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tv   Wall Street Journal CEO Council Discussion with Kevin Hassett Steven...  CSPAN  December 4, 2018 7:11pm-8:02pm EST

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[laughter] this is a huge upgrade for them. [laughter] [applause] . >> at that point we have to end. [laughter] please join me to thank governor bush. [applause] [applause] . >> you can continue eating we will start again downstairs at two oh 5:00 p.m.. we will have conversations at 2:00. .
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>> at the same event we heard from white house counsel economic advisor chair and treasury secretary stephen nguyen. this is just under 50 minutes. . >> so now let's get right into it talking about financial markets the dow is down around 700 points why is it down what does it tell you quick. >> day to day one of the main driving forces of equity markets as revisions to the outlook. look at how it has been revised with those changes the asian economy is slowing the european economy is slowing. the council of economic advisers and with us multinationals around the world us outlook is very positive so i don't know about
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today that the news is the global economy is in that boom. >> how long can the united states remain insulated with japan and germany? how long do we keep up this divergence quick. >> we have a much bigger concer concern. right now the us is recovering from the highest corporate tax break with cap - - capital spending is up in manufacturing jobs is up 350,000 since the president took office so's with that it will start producing output.
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so given that relationship between capital spending. >> but with that forecast in germany and outside the white house forecast for next year go into the economic report of the president what is the forecast with unemployment? . >> one of the jobs is the directory of the treasury sector 81 - - secretary who is the chair and it took a few weeks to finalize the forecast for next year but what i can say is last year write about this time we thought this year would be three.1 percent a lot of people said that was a big
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goal i member gary cohen said fraser hand and a lot of people did not put their hand up. but the fact is we are up three.3 percent so far gdp now at the atlanta fed with the fourth quarter coming in so last year at this time we set to be driven by capital spending that there's not a lot of cars to change the forecast going forward. >> and don't want to release the forecast but if you have the first year right in the tenure forecast you would expect to see that. >> the yield curve is pretty flat right now under 3 percent and in the past that is an indicator of a recession. >> but right now it is very low that recession risk is
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europe and some pockets but if you look at europe right now it is driven by a number of factors with the slow asian economy and certainly over breck set and in italy there is a debt problem so when europe asserted he is doing what it normally does it capital spending to put on hold those purchases of big ticket items but with the us the thing about capital spending you get that investment but then they gdp starts producing output so if you have all of this new investment that will increase goods so absence of a really big financial collapse somewhere.
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>> so you mentioned that it strikes me as a mixed picture of the investment group with the annual rate that was a slow down from 11 percent in the first quarter and that percentage of gdp 14.6 percent nominal 13.7 percent in 2014 and we have a tech boom in 2000 but here's a number that i know that you love with that nondefense capital goods year over year in october i could go on but it looks like that business investment that you have growth do you agree with that quick. >> i disagree first in those
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advance circles those are numbers that are affected by seasonals with those ups and downs with the cost of the capital model that we used to forecast they said it would be up about 9 percent and through the first three quarters at a seven.five. that's the same model that gave us 3 percent next year. it is correct to point out the very last data item but that's after a really big increase but then you have to expense that higher tax rate last year's there was a massive increase so if you go back with that 10 percent capital spending. >> so where are you? do you feel comfortable? mimic of the models that grow 10 percent in europe 2 percent i would say our model is
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looking at the data but the top line number even the underlying data is consistent. >> so you are comfortable this is a result of the tax cut? so we have a question. that the audience is responding to the trump administration economic policies. so to think about tax cuts or deregulation but the trump administration economic policies decrease or increase your investment in the united states while we are waiting for this. why don't i ask you quick.
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>> i would expect the majority of people with the simple economic corporate tax rate and some people because of chant one - - transfer pricing that the audience does not want us to talk about but there is vast economic literature that says to be very responsive. i would not expect that otherwise. >> there isn't a man or woman that increase their interest in investment despite the fact it is written a lot in the last year about paris - - or the tariffs. so tariffs put in place already?
