tv Kevin Hassett at Christian Science Monitor Breakfast CSPAN May 3, 2018 10:00am-11:02am EDT
i believe in turn limits for governors and for me the role of politics is a short-term deal. my wife and i have a cattle ranch and we are looking forward to the next chapter of getting back to the cattle ranch and enjoying time with each other and are two amazing kids. >> matthew mead is the second term governor of the state of wyoming. .e joins us thank you for your time, sir. >> we also want to thank our cable partners in cheyenne, that is spectrum. stay tuned for our next stop on the capitals tour, lincoln, nebraska. of our previous interviews on the c-span 50 capitals tour or a schedule of stops, visit our c-span community page. that will do it for the washington journal today. we will see you back here
tomorrow morning at 7:00 a.m. eastern, 4:00 a.m. pacific. have a great thursday. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org] [captions copyright national cable satellite corp. 2015] coming up, a conversation with agricultural economists on the 2018 farm bill and proposals to change subsidy programs. from the american enterprise institute of 11:00 eastern. a briefing from the nasa administrator on the space agency's mission to mars which is scheduled to launch on saturday. the briefing coming of the 4:00 p.m. eastern live on c-span.
on c-span this week in primetime, tonight at 8:00 eastern, a look at how the criminal justice system handles people suffering from mental illness. >> since 1980, the number of people going to jail has tripled and their sentences of increased by 166%. as you peel back the onion, you try to figure out what has happened. what you will find as most of this is due to untreated mental illness and substance use disorders. >> this week in primetime on c-span. >> next, president trump's talk economic advisor -- president trump's top economic advisor talks about the bill he signed last year in the u.s. economy. a spoke and took questions of breakfast hosted by the christian science monitor. this is one hour.
>> i think it is now 8:30 so we will start. i am linda feldman, the washington bureau chief of the christian science monitor. our guest today is kevin hassett, chairman of the white house council of economic advisers. this is his first appearance at a monitor breakfast, so welcome. first it will do background. nativeurs truly, he is a of the great commonwealth of massachusetts. he comes in greenfield. >> and i did not get the vote of either of my home state senators. >> that is terrible. he is a graduate of westport college and earned his phd in economics from the university of pennsylvania. before the senate confirmation last september to his current
post, he was a resident scholar at the american enterprise institute in washington. he was also professor at columbia university, worked at the federal reserve board of governors and served as economic adviser to three presidential candidates, george w. bush, john mccain and mitt romney. his current job is the first in the white house. now the ground rules. we are on the record here, so please know live blogging or tweeting. no filing of any kind while the -- is underway. we will in no pictures from this breakfast to all the reporters here as soon as the session and. as you know, i think some of your first-timers, most of you know if you would like to ask a question, please send me a signal and i will call on as many of you as time permits and chairman hastert -- hassett. >> what an honor it is to be
here at this very well-known breakfast. i'm not sure how long the breakfast has been a washington institution. 52 years. it has been institution since 1908. >> very good. the thing that sticks out about it is there is a prayer and that often it's a nice way to start the morning. but it's got unusual level of civility that i've noticed over the years. they impose old-fashioned standards. i am not calling for civility today. you guys can be and is aggressive -- as aggressive as you like. this makes it a special honor to be here. i have an additional ground rule which i apologize about and it is something i should have noticed on the schedule.
