Richard B. Cheney photo

Interview of the Vice President by Larry Kudlow, CNBC

January 19, 2006

Grand Hyatt New York

New York, New York

1:25 P.M. EST

Q: Vice President Dick Cheney, welcome again to Kudlow & Company. We appreciate it very much, sir.

THE VICE PRESIDENT: Good to be back, Larry.

Q: I'm obliged really to ask you about this missive from Osama bin Laden allegedly. But it is, of course, all in the news this morning. He actually at one point threatens that he's going to be planning to bomb American cities, and then somehow, the United States and he and his group will have a truce. I don't know what to make of it. But the bombing of American cities is something that obviously is catching my eye, and the eyes of almost everyone. What's your comment on this?

THE VICE PRESIDENT: Well, first of all, of course, we don't know yet the authenticity of the tape. We're checking that out. Secondly, we don't know when it was made. We haven't heard anything at all from him in over a year now. This would be the first, if it is, in fact, a current tape from bin Laden. And then we'll have to sit down and take a look at it, see what it means.

It's difficult sometimes to tell why they do these broadcasts -- whether he's trying to communicate with his supporters around the world, or whether he intends it as a threat. It's different to characterize it.

Q: Is this the kind of thing that might raise the Homeland Security threat assessment or threat levels?

THE VICE PRESIDENT: Well, it could. The fact of the matter is we're on sort of a high state of alert most of the time anyway, as far as the government is concerned. Obviously, we haven't raised the threat levels recently. The fact of the matter is, it's a good reminder for everybody that there is a serious threat out there. It has been more than four years since we've been attacked. I think a lot of people have sort of let down their guard and relaxed. This is a reminder that we can't afford to do that as a nation, that this is very much a very serious group of people doing their best to try to strike the United States. And we need to act accordingly.

Q: Is this the kind of thing that Congress needs to look at when they are addressing the Patriot Act, when they come back as people discuss the NSA eavesdropping of foreign conversations with Americans and so forth? It's all about homeland security. You think this will change any minds?

THE VICE PRESIDENT: I don't know. I would hope it would. I think -- there are reasons why we haven't been attacked again in more than four years. It's not just dumb luck. You can't -- nobody can promise that we won't be hit again. As I say, we know they're still out there trying. But we have a number of people -- some in Congress who now want to suddenly criticize the measures that have been taken since 9/11 to try to protect the nation. And that's unfortunate. I think, in fact, we have been very successful -- both with respect to the NSA program that has become the subject of controversy. I think the Patriot Act is vital. I think we have saved thousands of lives. I think we have disrupted attacks. And I think Congress and our critics -- some in Congress, obviously, not all, need to be careful before they embark on a course of action here that said somehow we ought to shut down those programs, or that we have "exceeded our authority." I don't believe we have.

We've operated within the bounds of the Constitution. The President has the responsibility, as well as the authority to do what needs to be done, and we've been doing it.

Q: Okay, shifting gears slightly but still on the international beat, Iran -- it's becoming a big financial market issue, as well as all the international security issues. Realistically, is there a way the United States and the allies can prevent Iran from getting nuclear weapons?

THE VICE PRESIDENT: I think it's important that we seek that objective. I don't think we want a nuclear-armed Iran. I don't think that's in anybody's interest -- either in the region or on a global basis. We've been working very closely with the European allies -- the Brits, the Germans and the French have been actively involved in this effort.

You've got a couple of concerns -- one is just a nuclear-armed Iran would be a problem. But then you add to that the dimension of the newly elected President of Iran, Mr. Ahmadinejad, who is hard to believe in terms of some of the more outrageous statements he's made in recent months, calling for the destruction of Israel, threatening a course of action that, obviously, would be a -- be devastating in terms of its consequences. So I think the U.S., as well as our friends and allies -- we're working hard on this problem. We'll continue to do so. But I do think we need to prevent the proliferation of nuclear weapons to a nation like Iran.

