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Transcript of final 2012 presidential debate, part 2

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And so the question is not a game of Battleship, where we're counting ships. It's what are our capabilities. And so when I sit down with the Secretary of the Navy and the Joint Chiefs of Staff, we determine how are we going to be best able to meet all of our defense needs in a way that also keeps faith with our troops, that also makes sure that our veterans have the kind of support that they need when they come home.And that is not reflected in the kind of budget that you're putting forward because it just doesn't work.

SCHIEFFER: All right.

OBAMA: And, you know, we visited the website quite a bit and it still doesn't work.

SCHIEFFER: A lot to cover. I'd like -- I'd like to move to the next segment: red lines, Israel and Iran.

Would either of you -- and you'll have two minutes -- and, President Obama, you have the first go at this one -- would either of you be willing to declare that an attack on Israel is an attack on the United States, which, of course, is the same promise that we give to our close allies like Japan.

And if you made such a declaration, would not that deter Iran? It's certainly deterred the Soviet Union for a long, long time when we made that -- we made -- we made that promise to our allies.

Mr. President?

OBAMA: First of all, Israel is a true friend. It is our greatest ally in the region. And if Israel is attacked, America will stand with Israel. I've made that clear throughout my presidency. And...

SCHIEFFER: So you're -- you're saying we've already made that declaration.

OBAMA: I will stand with Israel if they are attacked. And this is the reason why, working with Israel, we have created the strongest military and intelligence cooperation between our two countries in history.

In fact, this week we'll be carrying out the largest military exercise with Israel in history, this very week. But to the issue of Iran, as long as I'm president of the United States Iran will not get a nuclear weapon. I made that clear when I came into office.

OBAMA: We then organized the strongest coalition and the strongest sanctions against Iran in history, and it is crippling their economy. Their currency has dropped 80 percent. Their oil production has plunged to the lowest level since they were fighting a war with Iraq 20 years ago. So their economy is in a shambles.

And the reason we did this is because a nuclear Iran is a threat to our national security, and it is a threat to Israel's national security. We cannot afford to have a nuclear arms race in the most volatile region of the world.

Iran is a state sponsor of terrorism. And for them to be able to provide nuclear technology to non-state actors, that's unacceptable. And they have said that they want to see Israel wiped off the map.

So the work that we've done with respect to sanctions now offers Iran a choice. They can take the diplomatic route and end their nuclear program or they will have to face a united world and a United States president, me, who said we're not going to take any options off the table.

The disagreement I have with Governor Romney is that, during the course of this campaign, he's often talked as if we should take premature military action. I think that would be a mistake, because when I've sent young men and women into harm's way, I always understand that that is the last resort, not the first resort.

SCHIEFFER: Two minutes.

ROMNEY: Well, first of all, I want to underscore the same point the president mad,e which is that if I'm President of the United States, when I'm President of the United States, we will stand with Israel.

And if Israel is attacked, we have their back, not just diplomatically, not just culturally, but militarily. That's number one.

Number two, with regards to Iran and the threat of Iran, there's no question but that a nuclear Iran, a nuclear-capable Iran is unacceptable to America. It presents a threat not only to our friends but ultimately a threat to us to have Iran have nuclear material, nuclear weapons that could be used against us or used to be threatening to us.

It is also essential for us to understand what our mission is in Iran, and that is to dissuade Iran from having a nuclear weapon through peaceful and diplomatic means. And crippling sanctions are something I called for five years ago, when I was in Israel, speaking at the Herzliya Conference. I laid out seven steps, crippling sanctions were number one. And they do work. You're seeing it right now in the economy. It's absolutely the right thing to do, to have crippling sanctions. I would have put them in place earlier. But it's good that we have them.

Number two, something I would add today is I would tighten those sanctions. I would say that ships that carry Iranian oil, can't come into our ports. I imagine the E.U. would agree with us as well. Not only ships couldn't, but I'd say companies that are moving their oil can't, people who are trading in their oil can't. I would tighten those sanctions further. Secondly, I'd take on diplomatic isolation efforts. I'd make sure that Ahmadinejad is indicted under the Genocide Convention. His words amount to genocide incitation. I would indict him for it. I would also make sure that their diplomats are treated like the pariah they are around the world. The same way we treated the apartheid diplomats of South Africa.

We need to increase pressure time, and time again on Iran because anything other than a -- a -- a solution to this, which says -- which stops this -- this nuclear folly of theirs, is unacceptable to America. And of course, a military action is the last resort. It is something one would only - only consider if all of the other avenues had been -- had been tried to their full extent.

SCHIEFFER: Let me ask both of you, there -- as you know, there are reports that Iran and the United States a part of an international group, have agreed in principle to talks about Iran's nuclear program. What is the deal, if there are such talks? What is the deal that you would accept, Mr. President?

OBAMA: Well, first of all those are reports in the newspaper. They are not true. But our goal is to get Iran to recognize it needs to give up its nuclear program and abide by the U.N. resolutions that have been in place. Because they have the opportunity to reenter the community of nations, and we would welcome that.

