ryan live from londonderry, new hampshire. friday at 6:00 eastern, mayor pete to judge with an live town hall from nashua, new hampshire. watch coverage on c-span, anytime online at c-span.org, or listen live anywhere you are on the go using the free c-span radio app. fromark zandi moody's analytics, their chief economist. good morning to you. guest: good morning. host: what is your personal assessment of where we are going months when it2 comes to the economy? guest: growth has been slow. growth has already slowed. growth was about 3%. growth currently is about 2%. i the next 6-12 months,

expect growth to slow even further. a lot does depend on the trade war. if that continues on, the growth slowdown will be more severe. if the president finds a way to end the war or call a truce, we might have a different outlook. most likely, growth a year from now is slower than it is today, which is slower than it is a year ago. 4%,: unemployment below full employment, gdp plodding along steadily, wages rising, consumer spending is strong. shade yourat assessment of the economy? guest: we can stay at the thatnt rate of growth, will create jobs to keep unemployment low, below the 4%

number. the economic expansion could continue on, everything should be ok. slow inh continues to the trade war continues on, we won't create enough jobs and unemployment will start to rise. once unemployment starts to rise, people sense that right away, they will become more cautious in their spending, businesses will pull back on their hiring. it's a self reinforcing, negative, vicious cycle that will take hold. that is what we need to be wary of. the risks are not inconsequential. they are rising as the trade war continues on. host: is the trade or the main driver of the recent talks of recession? guest: the approximate cause for

this significant slowing and growth is the trade war. it is doing significant economic damage. tariffsct effect of the is a tax increase on american businesses and consumers. more significantly is the increase the trade war -- impact the trade war is having on business sentiment. business confidence has fallen sharply. businesses are unsure of where this war is headed. is it a 10% tariff or 25% tariff? which countries? we've been focused recently on china but we've had tariff increases on many countries in europe and asia. as long as businesses can't answer those questions, they will be nervous and they will be very cautious in their investment. there are other things going on.

the overriding reason for concerns about recession the next six months is the trade war. host: let's get your thoughts on what the president said. [video clip] economists say you should be preparing for a recession. >> honestly, i'm prepared for everything. we are doing tremendously well. our consumers are rich. i gave them a tremendous tax cut. they are loaded with money. the walmart numbers were through the roof. that's better than any pull, better than any economist -- poll, than any better than any economist. the rest of the world, if you look at germany, if you look at their european union -- the

european union, look at the u.k., the other countries aren't doing well. china is doing poorly. we are doing better than any country or even area, anywhere in the world, we are doing great. the consumer is strong. they are going to be for a long time. the curve always means about two years later, maybe you will go -- that's a long time, two years. i could be helped out by the fed. the fed doesn't like helping me too much. frankly, we have money pouring into our country. we have billions and billions of dollars daily that's pouring in. because they want to come into the united states. that's a great thing. that means we can loan that money out. borrowing costs are at an

all-time low. it is a great time. i told secretary mnuchin this is a great time to refinance our bonds. the money is pouring into the u.s. like never before and like no other country has ever experienced, including china money. they are all coming into the u.s. and we've never had anything like it. , plenty to start off with. he talked about the tax cut pouring money into people's pockets. guest: a lot to unpack. well, the benefit of last year's tax cut has completely faded. we got a temporary boost and growth last year. 3% gdpwhat we got the growth last year. we went out and borrowed a lot of money from investors, took that money and cut a check to

large businesses and wealthier households. that was spent. that benefit has now completely faded away. the tax cuts are no longer supporting economic growth. that had been some hope the lower tax rate for businesses would stimulate more investment spending, but so far -- there no evidence of that. maybe it is too early to judge. things are being masked by the effects of the trade war. business estimates for last year have flatlined. the benefits of the tax cuts were short-lived. for: talk about the ability the fed to lower rates and his calling on jay powell to do so. guest: the fed is reacting to

