Interview with Chris Wallace on Fox News Sunday

WALLACE: Joining us now to talk about the state of the race with little more than two weeks to go is Senator John McCain.

And, Senator, welcome back to "Fox News Sunday."

MCCAIN: Thanks, Chris, nice to be back with you.

WALLACE: Let's start with where this race stands now, 16 days before the election. According to the latest RealClearPolitics average of national polls, you trail Obama by seven points, 50-43.

And take a look at the latest electoral map from Karl Rove based on public state polls. He has Obama leading in states with 313 electoral votes, 43 more than he needs to win the presidency. You lead in states with 171 electoral votes.

Senator McCain, aren't you in a world of trouble?

MCCAIN: All right, look. First of all, there are polls this morning -- reliable -- Zogby, Rasmussen, Gallup -- all those that show us in the margin of error or somewhat behind. Are we behind? Sure. I'm the underdog.

I've always -- I've been the underdog in a number of races, and we're very happy with the way the campaign is going. I'm very happy with the debate -- went there the other night.

And look, I've been on enough campaigns, my friend, to sense enthusiasm and momentum, and we've got it, and I -- again, I don't have to look at polls, but the polling numbers have closed dramatically in the last few days.

We're going to be in a tight race and we're going to be up late on election night. That's just -- I'm confident of that. I've been in too many campaigns, my friend, not to -- not to sense that things are headed our way.

It's going to be tough. Sure, it's tough. I mean, Senator Obama raised $150 million in -- I understand, during the month of September, completely breaking whatever idea we had after Watergate to keep the costs and spending on campaigns under control -- first time, first time since the Watergate scandal.

And I can tell you this, that has unleashed now in presidential campaigns a new flood of spending that will then cause a scandal, and then we will fix it again.

But Senator Obama has broken it, and he broke his word to me and the American people when he signed a piece of paper when he was a longshot candidate that he would take public financing if I would. He signed a piece of paper.

Then, twice on national television he looked into the camera with Senator Clinton sitting there and said, "I'll sit down and talk to John McCain before I make a decision on public financing or not." He didn't tell the truth.

And finally, there's $200 million of those campaign contributions -- there's no record. They're not reported. You can report online now -- $200 million that -- that we don't know where the money came from -- a lot of strange things going on in this campaign.

The American people should know where every penny came from. They know where every penny of my campaign contributions came from.

WALLACE: Well, let me ask you about the money, because, as...

MCCAIN: Sure.

WALLACE: ... as you alluded to it -- I was going to ask you about it. Obama today announced that he raised $150 million in September. By way of comparison, accepting public financing, you're getting $84 million for the entire campaign.

He's outspending you on advertising 4-1. In the key state of Virginia, for instance, he has three times as many field offices. Is he buying this election?

MCCAIN: Well, I think you could make that argument, but we're not going to let him. We're not going to let that happen.

But what I worry about is future elections, too, not only mine. I worry about -- most about mine at the moment, but what's going to happen the next time around, four years from now? What's going to happen, particularly if you've got an incumbent president, and we no longer stick to the finance -- the public financing, which was a result of the Watergate scandal?

So what's going to happen? The dam is broken. We're now going to see huge amounts of money coming into political campaigns, and we know history tells us that always leads to scandal.

WALLACE: But, Senator, you said in the last debate, and you mentioned it again here today -- you compared it to Richard Nixon's spending in Watergate.

As best -- as best I can -- this is the greatest amount of spending in a presidential campaign since Nixon in Watergate. As best I can tell, he's not doing anything illegal.

And I know the thing you're talking about, which is $200 contributions he's not listing on his website. He doesn't have to.

MCCAIN: No, he doesn't have to. But here's a campaign that pledged full disclosure, change of direction and all of those things, and technology allows us -- we don't have any trouble reporting every penny.

WALLACE: But are you suggesting that there's...

MCCAIN: But I'm not suggesting...

WALLACE: ... anything illegal or improper?

