. >> it's my pleasure to be here is stephen moore with his new book "trumponomics" that he co-authored with arthur laffer which i don't think you need any introduction for that. you are a distinguished fellow at the heritage foundation you have been at the cato institute.

>> and you are on the board and a contributor at cnn. you have been everywhere. [laughter] . >> and again with the laffer curve and was our reagan economist. so it is really my pleasure to be here to talk with you. you and the head of the council of economic advisers in my opinion are the happiest word - - warriors of the free market out there. i agree.

and with these very happy warriors i have known you for a very long time that is one of your distinguished features. >> look as a free market conservative are naturally optimistic and my whole mentor's philosophy to love the free market said is true and it's so much doom and gloom because of climate change or we cannot grow faster and incidentally trump is an economic optimist people will flourish the rising tide lifts all boats that is what attracted us to trump.

>> i will share a small story i met you at about party in the nineties or early nineties having breakfast at the intercontinental it was like meeting a rock star. and i remember you said something to say to me with our reagan tax cuts one of the mistakes we made we're the tax cuts and i cannot remember but i think i implied it was a good thing he said absolutely not.

if flex expensive tomorrow and it just stayed with me. . >> that was relevant to the tax debate may be one third is how we got the tax bill passed the stories that we tell them there in that book there was a stage near the end as a phenomenal success but there was an issue if we should delay the business tax cuts for one year in exchange for a lower rate the longer-term. i was agnostic. but he was steadfast. but if you do this you will hurt the economy. in 2018 then that will lead to

less domestic activity in the short term he said that's a mistake that reagan made by the recovery didn't start until the full thrust was put in place. >>host: so what is the book about? [laughter] . >> it starts when larry kudlow and i and originally everyone watching the show probably knows donald trump stole larry kudlow away from us now he's the most important economist in the worl world. but we met trump almost exactly three years ago late 2015 for the presidential race just starting then there was that first meeting to the whole campaign people watching

the show have strong opinions about donald trump and he is pretty polarizing so we try to give the honest assessment of how he operates i greatly admire the man but there is a lot of great things about trump and character defects as well we try to lay that out in the first half i have come to admire him. he is focused on growth you have to get the economy growing so that i think is the focus of what "trumponomics" is about growing the economy going back to work trump is

pro-business i love that about him because you can have jobs if businesses are not doing well that ten years ago we elected a community organizer who is focused on how these public policy decisions benefit american businesses. >>host: but first we want to talk about the man. >> you remind us how unlikely it was did you always see that coming? that's a great question trump took a big risk i admire him for just taking the chance.

i thought it was a publicity stunt frankly. and then to change my mind about his viability is meeting them in person. after spending an hour that he has a good chance of winning. he has a winning attitude. he is personable most politicians are wonderful people in public but jerks in private but he is actually a wonderful person when you meet him personally and that resonated and it attended his rallies i started to go to or three just to see what was going on and there are 15 republicans running for president.

>> and trump was the only one and i was really struck by the people that were there so i don't know if i loved you but i sure loved your voters they are not republican or democrat but people tend not to be very politically active. so people from like michigan or ohio that they were left behind and both parties whether immigration or trade with personal economic conditions and then to tap into that i love these people you go to these rallies to see bus drivers and construction

workers and veterans and blacks and hispanics there can still be 500 or 1000 motorcycles. and these were people who were upset about washington and they were right. >> so to think about the trump phenomenon. and then the most important thing you can do and this is what president trump has done and is doing at his rallies.

and listening to what they are selling that turning point is when hillary clinton called these people deplorable but to hold them in contempt of the reagan democrats 40 hours a week and work hard and felt like nobody was paying attention to them. their financial stress, the worry about their jobs that hillary said these are the irredeemable deplorable people that is the elitist view that somehow they know better than the people of themselves how to run their lives and that was the key to trump's victory. he didn't know he would win but he had a good shot.

people said there was no way. it was zero chance. >> and one thing i learned from the trump campaign whether science or finance or business or sports more often in times than you would think the experts are wrong every consultant they all have that election room we know something will happen. >> often they are wrong. and calling on economists in particular there is a lot that the economist tell you so when

we predict the tax cuts are spending increases of the economy that the relationship with climate change data. and throughout history of population that you read the report. >> so come back to the trump phenomenon that i have read

other places about woodward or gates that says all of my friends that are working for him for what you have touched on in one of those things i find the most remarkable keys a big listener and will focus on what you are saying so if you want to elaborate a little bit quick. >> and he likes to debate he

doesn't surround himself with yes-men. when we told him we were for free trade. he said no. we have had a lot of fights with him. they were not disagreeable but we disagreed. you should not be surrounded by yes-men ultimately donald trump will make the ultimate decision who is on his cabinet and what's wrong with that? . >> that being said with people telling you a different side of the story? that you need to have that for - - that fighting spirit.

