CNBC Kudlow & Cramer - Transcript

CNBC News Transcripts

SHOW: Kudlow & Cramer (5:00 PM ET) - CNBC

HEADLINE: Former White House economic adviser Glenn Hubbard and Senator Jon Corzine of New Jersey discuss economic policy

ANCHORS: LARRY KUDLOW; JIM CRAMER

BODY:
LARRY KUDLOW, co-host:

Anyway, having said all that...

JIM CRAMER, co-host:

Thank you.

KUDLOW: The stock market is lagging and jobs are an issue. Could a Kerry administration do better? Well, tonight, surrogates for Bush v. Kerry. In this corner, Glenn Hubbard, former chairman of the Council of Economic Advisers, and in that corner, Mr. Jon Corzine, Democratic senator from New Jersey. Senator Corzine, in honor of your being from New Jersey, which is the home state of my colleague...

CRAMER: Indeed!

KUDLOW: ...Treasury Secretary Snow told us a few moments ago that he felt higher taxes and new rounds of tariffs would be very damaging to economic recovery. I will give you a chance to respond, sir.

Senator JON CORZINE (Democrat, New Jersey): No one is advocating a new round of tariffs that I know of. I think actually the Bush administration's the only one that I've seen actually lay those down with regard to steel, actually, in quite a long period of time. As it relates to tax increases, letting expire some of the tax cuts that have been put in place that were already scheduled to expire, I don't think is going to undermine the economy. In fact, I think the results we've already gotten show that they have not been that powerful a potion for creating jobs in America, and they've certainly been a powerful driver for creating a deficit. It's gone from about a $10 trillion negative cash swing since the Bush administration has been in office and its proposals with respect to tax cuts, and I think it's been-it's actually fairly tragic given the challenges that we know that we have with the entitlement programs and Medicare and prescription drugs and our Social Security system going forward, at a time when we're trying to fight a war on terrorism.

CRAMER: Right. We've got great talkers. Professor Hubbard, you heard that you were instrumental, and Larry and I were in favor of it, of the dividend tax cut. Why don't you-could you please give the other side to what Senator Corzine said?

Professor GLENN HUBBARD (Council of Economic Advisers Former Chairman): Well, sure. I think first of all the tax cuts that President Bush championed and Congress agreed to have been very helpful for the economic recovery and for the markets. Also, of course, Senator Kerry has two very large tax increases in store for the American people. One is the tax increase he's admitted to, which could be about $700 billion on upper-income taxpayers and entrepreneurs. The other's an additional trillion dollar tax increase that would be necessary to fund his new spending plans. It's hard to see that as a recipe for economic growth.

Sen. CORZINE: Is that-you know, by that logic, the privatization of Social Security would be an automatic $2 trillion tax increase because that's what it's going to cost to transition from current structure of Social Security to the president's proposal to privatize, at least according to his proposals on reform of Social Security.

Prof. HUBBARD: No, you-no, come on, I mean, you...

Sen. CORZINE: I mean, that's actually a bogus kind of analysis to say that because this kind of program is not stated in its funding, that it's therefore going to end up leading to those kinds of tax increases, I mean, we could follow the approach of the current administration, is just run up deficits, credit-card it.

Prof. HUBBARD: Let's do some economics and then some arithmetic. On the economics, with transition costs and Social Security, if you prefund your mortgage, you have not increased your cost. This is a matter of just timing, as you well know. On the accounting, Senator Kerry has proposed $1.7 trillion in new spending. The tax increase he's talked about at most is $700 billion. That leaves a full trillion dollars. That's just arithmetic.

Sen. CORZINE: Glenn, I think you've-first of all, there's a bunch of double accounting in here because I've gone through these numbers very precisely. It doesn't allow for any of the closure of tax loopholes and offshore corporation funding. There's a whole series of issues that are just left out. It's just bogus analysis and I don't think the Bush administration would want its proposals that it's laid down to stand up to this kind of scrutiny.

KUDLOW: Senator...

Sen. CORZINE: Senator Kerry has talked about...

Prof. HUBBARD: Well, wait. Hold on, hold on, hold on. The president has a budget, a document, which of course you have, that is very, very specific on taxes and spending. What we have from...

Sen. CORZINE: The one that says $540 billion budget deficit this year?

Prof. HUBBARD: That's correct, and shrinking in half every five years.

Sen. CORZINE: I guess that means we're going to have a $540 billion tax increase?

KUDLOW: But, Senator Corzine, can I ask you, really, a two-parter? Number one, if the economy grows at its 3 ½ percent historic rate, we'll have surpluses by 2011 or 2012. The CBO numbers are 2.8 percent. And number two, are you suggesting tonight, sir, that Mr. Kerry will let the tax cuts expire? In other words, he will not reverse them until 2008 and 2010? Is that what you're representing?

Sen. CORZINE: Senator Kerry has said that for those who received tax cuts above $200,000, those tax cuts...

KUDLOW: They go immediately.

Sen. CORZINE: They will go.

KUDLOW: Immediately.

Sen. CORZINE: They will go. I think, actually, they will expire where it fits into the normal expiration process and some of them, you'll have to take a proactive approach on. But you know what? You know, this whole issue about level of taxation in this economy strikes me as relatively hard to understand. When we created 22 ½ million jobs, when we balanced the budget, when we had the largest growth and productivity until actually just some of the most recent quarters, the most successful period in economic history-actually, in the United States history was in the 1990s. And now we're saying somehow or another, that wasn't good enough and we had to make all these changes and all it has led is...

CRAMER: Oh, I...

Sen. CORZINE: ...to a decline in jobs.

CRAMER: Senator Corzine, I'm going to have to be rude and interrupt. Glenn Hubbard, Senator Corzine, terrific to have you. Hope you'll come back. You guys were...

KUDLOW: We didn't give it enough time.

CRAMER: Yeah, I mean...

KUDLOW: We need more time.

CRAMER: We need more-and we dropped out of the picture and let them talk.

KUDLOW: Well, you guys are good.

CRAMER: Yeah.

KUDLOW: You guys are both good.

CRAMER: You guys were great.

Prof. HUBBARD: Thank you.

CRAMER: Thank you so much.

Sen. CORZINE: Thanks.