KUDLOW: On the corporate tax--on the corporate tax cut...

Sen. McCAIN: Yeah.

KUDLOW: ...which you've talked about pretty much all year, in order to help finance it, you mention you want to close some loopholes in corporate welfare. Would you raise the...(unintelligible)...interest tax on buyout funds and private partnerships as a means of financing your reduction in the corporate tax rate overall?

Sen. McCAIN: No. I would--no. But I'll tell you what, I would eliminate ethanol subsidies. I would eliminate the tariff on imported ethanol. I think our market is being very badly distorted as far as food prices are concerned. I know you know food prices skyrocketed 17 percent in a very short period of time. That's because we're distorting the market. I'm for biofuels, I'm for all that stuff, but let's let the market play. Let's not subsidize ethanol or any other alternate form of energy. Let's go ahead and take away the imports. Let's eliminate sugar protection. My God, it's amazing, still, the power of some of the sections of agriculture in America. And let's eliminate loopholes that are specially targeted, rifle-shotted to specific industries and--both agriculture and business, and let's let them all compete.

KUDLOW: Come back to this summer gas tax holiday that you unveiled in your speech today. It's a pretty interesting point. I don't think anybody's talked about anything like that. Let me just ask you, though, you've been very tough on the issue of carbon emissions, for example. Now, if you waive the gas tax...

Sen. McCAIN: Yeah.

KUDLOW: ...for motorists, isn't that going to actually spur gasoline consumption and increase carbon emissions?

Sen. McCAIN: Look, I'd love to tell you that would happen. We're talking about 18 cents a gallon for regular fuel and 24 percent--24 cents for diesel. I'm not sure that it stimulates it. I think it eases the burden. The people that drive the furthest in America are the lowest income people. You spent enough time in Washington, DC, to know that the wealthiest live in Georgetown and can almost walk to work; the least wealthy live the furthest away and drive many, many miles. I think that there--that it is a disproportionate burden on low income Americans that don't have access to mass transportation, that have to go a long way to work. But I'd like to see Americans get some relief this summer and maybe feel a little better. That's--and I think it'd be a nice thing to do, a good thing to do, including suspending further purchases of oil--of gas and oil for--of oil for the Strategic Petroleum Reserve.

KUDLOW: Well, some people have looked at this proposal this morning, which I said is a novel proposal, and they said, `Well, OK, but...'

Sen. McCAIN: Mm-hmm.

KUDLOW: `...isn't this going to provide, ultimately, more revenues for Saudi Arabia and OPEC, which is the reverse of what you have argued for in the past?'

Sen. McCAIN: No, I don't--look, I do not believe that we can continue our efforts to alternate fuels and alternate energy sources, including nuclear, which is vital, and still give Americans a little bit of relief and let them afford a vacation this summer. So all I can tell you is I'd like to give Americans some relief and it will have little or no impact of any kind on our overall effort that we must mount to become energy independent, and that has to do with a lot of alternate energy, again, and I emphasize nuclear.

KUDLOW: All right. A month ago on the housing and the mortgage issue, you gave a strong speech and you said one of your core principles--it is not the duty of government to bail out and reward those who act irresponsibly.

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