Kudlow's Money Politic$ on National Review Online

Kudlow's Money Politic$ on National Review Online http://kudlow.nationalreview.com Kudlow’s Money Politic$ is the daily web log of Larry Kudlow, leading supply-side economist and host of CNBC’s The Kudlow Report. en-us © National Review Online 2009. All Rights Reserved webmaster@nationalreview.com (NRO Webmaster) Sat, 07 Nov 2009 00:20:14 -0500 Sat, 07 Nov 2009 00:20:14 -0500 NRO RSS Generator v1.0 http://blogs.law.harvard.edu/tech/rss 5 http://www2.nationalreview.com/images/nro_rsslogo.jpg Kudlow's Money Politic$ on National Review Online http://kudlow.nationalreview.com 144 80 National Review Online A Short-Sighted Cheer for Easy Money -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=YjExN2VlNDhkN2NlNGFlZGZhYmU3MmFhMzA2MzZlNWE= Wall Street loves easy money. That’s what I conclude from today’s 200-point stock market rally, which started early and gathered force, pushing the Dow back over 10,000 at the close of trading. Oddly enough, stocks roared at yesterday’s opening by nearly 150 points, a response to the GOP sweep in New Jersey and Virginia. The government’s health-insurance takeover plan looks dead after the elections. Nancy Pelosi is walking off a cliff with her Saturday vote in the House. I don’t think she’s got the numbers. Post-election, Blue Dog Democrats are going to have a hard time voting for big tax hikes, big spending, big government, and a $500 billion Medicare cut. Independents, seniors, and affluent suburbanites all moved to the GOP column on Tuesday, a negative referendum on the Democrats’ big-government scheme. For whatever reason, stocks sold off yesterday afternoon -- right after the Fed signaled easy money for as far as the eye can see. To quote the Fed: “exceptionally low levels of the federal funds rate for an extended period.” Today, however, it looks like stocks took another read of the zero interest rate and the exploding Fed balance sheet and decided that there will be at least another six months of pump-priming and dollar-creation from the central bank. Of course, gold keeps rising. It’s now $1,090. But the Fed doesn’t care about gold -- or the declining dollar, or rising commodity prices, or even the higher inflation expectations that are being built into the Treasury bond market. Fed head Ben Bernanke is targeting the unemployment rate and something called “substantial resource slack.” He is ignoring the financial and commodity-price indicators which are all signaling that the target rate is too low and the rate of money-creation is too high. Back in mid-2008, after the dollar plunged and oil prices exploded, the CPI inflation rate peaked at nearly 6 percent -- this, despite the fact that the U.S. economy was already in recession and slack resources were by then suffering from recessionary underutilization. Oil prices already have jumped to $80 a barrel in response to today’s cheap dollar, and retail gas prices at the pump have moved up nationwide from $1.80 to close to $2.70. That’s a tax hike on consumers and the rest of the economy. It’s one of the many consequences of dollar neglect. So while the stock market is cheering easy money, the cheering is very short-sighted. I wouldn’t buck the tape, but I regard the Fed’s policy as a storm cloud over stocks and the future economy. The financial-market emergency and deep recession are over, but you wouldn’t know it from the Fed’s behavior. Even a 2 percent fed funds rate would be accommodative today, as Andrew Bary of Barron’s has written. But the Fed will have to hit the breaks a lot harder in the future if it continues its bubble headed policy at present. One more thought. The highly volatile go-stop-go-stop Fed policy of the last ten years is exactly what has wreaked so much havoc. The Volcker-Greenspan Fed of the early 1980s to the late 1990s was much more stable and pro-growth. But over the last decade the Fed’s pillar-to-post policies and Phillips Curve obsession with unemployment rather than inflation has caused nothing but trouble. This is one of many reasons why I think the Republican party should return to its Reagan roots as the hard-money party. Hard money will protect consumers and businesses, and would complement a low-tax-rate fiscal approach. A steady King Dollar is a strong incentive for investment, production, and employment, and of course price stability. But in the meantime, investors are riding the easy money wave to higher share prices. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=YjExN2VlNDhkN2NlNGFlZGZhYmU3MmFhMzA2MzZlNWE= Thu, 05 Nov 2009 16:27:51 -0400 Stocks and Voters Show GOP the Way -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=NjU1ZWEwYTI4NWNlNzRmZDkxMDBjMTVmNjI2Y2IzZWQ= Stocks loved last night’s election returns. President Obama and Nancy Pelosi got their ears pinned back over big spending, taxes, the health-care takeover, cap-and-trade, and well, the fact that government is getting too darned big under this crowd in Washington. The health-care insurance companies roared right up from the open. Investors are making a bet that the government-insurance option is in even bigger trouble after last night’s Republican victories. A Wall Street Journal news story also suggests that the big health-care bill won’t get done this year, and that it will be pushed into next year’s midterm calendar. Blue Dogs everywhere (and especially in Virginia) can read the election returns as accurately as any pundit. And they are not going to vote to jack up taxes, slash Medicare, and launch even more government spending and deficits. While it’s true that the GOP didn’t take all three races last night, NY-23 was darn close for an outsider like Doug Hoffman. Jon Corzine lost in New Jersey despite multiple Obama trips to the state, and Virginia’s Bob McDonnell is emerging as a new Republican star. But these big state races were about economic and fiscal discontent among the voters. That’s a theme that will last a long time -- especially if Team Obama and Nancy Pelosi are stubborn in pressing forward with their government-control agenda. The investor class doesn’t like government interference, and neither does the stock market. So the GOP now has an opportunity to rebuild and rebirth Reagan-like libertarianism with a strong free-market message that Washington should just leave us alone. Social issues didn’t play a role in New Jersey and Virginia. It was all about the threat of socialism lite. The social issues will emerge next year in certain districts, and as a pro-lifer I’m glad of it. But the overarching theme to rebuild the Republican party right now has to be about free-market economics and hopefully a supply-side message of lower tax rates to spur jobs and strong economic growth. And it would be a shame if the GOP doesn’t take up the issue of the declining dollar. This is becoming an economic symbol of America’s decline. Rabid big-government spending and borrowing is a principal cause of the greenback’s fall. And the policy statement from today’s Federal Reserve meeting shows that the doves won again, while the hawks lost big-time. This speaks to continued dollar decline and new record highs in the nominal gold price. A few weeks ago, Barron’s columnist Andrew Bary had it exactly right: The financial-meltdown emergency is over. Yet the Fed persists in running an emergency money-creating policy with a zero target rate that is completely inappropriate as the economy moves into a mild recovery. The Fed seems to think that too many people working is inflationary, and that with today’s high unemployment it’s okay to keep priming the money pump. This is nuts. Inflation is caused by bad money as the result of excess money-creation -- that is, the creation of dollars that the global markets do not want, just as we’re creating government bonds that the same markets don’t want. Financial, currency, and commodity-price signals are telling the Fed that they are way off course. But Bernanke won’t listen. The weakening fate of the dollar is a good political issue, and Republican’s should not overlook it. It links back to big-government overspending. Reagan knew this. Today’s GOP should relearn it. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=NjU1ZWEwYTI4NWNlNzRmZDkxMDBjMTVmNjI2Y2IzZWQ= Wed, 04 Nov 2009 15:44:21 -0400 The Economics of a Three-Race GOP Sweep -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=ZDMzY2I2OTQwZjdiYWMxN2I0ODQzOTAxYWNlOTg2ZDA= Against the backdrop of high unemployment and a public revolt against a Democratic health-care bill -- which would significantly increase taxes, slash Medicare spending, and massively raise health-care spending elsewhere in a government takeover of our leading growth sector -- a three-race sweep by Republicans is very much in play this Election Day. The Intrade pay-to-play betting/investment parlor shows big wins for Bob McDonnell in Virginia and Doug Hoffman in upstate New York’s 23rd congressional district. The New Jersey race for governor is too close to call, with the probabilities swinging wildly. Late last night, Chris Christie’s victory probability was 56-46 over Jon Corzine, a 16-point gain for the Republican. This morning, Christie showed a 55 percent chance of victory, with Corzine at 47. It’s interesting that early signs of economic recovery are not helping the Obama Democrats. This is largely because of the 9.8 percent unemployment rate, which is expected to move higher. Even the crazy jobs-saved-or-created campaign is having no discernable impact while the Obamacons try to fight the unemployment rate. If you go to recovery.gov, the official stimulus website, you’ll find that there has been $207 billion in stimulus spending through October 30, 2009 -- including $84 billion in tax benefits, $52 billion in contract grants and loans, and $71 billion in entitlements. So even if we give my friend Jared Bernstein his highly flawed “one million jobs saved or created,” that’s $207,000 per job in an economy where the average wage is about $46,000. Not good. Wasteful and ineffectual spending. (In reality, tax credits are spending. For incentivizing, you need marginal tax-rate cuts.) Mike Flynn of Breitbart’s biggovernment.com notes that the government pumped $170 billion into the third-quarter economy. But GDP grew by only $150 billion. As I said, ineffectual spending. That doesn’t mean the economy isn’t rebounding. It is. Glitches and all, third-quarter GDP popped up 3.5 percent at an annual rate after inflation. Statistically, the recession is over. That’s good. And it corroborates the big stock market rally over the past seven months. This is going to be a business-led recovery as self-correcting firms build profits on top of huge cash flows. Yesterday’s ISM manufacturing report for October also confirms the growth trend with a recovery reading of 55.7, the strongest since April 2006. And this morning’s factory orders for September also show a stronger-than-expected gain. Even car sales are expected to rise in October by more than ten million, at least one million better than September. Ford, which refused to take TARP bailout money, reported a surprise increase in profits. But the depreciating dollar remains a storm cloud over recovery. So are scheduled tax-rate increases and health-care legislation that will slam individuals and firms with higher tax burdens and higher tax costs for job creation. And then there’s the Federal Reserve. With gold up another $25 -- setting a new nominal record of $1,079 -- the Fed will release a policy statement tomorrow, one that is likely to continue a program of massive money-pumping and a zero interest rate. This whole Obama policy mix of huge government spending and a depreciating greenback is all wrong. It’s pro-inflation, not pro-growth. For a true economic recovery, we need a stable King Dollar and lower marginal tax rates to incentivize job creation. Jimmy Pethokoukis and others have noted that the first recovery quarter under Reagan was better than 8 percent, not 3.5 percent. In fact, the average real GDP growth rate for the first quarter of the ten post-war recoveries is 7.3 percent. So the economic-recovery story, and even the stock market rally, won’t bail out the Obamacons today, although it remains to be seen whether a free-market, anti-tax-and-spend message will emerge from a three-election sweep by the GOP. If so, it could doom the so-called health-care reform that has become a symbol of the leftward-tilting, big-government, economic-control policies emanating from Washington. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=ZDMzY2I2OTQwZjdiYWMxN2I0ODQzOTAxYWNlOTg2ZDA= Tue, 03 Nov 2009 12:13:56 -0400 GDP Up, Dollar Down, Troubles Remain -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=OTg3YzdjYjU5ZmUwYzZiYTg4ZTIzYjU0MGFmMDk0YjY= Today’s report of 3.5 percent GDP growth for the third quarter ending in September signals the end of the long recession. Although there are glitches in the GDP story -- including the one-time impact of Cash for Clunkers and the erratic bouncing around of disposable income from quarter to quarter (largely a result of government handouts), the fact remains that the economy is improving and that the big stock market rally is confirmed. Wall Street economists like Joe LaVorgna and Michael Darda expect 4 percent growth in the quarters ahead. My own view is that this will be a business-led recovery, not only in terms of capital-spending investment, but also business-to-business transactions. Corporate cash flows are very strong and profits are improving. Economy-wide productivity is very high. And let’s not forget the Fed’s highly expansionary policies, with a zero target rate, a steep Treasury curve, and a growing balance sheet. All of which raises an important policy point. As the economy recovers, where’s the exit strategy for all this stimulus? To protect the dollar, the Fed should be raising its target rate, or at the very least hint at raising it by changing the wording of next week’s policy statement. Gold roared up today as the greenback fell again. Stocks are mounting a huge 200-point rally as of this writing. World markets are anticipating an inflationary recovery in the United States. And never-ending federal debt creation from more and more government spending adds to the greenback’s woes. Restoration of King Dollar would be a tax cut for the whole economy. Think of it in oil terms: Crude oil jumped $2.40 today to $80 a barrel. If the dollar keeps sliding, oil is going to keep rising. And that’s a tax hike for the economy. It would block recovery. But if King Dollar were restored to its thrown, oil and other commodities would stay put, amounting to a de facto tax cut -- a spur to growth. President Obama had a tepid response to today’s GDP report, as the administration contemplates more spending for a second stimulus package. That’s exactly what currency markets do not want to see. Meanwhile, Treasury man Geithner talks about ending the too-big-to-fail policy for banks. But his idea sounds suspiciously like TARP in perpetuity -- where the government would take over failed banks, mostly at taxpayer expense, with some of it paid for by other bank insurance assessments. But TARP in perpetuity, stimulus in perpetuity, and easy-money in perpetuity is a fiscal/monetary overload that will reduce our potential to grow. It is a great thing that the financial meltdown is over and the Great Recession has come to an end. But profligate policies will surely undermine the private free-enterprise economy’s valiant efforts to recover. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=OTg3YzdjYjU5ZmUwYzZiYTg4ZTIzYjU0MGFmMDk0YjY= Thu, 29 Oct 2009 15:37:15 -0400 Supply-Side Health-Care Solutions with Sen. Mitch McConnell -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=OWFiZTkzYzI3MGYzMjEyMGM3ODVlZWVjMDZkOTYyOWI= Last night I had the pleasure of speaking with distinguished Senate Minority Leader Mitch McConnell on whether this high-tax, high-premium, deficit-ridden government takeover of the U.S. economy can be stopped. <object classid="clsid:d27cdb6e-ae6d-11cf-96b8-444553540000" width="400" height="380" codebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=6,0,40,0"> <param name="id" value="cnbcplayer" /> <param name="type" value="application/x-shockwave-flash" /> <param name="allowfullscreen" value="true" /> <param name="allowscriptaccess" value="always" /> <param name="quality" value="best" /> <param name="scale" value="noscale" /> <param name="wmode" value="transparent" /> <param name="bgcolor" value="#000000" /> <param name="salign" value="lt" /> <param name="src" value="http://plus.cnbc.com/rssvideosearch/action/player/id/1311598278/code/cnbcplayershare" /><embed id="cnbcplayer" type="application/x-shockwave-flash" width="400" height="380" src="http://plus.cnbc.com/rssvideosearch/action/player/id/1311598278/code/cnbcplayershare" salign="lt" bgcolor="#000000" wmode="transparent" scale="noscale" quality="best" allowscriptaccess="always" allowfullscreen="true"></embed> </object> <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=OWFiZTkzYzI3MGYzMjEyMGM3ODVlZWVjMDZkOTYyOWI= Thu, 29 Oct 2009 12:36:31 -0400 An Interview with Jon Kyl on the Back-from-the-Dead Public Option -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=OTk3Njk5YWQ0NjBmYmZjYTYyZWM3YmU2OTVjZjcyOTI= Here’s my interview from last night with Arizona senator and Republican Whip Jon Kyl. Kyl, one of the soundest thinkers in the Senate, takes apart Harry Reid’s new-fangled government-insurance option. The interview begins at the 3:18 mark. <object classid="clsid:d27cdb6e-ae6d-11cf-96b8-444553540000" width="400" height="380" codebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=6,0,40,0"> <param name="id" value="cnbcplayer" /> <param name="type" value="application/x-shockwave-flash" /> <param name="allowfullscreen" value="true" /> <param name="allowscriptaccess" value="always" /> <param name="quality" value="best" /> <param name="scale" value="noscale" /> <param name="wmode" value="transparent" /> <param name="bgcolor" value="#000000" /> <param name="salign" value="lt" /> <param name="src" value="http://plus.cnbc.com/rssvideosearch/action/player/id/1309151449/code/cnbcplayershare" /><embed id="cnbcplayer" type="application/x-shockwave-flash" width="400" height="380" src="http://plus.cnbc.com/rssvideosearch/action/player/id/1309151449/code/cnbcplayershare" salign="lt" bgcolor="#000000" wmode="transparent" scale="noscale" quality="best" allowscriptaccess="always" allowfullscreen="true"></embed> </object> <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=OTk3Njk5YWQ0NjBmYmZjYTYyZWM3YmU2OTVjZjcyOTI= Tue, 27 Oct 2009 11:32:18 -0400 David Goldman: The Dollar Is Toast and It Won't Help the Stock Market -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=MzhlNWNiZjE3MDkwNzQwZWE4MDNhZjQ4MTFhMjc1NTY= Market commenter David Goldman was on the show last night, explaining the bubble that’s formed in toxic, low-rated tranches of commercial real estate, as well as the rapid march by Asian nations to get out from under the dollar trap. Joining him were CNBC’s Rick Santelli and Politico’s Eamon Javers. <object classid="clsid:d27cdb6e-ae6d-11cf-96b8-444553540000" width="400" height="380" codebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=6,0,40,0"> <param name="id" value="cnbcplayer" /> <param name="type" value="application/x-shockwave-flash" /> <param name="allowfullscreen" value="true" /> <param name="allowscriptaccess" value="always" /> <param name="quality" value="best" /> <param name="scale" value="noscale" /> <param name="wmode" value="transparent" /> <param name="bgcolor" value="#000000" /> <param name="salign" value="lt" /> <param name="src" value="http://plus.cnbc.com/rssvideosearch/action/player/id/1309235071/code/cnbcplayershare" /><embed id="cnbcplayer" type="application/x-shockwave-flash" width="400" height="380" src="http://plus.cnbc.com/rssvideosearch/action/player/id/1309235071/code/cnbcplayershare" salign="lt" bgcolor="#000000" wmode="transparent" scale="noscale" quality="best" allowscriptaccess="always" allowfullscreen="true"></embed> </object> <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=MzhlNWNiZjE3MDkwNzQwZWE4MDNhZjQ4MTFhMjc1NTY= Tue, 27 Oct 2009 10:50:54 -0400 Why Not Cut Taxes and Spending? -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=YmQ5M2Q5MjFhZDgyYmJjMmQ2YTI5Y2JjMjgzN2EzOGU= Here’s a question: If unemployment is the problem, then why aren’t supply-side tax cuts, along with tougher government budgetary restraints, a possible solution? Top Obama economic advisor Christy Romer delivered a very gloomy forecast to Congress late last week. She said that unemployment will remain at a “severely elevated level” and that the U.S. jobs market will stay painfully weak next year. She was just being honest. Romer even said the Obama stimulus plan will not contribute much to economic growth next year. So the administration is searching for a jobs-recovery plan, just like the rest of the country. Meanwhile, big-government spending and temporary tax credits have not worked, by the administration’s own admission. That’s basically what Ms. Romer was saying. So why not try something different? Why not go for lower tax rates across-the-board on individuals, businesses, and investors? Why not go for permanent tax cuts that will create new growth incentives? To paraphrase economist Art Laffer, if it pays more, after tax, to work, produce, and invest, folks will work, produce, and invest more. It’s worked in the past. And I believe it will work again. Incidentally, this idea of cutting spending and cutting tax rates is attracting a lot of attention in many of the key state races right now -- like the governor’s race in New Jersey, where unemployment is also hovering around 10 percent. The idea is also looming large in Virginia, as well as in some of the early skirmishing in California. If it’s happening in the states, when will Washington finally get the message? <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=YmQ5M2Q5MjFhZDgyYmJjMmQ2YTI5Y2JjMjgzN2EzOGU= Mon, 26 Oct 2009 12:08:30 -0400 Hutchison Talks Health-Care Takeover -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=MjJiMzgzNmQyMjc4NjliOWNiNmFlODk2NTFlMWJlMDQ= Is the government’s insurance plan back from the dead? Here’s my interview with Kay Bailey Hutchison, Texas Republican senator and gubernatorial candidate, on the government’s attempt to takeover the U.S. health-care system. The interview begins at the 3:04 mark. <object classid="clsid:d27cdb6e-ae6d-11cf-96b8-444553540000" width="400" height="380" codebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=6,0,40,0"> <param name="id" value="cnbcplayer" /> <param name="type" value="application/x-shockwave-flash" /> <param name="allowfullscreen" value="true" /> <param name="allowscriptaccess" value="always" /> <param name="quality" value="best" /> <param name="scale" value="noscale" /> <param name="wmode" value="transparent" /> <param name="bgcolor" value="#000000" /> <param name="salign" value="lt" /> <param name="src" value="http://plus.cnbc.com/rssvideosearch/action/player/id/1305725943/code/cnbcplayershare" /><embed id="cnbcplayer" type="application/x-shockwave-flash" width="400" height="380" src="http://plus.cnbc.com/rssvideosearch/action/player/id/1305725943/code/cnbcplayershare" salign="lt" bgcolor="#000000" wmode="transparent" scale="noscale" quality="best" allowscriptaccess="always" allowfullscreen="true"></embed> </object> <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=MjJiMzgzNmQyMjc4NjliOWNiNmFlODk2NTFlMWJlMDQ= Mon, 26 Oct 2009 10:38:12 -0400 Is Rick Perry a Texas Supply-Sider? -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=NDM2MzQ0YzZiNjFiMGI2ZDZlNzE3YjZlNmJjNjNmNmI= I posed this question to Texas Republican Gov. Rick Perry on last night’s show. Click on the video to hear what he had to say. <object classid="clsid:d27cdb6e-ae6d-11cf-96b8-444553540000" width="400" height="380" codebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=6,0,40,0"> <param name="id" value="cnbcplayer" /> <param name="type" value="application/x-shockwave-flash" /> <param name="allowfullscreen" value="true" /> <param name="allowscriptaccess" value="always" /> <param name="quality" value="best" /> <param name="scale" value="noscale" /> <param name="wmode" value="transparent" /> <param name="bgcolor" value="#000000" /> <param name="salign" value="lt" /> <param name="src" value="http://plus.cnbc.com/rssvideosearch/action/player/id/1304480745/code/cnbcplayershare" /><embed id="cnbcplayer" type="application/x-shockwave-flash" width="400" height="380" src="http://plus.cnbc.com/rssvideosearch/action/player/id/1304480745/code/cnbcplayershare" salign="lt" bgcolor="#000000" wmode="transparent" scale="noscale" quality="best" allowscriptaccess="always" allowfullscreen="true"></embed> </object> <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=NDM2MzQ0YzZiNjFiMGI2ZDZlNzE3YjZlNmJjNjNmNmI= Fri, 23 Oct 2009 14:58:54 -0400 Kemp's Keys to Growth and Exceptionalism -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=N2ZhMWU1YzAyNDU3M2Q1NmVhODZlZDZiMDNlNjZhY2U= I believe that free-market capitalism -- on the supply-side and along with King Dollar -- is the best path to prosperity. That’s the model my late dear friend Jack Kemp successfully espoused to President Reagan more than 30 years ago. It’s the incentive model of economic growth. It conquered the inflation of the Carter years, and launched a 20-year prosperity that saw the creation of 45 million new jobs and a twelve-fold stock market increase. It’s the model that expanded the investor class to 100 million strong through the Clinton 1990s. I spoke this week at the launch of the Jack Kemp Foundation in Washington, and I emphasized this model along with the universal, timeless economic principles on which it is based. Today this model seems all but forgotten in the nation’s capital, but I firmly believe it is just what we need to reignite American economic growth and exceptionalism. Here are the model’s critical components: First, a sound dollar -- King Dollar. Second, low and flat tax rates to incentivize positive economic behavior by making it pay more, after-tax, to work, invest, and take risks. Third, free trade. Fourth, limited government. Fifth, market-driven solutions to ameliorate poverty and provide everyone with new opportunities to climb the ladder of success. Jack Kemp believed in growing the economic pie, not redistributing it. And he believed in growing it large. He would have hated today’s notion of a “new normal” -- of 2 percent growth and high unemployment. He also disagreed with raising top marginal tax rates, and he certainly would have opposed the extravagant spending-and-borrowing schemes that we’re saddled with today. We’ve clearly gone off the supply-side path -- off the winning path that Jack helped build. Growth, empowerment, opportunity, and incentives -- those were Jack’s key words. Now, more than ever, these principles must be revived. They are essential to America’s greatness. To her boundless optimism. To her prosperity and success. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=N2ZhMWU1YzAyNDU3M2Q1NmVhODZlZDZiMDNlNjZhY2U= Thu, 22 Oct 2009 15:25:32 -0400 One-On-One with Larry Lindsey -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=ZWI2MTQ0MDU4ZGNhNmUxZDczMzMxNzhiZmZkMGQ2ZDg= Last night I had the pleasure of speaking with Larry Lindsey, the former director of the White House Economic Council, about the state of the supply-side revolution, as well as the steady decline of King Dollar. <object classid="clsid:d27cdb6e-ae6d-11cf-96b8-444553540000" width="400" height="380" codebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=6,0,40,0"> <param name="id" value="cnbcplayer" /> <param name="type" value="application/x-shockwave-flash" /> <param name="allowfullscreen" value="true" /> <param name="allowscriptaccess" value="always" /> <param name="quality" value="best" /> <param name="scale" value="noscale" /> <param name="wmode" value="transparent" /> <param name="bgcolor" value="#000000" /> <param name="salign" value="lt" /> <param name="src" value="http://plus.cnbc.com/rssvideosearch/action/player/id/1303313088/code/cnbcplayershare" /><embed id="cnbcplayer" type="application/x-shockwave-flash" width="400" height="380" src="http://plus.cnbc.com/rssvideosearch/action/player/id/1303313088/code/cnbcplayershare" salign="lt" bgcolor="#000000" wmode="transparent" scale="noscale" quality="best" allowscriptaccess="always" allowfullscreen="true"></embed> </object> <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=ZWI2MTQ0MDU4ZGNhNmUxZDczMzMxNzhiZmZkMGQ2ZDg= Thu, 22 Oct 2009 11:35:54 -0400 An Interview with Gov. Tim Pawlenty -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=NTZjZTkyZWRlZTQ3YTgxYmIzM2FjZTdkZjcxNmY1MWE= Is the dollar’s demise a sign of global declinism for America? Will this decline blow up the bull-market economic recovery? Joining me to discuss this last night was distinguished Minnesota Republican Gov. Tim Pawlenty. Mr. Pawlenty also happens to be a leading GOP presidential contender for 2012. <object classid="clsid:d27cdb6e-ae6d-11cf-96b8-444553540000" width="400" height="380" codebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=6,0,40,0"> <param name="id" value="cnbcplayer" /> <param name="type" value="application/x-shockwave-flash" /> <param name="allowfullscreen" value="true" /> <param name="allowscriptaccess" value="always" /> <param name="quality" value="best" /> <param name="scale" value="noscale" /> <param name="wmode" value="transparent" /> <param name="bgcolor" value="#000000" /> <param name="salign" value="lt" /> <param name="src" value="http://plus.cnbc.com/rssvideosearch/action/player/id/1302171621/code/cnbcplayershare" /><embed id="cnbcplayer" type="application/x-shockwave-flash" width="400" height="380" src="http://plus.cnbc.com/rssvideosearch/action/player/id/1302171621/code/cnbcplayershare" salign="lt" bgcolor="#000000" wmode="transparent" scale="noscale" quality="best" allowscriptaccess="always" allowfullscreen="true"></embed> </object> <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=NTZjZTkyZWRlZTQ3YTgxYmIzM2FjZTdkZjcxNmY1MWE= Wed, 21 Oct 2009 15:30:24 -0400 Bernanke Is Playing with Fire -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=NmRiYmJkNjQzY2E2MGMzMGI2ZDE5NGU1ZGQ4ZjNiZmU= Fed chairman Ben Bernanke delivered a big speech yesterday and never mentioned the beleaguered dollar. Not once. This is just incredible -- beyond the pale. And so for now, the story remains the same: Gold and commodities continue to boom, while the greenback plunges further. Let’s be clear here: Mr. Bernanke is playing with fire. He is creating and fueling yet another speculative bubble that could spell doom for the bull-market recovery. This is why I’ve been calling it a storm cloud. One last point here. The dollar’s demise is a sign of global declinism for America. This could be the worst part of the whole story. If the Obama administration wants to undermine American leadership and exceptionalism, and treat this country like all the other C-students around the world, they are sorely mistaken. When the U.S. leads, the world prospers. When the U.S. declines -- as in the 1970s -- the world falls apart. The dollar therefore becomes a symbol, as well as a reality. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=NmRiYmJkNjQzY2E2MGMzMGI2ZDE5NGU1ZGQ4ZjNiZmU= Tue, 20 Oct 2009 16:31:48 -0400 The Value Added Tax: A Hidden New Tax to Finance Much Bigger Government -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=OTZjODlhNzMyNzhlNTQyZmY0ZGE2YjA5YzhmY2YxYTQ= Here’s a terrific new video from my friend Dan Mitchell over at the Center for Freedom and Prosperity Foundation. Dan explains why a value-added tax would be a dangerous money machine for big government. He also discusses the evidence from Europe showing that VATs actually lead to higher income taxes. <object classid="clsid:d27cdb6e-ae6d-11cf-96b8-444553540000" width="425" height="344" codebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=6,0,40,0"> <param name="allowFullScreen" value="true" /> <param name="allowScriptAccess" value="always" /> <param name="src" value="http://www.youtube.com/v/b6JDpw8a2Hk&color1=0x2b405b&color2=0x6b8ab6&hl=en&feature=player_embedded&fs=1" /><embed type="application/x-shockwave-flash" width="425" height="344" src="http://www.youtube.com/v/b6JDpw8a2Hk&color1=0x2b405b&color2=0x6b8ab6&hl=en&feature=player_embedded&fs=1" allowscriptaccess="always" allowfullscreen="true"></embed> </object> <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=OTZjODlhNzMyNzhlNTQyZmY0ZGE2YjA5YzhmY2YxYTQ= Thu, 15 Oct 2009 13:07:11 -0400 Dow Hits 10,000 as Storm Clouds Gather -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=Mzk1OGMyNDBlOWEzNTcwM2M3ODA4N2IzMzVhZmFjYTI= Dow Jones 10,000 arrived on Wall Street today for the first time in a year. It’s a milestone of sorts, and it certainly represents a vote for investor confidence in economic recovery. Blowout profit reports form Intel and JPMorgan helped fuel today’s 145 point gain. So did a retail sales report that excluding Cash for Clunkers was actually quite strong. Profits are the mother’s milk of stocks, business, and the economy. And top-line sales revenues now appear to be bolstering the corporate cost-cutting effort. As long as these earnings keep coming in strong, stocks will keep rising. My hunch is that we’ll move back to pre-Lehman levels -- to over 11,000 on the Dow and over 1,200 on the S&P. And backed by an easy-money Fed, the economy will probably grow in a mild V-shape of something like 3 to 4 percent for the next year or so. But storm clouds are gathering. And a big one is the sinking dollar. No one in the Obama administration or at the Fed seems to care about it. In fact, they are probably applauding the lower dollar as a sort of 1970s way of boosting exports and the manufacturing heartland in the Midwest. But the falling dollar is bad for consumers. And it ultimately will cause higher inflation, as signaled by the rising gold price. There also are future tax hikes and the explosion of spending and debt. All of this is why it’s hard for me to be a long-term bull. The great market boom of 1982 to 2000 was basically characterized by low marginal tax rates and King Dollar. Unfortunately, the 21st century has seen a weak dollar and more recently rising tax rates that are coming due in 2011 (if not sooner). In other words, the prosperity-inducing Mundell-Laffer supply-side model is being reversed. As Art Laffer put it to me, we are stealing demand and production from the future. So even as we get a V-shaped recovery now and into next year, 2011 may pay the piper for both low growth and higher inflation. Stocks could have another four to six months to rally. And that’s great for increasing the wealth of the investor class, and maybe even enhancing the animal spirits a bit. But the policy mix is wrong. Health-care entitlements and taxes punctuate the wrong-way policy mix. And what’s left to be seen is whether the Republicans can successfully challenge the Democrats with a true supply-side economic-growth and job-creating platform. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=Mzk1OGMyNDBlOWEzNTcwM2M3ODA4N2IzMzVhZmFjYTI= Wed, 14 Oct 2009 17:08:25 -0400 The Dollar Decline Must End -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=ZWUyMThlYmNmZjg5NTRjZDljYzk3ZjRiMGYxNDEyMjc= You know I’ve been crusading to save the greenback and restore King Dollar. But new entitlements that open the door to a government takeover of the health-care sector are no way to do it. Not surprisingly, as the Baucus Bill made it out of the Finance Committee yesterday, the dollar fell once again and gold jumped (closing at $1,064). Not good. Smells like the 1970s. Just look at two ominous headlines in the news: First is the global shift out of the dollar and into commodities. Second is the dollar losing its reserve status to the yen and the euro. In the second quarter ending in June, central banks around the world invested 63 percent of their new cash reserves into euro and yen, and put only 37 percent into dollars. Over the past six months, the dollar has lost 15 percent while gold has climbed nearly $150. If this continues, spiking inflation and interest rates will choke off the bull market in stocks and do serious damage to the economy. It could happen fast. How to solve this problem? In supply-side terms, cut tax rates for new growth incentives. Meanwhile, the Fed must drain cash to remove dollars from the financial system and the Treasury must simultaneously buy dollars in the foreign-exchange markets. And Washington must stop its explosive spending and borrowing. Some statutory -- or even constitutional -- limits should be set. That the dollar is the world’s reserve currency is a tremendous asset for the United States. We must stop the fall of the dollar now. It’s a self-inflicted wound that will do great damage to American leadership and prestige globally, and to the economy here at home. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=ZWUyMThlYmNmZjg5NTRjZDljYzk3ZjRiMGYxNDEyMjc= Wed, 14 Oct 2009 09:36:25 -0400 An Interview with Sen. John Thune -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=NmVmNDJjYzBjNjgyMGI2YTZlZjMwZjg0MDgzYjY4Yzk= Last night distinguished South Dakota Sen. John Thune, chairman of the Senate Republican Policy Committee, joined me to discuss the $829 billion Baucus bill just passed by the Senate Finance Committee, as well as the need for a clear TARP exit strategy. He’s got the story right on both. The interview begins at the 3:50 mark. <object classid="clsid:d27cdb6e-ae6d-11cf-96b8-444553540000" width="400" height="380" codebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=6,0,40,0"> <param name="id" value="cnbcplayer" /> <param name="type" value="application/x-shockwave-flash" /> <param name="allowfullscreen" value="true" /> <param name="allowscriptaccess" value="always" /> <param name="quality" value="best" /> <param name="scale" value="noscale" /> <param name="wmode" value="transparent" /> <param name="bgcolor" value="#000000" /> <param name="salign" value="lt" /> <param name="src" value="http://plus.cnbc.com/rssvideosearch/action/player/id/1294500947/code/cnbcplayershare" /><embed id="cnbcplayer" type="application/x-shockwave-flash" width="400" height="380" src="http://plus.cnbc.com/rssvideosearch/action/player/id/1294500947/code/cnbcplayershare" salign="lt" bgcolor="#000000" wmode="transparent" scale="noscale" quality="best" allowscriptaccess="always" allowfullscreen="true"></embed> </object> <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=NmVmNDJjYzBjNjgyMGI2YTZlZjMwZjg0MDgzYjY4Yzk= Wed, 14 Oct 2009 07:41:23 -0400 Save the Greenback, Mr. President -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=MTY3NjZmYzJhNTcyYjAzNTE2ZGI4MWY5YTNjNzQ5ZjE= We know that gold is soaring. And we know the dollar is slumping. But, did you know that year-to-date, while the S&P 500 is up 18 percent -- a great showing, no doubt -- gold is up even more? The precious metal is up 21 percent. In other words, measured in true, gold-backed purchasing power, stocks have really done nothing this year. Zip. It is most disappointing. I try to be optimistic about better earnings, a stock-market rally, and economic recovery. And I’m sticking to my guns. But what we’re seeing right now is pretty darn close to what we witnessed in the 1970s -- the rise in gold and inflation really cuts into the stock market. So what’s the way out? Well for starters, we need a stable dollar to stop inflationary pressures. And we also need lower tax rates to spur the economy, help it grow, and reduce unemployment. I’ve been calling this the Mundell-Laffer supply-side solution, after Nobel Prize-winning economist Robert Mundell and my mentor, former Reagan advisor Arthur Laffer. It was put to work with great success nearly 30 years ago to stop stagflation. It also launched a 20-year bull-market recovery. Put simply, the Mundell-Laffer model exercises monetary restraint to save the dollar -- and low marginal tax rates for economic-growth incentives that benefit investors, risk takers, small businesses, and workers. Right now, for therapy, the Fed should begin moving excess cash from the economy, and they should raise their target rate. Take a page from the Reserve Bank of Australia’s playbook and move rates higher. In addition, the Treasury ought to get out there and buy these unwanted dollars in the marketplace. Just go out there and bid for them. And they need to stop printing so much debt from Congress. All this massive spending and borrowing is killing us. We need to be slashing tax rates on large and small businesses. There’s just no better place to begin job creation. And leave the Bush tax cuts in place, for heaven’s sake. This supply-side shock therapy would save the dollar. And it would put real long-term torque into the recovery. We’re supposed to be in an era of post-partisanship. So in this spirit, I’d like to respectfully ask President Obama and his economic team to give this plan a try. It worked for JFK. It also worked for Bill Clinton and Ronald Reagan. It can work for you as well. The time has come to save the greenback and grow the economy, sir. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=MTY3NjZmYzJhNTcyYjAzNTE2ZGI4MWY5YTNjNzQ5ZjE= Fri, 09 Oct 2009 16:48:23 -0400 Controlling Leviathan: The Battle for Limited Government -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=YmUxOTJkN2U1ZWNhZTg5N2FlODM4YWJiYzQ0NDExMGQ= Here’s a terrific video from my friend Dan Mitchell explaining why the main fiscal threat we face is excessive government spending. Speaking at the Steamboat Institute conference, Dan makes an impassioned case for limited government and individual freedom. Definitely worth watching. (<a href="http://www.youtube.com/watch?v=meAF15Zv490">Click here</a> if you’d like to watch the Q&A session featuring commentary about the financial crisis, Keynesianism, stimulus, tax competition, and U.S. competitiveness.) <object classid="clsid:d27cdb6e-ae6d-11cf-96b8-444553540000" width="425" height="344" codebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=6,0,40,0"> <param name="allowFullScreen" value="true" /> <param name="allowScriptAccess" value="always" /> <param name="src" value="http://www.youtube.com/v/dIS6uN-cRtQ&color1=0x2b405b&color2=0x6b8ab6&hl=en&feature=player_embedded&fs=1" /><embed type="application/x-shockwave-flash" width="425" height="344" src="http://www.youtube.com/v/dIS6uN-cRtQ&color1=0x2b405b&color2=0x6b8ab6&hl=en&feature=player_embedded&fs=1" allowscriptaccess="always" allowfullscreen="true"></embed> </object> <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=YmUxOTJkN2U1ZWNhZTg5N2FlODM4YWJiYzQ0NDExMGQ= Thu, 08 Oct 2009 19:55:55 -0400 The Fight for Arlen Specter's Seat -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=M2FjMjQ2ZjNmN2QyNTUyYzJhMjdhMjY0NjQ1YzBkNDI= A big fight is brewing in the Keystone State over Sen. Arlen Specter’s Senate seat. The two men hoping to replace Specter -- Rep. Joe Sestak (D.,Penn) and former Republican Congressman Pat Toomey -- duked it out on last night’s show. Here’s the tape. <object classid="clsid:d27cdb6e-ae6d-11cf-96b8-444553540000" width="400" height="380" codebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=6,0,40,0"> <param name="id" value="cnbcplayer" /> <param name="type" value="application/x-shockwave-flash" /> <param name="allowfullscreen" value="true" /> <param name="allowscriptaccess" value="always" /> <param name="quality" value="best" /> <param name="scale" value="noscale" /> <param name="wmode" value="transparent" /> <param name="bgcolor" value="#000000" /> <param name="salign" value="lt" /> <param name="src" value="http://plus.cnbc.com/rssvideosearch/action/player/id/1287641608/code/cnbcplayershare" /><embed id="cnbcplayer" type="application/x-shockwave-flash" width="400" height="380" src="http://plus.cnbc.com/rssvideosearch/action/player/id/1287641608/code/cnbcplayershare" salign="lt" bgcolor="#000000" wmode="transparent" scale="noscale" quality="best" allowscriptaccess="always" allowfullscreen="true"></embed> </object> <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=M2FjMjQ2ZjNmN2QyNTUyYzJhMjdhMjY0NjQ1YzBkNDI= Thu, 08 Oct 2009 16:13:47 -0400 An Interview with Mike Pence -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=NjUxNzhmMGY1OGY0MWY1NmMzNTlhYjliMTVhYzBjZmY= Is a new supply-side, fiscally conservative awakening at hand? Distinguished Congressman Mike Pence (R., Ind.) -- the number three Republican in the House -- joined me last night to discuss surefire ways to light a fire under the U.S. economy and get this country of ours growing again. <object classid="clsid:d27cdb6e-ae6d-11cf-96b8-444553540000" width="400" height="380" codebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=6,0,40,0"> <param name="id" value="cnbcplayer" /> <param name="type" value="application/x-shockwave-flash" /> <param name="allowfullscreen" value="true" /> <param name="allowscriptaccess" value="always" /> <param name="quality" value="best" /> <param name="scale" value="noscale" /> <param name="wmode" value="transparent" /> <param name="bgcolor" value="#000000" /> <param name="salign" value="lt" /> <param name="src" value="http://plus.cnbc.com/rssvideosearch/action/player/id/1286605208/code/cnbcplayershare" /><embed id="cnbcplayer" type="application/x-shockwave-flash" width="400" height="380" src="http://plus.cnbc.com/rssvideosearch/action/player/id/1286605208/code/cnbcplayershare" salign="lt" bgcolor="#000000" wmode="transparent" scale="noscale" quality="best" allowscriptaccess="always" allowfullscreen="true"></embed> </object> <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=NjUxNzhmMGY1OGY0MWY1NmMzNTlhYjliMTVhYzBjZmY= Wed, 07 Oct 2009 11:11:18 -0400 All Eyes on the Virginia Governor's Race -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=M2MzNDRmMWNlMzAzN2MzZDAwOTMzZTI5ZTc4MmU4ODQ= National attention is turning to Virginia, where voters will choose their new governor this November. According to RealClearPolitics, the Republican gubernatorial candidate, Bob McDonnell, has the momentum and is pulling away in the polls. Right now he’s up 50-43. I spoke with Mr. McDonnell last night about the race, his plans for Virginia, and whether this contest is to some extent a hidden referendum on President Obama. I was impressed with Mr. McDonnell -- he’s a big positive surprise. <object classid="clsid:d27cdb6e-ae6d-11cf-96b8-444553540000" width="400" height="380" codebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=6,0,40,0"> <param name="id" value="cnbcplayer" /> <param name="type" value="application/x-shockwave-flash" /> <param name="allowfullscreen" value="true" /> <param name="allowscriptaccess" value="always" /> <param name="quality" value="best" /> <param name="scale" value="noscale" /> <param name="wmode" value="transparent" /> <param name="bgcolor" value="#000000" /> <param name="salign" value="lt" /> <param name="src" value="http://plus.cnbc.com/rssvideosearch/action/player/id/1286615755/code/cnbcplayershare" /><embed id="cnbcplayer" type="application/x-shockwave-flash" width="400" height="380" src="http://plus.cnbc.com/rssvideosearch/action/player/id/1286615755/code/cnbcplayershare" salign="lt" bgcolor="#000000" wmode="transparent" scale="noscale" quality="best" allowscriptaccess="always" allowfullscreen="true"></embed> </object> <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=M2MzNDRmMWNlMzAzN2MzZDAwOTMzZTI5ZTc4MmU4ODQ= Wed, 07 Oct 2009 11:07:50 -0400 Protect the Dollar; Go for Growth -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=Y2I0NmRiMTM1YjVmNTI0ZTQ3OGMxOWY3NjNiZjhlMzc= Two big economic stories today. The first is about the demise of the dollar. According to <a href="http://www.independent.co.uk/news/business/news/the-demise-of-the-dollar-1798175.html">London’s Independent</a>, the Arab oil producers in the Gulf are planning with China, Russia, Japan, and France to end dollar transactions for oil and move instead to a basket of currencies that might include the Japanese yen, the Chinese yuan, and the euro, along with gold and some kind of regional Gulf state currency. The other big story is about a possible new stimulus package from Team Obama, which is panicking over the lousy jobs and unemployment numbers from last Friday. As far as the currency story goes, I say where there’s smoke there’s fire. The dollar-demise story has been around for a while, and it keeps coming back. And it’s now clear that China and others have lost confidence in the greenback and want to end the dollar reserve-currency system. For the U.S., this is mostly a self-inflicted wound. And the Treasury and the Fed are in denial about this. The gold price, by the way, has jumped $22 to $1,045. The dollar index has fallen again. Of course, the U.S. is creating too many dollars through the Fed, and fiscal disarray continues to threaten more of the same. So I have a thought, at least for the short run: The Fed should follow Australia, the first G-20 country to raise their target interest rate. The Aussies raised their rate a quarter point to 3.25 percent. Right now the U.S. Fed should raise its target rate by 25 basis points. The fed funds target is currently 15 basis points, so this would make it 40 basis points. It would be a dollar-protection signal; a price stability signal. At least, it would be a beginning. Next, the Treasury should buy some dollars in the open market to back up the Fed. As for the second stimulus package, here’s my plan: Go for growth. Reduce tax rates to provide growth incentives, something Team Obama has avoided like the plague. Cut the top corporate tax rate from 35 to 25 percent, and accompany that with a small-business tax cut from 35 to 25 percent. And leave the Bush tax cuts alone. Don’t let them expire in 2011. That’s cap-gains, dividends, and the top personal rate. Yes, this is a supply-side solution. Reducing tax rates will spur growth incentives. Forget about Keynesian spending multipliers, which Harvard’s Robert Barrow writes are less than one. Instead, borrow from George W. Bush, Bill Clinton, Ronald Reagan, and John F. Kennedy. (And Calvin Coolidge and Andrew Mellon, too.) Forget about Keynesian spending. Forget about class warfare. Forget about income redistribution. Go for growth. Of course, none of this is gonna happen, either on the dollar or tax rates. I am a supply-side fossil. I am a dinosaur. I am a relic of the past. But I still believe the Mundell-Laffer policy approach works: A stable King Dollar for price stability and low marginal tax rates for growth. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=Y2I0NmRiMTM1YjVmNTI0ZTQ3OGMxOWY3NjNiZjhlMzc= Tue, 06 Oct 2009 15:44:01 -0400 Obama's Olympic Blunder -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=YzRjZmM0ZmQ4OTM4Mjc3ODU1N2Y0Y2Y5MjM3ZDczMDQ= First off, a big congratulations to Brazil. They are a rising nation -- so good for them. That said, the Olympic Committee’s rejection of Chicago in Copenhagen is deeply troubling to me. When a president acts on a last minute whim, as Obama did, there are huge international consequences. Was President Obama trying to save Mayor Daley’s re-election? I don’t know. If he did have a higher motive, one rooted in broad-based Olympic Americana, fine. But here’s the deal: His failed five-hour whirlwind trip harmed American interests and American prestige around the world. Obama’s ducks were never set in a row. Hence, the risk of defeat was simply far too great. It showed poor presidential judgment. Obama is playing with the prestige of the greatest country in the world, and the most powerful office in the world. This is precious capital. It must not be squandered; it must be harbored and protected carefully. It wasn’t. It’s obvious that neither he, nor his inner circle of Chicago advisors, understood the inner workings of the International Olympic Committee, as evidenced by that lopsided vote. It was a huge mistake. Moreover, the IOC surely knew the polls showed that half of Chicago was against it. Coming back from Copenhagen empty-handed, President Obama now faces big questions like the one recently posed by my good friend Doug Kass: Does this symbolize the end of America’s financial and economic hegemony? The conduct of international relations -- both symbolically and operationally -- is a delicate high wire act. It’s of the greatest importance in protecting both the security and reputation of the United States. Obama bungled this. No, it’s not the end of the world. But it is a big-time and ill-timed set-back. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=YzRjZmM0ZmQ4OTM4Mjc3ODU1N2Y0Y2Y5MjM3ZDczMDQ= Sat, 03 Oct 2009 11:31:06 -0400 More Unemployment Benefits Will Backfire -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=NzU5ZTg2YWViOTQyNTAyMGM5YWFmMzg5YjdjZGUzMTM= I’d like to weigh in on reports that the White House is currently negotiating with congressional Democrats to extend unemployment insurance. It’s a big story in the Wall Street Journal. I want to suggest to you that more unemployment insurance right now is a very bad idea. Here’s why: In supply-side terms, if the government subsidizes non-work, than we will get less work. In other words, higher unemployment. This has been the European disease for decades. They heavily subsidized unemployment benefits. Guess what happened? Until recently, their unemployment rate was substantially higher than ours here in the United States. Already, the stimulus program for workers who lose their jobs up to this December 31 get 79 weeks of more unemployment benefits. That’s already in the stimulus legislation. In other words, they get another year-and-a-half on top of the benefit increase they already have from the normal social safety net. That is what’s so amazing. Now, I don’t want to sound unnecessarily coldhearted. I like to think I’m compassionate. But supply-side economics is about incentives. And if we re-incentivize unemployment, it will surely diminish the will and the effort of our working people to find new work. That is an economic principle. So the longer we extend unemployment benefits, and the larger we make them -- including healthcare -- the more unemployment we are going to get. There have been countless studies showing this. It is something we should consider. I don’t mean to sound heartless or uncompassionate. But supply-side economic principles have a way of trumping the best of government intentions. And that is why a new stimulus package with more unemployment benefits will backfire and drive the jobless rate even higher. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=NzU5ZTg2YWViOTQyNTAyMGM5YWFmMzg5YjdjZGUzMTM= Sat, 03 Oct 2009 10:50:02 -0400 An Interview with the Next President of the United States? -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=ZmM0Y2MzZTBkMmUzNmJiYWViZTI0Y2Q0MjliN2QyNDY= Last night I had the pleasure of interviewing an old friend of the program, Texas Republican senator and gubernatorial candidate Kay Bailey Hutchison. Among other things, we discussed why she’s leaving Washington and heading back home to run against Rick Perry for the governor’s seat. I’ll just say this: If she wins in Texas, she’ll be president in 2012. <object classid="clsid:d27cdb6e-ae6d-11cf-96b8-444553540000" width="400" height="380" codebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=6,0,40,0"> <param name="id" value="cnbcplayer" /> <param name="type" value="application/x-shockwave-flash" /> <param name="allowfullscreen" value="true" /> <param name="allowscriptaccess" value="always" /> <param name="quality" value="best" /> <param name="scale" value="noscale" /> <param name="wmode" value="transparent" /> <param name="bgcolor" value="#000000" /> <param name="salign" value="lt" /> <param name="src" value="http://plus.cnbc.com/rssvideosearch/action/player/id/1281118125/code/cnbcplayershare" /><embed id="cnbcplayer" type="application/x-shockwave-flash" width="400" height="380" src="http://plus.cnbc.com/rssvideosearch/action/player/id/1281118125/code/cnbcplayershare" salign="lt" bgcolor="#000000" wmode="transparent" scale="noscale" quality="best" allowscriptaccess="always" allowfullscreen="true"></embed> </object> <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=ZmM0Y2MzZTBkMmUzNmJiYWViZTI0Y2Q0MjliN2QyNDY= Thu, 01 Oct 2009 13:34:45 -0400 Why Not Eliminate the Cap-Gains Tax for Everyone? -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=ODM2ODI5OThhNTU0MmFlMDg3YWNjNWRiYWMyMWNlNGY= The Case-Shiller home-price index increased yesterday for the third month in a row. That’s terrific news. After a 40 to 50 percent drop in home prices in recent years, sales are picking up, because prices are way down. That’s also great. Markets work. But here’s what I don’t like about this story: Big, central-planning, government-directed tax preferences for housing, like the $8,000 dollar tax credit for new buyers. Or even the popular mortgage interest deduction. And let’s not forget perhaps the biggest one of all: Home sales are basically capital-gains-tax free. That passed back in 1997. Many people (including myself) believe it helped create the bubble. Why not eliminate the capital-gains tax for everyone and all sectors, including investors and stocks and bonds? Why direct it only to housing? Let’s abolish the capital-gains tax altogether. Let’s quit double-taxing investment, which is what capital gains does. But let’s do it for everyone and everything -- not just housing. While we’re giving all these preferences to housing, what about manufacturing? What about transportation? Or health care? Or any other sector in the economy for that matter? We also could be cutting business tax rates across-the-board for companies big and small. And for all individuals and businesses, why not a simple, low, flat-rate tax? Somewhere between 15 and 20 percent? Get rid of all of the special preferences and deductions in the code. Stop favoring one sector at the expense of the others. Incidentally, this would stop the corruption of K-Street lobbyists who love to get these preferences in there. Let’s make the tax code simple, fair, and pro-growth, to unleash prosperity. Let’s stop the political direction of the economy, and let’s substitute a market direction of the economy. A true flat tax would do it. If you get to keep more of what you earn and invest at the lower tax rate -- if you tax something less -- you’ll get more of it. If you tax the whole economy less -- not just housing, but the entire economy -- you will get a much more prosperous and healthier economy. At a time when we’re all worried about economic growth, we ought to be thinking hard about this. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=ODM2ODI5OThhNTU0MmFlMDg3YWNjNWRiYWMyMWNlNGY= Wed, 30 Sep 2009 15:17:16 -0400 An Interview with Jon Kyl on the Public Option -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=YWEzMDkxZWJjY2RlMGU2MmFlMmRhYThiMWZhMjM0NzM= Is the public option really dead? Last night I interviewed John Kyl of Arizona, the Senate’s Republican whip, to get his take on the matter. Kyl -- who also serves on the Senate Finance Committee -- voted to reject the public option. He calls it “a solution looking for a problem,” and thinks it will ultimately come up short. He also believes there will be some substitute for the public option that most Democrats will rally around once it fails. <object classid="clsid:d27cdb6e-ae6d-11cf-96b8-444553540000" width="400" height="380" codebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=6,0,40,0"> <param name="id" value="cnbcplayer" /> <param name="type" value="application/x-shockwave-flash" /> <param name="allowfullscreen" value="true" /> <param name="allowscriptaccess" value="always" /> <param name="quality" value="best" /> <param name="scale" value="noscale" /> <param name="wmode" value="transparent" /> <param name="bgcolor" value="#000000" /> <param name="salign" value="lt" /> <param name="src" value="http://plus.cnbc.com/rssvideosearch/action/player/id/1280073801/code/cnbcplayershare" /><embed id="cnbcplayer" type="application/x-shockwave-flash" width="400" height="380" src="http://plus.cnbc.com/rssvideosearch/action/player/id/1280073801/code/cnbcplayershare" salign="lt" bgcolor="#000000" wmode="transparent" scale="noscale" quality="best" allowscriptaccess="always" allowfullscreen="true"></embed> </object> <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=YWEzMDkxZWJjY2RlMGU2MmFlMmRhYThiMWZhMjM0NzM= Wed, 30 Sep 2009 11:27:00 -0400 An Interview with World Bank President Robert Zoellick -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=MzYxMjYxZjkzOTM2YTU4YjMxOTljZGRkYjcxNmMyN2E= Last night I had the pleasure of interviewing distinguished World Bank President Robert Zoellick. Mr. Zoellick told me not to take dollar supremacy for granted. He blasted the Federal Reserve for bungling the asset-price bubbles. He believes that Treasury -- not the Fed -- ought to be our uber-systemic risk regulator. And he says the U.S. has huge policy choices in front of it. Here’s the transcript from our interview. KUDLOW: World Bank President Bob Zoellick, thanks for coming back on Kudlow Report, sir. ZOELLICK: Glad to be with you, Larry. KUDLOW: Let me just begin with some news. We’ve had a terrific rally up here on Wall Street. Dow’s up about 150 points as of this conversation. And as you know, in the last six months world stock markets, emerging stock markets, have had a tremendous rally. Is this a signal that the global recession is over and world recovery is upon us? ZOELLICK: I think it’s a signal that the governments have broken the fall in financial markets and that there’s a lot of liquidity out there. But there’s still a big question about whether the real economy will kick in. KUDLOW: What are the economics, people at the World Bank -- you’ve got a splendid staff, you’ve got a large staff. What are they saying about forecasts for, let’s say, 2010, next year? ZOELLICK: In general they see a cautious and gradual recovery; concern that there’s not enough demand because the U.S. consumer won’t play the role that it has in the past, so a possibility that developing countries could step in with the right financing. But also some big risks. So for example, if you look at China’s recovery, which has been strong, it’s been fueled by a huge increase in credit that’s now starting to get turned back. So later in 2010 we face additional risks. KUDLOW: Let me go to your speech today. You gave a very strong speech before the Johns Hopkins International School. And at the beginning, right up top, “US would be mistaken to take for granted the dollar’s place as the world’s predominant currency.” We would be mistaken to take for granted. Let me ask you to clarify, what do you mean by that? ZOELLICK: Well, it’s something I feel really strongly about, Larry, and I think you do as well. You know, on the one hand, I don’t believe all the stuff about that the dollar isn’t the key reserve currency. It is. You could see people turn to it today because -- in the crisis because of a flight to security. But my point is Americans do not recognize that, you know, countries over -- all over the world would die for the ability to be able to print money, to issue bonds as freely as the United States has. And as you look at out years, that’s not something we can take for granted. So what that means is coming out of this crisis, the Fed’s policies in terms of making sure we have a recovery without inflation, making sure that you got a good, strong value for the dollar, having a sense that the financial markets, yes, they need to improve the safety and soundness, but they have the depth and liquidity they’ve historically had, those are not going to be easy issues, but they’re going to be absolutely critically for the United States for decades to come. KUDLOW: If the U.S. dollar continues to decline -- I mean, by and large for about eight years, under Republican and now Democratic administrations, the dollar has been weak. If the dollar continues its chronic decline, would that stop world economic recovery? ZOELLICK: Well, you know, it depends on what else is going on and it depends, you know, how far of a decline and it depends on some of the effects that it has on interest rates. But my point really goes more to the direct interests of the United States. And I took a historical reference with Prime Minister Pitt of Britain saying that while people talk about the great campaigns that won the Napoleonic wars, it was the fact that he restored Britain’s credit that allowed them to fight a 20-year war and pay for a coalition. Now, the larger point there is the United States has been in a unique position in terms of being able to have the dollar accepted as the predominant reserve currency. The euro did a good performance in this crisis, it will be an alternative. I don’t think China’s renminbi is going to move to an open capital account soon. But in the speech I outline why over the next 10 years, 10, 20 years, it will also move to be more of an international role. So my message is whether it’s budget deficits or whether it’s the monetary policies, don’t take the dollar for granted. KUDLOW: Well, are you inferring a criticism here? I mean, are these self-inflicted wounds by the USA in terms of overspending or overborrowing or over money printing? ZOELLICK: Well, I think across different administrations, across different times, you know, we haven’t been able to get the discipline over the budget deficit across parties, different Congresses, different parties. And given the fact that we’re going to have a budget deficit as a percentage of GDP of over 10 percent, that is now fundamental to get on top of. You’ve seen the projections in terms of U.S. debt as a -- as a percentage of GDP. You know, for years it hovered in a range that was manageable. But the types of numbers that people are talking about move it into a whole different league. And that’s the type of thing, combined with monetary policy, that should be a priority for people across the political spectrum. KUDLOW: China has talked about this, numerous Chinese officials; Maria Bartiromo interviewed President Lula of Brazil and he talked about it. I didn’t hear anything specific from the G-20 on the dollar’s status, Bob. Did you? I mean, was there something, you know, in the back scenes, in the back rooms, in between the lines, because this is a question people on Wall Street and investors are asking. ZOELLICK: I think it showed up more in the discussion about the nature of having a sustainable recovery. And obviously part of that is monetary policy. You’ll see a lot of references to imbalances. That partly, of course, relates to the different trade imbalances, but it also relates to the need for countries to be able to pay their bills and get control and discipline over their spending. So it wasn’t so much focused on currency and exchange rates, but that hovers in the background. KUDLOW: All right. Moving on here, you have another topic in the speech that I think is controversial. You take some shots at central banks and, by implication, the Fed. Let me just read one of the money paragraphs and get you to respond. “Central banks fail to address risks in the new economy. They seemingly mastered product inflation in the ‘80s, but most decided that asset bubbles were difficult to identify and restrain with monetary policy. They argue that the damage to the economy from jobs, production and savings and consumption could be contained once bubbles burst through aggressive easing of interest rates.” And then you say, flatly and declaratively, “They turned out to be wrong.” Now, I’m just quoting from your speech. What are you saying here? What’d you have in mind? ZOELLICK: Well, it’s not all central banks. If you will also see in the speech, I actually compliment the European Central Bank. I think Jean-Claude Trichet did a pretty good job coming into the crisis and managing it. And while I didn’t get into this level of detail, Canada’s central bank, for example, has tried to look at some of the asset price inflation. And I think -- to be fair, I think the Federal Reserve and all the other central banks did a good job once the crisis hit. But I -- the key point of that paragraph was what I said about asset price inflation. Central banks felt that that was something they couldn’t manage, shouldn’t manage, they could deal with it through other means, and they learned a lesson, as we all have to learn out of this crisis, that that didn’t work. Now, the other point, though, I make about the central banks is less trying to cast blame, it’s more a question of political economy in the United States. As you know, Larry, we didn’t have a Federal Reserve until 1913. I mean, you go back to Alexander Hamilton, Congress and banks and bankers are -- that’s always been a rather acidic mix. And so -- and it’s going to be a big challenge to say that the Federal Reserve, which with its independence, which I think is appropriate for monetary policy, should be given additional role in the bank regulatory area. And I think you can see that in the debates in Congress. And frankly, my reading of the different reports and seeing at the time was one of the real challenges was whether the Treasury Department had enough authority to pull the regulators together. So it’s going to depend on each economy. So with central banks, part of this deals with political history and kind of attitudes towards the role of independent central banks. My view is the Fed’s going to have a big enough challenge concentrating on the monetary policy getting out of this crisis. That’s what I think should be the prime focus. I personally think the Treasury needs a little bit more authority on the regulatory side. KUDLOW: Well, that was my inference from reading this, that you think the Treasury should be the uber regulator of the uber banks. Let me just read. You’re saying -- this is your speech -- “My reading of recent crisis management is that the Treasury needs greater authority to pull together a bevy of different regulators. Moreover, the Treasury is an executive department and therefore Congress and the public can more directly oversee how it uses any authority.” You seem to be saying let the Treasury have the principal role and you are, sir, injecting yourself in a very controversial discussion going on in Washington. May I ask why? ZOELLICK: Well, I’m just sharing the perspective of somebody who’s been involved in this for about 25 or 30 years. And from my perspective, you know, whether it be Secretary Paulson or Secretary Geithner, you read the newspapers, you can see them trying to struggle to deal with the regulators. You’ve got a financial banking regulatory system that has a legacy of history of a vulcanized financial system. So if people are going to overhaul that, there’s a need to try to make sure that you’ve got somebody responsible and