Barack Obama and John McCain face debate moderator Bob Schieffer at Hofstra University [AFP]

The pair entered into debate at the Hofstra University campus on Long Island in New York state on Wednesday amid fears over the US and global economy dominating viewers' minds.

McCain opened the debate saying the US economic problems needed a "short-term fix and a long-term fix" to solve the current problems.

He said: "Let's take $300bn and go in and buy up those [bad] mortgages.

"We've got to reverse this, I'm disappointed that [Henry] Paulson [the US treasury secretary] and others haven't made this their priority."

'Worst crisis'

Obama said: "Everyone understands we are experiencing the worst crisis since the Great Depression."

He said the bailout financial plan was "an important first step" but added "what we haven't yet seen is a rescue package for the middle class".

He said the government should "focus on jobs, helping families with tax cuts, getting homeowners to do mortgages" and getting the "financial package to work quicker".

He said it was necessary to have a rescue package for the middle class, with a focus on boosting domestic employment and offering families cuts in taxation.

He said the long-term challenges were to "fix energy policy, fix healthcare and invest in the education system".

McCain centred on comments made by "Joe the plumber" - an American voter Obama addressed during his campaigning - to try and highlight differences between the pair.

He said to Obama: "What you wanna do to Joe the plumber is to have tax increases and not let him realise the American dream [of home ownership]."

Aggressive tack

Asked by Bob Schieffer, the debate moderator, if they would cut US government spending plans because of the economic crisis, McCain said "we need to freeze spending" while Obama answered "we need to cut programmes that don't work".

There was tension between the pair, with McCain taking an aggressive stance towards Obama.

Obama said that a McCain presidency would effectively be "eight more years" of George Bush, the US president.

McCain declared: "I'm not George Bush."

Asked about negative campaigning that had reportedly marred both candidates' campaigns, Obama said McCain "runs negative campaigns" while McCain said "Obama has double standards".

McCain said: "It's been a tough campaign ... Obama has spent more money on negative political ads then any other campaign in history and I can prove it.

Addressing his rival, he said: "You didn't keep your word, you didn't tell the American people the truth."

'Failed policies'

Obama responded by saying: "The American people cannot afford four more years of failed economic policies, we need to talk about what's most pressing to them - the economic crisis.

"I would love to see in the next three weeks us talking about economic, healthcare and sending kids to college."

Schieffer asked both candidates: "Why is your vice-presidential running mate better than your opponent's?

McCain said his running mate, Sarah Palin, was "a role model for women" while Obama said Joe Biden had "huge experience".

Schieffer queried how either of the pair would reduce US dependence on foreign oil in their first term.

McCain said he would seek to invest in nuclear power, while Obama said he would promote alternative energies.

Rob Reynolds said: "The most genuine - and the angriest - exchange between the two in all three debates was on Schieffer's question about negative campaigning.

"Obama kept his cool but McCain seemed to get angry towards the end. But McCain defended himself very well in trying to flip the criticism on its head."

McCain, the Republican candidate, is under pressure to put in a strong performance to help reverse his position in the opinion polls.

Gaining strength

The debate was held amid opinion polls that show Obama gaining strength nationally and also in battleground states.

Weeks of economic turmoil and plunging stock markets have led to many voters saying they trust Obama's leadership on the economy.

The debate comes as opinion polls show that Obama, McCain's Democratic rival, is gaining strength nationally and also in battleground states.

Weeks of economic turmoil and plunging stock markets have led to many voters saying they trust Obama's leadership on the economy.

McCain launched his vision for US economic revival on Tuesday.

But many national opinion polls show Obama enjoying a strong lead over McCain, with a New York Times/CBS poll showing Obama on 53 per cent and McCain on 39.

The debate is the last big event in the campaign before both candidates hit the trail for the two-and-a- half week drive to the elections on November 4.

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