TRANSCRIPT: Freedom Partners Forum: Ted Cruz, Rand Paul and Marco Rubio In Conversation with ABC’s Jonathan Karl Take a look at what Cruz, Paul and Rubio shared with ABC's Jonathan Karl.

 -- The first 2016 presidential forum of the year took place on Sunday Jan. 25 featuring a conversation between Sens. Ted Cruz, R-Texas; Rand Paul, R-Kentucky, and Marco Rubio, R-Florida, moderated by ABC News’ Chief White House Correspondent Jonathan Karl.

The panel, which took place in Palm Springs, California, was sponsored by the Freedom Partners Chamber of Commerce, a not-for-profit connected to conservative billionaires Charles and David Koch.

The following is a complete transcript of the 75-minute forum:

ABC News' JONATHAN KARL: So good evening, as you heard I'm Jonathan Karl with ABC News. It is great to be here in Palm Springs with three United States senators that are not only actively considering running for president but as far as I can tell actively preparing for possible runs for president. So it is great to be here.

This is the first time this year that we have seen multiple potential or even likely candidates for president sharing a stage. And I can assure you it will not be the last time. But this was the first time. My goal is simple. I want to have a free-flowing discussion. There are no timers, there are no bells. I don't want any talking points. No campaign speeches. Just what I hope'll be a lively and very informative conversation.

So with that, let's get right to it. I wanna start with the big picture on the economy. We've heard a lot of this from the present. Seven million jobs created since he took office. Unemployment rate is down to its lowest level in about eight years. Gas prices down. Even the deficit is down from where it was a few years ago.

So as we remember the last time we had a Republican in the White House spending was rising, deficits were rising and we had the greatest recession since the Great Depression. So, Senator Cruz, why should voters trust the Republicans with the economy again?

SENATOR TED CRUZ: Well, look, for one thing what we're doin' now, it isn't workin'. And--

JONATHAN KARL: Wait, seven million jobs.

SENATOR TED CRUZ: --but let's talk about that a little bit. So you watched the State of the Union last week. We were all sitting there watching it. And it seemed to me like we were watching a description of an alternate reality. You know, my daughters, as you know, are four and six. It reminded me of one of their favorite stories, Alice in Wonderland.

It was not connected to fact. Listen, right now what we have in this country is really a divided America. For those with resources they're doin' great right now. The top 1%, the millionaires and billionaires that this president loves to demigod one or two of whom are here with us today-- the top 1% earn a higher share of our income nationally than any year since 1928. The simple truth is with big government those with resources are doing well.

The people who have been hammered for the last six years are working men and women. We have today the lowest labor force participation since 1978. Ninety-two million Americans aren't working. And you wanna talk about what's making life hard for working men and women, wage stagnation. Median wages today are equal to what they were in 1996, for 20 years.

JONATHAN KARL: Okay, but let's-- and Senator Paul, maybe you can pick up with what I asked was why voters would trust Republicans again, right? I mean, wage stagnation's been a fact for about 30 years in this country. But, again, last time Republicans had the keys we had the greatest financial crisis since the '30s.

SENATOR RAND PAUL: It is okay if I object to the premise of the question?

JONATHAN KARL You know, I believe in freedom here. So go ahead.

SENATOR RAND PAUL: All right, let's start with somewhere in the beginning of that question there was this statement that the president made which I find to be the most galling thing I've heard in a long time. Or in Texas we might say a big whopper, all right? He said that deficit's decreasing. Well, technically that's kind of true. But it makes you think he's somehow a fiscal conservative.

All right, he quadrupled the deficits for many years and now they're coming off a little bit of quadrupling. But he is said to add more debt than all 43 previous presidents combined. So I think having him the premise of the statement that he's doing anything good about deficits is wrong.

JONATHAN KARL: Oh no, no, no, but to be fair, I didn't say he was doing better by deficits.

SENATOR RAND PAUL: No, but--

JONATHAN KARL: But--

SENATOR RAND PAUL: --no, but--

JONATHAN KARL: --but--

SENATOR RAND PAUL: --but here's the thing is you wanna know is the economy getting better? I think it is getting a little better. I think there is some disparity, as Ted said, between high and low. But the reason I would say the economy's getting better is despite the president and despite the president's policies. One of the things that has led the resurgence is oil and gas boom. The oil and gas boom's being done on private land, not public land. We're not allowed to drill on public land. This president should take no credit for any kind of recovery we have.

JONATHAN KARL: So--but--Senator Rubio, you in 2010 looking at the president's policies said that he was putting us-- quote-- "On nothing short of a path to ruin." Can we acknowledge at least that four years later with the unemployment now 5.6%-- you know, economic growth, the stock market about, you know, doubled since he took office, can we at least acknowledge that he didn't bring us to the point of ruin?

SENATOR MARCO RUBIO: No, in fact, we should be even more concerned 'cause we've lost four or six years in the process and I'll explain to you why.

The first is the unemployment rate, one of the significant reasons why the unemployment rate has gotten lower is 'cause less people are looking for work. We've lost-- our labor participation rate is-- has declined rapidly. But here's the second point which the president misses and some in our party miss as well, we-- these traditional markers of economic growth and prosperity don't work like they once did because there has been a structural change in the nature of our economy. Our economy we--this is not a cyclical downturn that we went through simply. It is a massive structural change in the very nature of the economy.

For starters, it's no longer just a national economy, it is truly a global one where your partners, your clients, your customers are-- and your competitors are just as likely to be halfway around the world as they are halfway across the country. And we are increasingly less globally competitive for investment and for innovation because of taxes, because of regulation. And quite frankly, because of anti-business rhetoric from Washington.

Second, many of the jobs that have sustained our middle class have been outsourced or eliminated. They've been replaced by automation or machines. There are better jobs that could potentially take their place. But they're either not being created in this country because of tax policy, regulatory policy, the national debt, Obamacare, or too many of our people don't have the 21st century skills they need for that.

And the third, and that's something that, Senator Cruz touched on a moment ago as well, the wage stagnation is happening at a time when the cost of everything is going up dramatically. And it's not just that the cost of everything is going up. We have expenses we didn't used to have. So my parents as a bartender a maid working at a hotel like some made it to the middle class. But they didn't have a cable bill until I insisted on ESPN. But they didn't have a cell phone bill until their 70s. We didn't have an Internet bill.

We, you know-- the-- and these are the sorts of things that are now crushing people, and especially the middle class. And I'll close with this point, I still teach a course of at Florida International University, a political science course. And most of my students come from what you would consider working class families. Let me tell you what they're really frustrated by and their parents are, they don't make enough for student aid, but they make too little to pay for it. So they're being weighed down through an extraordinary amount of student loans as the price of higher education continues to artificially inflate because we have a higher education monopoly in this country. Basically a university higher education cartel. All these factors are happening and the president's still trying to solve all this with big government, 20th century ideas that don't work anymore.

JONATHAN KARL: So I don't know if you guys saw this but Mitt Romney's talking about running again. Talking to people about a potential candidacy.

SEN. CRUZ: Really?

SENATOR MARCO RUBIO: Where was this?

JONATHAN KARL: Yeah, this is --and he said that he would have three pillars of a campaign if he were to do it again. He says it would be ending poverty, empowering the middle class and national security. So my question-- and I-- this is a jump all to any of you, if Mitt Romney had run on those three pillars last time around, would he have won? Don't all talk at once.

SENATOR MARCO RUBIO: Well, if he had run on those three pillars, would he have won against Barack Obama?

JONATHAN KARL: Yes.

SENATOR MARCO RUBIO: I don't know. I will, you know, I don't bla-- Mitt Romney I think is a extraordinary person. I thought he ran the best race he possibly could. It didn't work out.

JONATHAN KARL: You thought he run-- it was the best race he possibly could?

SENATOR MARCO RUBIO: Yeah, I mean, the best he-- you know, I think he put it all into the race. He, and I think, you know, he's someone who's earned the right to decide whatever it is he wants to do. I don't want to sit here and talk bad about the guy or about how he ran his campaign or what he should've done here or there. Monday morning quarterback is not something that, you know, I'm interested in being. I will just say that the things he's identified are all, at the end of the day, particularly, well, all three of 'em are directly tied to economic growth.

For starters, as I said, on economic growth today is as dependent on global factors as ever before. And that's why a strong American leadership is so important. Because in the absence of American leadership it leaves a vacuum that creates chaos on the planet. We have an important role to play that no other nation can play. And that about eliminating poverty, the best cure for poverty is a job, a good paying job. And our economy isn't producing enough of them.

If you're willing to work for $8 or $9 an hour, you can find a job. But you won't be able to pay your bills. So I do think those are essential issues that I would-- that are fine to focus on. But I think the bigger issue that we should look at is the one I outlined earlier and that is we are going-- undergoing a dramatic economic transformation and our government and many of our leaders, in both parties, are stuck in the 20th century in terms of trying to solve them.

JONATHAN KARL: Senator Paul?

SENATOR RAND PAUL: I'm kinda with Ann Romney on this one. No, no, no, no, never.

JONATHAN KARL: No, no, no, to Mitt Romney running again?

