When: Today, Thursday, August 23, 2012

Where: CNBC's "The Kudlow Report"

Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Rep. Paul Ryan (R-WI), Republican Vice Presidential Candidate, today, August 23rd, on CNBC. Excerpts of the interview will air throughout CNBC’s Business Day programming. The full interview will air on CNBC's "The Kudlow Report" tonight at 7PM ET.

All references must be sourced to CNBC.


LARRY KUDLOW, host: We welcome back to the program House Budget Chairman Paul Ryan, who, of course, is now the vice presidential hopeful on the Mitt Romney ticket.

Congressman Ryan, welcome back to The Kudlow Report, sir.

Representative PAUL RYAN: Hey, great to be back with you, Larry.

KUDLOW: All right. Thank you very much. Let me just raise this point. On Wednesday, I guess, you're going to make probably the most important speech of your life, 40, maybe 50 million Americans are going to see you at the convention when you accept your vice presidential nomination. It will really be your coming out. What message do you expect to convey, what principles do you want to show, what vision do you want people to hear when you make this hugely important speech?

Rep. RYAN: Well, first of all, President Obama's failed. His leadership has failed, the economy is failing because of his leadership, and you need to point that out. But, in addition to that, we have to show the country that we have a pro-growth plan to get people back to work to get this economy growing again, that we are offering specific solutions to get people back to work, to get this economy growing, and giving people a clear choice of two futures from which to choose from. We believe we owe the country an alternative to the path the president has put us on. It's a nation in debt, in doubt, and decline. We want to get back to the American idea that opportunity society with a safety net, a society of growth, of opportunity, of upper mobility. And I want to spell out exactly what that means, what the American idea is, and how we plan to retrieve that and get us back on the right track.

KUDLOW: Can you just talk a moment about the American idea? When you and I spoke at the end of the year, you were the human events man of the year, I was lucky enough to do the write-up for you. I know you used that term "American idea" quite a bit. Can you just slightly flesh that out for us, give us a preview of your speech?

Rep. RYAN: Sure. Well, the American idea is very clear. Look at our Declaration of Independence. Our rights as individuals, as citizens of this country, our rights come from God and nature, not from government. And what that means is that each and every single one of us have an opportunity in America because of freedom and economic freedom to pursue our dreams, to make our lives what we want of it. The only thing that limits us from becoming who we want to be and what we want to do with our lives is our own effort and our God-given talent. And the goal of government is to protect our rights and to promote the quality of opportunity so that we, as free people in America, can make the most of our lives vs. what I would say the president is trying to do. President Obama believes that, you know, the government should manage these--our society and we should have a government-directed economy. That leads to stagnation. That leads to a government that sees its role as equalizing the results of people's lives. It's a very different vision, and it's akin to what we're seeing occurring in Europe. And I think if we stick with the president's plan, we'll end up with a debt crisis, a welfare state, and all those promises that government made to people that they've retired and organized their lives around will become broken promises. We don't want to see that happen.

KUDLOW: All right. We want...

Rep. RYAN: We want to see promises made to our seniors and we want growth.

KUDLOW: All right. Growth. Let me go right to the Team Obama. They're already attacking you. They're running ads in Florida now, according to the newspaper, attacking your Medicare plan to offer choice and premium support. New York Times poll this morning says older people like your plan because you're no going to touch Medicare, but the under 55 crowd does not like your plan. I think that's where Team Obama is going to go at you to be--for your biggest vulnerability. What can you say to the under 55 crowd in Florida, in Wisconsin, in Pennsylvania, wherever?

Rep. RYAN: Well, Larry, as you know, I'm in the under 55 generation, from the X-generation. And the proposals we're advancing are bipartisan proposals. It has bipartisan support in Congress today. It's an idea that came from Bill Clinton's 1999 commission to save Medicare. And it's an idea that says you get a list of guaranteed coverage options, you know, like I do as a member of Congress or federal employees have today. You choose among these competing plans, including traditional Medicare, for your comprehensive Medicare benefit. And then Medicare subsidizes your premiums based on who you are--less for the wealthy, more for the middle income person, and total coverage for those who are low-income and sick. This is choice and competition. It's not government rationing or bureaucratic telling you what to do. You get to decide. That is the best way to save Medicare for my generation, the next generation, and it allows us to keep the Medicare benefit intact just as it's designed today for people in or near retirement today.

KUDLOW: How do you react--how do you react, Congressman, to Obama said that you are playing fast and loose with the facts regarding Medicare. I guess this whole thing is about the $716 billion coming out of Medicare to pay for Obamacare. They say you're wrong. They say the facts are on their side. How do you react to that?