it is the law that the white house is not allowed to comment on today's data until 9:30. so there are a couple of releases that came out at 8:30 and i am not allowed to discuss them. so you might notice there been a few cases where someone accidentally did that and then got in a lot of trouble. if you have specific questions about the advanced journals see me afterwards. here.ef of staff is questions, follow-up i would be happy to talk to anyone after this morning and to arrange that. shout out to dj. with that i will open it up, i think that will way more
interesting than me speaking. >> i will start with a few softball questions and we will move to reporters around the world -- around the room. if you want to ask a question, please raise your hand. all, the congressional budget office is projected next year's deficit is a most $1 trillion. do you believe there are any negative effects of these deficits or your ok with this? >> i think the academic literature is clear that long-run growth is impeded by higher deficits and that these .ffects are nonlinear that leads to slower growth. the literature as another result in pretty convinced of that makes great intuitive sense, government spending as a share of ddb is a big negative for
long-term growth as well. in the end long-run growth comes from innovation. if you have 50% of the gdp devoted to government spending, that's 50% double not have a lot of innovation. not going to have a lot of innovation. i think the literature -- what it means, you can say it is a risk as one downside risk. it is also an opportunity because countries around the world that it had unsustainable trajectories who have engaged in fiscal consolidation have tended to see growth surge from that. with all the progress we've made with deregulation and taxes, i think in the medium-term, fiscal
consolidation could be a positive as well. >> ok. i will throw in one margaret if deficits continue to increase despite faster economic growth, would you suggest revisiting the president's pledge not to address major changes to mandatory spending programs? > >> i think of we look at the economics, i disagree with the letter that was signed by some ormy formerolleague chairman in the past. i think most of the deficit problem in the long run is entitlements and in the paper that matt jensen and i wrote ago, weout a few years
-- fiscal consolidation is a country that has a deficit situation out of control and are trying to do something about it. countries generally adopt those go approaches. paymenthey divided the 5050 where they would have tax increases and spending cuts and those another bunch that tended to be mostly spending cuts. what matt and i found was the --ntries that accomplished achieve their own objectives. the countries that use the 50-50 approach did not achieve their objective. whenpeculation was that , andncrease tax revenues either gives a release valve to
fiscal decisions in the future and politicians tend to spend money that they have. if you make difficult choices to spending, you can have consolidation that works. alberto at harvard university has done some work on this. my job is not to give anyone political advice, but to be a , twoit to the literature people in the white house. >> how often do you talk to the president? >> i'm not supposed to talk about that. i've spoken to him many times and i very much enjoy doing so. he really likes to be in the where there are a lot of different points of view. ca is the i think the referee. our job is to provide objective analysis.
often, if not always -- there is even -- there was even one occasion weather was a meeting going on and they called me over and the president told everybody in the room to shut up and don't talk to kevin before he asked the question. clearly there was some dispute going on and they were hoping that i would come over and just tell them. role.k that the primary 50are a staff of about people with different backgrounds, probably three quarters of them i don't know the political party. know whate want to happens when we do this or that, we give them the estimate of the
economic literature. -- jonathan from the new jersey star-ledger. you might get a new jersey question. report talkson about that most middle-class households will not be up to claim the state and local tax reduction anymore because they cap to them. some states including new jersey and new york are trying to find ways around the cap why setting up terrible funds. would-be drug administration opposes effort? -- setting up charity funds. would the trump adminion
oppose those efforts? one of the first laws about taxes the government should try to avoid favoring one state over another. suppose we have to raise some money for an army to protect ourselves and we will do it with applesshould we tax only or apples and oranges of the same rate? everybody into a lee says let's tax them both -- everyone says let's tax them both. i think the basic principle if you're trying to raise a given with a tax isnue not do it in a way that what favors one state over another.
so in the previous code what we did is because the state and local production was more valuable for people from some statesman from others, then in some sense the federal government was taking money from a resident of mississippi and giving it to a resident of connecticut to compensate the connecticut person for the fact that they had potentially luxurious or inefficient government. i think the theory is getting government out of the way is pretty sound and i know it's putting pressure on states that in the past have had pretty inefficient and high taxes. if you are a state with really high income, if you're a town with an -- a high income in the people have lots of leisure time and they want to invest in expensive parks, that is not an inefficiency, it's a choice they make. a poor town wouldn't have the
money for the jungle gyms. so we don't think we should take money from the poor town and give it to the fancy village and so we support that part of the code. i've seen some legal attempts to relabel things and i think everybody believes in the economics of the analysis i just and i guess ifm there is something the clever lawyers came up with that made it so the code once again plays favorites, that we would support a. -- that they would support it. wondering if you could give us a general update on phase two of the tax reform timeline and the making permanent individual tax cuts. >> i gave a talk at the new york fed which i would be happy to gmail to anyone who wants to see a geeky economics lecture.
we just went over the -- everything that has been forecast, the the outlook for the u.s.. how ipretty stunning think the average outlook now -- andg the imf and oh we also have wall street firms, those average forecast of all gone up around 3%. which they were saying during the tax debatably pass the tax bill we can probably get around 3%. look, most everybody is looking ahead is saying you you're going to get growth like that. we think it is not just serendipitous, it is completely sensible the growth would go up about that much because of the tax bill.
