Freefall: Larry Kudlow On Managing The US Economy In A Pandemic

interview with Larry Kudlow
Tuesday, October 6, 2020

To watch the video, click here.


Peter Robinson: The economy was strong, even booming, and then came the pandemic. What now? Welcome to Uncommon Knowledge, I'm Peter Robinson. During the 1980s Lawrence Alan Kudlow served in the Reagan White House where full disclosure he and I became friends. After the Reagan administration, he went to New York to a career in banking and journalism. Perhaps most memorably as the host of CNBC's the Kudlow report. In 2018, Mr. Kudlow joined the Trump White House as the director of the Economic Council, the position he holds today. Larry, thanks for making the time to join us. You're working from home like all the rest of us, all right.

Larry Kudlow: Yes.

Peter Robinson: First question. Former President Obama speaking in 2018, when the economy was still strong, quote, "When you hear how great the economy "is doing right now, let's just remember "when this recovery started." Close quote. The recovery started way back in 2009, which was Barack Obama's first year in office. The question is the Obama economy versus the Trump economy, we'll come to the pandemic and the crash in a moment. But first, the first three years of the Trump economy versus the Obama economy. What do voters need to grasp?

Larry Kudlow: Well, I think that, yes, of course, the recovery started under President Obama. But actually, it was the slowest recovery from a recession. And oddly enough, when you have deep recessions like that, with the banking collapse, you'd expect a huge increase in GDP and other measures. And he never got it, I mean, averaged about 2%, maybe slightly more than 2% over his eight years. But I think what really distinguished the Trump economy was with tax cuts and deregulation, whereas the prior group was raising taxes and re regulating strictly in health care and energy. But with POTUS', plans on lowered taxes, and regulation, what we find out, actually just released about 10, 12 days ago, the largest increase in median family income we've ever seen, over a three year period, the increase under President Trump was five times the increase of the entire eight years of Obama. And in fact, it was the first increase in real family income, and the first increase in real wages going all the way back to the year 2000. President Bush didn't get it. And President Obama and Biden did not get any increases in income. That's a key measure that that's what just call it living standards. That's what many economists refer to it as. And that I think, on top of record low unemployment rates. Now, to be fair, in the Obama years, unemployment fell, but it fell very slowly. In fact, right now, over a five month period, in the recovery from pandemic, we're lowering unemployment and increasing jobs by a much faster pace than at similar times under Obama. But putting that aside, more important to me, the unemployment rate with 3.5% was lost in history. And you can go right across the board. Every minority group, African Americans, Hispanics, Asians, people with less than high school, certainly women, women are among the biggest beneficiaries of President Trump's first three years in office. And one last point that I would make, which I think is quite interesting, with the tax cuts across the board, but particularly the business tax cuts, as well as the rollback of regulations. We had probably the best increases of middle class and lower income wages than anyone has seen before. In fact, this idea that is only tax cuts for the rich, just factually untrue. Middle income folks, lower wages. In fact, the bottom 10 and 20% saw the fastest wage increases much faster than the top 1% of the top 10%. So what I'm saying is living standards way up. By the way, poverty rates fell significantly, I neglected to mention that inequality actually narrowed, record low unemployment, the best gains for middle income and lower income wages. That's what distinguishes Trump's first three years. And it reminds me to be perfectly honest with the Reagan years following the full implementation of the Gipper's tax cuts, we saw very similar things with wages rising for the middle income people, family living standards rising, very similar. And I think supply side economics works. I think when you tax something less, you get better work, you get more investment, you get higher real wages, you get higher family living standards.

Peter Robinson: So Larry, hold on, you just said something. So this business about the five fold increase in median family income, which was released 10 days ago.

Larry Kudlow: Yes.

Peter Robinson: That's just that's not just significant, that's huge. Hasn't that been the Holy Grail, the elusive goal of two decades now? We hear over and over and over again, that in this new normal, the income of ordinary Americans has stagnated.

Larry Kudlow: Yeah.

Peter Robinson: And you can give them a little more this program a little more in that program. You can say, well, health benefits of it. They're getting more because of technology. But when still an all ordinary Americans haven't felt much increase in their living standards for a couple of decades. And you are saying that under the first three years of this president, that finally changed, Do I understand that right?

Larry Kudlow: Yeah, secular stagnation ended. And by the way, I mean, there are lots of opinion polls on lots of different things. But the one staple, is President Trump gets very high marks for managing the economy. And I think people see with clarity. I mean, lower tax rates, interestingly, for business and small business. This is something that Kevin Hassett and I and Arthur Laffer and some others argued that those business tax cuts again both large and small companies would actually benefit the middle class more than the top rates. And that's exactly what we saw, simply because more profitable businesses, more investment from businesses, provides greater productivity and higher real wages. I called it the blue collar boom, president adopted that view. And I think that was a telling moment. And as I say, it's quite reminiscent of what happened during the Reagan boom. But the point is secular stagnation, which we told was--

Peter Robinson: The new normal, the new normal.

