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Maria Bartiromo Speaks to Chairman of the White House Council of Economic Advisors Edward Lazear and Director of National Economic Council Allan Hubbard on "Closing Bell with Maria Bartiromo" Today at 4:30 PM ET (Transcript Included)

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WHEN: TUESDAY, SEPTEMBER 18
WHERE: CNBC'S "CLOSING BELL WITH MARIA BARTIROMO"

The following is the unofficial transcript of a CNBC interview with Edward Lazear, Chairman of the White House Council of Economic Advisors, and Allan Hubbard, Director of National Economic Council, on CNBC's "Closing Bell with Maria Bartiromo" today. All references must be sourced to CNBC.

In the interview with CNBC's Maria Bartiromo, Lazear and Hubbard discuss the Federal Reserve's interest rate cut, economic growth and government spending, among other topics.

MARIA: WELCOME BACK. PERHAPS THE BIGGEST QUESTION ON WALL STREET AND MAIN STREET IS CONCERN THESE DAYS ABOUT WHETHER OR NOT THE UNITED STATES IS HEADED FOR A RECESSION. WE HAVE BEEN TALKING ABOUT THAT RECENTLY BROKE WITH CNBC TRILLION DOLLARS SURVEY PUTS THE SCENARIO AT 30% COMPARED 25% WHEN WE LAST ASKED THE QUESTION AND EARLY AUGUST. THAT IS THE CHANCE IS HIGHER BUT NOT FOR MOST OF WALL STREET. TODAY WE HAVE THE FEDERAL RESERVE LOWERING INTEREST RATES. THE FED CUT THE MARKET RESPONDED THAT WAS A MORE THAN THE ECONOMY NEEDS OR THE RIGHT BOOST TWO EASE PRESSURE? WITH ME HERE IN WASHINGTON IS CHAIRMAN OF THE COUNCIL OF ECONOMIC ADVISERS EDWARD LAZEAR ALONG WITH NATIONAL ECONOMIC COUNCIL DIRECTOR ALLAN HUBBARD.

HUBBARD: TERRIFIC TO BE HERE.

MARIA: I KNOW YOU CANNOT COMMENT ON THE FEDERAL RESERVE AN INDEPENDENT AGENCY BUT WHAT A CUT IN INTEREST RATES COULD MEAN FOR THE ECONOMY OVER THE NEAR OR LONGER-TERM. WOULD YOU EXPECT, WHAT IS YOUR GUT DO THINK WE COULD SEE A BOOST IN ECONOMIC GROWTH IN?

LAZEAR: RIGHT NOW IS A LOOK AT THE ECONOMY WE KNOW THAT WE HAVE HAD SUSTAINED GROWTH FOR A LONG PERIOD OF TIME. JOB GROWTH SINCE 2003, ABOUT 8 MILLION JOBS AND 47 CONSECUTIVE QUARTERS. THAT SAID WE ALSO KNOW THAT WE ARE AT THE MATURE STAGE OF THE BUSINESS CYCLE RECOVERY. SO WE HAVE RECOVERED. THERE IS NO ADDITIONAL RECOVERY WE NEED TO DO. THE QUESTION BECOMES CAN WE SUSTAIN THE RECOVERY? IT IS MORE DIFFICULT TO GET JOB GROWTH WHEN YOU ARE AT THE TOP THAN GOING TO THE TOP. SO WHAT HAPPENED TODAY WITH INTEREST RATES CUT IT WILL BE PRODUCTIVE IN SUSTAINING THE JOB GROWTH AND MAKE SURE THE ECONOMY CAN GROW INTO THE NEXT YEAR AND YEAR AND A HALF.

MARIA: SOMEBODY MIGHT SAY WE MIGHT BE IN DIRE STRAITS FOR THE FED TO CUT 50 BASIS POINTS ON THE FED FUNDS AND DISCOUNT RATE AND YOU ARE TALKING ABOUT SUSTAINABILITY A SCENARIO YET IF WE WERE ALL LOOKING AT THIS AS BEING IT STABLE AND STEADY BY WITH THE FED MAKE AN AGGRESSIVE CUT?

