This is a partial transcript from "Your World with Neil Cavuto," July 31, 2006, that was edited for clarity.

NEIL CAVUTO, HOST: The president has a powerful message for Iran and Hezbollah, not-so-accidentally linked, in a rare one-on-one granted me just a few hours ago.

Welcome, everybody. I'm Neil Cavuto, and this is "Your World," today from Miami, today with the president of the United States, talking very tough on terror.


CAVUTO: Mr. President, really good to be here.


CAVUTO: Thank you very much.

BUSH: Thanks.

CAVUTO: Reaction to the Middle East — we had a temporary suspension of hostilities. They were renewed this morning. What do you think?

BUSH: I think — first of all, I — I think your viewers ought to focus on the fact that the U.N. Security Council passed a resolution about Iran. And the world is coming together and making it clear that — to the Iranians, that their ambitions — their nuclear weapons ambitions — are just not acceptable.

Secondly, I do believe that we — we have an opportunity to work with our partners and allies to put a Security Council resolution in place that — that obviously reduces violence, but also addresses the root causes of the problems, which were, you know, terrorist attacks from Lebanon into Israel.

One of the things we have got to work on in order to address the root causes is strengthen the Siniora government. We want the — that young democracy in Lebanon to succeed. And one way to help it succeed is to help the Lebanese army move to the south, and then, with help from, you know, forces from elsewhere, begin to bring some security to the region, for the sake of the Lebanese people and the Israelis.

CAVUTO: But do you think, in light of what happened in Qana, that now there — there's more pressure on Israel to stop?

BUSH: I think there has been a lot of pressure on Israel to stop. But Israel is a sovereign nation, and, you know, she will defend herself. What we have got to do is put pressure on the — on the — on the world to help create the conditions, so that, when there's a cease-fire, it lasts.

See, stopping for the sake of stopping, you know, is — is — is — can be OK, except it won't address the root cause of the problem. And the root cause of the problem is armed militias firing rockets from a sovereign nation into another sovereign nation. And we want to work with the Lebanese government and other nations around the world to help deal with that issue.

And, look, it's a terrible situation where innocent people lose their lives. And yesterday's situation was awful. We — I understand that, but it's also awful that a million Israelis are worried about rockets being fired from their — from their neighbor to the north.

And, so, Condi is going to come back tonight and brief me about what she's — what she heard, you know, what she's — what — some of her conversations. And we will work with our allies in the U.N. Security Council to put a resolution forward that, you know, hopefully, will work, but will work in a sustain — for a sustainable peace.

CAVUTO: But if Hezbollah's not completely disarmed, Mr. President, is it fair to say that Hezbollah has won?

BUSH: Well, no.

You know, I think it would be — I think, if we can get a Lebanese force down there with some — some help of — from some other nations, it is — one will be able to say that we're beginning the process of implementing 1559, which...


CAVUTO: And the U.S. would be part of that force, sir?

BUSH: Probably not, but we would be glad to help, you know, through logistics and/or command and control. But most nations understand that we won't have troops there on the ground.

CAVUTO: You know, Iran has paid no attention to this latest U.N.-imposed deadline, where sanctions could kick in. Do you think they're looking at the Hezbollah-Israeli situation as an excuse to sort of give excuses?

BUSH: I think that they — you know, I think that they sponsor Hezbollah. And, therefore, I wouldn't be surprised if they're very much involved in the activities of Hezbollah.

You know, look, this — this is a clash in governing styles. This is — you know, as these young democracies begin to grow, you find terrorist groups trying to stop their advance. That's what's happening in Iraq. That's what's happening in the Palestinian territories.

Prime Minister Olmert reached out to President Abbas. That must frighten these terrorists. They can't stand the thought of democracies. And — and they're using their techniques and tactics, the destruction of innocent life, to stop the advance of democracy.

And this is the real challenge of our time. And Iran and Syria are — you know, are involved. And they have got to stop doing it.

But — and, so, today, the world sent a clear message to the Iranians on the issue of nuclear weapons, that, you know, he's not going to have a nuclear weapon.

CAVUTO: Let me ask you, sir — I would be remiss — speaking of Iran, Hugo Chavez was meeting with President Ahmadinejad.

BUSH: Yes.

CAVUTO: What did you make of that, and what did you make of his travels to countries and leaders who are no fans of yours and the U.S.?

BUSH: You know, what I care about is the Venezuelan people. And you, know, we have good relations with Venezuela for years. And I'm deeply concerned about a government that would undermine the basic fundamentals of democracy. And I would hope that the president of Venezuela invests in his people, that — there's a problem...


CAVUTO: But what do you think he is doing with all these weapons he's buying?