Larry Kudlow: New normal, all these so called mainstream economists were wrong, they were absolutely wrong. And what was necessary was a big change in policies. And I dare say if President Trump is reelected, you will see more of the same. Whereas on the other team, they're going to reverse those policies. And we will go back to secular stagnation, with higher taxes, and government running health care, government running energy, ending fossil fuels, making power and electricity prices higher, we will return to secular stagnation. And my great hope is, as President Trump, you know, he's getting stronger from the aftermath of the virus and so forth. You will really punctuate that in the next couple of debates and on the campaign trail.

Peter Robinson: Right, okay, let's just take you through the last six or seven months. COVID hits, we see a near collapse. In the second quarter of this year, the quarter and quarter change in GDP is more than 30%, which is the sharpest drop since the Great Depression. You were in the White House as the economy shut down. You have devoted your entire life to free enterprise, to growth, to just the kinds of policies that the Trump administration had put into effect. And that as you just argued, were working. We'll come to facts and figures in a moment. What did it feel like to sit in the White House down the hall from the president as the economy, everything that you'd worked for just fell off a cliff? You witnessed a meltdown what was it like Larry?

Larry Kudlow: Well, it was difficult. It's still difficult, Peter, to be honest with you. People didn't really expect it. It happened. You have to cope with it. Look, yes, we were all very disappointed that the President's boom was temporarily stopped by this pandemic, and the mitigation which closed down businesses which then led to a significant economic contraction in the first half of the year. On the other hand, I must say, much greater hardship than disappointment much more heartbreak than disappointment occurred throughout the country, among people who lost jobs, among people who got sick. Among people who lost their lives, fatalities rising. Those are very tough things, very brutal things. I think most Americans are great, and they have a spirit and they're working hard now to climb out of this. But it was a very difficult winter for everybody, not just White House, folks. But I think everybody around the country and I think it's a great testament to the American spirit, frankly, that as the economy has been reopening, it's being reopened at a very rapid rate. I hope we'll get into that because--

Peter Robinson: Yes, for sure.

Larry Kudlow: All the data are still showing a significant V-shaped recovery, which will generate fabulous, third quarter and fourth quarter. We'd be thrilled with 20% plus. But a lot of forecasters now, including the Atlanta fed GDP now models talking about 35% growth in the third quarter. So anyhow, we'll see how that works out. The snapback is coming as businesses reopen. This is not an easy period. It wasn't easy for us. It wasn't easy for anybody out there.

Peter Robinson: Larry, during the pandemic, the Fed pumps vast liquidity into the financial system. Over the course of a couple of months congress enacts and the president signs four different bills, major pieces of legislation coronavirus relief packages that comes to about 3 trillion. Too early to think about this, or can you distinguish between what was necessary and what was perhaps an overreaction? Did we need all that 3 trillion?

Larry Kudlow: Yes, absolutely.

Peter Robinson: We did no qualms about that whatsoever.

Larry Kudlow: No, it was a tremendous emergency situation. And really, as President Trump said time again, he was ready and willing to use the full power of the federal government to try and inject enough assistance, liquidity money to get folks or as many folks as possible through this crisis. And get to the other side. This was not really a macro economics event, so much as it was what you might think of as a natural catastrophe, a super bad hurricane or a super bad snowstorm. And it will pass and it is passing now. But we did what we had to do. And fortunately, we were able to craft a bipartisan package with the Democrats. And I think it was entirely appropriate. I remember sitting in one of the meetings, Secretary Mnuchin, Steve Mnuchin and I were up on the hill. And we were in a meeting with the Senate Republican conference. And Mitch McConnell, the Senate leader, a very distinguished man and a friend of mine. And at the time, I believe this was in maybe second or third week of March. They were talking about a trillion dollar assistance plan. And in that meeting, which was packed, I just said, Sir, it's gonna require much, much more than a trillion dollars. And maybe that was a turning point, maybe not. We wound up really, we wound up with nearly 3 trillion from that package. And you mentioned the Fed. I give the Fed very high marks. They poured money into the economy. They had been tightening. I think that was a mistake a year before. But in any event, Fed poured money into the economy. And with Treasury set up a number of lending mechanisms to stabilize financial markets and businesses. I think the Fed acted extremely well. And my hat's off to them. So together, you have the administration, you have congress, you have the Fed, doing what you have to do during a dire emergency like that.