SENATOR RAND PAUL: Yeah, but I think the-- seriously, what I would say-- and the reason is is that, once again, I agree with-- Marco on this, I think he's a good man, he's a generous man. He would of made a great president. He would of been much better than this president.

But to win the presidency you have to reach out and appeal to new constituencies. And I just don't think it's possible. And if he thinks, "Well, I'm just going to change a few themes and next time I'll reach out to more people," I think it's a little more visceral than that how you connect with people. And I don't think that's anybody's fault. I'm just not sure that that visceral connection is there with enough people to win a general election.

JONATHAN KARL: Well, let's get this, 'cause in talking about these three pillars what Romney is saying-- and he's talked about the gap, actually Senator Cruz, you alluded to it as well, the increasing gap between rich and poor in this country. And my question to you, beyond Romney, this is a much bigger issue than any one candidate is do you think that we have a problem in this country with the rising-- with the increasing gap between rich and poor and is it the job of government to try to lessen that gap?

SENATOR TED CRUZ: Look of course we have a problem. And I have to say I chuckle every time I hear Barack Obama or Hillary Clinton talk about income inequality because it's increased dramatically under their policies. Now I-- you look at the last election-- I think 2012 the reason Republicans lost can be sum up it in two words, 47%.

And I don't just mean Mitt Romney's comment that was caught on tape that, "The 47% of Americans who are not currently paying taxes who are in some as dependent on government, we don't have to worry about them." I don't just mean that comment.

I think Mitt is a good and decent and honorable man. I think he ran a very hard campaign. But the central narrative of the last election-- what the voters heard was, "We don't have to worry about the 47%." And I think Republicans are and should be the party of the 47%. You know, when you look at what we have right now, we have a structural system where those who walk the corridors of power in the Obama administration, they're getting fat and happy. The counties in and around Washington D.C. are getting richer and richer and richer with crony capitalism. And those that don't have access, it's getting harder and harder to move. And I think we need to move back to a dynamic where you have Schumpeter's creative destruction, where you have small businesses that are creating opportunities.

We should be fighting for the little guy who has dreams and hopes and desires. And what has happened under Barack Obama-- look, when government takes over the economy what it does, what it's done in the European socialist nations is it freezes everything in place. And it exacerbates income inequality. The reason so many millions of people have come to America seeking freedom, the reason Marco's parents fled Cuba to come here, the reason my dad fled Cuba to come here is this is a land where anybody can start with nothing and achieve anything. And in the last six years that income mobility has gotten harder and harder for people to achieve.

SENATOR MARCO RUBIO: Senator, I would just-- and one of the things we were able to say in Florida, Ted, and I think you're able to say in Texas is the reason why people fled New York and came here--

SENATOR TED CRUZ: Yeah.

SENATOR MARCO RUBIO: --is because of and both of our--

SENATOR TED CRUZ: But Marco, the one point is here is not California.

SENATOR MARCO RUBIO: --no, no, right, here meaning-- I-- we're still-- we still think we're in Texas and Florida. But I think you've touched on an important point that I wanna build on, a couple points to make. The first is the issue is not the central-- income inequality is a symptom of a bigger problem. Opportunity inequality. And the reason why we have opportunity inequality America 1) is this massive structural change. Right? When my parents came here in 1956 they both had the equivalent of a fifth or sixth grade education and they made it to the middle class as a bartender and a maid. It's very difficult to do that in the 21st century. There are jobs out there that will allow you to get there. But you have to have skills and you have to have a system that allows people to access that. So that's a big part of it.

The second problem is we have safety net programs that don't cure poverty. They alleviate the symptoms of poverty. But they do not cure it. And they don't cure it by helping people either find a job or acquire the education they need for a better paying job. But the bigger issue is the one that Ted has talked about and that is this, if you are a major corporation or a very wealthy multi-national company you might not like big government but you can afford to deal with it. You can hire the best lobbyists in Washington to create loopholes and the best law firms in America to help you navigate them. If you're trying to start a business out of the spare bedroom of your home, you can't do any of that.

And the result is that business never happens. And that is increasingly becoming a problem. And there are multiple examples of it and Obamacare is one of them. Imagine for a moment if you were in business and I told you, "We are going to pass a law that makes people-- we're going to force people to buy what you offer. We're gonna subsidize it if they can't afford to pay for it. And if you lose money, we're gonna come in and bail you out with taxpayer money." That is a heck of a deal. And that's exactly what insurance companies were able to do through Obamacare. A perfect example of the kind of cronyism.

JONATHAN KARL: Yeah, Senator Paul.

SENATOR RAND PAUL: You know, the initial question also was about does government have a role in fixing income inequality? I think it's important to think about this because government does have a role in enhancing and enabling the general welfare. The general welfare is everyone equally. It's not really the sense of where the wealth should be distributed but that we should enhance the general welfare. There are problems with income inequality. Interestingly, worse in states led by Democrats, in cities led by Democrats and in countries led by Democrats.

But the thing is is that one of the things you have to understand, if you're an ordinary person in our country and you're trying to save to get ahead you put your money in the bank and it gets zero.

You don't have the wherewithal to have enough money to buy stocks. You have to be a little bit above that to buy stock. The way to make money and the way money has done well in the last several years is in the stocks market. But why are the interest rates 0% in your bank account? Why don't you make any interest rates?

It's because of the Federal Reserve keeping interest rate low. Why do we keep it low? Because we have this massive debt that we've gotta pay off with new money, with cheap money. And so it's all intertwined. And it's-- income inequality is indirectly, if not directly, related to big government.

JONATHAN KARL: So, you know, Senator Santorum just yesterday, former Senator Santorum was at the forum in Iowa. He was talking about this issue. And he said, "For years the Republican message has been a rising tide lifts all boats which is fine unless your boat has a hole in it." And he was making a point that there is a role for government to help those at the bottom. Do you agree with that?

SENATOR TED CRUZ: I think there is a role for government protecting rule of law. And creating an environment where the private sector can create jobs. Government doesn't create jobs. Any politician that runs around talking about all the jobs they've created is blowing smoke. The people who create jobs are, frankly, the men and women sitting here. The people who create jobs are people in the private sector putting capital at risk to meet a need. Now government is very good at screwing that up.

JONATHAN KARL: But--

SENATOR TED CRUZ: And government has two important levers to facilitate job creation and create an environment where the private sector can create jobs. And those two levers are tax reform and regulatory reform. And every single time in our history that we have simplified taxes, reduced the burden, reduced the compliance cost, simplified regulation so that small businesses which create two-thirds of all new jobs can do that. We've seen an economic boom, we've seen people climb out of poverty into prosperity. That was true in the 1920s, it was true in the 1960s, it was true in the 1980s. We know how to fix this. And it's to get Washington to stop screwing it up.

SENATOR RAND PAUL: You know, I think government has a role and a safety net but it needs to be transitory and it needs to be a step towards a job. The goal shouldn't be more welfare, the goal should be the job. In creating jobs though, I agree completely with Ted, government doesn't create jobs.

There's the productive sector and the non-productive sector. Government's the non-productive sector. Government is inefficient and ineffectual at almost everything they do. In fact, I say it's not that government is stupid, although it's a debatable question.

SENATOR MARCO RUBIO: Yeah, yeah.

SENATOR RAND PAUL: Government doesn't getting the right signal so we should minimize. We have to have government for certain things that the private world can't do. But we should minimize what government does, maximize the productive sector. And you'll get more jobs created.

JONATHAN KARL: Well, let me just two specifics here, one: I think an easy one with the three of you-- the minimum wage. I think all three of you have come out against raising the minimum wage. So my question is do you think there should be a federal minimum wage at all? Just simple yes or no answer.

SENATOR MARCO RUBIO: No, it's more than a yes or no answer. Those are always-- the bottom line is--

JONATHAN KARL: No, no.

SENATOR MARCO RUBIO: --I'm not for repealing the minimum wage. But I can tell you, I don't want people to make $10.10 an hour. I want them to make $30 an hour, $35, $40 an hour. And the only way you're going to get there, not through a law but through a growing economy that creates those jobs-- and then have-- giving people the opportunity to make that and more. And my problem with raising the minimum wage is not that I wanna deny someone $10.10. I'm worried about the people whose wage is gonna go down to zero because you've now made them more expensive than a machine.

JONATHAN KARL: But you're not for repealing the minimum wage. You think there should be a federal minimum wage. You're happy where it is now at $7.25 an hour?

SENATOR TED CRUZ: John, I think it's important to look at who loses out. You know, we had a debate on the minimum wage just recently. And I gave a floor speech on the Senate floor with three simple charts, $10.10, the proposed Obama minimum wage. And then the next chart Marco just referenced was $0.00 which is the real Obama minimum wage because when you have the lowest labor force participation since 1978 to the millions of Americans who have lost their jobs under the Obama economy that's their minimum wage.

JONATHAN KARL: No, I--

SENATOR TED CRUZ: And then let me tell you the third number I had up there was $46.98. $46.98 is the average hourly wage of an oil and gas worker in North Dakota. And what I wanna see is an awful lot more people making $40 and $50 and $60 a week-- an hour and an awful lot less people making zero dollars a week.

