CNBC Exclusive: Dylan Ratigan Sits Down with President Bush's Economic Team for "The CNBC White House Economic Summit" on Wednesday, October 24 on "The Call" (Transcript Included)

WHEN: Wednesday, October 24th at 11:00am ET
WHERE: "The Call"

The following is the unofficial transcript of CNBC's Dylan Ratigan's exclusive interview live from Washington, DC following a cabinet meeting at the White House, with Bush's economic team for "The CNBC White House Summit." Ratigan speaks with Commerce Secretary Carlos Gutierrez, Chairman of the Council of Economic Advisors Edward Lazear, Director of the National Economic Council Allan Hubbard and Director of the Office of Management and Budget Jim Nussle, on CNBC's "The Call" today. All references must be sourced to CNBC.

In the interview, Bush's economic team discusses a broad range of topics including the mortgage crisis, the diving dollar, and China.

TRISH REGAN: WE WANT TO GO OVER TO DYLAN. DYLAN RATIGAN IS IN WASHINGTON, D.C. WITH A VERY,VERY, SPECIAL INTER.

DYLAN: HI, GUYS. YEAH, THANK YOU VERY MUCH. AS YOU CAN SEE, BY WAY OF INTRODUCTION, DR. ALLAN HUBBARD WITH US HERE. JIM NUSSEL. CARLOS GUTIERREZ AND ED LAZEAR. YOU'VE GOT THE TWO CHIEFECONOMIC ADVISORS TO THE PRESIDENT. THE DIRECTOR OF OFFICE OF MANAGEMENT AND BUDGET AND OF COURSE SECRETARY OF COMMERCE. WELCOME, GENTLEMEN. THANK YOU FOR TAKING THE TIME TO TALK.

LET'S START UNFORTUNATELY WITH THE SITUATION DEVELOPING IN SOUTHERN CALIFORNIA. WHAT CAN YOU TELL US AND WHAT DO YOU KNOW AND WHERE DO WE STAND TERMS OF GETTING RESOURCES TO THAT PART OF THE WORLD?

NUSSLE: THE PRESIDENT MADE INITIAL DECLARATION OF DISASTER. NOW AS JUST AS WE SAT DOWNHERE TODAY MADE THE MAJOR DISASTER DECLARATION. MEANS ALL OF THE ASSETS OF THE FEDERAL GOVERNMENT WECAN POSSIBLY PUT TO BEAR ON THIS ARE BEING COORDINATED AS WE SPEAK. WE'VE GOOD COORDINATION ONTHE GROUND WITH STATE AND LOCAL OFFICIALS AS WELL WITH THE FEDERAL LEVEL. THE PRESIDENT IS GOING THERE PERSONALLY AS WE ALL KNOW TOMORROW. THIS IS A, COMBINED, VERYUNIFIED, POSITIVE EFFORT. WE'RE DOING EVERYTHING WE CAN. THIS IS A TRAGEDY THAT IS UNFOLDING. WE DON'T KNOW THE EXTENT BUT WE'RE DOING EVERYTHING WECAN RIGHT NOW. I THINK IT'S A GOOD EFFORT.

DYLAN: I KNOW YOU'RE A FORMER STANFORD PROFESSOR AND GO TO CALIFORNIA AS OFTEN AS YOU CAN IT'S YOUR HOME.

LAZEAR: IT IS.

DYLAN: WHAT CAN YOU TELL US?

LAZEAR: OBVIOUSLY, THESE ARE REALLY SIGNIFICANT FIRES. CALIFORNIA IS USED TO DEALING WITH FIRES. WE HAVE A SUPERB FIREFIGHTING FORCE. THAT'S ONE OF THE POSITIVES. THAT'S BEEN COMBINED WITH FEDERAL EFFORTS THAT HAVE BROUGHT FIREFIGHTERS IN FROM OTHER STATES AS WELL. BUT THIS IS REALLY SIGNIFICANT EVENT. THIS IS NOT A SMALL SET OF FIRES. IT'S COMPARABLE TO THE ONES WE SAW IN NORTHERN CALIFORNIA IN OAKLAND YEARS BACK. THAT HAS BIG EFFECTS. THE IMMEDIATE EFFECTS OF COURSE ARE THE PERSONAL ONES. THE EFFECTS ON THE INDIVIDUALS. THAT'S WHAT THE PRESIDENT AND GOVERNOR ARE DEALING WITH RIGHT NOW. AS WE MOVE INTO THE LONGER RUN, YOU WORRY ABOUT THE EFFECTS ON THE LOCAL ECONOMY. FORTUNATELY THE AMERICAN ECONOMY TENDS TO BE PRETTY RESILIENT. I THINK KATRINA IS GOOD EVIDENCE ON THIS POINT. IF YOU LOOK SIX MONTHS AFTERKATRINA, WE HAD OVER 5% GROWTH AND IT'S PRIMARILY BECAUSE OF ROBUSTNESS OF THE AMERICAN ECONOMY. WE HAVE TO MAKE SURE WE BRING IN THE RESOURCES TO ALLOW THAT TO HAPPEN IN SOUTHERN CALIFORNIA AS WELL.

DYLAN: AT WHAT POINT, MR. SECRETARY, DOES THIS BECOME AN ECONOMIC VARIABLE?

GUTIERREZ: AS JIM MENTIONED AND EDDIE, FOCUS RIGHT NOW IS ON THE EMERGENCY. PRESIDENT AT CABINET MEETING WAS TALKING ABOUT WE NEED TO GET HELP TO THOSE IN NEED BUT THE POINT HERE ABOUT THE ECONOMY AND THE FACT THAT WE HAVE BEEN ABLE TO WORK THINGS LIKE KATRINA, THINGS LIKE 9/11, IT TALKS ABOUT THE IMPORTANCE OF OPEN, FLEXIBLE MARKETS. OUR CAPITAL MOVES QUICKLY. OUR LABOR MOVES QUICKLY. OUR BUSINESSES MOVE QUICKLY. THAT IS SO IMPORTANT TO KEEP THE ENVIRONMENT THAT WAY SO THAT BUSINESSES CAN MOVE FREELY. THAT'S ONE OF OUR TREMENDOUS ADVANTAGES AS AND ECONOMY. AND WE HAVE BEEN THROUGH DISASTERS BEFORE AND THE ECONOMY'S BEEN ABLE TO WORK THROUGH IT BECAUSE IT IS FLEXIBLE AND OPEN.

