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|Blair's Influence To Outlast His Iraq Stand|
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|Defending Rudy's Immigration Switch|
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|Rudy Giuliani's Dubious Leadership|
KUDLOW: we are right on business, right on america, and right on the money.. we still believe the that free-market capitalism is the best path to prosperity. this evening's program your money and turboprop my exclusive interview with america's mayor rudy Guiliani. he describes a minimalist government of taxes and regulating. he strongly disagrees with potential upload opponents, john edwards and al gore and hillary. he is in good health after his bottle with prostate cancer. i began by asking the mare to see if the seas and economic recession take a look. .
GUILIANI: If you're talking about a response of government, probably what government can do best is to try to limit spending and try to bring down government spending. We haven't done that in a while. We haven't done it in a concerted way. And it seems to me that's how the federal budget can have the best impact on the private economy. And make it clear that we're going to extend the tax cuts and it's not just a temporary thing so people can look forward to long term planning. And look for other ways in which we can put money back in the private sector.
KUDLOW: Have you given any thought to this whole controversy about sub-prime mortgages? You know, it's interesting, Congress in its wisdom for many years has been putting the heat on lenders to lend more to low income people, to minorities and so forth. That's what the lenders did. Now in the rising interest rates cycle, some of them are going to be out of luck. There is a foreclosure rate and there is a default rate. Do you think Congress should get in and regulate this area?
GIULIANI: Very reluctantly, I would think. I can't say that I know enough about it to give you a detailed opinion of it, but my instinct would be that Congress should stay out of it. We'd be better off if Congress did stay out of it. If some mistakes were made, and they'd be too aggressive, and after all, the housing market was growing by leaps and bounds for a very, very long time, that sometimes creates over investment. Sometimes creates bad decisions. It's kind of the natural thing in the market. So I'd rather have it correct itself than have Congress try to correct.
KUDLOW: As you travel around New York, obviously, but also outside of New York, you've been all over the country. How do you see the economy? What do you hear people saying about the American economy?
GIULIANI: The American economy is essentially a strong economy. One of the strongest in the world. I mean, a couple of economies are growing faster than ours, but they're coming for a very different place. You know, China, India. Of the mature economies we're probably growing the fastest. Of the, you know, full grown economies, we're growing the fastest. I think the tax cuts the president did are stimulating that economy. I feel very, very bad he didn't get the credit for that that he deserved. I don't know exactly why that is. Maybe it wasn't publicized in the right way. Maybe they just don't want to give him credit for anything, but the reality is it is fundamentally a strong economy with things you have to work on. But there's always things that you have to work on. And there's always going to be cycles. You're going to have too much of an investment in housing and then everybody's going to get too aggressive and then you're going to have to correct. And that's the nature of the free economy.
KUDLOW: Do you see a recession out there? Is that what you're hearing?
GIULIANI: I'm not hearing that, I heard what Greenspan says and I've heard what some people say and you hear some people say that and you see--you hear other people who say it's just a correction. But again, I'm not an expert. I'm not--I wouldn't want anybody to take my prediction of what is exactly going to happen in the future. I just think the government...
KUDLOW: Your goal as the mayor?
GIULIANI: I said my goal as the mayor was to do what's best for the city of New York so it had a positive impact on the economy. Whether the economy was in a period of growth or in a period of recession. And the best way to do that if it keeps spending under control, to try to get taxes down to competitive levels, put more money back into the private sector, regulate only when you have to, don't over regulate, let markets correct themselves. It's seems to us that's the proper role of government is. It's your job to do the predicting.
KUDLOW: In that--in your book, "Leadership," you talk several times about the benefits of a free economy. You talk about capitalism. I want to ask you, do you regard yourself as a free market capitalist? Do you regard yourself as a supply sider?
