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FIRST ON CNBC: CNBC TRANSCRIPT: NATIONAL ECONOMIC COUNCIL DIRECTOR LARRY KUDLOW SPEAKS WITH CNBC’S KELLY EVANS ON “THE EXCHANGE” TODAY

WHEN: Today, Tuesday, September 22

WHERE: CNBC’s “The Exchange”

Following is the unofficial transcript of a FIRST ON CNBC interview with National Economic Council Director Larry Kudlow on CNBC’s “The Exchange” (M-F, 1PM-2PM ET). Following is a link to video on CNBC.com: https://www.cnbc.com/video/2020/09/22/kudlow-v-shaped-recovery-doesnt-depend-on-stimulus-package.html.

All references must be sourced to CNBC.

KELLY EVANS: Joining me now is Larry Kudlow he is the director of course of the National Economic Council. Larry, welcome back.

LARRY KUDLOW: Thank you, Kelly.

EVANS: Let me start with whether we're going to have another relief bill, as I like to call it, on the COVID front. It does seem to quote a lot of the DC people we talked to yesterday. They said, listen with how vicious this fight over the Supreme Court seat is going to be, there's no way Congress is going to compromise on this bill now. Do you think that analysis is right?

KUDLOW: Well, I don't know, I mean I don't want to get ahead of it. You can walk and chew gum at the same time. So it's not necessarily given but look. As you just heard Secretary Mnuchin – it’s important from the administration from the president’s standpoint. We have been asking for five or six assistance programs. I don't think the v-shape recovery depends on the package, but I do think a targeted package could be a great help. In shorthand we call it kids and jobs. We wanted additional funds for example, I believe, 105 billion Kelly, all along to help open the schools any, you know, costs that are necessary for safety and security to help open the schools, which is absolutely vital for education, for psychology, for the economy. Second, we also wanted to extend the assistance plan, the PPP plan, to small businesses. I mean, we actually had money I don't know it's over 100 billion dollars that could be repurposed to go back into that plan. I think the plan was very effective. I think it did save, perhaps, 50 million jobs and I think it's helping folks get back to work. You know, better unemployment numbers than we suspected. So those are just two items. There are other items that we were happy to look at, but unfortunately, we couldn't reach agreement with the other side. And so that was before the judicial issues came up. So I'm just saying, I don't think one depends on the other. I just think we were at a stalemate and I wish we could break the stalemate because even though I think the economy is improving nicely, it could use help in some key targeted places.

EVANS: Larry, what do you think the macro impact is going to be? Let's say the Supreme Court seat is filled in the next couple of months by Republicans. What is the market impact? What is the economic impact likely to be over the next 5, 10, 15 years do you think?

KUDLOW: Well, that’s hard question, Kelly. I mean I think you're going to get a conservative jurist. I think that the President is acting correctly with the senate, Senate Leader McConnell. I don't know, I mean, in economic terms – and I don't want to go too deep into this I'm not a judicial Supreme Court expert – I'm just saying in economic terms, I think of when I look at these nominees for the court, I think of regulatory actions which come up quite a bit. And I think as you know I prefer a lighter touch, a lighter foot on regulatory actions especially economic regulations now. That has been the trend. As you know, the Trump administration has pushed very hard to roll back onerous regulations along with tax cuts and it has given us tremendous prosperity. So, I'm going to assume that the nominee, whoever he or she may be, will continue a lighter touch on regulation. Doesn't mean no regulation. It just means a lighter touch, maybe more sensitivity to business, jobs and the economy. But that's as far as it would go. I don't think that's going to be a dominant factor in the outlook for the economy over the next longer run.

EVANS: No, no. Although, I take your point that it could take some time to play out. Let me shift back to what looms for the next couple of months. We have not just the kind of need to extend some kind of relief program and as you've indicated you guys are looking maybe to some targeted programs. Two, three, four, five, six of them I don't know whether that could advance, but we also need those CR bills. You know just the idea of funding the government and keeping it open. Can you explain kind of the politics of this? I mean, which of these are bargaining chips? Is anything, everything on the table now? Are we going to be able to see kind of those issues dealt with and then the Supreme Court and other things as a separate fight?

