Vacation. Its not only increase federal boring it also opens a door for billions more in domestic and military spending. Allowing the deficit to rise next year to almost 1. 4 trillion. As someone once said a trillion here and a trillion there, soon talking serious money. The timing is not coincidental to the plan pushes tough decisions on spinning an effective Government Shutdown well past the 2020 election. The plan also put on hold automatic budget cuts notice sequestration which will put in place and the obama years in an effort to keep government while Government Spending keeps going up the economy may be slowing. The Commerce Department reported on friday Gross Domestic Product was down to 2. 1 percent. A 2. 1 percent in the Second Quarter of the year. It is down for the first quarter. They also revised down estimate for Economic Growth last year and 2018 to rates below three percent. Which had been a previous number and the administrations target. With me not to discuss all of this and many other economic issues, Top White House economic advisor, larry kudlow. Journey from washington d. C. Thank you for being here. Hello, thank you. Gerry gdp number if i may, 2. 1 percent. Not what we thought we were getting. It is not bad. Consumers with a hero of the numbers today. They are spending was up over four percent on an annual rate. I think that is a function of the strong gains in jobs and wages i might add. Across the board. Whether it is bluecollar, where women or hispanics or blacks or whatever. That was the star performer. We lost about one percentage point to some inventory adjustment. But that may prove to be healthy for the second half. We lost about and a half a point to boeing and their difficulties. You know, i will say this, we faced a twoyear period of severe monetary tightening. Seven rate hikes in 2017 and 18. Sometimes i wonder how the economy has grown at all. So i would just say to that the incentive policies of tax cuts and deregulation and energy and trade reform, i think they are working. I think you will see a much stronger second half going into 2020 judging from the stock market and some recent numbers on durable goods and retail spending. I am optimistic about the second half of next year. Gerry to be clear and again, so the number 2018 down below three percent but is defense fault essential. If they hadnt raised rates this much would be much stronger. I believe that actually. I mean, we havent had any inflation. In fact, todays numbers continue that i think the four quarter change for the various deflator is about 1 and a half percent. So yeah, i think monetary tightening has been a big headwind for the economy. But nonetheless, although we did not make out three percent target, we were 2. 7 percent and annual rate for President Trumps first two years. A good performance, the Prior Administration long cycle for eight years was only 1. 9 percent. So we are 40 percent ahead of their trendline. Gerry to be fair, the 1. 9 percent is heavily affected by the fact that the economy was in a deep recession for the first year. I think if you take that you get 2. 2 or 2. 3. I agree that if i may, i didnt want to quibble weve known each other long time. But the obama years, the deep recession goes into the bush years. Obama years get the early recovery. But it was never a strong recovery. The recession ended 2009. Anyway, as you said we do not want to quibble. Overall you have 2. 7 percent after massive fiscal stimulus. Huge taxcuts which has benefite the economy and in many ways. First of all lower marginal tax rates for businesses large and small individuals. That is not, that phrase fiscal stimulus, is not a spending increase it is not a onetime spending increase. Those lower tax rates create higher aftertax returns and incentives for as long as they last. And they are still in place so i think that is a very important point. Now, 2. 7 percent for the president s first two years and for the first half of this year think we are 2. 5 or 2. 6. Look, people said we cannot get to two percent, remember . That was the argument. Gerry sure. We have already come away leapfrogged all of the socalled secular stagnation arguments. Gerry okay. I think that is what happens you freed up the animal spirits in the economy. I rather helpful. By the way as i said, looks to me, judging from the stock market and a bunch of recent numbers, i think we are looking towards we will step into a very strong second half of 2019. That is my hunch. Gerry back onto the feds, they meet next week, a big meeting, where the expected cut rates. The question maybe is is it a quarterpoint or halfpoint cut. What would you like to see . I would say the market is expecting three 25 basis cuts. Thus the market. My own personal view and the fit is in the point and i wont preach they will do what theyre going to do. I would just say the sooner the better. I think that is my personal view. I believe that is the president s you. I would like to remove a lot of these unnecessary monetary headwinds that i talked about before. Gerry and if theyre going to cut by three quarters of a point over the rest of the year they may as well, i mean all the evidence historically is that you should frontload it get it done as quickly as possible. I would like to see that. One thing going on here is, not to get too technical, you know the game. The curve is inverted and its been for a while. Gerry right. I think the target rate should drop by 75 basis points, lets say. Then at the qc long term rates move up a bit. That would be a much more natural position for the financial markets. Which itself would help growth quite a bit. Gerry but youll see, some people are predicting a recession for the last