DYLAN: I KNOW WE'LL MOVE ON. WE HAVE A LOT OF OTHER SUBJECTS TO COVER. ARE WE AT A POINT NOW WHERE THIS IS A COMPARABLE SITUATION? ARE WE NOW DEALING WITH A SITUATION COMPARABLE TO A KATRINA OR --

NUSSLE: YEAH. THIS IS REALLY NO COMPARISON AT TO KATRINA. WHAT WE DON'T KNOW YET IS, HOW THIS IS ALL GOING TO UNFOLD. WE'RE GOING TO MONITOR THAT.RIGHT NOW AS THE SECRETARY SAID AND OTHERS, THIS IS A PERSONAL ISSUE FOR SO MANY PEOPLE WHO LOST THEIR HOMES. LOST THEIR BUSINESSES AND, WE JUST DON'T WANT ANYMORE LOSS OF LIFE. AND SO EVERYTHING WE'RE DOING RIGHT NOW IS TO PREVENT ANYMORE DISASTER OCCURRING, THEN WE'LL ADD UP THE NUMBERS. I'M SURE THAT WILL BE DONE.

DYLAN: LET'S MOVE ON TO, A LONG LIST, STARTING WITH HOUSING, DR. HUBBARD. HAVE THE DATA OUT THIS MORNING. IT WAS NOT ENCOURAGING. 8% DECLINE FROM AUGUST IN EXISTING HOME SALES 19% KLINE FROM THE PRIOR YEAR. DO YOU HAVE ANY INDICATIONS WHERE WE ARE IN OUR HOUSING MARKET IN THIS COUNTRY RIGHT NOW?

HUBBARD: THERE IS NO QUESTION THAT HOUSING IS THE AREA THAT WE'RE MOST CONCERNED ABOUT. THERE IS SIGNIFICANT SOFTNESS IN HOUSING AND TO BE PERFECTLY FRANK I THINK AS BOTH HANK PAULSON AND BEN BERNANKE HAVE SAID, IT'S NOT GOING TO TURN AROUND QUICKLY. THE GOOD NEWS IS THE REST OF THE ECONOMY IS QUITE STRONG. OUR UNEMPLOYMENT RATE REMAINS VERY, VERY LOW AT 4.7%. WE CONTINUE TO INCREASE JOBS EVERY MONTH. 49 STRAIGHT MONTHS WHICH IS A RECORD FOR THIS COUNTRY OF JOB EXPANSION. AND EXPORTS ARE THE, YOU KNOW, THE GREAT NEWS. EXPORTS ARE UP 12% YEAR-OVER-YEAR. WHILE IMPORTS ARE ONLY UP 2 OR 3%. SO, WE CONTINUE TO FEEL POSITIVE ABOUT THE ECONOMY AND OBVIOUSLY WE'RE CONCERNED ABOUT HOUSING.

DYLAN: BUT I MEAN AS YOU GUYS KNOW, WE HAVE, WE TALK ABOUT THESE THINGS LIKE THEY'RE ALL SEPARATE AND THEY'RE NOT. WE HAVE CREATED A FINANCING STRUCTURE TO PURCHASE HOMES. SOME OF THOSE HOMES WERE, HAVE BEEN DEFAULTED ON. AS A RESULT THE FINANCING STRUCTURE HAS BEEN A PROBLEM. MERRILL LYNCH THIS MORNING TAKING NEARLY $8 BILLION WRITE-DOWN. THE U.S. STOCK MARKET LAST I CHECKED IS DOWN 100 SOME AT POINTS AS RESULT OF THIS TIRE CHAIN. HOW CONFIDENT ARE YOU ALL WE CAN ENDURE THE DECLINE IN HOUSING AND HAVE IT NOT ULTIMATELY TIP THE U.S. ECONOMY INTO RECESSION?

LAZEAR: EFFECT PEOPLE POINT TO IS EFFECT OF HOUSING WEALTH ON CONSUMPTION. THAT IS THE OBVIOUS THING PEOPLE ARE CONCERNED ABOUT. THERE IS NO DOUBT HIS TORE THERE HAS BEEN EFFECT OF DECLINE IN HOUSING PRICES ON CONSUMPTION. WE HAVEN'T SEEN MUCH OF THAT YET. THE CONSUMPTION NUMBERS LOOK LIKE THEY WILL BE PRETTY GOOD. THIRD QUARTER LOOKS ACTUALLY PRETTY STRONG THERE. I THINK IN LARGE PART THE REASON FOR THAT THIS HOUSING DECLINE THAT WE'RE SEEING RIGHT NOW FOLLOWED A VERY SIGNIFICANT DEPPRECIATION IN HOUSING PRICES. SO MOST PEOPLE STILL HAVE A GOOD BIT OF WEALTH IN THEIR HOUSES. A LOT OF EQUITY IN MOST HOMES. AND, AS A RESULT, I DON'T THINK THAT WE'RE GOING TO SEE QUITE THE SAME KIND OF REBOUND IN CONSUMPTION WE MAY HAVE SEEN GIVEN OTHER HOUSING PRICE DECLINES.

GUTIERREZ: THAT'S A GOOD POINT. WE SAW IN THE SECOND QUARTER A BIG HIT ON HOUSING BUT THEN WE SAW THE IMPACT, AND ALSO, A VERY LOW QUARTER FROM STANDPOINT OF CONSUMPTION. CONSUMER PURCHASES.

DYLAN: WHAT DO YOU MEAN A VERY LOW QUARTER?

