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First on CNBC Interview: CNBC's Chief Washington Correspondent John Harwood Speaks with Republican Presidential Candidate, Senator John McCain on CNBC's "Squawk on the Street" (Transcript Included)

Presidential Candidate, John McCain
AP
Presidential Candidate, John McCain

When: April 15th at 10:45AM ET
Where: CNBC's "Squawk on the Street"

Following is the unofficial transcript of a FIRST ON CNBC interview with Republican Presidential Candidate, Senator John McCain. During the interview, Senator McCain discusses his tax plan, the U.S. economy, government spending, the federal gas tax, his economic plan and airline consolidation, among other topics.

The full interview with Senator McCain will be available on CNBC.com.

All references must source CNBC.

HAINES: IN ANOTHER FIRST ON CNBC, JOHN HARWOOD IS IN PITTSBURGH RIGHT NOW WITH THE MAN OF THE HOUR. JOHN?

HARWOOD: THANK YOU, MARK. AND SENATOR, McCAIN, THANKS FOR JOINING US AND NICE TIE.

MCCAIN: THANK YOU, JOHN, YOU'VE GOT GOOD TASTE IN TIES.

HARWOOD: LET ME START WITH THE BROADEST POSSIBLE QUESTION. WHAT DO YOU SAY TO THE ARGUMENT THAT AS SOMEONE'S WHO EXPERTISE AND INSTINCTS ARE IN NATIONAL SECURITY, BUT YOU'RE THE WRONG GUY TO BE PRESIDENT AT THE TIME THE ECONOMY'S TURNING DOWN?

MCCAIN: MY INSTINCTS AND MY KNOWLEDGE AND BACKGROUND EXCEEDS MOST PEOPLE. I'VE BEEN INVOLVED IN THESE ISSUES FOR MANY, MANY YEARS, I KNOW THE ISSUES, I KNOW THE ECONOMY.

HARWOOD: AS YOU KNOW SOME OF YOUR OWN REMARKS FUELED THAT ISSUE, SAYING THAT YOU DIDN'T KNOW SO MUCH ABOUT THE ECONOMY

MCCAIN: SURE THAT'S ONE OF THE THINGS THAT HAPPENS. OCCASIONALLY IN LONG CONVERSATIONS. I AM OBVIOUSLY VERY KNOWLEDGEABLE ON NATIONAL SECURITY ISSUES BECAUSE I SPENT 22 YEARS IN THE MILITARY AND I'VE BEEN INVOLVED IN THOSE ISSUES. I'VE BEEN HEAVILY INVOLVED IN ECONOMIC ISSUES SINCE THE 1980s. I WAS THERE WHEN WE BEGAN THE GREATEST PERIOD OF ECONOMIC PROSPERITY, PERHAPS, IN AMERICA'S HISTORY. WHEN WE WERE IN TERRIBLE ECONOMIC SHAPE UNDER THE JIMMY CARTER ADMINISTRATION. SO I'M VERY FAMILIAR WITH THE ISSUES, I'M KNOWLEDGEABLE. AND I'M VERY CONFIDENT OF MY ABILITY TO STEWARD THESE POLICIES. AND ONE OF THE AREAS THAT I'VE BEEN A LEADER ON IS CUTTING, SPENDING, REMOVING EARMARKS, KEEPING TAXES LOW AND DOING THE THINGS THAT ARE NECESSARY TO MAKE AMERICA'S ECONOMY GROW. OUR PROBLEM IS NOT A LACK OF TAX REVENUES, OUR PROBLEM IS SPENDING. SINCE WE HAD A BALANCE BUDGET AGREEMENT WITH THEN PRESIDENT CLINTON IN 1998, GOVERNMENT SPENDING HAS INCREASED BY 70%. REVENUES HAVE GONE UP. BUT IT'S SPENDING. I KNOW HOW TO ATTACK WASTEFUL SPENDING AND MAKE THE GOVERNMENT MORE EFFICIENT.

HARWOOD: YOU OPPOSED PRESIDENT BUSH'S TAX CUTS IN 2001 IN THE NAME OF FISCAL RESPONSIBILITY AND ALSO THAT SOME OF THE BENEFITS WENT TOO MUCH TO PEOPLE AT THE TOP.

