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'Your World' Exclusive: President Bush on Economy, War on Terror

This is a rush transcript from "Your World with Neil Cavuto," August 8, 2007. This copy may not be in its final form and may be updated.

NEIL CAVUTO, HOST: This is a FOX News Alert. Did something the president of the United States told us today move the markets today? They were up big much of the day, and then ending up even bigger. Another wild day for Wall Street, but a very big day here in Washington as we sat down with the president of the United States for an exclusive one-on-one on these big market swings, on the housing market, and mortgage problems, on calls for a bail-out, even on Barry Bonds' record home run last night.

We sat down for a rare chat inside the United States Treasury where the president was talking up the economy. Topic number one today though, those trapped miners in Utah.

(BEGIN VIDEOTAPE)

CAVUTO: Mr. President, always great to have you.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Thank you, sir.

CAVUTO: I notice in the heat, you just don't sweat.

(LAUGHTER)

CAVUTO: Let me ask you, I know you have been in contact, sir, with Governor Huntsman out in Utah and the miners. And you have offered whatever federal support and help he needs to rescue them. But it comes at a time when environmentalists say you should go a step further and maybe abandon coal. That it is too risky, too dangerous, too dirty. What do you say?

BUSH: I say that, first of all, it doesn't make any sense to abandon an energy resource of which we have got a bountiful supply if part of our strategy is to become less dependent on foreign sources of energy.

Secondly, I'm a believer in technology, and I believe we will be able to continue to develop technologies that will enable us to use coal in even more environmentally friendly ways.

CAVUTO: So at a time when we are looking the bridge collapse in Minneapolis, and infrastructure costs, and this push that maybe we need to reprioritize our federal spending, what do you say?

BUSH: Look, I'm all for prioritization, but if what one is suggesting is, is that we don't need to be fully engaged in an enemy that wants to attack us again, and therefore cut back spending and supporting our troops, I strongly disagree.

The biggest threat to our economy — short-term threat, the biggest threat to the lives of our citizens is another terrorist attack. And after September 11th, Neil, I vowed I would use all resources necessary to protect this country.

Now I believe we've got ample revenues to do a lot of important projects. I mean, if rebuilding bridges is that big a priority, then we ought to prioritize that in the highway monies that we have already budgeted, as opposed to helping individual congressman or senators realize pet projects in their districts. In other words, prioritization means real prioritization.

CAVUTO: Does it bother you, Mr. President, when every time we have a crisis, unfortunately, that if it wasn't for Iraq, we would have money for this, if it wasn't for Iraq we would have money for this?

BUSH: No, it doesn't bother me, because I firmly believe that what we are doing is the right thing. And I know it is an unpopular war with some. But I will tell you it would be even more unpopular, is if we abandoned the mission there and al Qaeda and other extremists became more emboldened and attacked us again.

And then people would look back and say, what happened to them in 2007? How come they could see the impending threat? Well, I see the threat. And I will look forward to working with Congress, with members of both parties to continue to focus on the threat.

And I have been told you can't fight a war and balance the budget. Well, we are fighting a war, we cut taxes, and our deficit is shrinking, as a matter of fact, it is — as a percentage of GDP, it is below the 40-year average.

We are told we can't do a lot of things. And I believe we can do a lot of things, starting with protecting our country and in the meantime, diversify our energy supply or fix infrastructure. But it does require prioritization, something that Washington is not very good at doing.

CAVUTO: Speaking of prioritization, sir, a lot of the Democratic presidential candidates have said since the mortgage troubles that we would have to rescue or bail out. They are very particular not using the word "bail-out," but what they do say is a reserve set aside for sick lenders.

Hillary Clinton, I think, is proposing something in the vicinity of a billion dollars to do that. Are you for such measures that would shore up the mortgage industry?

BUSH: I'm for letting the market work. My biggest concern when it comes to the mortgage industry is the lendee, not the lender. It is the person to whom people have lent money. In other words, I'm worried about people having their homes foreclosed. I'm worried about people buying into a deal that they are not certain as to what they are buying into.

And I think the focus ought to be on the individual homeowner. And to that end, I do believe there needs to be more transparency. And we are asking for more money for truth in lending. I think we ought to crack down predatory lending. I don't think we need new law, we ought to enforce the law on the books.