There -- there are people in Iran who have the same aspirations as people all around the world for a better life. And we hope that their leadership takes the right decision, but the deal we'll accept is they end their nuclear program. It's very straightforward. And I'm glad that Governor Romney agrees with the steps that we're taking. You know, there have been times, Governor, frankly, during the course of this campaign, where it sounded like you thought that you'd do the same things we did, but you'd say them louder and somehow that -- that would make a difference.

And it turns out that the work involved in setting up these crippling sanctions is painstaking. It's meticulous. We started from the day we got into office. And the reason is was so important -- and this is a testament to how we've restored American credibility and strength around the world -- is we had to make sure that all the countries participated, even countries like Russia and China. Because if it's just us that are imposing sanctions -- we've had sanctions in place a long time. It's because we got everybody to agree that Iran is seeing so much pressure. And we've got to maintain that pressure.

There is a deal to be had, and that is that they abide by the rules that have already been established. They convince the international community they are not pursuing a nuclear program. There are inspections that are very intrusive. But over time, what they can do is regain credibility. In the meantime, though, we're not going to let up the pressure until we have clear evidence that that takes place.

And one last thing -- just -- just to make this point. The clock is ticking. We're not going to allow Iran to perpetually engage in negotiations that lead nowhere. And I've been very clear to them. You know, because of the intelligence coordination that we do with a range of countries, including Israel, we have a sense of when they would get breakout capacity, which means that we would not be able to intervene in time to stop their nuclear program.

And that clock is ticking. And we're going to make sure that if they do not meet the demands of the international community, then we are going to take all options necessary to make sure they don't have a nuclear weapon.

SCHIEFFER: Governor?

ROMNEY: I think from the very beginning, one of the challenges we've had with Iran is that they have looked at this administration, and felt that the administration was not as strong as it needed to be.

I think they saw weakness where they had expected to find American strength. And I say that because from the very beginning, the president in his campaign four years ago, said he would meet with all the world's worst actors in his first year, he'd sit down with Chavez and Kim Jong-il, with Castro and President Ahmadinejad of Iran.

And I think they looked and thought, well, that's an unusual honor to receive from the President of the United States. And then the president began what I have called an apology tour, of going to various nations in the Middle East and criticizing America. I think they looked at that and saw weakness.

Then when there were dissidents in the streets of Tehran, a Green Revolution, holding signs saying, is America with us, the president was silent. I think they noticed that as well.

And I think that when the president said he was going to create daylight between ourselves and Israel, that they noticed that as well.

All of these things suggested, I think, to the Iranian mullahs that, hey, you know, we can keep on pushing along here, we can keep talks going on, we're just going to keep on spinning centrifuges.

Now there are some 10,000 centrifuges spinning uranium, preparing to create a nuclear threat to the United States and to the world. That's unacceptable for us, and it's essential for a president to show strength from the very beginning, to make it very clear what is acceptable and not acceptable.

And an Iranian nuclear program is not acceptable to us. They must not develop nuclear capability. And the way to make sure they understand that is by having, from the very beginning, the tightest sanctions possible. They need to be tightened. Our diplomatic isolation needs to be tougher. We need to indict Ahmadinejad. We need to put the pressure on them as hard as we possibly can, because if we do that, we won't have to take the military action.

OBAMA: Bob, let me just respond.

Nothing Governor Romney just said is true, starting with this notion of me apologizing. This has been probably the biggest whopper that's been told during the course of this campaign. And every fact checker and every reporter who's looked at it, Governor, has said this is not true.

And when it comes to tightening sanctions, look, as I said before, we've put in the toughest, most crippling sanctions ever. And the fact is, while we were coordinating an international coalition to make sure these sanctions were effective, you were still invested in a Chinese state oil company that was doing business with the Iranian oil sector.

So I'll let the American people decide, judge, who's going to be more effective and more credible when it comes to imposing crippling sanctions.

And with respect to our attitude about the Iranian revolution, I was very clear about the murderous activities that had taken place and that was contrary to international law and everything that civilized people stand for.

And -- and so the strength that we have shown in Iran is shown by the fact that we've been able to mobilize the world.

When I came into office, the world was divided. Iran was resurgent. Iran is at its weakest point, economically, strategically, militarily, then since -- then in many years. And we are going to continue to keep the pressure on to make sure that they do not get a nuclear weapon. That's in America's national interest and that will be the case so long as I'm president.

ROMNEY: We're four years closer to a nuclear Iran. We're four years closer to a nuclear Iran. And -- and -- we should not have wasted these four years to the extent they -- they continue to be able to spin these centrifuges and get that much closer. That's number one.

Number two, Mr. President, the reason I call it an apology tour is because you went to the Middle East and you flew to Egypt and to Saudi Arabia and to Turkey and Iraq. And by the way, you skipped Israel, our closest friend in the region, but you went to the other nations.

And by the way, they noticed that you skipped Israel. And then in those nations, and on Arabic TV, you said that America had been dismissive and derisive. You said that on occasion America had dictated to other nations.

Mr. President, America has not dictated to other nations. We have freed other nations from dictators.

