Larry Kudlow Speaks with Republican Presidential Candidate Fred Thompson on "Kudlow & Company" (Transcript Included)


WHEN: Thursday, November 15th at 7PM ET
WHERE: "Kudlow & Company"

The following is the unofficial transcript of a CNBC interview with Republican Presidential Candidate, Fred Thompson, on CNBC's "Kudlow & Company" today. All references must be sourced to CNBC.

In an interview with CNBC's Larry Kudlow, Republican Presidential Candidate Fred Thompson discusses Republican House Majority Leader Dick Armey's comments, taxes, the economy, whether he would veto the Farm Bill, the stability of the dollar and Ben Bernanke, among other topics.

LARRY KUDLOW, host:Senator Fred Thompson, welcome back to KUDLOW & COMPANY, sir.

Former Senator FRED THOMPSON: Thank you, Larry. Appreciate it.

KUDLOW: All right. We thank you very much.You know, last night on our program, we had former Republican House Majority

Leader Dick Armey, distinguished conservative, one of the best in the country. So he says Hillary Clinton is going to be the next president. He just wrote an article about this. He says Republicans are off message, they've departed from first principles on limited government and taxes and other things. And I want to ask you what you think about what Mr. Armey's saying.

Mr. THOMPSON: Well, I think we ought to pay attention to it. I think we ought to have more focus on what we're able, what made us a great nation, what made us a great and successful party, and not concentrate, obsess too much over who the Democratic nominee might be. So if we don't tend to business, we're going to be in big trouble. The pendulum's swinging against us. It's been, what, one time in 50 years where a party's won the presidency three straight times. We've got--we're down in the polls, independents are leaning the other way that used to lean with us. So we got to do some things better than we have and we've got to adhere to the principles that made us a great party and a great nation.

KUDLOW: Well, speaking of first principles, I mean, I've always believed Republicans were put on this earth to cut taxes. I don't know if they do a lot of things very well, but that seems to be their higher power and mission.

Mr. THOMPSON: Yeah, yeah.

KUDLOW: Warren Buffett, very famous billionaire, one of America's richest men, one of America's best investors, Warren Buffett testified yesterday, Senate Finance Committee. He wants to raise taxes. He wants to raise the death tax, he wants to raise capital gains taxes, he wants to tax private partnerships and private equity firms. What do you make of this fellow Buffett and what he's saying?

Mr. THOMPSON: I don't know. I don't know what to make of him. I don't know the gentleman. I know he's been pretty successful under policies, probably, that are contrary to what he's talking about now. But I do know something about the policies they're espousing. They're basically the policies of the Democratic Party. And I think they're dead wrong. You know, you look back history, you know better than most, whether it's been in the 20s or the Reagan administration or the Kennedy administration or this administration, when you've lowered taxes and lowered tax rates, you've got economic growth. I mean, everything depends on economic growth. And it gets back to our fiscal policies, our taxing and spending policies. And lower rates induce the kinds of things that contribute to economic growth.

And not only that, but it reminds us that, you know, the wealth of the government is not the same thing as the wealth of nations, you know. If you leave the money in the taxpayers' pockets, you know, you're not losing revenue, it's going to productive places on which that is taxed, too. It brings more revenue into the government. We're bringing more revenue in on what, that one day in April, I guess, earlier this year, brought more revenue in in the history of the country under lower tax policies. So that's what's--that's what's given us, what, six years now, almost, of economic growth. That's what's allowed us to overcome what happened on September 11, the Wall Street bubble and the scandals and all of that, and still gave us a growing economy. Oil prices and all that. It's really remarkable that we've done what we've done. And I think a lot of that goes back to 2001, 2003 tax cuts.

KUDLOW: You have been an economic optimist on the campaign trail, and now you're mentioning these other issues, for example, $100 oil. Before we get to that specifically, what if the economy doesn't perform well? What if it goes the wrong way? What if we are either in a recession or threatened to be in a recession? A lot of people believe a recession would be absolutely damaging to the Republican Party. What would your anti-recession program look like?

