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Speaker 1: Hi, This is new because of the coronavirus. I am

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Speaker 1: currently staying at home in Rome, where my wife serves

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Speaker 1: as the United States Ambassador of the Holy See. She's

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Speaker 1: leading the embassy and dealing with all the different changes

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Speaker 1: being brought about by the pandemic. To bring you this

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Speaker 1: episode this week, I'm recording from my home, so you

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Speaker 1: may notice a difference in audio quality. On this episode

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Speaker 1: of the News World, we are exploring the plan to

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Speaker 1: reopen America for business, and I am delighted that we

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Speaker 1: have as a guest someone who is helping design that

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Speaker 1: plan and who has a lifetime of being dedicated to

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Speaker 1: economic growth with more jobs, a better take home bay,

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Speaker 1: and more prosperity. And that is Larry Cudler. I started

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Speaker 1: working with Larry Cutler back in the ragging years when

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Speaker 1: he was one of the pioneers of what's called supply

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Speaker 1: side economics, the idea that you can focus on incentings

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Speaker 1: to create more wealth, more jobs, more opportunities, and to

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Speaker 1: work for Ronald Reagan. And for the first three years

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Speaker 1: under Donald Trump, it was astonishingly successful. Only when the

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Speaker 1: pandemic hit was a slowdown. And Larry Cutler's job is

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Speaker 1: to get us back to that kind of economic growth.

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Speaker 1: Larry Cutlow serves as Assistant to the President for Economic

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Speaker 1: Policy and Director of the National Economic Council. He leads

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Speaker 1: the coordination of President Donald J. Trump's domestic and global

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Speaker 1: economic policy agenda. As a friend of many many years,

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Speaker 1: it is a great delight to welcome Larry Cutler to

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Speaker 1: chat with us about the economy. Thank you for doing this.

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Speaker 1: So I want to go back to the beginning, because

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Speaker 1: I think people, particularly younger people, do not realize how

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Speaker 1: central you have been to the whole rise of supply

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Speaker 1: side economics and both the great achievement of Reagan and

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Speaker 1: then to follow one great achievement of Trump. So let

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Speaker 1: me just ask you for a minute, because we've actually

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Speaker 1: never had this conversation. How did you become convinced that

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Speaker 1: the whole lower taxes, less regulation, more Incenti's model was

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Speaker 1: superior to what had been the sort of dominant Keynesian model.

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Speaker 1: What was that process in your own life? Well, it

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Speaker 1: was a bunch of things, going back many years ago

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Speaker 1: into the seventies. I was trained first of all as

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Speaker 1: a historian. Second of all, at the Woodrow Wilson School

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Speaker 1: at Princeton. I did economics and politics, and you taught

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Speaker 1: to Keynesian models. But as a grad student, I watched

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Speaker 1: the economy fall apart in the early nineteen seventies with

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Speaker 1: high inflation and high unemployment, and frankly started doing a

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Speaker 1: lot of independent reading of people like Friedrich Kayak and

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Speaker 1: Joseph Schumpeter and Thomas soul and Milton Friedman. And I

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Speaker 1: was at the Federal Reserve Bank of New York learning

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Speaker 1: about monetary policy and bumped into Art Laugher and Jack

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Speaker 1: Kemp and Robert Bartley. I don't know. Sometime in the

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Speaker 1: mid seventies, I used to do some speechwriting for William Simon,

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Speaker 1: former Treasury Secretary, and got very caught up in what

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Speaker 1: we now call the supply side revolution, because we should

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Speaker 1: have stable money and stable prices, but so called Kensie

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Speaker 1: and aggregate demand did not work, probably cause inflation. And

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Speaker 1: I realized you have to produce in order to consume.

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Speaker 1: You have to invest in order to create jobs. You

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Speaker 1: can't have a good job without strong businesses. The incentive

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Speaker 1: model was something I worked on. I was a Wall

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Speaker 1: Street economists in those days at bear Stearns and really

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Speaker 1: became focused on marginal tax rates and the Laffer curve.

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Speaker 1: That's kind of how I progressed and then I wound

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Speaker 1: up in the Reagan administration. And it seems to me

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Speaker 1: the policies that you and Jack Kemp and others advocated,

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Speaker 1: which were revolutionary at the time, they worked so well.