MCCAIN: No, no. I'm saying that history shows us where unlimited amounts of money are in political campaigns, it leads to scandal.

I'm not comparing it with -- I'm saying this is the first since the Watergate scandal that any candidate for president of the United States, a major party candidate, has broken the pledge to take public financing.

We enacted those reforms because of that scandal. We know that we let unlimited amounts of money -- in this case $200 million unreported -- and there's already been stories of people who have made small contributions multiple times and all that.

I'm saying it's laying a predicate for the future that can be very dangerous. History has shown that.

WALLACE: You're behind in the polls. You agree.

MCCAIN: Sure.

WALLACE: You're being badly outspent. How do you turn it around in the final two weeks? What's your closing argument?

MCCAIN: I started turning it around the other night when we challenged Senator Obama's words. He is the most eloquent person I've ever known in politics, but he said he would -- on offshore drilling, he would, quote, "consider."

When he made several other statements that were clearly equivocation - - but you've got to nail it down and pin it down. We have -- did a -- I'm very pleased with what happened in that debate because it helped define the issues with the American people.

And Joe the Plumber -- of course, Joe the Plumber is the average citizen, and Joe the Plumber is now speaking for me and small business people all over America. And they're becoming aware that spreading -- that we need to spread the wealth around -- it's not what small business people want.

And before we go into this business of, "Well, they wouldn't be taxed," et cetera, 50 percent of small business income would be taxed under Senator Obama's plan. That's 16 million small business jobs in America. And that's what Joe the Plumber's figured out.

And finally, could I just say, where are we in America, where a candidate for president comes to a person's driveway, he asks him a question, doesn't like the answer, and all of a sudden he's savaged by the candidate's people -- I mean, savaged by them?

I mean, here's a guy who's a private citizen. What's that all about?

WALLACE: Well, Senator, I mean, I wasn't even going to get into that.

MCCAIN: Yeah. Sure.

WALLACE: But the fact is you brought up Joe the Plumber 21 times in the debate.

MCCAIN: Sure.

WALLACE: Is it the candidate? I don't know that Obama has savaged him. It really has been the media...

MCCAIN: Of course they have.

WALLACE: ... that looked into...

MCCAIN: Of course it's...

WALLACE: ... that looked into Joe the Plumber's history.

MCCAIN: Joe -- Senator Joe Biden attacked him the next day.

WALLACE: Well, he just said, "Give me a break, a plumber who makes..."

MCCAIN: No, no, he attacked...

WALLACE: "... more than $50,000..."

MCCAIN: No, no, he attacked him the next day. We'll -- we could -- you could probably run the clips. You could probably run the clips.

You know what? American citizens ought to be able today to ask a president -- candidate in their driveway a question and not have their whole life and everything...

WALLACE: I think the media did that.

Anyway, I want to ask you about something else.

MCCAIN: Well, he was attacked by Joe Biden. He was criticized by Senator Obama. And the media have attacked him. That's just what's happened.

WALLACE: In your radio address yesterday, you raised the "S" word, socialism.

MCCAIN: Sure.

WALLACE: But you did it indirectly, so let me ask you for some straight talk. Do you think that Senator Obama is a socialist? Do you think that his plans are socialism?

MCCAIN: I think his plans are redistribution of the wealth. He said it himself, "We need to spread the wealth around." Now, that's one of...

WALLACE: Is that socialism?

MCCAIN: That's one of the tenets of socialism. But it's more the liberal left, which he's always been on. He's always been in the left lane of American politics.

That's why he voted 94 times against any tax cuts or for tax increases. That's why he voted for the Democratic resolution, budget resolution, that would impose taxes on -- raise taxes on some individual who makes $42,000 a year.

That's why he has the most liberal voting record in the United States Senate.

WALLACE: But, Senator, when we talk...

MCCAIN: So is one of the tenets of socialism redistribution of the wealth? Not just socialism -- a lot of other liberal and left wing philosophies -- redistribution of the wealth? I don't believe in it. I believe in wealth creation by Joe the Plumber.