And then I think we ought to let the market work. People are reassessing risk. And there is — the good news is we have got ample liquidity in our society to be able to, you know, deal with this current issue. And.

CAVUTO: But I think what Senator Clinton is saying, Mr. President.

BUSH: Well, let me put it more bluntly. No, I'm not for a federal bail-out.

CAVUTO: OK. Because that is what she is essentially looking at.

BUSH: Right.

CAVUTO: And what she is saying is that because there were some duplicitous lenders out there that you can't just let that go. And people who were hoodwinked into these mortgages now have to be rescued.

BUSH: Oh, I thought you said the lenders as opposed to the lendees. First of all, I believe that, you know, there is enough liquidity to encourage refinancing. No question we ought to be cracking down on predatory lenders. And we will.

CAVUTO: So to be clear, sir. If someone was a victim of a predatory lender, who gave them sort of a song and dance on a mortgage, and they took that song and dance and they took that mortgage, and now they risk losing their homes, would you say it is not the government's job to rescue that person?

BUSH: Well, actually there is a place for people to refinance, and that is at the FHA. And therefore it is important to reform the FHA to make sure it has got a more extended reach. There are refinancing mechanisms at the federal level available for homeowners.

CAVUTO: Do you think the mortgage crisis, as it is being called, is overblown?

BUSH: I think anytime anybody's homes are threatened is something we ought to be concerned about. I do believe that we are adjusting from a plethora of capital that came rushing — or liquidity that came rushing into our system. And we are watching it very carefully and you know, paying attention to, you know, the — whether or not there is enough ample revenues in our society, ample cash in our society to help — for there to be a natural adjustment through the marketplace.

CAVUTO: I heard someone describe it, sir, as President Clinton presided over the Internet bubble, President Bush presided over the real estate bubble.

BUSH: Well, I think the verdict is still out on the real estate bubble. There is no question that there has been a correction. I think the good news so far is the correction has been what one would call a soft landing as opposed to precipitous decline.

I would point out that the economic growth in the second quarter was 3.4 percent. And I would remind people that this economy is pretty darn strong given the fact that the job picture remains strong. And so there was a correction.

And you know, markets tend to correct. And the fundamental question is, will they correct is such a way as to not derail the good, strong economic growth that we are seeing?

CAVUTO: So when Barney Frank, in the House Financial Services Committee, is looking at going after essentially the brokerage houses for packaging or providing support for these kind of loans, now his counterpart in the Senate, Chris Dodd, is against that, but what do you think of that?

BUSH: I think it comes — government tends to overreact at times with laws that will be counterproductive. That what we ought to be doing is encouraging markets and taking care of those who can't help themselves.

And for me that is the best policy. Markets tend to adjust. And if government throws up, you know, special laws that will prevent it from adjusting in an orderly way, it will be counterproductive.

CAVUTO: Let me ask you, sir, you have been moving up in some of the latest polls.

BUSH: Oh yes?

CAVUTO: You are in the mid 30s. I know you say you don't pay attention.

BUSH: I wouldn't know.

CAVUTO: But a lot of that has to do with, depending on the poll, fatigue over the candidates, Democrat and Republican. Do you think we have started this race way too early?

BUSH: Look, I started in June of 1999, it was when my first trip out of…

CAVUTO: Right.

BUSH: …Texas. I went to Iowa and New Hampshire. On the other hand, I had — during our legislative session there, you know, we had people come down, and a lot of policy people, and some financial people all setting the ground work for a run.

It is hard for me to tell whether it is too early or not. I don't know. I'm just glad I'm not out there running.

CAVUTO: It is interesting, though, in the latest Republican debate, they seemed to be piling on you, not as much as the Democrats, obviously, but what do you think of that? Do you shake your head or what?

BUSH: I didn't see any pile-on. I mean, there may be some candidates who probably won't be the nominee of the party, for example, using the immigration debate to make points. But I think on the big issues, keeping taxes low, Republican candidates understand it is the right policy.

