CHRIS WALLACE, FOX NEWS: Joining us now from the campaign trail in Milwaukee, Wisconsin, the Democratic vice presidential nominee, Senator John Edwards.

And, Senator, welcome. Good to have you back with us.

U.S. SENATOR JOHN EDWARDS, D-NC: Thanks, Chris. Glad to be with you.

WALLACE: President Bush said in Friday's debate that John Kerry is a big tax-and-spend liberal. I want to play some of what Kerry said in his closing statement. Let's listen.

(BEGIN VIDEO CLIP)

JOHN KERRY, DEMOCRATIC PRESIDENTIAL NOMINEE: I have a plan to provide health care to all Americans.

I have a plan to provide for our schools, so we keep the standards, but we help our teachers teach and elevate our schools by funding No Child Left Behind.

I have a plan to protect the environment.

(END VIDEO CLIP)

WALLACE: Sure sounds like a tax-and-spend liberal.

EDWARDS: No, I don't think so. If you look at John Kerry's record, Chris, he has a long history of fighting for fiscal responsibility, of fighting for balanced budgets. He stood up against his own party back in the 1980s to move us toward fiscal responsibility. He's been fighting basically the entire time he's been in the United States Senate for more cops on the street, more tax cuts for the middle class.

And I think the reality is, John Kerry is right in the mainstream, and what the president's saying is a distortion.

WALLACE: Let's look at the map of the Kerry-Edwards budget plan. The highly respected and independent Concord Coalition came out with an analysis this week. Let's take a look at it.

Your repeal of tax cuts for the rich and reform of the estate tax would bring in an extra $286 billion over 10 years. But your health- care plan would cost $476 billion. More education funding would cost $155 billion. Adding 40,000 troops would mean another $60 billion. The total increase, according to the independent Concord Coalition, in deficit: $1.27 trillion over 10 years.

Senator, the numbers don't add up.

EDWARDS: Well, I would respectfully disagree with that.

And I have to say first, we have enormous respect for the Concord Coalition. They do a lot of important and good work about fiscal responsibility. But there are some things left out, first of all, and the way they calculate some of those things we would certainly disagree with.

But, in terms of the things that are left out, I mean, we would also close down some corporate welfare and some corporate loopholes, and John McCain has said that would save $300 billion.

On top of that, we would also reduce some bureaucratic spending in Washington and some overlap between some bureaucratic agencies in Washington, which would also save many billions of dollars.

And I would add at the end of all that, John Kerry and I have made absolutely clear, Chris, that we have made this commitment. We are going to meet our commitment. And what that means is, if we have to scale something back, we will scale it back. And we are committed to doing that, and John Kerry's made that commitment.

WALLACE: Well, I want to follow up on precisely that point, because in Friday's debate, Senator Kerry said that he would cut the deficit in half during his first term, he would cut taxes for the middle class, but he also had all these new spending programs.

Are you saying right here and now that if the numbers, when you get into office, don't add up, that it's the spending programs that go first?

EDWARDS: Yes. Plus the other — don't forget the other things that I just said. But yes, on top of the other things I said, if we have to cut something back — for example, I know John's already talked about, if necessary, cutting back national service programs, early childhood, I mean, some other things that are near and dear to our heart. But if they're necessary, we'll do it.

I just have to say, though — you have to give me a second on this —you know, for the president to be attacking John Kerry for fiscal responsibility is outrageous. I mean, they took a $5 trillion surplus, projected surplus, turned it into a $3 trillion projected deficit in four years — $8 trillion turnaround, the biggest turnaround in American history.

You know, according to the newspapers, they've got another $3 trillion of spending in tax cuts that they have absolutely no way of paying for. I mean, they have been the walking, breathing example of fiscal irresponsibility. And for them to be critical of Senator Kerry on this is the height of hypocrisy.

WALLACE: But again, just to clear it up, I just want to make clear that you're saying that even Kerry's cherished health-care plan, he would cut that back before he would add to the deficit or raise taxes on the middle class?

EDWARDS: We will not raise taxes on the middle class, as John said clearly. And we will cut back — we will cut back on our programs if it's necessary to make sure that that happens.

WALLACE: Let's turn, if we can, to Iraq. Chief weapons inspector Charles Duelfer made his final report to Congress this week. And what got most of the headlines was his report that there were no weapons of mass destruction in Iraq and, in fact, no active program to develop them.

But there's also something very important that he said as well as that, and that is that Saddam Hussein intended to build weapons of mass destruction, that he was skimming billions off the oil-for-food program, and that he wanted, as soon as he got economic sanctions lifted, that he hoped to restart his WMD program.

Let's listen to what Charles Duelfer had to say.

(BEGIN VIDEO CLIP)

DUELFER: He clearly had ambitions with respect to weapons of mass destruction. He clearly had a strategy and tactic to get out of the constraints of the U.N. sanctions. He was clearly making a great deal of progress on that.

(END VIDEO CLIP)

WALLACE: Senator Edwards, wasn't that a threat waiting to happen?

EDWARDS: Well, of course it was. There are lots of threats waiting to happen all over the world. That doesn't mean that that justifies invading a country.