year. As we get more reports out this week saying its a long as expansion in u. S. History, 10 years old. You dont see any real risk even without a brexit action. You dont see any real risk of a recession then. No, i dont. I think the fundamentals are pretty good across the board. I really like the stock Market Action real year to date. I do fret about the curve a little bit but no, i do not see a recession. I think we are past that. Look, people it is a wonderful thing to be in washington and a gift to be a president ial advisor. It is truly a gift and a blessing. But here this recession talk from the moment i got here. But i heard it actually when i was still anchoring up at cnbc. People talk about the president s recession, the stock market was going to crash etc. I do not want to get personal. All im saying is, let me just repeat this thought. Gerry quickly if you will because we need a break. 2. 7 percent annual growth still in his first two years is a number that most mainstream academic and other economists do not think we could get. And we have gotten it and it is a 40 percent jump over the prior line below two. Fact is, every Insurance Company hopes you drive safely. But allstate actually helps you drive safely. With drivewise. It lets you know when you go too fast. And brake too hard. With feedback to help you drive safer. Giving you the power to actually lower your cost. Unfortunately, it cant do anything about that. Now that you know the truth. Are you in good hands . Josh can i please have a moment of your time . Boy 1 yes. Josh ok, i have a question. Boy 2 you can have eight moments. Josh thank you. So what do you get in trouble for . Girl sometimes i get in trouble like play the wrong piece of note for the piano. Boy 2 i play piano. Boy 1 i play piano. Josh you all three play piano . Girl i also play violin. Boy 1 i play violin. Boy 2 me too. Boy 1 gasp josh are you guys making this up . All noooo boy 2 ive played a piano. Boy 1 its a coincidence. Josh is it a coincidence . Boy 1 yes. Girl yeah, my mom plays piano and my dad plays violin. Josh sometimes you have a jam session. Boy 1 my dads mom took away his fiddle. All laugh josh as a father of two, i can tell you parenting isnt easy. But my friends at boys town have Parenting Tips and tricks to help you make the most of every moment with your family. Do yourself a favor. Visit boystown. Org parenting. My twhe didnt have anyas an. Autisfriends as a result it broke my heart. Brother let me be your shelter that was the inspiration behind my nonprofit score a friend go educating people to include the people with differences is so important because when jacobs included he feels like he can succeed in life and he feels like he actually has a purpose. Gerry i am back with larry kudlow. We talked about the reasonably good growth that you see despite headwind of particular interest rate. Another headwind is the currency. The dollar has been rising since the beginning of 2018 quite strongly. Talk about 10 or 11 percent against the trade basket of currencies increases cost the price of u. S. Exports, it lowers the cost of imports into the us. Is the dollar to strong . The way i look at it, the dollar has been quite steady. I think year to date it is up a little less than two percent. The dollar today on the trade business im using the indexes about where was when President Trump took office. So i think youve had a pretty steady dollar. I think its a very good thing indeed. We like a dependable, reliable dollar and i want to add, that there has been some loose talk about currency intervention. And the president himself decided this past week that there would be no currency intervention. He wants a steady dollar. He wants a dollar that is the world currency. But the president does not like is when other countries seemingly manipulate their own currencies maybe for some shortterm trade games. That we do not like and secretary Steve Mnuchin of the treasury has a watchlist where he is looking very carefully at that. For our point of view, we have a Strong Economy with great incentives for businesses and we like a steady dollar so were the most hospitable investment environment in the world today. Gerry would you include the European Central bank which is again cutting rates below zero. With negative Interest Rates in europe. As the economy weakens. Is it, are they pushing the yearold down against the dollar . I do not want to i will leave the labels to the treasury. That is their job. Look, i would say this. The ecb and other central banks, i think the bank of japan has pursued this you know quantitative policy that we pursued for years. And theyre not getting any growth. So my thought here is really what they need, is more supplyside, freemarket reforms. Again, its not exactly breaking news that i am a reagan supply cider and a trump supply cider. Gerry and the europeans are not. That is correct. So we go to the g7 at the end of august which is a lovely place. As you know. And you might hear some of us talk about this to our friends and elsewhere in europe, why not regulate your financial and labor and other markets . Why not have a more open economy . Easy money, i do not think is the answer. And it can destroy markets and distort economies. Gerry will you say that with them, easy money, the present you say, the bank of japan and the ecb, pursuing is actually hurting the economy . Do you want to see more stable, you talk about more stable dollar. Do you want to see more stable monetary environment generally . I would. I absolutely would. Look, and the mean is, i know many of these leaders. And respect them. Weve been in many bilateral through g7, g 20 and so forth. And they come to the states. Ive mentioned