Interview with Larry King of CNN

L. KING: Republican presidential candidate John McCain is here right now on LARRY KING LIVE.

Good evening.

Republican presidential candidate John McCain is my guest tonight.

We spoke earlier today in Tampa, Florida in between campaign stops and before Barack Obama's paid TV address. But we did speak about that and why he's so confident about Sarah Palin -- and a whole bunch of other things.

I asked him, by beginning, if all this is taking its toll and wearing him out. (BEGIN VIDEOTAPE)

MCCAIN: No. It's -- this is the most exciting time. We're getting into the last few days. The crowds are bigger. There's more enthusiasm. The polls close and the...

L. KING: Are you anxious?

MCCAIN: Well, no. You -- you know, you put one foot ahead of the other. But you've just got to keep your eye on the ball and know that every hour now is precious, because of the rapidity in the news cycle and you know, getting those undecided voters that I think are going to decide this election not only...

L. KING: Are you worried?

MCCAIN: ... Not only on your side, but out.

L. KING: Are you worried?

MCCAIN: Well, I don't think it's...

L. KING: It would be logical to...

MCCAIN: I don't think it's worried. I think, obviously, I know we're still the underdog. We're now 2 or 3 or 4 points down. And we've got six days to go to make that up (INAUDIBLE). It's not a matter of worry. It's just -- you know, you and I have been together long enough. You know I love the underdog status. I just want to leave that status at the time the polls close.

(CROSSTALK)

(LAUGHTER)

L. KING: ... Be favored.

MCCAIN: Yes.

L. KING: All right. Senator Obama had a 30-minute ad buy tonight.

MCCAIN: Yes.

L. KING: It ran right before we went on the air.

MCCAIN: Yes.

L. KING: Does that make it hard for you, the amount of money being spent against you?

MCCAIN: Well, let me tell what's -- let me...

L. KING: Frankly?

MCCAIN: Frankly, what's disturbing about it is that he signed a piece of paper back when he was a long shot candidate. And he signed it. He said I won't -- I will take public financing for the presidential campaign if John McCain will. I mean it's a living document.

He didn't tell the American people the truth. And then twice he looked into the camera when he was in a debate with Senator Clinton and said, I'll sit down and negotiate with John McCain before I decide on public financing.

Well, he didn't tell the American people the truth. He never had any -- I'm still waiting for the call.

So -- and what's happened now is that there's hundreds of millions of dollars that are undocumented credit cards. And we don't know where they came from. We don't know who contributed it.

And all my career, I've been trying to increase transparency, accountability and bring curbs to the flow of money. You tell me the next time now a presidential candidate will take public financing when Senator Obama has shown you can raise millions of dollars and...

L. KING: So...

MCCAIN: So we don't know who those donors are. Their response will be, oh, well, they're just small donors. We don't know that.

L. KING: If it...

MCCAIN: We don't know that because they're undocumented.

L. KING: All right. If it wasn't...

MCCAIN: We document every penny that (INAUDIBLE)...

L. KING: If it wasn't a change of mind, what are you suspicious of?

MCCAIN: What am I suspicious...

L. KING: I mean you make it sound like you're suspicious of something.

MCCAIN: Well, whenever you have hundreds of millions of dollars undocumented in campaign contributions -- these are the "small contributions" -- of course it opens itself up to question, because the one thing we need in financing of campaigns and contributions is transparency.

Senator Obama has not told the American people the truth. So therefore he now is able to buy these half hour infomercials and, frankly, is going to try to convince the American people, through his rhetoric, what his record shows that he's not.

L. KING: You told me some time ago, like back in February, that what you wanted this race to be was clean. You wanted the race solely based on issues.

What happened?

MCCAIN: Well, the first thing that happened is that I asked Senator Obama urgently and repeatedly to come and do town hall meetings with me, the way Jack Kennedy and Barry Goldwater had agreed to do before the tragedy of Dallas intervened.

When you're on the stage with someone and you're -- every few days, and you're having to talk to the American people directly, that changes the tenor of an entire campaign. You know that. You've seen it and I've seen it.