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how have they affected the economic picture quick. >> actually saying from the beginning the president said one year ago in june that actually made a presentation and with those objectives is to move toward zero tariffs in the previous presidents have wanted to make progress but president trump was very serious about putting tariffs on people if they didn't make their trade policies more reciprocal so if you look at the promising dinner we had with china with the free trade talks with europe and the korean deal you can see he really is trying to move this to a better place. the way you evaluate like the steel tariff if it creates all
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the positive movement and trade policy than the short run cost disrupting industries that consume seal might want - - steel it might be worth it. you have to understand what the trading partners. >> but how do the tariffs affect have you presented that to the president but the problem of choosing what to put a tariff on is pretty simple. suppose there is a chinese firm that 100 percent of the sales are in the us than if you put a tariff on that it is bad for the firm but good for somebody else. so trying to decide what the trade policy should be that using this as a tactic in a negotiation if they don't come
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to the table but without going into details to sort through all of that if you look at the big response of china in those markets the manufacturing sector and the very muted response that that has been very successful. >> so with that 25 percent tariffs what exactly has that had on the us economy quick. >> and the easiest thing with a lot of close substitutes to where they are the only supplier and then you slide down the scale but there is a heck of a lot of stuff that
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china does there was a report put out last year with trade policy that said maybe stealing as much as $500 billion per year. so if we start down 500 billion if that's what it takes to get to the top. >> but it is true if you go off the bottom you do more what does not match that example. >> that the terrorist from here hurt the united states quick. >> the simple economics is not the only concern and bob you could talk to him about it are also secretary t five - - secretary mnuchin about it. to have the effect on the us economy.
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>> do you kick china out of the wto after this next round of talks quick. >> i think the g 20 statement mentioned reform needs to be part and the reason the president believes that and i concur is that chinese intellectual property theft has been a serious problem here in and year out president obama got them to stop it and they keep going every time we go to the wto we win but then we will have these roles and they will create a circumstance where one country to steal hundreds of millions of dollars and then lose the case in the long run and that's the important sign that
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i said with the bbc last week and with the wto if they continue to misbehave but that is much less likely path and if the concerns with the markets without pause we have seen with secretary mnuchin he is a better source for that but i can see a lot of positive signs with movement and to get stuff worked out and it could be worked out quickly if everybody wants to. the real good news for me is that the two presidents agreed we have to work together so
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now talking about tariffs over the next 20 seconds. the administration is going through a process now to evaluate the auto imports for the national security threat what is that argument quick. >> that is for wilbur ross his team is putting together that report they'll have that report on steel and i look forward to seeing that you have to see what argument they decide until the report comes out i wouldn't want to speculate. >> with the fed actually let's open up to the audience. . >> maybe will come right back to the fed quick. >> inflation lately is running
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a little below the target so should the fed be raising interest rates at a time it begins missing the inflation target quick. >> i know the president has opinions but he did pick great people i would want to give them advice but when we simulated this last year and talked about right here on the stage what we saw of the economic models what happens you get a big supply-side investment boom that puts downward pressure on prices that decelerates the inflation so that's pretty much what the data look like. >> the fed is raising interest rates at a time that it is
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about to end the quantitative easing program what will be the impact on the financial markets and the economy with all of that coming out of the system quick. >> again i don't want to give the central bank's advice. they know what they are doing but if you go through. like the market bearing interest rates to where they are because we are not in the new normal love flow growth with you have normal gdp growth then you should expect other things to be normal also and we have gone back and we should expect to see that. >> this return to normalcy quick. >> that's for interest rates. >> i'm not giving the fed advice but just between the
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policy rates and the economy i would expect those to return to norma normal. >> moving back to tax policy. we just had lunch and we talked about george bush is economic legacy he agreed with november 1990 was a political disaster losing the election but economically in american history post-world war ii going toward. a budget knowing what can happen in that. the foreign policy in particular a tax increase was a success quick. >> with a decrease of the marginal tax rate it is a
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negative. what president bush did at that time was make a calculation austerity was a worthy objective setting the stage for continuing expansion and managing in a divided government and when we were legislating with people that would have been the first choice policy but the balanced budget that we saw set the stage for a massive expansion but most of that was because of the technological innovations like the internet and the computer. >> dick cheney went on to say it doesn't matter if they are forecasting $1 trillion does that matter quick. >> yes.