WALLACE: But, Senator, you voted for the $700 billion bailout that's being used partially to nationalize American banks. Isn't that socialism?

MCCAIN: That is reacting to a crisis that's due to greed and excess in Washington.

And what this administration is doing wrong, and what Paulson is doing wrong, is not going out and buying up home loan mortgages, home mortgages, and giving people new mortgages at the new value of their home so they can stay in their home.

They're bailing out the banks. They're baling out these institutions.

WALLACE: But you voted for that.

MCCAIN: Of course. It was a package that had to be enacted because the economy was about to go into the tank.

During the -- during the Depression, we had a program to take care -- where they went out and bought homeowners' mortgages, and then over time they even made money as the values of homes began to increase.

If we don't turn -- the housing market was the catalyst -- the greed and excess, and Fannie Mae and Freddie, which some of us proposed legislation to rein in -- the Democrats were in charge of Congress for most six -- for the last couple of years, and they did not act, and so -- and Senator Obama did not act.

But the point is that, of course, when a -- when a -- that's the reason why we have governments, to help those who need help, who can't help themselves, and when time of crisis to step in and do what's necessary to preserve the lives and futures of innocent people.

It wasn't Main Street America that caused this. It was Washington and Wall Street.

WALLACE: Senator, one tactic that you've been using in these final days is robo calls, automated telephone calls into people's homes, and let's listen to one of them. Here it is.

(BEGIN AUDIO CLIP)

NARRATOR: You need to know that Barack Obama has worked closely with domestic terrorist Bill Ayres, whose organization bombed the U.S. Capitol, the Pentagon, a judge's home and killed Americans.

(END AUDIO CLIP)

WALLACE: Senator, back in 2000...

MCCAIN: That is absolutely true.

WALLACE: Can I ask the question?

MCCAIN: No, no. But before you do, that is absolutely true. And I don't care about Mr. Ayres, and old -- and his wife, who was on the top 10 most wanted list. I care about everybody knowing the relationship between the two of them. That's legitimate.

Senator Obama and Bill Ayres served on a board of the Woods Foundation and they gave $230,000 to ACORN. What's that all about? He said that he was just a guy in the neighborhood.

He wasn't just a guy in the neighborhood. We know -- we need to know the full extent of that relationship. That is an accurate robo call.

WALLACE: But Senator, back -- if I may, back in 2000 when you were the target of robo calls, you called these hate calls and you said...

MCCAIN: They worked.

WALLACE: ... and you said the following, "I promise you, I have never and will never have anything to do with that kind of political tactic."

Now you've hired the same guy who did the robo calls against you to -- reportedly, to do the robo calls against Obama and the Republican Senator Susan Collins, the co-chair of your campaign in Maine, has asked you to stop the robo calls. Will you do that?

MCCAIN: Of course not. These are legitimate and truthful, and they are far different than the phone calls that were made about my family and about certain aspects that -- things that this is -- this is dramatically different, and either you haven't -- didn't see those things in 2000...

WALLACE: No, I saw them.

MCCAIN: ... or you don't know the difference between that and what is a legitimate issue, and that is Senator Obama being truthful with the American people.

But let me tell you what else I think you should be talking about and the American people should be talking about. In the debate the other night, I asked Senator Obama to repudiate a statement made by John Lewis, a man I admire and respect and have written about, that connected me and Sarah Palin...

WALLACE: This is the congressman and civil rights leader. MCCAIN: Civil rights leader, American hero -- that connected me and Sarah Palin to segregationists, to the campaign of George Wallace, and even alluded to the bombing of a church where four children -- four children -- were killed. And I asked him to repudiate that statement.

I have repudiated every statement made by any fringe person in the Republican Party. And it has come up from time to time, and it probably will. The fact that Senator Obama would not repudiate that statement, I think, is something the American people will make a judgment about.

That robo call is accurate -- is totally accurate. And there is no comparison between it and the things that were done and said in South Carolina.

