When: Today, Monday, March 5, 2012

Where: CNBC’s “The Kudlow Report

Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Republican Presidential Candidate Mitt Romney today, Monday, March 5th, on CNBC’s “The Kudlow Report” at 7PM ET. All references must be sourced to CNBC.

LARRY KUDLOW, host: Governor Mitt Romney, welcome back to THE KUDLOW REPORT, sir. We appreciate it very much.

Former Governor MITT ROMNEY: Thanks, Larry. Good to be with you.

KUDLOW: Let me just start with this. Look, some people believe that your 20 percent reduction in the personal tax rate really helped snatch victory from the jaws of defeat in Michigan a week ago, or a little more than that. Is the same scenario going to play out in Ohio? You're catching up in the polls. Have you stayed with your tax cut message?

Gov. ROMNEY: There's no question but that this is about getting the economy going again, and getting our economy going, putting people back to work means getting our marginal tax rates down. The president wants to take the other direction. I think as long as we're talking about the economy and jobs, and by the way, shrinking the deficit, we're winning. When we're talking about all sorts of other issues that come up, all these extraneous ideas, that puts us behind. Focus on the economy. That's where the president has failed the American people, and they know it.

KUDLOW: All right, I want to get to some of those other issues in a minute, but let me raise a counterpoint. There's this new conventional wisdom developing among the Beltway media and the established media, OK. The economy's looking better. The Dow Jones 13,000, the job story's looking better, and they are now saying that the election is over because your main issue is the economy and Obama is benefiting from the little bump-up. What's your reaction to that conventional wisdom?

Gov. ROMNEY: Well, we sure hope the economy gets better, but this has been the slowest recovery since Hoover. This president has failed us. As a result of his failures, it's taken much longer for this economy to reboot. And let me tell you, 8 percent is not the new normal. I mean, this president has a long way to go to be able to deliver on the promises that the American people expect. Incomes have not risen. Gasoline prices are high. The idea that everything's fine out there in America comes from people who are detached from America. I've been campaigning across this country. People are hurting; they want someone who can see rising incomes, rising jobs and a bright future for their kids.

KUDLOW: So, OK, specifically, the president is out there campaigning. He's saying, look, his bailout of Detroit and the car companies bailed out Michigan, bailed out the whole economy. He's saying it's created manufacturing jobs. In fact, his argument is `The bailouts and the payroll tax cut is what's doing it. Re-elect me.' And as I say, you got all these media pundits saying, `OK, that's it. Game, set and match. There's no economic issue left.'

Gov. ROMNEY: You know, he's been in for three years, the economy is still struggling. If he was so successful with his policies, why didn't he put them in place at the beginning of his term? Look, he had a Democrat House, a Democrat Senate. He did not get the job done. And with regards to the auto industry coming back, the reason it came back is he finally did what I said they had to do: They needed to go through managed bankruptcy and shed their excessive costs. Once they did that, then getting them back on their feet was a whole different story. Thank heavens they've come back, but they had to go through that bankruptcy process just like a lot of other industries that get in trouble that have overpromised, in this case to the unions, overpromised to retirees, overpromised to their distribution network. They had to go through bankruptcy. That's why they've come back. I'll be able to point out virtually everything the president's done has made it harder for this economy to come back. Obamacare didn't create jobs. Dodd-Frank hasn't created jobs. Card check didn't create jobs. Cap and trade hasn't created jobs. This president's policies have hurt the economy. They have not helped it.

KUDLOW: What happens, though--just--last question on this. I don't mean to beat a dead horse, but I can't--I'm reading this all the time now. If the numbers keep coming in better--I mean, we had, for example 15.1 million cars sales. That was a big number came out last night. If the numbers keep coming in good, do you switch your strategy? Do you respin your strategy? Do you look for other issues? How does that work? How do you make some midcourse corrections?

Gov. ROMNEY: Well, the economy and the strength of America's economy and rising incomes, people being able to count on a brighter future, that's going to be at the heart of what we're talking about in this campaign. At the same time, talking about a brighter future includes understanding what government is doing. Trillion-dollar deficits are crushing our future. This president has presided over four years with over a trillion dollars in deficit each year. We got a government that's far too big, far too intrusive. So the message is straight forward: More jobs, less debt, smaller government And he's failed at all three.

KUDLOW: How fast can you take the deficit down? Because your plan--you got 20 percent income tax cut, but you've also got--you've got spending cuts, you've got...

Gov. ROMNEY: Yeah.

KUDLOW: How fast can you get the deficit and the debt, for example, as a ratio of GDP to where it was precrisis, pre-financial meltdown? Is it one term? Is it two terms? How does that work for you?

Gov. ROMNEY: Well, in the first hundred days you've got to get the trajectory such that we go towards a balanced budget. If you don't want to actually balance it day one because that would cause a massive decline in the spending of our nation and we'd go into recession again. But you want to actually take that--the corrective actions of eliminating programs, cutting programs, sending programs back to states such that by the end of four years you've got federal spending as a percentage of the GDP from 25 percent today down to 20 percent, and then by the end of a second term, a balanced budget. This is what we have to get, and the decisions made in the first hundred days will determine whether we can hit those targets.