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deficits matter i am not in the bob rubin camp that it doesn't have that effect on interest rates but in the long run deficits are the policy opportunity with consolidation and there are a lot of countries around the world that we wrote a study at the aei and the growth effects so absolutely a powerful force going forward policymakers have to confront but i have to say the president was 100 percent correct to emphasize at the beginning to get the corporate rate to be competitive and that he inherited serious problems that were priorities genuinely. and we made an enormous amount
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of progress with that. look at the ten year forecast also with 6 trillion more gdp than when president trump took office but that gives you with the ability to fix that problem. >>. >> thank you very much. [applause] . >> let's continue this conversation so at the level we have seen for many years with the rising deficit how does the nation's bookkeeper keep track of all of this? steve mnuchin secretary of treasury the editorial page editor of the "wall street journal". [applause] . >> thank you.
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good to be here with you. >> thank you for being here so let's jump right in. this morning talking to john bolton and larry kudlow talking about the deal and the dinner i have to say qualcomm and some general promise i didn't hear anything specific that the chinese committed to what did they commit to quick. >> i will put this into perspective because i think it's important we have been having discussions with our current trip on - - counterparts with multiple trips over a long period of time. president trump and president xi spoke it was clear they would be at the g 20 and we started to do the work for this meeting this was the first time that china responded to us on the structural side with very
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specific items so they took the original document and they put it in 142 specific items then came back in advance of the meeting with risk specific responses to the other 142 items that they committed to and what they could do within a short period of time for those that were problematic. going into this meeting there was substantially more work done on the structural and nonstructural items. prior to the meeting myself and director kudlow had two meetings with the counterparts we have several meetings with the president and they said we want to hear this directly from president xi and then i will make a decision. so to say all be heard about
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was qualcomm and buying things i don't think that's the case at all. there were very specific commitments and spent time walking presidential through a very specific plan. you know, the issues we have talked about the structural issues. >> but what's that commitment to change behavior or change the laws? there is a lot of market chatter today that we got the nice markets on monday because there was a truce and progress was made but today they say maybe it's less than what meets the eye may be there is nothing except more talk that is one of the causes for the market to take the dive that it did. >> it is clear the market opens up 450 points. the president was very
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specific on the meeting which he drafted and spoke on air force one. look. the market is now in the wait and see as markets figure out is there a real deal at the end of 90 days or not? i will tell you there are very specific issues the president agreed on but they have to be dealt with on specific wording to that concept of a specific timeframe and deliverable and penalties if they don't respond. whether we can get that agreement to make that progress time will tell but this was not high level stuff it was very specific commitments made everything from intellectual property rights, forced technology
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transfer, joint ventures and cyberissues there were 142 specific items on the structural side we are dealing with. >> how firm is that 90 day deadline quick. >> that's up for the president to decide and he will see where we are in 90 days it is our expectation we have some form of an agreement with progress being made or the president will move forward with the tariffs. we will work our best at the direction this is the first time the president sat down to discuss specific missions they can say china made these commitments in the past if there is a deal there has to be a basis of a real deal. >> so now turning to the new nafta.
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us mcs. [laughter] . >> that is the short version. >> it is actually shorter than nafta in terms of letters. [laughter] . >> when us mca so if we did do that deal the president said the statement steel and aluminum of tariffs they are still in place and the president of mexico it almost didn't come to the signing ceremony because he was concerned about that. >> the answer to that is there are very specific discussions going on and the ambassador and wilbur ross are involved with the specifics to resolve these issues.
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i think what happened going after mexico and canada simultaneously we will not resolve canada without mexico and we ran out of time on the clock with the change of the administration i think it is that simple so now the new administration is in place there is a priority of the economic team to resolve those issues. >> but then they signed the deal what is complicated about that. >> when you say we assured them? i don't want to go into all the details, but there are conditions to lift them. whether we agreed to quotas or something else, there are specifics that have to be measured. i don't want to go into the details now. that would be inappropriate i think ambassador light heiser and secretary ross have very reasonable proposals i hope this is resolved quickly.