OBAMA: Bob, let me -- let me respond.

If we're going to talk about trips that we've taken -- when I was a candidate for office, first trip I took was to visit our troops. And when I went to Israel as a candidate, I didn't take donors. I didn't attend fundraisers. I went to Yad Beshef (ph), the Holocaust museum there, to remind myself the nature of evil and why our bond with Israel will be unbreakable.

And then I went down to the border towns of Storok (ph), which had experienced missiles raining down from Hamas. And I saw families there who showed me there where missiles had come down near their children's bedrooms. And I was reminded of what that would mean if those were my kids. Which is why as president, we funded an Iron Dome program to stop those missiles.

OBAMA: So that's how I've used my travels, when I travel to Israel and when I travel to the region. And the -- the central question at this point is going to be: Who is going to be credible to all parties involved? And they can look at my track record, whether it's Iran sanctions, whether it's dealing with counterterrorism, whether it's supporting democracy, whether it's supporting women's rights, whether it's supporting religious minorities.

And they can say that the President of the United States and the United States of America has stood on the right side of history. And that kind of credibility is precisely why we've been able to show leadership on a wide range of issues facing the world right now.

SCHIEFFER: What if -- what if the prime minister of Israel called you on the phone and said, "Our bombers are on the way. We're going to bomb Iran."

What do you --

ROMNEY: Bob, let's not go into hypotheticals of that nature. Our relationship with Israel, my relationship with the prime minister of Israel is such that we would not get a call saying our bombers are on the way, or their fighters are on the way. This is the kind of thing that would have been discussed and thoroughly evaluated well before that kind of --

(CROSSTALK)

SCHIEFFER: So you'd say it just wouldn't happen?

That's --

SCHIEFFER: OK. Let's see what --

ROMNEY: But let me -- let me come back -- we can come back. Let's come back to what the president was speaking about, which is what's happening in the world and the president's statement that things are going so well.

Look, I look at what's happening around the world, and i see Iran four years closer to a bomb. I see the Middle East with a rising tide of violence, chaos, tumult. I see jihadists continuing to spread, whether they're rising or just about the same level, hard to precisely measure, but it's clear they're there. They're very strong.

I see Syria with 30,000 civilians dead, Assad still in power. I see our trade deficit with China, larger than it's -- growing larger every year, as a matter of fact.

I look around the world and I don't feel that you see North Korea, continuing to export their nuclear technology, Russia said they're not going to follow Nunn-Lugar any more. They're back away from a nuclear proliferation treaty that we had with them.

I look around the world and I don't feel that you see North Korea, continuing to export their nuclear technology, Russia said they're not going to follow Nunn-Lugar any more. They're back away from a nuclear proliferation treaty that we had with them.I look around the world, I don't see our influence growing around the world. I see our influence receding, in part because of the failure of the president to deal with our economic challenges at home; in part because of our withdrawal from our commitment to our military in the way I think it ought to be; in part because of the -- the -- the turmoil with Israel.

I mean, the president received a letter from 38 Democrat senators saying the tensions with Israel were a real problem. They asked him, please repair the tension -- Democrat senators -- please repair the tension...

SCHIEFFER: All right.

ROMNEY: ... the damage in his -- in his own party.

OBAMA: Governor, the problem is, is that on a whole range of issues, whether it's the Middle East, whether it's Afghanistan, whether it's Iraq, whether it's now Iran, you've been all over the map.

I mean, I'm -- I'm pleased that you now are endorsing our policy of applying diplomatic pressure and potentially having bilateral discussions with the Iranians to end their nuclear program. But just a few years ago you said that's something you'd never do.

In the same way that you initially opposed a timetable in Afghanistan, now you're for it, although it depends. In the same way that you say you would have ended the war in Iraq, but recently gave a speech saying that we should have 20,000 more folks in there. The same way that you said that it was mission creep to go after Gadhafi.

When it comes to going after Osama bin Laden, you said, well, any president would make that call. But when you were a candidate in 2008, as I was, and I said if I got bin Laden in our sights I would take that shot, you said we shouldn't move heaven and earth to get one man.

And you said we should ask Pakistan for permission. And if we had asked Pakistan permission, we would not have gotten him. And it was worth moving heaven and earth to get him.

You know, after we killed bin Laden I was at ground zero for a memorial and talked to a young women who was four years old when 9/11 happened. And the last conversation she had with her father was him calling from the twin towers, saying "Peyton (ph), I love you and I will always watch over you." And for the next decade, she was haunted by that conversation. And she said to me, "You know, by finally getting bin Laden, that brought some closure to me."

And when we do things like that -- when we bring those who have harmed us to justice, that sends a message to the world and it tells Peyton (ph) that we did not forget her father. And I make that point because that's the kind of clarity of leadership, and those decisions are not always popular. Those decisions generally -- generally are not poll-tested. And even some in my own party, including my current vice president, had the same critique as you did.

But what the American people understand is that I look at what we need to get done to keep the American people safe and to move our interests forward, and I make those decisions.