Peter Robinson: Now we're coming out of it. You said this yourself. Just one more question on government aid. And right, I actually I have to confess I haven't looked at the news this morning. But the news as of the last several days has been that the House Democrats want a new relief package. And their number is something like 2.2 trillion. And the republicans in control of the Senate say no, no, no, that's but that's too much by at least a trillion. And circumstances are different. We're recovering. But of course, one just on the politics of it. The election takes place less than one month from today in many states, people are already voting by mail. And the republicans in the senate with the senate itself at stake, not just the White House, but the senate itself at stake. The Republicans are permitting themselves to look stingy. What's Larry say to Mitch McConnell today?

Larry Kudlow: Well, I support Mitch McConnell. President Trump was literally just out in the last 20 minutes with a tweet suggesting I mean, the bid and the offer here is 2.6 trillion.

Peter Robinson: 2.6, I misspoke.

Larry Kudlow: That's it, that's a trillion dollars, but even more than the number. So much of the Democratic plan, so to speak, is filled with politics and ideology and has virtually nothing has virtually nothing to do with COVID, or economic recovery. You know, things like providing new assistance plans to illegal immigrants just to name one thing of many talking about, you know, mail and balance and harvesting about... I mean, it's just I'm not going to go through it all, but had nothing to do. We have argued, and again, Secretary Mnuchin, the lead negotiator does a great job. We have argued that there are certain targeted areas that will be helpful to the economy, I don't think the recovery depends on it. But it would be helpful, for example, more assistance to small businesses, the so called PPP plan, payroll protection would be very helpful, requires legislation, even though there's about 130 billion of unspent funds from the first round. We'd like to see legislation for unemployment assistance. We offer it up as an executive order. Generous, but nonetheless, reducing disincentives $300 a week, that's not gonna be available forever. We're gonna run out at some point, let congress held back, we wanted some money for opening the schools, which I think is vital. We put in, I don't know $105 billion things of that sort. It just four or five things, the airline money is another one made sense in terms of the COVID problem, and coming out of a contraction. And that's just common sense. And I don't understand why you couldn't accept these four or five, maybe six items, without getting into a gargantuan with all due respect. I know the politics and ideology is different. I respect that. But now is not the time we can do these other things later on or after the election. So it's disappointing. Market's a little disappointed today about it. We'll see what happens. But right now, we are still at loggerheads.

Peter Robinson: All right, Larry, you called more on the recovery more on what we can look forward to. You used the term V-shaped recover yourself a moment ago, sharp contraction, very sharp rebound the markets of what the Dow has already recovered. It's already almost at the peak. Well, if they're down a little bit this morning, maybe they're off. But the Dow has already essentially recovered all its losses, employment going ticking up and so forth. Here's Joe Biden, former Vice President Biden. It's the recovery isn't V shaped, Larry, it's K shaped, K shaped going in two different directions here, quote, "Billionaires like President Trump "have done very well, but folks living in Scranton, "and working class towns in America, "how well are they doing?", close quote. What's the answer to Joe Biden?

Larry Kudlow: Well, look, they're doing better. I mean, here too, we have this sort of fact free analysis, that the rich always do better, no matter what republicans do. Right crime, the other side is the rich always do better. First of all, I have nothing against rich people but we aim to help the entire country. Remember America first from President Trump now in terms of the facts, two thirds, 66% of the newly created jobs, it's roughly 11 and a half million new jobs. Two thirds went to the lowest wage paying areas retailing, hospital leisure restaurants, and low end healthcare systems. Those are the biggest recoveries. And those are typically not for the rich. They are for the lowest end. Manufacturing, which is essentially the blue collar boom, has been one of the leaders in round numbers. Peter, we put I think, back to work about 700 some odd thousand in manufacturing, and another 500,000 in construction. There is a automobile boom going on. There is a housing boom going on. So you see production restarting inventories have to be rebuilt. Now those are more middle income wages. They're not millionaires. The hard hats are not millionaires, but God bless them. They are back to work in large measure, not holy, we got more work to do. But the charge that Mr. Biden and others make is simply not true. It's one of these fact-free ideological, finger-pointing which has no merit.

Peter Robinson: Think for a moment of the League of Women Voters, one of the organizations, as far as I know, it still does this. But certainly when you and I were kids in the Reagan White House. There are organizations that put together nonpartisan comparisons between the candidates issue by issue. I'm going to ask you to do that for me. Take me through it. Again, the election is less than a month from the date from today. I'm your ordinary voter. I'm trying to figure this out, taxes, Biden versus Trump.

Larry Kudlow: Well, that's too easy.

Peter Robinson: I thought I'd start you easy, Larry, it gets harder.