and again without referencing ratings,urable goods , the fourthat q4 quarter had capital spending enhance 11% so really is a spiting capital spending and our models predicted a spike around that scale because the technical type, depending on which you are looking at was dropping 10 to 15%. we expected the level of that would rise about one per one. there was about a 10% to 50% increase in capital spending. we expect that will sort of continuing to this year. if it does, ite ended september and the growth comes in about what we said,
then if people think back to the fact that when the president took office, that the storyline was we are stuck in 1% growth land forever, then relatively quickly was a few changes in policy we are able to move people to a better place and a better place with a pattern consistent with our models that they how should that happen. it's precisely the things we said we would go up. evidence, i kind of would hope people on a bipartisan basis would say how could we move next to make our country better off and there would be a second. that wouldarget of be to make those that expire permanent. >> so last week at the imf banks meetings, christine cited record
high public debt as one of her biggest concerns, is that something to cause you to rethink or how does that factor in? >> the public debt goes back to my fiscal consolidation point. the public debt being high is something that economists unanimously agree is a downside risk for growth. and that it is also an upside opportunity because if you have a smart fiscal consolidation you can get ahead of the curve on that. and increase growth significantly. some places a literature think you can add as much as a percent of expected growth in the medium-term with smart consolidation. the politics of how that might work is outside of my range. in terms of how the models work whathat they say, i think
i said will be the best characterization. >> jerry from the buffalo news. >> another question about state and local tax reduction. governor cuomo from new york has said for months now that curtailing the deduction could devastate the state economy, high income people could leave the state and that it is a real blow to new york half economy. is inour point of view the commonest, is the governor exaggerating and why or why not to mark >> the question is does the state and local deduction destroy the new york economy? hypothesis which is empirically relevant to the governor is unable to make policy changes. have a policy change in response to this, like cutting government spending in making government more efficient
, then whatever impact our models on the state local deductions would not be there. if we impose the tax on thing is goinghe to change a lot because of the tax, then you can expect that or ao cause a lot of harm lot of deadweight loss or distortion. if you're taxing something that isn't really a elastic, then you don't -- if you think of the state and peopleroblem, we've got and you know what property taxes look like in new york, it is a very high taxed place. you have people in those places that the question is what are they going to change and for moderate and low income people
it won't really affect them because they will be taking the standard induction. for higher income people, maybe some will move. right now mobility as of the lowest it's been its modern times. you will see a big spiting people moving out of the state's summit will be inconsistent with the latest data. and in the most likely outcome is high income people will be affected by this mostly. there will be a little bit of a tax break because their status to give it to them. that happens,s if what happens to the economy? i think if the tax affected moderate income people we would be concerned that may cause local economic problems. but for high income people, there consumption does not respond much to changes. my guess is it won't cause a calamity. >> bloomberg. >> i want to ask about the bond
markets. we are having to issue a lot more debt and treasury is seen issuing $1 trillion this year depending on how you slice of pie and that's going to cause oversupply and there are questions about global in central banks raining in extraordinary monetary policy mechanisms. i know the u.s. has a top-notch rating and is the error -- and has been reaffirmed, but is there concern for oversupply in the market and the underlying reason? is tojob as chairman respect the independence of the federal reserve and i look at their guidelines in my job is to not give them advice. chair is as the ca concerned, the bond market is always right and we have faith
in them. especially now that there are some of appointees there and more to be confirmed. ectdote. the level of camaraderie between former chairs is very high. you can call somebody up and i because irmer chair was at an event last weekend about you are saying we are going to have -- this year, where's the growth going to come from because we are at full employment. as an academic i wonder by the labor models and how useful they are and speculated maybe it was lower than you think. i think it was a bloomberg news
story or someone wrote a new story about the event. -- that i was attacking the fed. my former chair friend told me one of the things run not allowed to talk about is nehru. you have to respect the independence of the fed. >> jim from the los angeles times. >> all the estimates are it is going to be lower -- significantly lower than what we have in the fourth quarter. how can that be with the stimulus of the tax cut and what does that bode for the rest of the year? >> i look for reducing the number.
