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Larry Kudlow On President Trump v. “The Swamp,” All The Growth Ahead, Trade Deals and Tariffs, Regulatory Rollback

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Larry Kudlow, President Trunp’s chief economics adviser, joined me this morning:




HH: Joined by the one and only Larry Kudlow, now the director of the National Economic Council at the White House, old friend of the program. Larry, welcome back, it’s great to have you, congratulations.

LK: Thank you, Hugh. Thank you on all counts.

HH: Let me begin with President Xi. If he did not blink yesterday in his speech, the president of China, did he at least flutter his eyes a little bit when it comes to American automobile imports and other matters?

LK: Well, I don’t know, I mean, we’re going to evaluate the speech. But from what I gather reading the news reports, he did a lot more than blink. He made, I don’t know what the code is in China, but he may have blinked three times. And look, he’s talking about market openings. He’s talking about reducing barriers. He’s talking particularly in the automobile industry. It looks like he’s talking about joint companies, you know, American side can get over 50%. We’ll have to clarify that, but that seems to be in there. He also talked about intellectual property theft. He also talked about technology, force technology transfers. In other words, all of the things that we’ve been saying are wrong, he addressed in his speech in a positive way, that change is coming. And he said it’ll come sooner rather than later. Now I can’t interpret that, yet. We’ve got to get our whole team together today and have a look. They’ve said similar things in the past. I acknowledge that. But it covered the waterfront, and it was billed as a major speech. He never mentioned, he never mentions the U.S. issues – tariffs, proposals, what not, or complaints, let’s call them. He never really mentioned that. So it seemed like a peaceful speech with the intent of market openings. If it does, it changes the whole game. Financial markets are rallying, Hugh, so they saw it first in the Asian markets, so it’s a good sign. Let’s just say that. It’s a positive sign.

HH: It is a good sign, and our Dow’s up 309 in premarket trading, the Nasdaq 97 points, which is a percent and a half. It looks very, very good. Regarding the National Economic Council…

LK: This is the Kudlow scenario. It’s the Kudlow scenario, Hugh. I’m telling you, it’s the Kudlow scenario.

HH: I love that. It’s reported in Playbook this morning that Shahira Knight is leaving the NEC. Is that correct?

LK: I, if she is, she hasn’t told me. It’s a possibility. I’ll ask her. I don’t know.

HH: All right.

LK: Shahira is a great lady. She’s done great work. She’s been around for you know, a pretty tough 18 months. But I will have to track that down.

HH: Larry Kudlow, I want to spend most of my time on economics, but I do have to pause with you. A pretty tough 18 months – the President’s lawyer’s offices were seized yesterday. If that had happened to Judith Corley, President Obama’s lawyer at Perkins Coie or David Kendall, President Clinton’s lawyer at Williams Connolly, or James St. Clair, Richard Nixon’s lawyer, I’d have had a heart attack. How did the President react to this? How do you react to this?

LK: Well, the President reacted negatively, not surprisingly. Look, I’m not an attorney. All I can say is to me, as a layperson, it looked outrageous, over the top. I talked to some pals of mine in New York who were former prosecutors under Robert Morgenthau. They thought it was over the top. One guy said the FBI’s out of control. But I’m not a lawyer, and there’s a lot we don’t know, or there’s a lot I don’t know. The President’s furious. I wasn’t in that meeting where his comments were released, but it just, he’s just right to be furious. And I think…

HH: Have you talked to him since?

LK: No, I have not.

HH: All right. Let’s go back to economics, then, Larry. Do you expect 4% GDP growth in 2018?

LK: I don’t know if we’ll get to 4, but it’s going to be 3% or better.

HH: Possible 4? I mean I’m looking for this tax cut to really bounce the economy.

