MR. STEPHANOPOULOS: Two debates down, two coming up, and with 30 days of campaigning ahead, this presidential race is entering a fierce new phase. McCain aides told the "Washington Post" they will focus on what they call Obama's liberal record and questionable associations. Exhibit A, William Ayers, a Chicago professor once part of the Weather Underground, the radical group which bombed government buildings during the Vietnam War. In California yesterday, Sarah Palin took off on Obama for his ties to Ayers.
GOV. SARAH PALIN (R-AK): (From tape.) Thank you so much. This is not a man who sees America as you and I see America. Our opponent is someone who sees America as imperfect enough to pal around with terrorists who targeted their own country.
MR. STEPHANOPOULOS: The Obama team hit back fast and hard. In a new ad out this morning, they called the attack a shameless act of desperation from a struggling candidate.
ADVERTISEMENT: (From tape.) Our financial system in turmoil. And John McCain? Erratic in the crisis. Out of touch on the economy. No wonder his campaign wants to change the subject, turn the page on the financial crisis by launching dishonest, dishonorable assaults against Barack Obama. Struggling families can't turn the page on this economy, and we can't afford another president who's this out of touch.
MR. STEPHANOPOULOS: It is getting heated out there, and here to continue the debate, key players from four key battleground states: Pennsylvania Governor Ed Rendell, Minnesota Governor Tim Pawlenty and Senator Sherrod Brown of Ohio and Mel Martinez of Florida. Gentlemen, welcome to all of you this morning.
GOV. ED RENDELL (D-PA) (?): Good morning.
SEN. MEL MARTINEZ (R-FL) (?): Thank you, George.
GOV. TIM PAWLENTY (R-MN) (?): Good morning.
SEN. SHERROD BROWN (D-OH) (?): Good morning, George.
MR. STEPHANOPOULOS: Senator Martinez, let me begin with you. Florida has one of the highest foreclosure and unemployment rates in the country right now, and four Florida polls since the financial crisis hit all show Barack Obama ahead. So as the Obama campaign charges, is your campaign desperate to change the subject?
SEN. MARTINEZ: Well, look. For sure that the economy hurt the McCain campaign in Florida. Florida has been very hard hit as you just stated. The fact of the matter is that there's much to be done yet. The fact of the matter is that Florida is far from being over. Florida is going to be close all the way to the end. And John McCain has an awful lot of things going for him in the state of Florida, whether it is the fact that the older population really favors him strongly or the fact that the Jewish community does not trust Barack Obama's foreign policy or that the Cuban community is irate and offended by the fact that he would sit down to talk with the Castro brothers. There's any number of things about the population of Florida that all seem to trend in McCain's direction. McCain was well ahead in Florida before the economic crisis hit. I believe once this campaign gets beyond that immediate crisis that Florida is going to come back to the McCain camp.
One thing I will mention too, George, as very important to consider, Barack Obama has spent almost $13 million on television ads in Florida. John McCain has barely spent a couple of million. Once McCain engages in the air in Florida - Florida is a television state - I think that will also turn some numbers.
MR. STEPHANOPOULOS: But do you believe that -
SEN. MARTINEZ: It's amazing, by the way - the other thing that's amazing -
MR. STEPHANOPOULOS: Senator, but do you think that talking about William Ayers is what is going to take to turn it around? Senator Obama has said has deplored what Ayers when he said he was eight-years-old, and he says they're friendly but they have not been especially close.
SEN. MARTINEZ: I think the important part is whether they're truthful charges or not, not about what Barack Obama did when he was eight-years-old, but what occurred when he was 35, 38-years-old and was initiating his political campaign. It's about his judgment and who he associated with during those years and right on into his political campaign. But the bottom line on Florida is that for having spent $13 million in Florida, that race is still within the margin of error in all the polls, and in fact, until a few days ago, McCain was well ahead.
MR. STEPHANOPOULOS: Senator Brown, is this issue going to cut in Ohio?