Q: Is there a military option on the table as Secretary Rumsfeld has hinted, as Senator John McCain has proposed? Is there a military option in this?

THE VICE PRESIDENT: No President should ever take the military option off the table. Let's leave it there.

Q: The other issues are, regarding a possible sanctions campaign, a naval blockade, pinpoint air attacks, whatever, a lot of people in the financial community are very worried about $70 ,$80, $90, $100 barrel of oil, which could have some very negative consequences, obviously, for the economy -- indeed, the world economy. What's your thinking on that? Is that something that is in your plans, a contingency that might have to deal with triple-digit oil?

THE VICE PRESIDENT: Well, the way I think about it, Larry, is that the problem here is of sufficient magnitude that it needs to be dealt with. But I also would emphasize that we're attempting to do that through diplomatic means. Now, whether or not there would be a spike in the price of oil if, in fact, there's some kind of a crisis with Iran, it's entirely possible. But I think the consequences of that would be less significant than the consequences of haven't Mr. Ahmadinejad armed with nuclear weapons, able to threaten virtually anybody he wants to threaten, and conceivably even contemplate the use of nuclear weapons. That would be a major crisis.

So I think -- again, I'd like to emphasize that people need to stay calm, cool, and collected here as we deal with this problem. But it is a problem. As John McCain and Condi Rice and others have said, it does need to be dealt with, and we're dealing with it.

Q: You mentioned the Iranian verbal attacks on Israel. If Iran and any of its client terrorist organizations that it sponsors were to attack, much as Hitler attacked Poland in 1939, would the United States come to the military assistance of its longtime ally Israel?

THE VICE PRESIDENT: I don't think there's any question but what we would support Israel under those circumstances. I think any administration would.

Q: And that would include military assistance?

THE VICE PRESIDENT: Obviously, we would support our friends in Israel under those circumstances were they attacked.

Q: Sir, is there any way to get at this Iranian issue by helping the pro-democracy groups inside Iran, by bringing U.S. officers. Some have said we could use the Swiss embassy as a haven. Others have said private non-governmental groups and that sort of thing. Is there a way to undermine the current regime by helping out the pro-democracy groups?

THE VICE PRESIDENT: I think it's a matter of long-term policy. The United States wants to support the democracy proponents in Iran. One of the more hopeful things about the situation in Iran is you've got a whole younger generation that is very interested in the West, and the United States, that, I think, finds the current theocracy that governs in Iran distasteful, would like to see a change in their own government. And obviously, a change in policy would follow if there were to be such a change.

What mechanism might lead to those kinds of changes over time, how long it would take and so forth, those are all open questions at this point. But clearly, I think the outside world has an interest in seeing true democracy come to Iran instead of the kind of system they have now.

Now, of course, nobody can run without the approval of the clerics at the very top. And you have an unelected group at the very top, senior mullahs, if you will, in Iran, who dominate the country, who support Mr. Ahmadinejad, who have been involved in supporting Hezbollah and other terrorist organizations. I think long-term it's not in the interest of the Iranian people that that regime continue down that course.

Q: Would the administration be willing to have diplomatic relations with Iran? Some analysts in this country have said we should try to reconnect them with the United States, somehow do business with them? Is that possible?

THE VICE PRESIDENT: It's been impossible, in effect. In the past it has been very hard to communicate with them. They -- and of course, they have a track record that means they have, in fact, been staunch supporters of terrorism. And now they're obviously in the business of trying to develop their own nuclear weapons. Under the circumstances, it's not clear what would be gained by having normal relations, if you will, with Iran. They need to change their policies if they want to be treated by the international community as a full member of the world community.

Q: Let me switch gears, come back to the domestic side, talk some politics and some economics. 2005 -- not a great year for the administration. After the big victory in the election in '04, you kind of lost your mojo. You kind of lost your momentum in 2005. As you look back on the year, sir, is there anything you might have done differently to keep that momentum going rather than the apparent political problems that happened?

