Larry Kudlow, director of President Trump’s National Economic Council, sat down for a wide-ranging interview with CNBC’s Jim Cramer Wednesday morning in New York.
Kudlow made headlines last month by making the “pants on fire” claim that the deficit “is coming down — and it’s coming down rapidly” before clarifying to reporters that he meant that the deficit will come down over time as the Trump’s administration’s economic agenda powers growth far stronger than virtually all forecasters expect.
Kudlow again downplayed the danger of rising deficits Wednesday, and he also touched on the strength of the economy — there is "no recession in sight right now," he said — and the prospect of additional tax cuts. Here are some highlights from his comments (you can watch the whole interview here).
On the economy: “We are getting 3 [percent growth], and it may be 4 for a quarter or two. It may be plus, I don’t know. But that’s all to the good.”
“In some respects, we are in the ninth year of a recovery. … When I was a young economist at the Fed and Wall Street, it was usually labeled by economists of all stripes 2 percent growth was a growth recession. It was not a recovery. It was not really an expansion. … Just consider this possibility: We have been in a growth recession since the middle of 2009, and you can go back further if you like. Now, if we get the kind of [GDP] numbers that you’re suggesting and I’m suggesting … that may be the beginning of the recovery. … It is possible that a ‘real’ business growth cycle is right there in front of us for the next four, five, six years.”
On the budget deficit: “Yeah, gigantic deficits are not good, and we’re going to run, as a share of GDP, we’re going to run 4 or 5 percent. I’ve seen worse. I mean, in the Reagan years, in the beginning, you cut taxes, the first order is you lose some revenues, no question. But it’s like investing in a business. You may have to borrow to make a good investment. I don’t mean cash flow daily. I mean a good long-term investment. And I see the same thing happening now. The Trump tax cuts, yes, we will lose some revenues in the very short run. I believe we will get it back and more. … But the point is yeah, you’ll get your [deficits of] 4 and 5 percent [of] GDP. It’s far, far from the worst thing I’ve ever seen. Far from the worst thing.”
On additional tax cuts: “I don’t want to go too far on this. … But there are a number of people on the Hill, for example, who would like to make a lot of the tax cuts, the individual tax cuts, permanent. So not only did we have a successful tax cut, but we want to keep it that way. And then you may see, frankly, not only a [tax cut] 2.0, but you may see a 3.0, and you may see a 4.0. I’m an old Reagan tax reformer. Lower the rates, broaden the base. A lot of that was done in the last bill. Much needs to be done going forward. So some of those ideas are circulating and I think will come to fruition.”