By. Larry kudlow, welcome back to firing line. Thank you. Thank you very much. Appreciate it. Its been a while. Ware now in the midst of a pandemic. More than 150,000 americans have died in several months. So would you gree that when it comes to americas economic health, we are also inr und territory . Well, look, its a difficult story because, obviously, the economy has depended on the virus and the various mitigation measures, essentially shutting down the economy, affeed, you know, stores, shops, everything, sport at one point in april, you had almost a complete shuttering. Factories were down. So it took quite a toll. There waa lot of hardship, a lot of heartbreak. People were laid off. And as we meet here today, eve though theres still some gonnbe uncertainties on thisys story, i think the economy is cing back. I think theres a vshaped recovery in the making. Jobs are rising. Yeah. Things are improving. And i can also report from i sit on a coronavirus healthcare team, and actually, these popups weve had in the virus, particularly in the southwest, finally look like they are flattening out and even hooking down. Thats a relief. That answers some prayers. And again, the mitigat you know, masking and distancing and hygiene, that stuff works. And closing a buncars. So im hoping were getting through e hotspot stage, and i think theres a lot of solid economic information t there. So, lets go back to one thing you said. You, for the sake of the audience, define what you mean by a vshaped recovery. Well, if you put it on a chart, you know you can im sorry we dont have a blackboard. This goes a crash coming down. I mean, its not like a regular macroeconomic decline because its really more in the nature of a natural di, kind of a super awful rricane or a super awful so the idea of the upside of the v is that it recoverswh back te it was previously. Right. And, you know, just now, weve argued i argued that we came in a very Strong Economy 3. 5 unemployment, no inflation, strong stock marketmiddle and lowerincome wages doing ve, very well. , i think, coming out of thi we will also dokay. I dont know that its going there may be some moderation, but judging from what we know, can continue for a. And the v so then, we just recently received some new gdp mbers from the Second Quarter of 2020. And what we leard is that the United States economy actually contracted at a record rate, about 33 , as you know, which is the largest quarterldecline in recorded history of the gdp. So as you think about a vshaped recovery, recover that full 33 ,t we will those trillions of dollarslo the econom in the time since the coronavirus came to us . Well, it isnt really 33 , because thats an annualizedou number, to theh power or multiplying times four. I annt but is that what you mean . Are you talking about gdp recovering . Is that what you mean in t vshaped recovery . That we recover our gross domestic products output . Yes. Output, employment, theres a whole series of areas. And the economy fell by 8 to 9 in the Second Quarter. Its gonna take a while to make that up, but the signs suggest how long you think it will take . Well, i think youre gonna or more in the secwth rate half of this year. And in 2021, under right policies, i think youll get 5 or 6 Economic Growth. Could be a big, bad year. And we probably can t back to the to the por peak in real gdp perhaps sometime inh middle of 2021, maybe a little sooner, maybe a little later. T ll be someplace around there. Theres a harris poll, which is conducted weekly about American Attitudes about the conavirus. And what it tells us is that more than 50 of americans believe that if they get the and the truth is, e know, at least according to johns hopkins, is that the fatality rate in the United States is much closer to 3. 3 and perhaps even substantially lower if you take out the comorbidities. So, what we know is that there is real fear slowing down the American Economy and that sits in the hearts of the american people. And i wonder, do you agree that that is one of the problems with american tivity and Economic Activity rerning robustly . Well, i think theres something to that. I cant vouch for that poll, but i dont deny it. I think the fear factor is there on the other hand, americans are very resilient. Very resilient. And with the right incentive structure to work and invest and take risks and entrepreneurship, i think we will s those characteristics pop back again. Look, in may and june alone, roughl8 Million People returned to wo. I believe thats the fastest return in history. Now, what that told me is not that weve solved all the problems. No. But that there is a desire to go back to work. Le thats what peove to do, and i dont think were finished with at. Theres still way too many ople unemployed, but i think chipping away in the next bunch of months and into next year, were going to were going to put them back to work. Now, i will add this you know. Ect to the anxieties, no question about that. T thats why the guidanc is so important. Distancing, will repeat getting tested where appropriate masking and personal hygiene. Th ans a mantra we are repeating time and time again. And its working. I think that gives people confidence and a lot of our expertsxp and a lot ofts