SEN. BROWN: Well, you've seen a 26-year Senate veteran morph into an angry, desperate candidate in the last few weeks, especially in the last few days. And it just kind of makes me sad, George, that John McCain and Sarah Palin are resorting to these tactics. Look, I've done about more 100 roundtables in Ohio in most of the 88 counties in the last year and a half, and people are talking about the privatization of Social Security, people are talking about trade, what trade has done to Ohio, 200,000 lost manufacturing jobs in the last eight years. People want to go and talk about issues and they want to see the difference between the two candidates, and I think that's why polls in Ohio are showing increased support for Barack Obama because voters are paying attention to the difference on John McCain wanting to privatize Social Security, want to continue these job killing trade agreements, wants to privatize healthcare the same way that he supported the deregulation of the banking system and all these major issues are such a sharp contrast between John McCain, who wants to continue the policies we've seen in the last eight years, and Barack Obama, who has very different ideas of a very different direction.
MR. STEPHANOPOULOS: Governor Pawlenty, it sure does sound, when Governor Palin says of Obama, this is not a man who sees America as you do, it sure does sound like she is questioning Senator Obama's patriotism.
GOV. PAWLENTY: George, I think it goes to the issue of judgment. This individual, Bill Ayers, is an unrepentant domestic terrorist, and as you noted and as other news organizations have noted, he was involved in the bombing of the Pentagon, or attempted bombing of the Pentagon, the Capitol, and plans for other domestic terrorism. Now, Barack Obama at the time was eight or nine-years-old or whatever, but that's not the point.
The point is this same individual, Bill Ayers, hosted some sort of political event at his home for Barack Obama when Barack was running for state legislature in Illinois when he was well into his 30s. So this isn't about Senator Obama being eight-years-old. This is of his judgment when he was starting his political career in Illinois in the mid-1990s. And I think when people realize this is about 10 years ago, 14 years ago, it goes to the issue of what kind of judgment would allow an unrepentat domestic terrorist to host a political event for you in his home, in the terrorist's home.
MR. STEPHANOPOULOS: Governor Rendell, what's your response to that?
GOV. RENDELL: Well, let me say this. It is, as Senator Brown said, very sad. In March, when he became the presumptive nominee, Senator McCain said he would run a decent and honorable campaign. He hasn't, and it's going to get worse. First they lied about Senator Obama's position on taxes, and now they're starting to do the politics of personal destruction. The American people, and here in Pennsylvania, we're not going to buy that. The issues are too important: the economy, healthcare, what's going on abroad, Social Security. The issues are what people are focusing on and that's why this has gone bad for the McCain campaign, and no matter what they talk about, Reverend Wright, Mr. Ayers, you name it, it's not going to wash because when this country is in trouble, people are focusing on who's got the best plans to get us out of it, and that's Barack Obama.
MR. STEPHANOPOULOS: The McCain campaign has not brought up Reverend Wright and so I want to put the question back to Senator Mel Martinez. When the North Carolina Republican Party back in the spring did use Reverend Wright in ads, Senator McCain condemned it. Do you think it's appropriate for Senator McCain's allies now, and there are some ads by independent groups that use Reverent Wright, do you think it's appropriate for his allies to bring Reverend Wright into this conversation?
SEN. MARTINEZ: I believe that it's appropriate to talk about Barack Obama's judgment about how he got to where he is today. The American people are going to have to make a choice about who they trust with the presidency of our country during some of the most difficult times, whether it is internationally or domestically. And you know, for all the talk about the negativity, the ad that you just ran at the top at the show that the Obama campaign is playing on McCain is not a particularly nice ad and it's frankly not true. Governor Rendell, when he mentions about not being true about Barack Obama wanting to raise taxes for families that make $48,000, that's just wrong. He did vote to raise taxes on families that make only $48,000.
GOV. RENDELL: Mel, the Tax Policy Institute, a bipartisan think tank, has made it clear that Senator Obama's plan for 95 percent of the Americans will cut taxes three times more than Senator McCain. That's a fact. You can look it up on their website.
MR. STEPHANOPOULOS: Let me bring - allow me to me to bring the issue -
SEN. MARTINEZ: But the fact is how did he vote? How did he vote when he had the opportunity to raise taxes on families making $48,000? The fact of the matter is that his record may be different than what he's saying today, which is part of the reason why there's a lot of contention now about whether this is getting personal, is because we're talking about judgment, we're talking about character, we're talking about leveling with the American people, telling the American people the truth about his background, about who he is and where he wants to take the country.
MR. STEPHANOPOULOS: Go ahead, Senator Brown.
