Transcript: Rudy Giuliani on 'FOX News Sunday'

The following is a partial transcript of the Jan. 13, 2008, edition of "FOX News Sunday With Chris Wallace":

"FOX NEWS SUNDAY" HOST CHRIS WALLACE Well, with the primary races wide open in both parties, we continue our series "Choosing the President" today with an exclusive interview with former mayor Rudy Giuliani, who joins us from the campaign trail in Florida.

And, Mayor, welcome back to "FOX News Sunday."

REPUBLICAN PRESIDENTIAL CANDIDATE RUDY GIULIANI: Thanks for having me, Chris.

WALLACE: You were the frontrunner for the Republican nomination for all of 2007, but that has changed dramatically in recent weeks. Let's take a look, sir.

The RealClearPolitics average of recent national polls now shows John McCain is leading, with you back in third place trailing by 10 points.

And even in Florida, which your campaign has always called its firewall, a poll came out this weekend that shows you in second place, trailing McCain by eight points.

So, Mayor, I've got a simple question. What happened?

(LAUGHTER)

GIULIANI: The race tightened up. It's a wide-open race. We have now several candidates that have won different primaries.

You get a great deal of momentum and bounce from winning, but the reality is, you know, we've got a good long campaign here in Florida that we've put on for quite some time. We've got a lot of time until January 29th.

We're conducting a major campaign here in Florida. We've had great crowds yesterday both places that we were at, tremendous enthusiasm.

And in fact, many people don't know this, but people in Florida have already begun voting. Absentee ballots have been cast. There's going to be early voting starting next week. So this is a state in which we're well organized and we believe we're going to win.

WALLACE: But doesn't what we just saw in the polls -- doesn't that raise serious questions about your overall strategy? The candidates who have won in the early states have the momentum while at the same time you're fading.

GIULIANI: Well, you know, everybody has to have a strategy that fits their strengths, their weaknesses, the places where they can get their message across the best, and we think this is the place for us to get our message across the best.

After all, this is a state that has a property tax resolution proposition on the ballot on January 29th. I'm the candidate who has had the strongest record as a fiscal conservative, the strongest record as a tax cutter.

We have just announced a program that everyone says is a very bold, creative program to reduce taxes, probably the biggest tax reduction in American history, and a program to simplify taxes so you can file your taxes on one page.

I have it here with me. Believe it or not, you can do it on one page. This is something that some of the people of Florida are very, very interested in, a way of simplifying your taxes so that you can do it on one page.

This will result in major tax reduction. A family of four here earning $80,000 will save something like $3,000. A family of four earning $120,000 will save something like $7,000 -- money in their pocket.

These are issues that resound in Florida and, quite frankly, of course, they resound all over the country. But you know, the way these primaries are working, you sort of have to pick a state where you can get your message across and crack through that way.

WALLACE: Mayor, we're going to talk in more depth about your tax plan and that one-page fast form in the next segment, but let's talk about money right now and your money, your campaign money.

We learned Friday that your senior campaign staff, about a dozen of them, are going to work without pay for all of this month. Isn't that a sure sign of a campaign with serious money troubles?

GIULIANI: No, no. That was a very generous gesture on the part of that group of people who wanted to make sure that, you know, every last penny was available for Florida, for what follows. It really isn't necessary.

The campaign has enough money to compete here in Florida. We don't know what the other campaigns have. We may have more than some. We're certainly competitive. We have enough money to get our message out. And a lot of this campaign is a grassroots campaign anyway, so that was a very generous thing.

I think it showed their support and loyalty to the campaign, but it really wasn't necessary.

WALLACE: Let's take a look at the financial situation of your campaign. At the end of the third quarter, in September, you had $11.6 million cash on hand for the primaries, but at the end of the year, you had $7 million cash on hand in the bank.

The way I look at that, you spent $5 million more in the fourth quarter than you raised, only to sink in the polls.

GIULIANI: Well, I mean, the reality is it got much more competitive there at the end with all of those primaries going on. We expected that to happen, Chris, and it happens in every campaign. You know, you go up. You go down.

It's a very competitive race -- asking me about the money. There's enough money to put on a competitive race here in Florida. It's going to be decided on who has the best message here in Florida or the best set of messages, who do the people in Florida think will be the most effective leader.

And I believe we will win when they ask those questions. I've had the most executive experience of any of the candidates in the race, having been, you know, mayor of New York City, having had to deal with crisis, having had to deal with difficult problems and getting results.

WALLACE: But despite what you're saying now, Mayor, you didn't always intend to wait for Florida. Back in November and December, you spent $3 million in advertising in New Hampshire, and then you pulled out of that state.

You said at one time that you were going to make a stand in Michigan and South Carolina. Now you've pulled all your paid staff out of those states.

So hasn't your campaign over the last few months been in a steady retreat?

