Proft: Good morning, Dan and Amy. Trump State of the Union Address yesterday, He made it clear, from his perspective, that the era of economic surrender in the United States is Oh-va!
Trump (from tape): America has also finally turned a page on decades of unfair trade deals, that sacrificed our prosperity and shipped away our companies, our jobs, and our wealth. Our nation has lost its wealth, but we're getting it back so fast. The era of economic surrender is totally over. From now own, we *glitch* iting relationships to be fair, and very importantly, reciprocal.
Proft: Alright, fair and reciprocal trade. Are those words music to the ears of one Steve Moore, Wall Street Journal Columnist, Heritage Foundation Economist, joins us now. Steve, economic surrender is over...did you like that part of the speech?
Moore: Well, good morning. I liked a lot of the speech. I loved the "America is open for business again", and this idea that we are going to put America first, in terms of cutting taxes, cutting regulations, in terms of making sure that we're the number one economic superpower in the world. And look, he took a victory lap, well deserved, the economy is booming under his stewardship, so that was all good. But uh, you mentioned the one area that makes me nervous about Trump's policies, Dan...congratulations.
Proft: Well I'm in the market for a new washing machine. So that's why I had to mention it.
Moore: So look, I think when you think about what could disrupt this incredible boom that we're on right now, I think it IS trade protectionism, and so it does make me nervous. Does NAFTA need to be renegotiated and modernized? Yeah, I think it does, it could be improved, but I'm worried that Trump may try to get us out of NAFTA. I'm worried about, you know, his talk about tariffs against other countries in the world, which I don't think is very good policy. But, on balance I think that was a great speech, Trump is...one of my colleagues, Larry Kudlow, calls Trump "a one-man Chamber of Commerce for the United States". That was a speech...this speech, and his speech is Davos...both were appeals to people around the world, and businesspeople, and people with capital, to come to the United States, this is the place you want to invest in. And you know what? He's right.
Jacobson: And President Trump touted the low unemployment rates, but also reminded us that we're going to have more take-home pay. If we don't see it in this paycheck, we're going to see it in the next paycheck. But the Washington Post this morning is saying what he didn't talk about, in what they call his "Reagan-ist speech", is that he didn't talk about the budget deficit.
Moore: Sorry...about the budget deficit?
Jacobson: Yeah, there was no mention of that whatsoever.
Moore: *laughs* Well, you know, yeah...and I have to say this about Trump, and I kind of agree with them...you know, for the last 30 years the Republican Party has been obsessed about the budget deficit. And look you know, I've been for a fiscal analyst for the last...when I came to Washington in the early 80s, I was, you know, one of the budget experts in town, I know this stuff back and forwards. Would I like to see a balanced budget? Sure. Do I want budget control, do I want to see a shrinking of the government? Yes. But, I think what Trump has done is...the Republican Party is now a party of growth, it's a party of prosperity. We put prosperity ahead of balanced budgets, and let the Democratic Party be the party of austerity. You know, it was amazing to me last night, listening you know to some of the commentary, and you know, I did some of these post-elections debates, and the Democrats are still railing against the tax cut! I'm like "Really? Are you paying any attention to what's going on?" I mean, they're actually going to say the tax cut isn't working, when you've got 100 major companies, from Exxon to Disney to Apple, to FedEx, you know, announcing major bonuses for workers, and all this money coming back to the United States? So, look, I like the fact that he's a tax cutter, that he's trying to make America the most prosperous place in the world, and so far, so good.
Proft: Yeah, so I mean, they're not just railing against the tax increase, or tax cut should I say, they're railing against employment! They're unhappy about low unemployment!
Moore: They are! I mean, they're rooting against America. The Left is rooting against Trump and rooting against America and rooting against the American worker. They don't want Trump's policies to work, which is pretty pathetic, actually. It's pretty unpatriotic to say, "Gee, we hope we can score political points by..."...they'd love for the American economy to crash! They've been waiting the last 14 months for that happen, and of course it isn't happening. I'm predicting, guys, that we're gonna hit 4% growth this year. The reason that we only got 2.6% growth this quarter is...I agree with my buddy Art Laffer, what happened is a lot of businesses delayed their, you know, delayed their capital spending and a lot of their capital output until 2018, because that's when you get the tax cut, that's when you get the lower tax rate. We're gonna see a very, very strong first and second quarter this year, we're gonna have 4% growth, we haven't had that in 20 years!
