National Economic Council Director Larry Kudlow said the U.S. economy is leading the rest of the world by returning to a basic approach of cutting taxes and burdensome regulation to allow businesses to freely flourish without government oppression.
"The U.S. is the hottest economy in the world today. We're crushing it," Kudlow told the Economic Club of New York. "Capital is flowing here in huge quantities,"
the veteran financial guru and former Ronald Reagan adviser said.
"The single biggest story of this year, 2018, the single biggest news story is not a fictionalized version of what goes on in the White House and all the rest of it. The single biggest story is an economic boom that virtually everybody thought impossible," said Kudlow, who served as the Trump campaign's senior economic adviser.
"I believe the recent successes are not off-off. They will be continued and sustained because of the policies," said Kudlow, citing a laundry list of recent robust economic statistics such as rising consumer and business confidence reports, a solid labor market and increasing wages.
Kudlow also urged investors to avoid uninformed judgments against the president and his trade strategy.
"People are blaming the president," said Kudlow, who worked as Reagan’s budget deputy between 1981 and 1985.
"I say, do not blame Trump for this. He inherited this trading mess. He's trying to fix it. He is a reformer. It is not an easy task," Kudlow said.
"I wish our friends around the world would emulate and imitate our policies of lower taxes and deregulation so they can pick their growth rates up as well," he said. "Cut taxes and the economy will grow. It's a model that's been used [that] worked in the '60s, '80s, '90s [but] didn't work the last 20 years because we moved in the wrong direction. Now we're moving back in the right direction. Now we're moving back in the right direction, the incentive model."
However, a recent Federal Reserve report wasn't quite as optimistic..
The U.S. economy is expanding at a moderate pace with tight labor market conditions and rising input costs partly due to trade disruptions, the central bank survey said.
“Tariffs were reported to be contributing to rising input costs, mainly for manufacturers,” according to the Fed report, released last week in Washington.
The central bank’s Beige Book economic report was based on anecdotal information collected by the 12 regional Fed banks through Aug. 31. The New York Fed prepared the report, which will be reviewed by policy makers as they prepare for their meeting on rates later this month.
The U.S. economy will expand at about a 3 percent rate in the second half of the year, economists surveyed by Bloomberg predict. Amid low unemployment, and with inflation at the central bank’s 2 percent target, policy makers are signaling they’re prepared to raise interest rates when they meet Sept. 25-26.
In comparision, the economy is expanding at a 4.4 percent annualized rate in the third quarter, the Atlanta Federal Reserve’s GDPNow forecast model showed Friday despite retail sales recording their smallest gain in six months in August.
The economy grew at a 4.2 percent annualized rate in the April-June period, the fastest in nearly four years and almost double the 2.2 percent pace set in the first quarter.
The Beige Book report said labor markets were “characterized as tight throughout the country,” and, despite trade tensions, “businesses generally remained optimistic about the near-term outlook.”
Still, most districts reported concerns and uncertainty about trade tensions. “A number of districts noted that such concerns had prompted some businesses to scale back or postpone capital investment,” according to the report.
Fed districts weighed in with detail on how trade disputes are impacting businesses.
“Nearly two-thirds of the firms that offered general comments noted that price hikes and/or supply disruptions had already occurred or were anticipated because of tariffs,” the Philadelphia Fed said in its section of the report. “Some typical responses were that tariffs ‘have put us out of business’ on certain products and are a ‘cloud on every facet of our business planning.”’
Material from Bloomberg and Reuters has been used in this report.
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