What we have to do is confront these threats as they arise.

And I might add, on top of that, if you look at what's happened while this president's been in office, out of the three countries that are part of the "axis of evil" — Iraq, North Korea and Iran, according to the president — you know, we invaded the one of those three that doesn't have nuclear weapons.

Iran's moved forward with their nuclear weapon program on this president's watch. They've abdicated responsibility for confronting that threat to the Europeans.

The same thing's happened with the North Koreans. They've gone from one to two nuclear weapons to as many as six or seven nuclear weapons, again, abdicating...

WALLACE: But, Senator, if I can just break in for a second...

EDWARDS: Of course.

WALLACE: ... specifically on Iraq, if Saddam Hussein was getting billions from the oil-for-food program, if the economic sanctions seemed to be shredding, how were you going to stop him from restarting his WMD program?

EDWARDS: The same way we deal with all threats around the world. What we do is, first of all, we keep the sanctions in place for people like Saddam Hussein. If at some point down the road those sanctions are lifted, we use the intelligence operation of the United States of America in conjunction with the intelligence operation of other countries to make sure that we know what's happening.

I mean, there are lots of countries around the world that pose potential threats. I just talked about two of them just a minute ago. And we have to monitor constantly what's happening in those countries and confront those threats and confront them aggressively. And we would have done the same with Saddam Hussein.

WALLACE: Let me ask you about Iran, because Senator Kerry was asked about that, as well, in Friday's debate. And here's what he had to say.

(BEGIN VIDEO CLIP)

KERRY: I'm going to lead the world in the greatest counter-proliferation effort, and if we have to get tough with Iran, believe me, we will get tough.

(END VIDEO CLIP)

WALLACE: Senator, what does that mean? Was Kerry saying that, as president, that he will launch a preemptive strike, if necessary, but he will keep Iran from getting nuclear weapons?

EDWARDS: Well, first of all, what he's saying is we'll do what this administration has failed to do: We will confront the growing nuclear threat in Iran.

And what that means, to answer your question, is, instead of letting the Europeans deal with the Iranians, what we will do is join with our allies around the world. We will confront Iran. We will say to them, along with our allies, "You claim you're using this nuclear program for the purpose of producing energy, even though you sit on one of the greatest energy supplies in the world. And we're going to call that bluff."

In other words, we're going to say to you, all right, we will together, with the rest of the world, provide you with nuclear fuel, so long as we maintain complete control over it, so that you don't have spent nuclear fuel that you can use to develop a weapon.

And if the response is what I expect it to be, which is they would not agree to do that, then we would move forward with the international community to making sure they stop their nuclear program.

EDWARDS: I mean, we would never take — to answer your… they haven't been done.

WALLACE: Senator, we have a couple of minutes left, and I want to tackle a couple of issues with you.

In your debate last week with Vice President Cheney, he attacked your record in the Senate. But what got all the attention was the question of whether or not the two of you had met.

But there's another part of what he said that I want to ask you about. According to the news reports, you attended just three of 36 meetings of the Judiciary Committee, the worst record of any member of that panel, and you attended just four of 13 public meetings of the Intelligence Committee.

For someone who's been in the Senate less than a full term, isn't that a problem?

EDWARDS: No, I'll tell you exactly what happened. I was in — the first several years I was in the Senate, I had almost a perfect attendance record. And then I watched what was happening under this administration.

I mean, I had to fight this administration tooth and nail in their efforts to roll back our clean air laws. John McCain and Senator Kennedy and I wrote the patients' bill of rights, got it passed in the Senate. They blocked it. We fought to make sure we did something about drug company advertising on television. They blocked it.

I helped write the laws after September the 11th to keep this country safe, but at that point, I came to the conclusion that the only real solution to this was to get George Bush out of the White House. And that's when I decided to run for president, and that's the period of time that they're talking about.

WALLACE: We just have a little bit of time left, Senator.

Where do you think this race is now, after three debates, one debate left, three weeks left, where is this race now?

EDWARDS: I think it's a close, competitive race. We knew it would be. I think what people have seen in John Kerry, in the first two debates, is somebody who's strong and decisive and somebody who has a clear plan, both about jobs, health care, and what's happening in Iraq and keeping this country safe. I feel very optimistic about it right now.

WALLACE: And what do you think is going to be the central issue? We've heard an awful lot about Iraq and weapons of mass destruction and, you know, votes for or against the $87 billion. What do you think is going to be the central issue as we head into the home stretch here?

EDWARDS: I think there will be three issues that will drive the decision on November 2nd.

One is Iraq. One, what's happening in Iraq right now, and whether the president's going to level with people about that.

Two, what's happening with jobs and what's happened with jobs. The president's been the first president in 70-some-odd years to not create jobs.

And third is the health-care crisis. I mean, we have a health- care crisis in this country. People want to know, do we have a plan? We do. And that George Bush has done nothing about it for the last four years.

WALLACE: Senator Edwards, thank you. Thanks so much for talking with us. Safe travels on the campaign trail, and we hope to talk with you again soon.

EDWARDS: Thank you for having me.