The u. S. And the consumer at times. And did somebody say recession . Let us talk about these issues with larry kudlow. Please welcome them. [applause] hello, larry. Please take a seat and make yourself comfortable. Let us jump right into it as we have a lot of news this morning. They pelosi Just Announced democrats and administration have reached an agreement on the deal. Exicocanada how good is this for the rest of us . For the u. S. Economy . Will this make a difference . And is it any better than nafta . Mr. Kudlow i think it is better than nafta. I think it is broader than nafta. It updates nafta. Particularly in some important new economy ways. The way this was designed by ambassador like kaiser ambassador robert lighthizer, in a bipartisan sense, you have domestic content and labor issues which have been resolved. You also have new economy issues in particular intellectual Property Rights which have never been put in one of these trade agreements before. I think financial and Digital Services also. They will make a big difference and i think you will get a lot of investments you might not have had. I pulled out some of the estimates from the International Trade commission. The itc. I know this is very imperfect and they acknowledge it is imperfect but a lot of people were quoting numbers from the itc. Lower numbers. But actually, they gave wide ranges on the impact on the u. S. Economy. I just wanted to put that out there. Like on jobs, the range was when it is 76 up to 589,000 jobs and that is a big range. It does reflect uncertainties about better investment and better risktaking. That is a gigantic number. And similarly on gdp. Real gdp there was a very wide range of 35 basis points on 1. 2 . The midpoint of that was three quarters of a percent. Time, have anr increase of three quarters of a percent on real gdp on trend. 350,000 jobs per year. Those are big numbers. One other point i want to make is the currency stability provision in there that has never been done before and that is why we thought this was a template of a trade agreement. The Economic Growth impact of nafta or usmca is very substantial. Worker defense, domestic content, very substantial. And new economy breakthroughs are very substantial. Really, this is our big trade partner. I know china is a sexier topic. The reality is, total trade with canada and mexico is basically slightly more than twice what it is with china. Could this be a template for trade agreements . Mr. Kudlow i think so. We are also in negotiations with japan. We are also in negotiations with some breakthroughs on japan. We are also in negotiations with the eu. We may be in negotiations with the United Kingdom if that works out. As a template, i must say look, i have known Bob Lighthizer for a very long time. We were both reagan first term cub scouts together. I think he is the best trade negotiator in the business. I think he has created a template. It will be a progrowth template. Lets shift to the sexier topic, as you put it. The journal reported this morning that u. S. And chinese negotiators are planning to delay tariffs on imported chinese goods. Do you want to confirm that publicly . Mr. Kudlow i cannot confirm that. It was in the journal. It must be true. Mr. Kudlow i understand. [laughter] fabulous newspaper. A couple things. I wont go into details. I will say this. The president has struck a very constructive and optimistic tone. Orticularly in the last week two in his public comments, and tweets, and so on which is a good thing. My friend Henry Kissinger returned from a week in china. He reported back. He was in the office last friday. That the chinese hierarchy had a very positive attitude toward phase one. You have the two leaders. On the other hand, i am also bound to say that President Trump first of all, there is no final and second of all, he has said if it is not satisfactory, if it is not the kind of deal he wants, then the december 15 schedule tariffs will go back into place. So there is still a possibility . Mr. Kudlow yes. I dont want to sound pessimistic. I dont want to spin that. Im just saying the reality is those tariffs are still on the table, the december 15 tariffs and the president has indicated if the short strokes remaining negotiations do not pan out to his liking, those tariffs could go back into place. They could not but they also could and there is no definitive decision on that yet. How long will it take for us to get to a phase one deal . People in the administration have said we are close but then the president said last week we could wait till after the election. Which is it . Mr. Kudlow he is giving you a wide range of options. Which i reckon is the mark of a good negotiator. I would not want to comment any further. Time driven. R been there are no arbitrary deadlines. December 15 will be a very important date. No question about that. There is a week or so to go. Other than that, in it is what it is. The president said it could go on so it could go on. If the president is happy with the outcomes that are being mnuchined by secretary and ambassador robert lighthizer, it may work. We have reported that agricultural purchases, getting china to commit to big purchases of u. S. Agricultural goods, is a sticky point. How is that going . Mr. Kudlow it is certainly a hot topic for conversation. What about chinese demand to roll back u. S. Tariffs . Mr. Kudlow i believe that is also part of the conversation. Thank you. [laughter] some people have called phase one a mini deal. How significant will it be . Arent we just going back to where we were before this . Mr. Kudlow i have not read every detail. I am part of the Principles Group but have not read every detail. The Deputies Group is meeting almost daily or nightly. Things