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CNBC TRANSCRIPT: CNBC’S LARRY KUDLOW SPEAKS WITH REPRESENTATIVE JEB HENSARLING TONIGHT ON CNBC’S “THE KUDLOW REPORT”

Rep. Jeb Hensarling
Rep. Jeb Hensarling

WHEN: TONIGHT, WEDNESDAY, JANUARY 5TH AT 7PM ET

WHERE: CNBC’S“THE KUDLOW REPORT”

Following is the unofficial transcript of a CNBC interview with Representative Jeb Hensarling tonight on CNBC’s “The Kudlow Report.”

All references must be sourced to CNBC.

LARRY KUDLOW, host: History made in the nation's capital today: a new Congress, a new speaker, a new Republican majority in the House, with very positive consequences for the economy and your money, if you ask me. Let's hear from the new House Republican conference chairman, regarded as the fourth ranking GOP member, Jeb Hensarling of Texas.

First of all, congratulations, Mr. Hensarling.

Representative JEB HENSARLING: Oh, thank you, Larry. Thank you. It's a wonderful day.

KUDLOW: All right, let me just begin with this question: Can you, and the Republicans in the House and the leadership, can you work with a new and improved centrist Obama to lower the corporate tax and to cut budget spending in order to keep economic growth alive?

Rep. HENSARLING: I hope so. I don't know so. I don't know which President Barack Obama that we'll have the pleasure to work with. I hope that he and his team have figured out that their economic policies have unfortunately been an abysmal failure, one of the reasons we continue to unfortunately suffer through almost double-digit unemployment, one of the longest periods in our nation's history. And as you well know, Larry, you talk to investors, you talk to small business people in east Texas, they tell you the same thing, and that is, you know, uncertainty. Uncertainty of Obama care, uncertainty of the Dodd-Frank bill, uncertainty of the national debt. It doesn't want to cause anybody to go out and engage in the entrepreneurial activity of creating and expanding new businesses. I hope the president has figured that out. I hope he'll work with us on fundamental tax reform, a plan similar to, perhaps, what the president's fiscal responsibility commission--that I served on--proposed. I was hoping there could be some common ground.

KUDLOW: You know, if you hear that in the State of the Union message--I mean, it really looks like he's recasted his whole staff, right? Looks like Bill Daley, the former Clinton commerce secretary is going to be chief of staff; Gene Sperling, another old Clinton hand, probably come in to take Larry Summer's job. A lot of people like myself picked our ears up when he start talking about corporate tax reform, lower rates, a broadening of the base.

Rep. HENSARLING: Right.

KUDLOW: If you hear that in the State of the Union, as Wall Street people seem to be hearing it, will you be inclined to compromise or work with him?

Rep. HENSARLING: Well, Larry, my--I guess to some extent my disappointment with the president has been I agree with about 80 percent of what I hear him say, I just disagree with about 80 percent of what I see him do. And so, you know, words mean one thing; actions mean something else. And so listen, you don't--you don't compromise on your core principles, but obviously you sit down, you work with people, you try to negotiate. And the question is, you ask yourself, you know, is the policy taking in the right direction or the wrong direction? Republicans are not going to sign up for a compromise on any piece of legislation that furthers us going down the road to bankruptcy. We're not going to sign up for any legislation that puts even more regulatory burden or tax burden on American businesses.

Having said that, there are lots of ways that we can fundamentally reform this tax code to make our business enterprises more competitive. And, you know, I've got a way of doing it. Paul Ryan has a way of doing it. A lot of our members have a way of doing it. I'm sure the president does. Happy to sit down and negotiate those details with the president. But we're not going to--we're not going to compromise on our core values.

KUDLOW: President Reagan, of course, taught all of us "trust, but verify." Let me--let me move on to another issue. One of the mantras of the new House Republican majority is cut and grow. Cut and grow. Can you tell us what that means?

Rep. HENSARLING: Well, Larry, I got to tell you, since I've been a member of Congress--and I've just been elected to my fifth term--almost every single day that I go to the House floor, some new federal program is created. Then you wake up one day and then all of a sudden not only do you have your nation's first trillion dollar deficit, you have your nation's second trillion dollar deficit. And so what a radical idea Republicans have proposed. We're going to go to the House floor every single week and propose to cut a program, not create a new program. And by one estimate, there are over 10,000 federal programs already in existence. I defy any man, woman or child to name them all, much less tell me what they all do. So Republicans are changing the culture of spending in Washington. Every single week a new vote to cut federal spending, to cut a federal program, so that we start to put the nation back on the road to fiscal sustainability, which clearly today it's not on that road. And we're in peril of losing the American dream if we don't get our nation back on the road to fiscal sustainability and economic prosperity.

KUDLOW: Regarding the budget story, you got, what, six or seven months left after the continuing resolution for fiscal year 2011. Mr. Hensarling, can you still get the annual rate of $100 billion on spending cuts that was talked about a few weeks ago?

Rep. HENSARLING: Well, I don't know if it was talked about a few weeks ago, but Republicans back in October of last year put forth a document called the Pledge to America, where we pledged to roll back spending to prebailout, prestimulus levels. That was a proposal for the last Congress. Had it been enacted at the time, would've saved $100 billion. But since the Democrats did not accept the proposal, since they went on with their spending binge and now gave us this continuing resolution, the savings will be more modest. But that's just a start. And so again, had we done it when we wanted to do it, it would've been 100 billion. It might be two-thirds of the savings. But that's one program. We're going to have other rescission packages, we're going to terminate other programs. Today the dollars aren't large--rather, tomorrow the dollars aren't large, but we're going to vote to cut the congressional allocation or appropriation 5 percent. We're going to cut our own budget 5 percent. You know, you got to lead by example.

KUDLOW: All right, we'll leave it there. By the way, stocks and the dollar are rising. Congratulations on your ascendancy, Congressman Jeb Hensarling of Texas.

Rep. HENSARLING: Thanks, Larry.

KUDLOW: We appreciate it.

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