SCHIEFFER: All right, let's go. And that leads us -- this takes us right to the next segment, Governor, America's longest war, Afghanistan and Pakistan...

ROMNEY: Bob...

SCHIEFFER: Governor, you get to go first.

ROMNEY: You can't -- but you can't have the president just lay out a whole series of items without giving me a chance to respond.

SCHIEFFER: With respect, sir, you had laid out quite a program...

ROMNEY: Well, that's probably true.

SCHIEFFER: We'll give you -- we'll catch up.

The United States is scheduled to turn over responsibility for security in Afghanistan to the Afghan government in 2014. At that point, we will withdraw our combat troops, leave a smaller force of Americans, if I understand our policy, in Afghanistan for training purposes. It seems to me the key question here is: What do you do if the deadline arrives and it is obvious the Afghans are unable to handle their security? Do we still leave?

And I believe, Governor Romney, you go first?

ROMNEY: Well, we're going to be finished by 2014, and when I'm president, we'll make sure we bring our troops out by the end of 2014. The commanders and the generals there are on track to do so.

We've seen progress over the past several years. The surge has been successful and the training program is proceeding apace. There are now a large number of Afghan Security Forces, 350,000 that are ready to step in to provide security and we're going to be able to make that transition by the end of 2014.

So our troops will come home at that point.

I can tell you at the same time, that we will make sure that we look at what's happening in Pakistan, and recognize that what's happening in Pakistan is going to have a major impact on the success in Afghanistan. And I say that because I know a lot of people that feel like we should just brush our hands and walk away.

And I don't mean you, Mr. President, but some people in the -- in our nation feel that Pakistan is being nice to us, and that we should walk away fro mthem. But Pakistan is important to the region, to the world and to us, because Pakistan has 100 nuclear warheads and they're rushing to build a lot more. They'll have more than Great Britain sometime in the -- in the relatively near future.

They also have the Haqqani Network and the Taliban existent within their country. And so a Pakistan that falls apart, becomes a failed state, would be of extraordinary danger to Afghanistan and to us.

And so we're going to have to remain helpful in encouraging Pakistan to move towards a more stable government and rebuild the relationship with us. And that means that our aid that we provide to Pakistan is going to have to be conditioned upon certain benchmarks being met.

ROMNEY: So for me, I look at this as both a need to help move Pakistan in the right direction, and also to get Afghanistan to be ready, and they will be ready by the end of 2014.

SCHIEFFER: Mr. President?

OBAMA: When I came into office, we were still bogged down in Iraq and Afghanistan had been drifting for a decade. We ended the war in Iraq, refocused our attention on Afghanistan, and we did deliver a surge of troops. That was facilitated in part because we had ended the war in Iraq.

And we are now in a position where we have met many of the objectives that got us there in the first place.

Part of what had happened is we'd forgotten why we had gone. We went because there were people who were responsible for 3,000 American deaths. And so we decimated Al Qaida's core leadership in the border regions between Afghanistan and Pakistan.

We then started to build up Afghan forces. And we're now in a position where we can transition out, because there's no reason why Americans should die when Afghans are perfectly capable of defending their own country.

Now, that transition has to take place in a responsible fashion. We've been there a long time, and we've got to make sure that we and our coalition partners are pulling out responsibly and giving Afghans the capabilities that they need.

But what I think the American people recognize is after a decade of war it's time to do some nation building here at home. And what we can now do is free up some resources, to, for example, put Americans back to work, especially our veterans, rebuilding our roads, our bridges, our schools, making sure that, you know, our veterans are getting the care that they need when it comes to post-traumatic stress disorder and traumatic brain injury, making sure that the certifications that they need for good jobs of the future are in place.

OBAMA: You know, I was having lunch with some -- a veteran in Minnesota who had been a medic dealing with the most extreme circumstances. When he came home and he wanted to become a nurse, he had to start from scratch. And what we've said is let's change those certifications. The first lady has done great work with an organization called Joining Forces putting our veterans back to work. And as a consequence, veterans' unemployment is actually now lower than general population. It was higher when I came into office.

So those are the kinds of things that we can now do because we're making that transition in Afghanistan.

SCHIEFFER: All right. Let me go to Governor Romney because you talked about Pakistan and what needs to be done there.

General Allen, our commander in Afghanistan, says that Americans continue to die at the hands of groups who are supported by Pakistan. We know that Pakistan has arrested the doctor who helped us catch Obama (sic) bin Laden. It still provides safe haven for terrorists, yet we continue to give Pakistan billions of dollars.

Is it time for us to divorce Pakistan?

ROMNEY: No, it's not time to divorce a nation on Earth that has 100 nuclear weapons and is on the way to double that at some point, a nation that has serious threats from terrorist groups within its nation, as I indicated before, the Taliban, Haqqani Network.

It's a nation that's not like -- like others and it does not have a civilian leadership that is calling the shots there. You have the ISI, their intelligence organization, is probably the most powerful of the -- of three branches there. Then you have the military and then you have the civilian government.

This is a nation, which, if it falls apart, if it -- if it becomes a failed state, there are nuclear weapons there and you've got -- you've got terrorists there who could grab their -- their hands onto those nuclear weapons.