are moving. I think a lot of these chapters on intellectual property, on Financial Services, on currencies, a lot of the chapters have come beyond where we were and they have advanced the ball beyond from where we were last spring. Before the talks broke down. I have heard you and other members of the administration defend tariffs as a tactic toward a goal of leveling the playing field. At the same time, we have heard on executive earnings calls and in interviews that the uncertainty is really making it hard for them to plan their budgets, their sourcing, their supply chain. It is not just china. We have had new tariffs announced on argentina and brazil. Mr. Kudlow no, we have not implemented them. The administration had said it would. Mr. Kudlow no decisions have been made. The topic came up. I was uncertain about that. Mr. Kudlow proposed tariffs on france. The president threatened to impose tariffs on mexico and the did not. There are many executives who say this has caused them to hold back on investments. There are many economists who say this pullback is a significant reason for the global slowdown and the u. S. Economic slowdown. How do you respond . Mr. Kudlow the u. S. Economy is in great shape and is getting better. In my judgment. After ahad a soft patch year of very, very stringent monetary tightening. Which i think is a key point. Now the fed has taken the foot off the brake and the Balance Sheet is growing again, that is a good thing. The recent job numbers have been terrific. In fact, most of the recent numbers the housing numbers. We had very good productivity numbers this morning. In fact, on the productivity side, i think a lot of economists will change their for longterm potential gdp. You are running on and a quarter basis in round numbers 1. 5 productivity and job gains so you are almost at 3 in round numbers and i think that is very positive. I think first of all america is , working. These employment numbers have exceeded almost everybodys expectations. Except mine. That was a joke. [laughter] but i would argue that america is working. I would also argue that we are seeing a worker boom. My old boss Ronald Reagan used to call takehome pay after taxes and inflation. In less than three years, it has increased, according to the Census Bureau by 500,000 for a family of four. Im not sure we will have time. Mr. Kudlow i want to put these economic numbers in because i think trade is very important and trade strategy. The u. S. Economy is doing very tax cuts, deregulation, and energy opening. And to your point, trade reform. America is working. There is a worker boom. As economists on both sides of the aisle have pointed out, from the most recent numbers, the production workers are increasing their wages faster than that. To cut youg to have off there. We do want to go to the poll question. If we can put that up. The Global Economic slowdown. While you are answering, we have one more question before we open it up for the audience. I really wanted to ask you, what are the prospects for another Trump Administration tax cut proposal before the election . We will get all the results at the end. Will the president propose another tax cut . If so, when and what are the parameters . Mr. Kudlow we are working on something called tax cuts 2. 0. We are soliciting a lot of ideas from leading house and senate members. Outside experts and people in the administration. For specifically individuals or companies . Mr. Kudlow i dont want to be specific. I can tell. Mr. Kudlow my guess is what are some of the options. Mr. Kudlow we will have a very strong emphasis on middleclass tax relief. My guess is that it will improve business and individual reforms. What is the timeline . Mr. Kudlow i would not expect a product until well into 2020. Probably close to the election. It would be a postelection planning document. If elected, these are the kinds of approaches, pro growth approaches, middleclass, Small Business approaches that a second term would have. Yes. Do you want to take it away . Questions for larry from the audience . While you all are thinking, larry, just a point of clarity, the president said he was raising tariffs on steel and aluminum from brazil and argentina because he felt they had been wrongly devaluing their currency. Maybe the rules did not go through. That is what the president planned. Let me ask you about what you just said about the china trade deal. You expect that what is being negotiated now to move beyond what was already agreed to by the chinese in the spring. I know you do not want to get into too much detail, but can you give us a little bit more on those parameters and understanding about what additional headway has been made on some of the tougher issues . Mr. Kudlow i dont want to open up the details of the negotiation. It is very hard to do that. I would suggest that, it looks to me like some of these key chapters i mentioned, i. T. Theft, currency stability, Financial Services expansion, opening up agriculture, not just purchasing of commodities but actually reducing nontariff barriers on agriculture. As well as actually spending. Because these things are not resolved, i cannot be too specific. We heard about those in the paper already. Those are not the real big issues like state subsidies and tech transfer. Those are for a later date, i presume. Mr. Kudlow this was always planned. Phase what is not done is phase one. Two. The decisionnt by the president a few weeks ago to actually look at this in one largeher than discussion was a very significant phase which i think helped enhance the probability of getting some agreement. Other questions. Please tell us who you are. Nick thank you for being here. I wonder if you would give us some insight on how the white