tv WSJ at Large With Gerry Baker FOX Business July 27, 2019 9:30am-10:00am EDT
devin nunes and john radcliffe, my special guests right after the mueller testimony. they were among the questioners. ararararararararararararararara 10 i am live on fox news. start smart right here every week 6:00 a.m. to 9:00 a.m. easter with mornings with maria on the fox business network. start smart every morning with us. have a great rest of the weekend everybody. thank you for joining us. i will see you next time. >> hello and welcome to the wall street journal at large. so much for fiscal restraint. congressional leaders and the president facing a september deadline to increase the countries debt limit, struck a major agreement this week. maybe for members of the house and senate head home for august
vacation. it's not only increase federal boring it also opens a door for billions more in domestic and military spending. allowing the deficit to rise next year to almost $1.4 trillion. as someone once said a trillion here and a trillion there, soon talking serious money. the timing is not coincidental to the plan pushes tough decisions on spinning an effective government shutdown well past the 2020 election. the plan also put on hold automatic budget cuts notice sequestration which will put in place and the obama years in an effort to keep government -- while government spending keeps going up the economy may be slowing. the commerce department reported on friday gross domestic product was down to 2.1 percent. a 2.1 percent in the second quarter of the year. it is down for the first quarter. they also revised down estimate for economic growth last year and 2018 to rates below three percent. which had been a previous number and the administrations target. with me not to discuss all of this and many other economic issues, top white house economic advisor, larry kudlow. journey from washington d.c.. thank you for being here.
>> hello, thank you. gerry: gdp number if i may, 2.1 percent. not what we thought we were getting. >> it is not bad. consumers with a hero of the numbers today. they are spending was up over four percent on an annual rate. i think that is a function of the strong gains in jobs and wages i might add. across the board. whether it is blue-collar, where women or hispanics or blacks or whatever. that was the star performer. we lost about one percentage point to some inventory adjustment. but that may prove to be healthy for the second half. we lost about and a half a point to boeing and their difficulties. you know, i will say this, we faced a two-year period of severe monetary tightening. seven rate hikes in 2017 and 18. sometimes i wonder how the economy has grown at all. so i would just say to that the incentive policies of tax cuts
and deregulation and energy and trade reform, i think they are working. i think you will see a much stronger second half going into 2020 judging from the stock market and some recent numbers on durable goods and retail spending. i am optimistic about the second half of next year. gerry: to be clear and again, so the number 2018 down below three percent but is defense fault essential. if they hadn't raised rates this much would be much stronger. >> i believe that actually. i mean, we haven't had any inflation. in fact, today's numbers continue that i think the four quarter change for the various deflator is about 1 and a half percent.so yeah, i think monetary tightening has been a big headwind for the economy. but nonetheless, although we did not make out three percent target, we were 2.7 percent and
annual rate for president trump's first two years. a good performance, the prior administration long cycle for eight years was only 1.9 percent. so we are 40 percent ahead of their trendline. gerry: to be fair, the 1.9 percent is heavily affected by the fact that the economy was in a deep recession for the first year. i think if you take that you get 2.2 or 2.3. i agree that -- >> if i may, i didn't want to quibble we've known each other long time. but the obama years, the deep recession goes into the bush years. obama years get the early recovery. but it was never a strong recovery. >> the recession ended 2009. anyway, as you said we do not want to quibble. overall you have 2.7 percent after massive fiscal stimulus. huge taxcuts which has benefite the economy and in many ways.