THE VICE PRESIDENT: It's partly in the eye of the beholder, Larry. I don't think it was as bleak a year as some have suggested. I think we had significant success in both Afghanistan and Iraq from a political standpoint: new President sworn in, in Afghanistan; now a new parliament -- three successful elections in Iraq with constantly rising participation. We made major progress in two of the most important subject areas we've been dealing with.

The economy was also very good. In spite of concerns about Katrina, for example, we had over 4 percent growth in the third quarter. We've got unemployment back under 5 percent.

Q: Do you get a fair shake in the media? Do you get a fair shake in the media on the economy? Isn't the economy kind of an underrated story? But in fact, you and the President -- until very recently -- haven't done much to sell that underrated story?

THE VICE PRESIDENT: Well, it's true, but the fact is, if you just look at the data, I think any objective observer will say that 2005 was a very good year for the economy, in spite of things like Katrina.

Katrina hit -- we thought that would throw a real monkey wrench in the economy, and it didn't happen. Inflation is under control. Unemployment is down. Growth is very good. Productivity is running at all-time highs. So I look at '05 and I see a good year. Now you can say, well, we had some missteps along way -- yes, I think we could have done better on Katrina than we did. There's a temptation oftentimes, though, for the press, especially, to zero in on one problem and to ignore everything else. And I think Katrina was a unique kind of disaster -- national disaster. And the President himself has said we could have done better in terms of how we responded to it, and handled it.

But on balance, I think we look back from the perspective of history, 10 years down the road, I think '05 will not have been a bad year.

Q: Sir, again, thank you for agreeing to this interview. Recently the White House Office of Management and Budget came out with a revised budget deficit for the new year of $400 billion. That's about $100 more than last year. It was a surprise. Do you worry that this kind of new higher deficit estimate could really doom the tax cut extensions on dividends and capital gains when they come up for a vote in the Senate in a few weeks?

THE VICE PRESIDENT: Well, I certainly would hope not. I think the case could be made -- and we try to make it all the time that those new rates on capital gains and dividends have been instrumental in generating additional revenue for the federal government. And I know you've been a strong believer over the years, Larry, and I share your conviction with respect to wise tax policy and what it does with respect to government revenues. I don't think higher taxes mean a smaller deficit. I think, in fact, strong economic growth means a smaller deficit. And it's important that we maintain tax policy that promotes growth, and we'll continue to make that argument and make that case.

Q: In particular, though, I was surprised you didn't have a greater emphasis on spending cuts in this budget to offset whatever additional funds for Katrina -- $400 billion deficit is going to raise some eyebrows. Why not just clear out the pork in the federal budget? As you know, there's a popular outcry to do so. Why not have the White House come out against the earmarks? They're pork barrel earmarks. They've really allowed cash for legislative favors. In some sense, they're at the heart of the corruption. What's your own view on the earmark issue?

THE VICE PRESIDENT: I think the earmarks are a problem. I know from my time of running the Defense Department 15 years ago, it was frustrating then to be told by the Congress to specify spending amounts that had nothing to do with national security but were all geared to satisfy some member of Congress's political needs and requirements. And it has gotten much worse.

The bill when I -- the authorization bill at Defense used to be about 70 or 80 pages long 50 years ago. Now it's hundreds of pages long because of earmarks. One solution for this is the line-item veto. And the President has constantly supported that. If you had the line-item veto, he could reach in without having to veto the entire bill and knock out individual earmarks and do a lot to clean up that legislation. That would be a significant plus. I think you're right. I think earmarks are a significant problem.

Q: Will the White House come back? Are you going to have bigger spending cuts than in the past? Are you going to go across the board? Are you going to really say to the public, look, we know there was pork in that highway bill, we know there's pork throughout the government, we know there's a lot of agencies that could do without, or at least do with less? Are you going to be tough on the budget this year?

