Sen. McCAIN: Larry, in all due respect, don't you think that when corporate executives take exorbitant pay packages that are not justified by the--by the performance of the corporations that they have stewardship of and millions of--and 250,000 Americans in the last short period of time have lost their jobs, that that gives corporate America a bad name and then increases the influence of those who are basically anti-business? Don't you think that is also one of the--one of the spillovers here? We expect corporate America to be transparent, honest, accountable, and I don't care how much executive compensation is as long as it's justified by corporate performance. And you know and I know there are many of them that that's not the case. Not the majority, but there's enough of them that it gives Wall Street and corporate America a bad name, the strength and basis of America's economy. You and I are not in that much disagreement. But just like there are bad politicians that--who need to be punished, there are bad corporate executives and corporate greed that has to be checked, as well.

KUDLOW: Why? In the case of James Cayne--I mean, I don't want to get too deep into this...

Sen. McCAIN: Yeah.

KUDLOW: ...because neither of us are securities analysts.

Sen. McCAIN: Yeah. Yeah. Yeah.

KUDLOW: But he didn't do anything that broke the law. He worked there for 40 years.

Sen. McCAIN: Of course not.

KUDLOW: He collected stock over that whole period of time. And you yourself supported the JPMorgan/Bear Stearns deal. So I'm not sure where the issue is here, because he didn't do anything illegal.

Sen. McCAIN: Yeah. Well, when a politician gets corporate contributions and then writes an earmark for that corporation, which is not competed or any other virtue that I know of, that's not illegal, either. OK? But it ain't right. I'm saying that there are corporate executives--I'm sorry to waste our--I mean, to spend so much of our time together on this particular issue, because we're not that much in disagreement. I want accountability and transparency, and I know that you do, too. And there are bad corporate heads just as there have been bad politicians and there have been bad everything, unfortunately, in America. And transparency and accountability to shareholders is the best way to check it. And you and I are not in that much of disagreement of it.

KUDLOW: Yeah.

Sen. McCAIN: But I cringe when I hear--when I hear my constituents saying, `Wait, I just lost my job and that corporate CEO just cashed in X,' OK?

KUDLOW: All right. So as someone once said, let us move on, sir. Recently...

Sen. McCAIN: OK, sure.

KUDLOW: Recently, you've talked--you've said pretty clearly that the US economy is in recession. In terms of your speech today, can you tick off your major recovery points?

Sen. McCAIN: Bring spending, obviously, under control. That is very obvious. Have a balanced budget. Reduce corporate taxes from 35 to 25. Allow expensing in the first year of new equipment. Job retraining and education programs that work, that give us qualified workers into the work force. Let's have a gas tax holiday and maybe just give everyday Americans some relief this summer. Become--make it a national priority to--for energy independence. We're sending, as you know, $400 billion a year, half of our trade deficit, to countries that don't like us very much, and some of that money ends up in the hands of terrorist organizations. We--spending and spending and spending. In other words, we need to have a year pause, a year pause on discretionary spending, except for veterans and defense. And let's scrutinize every agency of government. You could--and by the way, how do you pay for it? Just the $35 billion in pork barrel projects that parents sign--the president signed into law the last two years, plus the 60 billion in pork barrel projects that are already in the pipeline. And let's get the spending under control so that we can give Americans real and meaningful tax relief, which they need, because--and we cannot make the tax--present tax cuts--we can't repeal the present tax cuts and we have to take a--many other measures. But I would argue with you that if we're going to really restore our confidence and trust, we cannot increase the tax burden on American families and businesses. It is not taxes that are insufficient, it's spending that's out of control. And one of the areas I would go after first and hardest is defense acquisition.

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