GIULIANI: I regard myself as a supply sider for sure. I mean, watched Ronald Reagan do it and learned it, so it works. Taxes get reduced, more revenue come in. Practiced it as the mayor of New York. I'm the first mayor ever to do that. It's almost harder to do in New York than it is in Washington. There was less of an acceptance for it and more resistance to it. But I have lowered taxes 22, 23 times. I started with a $2.3 billion deficit and by lowering taxes, we cleared that deficit and we started building a pretty big surplus. So not only do I believe in it, I've made it work. So I believe in it really strongly because it comes out of practical experience. Free market, more and more so. I've said over the last 10 to 15 years I've become more and more convinced that globalization, free market economics is the way to go for the United States. It really just challenges us to kind of predict the future and to try to think of the industries we have to create where we can take advantage of the large number of consumers that are emerging in China, the large number of consumers that are emerging in India. If we challenge ourselves, it really gives us the hope of real growth and that's what we should be pointing toward, growth.
KUDLOW: Do you invest in the Stock Market?
GIULIANI: No, I don't. I don't invest in the Stock Market. I did it a long, long time ago when I was really young and I got involved in all the investigations and all the prosecutions and I felt it was better if I didn't make individual investments. So I'm invested in funds, but not in individual--not in individual stocks.
KUDLOW: Why do people say to me, they don't know who the pro-Stock Market, pro-investor class candidate is. Many of the Democrats have been attacking rich people. They never talk well of the Stock Market. That even on the Republican side, no one is sure who's going to be the pro-Stock Market guy. Is that going to be you?
GIULIANI: Boy, this is--as the mayor of New York, I consider that a home town industry. I used to talk about the finance industry being to New York what the steel industry is to Pittsburgh 20 or 30 years ago. It's our home town industry. It's the thing that dominates 30 to 40 percent of the economy of New York City. It seems to me that's also true of the United States. And of course, it's the way in which we develop capital and drive these tremendous inventions, creations. I've always been in favor of a low capital-gains tax. In fact, as mayor of New York, I used to try to urge--actually removing the capital-gains tax. I thought it would be one of the best special benefits of New York. I couldn't quite get the Congressional delegation to agree with that. But the idea of you lower the capital-gains tax and if you do it smartly, you're going to end up with more revenues from the lower tax than you do from the higher tax. So I do think that if you look at my background and you look at my experience as mayor, I probably have the most aggressive, fiscal conservative record, supply side record. I'm probably the only one that's really practiced it.
KUDLOW: When you were a US attorney, you were very, very tough. You had a successful record. You were tough on the mobsters. You were tough on the drug pushers and the narcotics people. You were also tough on the white collar criminals. Let me ask you some of the hot button issues in the business community on this. First, CEO Perry and back dating stock options.
GIULIANI: CEO Perry to me is a question of private governance. That's what you have corporations for. That's what you have stock holders for, directors for. That gets corrected that way. That isn't--unless there's some fraud involved. It's not for the government to start evaluating how much money should be paid in a private business. Back dating stock options is a different thing. I mean, if someone committed fraud, they should go to jail. If they are pretending that the stock options were given on a certain date and they were actually given on another date, that's kind of straight out and out fraud and that's something the government has to be involved in. If there's an accounting dispute about the period of time you can select and it's a legitimate accounting dispute, then you probably handle that civilly.
KUDLOW: Another issue is the Sarbox--Sarbanes Oxley, this is another hot button issue. Treasury Secretary Paulson was on this program. He had a whole conference on it a week or two ago. Is Sarbanes Oxley, in your judgement, damaging American business competitiveness? Do we need to take action to relieve their burdens?
GIULIANI: That's what I see in a lot of reports. What Paulson has said, Mike Bloomberg and I've forgotten who else did it with them, a senator, it was Mike who did a report on how it was harming New York City. How some of the provisions...
KUDLOW: Senior Senator Schumer, actually.