this i will probably continue it. I think President Trump is going to argue for example, as a quick why not think about for growth, low tax rates, deregulation and lower trade barriers . Lower trade barriers to promote imports and. Gerry the clock is exhausted. Gerry they been saying that as long as we can remember. And wouldnt it ive only been saying it for 35 or 40 years. Gerry they go they have not listen to you. But wouldnt make it actually, give it a bit of leverage, if you actually said to them you know, do this and stop doing the monetary stuff or we may have to you know take action on the currency front. No. No i dont think so. I dont like that idea. I think currencies of the center. U. S. Dollar as the World Reserve currency and President Trump wanted to remain so. That is anchor and is a good thing. I do see glimmers. My friend Boris Johnson is now the Prime Minister of britain. I know he has some supplyside bones in his body. Look even present macron. We do not agree with his digital tax. I think its a big mistake by president macron has moved Corporate Tax rate down and he is seeking out labor reforms. I think well have interesting discussion there. But again, think President Trump will take the lead. The Growth Program which has shown results and if we do not say it, no one else will. So it needs to be said. Gerry stop you there. One more quick break. Ahead, three talks with trainer keep it down there. I have a system. Keith used to be great to roadtrip with. But since he bought his house. Are you going 45 . Uh, yes. 55 is a suggestion. Its kind of like driving with his dad. What a sign, huh . Terry, can you take a selfie of me . Take a selfie of you . Yeah. Can you make it look like im holding it . He did show us how to bundle home and auto at progressive. Com and save a bunch of money. 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Ive got their app right here, i can troubleshoot. I can schedule a time for them to call me back, its great you have our number programmed in . Ya i dont even know your phone anymore. Excuse me . what . I dont know your phone number. Aw well. He doesnt know our phone number you have our fax number, obviously. Todays xfinity service. Simple. Easy. Awesome. Ill pass. Gerry larry kudlow is my guest. Larry, ive known you for a while. Used to be 22 trillion total federal debt, trillion dollar debt as far as the eye can see. Have you had an epiphany . Actually, at the risk of pushing back slightly, ive always been a spending hawk. Limited government hawk. Ive never felt the deficits were the issue. I think if you want to get rid of deficits, which is a noble cause, you need to grow the economy rapidly and try to limit the scope of government it is sort of been my philosophy in general. You going economy you sing earlier at a reasonable pace in last two years. The deficit keeps going up. It is not using and that the deficit or the debt is it . Left, revenues are coming in, im looking forward to more. I like what i see in the economy and nominal gdp and so forth. In terms of the budget deal i think is what youre driving at, so our estimates are about 4 and a half percent. The deficit in scherie and 20 would be about four and half percent gdp. Everybody likes to see it lower. I would like to see less spending, absolutely. But politics is the art of the possible. The market with a two percent 10 year is not worried about the budget deficit were borrowing at the present time. I think it is a manageable number. Gerry im sorry go ahead. I was going to say is the budget deal perfect . No. But it does maintain a very important increase in defense spending, it allows the president to continue his efforts on the border, at the southern border and security in the rule of law. It will not get in the way of a number of policies, it does get us to roll it over so there will be no default which will be very bad. It aint perfect, we all wish for more. As conservative are like to see more limited. At the moment i think its a manageable story. Gerry this seems to be almost a consensus these days on the left and the right. The deficit doesnt really matter anymore. Markets seem to validate that. 10 year treasury way down two percent. Do deficits really matter if we have 22 trillion debt were 30 trillion debt . We have not gotten there yet [laughter] gerry it is early yet. Listen, i am a growth guide. We are in a prosperity cycle. We have picked up the rate of growth in the last couple of years. I want to keep it that way. I want to aim policies on the supply side with taxes and deregulation and so forth. To me thats the key. The way to slow the debt and reduce debt burden on gdp as well as the yearly deficits, i think number one, lets grow the economy. Number two, lets limit government and limit spending, there are lots of reforms that can be made. But i cannot get panicked about it right now. Gerry have to wrap this. One quick final question if i may. China trade talks, will begin a deal by the end of the year between u. S. And china . Quickly if you will. Impossible to predict. Next weeks talks in shanghai hopefully we go back to where we were in may and very much on the american side we want china to begin buying agricultural goods and products as they promised. Gerry larry thank you very much indeed for spending a term of this. Of this. It is rea all Money Managers might seem the same, but some give their clients cookie cutter portfolios. Fisher investments tailors portfolios to your goals and needs. Some only call when they have something to sell. Fisher calls regularly so you stay informed. And while some advisors are happy to earn commissions whether you do well or not. 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