outside the admistration, theyre sayingpe aps at warp speed we will have a vaccine toward the ba end of this year. Im not one of the experts, but im repeating their view. W and i think thl have a tremendously positive impact on peoples attitudes. Masking, social distancing, hygiene, and testing are the things that you saye portant in terms of how we behave to mitigate the spread of the virus. Uve been saying that for a while. The White House Coronavirus task force has been saying that, but we still had well over 50,000 cases per day for mostf july, and the cases were increasing in a dozen states. So how do you explain the difference . I mean, youve bn saying it, but it hasnt actually mitated the spread yet. Well, for one thing i know, i dont agree that it has mitigad. I think the terrible winter story was mitigated. Then, it came back in late june and july. And i think we are in the process of mitigating that. You ow, this is a tough one. It happens every hundred years. And not even am so old to have experienced the one in 1918. Let me ask you about unemployment, cause you brought it up. I can show you a chart from the department of labor. And what you see is a sharp decline from april and may. But then since then, claims have stopped declining and theyve ateaued. And they remain elevatede wh4 million initial claims recently, which is 6. 6 times higher than a year ago. So how do we get it to start declining more . How doesconomic activity really recover in the v shape you suggest, if that numb is plateauing . Well, listen, i think the plateau, by the way, is a response to what we saw with t hot spots in the southwest and up north, rticularly surprised. But as those hot spotse alt with, i think youre going to see continued decline. Weve fallen quite a bit on the claims and the contuing claims, but ill go a little deeper on this. I think its very iortant that we have as growthier an economy as possible and that president trumps policies, which are essentially supplysideoriented polics, largescale, acrosstheboard tax cuts, acrosstheb rollback of regulations, unleashing of the energy sector, and free and fair trade deals, those were powerful tonics for this economy for three years and two months. H and k we need to stay and i think at somt, margaret, the rescue mission, the liquidity rescue, as ill call it, and then the reopening, which we are in right now, and acknowledgingom thatof it slowed down in certain places, but nonetheless, now we have to move into an Economic Growth incentive stage toake sure we have the kind of highvelocity growte that we had be the pandemic set in. Im an optimist. I believe in these supplyside policies. So does the president. As you know, years ago, r i worked fald reagan. That was the first model. So i think were on the righttr. And i want a growttay there. Economy, across the board. Wee seen good signs. But you can remember that word, growthier. E growthier it makes laugh. Listen, i an, the the covid19 fiscal policy by the white house and also by the congress, it seems to have two parts, if were going to just eak it down very simply for an audience. You know, the first part is keeping businesses afloat, even though revenues are very low, and the second part is giving money to unemployed workers so that they can continue to consume goods and servicess justmost as though they were employed. Now, this could serve if this were a shortterm problem, like a bridge loan. But this has been going on for six months, and its at least, until thax months, vaccine that is proven and so were maybe a year away. Lic. I mean, this is going to keepwh going for e. And the deficit, which is something, as a reagan republican, i know is mething that doesnt pass you lightly, is already recordbreaking. So how will policye adjust in ming months to walk back from those levels of those deficit levels that are so recordbreaking . Well, i confess, im not very worried about the deficit right now. Why . Well, its the least of our problems. Because the government is taking emergency measures, which is what governments have to do during situations like this. I think it was the right approach. It will not last forever. It will probably end at the end of this year. Deficits, you know, theres no evidence of any harm. 10year treasuries, to take a benchmark, are about one half of one percen and i think, essentially, what were doing here, yes, we are borrowing, yes, we are sensitive to the borrowing, but at very low rates, were borrowing to reinvest in the health and welfare of the American Economy. Im sorry. I just want to make sure i understood you. Usd you say is it the white position th deficits dont matter . No, were sensitive to it. Its not a question of deficits dont matter. Its a question that people matter, health and safety matters, and an economic reopening and getting people back to work, helping them while theyre on unemployment and furloughedin and hebusinesses. I thk those priorities come first. tficit, as a theory, i certainly woulant to keep this going on forever. But, you know,ou can go back to world war ii, we ran deficits that were just as bad. You do what you have to do, and every countryn ise same position. Because of the government activism during this crisis, i heartily approve. And