you have to be in agreement on what this common foundation is to prosper and to be an asset and not a liability. don't think we as a country and i would say our party which is more about diversity speak enough about a common foundation and the girls we agree upon. if we do that i think we will have not just lip service but nurtured as a strength than perhaps is a liability. >> i was going to hug him. [applause] u.s. economy has been expanding now for several years but the

global economy has slowed a bit and we see uneven performance in the u.s. with the consumer at times. in a recession let's talk about these issues with larry kudlow assistant to the director of the economic coalition of the white house and neo-from the economic center. please welcome them. [applause] >> hello larry. please take a seat rep make yourself comfortable. let's just jump right in since we have a lot of news this morning. house speaker pelosi just announced the democrats and the administration have reached an agreement on the u.s.-mexico can it deal and we expect a vote next week so this is good news for all of you but how good is this for the rest of us for the

u.s. economy? is this going to make any difference and is it any better than after? >> i think it's better than nafta. i think it's broader than nafta and i think it updates nafta. particularly and some important new economy ways. the way this thing was always designed by ambassador lighthizer in a bipartisan sense you have domestic content and labor issues which have been resolved more on the old economy side very important by the by to update that but you also have new economy issues in particular intellectual property rights which have never been put into one of these trade agreements before. i think financial and digital services to. they are going to make a big difference and i think you are going to get a lot of investment

that we might not have had. i had just pulled out some of the estimates from the international trade commissioned the itc and i know this is very imperfect and they acknowledge that's very imperfect a lot of people were quoting numbers from the itc, lower numbers but they gave wide ranges of impact on the u.s. economy over period of several years and i just wanted put that out there. the range was 176 to 589,000 jobs. that's a big range and you could drive a truck through that but it does reflect uncertainties about that are risk-taking. that's a gigantic number. similarly on real gdp there was

a very wide range of 35 tases points to 1.2% in the mid-point of that was three-quarters of a% you could over time have an increase of three-quarters of a% on real gdp on trend and is much as 350,000 jobs per year. those are big numbers. those are very big numbers. one other point i want to make as there is a currency stability in there that's never been done before and that's why we always thought this was a template of a trade agreement. economic growth impact of nafta or usmca is very substantial. worker defense domestic content very substantial and new economy break is very substantial. really these are big trading

partners and i know china is a sexier topic but the reality is total trade and north american total trade with canada and mexico is basically slightly more than twice what it is for china. >> and when we say template is this the type of the template further trade agreements that would apply to other trading partners? >> i think so and as you know we are in negotiations with china. we are also in negotiations with some breakthroughs are in japan. we are slow in negotiations with the ceo and we may be in negotiations with the united kingdom if that works out. as a template i must say i have known bob lighthizer for a very long time. we did cub scouts together so

that's how far back we go produce the best trade negotiate in the business and he has created a template. it's going to be a very pro-growth template. >> let's jump to the sexier topic as you put it which i'm sure is on everyone's mind here. the drawer reported this morning that u.s. and chinese negotiators are planning to delay tariffs on imported chinese goods that are scheduled to go into effect this weekend. you want to confirm that publicly? >> i cannot confirm that or you. >> but it's in the journal. it must be true. >> yes, i understand. [laughter] fabulous newspaper. a couple of things. i'm not going to go into detail but i will say this. the president has struck a very constructive and optimistic tone particularly in the last week or two. in his public comment his tweet and so forth which is a good thing. my friend henry kissinger just

returned from a week in china and reported back. he was in the office last friday that chinese hierarchy including president xi had a very positive attitude towards phase one so you have the two leaders. on the other hand president trump first of all there is no final. second of all he has said if it is not satisfactory, that's not the kind of deal he wants than the december 15 scheduled tariffs will go back into place. >> is so there's still a possibility on the table. >> as there is but i don't want to sound pessimistic. i don't want to spend that. the reality is those tariffs are still on the table, the december 15 tariffs and the president has indicated if the

short strokes remaining negotiations do not pan out to his liking that those tariffs could go back into place. so they could not but they also could pay there is no definitive decision on that yet. >> it how long is it going to take for us to get to a phase one deal? many people in administration have said we are close with the president said we could wait until after the election. >> he's giving you a wide range of options which i reckon is the mark of a good negotiator. i wouldn't want to comment any further on that. this is never been a time when there is no arbitrary deadlines on this. december 15 will be a very important date, no question about that. there's a weak stomach to go but other than that it is what it is.