Larry Kudlow: I mean, that I think of the several key points the economy will be number one or number two. And of course, Mr. Biden wants to raise taxes by at least $4 trillion dollars. It's a point, by the way, I don't understand. It's like, if you're coming at this deep contraction, how would you raise taxes, I don't care whether they give me a good Keynesian, you know, demand side, You don't wanna take money out of people's pockets, as they're going back to work or trying to make through. It just doesn't make any sense. I mean, what you would do on the demand side, is spend more money and cut taxes, all right? Our view is we have spent a lot more money, emergency money but the President has pledged to lower taxes in his second term. In fact, he is assigned me and some others, we're trying to work out a middle income tax middle class income tax reduction, and some other tax relief so that's the point. Mr. Biden wants to raise regulations. Now here, this is tricky business because his party will drive him to nationalized healthcare, right? That's what they want. And the government option may not even be enough for them. But that was defeated years ago, during the Obama debates. They basically want government to run all aspects of this. And we'll work hard to store that and expand that. Secondly, they want to run the whole energy sector. And they want to destroy one of the great achievements, which is as we become energy independent, we're the world's largest producer we're actually exploiting energy now, which provides not only ample energy, natural gas, oil, nuclear, including renewables, but you have to have fossil fuels in the mix. They want to end fossil fuels. That cannot be done without literally destroying the economy, and millions and millions of jobs. So that's another big difference between the two. But Peter, I think, frankly, the the state of the virus, the state of the pandemic, and the state of reopening and healing from the pandemic, and this is a tough one, all right? It's very difficult to predict these things right now. I dare say it looks better, particularly if fatality rates way down. Although they're always little hotspots around I don't know that they're always there. But we learned to cope with them by targeting with them. I served on the Vice President's Task Force. I know the work that our scientists have done Deborah Burke's in that game, terrific stuff. I think the pandemic and the economy are the two absolute far and away the biggest issues. Traditionally, you and I know going down through the years, presidential elections are taught about fought about peace and prosperity, okay? We are returning to prosperity. And we do have peace. In fact, President deserves in my view, a lot of credit for foreign policy victories, but I think this one, we will have the pandemic and the subsequent economic recovery. And we'll see it's a close race right now, we'll see.

Peter Robinson: Larry, let me ask you for some historical perspective, because you're old enough to have become a historic person Larry, here's what I have in mind. When you and I were kids in the Reagan White House, the Democratic Party was one thing. It was still and still very substantially the party of Franklin Roosevelt and the party of John Kennedy, there's an overlay of course of liberal with Teddy Kennedy moving to the left, it was to some extent the party of John McGovern as well. But you can recall that President Reagan, you of all people would recall the President Reagan moved his economic agenda through congress with the support of between 30 and 40 Southern Democrats in the House because they were conservative, all right. That Democratic Party stood in through tradition of they want a little more government they stood for the ordinary working man, republicans wanted less government there was at least a notional alignment with Republican stood for the middle class and up and that had been going on for seven decades that back in six or seven decades that back and forth. Tell me about the Democratic Party as an institution today.

Larry Kudlow: Well, listen, it's moved, you know, 10 giant steps to the left. In our day with Reagan, most of our legislation was passed with 60, 70 Democrats, Southern Democrats, Midwestern so called Boll Weevil Democrats or Yellow Dog Democrats, is pretty much an extinct species unfortunately. There is a small group of moderate Democrats, along with moderate Republicans, they call themselves problem solvers. They're, I know many of them. They're pretty interesting people they're good thinkers, but by large the party has moved hugely to the left, where it really does border on socialism, or it does border on the government literally running the economy by taxing and regulating and spending and directing resources. So it's a big deal. Look, John F. Kennedy would be Reagan guy, would probably Trump guy today. I wrote a book on this.

Peter Robinson: I was about to yes. Are you happy about the way I set that up for you?

Larry Kudlow: Oh, yeah, it was beautiful. Thank you. You can go one click through Amazon. But JFK was a tax gutter. JFK was pro life went to church every Sunday. JFK was a staunch hawk on communism, all right? Today it isn't Soviet communism so much as it is Chinese communism. Ronald Reagan has been a very, very strong advocate for the United States, and has called China to account on a number of issues. I don't see the democrats there. And certainly on taxes, they're not there, as I said before, so we got problem. I think we're just gonna fight this out. That's why this is a pivotal election. It looks pretty close to me. POTUS might be three or four points down, maybe not all these different polls. But yeah, it's dead. Look, I was a Democrat. The last one I worked for was Pat Moynihan. I was a researcher when he ran for the senate. And I think I was still a registered Democrat in my first year working for Ronald Reagan. Reagan was a former Democrat. Trump was a former Democrat, there's no question in my mind the best republicans are always former democrats we learn, we understand, we have empathy and so forth. But the socialist wing, the AOC wing, this is a completely new breed of Marxist socialist Democrats. And all they do is bad mouth America and the American system. I'm not buying it.