WALLACE: I want to ask you about William Ayres. Last may, Bill O'Reilly asked you about Ayres and also about Reverend Jeremiah Wright. And here's what you had to say. Let's watch.

(BEGIN VIDEO CLIP) MCCAIN: This campaign is not going to be about -- in all due respect, about Reverend Wright or Mr. Ayres. It's going to be about vision. It's going to be about a plan of action, for the American people are hurting right now.

(END VIDEO CLIP)

WALLACE: But, Senator...

MCCAIN: And that's exactly -- and that's exactly what the campaign is about.

WALLACE: Senator, let me ask the question.

MCCAIN: Yeah, sure.

WALLACE: But, Senator, according to a New York Times poll this week - - and let's put it up on the screen -- there you can see it -- 62 percent of independents now think you're spending more time attacking Obama than explaining what you would do as president.

Haven't you gone on the attack against Ayres because you're behind?

MCCAIN: Facts are stubborn things. Senator Obama has spent more money on attack ads against me than any campaign in history.

In all due respect to that kind of poll, I know what kind of campaign we're running. I know what we're saying at the rallies. We need to keep Americans in their home. We need to create jobs. We need to keep taxes low. We need to restore this economy. That's what this campaign is all about.

And that's why we're going to do well, and that's why we're going to win. Of course, Mr. Ayres is an issue. Of course, there's other -- ACORN is an issue. There's a number of issues that are out there.

But what Americans want to hear is what we're telling them. And that is we're not going to spread the wealth around. We don't think we need to do that. We're going to create jobs. We're going to have Joe the Plumber create jobs for America. And we're going to show them the way to do it, by keeping taxes low and restoring our economy.

And we can talk about this process stuff for the entire time we're together. I'm glad to do that. But my message to the American people is I've got a plan to get our economy out of the ditch, and that's what we're going to do.

WALLACE: All right. Senator McCain, we need to take a break here.

MCCAIN: Sure.

WALLACE: But when we come back, we'll talk issues, we'll talk process, we'll talk Sarah Palin and what America will look like under President Obama or President McCain. Back from Ohio in just a moment.

(COMMERCIAL BREAK)

WALLACE: And we're back now on the campaign trail in the battleground state of Ohio with our exclusive guest, Senator John McCain.

Senator, on another Sunday talk show, General Colin Powell has just said that he's going to vote for Barack Obama. He says he meets the standard of being a successful president.

He says that Senator McCain is unsure about how to deal with the economy, and he does not feel that Sarah Palin is ready to be commander in chief. Your reaction?

MCCAIN: Well, I've always admired and respected General Powell. We're longtime friends. This doesn't come as a surprise.

But I'm also very pleased to have the endorsement of four former secretaries of state, Secretaries Kissinger, Baker, Eagleburger and Haig. And I'm proud to have the endorsement of well over 200 retired Army generals and admirals.

But I respect and continue to respect and admire Secretary Powell.

WALLACE: Just briefly, though, one of the key lines of your campaign has been that Obama's not ready to lead. Here is Colin Powell saying he is.

MCCAIN: Well, again, we have a very -- we have a respectful disagreement, and I think the American people will pay close attention to our message for the future and keeping America secure.

WALLACE: If Barack Obama is elected president with bigger -- and it looks likely that that's what's going to happen -- Democratic majorities in the House and the Senate, how will things be different in this country by the end of his first term?

MCCAIN: Well, we know that the majority leader, Harry Reid, and Speaker Nancy Pelosi, are already planning on new big spending packages, tax increases, already, so I -- I think you'll see another spending spree, and I think taxes will go up, and I don't think that it will be good for America.

I think we could drive -- and of course, as we know, protectionism is not good for America. Senator Obama believes that in many ways -- certainly, when he said he wanted to unilaterally renegotiate the North American Free Trade Agreement.

So I worry about the economy of the country, particularly at this difficult time.

WALLACE: You say that Obama's tax plan amounts to welfare because he'll give refundable tax credits -- in effect, checks -- to 40 percent of Americans who don't pay any income tax.

MCCAIN: Federal income tax, yes.