GUTIERREZ: THE SECOND, THE -- SECOND QUARTER CONSUMER IMPACT ON THE ECONOMY CONTRIBUTION TO GROWTH WAS VERY LOW. IN SPITE OF THAT, WE GREW 3.8%. WHY? BECAUSE EXPORTS WERE UP. BECAUSE NONREST CONSTRUCTION WAS UP. THE ECONOMY WAS ABLE TO OFFSET THAT DECLINE IN OTHER PARTS. WHAT WE'RE SEEING IN THE THIRD QUARTER IS STRONGER CONSUMER PURCHASES, CONSUMER SPENDING THAN WE HAD IN THE SECOND QUARTER AND --.

DYLAN: DO YOU BELIEVE IT'S SUSTAINABLE IF HOUSING MARKET CONTINUES THIS DETERIORATION?

GUTIERREZ: YOU'VE GOT TO LOOK AT EMPLOYMENT NUMBERS. WE SAW OVER 110,000 JOBS ADDED IN SEPTEMBER AND IMPORTANTLY WE'RE SEEING REAL WAGES INCREASE THAT IS WHAT ADDING TO THE CONSUMER FUEL.

DYLAN: TO THAT END, YOU SEE THE REVENUE LINE, HAVE YOU SEEN ANY SLOWDOWN IN THE RATE OF GROWTH OF COLLECTIONS, OF REVENUES THAT THE GOVERNMENT AS A RESULT OF THE SLOWDOWN -- YOU KNOW WHAT IS GOING ON IN OUR ECONOMY.

NUSSLE: WE'RE STARTING TO.

DYLAN: CAN YOU ELABORATE ON THAT?

NUSSLE: THE SIGNAL YOU'LL GET FROM ALL US WE'RE HAPPY WITH THE GROWTH BUT WE DON'T TAKE IT FOR GRANTED AT ALL. IT'S THE REASON WHY WE'RE SO FOCUSED ON EXCESSIVE SPENDING, ON NO TAX NCREASES. ACTUALLY, PROMOTING TAX REFORM AND EXTENDING THE TAX RELIEF WE'VE SEEN. WE KNOW THAT EXTENDS THE ECONOMIC GROWTH. WE DON'T WANT TO TAKE ANY OF THIS FOR GRANTED. THERE IS ENOUGH WARNING SIGNALS OUT THERE WE DON'T WANT TO TAKE ANY OF THESE ISSUES FOR GRANTED.

DYLAN: GIVE US INSIGHT INTO THE RATE OF HE SLOWDOWN YOU'RE SEEING IN THE GROWTH RATE OF REVENUE RIGHT NOW AS A RESULT OF SLOWING RATE OF ECONOMIC ACTIVITY.

NUSSLE: WE SAW A GOOD STRONG YEAR LAST YEAR. DEFICIT DOWN AS A RESULT OF GOOD STRONG REVENUE GROWTH. AS WE PROJECT FORWARD, BLUE CHIP AS WELL AS TREASURY IS SAYING THERE WILL BE SLIGHT MODERATION OF THAT GROWTH. NOT NEGATIVE. NOT RECESSION BUT ONE OF THOSE THINGS THAT MAKE US SAY, HEY, WE CAN'T TAKE THIS FOR GRANTED. WE CAN'T ALLOW EXCESSIVE SPENDING AND WE CERTAINLY DON'T WANT A TAX INCREASE AT THIS POINT.

LAZEAR: NOR IS IT SURPRISING PICKING UP ON JUMP'S POINT IF YOU THINK ABOUT EARLY PHASES RECOVERY THAT'S WHAT YOU WILL SEE MOST GROWTH BECAUSE YOU'RE COMING OUT OF DECLINE. ONCE YOU GET HEARD YOU BASICALLY RECOVERED AL, MADE A POINT WE'RE DOWN 4.7% UNEMPLOYMENT YOU TEND NOT TO SEE GROWTH TO BE AS PRONOUNCED AT THAT POINT AS SAW EARLY IN THE RECOVERY. THAT'S JUST NATURE OF RECOVERIES AND THAT'S THE WAY IT IS. BUT DOESN'T MEAN IT IS FORETELLING ANY KIND OF DECLINE OR ANY SUBSEQUENT RECESSION. WE THINK THE ECONOMY IS STRONG. AS LONG AS WE CONTINUE WITH GOOD POLICIES WE'LL CONTINUE.

GUTIERREZ: THAT IS THE KEY, GOOD POLICIES TO JIM'S POINT. THERE ARE TWO THINGS WE NEED TO KEEP IN FOCUS. ONE IS WE DO NOT NEED AND DO NOT WANT TAX INCREASES. NO TAX INCREASES. PRESIDENT SAID MORNING, NO TAX INCREASE, THE LAST THING ECONOMY NEEDS NOW. OTHER THING AT A TIME WHEN OUR EXPORTS, ARE ADDING TO OUR GROWTH, 40% OF OUR GROWTH CAME FROM EXPORTS IN THE SECOND QUARTER. 40% OF OUR GDP GROWTH. EXPORTS ARE CONTRIBUTING. THEY'RE BECOMING A MAJOR CONTRIBUTOR TO OUR ECONOMY. THAT SAYS A LOT ABOUT AMERICAN WORKERS AND BUSINESSES. WE'VE GOT TO KEEP THAT GOING AND KEEP ON OPENING MARKETS AND KEEP ON LEAVE BELIEVING IN THE POWER OF FREE TRADE.

DYLAN: NO QUESTION. YOU KNOW, NOT ONLY AS COMMERCE SECRETARY BUT AS FORMER BOSS AT KELLOGG PART OF THE REASON WE ARE SEEING INCREDIBLE STRENGTH IN EXPORT GROWTH IN ADDITION TO THE REASONS YOU CITE DEPRECIATION VALUE OF THE DOLLAR. CURRENCY BENEFIT TO ALL THE MULTINATIONAL CORPORATIONS HAS BEEN TREMENDOUS. IS THERE IMPLICIT ACCEPTANCE IF NOT ENCOURAGE OF CURRENCY DECLINE ALBEIT ORDERLY IN ORDER TO SUPPORT EXPORT GROWTH WHICH MAY BE ONE THING THAT KEEPS US OUT OF RECESSION, DR. HUBBARD.

