order to ensure the kind of trust and steadiness and calmness that an effect carp capital market needs.

KROFT: Do you think the worst is over?

OBAMA: It's hard to say. I think that we are going to continue to see a lot of institutions reluctant to lend money to other institutions because they don't know what their books look like. They don't know how many mortgages they're holding. And that's why it's so important for us to strengthen the housing market, make sure that we are getting more transparency and disclosure. We're gonna have to wring out some of the leverage, some of the borrowed money that has been used for all kinds of risky investments for years now that have created a lot of this speculation and risk taking. What I'm confident about is that, with the right leadership and the right guidance from the next president and his economic team, that we can get this economy back on track. We still have the best workers in the world. We still have the most creative people in the world. We've got, you know, extraordinary scientific and academic institutions that drive innovation. We still have very flexible financial markets, and a lot of talented and skilled people. And we've got a spirit of risk taking and innovation that has consistently made this economy grow. But all that has to be harnessed in a way that is good, not just for the few, but is good for the many. One of the interesting things that doesn't get talked enough about, because Republicans will constantly say, "Ah, you know, Democrats, they're anti-business. They're anti-corporate." Listen, I love businesses. I love corporations that are doing the right thing. They drive our economy. They produce jobs. They produce profits that get plowed back into the economy. I want to encourage entrepreneurship. But what I don't like is when businesses are putting their thumbs on the scale to advantage CEOs and, in some cases, shareholders, and disadvantage workers. What I don't like is when they're cooking the books. What I don't like is an economy that doesn't promote the kinds of honesty and transparent business practices that assure growth over the long term. And the last thing is, I want an economy that grows for everybody. There's a book that was recently written that showed that the economy has consistently grown faster under Democrat administrations than Republican administration. And there's been less inequality in the growth. It's grown more evenly. So this notion that there is a contradiction between us -- for example, changing our tax policy, as I've proposed so that we're giving cuts to 95 percent of workers, putting more money in their pockets to deal with rising costs. And that we're rolling back Bush tax cuts for the wealthiest Americans or corporations, making them close those tax loopholes and tax havens that they've got. That's not an anti-business measure. That is actually gonna grow the economy a lot faster than the out-of-balance approach that Bush has taken, and that that McCain now proposed.

KROFT: Why do you think you'd be a good president?

OBAMA: Well, I think that when you think about the challenges we face, these are challenges that require us to look forward and not backwards. When it comes to the economy I think we have to recognize that we are now in a global economy. And that the measure of our success is: how well are we training our workers? How well are we investing in the new energy economy?

KROFT: Why you? I mean, why do you think you would be a good president?

OBAMA: Well, I was gonna get to that.

KROFT: Oh, okay. Okay. Go ahead.

OBAMA: I think both by training and disposition I understand where we need to take the country. Not just where we've been. And so, when it comes to the economy, I think I understand the knowledge economy. I think I understand what it's gonna take in order for us to reinvest in our manufacturing base, and what it's gonna take to ensure that we are freeing ourselves from dependence on foreign oil. How we can fix our health care system. These are issues that I've been working on for years. And issues on which I have a fundamental disagreement with George Bush and the dominant economic ideology that we've been seeing for so many years, and got us into this rut. John McCain embraces that philosophy. I've got a different view. And that's on just on the economy. Now, there's a parallel when it comes to foreign policy. Because the threats that we're gonna face in the 21st century are not the same threats we faced in the 20th. Fighting al Qaeda is going to be different than my grandfather, who fought in Patton's army in Europe. There's a different set of threats. Some of them, like terrorism, that we have to focus militarily, but also diplomatically, and use all elements of power. Some like climate change, that we're gonna have to strengthen our alliances and form partnerships. And it's gonna be much more of a task of persuasion. We can't, you know, use our military to make sure the planet doesn't get warmer. And so that kind of leadership, of being able to bring people together, to apply practical commonsense solutions based on facts, based on science, based on what works you know, that's been the approach I have taken consistently as a public servant. That's the kind of style that I think we need in the presidency right now.

KROFT: But what is there specifically about you? You mentioned disposition. You mentioned disposition. What skills and traits do you have that would make you a good president?

OBAMA: Yeah. You know I am very good at analyzing complicated problems. Hearing all voices. Getting all perspectives. And then taking some decisive action in terms of moving us in a direction that's gonna solve the problem. And you know, that was true when I worked across the aisle on issues like ethics reform, or nuclear proliferation. It's been true when I was in the state legislation, when I provided tax cuts to people who needed them. But also made sure that, as we were moving women from welfare to work, that they had the kinds of transportation assistance or health care assistance or other things that they needed. You know, I am a practical person, somebody who, I think, can cut through some very complicated problems and figure out the right course of action. Now, there's one other element that I think is important that we need in the presidency right now. And that is somebody who understands what it's like to struggle. And understands what people are going through all across America. You know, I come from pretty modest beginnings. And I know what it's like to scratch and claw to get to where I am. I know, you know, what it's like watching your mom have to go to school and work at the same time. Or, you know, watch your grandparents live in a small apartment because they're trying to help the next generation. You know, I don't get a sense that the kinds of folks that my mom and my grandparents were, the kinds of folks that Michelle's mom and dad were, who were able to make it 20, 30 years ago, even without a college education, I don't get a sense that people in those same circumstances now feel like they've got those opportunities. And I think an insistence that the American dream, American promise, gets passed on to the next generation, that somebody's fighting for that middle class, working class, for group of people who have to work, and are working very hard but aren't getting a real fair shake right now -- I think that's what's needed in the White House right now.

