updated 10/23/2006 5:42:58 PM ET 2006-10-23T21:42:58

Following is the transcript of an interview conducted by CNBC's Maria Bartiromo with President Bush Monday.

CNBC's Maria Bartiromo: Mr. President, thank you for being with us. Do you think most Americans feel better off today than they did when you first took office?

President GEORGE W. BUSH: I think that's an interesting question, because when I first took office, no one would have anticipated that we'd have been under attack by an enemy as violently as we were.

I think most Americans feel like this economy is good and a lot of people are beginning to realize it more and more, real after-tax wages were up the past 12 months, which is important. I mean, people are keeping more of their own money. But we've been through some tough times over the past five years, we've been through a recession and the corporate scandals, which affected the--a lot of people's view of the economy, some high energy prices, big hurricane, and war. And yet this economy is strong because the entrepreneurial spirit is and people are working. And I feel like--I really am please with the progress we've made on the economic front, but there's obviously still more work to be done. Just got to make sure we remain competitive and keep taxes low.

CNBC: If you ask an economist on Wall Street or at the White  House, they will also say that the economy is doing very well. But let me ask you about the guy from middle America, the person who is the average middle-class American who may very well say he's feeling pressured.

Pres. BUSH: Yeah, I can understand that. Particularly last year, because he's a person whose wages weren't going up quite as strongly as we had hoped, and his health care costs were going up and the price of gasoline was high.

Now the same fellow's wages have gone up in real terms, having been adjusted for inflation, his health care costs are still high, but his gasoline prices are low, lower, and when you couple all that with the tax cuts, he's got more money in his pocket. And it's--I--as I say, I'm happy to see that the average worker, the person out there in middle-class America, is keeping more of his money, or her money.

CNBC: Why do you think oil prices have fallen from close to $80 to below 60?

Pres. BUSH: You know, it's--I would hope it would be the markets adjusting, although I would--I think there was a certain amount of speculation, you know, betting on the--hedging in the marketplace, and that people realized that there was--a correction was coming and they began to sell. Oil prices are--should be a reflection of  supply-and-demand. Oil prices are a reflection of supply-and-demand coupled with a speculator's view of what the future may look like. And I think what you saw was some speculators trying, you know, heading in the other direction on the price of oil. What we've got to do in this country, however, is welcome low oil prices but continue to spend money to make sure we become less dependent on oil. I think one of the real challenges to our economy and to the competitive nature of the American economy in a global world is to make sure that we have alternative sources of energy, which also will make us better stewards of our environment.

And by alternative sources of energy I mean ethanol, different types of ethanol, ethanol produced from corn, ethanol produced from hopefully some day wood chips or straw grass, different battery technologies that'll enable you to drive your car for--particularly in New York City for the first 40 miles on electricity. You know, there's some--hydrogen eventually could be used to power all of those other--there's a lot of things we can do now to make sure in the--in the out years that we're less dependent on oil.

CNBC: Has momentum on that stopped or slowed down at all now that gasoline is back?

Pres. BUSH: You know, not really. Gasoline prices have backed off, they're certainly still high for a lot of folks, and no, they won't--they won't in terms of our requests to Congress for research money. The interesting thing is is that a lot of private capital has started to move into alternative sources of energy, whether it be on--how we drive our automobiles or, you know, solar energies or wind energies are getting a lot of investment, and I think these investors are very savvy and they understand that in the longer term, you know, dependency upon oil is not good for this country.

CNBC: Are you worried about OPEC? Already, the Saudis are saying they want to cut back on production, OPEC wants to cut back because they want to see prices go back up.

Pres. BUSH: Yeah, you know, it's hard to tell whether or not there's speculation. I don't think there's actually a formal request yet, I think, if I'm not mistaken, some of the ministers talking about what they'd like to see happen. I would hope that the OPEC nations understand that high prices of oil could wreck economies, and if they wreck economies, it means the purchasers will be fewer.

CNBC: Mr. President, by a host of measures, whether it be the price in oil or whether it be unemployment, it's being confirmed by the stock market even today, 12,000 on the Dow, the economy is performing well, and yet more than half of Americans, 53 percent in a recent poll, disapprove of your handling of the economy.

Pres. BUSH: Yeah.

CNBC: Why the disconnect?

Pres. BUSH: You know, I guess it's--we're in a time of war. I mean, this is--you know, people turn on their TV screens and see these acts of violence in Iraq or Afghanistan or in other countries, and it can be unsettling. I think the other thing is, Maria, is that we got--you know, the gasoline prices are just starting to drop, and that'll help people feel better about the economy. I think there are some people that are concerned about the fact that people are changing jobs quite often in our economy. And so I guess there's a variety of factors. But the good news is the economy is strong. And so, you know, I can't--I don't sit around fretting based upon, you know, an opinion poll, because I am comforted by the fact knowing that more and more Americans are working, 6.6 million Americans, new jobs have been created since August of 2003. And the other factor that's really important, it's what I keep talking about, this increase in real wages by 2.2 percent over the last 12 months, that's good news. It means people have got more money in their pocket, and that's really what I want to see.