house balances the trade talks with perhaps endorsing congresss view of the hong kong protesters. Thinking maybe that gives the moderate forces in china less Maneuvering Room in a time we are talking to them. How do you balance the priorities . Mr. Kudlow i dont think there is a direct link. , i will callof the them freedom and democracy issues if you will and the trade talks. I dont think there is a direct link but having said that, i think the president has made it very clear that the united states, consistent with its long history, favors freedom and democracy. And human rights. And feels compelled to speak out where these things develop. Our support for the freedom and democracy gang, group in hong kong which was subsequently ratified by the local elections. These are separate tracks. Relationshipshe between a trade track and a human rights track. I get that. But, nonetheless, there may be some spillover. I understand that also. These are complicated matters. Complex matters. But we have very strong american , values that pertain to freedom. We support freedom loving people wherever they are around the world. That is true for our entire history. And so, in this case, we supported the congressional resolution secretary pompeo has been very eloquent on this. Vice president pence has been very elegant. President trump has said it many, many times. You have separate tracks and i understand they are related tracks. One last real quick question. If not im going to wrap it up. Victor. I have a question about Interest Rates. We are all operating in a lowinflation environment. We cannot foresee them going up anytime soon. There is pressure to keep bringing them down. If you have the normalization of the rate environment, how would your economic policies shift . Mr. Kudlow normalization would mean . Going up from doubling where they are today. Even tripling where they are today. The cost of money is mispriced today in my opinion. Mr. Kudlow global rates are very low. For a variety of reasons. That word normalizing, i dont mean to pick at you, but i do not know what that means. I dont know what that means. We live in a world where there is virtually no inflation. Reported inflation i mean the , traditional idea of the term structure of Interest Rates and the curve, the outlook for inflation, the outlook for real growth, for returns on capital, that hasremium been upended in recent years. There is no inflation out there. In part in fact, whatever inflation is recorded, i think is still too high. I dont see why Interest Rates have to go up. Im just giving you my personal view. The market determines most Interest Rates. I dont think that our central bank or other Central Banks should worry about growing about controlling Interest Rates. They should provide ample liquidity. The rates will take care of themselves. My former boss, paul volcker, just passed away. He was a great man. When i was a child and worked in him in the new york fed 1975 as a researcher and speechwriter, it was an easy job being a speechwriter for him because he never used my stuff. [laughter] but he was a brilliant man. He was exactly the right man the country needed to stop inflation. I will forever give him credit for that and he taught me a lot. He did not prefer my boss, he told me to come work for my boss. Journal, thetreet editorial, his view was that the market determines rates and i agree with that. I just dont think we have much to worry about. We do have a problem. The World Economy has slumped. Prominenttry showing Economic Growth. Stark stockhe market is growth will be faster in 2020. Theus not forget some of supply side policies that have worked throughout history. Lower marginal tax rates. Rolling back unnecessary and excessive regulations. To reduce trade barriers. Neoclassiclassic policies. Boss used them. My current boss is using them. The centralbank obsession is wrong. They need to be looking toward progrowth measures. The g7 will be here. In late spring, early summer. We are going to devote those sessions to what i call back to basics. We will be devoting those sessions to the need to restore world Economic Growth in europe, and latin america. In the middle east and asia. Is the single biggest problem that is facing us today. We must restore growth and prosperity. Those animal spirits as best we can. I dont see that so much as a centralbank function. Toee it as going back oldfashioned supplyside policies. Good news in inflation unless you are trying to raise your prices. Larry kudlow, thank you very much. Washington journal come alive every day with policy issues. We will talk about efforts to raise the minimum wage with the National Employment law project. And a discussion of the skill gap. Watch washington journal come alive at 7 00 eastern friday morning. Join the discussion. Live, the u. S. House returns. And the opening of the hundred 16th congress. Campaign 2020 coverage continues with senator bernie sanders. Speaking at the National Motorcycle museum. Trump is. M. , president in miami for the launch of evangelicals for trump. Cspan 2, 2 from the court of appeals. Argument, a case looking at whether President Trumps former White House Counsel Don Mcgahn must testify in the mueller report. Efforts at the at noon the u. S. Senate returns for the opening of the second session of the hundred 16th congress. 116th congress. Coverage of campaign 2020 with Amy Klobuchar at a townhall meeting in cedar rapids, iowa. Next, a look at the legacy of former president Herbert Walker bush and his wife barbara. President s grandson joined others at the Texas Tribune festival in austin. [applause] thank you. Welcome. And i feel like i probably dont need to introduce my fellow panelists here, because Everybody Knows who they a