KUDLOW: Do you think that was a mistake, looking back on it?

Mr. CHENEY: No, I don't. You had to negotiate with the Congress, Denny Hastert, who is not going to sign us a bill the president would veto. So we sat down and we negotiate on the top line and they, in effect, came into agreement virtually in every case. Now we're in a situation where they're trying to pass a budget, for example, this year that's $22 billion over our top line. We've made it clear we will veto it. They sent us the SCHIP bill, we vetoed it. They send us another SCHIP bill, we'll veto it. It's not politics. We think it's good policy. The other thing we've got, of course, you know, in tax policy, is there is a fundamental difference between the parties in terms of how we look at the world, in respect to tax policy. We had--you had Charlie Rangel@ on your show last night. Charlie's a good guy, I like him. Served with him for 10 years in the House. Respect him as chairman of the Ways & Means Committee.

KUDLOW: You and he have had some words in the past, as I recall.

Mr. CHENEY: Well, we have, but it was--it was good natured.

KUDLOW: What do you think of his mother of all tax reforms plan?

Mr. CHENEY: Well, I don't like it. I think it's bad in several respects. It raises the rate on capitol gains. It raises the rate on dividends. It raises the top rate on the income rate. Those are terrible ideas. Those are all rates we reduced when we came in in 2001 and 2003. They've been absolutely crucial to driving this economy and to creating the incentives out there for businesses to invest and to create more jobs and more wealth. They're the prime reason we've seen an increase in tax revenues. And also, the fact that we've got a deficit next year that's 1.2 percent of GDP, which is half what the deficit has been over the last 40 years. That's good tax policy and Charlie wants to change it.

KUDLOW: What about his proposal to lower the corporate tax rates? That gives some credit, I think. I mean, he comes with this, I think, in a good sense he's trying to help our companies.

Mr. CHENEY: Well, I think he may be. We'll see. Maybe that's trying to suck a few people in, but when I see him raising the top rate on individuals and recognize that about three-quarters of the people who pay the top rate are small businesses. And small businesses more than corporations, drive job creation in this economy. It's a fundamentally bad idea to to back and reverse course on that top rate on dividends and on cap gains and I'll give Charlie credit. He wants to reduce the corporate rate OK, but he's doing an awful lot of damage in the name of what he described as tax reform. I think it's a bad proposal.

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