ROMNEY: Absolutely. (CROSSTALK)
ROMNEY: Look, the revenue I get is by more people working, getting higher pay, paying more taxes. That's how we get growth and how we balance the budget. But the idea of taxing people more, putting more people out of work, you'll never get there. You'll never balance the budget by raising taxes.
Spain -- Spain spends 42 percent of their total economy on government. We're now spending 42 percent of our economy on government. I don't want to go down the path to Spain. I want to go down the path of growth that puts Americans to work with more money coming in because they're working.
LEHRER: But -- but Mr. President, you're saying in order to -- to get the job done, it's got to be balanced. You've got to have...
OBAMA: If -- if we're serious, we've got to take a balanced, responsible approach. And by the way, this is not just when it comes to individual taxes. Let's talk about corporate taxes.
Now, I've identified areas where we can, right away, make a change that I believe would actually help the economy.
The oil industry gets $4 billion a year in corporate welfare. Basically, they get deductions that those small businesses that Governor Romney refers to, they don't get.
Now, does anybody think that ExxonMobil needs some extra money, when they're making money every time you go to the pump? Why wouldn't we want to eliminate that? Why wouldn't we eliminate tax breaks for corporate jets? My attitude is, if you got a corporate jet, you can probably afford to pay full freight, not get a special break for it.
When it comes to corporate taxes, Governor Romney has said he wants to, in a revenue neutral way, close loopholes, deductions -- he hasn't identified which ones they are -- but that thereby bring down the corporate rate.
Well, I want to do the same thing, but I've actually identified how we can do that. And part of the way to do it is to not give tax breaks to companies that are shipping jobs overseas.
Right now, you can actually take a deduction for moving a plant overseas. I think most Americans would say that doesn't make sense. And all that raises revenue.
And so if we take a balanced approach, what that then allows us to do is also to help young people, the way we already have during my administration, make sure that they can afford to go to college.
OBAMA: It means that the teacher that I met in Las Vegas, a wonderful young lady, who describes to me -- she's got 42 kids in her class. The first two weeks she's got them, some of them sitting on the floor until finally they get reassigned. They're using text books that are 10 years old.
That is not a recipe for growth. That's not how America was built. And so budgets reflect choices.
Ultimately, we're going to have to make some decisions. And if we're asking for no revenue, then that means that we've got to get rid of a whole bunch of stuff.
And the magnitude of the tax cuts that you're talking about, Governor, would end up resulting in severe hardship for people, but more importantly, would not help us grow.
As I indicated before, when you talk about shifting Medicaid to states, we're talking about potentially a 30 -- a 30 percent cut in Medicaid over time.
Now, you know, that may not seem like a big deal when it just is, you know, numbers on a sheet of paper, but if we're talking about a family who's got an autistic kid and is depending on that Medicaid, that's a big problem.
And governors are creative. There's no doubt about it. But they're not creative enough to make up for 30 percent of revenue on something like Medicaid. What ends up happening is some people end up not getting help.
ROMNEY: Jim, let's -- we've gone on a lot of topics there, and so it's going to take a minute to go from Medicaid to schools...
LEHRER: Come back to...
ROMNEY: ... to oil, to tax breaks, then companies going overseas. So let's go through them one by one.
First of all, the Department of Energy has said the tax break for oil companies is $2.8 billion a year. And it's actually an accounting treatment, as you know, that's been in place for a hundred years. Now...
OBAMA: It's time to end it.
ROMNEY: And in one year, you provided $90 billion in breaks to the green energy world.
Now, I like green energy as well, but that's about 50 years' worth of what oil and gas receives. And you say Exxon and Mobil. Actually, this $2.8 billion goes largely to small companies, to drilling operators and so forth.
ROMNEY: But, you know, if we get that tax rate from 35 percent down to 25 percent, why that $2.8 billion is on the table. Of course it's on the table. That's probably not going to survive you get that rate down to 25 percent.
But don't forget, you put $90 billion, like 50 years' worth of breaks, into -- into solar and wind, to Solyndra and Fisker and Tester and Ener1. I mean, I had a friend who said you don't just pick the winners and losers, you pick the losers, all right? So this -- this is not -- this is not the kind of policy you want to have if you want to get America energy secure.
The second topic, which is you said you get a deduction for taking a plant overseas. Look, I've been in business for 25 years. I have no idea what you're talking about. I maybe need to get a new accountant.
ROMNEY: But -- but the idea that you get a break for shipping jobs overseas is simply not the case.
ROMNEY: What we do have right now is a setting where I'd like to bring money from overseas back to this country.
And, finally, Medicaid to states? I'm not quite sure where that came in, except this, which is, I would like to take the Medicaid dollars that go to states and say to a state, you're going to get what you got last year, plus inflation, plus 1 percent, and then you're going to manage your care for your poor in the way you think best.
And I remember, as a governor, when this idea was floated by Tommy Thompson, the governors -- Republican and Democrats -- said, please let us do that. We can care for our own poor in so much better and more effective a way than having the federal government tell us how to care for our poor.
