Interview Transcript: Dick Cheney

KUDLOW:  Some of the political pundits are saying, well, OK.  President Bush has become budget warrior with his veto pen.  He's also become very, very aggressive on preserving the low tax rates.  He calls himself a supply sider. I've heard him use that term before.  Glad to hear it.  But I was interested, all of a sudden...(unintelligible)...this year.  Is Mr.  Bush and are you trying to sharpen the Republican message for 2008?  Trying to say, here's our contrast, veto excessive spending, keep tax rates low.  Is this in large measure a political strategy?

Mr.  CHENEY:  No, I think it's--I think it is strategy driven my policy and our policy concerns.  I think that's good politics.  But I think if you look at it, in effect, what happened, of course, was for the first six years we were here, we had the Republican Congress.  We negotiated on the top line on budgets every year.  The Congress met our top lines, sometimes in the face of a veto threat, and so there was no opportunity or necessity to have vetoes as an important part of your strategy.

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.

KUDLOW: You were talking before about the success of the tax cuts and so forth. On the campaign trail, many Democrats, Senator Clinton in particular, have said two things. Number one, middle class has not participated in this economic boom.  She calls it a middle class trap door and says that wage inequality is the worst it's been since 1929.  Do you have a response to those charges?

Mr.  CHENEY:  Yeah, I don't agree with it.  I think that analysis is wrong.  I think we've added well over 8 million jobs since the recovery took off some four years ago.  We have seen a significant economic expansion underway now for 40 some months.  It's been, I think, a very successful economic policy. And the suggestion that somehow there are hard times out there, I just--I just think is a misstatement.  Now clearly, there are some pockets where people run in to difficulties.  Where we have economic slow-down for one reason or another.  Michigan still having troubles because of the auto industry and so forth.  But I think overall, in terms of macroeconomic policy and what's worked for the economy for the last several years now, it's what the president put in place, not what the Senator Clinton suggested.

KUDLOW:  But there is a middle class anxiety and it is going to be an issue in the upcoming presidential election.  Do you think the White House and the Republican Party in general has had a sufficient response to that anxiety? Some of it's about trade, some of it's about globalization, some of it's about transforming our economy.  What the eminent economist Schrumper@ had called gales of creative destruction.  I mean, people are worried out there?  Do you agree with that?

Mr.  CHENEY:  Yeah.

CONTINUED

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