the president's policies, trying to calibrate interest rates to the president's trade policy, the trade war. when the trade war is on, the fed has to do one thing. when there is a truce, they have to do another thing. the fed is working hard to keep up with this capricious policy around trade and tariffs and having a difficult time doing it. my sense is growth will slow and the fed will have to respond to that and continue to lower rates. they are on track to cut rates again in september. in all will lower rates likelihood but that's in response to the damage the trade war is creating. host: mark zandi joins us until 9:00. if you want to ask questions about the economy, 202-748-8001

for republicans, 202-748-8000 fo r democrats, 202-748-8002 for independents. , when it comes to the trade war itself, is there a happy medium to be achieved? is there a way the united states could act on its best interests with china? guest: very good question. i do think china is not behaving well, it is cheating around intellectual property, access to markets. there is a reasonable concern around our relationship with china. was thetegy transpacific partnership, the tpp. the was the free-trade deal

u.s. was entering into with other pacific rim nations, excluding china. china did not play fair. if you can't play fair, you can't play in the sandbox. because china could not be in the free-trade zone, it would do economic harm to china and that would be the incentive for them to begin to behave appropriately. wasourse, the tpp negotiated by the obama , president trump, one of his first executive orders was to rip up tpp. that was a mistake, in my view. that was the right strategy for china. the trade war is not going to work. i don't think the chinese are going to relent -- certainly not

until after the election. they will see how this plays out until they make major concessions. it will be a deal, some sort of face-saving arrangement to get out of this. host: mark zandi joining us. our first call comes from joseph in orlando, florida. democrats line. you are on with mark zandi. caller: good morning. what i'm about to say is admittedly a quasi-conspiracy theory regarding the tax cut from last year. rightobviously are some wing republicans who have a great dislike for medicare and social security, a group that has been trying to reduce that or eliminate it. it is difficult to do because it is such a popular program.

let'set together and say do this big tax cut, we will throw some crumbs to the middle class and give big money to the rich people, 3% of the richest people got 85% of the benefits of the tax cut, it's going to create a big deficit but that gives us a good excuse to go after medicare and social security down the line. what do you think? host: mr. zandi? guest: that is a theory. i think it is called starve the beast theory. that's going back to the reagan tax cuts of the 1980's. i don't know whether that is the case or not. that is a general sense the entitlement programs need reform. frame, theycurrent

are not sustainable in the long run. we do need to make some changes there. sense that that is an appropriate thing to do. why were arguments for might want to lower tax rates, particularly for businesses, corporations, to incentivize greater creation. not year's tax cuts did help to address any of those issues. the way it was designed and implemented has not supported business investment. in fact, business investment has gone nowhere. we have not made any progress with regard to our entitlement program and the physical situation generally. the debt is rising rapidly. yesterday from the

thatessional budget office the u.s. will suffer a $1 trillion budget deficit in the coming year, debt loads are going to rise. the starve the beast kind of validity, it is certainly not working because the size of the u.s. government is increasing rapidly. host: mark in new york. independent line. caller: good morning, mr. zandi. with whatn ties in you said about the federal debt, which is over $15 trillion. the gao on their website talk about the fiscal situation, saying we need an immediate and permanent increase in taxes by andor 38% or an immediate

permanent reduction in federal spending by 27%. that is just to stop the gap from growing. this issue is not on the radar screen. no candidates are being asked about this. the media and press are ignoring this issue. how much does it worry you? are there techniques for introducing this kind of meaningful dialogue into the political discourse? guest: it does worry me. the fiscal situation is very poor and everything points to it getting much worse going forward unless we change something, increased taxes or cut government spending. the fiscal outlook is very daunting. even more disconcerting, there doesn't seem to be any political will to address it on either side of the political spectrum.

it used to be the case that establishment republicans like were very mitt romney concerned about the fiscal situation. that was the stake in the ground for them. that is no longer the case. there's is really no political constituency out there pushing for fiscal discipline. that is an issue. complicating things enormously, it is hard to connect the dot back from the situation to the economy's performance in interest rates. it is very similar to the problem around climate change. there is widespread consensus that climate change is a problem. if we don't do something about it, it will ultimately be catastrophic, but we don't know when that will be and how that will manifest itself.

