WALLACE: Mayor Giuliani, you announced plans for a big tax cut yesterday. And you have been run-ning ads that say reducing taxes actually will increase revenues. But the bipartisan Congressional Budget Office, as well as two chairmen of President Bush's Council of Economic Advisers, all say that tax cuts don't pay for themselves, that in fact they add to the deficit, they don't reduce it.
So, given that, do you stand by your statement?
GIULIANI: Well, the reality is that some tax cuts do add to revenues. Other tax cuts don't add to revenues. It depends on the tax cut. And tax cutting has been part of the Bush program, the Reagan program, the Kennedy program, and it always led to significant increase in economic activity.
The Club for Growth looked at our plan, which is the biggest tax cut in history, and said that it would be a significant improvement in the economy and it would add to growth in the economy. Now, let me give you an example.
If you cut something like the corporate tax at 35 percent, you bring it down to 30 percent, you will get more revenues from that cut, because our corporate tax is the second highest in the world. If you cut some other tax, you might not get those kinds of revenues.
So, the question is: What tax are you cutting? Is it anti-competitive? If it is anti-competitive, you're actually going to get more revenues from that tax cut. But that's not the only answer to how you deal with a possible recession.
You also have to cut spending as significantly as you cut taxes. You have to be willing to impose cut-backs on each one of the federal agencies, the civilian agencies. I would do that the way I did as mayor of New York City, the way Ronald Reagan did it as president of the United States.
You have to be willing to engage in regulatory reform so that we have a picture here in the United States where we're not regulating businesses out of the country. The main things you have to guard against are overtaxing, overspending, overregulating and over-suing. And if you can find balance there, you will do things that are necessary to prop up the economy and to allow us to have a growth economy.
It's not just one thing.
WALLACE: Senator McCain, as a deficit hawk, I just want to ask you for a 30-second rebuttal on that.
Do you believe the tax cuts pay for themselves or do you believe that they add to the deficit?
MCCAIN: I think they stimulate the economy. I think that one of the first things we have to do that I forgot to mention is make these tax cuts permanent, because we've got to give some certainty to families and businesses all over America that these tax cuts will not expire and then give them the effect of a tax increase. So I believe they stimulate the economy, but, Chris, you've got to cut spending.
I'm proud to have been a member of the Reagan revolution, a foot soldier. And we cut taxes, but Ronald Reagan knew we had to cut spending at the same time. And that was our great failure as a party, is we cut taxes and then we let spending get out of control.
And frankly, it cost us a great deal. If we had adopted the tax cut package that I had, which entails spending cuts, then we would be talking about more tax cuts today.
It's a start -- good for Wallace.