Not only is it the right policy — I mean, it is the right policy because it has worked. Ours is an administration that in 2002, you know, acted — 2001 and 2003, excuse me, acted to the conditions created by a recession as well as a terrorist attack.

And not only has there been strong economic growth as a result of tax cuts, but we are — the deficit is shrinking. And the deficit is — as a percent of GDP, is below the 40-year average.

I mean, in other words, when candidates get up there and say, I want to keep your taxes low, it is not only nice political rhetoric, but it happens to work. And that is what we have proved.

CAVUTO: But they are all running against you, and you are not up for election.

BUSH: Are you talking about the Democrats?

CAVUTO: In this case.

BUSH: Well, I'm an easy target, yes.

(LAUGHTER)

BUSH: But you can't win an election if the vision is, I'm against somebody. It is very important for candidates from both political parties to say what they are for.

And you know, I'm confident our candidates will win this election — our candidate will win this election. Because I believe the candidate who will be the nominee will have articulated a plan to keep America safe and to keep America prosperous.

CAVUTO: But the tone is nasty. I know you have addressed this before, Mr. President, but I know when you were running for president, I don't remember you coming close to disparaging Bill Clinton to the degree even leaders disparage you today.

BUSH: Yes. I didn't talk about President Clinton a lot, because I wanted people to know what I was for, and was on my mind. Now I did differentiate myself from my opponents, flip-flop or, you know, whatever the.

(CROSSTALK)

CAVUTO: Right. But I don't remember you ever doing — Majority Leader Reid referring to you as the worst president ever, Nancy Pelosi, incompetent.

BUSH: Yes.

CAVUTO: You have to sit down in the Oval Office with these guys.

BUSH: Yes.

CAVUTO: So how does that go?

BUSH: It is called the test of leadership, Neil, whether or not one has the capacity to continue to do what is right for a country or whether or not I will allow the office of president to get drug into the, you know, mudslinging of politics.

And I made the decision to keep the office out of that kind of politics and to work as best I can with people from both parties to keep the country safe and to keep the country prosperous.

CAVUTO: It doesn't get a little bit hard?

BUSH: I have been around long enough to be able to understand how it works and — yes, look, nobody likes to be called names, on the other hand, there is — we have got a bigger enemy than name callers. That is al Qaeda or people losing jobs.

And so it is — I don't view people as enemies in politics. I don't hate. I'm a person who tries to understand where the other person is coming from and then work toward accomplishing big goals. And what people I think have learned is I'm not going to compromise my principles in accomplishing those goals.

CAVUTO: Let me ask you. There is a report out now that says a lot of the recent attacks on U.S. soldiers have clearly, almost indisputably come from Iranian-backed sources. That they might in fact be Iranian weapons themselves. Yet we continue to talk to the Iranians.

BUSH: We have made it clear to the Iranians that there will be a consequence when we catch your people moving weapons into Iraq, that is what we told them.

CAVUTO: And what is the consequence?

BUSH: Well, they will be brought to justice.

CAVUTO: Would the consequence involve ever going into Iran?

BUSH: This is a battle for Iraq and we are — made it very clear to the Iranian government that — that is the reason you meet with them, is that you are moving materials that are affecting the stability of Iraq and, more importantly for American families, causing death, and there will be a consequence for doing it.

CAVUTO: Separately, sir, there is a report that was in the U.K. Telegraph that the Chinese, very concerned about possible sanctions that might be slapped on them, would consider the so-called nuclear option, that is, selling a lot of dollar-denominated assets. I guess they hold close to a trillion dollars. Are you worried about that?

BUSH: Trying to do what? Trying to crater our economy?

CAVUTO: Right.

BUSH: That would be foolhardy of them to do that. That is why — first of all, I don't know who put out that report. I doubt it came from the president's office.

CAVUTO: Well, I guess that — because what happens is it comes through university sources, which is usually the way word gets out of potential government thinking.

BUSH: Oh really? Well, one of the reasons why we have got this Paulson-led economic dialogue with China is to particularly work — is to talk about those kinds of, you know, threats, if that is, in case, the position of the government. It would be foolhardy for them to do this. It would be.

CAVUTO: In other words, they would hurt themselves more than us.

BUSH: Absolutely, I think so.