So he refused. So he refused to do that.

Now the fact is that Senator Obama now has paid more for negative advertising against me than any presidential campaign in history -- in history. And...

L. KING: And you haven't done that?

MCCAIN: Of course. We have run ads that point out his record and also point out his associations. And I still think -- you know, what we're watching now, a major newspaper has a tape that apparently has Mr. William Ayers in it. I don't know if it does or not. That's the allegation.

But that newspaper and their parent, the Tribune Company, and the Obama campaign refuse to release that.

Shouldn't the American people know about that?

At least they should have full information.

L. KING: Speaking of newspapers, there is the "L.A. Times."

MCCAIN: Yes.

L. KING: They apparently -- your campaign says that they're suppressing videotape of a 2003 banquet when Barack Obama praised Palestinian activist and scholar, Rashid Khalidi.

What's this all -- what is this?

MCCAIN: Why shouldn't they...

L. KING: Why would the paper suppress this?

MCCAIN: I have no idea. If they have the tape, they ought to make the American people aware of it, let them see it and make their own judgment. Frankly, I've been in a lot of political campaigns -- a whole lot. I've never seen anything like this, where a major media outlet has information and a tape of some occasion -- maybe it means nothing. Maybe it's just a social event. I don't know.

But why should they not release it?

And why shouldn't the Obama campaign want it released? L. KING: Is this Palestinian some sort of terrorist?

MCCAIN: We know that at that time, the PLO was a terrorist organization.

L. KING: He was PLO?

MCCAIN: Yes. That's -- that's what the allegation is, Larry. I haven't seen the tape. So -- but we should see the tape to make it -- to make the American people make a judgment.

(END VIDEO TAPE)

L. KING: CNN, by the way, has fact checked the allegations the McCain-Palin ticket has made about Rashid Khalidi and Barack Obama's association with him.

In a 2004 "Washington Times" story, Khalidi denied ever being a spokesman for the PLO. He has been an activist for Palestinian causes and a critic of U.S. policy toward Israel. He currently is a scholar at Columbia University.

Eight years ago, Khalidi did host a political fundraiser for Obama. Obama has described him as a former neighbor and university colleague in Chicago.

However, CNN's fact check team notes the two men strongly disagree over the Israeli-Palestinian issue and there's no evidence of a continuing political relationship.

More with John McCain and what he thought about Sarah Palin being so -- or if so -- controversial, next.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

MCCAIN: Now I'd like to give you a little straight talk. We need to drill now and we need to drill (INAUDIBLE). My friends, I will bring troops home. I'll bring them home with victory and honor. I've been tested, Senator Obama hasn't. I'm not afraid of the fight, I am ready for it.

(END VIDEO CLIP)

(BEGIN VIDEOTAPE)

L. KING: OK. You're hot and heavy in these red states. You're -- the final week. You're in Florida, Virginia, North Carolina, Ohio, Colorado, and New Mexico. I think all those states went for George Bush four years ago.

What's -- why would these be the states you have to contest?

MCCAIN: Well, they are -- we're within margin of error. Look, this is a tough campaign. As you know, we've come from a long way back and we're now very close. But those are contested states. And I think we can win in New Hampshire. I have such a long relationship there that -- and that was a -- previously a state that didn't -- that President Bush didn't get.

But these are contested states. I mean, there's no doubt, we've got to hold them in order to win.

L. KING: Senator, are you hampered, frankly, by the Bush record?

Be honest.

MCCAIN: Well, you know, I think that that's a very intelligent campaign tactic on the part of the Obama campaign. Moveon.org a long time ago ran the ads, you know, President Bush and I together.

But I think that the American people realize that I'm very different, in many ways, whether it be spending or the conduct of the war in Iraq or climate change or the treatment of prisoners or a number of other issues.

But, look, I think that any campaign tactic that they want to use that's acceptable to the American people, it is certainly their right to do that.

