tv National Economic Council Director Larry Kudlow on Tax Reform CSPAN April 11, 2019 6:05pm-6:52pm EDT
c-span2. >> white house national economic council director larry kudlow this morning said the white house is, quote, for the moment standing by herman cain to stand on the federal reserve board. his remarks came in an interview with bob cusack of "the hill" newspaper. >> [laughter] >> i can't walk, i'm sorry. my back was thrown out yesterday. in texas. on an airplane and helicopters. [laughter] in several cities selling pipelines. pipelines, all right? pipelines. >> well, thank you for being with us, director kudlow. anyone who has back pain knows how painful it is, so we really
appreciate. hopefully, that pillow will help you. so we're here to talk about the tax cuts, the economy and by all figures, really -- most figures, certainly -- the economy is humming. >> yeah. >> will it continue into the rest of the year and into 2020? because there's a lot of fear, as you know, critics have said maybe there's a recession coming, but the last jobs report was very, very positive. >> yeah. well, you're right. it was a good number. i don't, i don't see any recession. >> okay. >> this year or next year. i will say a couple things on this point. a lot of people have misunderstood or, you know, just don't agree or philosophical differences regarding economic analysis and economic modeling. finish i know there's this idea that 2018 was a good year because we got 3% growth, but
it's a sugar high, that's all going to go away. but i want to rebut that. what we've done is not a kind of one-time, you know, tax rebate rebate -- i can't see you over there. or maybe i can move up. this is not a one-time cash tax rebate kind of thing, and it just goes away. what we did was we lowered marginal tax rates particularly on the business side, large and small companies, and this was the bulk of the plan. now, there are individual tax cuts, and some of those were rate reductions and some of them weren't. but the heartover of it -- heart of it is on the business side and lowering the corporate rate from, as you know, 35 to 21%, 100% expensing, new international rules. we want territorial so you don't
have to get double taxed on your overseas profits. so from my life as a supply-sider, the argument has been we are creating incentives so at the margin you keep more of what you earn on the extra hour of work, the extra dollar invested, the extra investment risk dollar. and those incentives will be in mace for a long time. now, if i get this right, the expensing, the 100% expensing -- which is very important -- is, i think, another five years if i'm not mistaken. the corporate tax rate reduction is permanent, you know, quote-unquote, but it is permanent. ditto for the, for the territorial treatment of overseas profits. so what am i saying? i'm saying that these incentives
designed to rebuild the economy. we haven't had good, we haven't had good capital investment, capital stock. we haven't had productivity, we haven't had real wage increases. these are designed to be maintained for many years to.com, literally as far as the eye can see. so, therefore, i don't -- it doesn't end, it continues. and a point i want to make, a lot of the larger companies are really probably going to produce more investment by which i mean capital goods, intellectual property which is really booming right now for years. unless and until these tax, these lower tax rates are repealed and we will certainly don't expect that, such a thing would never happen in the senate, but if it did, the president would veto it. we expect these to go on for a
long time. and these bigger companies, i think, are just beginning to adjust their investment horizons to take advantage of the new tack incentives. tax incentives. you following me in those big ships take a while to turn around. smaller companies can move faster, and that's a big source of job creation. and, you know, the numbers there from the nfib are very, very strong. so i like that. we're also seeing as part of this a tremendous increase in new business applications and new business formations. which is very important. we all say that small businesses are the biggest job creators in the economy. that's true up to a point, but actually it's the brand new businesses that really are the biggest job creators. so what i'm saying is the tax incentives stay in place, the lower marginal rates stay in place, and consequently -- unless there's some massive
exogenous shock, i don't see why the economy can't continue to grow at our 3% baseline. >> with the economy strong and unemployment rate lowest in five decades, why did, why do republicans lose the house then? with the economy strong, was it a messaging issue with the tax cutsesome some of the republicans quit talking about the tax cuts down the stretch of the election. >> yeah, i guess so. look, i'm not a political analyst per se. there's so many reasons for what happened, other issues, midterm elections, it's very hard for me to know. i'm interested, though, in the polling on in this -- on this where many of the polls i've seen show positive, you know with, approval of economic conditions or the president's economic policies. you know, those numbers are up in the high 50s, low 60s.
those are big numbers. and i think people are aware. some people would say, well, the tax cuts per se don't seem to poll well. i don't know if that's true. i'm not a polling expert. but the results are definitely polling well. as you noted, the employment way up, unemployment way down. and i want to add one other point on this, bob. that is we believe -- this is my dear friend and colleague kevin has set and i and others who worked on this plan way back almost three years ago -- that a new economic theory, i won't say brand new, but it was controversial. lowering business tax rates would help middle income, lower middle income work force the most, the most.