BUSH: I have no idea.

But, you know, the biggest threat he faces is under — the biggest face we threat — the biggest threat we face in the neighborhood is undermining democratic values and institutions. And it's just — we will continue to speak out on behalf of — of democracy. People deserve...


CAVUTO: Well, is he a military threat to the United States? Is Hugo Chavez a threat?

BUSH: No. He's not a military threat. We have got a — a very strong military. And if — we can deal with any threat that — to the homeland there is, and will, if we have to. But, no, I don't view him as a threat.

I view — I view him as a threat of undermining democracy. And I view him as a threat. You know, I — I — I would — wish he would invest his petrodollars with the people of Venezuela, and give them a chance to, you know, get out of poverty, and give them a chance to realize hopes and dreams.

CAVUTO: Now, in the meantime, he shut down a number of Citgo facilities in the United States. More could follow. Is he playing economic blackmail?

BUSH: I think he's — I think he is an indication that we have got to make sure we have got a wise energy policy in the United States. Listen, we get oil from parts of the world where people don't necessarily like us.

And, therefore, the faster we can, you know, reduce our dependency on oil, the more secure the nation will be economically and from a national security perspective. And that's why we're investing in ethanol and investing in battery technologies for automobiles and promoting hybrid automobiles.

And we're trying to encourage people to be — you know, use less gasoline through good policy and, at the same time, find new sources of energy.


Are — are you amazed, Mr. President, in light of all the turbulence in the Middle East, the ongoing Iraq war, threats from Iran, threats from Syria, threats from Hugo Chavez, that the economy has been doing extremely well? The markets have held up extremely well.

BUSH: Yes.

CAVUTO: Americans are still buying. McDonald's numbers have never been higher. So, they're still eating.


CAVUTO: So, what — what's going on?

BUSH: I think the entrepreneurial spirit is strong.

I mean, America is a land of entrepreneurs and small businesses. And people have responded. Particularly, they have — they have been encouraged by tax cuts. If you take money out of the pockets of the entrepreneurs and small businesses, there's less money to invest in jobs and new products and new ideas. And these — these tax cuts are working.

But the main reason we're doing well is because of — the spirit of America is strong. People want to take risk. And people feel like they will be rewarded for their risk. And it's just — it's amazing to watch. We — we got a fabulous country.

And we have got a lot of things we have got to overcome. We have got to overcome protectionism. And that's why I'm here in the Port of Miami talking about making sure that we have free and fair trade around the world. We have got to do something on energy, which you and I have just discussed. We have got to keep taxes low.

We have got to do something about the lawsuits that make it hard for people who risk capital. Health care is an issue that we have got to confront, and the — the problem of unfunded liabilities when it comes to Social Security and Medicare, which is a long-term problem for our economy.

CAVUTO: But the economy, as you said, is doing fairly well.

BUSH: Yes.

CAVUTO: Job growth is respectable. I mean, we have numbers that were akin to what they were 10 years ago.

And, yet, when polls come out on Americans' attitude, six out of 10, I think, in a Wall Street Journal survey, Mr. President, said they're nervous. They're anxious. They don't think times are good.

BUSH: Yes.

CAVUTO: Why is there that disconnect?

BUSH: Well, first, we're at war.

And I can understand people not being comfortable with the future, about the future, when they see, you know, the loss of innocent life on their TV screens. I mean, war — it's a difficult period.

But, as I told you, there's — there's just a clash of — between terror and democracy taking place, now manifesting itself in the Middle East. And — and, so long as I'm the president, I'm going to continue doing everything I can to defend the country and press democracy.

Secondly, now there is worry about competition. People look at China and are concerned about competition. Somebody told me the other day that, if you're under 30, you will have changed jobs four or five times, you know, by the time you reach the age of 30. And, for some older people, that would seem to be — you know, to be disconcerting, to see jobs — a person changing jobs that often.

Ours is a very vibrant, fluid society now.


BUSH: And — and that creates concern. So, I understand it.

On the other hand, the — the numbers are strong.


BUSH: I mean, people are working; 4.6 unemployment nationally is real good numbers, particularly if you're somebody who wants to work.

CAVUTO: I just wondered if you knew anything, when you talk about changing jobs, about my fortunes, but I will...


BUSH: I think you're doing fine.


CAVUTO: Could I ask you this, Mr. President? We slowed down from 5.6 percent growth to around 2.5 percent.

BUSH: Yes.

CAVUTO: Still very strong. It's expected to be at or about that, I guess, for the remainder of the year. But there are some who worry that these higher interest rates, higher energy prices, are going to lead a severe slowdown, if not a recession...

BUSH: Yes.