SEN. BROWN: Mel, you and I serve in the same body in the Senate. And you know how those votes work, and John McCain's voted for increased taxes dozens and dozens and dozens of times and all kinds of different fees and taxes and all that. The fact is look at the plans they have. Barack Obama wants to cut taxes, as Governor Rendell said, for 95 percent of the public - a middle-class working family tax cut. John McCain wants to continue the same George Bush policies and tax cuts for the rich.
I'm looking for one example, one time where John McCain would say, here's where I differ from George Bush - George Bush's economic policies of the last eight years. Here's where I differ from him. In the future, what I propose, there's no major difference between Bush economic policies, deregulation of Wall Street, deregulation of healthcare, privatization of Social Security, tax cuts for the rich, job killing trade agreements on all these issues, John McCain wants to continue - (inaudible).
MR. STEPHANOPOULOS: What's the answer to that, Governor Pawlenty? Go ahead. Governor Pawlenty, go ahead. Respond to that charge.
GOV. PAWLENTY: Well, that's simply not true. Well, to say that Senator McCain's record on economic matters and related issues is the same as President Bush's is simply not accurate. If you look at Senator McCain's record, he differs from President Bush on climate change, on energy policy including, by the way, the 2005 administration's energy bill that Barack Obama voted for and Senator McCain voted against. Senator McCain has had differences with the administration on spending, on earmarks, on importing prescription drugs from Canada, on the conduct and prosecution on the war, on torture, on nuclear arms proliferation, on any other both domestic, economic, and international issues. It is not accurate or fair to say that Senator McCain's record is the same as President Bush's. That is simply not accurate.
MR. STEPHANOPOULOS: I want to bring - excuse me, Senator. I want to bring the argument to healthcare because in that issue, Senator Obama says that Senator McCain's plans - and this is Obama's word - is even more radical than President Bush's. He was campaigning yesterday. I want to show everybody a clip of Senator Obama campaigning yesterday calling Senator McCain's plan the first time ever that health benefits will be taxed.
SEN. BARACK OBAMA (D-IL): (From tape.) He gives you a tax credit with one hand, but he raises your taxes with the other. And recently, after some forceful questioning on TV, he finally admitted that for some Americans, those with the best plans, his tax increase would be higher than his tax credit.
MR. STEPHANOPOULOS: Senator Martinez, I saw you shaking your head.
SEN. MARTINEZ: Well, no, because I think you have to understand that Barack Obama's plan is to turn over the healthcare system to the government. John McCain is trying to find a way to get the healthcare system to cover all Americans, and he does it with a tax credit. The government will give a tax credit to all Americans that cannot afford health insurance so they can then go buy it.
Now, Barack Obama, deceiving the American people, would say the money goes to the insurance companies. Well, hello, when you buy an insurance policy, you pay a premium to the insurance company, and then when you have to go to the doctor, the insurance company pays the doctor. That's how the system works. That is a private healthcare system that is going to try to insure every American because John McCain believes that every American should have access to some health insurance. What Barack Obama doesn't tell you is that his plan is basically to turn it over to the federal government.
MR. STEPHANOPOULOS: Governor Rendell, I want to get you - Governor Rendell, let me bring you in here. I want you to respond to that charge about government run healthcare, but also, the Tax Policy Institute, which you just cited on Senator Obama's tax plan, says that Senator McCain's healthcare plan will provide an average tax benefit of $1,200 to the average taxpayer.
GOV. RENDELL: Right. Well, there are two things wrong with what Mel said: number one, Senator Obama's plan does not turn it over to the government. It keeps the private insurance structure. In fact, if you're happy with the healthcare plan you've got with the private insurance company, you keep it. Senator Obama's cost cutting ideas will reduce your premiums, but you keep with your private insurer.
Now, secondly, he offers a $5,000 tax cut. Now, I don't know what it's like in Florida, but for a family of four in Pennsylvania, you can't buy healthcare worth a damn for $5,000 a year. It's got to be at least $12,000 and that's for a stripped down plan. So this is a farce. This is a charade. This is an attempt to fool the American people.
SEN. MARTINEZ (?): That's not true.
SEN. BROWN: If I could add something, George?
SEN. MARTINEZ: You know, Ed, I propose -
MR. STEPHANOPOULOS: Let Senator Martinez go, then you, Senator Brown.
