- Stocks take a tumble, asfears of recession grow.

Welcome to Faith Nation,I'm Jenna Browder.

- And I'm John Jessup.

Well, if an actual alarm bellexisted to signal a recession,

many economists say itwould be ringing tonight.

- In a healthy economy,long-term interest rates

are higher than short-term rates.

But when short-term ratesrise above long-term rates,

it's called an Inverted Yield Curve,

and that is what's happening right now.

In the past, this has beenfollowed by a recession

within several months to two years.

And for President Trump,this could spell trouble.

- That's right, he'slong touted the economy

as the highlight of his Administration,

and the Vice President's Chiefof Staff tells Faith Nation

the White House doesn'texpect that to change.

- It's been a pretty dynamiceconomy under Donald Trump

from both the regulatory impact,

as well as tax relief that we've provided.

We believe that the economy is strong.

We believe it's gonna remain strong,

so we're not anticipating a recession.

- Stephen Moore is aformer economic advisor

to President Trump andcurrently a distinguished

visiting fellow at theHeritage Foundation,

and he joins us now for more.

Stephen, thanks for being with us.

- So great to be with you.

- Steve, stocks fell todaybecause investors are worried

that the bond market issignaling a recession.

What do you think?

Is a recession on the way?

- No, I don't think so,but there's no question

the economy has slowed down.

You know, we were growingat three to three and a half

percent last year, andnow we're growing at about

two percent, and that's aresult I think, of two things.

Number one, the ongoingtrade war with China

and the uncertainty that that has created.

And the second factor has been the Fed,

which in my opinion andDonald Trump's opinion

has been way too tight.

And when you have theinterest rates this low

and the inverted yield curve,

that's a sign of Fed beingway too tight with money

and that needs to be reversed.

- So does this putpressure on the Fed to act?

- You better believe it does,

and I've been arguingthey should act tomorrow.

I mean there's no reason towait for their next meeting,

which is the middle of September.

Given the fact that we arein a precarious financial

situation right now, Ibelieve the Fed should act

immediately to cutrates by 50 basis points

to infuse more dollarliquidity into the economy.

You know, if you look atwhat's happened across the pond

in Germany, you know,Germany now has negative

real interest rates and that does presage

a potential recession in Germany.

We don't want them to go downthat path and the Feds should

act proactively to makesure that doesn't happen.

- Stephen you alluded to this earlier,

but what about criticswho say the President's

trade war with China is what's causing,

or potentially causing a recession?

- Well, certainly the tradewar is hurting growth.

Now I happen to agree withwhat the President's doing.

I think every day we seeChina as a worst actor

on the political and foreignpolicy and economic scene,

and we're now facing thepossibility of Chinese troops

going into Hong Kong to suppress these

freedom fighters there.

So you see their bad behaviorwhen it comes to the economy,

the fact that they're stealingour intellectual property

and they have not opened up their markets.

And then you see the cybersecurity threats that they

pose to the United Statesand then you see their

buildup in the military.

You know, I'm glad thatwe have a president that's

really standing up to Beijing,

and I view that as akind of short-term pain

for a longer-term gain.

So, has it hurt the economy?

Yes.

But better to fight backon China now than wait

five or 10 years.

- So, what does this doto the President's chances

of reelection, since the economy has been

one of the biggest achievements.

How would a recession...

I know you said you don'tthink it's gonna happen,

but if it did happen, howmight that hurt him in 2020?

- I think his major campaignthrust has been to talk about

how he has rebuilt the American economy

in an incredibly impressive way.

We have the lowest inflation rate,

the lowest unemployment rateand the lowest interest rates

in 50 years, so that'sa beautiful picture,

with rising wages.

So he does need the strong economy.

I happen to think there willbe a deal that gets done

in the next six months with China.

And when that happens,I think the stock market

and the real economy springs back to life

in a very powerful way.

So there's a real incentiveto get a deal done,

that both countries can live by,

and by the way, it will makeboth countries economies

perform much better.

- All right, we're gonnaend on a positive note.

Stephen Moore, thank youso much for your time.

- Thank you.