i believe, over time, as these programs wither away, as the economy picks up growth and throws off revenues and stronger business, i think we will get the deficit down to something thats much more manageable. But in the middle of the crisis. I mean, weve spent almost 3 trillion so far, and now theres another round of stimulus coming from congress. It looks like republicans are arguing for a trillioncr and des are arguing for 3 trillion. What is your position, at least on on the 600 Unemployment Benefits . I mean, is there is that an opportunity to sca back some of the deficit some of the spending . It, shortrun, and then we can go to reforming it to make sure that theres no disincentive too. And what weve done now its very hard to predict in negotiations, as you and i are talking, because its kind of in a state of flux, if you will, so i dont wt to predict the outcome. But we, our side, has suggested reemployment benefits or reemployment bonuses people going back to work. Ward so that will be part of the unemploymentreemployment situation. I think that will work out very well. Is it the White Houseat position then he 600 unemployment checks should shortterm. Ther round . Its not it not healthy its not a good incentive if t unemployment benefit is higher than your prior wage or higher than wages that are being offered to you at your skill set. Its not sustainable. However,it id leown very slowly. And again, iould put in employment or what we call reemployment benefits. So, unemployment might come down a bit, but these reemploymentil benefitsbe going up, and we will be rewarding people to come back to work. Well see what happe with this particular negotiations. And as you know, there a regularly scheduled election, and youll hear a lot more from predent trump about his views on lower taxes and rolling back regulations to promote growth, jobs, and wages. What about restaurants . I understand theres part of the bill thats about 120 billion bailout for restaurants that, you ow, some call it a bailout, but there are the opentable ceo warns that one in four restaurants are at risk of closure. Yelp has just released survey shuttered restaura0 of the on the platform are closed for good. Is the white house sportive of a restaurant bailout . Yes. Well, i wouldnt call it a bailout, o but its othe areas that needs assistance. Restaurantjust got so badly hurt and, you know, small stores, as well. So we are going to look to try to help once again extend help to those very areas. Thats tough. How many more trillion do you think were gonna need to spend altogether . Wouldnt want to guess. I just wouldnt want to hazard earlier this summer, Vice President biden unveiled a roughly 3 trillion build it back better economic plan, and it would paye for ending by raising top marginal rates and corporate taxes. What would that do to the economy, in your view . Well, you know, i think in policy terms, is exactly the wrong medicine right now. X those creases will damage middleincome people who will wind up paying foit in lost wages and higher taxes. E i think their lation is going to be very damaging,i very aock market. Thats not what we want. I mean, i would just say this. Youve experienced this awful pandemic with terrible loss of life and great, greadamage to bunesses and the workforce and families and so forth and health damage. Now, why keynesians and supplysiders should agree, the last thing in the world you want to do as we come out of this contraction is raise taxes. Its the last thingo youd want. And so it defies belief th biden is going in that direction. I mean, again, ironically, give me a give me a good keynesian who will say, all right, spd more and cut taxes, all right . Give me a od keynesiangh now. I dont know what happened to the theyre probably around someplace. Theyre not anywhere. In fact, theyve been replaced by the advocates of mmt,ar modern montheory. So, larry, this isnt the first time youve been a guest on firing line. You, of course, were on the original program with william f. Buckley jr. In 1998. Lets take a look at what you said then. How would you rate the negative effect, respectively, of unemployment and the welfare state . Hi i the welfare state was the single biggest governmental contribution to these problems. Somehow, this notion of victimizationot and, oh, itsour fault. Social conditions made you do it, and were gonna help you by giving you some money to get through the day, which became the month, which became the year, which became the decade, i think these things would absolutely underminehe whole moral fabric of this country. Has your thinking changed since then . Nope, not at all. Does your thinking change in a pandemic . Margaret, theyre just no the same. This is an Emergency Rescue mission, once the economyely different. Gets going again, and im always the optimistli who es, under the right incentive policies, it will get going again, then these programs will run off. Back in 2010 i wentug thsome of your transcripts you spoke with president george w. Bush about his book, decision points, and some of the choices that he made during the globafinancial crisis. And i want to read one quote from that interview. You said to him this. Reflecting back on that question how are the