Here are the candidates' responses to the first question, which deals with the economy:
WALLACE: Thank you, Brit.
Good evening, gentlemen. There are growing concerns that the country is headed for a recession. Here in South Carolina, they lost more than 12,000 manufacturing jobs in just the last year.
Governor Romney, do you believe that we're headed for a recession? And given your record in Massachusetts, which had the third lowest job growth of any state during the years you were governor, why should voters trust you over these other gentlemen to handle a slowdown?
ROMNEY: Well, first, Chris, let's get the record straight. Could we be headed for a recession? Absolutely. Do we have to be headed for a recession? Absolutely not.
Recessions hurt working families. They hurt people across this country. Our hearts go out to the people who are affected by job slowdowns and growth slowdowns. And so this is something we're going to have to address in a very aggressive way.
As to my record in the state of Massachusetts, I'm very proud of the fact that after many, many months of declining job growth, I took over the state and helped turn that around. And in my years as governor, we kept adding jobs every single month after we saw that turnaround.
The pipeline for new jobs coming into our state was in single digits when I came into office. When I left, it was over 200. And some of the biggest employers are still coming into the state. Every month since I've left, we keep on adding jobs. So I'm proud of what we did there.
What do we have to do at the federal level to keep a recession from occurring?
Number one, we're going to have to make sure that we stop the housing crisis.
Number two, we're going to have to reduce taxes on middle-income Americans immediately.
Number three, we're going to have to deal with gas prices. We're going to have to finally become energy independent and make the investments in new technology that will allow us to get there.
And, finally, R&D, investments in science and technology. That's an area where America can continue to lead the world.
It's time for us not just to talk about improving our economy; we're going to have to do the hard work of rebuilding our economy, strengthening it.
And I know that there are some people who think, as Senator McCain did, he said, you know, some jobs have left Michigan that are never coming back. I disagree.
I'm going to fight for every single job, Michigan, South Carolina, every state in this country. We're going to fight for jobs and make sure that our future is bright. We're going to protect the jobs of Americans and grow this economy again.
WALLACE: Since you mentioned his name, Senator McCain, you have 30 seconds to rebut. MCCAIN: One of the reasons why I won in New Hampshire is because I went there and told them the truth. And sometimes you have to tell people things they don't want to hear, along with things that they do want to hear.
There are jobs -- let's have a little straight talk -- there are some jobs that aren't coming back to Michigan. There are some jobs that won't come back here to South Carolina.
But we're going to take care of them. That's our goal; that's our obligation.
We need to go to the community colleges and design education and training programs so that these workers get a second chance. That's our obligation as a nation.
We're not going to end somebody's career and life of productivity at age 35 or 40 or older. We're going to design education and training programs that meet the needs of this information technology revolution that we are in.
And by the way, I don't believe we're headed into a recession. I believe the fundamentals of this economy are strong, and I believe they will remain strong. This is a rough patch, but I think America's greatness lies ahead of us.
WALLACE: Senator McCain -- and you have 90 seconds to answer this full question -- some of these ideas that are being talked about, like education and research and development, are longer term.
If we're talking about a recession in the next few months, in 2008, what kind of short-term, more immediate government fixes would you propose to try to keep the slowdown diminished or to reverse it? And would you support them even if they added to the government deficit?
MCCAIN: Well, the first thing we need to do is stop the out-of- control spending. Out-of-control spending is what caused the interest rates to rise. It causes people to be less able to afford to own their own homes.
We need to stop the spending. And that way we can get our budget under control and we can have a -- basically a strong, fundamental fiscal underpinnings.
The second thing that we need to do, of course, is stop spending $400 billion a year overseas to oil-producing countries that come right out of our economy immediately. Some of that money goes, unfortunately, to fund terrorist organizations.
We've got to -- and we can use Detroit for this, where there's tremendous technology in the state of Michigan, and tremendous abilities to develop technologies to reduce this dependency on foreign oil, and eventually eliminate it, and stop this outflow of some $400 billion a year. Education and training is obviously important, but stop the spending. As president, I know how to do it. I'll wield that veto pen, and I won't let another pork-barrel earmark spending bill cross my desk without vetoing it. And I'll make the authors of it famous.
