The U.S. economy has been growing since 2009, its longest expansion on record. But as the global economy shows signs of slowing and trade negotiations heat up, where are things headed?
Lawrence Kudlow, director of the National Economic Council at the White House, sat down with Nell Henderson, The Wall Street Journal's economics editor, to discuss these and other issues.
Edited excerpts follow.
MS. HENDERSON: House Speaker Nancy Pelosi just announced that Democrats and the administration have reached agreement on a U.S.-Mexico-Canada trade deal and expect to vote next week. Is the new deal really better than Nafta?
MR. KUDLOW: I think it's better than Nafta. I think it's broader than Nafta. And I think it updates Nafta in some important new ways.
You have new economy issues, in particular intellectual-property rights, which had never been put into one of these trade agreements before. Financial and digital services, too. They're going to make a big difference. And I think you're going to get a lot of investment that we might not have had.
I just pulled out some of the estimates from the International Trade Commission. A lot of people were quoting lower numbers, but they actually gave wide ranges of impact on the U.S. economy over several years. On jobs, the range was 176,000 to 589,000. The midpoint is 382,000, which is a gigantic number. On GDP, the midpoint was three-quarters of a percent. So you could over time have an increase of three-quarters of a percent on real GDP a year. Those are big numbers. There also is a currency-stability provision in there that's never been done before. That is why we always thought this was a template of a trade agreement.
MS. HENDERSON: When you say template, do you mean this is the type of agreement you could apply to other trading partners?
MR. KUDLOW: I think so. And as you know, we're in negotiations with China. We're also in negotiations with Japan. And we're also in negotiations with the EU. We may be in negotiations with the United Kingdom if that works out.
I have known [U.S. Trade Representative] Bob Lighthizer for a very long time. I think he's the best trade negotiator in the business. He has created a template, and it's going to be very pro-growth.
MS. HENDERSON: The Journal reported this morning that U.S. and Chinese negotiators are planning to delay the tariffs on imported Chinese goods that are scheduled to go into effect this weekend. Do you want to confirm that publicly here?
MR. KUDLOW: No, I cannot confirm that. 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 comments, his tweets, and so forth, which is a good thing.
My friend Henry Kissinger just returned from a week in China and reported back that the Chinese hierarchy including President Xi had a very positive attitude toward a phase-one deal.
On the other hand, President Trump has said if it isn't the kind of deal he wants, then the Dec. 15 tariffs will go back into place. The reality is they are still on the table.
MS. HENDERSON: Then how long is it going to take for us to get to a phase-one deal? Many people in the administration have said we're close. But then the president said last week we could wait until after the election. Which is it?
MR. KUDLOW: Well, he's giving you a wide range of options, which I reckon is the mark of a good negotiator. This has never been time-driven. There are no arbitrary deadlines on this. Dec. 15 will be a very important date, no questions about that.
MS. HENDERSON: We've reported that getting China to commit to big purchases of U.S. agricultural goods is a sticking point. How's that going?
MR. KUDLOW: It's certainly a hot topic of conversation.
MS. HENDERSON: What about Chinese demands to roll back U.S. tariffs? How's that going?
MR. KUDLOW: China's demands to roll back, I believe that's also part of the conversation.
MS. HENDERSON: How significant will a phase-one deal be? Aren't we just going back to where we were before this whole enterprise?
MR. KUDLOW: Things are moving. I have not read every detail, but I think a lot of these chapters on agriculture, on intellectual property, on financial services, on currencies, 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.
MS. HENDERSON: You and others in the administration have defended tariffs as a tactic toward the goals of leveling the playing field, making trade fairer for American companies and workers, stopping forced technology transfer and intellectual-property theft. Executives have said the uncertainty is making it hard for them to plan. And it isn't just China. We've had new tariffs announced last week on Argentina and Brazil.
MR. KUDLOW: We haven't implemented any new tariffs. No decisions have been made.
MS. HENDERSON: There also have been proposed tariffs on France. And last spring the president threatened to impose tariffs on Mexico and then didn't. Many executives have said this has caused them to hold back on investment and hiring. Many economists have said that is a reason for the global slowdown and U.S. economic slowdown this year. How do you respond?
MR. KUDLOW: The U.S. economy is in great shape and getting better. We've had a soft patch after a year of very, very, very stringent monetary tightening, which is a key point. Now the Fed has taken the foot off the brake, and the balance sheet is growing again.
The recent job numbers have been terrific. Housing numbers have been terrific. We had very good productivity numbers this morning. America is working.
I also would argue that we are seeing a worker boom. What my old boss Ronald Reagan used to call take-home pay, after tax, after inflation, in less than three years has increased according to the Census Bureau by $5,000 for a family of four.
MS. HENDERSON: Is the president going to propose another tax cut?
MR. KUDLOW: We're working on something called Tax Cuts 2.0. We're soliciting lots of ideas from leading House and Senate members and outside experts and also people in the administration.
MS. HENDERSON: For individuals or for companies?
MR. KUDLOW: My guess is it will have a very strong emphasis on middle-class tax relief. And my guess is it will include both business and individual reforms. And perhaps making some things permanent. I wouldn't expect it until well into 2020. Probably close to the election.