JONATHAN KARL: Okay, but-- and I wanna-- I wanna move off this. I just very sh-- do you think there should be a minimum wage at all?

SENATOR TED CRUZ: I think--

JONATHAN KARL: $7.25, is that the magic number? Is that where we are? I mean, you--

SENATOR TED CRUZ: --I think the minimum wage consistently hurts the most vulnerable. So, for example, on this--

JONATHAN KARL: --so there shouldn't be one. The market should set the minimum wage?

SENATOR TED CRUZ: --let me give you an example of this increase to $10.10 that Obama was urging. The Congressional budget office estimated up to one million people would lose their jobs. And the people who would lose their jobs are low-income, primarily African-American and Hispanic workers. And let me make it very real, 1957 when my dad came to the United States, he was 18. He couldn't speak English. So his first job was washing dishes. He made 50 cents an hour. Why did he get that job? Because you didn't have to speak English to take a dish and put it under hot water. Now if we had come in and made the minimum wage $2 an hour, you know what would of happened? They would of fired my dad and they would of bought a dishwasher.

JONATHAN KARL: So it's--

SENATOR TED CRUZ: That's who gets hurt.

JONATHAN KARL: --so let me try this one more time. Senator Paul, you gave me--

JONATHAN KARL: --an answer.

SENATOR RAND PAUL: Let me make a comment.

JONATHAN KARL: Just a straight--

SENATOR RAND PAUL: You know, I think what's important even more than whether we should have and what we should have or how much it should be is what is our attitude towards work? I'll give you an idea of, like, Michelle Obama, what she said about her kids. She wanted them to get minimum wage jobs so they could see how terrible it was to get a minimum wage job.

I see it completely the opposite I have two boys. One works delivering pizza, the other one works at a call center while going to school and they make minimum wage. And I'm proud of them. I'm proud of them when they go, "Dad, I've got money and I will pay for some things."

JONATHAN KARL: Right, so is-- but before I move on, would you give a yes or no if you think that we should have one?

SENATOR RAND PAUL: I could go into a long answer again if you'd like.

JONATHAN KARL: No, no, I just want a straight answer. I really don't want a long answer.

SENATOR RAND PAUL: No, here's the short answer--

JONATHAN KARL: But you could also say you don't wanna answer. That's fine too.

SENATOR RAND PAUL: --no, here's the short answer.

JONATHAN KARL: It's a free country.

SENATOR RAND PAUL: The minimum wage is only harmful when it's above the market wage. Okay, so when it's above the market wage it causes unemployment. The simple way to look at this is that if it's $7 an hour and labor can afford ten workers at $7 an hour, if you make it $14 they'll afford five workers. So you will have unemployment. The CBO says it would cost a half million jobs. So this is an economic argument. This is something that should be done in a rational way, not an emotional way.

JONATHAN KARL: Okay, so let me move onto to another--

SENATOR RAND PAUL: Did you like our answers?

JONATHAN KARL: --you wanna get really quickly?

SENATOR RAND PAUL: Did you like our answers?

SENATOR TED CRUZ: He was persuaded. I think John--

SENATOR TED CRUZ: --agrees with him now.

SENATOR MARCO RUBIO: I just wanted to-- as a practical matter I'm not calling to repeal the minimum wage. I'm not saying to get rid of it as a practical matter. I think it is what it is and we don't-- that's a disruption that we don't need with all so many other disruptions happening.

But I will say this, I think that all this focus that the president has on the minimum wage is a cure-all for the, you know, the problems being faced by working Americans is not only a waste of time, I think it shows how un-serious he really is about dealing with the challenges of our time.

JONATHAN KARL: Okay, so let me move on-- from a proposal the president has made to one that Paul Ryan has made. Paul Ryan had put out this plan as you all know to address the issue of poverty. And what he has proposed is an expansion of the earned income tax credit financed by closing tax loopholes. And he has specifically mentioned-- closing, you know, ending tax benefits to the oil and gas industry. And using the revenue saved there, estates are $4 billion to $7 billion a year-- to pay for an expansion of the earned income tax credit.

So my question to you-- all of you-- is do you agree with that principle of expanding federal spending on anti-poverty programs but doing them-- Ryan would say--

JONATHAN KARL: --in a smarter way-- using it--

SENATOR RAND PAUL: I'll go on that.

JONATHAN KARL: --by closing some tax loopholes.

SENATOR RAND PAUL: All right, I'll start on this one. When you look at the earned income tax credit, it has about a 25% fraud rate. We're looking at $20 billion to $30 billion. And this is from estimates from the GAO, from the government themselves.

If you want to help people who are of lower wage income, working class folks, I think the better way, rather than giving something that's refundable is to give them a deducting against their social security tax so they're working and you get the deduction for work. I don't really like the refundable nature and also the fraud related with the earned income tax credit. So I would object to what Paul Ryan's doing and I would offer a deduction on the social security-- taxes.

JONATHAN KARL: And you'd been in favor of ending tax benefits to the oil and gas industry to pay for that?

SENATOR RAND PAUL: See, it's I don't-- can I object to the premise again?

JONATHAN KARL: Well, you can. I mean, you can do whatever--

SENATOR RAND PAUL: But, I mean--

JONATHAN KARL: --you want, but, I mean, answer the question.

SENATOR RAND PAUL: --well, some you might call it a benefit. And if I'm in the oil and gas industry I might call it a business expense. You see what I mean? So it depends on what we're talking about.

JONATHAN KARL: Okay, whatever you wanna call it, would you be in favor of ending it to pay for--

SENATOR RAND PAUL: Well, it's important to what we're talking about. There are a lot of business expenses. I'm for the opposite. I'm for 100% expensing in the first year of everything you spend on your business because then you spend more and you'd buy more and your business would grow. So I'm not really-- a lot of people and Washington wanna cut out these loopholes and they wanna have revenue neutral tax reform. I tell people, "That's what we're for I'll go home." I want to cut taxes.

JONATHAN KARL: All right, Senator Rubio.

SENATOR MARCO RUBIO: A couple points, first on the oil and gas business exempt, I don't know the details of which one he's talking about. But the one that's traditionally debated is not an oil and ta-- oil and gas deduction, it's a deduction on capital expenditure that any industry could potentially use under the existing code.

They just seem to focus on the energy sector. And I'm not saying Paul Ryan is. I'm not familiar with exactly what-- which ones he's proposing or looking at. But on the earned income tax credit it's largely a program designed to reward work. I have actually called-- and I've worked with, for example, scholars at American Enterprise Institute on a concept called wage enhancement.

It would replace the earned income tax credit instead with something called a wage enhancement that it elig-- people between $15,000 and $40,000 a year in a scale that would ultimately phase out be eligible for that instead. And here's why that's better. First it's tied to your paycheck as opposed to simply your tax return. As Rand just alluded to a moment ago there was significant amount of fraud in the earned income tax credit program because people will file on the return, claim that they are supporting children, some of which sometimes don't even live in the United States, some of which are not their children, they're nephews and nieces and cousins.And there is significant fraud in the EITC program. A wage enhancement would be directly tied to what you're making. What it would do is it would a-- it's the same funds but you're delivering it through a different mechanism to r-- tied directly to work. And here's what the-- why that's valuable.

It now makes work more valuable than staying home and collecting long-term unemployed or collecting a disability in some cases. And that's important because Rand was also alluding to something which is very important, there is no such thing as a meaningless job. There is no such thing as a dead-end job. I've heard the president say that. There are jobs you don't wanna be doing your entire life. But even in a job that's paying you $8 an hour, you are learning skills and you are be-- and you're giving experience that are be-- that are valuable to you especially in the long-term. So there is no such thing as that.And we want as many people as possible working because we think, you know, if you're sitting home for five years and then decide to re-enter the workforce it's hard to find a job. Employers look at your resume, they see you've been sitting around for five years doing nothing and you're stigmatized by that. It is not good to have so many people sitting at home and not working. And one of the ways we could incentivize that is by replacing the EITC with a wage enhancement instead.

JONATHAN KARL: Okay, let me-- I've heard all of you at various times rail against corporate welfare You're, I think it's safe to say, all against corporate welfare, right? But there was a vote in the Senate, we call it-- this happens every year, the tax extenders package where you-- I think all three of you-- correct me if I'm wrong-- voted-- in favor of this package that had tax breaks for rum producers, wing energy, Hollywood, NASCAR track builders, race horse owners.

SENATOR RAND PAUL: Are you arguing against NASCAR? I just want to--

JONATHAN KARL: I would never. My dad's a big NASCAR fan. I would never do that But, you know, if you're--I mean, why did you vote for basically what is a-- you could have-- a package of heavily lobbied for, specific tax benefits for specific industries that were able to get these because they're been effective at lobbying, Senator Cruz?

SENATOR TED CRUZ: Look, that is a good example of one of the problems with Washington which is log rolling. That bill had a lot of good things in it and a lot of lousy things in it. And I'll tell you, at least in my office, and I suspect in Rand and Marco's office we had considerable debates about what the right vote was on this.

Ultimately for me, there were critical elements of the tax code that were important. Things like deducting business expenses that go right to small businesses-- expensing and to small businesses creating jobs and at a time when we've got stagnate economic growth. I couldn't in good conscience vote to strip away that tax treatment.

