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U.S. trade team ‘soldiering on’ in China ahead of high-stakes Xi meeting

Kudlow downplays deficit growth as experts, lawmakers sound alarms

White House economic adviser Larry Kudlow says the Trump administration will lower the deficit despite projections that suggest otherwise. (Chip Somodevilla/Getty Images file photo)
White House economic adviser Larry Kudlow says the Trump administration will lower the deficit despite projections that suggest otherwise. (Chip Somodevilla/Getty Images file photo)

U.S. officials on the ground in China for high-stakes trade talks are “soldiering on” and will get facetime with Chinese President Xi Jinping, something a top aide to President Donald Trump calls a positive sign as a key deadline approaches.

“I’ve talked to the group [in China]. They’re covering all the ground,” said Lawrence Kudlow, the White House’s chief economic official. “They’re hard at it. They are going to meet with President Xi, so that’s a very good sign.”

Kudlow declined to get into the specifics of the talks, saying, “They’re just soldiering on. The vibe is good.”

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The talks come ahead of a March 1 deadline for an agreement. If none is reached, U.S. tariffs on $200 billion in Chinese goods are set to balloon from 10 percent to 25 percent. But Trump on Tuesday signaled he might be willing to extend that deadline.

“If we’re close to a deal where we think we can make a real deal and it’s going to get done, I could see myself letting that slide for a little while,” he told reporters. “But generally speaking, I’m not inclined to do that.”

Two days later, Kudlow said there has been no final decision made on pushing back the March 1 trigger date.

Meanwhile, Kudlow said he soon will meet with New York Gov. Andrew Cuomo about the state and local tax deduction, also known as SALT, which was curtailed in the Trump-GOP 2017 tax law.

“They have some ideas to kick around. We might have some ideas to kick around,” he said. “I want to be deliberately vague, because vague is all we have. We’ll see.”

House Appropriations Chairwoman Nita Lowey of New York and others from her state have sought to push legislation fully restoring it. Lowey and others from high-tax states call the SALT deduction a way to make tax laws fairer in places like New York and other states where large deductions are common.

Kudlow also said the Trump administration is crafting “a tight budget, a tough budget” for fiscal 2020, and he predicted 3 percent economic growth in the current quarter. He also pushed back on the notion floated by some budget experts that the federal deficit is a drag on the economy and could help trigger a recession.

“I think you’ll see deficits as a share of GDP keep falling,” he said. “I don’t think that’s an issue, a problem.”

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The federal deficit passed the $22 trillion mark for the first time ever on Tuesday, and has been rising at a faster clip since Trump and Republicans passed a tax overhaul law in late 2017. Those new Treasury Department figures spawned new worries about the country’s fiscal situation, especially since the U.S. has taken on $1 trillion in new debt over the last 11 months.

Senate Majority Leader Mitch McConnell in October told Bloomberg the rising deficit is “disappointing” — and he blamed both political parties.

“It’s a bipartisan problem,” he said. “Unwillingness to address the real drivers of the debt by doing anything to adjust those programs to the demographics of America in the future.”

With deficits and debt come interest payments, which the nonpartisan Center for a Responsible Federal Budget has concluded: “is on course to be the single largest government program within three decades.”

“The federal government’s interest payments are set to increase dramatically, taking up a larger and larger chunk of overall federal spending,” the center said in a white paper published Wednesday. “Returning our debt trajectory to a sustainable course through a combination of spending reductions and revenue increases sooner rather than later would significantly alleviate this burden.”

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