L. KING: But I mean do you think that's the reason that it's close in states that he won?

MCCAIN: I think -- no. I think it's close in states that he won because most of those states have been back and forth, as you know. Ohio -- the last candidate to lose Ohio and still achieve the presidency was John F. Kennedy. So, it's gone back and forth between the winners. And Ohioans, they get to see a lot of candidates. And the same thing is true of Pennsylvania, to a degree. You know, the states we're talk -- Florida, my God. We all remember Florida in 2000.

So these have been traditionally battleground states.

L. KING: Did you think your vice presidential nominee would be as controversial as she is?

MCCAIN: You know, I didn't think she would be so controversial. But I've got to tell you, every time I'm around her, I'm uplifted. This is a solid, dedicated reformer, a fine governor -- the most popular governor in America. She ignites crowds in a way that, I've got to be honest with you -- and I'm not an immodest person. But, I haven't seen a candidate ignite people the way that Sarah Palin has.

I love her family. And it's just -- it's been a great joy for me to be -- to have her with me.

L. KING: Are you ticked, for want of a better term, about the discord reported between her camp and your camp?

MCCAIN: No. You know what happens with these things.

First of all, I have about 5,000 quote, "top advisors," that can be quoted by the media. But we get along fine. Sarah's a maverick. I'm a maverick. No one expected us to agree on everything.

Look, I'm going to have to go up -- you know, I'm against drilling in ANWR, OK?

I know that I'm going to have to go up to ANWR and look at it again after I'm elected because Sarah will drag me up there.

We have disagreements on some specifics. But we share the same values, the same principles, the same goals for this country. And I'm so proud. She's a reformer. Larry, she took on a governor of her own party after she thought that wrongdoing was going on. That's -- that's the kind of person she is.

L. KING: OK, a fair question.

MCCAIN: Sure.

L. KING: You're president of the United States...

MCCAIN: Anything is a fair question.

L. KING: You're president of the United States.

MCCAIN: Yes.

L. KING: You're flying over the Pacific between nowhere and nowhere. There's an attack on the United States.

How much confidence do you have in Vice President Palin?

MCCAIN: Total.

L. KING: Total?

MCCAIN: She has the instincts, she has the -- she shares my world view. She has -- look, I would remind you that there was an obscure governor from Arkansas that, not too many years ago, that gained the presidency. And he had no national security experience. He would never match up, as much as I love Bush I, with him on national security. We had just won the Gulf War.

Look, Sarah Palin understands these issues. She understands them very well. And frankly, with a lot of conversations that I've had with her, she's an incredibly quick study.

L. KING: So there would be no question in your mind that she could take over?

MCCAIN: She not only would take over, she would inspire Americans. That's what I think she would do. She would unite the country in a time of crisis.

L. KING: And you like her?

MCCAIN: And, by the way, I don't like this comment about me being dying. We don't want to (INAUDIBLE)... L. KING: I didn't say dying. I said you're over Pacific.

MCCAIN: Oh, excuse me.

L. KING: OK?

You're not dying.

MCCAIN: Excuse me. OK.

L. KING: You're over the Pacific.

MCCAIN: OK. I'm over the Pacific.

L. KING: God, that we don't want.

MCCAIN: Not in communication.

(LAUGHTER)

(END VIDEO TAPE)

L. KING: We'll have more with Senator McCain. He rips into Barack Obama's plans for the economy, right after this.

(COMMERCIAL BREAK)

L. KING: Before we get back with Senator Obama, John King joins us now. He's -- John King -- what did I say?

Obama. All right. It's Senator McCain. By the way, they're becoming intertwined.

John King joins us now with the latest from the campaign trail -- John, what -- where is all this going?

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: Well, Larry, if you look at the Electoral College map right now, we've made some changes today that tilt it even more in Senator Obama's favor.

The switch we made today -- most significant, we leave Colorado. It was a toss-up. Nine electoral votes. We made it blue. That would be leaning Democrat.

We also took Indiana from leaning red McCain, 11 electoral votes, made that one a toss-up.

