The following is a transcript of Neil Cavuto's interview with Vice President Dick Cheney that took place June 25, 2004.

NEIL CAVUTO, HOST: Mr. Vice President, great to have you at Fox. Welcome.

RICHARD CHENEY, VICE PRESIDENT OF THE UNITED STATES: Good to be on the show.

CAVUTO: First, on the economy (search), you were talking it up here today in a speech. We got more good economic news today, existing home sales at a record pace after yesterday, new home sales at a record pace. Does it bother you, though, that in the media it is still not trumpeted that much?

CHENEY: Well, I think the evidence is overwhelming that the economy is doing very well. We've come through the recession and the aftermath of 9/11. I think it's — it's beginning to sink in with the public as well, too.

You know, in this business, you don't have any control over what the press says and how they portray things. And that's their prerogative. But I think anybody who looks at it objectively has trouble making the case that somehow this is a bad economy. Our opponents...

CAVUTO: But, still, the other side is saying that it's the worst since the depression.

CHENEY: I know, and I just — I think when you say what John Kerry said, that it's — when he makes the claim that it's the worst economy since the great depression, nobody believes that. I mean, it's — it's — one, it's not true, and two, for that statement to be made I think just undermines his credibility with the voters.

(CROSSTALK)

CAVUTO: Still — and, again, it depends on the survey. I know there was one out of the University of Michigan today, sir, that showed an uptick in consumer sentiment. But there are a lot of other surveys, and even some polls, where Americans don't feel as gung-ho about the economy as you do. What do you say to them?

CHENEY: Well, we keep doing events like today, get out and talk to folks, have an opportunity to explain to them what our policies are and why we think they're working. You just have to go out and get a big bullhorn and convey the message just as often and aggressively as you can. And that's what we do.

CAVUTO: Are you afraid, though, that Alan Greenspan is going to rain on your parade?

CHENEY: No. I'm a big fan of Alan Greenspan's. I've known him for over 30 years.

CAVUTO: You were both in the Ford administration. He was Mr. "Whip Inflation Now."

CHENEY: I've sworn him in twice now as chairman of the Federal Reserve. I think he's done a superb job for the country. And that's what he gets paid to focus on. And I think we have to give him a lot of credit for the policies that the Feds pursued over the last three years that have clearly made room for the expansion we're on now, which is a very low rate of inflation, very low rate of interest. And so I think he's done a great job.

CAVUTO: All right. Now, the feeling seems to be, sir, that he's going to start raising rates a week from now, and that in order for them to adjust to where we are now, at the very least, they would have to double. Short-term interest rates would have to double. Now, they're very low, but are you comfortable with that?

CHENEY: Well, the Fed will make Fed policy. That's as it should be. I mean, the administration, White House, president and I have no involvement in that process, nor should we. Do we really want an independent central bank responsible for that?

And I say, we've got great confidence in Greenspan and his colleagues making sound decisions. It's a good group, and they don't want to choke off the recovery or the expansion. On the other hand, they've got obligations as well with respect to being concerned about inflation. And I don't have any reason to doubt that they'll make good, sound policy.

CAVUTO: Now, higher interest rates can't control higher energy prices. So that's the conundrum, as you know, the Fed has to deal with. But are you worried that energy prices, gas prices, oil prices have stayed so high for this long?

CHENEY: Well, it has stayed high, without question. And we've got significant worldwide demand out there. We look specifically at oil prices; there's less excess capacity that can be tapped in a time like this than has been true for many, many a year. And the economic growth in China, for example, has placed enormous additional demand.

And the fact of the matter is, we've been trying to get an energy passed, energy policy in place through the Congress now for three years. Now, we've gotten it through the House a couple of times. We still haven't been able to get enough votes in the Senate to get it in place.

But, to some extent, as a nation, we end somewhat ambivalent about energy. On the one hand, we put large chunks of the country off limits to any energy development. And on the other hand, we complain when gas prices go up because the international marketplace dictates higher prices.

We can't have it both ways. So we're going to have to adjust and produce more here at home if we want to, and then conserve more.

In terms of its economic consequences, though, a key figure for me, or statistic for me, is that in 1981 energy took about 8.5 percent of our GDP. Today, it only accounts for about 3.5 percent of our GDP. In other words, we do a lot more with less energy than before. We've gotten to be much more efficient consumers.