governmentw. Bush, bailouts now different . He didnt like it, by the the book. I interviewed him on he didnt. He did not like that question. No, he didnt like it at all. Let me just say this. This is completely different than wt happened in 2008 and 09. Completely. The nature of the crisis is different. But i want to know how t bailout is different or how the emergency measures not becoming commonplace isifferent. Well, i dont think weve done bailouts. I dont think weve done bailouts. I think we have provided broadbased assistance to every sector of the economy. How do we keep them from becoming commonplace . Theres no chrysler here. Er s no General Motors here. Theres no fannie and freddie. Theres no banking col its a completely different story. Again, its a pandemicbased contraction. Its not a macrobased i get it. No, n the economic circumstances are different, but the response how do you prevent the extraordinary governme spending from becoming commonplace . Well, i would just suggest, as we get across the bridge into a Stronger Economic sry,es programs, which are meant to be temporary, will, in fact, be mporary. Let me ask you then about monetary policy, because some emergency meas were put in place in the wake of 2008 with respect to the fed, with respect to monetary policy, of counterest rates came down, money was printed, f antitative easing, several rounds happened. People can argue or not reasonable measures in the aftermath of that event, but 12 years later, Interest Rates are still zero. And you have said that you dont expect that Interest Rates will go up in your lifetime. Probably not. Is this not an example of emergency measures becomingac common that there is there is no path for returning to normalcy . Look, i think the feds done a great b in this crisis. I really do. I think they acted reasonably quickly. You know, they had been raising intere rates. By the way, i dont know why. Well, theied in 2018. The markets responded poorly, so they returned them to close to zero. Yeah, they started in 2016. W tht 2017, 2018. They finally stopped in 2019. No there wanflation, so they were getting backto omething called normal, although i had some problems with it. Nonetheless, i thinkhey acted quickly in this emergency, in this pandemic. I think ey did exactly the right thing. I think they learned lot from the crisis of 2008, 09, and 10. They p liquidity into all the markets. I give the fed very high marks. I thpal has done a good job during this crisis. Keepingnterest rates at zero percent as a longterm policy is not a picy that is is good for main street, right . Ordinary people, how are they supposed to be encoura their savings if they cant put their savings in the bank and let it grow . Let me ask you, with allhe increase in the money supply, are you worried that we might be settinthe stage for inflation . Nope, not worried at all. s the huge demand for currency and money and liquidity huge demand. But in a broader framework,at this is overnment has to do. In effect, you know, talkbout the fed as the lend of last resort, okay . Really, what happened this time around with the coronavirus pandemic was both the federal government and the Federal Reserve acted as the lender of last resort. And i wouldnt want that to happen every year in the future, but when youre in a crisis like this,hen people are suffering hardships, when we close theconomy down to try to solve the virus, this is a tough one. We had to do whatever it takesl and use e federal levers in order to help folks out. In now i were pulling out of it. Not everyone agrees with me, but i think were pulling out of , and i think were going to see much, much better Economic Growth, we did before this crisis. Se you go to the white h every day for work, and a number of people at the white house have come down with covid19. Is covid19 under control in the white house . And what do you do as a precaution . Im tested every day. Im in and out of the oval, and a bunch of us are tested every day to protect each other and protect him. But actuallyyes, w had some cases. My dear, dear friend, robert obrien, a Great National security adviser, he had it. Hes come out of it beautifully, thank goodness. A wonderful person, doing a great job. Not too many, thoues. The percentages, as far as i know, is very, very low. And take every precaution possible. So weve done the best we can. And might add, although we dont wear masks in our offices, people wear masks as they move out the executive campus. So we try to be true to that, as well. Larry kudlow, thank you for your time. Thank you for returning to firing line. We appreciate it very much. My pleasure. Thanks for having me. Firing line with margarehoover is made possible in part by. And by. Corporate funding is provided by. Youre watching p. Llo, everyone, and welcome to amanpour co. Heres whats coming up. New allegations against salman filed in a ourt. Mmed bin a former saudi spy chief claims he could be the next victim after journalist jamal khashoggi. And in beirut, the latest for the people there. I think people liked this story so much, they didnt even question it. The whistleblower who brought down theranos and what that says abe coronavirus vaccine
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