Peter Robinson: China, you've devoted a lot of your effort in this White House to the negotiations with China. Let me set up what I understand is two different ways of looking at them. Question, 1.3 billion people, the second biggest economy in the world on some figures, they're going to surpass the sheer size of our economy in a single digit number of years. President Trump's argument, which he gets from Larry Kudlow, I'm not going to permit China to be unfair, they don't get to impose heavy tariffs on us while we impose light tariffs on their products, but it's tough a negotiating position as I take what I President Trump I'm trying to do is get to free trade. If they lower our tariffs, I beg your pardon, if they'll lower hours of trying to get to free trade. That's one position, here's the second position. And it's taken by Dartmouth economist Doug Irwin. And you'll remember Doug Irwin because he served on the staff of the CEA in the Reagan years. Doug is now a very senior economist in the discipline, and perhaps the leading trade historian, he just a couple of years ago, he wrote the definitive book on the American trade policy. This is a longest quotation, but it gets it something. And I'm not talking now about the election. I'm talking about how we deal with China in a second Trump administration and for years to come. This is Doug Irwin, "Market and non market economies "are in many ways incompatible. "The world trade organization system "that is the system of free trade, "the WTO system cannot accommodate non market economies "alongside market economies. "The Trump administration reached a phase one deal "with China. "Thank you Larry Kudlow, in which the Chinese pledged "to buy more American stuff. "But the phase two agreement on structural reform "has yet to be seriously negotiated, "and is probably an illusion. "Why would China change its economic model? "I Doug Irwin, I don't think we can change China, "we can only try to work out some arrangement "that will inevitably mean less integration." Well, that's different. That's not let's try to get to free trade. And as long as they play fair, we bring them into the trading system. Doug Irwin says, "No, it's just not going to work," Larry.

Larry Kudlow: Well, Doug Irwin was a very smart guy. And I regard myself as a free trader. The trouble is, with these so called non market economies, aka China, not alone, but China.

Peter Robinson: China is the one that matters by far the most, right?

Larry Kudlow: There's no reciprocity here. They're not playing by the same rules, the World Trade Organization, actually became the problem. It was supposed to be the solution that actually became the problem.

Peter Robinson: In what sense?

Larry Kudlow: Because it tolerated mischief and cheating by China, this whole facade that China is an undeveloped economy and therefore can have higher tariffs, then, first world economies or, you know, modern industrial economies with those days are long gone, and China has held on to that and the WTO allowed them, not only to charge high tariffs, but also, the WTO looked the other way, with respect to China's stealing intellectual property. And the way they set it up with American companies coming to China, naively, Chinese had the majority of the ownership of these companies, and therefore could force those American companies to transfer their technology, literally forced them to put their blueprints on the table, whereupon Chinese experts would reverse engineer, these are the problems. We have to figure out a way to deal with that, but we also must protect our economy. A lot of damage was done to our middle class to manufacturing and damage being done nowadays to technology. Chinese theft is a major issue and President Trump has refused to put up with it. He's the first president to really step down and take concrete actions. Okay, now, we are engaged with China in the phase one trade deal. And Ambassador Lighthizer and another Reagan person, Bob Lighthizer, great pal of mine, did a brilliant job negotiating. And they're actually according to Bob Lighthizer, following through, maybe not 100%, but on commodity purchases, for example. And apparently some important structural changes regarding intellectual property, and China courts, whatever that may mean. So there's hope there, and yet no hope on subsidies to produce cheap goods or, you know, government sponsored enterprises, or forced transfer of technology, China hacks, and commits espionage, and all kinds of ways attacking American companies attacking the American government. We see examples of that proliferating. That's why we have developed strong export controls, and to protect our crown jewels and America's most advanced technology in the world. It gives us growth that others can only envy, but we can't let them steal that. So presidents taken many steps. How this story plays out, it's very hard to predict, it's very hard to predict. China is obviously been a big problem with their lack of transparency on the pandemic. I mean, it really was the right Chinese virus. And they committed many sins along the way. What they've done to Hong Kong is catastrophe for freedom and democracy, catastrophe. They're messing around militarily in the South China Sea. They're oppressing these Shi'a and other minority Muslim groups inside China. We don't like any of that. And we have drawn attention to it from the President on down Secretary Pompeo, outspoken Security Advisor, O'Brien, outspoken, I led the charge on investor protections, protecting American investors ruin fraudulent Chinese public companies, and a lot of cooperation, and we put it into an executive order. So the China relationship is gonna be very difficult. I don't want to predict. I'm just saying it's going to be very difficult. And no, it's not going away, Mr. Irwin is right about that. I just don't particularly want to conclude anything.