>> and i don't say that that there's a lot of chaos but but just in the last two years how many are virginal people are left? there is a lot of turnover if you fail you fired. so he demands performance. so what is not fair is the criticisms what i found interesting is he is a perfectionist. in the hotel he goes into the bathrooms if something was not working he says this isn't working you don't get paid until you fix it. you've got to get this right

so let's deliver what you promised. >> there are a lot of things that are not working as advertised so tell me what you think being a republican and with a political scientist. >> between reagan and trump that he belongs on mount rushmore.

but word is similar for people to realize that reagan loved people and trump loves people and second of all and liberal should pay attention to this both reagan and trump were always always always underestimated by their political opponents. but when reagan ran for president people laughed when trump ran for president people laughed. both had us appraising victory. in areas that they differ and where is ideological conservative and that means

reagan understood the free market and grew up with bill buckley you and i are pretty ideological. but he doesn't look through the prism of will this work so now he comes around in the solutions of the best way to grow the economy and to take on conservative dogma and in terms of restrictions of what he wants to deal with.

>> i could think of a few others. because i am concerned because there is no ideology for those but that understanding of economics but that could be a problem but it does raise some concerns. >> one of the things i don't like about donald trump for

example, the gm layoffs recently he said we won't give you all more many keep the plant open but i don't want people to lose their jobs that's terrible but for the government to tell business where they put their money? that is a problem. >> one thing i want to ask you is should the government really be ran like a business? and then to tell you when you're correct or not? i can seal on - - see the appeal of the message but the united states is not a company and a lot of this analysis of the business world that leads to the long message i think

the message is great i like the energy but there are some limits to this. and i am also very wary of the cronyism of that young healthy marriage between the government and president trump for all his business acumen is his temptation to go full on cronyism. but this incentive and with the president trump that

pro-business should mean there's a whole loads of things that he really knows what he's talking about. but there is always a risk. with the cronyism at the same time. so the government is a 4 trillion-dollar enterprise but bringing business principles to have the bottom line to make sure if there is

not that much revenue but trump has brought some of those principles to washington that our long overdue. with barack obama he didn't know nothing of business so how could he possibly know what policy it would work? sumac the biggest difference between president obama and president trump. >> and companies are relieved. and to show literally so what are people talking about?

and through business confidence with two days after the election was the single most thing trump has done and in my opinion that businesses knew they were successful and then hit them over the head with it. we don't want clean air or safe water and to inhibit our businesses but you cannot have jobs without businesses. . >> so let's talk about tax

cuts. and to say in 25 years still calling for the reduction of the corporate tax. . . . . up ha

20-cent -- 20 percentage point gap right out of the gate. and almost twice as high as the average. >> host: were you high year than the french? the other thing, there's two things together that are detrimental to companies and the left is always talking about how well they are at home getting their monekeepingtheir money abt a solution that every investment decision that is dictated by the

tax system is not conducive to the business position i remember one of my favorite stories in the books that we are recommending that you run out a 20% business tax rate and i will never forget we are not going to do that don't you understand what we are saying. what's so interesting is from that day until almost exactly a year ago. i remember mitch mcconnell coming to the room and said we are so sorry we couldn't get 15%, would you take 20. absolutely i will take 20. trump is a master negotiator. he understood something we didn't understand the beginning. he negotiated up.

the other thing trump did it's important on the bill every time we would bring this up they would say what about the 26.5% small business in this country. i want to make sure every business man or woman who starts a business gets a tax cut. this had been mislabeled for the large corporations. every small business that had a tax liability got the tax cut thathen we did the repatriationo bring it back at a low grade and we estimate about half a trillion dollars of money that's come back to build factories. >> there's a man on the tax one of the changes made is to have a minimal global tax. but there is so many elements in the alternative minimum tax.

for businesses it's been a very positive thing. trump says that all the time because it is true when you cut taxes for businesses, it's a middle-class tax cut. how can that possibly be because when you get business is investing more in the country they will hire more workers and pay them more, the productivity is related to the investment and that is to say if you have a company that is 18 trucks that all of a suddeall of a sudden t, they have to hire two more truck drivers and so getting the business is healthy so they could hire more workers and incidentally you noticed today in america we have 7 million more jobs than we have people to fill them. that gives a lot of opportunities to bring their wages up.

