Larry Kudlow, Director of the National Economic Council, joined The Cats Roundtable this Sunday to discuss President Trump’s vision for the economy in 2020. From trade deals with China to surging consumer confidence, Kudlow gives the case for economic growth this election year.
In 2019, the stock market saw a roughly 30% increase, and Kudlow reads the boost as a signal of consumer confidence. He explains the biggest economic development in 2019 was that over 50% of Americans are currently benefiting retirement packages, 401Ks, pensions, and IRAs. These benefits have helped see the stock market gain 7 trillion dollars in asset value over the past year. He believes this confidence in middle America is going to be a leading bellwether for the economy in 2020.
“When people have more wealth, they spend more,” Kudlow explained.
With the job reports in 2019 reporting a 50-year low unemployment rate, Kudlow said Americans have more of what Ronald Reagan called “take-home pay,” or money after tax and inflation. Three years into Trump’s administration, Kudlow says middle-class and blue-collar Americans have gained more income than he has seen since the 1980s. This economic gain by the working class, whom Kudlow calls “the backbone of the Trump economy,” is going to build with a number of international trade deals underway. The USMCA is expected early this year, which the International Trade Commission said would add over half a percentile of GDP, or 350,00 jobs, to the economy. With the signing of a phase-one trade deal with China scheduled for January 15th, Kudlow expects half a percentile increase yearly to the American GDP. With the exit of the UK from the EU grinding on, Kudlow says chances for a free-trade deal with the UK and the EU are also on the table.
“These are tremendous accomplishments,” he said.
Though Kudlow says the benefits-to-wage earners won’t start out the gate, he believes that the protections and market openings provided to the technological and financial sectors, combined with currency stability and increased advances in intellectual property rights, put the U.S. in a prime position for the market in 2020; which, in turn, should make it one of the most competitive countries in the world.
Kudlow says that the President personally would like to see a world where free-trade, zero trade tariffs, and zero government subsidies are possible. “Of course,” he reflected, “that isn’t the real world.” He added that President Trump’s administration has tried to open markets while protecting American workers, in order to find a balance between the practical and ideal.
With the death of Iranian General Qasem Soleimani in a drone strike authorized by President Trump this past week, oil prices surged. But Kudlow believes the tensions between the United States and Iran will have “minimal impact” in the long run, partially because of the Trump administration’s deregulation of fossil fuel.
“That just shows you the strength of being the dominant energy company in the world,” he said.
As for the Federal Reserve’s interest rates remaining stable, Kudlow is confident. He says that the record numbers in the stock market and the jobs report are a result of the fact that with productivity increasing and technology advancing, prices are falling. While recalling the Federal Reserve tightening its belt in 2017 and 2018, their decision to cut rates in the second half of 2019, Kudlow says, removed an obstacle for market growth. He doesn’t rule out the Federal Reserve moving if the inflation rate remains below target, but believes the long term rates will stay moderate.
Kudlow believes that the 2020 re-election campaign is going to be reinforcing to voters that key policies of deregulation, tax-cuts, trade-deals, and “protect America policies” have led to unprecedented prosperity. He believes voting against Democrats espousing higher tax-rates, nationalizing health care, and potentially stopping the fossil-fuel industry is common sense.
“I think the President has made good on his promises and his policies,” Kudlow explained, “and I just think we need to stay on this course—and if we do, we’ve got years of prosperity ahead of us.”