-- >> first of all lower marginal tax rates for businesses large and small individuals. that is not, that phrase fiscal stimulus, is not a spending increase it is not a one-time spending increase. those lower tax rates create higher after-tax returns and incentives for as long as they last. and they are still in place so i think that is a very important point. now, 2.7 percent for the president's first two years and for the first half of this year think we are 2.5 or 2.6. look, people said we cannot get to two percent, remember? that was the argument. gerry: sure. >> we have already come away leapfrogged all of the so-called secular stagnation arguments. gerry: okay. >> i think that is what happens you freed up the animal spirits
in the economy. i rather helpful. by the way as i said, looks to me, judging from the stock market and a bunch of recent numbers, i think we are looking towards we will step into a very strong second half of 2019. that is my hunch. gerry: back onto the feds, they meet next week, a big meeting, where the expected cut rates. the question maybe is is it a quarter-point or half-point cut. what would you like to see? >> i would say the market is expecting three 25 basis cuts. thus the market. my own personal view and the fit is in the point and i won't preach they will do what they're going to do. i would just say the sooner the better. i think that is my personal view. i believe that is the president's you. i would like to remove a lot of these unnecessary monetary headwinds that i talked about
before. gerry: and if they're going to cut by three quarters of a point over the rest of the year they may as well, i mean all the evidence historically is that you should frontload it get it done as quickly as possible. >> i would like to see that. one thing going on here is, not to get too technical, you know the game. the curve is inverted and it's been for a while. gerry: right. >> i think the target rate should drop by 75 basis points, let's say. then at the qc long term rates move up a bit. that would be a much more natural position for the financial markets. which itself would help growth quite a bit. gerry: but you'll see, some people are predicting a recession for the last year. as we get more reports out this week saying it's a long as expansion in u.s. history, 10+ years old. you don't see any real risk even without a brexit action.
you don't see any real risk of a recession then. >> no, i don't. i think the fundamentals are pretty good across the board. i really like the stock market action real -- year to date. i do fret about the curve a little bit but no, i do not see a recession. i think we are past that. look, people -- it is a wonderful thing to be in washington and a gift to be a presidential advisor. it is truly a gift and a blessing. but here this recession talk from the moment i got here. but i heard it actually when i was still anchoring up at cnbc. people talk about the president's recession, the stock market was going to crash etc. i do not want to get personal. all i'm saying is, let me just repeat this thought. gerry: quickly if you will because we need a break. >> 2.7 percent annual growth still in his first two years is a number that most mainstream academic and other economists do not think we could get. and we have gotten it and it is a 40 percent jump over the
kudlow. we talked about the reasonably good growth that you see despite headwind of particular interest rate. another headwind is the currency. the dollar has been rising since the beginning of 2018 quite strongly. talk about 10 or 11 percent against the trade basket of currencies increases cost the price of u.s. exports, it lowers the cost of imports into the us. is the dollar to strong? >> the way i look at it, the dollar has been quite steady.
i think year to date it is up a little less than two percent. the dollar today on the trade business i'm using the indexes about where was when president trump took office. so i think you've had a pretty steady dollar. i think it's a very good thing indeed. we like a dependable, reliable dollar and i want to add, that there has been some loose talk about currency intervention. and the president himself decided this past week that there would be no currency intervention. he wants a steady dollar. he wants a dollar that is the world currency. but the president does not like is when other countries seemingly manipulate their own currencies maybe for some
short-term trade games. that we do not like and secretary steve mnuchin of the treasury has a watchlist where he is looking very carefully at that. for our point of view, we have a strong economy with great incentives for businesses and we like a steady dollar so were the most hospitable investment environment in the world today. gerry: would you include the european central bank which is again cutting rates below zero. with negative interest rates in europe. as the economy weakens. is it, are they pushing the -year-old down against the dollar?>> i do not want to -- i will leave the labels to the treasury. that is their job. look, i would say this. the ecb and other central banks, i think the bank of japan has pursued this you know quantitative policy that we pursued for years. and they're not getting any growth. so my thought here is really what they need, is more supply-side, free-market reforms. again, it's not exactly breaking news that i am a reagan supply cider and a trump supply cider. gerry: and the europeans are not. >> that is correct.so we go
to the g7 at the end of august which is a lovely place. as you know. and you might hear some of us talk about this to our friends and elsewhere in europe, why not regulate your financial and labor and other markets? why not have a more open economy? easy money, i do not think is the answer. and it can destroy markets and distort economies. gerry: will you say that with them, easy money, the present you say, the bank of japan and the ecb, pursuing is actually hurting the economy? do you want to see more stable, you talk about more stable dollar. do you want to see more stable monetary environment generally? >> i would. i absolutely would. look, and the mean is, i know many of these leaders. and respect them. we've been in many bilateral through g7, g 20 and so forth. and they come to the states. i've mentioned this i will probably continue it.