>> host: the corporate tax rate isn't just a giveaway to the businesses. it shows very clearly i that les to more capital investment it is counterintuitive i think for people and the fight for -- >> guest: we did a study that the average american has gained $2,000, the average middle-class workers have seen an after-tax increase in their income and then when you include the

increase in the salaries they are getting we estimate it's about $3 million. if you your families making 50 o $80,000 a year and you get an extra 2500 in your paycheck, that is a big deal i don't care if nancy pelosi said that is in crimes. there was a story i was in dallas a couple months ago walking down the street and within a woman walked by me and grabbed me by the arm and said are you the one that talks about economics and i smiled and said yes that was me. i wasn't sure if she was going to love me or something. she said i didn't vote for donald trump i don't even like him but i got a 2,000-dollar bonus from my employee.

>> host: after the tax plan was announced there were all of these bonuses increasing paid leave and all this stuff and it wasn't at all the tax cuts already working per se but the optimism. >> guest: you and i have known each other a long time and get their break down a rates down as possible and get rid of loopholes. we try to do as much of that as we could and if there were an area that failed, taking down a special interest groups trying to get rid of the loophole is a difficult thing to do. we got rid of some of them

didn't for example why should somebody in texas pay higher taxes so you can have high taxes in new york so $10,000 per household and that is a very positive thing. we got down to 40% to 37% and the small businesses can deduct 20% of the taxes so it is now effectively closer to 30%. >> host: they were complaining the richest taxpayers were going to be deducting their taxes

>> guest: if you are a liberal you have to understand one of the things we did in the tax plan we doubled the standard deduction you can itemize your deductions but we found almost 90% of americans now are better off just checking the box and you don't have to keep up your receipts and all that. with a few exceptions they are left itemizing deductions of people from the top percentage of the income what they are saying is they want to bring back a tax deduction for the richest vast majority goes to george soros and bill gates and

really rich people. >> host: the standard deduction, i wasn't a fan at all of the individual side. there were things i like and it's important for people to know a vast majority of because we are talking here about income taxes paid by the top 10%. 17% of the income taxes paid by the top 10% income earner. you talk about why you would do

it for reason is talking about the middle-class tax cut is nonsensical. doubling the standard deduction what it means you take even more people out of the tax will. politically i get it, that economically it's a bad idea and then on top of that pric the pre you pay in terms of economic trade-off is that you are not getting the biggest bang for the buck in terms of economic growth. again, there's the politics, i get it, but their rhetoric also bothered me. it's not just bad economics, but it's also the rhetoric was problematic. >> guest: 18% the only

deduction you get is for your kidkids, your cell phone and you have a great system where it's very simple. they will pay their fair share because they will not be able to shelter all of their money, and what we try to do by doubling the standard deduction so that 90% of people don't have to itemize is we've taken away the political constituency for these big group holds and now if we do another round of tax reform in the direction that even i would like to see, it is going to be easier to get rid of those because only rich people get them. we have to fight like hell to get the votes out of the senate and it was very dicey we didn't know until the last day we need

to get this done because the economy would be so enormous. the results as i said have been unbelievable and we got massive job creation and lowest unemployment rate in 50 years with the construction of a manufacturing movement and people feel it every day this wasn't the obama recovery and we've increased from 1.5% to about 3.5% and that was a heavy lift the tax cut was a big part of it. >> host: i saw it as the way to build. >> guest: when ronald reagan reformed the system in the 80s when it was 70 70% cheaper for h

effect and 28% and the economy boomed. the tax system we had the worst business tax system and the whole world how can you be competitive with that and now we fixed that. you are right we didn't do enough to fix the other side hopefully there will be a crack at it. we will talk about texas later in the spending but let's talk about regulation i will say i've been a vocal critic of president trump whether it's on the aspects of the tax cut or trade immigration, but i will say that on the regulation side, you've been an incredible champion to the american economy, and the thing that's important to know is fundamentally, the president

when it comes to regulation doesn't have a ton of power and yet he has been using every single tool and his toolbox to actually do what he could do, starting from day one calling on congress to repeal the elitist regulation that came out. can you talk more about this, you have a whole chapter. >> guest: when the three of us started working for trump he had a business roundtable with about 30 ceos that runs great companierun the greatcompanies l service companies commanding effect turns, construction companies and so on.

