Rudy Giuliani On Iraq, Taxes, Mistakes

By Maria Bartiromo

In two terms as mayor of New York, Rudy Giuliani turned a city beset by crime and violence into one of the safest, most livable metropolises in America. And he fearlessly led New York as it confronted the despair and destruction following September 11. But the turmoil of Giuliani's private life prompted many to dismiss his quest for the Republican nomination for President as the folly of a man with too much baggage to be a serious candidate. Never one to put much stock in political pundits or conventional wisdom, Giuliani has soldiered on, and as of Apr. 18, early polling had him leading the GOP pack.

What would you do differently in Iraq?

I think the policy in Iraq has to be: Clear, hold, and build. As soon as you get to a situation of considerably less violence, you have to get the Iraqis to rebuild their infrastructure, open their factories, fix their roads and schools. The statistic that worries me the most about Iraq, in addition to the obvious violence that has to be reduced, is its 60% unemployment, at least as of a month ago. If there's 60% unemployment in Iraq six months from now, it's going to be very hard to create stability.

When should the troops pull out?

I can't emphasize [enough] how irresponsible Congress has been. The idea of having a timetable for withdrawal, which many of the Democrats used to say they would never doParagraph .is very, very dangerous. I can't remember in the history of war when an army or a country has announced its retreat and then given the enemy a timetable of that retreat. It is dangerous for our troops, it's dangerous in terms of the way in which it will promote terrorism, and it's even dangerous, to some extent, for us here at home. If we do this timed withdrawal from Iraq, how is that going to affect us in Iran and in dealing with Syria, Pakistan, and Afghanistan? In every one of those situations, it's going to make things much worse for us.

Do you think we need to boost the budgets for security and the war on terrorism? If so, how do we do that in the face of mushrooming costs for Social Security and Medicare?

The first thing we need is a budget-reduction program. I don't think the government has had that kind of fiscal discipline, at least in my memory, since the Reagan Administration. What I did in New York was impose budget cuts on every one of my agencies...5% to sometimes 20%. That resulted in a 20% reduction in the size of the city government, with the exception of cops and teachers. And the military needs to be modernized. We've never quite made up for the peace dividend we got during the Clinton Administration. It was something I strongly opposed when it was happening. I thought it was kind of a repeat of the mistakes made right after World Wars I and II when we were anticipating an entirely peaceful world. The peace dividend was a very, very big mistake.

Do you support extending the 2001 and 2003 tax cuts?

I support continuing the level of taxation where it is, certainly not letting it increase. I would try to look for additional tax cuts that stimulate the economy. As mayor of New York, I cut taxes and raised more money. For example, the capital gains tax is a really smart tax to cut because if you cut it the right way, you could end up with much larger growth. I did that with the hotel occupancy tax. I got it cut by about 30% and was collecting $100 million more from the lower tax than the higher tax. And the death tax is just a great example of what's wrong with Washington. The death tax is going down to 45% in 2009. In 2010, it's going to zero. Then in 2011 it goes back to 55%. That is ludicrous. Only Washington could create a tax incentive for death. We've got to either eliminate the death tax—it's a double tax, anyway—or reduce it to something sensible.

You recently picked up Steve Forbes, who is a flat-tax advocate, as an adviser. Do you also support a flat tax?

I support simplifying the tax code. I think of the flat tax as theoretically a very good solution—and probably what we should have done when we first started the income tax. These days it would be unrealistic to go all the way to a flat tax. But you can use it as a guide to figure out how you're going to simplify taxes.

The economies of China and India are soaring. Should we be afraid of them, and how tough should the U.S. be on China?

We should see the growing economies in India and China as great opportunities for a country that is the leader in the world in technology, innovation, management, and administration. Every place I go, people want to learn about how America organizes its companies, how America has been able to be so productive. We can sell that to the world. In many ways India is at least as good or better an opportunity than China. It's already a democracy. It's already a country with a rule of law and courts. The big problem in China is protection of intellectual property. So we have to work on both fronts—keep China opening up its markets and at the same time try to get it to develop a more sophisticated legal system.

What about Russia? Is it an ally or an enemy?

We have to be concerned about a country that has taken big steps backwards in terms of proceeding as a democracy, as a country that respects human rights. And then we also have to be concerned about a country that appears to be using its energy position to get leverage in Eastern Europe and Europe.

How should Sarbanes-Oxley be changed?

We have a tendency to underregulate. Then we have scandals, and we swing wildly in the other direction. I think it's time we take a look at some of the requirements of Sarbanes-Oxley. That doesn't mean we get rid of it, but we start to make it more balanced. Most American businesspeople are honest. We have some dishonest ones, but we can't overreact to that.

Why do you think you can win over Christian conservatives?

Because Republicans, however people describe them, respect people who tell them who they are and don't pretend that they're going to agree on everything. Ronald Reagan is kind of my model, and his approach was: "If you're my 80% friend, you're not my 20% enemy." I think I'll do well with conservative voters because they will see that I'm one of the most fiscally conservative candidates in the race. I'm the one who has just about the strongest record on tax cuts. And I think they will be in pretty close to total agreement with me on how to handle homeland security and deal with terrorism. On social issues, they're going to find that the area of disagreement is not as great as some of my opponents have told them.

But so much has been made of your decidedly unconservative positions on gay rights, gun control, and abortion. How big a factor will those positions, your personal history, and Judith's personal history be in the campaign and Presidency?

Ultimately, the election will be about who the American people think will be the most effective leader. And they have every right to examine all aspects of my public life and my private life. Because I've had such a long career in so many different areas—probably the most diverse of anybody running—they can look to the success that I've had even though I've made mistakes and things went wrong, which I think kind of makes me human. When I was mayor, various things going on in my private life did not stop me from reducing crime by 57%, reducing homicides by 67%, turning a $2.3 billion deficit into a multibillion-dollar surplus. It didn't stop me from reducing the welfare rolls by 660,000. Then I had to deal with the worst attack in the history of the city, maybe the country. Sure, I've made mistakes, both privately and publicly, but what's the balance? The balance is that I've been able to have success. So I think they can be pretty confident that that's what would happen as President.

You said your wife, Judith, could sit in on Cabinet meetings if she wanted to. What role would she play?

The preface to that, Maria, was a question by Barbara Walters about what Judith would be interested in as First Lady. And her answer was: "I'm a nurse...and what I think I would be good at is educating people about the things they have to do to remain healthy." So then Barbara asked me: "Would you be comfortable with Judith sitting in on Cabinet meetings?" And I said: "I would if it was in areas that she's interested in or in areas where she has expertise." But she has no interest in being part of the Cabinet.

What about the critics who might ask how you are going to get things done with Congress? Does this country want another "my way or the highway" President?

I dealt with a city council that was 45 Democrats and 6 Republicans. And somehow I was able to get 23 tax cuts or eliminations...and that turned the city around. I've been in the federal government more than city government. I was the third-ranking official in the Justice Dept. I worked with Congress in the Ford and Reagan Administrations. I ran as a mayor by saying—and I borrowed this from [Mayor Fiorello] LaGuardia—there is no Republican or Democratic way to pick up the garbage.

Maria Bartiromo is the anchor of CNBC's Closing Bell.

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