We conserve better. We use it more efficiently. And per unit of output of GDP, we use less energy now than we ever have in our history.

CAVUTO: But, still, I mean, for the average American, sir, who's looking at paying higher gasoline prices, are you afraid that wipes out whatever benefits the typical American has gotten from those tax cuts?

CHENEY: Well, I don't think that's happened, because I think the economic results are there for all to see, that the tax cuts have been significant, worked out to a little over $1,500 per family across the family. And anybody who's paid income taxes has seen their taxes go down.

And a lot of it was targeted, too, at various parts. The small business treatment, and so forth, it was designed to encourage savings and investment and new hires. So I think the tax package has worked without question.

Now, there's no doubt but when gasoline prices go — go up, that's an additional added expense for the consumer. But if we look at those prices in real terms, adjusted for inflation, they're not has high now as they have been in periods in the past.

CAVUTO: Do you think they'll come down?

CHENEY: I think so, as we get through the summer driving season, we get into the fall. I think we'll be able to do that. But, you know, we complicate our lives enormously in the energy field.

We've got — I talked to a — a CEO of a major oil company the other day. He has to produce something like 51 different grades of gasoline for the U.S. market because of our Clean Air Act requirements and the fact that, you know, what you produce and sell in Detroit probably doesn't satisfy the requirements in Chicago, doesn't satisfy the requirements in Peoria.

You've got to have a different blend of gasoline for each and every one of those jurisdictions to meet the air quality standards. That complicates it. You can't import as much refined product from Europe as you used to be able to do because they don't produce any other product...

CAVUTO: Right. And Iraq complicates it, right?

CHENEY: Iraq complicates it in an international situation where you've got maybe only a million or two barrels of excess capacity out. And...

CAVUTO: But what if they shut down? What if the terrorists succeed, sir, in shutting down all Iraqi oil production for, let's say, even a few weeks? What would be the fallout here?

CHENEY: Well, first of all, I don't think that will happen. I think it will be disrupted from time to time. The Iraqis are getting better and better at managing that whole process. And as they rebuild the infrastructure and if they get more security — if they get more security forces deployed out there, I think the production will be more dependable and reliable. But there are other — other factors at work, too.

I think the markets, to some extent, have discounted that risk. It's already built in. We've also got our Strategic Petroleum Reserve. And the basic reason it's there is, if there were a major interruption in supply, then you'd tap the reserve.

CAVUTO: So if Iraq were shut down, Mr. Vice President, would you be inclined, would the administration be inclined to tap the reserve?

CHENEY: That's a decision the president would have to make. He'd make it at the time.

CAVUTO: Would you advocate that he do that?

CHENEY: It would depend on circumstances. I mean, the fact of the matter is, we went through a period here at the time that we actually launched into Iraq in the spring of '03. We had significant reduction in Venezuelan production and, of course, disruption in the flow out of Iraq. At that time, the Saudis made up a significant portion of the difference and were able to bring additional supplies on. And we never had to release the reserve. Sometimes that reserve is more valuable if it's there in its potential.

Impact on the marketplace has to be considered rather than actually using it. But you'd have to sit down and look at the circumstances at the time and decide whether or not the disruption met the — what you'd consider to be the requirements so you were willing to tap that strategic reserve.

CAVUTO: Right. Yesterday, Al Gore was speaking on Iraq, Mr. Vice President. And he had said that you and the president were perpetuating an artful and important lie about leaks between Saddam Hussein and al Qaeda to justify the war in Iraq. What do you say?

CHENEY: Well, Al Gore I don't think has looked very carefully at the evidence here. I didn't see his speech. I had just seen some press commentary on it.

I think the evidence is overwhelming that Saddam Hussein was an evil man. He ran one of the worst dictatorships of the 20th century. He had produced and used weapons of mass destruction in the past. He had provided a safe haven for terrorists.

The Abu Nidal organization was headquartered in Baghdad. The Palestinian Islamic Jihad used to operate out of there. He had an established relationship with al Qaeda.

The 9/11 Commission members say, yes, they did find evidence of links. Not to 9/11, but links between Iraq and al Qaeda.

CAVUTO: So, in your eyes, as well there is an unmistakable link between Al Qaeda and Iraq?

CHENEY: Absolutely.

CAVUTO: That seems to be — the vice president (UNINTELLIGIBLE) and John Kerry has been saying that has not been proven.

