Larry Kudlow told Fox News Sunday host Chris Wallace that he doesn't believe the exploding federal deficit is going to be a "burden on the economy."
March 10, 2019

We all know when Republicans will find religion again on the dangers of exploding deficits -- as soon as there's another Democrat in the White House. Trump's economic adviser Larry Kudlow was asked by Fox News Sunday host Chris Wallace about the new budget Trump will send to Congress tomorrow, and Kudlow did his best to downplay concerns over the growing budget deficit thanks to tax cuts and an increase in defense spending:

WALLACE: OK. Here's the problem with this. You talk about balancing the budget and the way you're going to do it is by cutting 5 percent in all domestic spending. But you know that if you take entitlements off the table, that you just can't get enough from domestic discretionary spending to cut the budget and your new budget is a case in point.

Traditionally, Republican presidents have said we are going to balance the budget and the budget they projected out that it's going to balance the budget in ten years. Your new budget doesn't balance the budget until 15 years, until the 2030s.

And the question I have is -- you and I have known each other a long time. When I covered you in the Reagan years, you cared and you thought that deficits and debt matter. What happened?

KUDLOW: Not overwhelmingly so, by the way, during the Reagan years.

Look, I don't think -- I don't think good growth policies have to obsess necessarily about the budget deficits and so forth. Look, Chris, my view and I believe the view of the administration, we are going to point a study guide path towards lower federal spending and federal borrowing as a share of the economy, as a share of GDP. That lowers the burden --

WALLACE: The deficit increased by an enormous amount in the first few months of this fiscal year, I think 70 percent.

KUDLOW: We are going to run I think about 4-1/2 to percent of GDP. That's a very modest number compared to even the recent past and with our --

WALLACE: It could be close to a trillion dollars.

KUDLOW: Perhaps so, but the economy is $20 trillion and net worth today, household net worth is about $100 trillion. So I don't think that's a burden on the economy.

And I think all the incoming data. Look, here's something, let's go to the financial markets. You have a 10-year treasury bond right now that's about 2.60 percent, 2.63 I think at the close on Friday.

If the markets were overwhelmingly worried about our budgets and our spending and our deficits, you would see that interest rate rise and be a greater penalty. I don't see it right now.

And again , long run, we do want to reduce the burden of spending and borrowing, absolutely, but always as a share of GDP.

WALLACE: OK.

KUDLOW: I put that -- that's the same policies, that's the same approach we had during the Reagan years.

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