Peter Robinson: All right, all right. That's fair, that's more than fair enough. Second big issue.

Larry Kudlow: So let me make a point here on the free trade position. The classical view of free trade really required open economies on both sides.

Peter Robinson: Yes, yes, that's Doug's point, I think, right, go ahead.

Larry Kudlow: That is correct. I subscribe to that view. So that we can see comparative advantage, where we produce what we do best other countries produce what they do best. And there is a significant consumer choice, and the free flow presumably, of investment and capital and labor. Those conditions have not been there for quite some time. Now, I personally oppose the steel tariffs three years ago, when they went into place. And probably would, again, President Trump and I disagree on that point. I have tried to work with many to develop European free trade, we have, you know, give Lighthizer credit. We have trade deals with South Korea. We have trade deals with Japan. A small trade deal with Europe. We did, however, complete the Mexican US Canadian trade deal, which was a brilliant template by Bob Lighthizer. So, you know, we're not necessarily, President Trump is not opposed to good trade deals with--

Peter Robinson: Larry, Larry, let me add,--

Larry Kudlow: Let's be realistic about this. And the classical model is not working. If they don't reciprocate, you know, and their markets are not open, that model falls apart.

Peter Robinson: So let me go ahead in a slightly different way. You can denounce the Soviets in the old days. And in fact, what President Reagan demonstrated, or one of the things he demonstrated was that you needed to denounce them, you had to tell the truth about them, because it had an effect on them, on the Soviets themselves. Gorbachev becomes general secretary and says, "We just can't continue this way," we now know he decided changes had to be made the moment he becomes general secretary. And you can do that without affecting your own position, because the Soviets buy some grain from you and that's about it. With China, our supply chains reach deep into China. We have hundreds of thousands of Chinese students here, here in Silicon Valley, Larry, the Chinese are invested all over the place. There were funds that did big business for a number of years now, under President Trump that businesses fallen off. But there were funds that essentially did nothing but run Chinese money, place Chinese money here in the valley. You take on China, and you're chilling all kinds of economic activity in your own country. How do you thread that needle?

Larry Kudlow: Well, it's good question. I think we are doing all we can, from the standpoint of policy, to make it easier to stay here at home or to come back home--

Peter Robinson: And for American businesses to read to repatriate our supply chains, is that correct? And all right.

Larry Kudlow: You know, the virus story illustrates the importance of that. And a lot of people, not only American companies, but European companies. Japanese companies have realized how difficult and vulnerable you can be if you're on China because they're not reliable. And so the markets themselves are moving supply chains away from a complex model that might be based in China to, frankly a simpler model that will be based in America or other countries, which are market economies. So that's one very important point. I can't say it's solved, but I can say that we're designing policies to provide incentives for companies to come back home. It's like, Peter, you have all these prodigal sons in China? Well, we want to welcome them home, in a scriptural sense, but also in a commercial and market sense as well. And we want to be the most hospitable country with respect to business and investment in the world. And the tax and regulatory policies were aimed at doing that, among other things, and if reelected, you'll see more of the same from President Trump.

Peter Robinson: All right, Larry, another question perspective here. And that question is to see--

Larry Kudlow: Austin.

Peter Robinson: Well, you know, I'll tell you a puddle until I reduced you to a submissive puddle. I just, we're gonna keep going. Legacy of Ronald Reagan. Two quotations one's you. This is Larry Kudlow speaking of The Wall Street Journal columnist Andy Kessler, quote, this is just months ago, as I recall. "If you look out over the next several years, "that's when we need the Reagan playbook. "You signal to investors and builders and technology "and entrepreneurs that Trump will stay on the supply side, close quote. Here's the second quotation. This is Ross Douthat in the New York Times. "Reaganomics was a relative success and its own time, "but now it needs an updating and in which conservatism "will seek to solidify the material basis "of blue collar communities with child tax credits, "wage subsidies, more skills based immigration system, close quote. So Ronald Reagan may have been your hero, Larry, and my hero. But that was another time. What is a permanent relevance from the Reagan agenda and what are you willing to modify or even surrender for the current more populist moment? Is that a fair question?

Larry Kudlow: Yes, interesting point. Look, it's interesting. The Reagan revolution starts about 40 years ago. That's so--

Peter Robinson: It was a while ago, we were lads.