CNBC: And typically, they will vote with their wallets, what do you think they'll do in two weeks for the midterm elections? Or is it really a referendum on Iraq?

Pres. BUSH: No, I think it's a referendum on a lot of things. I definitely think the economy is an issue. We'll just see what happens. I believe we'll hold the House and the Senate. I--no question that a strong economy is going to help our candidates, primarily because they have got something to run on, they can say our economy's good because I voted for tax relief. And listen, the entrepreneurs are investing, small businesses are growing, and tax relief is a part of the reason why our economy is doing so well.

CNBC: If you do retain both houses, are you going to push to get the capital gains and maybe their tax cuts permanent?

Pres. BUSH: I will. I think we ought to get rid of the death tax, I think that's a bad tax. I would like to see us make sure that the reductions in the capital gains and dividends are permanent, because I believe when you reduce the tax on dividends and reduce the tax on capital gains, it encourages investment. And the more investment we have, the more likely it is that there will be job growth. What I'm interested in is people working.

CNBC: How do you think the voter feels when he or she sees stories about corporate CEO compensation, one guy pulling down a billion dollars in pay packages from the health insurance company or hundreds of millions of dollars in pay from an oil company executive. And how--what do you think about when you hear stories like that?

Pres. BUSH: I am--first, I will temper my remarks by saying I don't think government should control salaries, but I would hope shareholders would take a close look at some of these compensation packages that they pay these corporate executives who are able to make money when the company is not doing well sometimes. I think that--I get astounded by the size of the pay packages, I'm--consider me floored when I see guys making billion dollars for--as a CEO of a company.

CNBC: I mean, is anybody worth $400 million?

Pres. BUSH: I guess it depends who you are. But it seems like not. But again, one of the things about our system is we do have a corporate governance system that should work hard to make sure that the compensation packages are fair. I mean, we have a board of directors --board of directors should serve on a company--serve a company and then watch the shareholders' money, that's what they ought to be doing, and these compensation packages can get out of hand. I do believe in incentive pay, I think that's good, just want to make sure the incentive pay is rational.

CNBC: Speaking of wealth, there's so much change in terms of technology on society, on business; I'm curious, have you ever Googled anybody? Do you use Google?

Pres. BUSH: Occasionally. One of the things I've used on the Google is to pull up maps. It's very interesting to see that. I forgot the name of the program, but you get the satellite and you can--like, I kind of like to look at the ranch on Google, reminds me of where I want to be sometimes. Yeah, I do it some. I'm not a--I tend not to e-mail or--not only tend not to e-mail, I don't e-mail, because of the different record requests that can happen to a president. I don't want to receive e-mails because, you know, there's no telling what somebody's e-mail may--it would show up as, you know, a part of some kind of a story, and I wouldn't be able to say, `Well, I didn't read the e-mail.' `But I sent it to your address, how can you say you didn't?' So, in other words, I'm very cautious about e-mailing.

CNBC: Let me turn to North Korea and Iran. It seems like the markets have discounted a threat from these countries, certainly the way that the markets are trading. How do you feel about those two countries? Tell me which one worries you most and...

Pres. BUSH: Right.

CNBC: ...the level of concern that you have.

Pres. BUSH: I don't discount the threat. As a matter of fact, I see the--I see the threat in a country like North Korea or Iran possessing, using or selling a nuclear weapon, and therefore, have put together a diplomatic effort to convince them that there's a better way for their governments and their people.

Now, both threats are equally, you know, equally serious. They both present different problems, but they're serious threats. And I--the progress that we've made on North Korea's important. I know you're going to China, and China has now become a very important partner in convincing North Korea to live up to her international obligations and get rid of her weapons in a verifiable fashion. It's much easier for us to achieve a diplomatic solution on this problem if there's more than one voice speaking to China. You now have China, the United States, South Korea, Japan and Russia all saying the same thing. I was briefed by Condi this morning. She came back from the Far East, and she gave me a full briefing on all the conversations she had in these--in Japan and South Korea, Russia and China. She's very pleased by the fact that they're all committed to enforcing the latest UN resolution, and they all know that in order for the North Korean leader to be convinced that we all must speak with one voice, and then effect the consequences inherent in the UN Security Council resolutions.

The same strategy applies to Iran. That we've got to say to Iran that China, Russia, the EU and the United States all are intent upon providing a way forward, but we're also intent upon making sure that they don't develop a weapon.