Proft: Right, but let me go back to something that you said. I agree with you in terms of market positioning...the Growth Party vs the Austerity Party, of sorts, even though I mean...Democrats and Austerity, they'll...the Democrats will spend money like termites go through wood. But, here's the thing...ultimately, you can't grow, or you're going to cap out, you're creating structural infirmities if you don't deal with things like a ballooning debt and unfunded liabilities.
Moore: So let me say this. This was my line to Trump and a lot of the Congressional Republicans, when I...and in fact I just talked to the Senate Republican Caucus yesterday and made this point...yes, we're concerned about that debt and the liabilities, Dan, you're exactly right. But, you're not going to make any progress on any of those problems unless you get the economy growing. You just can't get from here to there if you don't have 3 or 4% growth, I mean, I've looked at the numbers. You could slash everything, but if you don't get the economy growing, and people paying taxes, and businesses expanding...you know, when businesses are expanding and people are making more money...guess what? They're paying more taxes. So the first step in getting the debt under control, and these unfunded liabilities that you're talking about, is to get back to a strong economic growth pattern. We only grew at less than 2% under Obama, and now we're at 3 and if we get to 4, that makes this SO much easier to solve!
Proft: Well that's true, but you have to introduce that into the conversation, so it becomes something that is discussed and debated and moved forward, so for example your...the plan that you've touted, we've talked about many times on this show, the Penny Plan. I mean, that can at least be part of the conversation so that at some point in the not to distant future, there's actually movement on it.
Moore: I agree, and in fact...look, I agree with 90% of what Trump said last night. I am not in favor of getting rid of the Defense Sequester, and the sequester...the great budget control we've had over the last six or seven years was the Budget Control Act, which put caps on domestic and defense spending, and it actually has made a difference. I mean, government spending as a percentage of GDP is actually much lower today that it was during Barack Obama's first term, or actualy, George Bush's second term. So, you know, let's keep the caps in place, let's have some budget discipline! I love the idea...for those who don't know the Penny Plan, it's really is an amazing formula...you just cut every government program by one penny in 2018, and then cut it another penny...that is, a penny for every dollar they spend. So you reduce spending by one penny per dollar in 2018, and then again in 2019, 2020, 2021, and guess what? You've balanced the budget. It really is that easy! It just requires spending control. You don't even have to slash spending! You just have to make sure the rate of increase is cut in half.
Jacobson: Well, that sounds like a brilliant idea!
Proft: Well there you go! That's why Steve Moore's proposing it, yes!
Jacobson: So, President Trump yesterday had a number of people he featured that were heroes, but he also featured business owners, and I thought that maybe you took that to heart. Steve Staub, and Sandy Keplinger, who say they've seen a bump in their business this year. Did you like that?
Moore: You know what? I loved that aspect of the speech. I think everyone agrees that the fact he had these amazing American heroes and he called them out, and it really punctuated every point he wanted to make. And I thought another great moment was when he called out that gentleman from North Korea, I don't know if you remember that moment.
Proft: Ohhh...that was the best moment EVER!
Moore: Yeah, it was awesome! And he basically said "Look, this is what North Korea is about! These people are tyrants, they're our enemies, they are killers, and they're killing their own people!" And anybody can...I don't believe they Left...they seem to want to appease Kim il-Jong (sic), rather than...we've gotta take their weapons away from them, it's the most dangerous thing in the world. So I love the fact that he did that, it was such an effective device to make his point, to show...you know, whether it's a businessman, or a victim of Communism or so on, I think he's almost changed the way that State of the Union speeches will be given in the future.
Proft: He is Steve Moore, Wall Street Journal Columnist, CNN Senior Economist, Heritage Foundation Economist, Steve thanks as always for joining us, appreciate it.
Moore: Okay guys, have a great week, take care!