THE VICE PRESIDENT: Well, I just came back -- broke off a trip to the Middle East, an important trip when I was out dealing -- Iraq, Afghanistan, and so forth, to cast the tie-breaking vote in the reconciliation debate in December. This is to cut $40 billion out of mandatory spending for the coming fiscal year. And my vote was the one that got it through the Senate. We passed it 51-50. So we're committed to doing everything we can to try to restrain federal spending.

My big concern is not only the short-term problems. The President is concerned about that, as well, too. But where are we going long-term. Ultimately, I think the fate of the republic turns less upon the deficit in any one particular calendar year, fiscal year than it does on the long-term proposition we're faced with, with respect to the coming retirement of the baby boom generation, what happens to Medicare costs, and so forth long-term. Those are the problems we need to deal with. And this takes us back around to what the President was pushing very hard this year on Social Security. We've talked about it before, but we'll continue to push hard. But ultimately, we need to reform --

Q: You will continue to push hard on Social Security this coming year?


Q: The President mentioned it today in his speech in Virginia. But that is going to be a priority?

THE VICE PRESIDENT: It will continue to be a priority as long as we're here because ultimately it has to be addressed.

Q: Will you also push hard on tax reform? A recent study by the Tax Foundation says it costs a cool $265 billion a year to comply with the IRS and this tax code. Connie Mack presented you with recommendations and so forth on tax reform. Is tax reform on your list?

THE VICE PRESIDENT: It's clearly something we're looking at. I don't want to get into the business here of giving you a forecast on the State of the Union speech. That's coming up shortly. But we'll continue to look at the tax reform issues, as well. And we've talked before, I think it's very important to make the effort to maintain the reductions in rates that we've put in place now over the last five years, as well as the reduction in the tax on capital gains and dividends. We took that down to 15 percent. We need to make these changes permanent if, in fact we're going to continue the kind of economic growth that we all want to see.

Q: Speaking of regulations and so forth, what's your take on this extraordinary action by the state of Maryland which is forcing or mandating Wal-Mart to spend 8 percent of their payroll on health costs. If they don't, the differential goes to the state itself. What's your thought on that? Is this something you want to see across the country and the U.S.?

THE VICE PRESIDENT: Well, I haven't gotten into the issue in any great detail, Larry. I can't claim any expertise on it, so I'll take a pass.

Q: The Washington Post calls it a legislative mugging of Wal-Mart. What do you think?

THE VICE PRESIDENT: Well, again, I don't know enough about it, Larry, to have an opinion on it.

Q: All right, let me come back, a lot of people talk about the culture of corruption in Washington. And some commentators believe it's going to be a rough year for Republican candidates for both the House and the Senate. Your thoughts? And will you be out there on the campaign trail this year?

THE VICE PRESIDENT: I will be out on the campaign trail this year. I've already been out, and I expect to be very actively and aggressively involved.

I think it's also important to point out that from time to time we do run into problems with respect to individual members of Congress who don't adhere to the rules and regulations. We've seen that as -- no, I don't think either party has a corner, if you will, upon avoiding those kinds of problems. We had the issue of Congressman Cunningham this year. There are other issues pending with respect to the Democratic side of the aisle, as well, too. It's important that Congress conduct itself at all times in a manner above board. And when rules are broken, when laws are violated, that people be prosecuted. And I think that will, in fact, happen.

Q: Last question, sir, how do you feel? Are you ready for the battle ahead that's going to be on almost all fronts, international, economic, domestic and so forth? How are you feeling?

THE VICE PRESIDENT: I feel good, Larry. I've been very fortunate to have the opportunity to serve in this administration, and I look forward to the next three years as the President's number two man.

Q: Vice President Dick Cheney, thanks ever so much for joining us on Kudlow & Company.

THE VICE PRESIDENT: Thank you, Larry.

END 1:49 P.M. EST

Richard B. Cheney, Interview of the Vice President by Larry Kudlow, CNBC Online by Gerhard Peters and John T. Woolley, The American Presidency Project

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