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>> some type of quota system quick. >> exactly. we want to make sure we don't destroy the entire program or make sure there isn't shipments of other issues. i am optimistic we will resolve the issue. >> i'm still waiting for a significant democrat or a minority leader schumer to say they endorse the deal as it is for what i hear most of them say i don't support it as is. does that give you concern for the next congress quick. >> of course, it has to be a little bit of a concern but on the other hand, i would say when you go through the issues on this deal, i really do think it is a much better deal. not just like us content and autos but financial
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services, currency provisions, intellectual property, it lends the agreement the democrats were consulted extensively through this process with a process for democrats don't want to do anything. so i am optimistic when it comes down to this in the new congress it is a good deal and speaking to democrats along the way with private assurances. >> i know he was negotiating every step of the way where is sherrod brown quick. >> you shouldn't be surprised how it gets with politics. >> one other thing about this agreement that the president
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coming back from when a serious he wants to initiate a movement to terminate the nafta deal even before us mca is ratified. does that give more leverage to the democrats in the house because if they don't vote for it then that goes back to the pre- 1994 tariff rules that are much higher that could do significant harm to the economy. >> the president was pretty clear to put the pressure on democrats this is a better deal. they were consulted. . >> but if they say he gave us the deal we don't like it if the economy suffers politically the presidents take the blame. >> i'm not concerned about
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this there is a lot of business support on both sides that will come out for this. >> you think business will support this quick. >> absolutely. >> i don't see the autoworkers so far or any environmental groups. >> the labor was involved all along we will see how this plays out but this is a big step in the right direction. it shows we can bring trade deals and this is great for economic growth with all three countries. >> one of the things that you negotiated with mexico and canada is the wage rates specifically designed to help american lawmakers in general motors just announced it is closing four or five plants
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with a loss of 15000. >> this will make a big difference. >> i think it will but talk about the auto industry it think small cars or medium-sized cars suvs small trucks and trucks and the way the plants work there is a very big expense of retooling and it takes time. i am not as expert on the auto industry as others but the problem gm had is they have less demand for certain things in certain plants our focus is how do we make sure we put them back to work? the good news it is a great economy. people need workers so whether
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gm or other auto companies can retool those plants but there is a lot of demand for workers in that part of the country the most will be put back to work. >> philosophical question is it appropriate for a free market administration to criticize the ceo where they deploy their capital quick. >> i think the issue is the president and this administration has gone out of its way to support business and we constantly listen to ceos. and then to formulate these policies. there is a better way for general motors to handle this to come up with a plan.
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>> what would they have done better crack. >> to really look at the alternatives. but i leave that to gm to figure out. >> i think that was the question is better to leave it to the board they the ceo. so with those subsidies will those be for all quick. >> i think if we do we do it for all that is what the president wants to seriously consider. i for one don't think we need to necessarily subsidize electric cars at this point in the cycle. people want to buy electric cars it is an economic decision there has been some great developments they have
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never been subsidize it can stand on its own. . >> so we are looking at that and i hope it's in the budget. >> may be made a little bit of news there but one campaign with infrastructure spending over the first two years but it is a priority off of the democrats so democrats say you have to pay for it. some say we would like a tax increase so a tax reform in cutting rates to say maybe he would think about getting a deal with the democrats if it is raising the corporate tax
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rate if that is part of the infrastructure deal never have i heard that and then there was a big priority with military spending and then we agree with the democrats on on military spending but the issue flasher there isn't enough money but the democrats priorities but i can tell you
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because this is something i constantly speak to the president about he very much wants to do infrastructure spending so i am hopeful we can figure out a way to do that with the democrats my preferences rather. >> how about the individual top rate? that came back at 37 percent? that top priority for the democrats? that raises the top rate. that is a big component of the reason because he got rid of salt new york and connecticut in california and new jersey i
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still pay california taxes and my taxes went up significantly. we are very sensitive to the impact of the big part of the economy. and it is a major reason to lower the top rate. with some of the impact was something that was very important. >> so can we leave the markets here? we are concerned about the economy right now the tax increase is off the table crack. >> i have not heard anyone suggest otherwise. >> so let's get some questions. >> anybody over here?