Now the reason that you get leadership in both chambers wrapping that up with these lousy tax expenditures is precisely because they wanna put people in that box where the good element of it forces them also to include the rest of it ab-- and so, yes, there was corporate welfare there. And I will say one of the very nice benefits, I'm going to do something you haven't heard me do often, which is praise Mitch McConnell. One of the real benefits I believe of the new Republican majority is that Mitch McConnell has pledged to allow an open amendment process. What I would have liked to have seen on the tax extenders is the ability to offer amendments to strip out the garbage--

JONATHAN KARL: So would you--

SENATOR TED CRUZ: --and have straight up and down votes on the corporate welfare part rather than it all being wrapped together in one mess that we had to vote up or down on.

JONATHAN KARL: --so would you favor doing away with all of these tax benefits? I mean, I get the sense that it's a question of definition, Senator Paul?

SENATOR RAND PAUL: Yeah, and the other thing about it when you define a-- deduction or a credit as-- a corporate welfare you're sort of assuming that it was the government's money. I mean, this is earned by companies. And you may say it might be an unfair distribution of taxes. But really most of these companies are paying a lot of taxes. I don't think there are many companies that through the extenders are not paying any taxes.

JONATHAN KARL: But I--

SENATOR RAND PAUL: So here's my point is that if I were designing a tax code would I try to make it a better tax code and maybe not have some of this unevenness to it? Yes. But if I am faced with a vote to eliminate some deduction or a credit that raises taxes I think we pay plenty of taxes and I'm against raising.

JONATHAN KARL: --but you just a few minutes ago said that you were against revenue neutral tax reform. In other words, you are against the idea of eliminating these specific tax benefits, tax treatments, and in return using exactly the same amount of money saved to lower the rate.

SENATOR RAND PAUL: I think it'll do nothing to help the economy. I think to help the economy--

JONATHAN KARL: Well, it'll be more equitable. You wouldn't have--

SENATOR RAND PAUL: --well, no, to help the economy you need-- it'd be-- most equitable is letting people keep their own money. So you'd let them keep more of their money--

JONATHAN KARL: --well, this'll be the same amount of money but instead of having some industries--

SENATOR RAND PAUL: --right. And you so you wouldn't stim--

JONATHAN KARL: --that have better lobbyists--

SENATOR RAND PAUL: --you wouldn't stimulate anything because the same amount of money's going to the non-productive sector which is in Washington. So revenue neutral means you shift the burden from the left half of the room to the right half of the room just doesn't excite me. I mean, if that's what people wanna go in Washington to do, they can do it. And I can--

JONATHAN KARL: Senator Rubio?

SENATOR RAND PAUL: --I can go back to being a doctor. I'm just not interested--

SENATOR MARCO RUBIO: I think--in shuffling the deck.--I think the question really-- the choice really comes down to what are they gonna use-- if you get rid of, let's say, a tax exemption that someone is using, what are they gonna use that for? Are they gonna use it to lower the tax base for everybody, the tax rate for everybody? Or are they gonna use it to grow government? And that's where the central debate in tax reform has come down to.

And the second thing that came out in that bill which was important, at least for people in Florida, is the sales tax exemption. We don't have an income tax in Florida, for those of you that-- are interested in coming down. But everyone, including working families and poor families do pay sales tax. And if that bill had not passed their sales taxes that they're paying would no longer-- this would've been a tax increase on them, on everyone, and that was a problem for me. But I think that's an important point. I think all of us and probably everybody in this room wants there to be a flatter, simpler tax code. But often times in Washington when people think about getting rid of exemptions what they're saying is, "Let's get rid of these exemptions so we can get the money that it generates and use it to expand government spending." And that's real problematic for me and I think for all of us.

SENATOR TED CRUZ: Well, but I think the benefits of tax reform are enormous. Right now we have a tax code riddled with complexity. There are more words in the IRS code than there are in the bible. And--

JONATHAN KARL: Are the benefits of tax reform--even revenue neutral tax reform?

SENATOR TED CRUZ: Yes, even revenue neutral. Though I'll tell you the fixation on revenue neutral is somewhat misguided in Washington because at least up 'till now they've used static scoring instead of dynamic scoring. So they don't look at the growth effects.

But the benefits of tax reform, if you're number one, simplifying the tax code, you reduce the compliance that cost the hundreds of billions of dollars of deadweight loss that is lost every year in tax compliance. Number two, if you do that, if you broaden the base and lower the rates, the top marginal rate is what affects the next marginal action.

But number three, look, the biggest value of tax reform is it disempowers politicians. Right now, the way Washington works, the number one avenue of K Street lobbying is a special tax exemption. So someone from business comes to Washington, you put your arm around 'em, you say, "Hey, you know, you wanna get a special benefit in the tax code? Yeah, I can help you out. By the way, I've got a fundraiser on Tuesday, you can come to that."

JONATHAN KARL: Right, right.

SENATOR TED CRUZ: Well, if we moved to a simple, flat tax that was fair, that every American filled out his or her taxes on a postcard and sent it in--

JONATHAN KARL: So you wouldn't--

SENATOR TED CRUZ: --that would produce dramatic economic growth and it would also disempower Washington. It would disempower politicians so that when someone comes and says, "Hey, can you give me a special break in the tax code?" I think we should have to say, "Listen, I'm sorry, you pl-- pay the same flat rate everyone else does." That keeps power in the private sector and outta Washington.

JONATHAN KARL: So let me get to another issue that I've heard all of you talk about, the deficit. You're all in favor of the balanced budget. We remember there was a moment in the campaign, 2012 Republican primaries where we had all the Republican candidates on the stage and they were asked, "Would you accept a deal that included $10 in tax, I mean, $10 in spending cuts for every $1 in tax increases?"

So my question to you is the same. And they all said no. Jeb Bush came to Washington a little later for Paul Ryan's-- budget committee and said that, you know, if somebody offered him that deal, ten to one, "Put me in coach, I'd take it." My question to you, are you all saying absolutely no tax increases even if you were offered a deal that included ten times as much in spending cuts?

SENATOR TED CRUZ: You know, John, that is a question that the media loves to ask.

JONATHAN KARL: Well, I'm asking and I--

SENATOR TED CRUZ: And in the next cycle--

JONATHAN KARL: --really don't want a long answer. I just want--

SENATOR TED CRUZ: --well, I know you don't. But you know what, you get to ask your questions, we get to answer them.

JONATHAN KARL: --okay, that's fair. But, you know, answer.

SENATOR TED CRUZ: Now listen, that question is designed, as it was last time, to make every republican who raises his or her hand--

JONATHAN KARL: I didn't ask you to raise your hands now.

SENATOR TED CRUZ: --look silly now. No, you asked us just to say yes or no. Listen, that tradeoff has proven historically to be a fool's errand. President George Herbert Walker Bush was offered that tradeoff. He accepted it. A tax increase in exchange for phantom budget cuts. What happened? The taxes went up and the budget never got cut.

JONATHAN KARL: Something tells me--

SENATOR TED CRUZ: A little bit like Lucy and the football--

JONATHAN KARL: --or something tells me--

SENATOR TED CRUZ: --or one element of the promise never happened.

JONATHAN KARL: --something tells me I'm gonna get a direct answer out of Senator Paul on this. Absolutely no tax increases?

SENATOR RAND PAUL: My answer is that when and if any of these people up here might run for a president there should be an absolute rule no yes or no answers.

SENATOR MARCO RUBIO: Here, here.

JONATHAN KARL: You guys would all do well. That's--

SENATOR RAND PAUL: What I would say is sh-- the shortest and simplest and sweetest answer I can give you is if you raise taxes, they will spend it. So I don't want them to have more money. I want the productive sector to have more money and I want Washington to have less. We have a lot of taxation in this country. Raise your hands if you're undertaxed. I think we're d-- I think we have plenty of taxes in this country. We need less taxes.

JONATHAN KARL: Senator Rubio?

SENATOR MARCO RUBIO: Well, I would add-- I would echo what Ted said and I would add the following as well, you can't tax your way out of this problem anyway. It's silly to continue to talk about it as if somehow we're gonna tax away out of these issues that--

JONATHAN KARL: Well, this isn't a question of tax your way out of-- this is a question of deal--

SENATOR MARCO RUBIO: No because why would they raise the taxes? The purpose of raising taxes under the scenario you laid out is because the combination of tax cut-- of a tax increase and spending cuts are gonna balance the budget. And my argument, no it won't. You can't possibly raise taxes high enough to get out of the debt-- deficit spending problem we have. The only way you can get out of this problem is the combination of spending discipline, holding the line on spending, and wrap it in dynamic economic growth. 'Cause ultimately the issue of the debt is relevant in at what percentage of your gross domestic product does it represent?