CNBC: Why won't this administration talk directly to North Korea without any concessions?

Pres. BUSH: Well, the key is to try to put a--put a strategy in place that actually achieves the objective. And the notion of bilateral talks had been tried and it failed in 1994. And the idea is to try something that I think will work. And we--the--North Korea knows our position very clearly. There is a better way forward for the North Korean people. And the leader has that choice to make.

CNBC: Let me ask you, broadly speaking, about the competitiveness of this country. A lot of people worry--Treasury Secretary Hank Paulson among them--that a lot of business is going to international economies. You're seeing an enormous amount of, relatively speaking, IPOs going to Hong  Kong and London relative to the New York Stock Exchange.

Pres. BUSH: Yeah.

CNBC: Are you concerned about that, and how successful has Sarbanes-Oxley really been?

Pres. BUSH: Mm. Secretary Paulson and I have spent a lot of time talking about this issue. And on the one hand, we want to make it clear that our country will not tolerate any malfeasance through corporate executives. On the other hand, we understand that if you over-regulate, it'll drive capital elsewhere. And so Secretary Paulson and--has convened a group of leaders here in Washington--Chris Cox and others--to talk about how to achieve--you know, live within the spirit of Sarbanes-Oxley, but make sure that we don't over-regulate here in America. And--so one way you become less competitive is through over-regulation. Another way is through high taxation. Another way is through lousy education. And we've got plans to address all these issues to make sure that America's still the most competitive nation in the world.

CNBC: So are you expecting it will be rolled back, then? Sarbanes-Oxley?

Pres. BUSH: I think "rolled back" is the wrong way to look at it. I think fine-tuned in a way that achieves both objectives. One objective is good corporate governance so that people have faith in the balance sheets they read and the numbers that are presented. And on the other hand, to make sure that--the other objective is to make sure that capital remains here in the United States, that we don't drive it out because of over-regulation.

The good news is Secretary Hank Paulson knows a lot about the subject.

He's a tough-minded guy, as you know, when it comes to bad corporate governance, but he also understands capital very well. And he and I am concerned about IPOs being issued in overseas as opposed to here in New York and in America.

CNBC: What about he corporate sector and malfeasance overall today? Just today we're seeing Jeff Skilling get sentenced.

Pres. BUSH: Yeah.

CNBC: And while we haven't seen something as enormous as Enron recently, we have this new issue of fast-dating of options and companies going over the line there. How would you characterize the corporate sector with regard to fraud or the possibility of malfeasance?

Pres. BUSH: I think the word's out that this administration will come and get you if you break the law. The culture is now one of enforcement, that says, you know, we're not going to put up with it. The Justice Department is active, the FCC is active, and it's important to hold people to account, and we have been and will continue to do so.

CNBC: What about Wal-Mart? You just met with small business owners. Is Wal-Mart good for this country, or does it put small business out of business?

Pres. BUSH: I think Wal-Mart is--you know, made a significant contribution to this country in terms of affordable goods as well as employing people. I think that people are going to--you know, obviously competition is a vital part of the American society, and people shouldn't fear competition. They ought to learn how to adjust and compete.

CNBC: Aside from being a baseball fan, it's not a great time to be in Detroit these days, Mr. President.

Pres. BUSH: Yeah.

CNBC: The economy there is under pressure, the automakers continue losing market share to Japan. How far should the government be going in terms of bailing out the autos?

Pres. BUSH: Mm. I'm going to meet with the automobile CEOs here after the midterm elections. I chose not to meet with them before the midterms because I didn't want to politicize their issues. And they understood that.

I think, look, the--to the extent that they made commitment, they got to keep their commitments. There's a lot of people saying, `Well, you need to take their--take their health--their benefits that the promised off their hands.'No, I don't think that's a proper roll of government. They made a private contract with their employees; they need to keep it. On the other hand--keep that contract. In other words--but in terms of dealing with health care costs in general and ways for the government to be able to affect the rising cost of health care, I look forward to discussing it with them.

CNBC: What are your priorities in your final two years in office?

Pres. BUSH: Well, I want America to be the most competitive country in the world, and the best way to do that is for us to focus on engineering and science and make sure No Child Left Behind Act remains strong and vibrant so that our kids get the basic education. I do want to continue to make sure that we have alternative forms of energy available for our economy so they can remain competitive. I'm very worried about our dependency on oil from an economic security perspective and a national security perspective. I want to--I want to deal with the unfunded liabilities inherent in Social Security and Medicare. I believe we can do that, and at the same time assure those who are on Social Security they have nothing to worry about, and those who are going to pay into Social Security that we'll make sure you don't pay into a bankrupt system.