because of that uncertainty, lack of clarity, we can't find the political will to do something significant about it. same problem with this fiscal situation. sense that this can't be good for the economy long run. if we don't do something about it, at some point, it will be catastrophic for our economy. down and thethat way this problem manifests itself is hard to identify. it is a serious problem, not next week, next quarter, next year, but for our kids and grandkids, this will be a problem. we are going to have to increase more tax revenue in the growth rates and entitlement programs. host: remind people exactly what

a recession is and if we should go into one, what tools do the government have to react to it? guest: a recession is defined as a broad-based, sustained decline in economic activity. , declines indp jobs, industrial production, manufacturing, all those things go into assessing whether an economy is declining, contracting, getting smaller. historically, the way policymakers would respond to a weak economy, a recessionary economy, is to lower interest rates. the federal reserve would lower rates to help support business investment, housing demand, making it cheaper to go out and

buy a car, other consumer appliances, lowering debt burdens for households, interest rates would adjust with the rate the federal reserve sets, the other effect is fiscal policy, temporary tax cuts to stimulate the economy. there's also so-called automatic stabilizers already built into fiscal policy. if someone becomes unemployed, they are able to get a check to help them out. that's already built into the system to support it when things aren't going so well. is theson to be nervous current environment, we don't have a whole lot of room with those tools. take the interest rates. in the typical economic

recession since world war ii, there have been 10, the federal reserve has cut the interest 5%. by an average of right now, the funds rate target is at 2%. recession, the short-term interest rate will go to zero pretty fast and the fed won't be able to support the economy to the degree they've been able to. on the fiscal policy side, we talked about the deficits and that just adds to our longer-term physical problems, longer-term economic problems. recession is a pretty tough thing. it can be tougher than people are anticipating because there for policymakers to

address things if we actually go into recession. host: this is mark zandi joining therom moody's analytics, chief economist. sam in new york. hello. caller: thank you for taking my call. the u.s.ently claimed economy is strong but many economists don't feel the same. people have many problems here. ask the people sleeping in the streets. economic policy is directly connected. if we want to improve our economy, we need some changes in our policy. budgets for the military are decided to expand the military into space.

we could help people with health care costs. another thing that needs , the money weange are paying to other countries to influence their policies. there's something here that why should we pay iranian immigrants to take americans' jobs? to encourage iranian people to act against their country -- host: what about that idea largely as far as adjusting our spending? do you see a will to that? guest: i do sympathize with the point that there are a large

number of americans that are financially struggling. even with a sub 4% unemployment rate. recently dideserve a good survey study and found roughly 40% of american have less than $400 in cash that they could use in the case of an emergency. if something went wrong and they 40% ofquick cash, households have less than $400. that is a very telling statistic that gives you a sense that despite the good topline numbers for the economy, there are large segments of the population that are struggling. that's why it is so important that we avoid recession, that the economy continues to and and unemployment

remains low, so they can save more and prepare for what will inevitably be for all of us a problem. staying out of recession, we can ensure the economy moves forward, that has to be the priority. longer run, there's lots of do,es and things we need to particularly around training, retraining, education, trying to raise the skill level, the educational attainment of all of us. that means we will have higher wages and be able to compete better in the global marketplace and as a result save more and prepare financially. lots of issues there. has tober one priority be to not go into another economic downturn.

those households that are struggling are the ones that will struggle when there aren't as many jobs around. jobs -- for the had to bejobs created revised to 500,000 less. what does that say about the overall jobs market? guest: that was an interesting statistic. the bureau of labor statistics based that on a large sample of businesses. once a year, they go back and look at data for employment across all businesses. what they did yesterday was release information saying based on this so-called benchmark, they will revise down the job totals by 500,000 jobs.

