• This is a rush transcript from "Your World With Neil Cavuto," August 5, 2008. This copy may not be in its final form and may be updated.

    NEIL CAVUTO, HOST: Meanwhile, flipping out over flip-flops — the McCain camp today not buying that Barack Obama is, all of a sudden, supporting more drilling, saying his words speaks for themselves.

    (BEGIN VIDEO CLIP, AUGUST 2, 2008)

    SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: This wasn't really a new position. What — what I'm saying is that we cannot drill our way out of the problem.

    (END VIDEO CLIP)

    (BEGIN VIDEO CLIP, JULY 30, 2008)

    OBAMA: I know it's tempting. The polls say the majority of Americans think that that is one of the ways we're going to solve this problem. But it is not real.

    (END VIDEO CLIP)

    (BEGIN VIDEO CLIP, JUNE 20, 2008)

    OBAMA: Offshore drilling would not lower gas prices today. It would not lower gas prices tomorrow. It would not lower gas prices this year. It would not lower gas prices five years from now.

    (END VIDEO CLIP)

    CAVUTO: Former presidential candidate Mitt Romney weighing on just that moments ago.

    Video: Watch Neil's interivew with former presdiential candidate Mitt Romney

    (BEGIN VIDEOTAPE)

    MITT ROMNEY (R), FORMER MASSACHUSETTS GOVERNOR: Well, you know, I think he's trying to have it both ways, actually. He's — he's been pretty clear that he still opposes offshore drilling. And John McCain is in favor of offshore drilling.

    Barack Obama wants to say, well, he would consider it as part of a comprehensive plan. But, look, the Democrats have control of both houses in Congress. And, if he were president, he would have, obviously, an enormous sway. And he opposes offshore drilling, as the Democrats do. And we need it in this country, just like we need nuclear power.

    John McCain is right on these issues. Barack Obama is wrong.

    CAVUTO: Let me ask you, Governor, there are press reports now that Speaker Nancy Pelosi has been telling Democratic members, "Look, I'm going to stand firm on opposing a vote on this issue, that is, drilling, but you can go ahead and tell your constituents you're for it," and, essentially, everything will be hunky-dory."

    What do you make of that?

    ROMNEY: Well, I think she's — she's playing practical politics.

    She should, of course, allow her members to vote their conscience. And — and, frankly, what's right for America is for us to finally become energy-independent. And, for that to happen, it will require — if you will — every source of energy we have and every source of efficiency.

    And that means nuclear power. It means offshore drilling. It means more natural gas. It means liquefied coal, as well as ethanol, solar, wind power. T. Boone Pickens' wind power idea is a good one.

    We're going to have to develop all these sources. John McCain is for all of those. Barack Obama will just pick and choose. And, frankly, the ones he picks and chooses are not enough to get us energy-independent or to affect in a significant way our oil prices long term.

    CAVUTO: But, dating back to the debates, when you were still in the race, Governor, John McCain was not nearly as much of a fan for drilling as he has become one now.

    Now, obviously, higher energy prices had a lot to do with that. But is he just as guilty of flip-flopping as Senator Obama?

    ROMNEY: Well, I — I didn't accuse Barack Obama of changing his position. I accused him of trying to have both positions at the same time, and it's not going to work.

    He's been pretty clear that he still opposes offshore drilling. And John McCain, recognizing that we're suffering from $4-a-gallon gasoline prices, along with George Bush and many, many others, Republicans and Democrats — Nancy Pelosi pointed this out to her own Democrats — people are saying, you know what, we've got to change.

    And Barack Obama hasn't been willing to change. John McCain has. He favors offshore drilling, and we need it.

    CAVUTO: Let me step back a little bit and talk about matters today.

    I know you generally don't like to get into issues of addressing what the Federal Reserve does or doesn't do, Governor, but, as you might be aware, the Federal Reserve passed on a move on interest rates today, strongly hinted, though, that its next move would be one to tighten. The question is when.

    And, if rates start going up in a slowing economy, does that worry you?

    ROMNEY: Well, the Fed is in a very difficult position, because they know that, if they raise rates, that it will slow down the economy. And, in an already slow-growth economy, that's troubling.

    At the same time, they realize that, if they don't raise rates, they will risk a continued weakness in the dollar. They will risk rising inflation, which, long term, also hurts the economy and hurts the American family.

    So, they're in a real difficult position right now. And it's caused in part by this extraordinary mortgage crisis, as well as by the exceptionally high prices that are being charged for oil around the world by these oil-producing nations.

    And — and, so, the Federal Reserve is watching — is walking a tightrope. And they're watching it month to month to see if there's some way they can encourage the economy to grow, while, at the same time, holding down inflation. And I'm — I'm not surprised to see that they're thinking about raising interest rates, because of their concern about the rising prices associated with — with the rise up — or the increase in energy costs.

    CAVUTO: Governor, there was one very conservative member of your party who would argue that everyone's become Democrats now, everyone's in favor of spending measures and fiscal relief and urgent bailouts, John McCain included, to the point that no one addresses the costs of all these things, that it's become politically expedient to just allow these things.

    Does the Republican Party — should the Republican Party stand against these?

    ROMNEY: I think you're going to find, in John McCain, over his entire legislative history of some 25-plus years, an individual who stands up against spending and stands up against bailouts and sending checks to various companies. As a matter of fact...

    (CROSSTALK)

    CAVUTO: Yes, but he's been for the ones we have had, Governor, and they're not cheap.