i don't know what the right phraseology is, and i'm not doing as well as i'd like to do normally for an early morning with "the hill," but what i'll say is blue collars, main street, ordinary working folks have actually outperformed quite a bit. you know, when you look at the wage numbers, the rate of increase for the nonsupervisory workers, okay, is way ahead of the supervisory workers. so i just think of it as blue collar, white collar. that is a little simplistic, i know. but it's really very interesting. and i brought some numbers with me on this, because i just love this stuff. average weekly earnings for workers rose 3.3% which itself is a terrific number. supervisors rose 2.6%, okay? that's pretty good. but in the two years ending, the
two years since 2016 the average weekly earnings of workers rose 7.4%, all right? so it's much bigger than the overall number. for supervisors, 5.9%. so what i'm calling the ordinary workers, i don't mean that as demeaning, i'm just saying the non-managers are doing better than the managers are doing. and this was an idea that we had looked at. it was controversial. i reckon it's still somewhat controversial. but they're the ones that get helped more. we've been short business investment, we've been short productivity, and we've been short real wages, last couple of years. that seems to be turning around. and i know, you know, a couple years doesn't necessarily clinch that, and we will wait to see more evidence as the data comes
in. but that was our point. and we are seeing, you know, the productivity numbers are up. thankfully, 1.8% last year. and, again, i know it's just a year, so i appreciate any skepticism, but it's a good move. the increase in cap goods and intellectual property's doing well and real wages are doing well. so at the moment, i would argue the supply-side model is working, the incentives are working, and as long as they're in place, there's no reason the overall economy can't can't to grow. >> what about on trade? everyone has been waiting for a trade deal on china. are we going to get one? are you confident that this spring there will be a deal with china? >> well, confident -- >> what are the chances? >> i'm the happy warrior. i'm going to play it from the
optimistic side. as you've seen, the treasury secretary was out yesterday sounding optimistic. the president's been optimistic. my dear friend bob lighthizer's been guardedly optimistic. he's the best trade attorney, the best trade negotiator i've ever seen, and he and i are antiques, we're relics from the reagan years. i love that, bolton and lighthizer or and i are, like, reagan antiques. we worked 35 some odd years ago. i was 13 years old -- [laughter] i was the associate director of omb. [laughter] >> but have you seen progress? >> yeah. we've made good progress. i mean, that's -- i don't want to predict. look, it's tricky business. it's got to be the a great deal. you've heard the president say that. it's got to be a great deal, it's got to be the right deal, it's got to be an enforceable deal, and it has to cover the structural issues on technology and ip and cyber hacking.
and, of course, the commodities, the tariffs and nontariffs. we have made nor mouse progress. we continued that progress last week when they were here. they've been on teleconferencing this week. god, it's already thursday, yeah. they've been teleconferencing. they continue to make progress. i can't say the deal is done, it's not done. there are things that need to be covered. so am i confident? i would just say i'm going to play this from the optimistic side, but there are issues that still have to be done. >> do you think, i mean, the economy, where it can go from the here, a lot of people say if there is a deal with china, then the economy would really take off. i mean, what is the limit? i know it's not the only economic indicator, but could the dow hit 30,000? what is the ceiling here? >> well, look, you're asking me,
i'm the happy warrior. i think america has unlimited potential. i always have, still do. my, you know, my model of, my intellectual model is when, you know, free market forces rule the roost. when incentives to work, save and invest are in place, when the dollar is steady and the inflation rate is low, i think it's unlimited. look from the end of world war ii to the end of the year 2000, i believe 1947 is when the statistics were in place. the usa grew at 3.5% a year, unparalleled. and we hit a slump for whatever reasons in the last 16, 18 year, since 2000, no the question.
we -- no question. we hit a slump with democrats and republicans in charge. i think we can get back to that 3.5% long-term trend line. the president talks about getting to 4, 4.5%. i don't see why not. i'm not a believer in secular stagnation, i don't think there's anything, there's no cat gore with call imperatives.. categorical imtives w. the right policies and creating of opportunities for everybody, i don't see why we can't continue. i understand, you know, over time the business cycle will produce its own booms and busts, but i think we can get back to that long-term trend line. i'm always on the -- optimistic. we are a free market economy. the government doesn't run the economy in this country. maybe we can talk about green
new deals and socialism, one of my favorite topics to talk about. but it's individual men and women ownerring in the economy, using -- operating in the economy, using their god given talents to be entrepreneurs, to be great workers, inventers. as long as we give them the freedom to produce, i believe our future is unlimited, absolutely unlimited. i'm the quintessential optimist. i learned it from ronald reagan 35 years ago, and i'm still there. >> do you think fed chairman jerome powell is doing a good job? >> i do. i know we've had some discussions about that in recent weeks -- >> discussions with him? >> we've just had a lot of discussions, it's been very exciting. [laughter] >> tell us about those discussions. >> i started my career at the federal reserve. that's a little known factoid.