Larry Kudlow: We were kids, and so here we are 40 years later. So I'm back in government and grateful for that opportunity. But the point I want to make is the principles, let's say have limited government, limited regulation, limited taxation. Okay, lower tax rates, lower marginal tax rates, do provide incentives to work and invest and take risks. So 40 years later, President Trump essentially uses the same classical universal principles that Ronald Reagan used. Reagan was known for lower taxes and regulations. Now, Reagan, the issue then was Soviet Union. Remember, we waged heavy economic warfare against the Soviet Union. They were not in economic power. They were in nuclear power, but we did everything we can to cause them stumbles in the economic area. President Trump is doing that and more with China, I acknowledge the more part. But what this other chap is saying, I mean, we do have a child tax credit, which we think was a good tax cuts for parents. And we've used the AOTC tax credit for low income, but fundamentally, none of that is inconsistent. I know a lot of people that are trying to change the Reagan philosophy. Reagan, you know, again, lower tax rates, and sound money. The dollar has been reliable and independent now, under President Trump, lower tax rates and sound money, and lighter touch on the regulatory pedal. These are eternal economic truths. You know, these are capitalist truths. These are market and free enterprise truths. They're not going to go away. Kennedy employed them successfully in the 60s where the boom lasted well after his tragic assassination. Going back to the 1920s and the earlier part of that century and even late 19th century, you had no really no taxes. You had a steady and strong dollar. These are eternal verities. You want a free enterprise system, that's what you do. The other stuff to me is little knickknacks around the edges, they're not the central issues here, which is, to some extent economic freedom and economic setups to generate growth and prosperity. And you get off track. And sometimes republicans get off track, as well as Democrats, you will find, again, this word secular stagnation or whatever that means.

Peter Robinson: Right, okay, last questions, you'll be relieved to hear. I've got just a handful of last questions. And here's one, we mentioned a moment ago that Democrats versus Republicans, it's a back and forth argument about how many the tax level, how big government should be, and so forth. And that's been going on the back and forth for decades. There's an argument that now that the Democratic Party has moved to the left, as you argued that this election is off that continuum of back and forth and back and forth, because we have a Democratic Party, many members of which are saying they would intend to eliminate the filibuster in the Senate, pack, the Supreme Court, give the senate reliably democratic votes by admitting Puerto Rico and the District of Columbia as new states. The argument is that if the democrats win this election, it's a different party. And what they aim for is an end state in American politics, a permanent progressive dominance. And then of course, there's the argument, oh, relax, that's rhetorical. It's essentially it's kids, Alexandria Ocasio-Cortez is in her mid 20s. If Republicans lose the Senate, they'll only lose it by a couple of seats, relax. This is still normal American politics. Where do you come down on that? What do we face in this election?

Larry Kudlow: Yeah, I mean, I think that it's more than progressivism. I mean, it really works into socialism. And the government running everything and usurping individual rights, freedoms, whether it's freedom of religion, or freedom of speech, or freedom to conduct enterprise business. So I would say to you, if the democrats win in a month selection time, and pursue a socialist agenda, the voters will throw them out. And they will do it at the first possible opportunity, which would be 2022. Voters are a lot smarter than that, if Mr. Biden wins is not a vote for socialism. And if he is an empty vessel, I don't know that he is, I don't want to make that charge. But it has been dominated by the far far left, Sanders and AOC and folks like that. If they undertake those policies, they'll be thrown out of office. Look, there's parallels here. You know, Bill Clinton went way too far left, and lost his congressional majorities in the early 90s, and then governed as a very moderate, almost conservative Democrat. And when the Democratic Party had the house in the Senate, they jam through the Obamacare plan--

Peter Robinson: Obamacare right?

Larry Kudlow: And they lost their majorities also--

Peter Robinson: The Tea Party emerged.

Larry Kudlow: Exactly, that's exactly right. And first, the GOP took back the house and they took back the Senate and they took back the White House. So my confidence is not in the Democratic Party right now. My confidence, however, is always in the American voter, and our democratic system, which emphasizes fairness and equality and the rule of law and freedom.

Peter Robinson: Two more questions. One is about Donald Trump and the last question is about Larry Kudlow. Donald Trump. You know, you look at the polls, some large portion of the American public just finds the current president of the United States hard to take. It's all on the record. He's capable of being vulgar and insulting people. And you know, the whole story. You've known the man for decades. Now, as far as I understand it, you were never intimately close friends but you saw each other around town, you'd see each other at lunch from time to time, and you've known the man for decades. And it's my impression, we've never had a kind of point blank discussion in which I said, "Larry, what do you make of this guy?", but from comments you've made over the years, I get the impression that even before joining the Trump White House, you liked Donald Trump, and in a number of ways you admired him. Tell voters something that they don't already know about Donald Trump, is that possible?