HUBBARD: WE HAVE A RULE.

DYLAN: I KNOW THERE IS A RULE. WE ALL KNOW THE RULE.

HUBBARD: WE STICK TO THE RULE ONLY THE PRESIDENT AND, THE SECRETARY OF TREASURY SPEAK ABOUT THE DOLLAR.

DYLAN: FAIR ENOUGH. BUT TO THAT END, SO LET'S NOT SPEAK OF THE DOLLAR. LET'S SPEAK OF EXPORT GROWTH AND ROBUST NATURE OF IT AND EXTENT THERE HAPPENS TO BE A WIND RELATED TO CURRENCY RELATIONSHIPS IS SUPPORTIVE OF IT.IN OTHER WORDS, ARE YOU ULTIMATELY WHEN YOU GO TO BED AT NIGHT, YOU SAY LISTEN THIS CURRENCY SITUATION IS BENEFICIAL TO OUR ECONOMY RIGHT NOW BECAUSE OF THE -- LET'S BE HONEST. WE HAVE MEANINGFUL HOUSING DECLINE AND WE HAVE A MEANINGFUL GROWTH IN EXPORTS. THOSE ARE TWO VERY POWERFUL FORCES AT ODDS WITH ONE RIGHT NOW. TO THE EXTENT WHICH CURRENCY RELATIONSHIP IS BENEFICIAL TO THE STRONG COMPONENT OF THAT, THAT HAS TO BE ON SOME LEVEL A GOOD THING.

GUTIERREZ: LAST YEAR, 2006, CALENDAR YEAR EXPORTS GREW 12.7% THIS HAS BEEN GOING ON FOR YEAR-AND-A-HALF, TO TWO YEARS. WE SEE FREE-TRADE AGREEMENTS BUILDING UP. GETTING MOMENTUM. SEE BUSINESSES GETTING BEHIND EXPORTS. SMALL BUSINESSES EXPORTING. THIS IS PART WHAT WE'VE BEEN DOING UNDER THE PRESIDENT, GETTING OUT THERE AND ENGAGING THE WORLD AND COMPETING. WE'RE SEEING THE BENEFITS OF THAT.

HUBBARD: JUST TO ADD TO THAT THE OTHER THING THAT'S GOING ON IN TERMS OF THE WORLD IS THAT ECONOMIES AROUND THE WORLD HAVE STRENGTHENED IN THE LAST COUPLE YEARS. EUROPE IS STRONGER. JAPAN IS STRONGER. OBVIOUSLY CHINA CONTINUES TO BE STRONG. INDIA CONTINUES TO GROW VERY RAPIDLY. THAT GIVES, THAT PROVIDES A MARKETPLACE FOR OUR GOODS AND SERVICES AND AS CARLOS POINTED OUT, AS A RESULT OF THE PRESIDENT'S POLICIES, MOST IMPORTANTLY AS A RESULT OF THE ENTREPRENEURAL SPIRIT AND HARD WORK OF THE AMERICAN PEOPLE, WE ARE, COMPETING VERY, VERY SUCK SUCCESSFULLY. THAT'S WHY OUR EXPORTS ARE GROWING RAPIDLY. WE DON'T SPEAK ABOUT THE DOLLAR.

DYLAN: DOES ANYBODY HERE, DOES ANYBODY, YOU'RE GOING TO SAY --

HUBBARD: NO.

DYLAN: I THOUGHT YOU WERE GOING TO ABOUT THE DOLLAR. DOES ANYBODY HERE THINK WE'RE GOING INTO RECESSION

HUBBARD: NO.

NUSSLE: NO.

DYLAN: HERE?

LAZEAR: NO.

DYLAN: WHEN I HAVE CEO OF FEDEX, CEO OF YRC TRUCKING, CEO OF RYDER COMPANIES SAY I THINK WE'RE GOING INTO RECESSION. REASON THEY SAY THEY DECLINE OF NUMBER OF OBJECTS MOVING FROM POINT A, POINT B. WHAT ARE THEY MISSING?

NUSSLE: WE'VE SEEN, WE'VE SEEN SLOW GROWTH AND A MODERATION OF GROWTH. AT MANY TIMES DURING THE LAST NUMBER OF YEARS BUT THAT DOESN'T MEAN THE GROWTH IS GOING TO STOP AND THAT WE'RE GOING TO ALL OF SUDDEN GO INTO RECESSION. THERE ARE MANY SIGNALS OUT THERE VERY POSITIVE INCLUDING THE MARKET AS A WHOLE. IT CONTINUES TO GROW. I DON'T SEE ANY REASON WHY WE SHOULD, YOU KNOW, SUGGEST THERE IS GOING TO BE RECESSION WHEN IN FACT ALL OF THE INDICATIONS SUGGESTING THAT GROWTH IS GOING TO CONTINUE. IT MAY NOT AS STRONG BUT THAT'S WHY WE DON'T WANT TO TAKE IT FOR GRANTED AND WE WANT TO MAKE SURE OUR GROWTH POLICIES PUSH THAT FORWARD.

HUBBARD: IF YOU LOOK AT, YOU KNOW INFLATION, WHICH CONTINUES TO BE VERY, VERY LOW, NORMALLY, WHAT, ANTICIPATES A RECESSION IS, INFLATION RISES AND THEN THE FED HAS TO RAISE INTEREST RATES AND THAT CUTS OFF OR RESTRICTS CREDIT. AS A RESULT THERE'S A SLOWDOWN. GOOD NEWS INFLATION IS VERY MUCH UNDER CONTROL. WE BELIEVE IT WILL CONTINUE TO BE UNDER CONTROL BECAUSE WE HAVE CONFIDENCE IN THE FEDERAL RESERVE BOARD. AND THE, OTHER THING WE REALLY LOOK AT ARE JOBS AND THE JOB FRONT IS JUST STRONG. WE GET UNEMPLOYMENT CLAIMS EVERY THURSDAY. IT'S MOST CONTEMPORANEOUS STATISTIC WE GET. AND THAT CONTINUES TO INDICATE THAT WE'RE CREATING MORE JOBS AND JOB ENTRANTS. SO WE BELIEVE THE ECONOMY WILL CONTINUE TO EXPAND.

