CNBC "Squawk Box" Interview - Transcript

MS. QUICK: It is a time for a special edition of Your Money, Your Vote.

Senator Barack Obama, vacationing in Hawaii just a few weeks before the Democratic Convention. This morning, we have Obama's national campaign co-chair, also a man who has been talked about as a potential vice presidential candidate.

Virginia Governor Tim Kaine is in Richmond this morning. And Governor, thank you very much for joining us.

GOV. KAINE: Yeah, Becky. Glad to be with you guys today.

MS. QUICK: It's good to have you here. There you are. And Governor, we have a lot to talk about this morning.

GOV. KAINE: Great.

MS. QUICK: Obviously, you have been someone who has been mentioned all over the place, on the very short list for people who could be named as Barack Obama's potential vice presidential candidate, and so let's cut straight to the chase on this, governor. If you are asked to be Obama's vice presidential candidate, what would you bring to the ticket that would help him get elected?

GOV. KAINE: Well, I'm not campaigning for the job, Becky, I've got a great one as governor of Virginia, but what I've enjoyed doing with the campaign is being co-chair since February '07 and then working with our economics team. Virginia is a state with a strong economy, high rates of median income, low unemployment. We've been named best state for business three years in a row by Forbes.com. You guys, CNBC, named us best state for business last year and you gave us the number two ranking this year.

We know how to manage an economy in Virginia, and in this tough economic time, that has been what I have been trying to do to be helpful to the campaign and I'm very excited to be doing it and Virginia is a state that's very much in play.

MS. QUICK: If you are asked, would you accept that position?

GOV. KAINE: I haven't spent that much time worrying about it because I've never thought it was all that likely, but look, I signed on early to help Senator Obama win. I believe in his vision for America and I'm going to help him in whatever way he asks me. I'm not seeking anything. But whatever he wants me to do to help him win and then be a great president, you know, I would be very -- willing to help him.

MS. QUICK: All right. Governor, let's talk about something that's happening in your state and in states across the nation right now. The credit crunch and the budget crunch is hitting states hard and heavy. There's been some speculation that Virginia --

GOV. KAINE: Right.

MS. QUICK: That Virginia's state budget could fall short by another $1 billion. So what are you doing right now to try and deal with that?

GOV. KAINE: We're basically using the same management practices we've used for the last couple of years to get through the challenged economy. Our revenues were slow last year, Becky, and I had to do a $300 million round of budget cuts in October and then another $1.4 billion round in February as revenues slowed down.

I'm going to be giving a speech to the money committees and my legislature on Monday talking about revenue trends, and it is very likely that we'll do a re-forecast and then have to take expenses down even further. But the way we do it is we have a performance management system in Virginia called Virginia Performs that tracks every state agencies' progress and performance and prioritizes what we do. And so when we need to make cuts, we don't do big across the board cuts, instead, we strategically go after lesser performing programs or priorities that aren't as important to citizens. Every round of cuts gets tougher, but this is the business way to do it and it's what we've done so far and what we'll continue to do.

MS. QUICK: Governor, from where you sit, what's the economy look like?

GOV. KAINE: Well, you mentioned the housing and credit issues are both significant. We've also seen a slowing in the fourth quarter in Virginia in retail sales, the national sales numbers that are coming out later this morning, obviously, will be of interest.

The good news in Virginia is that the basic fundamentals are sound. We are relatively well off compared to the national economy. We have one of the lowest unemployment rates of any of the large states in high median income. We have a great human capital system in our schools and universities and we have great global connections through the port of Hampton Roads and Dulles Airport.

So we continue to land really good economic development deals, in fact, the dollar status vis-a-vis the Euro has led to a lot of European investment in Virginia in the last few years, which has been great. But look, we're in the same spot that every other state is in, and frankly, that every family and business is in. When the national economy starts to decline, we get affected. We just have to tighten our belt and we'll come out of it strong.

MS. QUICK: Governor, on the front page of The New York Times today, it talks about a new book by Jerome Corsi that's going to be coming out this Sunday as number one on The New York Times bestseller list. This is a book that attacks Senator Barack Obama. It paints him as a stealth radical liberal. It talks about a lot of things, including the windfall profits tax.

How do you convince people that he is not a stealth radical liberal?

GOV. KAINE: Well, I don't think you have to convince many people of that. Look, he's ahead in the polls right now. Americans embraced his candidacy during the primary and caucus in record numbers and with extreme enthusiasm, in Virginia, a state where in early polls -- in the primary, he was way behind. He won by nearly 30 points. And right now in Virginia, a state that hasn't gone Democratic for 44 years, Senator Obama is in a dead heat with Senator McCain.

So I don't think we need to be, you know, overly worried about where he in the polls right now. Obviously, it's going to be tough work between now and November. He's trying to do something very challenging, running against somebody who is very well known, but I feel a great confidence in both the senator and his team. And look, I wouldn't be supporting him and I was an early supporter if I didn't think his vision for our economy and for good management, basic fundamental management of the American government and the services that are delivered are going to really focus on excellence.