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Speaker 1: I think what's interesting in your career is you lived

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Speaker 1: through making it work once in the eighties and an

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Speaker 1: extraordinary recovery from the lack of economic growth that we

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Speaker 1: were caught up in on your carter. Then you come

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Speaker 1: back again and the same policies executed by President Trump

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Speaker 1: with you as part of the Chief Economic Team, lead

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Speaker 1: to the best level of unemployment in modern American history.

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Speaker 1: You mean, it's astonishing. Then of course we get Clomber.

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Speaker 1: I'm sure you were, like I was looking forward to

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Speaker 1: the election. Everything was moving in the right direction, The

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Speaker 1: economy was fabulous, and then boom. Now we have to

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Speaker 1: defeat this virus to get over the pandemic and in

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Speaker 1: the process take real risk with the economy. And part

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Speaker 1: of the way I'm going to talk to you, as

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Speaker 1: the White House has released their guidelines for opening of

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Speaker 1: America again, is somehow getting us not falling into sort

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Speaker 1: of the Pelosi Obama's rap, but rather getting back to

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Speaker 1: the principle approach that you and President Trump had taken.

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Speaker 1: And it's really curiously at your thoughts about how you

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Speaker 1: see over the next five or six months establishing a

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Speaker 1: really high innovation, high incentive, production oriented American economy. Again,

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Speaker 1: so the virus throws this enormous tragic hardship monkey wrench

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Speaker 1: into everything. So we have to deal with that, and

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Speaker 1: hopefully as the numbers continue to improve, and we have

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Speaker 1: put out our guidelines from the doctors and working with

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Speaker 1: the States and all the rest, we are moving towards

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Speaker 1: the reopening of the economy. I think. Note the key

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Speaker 1: point here is this thought the first tronsh of assistance

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Speaker 1: to the economy which is undergoing a major contraction across

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Speaker 1: the board. But it's all a function of the virus,

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Speaker 1: and so we want to stabilize things. We tried to

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Speaker 1: stabilize things with a number of rescue packages to help

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Speaker 1: ordinary folks and small businesses, middle businesses deal with the

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Speaker 1: unemployment consequences, cash and liquidity and deferring taxes and even

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Speaker 1: forbearance or deferring payments on mortgages or student loans. All

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Speaker 1: that I don't regard that as stimulus per se. I

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Speaker 1: just regard that as helping folks get through, just trying

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Speaker 1: to stabilize. In some cases, folks needed some cash assistance

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Speaker 1: just for daily needs. I mean a lot of them

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Speaker 1: were stuck at home, and we wanted to make sure

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Speaker 1: they got paid. We wanted to cover all of those vulnerabilities. Now,

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Speaker 1: as we look ahead and we are in a policy

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Speaker 1: planning process here with my colleagues, the whole team at NCCA,

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Speaker 1: Treasury and so forth, with the President and the new

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Speaker 1: Chief Mark Millos, I want to return to the tax

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Speaker 1: and regulatory incentives. I want to return to a growth

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Speaker 1: model that will spur the economy, resume the tremendous economic

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Speaker 1: growth we had just at the beginning of this year.

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Speaker 1: I mean, we were growing at three percent in January,

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Speaker 1: intepret But the point is I needed incentive of growth

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Speaker 1: that will emphasize a number of things. But it will

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Speaker 1: cover regulatory reforms, tax reforms, infrastructure reforms, broadband five G

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Speaker 1: type reforms, really across the board, things that will a

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Speaker 1: revive the animal spirits be make sure they're ample incentives

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Speaker 1: for inventiveness and creativity and entrepreneurship. I'm a great follower

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Speaker 1: of Joseph Schumpeter's Gales of creative destruction, and that's where

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Speaker 1: Donald Trump was back in twenty fifteen when our team

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Speaker 1: started helping him. Those are his instincts and we want

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Speaker 1: to continue along that path. It succeeded once during the

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Speaker 1: Trump years. I believe it can succeed a second time

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Speaker 1: after we've dealt with all these virus and health related problems.

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Speaker 1: Help and safeties God be first, no question about that,

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Speaker 1: no question. But now we move into the economic reopening stage.

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Speaker 1: I'm still life side or new and we're looking for

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Speaker 1: what I would cause supply side policies. You and I

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Speaker 1: have discussed recently the notion that one hundred percent expensing

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Speaker 1: would be unbelievably powerful in getting us into a permanently

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Speaker 1: innovative and investing society that could compete anywhere in the world.