Mr. THOMPSON: Well, you're talking about a bad hypothetical. And when you say recession, I think we have to keep in mind the difference between a recession and a not growing quite as fast as we have. I think that we're probably due for somewhat of a downturn. I mean, how many--how many administrations has there been, or how many quarters has there been before there's been a bit of a downturn? I don't think if that happens that we ought to panic over that. We're part of a world economy and everybody's doing pretty good right now and we're a part of that success. So things could happen in different places of the world which could cause us some problems; doesn't mean that we need to move away from sound fiscal policies. You can't get away from the underlying proposition that lower taxes brings about economic growth, and higher spending stifles it. And we've got to get a handle on both of those things.

KUDLOW: Would you--would you veto the Farm Bill? Just speaking of higher spending for a minute and speaking of Dick Armey's first principles for limited government? It's going to be about a $300 billion Farm Bill on top of $250 billion just a few years ago. A lot of people think that's insane. A lot of people think it's preventing a global free trade deal. Would you, as a President Thompson, veto a Farm Bill like that?

Mr. THOMPSON: I don't know everything that's in that Farm Bill, but what I do know is that we've got to get away from perpetual dependence on the farm subsidy program that we've got. We've got to move away from that. Most of the farmers don't get it, most of the crops are not subsidized. And it's still totally a political deal. I know the president's tried to put a cap of like $200,000 on those who can receive those subsides. Democrats want to keep it up to a million or something like that.

KUDLOW: Bare minimum, 200. You notice, people up on Park Avenue here in New York, these investors, who were getting farm subsidy benefits?

Mr. THOMPSON: Yeah, yeah, yeah. It's disgraceful. We've got move away from that. It doesn't make any sense and again, it causes us problems with WTO. We should be opening up our markets and have the higher ground on those issues with the WTO, and we're not doing that. Some of the things that we're doing are contrary to the rules. So for a lot of different reasons, we've got to move away from the approach--from the approach that we've had for a long time. We thought freedom to farm, you know, back when I was in the Senate, was going to open that up somewhat. And now we've gone totally in another direction.

KUDLOW: Would you cut the corporate tax, whether there's a recession or not, just as a matter of policy?

Mr. THOMPSON: Absolutely. Absolutely. No questions about that.

KUDLOW: How low would you take it?

Mr. THOMPSON: I would--I would say it should be no higher than 28 percent. That would be the norm of our competitive trading partners. We're the second highest now in the industrialized world. I think we're only one of two countries that hasn't lowered its corporate tax rates since 1994. And you know, when our rates started getting higher than our European friends, you know, we should take a serious, serious look at it. It's making us less competitive than we need to be. I don't know why in the world we're still bashful about doing something that would be good for our companies from a competitive standpoint and be good for American workers and be good for our economy.

KUDLOW: How about the corporate--how about the corporate capital gains tax? You know, there's a fellow in New York, James Tisch, Jimmy Tisch, the CEO of Loews, been on the show several times, he wants to reduce the capital gains corporate tax. Nobody's talking about that. Have you given that any thought?

Mr. THOMPSON: Not really.

KUDLOW: But off the top of your head--but off the top of your head?

Mr. THOMPSON: Listen, you just keep pushing, don't you? You'll find...

KUDLOW: I can't help it. I just can't help it. There's so many things out there that need to be done.

Mr. THOMPSON: There's only...(unintelligible).

KUDLOW: Oh, I'm going to get you with Jimmy Tisch. He's a smart guy.

Mr. THOMPSON: But I'll think on that. I'll think--yeah, absolutely. But from the individual rate standpoint, from the corporate rate standpoint, we need to maintain what we achieved, 2001, 2003, individually, and we need to lower the corporate tax rate, without any doubt.

KUDLOW: All the Republican candidates have defended President Bush's low capital gains tax and low dividend tax. But I want to ask you on a different matter, again, recession or no recession. Senator Hillary Clinton and the other Democrats are bashing Republicans. They say the Bush tax cuts only help the rich, but they go on to say that the middle class has suffered, their wages are stagnant, and the income inequality is expanding. How do you respond to Hillary Clinton's attacks on that? Would you focus and do you have a middle class tax cut plan?

Mr. THOMPSON: The answer for every conceivable ill in America is to tax some of the most productive people in our economy. Soak the rich. I mean, you can put it in different guises and call it different things, different times, but that's essentially their answer to absolutely everything. Five percent of Americans pay about 60 percent of the taxes now. How progressive do you want to get? I think everybody who espouses that sort of philosophy ought to say, how much is the federal government entitled to of someone's earnings? These people aren't usually born rich. If you look at the numbers, you see so many Americans start out as a lower rate. There was just a study done the other day that the IRS put out.