CAVUTO: You are right.

BUSH: And there are good ways to work through difficulties. Listen, we have a very complex trading relationship with China. I happen to believe it is very important for our economy that we have access to Chinese markets. And I think it has been beneficial, by the way, for consumers, that there be Chinese goods coming in which have helped hold down the cost of inflation, particularly in the face of rising energy prices. I would hope we could work out our differences in a cordial way as opposed to, you know, whatever the option you called it is. Or, frankly, legislation out of Congress that will affect our capacity to have a relationship. Now, having said that, when there is difficulties, we bring them up. I mean, we are — and we have used our powers with the — particularly through the Department of Commerce, to make it clear we expect to be treated fairly.

But yes, I mean, I — it is in the interest of the United States, Neil, in my judgment, that we encourage the Chinese to go from a savings economy to a consumer economy. And then have access to those markets so that U.S. producers and service providers can expand their businesses and therefore create more jobs here at home.

(END VIDEOTAPE)

CAVUTO: All right. We are not quite done. The president kind of saving the best for last. He was running a few minutes for this interview because you know who he was on the phone with? Barry Bonds. And wait until you hear what they talked about. And more what he has to say about Barry.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: And Bacsik deals. And Bonds hits one high! Hits it deep! It is out of here!

Seven-fifty-six!

(END VIDEO CLIP)

CAVUTO: Apparently we weren't the only ones watching that. Before he was president of the United States and a governor of Texas, George W. Bush was co-owner of the Texas Rangers baseball team.

So what did he thing about the controversy surrounding Barry Bonds' record-breaking home run?

Here now, my chat the most powerful baseball fan on the planet.

(BEGIN VIDEOTAPE)

CAVUTO: Can I go to a not-so-serious subject?

BUSH: Sure!

CAVUTO: Barry Bonds.

BUSH: Yes!

CAVUTO: Hit the home run record last night. Do you recognize him as being the legitimate home run champion?

BUSH: Well, I just got off the phone with him. That is why I held up this interview, because I was on the phone with Barry Bonds. And I politely waited until the appropriate time on the Pacific Coast and called him to congratulate him. He is a great hitter. He broke the record of another great hitter, Hank Aaron. And I congratulated him on breaking that record.

There is a lot of speculation about Barry Bonds, and my only advice for people is to just let history be the judge. Let's find out the facts, and then everybody's opinion, one way or the other, will be, you know, verified or not verified. In the meantime, however, I — it is appropriate to recognize this man can hit the baseball.

CAVUTO: But if it is later proven that a lot of his strength in the mid years…

BUSH: Then baseball.

CAVUTO: …came from steroid use?

BUSH: Then baseball — there will be a lot of disappointed people, and baseball and the baseball writers will have to make the determination as to whether or not he would receive the highest accolade of all, which would be to be admitted into the Baseball Hall of Fame.

CAVUTO: But the record would still be there, right? Or would it have an asterisk on it?

BUSH: Well, that's going to be up to baseball. They are going to have to figure all these kinds of things out. And, you know, look, I'm — as you know, I love the sport. Obviously, I'm dead set against steroids being in baseball. I think it is bad for the game. I was the one who put it in the State of the Union address — the issue of steroids.

CAVUTO: That is right. That is right.

BUSH: I put it in there, because it is part of a larger context, and that is how we behave as adults will influence how children behave. And I was very concerned that it would be viewed as OK to use steroids if you are a high school kid or a junior high kid. And it is not; it will hurt your body. And as a result of that, Senator McCain, for example, took up the hearings in Congress and baseball has been adjusting their policy.

But in terms of how baseball reacts, it really depends on what the facts are, and it is going to be up to them to make the determination as to asterisk. But more importantly, it will be the Hall of Fame. That will be the ultimate decision point for the baseball writers. In the meantime, anybody who knows the game will tell you, Barry Bonds is a great hitter.

CAVUTO: End of story?

BUSH: Yes, sir!

CAVUTO: Mr. President, thank you very much.

BUSH: Thanks for coming.

CAVUTO: Thank you. Very nice speaking to you.

BUSH: Appreciate it. You bet.

(END VIDEOTAPE)

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