US presidential candidates John McCain and Barack Obama clashed over economy and foreign policy as their first presidential debate is underway in Oxford, last night.

Republican McCain said the government needs to cut spending and repeated his call to veto every bill with earmarks.

Democrat Obama said the country "absolutely" needs earmark reform but said, "the fact is, eliminating earmarks alone is not arecipe for how we are going to get the middle class back on track."

They also tangled over who would cut taxes more.

McCain said he would lower business taxes in order to encourage job growth in the United States, while Obama said he would cut taxes for 95 percent of American families.

Obama also said that the United States was facing its worst financial crisis since the Great Depression.

McCain said he was encouraged that Republicans and Democrats were working together to solve the crisis.

After 30 minutes of debating on the economy, the topic went to foreign policy.

Obama said that the United States "cannot tolerate a nuclear Iran," calling for tougher sanctions.

McCain called for a new "league of democracies" to stand firm against Iran.

McCain also said the next president will have to decide when and how to leave Iraq and what the United States will leave behind.

The Republican candidate said that the war had been badly managed at the beginning but that the United States was now winning, thanks to a "great general and a strategy that succeeded."

Obama blasted McCain as having been wrong about the war at the start, saying McCain had failed to anticipate the uprising against US forces and violence between rival religious groups in the country.

"At the time when the war started, you said it was quick and easy. You said we knew where the weapons of mass destruction were," Obama said, citing the key White House policy justifying the 2003 invasion.