So if we had a $1 trillion debt in this country we'd be very happy. If Italy had a $1 trillion debt they would be very unhappy, right, because it would be 50%, it would be half of the size of their economy. So my point is, we need to-- and tax increases hurt rapid, dynamic economic growth. I've never seen a chamber of commerce brag about coming to our community and open a business, we raise taxes. There's a reason for that. You make something more expensive, people will do less of it. And one more point, you wanna talk about increasing revenue. One of the most dynamic revenue increases we've ever seen is cutting capital gains because every single time it's been done it's led to more investment income which has created jobs and opportunity for people. So when people argue this about raising taxes, cutting spending that doesn't wor-- that formula doesn't work. The only one that works is holding the line on spending and rapid economic growth and tax increases hurt--

JONATHAN KARL: Okay, so let's--

SENATOR MARCO RUBIO: --economic growth.

JONATHAN KARL: --let's get to the spending side of the ledger.

SENATOR TED CRUZ: Well, hold on a second, John, let me amplify on something Marco said because it's important. You started by talking about the need to balance the budget and deal with the deficits and debt. And you assume that the two variables there were spending cuts and tax increases. And I think that's missing the real game. If you look at the federal budget there is one and only one first order variable that affects the budget and the deficit and that is economic growth.

JONATHAN KARL: Come on.

SENATOR TED CRUZ: It is not, you know, there has been a debate in the Republican party between some who are advocates or austerity and others who are advocates of growth. Growth is the engine. We wanna turn around our deficits? Since World War II our economy has averaged 3.3% growth.

There were only two four-year periods where growth was less than 1%, 1979 to 1982, coming out of Jimmy Carter, and 2008 to 2012. You want to turn around the deficits and debt. Let's get back to historic levels of 3%, 4%, 5% growth. That's how you turn around--

JONATHAN KARL: Okay, but let's--

SENATOR TED CRUZ: --the deficit and debt.

JONATHAN KARL: -- but let's look at the budget for-- 'cause-- what we can control here right now. We addressed the tax side. I think you're all in favor of economic growth. Let's look at the spending side. And outside of entitlements, the big target there, big piece of the pie is defense spending.

So Senator Paul, on your website you make the argument that defense spending can come down. You say this is currently on your website, "The levels of defense spending are no longer justifiable to securing our country, especially given the-- our defense spending has surpassed the defense budgets of all other countries combined." This is a true statement.

SENATOR RAND PAUL: Absolutely.

JONATHAN KARL: So.

SENATOR RAND PAUL: Absolutely it's a true statement. But I would say as a preface to the answer to this that--

JONATHAN KARL: I haven't even asked the question yet.

SENATOR RAND PAUL: --that was just a preamble? You gotta ask shorter questions.

JONATHAN KARL: You don't want yes or no questions but--

SENATOR RAND PAUL: Well, that's why I thought it was a question. All right.

JONATHAN KARL: --no, no, so my go ahead, you amplify what you mean about--

SENATOR RAND PAUL: I would say that the most important thing that we spend money on in the federal budget bar none is national defense. And that when I evaluate spending the most important thing I did spend money on is defending the country. That being said, I'm not for a blank check. That being said, I'm for auditing the Pentagon. We shouldn't have $1,000 toilet seats, $500 hammers. We have never audited the Pentagon. Do you know what the Pentagon says? They're too big to be audited.

JONATHAN KARL: Too big to be so--

SENATOR RAND PAUL: But here's how you can save money and still have the defense that you need, the bureaucracy of the Pentagon has grown enormously and there are many who believe John Lehman as one of them, former secretary of Navy says that you can build more ships, you can have a more robust defense by cutting out civilian bureaucracy.

JONATHAN KARL: So, Senator Rubio, you've been big advocate of undoing the cuts that were put into the defense budget through the sequester.

MARCO RUBIO: Yes.

JONATHAN KARL: Doesn't Senator Paul have a point here? I mean, we have--

MARCO RUBIO: Certainly. Well, first of all, let me make two points.

You said something at the beginning of your question which basically means, you know, we're talking about the wrong thing. You said putting aside entitlements for a moment, you can't put aside entitlements for a m-- that's the reason for our long-term problem.

That is the reason. We've gotta deal with that. We are not in a debt crisis because of defense spending. Now that doesn't mean that there isn't waste, that doesn't mean that there isn't abuse, that doesn't mean it shouldn't be audited, that doesn't mean we shouldn't have efficiency because every dollar that's wasted in defense spending is a dollar that isn't going to our national defense.

But the cause of our long-term debt problem is we have entitlement programs with I-- my mom's on Medicare. I'm not asking to repeal or get rid of it. I would never do anything that would put my mom in worse off than she is today. But Medicare is going bankrupt.

It will not exist by the time I reach retirement age. Much sooner than that actually. And that is the long-term among-- along with Medicaid spending is the long-term driver of our national debt. You cannot ignore it. And my problem with the sequester deal was that it ignored it completely. That is the issue we have to confront. And people of my generation are gonna have to accept that if we want there to be Medicare when we retire and social security, for that matter, it is going to have to look different than our parents.

JONATHAN KARL: But point blank question, you don't need to answer yes or no but--

MARCO RUBIO: On the defense side.

JONATHAN KARL: --but a point blank question, do we spend too much on national defense?

MARCO RUBIO: No I think we waste money on national defense that could be better spend on national defense. But we need to continue to spend on national defense and I'll tell you why: Number one, we don't know what the Chinese national defense budget is 'cause I don't know if you know this but they're not exactly very open and--

JONATHAN KARL: Yeah, I heard that, yeah.

MARCO RUBIO: --so we have no-- all we do know is that they intend to build a Navy that's larger than ours and largely focus it on one region of the world which compromises 55% to 50% of all global trade. Second, the research and development that develops the weapon systems that today allow us to achieve things with less people and less time were all developed ten or 15 years ago.

You can't just overnight develop these advances in defenses. And every time you cut research and development in the military are eliminated options for a future commander in chief in the battlefield. We can never lose the technological edge. And there are other nations at this time that are ramping up their defense spending .We talked about China as one. But even Russia. They are undergoing dramatic challenges to their economy. And yet the only part of their budget they've helmed harmless is their military. And we can't ignore that because you think economic growth is bad with bad tax policy, try economic growth when you're under attack or economic growth when your national security's in peril.

So I certainly do not believe that-- that we should, in fact, I believe we should be spending more on research and development in our defense programs. But we can't balance our budget or deal with our long-term debt by putting entitlement reform to the side. The longer we take to do that the more disruptive those changes are gonna be. But those changes are gonna have to be made-- and I'm saying that as someone who represents Florida which has a significant number of beneficiaries of these programs. They will not exist in a little over a decade if we do not deal with those programs.

JONATHAN KARL: In favor of raising the retirement age, eligibility age for social security--

SENATOR MARCO RUBIO: For my generation, absolutely. For my generation. People in my generation are gonna work in their 70s 'cause they want to, not because they have to. People-- life expectancy needs to be taken into account. You have a program that was designed-- I think the ratio was 20 or 30 to workers-- 20 to 30 workers for every beneficiary. Now it's three to one, soon to be two to one. It d-- the program has to adjust to the modern reality.

JONATHAN KARL: So where would you put it?

SENATOR MARCO RUBIO: The retirement age?

JONATHAN KARL: Yeah.

SENATOR MARCO RUBIO: You allowed to continue to rise by it six-- the current rate it is now until it reaches 67 or 68 years of age. And maybe in my generation a little bit higher. You all-- you encourage people that are-- that are in my generation in their 60s and 70s to continue to work 'cause they're going to want to continue to work. There-- people are very productive in their 70s and 80s today. And we need to understand that that's gonna be even more so of a factor. What's the chuckles about? You guys are you know.

JONATHAN KARL: So.

SENATOR MARCO RUBIO: The point it's true. I mean, people-- and the point is that our entitlement programs have to reflect those realities if we want them to exist.

JONATHAN KARL: All right, I-- another major issue we've had s-- quite a few, the president's come up with since the-- since the midterms-- Cuba. Senator Paul, you're the only senator on this--

SENATOR RAND PAUL: --kinda surrounded on this--

JONATHAN KARL: --yeah, you're a little surrounded. You're also the only senator on the stage who supports the pr-- who agrees with the president on ending the embargo which seems like pre-trade position. You might even have some people that agree with you-- here in this room on that.

So, but what I wanna ask is the way you describe this, you suggested that Senator Rubio was an isolationist-- because he favored keeping the embargo where it is. This embargo, of course-- has been supported nine presidents-- ex-- into attempt. You're not suggesting they were isolationists by supporting this embargo, are you?

SENATOR RAND PAUL: You know, I grew up in a family that-- was about as anti-communist as they come. I mean, we-- I had a friend-- our family had a friend who fought against the Bolsheviks in 1917. Okay, so we have been enemies of communism since the beginning. But when Nixon opened up Red China, we were like, "Nixon, that squish." We didn't like it. We thought it was a big mistake. However, as I've seen history go along I think Nixon made the right decision. And I think opening up China has made us less likely to go to war and while China is still an oppressive regime they're less oppressive probably than they were in the '70s.

We've tried an embargo for 50 years. It hasn't worked. The reason I call it a form of isolationism is that if you apply the embargo or us not trading, us retreating and not engaging with Cuba-- if you do that for China, for Vietnam, for Laos, for any of the other host of countries that have human rights abuses that would be a policy of isolationism. In one particular instance, maybe it's not. But it's still the philosophy that somehow we shouldn't trade, that trade's not good with them. And I think trade actually would benefit.

