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Larry Kudlow
  Larry Kudlow on Economic Policy and Small Businesses  CSPAN  November 2, 2018 1:24pm-2:03pm EDT

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order to do that. i think the country is at risk. >> and i think the effects of the midterm election depending on whether it switches from a republican house to a democratic house will affect me and the members of my generation significantly and i'm really proud to see all of the not just members of my generation but all young people in general stepping up and running for offices, especially here in new hampshire. there is so many of us. >> voices from the states, part of c-span's 50 capitals tour. >> tonight on american history tv in prime time, we will look back 50 years to richard nixon's 1968 presidential campaign beginning with a film from our real america series featuring the republican nominee answering questions from georgia residents. it was one in a series of live television broadcasts in live states paid for by the nixon campaign.
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american history tv is tonight on c-span 3 beginning at 8:00 p.m. eastern. >> larry kudlow is the director of the white house national economic council. he spoke yesterday at a forum on small business hosted by the "washington post." this is just over half an hour. >> great to be with you. good morning, i'm bob costa with the "washington post," national political reporter. i really appreciate you all coming out for this small business forum. we're so glad to have larry kudlow here, long time cnbc commentator, writer, author, now president trump's top economic adviser in the white house, focusing on economic policy directing the national economic council. larry, thanks so much for being here. >> my pleasure, robert. starting at the new york fed in open market operations, 1973.
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>> i wasn't going to date you, larry. you're starting to bring up the biography. >> a couple stints on wall street and, yes, yes, yes, thank you very much. pleasure to be here. >> we appreciate you being here at the "washington post." i know everyone here is paying attention to the stock market and, larry, when you think about the market over the last few weeks, the last few months, is the president's trade war responsible for the dip? >> i doubt it very much. the economy is so healthy right now and profits are soaring. i mean, look, i've said this a bunch, corrections come and go, i mean, i've been around the stock market, i used to work in the stock market as a wall street economist. you can't predict it. you can't predict the top, you can't predict the bottom, which, by the way, you all should just buy and cold, that's a kudlow dictum. jeremy siegel dictum, et cetera. yeah, no, i -- i mean, the
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closest thing i can see -- i'm not giving -- this is just my personal opinion, i think a lot of the big, big tech stocks, the fang stocks got pretty topee and they were due for a correction. that's one man's opinion, that's not the official white house view or anything like that. i think they let the market down. corrections probably overdue. we had a much bigger one, by the way, last winter. i don't think trade enters into it. >> is this the start of a long-term downturn? >> i don't believe so, robert. the case i make is the economy to me looks so strong and durable right now, confidence is up, jobs are up, blue collar jobs are up, small businesses are up, we will get to that, i guess. we're seeing very good business investment, which is really the heart of a solid recovery, maybe
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a little sloppy in the third quarter, but capital goods orders are huge right now. so it just seems to me, you know -- again, profits are the mother's milk of stocks, profits are the lifeblood of the economy and i think profits are going to continue to rise. i think we're hitting on all cylinders. i do want to mention for our group, i'm sorry you can't see this, you probably have, for small business i'm a great devoty of the nfib, i hope i'm not offending anybody, but they do fabulous work on national federation of independent business. you look through this thing, this is their latest chart book for september, you see -- here, look at this. look at the optimism index. >> you say there is a lot of optimism in the economy among small businesses, but small businesses want to know about certainty and there is an election next week. >> yes. >> if the democrats take over the house what should small
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businesses expect? what does that mean for the trump economic agenda? >> actually, on that one i think inside this correction someplace is some nerves about the election because i think that small business and all business and frankly the workforce is enjoying a very strong economic boom, which is quite unexpected, our critics say you're going to stay in 1% to 2% growth and we are broken out of that to 3% plus. so things like corporate taxes, not just the big guys, 21% marginal rate, but also small business estimated to have a 19% to 20% effective tax rate down from almost 40. that's a huge thing. i think they're worried about that. i think they're also worried about red tape and regulations, which has been a hallmark of the president's economic growth