MCCAIN: LET ME JUST CORRECT THAT, I OPPOSED IT FOR THAT, I WOULD HAVE LIKED TO SEE MORE MIDDLE INCOME TAX CUTS.I HAD TAX CUT PROPOSAL OF MY OWN, BUT IT ALSO KEPT SPENDING UNDER CONTROL, WHICH IS THE KEY TO THE PROBLEMS WE HAVE. WE PRESIDED OVER THE GREATEST INCREASE IN GOVERNMENT SINCE THE GREAT SOCIETY. SO I WOULD HAVE HAD AS RONALD REAGAN DID SPENDING RESTRAINT ALONG WITH TAX REDUCTION. IF YOU'RE GOING TO GROW GOVERNMENT, YOU'RE GOING TO INCREASE SPENDING AND YOU'RE GOING TO LAY ON THE NEXT GENERATION OF AMERICA. IT'S A HUGE DEFICIT.

HARWOOD: NOW YOU'RE FOR THOSE BUSH TAX CUTS EVEN THOUGH THE SPENDING HASN'T BEEN CUT. YOU'VE GOT NEW ONES, $100 BILLION, $60 BILLION TO DOUBLE THE CHILD EXEMPTION THAT YOU TALKED ABOUT IN YOUR SPEECH TODAY, ANOTHER $60 BILLION TO GET RID OF THE A.N.T. AND NOW THIS NEW GAS TAX HOLIDAY THAT YOU TALKED ABOUT. DOES THAT MEAN THAT YOU'VE DECIDED THAT FISCAL RESPONSIBILITY IS JUST NOT AS IMPORTANT TO YOU?

MCCAIN: NO, JOHN. AS A MATTER OF FACT, THAT WE COULD ELIMINATE THE $35 BILLION IN THE LAST TWO YEARS THE PRESIDENT PUT IN EARMARK PROJECTS, YOU CAN ELIMINATE THE $60 BILLION THAT ARE ALREADY IN THERE. THAT MATCHES YOU UP RIGHT THERE, NOT TO MENTION ALL OF THE CUTS WE COULD MAKE IN SAVINGS IN DEFENSE PROCUREMENT. WE CONTRACTED TO BUY A LITERAL COMBAT SHIP THAT WAS SUPPOSED TO COST $140 MILLION, ENDED UP COSTING $400 MILLION, AND WE SCRAPPED IT. THERE'S SO MANY SAVINGS THAT COULD EASILY MAKE UP FOR THAT. AND BY THE WAY, THESE OTHERS SUCH AS THE AMT ARE PHASED IN OVER A TEN-YEAR PERIOD. WE UNDERSTAND THAT. WE WILL HAVE A BALANCED BUDGET IF I'M PRESIDENT OF THE UNITED STATES WITHIN EIGHT YEARS BECAUSE WE WILL HAVE FISCAL DISCIPLINE. IT'S NOT TAXES THAT ARE TOO LOW, IT'S SPENDING THAT ARE TOO HIGH. THAT'S A FUNDAMENTAL DIFFERENCE BETWEEN MYSELF AND SENATOR OBAMA AND SENATOR CLINTON.

HARWOOD: ON THIS ISSUE OF GAS TAXES.

MCCAIN: SURE.

HARWOOD: OIL PRICES HITTING NEW RECORDS NOW. AREN'T HIGH GAS PRICES SOMETHING THAT WOULD CAUSE AMERICANS TO USE LESS GASOLINE? AND ISN'T THAT SOMETHING THAT THE ECONOMY NEEDS TO HAVE HAPPEN IN ORDER TO HAVE THE MARKET KICK THE UNITED STATES OF ITS ADDICTION TO OIL?

MCCAIN: I THINK HIGH GAS TAXES ARE A REGRESSIVE TAX. WHO DRIVES THE FURTHEST? YOU SPEND A LOT OF TIME IN WASHINGTON, D.C. THE PEOPLE WHO LIVE CLOSEST TOWORK ARE THE WEALTHIEST WHO LIVE IN GEORGETOWN. THE PEOPLE WHO DRIVE THE FURTHEST ARE THE LOWEST INCOME AMERICANS.IT IS INCREDIBLY REGRESSIVE. WHERE'S THE FAIRNESS? WHERE'S THE FAIRNESS THERE? AMERICANS NOT ONLY ARE THEY SPENDING TOO MUCH ON THEIR GAS, BUT WE, AS A NATION, WE'RE SENDING $400 BILLION A YEAR TO COUNTRIES THAT DON'T LIKE US VERY MUCH, TO MONEY ENDS UP IN TERRORIST ORGANIZATIONS, IT DOES.AND IT'S A NATIONAL SECURITY ISSUE, NOT TO MENTION OUR NEED TO ADOPT GREEN TECHNOLOGIES. SO, AGAIN, AMERICANS ARE NOT UNDERTAXED WHETHER IT BE AT THE GAS PUMP OR WHETHER IT BE WHEN THEY FILL OUT THEIR TAX RETURN THAT'S THE DIFFERENCE BETWEEN US. AND IN ALL DUE RESPECT, SOMEONE THINKS WE OUGHT TO INCREASE TAXES ON GAS, THEY ARE LAYING A HEAVIER BURDEN ON THE LOWEST INCOME AMERICANS AND I DON'T THINK THAT'S FAIR TO AMERICA.