The bottom line is this. With five days of campaigning left, when the candidates wake up tomorrow, we have Obama with 286 electoral votes. That's enough. It takes 270 to win. So McCain has to not only win all these gold states, Larry -- those are the toss-up states -- he has to not only win all of those, he would have to take something big away on the blue side, like, say, Pennsylvania, where he has been focusing. Twenty-one electoral votes in Pennsylvania.

But let me show you a few new numbers that will show you just how hard the challenge is for Senator McCain -- you might say how steep the hill is.

First, why did we switch Colorado over?

Well, we switched Colorado, in part, because of our new poll that shows Barack Obama winning out there, 53 percent to 45 percent. So we are leaning that state blue now -- a state that George W. Bush won twice.

Now, let's come over here, Larry. You remember how many times in the past couple of election cycles that we talked about the importance of Florida. Well, it is still a toss-up state. But look at this. Barack Obama leading heading into the final days, 51 percent to 47 percent.

And as I take the poll graph and get rid of it, I want to show you why. He's winning huge down here, Miami and the Gold Coast, an area you know very well, Larry.

Democrats always win down there, but Obama is winning with a huge margin. He's also winning 70 percent to 29 percent -- those are blow out numbers -- among non-whites in the State of Florida -- African- Americans and Latinos. There's a growing Latino population -- Cubans, Puerto Ricans, from Mexico and further down in Central America, as well -- 70 to 29. Larry. Those are blowout numbers there.

One last state we'll look at, when we -- as we watch Florida unfold -- is the State of Virginia here. John McCain's senior adviser told me today they can't get to 270 without Virginia. Well, Barack Obama enters the final days with a 9 point lead, 53 percent to 44 percent. And here, Larry, is why. You win by winning where the people live. They live in Northern Virginia and the Washington suburbs. That's where the growth is. Barack Obama is winning huge there.

And also significantly, he is winning down here in Southeast Virginia. African-American populations down here in Hampton Roads and in Norfolk, but also military communities down here -- naval bases down this way, military retirees. Barack Obama winning by double digits down here, as well.

There's still some time for Senator McCain, Larry, as you interview him for tonight's show. He says he's the underdog and he will fight back. But the map is tilted in a way that makes his challenge very significant -- Larry.

L. KING: Boy -- boy, he sure seems up against it.

J. KING: That's a very fair way to put it. There's time, but he has to be perfect in the final days -- perfect.

L. KING: More with John McCain on Sarah Palin, the economy and his beef with Barack Obama, right after this.

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

L. KING: We're back with Senator John McCain.

We're, by the way, at the University of Tampa, one of his many stops in Florida today, as we are in the waning days of this ferocious campaign.

All right. In the area of...

MCCAIN: Could I just mention one thing before we -- we, Sarah Palin?

We're one team. We're together. You're going to have -- with all the advisers and counselors and all that, there's always a little friction within different camps and all that.

L. KING: But your camp has been criticizing her.

MCCAIN: Oh, yes. Yah, you know, but it's just...

L. KING: You let that go?

MCCAIN: It's just nonsense. It's nonsense. And we've put out -- you know, I've said to everybody, look, if anybody has a complaint, take it to me or Sarah. But our relationship and our teamwork couldn't be -- I couldn't be happier.

L. KING: Do you -- you don't believe Barack Obama is a socialist, do you?

MCCAIN: No. But I do believe -- I do believe that he's been in the far left of American politics. He has stated time after time that he believes in quote, "spreading the wealth around." He's talked about courts that would redistribute the wealth.

He has a record of voting against tax cuts and for tax increases. And I don't think there's any doubt that he would increase spending and he would -- and sooner or later, we would be increasing taxes.

There is no doubt in my mind that that's what his record -- 94 times he voted to cut taxes -- against tax cuts and for tax increases. He voted for -- and that's what matters, not rhetoric -- to raise taxes on individuals making $42,000 a year.

L. KING: Concerning spreading the wealth, isn't the graduated income tax spreading the wealth?

MCCAIN: The graduated income tax...