the president said it could go on and they could go on and if the president is happy with the outcomes being negotiated by secretary mnuchin then it may work. >> sticking points. we reported that agricultural purpose of getting china to commit to enter cultural goods how is that going? >> certainly a hot topic of conversation. >> what about chinese demands to roll back u.s. tariffs? >> chinese demands to roll back i believe that's also part of the conversation. >> think you. some people have called phase one of many deal. how significant will it the end i believe mike colley john bussey as my colleague mick mulvaney are we just going back to where we were before with this whole enterprise? >> i think personally and i have not read every detail. i'm part of the group that i have not read everything.

the deputies group is meeting almost daily or nightly so things are moving but i think a lot of these chapters on ag and intellectual property on financial services on currency's a lot of the chapters have come beyond where we were. they have advanced the ball from where we were last spring when talks broke down. >> okay. i have heard you and other members of the administration defend tariffs as a tactic toward the goal of lessening the playing field making it fairer for american workers, stopping force technology transfer and intellectual property. think a lot of people in this room would reroute those goals but at the same time we have heard on executive earnings

calls and interviews that the uncertainty is really making it hard for them to plan their budgets, their sourcing in their supply-chain. it's not just china. we have had new tariffs announced last week honored sateen in brazil. .. alright then certain about that. oppose tariffs on france, and then there is last spring when the president threatened to impose tariffs on mexico and then didn't. so, there are many executives have said this has caused them to hold back on investments and hiring, and there are many economists who said this pullback is a significant reason for the global slowdown

and u.s. economic slowdown this year. so how do you respond? >> a couple of things, first of all the u.s. economy is in great shape and getting better in my judgment. we had a soft patch after a year of very, very, very stringent monetary tightening, which i think is a key. now the fed is taken their foot off the brake and the balance sheet is growing again. and that's is a good thing. the recent job numbers have been terrific, actually most of the recent numbers have been terrific, the housing numbers have been terrific. we have very good productivity numbers this morning, and facts on the productivity side i think a lot of economists are now going to change their estimates for long-term potential gdp.

were running on an eighth quarter basis and in round numbers 1.5% productivity one a half% job gains, see her almost 3%. round numbers, i think that's very positive. so, i think first of all america is working. these employment numbers have exceeded almost everybody's expectations. except mine. that's a joke. [laughter] but i would argue that america is working. and i would also argue that we are seeing a worker boom, and i want to go to that. the worker boom, my old boss ronald reagan used to talk take-home pay. after tax, after inflation. and in less than three years it has increased according to the census bureau, by $5000 for a family of four. >> i would like to go to the poll question i'm not sure

were going to have time otherwise. >> i want to put these economic numbers in because i think trade is very important. trade strategy. but the u.s. economy is doing very well with tax cuts and deregulation and energy opening. and to your., trade reforms. so america's working, and there's a worker book, and actually has economists on both side of the aisle pointed out just for the most recent numbers that's been going on, the production workers are increasing their wages faster than management. >> alright i have to cut you off there. we want to go to the poll question. if we can put that up. it's as the global economic slowdown is prompted my company to cut back on planned capital investments and hiring. please answer if you can. and while you're answering, i think we'll probably have just about one more question before we open it up for the audience. and i really wanted to ask you

were the prospects for another trump administration tax cut proposal before the election? >> i'm just trying to read. >> don't will get all the results of the end. so is the president going to propose another tax cut in the near? and if so when and where the parameters? >> we are working on something with tax cuts now. we are soliciting lots of ideas from leading house and senate numbers and outside experts, and also people need administration. >> more specifically for individuals or companies? >> actually i don't want to be specific. >> i can tell, let's think this through. what are some of the options on the table? >> will have a very strong emphasis on middle-class tax relief, and my guess it will include both business and individual reforms.

>> what is the timeline? >> i would not expect the product until well into 2020. well into 2020. >> so close to the election? >> probably close to the election. it would be in effect kind of a postelection planning document. that if elected these the kinds of approaches, progrowth approaches, middle-class business, small business approaches that a second term would have. yes. >> okay, john doing a take away? question for larry from the audience. while you all are thinking, larry, just for a.of clarity. last week the president said he was raising tariffs on steel and aluminum from brazil and argentina because he felt they had been wrongly devaluing their currencies. but maybe the rules and go through, but that's with the president plan. but let me ask you though what you just said about the china trade deal. which is that you expect that

what's being negotiated now to move beyond what was already agreed to by the chinese in the spring. can you give us, i know you don't want to give too much detail, but can you give us a little bit more on that? a few more parameters? additional headway has been made on some of the tougher issues? >> well, it's very hard, i do not want to open up the details of the negotiations. it's very hard to do that. i would just suggest as i did that it just looks to me like some of these key chapters that i mentioned, ip theft, currency stability, financial services, expansion, opening up agriculture not just purchasing of commodities, but actually reducing the tariff barriers on agriculture.