KROFT: We've talked a lot of times, and we've talked a lot about the issue of experience. And, according to the latest CBS News poll and all the polls, it still remains one of the things that people are concerned about with you -- the lack of executive experience. I mean, suppose you wake up on the day after the election, the president elect of the United States. What are you gonna do? I mean, how are you gonna govern?

OBAMA: Well, look.

KROFT: You've never run anything. And now, all of a sudden, you're in charge of running the United States.

OBAMA: Well

KROFT: Besides your campaign.

OBAMA: Look, if the question is executive experience, then Senator McCain and I are on equal footing on that front. But you know, if people want to know what I'm gonna do, then they need to listen to what we're telling folks right now. I'm gonna call in the Joint Chiefs of Staff. And I'm gonna tell them, "We need to find a way to bring this war in Iraq to a close. And we want to do it safely and protect our troops. But we are gonna get it done because we can't keep spending $10 billion a month in Iraq when the Iraqis themselves aren't taking responsibility. And we have to refocus our attention Afghanistan." The second thing I'm gonna do is we're gonna pull together a working group including our treasury secretary, and everybody involved in our economy, and we are gonna make an assessment of where are we? What do we need to do in terms of stabilizing the financial markets and the housing markets. Third thing we're gonna do is we're finally gonna have an energy proposal that has moved through Congress that includes increasing production. But also make sure that we are making this economy more energy efficient. Fourth thing we're gonna do is get moving on a health care plan that finally provides health people health insurance at affordable rates. Now you know if people have watched my conduct as a legislator, my conduct as a presidential candidate, I think the one thing people probably have a pretty good sense of is that, you know, what this guy knows how to put together a team of really smart people; give them a sense of vision and direction; and get some good outcomes. And, you know, people don't think that I have enough experience to run the economy. I think it's important for them to understand that when you've got Warren Buffet endorsing you, it's not because he thinks he's gonna run the economy into the ground. When you've got generals and people who are, you know, former secretaries of defense or secretary to the Navy who have said, "This is somebody who can lead as commander in chief," they don't do that lightly. The people who know me, the people who've worked with me and for me both in the Senate and previously when I was in the state legislature, understand that I know how to make things run and get things done. Otherwise I wouldn't be here sitting having this interview with you. It's not just because you know, I can give a good speech once in a while.

KROFT: Who are the people that you would surround yourself with? Who are some of the people that you're considering to have in your cabinet?

OBAMA: Well, you know, I don't want to start giving names for specific positions. But I can tell you, for example, during this economic crisis the people I consult with are Paul Volcker, former Fed chairman; Bob Rubin , former Secretary of the Treasury; Larry Summers, also another Treasury secretary; Laura Tyson, former head of the Council of Economic Advisers; Paul O'Neill, former Treasury secretary under Bush. You know, so if you take a look at the kinds of people who are advising me, that will give you a sense of the direction I want to move when it comes to the economy. People who believe in markets, who've been very successful in the private sector but also recognize that we've gotta set up the rules of the road to work. When it comes to national security, you know, I look for guidance, not only from my own inner circle, not only my own team of advisors that include people like Secretary Albright, or former secretary of the Navy, Richard Danzig. You know, Susan Rice, former State Department officials. But it also you know draws from people like Dick Lugar, Republican ranking member on the Senate Foreign Relations Committee, with whom I have an extraordinarily close relationship. And who I've worked on critical issues surrounding nuclear proliferation. I think it's fair to say that when it comes to who I'm gonna choose for the Cabinet, my criteria is gonna be they're gonna be the best in their fields. They are going to be practical. Not ideological. They're gonna have integrity. They're gonna be in this for public interest and not for, you know, interests of self aggrandizement or cashing in later. And I want people who are gonna be independent and who argue with me. 'Cause one of the things you asked earlier about my leadership style, or why me. One of the things I'm good at is getting people in a room with a bunch of different ideas who sometimes violently disagree with each other and finding common ground and a sense of common direction. And that's the kind of approach that I think prevents you from making some of the enormous mistakes that we've seen over the last eight years.

KROFT: There have been presidential elections when people used to say this is a choice between Tweedledum and Tweedledee. This is not one of those elections.

OBAMA: No, there's a real choice here.

KROFT: What are the differences? The important differences, briefly, that separate you from John McCain.

OBAMA: Well, biggest differences, on the economy, John McCain wants to continue George Bush's economic philosophy. I don't think there's any dispute on that. You can't describe, and I don't think John McCain will be able to describe, a single significant area where he differs from the president. On his tax policy, he wants to do the same Bush tax cuts, but wants to extend them with $200 billion more in corporate tax cuts, including the companies like Exxon Mobile. On health care he wants to tax health care benefits for the first time, and then give people a tax credit that won't at all meet the cost of health care. So that's gonna be, potentially, 20 million people without health insurance. On education, he doesn't have a plan to make college affordable. So on most of these issues, he wants to continue what we've seen over the last eight years. I, obviously, want to move in a drastically different direction. On taxes, I want to cut taxes for 95 percent of Americans.