The following is a partial transcript of the Jan. 25, 2009, edition of "FOX News Sunday With Chris Wallace":
"FOX NEWS SUNDAY" HOST CHRIS WALLACE: And hello again from FOX News in Washington. President Obama has made it clear in his first days in office his top priorities are fixing the economy and changing how the war on terror is fought.
And for help, the new president has signaled he will turn to his campaign rival, Republican John McCain, who joins us here today.
And, Senator McCain, welcome back to "FOX News Sunday."
MCCAIN: Thanks, Chris. Thanks for having me on again.
WALLACE: Let's start with a speech that you made on the Senate floor this week warning Republicans who were delaying a confirmation vote on Senator Hillary Clinton. Here it is.
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MCCAIN: The message that the American people are sending us now is they want us to work together and get to work.
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WALLACE: Given that belief, what do you see as your role towards President Obama?
MCCAIN: I view it as the loyal opposition — help and work together where I can, and stand up for the principles and the party and the philosophy that I campaigned on and have stood for for many years.
And again, I don't have to tell anybody in America, this president faces probably greater challenges than any president going all the way back to Abraham Lincoln.
We are in two wars. We have an economic crisis of monumental proportions. We have the breakdown of financial institutions that Americans once had great trust and confidence in. We have scandals like the Madoff scandal that you couldn't — you couldn't write a book because nobody would read it.
And so there is a very full plate. Americans have lost a great deal of confidence. To rebuild that trust and confidence, we have to work together. But that does not mean that as the loyal opposition that I or my party will be a rubber stamp.
WALLACE: Well, let's talk about the nature. The president — the new president is clearly reaching out to you. The night before the inauguration, he came and spoke and embraced you there at a dinner honoring your bipartisan service.
The day of the inauguration, he sought you out at the congressional lunch after the ceremony specifically. How do you think you can help President Obama?
MCCAIN: Well, I think I can help in devising a strategy for Afghanistan. The hard truth is that the Afghan war has deteriorated.
The situation in Afghanistan is more complex in some ways than Iraq. It is very difficult. It's going to require a long-term commitment and all of us working together.
There's the continued Russian belligerent behavior. We now have the North Koreans saying all kinds of bizarre things, which is not unusual, but continue to be tensions there.
And of course, as the world economy is affected, you will see more — not governments in turmoil, but certainly pressures on governments and dissension at a very high level.
And so we've got a lot of work to do, particularly in the national security area.
WALLACE: Well, let...
MCCAIN: And there was a long time where people worked together on national security issues.
WALLACE: Let's talk about the economy. We'll get to national security in a moment.
The president is pushing an economic stimulus package of $825 billion that raises some of the issues that were at the heart of your campaign against Barack Obama — $275 billion in tax breaks, including money for people who don't pay income taxes; $550 billion in spending, including $200 million to re-sod the National Mall, $360 million to fight sexually transmitted disease.
As that package now stands, can John McCain vote for it?
MCCAIN: No. We need to make tax cuts permanent, and we need to make a commitment that there'll be no new taxes. We need to cut payroll taxes. We need to cut business taxes.
We need to have a commitment that after a couple of quarters of GDP growth that we will embark on a path as we'll say — called Gramm- Rudman — to reduce spending to get our budget in balance.
We're going to lay an additional 2 trillion, basically, dollars of debt on future generations of Americans. Is there going to be a point where foreign countries such as the Chinese stop buying our debt?
Look, we've got to eliminate the unnecessary — there's got to be some kind of litmus as to whether it will really stimulate the economy and whether it will in the short term.
Some of the stimulus in this package is excellent. Some of it, frankly, has nothing to do — out of those projects and others that you just mentioned — 6 billion for broadband Internet access. That will take years.
There should be an end point to all of this spending as well, say two years. If we need to stimulate the economy in a short period of time, let's enact those provisions which will...
WALLACE: Well, you're talking about a major rewrite of this — of this plan as it now stands.
MCCAIN: Well, the plan was written by the majority in — a Democrat majority in the House, primarily. And so, yeah, I think there has to be major rewrites if we want to stimulate the economy.
WALLACE: As it stands now, though, you'd vote against it.
MCCAIN: Well, look. I mean, I am opposed to most of the provisions in the bill. As it stands now, I would not support it.
WALLACE: Would you filibuster it?
MCCAIN: Well, let's — I mean, I want us all to sit down and negotiate. The Republicans have not been brought in to the degree that we should be into these negotiations and discussions.
So far, as far as I can tell, no Republican proposal has been incorporated. Maybe there has been. I just may have missed it. But clearly, we need to have serious negotiations.
We all recognize that the economy is in deep and serious trouble. But there's a Japanese example where they tried to stimulate their economy with the wrong kinds of projects and the wrong kind of spending. It didn't help their economy.
MCCAIN: We've got to stimulate the economy and jobs. We're losing sight of what the stimulus is all about, and that is job creation. If it doesn't create jobs, then it's just another spending project.
WALLACE: So given what you're talking about, which is a major reworking of the bill, is the — is the deadline that the president is talking about, Presidents' Day weekend, mid-February — is that unrealistic? That's like three weeks from now.
MCCAIN: Well, I think we can sit down in three weeks and work hard and negotiate and come to some agreement, hopefully. I will continue to hope that we will and will continue to dedicate myself to that proposition.