WALLACE: Right.

MCCAIN: Yes.

WALLACE: Obama points out that no one will receive one of these refundable checks if they aren't at least paying payroll taxes, Social Security taxes.

And your health care plan would also give these refundable checks to that same 40 percent who don't pay income taxes, federal income taxes. So if his plan is welfare, isn't yours?

MCCAIN: Well, it's -- the difference is that we need to provide -- it's a fundamental requirement to give people the chance to have affordable and available health insurance, or the option is to go into a big government program such as we have in Canada, in England and others.

Americans right now are without health insurance. They need to get it.

WALLACE: Let's talk about the first 100 days of a McCain presidency. You say that it would not be politics as usual in Washington. Be specific. What would you do in that first 100 days to show there's a different sheriff in town?

MCCAIN: Reach out to Republicans and Democrats alike, make sure that everybody's included in any plans and programs, and obviously getting our economy back on track is the -- is the prime and first and -- through tenth challenge we have, sit down across the aisle, outline an agenda that we can work together on.

That's been my record of reaching across the aisle, working with Democrats, putting people in a position of responsibility that are the best qualified, whether they're Republican or Democrat alike.

The approval rating of Congress even sunk lower under Democrat majorities in the House and Senate. They are ready now, I'm convinced, because they're patriotic Americans, to sit down and work together. That's the key to it.

WALLACE: But you...

MCCAIN: The key to it is working together.

WALLACE: But, Senator, you just talked about the Democratic agenda...

MCCAIN: Yes.

WALLACE: ... and you call it a far left agenda. I think you'll agree the Democrats are likely to increase their hold in both the House and Senate.

MCCAIN: Afraid you may be right. They are -- the Democrats had a majority in the House and Senate when Ronald Reagan came to office in 1981.

WALLACE: But given how difficult...

MCCAIN: He sat down with Democrats and Republicans together, and they worked together.

WALLACE: But given how difficult...

MCCAIN: And we turned the American economy around rather dramatically, but it took time.

WALLACE: But given how different your agendas are on the economy, on health care, on taxes, on foreign policy, wouldn't there just be more gridlock?

MCCAIN: Ronald Reagan's agenda was very different from that of Tip O'Neill's. Yet Ronald Reagan and Tip O'NEILL sat down together across the table and sat down and worked out a way to save Social Security for quite a period of time.

Americans are ready for that. They want it. Every place I go -- well, it's not just every place I go, but, I mean, it's very clear Americans are tired of the gridlock in Washington. They want it broken.

I will give the Democrats and Republicans a seat at the table and we'll work together. The gridlock in Washington hasn't prevented me from working with Ted Kennedy and Russ Feingold and Byron Dorgan and Carl Levin and many others. It won't keep me from working for the common good with them. It won't keep me from working with them as president.

Only this time, obviously, I'll have a more direct connection with the American people.

WALLACE: Your running mate, Governor Palin, appeared last night on "Saturday Night Live." Let's watch...

MCCAIN: She did a great job.

WALLACE: Let's watch a clip.

(BEGIN VIDEO CLIP)

ALEC BALDWIN: You can't let Tina go out there with that woman. She goes against everything we stand for. I mean, good lord, Lorne. They call her -- what's that name? They call her cara -- cara -- what do they call her again, Tina?

SARAH PALIN: That would be "Caribou Barbie."

ALEC BALDWIN: "Caribou Barbie," thank you, Tina.

(END VIDEO CLIP)

WALLACE: But while people are interested in Governor Palin, there seem to be growing doubts about her qualifications to be vice president.

According to the latest Fox News/Opinion Dynamics poll, people now say Palin makes them less likely to vote for you by a margin of 40 percent to 32. Back in September, those numbers were exactly reversed.

Senator, as a cold political calculation, hasn't Governor Palin become a drag on your ticket?

MCCAIN: As a cold political calculation, I could not be more pleased. She has excited and energized our base. She is a direct counterpoint to the liberal feminist agenda for America.

