KROFT: Do you have solutions for the Palestinian/Israeli conflict?
OBAMA: Well, probably not solutions that I can lay out in the next two minutes. Look, I think that both the Israeli people and the Palestinian people are weary of the ongoing conflict. I think they want to see solutions. What we don't have right now, particularly in the Palestinian community, are a set of leaders who have both the will and the capacity to renounce violence as a strategy to resolve the problems and to actually enforce any agreement that might be reached with the Israelis. And that is something that we can't do single-handedly, but if we're much more active than we've been, if we're paying attention, if we're deploying special envoys, if we are indicating to the Palestinians that we are ready and willing to work with them and the Israelis in finding an agreeable two-state solution, then it is possible that that leadership will emerge.
KROFT: You have a government that's run by Hamas.
OBAMA: Well, that's right. Whether it is a maturation of Hamas leadership where they realize that violence is leading their people nowhere, or it's Fattah cleaning up its act and recognizing that they have to be a responsible government as opposed to a patronage system in the Palestinian Authority -- the possibilities of those two parties coming together and then being willing to say to Israel, "We renounce violence. We recognize your right to exist. We accept the various agreements that have been signed between the Israeli government and the Palestinian people, and we are ready to create a two state solution." Until that happens I think we're not going see much progress. But the United States being actively engaged in encouraging that process I think is critical.
KROFT: What do you think the biggest issues are facing this country right now?
OBAMA: Our starting point has to be our security. Priority number two is creating a situation in this country where the basic values of opportunity and the ability to compete in a globalized world are available to all people. What we've seen over the last several years I think is a situation in which the economy's been productive, [but] the fruits of that productivity have been restricted to a very small portion of the population, and the average worker is feeling more insecure in terms of their healthcare, more insecure in terms of their retirement. Solving our healthcare crisis, and you know I've said previously that by the end of my Presidency I would want to see a plan to provide healthcare to all Americans. I think it is critical that we get a handle on our energy strategy in this country, and that's something that I've worked on quite a bit here in the United States Senate. I think that we have to have a President who's willing to use the bully pulpit and all the tools at his or her disposal to say that we can create a future of alternative fuels and we can deal with the problem of climate change. We can enhance our national security by weeding ourselves off oil imports. [Also] critical is revamping our education system in a much more fundamental way. I think that George Bush made a half step when he passed the No Child Left Behind act. But he left money behind, and the way it was structured has not created the kind of change that we'd like to see on the ground.
KROFT: Would you raise taxes?
OBAMA: I would start by engaging in some honest budgeting, because one of the things that this President has done over the last six years is engage in a lot of smoke and mirrors budgeting, and it's done incredible damage to our long-term fiscal health. So, I think it's going to be important for us to start by saying, "We're going to pay as we go. We're not going to run the credit card up for our kids and our grandchildren." And if we are going to cut taxes or we are going to engage in new spending, then we've got to figure out how to pay for it. That's a starting point.
KROFT: You think the Bush tax cut should be rolled back?
OBAMA: I think the Bush tax cuts to you and me. The Bush tax cuts to people in the top income brackets should be rolled back, because I don't think we can afford them.
KROFT: You're a fairly traditional left of center Democrat, right?
OBAMA: I think there's no doubt that I'm a Democrat, and there's no doubt that I'm a progressive. [However,] how we label ourselves in this town as conservative or liberal has to do with a handful of highly ideological issues that are of marginal importance to the everyday lives of Americans. And yet there is this huge area where there's potentially overlap between conservative and liberal ideas, between Republican and Democratic legislators where we could do a lot of work and get stuff done.
KROFT: How important is race in defining yourself?
OBAMA: I think all of us in America and particularly African-Americans have to think about race at some point in our lives. The way I like to think about it, I am rooted in the African-American community, but I'm not defined by it. I am comfortable in my racial identity and recognize that I'm part of a very specific set of experiences in this country, but that's not the core of who I am. Another way of saying is that's not all I am.