KUDLOW: Now, let's turn to Rick Santorum. I guess he's your main foe here in Ohio and elsewhere. So Santorum says your economic plan, your supply-side plan--`You're late to the party.' That's what he said. He says you're "tinkering." You've called him "an economic lightweight." So I'll just ask, first of all, why is your plan better than Santorum's plan?

Gov. ROMNEY: Well, my plan talks about a marginal tax cut across the board. I want to get our marginal tax rates down. At the same time, I'm limiting deductions and exemptions for high-income individuals so that we maintain progressivity in the code and...

KUDLOW: OK, so just...

Gov. ROMNEY: ...and--but...go on--and so that we don't add to the deficit. His plan is estimated to add about $900 billion a year to the destimate--to the deficit. We--look, we can't, in the name of growth, massively increase our deficit. We have to bring down the deficit, bring it down to a balanced budget at the same time we encourage growth. I do both.

KUDLOW: He says, on the point of limiting the deductions, which I agree is a consensus point among tax reformers--but he says in response to you that you're taxing rich people, that you're playing the rich card, that it's 1 percent vs. 99 percent, and that you sound like Obama. So how do you react to that?

Gov. ROMNEY: Well, President Obama wants to raise taxes from 35 percent to 40 percent. I want to take the top marginal rate from 35 percent to 28 percent, and I also want to maintain progressivity in the code. I'm not looking to punish anybody, but I want to maintain a code that's progressive. And as a result of that, to pay for this reduction without having to go into massive deficits, you have to bring down the deductions and the exemptions and close off some of the loopholes.

KUDLOW: All right, so he also believes that we should have a zero corporate tax for manufacturing. That's part of Senator Santorum's reach out to blue-collar workers. I just want to ask you your thought on that zero tax for manufacturing and your thought on connecting with blue-collar workers. I guess that's especially the case here in Ohio.

Gov. ROMNEY: Very, very important. And clearly, the right course is to get our corporate tax rates and our top marginal tax rates down to encourage enterprise. But we don't want to pick winners and losers. We don't want to decide that there's a certain part of the economy we like and the rest of the economy we don't like. That's a mistake. That's the kind of thing Europe has done. It's one of the reasons why their productivity gains have been so much slower than ours. It's why their income per person is about 50 percent less than ours. This is--you don't start choosing places to decide to give special breaks. If we're going to have breaks, bring it for all businesses, particularly small business. That gets the overall economy going, puts people to work. Don't try and pick one sector over the other. That's the Obama approach.

KUDLOW: All right. And... I'm not going to light my hair on fire.' That's you. I don't have it up here. But you say, `I'm not going to light my hair on fire.' Was that your way of saying that the economic issues have to be preeminent relative to the social issues? Was that your message?

Gov. ROMNEY: Well, my message is I'm not going to say outrageous things about the president or about my opponents. It gets headlines and a lot of excitement, and it gets you, by the way, a number of days in the polls to get a nice little bump. But I'm going to talk about the real issues Americans face and talk with respect about people who have differing views. I'm not going to attack them personally. I mean, I know that's fun, but it's just not productive. And we need, as a nation, to come together to recognize that even though we have differing views about the country and about where we should go, we all love the country. And I recognize that among Democrats and among Republicans. I want to lead the country. I don't want to castigate half of Americans. I want to bring us together and finally get the job done of having a stronger economy with a--with a government that's been kept in the—in the--into the box it ought to be kept into.

KUDLOW: Well, on the point of differing views, there's, of course, an NBC News/Wall Street Journal poll out--it's out this morning. It says the primaries have taken their toll, the negativism of the primaries have taken their toll. It's corroded support for the GOP. Now, it's interesting, you're picking up support among conservatives in this poll; you're losing support among independents; you've slipped a little relative to President Obama. First of all, can you get the independent support back? What would your strategy be? Are these polls accurately saying the public is not happy with the Republican Party? What do you do about that?

Gov. ROMNEY: Well, we got a long, long way till November, as you know, and anyone would love to be coronated, if you will, the nominee of their party, but that doesn't happen. We go through a rough-and-tumble process of sorting things out. I think it makes us tougher. It gets us ready for what's going to come from the Obama team when...

KUDLOW: You think you, yourself, are tougher? You described yourself in the debate as resolute.

Gov. ROMNEY: Mm-hmm.

KUDLOW: And you've had bunch of come-from-behind victories. Do you believe, personally, that this whole primary and debates and tough negative campaigning has made you a better candidate than you were at the start of the process?

Gov. ROMNEY: Absolutely. I anticipate that I'm going to be more able to debate, in the public square, Barack Obama, to point out why he's failed, to defend the policies that I have. I've also seen some of the, I'll say, less than accurate attacks and charges against me. I've been able to fend those off. I know where they're going to come from when the Obama machine turns it on with a billion dollars of spending. I'm more ready to go after the president than I was when I got started. There's a--there's an advantage to having done this twice, by the way. First time through you learn some lessons; second time through you're also continuing to learn. I think that's one of the reasons I'm better prepared to go after this race. And by the way, you are right. Independent voters, that's who we have to be able to connect with.