LAZEAR: JUST FOLLOWING UP ON AL, I WAS ALSO GOING TO POINT OUT THAT THE LABOR MARKET IS PROBABLY BEST INDICATOR WHAT'S HAPPENING IN ANY GROWING ECONOMY YOU CAN ALWAYS FIND NEGATIVERS. OBVIOUSLY HOUSING IS NEGATIVE NUMBER NOW.

DYLAN: WE'RE NOT PULLING SOMETHING OF A HAT.

LAZEAR: UNDERSTOOD. WHAT WE ALWAYS LOOK AT WE LOOK AT TWO DIFFERENT THINGS. WE LOOK AT WAGE GROWTH. WAGES DON'T GROW IF DEMAND IS SLACK. IF WAGES ARE GROWING THAT MEANS EMPLOYERS ARE FINDING IT DIFFICULT TO GET LABOR. THAT TELLS US THE ECONOMY IS STRONG. SECOND THING WE LOOK AT HOURS OF WORK. IF HOURS OF WORK ARE GROWING OR STABLE THEN WE FEEL THAT THE ECONOMY IS STILL ON TRACK. WHEN YOU START SEEING HOURS DECLINE, THEN YOU START TO WORRY ABOUT IT. WE HAVEN'T SEEN EITHER OF THOSE.

DYLAN: GO AHEAD.

GUTIERREZ: JUST TO ADD TO THAT CONSUMERS ARE ACTIVE. SO WE'RE SEEING THIRD QUARTER CONSUMER SALES PICK UP. FROM THE SECOND QUARTER, WHICH IS, YOU KNOW, IT'S, JUST ADDS TO THE EQUATION. JOBS, GDP GROWTH AND CONSUMERS ARE ACTIVE. THAT SHOULD KEEP DEMOVING.

DYLAN: YOU MENTIONED INFLATION. WE KNOW THAT THE CORE INFLATION DATA HAS INDEED BEEN QUITE BENIGN. HOWEVER WE ALSO HAVE WATCHED OIL DANCE TO $90 A BARREL.WE'VE ALL WATCHED AND WONDERED WHY ACTUALLY IT HASN'T HAD MORE OF IMPACT IN FINANCIAL MARKETS, WE HAVE,IN COVERING IT. WE WATCHED SOFT COMMODITY PRICES SOMETHING YOU'RE FAMILIAR WITH FROM YOUR PRIOR LIFE GO HIGHER IN MULTIPLES. WHEAT, SOY, CORN WHICH GOES TO CHEESE AND PIZZA.

CAN GO ON ALL DAY ABOUT THIS. WHY DO YOU GUYS THINK WE ARE HAVE BEEN ABLE TO ENDURE THE RISE IN COMMODITY PRICING BOTH HARD AND SOFT COMMODITIES AND NOT HAVING SEEN AT THIS POINT A MORE MEANINGFUL IMPACT ON THE OVERALL ECONOMY? IT HASN'T HAPPENED YET?

GUTIERREZ: TWO THINGS I'LL SAY. I'M SURE EDDIE WILL ADD TO THIS. ONE IS PRODUCTIVITY. WE CONTINUE TO SEE PRODUCTIVITY EXPANSION. WE CONTINUE TO HAVE THE MOST PRODUCTIVE COMPANIES IN THE WORLD. WE'RE SEEING THAT IN SMALL BUSINESSES AND LARGE BUSINESSES. THAT'S CONTRIBUTING. OTHER THING TOO TOO A LOT OF THESES ARE SMALLER PART OF OUR GDP THAN THEY ONCE WERE. WE'RE BECOMING A LOT MORE EFFICIENT AND BEING ABLE TO WITHSTAND SHOCKS AND CONTINUE TO MANAGEMENT BUSINESSES AND GROW.

DYLAN: OMB IF I WALKED INTO YOUR OFFICE OIL IS $40 A BARREL. LISTEN OIL WILL BE $90 A BARREL IN FALL OF '07 WHAT DO YOU THINK THE WORLD LOOKS LIKE? BY THE WAY MARKET IS AT OR NEAR A RECORD. WE'RE COUPLE PERCENT OFF OF THAT. EXPORTS ARE AT RECORD. I COULD DESCRIBE A VARIETY OF POSITIVE ECONOMIC CHARACTERISTICS YOU HAVE TO ADMIT THAT IS SURPRISING SET OF DATA.

NUSSLE: NOT ONLY IS IT SURPRISE AND HOW RESILIENT OUR ECONOMY IS ORDER TO DEAL WITH IT.

DYLAN: WHY DO YOU THINK ACCEPTING 90 SO WELL OR 80, OR 70?

NUSSLE: IF ONE PERSON KNEW THAT AND COULD PREDICT FUTURE. WE ARE NOT GOOD AT DOING THAT WE'RE LOOKING INDICATORS ALL OF THEM EXCEPT HOUSING ARE POINTING IN POSITIVE DIRECTION. ALL THAT COMBINED WITH THE FACT THAT WE JUST, HAVE SUCH A PRODUCTIVE WORKFORCE, AND, WHAT PEOPLE ARE ABLE TO DO, THAT'S REALLY WHAT IS I THINK THE DRIVER BEHIND OUR ECONOMY RIGHT NOW.

DYLAN: WHY DO YOU THINK WII -- ANYBODY HAVE A THOUGHT WHY WE ABSORBED THESE ENERGY PRICES AS WELL AS WE HAVE?