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policies. i think people were very worried about the energy boom, which is another hallmark of the president's economic growth policy. we will be pumping about 15 million barrels of oil per day in about two years according to the interior and energy departments. that's really quite -- we have so much natural gas that they're flaring it, burning it off and hopefully we can build a lot of pipelines to use that, sell it to europe, undermine russia, sell it to asia, maybe undermine china. so those hallmarks, there are other policies, we have had a lot of healthcare reforms that i think have helped small business. i think they're worried about that. i think everyone is worried about that. why would you want to overturn what appears to be a very strong economic period backed up by pro
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growth policies where -- i don't mean to filibuster, i will quit in a minute, but where you have a president almost from day one after the election in november 2016. this confidence, i apologize, but this thing starts to really jump. >> a lot of businesses, small businesses are nervous about this trade war and they're wondering win or lose the house next week just how far is this administration going to go in its trade war with china? >> well, again, folks like a president who ends the war on business. that's the point i wanted to make, and that became apparent when these confidence indexes jumped right after the election. ending the war on success and with lower tax rates, you know, you keep more of what you earn. you are rewarded if you're successful. so i think that accounts for the confidence that's so important. specifically regarding trade, i
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understand there is some questions and perhaps some anxieties about trade. i would say as a free trader that, first of all, the president would like to abolish tariffs and nontariff barriers and subsidies. he is a free trader, but we are stuck with a lot of foreign unfair trading practices, which -- >> how far do you take it? >> -- have been harmful to the u.s. workforce and the economy. i think, robert, the -- frankly the principal culprit is china. is how far do you take it? the president has made his statements using tariffs as a negotiating tool as part of his quiver. i don't want to get ahead of the cur curve. he, i guess, was interviewed a couple evenings ago and he said, look, if we could reach a deal,
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a satisfactory deal that helps both sides with china, then the tariffs could be pulled. i know that always -- >> what does that mean, a satisfactory deal? >> on the other hand, if we don't, which includes the intellectual property theft, forced technology transfers, the lack of ownership, high tariffs on commodities and industry supplies, cybersecurity, the whole list, which is very, very important to us, if they don't make it satisfactory offer then the president will continue to aggressively pursue his agenda and i think he's right to do so. i say that as a free traderer, but you can't have free trade with this -- china is breaking the rules. we signed at the u.n. a tri-par tied agreement with the eu, usa
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and japan and that agreement was a very important agreement. that agreement lays out the brief against nonmarket economies they call it. what did i just hear this morning? did you tell me or somebody told me the ambassadors to france and germany were in china, i hope i get this story right, essentially sending that message, you must change. you must change. so how far do i want to get ahead of the curve? there will probably be a meeting in argentina. >> what's the specific goal of that meeting between president xi and president trump. if you are a small business you're wondering can they make peace on trade or not? >> you know, robert, i don't know the answer to that. my crystal ball is not at all clear. the agenda is being discussed and worked on inside both camps. i think it will include trade,
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i'm not 100% sure, i don't want to get ahead of our curve. >> we are talking about a pull aside meeting coming up this month between president xi and president trump. >> actually, it would be a very formal bilateral sit-down, a very formal one. there was even talk of a meal, lunch or dinner, i don't know. ambassador bolton is the lead on that, nec, treasury, we are all working very hard, of course, ambassador lighthizer who has done a great job as our trade rep. i don't know. i don't know. the president says i don't know xi. when he came here i wasn't in the government so i've never met him. the president says they have good relations, okay. i hope so. i think, frankly, we've been to beijing, they've been to washingt washington. i think only they can break the log jam. >> what does it mean for a u.s. small business if the chinese economy continues to have a
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struggle and it's having its own is slide over there? >> you know, i'm not going to deny that there could be some very modest affect and i underscore very modest. >> on the u.s. economy? >> that's correct. i know small businesses, import, export, i love that, international trade, supply chains, but we can do it, we are doing it right now without china. right now we are doing it without china because we put up a lot of tariffs, i don't know, 250 billion. the 200 is 10%, the other 50 billion i think is 25%. i call it the technology tariff, which is very important. no, i think, you know, we're growing 3.5% q3, 4.2% in q2, the four quarter change is 3% which is a milestone.
