This is a rush transcript from "Your World with Neil Cavuto," October 31, 2007. This copy may not be in its final form and may be updated.

NEIL CAVUTO, HOST: Well, you know, in the meantime, this guy has been called the dark horse in the GOP race. And, certainly, he stands to benefit from a strong economy.

With us now, presidential hopeful — I'm not sure they call him a dark horse anymore. He may be close to a front-runner. I'm talking to former Arkansas Governor Mike Huckabee.

Governor, good to have you.

MIKE HUCKABEE, PRESIDENTIAL CANDIDATE: Thank you, Neil.

It's better to be called a dark horse than a dead horse, isn't it, any day?

CAVUTO: Yes, a thin dark horse. You still look great, by the way.

(LAUGHTER)

CAVUTO: Lost all that weight and kept it off.

Let me ask you about this notion that this staves off a recession or a slowdown, good for Republicans.

HUCKABEE: I think it is good for Republicans when the economy's doing well, especially when you have a Republican in the White House.

But Republicans are still going to have to address the microeconomy, which is something I don't think we're doing very well. We are addressing the macroeconomy, how its overall impact on the marketplace and the Dow.

But, when you start talking about how it's drilling down into individual families, and are they getting ahead, the reality is, there are many families that really are working as hard or harder than they have ever worked in their lives, and they are not seeing that pay off in terms of their capacity to do better and to do more. And...

CAVUTO: So, cutting interest rates does not change that?

HUCKABEE: It may help them, particularly if they are in the middle of that housing crunch. And I think it also may help them in consumer items.

Where it really may help is a sense of consumer confidence. But what still has to happen is a major change in the overall tax policy. Energy prices have to come down, because the guy that is working for an hourly wage, he has still got to put gas in his car to get to and from work. And, when prices go up, he feels it really, really hard right in the back pocket.

CAVUTO: All right.

Now, you come from a party the predominant candidates of course have been saying it is not up to the government to solve these problems; it's up to individuals and companies incentivized to fix them.

We have seen that illustrated in the home mortgage situation, with the president kind of pushing these guys to do something. Do you subscribe to that?

HUCKABEE: Well, again, generally, government is not there to fix all these problems, but what the government does is mess it up by getting in the way with incredibly complicated tax policy that makes it very difficult for a free market to survive.

I mean, in the purest of worlds, there would be a real free market, where you could go out and earn whatever you wanted to earn, and the government would not confiscate you for your productivity. Now, what we have is a graduated income tax system that says, the harder you work, the more you are going to pay. You save it, we tax it. You invest it, we tax it. You inherit it, we tax it.

And, so, it is counterproductive to what ought to be happening in the economy. And that is turn it loose and let it roll. That is what would really give people at the bottom a chance to reach the next rung on the ladder.

CAVUTO: Now, as long as I have been covering you, Governor, you have been saying kind of the same thing, which is good. I mean, your message is consistent.

HUCKABEE: Yes.

CAVUTO: But now it seems to be registering in these latest polls that have you up. I think, in Iowa, you and Rudy Giuliani are essentially tied. Nationally, in some of them, you place above Mitt Romney.

What is going on?

HUCKABEE: The message is getting through.

People are looking for a candidate who is just straightforward, and I think is giving them a sense that the message is authentic. I am not saying anything different. I think you hit it on the head without even realizing it. I am saying the same thing that I said before.

CAVUTO: I never realize what I'm asking, so...

(CROSSTALK)

(LAUGHTER)

HUCKABEE: But I think that is a lot of it, is that people say, this guy is saying what he said before. He's not just changing his message to run for president.

And, if there is anything that people are looking for, it's somebody who has true convictions and hopefully will communicate them, and then explain why that will work for the economy.

CAVUTO: But, you know, why I think you are registering now, Governor, for good or ill, is they are picking on you more. And one of the things you hear a lot is, you know, when he was running things back in Arkansas, he was a taxer. He was a liberal on that stuff. So, he's not what he appears to be.

HUCKABEE: Well, I was anything but a liberal in Arkansas. That would really surprise a lot of the Democrat legislators who beat me over the head about being too far to the right.

But here's what I did do. I did govern. I balanced the budget every year I was in office, and cut taxes 94 times. The other thing we did, we rebuilt out roads. We improved our schools. That is what government is supposed to do. It is supposed to just do it well.

CAVUTO: All right, can you hang around, Governor?

HUCKABEE: I will. Sure.

CAVUTO: We continue with a bit more here.

I want you to remember this from my exclusive chat yesterday Rudy Giuliani.

(BEGIN VIDEO CLIP)

RUDOLPH GIULIANI, PRESIDENTIAL CANDIDATE: Huckabee's a wonderful man.

CAVUTO: A wonderful running mate?

(END VIDEO CLIP)

CAVUTO: All right, Rudy's answer and Mike Huckabee's response — that's called drama in TV — after this.

(LAUGHTER)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GIULIANI: Huckabee's a wonderful man.

(CROSSTALK)

CAVUTO: A wonderful running mate?

GIULIANI: I think — well, I will tell you about — I don't know about running mate, but I sure like having him at the debates, because he makes me laugh.

(LAUGHTER)

(END VIDEO CLIP)

CAVUTO: Well, and, actually, he's making people nervous right now, because he's moving up in the polls. The question is, who is going to get the last laugh?