GIULIANI: Yeah, it was Senator Schumer, right. It was a good combination, a Republican and Democrat. But they were saying that some of the provisions had decreased the amount of activity in New York, moved a lot of it to the London market, elsewhere. That would be a bad thing. And Sarbanes Oxley is almost another example of what we're talking about with that housing market. And I've watching this from the time I was US attorney in the Justice Department. You go through a period of time in which we have these things happen where people commit crimes, which is kind of a part of human nature. Some people just commit crimes. Then we over regulate, then we have to go back and correct the over regulation. And I think probably that's what happened to Sarbanes Oxley. We reacted. We reacted to some pretty serious crimes that were committed. Congress reacted. Probably over reacted. Some of the provisions are somewhat unrealistic about certifications--certificiations that somebody just can't make accurately.
GIULIANI: I ran a city like New York, it's like running a big gigantic multi-national company. I had 300,000 employees. I remember when I first came into it with a bond offering and they wanted me to certify it, with everything with accurate. I said, `I can't sign that.' I said I'm a votist, I'm a--I'm not going to sign because I don't know if it's accurate, you're going to have to go back and make the certification accurate. You're going to have to say other people represented this to me. And you've got to give an accurate picture of how this operation really works. And I think Sarbanes has pushed us to a point where things that are being required are almost fiction and that's not a good thing.
KUDLOW: A lot of times, the accountants have to have accountants in order to monitor them and the it's especially burdensome on medium and small businesses.
GIULIANI: Larry, it's actually quite astonishing that our economy has grown the way it has with the extra expense, particularly with the original imitation of Sarbanes Oxley. Companies were spending, 30, 40, 50, 60 million dollars more just in order to set up the systems so they could comply with somewhat unrealistic certification requirements. And that added to, of course, ultimately to the cost of goods, to the cost of services. So it's quite remarkable that our economy has grown. I think it's a real credit to the tax cuts that it had that kind of effect because it's going against the grain.
KUDLOW: Some in Congress, speaking of tax hikes, some in Congress are talking about taxing these private equity funds, which many believe have made business more efficient. They want to tax the so-called carried interest. Do you have a thought on that?
GIULIANI: I first would intuitively say, no well studied or deeply knowledgeable would be I'm against most taxes. I think that taxes have to exist. They should exist at the lowest possible level and to the extent that we can, we shouldn't invent more. Maybe that's my experience being mayor of New York City, where we had so many taxes. I mean, think about it, I made 23 different taxes. And I'm not sure I made all of them. I mean, the city shouldn't have 23 taxes or 30 taxes or 40 taxes. There should be a few. They should be simple. They should be easy to comply with. They should raise the revenue that's most for the essential services of government and they should be competitive. Whenever the people talk about a new tax, I generally don't like the idea.
GIULIANI: I think it needs a massive simplification. If we were doing income tax for the first time. In other words, if we were starting off new back at the beginning of the last century, then probably we should go with a--we probably should've gone with a flat tax, maybe two levels of tax, but really simple. Our economy has kind of grown up now on depreciation and deductions and industries have grown up around that and so I don't know exactly how much you can simplify it, but you sure have to make a stab at it. And I think Reagan got it right. I felt that what Reagan did was, I kind of think of it as like cleaning out the forest. You got--the tax code was this big, he got it down to a simple code, reduced the top rates. Kind of leveled out the rates a little so there weren't as many. The tax code needs a simplification in addition to lowering your sum taxes. Another tax that has to be dealt with is the death tax. That's a double tax. People get it twice and it has a major impact on lots of people who aren't really wealthy. You know, people who have their money in land or they have they money in real estate or they have they have their money in the family business or the family farm and they've got to sell the darn thing or they get in a big dispute with the IRS about what it's worth on paper.
KUDLOW: John Edwards, former Senator John Edwards has talked about raising taxes on the rich in order to create universal health coverage. Your thought on the Edwards plan.
