Top White House officials have dismissed concerns about a looming recession, but said the Trump administration was considering more fiscal stimulus, including a new round of tax cuts funded by tariffs.
“I don’t see a recession at all,” Larry Kudlow, the top White House economic official, told Fox News Sunday.
Last week, the US yield curve, widely seen as a reliable predictor of recessions, turned upside down for the first time since the summer of 2007, rattling global stock markets.
But on Sunday, Mr Kudlow, director of the National Economic Council, rejected suggestions that the economy was heading for a downturn. He cited data showing US retail sales rose 0.7 per cent in July, compared with 0.3 per cent the month before, as well as strong employment and consumer spending figures as evidence of the strength of the US economy.
“That is about as good as it gets,” Mr Kudlow said. “I think we are in pretty good shape.”
In December 2007, in the run-up to the financial crisis, Mr Kudlow, who was a journalist at the time, said: “There’s no recession coming . . . the pessimists are wrong. It’s not going to happen.”
When asked about those comments on NBC’s Meet the Press on Sunday, Mr Kudlow said he pleaded “guilty to that late 2007 forecast”. But he added: “This is not then. Our banks are well capitalised. Our financial system’s in very good shape.”
“We’re doing pretty darn well in my judgment. Let’s not be afraid of optimism.”
Peter Navarro, director of the White House Office of Trade and Manufacturing Policy, told ABC’s This Week: “What I can tell you with certainty is that we’re going to have a strong economy through 2020 and beyond with a bull market . . . the Fed will be lowering rates. The ECB will be engaging in monetary stimulus. China will be engaging in fiscal stimulus.”
He added that the yield curve was flat, not inverted, and a “very weak signal”.
US president Donald Trump has pegged his re-election campaign to US economic growth. At a rally in New Hampshire last week, Mr Trump said that even Americans who dislike him would “have no choice” but to vote for him in 2020.
“You have no choice but to vote for me because your 401(k), down the tubes, everything is going to be down the tubes,” he told the rally. “Whether you love me or hate me, you’ve got to vote for me.”
Mr Trump has previously vowed to put in place a 10 per cent tax cut for middle-income families as soon as 2020.
Mr Kudlow said on Sunday that the White House was “looking at” the proposal. He also floated a suggestion first made by Rick Scott, the Republican senator from Florida, to return money collected from tariffs on China to Americans in the form of tax cuts.
“That’s an idea,” he said.