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CNBC TRANSCRIPT: FORMER NYC MAYOR RUDY GIULIANI SPEAKS WITH CNBC’S LARRY KUDLOW TONIGHT ON “THE KUDLOW REPORT”

When: Today, August 14, 2012 at 7PM ET

Where: CNBC’s “The Kudlow Report

Following is the unofficial transcript of a CNBC interview with Former New York City Mayor Rudy Giuliani (R) tonight, Tuesday, August 14th at 7PM ET on “The Kudlow Report.”

Following is a link to the video on CNBC.com: http://video.cnbc.com/gallery/?video=3000109203&play=1.

All references must be sourced to CNBC.

LARRY KUDLOW, host: Now, of course, this election, it's a referendum on the anemic economy, and there's a clear choice between free enterprise on one side and big government entitlements on the other. So let's bring in tonight's very special guest.

We welcome back America's mayor, my favorite mayor, Rudy Giuliani. Mr. Giuliani, as always, thank you, sir.

Mr. RUDY GIULIANI: Thank you.

KUDLOW: I’ve got to play this. Joe Biden, speaking in Virginia today, said if the Romney/Ryan ticket wins, we're all going to be put into chains. Now, let me play this for you. Hang on a second.

Vice President JOE BIDEN: Look at what they value and look at their budget and what they're proposing. Romney wants to let--he said in the first hundred days he's going to let the big banks once again write their own rules, unchain Wall Street. They're going to put y'all back in chains.

KUDLOW: You know, what did he say? `Y'all going to be put back in chains'? That almost has racial overtones, Rudy Giuliani. What's your take on that?

Mr. GIULIANI: Well, I think if it came from somebody serious maybe we'd get all excited about it. But the--I think the vice president of the United States has become a laugh line on late night television. I mean, he--I've never seen a vice president that has made as many mistakes, said as many stupid things. I mean, there's a real fear if, God forbid, he ever had to be entrusted with the presidency, whether he really has the mental capacity to handle it. I mean, this guy just isn't bright. He's never been bright. He isn't bright. And people think, `Well, he just talks a little too much.'

Actually, he's just not very smart.

KUDLOW: All right. Or there's another take, or maybe it's consistent with what you're saying, that this is just part of the Team Obama attempt to smear Mitt Romney.

Mr. GIULIANI: Oh, of course.

KUDLOW: You know, smear Romney, tying him to this terrible tragedy where the woman had cancer, he won't pay his taxes for 10 years, he's going to destroy Medicare. I mean, Rudy, it just looks like a smear campaign.

Mr. GIULIANI: It's his only chance of winning, Larry. It's his only possible strategy. He can't run the way Ronald Reagan ran. He can't run the way Bill Clinton ran. He can't go to the American people and say, `Are you better off now than you were four years ago? Here are the things I promised; here are the things I delivered.' What he's delivered is our worst economy maybe since the Great Depression, our most anemic recovery ever, and policies that make most people in business too frightened to expand, to invest. So if he ever went to the American people and said, you know, `I made these promises, I did a good job. Are you better off than you were four years ago?' he would lose by 60/40. So he's--the only way he can win is by making Romney, and now Ryan, he's got to try to make them monsters. Well, they're not monsters. They happen to be two very decent guys, two very bright guys, two very successful guys. So, I mean, I don't think it's going to work, but he's going to try it.

KUDLOW: Let's hear, what's your take on Paul Ryan as vice president? Were you surprised? Are you pleased?

Mr. GIULIANI: I was. I was. I was surprised and I was pleased and I thought it showed a lot of boldness on the part of Mitt Romney because I had been saying I thought Mitt Romney would select someone because Mitt is kind of risk averse. Well, this is a risk because it brings out all these Democratic attacks about Medicare and about the budget. But I think this is exactly the debate we have to have. I think we're going to win this debate, and I think when we do, Romney and Ryan will have a mandate to make these changes. I think--I think Governor Romney has put the only substance into this campaign. This has been just, you know, vicious attack after vicious attack. Now we're going to be able to debate should we reform Medicare so we can save it. It's ridiculous to say that Paul Ryan wants to end Medicaid. In fact, his proposal is the only way to save it. Medicare is not going to be available to people twenty years from now. It's going be bankrupt. It's also going to take down a lot of the government with it if we don't start to reform it right now.