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our small businesses are soaring. soaring. they're killing it. that's what these charts show. and i apologize, i should have put it up on the scene. >> should small businesses expect 3% growth next year? >> yes. yes. kudlow forecast. maybe higher. yes. >> but that's a baseline for next year? >> that's right. we will put out our budget, mick mulvaney and so forth -- i don't want to give away the family jewels, but 3% is a good number to think about. people said it couldn't be done. let's just pause for a second, robert. i know there's a lot of political stories out there. >> we're talking about the economy. >> i know. and you've gotten very good at it really. i've known him for years. and i'm impressed. >> okay. thank you, larry. >> back to the questions. >> back to the questions.
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i believe the biggest story in 2018 is an economic boom that almost everyone said would be impossible. >> how are you going to bolster wages, though? there are still some nerves about that? >> let me just tag line that last one because there's a million political events and i understand that and some are more important than others, but here is -- and i owe this to the wast post excellent reporting. a couple fact oids. i just met the woman -- i don't want to get her in any trouble. >> heather long. >> but heather long wrote this fabulous piece a while back, front page, above the fold, "washington post" is a well know supplied side newspaper -- that was a joke. she noted the explosion of blue
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collar jobs, which hadn't -- people hadn't really focused on that, including me, and she went all the way back to reagan in '84 where i was a reagan cub scout economist in the office of managed budget knows this, that's big. that's very big. the other factoid which came from another source, but collar workforce wages are growing faster than the white collar. they're not as high, don't get me wrong, but they're growing faster. that's extremely unusual and suggests to us that particularly the business tax reforms and tax cuts are really working because kevin hasset my dear friend wrote this piece, i don't know, 10, 15 years ago, i've been using it for years for corporate
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tax reform, the biggest beneficiaries of corporate tax reform are the ordinary workforce and it's kicking in. >> larry, if the democrats take over it's going to be divided government. >> yes. >> would you be willing to consider a deal with the democrats, a fiscal deal, where tax hikes were involved at some level? >> you're asking me personally? >> yes. >> absolutely not. >> what about president trump? >> i cannot speak for him. >> so he hasn't ruled out tax increases as part of a fiscal deal? >> well, look, we just signed a joint statement with congress looking for middle class tax cuts and ways and means chairman kevin brady just got a floor vote on the tax cuts 2.0 which would make the individual tax cuts permanent and some other important savings incentives. so you're not seeing this. i mean, if you -- to look ahead, look what we're doing now, look what the president is campaigning on, look what
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chairman brady is talking about. so i can't predict the world, but i will say at the present time i do not believe we will raise taxes. i do not believe it. if democrats take the house, a possibility, i would expect tax cuts to be -- tax hikes, rather, that's what they're running on, they want to overturn the tax bill, they won't get through the senate and if it ever did president trump would veto it. that's my personal view. it hasn't happened, but that's my personal view. the senate probably would stop the tax hikes and if by chance it got through the senate, president trump would veto tax hikes. >> do you think tax hikes are necessary to address the deficit at some point? >> no, i think we need ten years or so of economic growth, running about 3% per year. i also think we need to limit spending. you will see a very tough budget
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coming from the administration in a couple months. again, mr. mulvaney. >> does that cut social security or medicare? >> it will not. it will not. i just want to correct -- i try to do this to correct the record, i've been trying for months, nobody wants to pick it up. in an interview in new york a while back there was some confusi confusion. the interviewer who is a very bright lady and a friend of mine, she was referring to the two big entitlements. i was referring to the remnants of obamacare. i said, that's where we're going to go, that's where we're going to go. we got tangled up. no, we have no plans to touch the large entitlements. we do have plans, however, to erase remnants of obamacare and provide more market-oriented, incentive-oriented healthcare. >> you've been in the everybody is testify movement for decades, that's been a project for conservatives, trying to pull back long-term federal spending
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on social security and medicare. now you're saying a republican president won't touch them? >> that's correct. that's his view at the present time and, you know, i think you described it aptly. look, president trump is a growth guy. president trump is a growth guy. his view, which i fully totally 100% support, is that these tax cut and deregulation policies are working, the economy has picked up, he believes that can go on. he actually tells me all the time we need to have higher growth than 3%. i will take 3, but -- and that has a big impact on the budget. i mean, if the cbo is running a baseline of 2% growth or less and we get 3% growth over ten years, that's roughly, roughly $3.5 trillion reduction in the