LAZEAR: I BELIEVE IT'S TAKEN SOME TOLL ON THE ECONOMY BUT IT'S RELATIVELY SMALL. SO THE WAY I WOULD THINK OF IT, WHERE WOULD BE BUT FOR THIS, WOULD BE A LITTLE BIT HIGHER. THE QUESTION IS WHY DON'T WE SEE US DECLINING OR SEEING VERY SLOW GROWTH? THE ANSWER IS BECAUSE THERE ARE SUBSTITUTES. TAKE THE HOUSING MARKET. THE HOUSING MARKET HAS NOT BEEN STRONG. WHERE HAVE YOU SEEN THE OFFSET? YOU'VE SEEN IT IN NON-RESIDENTIAL CONSTRUCTION. THAT NATURAL. WHY? PEOPLE COULD BE BUILDING HOUSES ARE NOW BUILDING COMMERCIAL PROPERTY. THERE IS SOME SUBSTITUTION. THAT IS NATURAL FACTOR. YOU SEE THAT IN A SOCIETY WHERE YOU HAVE MOBILE FACTORS. THE POINT THAT CARLOS MADE EARLIER ABOUT MOBILE CAPITAL, MOBILE LABOR, REALLY iMPORTANT BECAUSE THAT'S WHAT KEEPS US GOING.

GUTIERREZ: tHE PRESIDENT FROM THE VERY BEGINNING BELIEVED IN THE POWER OF FREE ENTERPRISE. THE POWER OF FREEDOM. THE POWER OF OWNERSHIP THE POWER OF LETING ENTREPRENEURS BE ENTREPRENEURS THAT IS WHAT WE ARE SEEING. THIS ISN'T AND ECONOMY THAT'S MANAGED BY WASHINGTON OR THE CENTER. MANAGED BY INDIVIDUAL, BY ENTREPRENEURS SMALL BUSINESSES. 50% OF OUR NEW JOBS ARE CREATED BY BUSINESS THAT HAVE BEEN IN PLACE FOR LESS THAN FIVE YEARS. THAT'S ENTREPRENEURIALISM. THAT IS WHAT IS HAPPENING IN OUR ECONOMY.

DYLAN: LET'S GO WITH THAT fOR A SECOND. THAT ALSO GETS US TO THE CONVERSATION ABOUT CHINA AND THE ENTIRE EXPORT CONVERSATION, RIGHT BECAUSE OF SMALL PERSON PERSON WILL SAY ON ONE HAND YOU'RE POTENTIALLY CREATING THIS HUGE MARKET FOR ALL OF AMERICAN CREATIVITY. I MYSELF WAS IN CALIFORNIA LAST WEEK. VALLEY WAS, IT'S NEVER BEEN BETTER. REALLY, POWERFUL TO BE ABLE TO SEE THAT. BUT AT THE SAME TIME, THERE'S A CONCERN A, EXPORTING OF JOBS AND B, UNFAIR ADVANTAGE THAT IS PERCEIVED TO BE HAD BY CHINA AT THIS POINT AS A RESULT OF THE FACT THAT THEIR CURRENCY IS PEGGED WHICH ALLOWS THEM TO GET THINGS OUT CHEAPER THAN THEY REALLY OUT TO BE GETTING OUT. HOW LONG CAN WE SUSTAIN THAT RELATIONSHIP BEFORE BECOMES REAL LIABILITY TO US AS OPPOSED TO ASSET. START WITH CHINA CURRENCY.

HUBBARD: SECRETARY PAULSON WHO REALLY LEADS THE ADMINISTRATIONS EFFORTS AND ECONOMIC RELATIONSHIP WITH CHINA HAS MADE IT VERY CLEAR TO THE CHINESE PRIVATELY AND PUBLICLY THAT THEY NEED TO CONTINUE TO MOVE TO MAKE THEIR CURRENCY MORE FLEXIBLE.

DYLAN: DO YOU REALLY HAVE LEVERAGE

HUBBARD: WELL IT WOULD BE GOOD FOR THE CHINESE TO DO THAT.

DYLAN: WHY

HUBBARD: IT WOULD HELP THEM CONTROL THEIR INFLATION IT WOULD HELP THEM CONTROL GROWTH SO THEY WOULDN'T HAVE THE EXCESSES MOST IMPORTANTLY CHINA SAVES 50% OF THE GDP WHICH MEANS THEIR PEOPLE ARE NOT GETTING THE BENEFITS OF THEIR GROWING ECONOMY. THEY NEED TO MOVE AND THEY RECOGNIZE THIS THEY NEED TO MOVE TOWARD A CONSUMPTION BASED ECONOMY AS OPPOSED TO AN EXPORT BASED ECONOMY AND AS THEY DO THAT MOVE TOWARD A MORE CONSUMPTION BASED ECONOMY THEY WILL START IMPORTING MORE GOODS AND THEIR BALANCE IN TRADE SURPLUS WILL DECLINE.

DYLAN: BUT WHEN YOU MEET WITH CHINESE OFFICIALS DO THEY REFLECT THE STATEMENT THAT YOU OFFER?

HUBBARD: THEY REFLECT THAT STATEMENT AND WE'RE WAITING FOR THEM TO EXECUTE. THEY RECOGNIZE THAT. WE'RE WAITING. CHINA IS A HUGE COUNTRY AND THERE ARE LOTS OF PRESSURES.BUT THEY ARE CONCERNED ABOUT THE ECONOMY BECAUSE THEY NEED TO CREATE 25 MILLIONJOBS A YEAR TO KEEP THEIR PEOPLE EMPLOYED. THAT IS A BIG CONCERN. THE WEEK MOVE MAKE BACK WE BELIEVE THEY CAN MOVE TOWARDS A CONSUMPTION BASED ECONOMY THAT IS MARKET BASED IN THEIRECONOMY WILL CONTINUE TO GROW AND CREATE JOBS THAT WE'LL ELIMINATE DISEQUILIBRIUM THAT CURRENTLY EXISTS IN THE WORLD'S MARKETS.