CAVUTO: ... and soon.

Are you in that camp?

BUSH: No, I'm not at all. I mean, look, in my line of work, I hear all kinds of forecasts and, you know, prognosticators. And, you know, that's the great thing about our society, is, a lot of people are allowed to express themselves.

And, no, I'm not. I believe — listen, I believe that we're going to remain strong, precisely because of what you said. Look at what we have overcome to get here. I mean, we — it's — it's — it's a remarkable economy and a remarkable society that can overcome terrorist attacks, stock market corrections, corporate scandals, natural disasters, high energy prices.

You know, the United States aggressively pursuing our own — or our security — and, yet, the economy is good. And the reason why is, is because, you know, people have got more money in their pockets to — which helps them unleash this great creativity of the American people. And, plus, we got great workers.

And so, I — for the short run, I'm comfortable. Now, I'm not a forecaster, but I feel good about it, from what I see.

What concerns me is — is some of the longer-term issues. Will be in — will we have an educated work force that will be able to compete with other nations? You know, are we going to be protectionists, or will be confident in our willingness to open up markets and demand we be treated the same way — be treated fairly?

Now, will we be able to address the long-term costs of rising health care? If we can address those issues, then I'm confident, for the long run, as well, that this economy will remain strong. But I — I — I feel fine about our economy.

CAVUTO: The economy is strong, and that's why the Fed keeps raising interest rates. Are you worried, though, that they risk killing housing?

BUSH: What I'm worried about is talking about the Fed. What you're trying to do is to get me to violate a principle of the presidency, which is to, you know, encroach upon the independence of the Fed.

And I have got confidence in Ben Bernanke and his...


CAVUTO: Do you have confidence in housing?

BUSH: I have got confidence in Ben Bernanke and his team, to be able to balance the — balance inflation with growth.

CAVUTO: Well, Wall Street doesn't share your confidence with Ben Bernanke. They say he talks too much to reporters and he's made a couple of flubs. How does he compare to Alan Greenspan?

BUSH: They're both excellent.


CAVUTO: That's the extent of your Fed comments.


CAVUTO: All right, much more of my exclusive chat with the president of the United States coming up after this — some pretty strong views about killing the death tax, once and for all, plus, a surprising take on illegal immigration, what he wants to do about the minimum wage. Maybe he is open to hiking it — all of that after this.


CAVUTO: Welcome back, everyone — coming to you from Miami, Florida, where I had a chance to talk to the president of the United States today.

He is still dead set, by the way, against the death tax.

More now of my chat with the president on that very subject.


CAVUTO: You know, sir, this weekend, the House, went ahead and voted for a $2.10 increase in the minimum wage.

BUSH: Yes.

CAVUTO: But they tied it to a cut in the estate tax. Democrats say that's a non-starter going to the Senate. Would you be open to decoupling those?

BUSH: I think — I think the strategy is to get the senators to vote on the bill as presented. And what — what the House is trying to do is, they're trying to get the death tax eliminated, particularly for smaller estates.

You know, I — I — I strongly believe we need to get rid of the death tax. And the reason why is because it's unfair to tax somebody's assets twice, I mean, while they're living...

CAVUTO: But is it fair to link that with a hike in the minimum wage?

BUSH: Well, if it achieves the objective, I strong — you know, I support it. I support what the leadership is trying to do, which is to get tax extenders and the death tax and the minimum wage all passed. And, hopefully, the Senate will do so.

CAVUTO: But if they did it one at a time...

BUSH: It's not going to happen that way, though. The — the decision has been made.

CAVUTO: So, if both are not...

BUSH: That's what the decision has been made, to pass it to the Senate.

CAVUTO: On illegal immigration, sir — I know you touched on this in your remarks today — I had Mayor Mike Bloomberg of New York on not too long ago, and he was saying, if it were not for illegal immigrants — illegal immigrants — New York City would have gone under.

BUSH: Yes.

CAVUTO: What did you think of that?

BUSH: I didn't hear him say that, but, if you ask any of the entrepreneurs here in Miami, they will tell you one of their biggest problems is finding workers. I mean, there are — there are a lot of jobs that Americans aren't doing that are being filled by people who are here illegally.

And my attitude is, that — that screams for a comprehensive plan, which is, enforce the border — which we're spending a lot of money on. And, you know, we're increasing Border Patrol, and we have got the Guard down there to help, until the Border Patrol comes online, new technologies on the border to — and along the ports — to help prevent people from sneaking in here.

But you can't have a border security program without recognizing that people are coming here to do jobs Americans aren't doing. And there ought to be a way for them to come temporarily on a legal basis. That way, they don't have to sneak in.