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deficit. now, i'm not saying -- there is a lot to reduce. the president has said nondefense, nonbig entitlemente, but everything else will be subject to a 5% reduction across the board. it may not be even, programs -- some useful programs may rise, but most of them are not. so you will see that be the toughest budget yet and he's made that statement and they're fleshing it out at omb. so the combination of lower spending and faster economic growth through the tax cuts is our policy, it's the policy that's working and i think certainly as a share of gdp the budget deficit will be coming down each and every year. it clocked in at, what, 3.8 or 3.9% of gdp. it actually came in $100 billion less than cbo thought. too high, don't get me wrong, but we're gaining on it. >> do you think the deficit will
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come down or is the administration committed to having it come down? >> both. both. i think it will come down because of faster economic growth and i think the administration is committed to policies that will restrain government, in effect. look, president trump, as you know, is a very successful former businessman, doesn't care much for waste. he is going to go after it. his promise a couple weeks ago of a 5% reduction in nonentitlement domestic spending, i can't recall anything quite so tough. by the way, people say all the money is in the big entitlements. actually it's not. >> there is a lot of money there, though. >> yes, there is, but there's a lot of money in discretionary programs and smaller entitlements. >> your whole argument is grow the economy and don't touch the long-term federal spending programs. the minimum wage the democrats are going to come if they get any kind of power on tuesday and
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say, larry, president trump, we want a $15 federal minimum wage. is there any way you could go up to that level and cut a deal with us in the minimum wage? >> look, i, again, can't speak for the president. >> is it possible to cut a deal with the democrats on the minimum wage? >> my view is no. my view is a federal minimum wage is a terrible idea. terrible idea. and will damage particularly small businesses to force them to take a kind of payroll increase would be silly. idaho is different than new york, alabama is different than nebraska. that's why the federal minimum wage doesn't work for me. now, a month ago or so, i hope i get this right, amazon raised its corporation's minimum wage to $15. that's right? >> amazon's ceo personally owns
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the "washington post." >> yes. >> no, we have to disclose that. >> yes. >> larry brought it up. >> look, man, it's a supply side newspaper. anyway -- >> that's his opinion. we are a nonpartisan newspaper. >> i'm working here. so i applauded it. i applauded mr. bezos. i applauded it. great. i'm a jack kemp, jfk, my book "jfk and the reagan revolution" which is all about tax cuts which should be bipartisan in my humble opinion, by the way, you can easily get it, jfk and the reagan revolution, just one click on amazon, you can pick it up. so i applauded the 15% minimum wage, that's a private decision,
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absolutely, and i want the workforce to grow, prosper, i want wages to soar. i don't think it's inflationary. i don't think more people working and succeeding is inflationary. i have always had that view. now, then, people say, well, i guess later on on cable tv bernie sanders came out and supported a minimum wage so people were saying, well, kudlow and sanders are agreeing. i guess on that topic we do, but not the federal. i would argue against state and local, but that's up to the states and localities. >> speaking of inflation, the federal reserve, a lot of public frustration from president trump about chairman powell. has the president considered replacing powell as chairman, keeping him on the board of governors but replacing him as chairman? >> no. no. to my knowledge. to my knowledge, no. by the way, it would be impossible to ask. jay powell is a friend of mine mine, i don't even want to go
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down this road, but a fed chair can only be removed for cause. >> that's maybe from the federal reserve board, but could you install a different chairman? >> i don't think so, it's a four-year term. i would have to look at the archives on that, but i think it's a four-year term. the president has said we're not going there. he has said that. look -- >> has the president ever called chairman powell, that you know of, and said, please don't raise the rates? >> not yet. no. president -- you know, a successful businessman investor, knows a lot about this. he is giving his opinion. he's giving his opinion. you know, greenspan whose book just came out, alan said way or the other, talking, notes, phone calls, presidents are always giving the fed advice. president trump has not made the call -- phone call, but he believes -- or he is concerned
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that the fed is moving its target rate up too high and too rapidly. that's his view. by the way, a lot of distinguished economists hold that view. >> has chairman powell, though, ever called and said larry, this is too much, this public pressure? >> i had -- i have lunch with chairman powell each month and we swap anecdotes and stories. i was just going to say that i believe the fed and the administration have similar goals, that is to say, not inflationary growth, and i think that over time, that will become more and more apparent. and i also will applaud chairman powell for breaking out of the mold, low unemployment is bad, it is going to cause inflation, no it's not. no, the dollar collapse, that will cause inflation.