SEN. MARTINEZ: Yes. I proposed a bill very similar to the McCain proposal and when we did, we had an analysis of it and families can purchase health insurance for $5,000.
GOV. RENDELL: For $5,000?
SEN. MARTINEZ: If you turn it over to the government, if you turn it over to the government -
GOV. RENDELL: Mel, tell us all where.
SEN. MARTINEZ: - then the costs go up.
GOV. RENDELL: Give us the name of one -
SEN. MARTINEZ: As long as you keep it in the private sector -
GOV. RENDELL: Give us the name of one company that will insure a family of four for $5,000. The people out there know that's complete bull.
MR. STEPHANOPOULOS: Senator Brown?
SEN. MARTINEZ (?): That's not true. That's not true.
SEN. BROWN: George, what John McCain doesn't tell you in all his ads and all his speeches about this is that first of all, he's going to tax people's benefits of everybody with an employer-based healthcare plan will get taxed on that plan now based on the worth of the plan. He doesn't tell us that. He doesn't tell you that - (inaudible).
MR. STEPHANOPOULOS: For most taxpayers, the tax credit will offset that tax increase. Isn't that true?
SEN. BROWN: But the tax credit will go direct - hold on.
GOV. PAWLENTY: George, on that point -
SEN. BROWN: Let me finish. That the tax credit will go directly to the insurance company, and then what will happen, what else he doesn't tell you is that people that are healthy and younger will get out of their plan because they will get something less expensive in the private market as a result of this, and all kinds of nonpartisan studies say 20 million people will lose their health insurance because the people left in those private plans in a company, in a business, will see their costs go up because they'll be sicker and older, the ones remaining in those private plans will be canceled.
MR. STEPHANOPOULOS: Governor Pawlenty, get in here.
SEN. BROWN: So 20 million Americans could easily lose their health insurance under John McCain's plan.
MR. STEPHANOPOULOS: Governor Pawlenty?
GOV. PAWLENTY: Thank you, George. Some of this just relates to the confusion between a deduction and a credit, and I know that's a lot to get into on the context of this show, but if you have a, say, even a $10,000 plan, assuming some of what Governor Rendell is saying is true that the plans cost more, if you're taxed on a $10,000 plan and you're in a 10 percent tax bracket, you pick up $1,000 of tax liability. If you're under 20 percent tax bracket, you pick up a 20 percent or $2,000 tax liability and so on. John McCain is offering a tax credit which means your liability not your deductibility, your liability on taxes is eliminated by a dollar for dollar amount. So you'd have to have a very expensive plan to equal the power of this tax credit that Senator McCain is offering. And third-party groups - don't listen to politicians, listen to the third-party groups who've analyzed this plan. Several of them in the last week have said in many instances and perhaps even most instances, Senator McCain's purchasing power or benefit to the people involved would exceed Senator Obama's.
MR. STEPHANOPOULOS: But for the 50 million -
GOV. PAWLENTY: And by the way, Senator Obama's plan -
MR. STEPHANOPOULOS: Go ahead.
GOV. PAWLENTY: Senator Obama's plan, by the way, also has a pay or play feature in it for employers. So he has, first of all, a universal standard that says these are going to be the benefits everybody will get, and if you're an employer and you don't participate, you're going to pay. Now, that puts a new and additional burden on the folks who are providing jobs in our country in terms of small businesses and medium size businesses which are the engine of job growth.
MR. STEPHANOPOULOS: Governor Rendell?
GOV. RENDELL: But for the 50 million Americans who don't have healthcare and people are losing healthcare, as you know, George, literally every month, tens of thousands of people lose their healthcare, the McCain plan offers nothing. A $5,000 tax credit will not get you coverage.
MR. STEPHANOPOULOS: Governor Pawlenty, let me switch the conversation - I want to move on to some politics now, some more of the politics. And there's a new poll out in your hometown paper in Minneapolis this morning, Governor Pawlenty, that shows Senator Obama 18 points ahead, I think. Now, that may be an outlier, but it comes on the heels of another poll showing in double digits. Is Minnesota truly in play? I know he's spent a lot of money there, but is Minnesota truly in play for Senator McCain right now?
