This is a partial transcript from Your World with Neil Cavuto, March 4, 2003, that was edited for clarity. Click here for complete access to all of Neil Cavuto's CEO interviews.

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NEIL CAVUTO, HOST: With war drums beating louder, is now really the time to be talking dividends and tax cuts? Senator Rick Santorum of Pennsylvania says, you bet it is. He's the chair of the Republican conference. He isn't backing down one inch.

Senator, good to have you, thanks for coming.

SEN. RICK SANTORUM, R-PA., SENATE REP. CONFERENCE CHMN: Thanks, Neil, good be with you.

CAVUTO: So you still say, despite Democratic opposition, push them, push them, right?

SANTORUM: Oh absolutely. I mean, this so important for our economy.  The best thing we can do to help the war effort, both the war on terrorism and the prospective war on Iraq is to make sure we have a strong economy.  And there is ample evidence out there that the reason we have this weak economy is because of the markets, because of the devaluation of those stocks. And this will help the valuation of stocks. It will get more money in people's pockets, and will be a very positive thing for corporate governance, which is another very important reason I believe we were in the recession we are in.

CAVUTO: Senator, let me ask you something, I know you don't want to negotiate on the air, particularly live with us, but, how married are you to the 100 percent dividend tax cut? Would you be willing to, if it means passing the Senate, make it 50 percent?

SANTORUM: One of the things I realized a long time ago is number one, you don't negotiate on television. Number two, you have to understand though that The United States Senate is not a place where you get everything you want. You get as much as you can get, get the bill to conference and then you can negotiate with the House. So I would not be at all disappointed if we didn't get the entire low for the president's tax bill. But we are going to try to get as much as we can. I think this component is vitally important for the future of our economy, for the markets, and particularly for corporate governance.

CAVUTO: You know, Senator, I have heard from very high up administration officials that that is a non-debatable issue, it's either 100 percent on the dividend tax cut or none at all. Are you in that camp?

SANTORUM: I believe that that is the best way to go about it. That's something I'm for. I'm going to fight to the very end for that. As I said before, though, in the United States Senate, you know, the idea of expecting to get 100 percent, even the president's bill two years ago we didn't get everything he wanted. We had to go to conference. We had to work it out. And we came back with almost everything. And that's what I hope we do this time around too.

CAVUTO: But you are also a very good vote-counter, Senator. And you know that two within your own party and possibly more, Snowe in Maine, of course, Chafee in Rhode Island have already come out publicly against the president's package. Senator Breaux, a Democrat, a key swing vote, who voted the last tax cut package, is not for this one as it stands now. So you are already behind eight ball. What do you do?

SANTORUM: Well, one thing I do know is when the president has been focused on something he really cares about, he does a heck of a job selling it, not just to American public but here on Capitol Hill. And I have faith in him. And I have faith in the fact this is just a meritorious proposal.  It's the right thing to do for the country. It's the right thing to do for our economy. It's the right thing to do for investors. And that in the end I think will be persuasive to get the votes we need to make it happen here.

CAVUTO: Is the understanding, Senator, very quickly, that because of imminent war very likely in Iraq and the accompanying approval ratings that will likely soar for the president. that that is going to be the wind at his back for pushing this package?

SANTORUM: Well, you know, obviously, I don't think you can make connection between the two. But the fact of the matter is that this president has been very persuasive. You know, if we are in a war or after a war, obviously, having a popular president helps all of his programs here on Capitol Hill. And this will certainly be a beneficiary of that.

CAVUTO: All right. Senator Rick Santorum, thank you very much, a pleasure.

SANTORUM: Thanks, Neil, you bet.

CAVUTO: Meanwhile, for Democrats, the issue is not whether now is the time to axe the double tax, they are largely against the idea altogether.  They say there are other ways to boost the economy. Fair and balanced.  Now reaction from the other side of the aisle, New Jersey Democrat Frank Lautenberg.

Senator, good to have you.

SEN. FRANK LAUTENBERG, D-N.J.: Hi, Neil.

CAVUTO: What do you make of that argument, that we have to do this, it is for good of the economy?

LAUTENBERG: Well, I think, if we do it, it is to the dread of the economy. There responsible voices all over, 11 Nobel Prize winners, that think this is a terrible idea. Look at what's happening with deficits now. They are ballooning. When President Bush took office, we were leaded for a $2 trillion-plus surplus for the next 10 years. Instead, the prospects are for a $5.5 trillion deficit.

CAVUTO: But Senator, no offense, I had you on this air before you were reelected in New Jersey, and the fact of the matter, you didn't trust those numbers when they were surpluses because they were unreliable, you said, six months ahead, let alone 10 years ahead.

LAUTENBERG: Well, listen, there is some doubt about these things.  But on the other hand you have economists of note, Nobel Laureates, who are saying this is a poor idea. When you look at what happens with the dividend tax exemption, over half of the dividends now go to tax exempt recipients.

CAVUTO: But the fact of the matter is, Senator, most people, a lot of older people get those dividends. A lot of Americans are investors, better than 50 percent of them. What's wrong with cutting them a break?

LAUTENBERG: Well, the fact of the matter is that it doesn't do anything for the economy, to stimulate it. And it furthers the deficit.  And at some point along the way that is going to be a real shock to our economy. If you see interest rates going up, after all, one of the sectors that is now still prospering is the housing sector. Now why is that? It is because interest rates are so low, and mortgages are so attractive.

CAVUTO: But Senator, that is my point exactly. Interest rates have stayed low through these deficits that have been building up the last couple years. And by the way, they stayed relatively low through the '80s, a point bemoaned by many Democrats through the Reagan tax cuts.

LAUTENBERG: Yeah. But, Neil, the reason that interest rates are low, is because we are in the significant recession. The fact of the matter is that with all of the low interest rate money available, none of the startup companies can get it. And you know, I started a company many years ago that succeeded handsomely. And.

CAVUTO: So you would say no tax cuts, Senator, at all?

LAUTENBERG: Well, I would say that tax cuts ought to be limited to those who are in the middle range of the income cycle, those who need the money to send their kids to school, who need it to take care of their health care needs, need to it pay off their mortgages. The people like me, and I'm not bragging, but I had a successful business, a very big business, now over 40,000 employees, I don't need a tax cut.

CAVUTO: But there are a lot of people, Senator, who are not as rich as you are, who still benefit from that tax cut. And they say, Senator, fine, you want to keep your money, that's OK, but I could use it.

LAUTENBERG: Yes. But those people deserve it.  But the people among the wealthiest in the country -- their average income is over $300,000 -- will benefit to the tune of about 49 percent of the...

CAVUTO: Even though they already pay the most taxes, right?

LAUTENBERG: Well, that isn't a rational economic reason.

CAVUTO: OK.

LAUTENBERG: Neil, you are a very clever guy. You know that you double tax on all kinds of things. Every time you buy something you have a sales tax, you have already paid tax on that, the income you used to buy it. So it.

CAVUTO: Senator, thank you. I'm sorry, sir.

LAUTENBERG: It was good to be with you.

CAVUTO: Thank you very much, Senator Frank Lautenberg on Capitol Hill.

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