L. KING: If you and I paid more so that Jimmy can get some for him or pay for a welfare recipient, that's spreading the wealth.

MCCAIN: Well, that's spreading the wealth in the respect that we do have a graduated income tax. That's a far cry from taking from one group of Americans and giving to another. I mean, that's dramatically different.

Senator Obama clearly has talked about, for years, redistributive policies. And that's not the way we create wealth in America. That's not the way we grow our economy. That's not the way we create jobs.

And when small business people see that half of their income -- half of the income of small businesses is going to be taxed by Senator Obama, then they're very upset about it.

L. KING: He says it's only the personal income tax. If you run a small -- if you make $250,000 or more as a personal income, not a business income, that's where he's...

MCCAIN: And that's...

L. KING: ...he would increase your taxes.

MCCAIN: And that's where his folks just reduced it to $200,000. And then Senator Biden yesterday said $150,000. And the fact is that if "Joe the Plumber" is able to buy the business that he works in, the guy that he buys it from is going to see an increase in capital gains taxes. They're going to see an increase in payroll taxes. They're going to see -- if he reaches a certain level -- an increase in his income taxes. And that's what got people concerned. That's what's got "Joe the Plumber" upset.

L. KING: But doesn't taxing...

MCCAIN: He wants to redistribute the money.

L. KING: Doesn't taxes pay for services?

MCCAIN: Taxes pay for services...

L. KING: I've got taxes.

MCCAIN: But do we want -- taxes pay to keep our government secure, to help those who can't help themselves and other functions of government...

L. KING: Right.

MCCAIN: ...which by the way, expanded by some 40 percent in the last eight years and gave us a $10 trillion debt...

L. KING: Under Bush.

MCCAIN: And the last two years under Democrat majorities in the House and Senate. But that's the job of government.

But it is not the job of government that I believe in that would take a group of Americans who have some money and say, we're taking your money and we're giving it to others -- this 95 percent tax cut he's talking about for 95 percent of Americans. Forty percent of Americans pay no income tax. So he's just going to give them some money. Where is he going to get it?

He's increasing taxes for other groups of Americans.

L. KING: What are you going to do? MCCAIN: That's his plan.

I'm going to keep taxes low. I'm going to...

L. KING: Keep them right where they are?

MCCAIN: Sure. Absolutely. And double the exemption for every child in America. Give them $5,000 to go out and buy the health insurance that they can't afford today. That's for a specific purpose -- a refundable tax credit.

L. KING: And how are you going to wipe out the deficit in one term?

MCCAIN: By growing the economy. By growing the economy. You know, when Ronald Reagan came to office, inflation was double-digit, interest rates were double-digit, unemployment were double-digit. And everybody said, you can't do it by cutting taxes and by increasing wealth and having our economy improve.

Honest to God, Larry, we have to get this economy out of the ditch we're in. And to increase taxes, at that time -- well, even Senator Obama, some time ago, said, well, maybe he would forgo these tax increases if we had a bad economy.

I've got news, we're in a bad economy.

(END VIDEO TAPE)

(COMMERCIAL BREAK)

L. KING: Next, John McCain with a few surprising words for Barack Obama.

You'll hear them next.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GOV. SARAH PALIN (R), VICE PRESIDENTIAL CANDIDATE: Are you ready to send us to Washington to shake things up?

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

MCCAIN: We have to act. We need a new direction and we have to fight for it. And we'll fight together.

(END VIDEO CLIP)

L. KING: We're back with our remaining moments with Senator John McCain of Arizona.

The top two issues -- the economy, the war on terror. Would you use Vice President Palin in these areas?

MCCAIN: Yes. But I really would focus her on reform because she reformed the government in Alaska. Energy issues, she negotiated a $40 billion pipeline of natural gas to the Lower 48, and also to special needs families.

Special needs families need a lot of attention in America today. Every town hall meeting I come to, there is a child that is brought that has autism or Downs, and the way they relate to Sarah is wonderful.

And I would certainly -- I think she's totally qualified...

