Q So, Larry, if the negotiations do not bear fruit and the government shuts down again - you have a lengthy shutdown, a reopening, and then another shutdown - could that compound any economic effect or hardship effect on these federal employees?
MR. KUDLOW: Yeah, I just don't want to speculate on "what ifs." We've got a process laid out here. Let's see if it bears fruit. I just don't want to speculate on any of the "what ifs." Again, the state of the economy - to me, my colleagues, Kevin Hassett, and so forth - it looks very strong. And I don't think that was disruptive. I don't.
I know things have been written and there are individual hardship cases - again, I'll repeat that. But, in the aggregate, you know, the numbers we saw - low unemployment claims, unbelievably strong same-store retail sales, the industrial production number from the Federal Reserve where business equipment went up for the seventh straight month - just a scattered look at all those kinds of data points suggests to us that we're still in a very strong mode right now. And I used the 3 percent as our longer-term view, but I also think it's going to pan out in the short run. So we will see.
Yes.
Q In the Chinese talks this week, is it possible we'll see the framework for a deal emerge?
MR. KUDLOW: I don't want to say anything on that. Secretary Mnuchin is correct. I don't want to make any predictions on that. These are very difficult. Very, very important.
The only comment I'll make is - and I've said this before - the scope of these talks will be the broadest and deepest in U.S.-China history. We've never had anything this comprehensive. And I regard that as a big plus. How these things are worked out, we'll have to wait and see. The President has expressed some, I would say, "guarded optimism" about the talks. Liu He is coming with his top people, and that's very important. And our top people will be negotiating.
But it's encouraging to me that everything is on the table. I know that's a cliché in other areas, but, in trade talks, it is too.
Having said that, I do want to reiterate - I don't recall whose point it was - enforcement issues will be very important. And I know Ambassador Lighthizer has said that, and it's a key part of this discussion.
Q (Inaudible) government contractors who were furloughed also getting backpay?
MR. KUDLOW: I'm not sure how - some of them do. I think the defense-related ones will, but I'm not sure. I'm not an expert on that. I'd have to go and check that. I'd have to take a look at the scope of it. I honestly don't know.
Yes.
Q I want to get back to the CBO because they also looked at protections over the next decade, in which they said the deficit for Fiscal Year '19 is going to be roughly $900 billion starting in 2022 - a trillion dollars, year after year after year after that; 2029 - 93 percent. That's the GDP. And they say it is simply unsustainable, the path that we're on. Does the White House agree with that? And if it is unsustainable, is the White House planning to do anything to change it?
MR. KUDLOW: You know, we have a fundamental disagreement with that agency regarding the growth outlook. Economic growth is the single biggest factor in compiling any of these numbers. So they have had a very low growth estimate in response to Trump policies on taxes and deregulation, and we've had a much higher one - about a 1-percentage point differential, more or less. We're at 3; they're at 2, more or less.
So the differential over 10 years is very significant. You know, it could be as much as $3.5 trillion dollars in deficit reduction if we are right.
All I'm saying is that, in the first two years of the Trump administration, our view has essentially been correct, and their pessimistic view has essentially not been correct.
Now, again, I'm not here to rail on against the CBO. They have a point of view. We have a different point of view. They're professionals, and I respect that. But that's the single biggest difference.
Now I would say one other matter: We anticipate a very strong, tough budget coming out to hold down spending. The President has talked about this - at least 5 percent reduction in the nondefense accounts across the board. And I think that's going to help.
And then, finally, my own view has always been: Economic growth is absolutely essential to reducing the deficit share of GDP, which is the burden on the economy. And if you look at our numbers, which are moving somewhat but not enormously, we anticipate a much lower deficit share of GDP. And that's probably another reason we disagree.
Q Larry, today, both Caterpillar and Nvidia said that a slowdown in demand in China is negatively affecting their businesses. Is the administration at all worried that it's putting too much pressure on the Chinese economy and that it could boomerang and negatively impact the U.S. economy - that is, a slowdown there could spread to a slowdown here?
MR. KUDLOW: Well, look, we're - you know, we're - the kind of trade openings that we're talking about and other structural factors are all pro-growth - every one of them.
If the trade negotiations, you know, turn out positively insofar as lower barriers, let's say; and much better treatment of private property rights; and, as Steve Mnuchin said before, very important, ending the forced transfer of technology - things like that, look, we will export, I believe this strongly - the United States, give our people the chance to sell to China, and we will export a ton. Our export sales will roar. Roar. And it will be much greater if they open their markets. And that's going to help China's economy and it's going to help our economy. I've always believed that.
And the question here is fairness and reciprocity, as the President has emphasized and I completely agree. But it's also a matter of economic growth - lower barriers. You know, the United States, in my judgment, is the most competitive economy in the world today. We are the hottest economy and the most competitive economy. I think the Davos survey just pushed us back to the number one spot and I'm proud of that.