So I have complete confidence in him and I think the response that he's gotten throughout this campaign shows that Americans have a great deal of optimism about the kind of president Senator Obama would be.

MR. KERNEN: He's leading in the polls right now, Governor, but as you mentioned, it's very, very slim.

GOV. KAINE: Right.

MR. KERNEN: A true liberal from the old days. Governor Dukakis was, I think, he had a 20-point lead at one point.

So we can't tell what the election is going to finally look like.

Some of the things that people would point to as a reason for invoking the L word is this windfall profits tax. We bring this up a lot. I keep trying to let someone explain to me why -- how they're going to do this, how Washington or how anybody in Congress is going to decide who is subject to windfall profits and who isn't, considering that oil companies -- I know you know business. The oil companies -- their profit margins of ten percent are much lower than many other industries.

Where do you draw the line? How do you decide that Exxon or someone's shareholders suddenly are going to be subjected to making too much money by politicians in Washington?

GOV. KAINE: Well, look, what folks in government do is they have to make choices, and I think a choice at a time when these companies are showing record profits that we want to give them more tax cuts is the wrong choice, instead, I think the notion of reasonable taxes on profits that we can use then either to help consumers deal with rising energy costs or invest in alternative energy research is a very smart strategy.

And so the question of, you know, how you apply other energy issues which are top line for Americans right now.

MR. KERNEN: You said not give them tax cuts. We're not talking -- deciding that these profits are egregious when the shareholders and pension plans and everybody who is invested in the stock of these, the way this country works, we don't all of a sudden decide you're making too much money and usually that would be a good thing if a company --

GOV. KAINE: Let me set you straight right here. There's a bipartisan bill that is getting a lot of support in Congress right now by this so-called gang of ten that would involve taxes on oil companies who are reporting record profits to invest in alternative energy research. It would also involve some openness to the prospects of exploratory drilling. It's a comprehensive bill that is bipartisan that would probably involve some of the biggest investments in alternative energy research, which is the area where we have been weak as a nation. We've got to do this. This is something that Senator McCain apparently opposes, even though there is great bipartisan support for the notion.

I think what he should do is, you know, try to get on board with a bipartisan plan that will try to end the addiction that we have on oil and start to invest in other energy sources.

MS. QUICK: Governor, we're also joined by David Ratcliffe who is the CEO of Southern Company.

MR. RATCLIFFE: Governor, good to see you. We had a chance to meet before. I think you made some comments earlier in the week about the need for regional energy policy in the Southeast and you know one of the things that we've tried to say is we don't have a magic solution here. We need lots of different forms of energy.

I'm curious about your take on that.

GOV. KAINE: Well, absolutely, David. As you know, I'm the chairman of the Southern Governors Association and the initiative that I'm promoting during my year, as chair is to get the Southern governors together on a regional strategy to deal with energy and climate issues. We're all doing things in our own states, but the other regions of the nation, Northeast, Midwest and West have regional governors' initiatives, and I want to make sure that we're doing the right thing in our region, but that we're also represented around the table in Washington when Congress turns to this energy policy and climate issue in the new administration.

So what we're looking for is a strategy that we can agree on that basically encompasses four efforts, continuing the South's traditional focus on having a reliable energy supply at relatively low cost, increasing ever-increasing cleanliness of energy production, both in the utility and manufacturing sector, but also in transportation, trying to make sure we rely on our own sources and become more energy independent rather than over-relying on sources from others and then pushing conservation. That's something in Virginia at least and in many states in the South we haven't done good enough job at. We need to push that.

So it will be a balanced strategy that tries to accomplish all those goals, but I think they are the right goals for the region and for the nation.

MR. KERNEN: Governor, you know, we're probably going to need hydrocarbons, obviously, we're not going to make the switch immediately. You've got a company like Exxon -- probably one of the best companies in the world for finding and developing hydrocarbons.

Do you think that politicians in Washington should force a company to suddenly start researching wind power and solar instead of letting the private sector through venture capital develop these types of alternative energies? Why should Congress force Exxon to do something that it hasn't done necessarily in the past and it might not be good at and decide what corporate managers should be doing for their shareholders? Washington is not very effective.

GOV. KAINE: Well, look, I would say Washington is not effective; Washington is broken because it hasn't promoted alternative energy research and investment as many other nations in the world have done. And so we're in a situation where we are lagging behind other nations in energy research. Take a look at what Brazil has done or other nations where we've been enthralled to petroleum, now, petroleum is going to be part of the solution, obviously, going forward. Coal is going to be part of the solution. We've got to have a balanced package. But where we've been weak as a nation is failing to invest in alternative energy research and that is why we're seeing the cost that we're seeing today, the price is rising and really hurting consumers and why we are, frankly, enthralled to a lot of nations who mean us ill.

So the right strategy for our nation going forward and I believe this so very deeply is that while we've got to have a balanced menu of options, we need to do much, much better in alternative energy research. That's the only way out of the mess that we're in.

MS. QUICK: All right, Governor. I want to thank you for joining us this morning.

GOV. KAINE: Absolutely, guys. Good to be with you.

MS. QUICK: Good to have you, Governor Kaine, and we hope you come back again soon.

END.

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