as well as actual spending. now because these things, john, are not resolved, i cannot be too specific. >> we've heard about those in the paper, those are not the real big issues like steak subsidies and forced tech transfers, i assume those are for a later date. >> yes some of those will fall -- this was always planned, phase one, and what's not done will go into phase two. one just quick.the decision by the president, a few weeks ago or whatever it was, to actually look at this in phases rather than one large discussion, was a very significant phase which i think helps enhance the probability of getting some agreement. >> okay, another question right here in the back please celso you are. >> i'm nick from snap-on, thanks for being here.

i wonder if you give us some insight on how the white house balances the trade talks with perhaps endorsing the congresses view of the hong kong protester protesters. thinking maybe that gives the moderates forces in china, interested in china less maneuvering room in a time in which we are talking to them? talents. >> will look, i don't think there is a direct link between some of the, i will call them freedom of democracy issues if you will, and the trade talks. i don't think there is a direct link. but, having said that, i think the president has made it very clear that the united states consistent with its long history favors freedom and democracy. and human rights. and feels compelled to speak

out where these things develop. so you saw our support for the freedom of democracy gain, group, and hong kong. which was subsequently ratified by the local elections. now, these are separate tracks, i understand that those relationships between a trade track and a human rights track i get that, but nonetheless there may be some spill over. i understand that too. it's a complicated matter, its complex matters. but we have very strong american values that pertain to freedom. we support freedom loving people wherever they are around the world. and that is true for our entire history. and so in this case, we supported the congressional resolution, second-rate

secretary pompeo's number and eloquent on this, vice president pence has been elegance, president trump has said it many, many times. so, you have separate tracks and i understand they are related tracks. >> with one last quick question than if not a minute wrap it up. yes just a very quick. >> larry victor jody from cibc and i have a question about interest rates. we are all operating at a persistently low rate low inflation environment. we can't see them going up anytime soon, there are pressure pressures to bring them down. if you have a normalization of the environment, how would your economic policies shift? in a very brief overview. >> and normalization would mean? >> even doubling or tripling from where they are today. because the cost of money is mispriced today in my opinion. >> will course global rates

are very low. for a variety of reasons. that word normalizing, i don't mean to pick a jew, but i just don't know what that means. i don't know what that means. we have, we live in a world with there's virtually no inflation. i mean reported inflation is the traditional idea of the term structure of interest rates and the curve. the outlook for inflation and real growth and returns on capital and return on premium. but that has been upended in recent years. there is no inflation out there. whatever inflation is recorded, is probably still too high. if we calculate this properly. i don't see why interest rates have to go up. i'm just giving you my personal view. the market determines most interest rates. the market determines most interest rates.

and i don't think, are central bank or other central banks should worry about controlling interest rates. i think they should provide ample liquidity, and their rates will take care of themselves. my former boss just passed away he was a great man. but when i was a child and works for him and the new york in 1975 as a researcher and speechwriter, it was an easy job being if. [inaudible] [laughter] he was a brilliant man. he was exactly the right man the country needed to stop inflation. and i forever give him credit for that and he taught me a lot. and although he did not prefer my boss he did tell me to it come work for my boss. volker if you read a very good article i just scanned in the

wall street journal, the editorial the news report. his view is that the market will turn and i agree with that. i just don't think we have much to worry about. i will just say this. we do have a problem sir with the world economy has slumped. this is the only country, the usa is the only country showing prominent economic growth, and i think the signal of the stock market means 2020 growth is going to be much faster than 2019. you may agree or disagree and i appreciate that. let us not forget, some of the incentive oriented supply-side policies that have worked throughout history. namely, lower marginal tax rates, rolling back unnecessary self regulations, and attempts to reduce trade

barriers. these are classic and neoclassic incentive oriented policies, my former boss ronald reagan used in my current boss is using. i think that's your problem for world growth. i think the central bank obsession is just wrong, and i think they are looking through growth measures. the g-7 will be here in the u.s. at camp david in late spring early summer. i will be available in any function to run that thing. and we are going to vote those sessions through what i call back to basics. we will be devoting those sessions to the need to restore world economic growth appeared world economic growth. in europe, in latin america, and the middle east, and in asia. there are very few countries growing, most countries are

not. that is the single biggest problem that faces us today. we must restore growth and prosperity, and then look those animal spirits a best we can. we will devote our g7 efforts towards that. i don't see that so much as a central bank function, i see it more as going back to old-fashioned supply and scented policies where we should reward success and not punish it. >> so good news on inflation unless you're trying to raise your prices. [laughter] my code well thank you very much. [applause] next, the managing director of the international monetary fund speaks at the annual wall street journal ceo council meeting in washington d.c. >> soleri gave us a very good primer on the u.s. economy and began talking about the internatl