DYLAN: THE HEADLINE THIS MORNING FROM MERRILL LYNCH A 8 BILLION DOLLAR WRITEDOWN WE HAVE WATCHED ALL OF THE WRITE-DOWNS COME THROUGH. RESPECTING 4 BILLION THEN ASK WHY IT GOT BIGGER IT THEY SAID WE DECIDED TO TAKE A MORE CONSERVATIVE APPROACH. WHAT IS A CONFIDENCE GLOBAL THAT YOU HAVE A WASHINGTON, THE FOUR OF YOU AND YOUR COLLEAGUES AS TO THE STABILITY AND INTEGRITY AND OUR ABILITY TO CONTINUE TO LEND ON A LARGE LEVEL AS A RESULT OF THE LOCKUP IN THAT ONE PIECE OF THE CREDIT MARKET?

LAZEAR: WE CERTAINLY KNOW THAT THE CREDIT MARKET HAS BEEN A BIG NEGATIVE FACTOR OVER THE SUMMER. I MUST SAY THAT WE ARE PLEASANTLY SURPRISED BY THE FACT THAT IT HAS NOT TRANSLATED INTO THE REAL ECONOMY TO A GREATER EXTENT THAT IT HAS. THINGS SEEM TO BE GETTING BETTER. THAT DOES NOT MEAN WE'RE OUT OF THE WOODS THERE IS A LONG WAY TO GO BUT IT SEEMS TO BE GETTING BETTER. I VIEW THE ANNOUNCEMENT BY COMPANIES LIKE MERRILL LYNCH AS POSITIVE BECAUSE YOU WANT THIS STUFF TO BE RECOGNIZED. IT IS NOT A GOOD THING FOR COMPANIES TO DECLARE LOSSES BUT THEY ARE THERE IT IS BETTER TO KNOW ABOUT THEM THEN SWEEP THEM UNDER THE RUG. THE EARLIER WE GET THE INFORMATION OUT, THE MORE TRANSPARENT SWEET DAYS TRANSPARENCY WE HAVE A THAT WILL BE HELPFUL TO THE ECONOMY.

GUTIERREZ: RISK IS BEING REPRICED. AUGUST WAS A TOUGH MONTH. AT THIS POINT IT IS IMPORTANT THAT WE ARE GETTING SOME OF THE STUFF BEHIND US. GETTING THESE WRITE-DOWNS BEHIND US. THAT IS ALL PART OF THE TRANSITION AND I THINK IT IS POSITIVE THAT WE'RE MOVING FORWARD.

DYLAN: DO HAVE AN INDICATION THAT THE LIQUIDITY IS BACK? THAT THE SUPERFUND WILL SOLVE THE PROBLEM?

HUBBARD: THIS WILL TAKE SEVERAL MONTHS BUT IT WILL GET BETTER. FOR EXAMPLE, A JUMBO MORTGAGES ARE NOW BEING MADE. IN A LARGE MEASURE ARE BEING SECURITIZE BUT THE DISPARITY BETWEEN THE JUMBO MORTGAGE INTEREST RATE AND WHATS CALLED THE COMFORMING INTEREST RATE OR THOSE THAT ARE GUARANTEED BY FREDDIE MAC OR FANNIE MAE THE DISPARITY IS DECLINING SO THAT INDICATES THAT THE MARKET IS ADJUSTING AND NORMALIZING. BUT IT STILL HAS A WAYS TO GO.

DYLAN: LET'S FINISH ON SPENDING. YOU ARE ONE OF THE APPOINTEES TO ADDRESS THE S-CHIP VETO AND THE SPENDING DEBATE ON HEALTH CARE IN GENERAL. WHERE WE STAND ON THAT AND OF ALL OF THE SPENDING ISSUES AND YOU ALL KNOW THIS ADMINISTRATION HAS BEEN CRITICIZED FOR THE LACK OF SPENDING DISCIPLINE OVER THE PAST SIX OR SEVEN YEARS YOU TO DEBATE THE REASONS FOR THAT. WHY HAS THIS PARTICULAR ISSUE NOW BECOME SUCH A SUBJECT OF DEBATE?

HUBBARD: THERE ARE A NUMBER OF REASONS FOR THAT. MOST IMPORTANTLY WHAT THE DEMOCRATS ARE DOING ARE TRYING TO CONVERT OUR PRIVATE SECTOR, PRIVATE BASED HEALTH-CARE SYSTEM INTO A GOVERNMENT BASED HEALTH-CARE SYSTEM. THEY WANT A SINGLE PAYER SYSTEM, SOCIALIZED MEDICINE WHICH RESULTS IN RATIONED CARE, PEOPLE WOULD HAVE TO WAIT 12 FOR 24 MONTHS TO GET ELECTED SURGERY, WAIT TOO LONG FOR EMERGENCIES. IT WOULD ELIMINATE THE DOCTOR PATIENT RELATIONSHIP. PEOPLE BEING ABLE TO CHOOSE A DOCTOR THEY WANT TO, THE HOSPITAL TO GO TOO.

DYLAN: WE WATCHED THE UAW WE KNOW THE CORPORATION IS REACHING A BREAKING POINT. IN ITS ABILITY TO CARRY THE BULK OF THE HEALTH CARE BURDEN. WHAT IS THE SOLUTION?

HUBBARD: THE PRESIDENT MADE IT CLEAR HE WANTS THE SCHIP REAUTHORIZE HE THINKS IT IS VERY IMPORTANT. IT IS DESIGNED TO TAKE CARE OF POOR CHILDREN. HE THINKS IT SHOULD BE REAUTHORIZE FOR POOR CHILDREN. THE DEMOCRATS WANT TO REAUTHORIZE FOR POOR AND COME CHILDREN AND MIDDLE INCOME CHILDREN AND FOR ADULTS. IT WAS CREATED FOR CHILDREN NOT ADULTS. WE SHOULD PRESERVE IT ANKE BUT THE WAY IT WAS DESIGNED. THE PRIVATE SECTOR SHOULD TAKE CARE OF CHILDREN AND MIDDLE INCOME CHILDREN AND ADULTS. THAT IS WHAT THE FIGHT IS ALL ABOUT. ONE OTHER POINT. IF WE LOOK AT WHAT THE DEMOCRATS ARE DOING, IT EVEN GIVEN THEIR GOALS THEY ARE SPENDING TWICE AS MUCH MONEY AS NECESSARY. THEIR BILL IS 35 BILLION. WE THINK BASED ON WHAT THEY SAY THEIR GOALS ARE THEY TO DO IT FOR 15 or 20 BILLION AND A THINK WE WILL HAND THEM THE MONEY AND THEY WILL SPEND IT ON OTHER THINGS AND EXPANDING HEALTH CARE.

