>>> THE LAST TWO YEARS, WE'VE
EMBARKED ON AN UNPRECEDENTED
ECONOMIC REVIRAL, UNPRECEDENTED.
AMERICA IS NOW THE HOTTEST
ECONOMY ANYWHERE ON THE PLANET
EARTH.
THERE'S NOBODY CLOSE.
PAUL: THAT WAS PRESIDENT TRUMP
THURSDAY NIGHT, TOUTING THE
STRENGTH OF THE U.S. ECONOMY AT
A RALLY IN GRAND RAPIDS,
MICHIGAN.
THE PRESIDENT HOPING TO MAKE HIS
ECONOMIC RECORD A CORNERSTONE OF
THE RE-ELECTION CAMPAIGN BUT ARE
THERE SIGNS OF A SLOWDOWN
HEADING INTO 2020.
LET'S ASK LARRY KUDLOW, THE
CHAIRMAN OF THE NATIONAL
ECONOMIC COUNCIL.
WELCOME.
WE KNOW THE ECONOMY IS SLOWING,
FOURTH QUARTER REVISED DOWN TO
2.2 FROM 2.6.
HOW DO YOU EXPLAIN WHAT'S GOING
ON?
>> YOU KNOW, IT'S TRICKY
BUSINESS RIGHT NOW ON THE DATA.
BECAUSE FIRST OF ALL, YOU ALWAYS
HAVE LOUSY SEASONAL ADJUSTMENTS
IN WINTERTIME.
COMMERCE DEPARTMENT, I WISH THEY
WOULD GET THEIR ACT TOGETHER.
YOU DID HAVE A GOVERNMENT
SHUTDOWN WHICH DID IMPACT SOME
OF THE NUMBERS.
BUT, BUT, BUT, BUT, LET ME SAY,
INSIDE THAT REPORT CAP GOODS,
BUSINESS INVESTMENT SPENDING
LOOKED GOOD.
THAT'S A KEYSTONE OF OUR LOWER
TAX RATES AND DEREGULATION,
CONTINUES TO PAY OFF, CAP EX,
PRODUCTIVITY, JOBS AND WAGES,
THAT'S THE STRONGEST PART OF THE
STORY.
ALL THAT HE
ALL THAT CE
ALL THAT CREATES PLENTY OF
INCOME.
SO I THINK WE'RE GOING TO GET
ALL THAT BACK AND THEN SOME ONCE
WE GET INTO THE SECOND QUARTER.
WE'VE GOT TO GET THROUGH THE
FIRST QUARTER.
HISTORICALLY, THE FIRST QUARTER
IS ALWAYS THE LOW BALL QUARTER.
I CAN'T HELP IT IF THE COMMERCE
DEPARTMENT, MAYBE THEY SHOULD DO
CONDOMINIUMS THERE INSTEAD OF
THE ECONOMIC ANALYSIS.
PAUL: COME ON, SO YOU'RE GOING
TO SEE A LOW NUMBER IN THE FIRST
QUARTER.
BUT HERE'S ANOTHER SIGNAL, IT'S
THE BOND MARKET.
OKAY.
AND NOW THE 10 YEAR I THINK IS
-- 10 YEAR TREASURY IS LOWER
THAN THE FED FUNDS RATE.
THAT'S TELLING US SOMETHING.
WHAT IS IT TELLING US, IF NOT
RECESSION?
>> I DON'T KNOW IF IT TELLS US
-- IT IS A WARNING, NO QUESTION.
SECOND POINT, I THINK IT TELLS
US THE FED IS PROBABLY TOO TIGHT
IN ITS POLICY.
PAUL: REALLY?
CUT AGAIN?
>> YOU ASKED MY VIEW.
I WOULD SAY THAT MY VIEW IS
COINCIDING WITH PRESIDENT
TRUMP'S VIEW ON THIS.
I THINK MARKET PEOPLE, YOU SEE
IT EVERYWHERE NOW, BELIEVE THAT
THEIR ACTIONS IN THE FOURTH
QUARTER WERE MUCH TOO STRINGENT.
THAT'S WHAT IT'S TELLING US.
I SPEAK TO FED PEOPLE, OF
COURSE.
THEY BELIEVE THAT THAT'S
SOMETHING THEY HAVE TO WATCH
VERY CAREFULLY.