I know how to do it. I saved the taxpayers $6 billion on a bogus tanker deal. I'm called the sheriff by my friends in the Senate who are the appropriators, and I didn't win Miss Congeniality. And as president, I won't win Miss Congeniality, either.
I'll stop the outrageous spending, and that'll be the best thing that can happen to America's economy.
WALLACE: Governor Huckabee, you have started running a TV commercial in Michigan that says voters want a president who reminds them of the guy they work with, not the guy who laid them off.
Do you believe we're headed for a recession? And do you have a short-term government economic stimulus package that you think would be more effective than what you've heard so far from Governors Romney and Senator McCain?
HUCKABEE: Chris, I hope we're not headed toward recession, but if we are, there's four factors that will be the reason.
The first one is fuel prices. When gasoline gets as high as it is, and oil goes to $100 a barrel, it impacts the way people live. It may not impact people at the top, but people who barely make it from paycheck to paycheck know that it doesn't just affect the fuel going to and from work.
Everything they reach for on the shelf of their store costs more because it took more money to transport it to that store.
HUCKABEE: So that's the first thing we have to realize, is with our dependency upon foreign oil, if we don't begin to reverse that and become energy independent, we well could continue this enslavement to foreign oil, and ultimately wreck our economy.
The second thing, subprime mortgages. Two million people today in America risk losing their homes. Now, there's culpability on both lender, as well as a lot of borrowers who bought more home than they could.
And I commend the president. I think he's handled this right without trying to rush in an do something with taxpayer money to fix this, but certainly to get the parties to make it work.
Two other thing, health care costs, and the other is education cost. All those factors together.
And a lot of people are working harder this year than a year ago, and yet they're not getting ahead. Even if they make more money, they're not making enough money to make up. So the first thing is not raise taxes, cut the marginal tax rates, if anything, and eventually go to a fair tax which really does stop the penalties on people's productivity.
WALLACE: Mayor Giuliani, you announced plans for a big tax cut yesterday. And you have been running ads that say reducing taxes actually will increase revenues. But the bipartisan Congressional Budget Office, as well as two chairmen of President Bush's Council of Economic Advisers, all say that tax cuts don't pay for themselves, that in fact they add to the deficit, they don't reduce it.
So, given that, do you stand by your statement?
GIULIANI: Well, the reality is that some tax cuts do add to revenues. Other tax cuts don't add to revenues. It depends on the tax cut. And tax cutting has been part of the Bush program, the Reagan program, the Kennedy program, and it always led to significant increase in economic activity.
The Club for Growth looked at our plan, which is the biggest tax cut in history, and said that it would be a significant improvement in the economy and it would add to growth in the economy. Now, let me give you an example.
If you cut something like the corporate tax at 35 percent, you bring it down to 30 percent, you will get more revenues from that cut, because our corporate tax is the second highest in the world. If you cut some other tax, you might not get those kinds of revenues.
So, the question is: What tax are you cutting? Is it anti- competitive? If it is anti-competitive, you're actually going to get more revenues from that tax cut. But that's not the only answer to how you deal with a possible recession.
You also have to cut spending as significantly as you cut taxes. You have to be willing to impose cutbacks on each one of the federal agencies, the civilian agencies. I would do that the way I did as mayor of New York City, the way Ronald Reagan did it as president of the United States.
You have to be willing to engage in regulatory reform so that we have a picture here in the United States where we're not regulating businesses out of the country. The main things you have to guard against are overtaxing, overspending, overregulating and over-suing. And if you can find balance there, you will do things that are necessary to prop up the economy and to allow us to have a growth economy.
It's not just one thing.
WALLACE: Senator McCain, as a deficit hawk, I just want to ask you for a 30-second rebuttal on that.
Do you believe the tax cuts pay for themselves or do you believe that they add to the deficit?