i was 13 at o to mb, so i was at the new york fed at 19, freshly minted princeton grad student person. so i have a long history with the fed. look, it's obviously well known that the president did not agree, does not agree with the last couple of rate hikes. i agree with the president on this. i thought that they were unnecessary. now, i, again, the fed is an independent central bank, and we aim to keep it that way. all right? that doesn't mean we can't express our opinions periodically. the president himself is a very well-informed investor and businessman. i have views, we all have views. so as i've said before, when the fed is ready, i wouldn't mind
seeing them lower the target rate 50 basis points or so, in line with the falling inflation rate, by the way. now, having said that, with regard to jay powell who's a friend, he's a fine person. i think he's going to turn into a good fed chairman. speaking personally, he has my confidence, and we have some great -- rich claire da is the vice chairman. he's a very old friend of mine. i think he's a brilliant, brilliant guy, and i think they will work well. as i say, we wish they hadn't raised. i noticed from the various reports and so forth that they've changed their view. i don't think rates will rise in the foreseeable future, maybe never again in my lifetime. whether they will fall, i wouldn't mind them falling. i'm not storming the ramparts. again, fed is independent and i don't have any problem with that. >> along those lines -- >> i'm not sure there are, i'm
not sure the differences between the fed's world view and our world view are as big as they are sometimes portrayed. all right? i'll just make that statement. >> that's fair. we've talked to some republicans who say that herman cain cannot get the votes to serve on the fed board s. is the administration standing by on? >> yes, we are, at the moment. >> at the moment? >> at the moment, that's right. he's in the vetting process -- >> because his paperwork has not yet gone. >> his paperwork is in. he's being looked at by the fbi -- >> to the senate, i mean. >> that's correct. it will -- >> okay. so you plan on moving forward with that. >> we have to start internally at the white house. that process is going on. as the president said yesterday, he continues to support him, and we will see how that turns out. i don't want to prejudge it one way or the other. we have already, in fact, started con consultations with
the senate banking committee, senator crapo, who's a good man, a friend of mine. they will go through their own process. i know there are things about, allegations and so forth. this town is full of allegations. sometimes they're true, sometimes they're completely untrue, as we've seep. i want to give him, herman, a decent chance to go through that process. >> is it encompassing the allegations from the four women? could that stop him internally? >> i would just say when the fbi vets, they vet pretty good. >> okay. >> count on it. they vet very well. they vetted me. [laughter] >> you got through. >> i've been vetted a couple times down through the years. well, my ex-wife and i get along. [laughter] i pay my taxes. [laughter] i've been married 32 years. haven't had a drink in 25 years. life is good. it's all grace. you know, these things, you
know, we'll see. all i'm saying is he's in the process. we'll let him go through it. the president insists on that. late last night we got off marine one landing here from texas, the president said he stands, he continues to stand behind mr. cain. and we will be consulting with the senate banking committee. they will do their own vetting and, you know, my goal here as nec director is just to make sure these processes are going fine. >> many corporations are raising their minimum wage. is it time for the federal government, the federal minimum wage to be increased? democrats are going to be pushing that legislation. >> i love it when companies raise their minimum wage. love it. love, love, love. really. that's the best way to do it. i don't want the federal government to do it. i've never understood how the
federal government can fiddle with minimum wages and other related regulations just because, you know, cost of living is different in the different parts of the country. the cost of living in idaho is different than it is in new york or washington d.c. and that's one of the reasons. i have other reasons, but one of the reasons is i don't want like minimum wages -- i don't like minimum wages. but when you're in a prosperous, good strong-growth period like we are now, these companies are raising their minimum wages. it's fantastic. >> right. >> fantastic. and lets me come back to another point. it's kind of a fed point, but it's also a generic point on macroeconomic policy. more people working at higher wages, first of all, is a good thing not a bad thing. second of all, it doesn't cause
inflation. and that is maybe an econometric philosophical difference that we may have with some of these other big economic models. right now workers, as we went through these numbers a few moments ago, even the middle and low-end workers are the most successful worker getting the biggest wage increases. they're earning it through higher productivity. there's nothing wrong with that. i mean, it's a fabulous thing, actually. and, therefore, if -- i don't remember who was in the paper this morning raising the $15 -- somebody was in the paper this morning. i think before that it was amazon, before that -- i love that. >> yeah. >> i don't want to order them or mandate the companies to do it. they're doing it because the economy is booming. that is the best way to do it. and they're doing it as
individual, privately-owned companies. fabulous. absolutely fabulous. and i hope to see more of it. bet you we will see more of it -- >> one thing that -- >> i'd like my minimum wage to go up. [laughter] >> one economic indicator that has been bad news, and you were very critical of the debt levels in the obama administration, we got a new number, $691 billion deficit in the first half of the fiscal year, we're looking at there trillion dollar deficits. democrats say a big part of that, or at least some part of it, is the tax cuts. are the tax cutses paying for themselves? >> yes. >> some experts say their not -- >> they always will. >> we're talking about nonpartisan experts. >> i have to process that, nonpartisan expert -- i'll think about that. >> okay. >> but look, interestingly i just saw february-march year on