JONATHAN KARL: So doesn't he make-- a good argument there, Senator Rubio, you wanna--

SENATOR MARCO RUBIO: I'll need a couple minutes to answer this one though. It's a complicated issue.

JONATHAN KARL: But you've had an embargo for over 50 years. And we still have a guy named Castro runnin' the place.

SENATOR MARCO RUBIO: So let me begin by saying what the goal is which I think all of us share. But my sole, singular goal for Cuba is freedom and democracy. And I think a free people have the right to choose any economic model they want. There's one I would suggest. But they have the right to choose any economic model they want. So the question really-- and I don't disagree that most people are involved in Cuba policy. I would even say the president too is interested in freedom and democracy. One school of thought is that if we open up economically to Cuba and overwhelm them with free enterprise that that will change the regime. It will force them to become a democracy.

The reason why I disagree with that is there isn't a single contemporary example of that happening. For example, the example of China has been used. And it is true that we opened up diplomatically to China in the late 1970s and then gave them most favored nation status in the early 1990s. China today is a more prosperous country but it is not a free country.

In fact, in China, when you go you'll see you can't go on the Internet and go on any site you want. It's a walled off sector of the eco-- of the Internet that China controls. There are no political freedoms. They have jailed dozens of hundreds of people every single month for political dissidencey in China. What it is is the richest tyranny in all of human history. Now there is geopolitical reasons why you have to deal with China differently than you would another country. Second largest economy in the world, rapidly growing military, nuclear weapons capable of reaching the west coast, perhaps the entire continental United States. But economic opening to China has not produced any political opening on the island-- on in that country.

Vietnam is another example that's used. Another country that for geopolitical reasons we recognized diplomatically because they had invaded a neighbor. And we also have used them in some ways as a counterbalance to Chinese influence in the region. But they are not a democracy. And even in Burma, a recent example, where the president granted them diplomatic-- status and trade, and Burma actually took some democratic steps. They allowed the minority party to run three or four people. They have begun to take back all of those again.

So my point is there is no contemporary example of where an economic opening by itself has led to a democratic opening. And then you study the nature of this regime. Just because we want to sell them all kinds of stuff doesn't mean they will let us. They will pick and choose what they allow to come into their economy. And they will do so very carefully. And you will see that play out. And my last point, even if you disagree with everything I said, I think it's hard to argue that the president's deal is a good one. He has basically given them a series of economic openings that they ask for. And in exchange for that, what he basically got was the release of 53 political prisoners, 14 of whom had already been released. One of whom had been released a year earlier, five of whom have been rearrested. And, by the way, since December 17th, 53 people were released, five of them are back in jail, 200 additional have already been arrested--

JONATHAN KARL: Senator Paul?

SENATOR MARCO RUBIO: --since that time. It's not a good deal.

SENATOR RAND PAUL: You know, there are 25 predominately Muslim nations that imprison Christians for blasphemy, apostasy, interfaith marriage. If we apply the Cuba policy of human rights, we shouldn't trade with them. Saudi Arabia's got a young man they're giving 1,000 lashes to. They behead people in the street in Saudi Arabia. I'm not a real big fan of a lot of these regimes. But I guess I don't wanna isolate ourselves and say we're not going to trade with people who aren't perfect Western-style democracies. There's a lot of emotion on the part of Cuba, you know, both Marco's family and Ted's family fled Batista.

You know, and the thing is that that was a part of a complicated dance there. Castro's a reaction actually to American foreign policy of supporting a horrible dictatorship in Batista. It's a complicated foreign policy that's arisen out of Cuba and I think that isolation hasn't worked.

SENATOR MARCO RUBIO: But I would just add to that point, the thing about Cuba that's different from those countries-- and we should condemn, as I just signed a letter three days ago-- to the Saudi government condemning the lashes. And I condemn, you know, even in places like Bahrain, which houses one of the most important naval families that we have in the Middle East, I've condemned that government for its violation of the democratic order. The difference between Cuba and them is Cuba's 90 miles from our shores. Three times in the last 50 or 60 years Cuba has been the cause of three major mass migrations, one in the '60s, one in early 1980 with a Mariel crisis, and again in 1994.

And now I think we're in the midst of a fourth mass migration. An increasing number of Cubans crossing over the Mexican border, coming through third countries and rafters. Ninety miles from our shore, a country that continues to aligns itself with Russia, our diplomats arrived in Cuba on Tuesday of this last week to negotiate this new status. But on Monday a Russian spy ship arrived at the port of Havana and a week earlier than anticipated.

I think we cannot forget that the difference between Cuba and some of those countries is a combination of we have the leverage to bring about political change and it's 90 miles from our shores. What happens there we will feel immediately. And so, you know, clearly I think every country's different in that regard. But I agree. We should condemn human rights abuses as I have tried to consistently do no matter who it is, even our allies.

JONATHAN KARL: Senator Cruz?

SENATOR TED CRUZ: Well, let me make a broader point, I think this Cuba deal was a terrible mistake. And it is actually-- it follows a pattern-- of the Obama foreign policy which is that for six years we have consistently alienated and abandoned our friends and we have appeased our enemies.

So first it was Russia, then it was Iran, then it was Cuba. Cuba for many, many years was dependent economically on the Soviet Union. When Soviet Union collapsed Venezuela stepped in as the benefactor keeping the Castros in power. And I would note, look, the Castros are brutal dictators. My family understands this firsthand. My father was imprisoned and tortured by Batista. And my aunt, my father's kid sister, was thrown in jail and tortured by Castro's goons. The human rights abuses there--it is a cruel, horrible, totalitarian regime.

JONATHAN KARL: But--

SENATOR TED CRUZ: But Venezuela kept them in place. And actually the tradeoff-- what Castro would do-- Castro was exporting goons-- military thugs to Venezuela. The military thugs are oppressing the Venezuelan people, in exchange he's getting money and oil from Venezuela.

Now right now oil prices have collapsed, Venezuela's economy is in free-fall. And at the exact moment when Cuba is reeling, this administration steps in with an economic lifeline. And one of the differences between Cuba and China, China you can have direct investment, you can hire Chinese directly.

In Cuba every foreign investment goes through the government, every foreign currency goes directly to the government. They pay the Cubans in pesos which means this will result in billions of dollars more for the Castro regime. And one of the easiest measures, if you listen to the Cuban dissidence, last year I had two Cuban dissidences who had been imprisoned and tortured come to Washington D.C. I interviewed them in Spanish to tell their stories. And what they are saying consistently is this deal will keep the Castros in power and it makes it less likely that when Fidel and Raul die they will move to a free society. We want a free ally, not a hostile communist country 90 miles from our shore trying to undermine America.

SENATOR RAND PAUL: Maybe, maybe not. I mean, the thing is we've tried for 50 years and it hadn't worked. So there's at least some objective, historical evidence that it's not working. And I've never said that we shouldn't tie behavior to any of our changes. So yes, I think we should tie behavior to some of the changes. But I'm not absolutely steadfastly opposed-- and we have embassies everywhere. An embassy is--diplomacy is a good thing, not a bad thing. We have people in our party now who want no negotiations with Iran.

There are people saying, "Absolutely, it's capitulation to talk to the enemy." Well, Reagan wasn't that way. Reagan talked to the Russians We all-- every president we've ever had talked to the Russians for 70 years and it's a damn good thing they did. You know, if they said, "We can't trust the Iranians, we shouldn't talk to 'em." Well, we couldn't trust the Russians. You don't negotiate with people you trust. That's what diplomacy's about.

SENATOR MARCO RUBIO: So, John, let me just point-- two points on Cuba, to close the loop on it, I've heard that said before, the embargo hasn't worked. And we have to understand, the purpose of the embargo was not to overthrow Castro. The Bay of Pigs was about overthrowing Castro. That didn't work either. But the embargo wasn't the-- embargo was put in place to protect American companies that had had billions of dollars of property stolen, taken from them. To this very day the Cuban government actively uses equipment, machinery and real estate that once belonged to America and American companies that they basically stole and never compensated them for.

What it has an additional purpose in the 21st century and that is leverage. And the leverage is a success for government after Fidel and Raul disappear, which they will because they're both in their 80s-- and still working--and-- at least one of them is. And but the point is that you now say if you want-- if you want there to be-- more economic interchange between our countries then you have to make some political openings.

And on Iran, let me just add this on Iran, I know this is not a foreign policy forum. I think there's a distinction between Russia and Iran, Russia was the Soviet Union was terrible. It was a communist government. But it was a traditional nation state that made decisions on the cost benefit analysis of the nation state. Iran is run by radical Shia cleric who doesn't view himself as the leader of Iran. He views himself as the leader of global Islam. And he views it as his obligation to bring the whole world under the--

JONATHAN KARL: So.

SENATOR MARCO RUBIO: --flag of Islam. And, by the way, he is a clerical leader of a brand of Islam that believes that we need a catastrophic showdown between the west and the Muslim world to bring about the emergence of the 13th imam, the Mahdi. Which-- and they openly talk about this. It's embedded in their constitution and in their speeches.