LK: Well, listen, you know, you’ve turned into a great economist under my tutelage down through the years. So I certainly don’t want to go against that point of view. Here’s what I can tell you. The first quarter is going to be a little slower. It often is in the winter – storms, snow, things of that sort. But the trend line is moving to 3, the last three quarters, 3.1% at an annual rate. That’s good. We’re seeing a big move in business investment spending, capex as it’s called on Wall Street, huge move, year on years, depending on how you measure it, up to 7% gains to 9% gains. In 2015 and 2016, Hugh, there was no capex. None. Zero. Nada. That’s a huge chunk of the economy, and that’s where our tax cuts were aimed on the business side, exactly to stimulate investment spending and provide new incentives. So I like what I’m seeing. The dollar is steady. Gold is steady. I don’t see any inflation. Interest rates remain very moderate. So the stage could be set for the Hugh Hewitt boom. That is a possibility. I may rename it. I may rename it the Trump boom, but I hope you don’t mind.

HH: Not in the least. Do you, would you like the Fed to hold interest rates steady, Larry Kudlow, for a year?

LK: No, I’m not going to get in the way of the Fed right now, but from what I see, and I’ve spoken to Mr. Powell, all I can say is that I believe they’re on the right track.

HH: All right, let me talk to you about trade. Liam Fox, Minister of Trade at the United Kingdom, wants a deal with the United States as they exit Brexit. Do you think we see that in 2018?

LK: Sorry, breaking up just a little bit.

HH: Yeah, I’ll go back and repeat it. Liam Fox wants a trade deal with the U.S. this year.

LK: Right.

HH: Do you think we get one in 2018?

LK: Well, I don’t know, but I think this, you know, we want that. I think the President has said many times, he was a supporter of Brexit as you know, he would like to make a bilateral deal, so I can’t promise, you know, we’ve got the China thing on our plate. And we’ll have to see how all this works out. But there’s a green light to go and get one.

HH: The Prime Minister of Canada also said NAFTA renegotiation is going pretty well. Are you an optimist there, Larry Kudlow? I know you’ve been on the job all of nine days, but are you an optimist about that?

LK: Well, actually, it’s, I’m trying to think, it’s, today is day seven. Today is working day seven.

HH: Okay.

LK: Yeah, working days, and I want to beat Scaramucci. I think he was ten. So I’m at seven. I would, Canada, yes, I’m sorry, NAFTA is going better and better. I can’t make a promise. I can’t give you a timetable. But I know that the outlook for NAFTA renegotiation is positive, quite positive.

HH: Now turning over to the interconnection between your council and the National Security Council, your old buddy, John Bolton, showed up yesterday.

LK: Yeah, yeah.

HH: Do you sit on the NSC? And does he sit on the NEC?

LK: I’m not sure how we’re going to do that. He’s welcome to our meetings. I’m hoping I’m welcome to theirs. You know, at the deputies level, we have a lot of crossover. You know, we handle the international economics, and of course, he handles the international strategies and so forth. John is a very dear and old friend, as you pointed out. I was thrilled when he got the appointment. But the NSC and the NEC are going to be on similar tracks, trust me on that. There’ll be a lot of crossover. He and I will sort out various personnel matters.

HH: Now I want to turn to deregulation, Larry Kudlow. I always tell people Scott Pruitt is my friend. My son works at EPA, so they can sort out the conflicts for themselves. But I think deregulation is the key to getting this economy to 4%, not just at the EPA, but the Interior, the U.S. Fish and Wildlife Service, the Army Corps of Engineers. Is that part of your portfolio? And are you pushing it?

LK: Yes, pushing it. Look, each agency, of course, has its own agenda. But the President’s program heavily emphasizes rolling back costly regulations that are penalties to business from day one. And I haven’t seen the latest stats, but he was way, way ahead of any activity on that front, than any other president. And of course, we’re unwinding all the Obama regulations which basically tied businesses hands, tied their feet, tied everything. It was a war against business. Mr. Trump has ended the war against business. So yeah, it’s a huge point, Hugh. Energy is the big sector that’s deregulated. We were talking yesterday, we could produce nearly 11 million barrels this year in oil, which is phenomenal. So yes, the answer is yes, three or four hundred times.