GIULIANI: Well, the reality is as these primaries played out, certain people were very strong in some, and you had to look for the opportunity where you had the best chance to demonstrate your strength.

And it turned out that the analysis was that Florida was the best place for us to do it. Florida also comes on January 29th. It's kind of a gate opener to the February 5th primaries.

So you know, we're competing in Florida. We've already begun our campaign. We had great receptions yesterday in the places we went. We're going to be in a parade today.

We're going to be campaigning all over the state on a bus tour over the next three days. And this is just as early voting begins. So we've got a good strong campaign here.

And of course, you know, you've got to work really hard, but we believe it will succeed.

WALLACE: But what happened, for instance, in New Hampshire where you did seem to be making an effort in November? You did pour $3 million in advertising into it and then pulled out. Why did you make that decision?

GIULIANI: Well, what happened in New Hampshire is real simple. John McCain won a very good victory. He campaigned there for quite some time. He turned it all around. He won a big victory in New Hampshire.

WALLACE: But why did you pull out in November or December before he won a victory?

GIULIANI: We didn't pull out. We didn't pull out. What we did was we decided -- I can't remember exactly when it was -- January, December -- at some point we decided that we had to put our principal focus on Florida, that that was the best strategy for us, for all the reasons that I pointed out to you.

And you know, everybody's interested in the horse race, you know, among the reporters, but actually, people are more interested in who's going to be best in dealing with terrorism, who's going to be best in dealing with the economy, who's going to reduce taxes the most, who's going to bring us energy independence.

Those are the things that people are really interested in. And if you keep your campaign focused on that, you have a good chance of winning.

WALLACE: But let me ask you about trying to get your message out, because part of the problem is that you're not really in the conversation now.

You made a big speech in December in Florida with a new slogan, "Tested, ready now," but because all the other candidates were in Iowa, you got very little attention.

Then just last week -- and we're going to talk about it in the next segment -- you made a big speech with a new tax cut plan, but again, all the candidates were in New Hampshire, so again you got very little traction.

How do you get back in the conversation? How do you become a player again in this campaign?

GIULIANI: Well, no, I don't agree with you on the second one. I think the tax program got a good deal of attention. It certainly got a good deal of attention here in Florida.

It really was -- given the fact that we're focusing on this primary intended for Florida. And we'll have more announcements like that.

And the reality is that we're trying to get those messages through to the people of Florida, and we believe that they have gotten through.

WALLACE: Is it fair to say at this point, given all of this talk about Florida, that you have to win in Florida to stay in this race, sir?

GIULIANI: It's fair to say that it's a critical state for us, an important state for us. I don't think any candidate would ever say "have to," but if you want me to say it's real important, Chris, it's real important.

WALLACE: So you have a scenario where you could lose in Florida after putting all of your eggs in this basket?

GIULIANI: As I said, it's real important to win in Florida.

WALLACE: Mayor, even if you do win in Florida, it looks to us, looking at your campaign finances, like you'd be almost broke at that point.

How then do you go on to win in those 22 states that vote around the country just a week later on Super Tuesday?

GIULIANI: It wouldn't be terribly different than the other candidates, who all are going to have the same set of difficulties in fundraising. You've got to continue to fund raise, and you do well, and that jumps up your fundraising. And that's pretty typical of the way a lot of these primaries have gone.

WALLACE: All right, Mr. Mayor. We have to take a break here.

But when we come back, we're going to ask Rudy Giuliani about some of the key issues he thinks will turn his campaign around. Back in a moment.

(COMMERCIAL BREAK)

WALLACE: And we're back now with Republican presidential candidate Rudy Giuliani.

Mayor, the linchpin of your campaign is national security, that you are the Republican candidate best suited to win the war on terror. You have a new commercial out called "Ready." Let's take a look.

(BEGIN VIDEO CLIP)

NARRATOR: Leaders assassinated, democracy attacked, and Osama bin Laden still making threats. In a world where the next crisis is a moment away, America needs a leader who's ready.

(END VIDEO CLIP)

WALLACE: Mayor, if it is a choice of which Republican is ready on these issues, why not John McCain, who was the leading voice for years in terms of criticizing the way the war was being waged in Iraq and then was one of the primary voices behind what became known as the troop surge?

GIULIANI: Well, as we pointed out in that piece there, I believe that I've been tested in a way that others haven't. I mean, I've had to deal with crisis. I had to deal with crisis in many different ways as mayor of New York City and have proven that I can and that I'm ready to do that.

I've had what some people regard as the second toughest job in the United States as mayor of New York City, and I had it during difficult times and had to get extraordinary results, and we accomplished that.

And then my history of dealing with violence, violent organizations, having the safety and responsibility of other people on my shoulders goes back even before being mayor of New York City, to being United States attorney, associate attorney general.