So I am a little cautious, I would say, and perhaps skeptical, about negotiating with someone who has openly said he wants to force all of us to either be like him or die. And who believes that a showdown-- is what we need to bring about the Mahdi, so.

JONATHAN KARL: All right, let's-- we're-- we don't have much time left, let's get specific on Iran because you have an issue right before the Congress right now whether or not to slap new sanctions on Iran or to give the president some time to try to wrap up these negotiations, they get a deal on the nuclear program.

SENATOR MARCO RUBIO: That's not the issue before the Congress. That's not exactly what it is. There's two issues before the Congress and I think we all agree on the first one and that is whatever deal he cuts there has to be Congressional approval of it. I think we all agree on that.

And the second w-- is sanctions that are put in place if the deal fails, those sanctions kick in which is what the president said he wants to do anyway. So all we're saying is, "Fine, then let's put it in place so it'll happen the minute the talks--"

JONATHAN KARL: Well, the president also says that the minute you pass that the deal--the negotiations will collapse. Senator Paul, are you gonna support the sanctions bill?

SENATOR RAND PAUL: I think new sanctions now has two problems. And most of all impact-- all of our allies have said it may break apart the sanctions regime. We've had a coalition of many countries. And sanctions have worked. And I have supported sanctions because they've worked as a multi-lateral-- organization to exert pressure on Iran. I don't think unilateral sanctions will work. Germany, France, England have all said that they fear that that coalition breaks up. The other fear is that Iran backs away from the table and then we have two choices. They either get a nuclear weapon or we have a military option. I'm a big fan of trying to exert and-- try the diplomatic option as long as we can.

If it fails I will vote to resume sanctions and I would vote to actually have new sanctions. But if you do it in the middle of the negotiations you're ruining it. So many people on our side say, "Well, we don't want 535 generals, the president should be in charge of war." But now they're saying, "We want 535 negotiators, not the president." I don't trust the president. I don't believe or support him on almost anything he does. But at the same time, I do think diplomacy is better than war and we should give diplomacy a chance.

JONATHAN KARL: Give diplomacy a chance with Iran? Senator Cruz?

SENATOR TED CRUZ: Let me give a very different perspective. I think the threat of Iran acquiring nuclear weapons capability is the single greatest national security threat facing the United States today I believe we are repeating the mistakes of the Clinton administration in the 1990s with respect to North Korea.

In the 1990s the Clinton administration relaxed sanctions, led the world in relaxing sanctions against North Korea. Billions of dollars floated in North Korea and they used that money to develop a nuke. The Obama administration, and this is astonishing and revealing, has recruited the very same person, Wendy Sherman, who led the failed North Korea negotiations to come in and be our lead negotiator with Iran.

Now the difference is that it's qualitatively more dangerous. Listen, Kim Jong-il, Kim Jong-un, they're radical, extreme, unpredictable. But both father and son are fundamentally megalomaniacal narcissists, which means, as Sony Pictures discovered, which means some degree of rational deterrence is possible. Both father and son understood--

JONATHAN KARL: But--

SENATOR TED CRUZ: --if they ever used nukes-- let me finish this, John, if they ever used nukes, that day their regime would end. The problem with Iran is Khamenei and the Mullahs are radical, religious, Islamic nutcases. And that's a technical term.

JONATHAN KARL: Okay. Okay I understand but--

SENATOR TED CRUZ: And let me flesh out a little more, look, when you have religious leaders who glorify death or suicide, ordinary cost benefit doesn't work. Cost benefit prevents a lot of people from wrapping dynamite around their chest and walking into a mall. But the problem is if Iran ever acquired nuclear weapons I think the odds are unacceptably high that it would use those nuclear weapons either in the skies of Tel Aviv or New York or Los Angeles.

JONATHAN KARL: But Senator Paul's not endorsing Iran having nuclear weapons. He's saying negotiate with them.

SENATOR TED CRUZ: Okay, but--

JONATHAN KARL: Senator Paul, do you wanna--

SENATOR TED CRUZ: --all right, then negotiate smart 'cause we didn't just negotiate. Billions of dollars are flowing into Iran right now. And, by the way, we are allowing Iran to continue building centrifuges and enriching uranium. They've been negotiating for two years. This is the worst negotiation in the history of mankind.

JONATHAN KARL: Senator Paul-- let me Senator Paul-- before we move on has got--

SENATOR RAND PAUL: Had I been in charge of the negotiations I would've delayed any release of sanctions until we saw compliance. So I would have delayed and had a delay between the two. I do think though that many times in our fear and anger and distrust and we want to, you know, what are we gonna do? Are you ready to send ground troops in Iran? Are you ready to bomb 'em? Are you ready to send 100,000 troops? Are you ready to send them into Iraq? Do you want 'em in Syria? Do you want 'em in Libya? The place is a mess. It's been a mess for 1,000 years. So we have to think about what really are the practical results of not negotiating? Iran's a big threat. You know who else is?

Pakistan, maybe a greater threat. We get a government toppled in Pakistan with a real nuclear capability it's an enormous threat to the west. So yes, these are all threats. But I want you to think through and when we think about this we think about what happened with the war in Libya. Many in our party just said, "Oh we needed to send more troops in there." They thought Obama's only mistake was not going in with too many troops. Gaddafi gave up his nuclear weapons. We toppled him anyway. What do you think lesson that sent to Iran? So it is a real problem. Libya's a huge disaster. Hillary's war in Libya was a disaster. And the people on our side who wanted even more of a war than Hillary, it was a mistake. Libya's a huge disaster and we should've never gone into Libya.

JONATHAN KARL: Very quickly--

SENATOR MARCO RUBIO: No, but this is important, I'm glad we're covering this topic. On the issue of Iran versus Pakistan and these other places, the Pakistani weapon is a typical weapon in the sense they have it for purposes of leverage against India because India has a weapon. North Korea has it basically because they want regime security. It's not even a country, it's a criminal syndicate that runs territory. China, Russia, everybody else, all the other nuclear powers. Iran wants a weapon, not for leverage against Saudi Arabia, Egypt or Turkey.

They want a weapon to trigger a global cataclysm that will bring about the arrival of a 13th imam. I know this sounds bizarre. But this is their theology and we should take 'em seriously since they've dedicated their life to spreading it. This is a very real risk. And let me tell you about negotiations, it is a tactic that Iran is using and here's why, in 2003 the world told Iran, "You cannot have any enrichment capability." Then it became, "Okay, you can enrich but only up to 20%."

Then it became, "Okay, you can enrich over 20% but you have to ship it overseas." Now it's, "Okay, you can enrich it 20% but you can only use it to a research reactor." At this pace in five years we're gonna build the bomb for them. I mean, that's the direction this is going. They use negotiations as a tactic. And they are trying to buy as much time as possible to acquire the capability of being able to build a weapon. And once they do, they don't even have to build a weapon. They just have to prove that they have a delivery system, which they're continuing to develop, unabated and untouched by the sanctions, a weapon design that they can easily buy from multiple people around the world and the last is the enrichment capability. And if you can enrich at 3%, you can enrich at weapon grade. It's the same equipment, it just takes a little longer.

JONATHAN KARL: But Senator Paul, ask the question, so what do you want, you wanna bomb Iran?

SENATOR MARCO RUBIO: I think there's a risk of a nuclear Iran is so high that nothing should ever be off the table. It's unac-- we can't live with a nuclear Iran and can't contain 'em.

SENATOR TED CRUZ: And let me--

SENATOR MARCO RUBIO: You have to do whatever you have to do.

SENATOR TED CRUZ: --let me answer that.

JONATHAN KARL: Very quickly, 'cause I am outta-- I am really outta time. So go ahead.

SENATOR TED CRUZ: All right, the question of what we should do, number one, I filed legislation in terms of what we should be doing with Iran. The legislation I filed would immediately reimpose sanctions, would strengthen them to make them more crippling. And then lays out a clear path that Iran can follow to lift the sanctions.

If it wants to lift the sanctions it must disassemble all 19,000 centrifuges, it must hand over the enriched uranium, it must shut down its ICBM program which exists for one reason only and that's to carry a weapon of mass destruction to America or our allies and it must be stop being the world's leading state sponsor of terrorism. If you wanna negotiate with them you need more stick and less carrot.

JONATHAN KARL: Senator Paul?

SENATOR RAND PAUL: And if we renew sanctions now, negotiations end and inspectors are forced out of the country. Are we better off or worse off? Our two choices then are nuclear weapon-- nuclear weapon at that point or military action.

SENATOR TED CRUZ: And let me be clear, let me make a final point on this, John, beyond sanctions, a strong commander in chief would make abundantly clear on the global stage under no circumstances will Iran be allowed to acquire nuclear weapons capability.

Either they will cease or we will stop them. Ironically, weakness increases the chance of military conflict. No one wants to see a military conflict. But the weakness and appeasement of this administration only encourages the Iranian Mullahs to move forward more. There is a reason why. In January, 1981 Iran released our hostages the day Reagan was sworn in because they understood they were no longer dealing with the weakness and appeasement of Jimmy Carter.