This is -- this is an important part of the world for us. Pakistan is -- is technically an ally, and they're not acting very much like an ally right now. But we have some work to do. And I -- I don't blame the administration for the fact that the relationship with Pakistan is strained. We -- we had to go into Pakistan. We had to go in there to get Osama bin Laden. That was the right thing to do. And -- and that upset them, but obviously there was a great deal of anger even before that. But we're going to have to work with the -- with the people in Pakistan to try and help them move to a more responsible course than the one that they're on. And it's important for them. It's important for the nuclear weapons.

It's important for the success of Afghanistan. Because inside Pakistan, you have a -- a large group of Pashtun that are -- that are Taliban. They're going to come rushing back in to Afghanistan when we go. And that's one of the reasons the Afghan Security Forces have so much work to do to be able to fight against that. But it's important for us to recognize that we can't just walk away from Pakistan. But we do need to make sure that as we -- as we send support for them, that this is tied to them making progress on -- on matters that would lead them to becoming a civil society.

SCHIEFFER: Let -- let me ask you, Governor because we know President Obama's position on this, what is -- what is your position on the use of drones?

ROMNEY: Well I believe we should use any and all means necessary to take out people who pose a threat to us and our friends around the world. And it's widely reported that drones are being used in drone strikes, and I support that and entirely, and feel the president was right to up the usage of that technology, and believe that we should continue to use it, to continue to go after the people that represent a threat to this nation and to our friends. But let me also note that as I said earlier, we're going to have to do more than just going after leaders and -- and killing bad guys, important as that is.

We're also going to have to have a farm more effective and comprehensive strategy to help move the world away from terror and Islamic extremism. We haven't done that yet. We talk a lot about these things, but you look at the -- the record, you look at the record. You look at the record of the last four years and say is Iran closer to a bomb? Yes. Is the Middle East in tumult? Yes. Is -- is al-Qaida on the run, on its heels? No. Is -- are Israel and the Palestinians closer to reaching a peace agreement?

No, they haven't had talks in two years. We have not seen the progress we need to have, and I'm convinced that with strong leadership and an effort to build a strategy based upon helping these nations reject extremism, we can see the kind of peace and prosperity the world demands.

OBAMA: Well, keep in mind our strategy wasn't just going after bin Laden. We created partnerships throughout the region to deal with extremism in Somalia, in Yemen, in Pakistan.

And what we've also done is engaged these governments in the kind of reforms that are actually going to make a difference in people's lives day to day, to make sure that their governments aren't corrupt, to make sure that they're treating women with the kind of respect and dignity that every nation that succeeds has shown and to make sure that they've got a free market system that works.

So across the board, we are engaging them in building capacity in these countries. And we have stood on the side of democracy.

One thing I think Americans should be proud of, when Tunisians began to protest, this nation -- me, my administration -- stood with them earlier than just about any country.

In Egypt we stood on the side of democracy.

In Libya we stood on the side of the people.

And as a consequence, there's no doubt that attitudes about Americans have changed. But there are always going to be elements in these countries that potentially threaten the United States. And we want to shrink those groups and those networks and we can do that.

But we're always also going to have to maintain vigilance when it comes to terrorist activities. The truth, though, is that Al Qaeda is much weaker than it was when I came into office. And they don't have the same capacities to attack the U.S. homeland and our allies as they did four years ago.

SCHIEFFER: Let's -- let's go to the next segment, because it's a very important one. It is the rise of China and future challenges for America. I want to just begin this by asking both of you, and Mr. President, you -- you go first this time.

What do you believe is the greatest future threat to the national security of this country?

OBAMA: Well, I think it will continue to be terrorist networks. We have to remain vigilant, as I just said. But with respect to China, China is both an adversary, but also a potential partner in the international community if it's following the rules. So my attitude coming into office was that we are going to insist that China plays by the same rules as everybody else.

I know Americans had seen jobs being shipped overseas; businesses and workers not getting a level playing field when it came to trade. And that's the reason why I set up a trade task force to go after cheaters when it came to international trade. That's the reason why we have brought more cases against China for violating trade rules than the other -- the previous administration had done in two terms. And we've won just about every case that we've filed, that has been decided.

In fact, just recently steelworkers in Ohio and throughout the Midwest -- Pennsylvania -- are in a position now to sell steel to China because we won that case. We had a tire case in which they were flooding us with cheap domestic tires -- or -- or cheap Chinese tires. And we put a stop to it and as a consequence saved jobs throughout America. I have to say that Governor Romney criticized me for being too tough in that tire case; said this wouldn't be good for American workers and that it would be protectionist.

But I tell you, those workers don't feel that way. They feel as if they had finally an administration who was going to take this issue seriously.

Over the long term, in order for us to compete with China, we've also got to make sure, though, that we're taking -- taking care of business here at home. If we don't have the best education system in the world, if we don't continue to put money into research and technology that will allow us to create great businesses here in the United States, that's how we lose the competition. And, unfortunately, Governor Romney's budget and his proposals would not allow us to make those investments.

