Following is the unofficial transcript of a CNBC interview with House Budget Committee Chairman Paul Ryan last night on CNBC’s “The Kudlow Report.” All references must be sourced to CNBC.

LARRY KUDLOW, host: All right. House Republicans stayed true to their campaign promises today, voting just a short

time ago to repeal Obamacare. Democratic leaders in the Senate have already vowed to shelve the repeal bill. President Obama promised a veto if it ever reaches his desk. Here now for an exclusive CNBC interview is House Budget Committee Chair Paul Ryan, Republican from Wisconsin.

Paul Ryan, it gives me great pleasure to address you as Chairman Ryan after all these years. First of all, congratulations on your chairmanship. Second of all, let's go right to the Obamacare repeal. As you well know, the Democratic argument against is, among other things, the repeal of Obamacare would raise the budget deficit. What's your response?

Representative PAUL RYAN: No, it won't. How's that for a response? First of all, it's because they cooked the books. Nobody is disputing what the Congressional Budget Office does. What happened--this is the same debate we had last year. What the Democrats did was they manipulated the score they were going to get from the CBO to claim deficit savings. Ten years of tax increases with six years of spending. Double counting Medicare and class-action fees, double counting Medicare cuts, not counting the doc fix, not counting $115 billion in discretionary spending to set up the bureaucracy to run this new thing. So if you strip away all the smoke and mirrors and double counting, using CBO numbers, it's about a $701 billion deficit in the first 10 years. When you actually look at this bill, when it's fully implemented, it spends $2.6 trillion over 10 years. I personally think that's a low-ball estimate. So the problem is they manipulated the CBO to get that claim. When you look at all the reality with the dust settling, it's a big deficit buster.

But take a look at it this way, when the CBO looks at its effects on the debt, they can take into consideration everything. They can actually take a real look at it and the CBO says this raises the debt. So how could it be that this law lowers the deficit yet increases the debt? That's because when they get a score on the bill itself, they look at the manipulated stuff. They look at all the smoke and the mirrors.

KUDLOW: Mm-hmm.

Rep. RYAN: And so look, take no bones about this thing. This is a big budget buster. How can you create a new open-ended entitlement and not be raising spending and deficits?

KUDLOW: All right. Two new entitlements in effect, to be specific.

Rep. RYAN: Two, two, that's right.

KUDLOW: The 35 million people that are supposed to go on the subsidized health care plan and then you've got this long-term assistance plan, the Community Living Assistance Services. I don't think Americans understand intuitively how creating two new entitlements can possibly save us money. And I think that fiscal issue alone, raising the threat of bankruptcy, Mr. Chairman, after we know Medicare is essentially bankrupt on a present discounted future basis. How can that pass muster?

Rep. RYAN: So the General Accountability Office is telling us $88.6 trillion is the number of our unfunded liabilities, $5.3 trillion is that--of that is Social Security. The rest of it's health care entitlements. So we already have these unfunded health care entitlements already on the book, Medicare, Medicaid, as you just mentioned, Larry, and now we're treating two new open-ended health care entitlements? Obamacare is actually going to be larger than Medicare, we believe, because Medicare goes to people over the age of 65. Forty million people today, that number obviously, grows with the baby boomers. What Obamacare basically says to most Americans, if you make less than $100,000 in America, effectively, which is most Americans, and your health care expenses exceed anywhere from two-point--I think--7 percent to 11 percent of your adjusted gross income, don't worry about it.


Rep. RYAN: Federal government's going to pay for the rest of it. We have created the most open-ended entitlement we've ever created in the history of this country and we don't think this is going to raise the debt and the deficit? Oh, come on.

KUDLOW: That's the thing. I mean, I'm wondering whether this bankruptcy, I mean, I think Americans see two gigantic health care--new health care entitlements, we're going to go bankrupt. Medicare and Medicare already bankrupt. I wonder whether this isn't the best selling point to repeal this thing. And on top of that, I just read a missive from Grover Norquist, Americans for Tax Reform, 21 separate tax increases...

Rep. RYAN: Hm.

