Interview with Kiran Chetry on CNN's "American Morning"

CHETRY: And Senator John McCain joins us now. Thanks so much for being with us this morning, senator. You know, your opponent Barack Obama seizing on the comments that you made yesterday. And so, I want to ask you this morning, what did you mean when you said the fundamentals of the economy are strong?

SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: Well, what I obviously was saying, and I believe is the American workers, the most productive, the most innovative, they are the fundamental of our economy and the strength of it and the reason why we will rebound. We will come back from this crisis. But right now, we are the victim of greed, excess and corruption in Wall Street, which is hurting them very, very badly and, unfortunately, it will in the future. But I believe in the American worker and I believe the American worker is the fundamental strength and future of America.

CHETRY: You did say that greed on Wall Street was behind this situation suggesting there should be more oversight. Throughout your record, though, you've really been somebody who pushes deregulation. Are you changing your position on that?

MCCAIN: Of course not. Ask any American citizen who has been the victim of a bureaucrat or a bureaucracy. I said two years ago that the Fannie and Freddie thing was a very serious problem and we had to work on it. And I have always opposed greed of Wall Street and I know how we can fix this.

We have to assure every American that their deposit in a bank is safe. We have to have a 9/11 commission, and we have to fix this alphabet soup of regulatory agencies that's left over from the 1930s. We can come back from this. It's a very tough crisis and we are the victim of the violation of the social contract between capitalism and the American citizen.

CHETRY: When you make -- if you make it into the White House and you're taking a look at this, it's now in your lap. What do you propose for smart regulation to make sure that businesses can still thrive and at the same time what we saw with the subprime mortgage crisis doesn't happen again?

MCCAIN: Well, first of all, we have these regulatory agencies, some of them who are asleep at the switch for the last couple of years or a few years, and they were designed for the 1930s. Now, we have an instantaneous global financial situation, and those agencies have to be consolidated and they have to be given more strength where necessary. And we have to figure out exactly how it is that we can understand a global economy where, what happens in the United States of America affects the rest of the world and vice versa. But these regulatory agencies were fine maybe in the 1930s.

Teddy Roosevelt said that unfettered capitalism leads to corruption. We are seeing that now, and the social contract has been broken. It's got to be fixed, and some of that money ought to be given back, by the way. CHETRY: I want to ask you about this though when it comes to tax policies, the non-partisan Tax Policy Center calculated the middle class would actually save significantly more under Barack Obama's tax plan than yours. How will your tax cuts, as it breaks down on income level, benefit the working class and the middle class?

MCCAIN: Well, first of all, Senator Obama wants to raise taxes. I'm not going to raise anybody's taxes and the fact is, that with my health care plan where people receive a $5,000 refundable tax credit, that will have a huge impact.

One of the greatest things that's hindering the progress of many middle-income Americans and lower income Americans is affordable and available health care. I will do that. Every child, every child in America, every family with a child will receive a $7,000 refundable tax exemption for their children, and we will continue to make sure that low-income and middle-income Americans have the tax reduction and nobody has their taxes increased.

You raise taxes in tough times and certainly I'm going to restrain spending in government, and Senator Obama has plans for increasing government spending dramatically.

CHETRY: I want to ask you --

MCCAIN: I'll restrain spending.

CHETRY: I want to ask you about that.

MCCAIN: That's the reason why our economy is in trouble today.

CHETRY: Well, most of our independent economists say that Barack Obama is actually cutting taxes for about 90 percent of Americans. Do you agree with that?

MCCAIN: No, because they are taxes -- many Americans are not paying taxes at all. But the point is, that keeping taxes low and restraining spending, he wants to increase and has voted for consistently increases in spending. He has voted for, in the Senate, raising taxes on people that make as low as $42,000 a year. So he's been all over the map on this, and he has consistently voted to raise taxes as well as payroll taxes, as well as others. And I'm not for that, and that's my record.

CHETRY: I want to ask you about the current financial crisis. We're talking about billion dollar bailouts that the government's funding. We're talking about a growing national debt. Is it realistic to even promise tax cuts right now?

MCCAIN: I think the worst thing you can do is promise tax increases. I think if you increase American's taxes right now, no matter who they are, it will be a harmful blow to an already very, very serious situation. And I am committed to keeping taxes low and restraining spending.

It's not taxes that has caused a lot of the problems. It has been out of control spending. I have fought to control spending. I have fought against earmark and pork barrel projects. Senator Obama has asked for $932 million of earmark projects and pork barrel projects --

CHETRY: Let me just as you --

MCCAIN: I never asked for one.

CHETRY: Because you have made this a centerpiece of your campaign, fighting against earmarks, pork barrel spending. But, your bottom of the ticket, Sarah Palin, the governor of Alaska, also asked for millions upon millions of dollars in earmarks, including in budgets 2008 and 2009.

So, how do you square that?

MCCAIN: Actually, she has cut and vetoed many, many bills. A half a billion dollars worth. She has cut spending, she has returned money to the tax payer. I'm proud of her record as opposing, including the Bridge to Nowhere in Alaska, and she understands very well the necessity of eliminating these earmarks and she's done a great job of vetoing these bills that have come across her desk as governor. She'll do that in Washington. We'll change things and we'll shake them up.

CHETRY: Senator John McCain, thanks for joining us today. Great talking to you.

MCCAIN: Thanks for having me on.