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CNBC TRANSCRIPT: CNBC'S LARRY KUDLOW SPEAKS WITH REPRESENTATIVE JEB HENSARLING (R-TX) ON CNBC'S "THE KUDLOW REPORT" TONIGHT

WHEN: Tonight, Tuesday, November 15th at 7PM ET

WHERE: CNBC's "The Kudlow Report"

Following is the unofficial transcript of Larry Kudlow's interview with Representative Jeb Hensarling (R-TX) tonight on CNBC's "The Kudlow Report." All references must be sourced to CNBC.

Super Committee: 8 Days & Counting

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LARRY KUDLOW, host: But we begin tonight with our top story, eight days and counting, and breaking news. Moments ago the supercommittee broke up for the ninth--for the night with no new deal. I want to ask, is a high tax supercommittee compromise going to damage the economy even more? Is this kind of compromise really worth it. So joining us now is the committee's co-chair, Jeb Hensarling, Republican of Texas. He also chairs the House Republican Conference. Jeb Hensarling, thank you. I know you're super busy and I know you're working on the supercommittee, but I want to ask you about the threat of super tax hikes that could sink the economy.

Representative JEB HENSARLING: Not going to happen, Larry. I mean, listen, we're facing a jobs crisis and a debt crisis. We're certainly not to going to exacerbate one by trying to address the other. Frankly, that's one of the reasons that we are somewhat stymied at the moment. We all know, in fact, President Obama said the drivers of our debt crisis are Medicare, Medicaid, and health care spending. Nothing else comes close, but the Democrats won't put a plan on the table to solve the problem. And anything they do that even remotely addresses health care, even superficially, they're insisting upon a trillion dollar tax increase on the worst economy since the Great Depression. It's not going to happen. I mean, Republicans have countered. We have put real plans on the table that would actually save and secure Medicare, not just for my parents but for my children. And we have come forth, frankly, with a very good faith offer of putting some tax revenue on the table but only if we do it in a pro-growth fashion to broaden the base, bring down rates, which is what every, frankly, other bipartisan effort has done. That would help unleash pro-growth economics by one study. Now you could get as many as a half a trillion dollars in dynamic revenue...

KUDLOW: But, Congressman, I--I'm all for that. And by the way, I was willing to live with the Pat Toomey deal.

Rep. HENSARLING: Well, good.

KUDLOW: But I want to ask you, is The Wall Street Journal report this morning wrong? They're telling about $300 billion in revenues up front, another $500 billion in revenues later. They say Republicans are looking at this bill and we'll really get nothing for it. On balance, that would be one of the biggest tax hikes in history. Can you say categorically to us this evening that that deal is a nonstarter, that there will be no 300 billion up front and another 500 billion to determine later? Is it off the table?

Rep. HENSARLING: Well, Larry, all I can tell you, as the co-chairman of the committee, I don't know what agreement you're talking about. It certainly hasn't been presented to me.

KUDLOW: That's what The Journal reported this morning. It's what The Journal reported this morning.

Rep. HENSARLING: Well, all I can do is repeat it. I didn't--I hate to insult the people at The Journal. I didn't read their newspaper today. I'm unaware of this. So since I'm the co-chairman, I think if their--if it was out there, I would know about it, and all I can do is repeat myself and say it's not going to happen. We, listen, we have gone as far as we fell we can go. On balance, we've got to make sure we're helping the economy. There's a legitimate jobs crisis out there. And so, again, we put $250 billion of what is known as static revenue on the table, but only if we can bring down rates. We believe we can bring the top individual rate down to 28, 29, maybe at most 30 percent, bring the corporate rate down to the median of the EU, 25 percent. And on balance, we think that would be pro growth. But, listen, any penny of increased static revenue is a step in the wrong direction. We can only balance that with pro-growth reforms. And, frankly, the Democrats have never agreed to that.

KUDLOW: Well, where are the...

Rep. HENSARLING: So I don't know how many times I can tell you is that that agreement's not going to happen, it's never been presented to me.

KUDLOW: All right. I'm going to take you at face value. I appreciate the honesty because everybody's been worried about that. I mean, I've been on the phone today. Conservatives are worried about it. Republicans are worried they're going to lose their message.

Rep. HENSARLING: Well...

KUDLOW: People in the stock market are worried that it's going to damage the outlook for the economy. So let me ask you the follow-up question, which is easy. Where are the super spending cuts because I don't see much talk even about any spending cuts, and what I see would be, you know, one-to-one, spending cut for revenue hike, that kind of thing.

Rep. HENSARLING: Well, again, there are certain revenues that are non-tax revenues. I think most people, for example, would want to increase the guarantee fees for Fannie and Freddie. We know that PBGC is underfunded, so part of this is fees. Part of it, again, we believe there's a dynamic revenue feedback. But listen, I'm disappointed. I mean, what passes for spending discipline around here, as you well know, is simply, you know, preventing the rate of increase in government spending. And again, if we don't address Medicare and Medicaid and health care--and, again, it's not just me saying it, the president of the United States says it--we will fail in our statutory duty. We have a duty to put forth legislation that actually addresses this. So again, if we can't get any type of reforms in health care, which has helped driving the nation towards insolvency, then, no, there's no reason to, frankly, to put any static revenues on the table.

KUDLOW: Well, all right. If you can't dent the health care problem, if you can't dent Obamacare, if you're looking at these tax hikes, I would say--I mean, what's wrong, pull the trigger for the across the board spending cuts sequester. Why not pull that trigger? Trillion dollars, 1.2 trillion, that's OK. At least it's lower spending.

Rep. HENSARLING: Well, Larry, a couple of important points. You're right, a lot of people don't realize $1.2 trillion of deficit reduction is going to happen anyway. We'd prefer to do it in a smarter fashion. And the 1.2, frankly, half of that is aimed at national security. Leon Panetta, our secretary of defense, says that will hollow out our defense. So, number one, I would be committed to keeping the 1.2. We've got 13 months to find a smarter way to do it. I think the cuts that are aimed at defense, frankly, go too far. But this is one--this is a very important point that you make. You know, if the 1.5 isn't met, there's a 1.2 backstop right there. That's...

KUDLOW: And what matters is 2013. The all the out year stuff for defense and non-defense will be fixed later with the new Congresses, new presidents and whatnot. At least grab off some spending reduction.

Rep. HENSARLING: Well, again, Larry, something is better than nothing. We are trying to get the Democrats to agree to any spending reductions whatsoever. But, again, we've got a jobs crisis. We've got a debt crisis. Republicans will do nothing to exacerbate the job crisis in order to deal with the debt crisis. And again, as a nation, we're just kicking the can down the road and we don't have that much road left until we fundamentally figure out how we're going to get quality health care, quality retirement security at a cost that doesn't mortgage our children's future.

KUDLOW: All right. All right. We'll leave there. A super congressman, Jeb Hensarling, who is the co-chair of the supercommittee. Thank you, Mr. Hensarling. We appreciate your time very much, sir.

Rep. HENSARLING: Thank you, Larry.

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