KUDLOW: Are they lucky? You know, Buffett--a lot of people have said it's just lucky, getting rich is just luck, an act of God.

Mr. THOMPSON: Yeah. Well, they progressively got luckier as they worked harder and as they went along because their tax returns show that they've moved from one level to another to another. That's America.

KUDLOW: Do you think there's a link between luck and hard work?

Mr. THOMPSON: Yes, yes. I think we could probably all attest to that.

KUDLOW: Now, what do you say to Hillary, though? Middle class tax cut?

Mr. THOMPSON: But excuse me, let me--let me--let me--let me elaborate on that just a little bit, because a lot of what she's talking goes back to things like education. As long as you have a vibrant economy and a growing economy and a free economy where everybody rose up and plays by the rules can expect to have a decent shot at living the American dream, then you've achieved a great thing there. And where people fall behind, usually, in this country, has to do with their level of education. And certainly, we have some problems there. Some of their are societal problems. And it's a fact that we're not--we're not a nation yet where the richer just keep getting richer and the poorer are getting poorer, and we won't be...

KUDLOW: That's what she's saying.

Mr. THOMPSON: I know, but...

KUDLOW: In fact, that's what she's saying.

Mr. THOMPSON: You know, the numbers don't bear that out and...

KUDLOW: You would fight that on the campaign.

Mr. THOMPSON: Yeah. They don't bear that out. You know, Abraham Lincoln and a lot of other great Americans have pointed out that you don't help those in a lower economic situation by punishing those in a higher situation who may have been in a lower bracket themselves a short time ago. That's what you call freedom, that's what you call liberty. It's a part of a dynamic economy. How do these folks think we got where we are as the freest, most prosperous, most powerful nation in the history of the world? It's because of things like the rule of law, market economies and trade. Every country that's ever applied those principles has been successful.

KUDLOW: How about Social Security? You've put out a pretty bold plan. I think it's the most detailed of any candidate either party. You're going to slow down benefits, you're going to have add-on for private savings accounts of kind of 401(k), as I understand it. First of all, let me ask you this. A lot of pundits are saying, `Well, why would he do this? This is probably lousy politics.' Why are you doing this?

Mr. THOMPSON: You know, I don't think it's lousy politics. I think the American people are smarter than people--politicians give them credit for. Everybody knows what the economists are all saying, that is our current system is unsustainable. What I'm doing is putting forth a plan that will save Social Security. The current path is unacceptable and unsustainable. Even the politicians agree on that. They just want to change the subject after making that statement. I'm forcing them to talk about it.

I'm the only one that's got anywhere near a detailed plan to do it. And I've got several components. It has several components to it, but the main one is, as you pointed out, is individual private accounts, which government would match on a sliding scale, something that is a good concept in and of itself, but alone can't solve the problem. In addition to that, you've got to change the way you index benefits when someone retires. We can--we can index benefits to inflation and continue to have the COLA the way we have it now, cost of living increase, the way we have it now, indexed to inflation, and make sure that the future retirees get the same thing that current ones do. But we're now promising future retirees something much greater than that that we cannot deliver.

KUDLOW: Are you touching the third rail when you do this, and talk about even future benefit slowdown? Not a reduction but it is a slowdown. Do you get inside your body a certain heartburn feeling? I mean, everyone says you can't do this, Senator Thompson.

Mr. THOMPSON: I know.

KUDLOW: Why are you out there doing it?

Mr. THOMPSON: Well, for me, from a political standpoint, frankly, no, it's the right thing to do. If you can't do the right thing, say what you believe and what everybody really basically knows that run for president, why do it? I mean, why bother? I mean, life is too short for the aggravation. So if you can't...

KUDLOW: So why bother?

Mr. THOMPSON: ...say something, you're saying something important. I'm telling the truth, I'm forcing everybody else to address it. And for the benefit to me? I think Americans--the American people will look at something like this and a guy like me and say, `You know, I don't know if this is the right way, but the guy's doing what he thinks is right, and he's addressing issues and he's not afraid to tell us before he gets elected to something what he'll do when he gets elected,' remembering that people are smart enough to figure out that if you've got a system that's going bankrupt and a guy's trying to do something to save it, you don't compare what this guy is doing compared to pie in the sky, you compare it to the bankruptcy, which is inevitable. So you know, we'll see how it turns out. But I'm pretty optimistic about that, too.