year the federal revenues are coming in when you adjust for a day short nor march or a day short in february. about 9%. it's a good number. revenues are really coming in nicely. i believe what'll happen here is as a share of gdp, which i think you have to look at these things in relation to the economy, you will see the deficit on a steady glide path lower, same for the overall publicly held debt. i think that if you look at the adjustments, let's take a nonpartisan cbo, i'm going to call them nonpartisan. this morning. their own numbers show pre-tax cut, post-tax cut, all right? they raised the level of nominal
gdp, which is your national income revenue number quite a lot. if my memory serves me, and i'm not doing so great this morning, but it's about $7 trillion. more -- give me some elbow room on that for a wounded warrior after a bad day. that, you know, at an average tax rate of 17, 17.5% has produced something around 1.2 trillion something extra dollars generated from the increase in nominal gdp. and the tax cut, as you recall, was estimated at 1.4, 1.5 trillion. so, yes, i think we have already paid for a good chunk of it. our numbers show the same thing in the office of management and budget. and i think we're right on target. give us some time, you know? i never argued in year one it would pay for itself.
the laffer curve doesn't suggest that. but after a couple of years, i think it will and then some. i think we've gotten off to ad good start. i do believe we have to seek limited government. we have a tough budget which we are lowering domestic accounts by more or less 5% across the board. the president has indicated if the spending caps going all the way back to the 2011 deal are not met, then we will sequester across the board, both defense if nondefense, including -- we will run by those rules. that's tough stuff. i think it's appropriate. i'm reading in the paper that the, some people in the congress want to raise spending on both domestic and military, i don't think we can do that. i've always been a limited government guy. i think the key here is growth. growth, growth, growth. that's the ultimate solution. but i think you have to the really try to run an efficient
histor history, centrally planned these political economic models are tyrannical and they impart poverty that performance and i don't want to forget that and have this conversation yesterday or the day before senator sanders put out put out his health care plan universal medicare essentially government takeover he was a guest on my tv show years ago i respect his views but i completely disagree.
not only would it be so costly as the estimates run around $30 trillion with those centerleft and center-right think tanks but the number that sticks in my craw is 180 million people with private healthcare plans would lose them for call that is extraordinary. and that is damning to the socialist model where the government takes over everything. i think that would be catastrophic. i do not believe that but let me add the green new deal and the idea of financing anybody that doesn't want to work, no regulations on - - would
decimate the economy and would lose 15 percent of gdp. >> are you combining quick. >> combining some aspects of the green new deal with universal medicare that we have looked at these numbers up and down i know some of those policy statements are not as detailed but a loss of 15 percent of gdp. that would destroy that country and the freedoms would be destroyed and our morality be destroyed there is nothing more demoralizing to individual men and women to have these governments run
everything inside with political liberties. i want to make that very clear. want to have this discussion. i think it is very important. it is so interesting people say the country like socialism. know it doesn't. i was looking at my friend and a tracking gallup poll's and that hasn't changed very much through the years and that would be devastating. one of my historical idols , i'm so old i use to have
breakfast with him periodically, winston churchill. he said if you're not a socialist in your twenties you have no heart if you're not a capitalist in your thirties that you have no mind. the reason i say that is i personally want to talk to the younger group, the millennial's i want to give them the benefit of some experience and history and they are in the workforce now and matriculating to their careers. i hope they will discover the idea of central planning does not work. and it would be devastating to the economy. devastating. >> do you think the democratic house is holding back or hampering the economy? and do you think they will approve of the new nafta yes
and no progressing speaker pelosi has been very accommodative to us frankly. she has opened the door regarding the conference which was very positive things that i think she is looking at it ms. pelosi has voted for many trade deals over the years i will not pre- judge them by the way i have not seen but she has been on the kudlow report several times. i am no expert but she will determine the vote i do think we will get a vote with you mca and if we do we have an excellent chance to pass it
but i do want to put in a plug for us mca it is a very important trade deal because here you have not only a better distribution with respect to content of manufacturing and automobiles and wage adjustments, very important we had some good breakthroughs with our neighbors to the north on farming issues. but also the new economy is very very positive and much stronger intellectual property protections it is so vital with expansion of digital services and financial services and expansion of biologics and so far the.