PAUL: YOU COULD SEE, YOU THINK,
ACTUALLY A 25 BASIS POINT CUT
HERE COMING UP?
YOU WOULD NOT BE SURPRISED IF
YOU SAW THAT?
>> I DO
>> D DO
>> DONO
>> DON'T KNOW THE TIMING OF IT.
I'M READING IT IN THE MARKET.
I'M LOOKING AT THE FED FUNDS
FUTURES MARKET, COMMODITY
MARKET, TIPS MARKET, WOULDN'T
SURPRISE ME.
TO TELL YOU THE TRUTH, PROBABLY
MAKE ME QUITE HAPPY.
PAUL: ALL RIGHT.
SO WE ALSO HAVE PROBLEMS
OVERSEAS.
EUROPE IS NOT DOING WELL.
ITALY MAYBE ALREADY IN
RECESSION, MAYBE GERMANY TOO.
AND OF COURSE THE BREXIT WOES
AND CHINA HAS SLOWED
CONSIDERABLY.
HOW MUCH IS THAT GOING TO WASH
UP INTO U.S. GROWTH?
>> LOOK, IT AFFECTS US, THERE'S
NO QUESTION.
BUT YOU CAN OVER-PLAY THAT CARD
TOO.
I MEAN, OUR INCENTIVE STRUCTURE
WITH LOWER TAXES AND REGULATIONS
IN ENERGY AND TRADE REFORM,
INCENTIVE STRUCTURE IS IN VERY
GOOD SHAPE.
THE PRESIDENT IS REBUILDING THE
ECONOMY.
SO I DON'T DENY THAT THESE
OVERSEAS WEAKNESSES WILL HAVE AN
IMPACT.
BUT YOU KNOW, ON THE TRADE
BASIS, IT'S REALLY NOT A LARGE
PART OF GDP.
WE'RE A HOME-GROWN ECONOMY.
WE'RE THE STRONGEST ECONOMY IN
THE WORLD.
AS THE CLIP SAID.
THE PRESIDENT IS STILL BRAGGING
ON THE ECONOMY.
HE'S RIGHT TO DO SO.
MONEY IS POURING INTO THE UNITED
STATES FOR DIRECT INVESTMENT
WHICH IS WHAT WE REALLY WANT IN
AUTOS AND MANUFACTURING AND
WHATNOT.
SO I'M NOT GOING TO DENY THE
OVERSEAS WEAKNESS, BUT I DON'T
WANT TO OVER-PLAY THAT CARD
EITHER.
I DON'T SEE ANY REASON WHY WE
CAN'T GET BACK TO A 3% GROWTH
PATH BY THE SPRING.
PAUL: .
OKAY.
THE ONE REASON I WOULD SUGGEST
MAYBE WE WOULDN'T WOULD BE TRADE
AND WE'VE GOT THESE TARIFFS THAT
ARE ON THE ECONOMY, ON IMPORTS,
AND WE ALSO HAVE RETALIATION
THAT'S HITTING THE FARM BELT IN
PARTICULAR AS YOU HE
PARTICULAR AS YOU KE
PARTICULAR AS YOU KNOW.
HOW CLOSE ARE WE TO A CHINA
TRADE DEAL THAT WOULD RELEASE
SOME OF THIS UNCERTAINTY?
>> WELL, THE EARLY REPORTS FROM
THE LIGHTHIZER MNUCHIN TRIP,
THEY'RE ON THE PLANE BACK, SO I
HAVEN'T TALKED TO THEM, MORE
PROGRESS WAS MADE.
THAT'S BEEN A PRETTY STEADY
DRUMBEAT, MORE PROGRESS IS BEING
MADE.
PAUL: IS IT TRUE THAT 70, 80%
OF THIS THING IS ALREADY WRITTEN
AND YOU'RE WAITING FOR THE
TOUGHEST END GAME HERE?
>> WE'RE COMING DOWN TO THE
FINAL STROKES.
I WANT TO TRY TO MAKE A POINT.
I HAVEN'T REALLY BEEN SUCCESSFUL
ABOUT MAKING THIS POINT TO THE
MEDIA.
I'M GOING TO TRY YOU.
[ LAUGHTER ]
>> THE DEAL AS THE PRESIDENT HAS
SAID HAS TO BE A GREAT DEAL FOR
THE UNITED STATES, STRUCTURALLY,
I.P. PROTECTIONS.
