White House economic adviser Larry Kudlow isn’t worried about the ongoing government shutdown inflicting any permanent damage to economic growth.
In fact, as soon as the standoff is resolved and the government reopens, the economy will come roaring back, the veteran financial guru and former Ronald Reagan adviser told CNBC.
“It's a temporary issue,” said Kudlow, who worked as Reagan’s budget deputy between 1981 and 1985.
“I acknowledge that we'll lose some in the accounting of gross domestic product,” said Kudlow, the head of the National Economic Council that advises President Donald Trump.
“I do not acknowledge that the fundamental economy will be adversely affected, as well. This is temporary stuff and when the shutdown comes to an end and the negotiations are completed for the administration and others, we will get it all back,” said Kudlow, who served as the Trump campaign's senior economic adviser.
Kudlow admitted the first-quarter economic growth may suffer, but the first quarter can often be difficult because of seasonal factors.
“My own view, some may disagree, but I'm strong on this is that we'll see a snapback right away. We've been through this before. I acknowledge it's longer than sometimes in the past. I lived through these in the Reagan years and the '90s. There will be virtually an immediate snapback,” said Kudlow.
He denied that there are any lingering, structural flaws in the economy.
“At the two-year mark of the trump administration, our economy is growing at a 3% plus rate,” he said.
Kudlow said recent strong manufacturing and sales data prove his ongoing argument that lower tax rates, rolling back onerous regulations, opening up the energy sector and other pro-growth reforms have generated “much faster economic activity than we have seen in I don't know how many years. Maybe a couple of decades to be honest with you.”
“Excluding the first quarter 2017, which is President Obama's last quarter, we're basically grown at 3% plus at an annual rate for 7 quarters and I'm proud of that achievement. And along the way we have had record increases in blue collar employment and blue collar by the way their wages are rising faster than the white collars,” he said.
“We are proud of that and in my judgment although we will have a glitch with respect to the temporary shutdown, the economy is very strong. The private sector is very strong and I know there's a lot of pessimism out there. I do not share that pessimism.”
Such pessimism was reflected in a new Gallup poll released just before Kudlow spoke.
The Gallup poll found that Americans' outlook for the economy has soured in the past two months, with 48% now saying economic conditions are worsening -- up from 45% in December and 36% in November. Meanwhile, Americans remain positive about the availability of quality jobs and are still split on whether the economy is in overall good shape.
Americans were split last month on whether the economy is in good shape (50% saying "excellent" or "good") or not (49% saying "only fair" or "poor") and little has changed this month. Forty-nine percent now have a positive view (12% "excellent and 37% "good") and 50% a neutral (36% "only fair") or negative one (14% "poor").
For its part, the International Monetary Fund cut its forecast for the world economy, predicting it will grow at the weakest pace in three years in 2019 and warning fresh trade tensions would spell further trouble.
In its second downgrade in three months, the lender blamed softening demand across Europe and recent palpitations in financial markets. It predicts global growth of 3.5 percent this year, beneath the 3.7 percent expected in October and the rate in 2018, Bloomberg reported.
“The world economy is growing more slowly than expected, and risks are rising,” Managing Director Christine Lagarde told reporters in Davos, Switzerland.
The outlook is perhaps more upbeat than that of many investors who openly fear a U.S-led slowdown taking hold. The fund left its projections for the U.S. and China unchanged and even anticipates a pickup in worldwide expansion to 3.6 percent next year.
Risks nevertheless “tilt to the downside,” the IMF said in a report which came hours after China revealed the slowest expansion since 2009 last quarter. The IMF’s outlook will set the tone for this week’s World Economic Forum meeting in Davos.
“It is important to take stock of the many rising risks,” said Gita Gopinath, the fund’s new chief economist. “Given this backdrop, policymakers need to act now to reverse headwinds to growth and prepare for the next downturn.”
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