KUDLOW: ...which are going to have to depress the economy. I thought you all decided in Washington that this was no time to raise taxes.

Rep. RYAN: Yeah, they kicked most of them to 2013. So there's about a $500 trillion, about a half a trillion--500 billion, excuse me, half a trillion dollars of tax increases in here. You know what the shame of this thing is, Larry, that a lot of us have offered solutions and we've tried to make them as bipartisan as we could, even though they made this a partisan thing last year. You can fix what's broken in health care without breaking what's working in health care. You can get to the issue of affordable health care, the uninsured, people with pre-existing conditions. You can fix all of those things without creating a new entitlement programs and you can do it in a consumer-directed, patient-centered way that doesn't put the government in charge but that puts patients in charge and go at the real root causes of health inflation, which will help us with our other entitlement problems, which will help us with our debt crisis and our bankruptcy. Unfortunately, they went with party and ideology and they just put two new open-ended entitlements on top of the two we already have, which are going bankrupt.

KUDLOW: Can you make the case by repealing Obamacare with a couple of trillion dollars of extra spending, and the 21 tax hikes, that this would, in effect, not only save the country from another bankruptcy, but would be pro-growth? Can you make this in a pro-growth context?

Rep. RYAN: Not only would this be pro-growth, but it would be good for health care. I sincerely believe that this law will reduce the quality of health care in America or restrict the access of health care in America or reduce innovation in health care in America. Will push innovators like medical device manufacturers and others overseas. So we'll take what has been a very vibrant, excellent sector of our economy, a source of jobs and innovation, and make it stagnant, make it--when you go to a basic cradle to the grave welfare state, sort of government-run health care kind of system, a single payer type of system, which this effectively becomes, in my opinion, then you take away all the innovation. That costs us jobs. So by repealing this massive tax increase, by repealing this government takeover over this massive sector of our economy, it is pro-growth. It does keep the health care sector vibrant and growing. But make no bones about it, we shouldn't go back to just the status quo we had before.


Rep. RYAN: Because that was unacceptable as well. We should have a patient-centered, consumer-directed system which thrives on innovation, which incentivizes consumers to actually have real marketplace ideas. The principles of free enterprise should be applied in health care where they have not been. And if we do that, then we have a real pro-growth agenda going ahead of us.

KUDLOW: Two lightning round points, Mr. Chairman. Number one, 23 Senate Democrats are up for re-election. How can the Senate possibly not vote on repealing Obamacare because their constituents are going to be rabidly in favor, at least, of a vote, let alone the outcome of the vote?

Rep. RYAN: Because of the way the rules work over there, Mitch McConnell will get an opportunity over sometime in the near future to be able to have a vote on this. So just knowing the way the Senate works a little bit, he's going to be able to bring up and force that vote and those senators will be on the hook and they'll have to take that vote.

KUDLOW: And one last one, quickly, we can't do it justice. On the debt limitation business, a lot of people are coming up with ideas to use the revenue flow to pay off the interest on the debt...

Rep. RYAN: Mm-hmm.

KUDLOW: ...while the spending limits and the spending cut deal is taking place. Doesn't the revenue flow cover the immediate interest expense and maybe guaranteeing principle where applicable?

Rep. RYAN: Well, the law doesn't do that, so Pat Toomey, a great guy, senator from Pennsylvania, is arguing in favor of that. It's a good idea to make that more senior so we don't default, but that's not the way the law works right now. You'd have to change the law to be able to accomplish that goal.

KUDLOW: Couldn't that be changed?

Rep. RYAN: Sure. Yeah. Mm-hmm.

KUDLOW: I mean, isn't that the way out? You don't want to give it up without some kind of spending concessions.

Rep. RYAN: Yeah, look, we're not interested in rubber stamping big government. If we're going to go down this path of preventing default and nobody wants to see defaults happen, you've got to cut spending, you've got to have significant cuts in controls in spending and that's our position and we're not changing that.

KUDLOW: All right. I've got to leave it there. Chairman Paul Ryan of the House Budget Committee, thank you very much for visiting with us and good luck on your new post.

Rep. RYAN: Thanks, Larry.

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