Transcript: John McCain

MCCAIN: Well, all I can say is that I used my best judgment. I consider myself the loyal opposition and that is loyal to the president where I can be and in opposition where we have fundamental disagreements. And I look forward to working with the president on a number of issues and I will continue to try to do so.

STEPHANOPOULOS: Let me bring one of them, you just talked about the deficit. You just learned today the administration's saying that over the next 10 years the deficit will be $2 trillion higher than they thought, $9 trillion.

I spoke with Secretary – Treasury Secretary Geithner just a couple of weeks ago. And he pledged that this administration would do whatever it takes to get that deficit down over the long run including new revenues. Can you make that same pledge?

MCCAIN: No. First we have to send a message to the American people that we're serious. The earmark and pork barrel spending you know and when we've talked about earmarks, only a few million dollars, only a few …

STEPHANOPOULOS: That's a tiny fraction of the budget, (INAUDIBLE).

MCCAIN: It's a tiny fraction, but it's a signal of how serious we are. And when you say it's a tiny fraction, remember every time we add one of those projects, it becomes a permanent part of the budget.

So it has a cumulative effect. Look, there was 9,000 of them in the omnibus bill, I mean 9,000 and all of them became a permanent part of the budget. So we've got to show the American people we're serious about tightening our belts.

Then in my view, we have to look at entitlement reform. And we all know that Social Security and Medicare are going broke. And we have to sit down together and do that or maybe have a same thing like a BRAC Commission, commission of most respected Americans come out with a recommendation to reform Social Security and Medicare and it's an up or down vote in Congress.

STEPHANOPOULOS: The president has said he's open to that kind of a commission as well but even – and I think you would agree that former Fed Chair Alan Greenspan is no slouch on the deficit, has credibility on the deficit. He also said there's no way you're going to solve this problem over the long run without new revenues, probably a value added tax.

MCCAIN: Well first of all think with value added tax is a regressive tax and it's a European model, which I don't think has been successful. Second of all, should we go to the American people and say hey, we're going to have to have new revenues when we're spending several million dollars on a pork barrel project that we have corruption? We have absolute corruption that people go to jail on?

Can't we reform that first? Can we go to the American people with clean hands before we ask them to make further sacrifice? And second of all, as principle, I think the worst thing we do in bad economic times is raise taxes.

STEPHANOPOULOS: Not right now, but over the long run you're not going to solve a $9 trillion gap without revenues are you?

MCCAIN: I think you can reform Medicare and Social Security and not have to do that if you truly reform it. Look at what eats up a greater and greater percent of the federal budget, the Social Security and Medicare.

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