GOV. PAWLENTY: Well, there was another poll, the SurveyUSA poll that had Senator McCain up by one point in Minnesota just a few days ago as well, George. And the poll that you cite is notoriously not accurate, but nonetheless, Minnesota is a Democrat leaning state, but not so much that it's implausible for a Republican to win here as witnessed by President Bush coming within a few points the last two cycles. We have a Republican Senator Norm Coleman. I was able to win here a couple of times. So it's entirely plausible for a Republican to win, and particularly the kind of Republican Senator McCain is, a maverick, populist, straight talker. I think those kinds of values and approaches sell well in the upper Midwest. He's going to be here this week. So I'd still say there's an advantage or it leans to the Democrats, but Senator McCain could win here and I think he's going to make great progress in the next month.
MR. STEPHANOPOULOS: And Governor Rendell, you were quoted in the "New York Times" this morning saying that Senator Obama has not, by any means, put Pennsylvania away yet even though it was won by Senator Kerry four years ago. And we keep hearing in a lot - there's been a lot of coverage of this - that race may be something holding Senator Obama back in your state. You even acknowledged earlier in the campaign that it was an issue for a lot of the voters of your state.
GOV. RENDELL: Well, two things: number one, the economic crisis changed everything in Pennsylvania. It started getting people focusing on the issues, and when they focus on the issues here, they conclude that Senator Obama's plans are much better for their family. Number two, on the issue of race, here's the analogy I give, George. If you're drowning in the middle of the river and you see a man on the river bank and he's got a coil of rope in his hand, you don't care whether he's black, white, orange or fuchsia. You don't care whether he's Methodist, Jewish or Unitarian. You just care that he's got a strong right arm that can get that rope out to you in the middle of the river. And Senator Obama has that strong right arm. He's got the policies that can turn this country around. And Pennsylvanians are focusing on that.
I think it's going to be much less of a factor than anybody ever thought because when the country is in trouble, and Americans now know for sure the country's in trouble, they look for the best man with the best ideas, the most poised and calm leader, and that surely has been Barack Obama in the last month.
MR. STEPHANOPOULOS: Senator Brown, the McCain campaign has filed suit in your state with the Ohio Supreme Court because they want there to be a poll watcher at every single polling place in the state. They want that mandated. I know you're a former secretary of state as well. Why shouldn't each party have a poll watcher at every polling station? Why shouldn't that be a rule?
SEN. BROWN: I don't know that it needs to be a rule. I think that under Ohio law, people can have access to the polls, can be outside the polling place and can, in most cases I believe, if the law is still what it was, get inside the polling place.
But I want to take off a second on what Governor Rendell said. What we've seen in the last two weeks when polls - polling numbers in Ohio were even or slightly even leaning towards McCain. As people have seen these economic problems, the race has very much changed. And I think people saw the leadership that Barack Obama showed in Washington during the economic bailout issue. When John McCain suspended his campaign and flew into Washington and tried to have this impact and didn't really have much impact, Barack Obama quietly, steadfastly got on the phone, made phone calls, made a difference, as most media outlets have said, made a difference in what happened in the vote in the House of Representatives. He stood up on the floor and made a 15-minute speech. I sit right behind him and saw that speech. John McCain didn't even bother - in his first vote he cast in six months, didn't even bother making a speech on the most economic crisis we faced. I think that will really show a difference in not just style but in the serious steadfast way that they will bring leadership to this country.
MR. STEPHANOPOULOS: Let me get Senator Martinez to respond to that because it sure does seem, Senator Martinez, like the financial crisis has hurt Senator McCain especially in Florida. You get the last word.
SEN. MARTINEZ: Well, there's no question. The fact is that the economic crisis (unfocused ?) people on the election, on the choice they have to make. They have to make a choice in the next few days about whether they're going to turn this country over to an inexperienced, untested, poor judgment person like Barack Obama, or they're going to trust John McCain, who's a proven leader. John McCain showed up. He stopped his campaign, put country first, came to Washington, and got engaged. I think he made a difference. Sherrod doesn't think so. The fact of the matter is Barack Obama sat back and said, call me if you need me. That is not leading at a time of real difficulty for our nation. The bottom line is John McCain is a man that has led, is ready to lead and can take America forward. I trust him to do that, and I think Floridians will too.
MR. STEPHANOPOULOS: Okay, gentlemen. We're going to have to leave it there this morning. Thank you all very much for your time. We've got 37 days ahead.