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Speaker 1: Could you explain from why you believe so deeply that

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Speaker 1: that kind of a strategy would be powerful? Yes? Sure,

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Speaker 1: How do you perstand? Expensing just means businesses can write

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Speaker 1: off their investments immediately, So whether it's planned equipment, structures, buildings,

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Speaker 1: research and development, intellectual property, all these things all investment incentives.

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Speaker 1: You're lowering the cost of capital, and you're basically providing

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Speaker 1: inducements so that business is willing to invest between one

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Speaker 1: hundred percent expencing, that is immediate rite offs of investment,

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Speaker 1: and the drop in the corporate tax rate from thirty

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Speaker 1: five to twenty one spurred to boom. It lowers the

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Speaker 1: cost of capital, it increases the rate of return after tax, So,

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Speaker 1: to use Art Lapper's phrase, you tax something less, you

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Speaker 1: get more of it. And those businesses create massive jobs

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Speaker 1: at high wages. It turns out it was the middle income,

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Speaker 1: blue collar worker or lower wage earners who did the

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Speaker 1: best in Trump's first three years plus as a consequence

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Speaker 1: of the combination of widescale business write offs and expensing

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Speaker 1: and lower tax rates the way not just for large

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Speaker 1: companies but for small companies as well. And although Democrats

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Speaker 1: were in denial about this, the reality was it was

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Speaker 1: the median and lower wage earners who far outstripped in

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Speaker 1: terms of growth of wages the upper end. So we

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Speaker 1: had a boom. We had an increase in plant and

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Speaker 1: equipment and inventions and entrepreneurship, increase in technology and intellectual property,

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Speaker 1: and that created massive jobs and lower unemployment across the board.

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Speaker 1: We also induced an energy boom with deregulation. All right.

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Speaker 1: That may be getting crushed now temporarily because of the

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Speaker 1: collapse of demand because of the virus, but it will

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Speaker 1: come back, and frankly better trade deals too, to protect

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Speaker 1: American intellectual property and open up markets. So listen, these

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Speaker 1: are very similar to what Ronald Reagan. Did you know

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Speaker 1: I do this once every thirty five years. By the way,

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Speaker 1: I wrote a book about this, very similar to what

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Speaker 1: John F. Kennedy did back in the early sixties. From

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Speaker 1: Kennedy to Reagan, the Trump and I think there's no

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Speaker 1: reason why we shouldn't continue these supply side, market oriented,

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Speaker 1: incentive minded policies to recover from the pandemic. So help

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Speaker 1: and safety first, But as we reopen, I don't want

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Speaker 1: to just keep writing checks, although that was important to

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Speaker 1: stabilize folks. I want to restore the incentive model nut

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Speaker 1: and really let those animal spirits rip. You mentioned. I

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Speaker 1: think going fox business may would be a really important

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Speaker 1: transition month. What do you mean by that and how

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Speaker 1: do you see it involving in view of the guidelines

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Speaker 1: from our health experts and in view of the improving data.

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Speaker 1: I don't want to be in the prediction business. But

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Speaker 1: I will just say as we are talking today, new

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Speaker 1: cases of the virus have come way way down. The

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Speaker 1: infection rate was rising nut back in mid March at

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Speaker 1: about forty forty five percent. It's now down to I

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Speaker 1: think three or four percent, and the mortality rate has

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Speaker 1: come way way down too. So we issued a bunch

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Speaker 1: of guidelines regarding surveillance testing and diagnostic testing and temperature

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Speaker 1: taking and best practices with washing up and cleansing and

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Speaker 1: things of that sort, and observing that if you have

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Speaker 1: a declining trajectory of cases within a fourteen day period,

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Speaker 1: you begin to look into opening what's called phase one,

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Speaker 1: and I think in some states news that's going to

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Speaker 1: come by May first. We should get most of the states,

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Speaker 1: and the country will be moving towards the reopening. May

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Speaker 1: will be a transition from the shut in to the reopening.

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Speaker 1: It won't happen all at once, but it will happen gradually,

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Speaker 1: that is, assuming there's no rebound in the volume of cases.