there's a standard error in the number and it's pretty darn high. so it's important not to overreact to the first one because the final one could be a percent different. there are some special factors affecting the first quarter i am looking to see how they end up affecting the bottom line number. one of them is that because of the tax bill being retroactive to september and it was retroactive to september effectively in the house bill which passed right at the beginning of the quarter. then there was this period with an unusually strong tax incentive to locate your capital spending in the fourth quarter. i talked about the capital spending jumping a lot in the fourth quarter in the reason is you got to expense at a higher tax rate. the deduction of
35% instead of 21%, that is pretty attractive. i think it was a lot of moving stuff for the first quarter to the fourth quarter and things like that that could put downward pressure on q1 because they loaded up into q4. andother thing we looked at probably the agency i respect the most until someone can give me a counterexample is the bureau of economic analysis. they are politically unbiased, they are career professionals, they know the data that than anybody. if you question, there was danger calls and explain. one of the things i've seen in the gdp data lately which you can make a chart yourself of is there appears to be some residual seasonality in the first quarter. gdpou look at first quarter
, for a number of years it tends to be the lowest quarter of the year. is isy what that residual the cause of academic debate. one thing suggested i be as high as .8 and so if you saw -- i will pick a number outside the range completely. five, that would mean it's really 5.8. if you believe the residual seasonality story. with that said, when we get the details, we think we understand where the seasonality comes from and so we can look and see if those are the parts that have the patterns and it could be the number, there has been a wide ,ange of models that people use my favorite is the atlanta fed gdp now. 1.9 and they might have changed it responsive to today's
data. so imagine if that were the number, then it could be the way we think about that what that does for our outlook is nothing because of the residual seasonality. growth, use of3% close to 3% growth, the bar the president set was 3% or over, and the forecast for this year, the fed and imf are for less than 3% and going down afterwards, how do you account for that and why you think the tax bill will get us up over 3% when even in the first year it's not going to get us to 3%? >> we will see what happens this year. we think we will get to 3% this year. i think the average for the cbo and if i stayed a number and you want to write it, please double check me because i'm averaging numbers in my head. i think the average for this
year and next is 3.1. i'm just sort of remembering in my head. my new york fed lecture and on monday i went through the forecast revisions for folks all around the world and tre are lots of people that move around three. we were in a that world where we were thinking we would be stuck in the ones, that is really quite impressive. year,ended up being a 2.9 then i think it would still be a good year. >> paul from the washington examiner. having worked with sony politicians, how is trump different and how does he approach your information differently than say in the forr race, what is a chance
a dow 36,000 under trump? eight person you work with has their own style. i think the most part president trump's style is pretty similar to that of romney's. he is a little bit of romney and a little bit of mccain in many ways in the ways he runs the meetings. teaching going back to governance in graduate school, you have a lot of decisions to make and you have to make them at a high frequency. --you have to accumulate recruit experts you trust and then constructive process that you can figure stuff out and make decisions in timely fashion and an effective and accurate fashion. the person has the run style for that and president trump is really good at it.
i've seen long meetings move towards positive outcomes in front of him than in a way very similar to the kinds of things where he wouldy ask them to disagree with each other in front of them. i think that's the basic problem he is solving is the same that presence of candidates have, they get asked to have an opinion about many things and it really matters for the future of the country what the decision is so it's a very high state process where you have to gather experts and decide what to do. the equity premium right now is about 3% and so if you look at -- you should expect a real return going forward of whatever your favorite guess for the bond yield.
that is what that model is. you use the equity premium to think about what the annual return on equity says. obviously as numbers get larger, take smaller percentage changes. >> i'm going to throw one in here. talking about people disagreeing with each other, earlier this month you told the wall street journal robert white heiser has everyone's trust meeting everyone at the white house regarding -- regardless of their views on trade. getting your views on trade versus the president, how does that work in a white house with a president with such strong views on trade and then having economic advisers, chief economist larry kudlow on the other side of that? >> i don't know if we are on the other side of the question.
as an example, the 301 action on work is based in part on that the cea did estimate the cost of intellectual property theft from china. previously just , if chinaublic events wants to be the largest economy on earth, they need to act like it and respect intellectual property rules and not require people to joint venture to operate in the country and transfer their technology to the country. so the idea that everything that everybody in the trade space wants to do is hated by a subset of the team is not accurate.