Larry Kudlow: Oh, sure, look. I know he can be a gracious man, incredibly gracious and thoughtful. And I know how much he has helped people down through the years. There's a lot of stories of things he's done, contributions he's made, jobs he's authored, stories that he very seldom talks about. But we know those stories. I'm not sure the public sees that part of it, maybe they do sometimes. He's a hard driving New York businessman, and a very successful one. And of course, he has his own style. These presidents all have different styles. He's a results oriented man. And I think it, you know, whatever you may think of him, if you look at what he's accomplished in four years, both at home and abroad, it's really quite a large number of items, which is quite unusual, I think, in four years, so I think people will respect that. Some people don't like him at all, sorry about that. That's the way it goes. We'll see how the voters say it. I can tell you, for me personally, he has always been gracious and accessible, and just wonderful. He and I have our disagreements in meetings or in private. On the other hand, he's a guy who will say, to a roomful of policy, big shots in the Oval, you know, Kudlow has got this right or this, he says it to other people, too. He loves that, and he also values loyalty and so do I. And this whole period, Peter, I've been here, I'll be wound up three years, probably longer than I thought, my wife thought. But there you have it, I'm grateful to serve. It's been a remarkable experience for me, it's been remarkable learning experience, you know, an old guy can still learn stuff. Remarkable in terms of relationships with my colleagues and staff. It's really remarkable on the media side, which is you mentioned I did for a living for 20 years, like being on the White House sides is a different game. The whole thing has been extraordinary. And, the pandemic itself is a remarkable experience. I mean, everybody, as I said earlier, myself, everybody is having a hard time on edge, high anxiety, trying to stay afloat trying to stay healthy. It's incredible, nothing like that, or maybe the last time was 100 years ago. So it's been one heck of a ride for me. And I will always, no matter what President Trump may say something that I don't like, or I may say something that he doesn't like, but I will always be enormously grateful to him. And I know him to be a very gracious man. And I will just add, because it's sort of in the air, shall we say? There is not a discriminatory, bigoted bone in his body, there is not a discriminatory bigoted bone in his body. And I've known him over a long period of time. And we've talked about this privately, whatever people may say they are incorrect on that subject, as well as many other subjects.

Peter Robinson: Larry last question. There are those who argue that the United States was tainted from its inception, this New York Times 1619 project slavery is the real founding of the United States. Racism, colonialism, on and on. This country is fundamentally corrupt, from the very beginning. What do you say to young people, students, they're getting that view in college, some exclusively that view, I don't mean to say, but they're hearing that view. They click on YouTube or Facebook and they see riots across the country. And then they see a socialist impulse, more than an impulse, they see a kind of rampant socialism, proud socialism and Bernie Sanders and Alexandria Ocasio-Cortez, by the way, these are two very impressive, very well spoken, articulate, compelling human beings. So in some basic way you're not a military guy, but in some basic way, you've dedicated your life to the United States to economic growth to free enterprise. You understand the socialist impulse because you were a kid member of the Americans for democratic action when you were a student yourself. What do you say to kids? What do you say to kids about the importance of freedom in this country, free markets, but freedom? What do you say to convince kids that the United States of America is still worth defending?

Larry Kudlow: Well, look, I have a lot of confidence in the kids, frankly. I meet with a lot of young people, a lot of young people in the White House. I mean, young, young, like maybe a year or two out of college. And I see some of the protests. I don't know if the young people like violent protests. I don't see that. I know they have ideals. And I love that I think they should have ideals I have, I still have. But I think as they developed views on these subjects, they will learn good history, they will learn how great the US is, how our system of democracy is the greatest in history, how our freedoms and our rule of law are the greatest in history, how others have always followed us, some more than others, some successful or not, but they will see that I think the young people are very smart. And I think as they get into life, and work and go through business, they will learn even more about the free enterprise system. I see no evidence that young people are dying to see the government tax their income away, or regulate their business away, I don't see that. I think they learn. You know, I always go back to Churchill's great statement that if you're not a socialist in your 20s, you have no heart. And if you're not a capitalist in your 30s, you have no mind. Works for me, actually, it did work for me. I think it'll work for a lot of the younger generation who are, they're gonna make us proud. I believe that there may be fringes that won't make us proud, there always are. But I think these young people will make America proud, will love this country, will see its ideals and how important it is for their lives, and for the example to the rest of the world. I'm not concerned about that. As I say, I have great faith Peter in voters. I just I've always seen it that way. I have great faith in voters. And if they get it wrong, they'll fix it. And I like that an awful lot.

Peter Robinson: Larry Kudlow, Director of the National Economic Council, and my old friend, thank you.

Larry Kudlow: Thanks, Peter, appreciate it.

Peter Robinson: For Uncommon Knowledge, the Hoover Institution and Fox nation, I'm Peter Robinson.