Rep. RYAN: Look, don't ask me, look at the authorities. It is crystal clear, well documented that President Obama, in order to pass Obamacare, raided $716 billion from Medicare to pay for Obamacare. That's not my statistic, that number came from the Congressional Budget Office. And so when you take money from Medicare to pay for another program, that money's not there for Medicare. We're going to end the raid of the program, restore this program. More to the point, Larry, what President Obama also does in Obamacare, he puts this new board of 15 unelected, unaccountable bureaucrats in charge of cutting Medicare provider payments annually every year, which will clearly lead to denied care for current seniors. Medicare is telling us, the Medicare actuaries, one out of six hospitals and nursing homes will go out of business or just stop taking Medicare patients. Four million seniors will lose the Medicare Advantage plans that they have already chosen for themselves. So the inconvenient truth with respect to President Obama on his failed leadership on this issue is that he is damaging current Medicare for current seniors in order to take that money and pay for Obamacare. We think that's wrong. And when we comprehensively repeal Obamacare, we repeal the damage that President Obama does to Medicare as well.

KUDLOW: Now, the other spat that’s developing yesterday in Virginia, you called the president's recovery an "imaginary" recovery. They are firing back that the Paul Ryan budget is going to ruin the social safety net, it's going to wreck student loans, it's going to wreck educational assistance, and it's all being done for tax cuts for the rich. Imaginary recovery vs. your evil and mean budget plan, according to Team Obama. How will you respond to that?

Rep. RYAN: We're used to this kind of over-the-top rhetoric. If you look at the House budget, it did not cut Pell Grants. It kept those fully funded as opposed to the president, who discontinues funding after a couple of years.

The point is basically this, Larry. The president can't run on his record. You have 23 million people who are struggling to find work today. Our economy is languishing. Unemployment has been above 8 percent for 42 months. Nearly one in six Americans today are in poverty today. That's the highest poverty rate we've had in a generation. So the president can't run on his record. He didn't change his tune, he didn't moderate, he tacked far to the left. So all he has left is this: distort, demagogue, distract to try and win this election by default. Mitt Romney and I are proposing specific solutions, getting people back to work, get economic growth back on track. We have a goal and an aspiration to get this economy growing at an average rate of 4 percent over the next four years. And if we can do that, which we think we can with the right economic pro-growth policies, we can get 12 million people back to work.


Rep. RYAN: We can be the port in the storm in the global economy.

KUDLOW: You know, you don't hear--I know those numbers are in your economic plan, and you just said them, and I--you've said them before. I don't hear Mitt Romney saying them. A lot of people are saying that somehow Governor Romney is not getting the growth message across. What's your reaction to that? What should he do? I mean, we've had the critique of the poor recovery--you made it again yesterday--but what about the future? How will the Romney program of tax cuts and spending restraints and deregulation and so forth, how does it affect ordinary people? How does it prove to them that we can get out of this mess and really grow the economy back to its potential?

Rep. RYAN: Mitt Romney has been more specific with bold solutions on how to get economic growth turned back on in America than anybody else in this debate, including President Obama. Today he offered a very comprehensive energy policy to make North America energy independent by 2020. It's a--it's a comprehensive plan to make sure that we can utilize this great discovery of new technologies to get energy produced in North America so we can become independent.

He's proposed comprehensive tax reform to lower tax rates by broadening the base and getting rid of special interest loopholes to lower tax rates through economic growth.

Comprehensive regulatory reform throughout various industries like financial services and health care and energy and the rest to get the regulatory juggernaut that is struggling and stifling successful small businesses so that they can grow and create jobs.

Get rid of this tax cliff, end these devastating defense cuts. He has proposed a very comprehensive plan to do all of this. Getting the deficit under control, getting trade agreements that work so we can sell and export more things, getting our spending under control, tax rate reduction and reform. These are comprehensive plans that Mitt Romney's offered which will get us back to growth, get us back to opportunity, get higher take-home pay, more jobs and get people back to work, and put this country on the trajectory that it ought to be placed upon, which is a pro-growth society, an opportunity society with a safety net that's sustainable, that works, that people can count on vs. the path that President Obama's put us on, which I think will lead us to a welfare state and a debt crisis, more joblessness, fewer solutions. And that's why the president's just attacking us with all these sort of baseless attacks.

KUDLOW: Well, there's a very tough piece in yesterday's Wall Street Journal, I'm sure you saw it, Austan Goolsbee, formerly one of Obama's top economists. He says basically your tax plan just cannot work. What he says is, if you cut tax rates by 20 percent, that's going to add four trillion to deficits over the next 10 years. That's on top of extending the Bush tax cuts, which will also add. Goolsbee said for high-income earners you could take away all the deductions you want, all the special exemptions and carve-outs you want, you still are going to run up the budget deficit by as much as $2 trillion. And that means there has to be a middle class tax increase to pay for all this. Now, Goolsbee was quite specific on his numbers, Paul, and I wondered if you can give a specific rebuttal?