we certainly have other things we debate, but in the end, i think the president's agenda, thinkade agenda and i it's interesting that that chapter is not attacked by comes lupton right. the objective of the president is a worthy one which is that we need to move towards a world where trade barriers around the world come down, not just for us, but for trading partners. if you look at asymmetries, there really destined a are really noticeable and at times disturbing. speculation is a was dangerous when i have it speculation. i've is speculation or in progress that president trump is in the process of moving us toward 21st-century trading structure that what happened like the story of the 20th century was there was a conflict
between the soviet union united date and we were are each recruiting countries to be under our umbrellas. we set up this global trading system where we unilaterally disarmed and barriers practically don't exist. and in countries joined our system and they kept their tarriffs and barriers up. it was a very -- a deal to get them to become a liberal democracy. i think now that the world is more mature, you have training partners with incomes north of hours, the idea we should tolerate that country a simmering -- asymmetry is one that i think we should revisit and i know the purpose of all the trade policy is to move
worlds a more reciprocal isre this asymmetry extensively documented. i think if you take the imf model where they estimate the impact on the u.s. global gdp of such a policy, it's a policy opportunity for improving welfare around the world. it would reduce their trade barriers, increase the global trade and make the economy more efficient. market, christian science monitor. >> in the economic report, there is quite a bit about labor participation and how to improve it. the need to improve it and that we have senator sanders and
others on the left saying let's get a job for everyone, maybe a government provided job. in the economic report it talks the work requirements. those are those go very different approaches to the problem. i wonder if you could comment on is there at least some common and some of the same solutions around whether it's job training or the opioid opportunityhere an and how much could you then that curve of declining labor participation. >> i think the curve you are referencing, virtually everybody here i think with a slightly different angle could write an interesting piece on what's happening to labor force participation right now. if you look at the chart, it was basically headed straight down
outlook inok at the previous economic reports, then it was expected that would continue and one of the reasons why we are in the new normal with low growth was that we didn't have the workforce because the labor force participation was continuing on a downward trend. i think i'm a member and the number right of the obama administration's estimate of that dropping for 10th a year. i apologize to them if i don't. now it is even heading up. and the chart is really quite striking and i think that's because the stronger economy, the tight labor market and we are increasing wage growth, that is attracting people back to labor force. and that news is spreading. and so i know we are on a couple of tv shows right now, but i'm sure there are people viewing
who got discouraged applying for jobs because the cap applying for jobs and not getting a job. you can decide i'm going to stop doing that because it is such an emotional strain. you should try again right now. labor markets are tight and it has been an enormous amount of success for people attach the labor force. i think the sanders people are right and that's an important objective and policy. hadink the great recession some policies that separated people from the labor force in a way that did not make much sense. i think the unemployment insurance extension made people long-term unemployed that are hard to reattached. i think the affordable care act raise the margin. i think it did a lot of stuff to drive it down. we are reversing it now and it's clear that it will continue. time weful that by the write a report and release the
next february that we will have a significantly more optimistic forecast for labor force participation then he had in this economic reform. whatever you're suggesting some and will break off from the trend, that somewhat of a risky forecast. it seems like that's in the data. , theast thing about that increase of labor force participation makes digesting the wage data a little bit challenging for economists. join thehen people workforce after being out for a while, they tend to be low-wage people. because they have to re-skill before their wages can grow again. when you look at average wave -- wage measures. you're averaging over a different sample and that includes low-wage people. so that's where thing about the wager back of the tax bill we so wetching that closely are keeping track of what's happening to the median person. >> we have 20 minutes to go and
i think of got eight or nine people. so the gentleman in the glasses, i don't know your name. what about capital gains with respect to inflation? there is been speculation about the larry kudlow, how big a priority should this be at all and should be executed by a regularly reaction rather than full-blown legislation? >> i have not participated in discussions on the matter so i'm not informed. if there is something cooking or not, i can't say. there are a lot of things going on in government and now be something happening at treasury. >> what about your views than more generally on the capital gains tax?