KUDLOW: Well, Obama's sucking $750 billion out of Medicare to put it into Obamacare. That by itself is going to cripple it. But I just want to ask you, which is more important in your judgment strategically: Should this be a referendum on Obama's lousy economy; or, as you just suggested, should there also be a clarity of choice, the differences between the two teams? Which is more important? Or do they just go together?

Mr. GIULIANI: I think the second will be--will be a far better election. It will give the Romney/Ryan team much more of a--much more of a mandate to accomplish what they have to accomplish. I congratulate Mitt Romney on lifting the level of the campaign by selecting Paul Ryan. He could have gone with a scorched earth policy against Obama. There's a real good argument you can win that one. But, instead, what he's--what he's elected to do is to try to contrast his philosophy of less government, more money back into the pockets of private people to spend it dynamically as against Obama's version which is much more government. If anybody's going to put anybody in chains, the way the government is going to take over your life and tell you exactly how much health insurance you have to have, and tell you exactly what you can do and can't do, it's really more on the other side if you want to use it as a--as a metaphor.

KUDLOW: You know, it's interesting, Ryan's polls are already rising. We're going to have Scott Rasmussen on. He's now through 50 percent favorability just in the last, what, 72 hours or so. Rudy, this is a guy who knows the numbers. He has a nice way of expressing himself. You know, he has a moderate temperament. I mean, in some ways, this is Obama/Biden's worst enemy.

Mr. GIULIANI: Absolutely right. I think they were wishing for him because they want to have this debate. I would remind them this is the debate we had in 2010, and we had a historic Republican victory. We went to the American people with, `Are you tired of how Obama has built up this government, wants to continue to build it up through Obamacare and many other ways?' I think if we get the debate as a choice between Obama's vision and the Romney/Reagan—I was going to say Reagan--the Romney/Ryan vision--because he reminds me a bit of Ronald Reagan...

KUDLOW: Right.

Mr. GIULIANI: ...I think--I think we'll win this election. It is a gamble, but I think this--I think this is--I think it's a gamble that's going to work out.

KUDLOW: Well, this is probably the clearest--let's stay with that Reagan slip of the tongue because I think you did it deliberately. You're a Reagan alumnus; I'm a Reagan alumnus. And it's a very important point, 1980 probably was the greatest choice election until recently, and maybe for many years.

Mr. GIULIANI: Right.

KUDLOW: The Reagan view, which is much akin to what I call "R squared"—Romney and Ryan--vs. the Carter view, which is very much akin to Obama and crazy Joe Biden. And what do you think? This is--remember Reagan, they said, was crazy and trigger happy and couldn't possibly win, and look what happened.

Mr. GIULIANI: Yeah, he won by eight, 10, 12 percent. I mean, he won big by the time it actually all shook out, and nobody thought he could win. I think that could happen here. I think that the other way would also be risk. Suppose you did a scorched earth policy against Obama, then there'd be no one voting positively. I think we're going to see that a lot of people positively affected by it. I think the Democrats are going to be hurt by how they've overstated the case against Paul Ryan, you know, with that ad, him throwing an old lady or old man off a cliff. Paul Ryan is nothing like that. That is not what he's suggesting. What he's suggesting are actually pretty darn prudent fiscal measures that will make it possible for us to have Medicaid, make it possible for us to have Social Security.

KUDLOW: Yeah.

Mr. GIULIANI: If you ask a group of young people, as I did just recently at a college, `Do you think you're ever going to be able to ever collect Social Security and Medicare?' about six people out of a thousand put up their hand and say yes.

KUDLOW: Well, I tell you, Mayor, we got to go. I know you have to go. I think economic growth has got to be the key message, and growth solves a lot of problems, including these entitlement problems. And I think these guys are up to it. Anyway, many thanks to America's mayor, Rudy Giuliani.

Mr. GIULIANI: An exciting choice.

KUDLOW: Thank you, sir, appreciate it.

Mr. GIULIANI: Thank you.

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