Rep. RYAN: So, look, I didn't read the piece, but I know Austan fairly well. He and I have, I guess, debated each other over the years. What they're saying is, they're measuring all of this against this massive tax increase that's coming in January, which the Congressional Budget Office just tells us yesterday, if this happens, if President Obama gets his wish, we'll go back into a recession. And so they try to measure the world against this massive tax increase that they want to occur, which we think will trigger a recession, which hurts revenues. We're saying plug loopholes, lower tax rates.

Let's not forget, Larry, that eight out of 10 businesses in America, they file their taxes as individuals, as Subchapter S corporations, as partnerships, as LLCs. Other countries around the world are lowering the tax rates on their small businesses. President Obama is promising that in January the top tax rate on successful small businesses goes above 40 percent. That's going to kill growth, kill jobs. By plugging loopholes, which are uniquely enjoyed by higher income individuals, you're reducing their ability to shelter their income from taxation; therefore, more of their income is subject to taxation and that allows us to lower tax rates for everybody in America--families, small businesses. It gets us a competitive system, a simple system, one that is wired for economic growth and that will get economic growth.

The best way to raise revenues is to grow the economy, not tax successful job creators. That's what we're offering. More to the point, what President Obama's been proposing is more loopholes. Have Washington pick winners and losers in the economy. It's crony capitalism. It's corporate welfare. Every country that's tried this has failed to do this. Republicans are guilty of this in the past. We're not going to commit that error again. We want basic tax reform that is fair, simple, competitive, pro-growth. And we can keep the same kind of level of revenues coming in with this sort of tax reform we're talking about, and we believe we'll actually get higher revenues because people will go from collecting an unemployment check to collecting a paycheck and paying taxes and that will be good for revenue growth and economic growth.

KUDLOW: All right. Well,look it, I've been a supply-sider my whole career, and I agree with the economic growth, and I know you do, too. But in terms of these numbers, and you're going to have this problem. I mean, I worked for Reagan years ago and everybody went after Reagan's numbers. You know, you've got a trillion dollars of tax deductions that you could eliminate. That's Marty Feldstein's number. But Goolsbee is saying...

Rep. RYAN: That’s annually, yeah, right.

KUDLOW: But, yeah, but that includes everything. That would include removing the tax deductions for the middle class as well as. What Goolsbee and others are saying is you're going to have a $4 trillion hole. Now, you make up some of it from economic growth, as you have just said. You can make up some of it by limiting the deductions to the upper income people. But don't you have to have a spending cut component in there to make these numbers work?

Rep. RYAN: Right.

KUDLOW: And specifically, what would that spending cut component be?

Rep. RYAN: Well, yes, I mean, that's the other side of the coin which, obviously, we--I've been as specific as anybody in Congress about spending cuts. What Mitt Romney is saying is let's get the size of government back down to where it historically has been, 20 percent of GDP by 2016. It's clearly something we can do through spending cuts, through discretionary spending cuts on domestic spending. That's an area of government that President Obama dramatically increased. And a comprehensive entitlement reform that's phased in that guarantees benefits for people in or near retirement and phases in reforms for younger generations so these programs are there when they retire. So it's a three-point plan. Pro-growth policies, energy policy, regulatory reform, tax reform, spending cuts to get the deficit down in the near-term, and reforms that get the debt paid off, ultimately, over the long-term.

KUDLOW: Are we...

Rep. RYAN: That is how we dodge a debt crisis.

KUDLOW: ...are we--with respect, are we talking about 700 billion in spending cuts in the first term, 800 billion, a trillion. What kind of ballpark number?

Rep. RYAN: Oh, you know, I--we can have a long debate about this. That's what we're going to have to negotiate with Congress in January. But mark my words, we have to cut spending. We're very serious about that. Mitt Romney's been really clear about that. The House has led on cutting spending, on passing budgets. President Obama has been MIA on this debate. We have a debt crisis staring us--in our--in the face, it's on our horizon; and what has the president of the United States been doing? Four budgets with trillion dollar deficits every single year and not a single solution to tackle this problem. What's worse is the Senate Democrats haven't passed a budget for three years, Larry. Even though we have a budget law that requires Congress passes a budget every year, they've ignored that law. So we don't have leadership where we need it. We don't have leadership in the White House, we don't have leadership from Senate Democrats. We've seen leadership from House Republicans, and we've clearly seen leadership from Mitt Romney on what it takes to get spending under control, to get this budget under control, and to grow the economy. That's what we need, that's what we'll get in 2013 if we win this election.