SCHIEFFER: All right.

Governor?

ROMNEY: Well, first of all, it's not government that makes business successful. It's not government investments that makes businesses grow and hire people.

Let me also note that the greatest threat that the world faces, the greatest national security threat is a nuclear Iran.

Let's talk about China. China has an interest that's very much like ours in one respect, and that is they want a stable world. They don't want war. They don't want to see protectionism. They don't want to see the world break out into -- into various forms of chaos, because they have to -- they have to manufacture goods and put people to work and they have about 20,000 -- 20 million, rather, people coming out of the farms every year coming into the cities, needing jobs.

So they want the economy to work and the world to be free and open. And so we can be a partner with China. We don't have to be an adversary in any way, shape or form. We can work with them, we can collaborate with them, if they're willing to be responsible.

Now, they look at us and say, Is it a good idea to be with America? How strong are we going to be? How strong is our economy? They look at the fact that we owe 'em a trillion dollars and owe other people $16 trillion in total, including that.

ROMNEY: They look at our -- our decision to -- to cut back on our military capabilities. A trillion dollars. The secretary of defense called these trillion dollars of cuts to our military devastating. It's not my term, it's the president's own secretary of defense called these trillion dollars of cuts to our military devastating. It's not my term, it's the president's own Secretary of Defense, called them devastating.

They look at America's commitments around the world and they see what's happening, and they say, well, OK. Is America going to be strong? And the answer is, yes, if I'm president, America will be very strong.

We'll also make sure that we have trade relations with China that work for us. I've watched year in and year out as companies have shut down and people have lost their jobs because China has not played by the same rules, in part by holding down artificially the value of their currency. It holds down the prices of their goods. It means our goods aren't as competitive and we lose jobs. That's got to end.

They're making some progress; they need to make more. That's why on day one, i will label them a currency manipulator, which allows us to apply tariffs where they're taking jobs. They're stealing our intellectual property, our patents, our designs, our technology, hacking into our computers, counterfeiting our goods.

They have to understand we want to trade with them. We want a world that's stable. We like free enterprise, but you got to play by the rules.

SCHIEFFER: Well, Governor, let me just ask you. If you declare them a currency manipulator on day one, some people are -- say you're just going to start a trade war with China on day one. Is that -- isn't there a risk that that could happen?

ROMNEY: Well, they sell us about this much stuff every year, and we sell them about this much stuff every year. So it's pretty clear who doesn't want a trade war. And there's one going on right now, which we don't know about it. It's a silent one. And they're winning.

We have enormous trade imbalance with China, and it's worse this year than last year, and it's worse last year than the year before. And so we have to understand that we can't just surrender and lose jobs year in and year out. We have to say to our friend in China, look, you guys are playing aggressively. We understand it. But this can't keep on going. You can't keep on holding down the value of your currency, stealing our intellectual property, counterfeiting our products, selling them around the world, even to the United States.

I was with one company that makes valves and -- and process industries and they said, look, we were -- we were having some valves coming in that -- that were broken and we had to repair them under warranty and we looked them and -- and they had our serial number on them. And then we noticed that there was more than one with that same serial number. They were counterfeit products being made overseas with the same serial number as a U.S. company, the same packaging, these were being sold into our market and around the world as if they were made by the U.S. competitor. This can't go on.

I want a great relationship with China. China can be our partner, but -- but that doesn't mean they can just roll all over us and steal our jobs on an unfair basis.

OBAMA: Well, Governor Romney's right, you are familiar with jobs being shipped overseas because you invested in companies that were shipping jobs overseas.

And, you know, that's -- you're right. I mean that's how our free market works. But I've made a different bet on American workers.

If we had taken your advice Governor Romney about our auto industry, we'd be buying cars from China instead of selling cars to China.

If we take your advice with respect to how we change our tax codes so that companies that earn profits overseas don't pay U.S. taxes compared to companies here that are paying taxes. Now that's estimated to create 800,000 jobs, the problem is they won't be here, they'll be in places like China.

And if we're not making investments in education and basic research, which is not something that the private sector is doing at a sufficient pace right now and has never done, then we will lose the (inaudible) in things like clean energy technology.

Now with respect to what we've done with China already, U.S. exports have doubled since I came into office, to China and actually currencies are at their most advantageous point for U.S. exporters since 1993.

We absolutely have to make more progress and that's why we're going to keep on pressing.

And when it comes to our military and Chinese security, part of the reason that we were able to pivot to the Asia-Pacific region after having ended the war in Iraq and transitioning out of Afghanistan, is precisely because this is going to be a massive growth area in the future.

And we believe China can be a partner, but we're also sending a very clear signal that America is a Pacific power; that we are going to have a presence there. We are working with countries in the region to make sure, for example, that ships can pass through; that commerce continues. And we're organizing trade relations with countries other than China so that China starts feeling more pressure about meeting basic international standards.

That's the kind of leadership we've shown in the region. That's the kind of leadership that we'll continue to show.