indexing capital gains for inflation is a worthy idea. it's probably not nearly the big deal now that it was back when inflation was a big number. but taxes supposed to be unreal income, then you should index capital gains for inflation. and it's not uncommon around the world to do so. u.s. hade told me the decided they figured out a way to do that, i would not think that's a negative. it would be a positive. from inside u.s. trade. >> i was asking about trade. i think there is a lot of concern about the trade policy both on capitol hill and the business community. effectsy the downstream like the steel and aluminum
tariffs as well as potential retaliation from china and other countries and also a general uncertainty with the negotiation and groups have said this potentially undo some of the benefits of the tax reform and growth you've talked about. do you share that assessment that these trade actions that undermine some other growth of fact? >> there are a lot of negotiations and discussions underway. joined't until i government and someone explain to me that discussions and negotiations are different. so discussions and negotiations are underway. i can't comment on those. i think it is underappreciated that the global effects of barriers around the world coming down to the u.s. level would be really quite positive. and if you're only thinking about the worst thing that can happen, you're not accurately balancing the risks. >> the president has talked a couple times about getting back into tpp, recently as a couple
of weeks ago. share -- you think the u.s. should get back in? >> that the issue for the ambassador. i can say about trade now is a global issue outside of the question, i was on a plant death panel along time ago, i think it was a mccain adviser. andere talking about trade as he often does, he said something really brilliant about the role of the economist in the trade debate. because he said if an economist wrote a new trade deal, it would be one sentence. it would say free-trade. but the trade deals have thousands of lines written by lawyers. and so when we as economists talk about trade, we talk about what trade looks like in our model and that can be interesting or academic purposes, but when you are thinking about what we should do with a deal, you have to
remember the deal has thousands of pages. being humblen about his ability to assess. think when you ask me about a trade deal, the are so many things going on. the negotiators are really confident. he is really good at this and mindful of economics. i talk with him all the time. and i've aate on it great deal of competency can deliver what the president wants which is better trade deals. i want to take you back your answer but when the first questions when you were asked about phase two of tax cuts. in your answer you talked about
the wisdom of the second bite of the apple but i don't think you answer the question about the timetable and along those lines, is there any sense of the about getting that done while republican still control the house? i have only a little more -- than he does. that is not just in my lane to discuss or assigned timetables. i think a second bite could make sense, making things permanent could make sense. exactly when it happens, i'm not sure. andof mark's top priorities i would encourage you do think about and write about is we have all these nominees whose confirmations are being held up and it is really unacceptable to those of us working in government that very often when we wander over into an area where we have an important topic
there are all these political appointees who have not been confirmed and have been in the process for more than a year. we look forward to the legislative calendar, we are extremely hopeful the senate will get around to can arming people. we have about 100 -- two confirming people. i am not the person who set the schedule and i know the president thinks it's a good idea and would celebrate it happening. but whether that can be done given the limited number of days available to the senate is of the mitch mcconnell. >> jeff mason from reuters. >> good to see you. , what about infrastructure? is that something you are advising the president and his team to push this year and what kind of an economic impact will that have?
on the trade issue, have you put together numbers or advise the president or anyone else in the white house about the economic impact of a trade war. if some of these issues are not resolve with regard to terrorists -- tariffs? >> we have a whole chapter on infrastructure in the economic report. i think there is a lot of really interesting food for thought or the question of everybody is dring aund in electric car, how ely is the gas tax paying to fix the bottles? -- potholes? ,he infrastructure team including paul worthington, did a fantastic job going through the infrastructure policy and thinking about how relates to
economic growth. i think we could get a 10th or two out of economic growth for a good long time out of infrastructure, smart infrastructure spending. the president's approach is really sound. , one big billtion is something everybody hoped for and it might still happen. our infrastructure plans are so detailed and nuanced that i think one could expect infrastructure components every time it's possible until he big bill comes. it's important to the president. is of the biggest obstacles the attraction of private capital into the infrastructure space is the government uncertainty. introduced by the fact that nine cabinet agencies have to say it's ok before you do a project.
we haven't found out which one, but i've been in meetings where people say there is one object waiting approval that was submitted in the 30's. i have to find that project, maybe it's not true. tore are things we can do get the permit delays down, to give project a concierge and a lead agency to make sure the others are cooperating, you want to protect and dangerous species and all that but you need to make the decision in a timely fashion. if you get the permit black down to two years, all of a sudden private capital would come in and be a force multiplier for government. agrees therybody infrastructure in the u.s. needs a lot of work, it is not up to international standards, it is causing economic harm with congestion and other things. it's on the we need to focus on. if we don't get a big bill, we will put part of our plan in
every bill we can. i think we should watch for that. >> second question. >> it was the trade war. so the trade team is in and they areations doing that because they are hopeful they can reach agreements that are good for our trading partners and for us ourselves. intent ofat is the everybody is to get good trade deals and move us towards a better place we described. >> the forecast for the scenario in which that -- have you put together forecasts for a scenario which that does not happen? >> we have two different the things we make public in the things we provide to the executive as an internal document and internal documents
are privileged and of not allowed to discuss them. white house counsel has coached us on when we can talk having -- talk about things and when we can't. >> just a follow-up. are you concerned about the impact of the trade war on long-term economic growth and could we as a country sustain a 3% economic growth with a real trade war with china? are those two things compatible? >> i think trade is an upside opportunity. trraiffs.25% -- tarriffs.