So -- so let's state -- one of the magnificent things about this country is the whole idea that states are the laboratories of democracy. Don't have the federal government tell everybody what kind of training programs they have to have and what kind of Medicaid they have to have. Let states do this.
And, by the way, if a state gets in trouble, well, we can step in and see if we can find a way to help them.
LEHRER: Let's go.
ROMNEY: But -- but the right -- the right approach is one which relies on the brilliance of our people and states, not the federal government.
LEHRER: (inaudible) and we're going on -- still on the economy, on another -- but another part of it...
LEHRER: All right? All right. This is segment three, the economy. Entitlements. First -- first answer goes to you, two minutes, Mr. President. Do you see a major difference between the two of you on Social Security?
OBAMA: You know, I suspect that, on Social Security, we've got a somewhat similar position. Social Security is structurally sound. It's going to have to be tweaked the way it was by Ronald Reagan and Speaker -- Democratic Speaker Tip O'Neill. But it is -- the basic structure is sound.
But -- but I want to talk about the values behind Social Security and Medicare, and then talk about Medicare, because that's the big driver of our deficits right now.
You know, my grandmother -- some of you know -- helped to raise me. My grandparents did. My grandfather died a while back. My grandmother died three days before I was elected president. And she was fiercely independent. She worked her way up, only had a high school education, started as a secretary, ended up being the vice president of a local bank. And she ended up living alone by choice.
And the reason she could be independent was because of Social Security and Medicare. She had worked all her life, put in this money, and understood that there was a basic guarantee, a floor under which she could not go.
And that's the perspective I bring when I think about what's called entitlements. You know, the name itself implies some sense of dependency on the part of these folks. These are folks who've worked hard, like my grandmother, and there are millions of people out there who are counting on this.
OBAMA: So my approach is to say, how do we strengthen the system over the long term? And in Medicare, what we did was we said, we are going to have to bring down the costs if we're going to deal with our long-term deficits, but to do that, let's look where some of the money's going.
$716 billion we were able to save from the Medicare program by no longer overpaying insurance companies by making sure that we weren't overpaying providers. And using that money, we were actually able to lower prescription drug costs for seniors by an average of $600, and we were also able to make a -- make a significant dent in providing them the kind of preventive care that will ultimately save money through the -- throughout the system.
So the way for us to deal with Medicare in particular is to lower health care costs. When it comes to Social Security, as I said, you don't need a major structural change in order to make sure that Social Security is there for the future.
LEHRER: We'll follow up on this.
First, Governor Romney, you have two minutes on Social Security and entitlements.
ROMNEY: Well, Jim, our seniors depend on these programs, and I know anytime we talk about entitlements, people become concerned that something's going to happen that's going to change their life for the worse.
And the answer is neither the president nor I are proposing any changes for any current retirees or near retirees, either to Social Security or Medicare. So if you're 60 or around 60 or older, you don't need to listen any further.
But for younger people, we need to talk about what changes are going to be occurring. Oh, I just thought about one. And that is, in fact, I was wrong when I said the president isn't proposing any changes for current retirees. In fact he is on Medicare. On Social Security he's not.
But on Medicare, for current retirees, he's cutting $716 billion from the program. Now, he says by not overpaying hospitals and providers. Actually just going to them and saying, "We're going to reduce the rates you get paid across the board, everybody's going to get a lower rate." That's not just going after places where there's abuse. That's saying we're cutting the rates. Some 15 percent of hospitals and nursing homes say they won't take anymore Medicare patients under that scenario.
We also have 50 percent of doctors who say they won't take more Medicare patients.
This -- we have 4 million people on Medicare Advantage that will lose Medicare Advantage because of those $716 billion in cuts. I can't understand how you can cut Medicare $716 billion for current recipients of Medicare.
Now, you point out, well, we're putting some back. We're going to give a better prescription program. That's $1 -- that's $1 for every $15 you've cut. They're smart enough to know that's not a good trade.
I want to take that $716 billion you've cut and put it back into Medicare. By the way, we can include a prescription program if we need to improve it.
But the idea of cutting $716 billion from Medicare to be able to balance the additional cost of Obamacare is, in my opinion, a mistake.
And with regards to young people coming along, I've got proposals to make sure Medicare and Social Security are there for them without any question.
LEHRER: Mr. President?
OBAMA: First of all, I think it's important for Governor Romney to present this plan that he says will only affect folks in the future.
And the essence of the plan is that you would turn Medicare into a voucher program. It's called premium support, but it's understood to be a voucher program. His running mate...
LEHRER: And you don't support that?
OBAMA: I don't. And let me explain why.
ROMNEY: Again, that's for future...
OBAMA: I understand.
ROMNEY: ... people, right, not for current retirees.
OBAMA: For -- so if you're -- if you're 54 or 55, you might want to listen 'cause this -- this will affect you.
The idea, which was originally presented by Congressman Ryan, your running mate, is that we would give a voucher to seniors and they could go out in the private marketplace and buy their own health insurance.
The problem is that because the voucher wouldn't necessarily keep up with health care inflation, it was estimated that this would cost the average senior about $6,000 a year.