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>> could the president install a dove on the fed at some point? >> i believe there are still two appointments to be made, okay? but i don't want to conjecture on that. >> why not put a dove in there? >> look, i don't want to conjecture on it. >> the president may be open to it, someone with a different mindset. >> i don't even want to put words in his mouth on any of that stuff, that's hypothetical. and as you know i hate hypotheticals. as i'm saying j. powell has said publicly in his speeches that these old fed model, more people working at low employment is bad, he doesn't buy it, he said that publicly, he said he doesn't know what the interest rate is, he said that publicly, and he said we don't know steady state inflation, why does it have to go above, so i think he and the president share important goals. that's what i think. but the president has an opinion about this. he is not pushing the fed. he is not trying to drive
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through their independence. he said that. he is not saying change, not making calls, this and that. he is not disrupting their independence. he has said that several times. and i believe that myself. he is just giving his opinion. >> since we're here at the watch, our colleague jamal khashoggi, killed in the saudi consulate. >> tragic, terrible. >> what should the economic ramifications be for the saudi royal family? >> oh, i don't know. by the way, again, a tragedy, absolute tragedy. terrible story. so as you know, the investigations are ongoing. and as you also know, the saudi royal family has actually changed their tune quite a bit, and now acknowledges that khashoggi is dead, i mean it took a while to get that out, so president trump has said many times, let's wait and see what
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the investigations produce, facts, and then consider potential options or not. you got to get the facts fully on the table. >> when you think about that arms deal, should it continue, $110 billion arms deal president trump talks about if? is it necessary for the economy? >> the president has said many times he would like that. but he said everything is on hold pending this investigation. >> we only have a few minutes left, a couple minutes left. you say you're a supply sider. >> yes. >> you have had a long time support for immigration in this country. and you talked about how the closing message maybe from your view should be the economy. president trump's focusing a lot on immigration. do you personally agree with him that birthright citizenship should be ended? >> well, you know, i'm not a constitutional scholar. some people i know and respect are. and believe that the 14th amendment deals with that. but i'm not a scholar, okay?
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i do think many of these practices, illegal practices have to be curtailed, okay? and i am pro-immigration, always have been, but i'm pro-legal immigration. the system is groeken. the system has been broken for quite some time. and it needs to be fixed. the president has made, as you know, a number of proposals to fix that system, border security, and different, you know, stop at the border, sanctuary cities, a whole program of merit points to come into the united states, which many countries successfully use. i agree with that. i agree with all of that. the trouble is congress never passes it. so yes, i'm a supply sider.
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i'm a free market guy. and i believe in the free flow of labor and capital. i think that benefits growth. but i also believe in legal sovereign borders and a legal immigration system. >> final question, larry, how long do you plan to stay in this job? is that the answer? >> i serve at the president's pleasure, as you know. i love this job. most days, it is the most fun i've ever had, honestly, most fun. >> you said most? >> most days. you know, you have your bad days. aaron judge will have a bad day or two, the yankees homerun hitter, but the answer, the president has been great to me, open, accessible, see him all the time, i love the work of the
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national economic council, we are involved in domestic and international policies across the board. i love the committee work. i'm dill zbent -- diligent in doing it. i love helping out in the media. it is a wonderful job. it is like a dream job. my wife said to me, when this came up, the president was calling us back in march, and we were considering it, she said, you know, you've been training 40 years for that job, and my saintly wife is probably right, that i've been in the government, omb, the reserve, wall street, been a broadcaster, 15, 20 years, on tv, you study the issues, you see it from different perspectives -- >> but you don't have a time line in mind? >> i do not. i do not. i feel great. i just love my job.