Republicans will have proposals as part of the stimulus package. I hope they are considered and I hope they're adopted...
MCCAIN: ... if it's going to be truly bipartisan.
WALLACE: Let's turn to foreign policy. President Obama also moved in that area this week, announcing that — a process to start closing Guantanamo Bay within a year, to review all of the interrogation and detention techniques.
Some critics are saying that he is ending the war on terror and turning this into a law enforcement matter again. Do you think that's fair?
MCCAIN: No, I don't think that's fair. But I believe that announcing the closing of Guantanamo without addressing the other really difficult aspects of this issue — look, Guantanamo has become a symbol and it should be closed, in my view.
It's Abu Ghraib. It's mistreatment of prisoners. It's all the things that have damaged America's image in the world.
But we need to have a process that is — replaces the military commissions. By the way, the military commissions were finally beginning to function, and so I'm sorry they're put on hold.
We need to decide what you do with people that we can't return to the countries that they came from. We need to decide what to do with people we know if we release them they will go out, as we've just seen — a recent example of a guy who became a high-ranking member of Al Qaida. We can't continue to release people who are going to be leaders of Al Qaida.
So we've got to work through that. And to just announce the closure of Guantanamo without addressing these other issues, I think, is not the best way to approach it.
But finally, where are you going to send them? Where are you going to send them? That decision I would have made before I'd announced the closure, because I don't know of a state in America that wants them in their state. It's going to — you think Yucca Mountain is a NIMBY problem? Wait till you see this one.
WALLACE: I've got a couple of other issues I want to get through.
WALLACE: And let's try and move...
WALLACE: ... through them...
MCCAIN: More shorter answers is what you're saying. Yes.
WALLACE: It's amazing how you picked that up, Senator.
The president's choice for attorney general, Eric Holder, said the other day at his congressional hearing that waterboarding is torture, and he left open the possibility that lawyers or CIA officers who participated in some of these activities could be liable to criminal prosecution.
How do you feel about that, the idea of the possibility of investigations and even criminal prosecution of people who were doing what they were told to do during the Bush years?
MCCAIN: I think it's time to move forward. I believe that waterboarding is in violation of the Geneva Conventions, and I've said it for years. But it's time to move forward.
Let's enact policies that make sure that America's image in the world is never damaged again.
But to go back and to prosecute people, in my view, who were carrying out the instructions that they were given — some of the toughest jobs in the world are being members of our intelligence services. People put their lives on the line every day.
I would not like to damage the morale of those brave Americans who serve at not very high pay and not a lot of compensation under the most difficult of circumstances.
WALLACE: President Obama announced this first week tough new rules on lobbyists and then promptly announced a waiver for Bill Lynn, a lobbyist for Raytheon, to be deputy secretary of defense.
Will you support an exception for Mr. Lynn?
MCCAIN: I don't like it. I think it's a bit disingenuous to announce strict rules and then nominate someone with a waiver from the rules that you just announced in one of the most important jobs in Washington, the number two person at the Defense Department.
I have asked to see which areas that Mr. Lynn will be recused from. But I think we need to probably move forward with his — with his nomination.
WALLACE: Finally, let's talk about John McCain, and I'm going to ask you not for one-liners, which I know that you sometimes use...
MCCAIN: OK. Yeah.
WALLACE: ... but for some straight talk. After working so hard to become president and believing that you could lead the country in a way only a president can lead, how painful (inaudible)?
MCCAIN: Oh, look. I know that it's hard to understand for some people. I have been honored to serve this country, as President Obama pointed out many times during the campaign, for over a half a century.
Every day I am humbled by the experience. Every day I'm proud to have the opportunity to serve...
WALLACE: But you're a competitive...
MCCAIN: ... the people...
WALLACE: ... guy. It's got to hurt to lose.
MCCAIN: Of course it hurts to lose, and the easiest thing to do, and I enjoy it enormously, is to feel sorry for myself. But the fact is I am humbled and honored to have the opportunity to have served this country.
I'm grateful for every day. I want to work with this president to address the challenges that face this country, and there is no time to look back and — with either sorrow or regret. I'm proud of our campaign and I'm proud of what we were able to achieve.
WALLACE: I do want to ask you — and you may call this looking back. You were very honest in the last few years about saying that your one big regret about the 2000 campaign was trimming on your views about the Confederate flag in South Carolina. What's your biggest regret about this campaign?
MCCAIN: You know, I don't have a lot of regrets about it. I think we ran an honorable campaign. I'm proud of the people around us. I'm proud of everything we were able to do.
And so I'm sure that, you know, there's a myriad of books being written right now. I'm sure they will point out the mistakes that were made.
WALLACE: Any second thoughts about Sarah Palin?
MCCAIN: Oh, no. I — listen, I think the world of Sarah Palin. She energized our party. She has a bright future in our party. I'm pleased to have known her and her wonderful family.
WALLACE: Finally, after a lifetime of service, how do you view what lies ahead for you?
MCCAIN: A chance and an opportunity to continue to serve, and I think that there is one beneficial result of our campaign, and that is perhaps I can have — be more effective here in Washington in these very difficult times.
I cannot overemphasize how difficult and challenging these times are for America and for all of us to try to work together.
WALLACE: Senator McCain, thank you. Thank you for coming in today. And you are always welcome here, sir.
MCCAIN: Thanks, Chris. Thanks for having me.