CHENEY: Well, they're wrong. And the fact is, if you go look at George Tenet's testimony before the Senate intel committee in the fall of '02, he talks about a relationship going back 10 years, to the early '90s.

There's a story on the front page of The New York Times this morning that talks about a link between Iraq and al Qaeda when Saddam Hussein was operating in the Sudan, which he did for many years before and moved to Afghanistan. We have the whole case of Zarqawi, who is today probably the biggest terrorist operating in Iraq, and the ongoing conflict there.

He originally was Jordanian. He was an associate, an al Qaeda associate. He was operating training camps in Afghanistan. He fled to Baghdad after we took Afghanistan.

Saddam Hussein knew he was in Baghdad because we arranged to have that information passed to — to a third country intelligence service. In Baghdad, he ran the poisons facility, largest poisons facility we've ever found that al Qaeda was operating up in northeastern Iraq. He had about two dozen associates with him in Baghdad from an outfit called Egyptian Islamic Jihad, which had merged with al Qaeda.

Zawahiri, who's bin Laden's number two, used to run the EIJ. And all of them, that operation, was in Baghdad prior to the time we launched in there.

He's a man who ordered the killing of Laurence Foley. He tried to smuggle riacin and other products out of that poisons factory. People had been trained in the poisons factory in order to..

(CROSSTALK)

CAVUTO: Where is all that stuff now? Where are all those?

CHENEY: Well, we destroyed the facility when we went in and...

CAVUTO: Right.

CHENEY: ... we launched air strikes on them when we first went in.

CAVUTO: But in your gut, Mr. Vice President, do you think it's still hidden or that it's been discarded (ph) away, some say Syria, some other countries. What do you think?

CHENEY: I think there — we're finding — well, Charles Duelfer, who's now in charge of the Iraq Survey Group, was — just yesterday made announcements that they found additional cells — shells which have tested positive for sarin. And clearly, Saddam Hussein had produced or used weapons of mass destruction in the past. He used it against the Kurds; there's no question about that.

He used it against the Iranians in the Iran-Iraq war. You can go up into northern Iraq today and go to the fields where the thousands of people are buried that were killed with chemical weapons by Saddam Hussein back in the — I think 1888 — 1988.

The — so there's no question about what he's had and has used it in the past. We're now finding — we found a shell the other day that had been wired up as an explosive device that contains sarin. So we're finding...

CAVUTO: So you think we'll find something conclusive?

CHENEY: Well, we're finding, I'd say, at least at this point, items from stockpiles that were never reported, that were never accounted for. Some of it predates the Gulf War. So there's no doubt in my mind we'll find some of that stuff.

Now, exactly how much that's brand new or recent, that's hard to say. It's just — it's still a very big country, there's still a lot of work to be done in terms of looking for it. But the notion that somehow — you know, it's as though people are going back, trying to scrub Saddam clean here now, this is really just a poor, misunderstood fellow there in the Middle East.

CAVUTO: Right.

CHENEY: We've got to remember now what (UNINTELLIGIBLE) and why we did it. And if we had to do it all over again today, we'd do it absolutely. We've liberated in the last three years 50 million people in Afghanistan and Iraq. We got rid of brutal dictatorships, set them on the path towards establishing democracies and representative governments.

CAVUTO: But does it bother you that a lot of them appear pretty ungrateful?

CHENEY: Well, some of them do. But I think the Iraqis — I think they're going to make it. It's tough, it's not easy to do. It's a very hard task. But we've only been at it 15 months.

CAVUTO: Yes.

CHENEY: And look at what we've done already. Saddam's in jail. His sons are dead. His government's gone. We've stood up an interim government there in its place.

We've got — in Afghanistan, we've got a new constitution written. Hamid Karzai addressed a joint session of Congress last week.

CAVUTO: Right.

CHENEY: He'll have free elections later this year. The Iraqis will have elections in January. And we're standing up effective security forces in Iraq so they can take over more of the responsibility for establishing security there so our guys won't have to do it.

So we're heading in the right direction. And it's important for us to — to get the job done. We don't want these countries to revert back to what they were before.

CAVUTO: All right. Sir, a couple of little issues I want settled, or maybe to get the real skinny on. One was this blowout you had the other day with Senator Patrick Leahy of Vermont. What happened?

CHENEY: Well, I guess you could say we had a little floor debate in the United States Senate.