PAUL: TAKE ON THE TOUGH ISSUES.
>> TRANSFER OF TECHNOLOGY,
OWNERSHIP, CYBER HACKING, ET
CETERA, ET CETERA, AND
ENFORCEMENT ALONG WITH THE
COMMODITY PURCHASES AND SO
FORTH.
LOOK, IT'S NOT TIME SENSITIVE.
IT'S NEVER BEEN TIME SENSITIVE.
NOW, YOU I'VE BEEN SAYING THAT,
HOWEVER UNSUCCESSFULLY, FOR THE
PAST WEEK.
YOU'RE AN EXCEPTION TO THE RULE
REGARDING THE MEDIA.
[ LAUGHTER ]
PAUL: LARRY, MY VIEW, IT IS
TIME SENSITIVE BECAUSE THE
ECONOMY NEEDS THIS UNCERTAINTY
LIFTED OFF ITS SHOULDERS.
>> WE WILL HAVE TO HAVE A GREAT
DEAL FOR THIS TO WORK AND IF
THAT TAKES A LITTLE LONGER, IT
WILL TAKE A LITTLE LONGER.
I HAVE SPOKEN TO AMBASSADOR
LIGHTHIZER ON THIS MANY TIMES.
FEDERAL RESERVE IS
DATA-DEPENDENT.
THE CHINA DEAL IS NOT
TIME-DEPENDENT.
FOR ANOTHER FEW WEEKS, I WAS
QUOTED AS SAYING A FEW WEEKS OR
A MONTH, I DON'T KNOW.
I'M JUST SAYING IT'S GOT TO BE
THE RIGHT DEAL AND, LOOK, YOU
KNOW THE ENFORCEMENT ASPECTS OF
THIS ARE CRUCIAL AND WE HAVE A
VERY GOOD MULTITIERED P
ENFORCEMENT PLAN.
IT WILL BE BACKED UP BY TARIFFS
AND WE BELIEVE IF COMPLAINTS ARE
REGISTERED AND WE ACCEPT THEM,
WE WILL USE TARIFFS AND CHINA
CANNOT RETALIATE.
THAT SHOULD FIX THE COMPLAINT.
PAUL: IT WILL BE FASCINATING.
>> THE IF
>> IHE IF
>> IFE IF
>> IF TIF
>> IF THESE THINGS TAKE MORE
DAYS, A WEEK OR A MONTH, SO BE
IT.
IT COULD BE THE MOST HISTORIC
IMPORTANT PRO-GROWTH TRADE DEAL.
WE HAVE TO GET IT RIGHT AND BE
PATIENT.
WE HAVE TO BE PATIENT.
PAUL: WE'RE GOING TO BE PATIENT
BY NECESSITY.
ONE THING WE'RE NOT IMPATIENT
ABOUT, BUT WHEN ARE YOU GOING TO
LIFT THE STEEL TARIFFS ON MEXICO
AND CANADA.
YOU PROMISED TO DO IT IF WE GOT
A NEW NAFTA.
YOU STILL HAVE THEM TIED ON.
>> TIED UP WITH THE USMCA VOTE
IN CONGRESS WHICH I THINK THE
OUTLOOK THERE IS PRETTY GOOD.
AGAIN, I DON'T KNOW THE TIMING
OF.
SPEAKER PELOSI'S BEEN VERY GOOD
TO LIGHTHIZER, SHE'S GIVEN HIM
COMPLETE ACCESS TO THE
DEMOCRATIC SIDE.
HE'S TALKING TO CANADA AND
MEXICO.
HE WANTS TO SHIFT THIS AWAY FROM
TARIFFS AND TOWARDS SOME SORT OF
QUOTA SYSTEM.
HE'S GAINING ON IT.
IT'S NOT EASY.
WE'RE WORKING HARD ON IT.
I'M GOING TO PLAY THAT FROM THE
OPTIMISTIC SIDE ALSO.
YOU KNOW, FOR THE ADMINISTRATION
--
PAUL: WE'VE GOT TO GO.
>> HIGHLY PROTECTIONIST AND SO
FORTH, WE'RE CLOSE TO A MAJOR
DEAL WITH NORTH AMERICA AND
CHINA AND WE'RE TALKING TO JAPAN
AND WE'RE TALKING TO EUROPE,
SIR.