White House economic adviser Larry Kudlow revealed Sunday that President Trump will call for a 5 percent cut "across the board" on all domestic spending as part of his proposed 2020 budget.
"It will be a tough budget," Kudlow said during an appearance on "Fox News Sunday." "We’re going to do our own caps this year and I think it’s long overdue."
Kudlow added: "Some of these recent budget deals have not been favorable towards spending. So, I think it’s exactly the right prescription."
WALLACE: The president sends a new budget to Congress tomorrow that will reportedly call for stiff domestic spending cuts in environmental programs, transportation, antipoverty programs, at the same time that it’s calling for a big increase in defense spending and you've still got those tax cuts.
Why do that on the domestic side?
KUDLOW: Why not? I mean, if you want to deal with budget deficits, you've got rapid growth, which means keep the tax cuts in place. We believe the 3 percent growth rate of 2018 will continue in 2019, and beyond 2020 and so forth.
I think the other element is always to limit spending and the president is proposing roughly a 5 percent across-the-board reduction in domestic spending accounts. It will be a tough budget.
We are doing our own caps this year and I think it's long overdue. Some of these recent budgets have not been favorable toward spending.
So, I think it's exactly the right prescription.
WALLACE: All right. You say that you’re going to have a 5 percent domestic spending cuts. On the other hand, reportedly, you’re going to ask for another $8.6 billion from DHS, Homeland Security and the Pentagon to build a wall. So there's going to be another budget fight over the wall?
KUDLOW: Well, I suppose there will be. I would just say that the whole issue of the wall and border security is of paramount importance. We have a crisis down there. I think the president has made that case very effectively.
It's a crisis of economics. It's a crisis of crime and drugs. It's a crisis of humanity. We have to be much tougher and have more constructive immigration policy, which we will be developing over a period of time.
So, yes, he's going to stay with us while and he's going to stay with the border security and I think it's essential.
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.
KUDLOW: I put that -- that's the same policies, that's the same approach we had during the Reagan years.
WALLACE: OK, let's talk about something the markets were worried about a friend and that's the fact that you got a bad jobs report. And let’s take a look at it. Only 20,000 jobs added in February. The projection had been 180,000 jobs. Good news, wages rose 3.4 percent, which was the fastest in almost ten years.
Question, are we reaching -- reaching full employment weather just aren't going to be that many people who want jobs because they already have jobs?
KUDLOW: Well, let me say on that number on Friday, the payroll numbers from the establishment survey was only 20,000 -- a very fluky number. It has a lot to do with the government shutdown and the timing of jobs.
WALLACE: You didn't say that when her 330,000 jobs a month before.
KUDLOW: Well, we didn't have the shutdown issue the month before.
WALLACE: But my point is, the number was the number and you --
KUDLOW: And the household survey from which unemployment is derived, 255,000. So, that's a big home run. The unemployment rate fell from 4 percent to 3.8, which is very, very important. You noted correctly, wages are up 3.4 percent. That's a terrific sign.
And what's happening as wages have been rising, people are coming out, moving back into the labor force. They’re now only coming off unemployment to work at the higher wage rates, but they're actually sort of coming out of the woodwork. People who were not part of the labor force are now coming back. And I think is very important.
Participation rates are very high and that's a signal that we still have lots of labor resources. By the way, the biggest category of improvement, people coming back to work and supplying the labor, women across the board and I think that's very --
WALLACE: That was a great number this month.
The other concern is that after ten years of growth, is the economy slowing down? I want to put up some numbers on this. Growth in 2018 went from 4.2 percent in the second quarter, you can see down in his third quarter and all the way down to 2.6 percent in the fourth quarter.
And with the economies in Europe and China slowing, there is a growing consensus among experts, you’re not going to make 2 percent for the first quarter this year. Do you agree with that, that you’re going to be in the ones for the first quarter of 2019?
KUDLOW: I’m not going to score it just yet. I’ll take the over on that forecast. As I have -- as I generally do, by the way.
WALLACE: I was going to say.
KUDLOW: I would just say, as long as we keep our policies intact -- low tax rates for individuals and businesses, across the board deregulation, lighten the paperwork burden, let small businesses breathe and get a good rate of return.
The president has ended the war on business. The president has provided incentives for economic growth. We've opened up the energy sector.
Our policies are strong and I think the growth rates this coming year will exceed these estimates just as they had last year, in 2018.