So the China talks - what's at stake here, I think, is, you know, the possibility of spreading prosperity, frankly, in both countries - all right - along with the need to make, you know, legal reforms and reciprocal reforms.
We got time for one more. Yes?
Q Larry, you talked a moment ago about hardships people felt during the shutdown.
MR. KUDLOW: Yes.
Q So if, at the end of three weeks, by February 14th or February 15th, if there is no deal, will you counsel the President not to shut the government down again?
MR. KUDLOW: I just don't want to make any comments on that. We will see what happens. As I said before, there is a process. That's - see if it works. It's not my place to say that.
Thank you. Appreciate it very much.
MS. SANDERS: Thank you. Tough group to follow, but I will give it my best shot.
Jonathan, go ahead.
Q Thank you, Sarah. Is the President really willing to go through another shutdown if he can't get any money out of the Democrats for the border wall?
MS. SANDERS: The President doesn't want to go through another shutdown. That's not the goal. The goal is border security and protecting the American people. Ideally, Democrats would take these next three weeks to negotiate in good faith, as they've indicated that they would, and come up with a deal that makes sense, that actually fixes the problem so we don't have to go through that process.
Q But what do you say to those, like Republican Rob Portman and others, who say that a shutdown should be taken off the table - in fact, to pass a law that basically says the shutdown can never be an option in the future? Would the President support that? Just take this off the table?
MS. SANDERS: Look, I'm not going to get into the hypotheticals of taking that off the table. I haven't seen a piece of legislation for us to even consider at this point that would make that a reality.
But what I do know is that the President is committed to fixing the problem. And it's pretty simple; we have three weeks to work with Democrats. As the President has indicated on a number of occasions, they could get this done in 15 minutes. We agree on the fundamentals that border security is important. We agree on the fact that there is a problem and we should do something about it. So let's spend some time over the next three weeks. Let's get it done.
The President has opened the government on the basis that Democrats have signaled to us that they're willing to actually get serious about a real deal and get serious about fixing the problem at the border, including funding for a border wall.
Steve.
Q The President's proposals for protecting the DREAMer children and some of the other concessions he made in his immigration speech - are those still on the table?
MS. SANDERS: Look, I'm not going to negotiate here. That's why they have the conferences for congressional members to work through some of those things, to come back the President with a deal. The President has laid out things in the past that he's willing to do. We'll see what they come back with.
But what I do know is if they don't come back with a deal, that means Democrats get virtually nothing. That will make the President - and force him to have to take executive action that does not give Democrats the things that they want. So this is a perfect time. And the table has been perfectly set by the President in order for a good deal to come together where everybody gets a little bit of something they're looking for.
Josh.
Q The President has described illegal immigration - unchecked illegal immigration as a perilous threat and has said that they're taking American workers' jobs. Could you explain why the President hired and employed so many undocumented immigrants at his club for years and didn't do more to prevent them from staying employed and working there?
MS. SANDERS: Look, I can't get into specifics about the President's organization outside of the White House. I'm only allowed to speak on behalf of the President in his official capacity. I do know that the Trump Organization has put out a statement addressing that issue. I would refer you to that and to them for further questions.
Q But, Sarah, what does the President think - what does the President think should happen to a business that, you know, employs illegal immigrants and doesn't use systems to check and make sure they're not doing that? Does the President -
MS. SANDERS: I think that's one of the reasons that the President wants to actually fix the problem. He's one of the people that's identified the fact that we have a problem and we should fix our immigration system. If Democrats want to get serious about fixing that, they have a President that's more than happy to sit down with them and do exactly that.
John.
Q Since I know so little about this, let me ask you a couple of questions and see if I can educate myself. (Laughter.)
MS. SANDERS: Well, at least we're in agreement on something. (Laughter.)
Q Senator Joe Manchin -
MS. SANDERS: It's a joke. Everyone settle down.
Q Ha-ha. Senator Joe Manchin said yesterday that if the President were to move further on DACA and offer at least a path to status, if not a path to citizenship, he'd likely get more Democrats to come to his idea about the need for a border barrier. The President has been resistant to going any further than offering three years of more protections. What is the reason why the President doesn't believe that DACA recipients shouldn't have a path to status?
MS. SANDERS: Again, I'm going to negotiate up here. That's the reason that they're going into conference -
Q I'm not asking you to. I'm asking why he doesn't believe that they deserve or should have a path to status?
MS. SANDERS: Again, I'm not going to get into negotiating immigration reform up here. That's why we have the conference. That's why the President has asked that that take place over these three weeks - whether or not that happens during this time or after.
The focus of this right now is border security. We'd like to see that happen. And the President would love to deal with the overall problem of illegal immigration, fixing a number of the loopholes that would prevent some of those things from happening so that we could move forward with a system that actually works and functions.