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so i may not love my job, if i was in that nfib optimism index, i would be part of the up line. it really is the most fun i've ever had. >> thank you, larry. larry kudlow, national economic council director. thank you. . later today, former president barack obama will campaign in miami at a rally for senator bill nelson, candidate for governor andrew gillum and other democrats on the ballot tuesday at 2:30 p.m. eastern live on c-span. and president trump and vice president pence are also on the campaign trail. they hold a campaign rally in indianapolis at 7:15 p.m. eastern. live on c-span. your primary source for campaign 2018.
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this weekend, c-span cities tour takes you to lake havasu center, arizona, with the help of our sudden link by altese cable partners we will explore the literary life and history of leave haven sue, saturday at noon eastern on book tv. hear from the author and lifelong resident rick kingsbury as he shares the lake havasu early history, from his book, living at the end of old 95, lake havasu before the bridge. >> we moved here lock stock and barrel in february of 1965. there was somewhere around 600 people. and there might have been 20 homes. for our family, it was three years before, no, i'm sorry, three months, three months before we finally got running water, and it was another, i think it was five months when we finally got electricity. and then it was a year before we
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finally got a telephone. >> on sunday at 2:00 p.m. eastern, on american history tv, a visit to the parker dam, which plays a vital role in supplying water to millions of people in arizona, and southern california. >> we have about a million acre feet of water going to l.a., which if you don't know what an acre foot is, it is about 326,000 gallons, enough to feed two families of three or four for a year, and another one and a half million acre feet goes to phoenix and tucson. >> watch c-span cities tour of lake havasu city, arizona, saturday at noon eastern on c-span-2 book tv. and sunday at 2:00 p.m. eastern on american history tv on c-span 3. working with our cable affiliates as we explore america. the c-span bus is traveling across the country, on our 50 capitals tour, during our stop in concord, new hampshire, we
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asked folks which party should control congress, and why. >> i believe republicans should retain their majority in both houses of congress. after the midterm elections. i think president trump is doing a great job at the white house with some of the policies he has enakked. i think congress, along with mcconnell and speaker ryan are doing their part. i think due to the economy and strong gains in the judiciary and foreign policy and world affair, i think they're doing a good job. and although speaker ryan will be retiring i think it will be interesting to see ho will take over the helm if republicans do maintain their majority in the house of representatives. and who will be speaker. and i think with the gains they've made, i think the country is doing quite well, and i think president trump should be given a chance to continue to work with the republican jort that is doing so much for the country. >> i want to thank c-span for visiting new hampshire. new hampshire does democracy better than any other state, and coming up in these midterm election, people are active and engage and informed and ready to vote on november 6, and the
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democrats are going to take control. >> if control of congress changes after the 2018 midterm elections, that will greatly impact me, my family, and many fellow students. there are many issues going on right now that i care about, one of those being health care policy. my mother has been greatly affected by health care policy. and if the democrats were to regain control of congress, i feel that that not only myself, my family, and many other americans across the country will benefit for the best. >> what happens if the congress changes, i think the d's have a wonderful chance to win the house. that's very significant. i'm not so sure about the senate race. it looks as if the senate race maybe best case scenario would be 50/50, worst case scenario, 52/48, in terms of the republicans. what is going to happen after the midterm election is anybody's guess. i think indeed some of the ert efforts that have been put forth
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by the president really have got to be stopped. and it will take a congress made up of democrats in order to do that. i think the country is at risk. >> and i think the effects of the midterm election, depending on whether it switches from a republican house to a democratic house, will affect me and the members of my generation significantly. and i'm really proud to see all of the not just members of my generation, but all young people in general stepping up and running for offices, especially here in new hampshire. there's so many of us. . >> voices from the states. part of c-span's 50 capitals tour. the heritage foundation recently hosted a discussion on human rights in north korea. and how the u.s. and the international community can pressure north korea to improve human rights.