MCCAIN: I think they stimulate the economy. I think that one of the first things we have to do that I forgot to mention is make these tax cuts permanent, because we've got to give some certainty to families and businesses all over America that these tax cuts will not expire and then give them the effect of a tax increase. So I believe they stimulate the economy, but, Chris, you've got to cut spending.
I'm proud to have been a member of the Reagan revolution, a foot soldier. And we cut taxes, but Ronald pay Reagan knew we had to cut spending at the same time. And that was our great failure as a party, is we cut taxes and then we let spending get out of control.
And frankly, it cost us a great deal. If we had adopted the tax cut package that I had, which entails spending cuts, then we would be talking about more tax cuts today.
WALLACE: Congressman Paul, do you support a government program to stimulate the economy?
PAUL: Well, a government program is too vague. What kind of a government program?
If it's appropriating money and trying to stimulate that way and spend more money, no, that would be the wrong thing to do. But a government program of a -- of a reduced tax burden, yes, that would be.
Also, to solve this problem, you have to understand why we're in a recession. I believe we're in a recession. I think it's going to get a lot worse if we continue to do the wrong things that we've done in the past, that it's going to be delayed, just as what happened in the Depression.
But you have to understand that over-stimulation in an economy by artificially low interest rates by the Federal Reserve is the source of the recession.
PAUL: The recession has been predictable. We just don't know exactly when it will come.
If you do the wrong thing, it's going to last for a long time. The boom period comes when they just pour out easy credit and it teaches people to do the wrong things. There's a lot of malinvestment, debt that goes in the wrong direction, consumers who do the wrong things, and businessmen who do the wrong thing.
So we have to attack this and understand the importance of Austrian theory of the business cycle. If you don't, we're going to continue to do this and the longer you delay the recession, the worse the recession is, and we've delayed a serious recession for a long time.
The housing market's already in depression and a lot of people are hurt and the standing of living in this country is going down. Look at what's happening to the dollar.
And what is being offered by the Federal Reserve and Treasury and everybody in Washington? Lower interest rates. Well, lower interest rates is the problem. Artificially low interest rates is the artificial stimulus which causes the bubble, which allows the inevitable recession to come.
So what we need to do is deal with monetary policy and not pretend that artificial stimulus by more spending is going to help. That won't do you one bit of good.
WALLACE: Senator Thompson, I'd like to get your opinion, also, on whether or not we're in a recession or headed for one. And, as well, you have proposed a big tax plan, but much of it, including, for instance, extending the Bush tax cut, wouldn't help in the short run.
Do you support a short-run government stimulus package or should we just leave the economy alone?
THOMPSON: First of all, I need to defend Rudy a little bit on his tax plan, because it looks an awful lot like the one I put out a couple of months ago.
So the government never loses as much revenue as the experts say we're going to. With the '01 and '03 tax cuts in place, we received more revenue into the government in one day in April of this year than ever before in the history of the country.
So much for the experts, as far as that's concerned. It does stimulate growth and it's overall beneficial for the economy.
Unemployment is up to five percent. That used to be considered full employment, but we're going in the wrong direction with regard to that. It's not just the subprime market now. It's poured over into the general housing market.
Credit is scarce. It's affected the consumer credit market in general. If you're talking about automobile loans or you're talking about credit card thieves or anything like that, the money is getting tighter and tighter.
We still have a bunch of two-handed economists in Washington. On the one hand, we may go into recession, and, on the other hand, we may not. Nobody knows. But I think that as we proceed, we need to count on the fed doing the right thing in terms of the interest rates and we need to look seriously at whether or not we should do things such as speed up depreciation schedules for businesses, those that create jobs, have a deduction for capital expenses instead of having to capitalize them, things of that nature.
We had a stimulus package back in '01. It's targeted toward the lower income people. I think that has to be considered somewhere along the line if the economy calls for it, not today, but perhaps a little later on.
But we have to keep in mind a great many lower income people don't pay income taxes to start with. So an income tax rebate like we've tried before would not work.
We would all be a lot better off if people knew that these tax cuts of '01 and '03 were not going to expire at the end of 2010, which they're scheduled to do.
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