KING: So you would specialize...

(CROSSTALK)

MCCAIN: ... to address those priorities immediately.

KING: Rush Limbaugh said that Powell's endorsement -- Colin Powell's endorsement of your opponent was all about race, something you say you don't agree with, right?

MCCAIN: No.

KING: Of course, well, how could someone see it from someone's mind...

(CROSSTALK)

MCCAIN: I just don't. I don't...

KING: Do you see race...

MCCAIN: ... think that at all and...

KING: Do you see race as...

MCCAIN: ... I reject it.

KING: Do you see race as any factor in this race?

MCCAIN: It -- look, there is racism in America. We all know that because we can't stop working against it. But I am totally convinced that 99 and 44 one hundredths percent of the American people are going to make a decision on who is best to lead this country.

These are one of the most difficult times in our history, both domestically and national security. I have faith in the American people that they'll make the judgment for the best of reasons, not the worst of reasons.

KING: So, it'll be a small minority that would vote, say, against -- MCCAIN: It would be a tiny minority. It would be a tiny, tiny, minority. Because people are hurting too much now. I mean, they're worried about staying in their homes, keeping their jobs. I don't have to tell you all these things.

So, I believe in fundamentally in the decency of the American people and that's why I believe we're going to come out of this economic crisis we're in.

KING: Senator Biden, you mentioned him earlier. He uses words such as erratic, lurching, angry, in referring to you. He says, Obama represents a steady hand of leadership.

First of all --

MCCAIN: When has Senator Obama displayed that?

KING: Do you have a temper?

MCCAIN: Do I get angry? Americans are angry right now. They're angry at the excess and greed in Wall Street and in Washington. They're very angry. And I'm angry with them.

KING: What do you make of Biden saying, erratic?

MCCAIN: Joe, the Biden, I say, thank you.

KING: Joe the Biden --

MCCAIN: I say, Joe, thank you for pointing out that if Senator Obama is going to be president, he's going to be tested by an international crisis. That really helps because Americans know that I've been tested.

KING: Are you friendly with Senator Biden?

MCCAIN: Oh, sure. Yes, yes, of course.

And, by the way, if we're an idiom (ph), can I say you and I have been together for many years and we've had interview on every kind of issue and I'd like to again say thanks for the way you inform the American people.

KING: Thank you. And we always will remember that debate in South Carolina.

MCCAIN: Yes, you did great.

KING: A couple of other things --

MCCAIN: I didn't do so great, but you did.

KING: You did fine that day.

It was -- the deck was stacked.

MCCAIN: There you go.

KING: The Federal Reserve just announced today, they're cutting federal fund rate by a half a point, lowering it to one point.

Any comment?

MCCAIN: Yes. I think it's probably necessary. I think it's necessary and we need -- but could I finally say -- the most important thing is to get a floor on these housing -- on housing.

It was the housing crisis that got us into it. Go out, buy these mortgages, give people a new mortgage at a payment level they can afford and reverse this alarming trend in decreasing value of homes. Let people realize the American dream and stay in their homes. That's what we've got to do. And I'm very disappointed in the administration for not doing it. The head of the FDIC recently was critical of the administration. Get those mortgages bought up, keep people in their homes.

KING: But, you favor that move today?

MCCAIN: Yes. I think it's --

KING: In 2000, you were the darling of the press. Do you think it's changed? Do you think the press has treated you fairly?

MCCAIN: Honestly, I cannot complain about the media. I have seen other politicians do it. I'm playing the hand I'm dealt. I believe I'm going to win this race and I believe that at the end of the day, that the American people will make the right decision. And I can't tell you how humbled I am to have had this incredible opportunity that very rarely happens to any American. You know, I'm a guy that's had a little bit humble beginnings, who only wanted to be a Navy pilot.

KING: Obama says that there's a lot he likes about you. What do you like about him?

MCCAIN: Oh, he's inspired a lot of Americans. He's very eloquent. He's -- I know a good father to his children. He has done a remarkable job in getting people involved in the political process.