Back with us, GOP presidential candidate Mike Huckabee.

Governor, he kind of liked the idea of Vice President Huckabee.

HUCKABEE: I was thinking Vice President Giuliani and President Huckabee.

(LAUGHTER)

HUCKABEE: I think we have it reversed.

But, you know, I have a lot of respect for Rudy. He and I obviously differ on the sanctity of life and Second Amendment and some other issues, but...

CAVUTO: And you think those are the issues where he's most vulnerable, right? Because with...

HUCKABEE: In the primary.

CAVUTO: ... you know, a lot of the conservatives in the party, that has been a big issue with him.

HUCKABEE: Yes.

But, you know, Rudy has got a lot of strengths. And he has also, I think, exceeded a lot of the expectations that people had in terms of his ability to connect with people out there in the field.

One thing I appreciate about him — and I have said this to crowds — I don't care whether they're the most conservative social part of the party or not — is that you have got to give Rudy credit for not changing up his message for each audience to which he speaks. He says, look, you may not like me, may not agree with me. Here I stand.

CAVUTO: Well, who does, then?

HUCKABEE: Well, I just think people are looking for somebody who has the same message. And Rudy has done that. And that is one of the reasons that he has been able to attract people that ordinarily would not go to him.

CAVUTO: Let me ask you this, Governor. Could you, as a very serious and dedicated pro-life individual, be on a ticket with — either way...

HUCKABEE: Yes.

CAVUTO: ... with a pro-choice candidate?

HUCKABEE: It is a question that I don't have to think through right now, because, right now, my focus is just getting to the top of the ticket and making that decision later.

CAVUTO: If you did get to the top of the ticket, would your running mate have to be pro-life?

HUCKABEE: I would want him to be. I would certainly want him to understand that is where I am, unapologetically and unflinchingly.

CAVUTO: Is it a deal-breaker if he or she is not?

HUCKABEE: I would have to really think and pray through that very carefully.

The one thing I do believe is that any Republican on our stage would do a better job of giving overall leadership to America than any Democrat on the other stage. And it is not that I dislike all those Democrats. I think there are some really quality people over there.

But I believe that where they would take the country on taxes, and the control of health care, and in terms of how we would structure our foreign policy in relationship to Iraq and Iran, I just believe that the country, its long-term future, including court appointments, is far better off with any Republican on that stage than any Democrat on that stage.

CAVUTO: There are some real diehards in the party who love you and say, if you're repudiated, not good. They would like to see you run as a third-party candidate.

HUCKABEE: No, that won't happen. I'm not going to...

(CROSSTALK)

CAVUTO: That will never happen?

HUCKABEE: No. And there's a couple of reasons.

One, it only is just a way to absolutely guarantee the election of the Democrat. But the second reason is, if I can't win within my own party, I don't really see that there is a great groundswell to say, oh, let's have a third one. We have tried that, and all it does is tip the favor toward the party that you're supposedly against.

CAVUTO: Well, not necessarily, right? Had Ross Perot not gotten a little crazy in the end, he could have done it, right?

HUCKABEE: I don't know that he ever could.

And the reason is, is because parties sometimes are problematic. I understand that. But they form the track on which the train runs. It provides a mechanism and a support, an infrastructure, if you will, on which the candidates are able to carry their message in the ultimate election.

If you take that away, and you have to build it from scratch, the amount of money necessary to build that infrastructure on which to finally push that message out is just overwhelming.

CAVUTO: All right.

Tax cuts, you are for them. You like the idea of extending the president's tax cuts. Only Mitt Romney has signed this pledge.

HUCKABEE: No, I have signed it.

CAVUTO: Oh, you have? I didn't — oh, I didn't realize. OK. I apologize.

HUCKABEE: Oh, yes, way back in like February or March.

CAVUTO: I apologize.

HUCKABEE: Oh, yes.

CAVUTO: So, Rudy Giuliani did not. Should he be chastised for that?

HUCKABEE: I think we ought to hear his explanation.

I am little more forgiving than some candidates. I think that it's really one of the worst things about politics when you go into everything being the sloganeering and the did you yes or no this or did you yea or nay that. Sometimes, listen to the candidates in the background, because...

(CROSSTALK)

CAVUTO: Well, he said the reason why he did not do the pledge thing is, he takes only one pledge, that is...

HUCKABEE: The Constitution.

CAVUTO: Right.

HUCKABEE: That's a nice way to say it.

CAVUTO: And there are circumstances you just don't know.

HUCKABEE: I wish he would.

I wish what he would do is to join me in supporting the Fair Tax, which I think is whole better than the tinkering with the tax code we have. That's the mistake.

CAVUTO: That's never going to happen.

HUCKABEE: You know, it could.

CAVUTO: Really?

HUCKABEE: And I will tell you how it could.

CAVUTO: Real quick.

HUCKABEE: Sell it to the American people. Let them sell it to Congress.

No, Congress isn't going to do it, but I have not talked to an American who fully understood it who did not really, really like it.

CAVUTO: Governor, very good seeing you again.

HUCKABEE: Thank you. It's great to be with you, Neil.

CAVUTO: Best of luck. I know you're always flying.

All right, Governor Mike Huckabee.

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