Robert Mundell’s New Wisdom
By Larry Kudlow
New economic stats on consumer spending and business durable-goods investment show an economy that’s sinking fast across-the-board. Wall Street economist John Ryding expects a 4 percent drop in fourth-quarter real GDP. Of course, the Fed is pouring in new cash hand-over-fist. And plunging retail gas prices to about $1.85 per gallon nationally amounts to a huge consumer tax cut of perhaps $320 billion, according to Mark Perry of the University of Michigan. So we’ve moved from tight money and an energy tax hike a year ago, to easy money and an energy tax cut today. The former mix has generated a nasty credit crunch and a recession. But the new monetary/energy mix will generate recovery next year. I hope.
Read “Robert Mundell’s New Wisdom” — By Larry Kudlow
Obama’s Pro-Growth Economic Team?
By Larry Kudlow
When President-elect Obama had a chance to squash the tax-hike threat once and for all at his news conference Monday, he took a pass and let the question linger for another day. But his new economic cabinet appointments strongly suggest there will be no tax hikes next year. Stocks, for one, like what they’re seeing from Obama’s latest cabinet selections. On Friday, Obama announced Tim Geithner will be his Treasury man, and on Monday he made Larry Summers his White House economics tsar and named Christine Romer to the top spot in the Council of Economic Advisers (CEA). Stocks rallied 900 points across this stretch. That’s not the end of the stock story. Markets also like the new super-TARP government plan to bailout Citigroup, which effectively guarantees the banking system with a massive insurance-like policy. But markets may also sense a little pro-growth good news in the Obama policy mix.
Read “Obama’s Pro-Growth Economic Team?” — By Larry Kudlow
Tarp the TARP
By Larry Kudlow
Treasury Secretary Henry Paulson has called for a pause in the financing request for the Troubled Assets Relief Program (TARP), halting it at $350 billion. (The original request was for $700 billion.) I think that’s an excellent idea. But in a recent hearing of Barney Frank’s Financial Services Committee, Democrats went ballistic at the thought of no more TARP money. They want to keep spending. They want to throw money at GM, the other Detroit car makers, plumbers, auto-parts suppliers, homeowners, mortgage problems, and foreclosures. Candy stores all over America now want TARP money.Meanwhile, Senior Obama advisors are talking about another $600 billion to pull us out of recession. Some reports even suggest the development of a new industrial policy for big-government interference in housing, banking, energy, autos, and more.
Read “Tarp the TARP” — By Larry Kudlow
Stimulus that Stimulates
By Thomas E. Nugent
On September 18, in an article entitled “The Financial Sun Will Shine Again,” I made some suggestions about resolving our financial and economic crises. At that time the Dow Jones was at 11,019. Since then, the Dow has plunged to an intraday low of 7,774 — a decline of 29 percent in just two months. The situation has worsened significantly, and the way out of this mess has necessarily altered.Global markets have fared even worse than U.S. markets as a worldwide economic slowdown has become a full-blown recession. Consumers, in the face of tougher times, have predictably withdrawn from discretionary spending — a development that only accelerates the economic downturn.
Read “Stimulus that Stimulates” — By Thomas E. Nugent
Bush Shows Obama the Way
By Larry Kudlow
President George W. Bush came out fighting for free markets with a strong and stirring defense of American capitalism on the eve of the G-20 World Economic Conference. Stocks soared 550 points Thursday as Bush’s luncheon speech was played live on all the major cable networks. It was as though Mr. Bush was trying to leave an economic-primer to his successor-elect Barack Obama. Markets cheered because it’s the best thing they’ve heard in many weeks. Here’s one of several great passages from Bush: “At its most basic level, capitalism offers people the freedom to choose where they work and what they do … the dignity that comes with profiting from their talent and hard work. … The free-market system also provides the incentives that lead to prosperity — the incentive to work, to innovate, to save and invest wisely, and to create jobs for others.”In other words, free-market capitalism is the best path to prosperity.
Read “Bush Shows Obama the Way” — By Larry Kudlow
Next Up for Nationalization: the Internet
By Phil Kerpen
Following the nationalization of investment banks, Fannie and Freddie, consumer banks, and private insurance companies, taxpayers are likely asking: What’s left for the federal government to nationalize?How about the Internet?Network neutrality, or net neutrality, is the beneficent-sounding name for sweeping new government regulatory power that would prohibit Internet service providers from innovating in their own networks. This could lead to much less broadband investment by private companies, and could potentially force government subsidization, control, and outright nationalization of the Internet. The implications of this are chilling.
Read “Next Up for Nationalization: the Internet” — By Phil Kerpen
Weak Dollars, Weak Presidencies
By John Tamny
The late Hall of Fame football coach Bill Walsh used to say that the quarterback’s footwork often told the tale of the games. If Walsh lacked access to the scoreboard, highlights, and game statistics, he could tell which team did well by watching the quarterback’s footwork to the exclusion of everything else.When we look at U.S. presidencies, a similar pattern emerges. Since 1961, even if you had no access to newspapers, polls, unemployment numbers, and stock-market indices, you could have made some prescient predictions about presidential fortunes simply by watching the value of the dollar. Indeed, with the unique exception of George H. W. Bush, the performance of the dollar has predicted presidential outcomes very well.