So I've got some big items I want to work on, and I'm going to work hard to get them done.

CNBC: Is the privatization plan effectively dead, regardless of happens in November?

Pres. BUSH: I would call it a reform plan, Social Security. No, I think it's very much alive. Because what hadn't worked is that Democrats and Republicans put aside all their partisanship and come together and say, `Let's work together to make this program solvent.' And I know Secretary Paulson is anxious to be a part of getting Democrats and Republicans to the table, as am I. Hopefully in my last two years of office people will say, you know, all this kind of politics that has dominated so much of Washington, DC, as a waste of time and effort, let's work with the president and get some things done.

CNBC: Can you tell us any detail about the reform you're thinking about?

Pres. BUSH: I can. And that is that, first of all, this is my idea. As I say, there has to be Republicans and Democrats very much a part of the mix for Social Security. I want to--I think the best way to do this is to say if you're a person at a certain income level or below, nothing changes for you, today or in the out years. If you're a wealthier citizen, your benefits increase at the cost of living, as opposed to a higher cost. So everybody's benefits go up, some go up faster than others. And that'll cure a lot of the problem.

I also happen to believe that a worker, at his or her option, ought to be allowed to put some of their own money in a, you know, in a private savings account, an account that they call their own. It's an asset that they're call their own. They'll get a much better rate of return on their own money than they would in the Social Security if the government manages their money for them, for example. And that would be, you know, a valuable contribution to our economy because it's asset accumulation, which is good for American families.

CNBC: Mr. President, the war in Iraq has cost Americans nearly 3,000 lives and nearly $400 billion. You're talking about a change in tactics. Tell us about that change.

Pres. BUSH: Well, I've been talking about a change in tactics ever since I--ever since we went in, because the role of the commander in hief is to say to our generals, `You adjust to the enemy on the battlefield.' The goal is an Iraq that can defend itself, govern itself, sustain itself and serve as an ally in the war on terror. The goal is to get rid of a threat, which we did.And now the goal is to help this country achieve its objectives, the objectives of 12 million people. And so we're constantly adjusting tactics to meet that goal.

I'll give you an example. IED started to flourish, and so we began to spend money here in Washington, DC, and around the country to make sure that our soldiers had better equipment when it came to defending against IED. They started developing ways to detect and/or trigger an IED before people came into harm's way. So we're constantly adjusting tactics. And we'll continue to do so.

I know there's a lot of speculation about the tactics, but the--what you got to know is the meeting I had with the generals on Saturday was--the meeting went like this: `We want to win.' `Yes, sir.' `What are we doing to adjust to the enemy?' `And here are some options, Mr. President.' And my answer is, `You choose, and I support you.'

CNBC: Let me ask you this. A former top official in your administration has predicted privately that the US will start withdrawing troops within six months.

Pres. BUSH: Mm-hmm.

CNBC: Is that possible?

Pres. BUSH: I don't know who that is, and I want to get our troops home as fast as anybody else. On the other hand, I understand the consequences of failure, and we're not going to fail in Iraq. As a matter of fact, we have a strategy for victory. Failure in Iraq would be terrible for future generations of Americans because if you provide safe haven for these terrorists who attacked us, there's wealth that they could use to enhance their capacities to develop new kinds of weapons that would hurt us. They want to topple modern governments. In other words, there's--they had--the al-Qaeda and its affiliates have objectives in Iraq. And we're not going to leave Iraq until we get the job done.

As to when our troops come home, that'll be depending on those on the ground whose responsibility it is to achieve victory. And if they were to say, `I need more troops or less troops,' I will support them.

CNBC: My final question, sir: What is the biggest risk to losing one of the houses of Congress in the midterm elections? Is it the role--the reversal of the tax cut plan, or weakening the war in Iraq?

Pres. BUSH: Mm. I refuse to answer that question. It's a very tricky question that you asked me. I'll answer it, but I'm going to refuse to answer it the way you expect me to. I--we're not going to lose either body. And thereason why is the economy's strong and we got a plan for victory in Iraq. The other folks will raise the taxes if the end up with power, and the other folks don't have a plan for victory in Iraq. As a matter of fact, a lot of them want to leave before the job is done. So there's a clear difference of opinion between the two political parties. And I believe that once the people get in the ballot boxes and take a hard look at the stakes, they'll decide to stay with our party.

CNBC: Mr. President, with all due respect, that doesn't have--that hasn't done anything for the polls.

Pres. BUSH: I know, but I think--my advice--you didn't ask for my advice, but I'll be glad to give you my advice--is let's watch what happens on the poll that actually matters, and that's what happens on--two weeks from tomorrow.

CNBC: Mr. President, good to have you with us.

Pres. BUSH: Thank you.

CNBC: Thanks very much.

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