KUDLOW: Well, I would say separate tracks, Kelly. In other words, the CR, which is necessary to keep the government open – I think Speaker Pelosi, and Secretary Mnuchin decided several weeks ago, that that would be a clean bill, it would not affect or include any of the potential targeted assistance plans for the broader CARES Act, three, four – whatever CARES Act we're on. So, I think that runs a separate track. I think there's a broad agreement developing on the CR but it's not completed yet. There is still some matters that are up for grabs. I don't want to interfere with those negotiations. I don't want to speculate. But the CR is to keep the government open I believe they agreed to mid-December I think that's what the push is. So, that's a good thing nobody wants a government shutdown if we can avoid it. That is a separate action from the stimulus conversation and that's a separate action from the judicial conversation.

EVANS: And finally, Larry, because you know, we can't go unless we talk about TikTok and what an odd, strange, you know – but again, I understand that the reason why it's of essential national security importance, but I'm still confused about the deal shaping up. I think a lot of people are. You know, what exactly the ownership structure is, who's the majority and who's not. What do you think is the main takeaway from – that we should all have in mind when it comes to the process that's going on? I don't even know how to describe it. I mean what are we to make of TikTok? Is this a done deal and do you feel good about it?

KUDLOW: I’ll echo what the president has said, the two key points, Kelly. Number one, security, that is absolutely essential. And this is being discussed as being looked at intensely by review processes inside the government, but security is essential. We do not want the Chinese government or the Communist Party, or the Chinese military to have access to very significant and important personal information, which might open the door to even more information. We want to stop that. It can be done, but it's being looked at very, very carefully. And the bidders, principally Oracle right now on the tech side, are working with us internally to sort that out. I can't give you a conclusion yet. The other point is ownership. The president wants U.S. ownership of the new co., if there is a new co. And again, I can't get ahead of that story, but that's being examined very, very carefully. I mean look, there is a process it’s ongoing, it's evolving. I don't want to front run, but I think the President suggested some optimism about it but it's not a done deal. That's for sure.

EVANS: Larry, there's one thing I would love your philosophical stance on, though, before we go very quickly, but we had son of the Communist Party mouthpiece saying, Hey, we, we don't mind what the U.S. is doing with TikTok, it could be a template for how countries deal with multinationals going forward. What happens if China in a few years’ time says, well, Apple can kind of play by our rules if TikTok can play by yours.

KUDLOW: Well, we can't control what China does. The Chinese government has said time and again, with respect to their companies – their private companies or whatever the public, quasi-public companies – but in any case, the government has said they have a call, they have access by law on information from those companies. They can call on it at any time. And that is unsatisfaction to us, with respect to operations in the U.S. And again, the President said this many times, Secretary Pompeo has said it, Mnuchin has said it, I’ve said it. many others have said it. So that's a key point, and we're not going to accept anything less. With respect to the TikTok deal, or for that matter, other deals. We are being tougher. China has a terrible record here of hacking and cyber hacking and interfering and espionage. You know we've talked about structural changes in the trade deal with respect to IP theft and forced transfers of technology. You know, the trade deal is being engaged, but I'm saying on this particular deal with respect to ByteDance and TikTok, and Walmart and Oracle. These are key considerations. We have to have those considerations. I think the American public doesn't want anything less. It’s a matter of protecting security. And by the way, you know, we've argued, I've argued, we have to take a look very carefully now at Chinese companies who are listed here in the United States. We had a presidential memo on this from the financial working group that the issues of fraud and lack of transparency down to the years as raised by the public accounting board in the SEC are going to have to be resolved in one year. And if they're not resolved, and that includes back up papers, then, we will have to look at delisting some of these companies that don't meet our criteria. I mean, I just want to say that on all these matters, we're trying to protect the health and safety of the U.S. and the economy. Right now coming out of this dreadful pandemic contraction, we're still dealing with it the economy's coming back. There is a v-shaped recovery. You’ve heard me say that before and I think the data show that. We just had great numbers on living standards, on household wealth, today we had good numbers on housing sales. That's excellent. So, we think this is going to go forward with or without a stimulus package. But overhanging this with our dealings with China, we must protect American workers – manufacturing, technology – we must protect our family jewels, we must protect our innovative efforts. We are the most inventive country in the world when it comes to technology. Technology drives the economy these days.

EVANS: 100%.

KUDLOW: So, I think you can't get – you certainly can’t blame us for being even more careful. I think it's been lax in prior administrations and President Trump has tightened it up enormously. And this TikTok deal is part and parcel of that.

EVANS: All right. Well, again, the fact remains to be seen in the years ahead. I'll put this up there with the Supreme Court about what it means for American multinationals and so much more. But for now Larry, we'll leave it there and thank you so much for your time today. Larry Kudlow is Director of the National Economic Council.

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