LAZEAR: I THINK THE FED IS RESPONDING TO THE FACT THAT WE ARE AT THE POINT IN THE BUSINESS CYCLE WHERE THINGS COULD GO THE OTHER WAY BUT ARE NOT LIKELY. IN FACT THE STATISTICS YOU JUST A 30% PROBABILITIES WE KNOW THAT THERE IS MORE 2/3 PROBABILITY IT WILL CONTINUE TO GROW. IT IS NOT A QUESTION OF WHETHER IT WILL GO NEGATIVE. IT IS A QUESTION OF HOW POSITIVE CAN THE GROWTH BE? TO WANT TO MAKE SURE WAGES CONTINUE TO GROW AND JOBS ARE AVAILABLE. THAT IS THE KEY THING. RIGHT NOW WE ARE 4.6 PERCENT UNEMPLOYMENT. WE ALSO HAVE CONTINUED WAGE GROWTH 1.7% REAL WAGE GROWTH LAST YEAR THAT IS A GOOD DEAL BUT WE NEED TO MAKE SURE THAT CONTINUES. WE DON'T WANT TO RETREAT INTO A SCENARIO THAT IS NEGATIVE FOR THE AMERICAN WORKERS.

MARIA: THE AMERICAN WORKER HAS SEEN SOME OF THE JOBS GO OVERSEAS. LET ME TALK TO YOU ALLAN HUBBARD ABOUT THE GLOBAL STORY. YOU HAVE BEEN WORKING ON TRADE AND OPENING MARKETS OBVIOUSLY AS A WAY TO CONTINUE TO ENCOURAGE ECONOMIC GROWTH. WHATCAN YOU TELL US? AND IF WE WILL SEE ANY POSITIVE, ALT A OF ANYTHING YOU ARE WORKING ON BY THE END OF THE YEAR.

HUBBARD: BY THE WAY AS YOU KNOW SUE SCHWAB IS THE U.S. TRADE REPRESENTATIVE SHE LEADS THAT EFFORT WITH PRESIDENT BUSH. THE WHOLE CABINET IS ENGAGED AS WELL AS US AND THE WHITE HOUSE WORKING ON THIS. IT IS SO IMPORTANT. THE TRADE REGIME THAT EXISTED AFTER WORLD WAR II IF IT STILL EXISTED TODAY THE AVERAGE AMERICAN HOUSEHOLD WOULD EARN $9,000 LESS THAN IT EARNS TODAY SO THAT'S WHY IT IS SO IMPORTANT TO CONTINUE TO OPEN UP MARKETS AND MAKE IT POSSIBLE FOR AMERICAN MANUFACTURERS AND SERVICE COMPANIES TO EXPORT AROUND THE WORLD.

MARIA: ANY PROGRESS?

HUBBARD: WE'RE DEFINITELY MAKING PROGRESS BUT IT IS HARD AND TOUGH. SUE SCHWAB IS DOING A FANTASTIC JOB. SHE SIGNED FOUR FREE TRADE AGREEMENT WERE ARE AWAITING CONGRESS TO APPROVE THEM. IT WILL BE TOUGH BUT THE PRESIDENT HAS COMMITTED TO MAKE IT HAPPEN. IT IS WITH PERU. PANAMA AND MOST IMPORTANTLY COLOMBIA WHO IS A GREAT FRIEND OF OURS. AND A GREAT COUNTER TO CHAVEZ IN VENEZUELA AND MIRALES IN BOLIVIA. HE IS A GREAT FRIEND OF AMERICA THAT IS WHY IS SO IMPORTANT TO GET THE COLUMBIA FREE-TRADE AGREEMENT DONE. THERE IS ALSO KOREA. BUT THE DOHA ROUNDS IS WHAT IS MOST IMPORTANT FROM THE ECONOMY PERSPECTIVE 151 COUNTRIES SUE SCHWAB HAS BEEN WORKING TIRELESSLY TO MAKE THAT HAPPEN IN. WE ARE OPTIMISTIC THAT IT WILL TAKE A LOT OF WORK ON OUR PART AS WELL AS OUR TRADING PARTNERS PART.

MARIA: WHEN IT COMES TO SPENDING OBVIOUSLY ALAN GREENSPAN IS OUT THERE CRITICIZING YOU GUYS. THE REPUBLICANS DESERVE TO LOSE PART OF THEY SPENT SO MUCH MONEY THEY SHOULD HAVE VETOED PRESIDENT BUSH SAID HE RESPECTFULLY DISAGREES. WHAT DO YOU HAVE TO SAY? IS THE GOVERNMENT SPENDING WAY TOO MUCH MONEY?