that's why the growth rate was so low because the business has stopped investing. somebody is going to whack you over the head if you insist they are not going to do it. i think that had a big impact on the thinking and the fact that he is a builder. >> host: i remember watching him on tv once he was doing a presentation and the first time when he was talking about economic issues and i was like she gets it at a very profound level and with all of the licensing stages, you remember that it was quite striking explaining things like the licensing requirement makes you

get two in a row and to get the third one you ha had a mandatory time of two months to wait until you can even apply for it, or six months for all of these incredible requirements. >> guest: remember what he said in a state of the union speech. it's a great thing to do. to get a permit to build the road can take five to ten years. that is ridiculous. you can develop it for five to ten years because of the mall santasanta for one, another exae was obama passed this climate legislation but in its intention was to destroy the coal industry in america. we have 100,000 people this is important. they are almost impossible to comply with an impact in that

case they knew that it would bankrupt the industry. but you don't want the government bankrupting an industry to fill up some kind of a political objective. you can tell the stories hundreds of times in the business the last chapter in the book is called a light switch is what has happened to the economy. health is the economy doing, how is your business doing that and they said this was six months after the election it's almost like the day after a light switch and the persons they might have more business than i can possibly handle and that is just kind of the unleashing of that business knowing it's going to be okay.

>> host: i want to go to three issues the you barely touch on them and they are the big missing part i think the spending trade and next month it is going to be $22 trillion when president obama goes into office almost 11 trillion, so 11 years as mormore than the entire histy before and it only uphill from there. you make a mentioning of this that there is not enough spending cuts.

and we are back to the years where any spending cuts and any financial regulation is in the fiscal disability taking a backseat in the name of defense spending and it's very surprising coming from donald trump. >> guest: so the audience knows in 2018 the first year federal revenues into the united states government were higher than they've ever been in history. the tax cuts have grown the economy.

it's not of the tax cuts to pay for itself it's not a problem it is a drop in the bucket. they already revised the economy we thought they'd recouped about two thirds of the static revenue this spending is out of control no doubt about that. the problem was the only way to get the benefit democrats to the is to put more money into social programs. then that led to the upward spiral into debt. they are trying to get him right now to do a war on waste and you go through every note and cranny of the government.

i know that his administration is reforming medicaid in a way that has served its population of medicare and social security are the two areas that to be fair to him, the republicans don't seem to have any interest in reforming social security. >> the driver of the debt is going to lead to becoming less growth and higher taxes for everyone because you can't get that kind of money. >> we can pay for social security and medicare programs. we just need more growth.

one thing is for sure if you don't get the tax for growth and we are on this. we show here that 2% growth they are calculating and if you look at the gdp with 3.5% growth it goes down. it's going to be the key component and one other thing i don't think trump would win the election if he could social security and medicare. i just don't see how. >> host: everybody wants to put their big boy pants on and say we have a problem with the program. >> and other people don't really recognize i think republicans don't recognize this enough that if you value your tax cuts you better stop spending.

>> the peak of don't quite understand big government have very regressive taxes comes with a french have much more regressive income taxes, they have a value added tax of 20% and the payroll tax is seven points higher. these are regressive taxes. the thing we are not keeping those tax cuts if you are not cutting spending. >> host: i want them to start vetoing spending bills to be speaker in less than 30 days and we should see some sights on spending. he should do that. he amounts we are spending for the $20 trillion in debt is

completely outrageous. >> host: one final thing, too much government spending is going to kill growth, and growth is important -- >> guest: they like to se say it is a true cost of government is that much -- >> guest: now, you've said you are a student of joe and simon. she who believed fundamentally come and you wrote about this it wasn't just people like me can you have been such a vocal advocate for those and as the ultimate resource i'm very surprised that -- >> guest: has changed a little bit. we need more immigrants in this country. we don't have enough workers to fill the jobs.