ROMNEY: I just want to take one of those points, again, attacking me as not talking about an agenda for -- for getting more trade and opening up more jobs in this country. But the president mentioned the auto industry and that somehow I would be in favor of jobs being elsewhere. Nothing could be further from the truth.

I'm a son of Detroit. I was born in Detroit. My dad was head of a car company. I like American cars. And I would do nothing to hurt the U.S. auto industry. My plan to get the industry on its feet when it was in real trouble was not to start writing checks. It was President Bush that wrote the first checks. I disagree with that. I said they need -- these companies need to go through a managed bankruptcy. And in that process, they can get government help and government guarantees, but they need to go through bankruptcy to get rid of excess cost and the debt burden that they'd -- they'd built up.

And fortunately...

(CROSSTALK)

OBAMA: Governor Romney, that's not what you said...

(CROSSTALK)

OBAMA: Governor Romney, you did not...

ROMNEY: You can take a look at the op-ed...

(CROSSTALK)

OBAMA: You did not say that you would provide government help.

ROMNEY: I said that we would provide guarantees, and -- and that was what was able to allow these companies to go through bankruptcy, to come out of bankruptcy. Under no circumstances would I do anything other than to help this industry get on its feet. And the idea that has been suggested that I would liquidate the industry, of course not. Of course not.

(CROSSTALK)

OBAMA: Let's check the record.

(CROSSTALK)

ROMNEY: That's the height of silliness...

(CROSSTALK)

OBAMA: Let -- let -- let's...

(CROSSTALK)

ROMNEY: I have never said I would liquidate...

(CROSSTALK)

OBAMA: ...at the record.

(CROSSTALK)

ROMNEY: ...I would liquidate the industry.

(CROSSTALK)

OBAMA: Governor, the people in Detroit don't forget.

(CROSSTALK)

ROMNEY: ... and -- and that's why I have the kind of commitment to ensure that our industries in this country can compete and be successful. We in this country can -- can compete successfully with anyone in the world, and we're going to. We're going to have to have a president, however, that doesn't think that somehow the government investing in -- in car companies like Tesla and -- and Fisker, making electric battery cars. This is not research, Mr President, these are the government investing in companies. Investing in Solyndra. This is a company, this isn't basic research. I -- I want to invest in research. Research is great. Providing funding to universities and think tanks is great. But investing in companies? Absolutely not.

(CROSSTALK)

OBAMA: Governor?

ROMNEY: That's the wrong way to go.

(CROSSTALK)

OBAMA: The fact of the matter is...

(CROSSTALK)

ROMNEY: I'm still speaking. So I want to make sure that we make -- we make America more competitive.

OBAMA: Yeah.

ROMNEY: And that we do those things that make America the most attractive place in the world for entrepreneurs, innovators, businesses to grow. But you're investing in companies doesn't do that. In fact it makes it less likely for them to come here...

OBAMA: Governor?

ROMNEY: ...because the private sector's not going to invest in a...

(CROSSTALK)

OBAMA: I'm -- I'm -- I'm happy.

(CROSSTALK)

ROMNEY: ...company...

(CROSSTALK)

OBAMA: ...to respond to you...

(CROSSTALK)

ROMNEY: ...if -- if you're...

(CROSSTALK)

OBAMA: ...you've had the floor for a while.

(CROSSTALK)

ROMNEY: ...get someone else's. OBAMA: The -- look, I think anybody out there can check the record. Governor Romney, you keep on trying to, you know airbrush history here. You were very clear that you would not provide, government assistance to the U.S. auto companies, even if they went through bankruptcy. You said that they could get it in the private marketplace. That wasn't true. They would have gone through a...

(CROSSTALK)

ROMNEY: You're wrong...

(CROSSTALK)

OBAMA: ...they would have gone through a...

(CROSSTALK)

ROMNEY: ...you're wrong.

(CROSSTALK)

OBAMA: No, I am not wrong. I am not wrong.

(CROSSTALK)

ROMNEY: People can look it up, you're right.

OBAMA: People will look it up.

ROMNEY: Good.

OBAMA: But more importantly it is true that in order for us to be competitive, we're going to have to make some smart choices right now.

Cutting our education budget, that's not a smart choice. That will not help us compete with China.

Cutting our investments in research and technology, that's not a smart choice. That will not help us compete with China.

Bringing down our deficit by adding $7 trillion of tax cuts and military spending that our military is not asking for, before we even get to the debt that we currently have, that is not going to make us more competitive.

Those are the kinds of choices that the American people face right now. Having a tax code that rewards companies that are shipping jobs overseas instead of companies that are investing here in the United States, that will not make us more competitive.

And the one thing that I'm absolutely clear about is that after a decade in which we saw drift, jobs being shipped overseas, nobody championing American workers and American businesses, we've now begun to make some real progress. What we can't do is go back to the same policies that got us into such difficulty in the first place. That's why we have to move forward and not go back.

ROMNEY: I couldn't agree more about going forward, but I certainly don't want to go back to the policies of the last four years. The policies of the last four years have seen incomes in America decline every year for middle income families, now down $4,300 during your term. Twenty-three million Americans still struggling to find a good job.

