Economy Dominates Presidential Debate

By Kathy Kiely and David Jackson, USA Today

John McCain and Barack Obama exchanged blame and offered proposals to address the nation's financial crisis during Tuesday's presidential debate, with McCain promising aid to struggling homeowners and Obama saying the government must assure the massive federal financial rescue package works as planned.
The town hall-style debate focused immediately on the economy and stayed on it for much of the night, with McCain calling for the Treasury Department to buy up troubled mortgages — with some conditions — and renegotiate them with homeowners at the current value of homes. His campaign estimated the cost of the program at $300 billion.

"Is it expensive? Yes, but we all know, my friends, until we stabilize home values in America, we're never going to start turning around and creating jobs and fixing our economy, and we've got to get some trust and confidence back to America," McCain said.

"It is my proposal. It's not Sen. Obama's proposal. It's not President Bush's proposal," he added.

Obama called the current downturn "the worst financial crisis since the Great Depression" and said the government must assure that the financial rescue package signed into law last week worked as planned.

"I believe this is a final verdict on the failed economic policies of the last eight years, strongly promoted by President Bush and supported by Senator McCain," he said.

The debate began hours after the Dow Jones industrial average tumbled another 508 points, and the resulting financial anxiety is looming large over tonight's session.

The two clashed repeatedly over taxes and spending, with McCain saying that "nailing down Sen. Obama's various tax proposals is like nailing Jell-O to a wall."

"I'm going to ask the American people to understand that there are some programs that we'll going to have to eliminate," McCain said, but he limited that proposal to "programs that aren't working."

Obama said the nation's debt problems start "with Washington. I think we've got to show that we've got good habits, because if we run up trillion-dollar debts that get passed on to the next generation, then a lot of people are going to think there's easy money out there."

McCain accused Obama of being the Senate's second-highest recipient of donations from individuals at Fannie Mae and Freddie Mac, the two now-disgraced mortgage industry giants.

"There were some of us who stood up against this," McCain said. "There were others who took a hike."

Obama shot back that McCain's campaign manager, Rick Davis, has a stake in a Washington lobbying firm that received thousands of dollars a month from Freddie Mac until recently.

NBC's Tom Brokaw moderated the debate. Questions came from an audience of 80 Nashville-area voters, who are seated in a semi-circle in front of the candidates. Members of the audience were selected by The Gallup Organization to represent a demographic cross-section of undecided voters in the region.

The candidates covered other issues as well, including:

•Energy policy. McCain called for more nuclear energy and alternative energy sources, and again called for more oil drilling. Obama said McCain "talks a lot about drilling, but added, "We have 3% of the world's oil reserves and use 25% of the world's oil. We can't simply drill our way out of the problem."

•Health care. Obama noted McCain's proposal would give individuals a $5,000 tax credit — but tax their employer-provided health care as income.McCain said Obama will "impose mandates." on health care.

•Foreign policy. McCain, as he has for months, said Obama "does not understand our national security challenges." Obama said "there are things I don't understand, including "How we ended up invading a country that had nothing to do with 9/11, while Osama bin Laden was setting up base camps" in Pakistan.

Obama also said he would be willing to send U.S. troops into Pakistan if necessary to hunt down bin Laden. That brought a chiding from McCain, who said a president must speak responsibly about military actions. "The point is that I know how to handle these crises...I'm not going to telegraph my punches, which is what Senator Obama did."

The session here at Belmont University fell during a week when McCain began to sharpen his attacks on Obama, and Republican surrogates — most notably, vice presidential nominee candidate Sarah Palin — revived efforts to make an issue of Obama's association with Bill Ayers, a 1960s radical turned education professor.

Ayers, 67, was a founder of the Weather Underground, a student group that opposed the Vietnam War and was involved in several bombing incidents. Now a professor at on the University of Illinois-Chicago faculty, Ayers helped Obama on several of his state Senate races. The two served together on the board of a Chicago foundation's board that gives grants to civics and arts organizations.

Obama has played down their relationship, referring to Ayers — who lives several blocks away from him on Chicago's South Side — as "a guy who lives in my neighborhood." The Democrat has also denouced the violence and views of Ayers' former group.

McCain launched his sharpest attack to date on Obama on Monday, saying voters do not know nearly enough about the first-term senator from Illinois and stopped just short of calling his rival a liar. "Who is the real Barack Obama?" he asked an audience in Albuquerque.

Obama, in Asheville, N.C., accused McCain of trying to distract voters' attention from the troubled economy. "I cannot imagine anything more important to talk about," he said.

The Democrat's campaign, meanwhile, released a video about McCain's links to Charles Keating, the owner of a failed savings and loan in McCain's home state of Arizona. Keating went to jail for his role in a banking scandal. McCain, along with four other senators, became the subject of a Senate ethics investigation that led to him reimbursing the U.S. Treasury and Keating for contributions and plane trips he received from the disgraced S&L owner.

Contributing: Mark Memmott in Nashville; Randy Lilleston in McLean, Va.; Associated Press

Photo: Jim Bourg, Associated Press