HARWOOD: LET ME ASK YOU ABOUT THE HOUSING MESS.

MCCAIN: SURE.

HARWOOD:YOU HAVE SUPPORTED THE FEDERAL INTERVENTION IN BEARSTEARNS SAYING IT WAS NECESSARY TO PREVENT SYSTEMIC FAILURE IN THE MARKET PLACE. BUT AS FAR AS INDIVIDUAL HOMEOWNERS GOES, YOU HAVE PROVIDED A PLAN TO HELP WRITE-DOWN SOME MORTGAGES AND HAVE A FEDERAL BACK STOCK THERE, BUT YOU'VE DEFINED IT NARROWLY. YOUR AIDS SAY PERHAPS AS FEW AS 200,000 HOMEOWNERS MIGHT BE AFFECTED.THERE ARE 2 MILLION HOMEOWNERS NOW FACING FORECLOSURE. IF THIS IS A VIRAL PROBLEM, AS YOU SAID, WHY ISN'T THAT SYSTEMIC RISK ENOUGH TO JUSTIFY A BROADER APPROACH TO THE PROBLEM THAN YOU'VE SUPPORTED SOFAR?

MCCAIN: LOOK, FIRST OF ALL, I THINK THAT CORPORATE GREED IN EXCESS AND CORPORATE COMPENSATION, AS IMENTIONED IN MY REMARKS, IS UNACCEPTABLE IN AMERICA. AND I'M NOT SURE IF CORPORATE AMERICA UNDERSTANDS HOW BAD THEIR REPUTATION IS TODAY BECAUSE OF IT.WHEN WE HAVE A MAJOR ORGANIZATION TURN DOWN A SHAREHOLDER, NON-BINDING RESOLUTION ON EXECUTIVE COMPENSATION, THERE'S SOMETHING BADLY SKEWED.

HARWOOD: DO YOU THINK SHAREHOLDERS, BYTHE WAY, SHOULD BE ABLE TO VOTE ON A SORT OF PAY PACKAGES OF CEOS?

MCCAIN: ABSOLUTELY. ABSOLUTELY.

HARWOOD: YOU'RE IN THE SAME PLACE AS OBAMA AND CLINTON ON THAT ISSUE?

MCCAIN: BUT I'VE BEEN THERE FOR A LONG TIME. I THINK THE POINT IS THAT SHAREHOLDERS OUGHT TO HAVE, OBVIOUSLY, MORE SAY.THAT'S THE EXCUSE AND RATIONALE FOR THE SYSTEM WE HAVE TODAY ANDI THINK THEY SHOULD BE THE ONES THAT PUNISH.BUT IN THE CASE OF THE OVERALL SITUATION, BEAR STEARNS, PROBABLY WOULD HAVE IF THEY'D COLLAPSED HAD A RIPPLE EFFECT THAT WOULD IN THE END HURT THOSE HOMEOWNERS BECAUSE OF THE DEVASTATING EFFECT IT WOULD HAVEON THE ECONOMY.THE KEY IS TRANSPARENCY, THE KEYIS KNOWLEDGE, THE KEY IS BETTER OVERSIGHT OF THESE INSTITUTIONS,THE KEY IS UNDERSTANDING A GLOBAL ECONOMY WHEN THE SUBPRIMELENDING CRISIS AFFECTS A TOWN IN NORWAY, WE'RE IN A VERY DIFFERENT WORLD THAN MOST OF US GREW UP IN. BUT I BELIEVE WHEN YOU'RE TALKING TO MY VIEW, IT'S 400,000 HOMEOWNERS, THIS IS GREAT BEGINNING.BUT YOU ALSO DON'T WANT TO REWARD PEOPLE WHO WERE PART OF THAT MISLEADING OF THE AMERICAN PEOPLE THAT BOUGHT HOMES ON PURE SPECULATORY REASONS AND LEFT THEM EMPTY IN THE BELIEF THAT THEY WOULD FLIP THEM A COUPLE YEARS LATER.I WANT TO HIT THE PEOPLE WHO ARE MOST DESERVING FIRST AND MOST EFFECTIVELY THAN IF THERE'S OTHER THINGS WE CAN DO. AND THERE ARE, WE PAST A STIMULUS PACKAGE, WE'VE TAKEN OTHER MEASURES, AS WELL.