KUDLOW: What do you say to them right now? I mean, as you move through Super Tuesday, what do you say to them? How do you tailor? You sort of have two issues here. One is Obama and economic recovery. You've got to deal with that. Now the second one is a little bit of a bump down in the independent voters. How do you strategize to deal with that?

Gov. ROMNEY: Yeah, I--for me I think it comes back to that same message, which is people want to see more jobs and less debt and smaller government. And independents feel the same way. They don't want to have someone who they think is angry at them, that is mean-spirited. They want someone who loves the country, that they can identify with. But they do want to see America become stronger and they're concerned that the future is not as good for their kids as the past they've enjoyed. And I want to bring back that America's promise. I want to reclaim the promise of a very bright future: Good education, good values, hard work and you got a bright tomorrow.

KUDLOW: Should kids go to four-year colleges?

Gov. ROMNEY: Those that want to, absolutely. Those that want to take a different course, that's their right as well. But we'd like people to have opportunity. This is the quintessential American promise, which is opportunity to achieve your dreams.

KUDLOW: I thought everybody--I mean, I know everybody--certain trade schools and community colleges. But in all seriousness, when Rick Santorum said that that was a snobbish thing for the president to say, I always thought, you know, people, older generations, they want their kids to go to college. I thought that was the American dream. Is that changing now? Have we regressed in this country? We don't actually want people to go to college?

Gov. ROMNEY: Well, sometimes the rhetoric gets a little hot. And my view is, for those kids that want to go to college and for their parents and grandparents that want them to go to college, that's a terrific goal to have. I remember my wife's dad came here as an immigrant with his sister and two brothers. They couldn't afford four of them going to college.


Gov. ROMNEY: So they pooled their resources so that he could go to college. Then he started a business and hired them. I mean, wouldn't it be wonderful if in America everyone who wanted to go to college could afford it?

KUDLOW: All right, last one. It's an economic question. A lot of conservatives, led by The Wall Street Journal editorial page, were horrified when you said you want to index the minimum wage for inflation. And they said, `Look, that's just going to raise the minimum wage. That's going to raise the unemployment rate, especially for young people, especially for minorities. It's sort of a little bit of unfinished business.' Why do you want to raise the minimum wage? Why do you want to index it for inflation?

Gov. ROMNEY: Well, actually, when I was governor the legislature passed a law raising the minimum wage. I vetoed it.

KUDLOW: Uh-huh.

Gov. ROMNEY: And I said, `Look, the way to deal with the minimum wage is this. On a regular basis,' I said in the proposal I made, `every two years we should look at the minimum wage, we should look at what's happened to inflation. We should also look at the jobs level throughout the country, unemployment rate, competitive rates in other states or, in this case, other nations.' So, certainly, the level of inflation is something you should look at and you should identify what's the right way to keep America competitive. inflation...

Gov. ROMNEY: So--right.

KUDLOW: ...or at least very minimal inflation so far.

Gov. ROMNEY: Yeah, so that would tell you that right now there's probably not a need to raise the minimum wage. What I can tell you is had one indexed the minimum wage back to, let's say, 1990, the minimum wage would be lower now than it actually is. Democrats make big hay of this every few years--`Oh, we're going to raise the minimum wage'--and get a lot of hoopla for it. Frankly, the right way to process it is to look at the minimum wage, look at how unemployment rates are, make adjustments as time goes on based upon our need to compete, the need of the job market, and, of course, what's happened to inflation.

KUDLOW: Would it be better on the indexing front to index the capital gains tax for everybody? That's a pro-investment tax. That'll lower unemployment.

Gov. ROMNEY: Well, I'll give that some thought, Larry. But I--one thing you do know that I want to do is for people with middle incomes to have no capital gains tax at all...


Gov. ROMNEY: interest--no tax on interest...

KUDLOW: Which is controversial in conservative circles.

Gov. ROMNEY: tax on dividends. I want to get rid of that--those tax on saving.

KUDLOW: You're firm on that. You do not want that to extend to everybody. Just for the middle income.

Gov. ROMNEY: Look, I'd like--look, I'd like--someday I'd like us all to pay almost no taxes at all. That's--and I'm going to see great growth. But, of course, you have to make sure that what you're doing is something you can afford. And so when I look at tax cuts, I look to make sure that I can continue to hold down the deficit or to bring the deficit down and at the same time encourage growth. So I'm trying to find those cuts that are the most effective, that encourage growth, that help people that are most in need and that don't add to the deficit.

KUDLOW: All right, I'm going--I'm going to leave it there. We've taken a lot of your time. Governor Mitt Romney, we appreciate it very much. Good luck on the campaign trail.

Gov. ROMNEY: Thanks, Larry. Good to be with you.


Gov. ROMNEY: Once again.

KUDLOW: Thank you.

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