KUDLOW: Can I ask you just a couple of one-liners, just a couple of one-liners?


KUDLOW: This morning...

Mr. THOMPSON: The flash round.

KUDLOW: These are the flash round, the lightning round. The CPI, the Consumer Price Index, out this morning, up 3/10 of 1 percent. It's 3 1/2 percent above a year ago, 3.5 percent able a year ago. Is that too high?

Mr. THOMPSON: I don't know. I mean, what's too high in a free market? You know, it is what it is. We need to take--I don't think that you can afford--one can afford to look every day, every couple hours, at what's happening on Wall Street. I think you have to look at the longer trends, you have to recognize problems such as we've got in the substandard housing market situation now. But you mainly have to look at the underlying policies that govern this country, our fiscal policies...

KUDLOW: Well...

Mr. THOMPSON: ...and keep your eye on the strait and narrow.

KUDLOW: What about--is Ben Bernanke doing a good job at the Fed? Does he have your confidence? Would a President Thompson reappoint Mr. Bernanke?

Mr. THOMPSON: Well, that's two or three different questions. I mean, the first one's yes and then the last ones, I don't know.

KUDLOW: OK. Yes, he's doing a good job...

Mr. THOMPSON: Yeah. I think he's...

KUDLOW: ...but you're not sure who you would appoint.

Mr. THOMPSON: Yeah. I think he's responding to the situation. Obviously, he sees a little--you know, some recessionary concerns on the horizon. He's got the housing situation to deal with. I think so far, you know, what they've done has been quite conservative and responsible. Seems like the right thing to me.

KUDLOW: Does the Treasury Department, Henry Paulson, secretary of the treasury, do they need to defend the dollar? Do they need to stabilize the dollar? Has the dollar fallen too much? You know, when I worked for Reagan, Reagan always said a great country needed a reliable and steady currency. We need to have a different approach on the dollar?

Mr. THOMPSON: Any president and any leader and any secretary of the treasury should support a strong dollar. If people get the idea that we're deliberately devaluing the dollar, that's going to be trouble for us.

KUDLOW: Do you think that idea's out there now, sort of...

Mr. THOMPSON: I don't--no, I don't--I don't--I don't think so. I mean, obviously, it doesn't take a genius to figure out that it helps our exports some at a time when we need some help with regard to our exports. And we are lowering our interest rate some, which all contributes to that. But it's--you know, it's set in a global marketplace. We can't turn a screw and bring the value of that dollar up. We're exporting more--I'm sorry--we're importing more than we're exporting because we're a richer country than most of the others. And it's a natural consequence of that.

KUDLOW: Last one. Political question. At the CNBC/Wall Street Journal debate, I did the post-game show, you really handed it to Rudy Giuliani. You just blasted him. Now, I don't recall whether you used the, what is it, Rudy McRomney? I don't remember if you actually...

Mr. THOMPSON: No, I would not...

KUDLOW: ...but you pounded Giuliani on a number of--I want to ask you, number one, are you still pounding him on the campaign trail? Number two, do you intend to continue to pound Rudy on the campaign trail?

Mr. THOMPSON: I haven't pounded all day.

KUDLOW: Today.

Mr. THOMPSON: Today.

KUDLOW: How about yesterday? How did you nail him yesterday?

Mr. THOMPSON: Well, I'll have to go back and check. No, we're pointing out--we're pointing out some policy differences.

KUDLOW: What's the biggest difference, in your judgment, between you and Rudy?

Mr. THOMPSON: Well, there are several of them.

KUDLOW: There's one major difference.

Mr. THOMPSON: He's taking--he's taken--he believes in federal funding for abortion. He's been--when I was passing a bill outlawing sanctuary cities, he was going to court to stop our bill so he could keep his sanctuary city. He's never--he's never met a gun control bill he didn't like, and there are a few other things like that.

KUDLOW: All right.

Mr. THOMPSON: Just good, solid, honest disagreements.

KUDLOW: I appreciate that. We're going to leave it there. Senator Fred Thompson, thank you for coming back on the show.

Mr. THOMPSON: Thank you Larry

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