HUBBARD: ABSOLUTELY THE GOVERNMENT SPENDS TOO MUCH MONEY BUT PRESIDENT BUSH HAS DONE A FANTASTIC JOB GETTING IT UNDER CONTROL. BUT THERE'S A LOT MORE TO BE DONE. IF YOU LOOK AT THE PRESIDENT'S BUDGET THERE'S BEEN A SIGNIFICANT INCREASE IN SPENDING FOR DEFENSE AND SECURITY BUT NON-DEFENSE DISCRETIONARY SPENDING, THE LAST THREE YEARS IT HAS BEEN LESS THAN INFLATION. THE PRESIDENT INHERITED A NON-DEFENSE SPENDING GROWING AT 15% A YEAR NOW IT IS GROWING LESS THAN INFLATION A REMARKABLE ACHIEVEMENT. BUT AS THE PRESIDENT AND ALAN GREENSPAN HAS POINTED OUT, THE REAL ELEPHANT IN THE ROOM IS ENTITLEMENTS MEDICARE AND SOCIAL SECURITY. THIS PRESIDENT HAS TRIED HIS HARDEST TO TACKLE THAT AND THE DEMOCRATS IN CONGRESS REFUSED. THAT IS WHAT WE NEED TO TACKLE THAT IS THE WAY TO GET SPENDING UNDER CONTROL UNDER CONTROL AND BE FISCALLY RESPONSIBLE.

LAZEAR: I WOULD JUST ADD WE KNOW THE DEFICIT HAS COME DOWN QUITE DRAMATICALLY OVER THE LAST COUPLE YEARS. THE MAIN REASON IS THE ECONOMY HAS GROWN. THE DEFICIT IN REVENUES ARE MOST CLOSELY RELATED SHORT-TERM HOW THE ECONOMY DOES AND IT HAS DONE VERY WELL. IT IS REALLY IMPORTANT MAKE SURE THAT WE CONTINUE TO HAVE THE ECONOMY GROW IN ORDER TO GET THAT DEFICIT DOWN. RIGHT NOW IT IS THAT 1.5% OF GDP THAT IS LOW BY HISTORIC STANDARDS THAT IS NOT LARGE. WE ARE DOING THAT DESPITE THE FACT THAT WE HAVE A MAJOR NATURAL DISASTERS, 9/11, RECESSION, CORPORATE SCANDALS.

MARIA: HOUSING BLOW UP.

HUBBARD: AND A WAR.

LAZEAR: AND ALL THOSE GOING ON AT THE SAME TIME DESPITE THAT THE AMERICAN ECONOMY CONTINUES TO BE ROBUST AND FIGHT OFF ANY NEGATIVE FORCES BECAUSE OF THE FLEXIBILITY AND THE KINDS OF POLICIES GROWING THE AMERICAN ECONOMY.

MARIA: ARE THE ODDS OF A RECESSION LOWER TONIGHT?

LAZEAR: I WOULD SAY THAT THE ODDS OF CONTINUED EXPANSION ARE HIGHER TODAY. AS A RESULT OF A VARIETY OF POLICIES. AS WE GO FORWARD, I AM OPTIMISTIC AND I THINK WE WILL SEE A GOOD ECONOMY FOR THE NEXT YEAR AND WE CAN SEE GROWTH RATES PICK UP TO SOMEWHERE TWO OR 3% IN THE FOLLOWING YEAR. I THINK THAT WOULD BE FINE. I THINK WE WOULD BE HAPPY WITH THAT GIVEN THE FACT THAT THE HOUSING MARKET DID EXPERIENCE SAY IS THE BIGGEST DECLINE OVER THE LAST YEAR.

HUBBARD: IT IS MOST IMPORTANT TO SUSTAIN THIS ECONOMIC GROWTH AND NOT RAISE TAXES AND THAT IS WHAT THE PRESIDENT IS COMMITTED TO A WE ARE SO FEARFUL THE DEMOCRATS WILL DO IT. THERE ARE BUILT-IN TAX INCREASES RIGHT NOW BE ALTERNATIVE MINIMUM TAX WOULD ADD 50 BILLION IN TAXES AND THE DEMOCRATS WILL NOT PATCHED THAT YET AND WE WILL ARE DESPERATELY HOPING THEY WILL DO IT SOON. PRESIDENT'S TAX CUTS THAT EXPIRED 2010 WE NEED TO MAKE SURE THAT THOSE ARE MADE PERMIT IT TO MAKE SURE THE CONTINUED ECONOMY GROWS TO MAKE SURE THAT TAXES DO NOT GO UP.

MARIA: A GOOD TO HAVE YOU BOTH WITH US. EDWARD LAZEAR AND ALLAN HUBBARD.





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