HH: All right, now take us inside the relationship with the President. You’ve been there a week. Commentators never see the whole deal. How is it working with Donald J. Trump?

LK: It’s fabulous. He’s just been great. Now of course, I’ve known the President for a good while. I interviewed him many times on TV and radio. I helped him in the campaign. Steve Moore and I helped him on the tax cuts along with a good team, including Steve Mnuchin, Treasury Secretary. The President’s has been wonderful to me. I mean, I’ve spent a lot of time with him. I just in the last week or whatever, eight days, and he’s been terrific. I see him several times a day. A lot of the issues, you know, I work through the issues with him. So it’s been terrific. He’s been great and supportive. And he likes it that I’m helping him on trade. I think he was a little worried about that. But I think that you know, China’s, China trade was the one.

HH: Well, that’s where I want to finish. I want to talk about China. I want to talk about the intellectual property theft and how do we end that, because you can reduce tariffs on our cars, and we can reduce tariffs on our whiskey. But if they keep stealing our stuff, we can’t get an intellectual advantage. How do we bring that to heel?

LK: Well, this is one of the key points, this and the technology transfer issue, the force technology transfer issue. Look, Hugh, it’s hard to know on the details, because China’s never taken large enough steps. You know, they’ve promised in the past, but they never did much. So we’ll have to see. But look, they’re going to have to lay out a plan, you know, that will give us assurance, Robert Lighthizer is our chief trade negotiator, as you know, assurances that they’re going to stop this theft of intellectual property, and they’re going to stop the force transfer of technology. I mean, this is probably the single biggest area of concern. Lighthizer wrote a pretty good paper on this how technology and the expansion of American technology is the backbone of our economy.

HH: Yeah, yeah.

LK: It’s what makes us innovative, right? This is like right out of Joseph Schumpeter, the ails of creative destruction. We’re the only country on the globe that has this kind of technology powerhouse, only country. China doesn’t have it. They’re, they have been trying to steal it. He’s promised today that that’s going to end. I don’t know what the details are. I don’t think anybody knows until we talk directly with him. But it’s a step in the right direction. And it’s a must. It’s an absolute must. Really, more important than trade deficits and tariffs and so forth is this technology issue. I mean, it’s all a package, and it’s all a process. But it is the central aspect of this complaint, of our complaint.

HH: Then let me close by talking about the President again. If he’s furious with Rod Rosenstein for sending the agents in to seize Cohen, can he compartmentalize and focus, Larry Kudlow, on other issues? You’ve worked with him. Can he turn off the anger at Mueller and Rosenstein and Sessions and focus on other issues easily?

LK: Oh, I’m sure he can. I mean, I’ve seen this in the past. Look, this town, aka the swamp, has been trying to thwart him at every turn, every turn, Hugh. Whatever policies, economics, international foreign policy, regulatory policy, tax policy, and they’ve tried to hound him with this Russian collusion charge, there is no collusion. There never has been any collusion. So the answer is yes, of course he can compartmentalize. I’m going to bet you he holds his regular schedule today, and I’ll be you he gets stuff done through meetings and decisions. I’ll be traveling with him with a group going to Latin America this, well, say Friday, Saturday, Sunday, Japanese summit after that in Florida. I don’t think it’s going to stop him. It never stops him. He’s a tough guy. He’s a tough guy. And he’s a smart guy. And this place, Washington, D.C., aka swamp, they underestimate him. So let them underestimate him. Right now, he is getting his agenda done. I mean, really, and so I have, you know, for me, it’s a great honor and a privilege, really, it’s a great honor and a privilege.

HH: Well, it makes a lot of us happy, Larry Kudlow. Come back early and often, and preach the free market gospel, and thank you for joining me this morning.

LK: Appreciate it, Hugh. Take care.

End of interview.


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