KUDLOW: So what's going to--all right, 2013, though, could be a brutal year. You know the CBO yesterday just put out their numbers. If we go off the tax cliff, go off the defense spending cliff, I guess, we're going to have a recession in 2013. The economy will shrink by at least half a percent, maybe 1 percent. The unemployment rate's going to be as much as 9 percent. I don't think this country can take another recession, Paul Ryan. I mean, I just don't think...

Rep. RYAN: I agree with you.

KUDLOW: ...psychologically we can take it. How do we get out? In the first 100 days of a Romney/Ryan administration, what are you going to do to deal with the fiscal cliff problem?

Rep. RYAN: Well, look, just so you know I'm the guy who offered the legislation and passed it through the House already that prevents these devastating defense cuts, that cuts spending in other areas of government to replace the spending cuts for the Pentagon so that we don't have these devastating defense cuts that the CBO says could be part of triggering of a recession. Don't forget that we already also passed in the House an extension of all the tax policies, the current law tax rates, for another year to buy us time for fundamental tax reform. Mitt Romney supports that. And so what we're saying is, what we've already done, we've shown this leadership in the House. The president has ducked this issue. The Senate hasn't even taken it up. Mitt Romney is saying that we will deal with this right away, prevent this cliff, this massive tax increase, these devastating defense cuts from taking place.

KUDLOW: Right way. Right away.

Rep. RYAN: We'll do it as fast as we can.

KUDLOW: Right away.

Rep. RYAN: Right away to prevent--right away to prevent this, and we'll telegraph that so the markets know that.

KUDLOW: Before the other plans go into place.

Rep. RYAN: So they know...

KUDLOW: Before the other plans go into place, the first thing, first order of business for Romney/Ryan will be to deal with the tax cliff and the threat of recession.

Rep. RYAN: That's right. Because we need to get this economy growing, we need to get people back to work. The markets need to know, businesses need to know, employers need to know that we're not going to sock it to them with all these tax increases and spending increases and big deficits or these devastating defense cuts. So what we're going to do is fix this right away and then get to the work of putting in place a structural long-term solution to get growth back into our economy, get opportunity turned back on and get people back to work.

KUDLOW: All right, my last one. My pal and your pal Steve Forbes was on the show last night. I mentioned that you and I were going to be talking. I asked him to ask you a question. He wants to know what your monetary strategy is going to be and, in particular, two points, Paul: Should the Fed add more stimulus to the economy today? And I take it you and Governor Romney want a Fed audit. What does that mean? So, A, more stimulus in the Fed...

Rep. RYAN: OK.

KUDLOW: ...and, B, what would a Federal Reserve audit mean?

Rep. RYAN: OK. First thing, two words: sound money. We want to pursue a sound money strategy so that we can get back the king dollar, as you say it, Larry. Number two, I'm not a fan of more stimulus or more easing. I think the benefits are clearly outweighed by the long-term costs of this. There--it's not working, and all this loose money from the Fed is basically bailing out the fact President Obama has failed on fiscal policy. The Fed can't keep bailing out bad fiscal policy. We need to get our fiscal policy right.

And with respect to the audit, which I voted for that, I believe we need to get in and have more transparency of the Fed's balance sheet. I think that's very important to have more transparency and accountability of the Federal Reserve. Have the Federal Reserve focused on sound money, price stability, but also we have to also make sure we maintain the autonomy of the Federal Reserve, the independence of the Federal Reserve because--and I put out a statement when that bill passed to this effect. Because we don't want to have members of Congress meddling with the management of monetary policy. So we want to keep that independent central bank authority, but we want that central bank authority to be transparent, to be accountable, and be focused on sound money policies.

KUDLOW: All right. Budget Chairman Paul Ryan, we appreciate your time very much this morning. I personally do. I wish you best of luck in your great speech at the convention and on the campaign trail.

Rep. RYAN: Great to be back with you, Larry. Thanks for having me.

About CNBC:

With CNBC in the U.S., CNBC in Asia Pacific, CNBC in Europe, Middle East and Africa, CNBC World and CNBC HD+, CNBC is the recognized world leader in business news providing real-time financial market coverage and business information to more than 395 million homes worldwide, including more than 100 million households in the United States and Canada. CNBC also provides daily business updates to 400 million households across China. The network's 16 live hours a day of business programming in North America (weekdays from 4:00 a.m. - 8:00 p.m. ET) is produced at CNBC's global headquarters in Englewood Cliffs, N.J., and includes reports from CNBC News bureaus worldwide. and CNBC Mobile Web ( offer real-time stock quotes, charts, analysis and video.

Members of the media can receive more information about CNBC and its programming on the NBC Universal Media Village Web site at