they require people looking for the market to joint venture and that slows the activity between our countries that's detrimental. areink the objectives sometimes lost as people think about what is the worst thing that could possibly happen. the objectives are were the ones and their discussions going on. hopeful that we will reach a positive outcome. >> have you made any projections about the impact if the u.s. were to pull out of nafta or what a renegotiated nafta might have? >> that's another one. harriet from the wall street journal. a question about tax reform. earlier this year was the first time people started to see more money coming into the bank ounce
and yet consumer spending has been rather weak in the first quarter. i wanted to ask about that and if you have any concerns about whether tax reform is giving people into just to spend, you mentioned businesses earlier. you said you were wondering about nehru models and i wanted to wonder if you could go into detail about that? >> that's a thing i'm not supposed to talk about according to my friend who was a ca chair. -- cea chair. let me start with the consumer. so consumer spending in the first quarter after a blowout fourth-quarter is a positive for gdp and we will find out tomorrow how positive. if you look at the retail sales
data and retail control, it suggests it has gone down a little bit from the fourth quarter which is one reason why the atlanta fed gdp now is in the lower choose. -- lower two's. consumer spending is projected by everyone to be pretty high this year and pretty healthy. that would be consistent with other data we see. we expect income will rise sharper which will support consumer expanding. just consumer spending. -- will support consumer spending. i think probably the main driving force is there was so much consumption in the second half of last year that people were looking at their savings account and rebalancing a bit.
inhholding was only change february and the wage of facts, there are all these bonuses. presumably they will spend those over the coming months. -- my guess isy we'll start to see it in march and we are even having this old timers versus youngsters assessment of this at the cea because i can remember when i got my first job and my first check and i was scrutinizing every line saying why did they take this much social security and however many gets direct deposit and they are not necessarily scrutinizing their checks right away so it could be the eyeball demonstration of fact of withholding changes has changed over time because people are not necessarily checking there to direct deposit receipt to see how it changed. there is speculation the extra money might take a little longer
people to turn into consumption. so i expect that march or april is when we see those. >> since you can't talk about can i talk about labor force participation. one of the instant fact about the u.s. is it's pretty much the only western bigger economy where female labor force participation is in decline for about the past 20 years. what you think is going on there? >> i would have to get back to you on that. that would really just be speculation. economist who is our chief mastic economist who knows everything about that. if you want to read a piece about that i would be happy to set up a call with the real us to what we know about that. the gentleman to your right. my question was about fiscal
consolidation and you mentioned you would look at the record and saw a preference for spending cuts over a combination spending cuts and tax increases. my question is looking forward could you talk to that menu of options? : now i amett referencing my paper before i joined the white house and not speaking to the white house policy. problem,s., the problem, ithat drivenike an entitlement problem. although the high debt is also a problem because if interest rates were to go back to normal,
that contributes as well. so i think getting ahead of the curve on that would require getting ahead of the curve of all spending. if you didn't make progress on entitlements that he wouldn't be able to solve the problem. timeframe, canar you make a dent? hassett: as an economist and we accept that it is entitled based, the important thing is that you give people against a successful reform. they didn't change much for 20 years. they give people 20 years notice they increased the retirement age, think like that. the reason you do that is because you are a pretty young fellow and if we did anything
that would affect your retirement, we should give you plenty of time to adjust your saving pattern so you still have the healthy retirement to deserve. economists from that issue, it is clear. the long-run budget deficit and it is clear that moving earlier is better than moving later that it isn't clear that it affects retirees. it is more giving people a chance to play and to minimize the effect. >> you have survived your hour. comingou very much for and i hope you will join us again. course, thank of you. now at the alive american enterprise institute in washington.