DYLAN: BUT THEY HAVE GIVEN THE 30 OR 40 SECONDS I WILL NOT ASK YOU TO SOLVE AMERICA'S HEALTH-CARE PROBLEM RIGHT NOW BUT MAYBE WE TALKED TO MUCH. IF WE TALK LESS MAYBE WE CAN GET TO IT. NOW AS COMMERCE SECRETARY, WHAT DO BELIEVE THE SOLUTION IS? WE WATCHED THE HEALTH-CARE COST GET PUSH FROM A CORPORATE BALANCE SHEETS AND A LABOR BALANCE SHEET IN THE LABOR AUTO INDUSTRY. DO BELIEVE THAT IS THE BEGINNING OF A SOLUTION? THAT WE WILL SEE A COLLECTIVIZATION OF HEALTH-CARE RESPONSIBILITY ON THE LABOR SIDE AND IS THAT PROVIDE A MEANINGFUL SOLUTION FOR AIRLINES FOR INDUSTRIAL FOR THE ENTIRE INDUSTRIAL COMPLEX --?

GUTIERREZ: YOU HAVE TO ANSWER A STRATEGIC QUESTION FIRST. DO YOU WANT THE GOVERNMENT TO TAKE OVER HEALTH CARE AND NATIONALIZE HEALTH CARE OR DO WANT TO GO DOWN THE PRIVATE OUT AND GIVE CONSUMERS MORE POWER AND HAVE MORE COMPETITION AND HAVE MORE TRANSPARENCY IN PRICING AND BRING PRICES DOWN AND HAVE INDIVIDUALS HAVE HEALTH CARE ACCOUNTS NOT ONLY HAVE TAX BREAKS FOR CORPORATIONS BUT ALSO INDIVIDUALS. BUSINESS IT IS A STRATEGIC QUESTION THE, WE DON'T WANT TO BE TAKING DOWN THE ROAD OF UNIVERSAL HEALTH CARE WITHOUT....

DYLAN: YOU ARE SAYING EFFECTIVELY THAT IS A STEP IN THAT DIRECTION.

HUBBARD: THIS IS ANOTHER STEP IN THAT DIRECTION. THAT IS EXACTLY RIGHT.

NUSSLE: WE WANT HEALTH TO BE PERSONAL. IT IS PERSONAL TO ALL OF US. WE WANT TO MAKE SURE THAT HEALTH CARE IS PERSONAL. IT SHOULD NOT THE GOVERNMENT RUN IT SHOULD BE PERSONAL

DYLAN: BUT THE QUESTION IS...NO DOLLAR?

NUSSLE: I CANNOT COMMENT ON THE DOLLAR.

DYLAN: WE ARE DOING TWO THINGS AT ONCE. WE'RE BEING HIGHLY PRODUCTIVE.

LAZEAR: CAN I JUST THROW IN ONE POINT..THE NOTION THAT BY GOING TO GOVERNMENT HEALTH CARE IT ASSUMES IT IS A FREE LUNCH AND SOMEONE HAS TO PAY FOR THAT. BUT THAT IS WITH TAXES. WHEN TAXES GO UP IT WE BECOME LESS COMPETITIVE. SO THE NOTION THAT IF WE REMOVE THIS BURDEN THE CORPORATION IS PAYING FOR PRIVATE HEALTH CARE AND PRIVATE HEALTH CARE IS A LOT MORE EFFICIENT EVEN WHEN IT IS MORE EXPENSIVE. IF YOU MOVE THIS TO THE GOVERNMENT AND PASSING IT THROUGH THE TAX SYSTEM THAT WILL NOT HELP.

GUTIERREZ: WHAT COUNTRY HAS HAD SUCCESS WITH NATIONALIZED HEALTH CARE THAT CAN DELIVER THE QUALITY THAT WE HAVE?

HUBBARD: THE PRESIDENT HAS MADE IT CLEAR THAT WE NEED TO TAKE CARE OF POOR CHILDREN BUT WE ALSO NEED TO TAKE CARE OF OUR OVER HEALTH CARE SYSTEM. THE COSTS ARE GOING UP TOO RAPIDLY, AND THERE 46 MILLION AMERICANS WHO DON'T HAVE INSURANCE. WE NEED TO ADDRESS THOSE PROBLEMS. HE HAS GIVEN US COMPELLING PROPOSALS TO ADDRESS THOSE PROBLEMS AND UNFORTUNATELY THE DEMOCRATIC CONGRESS HAS BEEN UNWILLING TO DEAL WITH THEM.

DYLAN: YOU HAVE THINGS TO DO AND I'M GRATEFUL FOR THE TIME YOU HAVE DECIDED TO SPEND WITH US TODAY.

WE WILL TAKE A MOMENTARY BREAK AND THEN I WILL HARASS THEM ABOUT THE DOLLAR DURING THE COMMERCIAL BREAK AND BRING IT IN THE COMMENTS ON THE CURRENCY RIGHT AFTER THIS.

About CNBC:
CNBC is the recognized world leader in business news, providing real-time financial market coverage and business information to more than 340 million homes worldwide, including more than 95 million households in the United States and Canada. The network's Business Day programming (weekdays from 5:00 a.m.-7:00 p.m. ET) is produced at CNBC's headquarters in Englewood Cliffs, N.J., and also includes reports from CNBC news bureaus worldwide. Additionally, CNBC viewers can manage their individual investment portfolios and gain additional in-depth information from on-air reports by accessing http://www.cnbc.com.

Members of the media can receive more information about CNBC and its programming on the NBC Universal Media Village Web site at http://nbcumv.com/cnbc/.