CAVUTO: I heard it was more than a debate.

CHENEY: Well, I expressed myself rather forcefully, felt better after I had done it.

CAVUTO: All right. Now, did you use the "F" word?

CHENEY: That's not the kind of language I usually use.

CAVUTO: All right, because the reports were that you did.

CHENEY: Yes, that's not the kind of language I ordinarily use. But...

CAVUTO: What did you tell him?

CHENEY: I expressed my dissatisfaction for Senator Leahy.

CAVUTO: Over his comments about you and Halliburton?

CHENEY: No. It was partly that. It was partly — also, it had to do with — he is the kind of individual who will make those kinds of charges and then come after you as though he's your best friend. And I expressed, in no uncertain terms, my views of the — of his conduct and walked away.

CAVUTO: Did you curse at him?

CHENEY: Probably.

(LAUGHTER)

CAVUTO: Do you have any regrets?

CHENEY: No. I said it, and I felt that...

(CROSSTALK)

CAVUTO: So let me understand, he comes up, he sees you, Mr. Vice — he's all nice, shakes your hand. And then what do you do, let into him?

CHENEY: Explain my unhappiness with the way he conducted himself. Ppart of the problem here is, that instead of having a substantive debate over important policy issues, he had challenged my integrity. And I didn't like that. But, most of all, I didn't like the fact that after he had done so then he wanted to act like, you know, everything's peaches and cream.

And I informed him of my view of his conduct in no uncertain terms. And as I say, I felt better afterwards.

CAVUTO: All right. Now, they say you broke decorum for normally a Senate or congressional session. Now, technically, I guess, it wasn't in session.

CHENEY: No, we weren't in session. What we were doing was waiting to take our pictures, our official Senate photo. And I go up and sit in the chair, as the president of the Senate (UNINTELLIGIBLE).

CAVUTO: What was reaction from the crowd?

CHENEY: Well, I think that a lot of my colleagues felt that what I had said badly needed to be said, that it was long overdue.

CAVUTO: Pretty feisty guy, aren't you?

CHENEY: Well, I'm usually fairly calm (UNINTELLIGIBLE).

CAVUTO: Your wife's just a few feet away.

CHENEY: And ordinarily I don't express myself in strong terms. But I thought it was appropriate here.

CAVUTO: You sounded like me in one of my staff meetings.

CHENEY: Yes.

CAVUTO: Let me ask you, the Supreme Court yesterday, as you know, sir, refused to force you to open up those energy force panel records. For now, I guess, they kick it back to a lower court. Is that a victory, or is it just a matter of time before you will have to reveal?

CHENEY: No, it's a very important victory. It's not a matter of not wanting to reveal. Everybody thinks I'm — you know, I'm into secrets here.

There's a very important principle involved here, Neil, and that is that the president of the United States and the vice president need to be able to solicit advice from whatever source they want to solicit it from. They need to be able to do that in confidence if they're going to get people to deal honestly with them as they consider policy options and have to make important decisions.

And what we did with respect to the energy task force was exactly that. Now, we set up a group of government officials, and — as we do with national security issues or anything else, cabinet members, senior White House officials, and came up with a set of options for the president, which he then made public and which went forward as our energy policy.

The Sierra Club and another group have come in and demanded to know everything. Initially, the demand was they wanted to know everybody I had met with, they wanted to know everything that had been said. They wanted memos of meetings and so forth. And we basically said no, that those people had talked to us in confidence, not with any expectation that this material was to be made public. And...

(CROSSTALK)

CAVUTO: I know you can't talk about that, but would there be anything that one could glean from that, given your past dealings with the energy industry, that would look weird?

CHENEY: Well, but what happens oftentimes — what has happened to the presidency is we — we've eroded the power of the presidency over time, oftentimes to relieve the pressures of the moment. They'll simply concede points, and this had happened previously.

What I did, with the approval of the president, is said we're not going to do that, and that there's a very important principle here in terms of separation of powers and the ability of the executive branch to make decisions without having anybody, for example, to be able to go to court and get a judge to direct discovery so that they can pore through all of the papers and all the recommendations and, in effect, inhibit that decision-making process in the executive branch.

And the Supreme Court basically sustained that position. In effect, what they said was that the — they directed the circuit court now to take into account this whole separation of powers issue and the arguments that we made in this lower court levels and go back and readdress this question of whether or not the case should proceed.

