This is a rush transcript from "Your World With Neil Cavuto," September 23, 2008. This copy may not be in its final form and may be updated.

NEIL CAVUTO, HOST: I love when this guy is on. Ed Rendell is here. He's the Democratic governor of Pennsylvania, speaks his mind, answers questions, an oddity in either party.

But, Governor, you probably heard...

GOV. ED RENDELL, D-PA.: Sure, Senator McCain.

CAVUTO: Not Ahmadinejad, but — who, by the way, still hates us — but Senator McCain saying, I'm for this, but let's not go crazy with this, about the $700 billion rescue.

I think I interpreted that correctly.

RENDELL: Yes.

CAVUTO: What do you make of that?

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RENDELL: Well, I liked some of the things that Senator McCain said. Certainly, taxpayers getting to recoup some of this money has to be a part of it. Limitations on CEO pay, absolutely, he couldn't be more right about that.

But he left out two pretty important components. Number one, we have to put in place, as a part of this bill, a regulatory scheme that will make sure that what caused this to happen is prevented in the future. That's got to go hand in glove with this.

And, secondly, we have got to do something, Neil, for the 100,000 people who are facing mortgage foreclosure now. It's OK to help the big financial institutions, but, at the same time, if we're going to spend this type of money, let's help those people.

Let's put together a plan to allow their mortgage rates to be adjusted. They still have to pay significant, but — but something they can live with. Let's make that part of the process.

CAVUTO: Do you worry, though, Governor, that that's not just a little ancillary expense. I mean, to help them all, I mean, potentially could — could be tens of billions of dollars.

RENDELL: Well...

CAVUTO: So, where would you — and you're pretty good at running a fiscal house. Pennsylvania is one of the best-run states in the nation now. Where would you draw the line?

RENDELL: In terms of how do we get — recoup this money?

CAVUTO: Right.

RENDELL: Well, you're not going to like this answer, Neil, but I would do what I think President Bush should have done after 9/11, look in the camera and say: "Mr. and Mrs. America, we're facing a crisis of incredible proportions. And we have got to suspend the tax cut."

The tax cut on the wealthiest people in this country could easily absorb...

CAVUTO: But would you do that in a slowing economy? Your party has been saying it's all but a depression, right, so...

RENDELL: Well, you...

CAVUTO: So, you would have a slowing economy. You would be hiking taxes into it.

RENDELL: But I...

CAVUTO: When Bill Clinton raised taxes, you know, Governor, we know in retrospect, the economy was moving up. So, it's better to do it the wind at your back than the wind at your face, right?

RENDELL: Well, you know, I think you can make a case that, when Bill Clinton raised taxes and used that revenue to balance the federal deficit, that was the key component in — in having the economy surge the way it did.

I always kid some of my Republican supporters. I said, "Sure, Bill Clinton raised your taxes $40,000 a year, increased your net worth by about 20 million bucks"

CAVUTO: Well, he also had this little thing called an Internet boom.

But, you're right. We can argue the semantics and...

RENDELL: But, certainly, Republicans were saying for years, balance the budget.

CAVUTO: Right.

RENDELL: Eliminate the deficit. The economy will zoom. That's what Bill Clinton did.

CAVUTO: Well, you raise some good points. We could quibble over the details how he got there.

(LAUGHTER)

RENDELL: Right.

CAVUTO: But let me ask you, Governor, about what McCain is saying. He is open — seems to be open — for doing something to help individuals and those behind in their mortgage.

RENDELL: Well, that wasn't a part of his five principles.

CAVUTO: But — well, but he's open to pass this legislation, I'm saying.

So, what I'm asking you is, where do or should we draw the line? Because, pragmatically, Senator Obama today was saying, whatever things we want to do, either to help those behind in their mortgages, right, let that be in separate legislation. Let's get this thing through now.

What do you — whose approach is right?

RENDELL: Well, look, I think this is — there's going to be one bill.

First of all, I think there's no reason to deliver the $700 billion check at once. I would phase some of this in to give us time to do adequate regulations and to give us time to assess where the money's going.

Don't you, Neil, and you're — I watch you, and I don't always agree with you, but you're a responsible person. Don't you want to know where this money is going? And don't you want to be able to say, whoa, you gave the money to these guys under those conditions? That's unacceptable.

If we give the Treasury the $700 billion now, who is to check...

(CROSSTALK)

CAVUTO: You raise a great point, Governor.

Here's what I'm asking, though, is that, is — is there a fear here that, for those who are behind in their mortgages you do help out, the few percent that that's representing in the overall economy, how are the other 95-plus percent going to feel, like, hey, you helped out Joe; you didn't help out me?

RENDELL: Well, the way to help them out is to get the economy back on track. And that's where I believe Senator Obama has by far the better plan.

You heard Senator McCain say — and I was interested, because, you know, Governor Schwarzenegger and I and Mayor Bloomberg have started this infrastructure, Rebuild America group.

CAVUTO: Right.

RENDELL: For the first time, Senator McCain said something about infrastructure. He said, this $700 billion could repair the infrastructure of America's towns.

He's wrong. $1.6 trillion is the price tag that the American Society of Civil Engineers says. But repairing the American infrastructure creates great jobs, can't be outsourced, and tremendous orders for American companies.

(CROSSTALK)

CAVUTO: Let me ask you this.

RENDELL: But, no, but I'm saying...

CAVUTO: If you know...

(CROSSTALK)

CAVUTO: I'm sorry, Governor.

RENDELL: That's all right.

(CROSSTALK)

CAVUTO: Bill Clinton had to renege on his middle-class tax cut promise in '92 when he realized the economy was softening. Do you think Barack Obama will have to do the same thing should he get elected?

RENDELL: No, because, number one, he's going to get us out of Iraq quickly, and that's going to save us $140 billion a year.

CAVUTO: He would have to get us out on the 21st.

RENDELL: No, but he will get us out quickly enough.

And, number two, we're going to suspend the tax cuts for the wealthiest people in this country.

And, number three, just think of his proposal. Don't you think we can cut 10 percent of the outside contractor business we're doing? Weren't you stunned by how much business goes to outside contractors? Four hundred billion dollars of the federal treasury.

Barack Obama says, we can pick up $40 billion just like that. Cut 10 percent.

CAVUTO: We always say that. Then we never do it.

RENDELL: No, but I think he can do it. I did it.

CAVUTO: Right.

RENDELL: I did it when I was mayor of Philadelphia, you know.

CAVUTO: All right.

RENDELL: You know, I think there's no reason we can't do that.

CAVUTO: Governor, all right, thank you very much.

RENDELL: Thanks, Neil.

CAVUTO: By the way, Ahmadinejad still hates us.

RENDELL: Doesn't like us, right.

(LAUGHTER)

CAVUTO: All right.

Governor, thank you so much. Very good seeing you.

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