i think it is very progrowth. and that's why i try to push it wherever i go. and i think we have a very decent chance and the speaker has been intent on this. it is interesting just as a sideline if you will permit me, a lot of people criticize the trump administration for being anti- trade but actuall actually, as we sit here this morning, we have a decent chance of a historic trade deal. have a very good chance of a historic renewal of the usmca and negotiating with europe and negotiating with japan.
we passed a very good south korea free trade deal perk i think the presidents trade reform we have been free and fair zero tariffs zero subsidies as a model i think it is working rather well. people were skeptical but in the last year or so i will say amid the controversy one thing that he has taught me is sometimes tariffs can be a very effective negotiating tool and leverage for yes sir he has been tougher especially on china than anybody in either party the last several decades. i will just regard the trade
story is very progrowth. i can't guarantee it will get ahead of the curve but i like the story. >> we have had a number of questions coming in through social media. what is the white house doing to provide more certainty to investors with the opportunity funds we are launching. we are pretty much finished with the regulations this is part of the supply-side cuts and incentives and this goes back to one of my mentors over the years a very dear friend the late jack kemp and this comes out of that. it basically through lower tax
rates is designed to have private capital investment and there are property areas around the country. it will cover a lot of areas. it will cover a lot, a lot of areas. the number will be in the thousands when it is all said and done. hats off to secretary carson for pushing this. he is part of the group that is working on this. not only the tax incentives but the piece of education reform and job training and that sort of thing that can go with it.
security and safety, it's a fabulous idea and a great way to broaden the base across america. so for me i want every nook and cranny of america to share in prosperity. but i don't believe, and judging of the experience of the past decades, that government can't do that. and i do believe we should try the private investment capital route. and again help by other reform areas with job training. it is a very big deal. anyway, the final product will be out very very soon.
and it will prove to be a great success you will see a lot of movement of capital in these areas. >> we are in the political season but going into 2020 what about that quintessential question for four more years are you better off quick. >> i think we are happy to answer that. >> is the economy the number one issue from your side quick. >> i don't know political strategy but the economy is always key presidential elections and peace and prosperity tended to be histori historic. we are proud of our record on the economy. and that prosperity that is developing that will broaden and strengthen will be crucial absolutely.
we are proud of our record on jobs, but we are proud of our record on trade, i know the president is fighting hard and will continue to fight hard for various international security issues. including the wall and the reforms that he wants. border security is really part of the economic security. i will not go to the foreign policy side but the president has made significant reforms in our foreign policy that i believe are working and that is essential to great discussion as you might guess. and is a strong pro-life and i am to that is part of the discussion but absolutely the
economy will be central, it always is and should be. we are proud of our record and i'm sure he will be quite happy. he is a growth president. to put the final leg on marine one and doing the growth routine growth growth growth. the executive order that is a remarkable thing that we're trying to narrow it down and if the basin was a country it would be the fifth or sixth largest gas or oil producer.
but the price of that gas is close to zero it produces so much to have access they have to burn and flare to get rid of it. that is no good but they do that because there is no pipeline for passage. if you go south to the goals that we need to tie it to the east coast and the northeast so they don't have to buy russian gas and fuel. they're buying a lot of stuff from russia we can sell it to asia and europe and undermine russia i don't think they should be the dominant oil and gas producer in europe. that is it necessary. we are highly competitive so we are making some deregulatory changes and rolling back with our regulations that is incredibly
important to the growth of the economy across the board. and the pipeline initiative and those refineries that go with i it, we want a more reasonable regulatory structure to allow us to bring much cheaper fuel to key parts of the country like the mid-atlantic and new england and also to europe. this is really big stuff. with this regulatory stuff i want to go back because you asked me earlier about the economy the small business explosion of net new business formations i believe was a direct result of the regulatory rollback. i saw this during the reagan
years. if you make it easier, it is paperwork i'm not against regulations but im with extreme regulations with men and women of all stripes and races exploding the new business that has a lot to do with the regulatory rollback but that pipeline yesterday in texas was wonderful i love that. hardhats. metal constructs. i am a city boy so i love to watch that. it was great but i can't walk we will do that later. >> we have run out of time. thank you for joining us please thanks to director