GIULIANI: That's how you--that's how you decelerate the economy. I mean, it's exactly the way in which you take the growth that we're having and put a lid on it and start to move it back in the other direction. The reality is that the more ways that we can find to put money back into the private economy, the more our economy grows because that money gets used in a dynamic way. It gets used to create jobs. I used to be a big advocate of lowering the sales tax in New York, or even doing away with it because right around New York we have states that don't have a sales tax. We lose an incredible amount of business to those--to those states. If we did away with the sales tax in New York, it would be a jobs program for New York. The scales would have to go higher, 10 percent more employees, 20 percent more employees, 30 percent more employees. We'd make back a lot of that tax through the income tax, but we would also, more importantly have a growing economy. And that's--the government has to constantly be thinking about. What can we do to grow the economy.
GIULIANI: To give people a chance at--if you have a growing economy, then you don't have to go buy health insurance for people. They can earn a living and buy the health insurance for themselves, which is a much healthier society.
KUDLOW: Al Gore, of course, has this apocalypse now vision of global warming and so forth and he wants carbon caps on the greenhouse emissions. He also wants a carbon tax. Here we go. What's your take on that idea?
GIULIANI: I don't like taxes. I don't know how to make that any clearer. I don't like taxes. I generally think taxes are, given the level of taxations that we have in a lot of our states and in the country, kind of inventing new ones is a very big mistake. Find other ways to do it. If you want to deal with global warming, the way to deal with global warming is to--is to develop these alternative technologies. Get serious about energy independence, which we probably should've been serious about 30 years ago, or we wouldn't be in this situation where we have to send money to our enemies. Get serious about why we haven't licensed a new nuclear power plant in 30 years because people are afraid of nuclear power. I do security work for nuclear power, I have in my private life. Nuclear power is dangerous, so is every other form of power, but nobody's died from nuclear power. China is building 40 nuclear power plants. India just made a deal, so they can build nuclear power plants. We've got to get serious about ethanol because Brazil is way ahead on ethanol. So let's put the resources in to catch up on ethanol and get ahead of Brazil on ethanol.
GIULIANI: Nuclear power is dangerous, so is every other form of power, but nobody's died from nuclear power. China is building 40 nuclear power plans, India just made a deal so they can build nuclear power plants. We've got to get serious about ethanol. Brazil is way ahead of us on ethanol. So let's put the resources in to catch up on ethanol and get ahead of Brazil on ethanol.
Let's look at wind and solar from the point of view of can we spare that energy? Right not, it's inconsistent energy. When the wind is blowing, you get energy. When it isn't, you don't. Is there a way to develop a technology that you can store it? Can we clean coal? Carbon sequestration, it can be done. Can we expand it? The other benefit is looking at this way, which I consider a pro growth way, is, we move ourselves to that energy independence and then we also create an industry, a new industry in America. And with the growth of China and the growth of India, if we're at the head of that industry, we're going to make a lot of money in China and we're going to make a lot of money in India. We won't just be buying things from them, they'll be buying things from us.
KUDLOW: If we rewind Kyoto as per the grow idea, wouldn't then a lot of factories and jobs and investments just move offshore to China and India?
GIULIANI: They would move offshore to China and India and it would have no impact on global warming. Whatever your scientific conclusion about global warming, whether it's manmade or it isn't or whatever, the reality is that if you don't have--if you don't have restrictions on China, if you don't have restrictions on India, our contribution, ultimately, is going to be minor. We could put all these restrictions on ourselves and have just as much arguable global warming if China, India, some of these other countries that are going to be contributing a lot more to this don't become part of some kind of system to create alternatives.
KUDLOW: Got a quick regulatory issue. The union movement now wants to end the secret ballot for organizing companies and put in its place a card-check program. Mr. Jack Welsh was on this show, who's very much against it. Said it would enormously damage American competitiveness. Your thoughts on this card-check business?
