Interview with Peter Cook of Bloomberg's "Money and Politics"

COOK: Senator Obama, thank you very much for joining us here on Bloomberg today.

OBAMA: Thank you so much for having me.

COOK: I want to talk about the economy, but I've got to begin with some news of the day coming out of Washington. The Supreme Court today - this is a very important ruling with regard to the handgun law in the District of Columbia. The Supreme Court is shooting that down today five to four. Your reaction to that decision.

OBAMA: Well, you know, what I've consistently said is that I believe that the 2nd Amendment means something, that it is an individual right, and that's what the Supreme Court held. So I agree with that aspect of the opinion. What I've also said is that every individual right can be bound by the interests of the community at large. And the Supreme Court agreed with that as well.

It looks to me that the D.C. handgun ban overshot the runway, that it went beyond constitutional limits. But it doesn't mean that local communities can't, you know, pass background checks, that they can't make sure that they're tracing guns that have been used in crimes to find out where they got them from. So there's still room for us to, I think, have some common-sense gun laws that are also compatible with the 2nd Amendment. And the key is to try to stop using this as a wedge issue and let's figure out an intelligent way where we can stop having kids being murdered on the streets of American cities while making sure that law-abiding gun owners are protected in their rights.

COOK: Sir, there are a lot of Democrats here who are going to say, the Supreme Court got this one wrong; you're not in that camp.

OBAMA: I'm not in the camp of their overall reasoning. Now, how they applied it and how they will apply it in the future I think is the key question. I think it's very important for everybody to understand that the Supreme Court ruling did not say that you can't have common-sense gun laws; it just said that this particular case violated a basic principle that people do have a right to bear arms.

COOK: All right. One other piece of news from today - President Bush, after this declaration from North Korea on its nuclear inventory today, taking the step of asking Congress to remove North Korea from the list of state-sponsors of terrorism. Is that a wise move?

OBAMA: Well, I think that it is going to be important for Congress to verify what's in this declaration to make sure that there's a full accounting of not only the current nuclear program that North Korea has - both in terms of plutonium and enriched uranium - but also some of the proliferation issues. It appears that North Korea may have, for example, provided technology to the Syrians to build a nuclear reactor. We need to know all of that information.

Assuming that information is there, then this is an important step in terms of us dealing with not just North Korea, but putting back together a non-proliferation strategy that's going to be so important for our long-term safety and security. But Congress has to review it. We have to make sure the North Korea abides by the future aspects of this agreement.

I think it also, though, underscores the importance of direct talks. And keep in mind that when we weren't talking to North Korea that they were advancing their nuclear program. Once we began direct talks, we saw the break route that is bearing fruit today. And that I think is a principle that we've got to apply to other countries as well.

COOK: All right. Let's shift to the economy. You've been on this tour for about two-and-a-half weeks talking about the economy. You had the summit today with CEOs, academics, and others. First of all, today, we've got another stock sell off. We've got questions about the economy going forward, energy prices at these incredible levels. Are you sure you really want to be president of the United States under these circumstances?

OBAMA: (Chuckles.) Right. The - well, look. What we heard in the panel that I put together today is, these are moments of extraordinary challenge, but also extraordinary opportunity. I mean, you're absolutely right; we've got a convergence of forces. The housing market collapsing is a consequence of the sub-prime lending crisis and the lack of good oversight in that market. We've got skyrocketing energy prices partly as a consequence of rising demand in places like China and India. The Fed is in a tough situation because it wants to control the inflation that's being caused by energy at the same time as it's still trying to restart the economy.

COOK: And so they signaled yesterday that perhaps they might be preparing to raise interest rates. Would that be a mistake?

OBAMA: Because of the concern. Well, they're - look, I don't tend to comment on what the Fed does. It's an independent agency. It should be focused on what's best for the economy. But what I do know is this, that if other branches of the government, if Congress and the presidency are implementing smart plans, that will take some pressure off of the Fed so that they can focus on fighting inflation and they're not carrying the entire burden in terms of stimulating the economy.

So here are some concrete things we need to do. Number one, I think we have to have a second round of stimulus rebates that will pump the economy. We know that consumer confidence is at all-time lows. And we've got to give people some sense that they can absorb these rising costs in gas, food, medical care. I want to pass a permanent tax cut, $1,000 per family per year; 95 percent of Americans would benefit from this tax cut.

COOK: It would cost about 80 to $85 billion dollars a year?

OBAMA: It's a substantial cost. We can pay for it by closing some of the loopholes that have outlived their usefulness, really seriously dealing with some of these off-shore profits that are not currently being taxed, put money in people's pockets so that they can start spending again.