She has a wonderful family. She's a reformer. She's a conservative. She's the best thing that could have happened to my campaign and to America. And when I see the enthusiasm and I see the passion that she has aroused, I am so happy.

And the fact is Americans are also beginning to learn that she ran a state. She's an executive that has 24,000 employees. She took on a governor of her own state, of her own party.

She knows energy better than certainly most people in Washington. She's had executive experience. She has knowledge and background, and she also has a compassion and understanding of special needs families. So I couldn't be happier.

WALLACE: Finally, I want to ask you about the personal side of this campaign for you and your family. The New York Times ran a very rough piece about your wife Cindy yesterday in which it said, among other things, that she aspires to be Princess Diana, which I guess means that you would be Prince Charles.

But seriously, look, it was a tough article. I wouldn't like it written about my wife. What's your reaction and her reaction to the story?

MCCAIN: I didn't read it. I heard about it. And I suggested that she not do that either.

WALLACE: Do you agree with your wife's lawyer that if they're going to go into these kinds of matters that the New York Times should investigate Barack Obama's drug dealer?

MCCAIN: I just want to go on with this campaign. Most Americans want in these difficult economic times to see who has a plan of action for getting our economy out of the ditch, helping working families, men and women.

I think I made a very good point of that, that I have that plan, in the debate the other night. I think it's being reflected in the polls. I know it's being reflected in our campaign events. And I'm very pleased where we are.

And I love being the underdog. You know every time that I've gotten ahead, somehow I've messed it up.

(LAUGHTER)

WALLACE: So let's get right to the finish line, huh?

MCCAIN: Glad to be...

WALLACE: Let me ask you about the media, though, because for years it was said that you courted the mainstream media. In fact, you used to laugh yourself and say that they were your real base, the media. What have you learned...

MCCAIN: That was said at one of those dinners where you're supposed to be funny.

WALLACE: What have you learned about the mainstream media in this campaign?

MCCAIN: Oh, listen, I -- if I complain about anything, my friend, a guy that stood fifth from the bottom of his class at the Naval Academy that now has the nomination of the party of Abraham Lincoln and Theodore Roosevelt and Ronald Reagan, I'd be crazy.

I'm honored and humbled. This is the most exciting experience that anybody could have. I'm just grateful.

WALLACE: When people saw you at the Al Smith dinner and they saw you on "Letterman," a number of people this week said, "Where's that John McCain been," that, you know, "There's the funny, unplugged John McCain," and that you've been too bottled up by your campaign. Do you feel that at all?

MCCAIN: Campaign rallies are not for stand-up comic routines. Campaign rallies are to tell people what you're going to do for them and for America and draw the differences between ourselves and our opponents.

It's not an easy business. It's not beanbag. But it is exhilarating. It's exciting. And I cannot tell you how proud I am at the -- at the support we have and the enthusiasm we're seeing.

WALLACE: As we said at the beginning of this interview, you are behind in this race, but you are a fighter. You have been your whole life.

Have you considered -- have you even dealt in your mind with the possibility that you could lose, and could you live with that? MCCAIN: Oh, sure. I mean, I don't dwell on it. But look. I've had a wonderful life. I have to go back and live in Arizona, and be in the United States Senate representing them, and with a wonderful family, and daughters and sons that I'm so proud of, and a -- and a life that's been blessed.

I'm the luckiest guy you have ever interviewed and will ever interview. I'm the most fortunate man on earth, and I thank God for it every single day.

WALLACE: So if the world turns an unfortunate way on November 4th, don't feel sorry for John McCain?

MCCAIN: Don't feel sorry for John McCain, and John McCain will be concentrating on not feeling sorry for himself.

WALLACE: And you might just be president.

MCCAIN: You never know.

WALLACE: Senator McCain, we want to thank you so much for coming and talking with us 16 days before the election. Safe travels in the final two weeks of the campaign, sir.

MCCAIN: Thank you. Thanks for having me on again, Chris. I love our spirited discussions.

WALLACE: Me too, always.