GIULIANI: I find it very, very odd when I listen to Democrats, you know, talking about their interest in democracy and the right to vote and they want to take away--they want to take away this sacred right from employees in making a decision about whether they should be members of a union. Why shouldn't they have a right to a secret ballot? That's probably the most honest, that's the most traditional way of doing it, that's the way they do it when they elect public officials. And if they want to have a union, God bless them. If they want to have a union, that should be their free choice. If they don't want to have a union, that should be their free choice. And there should be no intimidation involved where it has to be done--where it has to be done publicly where people can pressure them and people can put them out of undue pressure on them.
KUDLOW: Senator Hillary Clinton was CNBC network a few weeks ago. She talked about limiting the foreign purchases of US government bonds aimed especially at China. She also talked about taking some action to limit the US trade deficit. What's your response to those kinds of protectionist ideas?
GIULIANI: Generally a bad idea and generally self-defeating. And certainly not an agenda for the future, kind of an agenda for the past. It's a way of trying to keep yourself in the past, lock yourself in the past. I mean, I saw that so often with measures like that in New York when unions would do feather bedding or things like the New York Port, New York docks lost hundreds of thousands of jobs. It sounds good for a few days, then you start moving into the future, it deteriorates an economy. The best way to deal with the global economy is to take advantage of it in an aggressive way, in an optimistic way. Let's build industries that we can sell in this--in this--in this new part of the world where we have a growing number of consumers. And it's energy independence is only one. Health care. Let's think of the strength of American health care rather than just the weaknesses of it. It's still the place--we're still the place where more people want to come to get medical treatment. People aren't flooding hospitals in Europe and Asia to get brain surgery and cancer treatment, they're coming to America. We're still--we're perilously close to pushing them in the other direction of socialized medicine, but we still have the best health care system in the world. Let's market that. That's a product we can sell. We're ahead of everybody else on that.
KUDLOW: 9/11, a pivotal moment, I mean, in some sense, in everybody's life. But how did 9/11 change your thinking and is the 9/11 experience part and parcel of your quest for the presidency?
GIULIANI: I mean, it changed my life dramatically in many ways. I mean, there isn't a day that goes by that I don't think about it. There are terrible, terrible memories of September 11th, things that I saw, people that I lost, the devastation, the identification of bodies. I mean, all these memories come back to you at different times. And then the other side of it this tremendous response with the firefighters and the police officers saving people, the rescue workers. I just met--I just met somebody from Morgan Stanley who got out that day. He was at a fund-raiser from California. He came up to me, hugged me and he thanked me for what I did, and I hugged him back and I thanked him for Rick Rescorla, who was the security manager at Morgan Stanley. And the reason why Morgan Stanley had so many people saved was Rick. It was Rick organizing, his organizing in advance, and his staying in the building until he got the last person out. And he gave up his life to do that. And, I mean, it has affected me in ways that I'm probably not--I'm never going to completely know.
KUDLOW: How do we keep the bad guys out of this country? And as you know, President Bush has already told the House Democratic bill, he is going to veto that bill, this is the Iraq funding bill. Of course, it's larded up with pork, but it also sets troop deadlines. How do we keep the bad guys out? What's your strategy on Iraq and homeland security?
GIULIANI: Well, it'd have to look beyond Iraq. We're spending too much time focusing on Iraq. Very, very important. We've got to get it right. But on the other hand, this whole terrorist war against us is bigger than just Iraq. Iran, as we know, is enormously important, maybe more dangerous than Iraq. Syria, Pakistan, Afghanistan, making sure we--making sure we've crushed al-Qaeda, making sure the Taliban does re-emerge, finally catching bin Laden and putting him--putting him--putting him on trial or bringing him to justice or--there's got to be some end to that and justice has to happen there. So there's a lot here. The way I've described it is we've got to be on offense against terrorists. And I think that Congress, at least the Democrats in Congress, and some Republicans, are trying to look at Iraq in a vacuum, as if it's all by itself, it's just one little problem and it isn't. Iraq affects the entire view of the terrorists against us.