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Speaker 1: So we are moving ahead. We're replenishing some of the

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Speaker 1: successful stabilization programs, like the small business loans, but we

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Speaker 1: want to look down the road and see if we

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Speaker 1: can't take steps to make sure we have an incentive

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Speaker 1: model of economic growth. I don't want it to rely

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Speaker 1: on big government. I wanted to rely on the creative

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Speaker 1: capabilities of American men and women in new businesses and

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Speaker 1: small businesses and so forth. That's what we want. If

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Speaker 1: it pays to work more after tax, if it pays

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Speaker 1: to invest more after tax, people will do So. That's

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Speaker 1: what the supply side model says, that's what the lap

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Speaker 1: of curb says. And one of the great things with

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Speaker 1: President Trump in this crisis, he has partnered with the

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Speaker 1: private sector. Individual companies have helped us enormously in virtually

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Speaker 1: every area, whether it's development and therapies and medicines and vaccines,

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Speaker 1: the distribution of various medical equipment and the testing proceed

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Speaker 1: All the companies have come into the White House. We

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Speaker 1: just had a series of probably close to two hundred

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Speaker 1: people from private business advising the President on what to

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Speaker 1: do in terms of promoting health and safety and economic

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Speaker 1: growth ahead. So rather than a government top down, command

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Speaker 1: and control model, and look, government, it's got to play

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Speaker 1: a role in these crises. Nonetheless, much of what's going

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Speaker 1: on is coming out of the private sector. That is

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Speaker 1: a uniquely Trumpian idea, because of course he's a former businessman,

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Speaker 1: and I think that's very important, and I think the

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Speaker 1: same principles will apply as we move forward on the economy.

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Speaker 1: Chris Damouth, the former head of Enterprises too, wrote a

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Speaker 1: very instant piece in the Wall Street Journal and said

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Speaker 1: this is the first national crisis that he thinks in

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Speaker 1: American history where the president's response has been to trust

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Speaker 1: the American people, to trust the private enterprise system to

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Speaker 1: decentralize out of Washington, rather than centralizing through relying on

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Speaker 1: the governors. There was really a very important article describing

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Speaker 1: Frump's reliance on citizen leadership over bureaucratic control. Yeah, I

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Speaker 1: thought Christmas spot On. Chris had the office next door

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Speaker 1: to me in omb thirty five years ago, and he's

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Speaker 1: a brilliant guy. That's kind of what I was getting at.

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Speaker 1: We want public private partnerships, government private partnerships, and of

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Speaker 1: course we do respect federalism. To all these things I

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Speaker 1: think have helped promote a very strong campaign. There is

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Speaker 1: nobody who expected the exponentia crushing growth of this coronavirus.

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Speaker 1: President has moved rapidly in the face of criticisms, but

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Speaker 1: he's been a good leader. Now. I remember we had

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Speaker 1: Rose Garden ceremony a few weeks ago. We had Walmart

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Speaker 1: and Target and these biotech companies knew it was really something,

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Speaker 1: and you know, creating the masks and the ventilators, and

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Speaker 1: you know, shifting production in some of these big companies

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Speaker 1: like GM and Board and three M that's never been

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Speaker 1: done before. So that's a really important aspect of this.

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Speaker 1: CHRISTA Mute is right, And I'm just saying, going forward,

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Speaker 1: as we plan for the economy, I don't see why

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Speaker 1: those very same principles can't be put into place. I

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Speaker 1: don't want a government driven economy, knew. I want a free,

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Speaker 1: enterprise driven economy with the appropriate incentives that will generate

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Speaker 1: rapid growth. We did it under Kennedy, we did it

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Speaker 1: under Reagan, We've done it under Trump under President Trump.

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Speaker 1: We can do it a second time. That's my vision.

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Speaker 1: That's my view. Not everybody agrees, but I think we

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Speaker 1: will come through this and do very very well once

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Speaker 1: the virus is sufficiently subdued or eliminated. Because the President

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Speaker 1: made the decision to really trust the governors, this is

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Speaker 1: going to be a great experiment in how things evolved.