that is quite significant, a large revision. it does change the picture we had of 2018. strong, inrelatively large part because of the temporary effects of the tax cuts. it wasn't nearly as strong as we thought. the gdp growth wasn't nearly as strong, the bureau of economic analysis lowered those estimates a month ago, and now, we see they were fewer jobs created last year. numbers the weaker job were in leisure and hospitality and retailing. retail laid-off workers. the economy did well last year but not nearly as well as we thought. that means coming into this year and going forward, the economy is not in nearly as good a shape

as we thought it was. host: your question for mark zandi. caller: good morning, gentlemen. i'm curious to get mark zandi's response. for starters, it's important to talk about the federal reserve's contribution to the bubble and bust cycle. we could go back to the qe, the bailouts, mounting $24 trillion of liquidity that went right into the current asset bubbles we have, the stocks and bonds. economists -- for economists to look at the economy and determine what goes up or down, i've noticed over the last 30-40 years, there's been an incredible manipulation of statistics by the government for political reasons.

it happens gradually, whether it is in cpi, unemployment, or whether they determine gdp. in the 1980's, you had totally different numbers than we have today. we have economists trying to tell us what the gdp is. a simple fact that the debts we run through our monetary policy, we are adding $1 trillion to the gdp every year through government spending. curious how economists inl with this problem accurately determining what is black, what is white, what is real, what is not real. host: thank you very much. guest: let me take the second point about the data first

before we talk about the fed. i think the data is pretty good. i'm a careful consumer of that information and data. . i've been doing it for 35 years. i don't sense any significant erosion in the quality of the information we are getting. in many cases, it has improved. we shouldn my view, be spending more resources to get better information and data. the better data we have, the better policy we can put in place. even abstracting from that issue, i think the data quality is pretty good. i think it is accurate data. in all data, there's issues and problems. they are no bigger today than they were 20 years ago. the other thing that's useful in this regard, we are now getting

data from other private sources that are very helpful. the humanh adp, resource company that processed a lot of payroll records. >> we get information on which is a large sample of employment. int is very helpful assessing what's going on in the job market. that is just an example. asre's many examples technology improves and becomes more ubiquitous. faith and unbiased faith in thel quality and unbiased nature. these are run by highly skilled

individuals. i have every confidence that we have a pretty good sense of what's going on, at least as good as we've had historically. , this is abouted the federal reserve and bubbles -- i'm more sympathetic with the caller's perspective, i think. i do think monetary policy contributed to two large asset bubbles. 1990's in the late around y2k, the so-called tech prices,a surge in stock that ultimately blew up and caused the recession of 2001. the more serious bubble was the housing bubble in the early mid mid-200ands -- early 0's.

7 million people lost their homes in foreclosure. there is concern about another bubble today. it.less concerned about it is very important that federal reserve policymakers remain focused on potential asset bubbles. we don't want another tech bubble or housing bubble. so far, i don't see that out there in the marketplace. there are things that make me a little worried, but nothing to the point where i think it's going to be existential to the economic recovery. stock prices are high but they haven't really gone anywhere since the early part of 2018. i'm not overly concerned about that. housing values are up. they are very consistent with underlying incomes and rent. i'm not overly concerned about a bubble at this point.

clearly, it should be something we are on the watch for. the headline from "the los angeles times" highlights there was a climb yesterday. how should someone look at the stock market as an indicator of the economy? guest: generally, i wouldn't look. the stock market goes up and down, all around. i don't think it sends a strong signal about where the economy is headed except around recessions. s always decline significantly, 20% from their peak, prior to an economic downturn. investors sense that companies are having trouble, starting to weaken, and they sell stock.

that happens roughly 6-9 months economic recession actually occurs. sustained declines in stock values are good indicators of recession. the stock market has predicted nine of the last five recessions. what that means is stock prices downo down, they can go significantly but we don't have recessions that follow. it's a helpful leading indicator but not a full proof leading indicator. host: todd, good morning. caller: good morning. i remember him saying that, too. ultimately going to lead

to a question about the value of capital gains taxes. i don't accept that tax cuts exist at the federal level -- i'm looking at this >> we take you live to a discussion about children's online privacy. from anbe hearing official with the ftc, a privacy attorney and other officials. >> important issues facing kids families and internet. in the united states, the collecting of children's data has been regulated by the children's online privacy protection act for 20 years. this has stated facebook, snapchat and alibaba. in the last month, we have