Read “Weak Dollars, Weak Presidencies” — By John Tamny
Is Obama Swiping the Tax Cut Issue?
By Larry Kudlow
Wouldn’t it be the height of irony if Barack Obama wins this election as the Ronald Reagan tax-cutter? His tax plans are severely flawed and his campaign narrative to support them is all wrong. And yet a recent Rasmussen poll shows that 31 percent of voters believe Obama is the real tax cutter, while only 11 percent choose McCain.Believe it or not, Obama seems to have swiped the tax-cut issue from the Republican party. How can this be?
Read “Is Obama Swiping the Tax Cut Issue?” — By Larry Kudlow
A Very Taxing Election
By Grover G. Norquist
Soon after the primaries ended the core issue of the 2008 presidential election shifted from Iraq to the economy. But today’s debate over economic policy does not highlight unemployment and job creation, traditional issues that had dominated campaigns in the forty years following the Great Depression. Nor does it focus on the politics of the “misery index” — unemployment plus inflation — as identified by Jimmy Carter in the 1976 election. Rather, the core economic issue at the close of the 2008 election is taxation. Tax policy has taken center stage in elections before. In 1980 candidate Ronald Reagan argued for a 33 percent reduction in all individual income-tax rates, mirroring the 22 percent supply-side tax-rate reduction of Kennedy/Johnson in 1964. Carter stood opposed. Four years later Reagan defended his tax-rate reductions while Walter Mondale announced at his nominating convention that he “would” raise your taxes.
Read “A Very Taxing Election” — By Grover G. Norquist
An Interview with Senator McCain
By Larry Kudlow
What follows is a transcript of my interview Friday morning with Sen. John McCain on the investor class and the stock market. Big Mac is talking tax cuts on capital gains, businesses, and individuals. There’s no question that he is energized. But politically he is still running even with Obama among investors. That is not good. Is there time for Sen. McCain to break through and run up his margin with this crucial voting bloc?Larry Kudlow: Let me go back to the first question, which you were beginning to answer. We’ve had this terrible stock market slump. Some say $3 trillion dollars worth of wealth have been lost by investors in the investor class. And I was asking, and I think you were answering, what is your plan to create some recovery in the stock market?Sen. McCain: Keep taxes low, cut spending, create jobs with alternative energy, including nuclear power plants, including drilling offshore, wind, tide, solar. Free us from our sending $700 billion or whatever it is across to countries that don’t like us very much. Free up credit. Larry, I’ve been meeting with a lot of small-business people, and they’re having great difficulty getting lines of credit. This is something we’ve got to free up. Now, we have given the banking, the banks and other institutions the kind of infusion they need. It’s time they pass that on to small businesses who say they can hire. They’ve got business, but they just haven’t got the line of credit.But make sure that everybody knows that we’re going to keep taxes low. We’re not going to raise taxes. We’re the creator of business and the engine of our economy and small business, Sen. Obama’s proposal would tax half of all small business income, some 16 million jobs in America would be at risk. And then you put on top of that, he will force his mandated health care plan on small businesses, their employees, and their children. It’s not good for America.
Read “An Interview with Senator McCain” — By Larry Kudlow
From Panic to Depression?
By Phil Kerpen
Blame for today’s financial panic can be assigned to a Federal Reserve that kept interest rates too low while a bubble inflated; unscrupulous lenders; people who bought homes they couldn’t afford; Wall Street wizards who overleveraged and wrote derivatives they couldn’t pay; and a Congress that set the policy goal of universal home ownership and recklessly grew Fannie Mae and Freddie Mac to pursue that goal. But with so many real culprits out there, we cannot afford to blame the fake culprits of free trade, low taxes, and flexible labor markets. These are the fundamentals of a free economy. If we undermine them in response to the panic, we risk repeating the mistakes that followed another great panic and ushered in the Great Depression.
Read “From Panic to Depression?” — By Phil Kerpen
Reagan + Friedman + Keynes
By Larry Kudlow
Back in early 1981, when I went to Washington to work for President Reagan, one of the architects of supply-side economics, Columbia University’s Robert Mundell, visited my OMB budget-bureau office inside the White House complex. At the time we were suffering from double-digit inflation, sky-high interest rates, a long economic downturn, and a near 15-year bear market in stocks. So I asked Prof. Mundell, who later won a Nobel Prize in economics, if President Reagan’s supply-side tax cuts would be sufficient to cure the economy. The professor answered that during periods of crisis, sometimes you have to be a supply-sider (tax rates), sometimes a monetarist (Fed money supply), and sometimes a Keynesian (federal deficits).
Read “Reagan + Friedman + Keynes” — By Larry Kudlow
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