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Speaker 1: Because some of the more liberal states are going to

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Speaker 1: be very high tax, very bureaucratic, very regulatory. Other states

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Speaker 1: are going to be very entrepreneurial, very open, very friendly

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Speaker 1: to creating jobs. And my guess is in the next

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Speaker 1: six or eight months, you're going to have a remarkable

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Speaker 1: test case of which model works better and which model

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Speaker 1: leads back to prosperity with physical safety. It's truly one

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Speaker 1: of the great experiments in American history. I never underestimate

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Speaker 1: the capacity for change. And I know that some states

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Speaker 1: have a very big government, high tax and regulate MILA

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Speaker 1: that hadn't worked very well for them. Increasingly, I think

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Speaker 1: among the states, the low tax, low regulate incentive MALA

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Speaker 1: has worked very well. There's been a shift in the

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Speaker 1: output of the United States and the resources into these

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Speaker 1: limited government states i'll just call them now. I don't

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Speaker 1: want to prejudge anything. I mean right now, I want

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Speaker 1: everybody to succeed. I mean, I myself have had great

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Speaker 1: conversations with governors who would be considered left of center,

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Speaker 1: but we're just trying to solve this massive health and

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Speaker 1: safety problem. As far as future economic policies, we'll see

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Speaker 1: you know, maybe there'll be some changes President Trump's leadership

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Speaker 1: on economic reforms, going back to the deregulation and tax reforms.

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Speaker 1: I think that leadership will exert a lot of influence,

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Speaker 1: provide a good example, so we will see new you

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Speaker 1: know what I mean. I'm ever the optimist. Let's see

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Speaker 1: how this plays out. Right now, May is going to

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Speaker 1: be transition. I think May is going to be a

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Speaker 1: turning point. I don't think it's going to be a

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Speaker 1: miracle overnight, but I do think it's very possible that

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Speaker 1: when we get into the height of the summer, the

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Speaker 1: shut ins will give way to reopening and we will

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Speaker 1: see the American entrepreneurial spirit revive again. I think we

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Speaker 1: have to assure people that we will be on top

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Speaker 1: of the health and safety that gives them confidence, and

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Speaker 1: then we have to make sure we have the necessary

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Speaker 1: incentives so that they will in fact go back to

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Speaker 1: work and start reinvesting and so forth. I believe it

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Speaker 1: can be done. I've never seen anything quite like this.

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Speaker 1: You know, you and Ivan pals for forty years maybe more.

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Speaker 1: You are a great supply sider with the Jack Camp group.

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Speaker 1: This is something we've never seen before. The scale of it,

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Speaker 1: the shock of at the speed of it. I don't

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Speaker 1: know anything comparable maybe World War two. This is an

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Speaker 1: enormous impact on our society, and I think the President

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Speaker 1: and his entire team, they've done an astonishing job in

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Speaker 1: a totally new and different environment. It's been remarkable. I

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Speaker 1: think that the history of this country is we do

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Speaker 1: recover from shocks better than anybody else because we are free, democratic,

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Speaker 1: open society with wonderful opportunities. I frankly think part of

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Speaker 1: the American backbone, particularly in crises, is a great belief

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Speaker 1: in faith, faith in the country, faith in our future,

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Speaker 1: faith in a power greater than ourselves, whatever that may be.

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Speaker 1: I think faith is going to play a big role here,

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Speaker 1: and so I just always encourage people to think in

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Speaker 1: those terms. We will get through this. We will get

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Speaker 1: through this. Thank you to I guess Larry Cutler. You

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Speaker 1: can read more about the plan for restarting the economy

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Speaker 1: on our show page at newtsworld dot com. Newtsworld is

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Speaker 1: produced by Gamers three sixty and iHeartMedia. Our executive producer

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Speaker 1: is Debbie Myers and our producer is Garnsey Slump. The

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Speaker 1: artwork for the show was created by Steve Penley Special

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Speaker 1: thanks to the team at Gngwich three sixty. Please email

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Speaker 1: me with your comments at Newt at newtsworld dot com,

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Speaker 1: and if you've been enjoying Newtsworld, I hope you'll go

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Speaker 1: to Apple Podcasts and both rate us with five stars

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Speaker 1: and give us a review so others can learn what

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Speaker 1: it's all about. On the next episode of Newtsworld, we're

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Speaker 1: going to explore China's responsibility for having lied to the

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Speaker 1: entire planet, costing well over two hundred thousand lives before

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Speaker 1: it's over, costing trillions of dollars in economic growth before

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Speaker 1: it's over, and what should be about it. I'm Newt Yangwig.

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Speaker 1: This is Newswort Hm