we need agricultural workers and anybody that wants to work in this country i am all for it. here's the problem. the american people especially trump voters and i've talked to them personally, they don't want to do anything about illegal immigration system increasing until the border to secure. and i'm with you, i'm with them on that. let's get a wall built and get the border secured. this idea you have sanctuary cities and catch and release and you can give in to the border control, that's idiotic. if you are goin were going to co this country you have to come legally. if we can get the border security done and hopefully get it done in 2019, then you can actually pass -- and i think trump is open-minded to a bill that legalizes a lot of these kids in the country and also allows us to expand the legal immigration system. >> host: most people come here

legally so i don't know that the wall is going to have that much bubut we also have to be -- our job as economists, as free-market economists, there are so few of us that can praise immigration for the greatness in the country. >> host: that's all i'm saying. but then you have to reform the system to allow all these -- >> guest: we should be selective in who we bring in. for example immigrants bringing in their elderly parents, they are not going to be a benefit to the country. >> host: it's not a high skill low skill -- >> guest: >> host: things like low skilled immigrants who -- >> guest: they will bring more benefits than low skill. >> host: they bring the benefit by allowing americans who are here who are low skill and middle class to actually go up the ladder.

>> guest: the marriage-based system trump wants to make sure it's coming you to make sure it's coming you get more points if you have skills and no english and have the talent that we need. other countries like australia, canada, they have the system that works well for them. why shouldn't we move in that direction as well. >> host: i think if we get this spending and taxes in line, everyone is going to continue coming here. >> but >> guest: people see trump hates hispanics. wait a minute, there's all these hispanics at the border trying to get into the country, how can that be if everybody wants to come in here. >> host: you and i, we know that fundamentally the economic benefit of trade is unilateral, and yet we would know if there were no trade barriers around the world but ultimately --

>> guest: the economics are clear on this. all zeros. >> guest: wouldn't it be better if we could have the optimal outcome be that both countries have zero. using tariffs as a negotiating tactics to get others to reduce fares. it's just a truism. it's in the book. they are lower than virtually every other country. >> host: one has lower than mass and other countries have lower -- >> guest: not according to -- they are slightly higher than we are. >> host: we went to war and all outcome of the current state of the world right now because of this is we have higher

tariffs on a lot of things. >> guest: i'm optimistic trumped is going to win. they are completely negative i agree on that. the big deal i think americans should be concerned about is china as the new soviet union they are out of control and the fact that they steal, lie, cheat, we can't live without anymore and if it takes the terrorists to get them to behave themselves and stop stealing and cheating we ought to do that. >> host: [inaudible] it's really hurting us and it's interesting when you look -- >> guest: so you would be in favor of just not letting china continue to be -- >> host: there is no silver

bullet ever. what is important is to have different ways -- >> guest: like what? >> host: i think gdp was a great way. >> guest: wto, really? >> host: we benefited from this the highest level of complaint in the united states and the data shows the united states complies. >> guest: are you kidding me? >> guest: i've looked at the data. there are taxes --

>> host: we are imposing high taxes on americans until they start treating their people right. the jury is out. >> guest: trump is using leverage and needs access to grow especially china and he's basically saying you're not going to have access to the market until you start behaving yourself and create a level playing field open up your markets to america. the request for exemption they are heartbreaking. we always talk about it's a consumption bot but workers and manufacturers in america were consuming a lot.

it is so hurtful. that's where i disagree i think that he is going to win and we are going to get a free trade system as a result of what he is doing they will reduce their tariffs. >> host: i think they will do the minimum they have to do but the touches will still be there for the long haul. >> guest: i agree those are hurting america because they are making american manufacturing jobs -- >> host: i don't think it's a good strategy but i'm not at the head of the country i'm just an economist. >> host: there's a lot of truth to what you say that i thinbut ithink china is a diffee in my opinion. >> host: people used to say russia. >> guest: we didn't have free trade with the soviet union. >> host: it is a recurring fear and i don't think punishing ourselves is the way to go.

that being said, i am so glad we had that conversation. it's a really interesting perspective. >> host: the silent partner in the book he's basically saying any country that wants to cut to zero in the united states we will cut to zero it would be a great outcome. it would be ironic if it led to more free trade not less. >> host: thanks so much for this conversation. >> guest: divided

i'm pleased to introduce carmine to politics and prose. an attorney in private practice and cofounder of apron and hair she attended harvard university, columbia university and cornell law school and has worked at citigroup. when she took a job at the federal reserve bank of new york, she believed she would be monitoring the bank's behavior in order to avoid another financial crisis. instead, she encountered a federal reserve holding banks accountable and began secretly recording her meetings, recordings which became the basis of the this american life episode.