And, therefore, the Border Patrol can focus on drugs or terrorists, as opposed to, you know, workers.

CAVUTO: But the ones who are still here, Tom Tancredo and others...

BUSH: Yes.

CAVUTO: ... as you know, sir, have sort of said, that path to citizenship is akin to amnesty.

BUSH: Yes.

CAVUTO: What do you say?

BUSH: I just — this — this is a lot of, you know, just screaming over words. Amnesty, to me, means that, you have been here illegally, you're an automatic citizen. And I'm against that. I think that would be — send the wrong signal.

On the other hand, I don't believe it's feasible to kick people out who have been here. And, so, my — my position is, is that, if you have been here, and you pay a penalty for being here illegally, which is a fine, and you have learned English, and you have been a good citizen, that you ought to be able to apply for citizenship, and get at the back of the line, not the front of the line.

See, there's a citizenship line that now exists. People have applied here, you know, have been here legally, and they have applied to be a citizen. And I think that somebody ought to be able to get in line.

But, you know, the words "amnesty" are loaded words. And I certainly don't promote — promote an amnesty program, but I do promote a comprehensive plan that will solve the problem and treat people humanely and with respect.


CAVUTO: All right, when we come back, the two most important things — the two most crucial things the president wants every American to know — the conclusion of my one-on-one with the president.


CAVUTO: Well, the president still has essentially the same time in office that JFK had for all of his years in office. Reflecting with me earlier today on what he views as the single-most important responsibility — the conclusion now of my one-on-one with President Bush.


CAVUTO: Finally, sir, I will indulge one final question.

The historian Victor Davis Hanson had said very recently, "As we near the fifth anniversary of 9/11, most have forgotten about the dangers of a terrorist attack. Often, the public appears to worry more over the Patriot Act and wiretaps, as if our leaders pose a greater threat to the U.S. than the mass-murdering Islamist terrorists."

Is he right? Have we forgotten?

BUSH: Oh, I think — you know, I think, Neil, that one of the — I think there's a certain truth about people not wanting to, you know, kind of remember the horrors of September the 11th. It seems like a faded memory to some.

I think a lot of Americans, though, understand the stakes of the world in which we live in.

My job is to do — is to do two things, one, remind people about the war on terror, and remind them that we're doing everything we can to protect them, so that they're able to go about their lives. In other words, what you don't want is, you don't want an economy to shut down because people are worried about the next terrorist attack.

It's a — you know, it's — you want the environment for — for people taking risks to be such that people say, "I understand that there's a War on Terror, but I'm still willing to take risk."

You know, taking risk in our system is how people form businesses and how jobs are created. And, so, I — I — I'm not surprised that some have said, "Well, this war is really not a war anymore."

But I know it's a war and I think about it every day of my presidency.

I think about Al Qaeda every day. I'm asking questions all the time: Are we doing everything we can to protect this country?

And I want the American people to know that, even if they don't think that we're still at war, I do, and, therefore, will deploy the — the assets of the federal government to protect us here at home and to bring the people who — who intend to hurt us to justice.

An, at the same time, I fully understand that the ultimate long-term solution to the problem of Islamic totalitarianism is — is freedom. And what people are seeing today is a — is a clash between those who advance freedom and those who have a — an ideology based upon hate.

And, so, I have got two big issues, Neil, as we go into the future. One is to remind people we're still at war, but have them comfortable with the fact that the government's doing everything we can to protect them; and, two, to remind people that the terrorist activities of a Hezbollah or an Al Qaeda or a militant Hamas, are all linked, that they may not be coordinating together, but they have this kind of same attitude and same desire to stop the advance of democracy. The long-term peace for America will come when liberty is unleashed in the Middle East, and a policy that had excused tyranny in the past simply didn't work.

It may — the world may have looked safe, but, on September the 11th, we learned that the resentment caused by tyrannical societies could cause great harm to the American people.

So, to me, my presidency is — you know, I think, a lot about the economy, a lot about the questions you asked — but I spend most of my time thinking about how to protect the American people in what is a dangerous world.

CAVUTO: Finally, was this your idea or Tony Snow's, to have the interview outside, when it's almost 100 degrees?

BUSH: Are you comfortable?

CAVUTO: I'm very comfortable.

BUSH: Well, then, it was mine.


BUSH: But, if you were uncomfortable, it would have been Snow's.

CAVUTO: That's fine.


CAVUTO: That's fine.

Mr. President, thank you very much.

BUSH: Thank you, sir.

CAVUTO: Good having you.

BUSH: Yes.


CAVUTO: It was about 100 degrees, 100 percent humidity. He didn't sweat. I did. And the guy is a lot older than I am. Go figure.

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