JONATHAN KARL: So I have just two more. So it has to be very quick 'cause we're just about out of time but I have two more that I've gotta ask you.

SENATOR MARCO RUBIO: That's missile with three senators.

JONATHAN KARL: I know, we're gonna try this very quick. The first thing I think you'll all agree on, we'll see. There's been a lotta talk that-- and you hear this actually from governors that the next Republican nominee, I mean, the next president can't be another one-term senator.

It's gotta be somebody with executive experience, somebody with experience out there in the states. So I wanna flip that around to the three of you. Given the issues we've just been discussing, seriously dangerous times, serious foreign policy issues, would it be a mistake for the Republican party to nominate somebody who has no foreign policy experience, who is just, say, governor of a Midwest state? Just to pick--

SENATOR MARCO RUBIO: Well, I think it would be a mistake to elect as president the architect of the Obama foreign policy. That would be a terrible mistake.

JONATHAN KARL: Well--

SENATOR MARCO RUBIO: And I-- and--

JONATHAN KARL: --I don't think the Republicans are going to do that.

SENATOR MARCO RUBIO: --no, I'm not saying Republicans, I'm saying in general. But, look, I think the number one obligation the federal government is the national security of the United States in conducting its foreign policy. And I do think having experience but also a seriousness about the breadth and scope of the challenges we face, which are much more difficult than they were 25 years ago in a bipolar world or in a world that had multiple, you know, two great powers.

Today the world has multiple facets of challenges. You have a rising China that's challenging the global order, Russia that's ignoring it, Iran and North Korea that believes they can become immune to it through nuclear weapons. And we haven't even talked about non-state actors-- ISIL and Al Qaeda and transnational criminal groups that threaten world security. It is important for the next President of the United States to understand the diversity of these challenges, to have a global strategic vision and an understanding of what the U.S.' role in it. Now does that mean that, you, a governor can't acquire that? Of course they could. But I would also say that, you know, taking a trip to some foreign city for two days does not make you Henry Kissinger either. I mean, you've got to spend some time on these issues. They're important issues for the country.

JONATHAN KARL: 'Cause se-- 'cause Governor Walker told me-- not long ago that not only must the nominee be a governor or a former governor but the running mate be a governor or a former governor. That, you know, you Washington guys, it's just--

SENATOR MARCO RUBIO: Well, if I was a governor I'd say the same thing.

SENATOR RAND PAUL: Well, you know, we've had some good senators, some bad senators. You know, we had Jimmy Carter where happened to be a governor, well, it didn't turn out so well from our perspective. I don't think the office that you hold is as important. I think we will nominate somebody and the president will be somebody who probably holds a statewide office. It seems to have been that way for a long time. But I think really what you want in a commander in chief is someone who has strength, wisdom, judgment, someone who believes that war is the last resort, not the first resort. And so I think the ability to have good judgment is more important than the actual office that's been held.

JONATHAN KARL: All right.

SENATOR RAND PAUL: Not that I'm biased or anything.

JONATHAN KARL: Not that you're biased or anything. Last question-- you're here at a forum of course-- the Koch brothers have sponsored and invited us all here. I've got a question for you at billionaires and politics, do you think that there is too much influence in our politics by super wealthy political donors on both sides? Again, this is a jump ball--

SENATOR MARCO RUBIO: As opposed to--

JONATHAN KARL: --anybody can take this.

SENATOR MARCO RUBIO: --as opposed to Hollywood or the mainstream media you mean--

JONATHAN KARL: Well--

SENATOR MARCO RUBIO: --or other multi-billion dollar entities that-- that try to influence American politics every day.

JONATHAN KARL: --so--

SENATOR MARCO RUBIO: I would say--

JONATHAN KARL: --so I think you just got a round of applause for billionaires--

SENATOR MARCO RUBIO: --no, here's the point--

JONATHAN KARL: --having influence in politics.

SENATOR MARCO RUBIO: --I believe in freedom of speech. I think that political spending and political activism is a form of protected speech. There is a gentleman out there who has radical environmental ideas who has spent tens of millions of dollars, lost most of his races. But spent tens of millions of dollars attacking Republicans that didn't want to impose his radical environmental agenda.

He has a right to do that. This is-- I believe in freedom of speech. And I believe that spending on political campaigns is a form of political speech that is protected under the constitution. And the people who seem to have a problem with it are the ones that only want unions to be able to do it, their friends in Hollywood to be able to do it and their friends in the press to be able to do it.

JONATHAN KARL: So, well let me ask it a different way, if--

SENATOR MARCO RUBIO: You know, my kids have the best observation. Why are they so obsessed with the Koch brothers? Why is no one asking what Dr. Pepper's up to?

JONATHAN KARL: --well, l--

SENATOR MARCO RUBIO: Get it, Koch, you know.

JONATHAN KARL: I totally get it. But can you say, look, if any of you are successful and get all the way to the White House-- you're going to have some people who've spent millions of dollars on your behalf to get you there. Will you each guarantee-- can you say that those people who support you in a big financial way will not have special access to you when you get to the White House?

SENATOR TED CRUZ: Let me say something, John, you know, it's interesting if you look at the three people sitting here and let me say, before when you were asking about governors and senators I'll say something which is there is a cadre of young senators right now who have run and won-- let me tell you, when Rand Paul and when Marco Rubio were elected to the Senate all of the money in the state was against them. All of the establishment in the state was against--

JONATHAN KARL: And you as well.

SENATOR TED CRUZ: --all of the political power was against 'em and they ran campaigns that inspired me, inspired me to run to see that they could stand with the people and turn things around.

JONATHAN KARL: Yeah. None of you were supposed to win.

SENATOR TED CRUZ: I-- and--

JONATHAN KARL: Republican establishment was against all of you.

SENATOR TED CRUZ: and all the money was against all three of us.

JONATHAN KARL: Yes.

SENATOR TED CRUZ: But let me say more broadly, listen--

JONATHAN KARL: But my question about access though--

SENATOR TED CRUZ: I wanna take on your first question because your first question is important. There are a bunch of Democrats who have taken as their talking point that the Koch brothers are the nexus of all evil in the world.

Harry Reid says that every week. Let me be very clear. I think that is grotesque and offensive. There is a reason Harry Reid and the Democrats do that. They cannot defend the record. They can't defend the Obama economy, it's a disaster. They can't defend Obamacare which is a train wreck. And they certainly can't defend the Obama/Clinton foreign policy.

So they wanna scare people by painting a picture of nefarious billionaires. I'll tell you, when Harry Reid's done that in the Senate floor I rose and asked the majority leader who had just attacked two business leaders who, let me be very clear, I admire Charles and David Koch. They are businessmen who've created hundreds of thousands of jobs--

JONATHAN KARL: But hold on--

SENATOR TED CRUZ: --and they have stood up for free market principles and endured vilification with equanimity and grace. And I asked the majority leader on the Senate floor, "When the character of a senator's impugned there is a point of personal privilege that you can rise and defend your character. What is the point of personal privilege for a private citizen when the majority leader tries to drag his or her reputation through the mud?" I think-- look, we need more citizens involved in politics, expressing their views.

The men and women are gathered here I believe are patriots who love this country and who fear for the direction for their kids and grandkids and they are fighting for an environment where there is more growth and more opportunity in the future. And I would love to see more and more conferences five times this size, ten times this size of citizens, of small business owners all across the country fighting to change the direction.

JONATHAN KARL: I don't expect any of you are actually gonna disagree. But and quick final comment from both of you.

SENATOR MARCO RUBIO: I wanna answer that.

SENATOR RAND PAUL: I would add one thing. I would say that special interests can have a bad influence on government. But the special interests that I'm concerned about are those who do business with government, get government contracts, take the government money and then try to get more contracts.

And I am for some limitations. I think there's a possibility of campaign finance reform that would include a contractual clause in government contracts to say that if I'm gonna give you $1 billion to do work for the government you will agree not to do certain things to lobby government for more money. So I think there is the ability to have some campaign finance reform. But I haven't met one person since I've been here or as I travel around the country who's coming up saying, "Oh I want a contract." They're sitting-- they wanna be left alone. So I don't fault anybody for that.

JONATHAN KARL: Final words, Senator Rubio?

SENATOR MARCO RUBIO: And I would just add to that, number one-- and I think I can speak for my colleagues when I say we run for office and people buy into our agenda. And then if-- most of the people that support us support us 'cause they agree to what we're doing, not because we agree with what we're doing.

And the second point is the one Rand made. And at least acr-- I don't know a single person in this room has ever been to my office. And I don't-- haven't seen everybody here today. But a single one that's ever been to my office asking from government any special access. By and large what they want is to be left alone. They just want government to basically do what government should be doing and leave the rest up to men and women like them and countless others around the country who through hard work, perseverance, sacrifice and risk taking are creating opportunities that are providing the American dream for millions of people. That's what they want for government.

JONATHAN KARL: All right, well, thank you, we are out of time. Thank you all for coming. Thank you for inviting me here. Thank you to Freedom Partners. Thank you to the senators.

SENATOR MARCO RUBIO: Thank you.

JONATHAN KARL: I think we see there is a interesting debate ahead in the months ahead So thank you.

END OF TRANSCRIPT.