When you came to office 32 million people on food stamps. Today, 47 million people on food stamps.

When you came to office, just over $10 trillion in debt, now $16 trillion in debt. It hasn't worked.

You said by now we'd be at 5.4 percent unemployment. We're 9 million jobs short of that. I've met some of those people. I've met them in Appleton, Wisconsin. I met a young woman in -- in Philadelphia who's coming out of -- out of college, can't find work.

I've been -- Ann was with someone just the other day that was just weeping about not being able to get work. It's just a tragedy in a nation so prosperous as ours, that the last four years have been so hard.

And that's why it's so critical, that we make America once again the most attractive place in the world to start businesses, to build jobs, to grow the economy. And that's not going to happen by just hiring teachers.

Look, I love to -- I love teachers, and I'm happy to have states and communities that want to hire teachers do that. By the way, I don't like to have the federal government start pushing its weight deeper and deeper into our schools. Let the states and localities do that. I was a governor. The federal government didn't hire our teachers.

UNIDENTIFIED MALE: Governor?

ROMNEY: But I love teachers. But I want to get our private sector growing and I know how to do it.

SCHIEFFER: I think we all love teachers.

(LAUGHTER)

SCHIEFFER: Gentlemen, thank you so much for a very vigorous debate. We have come to the end. It is time for closing statements,

I believe you're first, Mr. President.

OBAMA: Well, thank you very much, Bob, Governor Romney, and to Lynn University. You've now heard three debates, months of campaigning and way too many TV commercials. And now you've got a choice. Over the last four years we've made real progress digging our way out of policies that gave us two prolonged wars, record deficits and the worst economic crisis since the Great Depression.

And Governor Romney wants to take us back to those policies, a foreign policy that's wrong and reckless, economic policies that won't create jobs, won't reduce our deficit, but will make sure that folks at the very top don't have to play by the same rules that you do.

And I've got a different vision for America. I want to build on our strengths. And I've put forward a plan to make sure that we're bringing manufacturing jobs back to our shores by rewarding companies and small businesses that are investing here, not overseas.

I want to make sure we've got the best education system in the world. And we're retaining our workers for the jobs of tomorrow.

I want to control our own energy by developing oil and natural gas but also the energy sources of the future.

Yes, I want to reduce our deficit by cutting spending that we don't need but also by asking the wealthy to do a little bit more so that we can invest in things like research and technology that are the key to a 21st century economy.

As Commander in Chief, I will maintain the strongest military in the world, keep faith with our troops and go after those who would do us harm. but after a decade of war, I think we all recognize we've got to do some nation building here at home, rebuilding our roads, our bridges and especially caring for our Veterans who sacrificed so much for our freedom.

And we've been through tough times but we always bounce back because of our character, because we pull together and if I have the privilege of being your president for another four years, I promise you I will always listen to your voices. I will fight for your families and I will work every single day to make sure that America continues to be the greatest nation on earth.

Thank you.

SCHIEFFER: Governor?

ROMNEY: Thank you.

Bob, Mr. President, folks at Lynn University, good to be with you. I'm optimistic about the future. I'm excited about our prospects as a nation. I want to see peace. I want to see growing peace in this country. It's our objective.

We have an opportunity to have real leadership. America's going to have that kind of leadership and continue to promote principles of peace to make a world a safer place and make people in this country more confident that their future is secure. I also want to make sure that we get this economy going. And there are two very different paths the country can take. One is a path represented by the president, which at the end of four years would mean we'd have $20 trillion in debt heading towards Greece. I'll get us on track to a balanced budget.

The president's path will mean continuing declining in take-home pay. I want to make sure our take-home pay turns around and starts to grow.

The president's path will mean continuing declining in take-home pay. I want to make sure take-home pay turns around and starts to grow. The president's path means 20 million people out of work struggling for a good job. I'll get people back to work with 12 million new jobs.

I'm going to make sure that we get people off of food stamps, not by cutting the program, but by getting them good jobs.

America's going to come back, and for that to happen, we're going to have to have a president who can work across the aisle. I was in a state where my legislature was 87 percent Democrat. I learned how to get along on the other side of the aisle. We've got to do that in Washington. Washington is broken. I know what it takes to get this country back, and will work with good Democrats and good Republicans to do that.

This nation is the hope of the earth. We've been blessed by having a nation that's free and prosperous thanks to the contributions of the greatest generation. They've held a torch for the world to see -- the torch of freedom and hope and opportunity. Now, it's our turn to take that torch. I'm convinced we'll do it.

We need strong leadership. I'd like to be that leader with your support. I'll work with you. I'll lead you in an open and honest way, and I ask for your vote. I'd like to be the next president of the United States to support and help this great nation and to make sure that we all together remain America as the hope of the earth.

Thank you so much.

SCHIEFFER: Gentlemen, thank you both so much. That brings an end to this year's debates and we want to thank Lynn University and its students for having us. As I always do at the end of these debates, I leave you with the words of my mom, who said: "Go vote; it'll make you feel big and strong."

Good night.

(APPLAUSE)

END