I think this prepares you for executive decision-making in a way that suggests that I would be a good president at this time, you know, being able to deal with the kind of things that terrorists may be throwing at us and then, of course, all of the other things that you have to deal with as a chief executive.

WALLACE: But it does come down, and any election does, to a choice. John McCain has been a leading voice on the front lines of the debate over national security for more than a decade now, not just on Iraq, but on the whole issue of torture...

GIULIANI: Right.

WALLACE: ... on the whole issue of military spending.

If the question is who is the strongest Republican candidate on national security -- you've talked about your credentials -- why not vote for John McCain?

GIULIANI: Well, I think, with all due respect, there's a difference between, you know, being one of 100, being a voice, and then actually being the decision-maker that day in and day out is actually on the line for making those decisions, so you can see the consequences of those decisions.

And that may be why Americans more often turn to people with executive experience, you know, people who have been governors or, in my case, mayor of the city that's as large or larger than most states.

WALLACE: Now, when he's asked about this, John McCain says that he was the head of the biggest squadron in the Navy, more than a thousand sailors. Your response to that?

GIULIANI: Great respect for John. He's someone who's accomplished a great deal, and he's a friend of mine and a hero.

I just believe that the executive experience that I have, which is more similar to the kind of background that most of the selections for president have been like -- I think that executive experience, where you're the person who is a decision-maker and, in my case, during times of crisis and difficulty -- and I'm not just talking about September 11.

I'm talking about a city that I actually had to turn around and accomplished turning around. I think that argues well in favor of someone, you know, having to deal with crisis in the presidency.

WALLACE: Besides the question of which job you held and which job John McCain held, are there any differences on policy?

GIULIANI: Oh, I'm sure there are, you know, but I think this is a question of people deciding who they think has the better experience, who they think is better able to handle this area.

And then, of course, it's never one thing. I also believe I'm the strongest fiscal conservative in the race. In having been an executive, I had to balance budgets. I had to figure out how to get spending under control.

I cut taxes more than anyone in government at the time that I was in government, which is sort of the core of the program that I'm now able to put together, which would be the largest tax cut in American history.

It's one that I think I can argue for more effectively than anyone else because things like this have worked for me in the past.

WALLACE: Let's talk about that tax cut because, as we mentioned, you did propose a big plan just this week, including -- and if you want to take it out again -- the one-page fast form for taxpayers. But I want to ask you...

GIULIANI: Here it is.

WALLACE: ... about an example that your campaign gave when talking about your one-page fast form.

You say that a family of four earning $80,000 a year would get a tax cut of 24 percent, but a family of four making $120,000 a year would get a tax cut of 36 percent.

So if I read that right, Mayor, your tax cut would help the rich more than it would the middle class.

GIULIANI: Well, it helps everyone. And it depends on the rates that you fall in. And in fact, the primary benefit are to people that are middle income. And we're just talking about the tax savings, I believe, from the fast form.

There are other benefits, other tax reductions, that would help balance that also. Let me explain the way we put these out. We put out a number of tax reductions.

As I've said, I'm going to fight for all of them. I doubt that all of them are going to pass, because you never get all the tax reductions that you ask for. I never did when I was mayor of New York City.

But I put out all the ones that I thought were the best. So to actually do a calculation of who benefits the most can only be done after you figure out which ones you can get through Congress, which ones are going to be approved, which ones are going to be adjusted. That was just to show the effect of the fast form.

And I should indicate with the fast form that that's also an option, meaning you can file the other form if you want to. So you have the option of doing it on one page with the key deductions maintained, or you can file the longer form.

And it might be that under the longer form you'll get more benefits if you want to take the time to do it.

WALLACE: Mayor, the big issue right now, of course, is the possibility that we may be sliding into an economic recession. Do you favor a short-term government stimulus package? And if so, what would you put in it?

GIULIANI: Yeah, favor. That's why I made the announcement that we should do tax cuts right now. I favor a program right now of doing three things: Strategic tax cuts that stimulate the economy, like cutting the corporate tax from 35 percent to 25 percent, which would be an immediate boost in jobs and, I think, investment in the United States.

Making clear that the investment tax -- you know, the capital gains tax, the dividend tax -- the Bush tax cuts are made permanent, particularly with regard to those areas that are sensitive to investment in the United States.

I would also immediately begin a program to reduce government spending, which we'll be talking about next week and the week after, to show confidence that we're returning to very, very strict fiscal discipline.

And then I would accelerate this whole effort to look at regulations so that America doesn't over regulate businesses and money out of the United States. Those three things have to be adjusted.

You can overtax, you can over regulate, and you can overspend to such an extent that you're hurting yourself on a competitive basis. Those are the things that I think are the core of a sound fiscal policy.