HARWOOD: LET ME ASK YOU A COUPLE OF THINGS QUICKLY BECAUSEWE'RE SHORT ON TIME.DELTA AND NORTHWEST NOW LOOK LIKE THEY'RE GOING TO MERGE. THE AIRLINE INDUSTRY HAS BEEN IN DEEP TROUBLE. IS THAT THE RIGHT ANSWER? CONSOLIDATION FOR BOTH THE INDUSTRY AND FOR CONSUMERS?

MCCAIN: WE'VE ALSO SEEN FOUR OR FIVE AIRLINES GO UNDER, JUST AS YOU KNOW IN THE LAST COUPLE OF WEEKS.THE AIRLINE'S IN TROUBLE, PART OF THIS GOES BACK TO FUEL COST, THIS GOES BACK TO AN ABSOLUTE VITAL REQUIREMENT.WE BECOME INDEPENDENT OF OIL.THESE THINGS ARE NOT DISCONNECTED. I'D LOOK AT IT CAREFULLY, I'D THINK YOU'RE PROBABLY GOING TO SEE MORE CONSOLIDATIONS IN THE INDUSTRY.

HARWOOD: AND THAT'S OKAY WITH YOU?

MCCAIN: IT'S NOT PARTICULARLY OKAY.WE'D HAVE TO LOOK AT MARKET SHARES AND ALL OF THAT KIND OF STUFF.AS A NATION, WE'RE THE BEST IN THE WORLD. BUT I ALSO WANT TO EMPHASIZE ANOTHER THING.WE HAVE CONSISTENTLY FAILED TO FIX THE FAA, BOTH AS FAR AS THE AIR TRAFFIC CONTROL SYSTEM IS CONCERNED, OR THEIR INSPECTION AND SAFETY PROCEDURES. THAT HAS TO BE -- WE CAN'T HAVE A REOCCURRENCE OF WHAT JUST HAPPENED WITH AMERICAN AIRLINES. IT'S DEVASTATING TO SO MANY ORDINARY CITIZENS.

HARWOOD: LET ME ASK YOU ABOUT -- IF YOU LAY SPENDING ASIDE.

MCCAIN: YEAH.

HARWOOD: IT SOUNDS IF YOU'RESAYING ON THE BIGGEST ISSUES, TAXES, TRADE, REGULATION, THAT PRESIDENT BUSH HAS GOTTEN IT RIGHT.IS THAT WHAT YOUR VIEW IS?

MCCAIN: SPENDING IS -- IT'S GOTTEN TERRIBLY WRONG. I CAN'T TELL YOU THE NUMBER OF TIMES THAT I SAID VETO THIS BILL.

HARWOOD: ON THE OTHER ISSUES.

MCCAIN: I THINK HE WAS RIGHT ON TRADE. BUT WHEN YOU SAY RIGHT ON TAXES, THAT'S LIKE SAYING, YOU KNOW, YOU'RE HALF RIGHT WHEN YOU SEND A HUGE PROBLEM AND YOU ONLY ADDRESS HALF OF IT. ON TRADE, ABSOLUTELY. AND I WILL DEFEND FREE TRADE FOREVER. AND I AM A STUDENT OF HISTORY AND I KNOW HISTORY. AND I KNOW WHAT HAS HAPPENED IN THIS NATION WHEN WE HAVE ADOPTED PROTECTIONIST MEASURES AND THEY'VE BEEN DEVASTATING.IN THE COLOMBIA FREE TRADE AGREEMENT BEING TURNED DOWN SENDS A MESSAGE THROUGHOUT THE HEMISPHERE. AND WHEN A CANDIDATE FOR PRESIDENT SAYS HE'S GOING TO UNILATERALLY RENEGOTIATE A TREATY -- THAT SENDS A MESSAGE. TERRIBLY DISTURBING.

HARWOOD: SENATOR McCAIN, THANKS SO MUCH FOR JOINING US.

MCCAIN: THANKS, JOHN.




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