And they trip comparing it to Vietnam, but there's a big difference with Vietnam. The scare was different. But also, the communists and the Cold War was another situation in which they were planning to come here and kill us. And they never did come here and kill us. In the long stretch of the Cold War, they never came into the United States and infiltrated and blew up the World Trade Center or tried to blow up the Brooklyn Bridge or tried to blow up train stations and buses in London or--so this is a different kind of enemy, and it's an enemy that has tremendous aggression toward us.
So when you look at Iraq, you got to say to yourself, how do we want that to end in order to reduce that aggression or how is it going to increase that aggression? Now, if we have a great victory, it is going to increase that aggression. And it's also going to lead to a regional war. So we've got to get it right. And I think that this idea of putting timetables down, that, I don't get at all. I don't understand where the common sense comes about in wanting to tell your enemy the time for your retreat. I can't imagine in the long history of war that that's ever been very successful. You just announce to your enemy, you know, on March, this date, and July that date, they're going to take out so many--so they know exactly how weak we are at certain points in time. It makes no sense. It has to be an overreaction and not a clear appreciation of what needs to be done after September 11th to be on offense against terrorists.
KUDLOW: Need to ask a couple quick political questions. You've been very generous with your time. We appreciate it. You have a huge lead in the Republican polls. You're about 15 percentage points ahead of Senator McCain. You're also about 5 or 6 percentage points ahead of Senator Clinton in this race. First of all, are you surprised at these unbelievable numbers?
GIULIANI: Sure, I guess I'm surprised by them. I don't take them too seriously. And if I were that far behind, I wouldn't take it too seriously either. It's too early. We're in the organizing phases. I am surprised, I think, because we got started late and actually, if I could do it all over again, I would have started three months earlier. So we got started a little bit late. We didn't really get started until the end of January and probably should have done it three months earlier. So yeah, I'm surprised at all where we are. I don't expect to remain there. I think it's going to go up and down. I hope we're there at the end and I think we will be.
KUDLOW: Why didn't you run against Hillary Clinton in 2006? What was your thinking there? You may wind up running against her for president on '08.
GIULIANI: Well, I was very, very disappointed that I wasn't able to go forward with that race. At the time, it was very, very close. I was ahead by 2 points in some polls, she was ahead by 2 points in other polls. I thought I'd have it. You never know if you're going to win or not, you never know that. But you know, I'm always optimistic and I thought I was going to win. I really couldn't deal with the idea of having to be treated for prostate cancer and being able to campaign the way I campaigned. The way I campaign is 24 hours a day. I win elections by out campaigning my opponent. That's always the way I've done it. And I thought this was going to be a very, very tough campaign. It was going to be very, very close, and I couldn't give the Republican Party my best, if I was in and out of cancer treatment.
KUDLOW: And in '06, just last year, did you ever consider running against her last year?
GIULIANI: No, no. I--for the last two or three years, the question has been, was I ever going to run for president. I didn't really make up my mind until November or so. But that's the thing I've been considering, listening to advice, talking to people, trying to figure out is it a good thing, going back and forth about it a few times about whether it is or it isn't. But that was the thing that was really more on my mind as a question.
KUDLOW: We saw last night on TV, Elizabeth and John Edwards talking about her coming back with unfortunately, tragically, incurable cancer. They have apparently decided to continue their presidential campaign. You, of course, had had the episode with prostate cancer. Some people want to know how you're doing, how are checkups, how do you feel?
GIULIANI: I'm doing great. My PSA is low, nonexistent. I'm cancer-free, I have been for six years. I'm extremely healthy and energetic and I just got back on a red eye from California and I do four or five speeches, fund-raisers, meetings a day, sometimes six. So I've got tremendous energy. But for me to campaign, this is the year I have to do it. And back in 2000, I realized that'd have to be a part time or a quarter time candidate, and that just would have been--that just would have been unfair.
KUDLOW: New Yorkers known Rudy Giuliani. We thank you for coming on Kudlow & Cramer
GIULIANI: Thanks, Larry. Good to see you.