WALLACE: But, Mayor, let me just say that even if you passed -- even if you were president now and you put all of those in with the state of the union later this month, those wouldn't help in the short run. Those wouldn't help for a couple of years.

Senator Hillary Clinton, for -- let me just say Senator Hillary Clinton has just proposed a $70 billion package which would send money to the states to help stop foreclosures, help with heating oil, extend unemployment benefits.

She and some people at the White House are talking about tax rebates right now. I mean, that's the kind of short-term stimulus you need, isn't it?

GIULIANI: No. The kind of short-term stimulus you need is to present the picture, realistic picture, of an economy that's going to grow.

And then the private sector and the investment from the private sector -- the multiples of money that that would involve dwarfs anything that you're talking about.

Here, look at it this way. You're a business. You're making a decision about where to place your business, a business that you're going to have there for the next 20 years to 30 years.

You're looking at a picture of the United States of, you know, Democrats possibly getting elected, talking about raising taxes 20 percent or 30 percent, talking about building the central government, regulating more.

You look at another country where the corporate tax rate is considerably less than the United States. The other tax rates are going down. And they're talking about putting more back into the private sector.

Where do you put your business? Where do you make your long-term investment? Where do you put your money? How do you evaluate the currencies? If the government in Washington presents the picture of immediately moving toward pro-growth policies, you have growth right away.

A lot of the movement of money, as you know, not just in markets but in general is a prediction of not just where the economy is today, but where the economy is going to be next year, the year after, the year after that.

So by announcing strong pro-growth policies, you can affect that decision, and that brings more liquidity. It brings more money. It brings more investment into your economy.

That's why the Club for Growth pointed out that my tax program would be one of the best things that you could do to strengthen the economy right now and create growth.

WALLACE: Mayor, we have only a few minutes left, and I want to talk to you about one last issue, which is immigration.

GIULIANI: Right.

WALLACE: You have a comprehensive plan that calls for building a fence, both a physical fence and a high-tech fence, to secure the border.

You also talk about immediately deporting any illegals who commit crimes, but that's still going to leave, by some estimates, 10 million people here. What would you do with them?

GIULIANI: What you would do is you would secure the border. You'd have the fence. The fence would stop people from coming in.

You'd set up a rule that to come into the United States, you have to identify yourself, which, after all, is no different than the rule in just about any other country.

You'd have a tamper-proof I.D. card. You'd get that working. And once it was working, what you would do is you'd deport the people who are criminals. You'd let the other people come forward who are here, who want to get fingerprinted, photographed, checked out, put on the rolls, paying taxes.

The people who didn't come forward you would focus on, and you would throw them out of the country. And you probably would also find that a number of those people that won't come forward will also leave.

WALLACE: But I want to...

GIULIANI: So your number -- well, let me just finish that, Chris. So your number -- what you've got to do with the, OK, 10 million here, 12 million here, is you've got to get that number down to a number that is deportable, that fits within a system that will deport them.

At multiple millions like that, it's numbers that the government can't deal with. So if you get rid of the criminals...

WALLACE: But what will you do -- but what will you do with the ones -- let's say 8 million, 6 million, whatever -- who haven't broken the law, who are willing to pay taxes, willing to pay a fine? What do you do with them?

GIULIANI: You let them sign up. You let them get fingerprinted, photographed. You assure yourself that they're safe, decent people, that they're working, that they're now working on the rolls. You'll get the tax revenues from them. They will be paying their fair share.

And in essence, you create a self-selection process among those people. But you'll be doing it with the borders secure, with the borders now in a situation where more people can't come in.

If you try to do that before you secure the borders, your 12 million might become 16 million or 18 million.

WALLACE: But, Mayor, that sure sounds like amnesty for that self-selected group of people.

GIULIANI: Not at all. If they ever wanted to become citizens, they would have to get on the back of the line. They couldn't get ahead of anyone else. They would have to pay fines.

And then at the end of the road, anyone on any of these lists would have to be able to read English, write English, speak English. There would be substantial things that had to be done. Amnesty is being free and clear of all penalties of any kind.

WALLACE: But you wouldn't make them leave the country, would you?

GIULIANI: They'd have to pay a penalty.

WALLACE: But you wouldn't make them leave the...

GIULIANI: No. The way I would do it is the -- the way I would do it is the way I just suggested. I think that's the only way. In terms of the numbers you're talking about, and the ability of the federal government to actually get it done, that would really be the best way to get it done.

But critical to all of this, Chris, is you have got to secure the borders first. None of this can work if you don't secure the borders, because any kind of solution that you have for the people that are here, no matter how rational it is, would end up just having the problem run away from you if you don't secure the borders first.

WALLACE: Mayor Giuliani, we're going to have to leave it there. We want to thank you so much for coming off the trail and talking with us today. And safe travels, sir.

GIULIANI: Thank you, Chris. Thank you very much.