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. >> secretary with the negotiation with china you talked about with those dropping in to date was 800 points what about the next 90 days have an impact with the negotiation with the administration quick. >> i don't think it will have a big impact and from my perspective, first of all, i do think we have a lot more market volatility in general because of the amount of electronic trading and trading programs there are and with the dodd/frank issues, dealers can no longer really deal with principles so we start this with the regulators. we have more in both
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directions so that we move quickly in both directions. we are very focused on economic growth so where is gdp and inflation with the inflation numbers? particularly with oil coming down i see the economic environment so if we can get a deal that works this is the first time that china has ever sat down at this level to have a commitment to renegotiate a real deal. if we can get this it is enormous to put on the table not about selling out $2 trillion over how many years but if we can get the
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structural changes the us companies will sell a lot more goods with the growing china middle-class. if we can get this right is one of the biggest things for us businesses and workers and the us economy. >> secretary, one area you touched on his places a fireman and energy prices and how you see things play out quick. >> i think this is something you see a whole of government work really, really well. this has been an integrated strategy a big part of what i focus on i have worked very
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closely with mike pompeo and others we wanted to be sensitive to the oil markets they ran up in advance and the sanctions are working. and i ran just had a missile test this week i can tell you from my conversations with the europeans at the g 20 we may have a difference of strategy of how to get there but everybody is 100 percent aligned we don't want iran to have nuclear weapons. we don't want iran to be investing in ballistic missiles to export terrorism it is a strategy that is working you could not change it effectively he terminated it and you are beginning to see the economic impact on them and we did it in a way to
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have a moderate impact on the us economy. >> just the friday after thanksgiving there was a concerning report about climate and its impact economically and societal lee in the modern time frame not very good the president has shared his views on that subsequently do they have any factor into the priorities of the administration looking ahead to neutralize a stable economy quick. >> i will comment on - - i will comment i've a vast responsibility across the government and this is not one of my areas of expertise. i did read the report i found parts of it interesting. i will tell you the issue i've
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spent more time on is the paris agreement if you look at what the us has done in terms of cutting carbon emissions and efficiencies in the private sector we have done an enormous amount. talk about china us, pollution is a big problem in china. they know it. but frankly if they were going to have goals similar to ours it would be one thing but it is a one-sided issue but i am not an expert i cannot comment on the report but the president is interested in clean air and water and in the energy efficient way but i'm not an expert i did not read all of it it was quite long. . >> you mentioned the tax credits would you be opposed to removing them also with the
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wholesale quick. >> i think that's a policy but i don't think we have made any decisions on that. >> there are a number of people in foreign trade negotiations that are determined the president is the owner then who is the coach quick. >> it is like inside baseball. people make this into the different issues y-letter will explain this carefully because i think a bunch of people want to make it more than it is. first of all, we have an integrated economic team. that includes kevin, wilbur ross, myself, larry kudlo kudlow, chris odell and others
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with these discussions of china that have occurred myself and bob and larry kudlow before that was gary we have different views at times we present those different views to the president and he gives us direction now the person clearly should be the one that is negotiating the agreement as it is his job to put this into an agreement i am very involved with my counterpart with the detailed discussions but clearly the job of documenting this and there is nothing more to this i know people want to make this out like a one team versus the other but i will tell you president trump said
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in the night with president xi even joked about the fact he had different people with different views and president xi said i'd have you sitting across my table that we really do have an integrated approach. everybody wants to get to the same place. thank you. [applause] [applause] . . . .
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. >> senator lindsey graham, chair bob corker and rand paul. >> are you satisfied with the briefing today senator? >> yes i was satisfied with the briefing. i'll say i am now more convince than i was before, and i was pretty convinced that the united states must have a strong response to both the war in yemen, as well as the killing of united states permanent resident and journalist jamal khashoggi. and only a strong response by the united states will send a clear and unequivocal message that such actions are not acceptable in the world's stage. and i think that's more importantn


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