And then we've got a bunch of structural problems that we talked about in the competitiveness summit today, energy at the top of the list. We are going to have to get serious about reinventing the automobile, reinventing our electricity grid. I want to spend $150 billion over 10 years in solar, wind, biodiesel, plug-in hybrids, conservation, energy efficiency. If we do those things, if we get that right and we create a more efficient health system, as I've proposed, and we fix our school system, those can be the building blocks of long-term competitiveness and we can create jobs for the future. But we're going to have some short-term pain.

COOK: Well, there are a bunch of areas I'd love to follow up on, but let's follow up on one specifically, the auto industry. You had the GM CEO Rick Wagner here. He said directly to you some of the things the government could do to help the auto industry right now: pay money, spend federal dollars on basic research, also incentives to allow Americans to buy the cars of the future. First of all, are you prepared to do that? Are you prepared to go even further? Some people are talking about perhaps federal dollars for this industry, the loan guarantees that Chrysler wanted back in the '80s.

OBAMA: Well, I think that let's start with those two things that you mentioned at the top. I do think that it's going to be important for the federal government to invest. And I'm glad, for example, that John McCain also wants to invest in technology around electric cars.

I think a $300 million bounty is the wrong way to go about it. You know, when we decided we were going to send a man to the moon, we spent in today's dollars about $100 billion not $300 million. We're going to have to make a serious investment in basic research and technology around electric cars, plug-in hybrids and our electricity grid so that all those things are fitting together.

I do think that incentivizing consumers so that they can absorb some of the higher costs on the front end of more fuel-efficient cars, even though they'll get that money on the back end in less gas expenditures, I think that's important as well. If we do those two things, I think that the auto industry here in the United States is ready to transition. They know they've got to do it. They're already making some investments. We need to provide them with some help. And if we do, then I think they can compete with anybody.

COOK: Sir, as you and I are talking, I'm hearing in my ear the AFL-CIO has officially endorsed you; organized labor, of course, part of the equation with the auto industry. Does organized labor have some responsibility for the problems in the auto sector as well?

OBAMA: Well, look, ultimately, management is in charge of the auto industry and I think some poor decisions were made in the past. I think you've got some smart, enlightened auto executives who are in place now and recognize that they need to build the cars of the future.

I think what's happened in the UAW and all industrial unions is a recognition we now are in a global competition and that we can't have the old adversarial relationship between management and labor. There's got to be cooperation. Labor is entirely justified to say that they want to share in the rewards when companies are profitable. But labor, I think, also recognizes that there won't be any rewards if companies go under or jobs are being shipped overseas. So I think in this new global economy, there is a natural corrective if labor is not working cooperatively, because jobs will be lost. And they've got every incentive to make sure that these companies are successful.

COOK: Sir, just a couple moments left here. I want to let you have your chance to make your pitch to those people in the business community who see your record, your experience. And they have real questions about whether Barack Obama should run the world's largest economy. And if he does run the world's largest economy, what it means for their business?

OBAMA: Well, look, I've now had two successive days meeting with some of the top CEOs in the country. And if you talk to them, I think they'll tell you they came away with enormous confidence about my ability to move this economy in a better direction and to bring all the parties together to do what needs to be done. If you look at my track record, I've got a terrific relationship with the business community in Chicago. I always had a good relationship with the business community in Illinois. And it was based on the fact that I listen and I learn and that I don't come with a particular ideological prescription in terms of how we should move forward.

Now, I'm very honest with CEOs. I'll say, your individual income tax will probably go up. We're going to roll back the Bush tax cuts back to the levels they were in the 1990s when well-to-do folks like myself and you were doing pretty well. But when it comes to business growth, when it comes to making sure that we are stabilizing our deficit, that we're not running up another trillion or 2 trillion or $4 trillion worth of national debt, when it comes to being serious about reining in inflation, when it comes to making sure that we're getting a better bang for our federal buck so that we're rooting out waste and corruption in the federal government, and then making some serious investments in energy, education, science and technology, those are the recipes for long-term economic growth.

And you know, what's interesting is there is a consensus among business, among labor, among academics about what needs to be done. What's been lacking is leadership. And that's what I intend to provide as president.

COOK: Our latest poll has you up 15 points over John McCain. Is this your race to lose?

OBAMA: You know, I don't believe in polls. I didn't believe them when I was down 20 or 30 last summer and I don't believe them when I'm up 15. My job is to present a vision for how we can move this economy forward, how we can grow the economic pie, and have continued upward mobility. And that's the key.

The American dream has always been premised on what's good for business is good for America because everybody has got a chance to advance up that economic ladder. And so what we have to do is to restore that sense of bottom-up economic growth in this new global environment, a leaner, meaner America but one that, if it's competing, benefits everybody. If we do that, I have great confidence in our future.

COOK: Senator Obama, we thank you very much for joining us here on Bloomberg.

OBAMA: I really enjoyed it. Thank you.