SCHIEFFER: And we’re back now with Senator Obama.

Senator, it seems to me that the whole debate came down to a couple of questions. You questioned Senator McCain’s judgment, repeatedly. He repeatedly said you just didn’t understand, that you didn’t have the knowledge or the understanding to deal with these issues, both the financial issues and foreign policy issues.

OBAMA: Well, the interesting thing is he kept on asserting I didn’t understand, but beyond saying the line never indicated what exactly I didn’t understand.

It’s true I don’t understand Senator McCain’s positions on a whole host of issues, because given how the Bush administration has created an extraordinary crisis in the economy and considering that we remain bogged down in Iraq, Al Qaida is resurgent, Iran is developing nuclear weapons, that our foreign policy is if not in a shambles, then certainly in a place that I think anybody is comfortable with -- given those facts, what I don’t understand is that Senator McCain continues to promote them.

There was not one instance where Senator McCain could support his assertions with some indication that in fact he had some secret understanding of what the Bush administration was doing that made sense.

OBAMA: In fact, he essentially is defending a status quo that is not working for the American people.

SCHIEFFER: Some Democrats said that they thought he was being condescending to you. Did you take it in this way?

OBAMA: Well, I think it was a debating trick, which is to essentially just keep on asserting that because of my vast years in Washington, somehow I’m better qualified to be president. And one of the points that I’ve made consistently in this campaign is that if the length of tenure in Washington is a measure of your wisdom, then people should vote for somebody else. But I think the American people understand that the conventional wisdom in Washington, which John McCain has followed for the last eight years, is exactly what needs to be changed.

SCHIEFFER: One of the most heated points in the debate came when we were talking, or you all were talking about whether or not you would sit down with America’s enemies and under what conditions. Would you and under what conditions would you talk to, say, somebody like President Ahmadinejad of Iran?

OBAMA: Well, what I’ve said repeatedly is that as president of the United States, I would reserve the right to meet with anybody at a time and place of my choosing if I thought it would advance our national interest and make us safer. That is or should be uncontroversial.

Nixon met with Mao. Kennedy met with Khrushchev. Reagan met with Gorbachev. So we have a tradition of recognizing that diplomacy, even with our enemies, can be an important tool of American power. Not the only tool.

So what I’ve said is that with respect to Iran, for example, I think for us to initiate direct diplomacy, not beginning with the presidential level but initiating diplomacy, opening up a dialogue, and then being very clear and firm with Iran. We do not accept your threats against Israel, our ally. We do not accept your development of a nuclear weapon or your funding of Hezbollah, Hamas and other terrorist organizations. We are prepared to really crack down if you continue these practices. But we are willing to listen and we are willing to assist in Iran being a more full part of the international community, if they change their behavior.

Now, as I said during the debate, it’s possible that they don’t change their behavior. But we are then in a stronger position to put in place the sanctions that can actually change their behavior. I think that’s common sense, and the American people understand that.

SCHIEFFER: While we’re still on foreign policy, Senator McCain’s running mate Sarah Palin claimed in an interview that Alaska’s proximity to Russia somehow enhances her foreign policy experience and credentials. Do you agree with that?

OBAMA: I will let the American people make a judgment on that. I think that...

SCHIEFFER: Well, do you believe she’s qualified?

OBAMA: Again, I think it’s important for the American people to make a judgment based on what they hear from Sarah Palin herself. More importantly, I think we’re electing a president before -- alongside a vice president, but the president ultimately is going to be in charge. I think what people have to ask themselves, is John McCain equipped to deal with the 21st century challenges that we have? Is he able to look to the future and not to the past?

SCHIEFFER: But don’t you think what she says is important? She could be a heartbeat away from the presidency.

OBAMA: I think it is important. And I think that I’m more concerned about the fact that she doesn’t seem to have any differences with President Bush when it comes the foreign policy and would continue, as John McCain would, the same policies that we’ve seen over the last eight years that have, I believe, weakened our position in the world.

SCHIEFFER: Neither you nor Senator McCain would kind of be pinned down on the changes that are obviously going to have to be made because of this financial situation. There are some things that simply we’re not going to be able to afford. Senator McCain said one thing he would do would freeze spending, freeze all government programs, with the exception of entitlements, national defense and veterans care. Do you think that’s feasible?

OBAMA: As I said in the debate, I think that’s a way of punting responsibility. The president has to make choices. And those choices mean that when you deal with the budget, you don’t take an ax to it; you use a scalpel.

There are programs in our government that do not work. And I mentioned one during the debate. We have a program where we subsidize insurance companies to process and run their own Medicare program that’s not any better than the Medicare program that comes through the government.

OBAMA: That costs us $15 billion a year. It is a straight subsidy to the insurance companies. We should put an end to that.

Now, what Jim Lehrer asked me about was, are there proposals or plans that I’ve made, during the course of this campaign, that I would have to alter as a consequence of this financial crisis?

And what I said is, we don’t know yet what the budget is going to look like, so it’s hard to gauge the magnitude of the shifts.

Most of the proposals I’ve made to provide health care to all Americans, because families are desperate to get some relief there; to have an energy policy that would not only lower gas prices but strengthen our national security and deal with climate change by freeing ourselves from dependence on foreign oil, some of those things are critical to American families and to the fundamentals of our economy.

I think it’s important for us to do those, but I will say that some proposals I’ve made -- for example, I’m a strong supporter of foreign aid.

SCHIEFFER: We really have to go.

OBAMA: We may have to delay that a little bit.

SCHIEFFER: All right. Senator, thank you so much. We’re just out of time.

OBAMA: I really enjoyed it. Thank you so much.

SCHIEFFER: Thank you. Back in a minute.