I think it was a very significant victory for the principle, that separation of powers is important, and that you have to give due regard and deference, if you will, the court should, to the ability of the president and the executive to be able to make sound policy decisions and not inhibit that process by what were called vexatious lawsuits. I think it's a good decision.

CAVUTO: Mr. Vice President, how are you feeling?

CHENEY: Very good, well behaved. Just back...

CAVUTO: Well, your wife might dispute that, but we'll go with that.

CHENEY: No, no. We're just back from a physical, oh, within the last month, and I got a clean bill of health going forward. I do that very — every year.

I'm careful. I've got a large number of medical people who look after me and follow me around.

CAVUTO: Yes. Have you changed your diet? I mean...

CHENEY: No, I watch — watch it carefully...

CAVUTO: Yes.

CHENEY: ... what I eat, and exercise on a regular basis. Got an exercise room full of equipment at the house. And trying to take care of myself. I'm 63 years old and have a certain medical history, so you have to be moderate in your behavior.

CAVUTO: Yes. It always come at a time, you know, you had some Republicans, sir, who say, well, maybe, maybe because the race looks as tight as it does that the president ought to replace Dick Cheney. And you hear that (UNINTELLIGIBLE) the president's indicated obviously he stands by you. What have you told him?

CHENEY: About what?

CAVUTO: Staying on the ticket?

CHENEY: Well, he asked me to stay and I've agreed.

CAVUTO: So all this talk that there's maybe secret rumblings that maybe before the convention you'll be asked to step down or that you will step down, not true?

CHENEY: No. He asked me last fall, and reiterated again once more he wanted me on the ticket. The only reason I'm here, Neil, is because he asked me to be here.

CAVUTO: Right.

CHENEY: The first time he asked me to serve as his running mate in the last campaign I said, "No, thanks." I really didn't want to do it. And then he asked me to help him find somebody, which I agreed to do.

Then over about a three-month period of time we worked very closely together. I developed a very high regard for him and the way he thought about the job. And at the end of that period he said, "Look, you're the solution to my problem. I want you to be my running mate."

And I signed on. It's been four years ago now. Don't regret it for a minute. It's been an amazing experience. But I'm there as long as he wants me.

I'm not there any longer than he wants me. I'm there specifically to serve him. And he's indicated he wants me to run again, and I've signed up.

CAVUTO: You are the vice president of the United States.

CHENEY: That's right.

CAVUTO: You're one step away from being president of the United States. Are you seriously not interested if the president is re-elected in running for president?

CHENEY: I looked very carefully at running myself back — this was the 1994 timeframe. And I thought about running. That would have been in the '96 cycle.

CAVUTO: Right.

CHENEY: I went out and spent about a year, raised a lot of money (UNINTELLIGIBLE), did 160 campaigns in that election cycle around the country. All those things you would do if you wanted to run. And then I sat down over the holidays and — with the family to decide whether or not I wanted to run for president myself.

And I concluded I did not. That I wasn't prepared to do those things I would have to do if I was to be a serious candidate for president for the next two years after that. And it was a good decision. It made sense then, it makes sense for me now.

And then I went off to private life. And I enjoyed that very much. The only reason I came back, as I say — and I did so reluctantly at first — was because I came to believe in George Bush and because he asked me. And I think when a president of the United States asks you to take on an important assignment, you try to do it if you can.

But this is my last campaign. I have no desire or aspiration to run for anything else, not to run for president in 2008. And so this will — this will be it.

CAVUTO: This is it?

CHENEY: Absolutely. And part of the reason the relationship works as well as it does is because he knows I'm there to serve him, that I don't have any other agenda, that I'm not worried about what the county chairman in — in Ottumwa, Iowa, is going to think about the...

CAVUTO: Yes.

CHENEY: ... caucuses in Iowa or how that's — how he's going to look at me. That's not on my radar screen. I'm there specifically to give the president the best advice I can to do what he needs to have done.

I'll say I've loved working for him. It's been a remarkable four years when you think about all that we've been through as a nation. And I wouldn't have missed it for the world. But it will end in January of '09 when we swear in our successors.

CAVUTO: Mr. Vice President, a real pleasure. Thank you very much.

CHENEY: Neil, I've enjoyed it.

CAVUTO: Thank you, sir.

CHENEY: Good to see you.

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