i think president trump is going to argue for example, as a quick -- why not think about for growth, low tax rates, deregulation and lower trade barriers? lower trade barriers to promote imports and. gerry: the clock is exhausted. gerry: they been saying that as long as we can remember. and wouldn't it -- >> i've only been saying it for 35 or 40 years. gerry: they go they have not listen to you. but wouldn't make it actually, give it a bit of leverage, if you actually said to them you know, do this and stop doing the monetary stuff or we may have to you know take action on the currency front. >> no. no i don't think so. i don't like that idea. i think currencies of the center. u.s. dollar as the world
reserve currency and president trump wanted to remain so. that is anchor and is a good thing. i do see glimmers. my friend boris johnson is now the prime minister of britain. i know he has some supply-side bones in his body. look even present macron. we do not agree with his digital tax. i think it's a big mistake by president macron has moved corporate tax rate down and he is seeking out labor reforms. i think we'll have interesting discussion there. but again, think president trump will take the lead.the growth program which has shown results and if we do not say it, no one else will. so it needs to be said. gerry: stop you there. one more quick break. ahead, three talks with trainer
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guest. larry, i've known you for a while. used to be -- $22 trillion total federal debt, trillion dollar debt as far as the eye can see.have you had an epiphany? >> actually, at the risk of pushing back slightly, i've always been a spending hawk. limited government hawk. i've never felt the deficits were the issue. i think if you want to get rid of deficits, which is a noble cause, you need to grow the economy rapidly and try to limit the scope of government it is sort of been my philosophy in general. >> you going economy you sing earlier at a reasonable pace in
last two years. the deficit keeps going up. it is not using and that the deficit or the debt is it? >> left, revenues are coming in, i'm looking forward to more. i like what i see in the economy and nominal gdp and so forth. in terms of the budget deal i think is what you're driving at, so our estimates are about 4 and a half percent. the deficit in scherie and 20 would be about four and half percent gdp. everybody likes to see it lower. i would like to see less spending, absolutely. but politics is the art of the possible. the market with a two percent 10 year is not worried about the budget deficit were borrowing at the present time. i think it is a manageable number. gerry: i'm sorry go ahead. >> i was going to say is the budget deal perfect? no. but it does maintain a very important increase in defense spending, it allows the president to continue his efforts on the border, at the
southern border and security in the rule of law. it will not get in the way of a number of policies, it does get us to roll it over so there will be no default which will be very bad. it ain't perfect, we all wish for more. as conservative are like to see more limited. at the moment i think it's a manageable story.gerry: this seems to be almost a consensus these days on the left and the right. the deficit doesn't really matter anymore. markets seem to validate that. 10 year treasury way down two percent. do deficits really matter if we have $22 trillion debt were $30 trillion debt? >> we have not gotten there yet! [laughter] gerry: it is early yet. >> listen, i am a growth guide. we are in a prosperity cycle. we have picked up the rate of growth in the last couple of years. i want to keep it that way. i want to aim policies on the supply side with taxes and deregulation and so forth. to me that's the key.
the way to slow the debt and reduce debt burden on gdp as well as the yearly deficits, i think number one, let's grow the economy. number two, let's limit government and limit spending, there are lots of reforms that can be made. but i cannot get panicked about it right now. gerry: have to wrap this. one quick final question if i may. china trade talks, will begin a deal by the end of the year between u.s. and china? quickly if you will. >> impossible to predict. next week's talks in shanghai hopefully we go back to where we were in may and very much on the american side we want china to begin buying agricultural goods and products as they promised. gerry: larry thank you very much indeed for spending a term of this. of this. imy insurance rates are probably gonna double.
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faltering performance by special counsel who at times didn't even really seem in control of his brief. >> well we -- at the outset determined that we -- can you repeat that please?it went a little fast for me. i will leave the answer to the report. the question was, i would have to refer you to the report on that.you have to repeat that for me. gerry: not only did he advance impeachment host but may have killed them off once and for all. in the end it may probably be for the best. the obsession among both parties over the last few decades would be delegitimizing. now a very established part of the american political process unfortunately. surely undermining peoples faith in the political process. presidents are elected by the people there will be an election in a little over a year from now. the people can truly decide
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