accountable. The second observation in that paragraph is I believe very much in a -- in a democratic sense of responsibility. The Congress is going to be sensitive to make sure that it can exercise oversight over financial regulation, as it should. And it’s much more natural to have that in an executive branch which has to get elected every four years and plays -- has a -- has a balance of power relationship, shared powers with the Congress, than it is in an independent central bank. Now, different countries are going to do this differently. You see this debate in Britain, you see it in Europe. But I think for the U.S.system, the key message is now that we’re coming out of the crisis, the real danger is going to be complacency. We got to fix the regulatory supervision. In my view, I would make sure that the Treasury had the authority to play the role it should. KUDLOW: All right. So you’re saying we got to fix the regulatory system, give the Treasury a large piece. You’re also saying we got to fix the dollar. Let me just ask you, are you also inferring it’s time for an exit strategy from TARP, from all the spending and borrowing and from all the money printing? Are you suggesting it is time right now for the USA to protect its system and its integrity and the value of its currency for an exit -- an exit strategy? ZOELLICK: Well, I think the U.S. -- and again, the -- both the Federal Reserve and the executive branch are preparing for the exit. At the same time, I think one has to be careful about trying to pull the plug of support too quickly because, as I said, I think you face a lot of uncertainties in 2010. So you’ve seen some of the articles that have been written in terms of Kevin Warsh and others from the Federal Reserve trying to identify some of these issues. So I think that they’re doing the right thing. And I also mean to emphasize this is not going to be an easy call. But it’s going to be a critical call and it’s one that needs the informed debate. KUDLOW: Last one, Bob Zoellick. Big German elections, the center-right won. Chancellor Merkel was re-elected with strong support from the Free Democratic Party. They’re all pledging supply-side tax cuts, and I can’t help but ask you, is supply-side tax cutting going to be coming back into vogue instead of all this Keynesian spending? Would Germany lead the way and change world economic policies? ZOELLICK: Well, that’s been the view of some of the parties in the coalition. The CSU, the Bavarian party has got a great young leader, zu Guttenberg, but also the Free Democrats. I think they’re going to have to balance it with their own budget issues. And, you know, while -- Larry, while I support lower taxes, I also support paying for what you spend. So that’s going to be their decision on how they manage the spending and the -- and their overall revenues. It is an interesting commentary, though, about I think something you feel more generally out there, which is that while there are different ideas about stimulus and the role that it played, I think people want to make sure that they pay their country’s bills, and that’s a good thing. KUDLOW: All right, World Bank President Robert Zoellick, we appreciate your time, we appreciate your controversial speech. Thanks for coming back on Kudlow. ZOELLICK: You bet, Larry. KUDLOW: All right. ZOELLICK: Bye. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=MzYxMjYxZjkzOTM2YTU4YjMxOTljZGRkYjcxNmMyN2E= Tue, 29 Sep 2009 10:59:52 -0400 A Supply-Sider in the California Governor's Race -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=ZjFlNGFkNzc5ZWFiMjZmNDhhNzY0YWYyODY5ZDJjZjM= There’s a lot of interest in the California midterm elections because of two well-known business ladies, Meg Whitman (former-CEO of eBay) and Carly Fiorina (former-CEO of Hewlett-Packard). Of course, California’s economy and fiscal position are in a death march. All kinds of capitalists and entrepreneurs are running away from the state’s high taxes and over-regulations. (Among other palaces, they’re headed to Texas.) But Whitman and Fiorina -- because they are women and former big-business honchos -- lend some glamour and renewed interest to California Republicans. I have not interviewed Carly Fiorina recently -- that’s on the schedule. (Fiorina hopes to beat Barbara Boxer in the U.S. Senate race.) But I did interview Meg Whitman, along with her Republican gubernatorial primary opponent, Steve Poizner, a statewide-elected GOP official who is himself a very wealthy and successful high-tech entrepreneur. Being of relatively sound mind and chock full of sense and sensibility, I am not taking a position on the Whitman-Poizner primary. But I will say this: Mr. Poizner has a very strong, across-the-board, 10 percent tax-rate-reduction plan for personal income, sales taxes, and business taxes, and a 50 percent reduction plan for the state’s capital-gains tax. He cited Arthur Laffer in my interview with him, and essentially declared himself a pro-growth supply-sider. Ms. Whitman was vague on tax policy. When asked if she would support a 5 to 6 percent flat-tax rate, she said she’d look at it. But her top priority is to cut state spending -- a very important mission. She wants to lower taxes down the road, but nothing specific yet. Both Whitman and Poizner favor heavy use of the governor’s line-item veto, and both want tort reform to reduce business costs. Ms. Whitman would somewhat roll back California’s onerous cap-and-trade policy, while Poizner would freeze the whole plan. Most observers believe Meg Whitman has the greater star power in the race. However, both candidates are going to spend a lot of money. As I said, I’m not choosing sides right now. But it was interesting to hear Mr. Poizner’s almost pure, supply-side, Laffer Curve-driven, tax-cut rhetoric. I can’t help but wonder if Meg Whitman won’t jump on this bandwagon before it’s all said and done. It will be a Republican year in 2010, and the GOP could pick off the California statehouse and use it as a tax-cutting, limited-government model with national impact -- in ways that Gov. Arnold Schwarzenegger never did. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=ZjFlNGFkNzc5ZWFiMjZmNDhhNzY0YWYyODY5ZDJjZjM= Thu, 24 Sep 2009 17:08:56 -0400 Another Fed Meeting, More Helicopter Ben -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=MWM5OTk5ZjkwYmZhN2I1MTEwZWE1ZTJiMTc3ZDBhZTM= Today’s FOMC <a href="http://www.federalreserve.gov/newsevents/press/monetary/20090923a.htm">policy announcement</a> from the Federal Reserve basically sends a message that Bernanke & Co. doesn’t care one wit about the sinking dollar or the rising gold price. In fact, the latest policy directive removes last month’s reference to commodity-price increases, while there is no reference to the greenback at all. The central bank is going to keep buying mortgages and adding to its balance sheet of high-powered money creation. A Bloomberg story last night said the Fed has been talking to government bond dealers about something called “reverse repos,” which simply means the Fed would sell Treasury bills to Wall Street and withdraw cash liquidity from the financial system. But there’s no mention of this exit strategy in today’s policy memo. Essentially, the whole reverse-repo business has to do with the Treasury’s debt-ceiling limitations and the fact that the U.S. government is taking back $200 billion of cash sitting at the central bank. So the Fed could absorb some of that $200 billion through the reverse RPs, or simply let excess reserves held on deposit at the Fed go up another $200 billion. Whatever, it’s a technical matter. The bottom line is that the Fed is going to continue to create an excess supply of new dollars, which is why the dollar exchange rate is likely to keep falling while gold and other commodities keep rising. Today’s incipient inflation will become much more pronounced in the next year or two. Helicopter Ben is not turning into King Dollar Ben. Actually, I believe the Fed and the Treasury want to nurture a cheaper dollar to boost U.S. exports as a means of fine-tuning stronger economic growth through the international channel. But there is no exit strategy from dollar creation. That’s gonna wait well into next year. It’s ironic that today’s policy announcement sounded much more optimistic in terms of the economy. And in view of this great monetarist experiment -- which really is Friedmanism run amok -- the Fed and everyone else may be surprised by a barnburner of an economic recovery over the next four to six quarters. Anticipating this, the stock market has had a tremendous run, and will probably continue on its upward path. Trading has been lackluster following the Feds’ statement, with the Dow up only 20 points as of this writing, somewhat lower than the pre-Fed level. Reflation investments in industrials and commodities are clearly the place to be with the Fed strategy. But heading into the G20 meeting, the U.S. has no exit strategy for fiscal or monetary policy. That could well create more problems, including more chatter from China and others about the dollar’s status as the world’s reserve currency. The Obama-Geithner-Bernanke dollar-depreciation strategy is fraught with risk. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=MWM5OTk5ZjkwYmZhN2I1MTEwZWE1ZTJiMTc3ZDBhZTM= Wed, 23 Sep 2009 15:45:45 -0400 Art Laffer's Four Prosperity Killers -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=MDBlNGY4ODdlNGU2MDAyYjdiNWIzZDkwNzYwOGY0NzA= Right now is as good a time as any to revisit my old friend Art Laffer’s four prosperity killers. You can put a check mark next to each one. 1. Rising tax rates 2. Inflationary money 3. Trade protectionism 4. Government control/re-regulation And while we’re on the subject, make sure to check out Art’s terrific <a href="http://online.wsj.com/article/SB10001424052970203440104574402822202944230.html">op-ed</a> in today’s Wall Street Journal. He argues that while Fed policy was undoubtedly important, it was ultimately tariffs, rising taxes, and currency devaluation that ruined the 1930s. According to Art, we face the same dangers today. He’s dead right. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=MDBlNGY4ODdlNGU2MDAyYjdiNWIzZDkwNzYwOGY0NzA= Tue, 22 Sep 2009 13:59:40 -0400 Can Meg Whitman Save California? -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=Y2VkMmRkZWJiYTQ4ZTk1Nzc4N2VlZTAxNTMyMDk5N2Y= Last night I had the pleasure of interviewing California gubernatorial candidate and former eBay CEO, Meg Whitman, on her plans to rescue the moribund Golden Sate. California is one big fiscal and economic nightmare. She's got her work cut for her if she wins. I wish her all the best of luck. <object classid="clsid:d27cdb6e-ae6d-11cf-96b8-444553540000" width="400" height="380" codebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=6,0,40,0"> <param name="id" value="cnbcplayer" /> <param name="type" value="application/x-shockwave-flash" /> <param name="allowfullscreen" value="true" /> <param name="allowscriptaccess" value="always" /> <param name="quality" value="best" /> <param name="scale" value="noscale" /> <param name="wmode" value="transparent" /> <param name="bgcolor" value="#000000" /> <param name="salign" value="lt" /> <param name="src" value="http://plus.cnbc.com/rssvideosearch/action/player/id/1265817344/code/cnbcplayershare" /><embed id="cnbcplayer" type="application/x-shockwave-flash" width="400" height="380" src="http://plus.cnbc.com/rssvideosearch/action/player/id/1265817344/code/cnbcplayershare" salign="lt" bgcolor="#000000" wmode="transparent" scale="noscale" quality="best" allowscriptaccess="always" allowfullscreen="true"></embed> </object> <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=Y2VkMmRkZWJiYTQ4ZTk1Nzc4N2VlZTAxNTMyMDk5N2Y= Fri, 18 Sep 2009 11:35:44 -0400 What the Doctors Think -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=OTZmMmUyY2IzNDNmZmQwZWMxNGQ3MjlkNDk1MmNjMDM= Will Americans soon be too sick to work, produce, invest, and generate new prosperity? That’s one conclusion you can draw from a <a href="http://www.investors.com/NewsAndAnalysis/SpecialReport.aspx?id=506106">new series</a> by Investor’s Business Daily, which reveals that doctors are overwhelmingly opposed to a government takeover of health care (including the Baucus plan). Just as important, IBD reports that any government-based health-care overhaul will exacerbate the growing shortage of doctors in this country. IBD/TIPP found that 71 percent of physicians believe that government cannot cover 47 million more people without significant rationing of health care. And nearly half of the doctors polled say they would retire early if Congress passes the proposed overhaul. IBD/TIPP surveyed nearly 1,400 physicians for its series. In written responses, doctors have pointed to lower pay, increased government mandates, and less freedom to practice as reasons for the physician shortage. In particular, Medicare and Medicaid, which essentially are running half of our health-care system, continue to pay below-market reimbursement rates that are putting doctors out of business. Primary-care physicians are the worst off. The American Academy of Family physicians reports that primary-care doctors need a 30 percent pay raise in order to survive. They’re not going to get it under Obamacare, or Obamacare Lite. In fact, physician payments will move lower should any of the various House and Senate plans pass. The Massachusetts Medical Society, operating in a state that has implemented a Washington-like universal-overage plan, reports that primary-care doctors are in short supply for a fourth straight year, that the percentage of primary-care practices closed to new patients is the highest ever recorded, and that seven of 18 specialties -- dermatology, neurology, urology, vascular surgery, and obstetrics-gynecology, in addition to family and internal medicine -- are all in short supply. On top of all that, enrollment in medical schools is already declining. By some estimates, the nation will have 159,000 fewer doctors than it needs by 2025. So what exactly are we supposed to do about this doctor shortage? The easy answer is to create incentives for new doctors. And for that matter nurses. And for that matter hospital space. We should expand and grow the entire free-market health-care system, which up until recently was America’s greatest growth industry. But these government plans will do just the opposite. They will shrink private care and private insurance. They will reduce jobs. And they may well undermine American health and wellness. Everyone should read <a href="http://www.investors.com/NewsAndAnalysis/SpecialReport.aspx?id=506106">the IBD series</a> and consider the health-care debate from the standpoint of the doctors. That’s something that hasn’t been done yet. But it’s darn important. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=OTZmMmUyY2IzNDNmZmQwZWMxNGQ3MjlkNDk1MmNjMDM= Thu, 17 Sep 2009 15:38:22 -0400 Royce on Defunding ACORN -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=Y2E1YzkzMWNkN2NlMDgwNzc3MjMwMTNiOWI3MDE3MTg= Congressman Ed Royce (R., Calif.), co-sponsor of the Defund ACORN Act, joined me last night to discuss the investigation and possible defunding of ACORN. The Senate just voted 83-7 to defund ACORN. The question now becomes whether the House will follow suit. The interview begins at the 2:01 mark. <object classid="clsid:d27cdb6e-ae6d-11cf-96b8-444553540000" width="400" height="380" codebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=6,0,40,0"> <param name="id" value="cnbcplayer" /> <param name="type" value="application/x-shockwave-flash" /> <param name="allowfullscreen" value="true" /> <param name="allowscriptaccess" value="always" /> <param name="quality" value="best" /> <param name="scale" value="noscale" /> <param name="wmode" value="transparent" /> <param name="bgcolor" value="#000000" /> <param name="salign" value="lt" /> <param name="src" value="http://plus.cnbc.com/rssvideosearch/action/player/id/1255619356/code/cnbcplayershare" /><embed id="cnbcplayer" type="application/x-shockwave-flash" width="400" height="380" src="http://plus.cnbc.com/rssvideosearch/action/player/id/1255619356/code/cnbcplayershare" salign="lt" bgcolor="#000000" wmode="transparent" scale="noscale" quality="best" allowscriptaccess="always" allowfullscreen="true"></embed> </object> <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=Y2E1YzkzMWNkN2NlMDgwNzc3MjMwMTNiOWI3MDE3MTg= Wed, 16 Sep 2009 15:23:35 -0400 Bernanke: 'Recession Is Very Likely Over' -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=MmUwNDcwZDM5YmExMTk5Y2NkYjFlMzU4NzRhZjBjZTU= Fed head Ben Bernanke declared “the recession is very likely over at this point,” adding the phrase “from a technical perspective.” He said this during a question-and-answer session at the Brookings Institution today. Well, gee whiz golly. While Mr. Bernanke’s forecasting prowess is somewhat suspect (we all can say that), he got some strong ammo from a blockbuster retail sales report that was way above Wall Street expectations. Overall retail sales jumped 2.7 percent at an annual rate in August. Take out the cash-for-clunkers temporary car bulge, and sales still jumped 1.1 percent. In GDP terms, core retail sales (excluding autos, gasoline, and building materials) still rose 0.8 percent for August, which comes to 2.7 percent annually over the past three months. This means consumer spending in the third quarter ending in September will rise by more than 2 percent annually. I wonder if Mr. Bernanke isn’t underestimating the very substantial monetary stimulus that he has injected into the economy, going back about nine months. This is the Milton Friedman monetarist experiment. The Fed’s balance sheet has grown by over $1 trillion; various money-supply measures are running about 10 percent on average; the Treasury yield curve is very steep and positively sloped; and of course the target rate is near zero. Add to that $1,000 gold and a weak dollar. We’re talking easy money here. It started last fall, and with a roughly six-to-twelve-month lag, it’s now beginning to impact the economy in a significant way. So Mr. Bernanke may be underestimating a V-shaped recovery that will extend through 2010. And don’t forget that marginal tax rates are going up in 2011. That’s likely to mean -- in supply-side-incentive terms -- that many folks will bring as much income and investment as they can into 2010 to beat the tax hike. And that could add to GDP in a significant way next year. Another recovery indicator from my pal <a href="http://mjperry.blogspot.com/">Mark Perry</a>: The TED spread, which is the three-month LIBOR rate minus the three-month T-bill rate, considered to be an important indicator of credit risk in the economy, has plunged from nearly 500 basis points last October to only 16 basis points currently -- the lowest level in more than five years, going back to June 2004. In very simple terms, money is easy and plentiful while business profits are rising. It’s a recipe for recovery. Now let’s hope Team Obama doesn’t take over the whole economy. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=MmUwNDcwZDM5YmExMTk5Y2NkYjFlMzU4NzRhZjBjZTU= Tue, 15 Sep 2009 16:28:28 -0400 The Empirical Evidence against Big Government -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=ZDNkNWRhOWQxMTE4ZDlhNjk2ZTdiZTJhY2ZlMzliMTE= Here’s the latest video from my friend Dan Mitchell over at the Center for Freedom and Prosperity Foundation. It presents real-world data and research showing that the burden of government spending is far too high -- not only in the U.S. (where the Bush-Obama policies have increased the federal budget by more than 100 percent), but also in other nations where government budgets sometimes consume more than one-half of an economy’s output. <object classid="clsid:d27cdb6e-ae6d-11cf-96b8-444553540000" width="425" height="344" codebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=6,0,40,0"> <param name="allowFullScreen" value="true" /> <param name="allowScriptAccess" value="always" /> <param name="src" value="http://www.youtube.com/v/4pdmNynEwYA&color1=0x2b405b&color2=0x6b8ab6&hl=en&feature=player_embedded&fs=1" /><embed type="application/x-shockwave-flash" width="425" height="344" src="http://www.youtube.com/v/4pdmNynEwYA&color1=0x2b405b&color2=0x6b8ab6&hl=en&feature=player_embedded&fs=1" allowscriptaccess="always" allowfullscreen="true"></embed> </object> <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=ZDNkNWRhOWQxMTE4ZDlhNjk2ZTdiZTJhY2ZlMzliMTE= Tue, 15 Sep 2009 15:16:41 -0400 An Interview with John Thune on Obama's Health-Care Hail Mary -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=MjQ5YTliNTBmZTJkZWE1NjQwN2M1YWEyMDBiM2YyODc= John Thune, South Dakota Republican senator and chairman of the Republican Policy Committee, joined me last night to offer perspective on President Obama’s Hail Mary pass before Congress this evening. He also offered some clear-eyed GOP health-care solutions of his own, including interstate-insurance deregulation and medical-malpractice reform. Interview begins at the 3:32 mark. <object classid="clsid:d27cdb6e-ae6d-11cf-96b8-444553540000" width="400" height="380" codebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=6,0,40,0"> <param name="id" value="cnbcplayer" /> <param name="type" value="application/x-shockwave-flash" /> <param name="allowfullscreen" value="true" /> <param name="allowscriptaccess" value="always" /> <param name="quality" value="best" /> <param name="scale" value="noscale" /> <param name="wmode" value="transparent" /> <param name="bgcolor" value="#000000" /> <param name="salign" value="lt" /> <param name="src" value="http://plus.cnbc.com/rssvideosearch/action/player/id/1246351047/code/cnbcplayershare" /><embed id="cnbcplayer" type="application/x-shockwave-flash" width="400" height="380" src="http://plus.cnbc.com/rssvideosearch/action/player/id/1246351047/code/cnbcplayershare" salign="lt" bgcolor="#000000" wmode="transparent" scale="noscale" quality="best" allowscriptaccess="always" allowfullscreen="true"></embed> </object> <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=MjQ5YTliNTBmZTJkZWE1NjQwN2M1YWEyMDBiM2YyODc= Wed, 09 Sep 2009 10:33:34 -0400 China Raises the Money-Printing Alarm -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=YTJlYTE3MzdkMzAwNjJiOTY1ODQ1Y2QwZGM5NmExYWY= A hugely important <a href="http://www.telegraph.co.uk/finance/economics/6146957/China-alarmed-by-US-money-printing.html">story</a> from Ambrose Evans-Pritchard of the London Telegraph that China is alarmed by U.S. money-printing has helped drive the dollar price of gold over $1,000, at least temporarily, and drive down the exchange rate of the greenback. Other commodities like oil and copper have also rallied today. At a conference in Lake Como, Italy, a leading Chinese economic spokesman -- Cheng Siwei -- criticized Ben Bernanke’s loose monetary policy. “If they keep printing money to buy bonds it will lead to inflation,” said Cheng, “and after a year or two the dollar will fall hard.” Cheng went on to say that China was diversifying its roughly $700 billion of U.S. foreign-exchange reserves into gold. “Gold is definitely an alternative, but when we buy, the price goes up,” he said. “We have to do it carefully so as not to stimulate the market.” Ambrose-Pritchard interprets this as the “Beijing Put” on gold -- meaning the Chinese will buy gold on the dips, which is going to prevent the yellow metal from falling hard. It also puts upward price pressure on gold for the long term. Beijing has in fact doubled its gold reserves to 1,054 tons. As a corollary to this, the Chinese are clearly losing confidence in the U.S. dollar. And while nobody is much paying attention to a new UN report that the global financial system needs a new reserve currency to replace the dollar, the fact is that Chinese spokesmen (and Russian and Brazilian spokesmen) have said the same thing from time to time. Incidentally, the G20 meeting of finance ministers and central bankers in London this weekend failed to articulate a fiscal and monetary exit strategy from all their massive spending, borrowing, and money-creating to fight off the financial meltdown and the world recession. The G20 reluctance to exit from hyper-stimulus is also bullish for gold -- and, for that matter, bearish for paper currencies in general. Cheng, by the way, hinted that China is experiencing a speculative boom in stocks and property. But if the Chinese raise interest rates ahead of the Fed they will risk being flooded with hot money that will make the boom even worse. “We have to wait for them,” said Cheng. “If they raise, we raise.” Many Wall Street traders are dissing the gold-rally story. But I think they’re missing the bigger picture of excess money-creation in the U.S. and elsewhere. As I recall, Confucius once said: Where there’s smoke, there’s fire. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=YTJlYTE3MzdkMzAwNjJiOTY1ODQ1Y2QwZGM5NmExYWY= Tue, 08 Sep 2009 15:18:28 -0400 An Interview with Eric Cantor on Obamacare -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=YjZhMWI3MzM1NDI1NWNlNmNlMzIzZThmZmJmM2RiMzQ= Will President Obama and the Democrats keep up their push for a government-run health-care plan? And what will we hear from Obama in his speech before Congress on Wednesday? Helping me sift through these questions on last night’s show was House Minority Whip Eric Cantor of Virginia. <object classid="clsid:d27cdb6e-ae6d-11cf-96b8-444553540000" width="400" height="380" codebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=6,0,40,0"> <param name="id" value="cnbcplayer" /> <param name="type" value="application/x-shockwave-flash" /> <param name="allowfullscreen" value="true" /> <param name="allowscriptaccess" value="always" /> <param name="quality" value="best" /> <param name="scale" value="noscale" /> <param name="wmode" value="transparent" /> <param name="bgcolor" value="#000000" /> <param name="salign" value="lt" /> <param name="src" value="http://plus.cnbc.com/rssvideosearch/action/player/id/1240482397/code/cnbcplayershare" /><embed id="cnbcplayer" type="application/x-shockwave-flash" width="400" height="380" src="http://plus.cnbc.com/rssvideosearch/action/player/id/1240482397/code/cnbcplayershare" salign="lt" bgcolor="#000000" wmode="transparent" scale="noscale" quality="best" allowscriptaccess="always" allowfullscreen="true"></embed> </object> <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=YjZhMWI3MzM1NDI1NWNlNmNlMzIzZThmZmJmM2RiMzQ= Fri, 04 Sep 2009 11:06:22 -0400 Coburn Talks 'Kennedy-Care' -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=ZjcyZmZhNmYwOWY4MmZkYTE3ODgzMWJiN2VjZGU1MWU= Here’s the video of my recent interview with Dr. Tom Coburn, the Republican senator from Oklahoma. We discuss the state of the health-care debate, and what appears to be an attempt by the Democrats to exploit the passing of Sen. Ted Kennedy. Note: The interview begins at the 1:57 mark. <object classid="clsid:d27cdb6e-ae6d-11cf-96b8-444553540000" width="400" height="380" codebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=6,0,40,0"> <param name="id" value="cnbcplayer" /> <param name="type" value="application/x-shockwave-flash" /> <param name="allowfullscreen" value="true" /> <param name="allowscriptaccess" value="always" /> <param name="quality" value="best" /> <param name="scale" value="noscale" /> <param name="wmode" value="transparent" /> <param name="bgcolor" value="#000000" /> <param name="salign" value="lt" /> <param name="src" value="http://plus.cnbc.com/rssvideosearch/action/player/id/1229746834/code/cnbcplayershare" /><embed id="cnbcplayer" type="application/x-shockwave-flash" width="400" height="380" src="http://plus.cnbc.com/rssvideosearch/action/player/id/1229746834/code/cnbcplayershare" salign="lt" bgcolor="#000000" wmode="transparent" scale="noscale" quality="best" allowscriptaccess="always" allowfullscreen="true"></embed> </object> <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=ZjcyZmZhNmYwOWY4MmZkYTE3ODgzMWJiN2VjZGU1MWU= Thu, 03 Sep 2009 10:23:01 -0400 An Interview with the FDIC's Sheila Bair -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=Yzk3ZDk1YmY1YzZiZTU0OTBjYmFiNjgxZTI2ZDY4YzA= This week I had the privilege of discussing the state of the banking industry with distinguished FDIC chair Sheila Bair. One interesting highlight was her comment that commercial real-estate loans remain a “looming problem” on bank balance sheets. She expects this area to be a driver for bank failures through the remainder of this year and into 2010. And she remains firmly opposed to the idea of a single super-regulator. Incidentally, I still think she’s absolutely right about needing competition among the regulators, with various checks and balances. The Fed has not earned its uber-regulator status. <object classid="clsid:d27cdb6e-ae6d-11cf-96b8-444553540000" width="400" height="380" codebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=6,0,40,0"> <param name="id" value="cnbcplayer" /> <param name="type" value="application/x-shockwave-flash" /> <param name="allowfullscreen" value="true" /> <param name="allowscriptaccess" value="always" /> <param name="quality" value="best" /> <param name="scale" value="noscale" /> <param name="wmode" value="transparent" /> <param name="bgcolor" value="#000000" /> <param name="salign" value="lt" /> <param name="src" value="http://plus.cnbc.com/rssvideosearch/action/player/id/1235983081/code/cnbcplayershare" /><embed id="cnbcplayer" type="application/x-shockwave-flash" width="400" height="380" src="http://plus.cnbc.com/rssvideosearch/action/player/id/1235983081/code/cnbcplayershare" salign="lt" bgcolor="#000000" wmode="transparent" scale="noscale" quality="best" allowscriptaccess="always" allowfullscreen="true"></embed> </object> <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=Yzk3ZDk1YmY1YzZiZTU0OTBjYmFiNjgxZTI2ZDY4YzA= Thu, 03 Sep 2009 10:03:50 -0400 Helicopter Ben or King Dollar? -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=NGE0NTEwYzJiNDFlYzUzMWM5MmUwZTJlMzA0MDVlNmQ= It’s no surprise that President Obama re-nominated Fed head Ben Bernanke to a second term as chair of the central bank. It was the path of least resistance. Essentially, the president argued that Bernanke was the guy who kept us out of a second Great Depression. Okay, fine. But now we must ask: Is Bernanke the right guy to craft and pilot an exit strategy that avoids new inflationary bubbles? In short, will he be Helicopter Ben or King Dollar? It’s a tough question that markets are puzzling over. Interestingly, there was very little change in stock and bond trading today. So the guessing game will continue. If Mr. Bernanke repeats his role as Alan Greenspan’s bubbled-over, easy-money copilot between 2002 and 2005, we’re in for trouble. Stanford economist John Taylor wrote this up in his great short book, Getting Off Track. The dollar plunged while hard-asset prices (like housing, commodities, energy, and gold) soared. And then came the tightening that moved us from boom to bust. Is this movie gonna play all over again? Nobody knows. On the other hand, if Mr. Bernanke adopted a financial-and-commodity-market price rule -- using inflation-sensitive, real-world price indicators like gold, commodities, bonds, and so forth -- the so-called exit-strategy outcome from the easy-money rescue of the banking system over the past year might have a much happier ending. But looking at Bernanke’s record and numerous speeches, he really seems more like a Republican Phillips-curve advocate who targets the unemployment rate in a false trade-off with inflation. This means he will likely overstay the Fed’s easy-money welcome, and that future inflation and interest rates are going up. I have never heard Mr. Bernanke proselytize for a stable-dollar currency value of money. Never. Of course, like any central banker, he says he’s for price stability. But the question remains how to get there and what model to use. Supply-siders like myself strongly support a price-rule model, where markets tell government what to do. But all too often it seems like Mr. Bernanke -- who has been out there buying Treasury and mortgage bonds in a futile attempt to control their yields -- prefers the model where the government tells markets what to do. This is a loser, as we have painfully learned in the past. Paul Volcker watched gold in the ’80s. So did Alan Greenspan for most of the ’90s. But I don’t think Mr. Bernanke watches gold at all. And I don’t think he worries much about the fate of the dollar. Let me not pre-judge Bernanke’s second term. The Fed chair has done a good job over the past year in moving the financial system towards recovery. But I think the ultimate question remains: Helicopter Ben or King Dollar? <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=NGE0NTEwYzJiNDFlYzUzMWM5MmUwZTJlMzA0MDVlNmQ= Tue, 25 Aug 2009 15:21:44 -0400 Eight Reasons Why Big Government Hurts Economic Growth -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=OTAzNGMxYWI3ZTRlOWEyZGY2MTE4YzJjMGI4Y2YyZDg= Here's Dan Mitchell's latest mini-documentary explaining how and why excessive government spending undermines economic growth. Incidentally, a new poll out today reveals that 57 percent of Americans say the stimulus package is having no impact on the economy or making it worse. Moreover, 60 percent doubt the stimulus plan will help the economy in the years ahead. <object classid="clsid:d27cdb6e-ae6d-11cf-96b8-444553540000" width="480" height="385" codebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=6,0,40,0"> <param name="allowFullScreen" value="true" /> <param name="allowscriptaccess" value="always" /> <param name="src" value="http://www.youtube.com/v/Mo192DJqvYc&hl=en&fs=1&" /><embed type="application/x-shockwave-flash" width="480" height="385" src="http://www.youtube.com/v/Mo192DJqvYc&hl=en&fs=1&" allowscriptaccess="always" allowfullscreen="true"></embed> </object> <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=OTAzNGMxYWI3ZTRlOWEyZGY2MTE4YzJjMGI4Y2YyZDg= Wed, 19 Aug 2009 10:59:46 -0400 Have We Seen This Fed Movie Before? -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=M2E0M2U3MWI5ZjExMGE4Y2JlYTFlZjZiNDE4ODYxMzc= The bull market snapped back yesterday and prospects for modest economic recovery still look good. But I want to issue a warning or two about the latest policy statement from Bernanke & Company. I am not thrilled about it. The Federal Reserve is keeping its fed funds target rate down near zero and is talking about adding another $1.5 trillion to its balance sheet through the purchase of mortgage bonds and Treasuries. Now, I don’t care whether those purchases come sooner or later. They represent massive new dollar creation and potential inflation. The Fed is targeting unemployment, not price stability or King Dollar. Here’s my question: Is the Fed repeating the very same easy-money mistake it made between 2002 and 2005, when it totally bubbled-up and inflated housing, energy, and financial markets, all of which led to a 6 percent inflation rate down the road? Of course, all of that also led to a very deep recession. So color me worried. Distinguished monetary historian and Fed expert Alan Meltzer from Carnegie Mellon says the Fed needs to wind down the printing of excess cash and balance-sheet expansion in order to stop future inflation. He’s absolutely right. And even if government health-care control doesn’t pass, it’s bad enough that Uncle Sam is borrowing too much and spending too much. This will slow future prosperity and bias the system toward inflation. In the short run, excess liquidity from the Fed may be good for stocks. In the longer term, it is not good for stocks, the economy, or your pocketbook. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=M2E0M2U3MWI5ZjExMGE4Y2JlYTFlZjZiNDE4ODYxMzc= Thu, 13 Aug 2009 10:57:40 -0400 Market-Driven Optimism -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=MGIwNGU4NWU2OTczZDhmYjliZDdkZmE0NzU1ZGU3ZTc= There’s a lot of talk right now about big government saving America, either from a second Great Depression (according to economist Paul Krugman) or from a health-care meltdown (according to President Obama). Well, I don’t think big government saves us from anything. At the end of the day, it is economic freedom, market competition, and free enterprise that remain the great engines of American growth. The greatest source of stimulus for both the new bull market and the new economic recovery is profits. I’ve said it before, and I’ll say it again: Profits are the mother’s milk of stocks, business, and the economy. And if the positive-profits story continues its steady march higher, as I believe it will, investors are going to be just fine with stocks. And American consumers and workers are going to be just fine with economic recovery. Of course, the Fed has played a big role in cushioning the banking system. I applaud that. But ultimately the self-correcting actions of American businesses and families are what always drive this economy, as long as we permit them to drive it. Now, I’m not an optimist because we are spending and borrowing trillions of dollars. I’m not even an optimist because the Fed has front-loaded so much new cash into the financial system. I’m an optimist because -- right now -- we remain a market-driven economy. And if we protect that precious mission, and allow these great engines of growth and prosperity to do what they do best, then we will be just fine. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=MGIwNGU4NWU2OTczZDhmYjliZDdkZmE0NzU1ZGU3ZTc= Tue, 11 Aug 2009 10:33:20 -0400 This New Bull Market Is No Clunker -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=MmQ3Mjc0YTcxMmFmMWZiNGY3ZmNjYTI5MTZmNzdmZDA= The new bull market continues to rally today, with stocks surging across-the-board. The Dow is up over 100 points at this writing, moving toward 9,300. The NASDAQ has pushed through the 2,000 level and the broad-based S&P 500 has run past the 1,000 mark with a 1.5 percent gain. This powerful summer rally adds to the early March rally, and it provides powerful new proof that we are in a genuine new bull market. My <a href="http://article.nationalreview.com/?q=OTM1N2IwMzFhMmI4NDZiMTQzNmNkYmYzYzYwNWYyZjc=">thesis</a> remains that free-market capitalism is more resilient and flexible than its detractors think. What’s more, the business sector has undergone tremendous cost corrections in the aftermath of the financial meltdown. This is where the new economic strength is coming from as the economy pushes ahead from recession to recovery in the third quarter. Market forces are pushing back against Obamanomics and the long-term spending-borrowing-taxing-and-regulating threats to our long-run prosperity. This is predominantly a cyclical move in stocks and the economy. Today’s ISM manufacturing report tells the story. The overall index moved up to 48.9 in July from 44.8 in June, a much bigger-than-expected jump that signals 3 percent economic growth. (The first-quarter average for the ISM was only 35.9.) Inside the index, new orders have surged to over 55 while production has jumped to nearly 58. Order backlogs hit 50. Rising orders are a key leading indicator of better businesses, and that means stronger consumers. Incidentally, banks are surging today in the market, another indicator of the recovery power of a zero short rate and a steep, upward-sloping Treasury curve. Carmakers, meanwhile, are reporting better sales on the shoulders of the silly cash-for-clunkers program. The Wall Street Journal correctly calls it “crackpot economics.” Not surprisingly, numerous automakers appeared on CNBC today to tout the greatness of the clunker program. I asked the sales head of Ford if the company was really going to ramp up production in response to this temporary government giveaway. He wouldn’t answer. But he and his colleagues are all touting the program. You have to love it, the stupidity of it all. Of course, clunker sales today will borrow from next year’s expected sales. But no one is thinking in those terms, and the Senate will surely put another couple billion of dollars into the program. On the other hand, the new bull market is not a clunker. Nor is the gradual move towards business health. We’ll see if there’s any improvement when we get the jobs report on Friday. Optimistic as I am in the short-run, I acknowledge that declining jobs, hours worked, flat wages, and rising unemployment make up the Achilles’ heel of my bull-market thesis. Let’s wait and see. Right now Wall Street is celebrating. We’ve waited a long while for good news. I like good news. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=MmQ3Mjc0YTcxMmFmMWZiNGY3ZmNjYTI5MTZmNzdmZDA= Mon, 03 Aug 2009 15:10:27 -0400 Stocks Surge as Obamacare Implodes -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=YTM2ZGYyMjIyZDk0NDFmMTc5NGI2NTNjZjM3MzViMGM= Hate to say it but Obama’s disastrous press conference last night is a big contributor to today’s roaring stock market. The Dow opened strong and is now up over 200 points, continuing a very bullish rally that is breaking new high ground for shares this year. Politics is not everything, but I believe that the shrinking probability of a new government insurance plan that would lead to nationalized health care -- along with the demise of cap-and-trade that would nationalize energy -- is very bullish for stocks. Hat tip to Bill Kristol for the phrase “docs and cops,” that latter of which were attacked by Obama last night. It looked real bad. In fact his whole garbled, inconsistent, and baffling defense of health care looked real bad. The president’s polls have been falling, especially on his policies. And markets see the possibility that free-market capitalism will live to see another day. Of course, there are a lot of positives going on inside the economy and markets. Earnings continue to surprise on the upside and a profits bottom following a nasty two-year decline is upon us. This morning, the weekly jobless-claims figure -- a key leading indicator of future employment -- did rise 30,000. But that does not erase the near 100,000 downward spike on a four-week moving average. The chart has gone from 660,000 claims to 566,000. It could well mean that businesses cut too many jobs in the first half of the year. Planned layoffs are falling, and the July jobs figure may be better than we think. The unemployment rate might actually level off. Meanwhile, Ben Bernanke is signaling an accommodative Fed policy for as far as the eye can see. And in the money and bond markets, credit-risk spreads have now fallen back to the pre-Lehman levels of late last summer. Economist Joe LaVorgna thinks stock prices could go back to pre-Lehman levels, too, which would be about 1,250 on the S&P -- nearly 30 percent higher than today’s 977 level. I’m not predicting a return to the all-time S&P high, which was over 1,500. There are still too many government threats to free-market capitalism emanating from Democratic Washington. But the political tide is clearly turning for the better. And so are the economic stats. If the July employment report wipes out some of the negatives of the June report, this market could really roar. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=YTM2ZGYyMjIyZDk0NDFmMTc5NGI2NTNjZjM3MzViMGM= Thu, 23 Jul 2009 15:12:46 -0400 Recovery Canaries in the Economic Coal Mine -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=ZDFlYzkxYTkwNDUzNmVlMTMzYmE5Nzk3ODY3NjdiOWY= Hailing from four separate corners of the U.S. economy, Apple, Caterpillar, Starbucks, and Merck all beat the street. Throw in the banks and now you’re talking five corners. It’s bullish -- 90 percent of the American workforce and rising business may be doing some spending and risk-taking after all. I like this story a lot. (Special <a href="http://247wallst.com/2009/07/22/apple-appl-and-caterpillar-cat-someone-somewhere-somehow-is-spending-money/">hat tip</a> to blogger Douglas McIntyre.) Ben Bernanke may be too pessimistic. Perhaps it’s time for him to begin his liquidity-exit strategy -- before year end. That is, if he has the wisdom to follow market-price indicators in order to prevent an inflationary bubble. Like Dr. Copper for example: The metal’s up 70 percent from the bottom. Are you watching, sir? I’m staying with my “buy banks” call. Look folks, toxic assets are still a problem. But don’t forget that zero interest rates and a steep yield curve mean that banks can, and will, and are, earning their way out of the non-performing assets problem. It’s not all about toxic assets. Think cash flows. Give it time. Banks look like they are still a great investment. Despite solid, beat-the-street earnings from drug companies like Pfizer, Glaxo-Smith-Kline, Eli Lilly, and Merck, health care actually dropped yesterday after rallying pretty well in recent days. You know why health care dropped? Because President Obama is going to try to snatch victory from the jaws of nationalized health-care defeat. The current debate over health care is of paramount importance. It is without a doubt the most pivotal issue facing this country’s free-market system right now. Obamacare would be a total disaster. This battle must be won in order to stave off the rising socialist tide in Washington. Caveat emptor investors. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=ZDFlYzkxYTkwNDUzNmVlMTMzYmE5Nzk3ODY3NjdiOWY= Thu, 23 Jul 2009 10:21:47 -0400 Stocks Roar on Positive Leading Indicators -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=ODNiMmRiMDk4NzlmZjY2OTE5N2M4ZjhmZTA0YTc2NWE= The discouraging June jobs report published two weeks ago has been overtaken by some really positive leading indicators for the economy. Initial jobless claims have plunged in recent weeks. Housing starts are up, although modestly, for four straight months. And today, the Index of Leading Economic Indicators (LEI) from the Conference Board provided the most bullish sign yet that the recession is ending. For the first time in four years the LEI is up three straight months, with a better-than-expected 0.7 percent gain in June following upwardly revised gains of 1.3 percent in May and 1 percent in April. Higher stock prices, falling first-time jobless claims, rising housing starts, and a steep upward sloping Treasury yield curve led June’s advance. Stocks roared on the news, with the Dow up almost 100 today and the S&P 500 reaching a new yearly high. Goldman Sachs strategists are now expecting a barnburner second-half stock market rally of 15 percent to 1,060 by year-end. Right now the level is almost 950. Profits continue to come in stronger than expected, mostly from rabid cost-cutting which has caused a steep drop in jobs and hours worked. But if the leading indicators are correct, and the economy expands by even 2 percent at an annual rate in the second half of 2009, then top-line corporate revenues will start rising again, taking some of the pressure off job cuts and rising unemployment. As I’ve said before, stocks are the best barometer of future business and the economy. This current rally is signaling that business conditions are getting better, not worse. There are too many negatives out there for the kind of 5 or 6 percent growth that should happen after a deep recession. But I’ll go out on a limb with two positives: Nationalized ObamaCare and cap-and-trade are dead in the water. That includes their massive tax hikes and central-planning controls of the economy. Oh, and did I mention that in early Rasmussen polls for the hypothetical 2012 race, Obama is now running even with Mitt Romney and Sarah Palin? There’s gotta be something good embodied in those numbers. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=ODNiMmRiMDk4NzlmZjY2OTE5N2M4ZjhmZTA0YTc2NWE= Mon, 20 Jul 2009 15:43:49 -0400 Bravo for Paulson and Jobless Claims -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=ZjZmN2M1MDBiYjY5YzZhMDJlMzU4NDUwNTQ0Nzg1ODk= Initial jobless claims fell a huge 47,000 in the week ending July 11 to 522,000. In the prior week they dropped 48,000, according to the U.S. Labor Department. So that’s a giant 95,000 drop in just two weeks, bringing the four-week moving average down to 585,000. If you buy into these numbers, the long march toward big job losses and soaring unemployment may soon be coming to an end. Veteran Wall Street economist Robert Sinche believes unemployment will peak below 10 percent. He bases this on the sinking jobless claims that are a key leading indicator of the jobs market. Some, however, think the recent claims data are massively distorted by the shift in timing of summer shutdowns in the auto industry. The collapse of GM and Chrysler pulled this summer’s layoffs -- and then some -- into the spring. This is the view of John Ryding and Conrad DeQuadros. We won’t know how reliable these initial jobless claims data are until we get into August. I myself am still concerned about the dismal June jobs report and the implication for sinking incomes. So I remain cautious. But perhaps the clouds are parting more than I think. Even permabear Nouriel Roubini is saying the recession will end by year-end. And stocks are certainly signaling a change for the better: The Dow is up another 100 points as this week’s gigantic rally continues to roll, led by banks and tech. CIT is not too big to fail -- it’s going into bankruptcy and the market is applauding. And Henry Paulson’s testimony on the Bank of America/Merrill deal has been well received on Wall Street. Both Republicans and Democrats on the investigating committee look like fools. Paulson basically told them, “You bet I put a gun to Ken Lewis’s head to complete the merger. We were in a crisis, and could have tipped over into the abyss.” Essentially, Big Hank just stuck it to the politicians. He put the wood to Lewis and was right to do so. These flatfooted, tinhorn politicos in Washington look like fools. There’s no smoking gun. They’re looking for a needle in a haystack, and if they ever found it, it would be rusted and useless. Paulson deserves a congressional medal of economic and financial honor, not this ridiculous witch-hunting-and-fishing expedition. Take a look at the improving health of the financial system today and compare it to the dark days of last autumn. Not everything was perfect. It never is during wartime. But efforts by the Fed, the FDIC, and the Paulson Treasury helped save the system. Paulson’s a hero, not a goat. Oh, and did I forget to mention that former Pres. George W. Bush, the man who appointed Paulson, signed off on the Treasury rescue operations and publicly took the heat for them? Of course, no one ever gives him any credit. I’ll have more to say about this Paulson stuff in a forthcoming column. But suffice it to say stocks are very bullish today, and stocks are the best leading barometer of business and the economy. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=ZjZmN2M1MDBiYjY5YzZhMDJlMzU4NDUwNTQ0Nzg1ODk= Thu, 16 Jul 2009 16:20:14 -0400 The Stock Surge and the Profits Paradox -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=MDViOTVkMWMyMWQ1ZmRhNDViNWFhN2JiNGE2NmQ4NDU= Stocks are roaring this week. A 6 percent surge is being fueled by better-than-expected earnings -- profits that make capitalism go. Earlier this morning, on the heels of stellar results from Goldman Sachs and Intel, JPMorgan Chase announced record net revenues that easily beat analyst estimates. The bank’s second-quarter profits rose 36 percent from a year earlier. Profits remain the mother’s milk of stocks, business, and the economy. Even though profits may be a dirty word in Washington these days, this is the golden rule on Wall Street. Here’s an unconventional capitalist thought: Businesses are slashing jobs, hours worked, production, and inventories -- big-time. Unfortunately, this is driving up unemployment and creating skepticism about a real economic recovery. However, at the same time, these cost-cutting measures are contributing to better earnings and profit margins. This, in turn, is driving up stocks. I call this the profits paradox. Bad economic news can be good profits news, at least for awhile, as businesses take corrective measures. And from this business discipline comes a big surge in productivity, which ultimately drives us into recovery. This is all part of the self-correcting nature of free-market capitalism. Second point: I was right one time in a row about this bank-stock rally. Financials have soared this week. So let me repeat: Borrowing at near-zero interest rates and lending much higher is so profitable that even bankers can do it right. The steep, upward-sloping Treasury yield curve, which has gotten even steeper, is the best bailout for banks. They are earning their way out of their toxic problems. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=MDViOTVkMWMyMWQ1ZmRhNDViNWFhN2JiNGE2NmQ4NDU= Thu, 16 Jul 2009 10:35:01 -0400 Will ObamaCare Kill the Economy? -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=ZjNkMDZhZTQzZjM4MTEwMDViYjcwZWNhZDQ1NmExZTI= Here’s the transcript of last night’s Senate GOP response to the House Democrats’ tax-and-spend health-care-bill proposal on the Kudlow Report. Joining me were senators John Barrasso (R., Wyo.) and Bob Corker (R., Tenn.). Incidentally, Sen. Corker senses a “train wreck” coming. LARRY KUDLOW: Gentlemen, thank you very, very much. Mr. Barrasso, as a doctor, let me start with you, because I’m fascinated in this. You actually may know something about the details of how this works. What’s going on here? Because what I am hearing is a new government entitlement on insurance and a wave of higher taxes to fund it. And President Obama keeps saying this is going to help the economy. Huh? SEN. JOHN BARRASSO: It can’t help the economy. To me this is a program that’s bad for all the people of America. It’s bad for people who are patients; it’s bad for the folks who have to pay for it; and it’s bad for providers, whether it’s nurses, doctors or hospitals. We have a trillion dollar deficit that was just passed today Larry, we’ve gone beyond that number, the highest in the history of the United States. That’s going to get worse. We can’t afford this right now. There is plenty of money in the healthcare system. There’s a lot of care that is not necessarily helping people get better. There are ways we can be more efficient, and do a better job at taking care of people, and save money that way. We do need healthcare reform. We do need to get the costs under control. But to throw another trillion dollars or more at it, which is what I see the Democrat plan doing, I just don’t see this thing as the right solution at all. KUDLOW: Senator Corker, what do you and your colleagues make of these tax hike proposals coming out of the House? SENATOR BOB CORKER: Well this is what I think we expected. I mean in essence, if you look at this healthcare plan, you have small business paying for most of it. On the Medicaid side, I haven’t read the details, but up until earlier today, it was states paying for it, for Medicaid programs. And then you have this Medicare program which we all know is insolvent -- $38 trillion in unfunded liabilities -- taking money from that program, one that’s insolvent, it almost makes Madoff look like a piker. Taking money from that to fund a whole new program, that is going to again, add lots of costs to our healthcare system. So it’s pretty phenomenal to me. I do think, as someone said earlier, that we’ll be a little saner in the Senate. I do not think this is the kind of thing that will come out of the Senate. KUDLOW: Mr. Barrasso -- or Dr. Barrasso, look, you’ve got in this bill a 5-½ percent surtax on the top incomes. Now maybe it’s unpopular to be millionaires. There’s a new study out by the way written by Robert Samuelson of the Washington Post, he reported on it, that actually the highest end, successful earners, formerly, have been the hardest hit in this recession. I don’t know if anybody is looking at that. But they have been the ones that have been killed. You can’t have a successful economy without successful earners. That’s one point. Second point is this House tax from my friend, Ways & Means chairman Charlie Rangel would raise the tax on capital gains. And the history of these things is, when you raise the tax on capital gains, and you raise the top income tax, you actually get lower revenues. SEN. BARRASSO: Well you do get lower revenue if you do that. And look what happened in Massachusetts. Look at the Massachusetts plan, it ended up costing much more than even the anticipated amount. So I have grave concerns. And especially, I agree with Bob Corker, they talk about doing this against Medicare -- to take $500 billion off of Medicare? It’s absolutely ridiculous. Our seniors are going to be paying for those people that don’t have insurance. People on Medicare right now are having a hard time finding physicians. And to say, well, we’ll just $500 billion away from Medicare, away from our seniors, I think is irresponsible. KUDLOW: Mr. Corker, what’s going to happen here? Can you walk us through this? SEN. CORKER: You know Larry, it’s interesting. Up until about a week ago, I felt like there might be a bipartisan solution. You know there’s about 80 percent of the thing that we actually have some agreement on. I feel a train wreck coming. And I do because I think the pay-fors, the things that you’re talking about right now, are getting sort of cast in stone. And I know that a number of practical thinking Democrats have great problems on the Senate side with much that’s being discussed. I know I was with Chairman Baucus today, he said that he is going to have a bill out of the Senate by this work session, by the time we have August recess. I just see things spinning apart right now. And I don’t know what’s going to happen. I would have predicted a possibility of a bipartisan solution not long ago, I’m not sure about that now. KUDLOW: Senator Barrasso, what can you agree on for healthcare reform? Where are the areas of agreement? SEN. BARRASSO: I agree that we need to have healthcare reform and cut down the costs. And I believe that you get that by allowing people to buy insurance across state lines; by giving people the ability to actually make lifestyle changes that help lower their own costs, not just something, you know in the prevention in the Kennedy bill -- they say well we’ll put some sidewalks in, and some streetlights, and jungle gyms. I’m talking about ways to help an individual person and incentivize them. If they lose some weight, if they get their diabetes under control, get their blood pressure under control, that they can personally save money. That’s the incentives. But I have to tell you Larry, from all of my years practicing medicine, people are very smart about using their own money -- in terms of what their deductibles are, their co-pays. But when it comes to spending the insurance company money, or government money with Medicare, people are focused more on their own wallet than they are on somebody else’s money. That’s always been the case. And Medicare has really been the biggest deadbeat in terms of paying and has never done anything to coordinate care or to work prevention. And I think we need to really redefine the way Medicare works in this country. We ought to start with that, get that under control, and then incrementally build from that. KUDLOW: You know Senator Corker, I’ll give you the last word on this. I appreciate your time, from both of you. President Obama is saying that healthcare costs are the cause of this recession, or one of them. I don’t know a single economist who makes that point. And therefore, if we’re aiming for growth, and we’re aiming for jobs, I don’t know a single economist who believes healthcare reform is a job creator. So in other words, I don’t understand the logic. What is the immediate issue here? I thought it was to create jobs and generate economic recovery. But a massive spending bill, and a massive tax hike to go with it, it just doesn’t make sense to me. I have to believe that it doesn’t make sense to the American people either, no matter how much we need improvements in healthcare. SEN. CORKER: Well I hear the music, so my last word is I agree with you and I look forward to seeing you soon. KUDLOW: (Laughter) Well I mean the logic is not there. That’s the thing that has baffled me. We could’ve just fixed Medicare. A lot of people would like to do that, because they’re furious at the deficits. I don’t know… SEN. CORKER: And let me say, Republicans are willing to, want to, look at ways of helping people who can’t afford private insurance to do that. That’s the 80 percent area we need to work on. SEN. BARRASSO: And if you’re going to change one-sixth of the entire economy of this country, you need to basically slow it down and get it right. We should be focused on getting it right, instead of getting something passed quickly. KUDLOW: All right gentlemen, I appreciate it very much. Sen. John Barrasso and Sen. Bob Corker. Thank again. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=ZjNkMDZhZTQzZjM4MTEwMDViYjcwZWNhZDQ1NmExZTI= Wed, 15 Jul 2009 16:02:35 -0400 Stock Markets Are Up Again -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=NWFhYWI1MGM3NWRlYzFkNWFmYmQ2YWI4ZWQ2ZmY4YzE= I agree with publisher Mort Zuckerman who recently <a title="blocked::http://www.usnews.com/articles/opinion/mzuckerman/2009/07/13/nine-reasons-the-economy-is-not-getting-better.html" href="http://www.usnews.com/articles/opinion/mzuckerman/2009/07/13/nine-reasons-the-economy-is-not-getting-better.html">wrote</a> that subprime jobs numbers in the U.S. foreshadow continued economic weakness. But the stock market seems to disagree with both of us. Stocks are roaring ahead again today -- up over 150 points -- after holding the high ground yesterday and following Monday’s huge rally. Even a sub-par retail sales report didn’t stop retail stocks from posting a 1.6 percent gain. Blowout profit numbers from financier Goldman Sachs and chipmaker Intel -- covering two key sectors -- suggest that better times are coming. I’m hearing a lot of ankle-biting about Goldman’s performance. But I’m not with the naysayers on this one. I say bravo to Goldman. Look, the firm made $3.5 billion in profits on $14 billion in revenues. Those are unbelievable numbers. And you know what else? Goldman paid down $10 billion of its TARP money. Plus, it paid taxpayers $426 million in dividends. Of course, I’d like to see Goldman get out from underneath its $30 billion in government taxpayer-guaranteed debt. I’d also like to see some more transparency in its toxic asset reporting. But I continue to argue that the big banks are the best stock market investment right now. That remains my mantra. Near-zero borrowing rates and a steep Treasury yield curve will allow the banks to earn their way out of their problems. And if the Intel profits blowout carries through to the other big tech companies, that tells me there’s something good going on in the economy. As far as Washington is concerned, hopefully the Senate will bury cap-and-trade and health-care legislation -- two extremely toxic, anti-growth bills that would clobber businesses and the U.S. economy. The cap-and-trade-and-tax energy takeover will jack up costs for everybody and let the central planners run wild in the economy. And big-government healthcare nationalization will be funded with personal tax rates above 50 percent and yet another hike of the dividend and capital-gains tax rates. You know what folks? If you want to create new jobs, you need to help businesses. But President Obama and congressional Democrats seem to think that “business” is a dirty world. It makes no sense. This is not good and it must be changed. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=NWFhYWI1MGM3NWRlYzFkNWFmYmQ2YWI4ZWQ2ZmY4YzE= Wed, 15 Jul 2009 11:51:38 -0400 Banks Winning at Expense of Taxpayers -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=ZTQyMzZiMGI3MTc1YjkwNjEwNmJkYjllMDliYmFlM2Y= Banks surged and stocks followed yesterday, mostly on the heels of high expectations for trading firm Goldman Sachs, which really is more of a hedge fund than a real bank. Last Thursday, I said banks are my favorite stock market sector. So I got it right one time in a row. With a steep upward Treasury curve, even a banker can make money borrowing at near-zero and lending at much higher rates. Deposits are flowing into the big banks. Mark-to-market reform permits cash-flow valuation to replace fictional distressed-market sales which have unnecessarily crashed bank capital and profits. Toxic assets can be funded by low rates for as far as the eye can see. And let’s not forget that President Obama -- the biggest government-bond salesman in our nation’s history -- needs Goldman and other banks to re-offer the massive, record-breaking, and unprecedented Treasury debt sales to the public. In other words, our terrible spending-and-borrowing story is at least good for somebody -- even if it does mean banks are winning at the expense of taxpayers. Incidentally, the federal budget deficit update for June was horrible. Year to date the deficit broke past $1 trillion. Now, June is always a surplus month. But this year it’s a deficit month. We are cruising toward a $2 trillion budget deficit for fiscal year 2009. Federal spending is up 23 percent against the year-ago level. Recessionary revenues are plunging; they are down 16 percent. Personal tax receipts are off 22 percent and, get this, corporate taxes are off an astounding 57 percent. But no one in Washington gives one hoot about business. What a pity. Businesses are the ground-zero job creators in the economy. So all is not well in this story. But as far as yesterday goes, stocks were very bullish. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=ZTQyMzZiMGI3MTc1YjkwNjEwNmJkYjllMDliYmFlM2Y= Tue, 14 Jul 2009 10:28:47 -0400 Washington Is Going the Wrong Way -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=ZDFjOWI3MTI0MjQ0NWIzN2ZiZTFhYmM2MWU2MTM2ZGQ= Are current government policies causing the U.S. to lose competitiveness in the global race for capital, prosperity, and growth? Fortune magazine recently reported that the number of U.S. companies in the world’s top 500 fell to the lowest level ever, while more Chinese firms than ever before made the list. Thirty-seven Chinese companies now rank in the top 500, including nine new entries. Meanwhile, the number of U.S. firms has fallen to 140, the lowest total since Fortune began the list in 1995. This is not good. China also surpassed the U.S. as the world’s biggest automaker in the first half of 2009, with June sales soaring 36.5 percent from a year earlier. The Chinese registered 6.1 million car sales for the first half of the year. That way outpaced American sales, which were only 4.8 million. And China has no capital-gains tax. It only has a 15-to-20 percent corporate tax. The U.S., on the other hand, is raising its cap-gains tax rate to 20 percent. It’s also increasing its top personal tax rates. In fact, the scheduled income-tax hike, plus the much-discussed health-care surtax, will balloon the top U.S. tax rate all the way to 51 percent. Compare that to the OECD average of only 42 percent. When those tax-hikes kick in, the top U.S. tax rate will rank above that of France, Germany, and Italy. That can’t be good. Incidentally, our 40 percent corporate tax rate is already almost 15 percentage points higher than the corporate rates in most of Europe. Washington’s enormous expansion of the government’s spending share of GDP to over 40 percent -- including Bailout Nation, TARP, and government takeovers in numerous industries -- is eerily reminiscent of Old Europe’s old policies. In a twist of irony, Europe seems to be moving toward a lower-tax-and-spend-and-regulate, Ronald Reagan-type approach, while we in the U.S. are regressing to the failed socialist model of Old Europe. This makes no sense. Here’s the clincher: Year-to-date, Dow Jones stocks are off 7 percent, while China stocks are up 71 percent. The world index is up 4 percent. Emerging markets are up 25 percent. They’re all beating us. None of this is good. We’re going the wrong way. That’s why stock markets are not voting for the United States anymore. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=ZDFjOWI3MTI0MjQ0NWIzN2ZiZTFhYmM2MWU2MTM2ZGQ= Fri, 10 Jul 2009 11:58:55 -0400 Let Oil Markets Work -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=OGJiY2ZiZjE4YTk4NGM2MmRiODhiM2U4MGM3NTgyOTY= <a href="http://online.wsj.com/article/SB124706990237412441.html?mod=googlenews_wsj">Placing regulatory limits on oil trading</a> is a terrible idea. This is the latest example of the government sticking its nose where it doesn’t belong. We ought to allow oil markets to trade unencumbered, without government meddling, or limits, or controls on both large and small investors. This creates the broadest possible base and the largest possible volume. This approach -- unsurprisingly -- creates an efficient market. Oil prices are continuing to fall as economic fears linger among investors. What’s so hard to grasp about this story? Look, if President Obama, Vice President Biden, and the White House advisers managed to misjudge the economy, why can’t we cut some slack for the oil traders who decided oil demand won’t be so strong? By the way, if we would stabilize the value of the dollar, oil prices would probably be less volatile. And speaking of volatility, have you taken a look at the VIX index for stocks? It has been incredibly volatile of late. And yet I don’t hear tinhorn, flatfooted politicians calling for a limit to stocks. Do you? England’s Gordon Brown and France’s Nicholas Sarkozy wrote a Wall Street Journal <a href="http://online.wsj.com/article/SB124701217125708963.html">op-ed</a> yesterday saying oil prices need government supervision. Nonsense. Oil prices need market supervision, and Brown and Sarkozy need adult supervision. They need to stop meddling in markets and attempting to control prices. Here’s the key: If Team Obama would deregulate energy, drill, drill, drill, and make it easier for our Canadian cousins to send us oil from the oil sands in Alberta, oil prices would be a whole lot lower with greater inventory supplies. And our enemies in the Middle East would be a whole lot poorer. Yes, I believe oil trading and any other market trading should be totally transparent. But various forms of market meddling and price controls would be an unmitigated disaster. Finally, the markets will move offshore if we mess with them. So let market freedom rule. Drill, drill, drill. Work with Canada. Stabilize the dollar. And accept the fact that markets always work better than government planners do. Why is this so difficult for Washington to grasp? <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=OGJiY2ZiZjE4YTk4NGM2MmRiODhiM2U4MGM3NTgyOTY= Thu, 09 Jul 2009 11:18:21 -0400 Washington Needs to Help Businesses for a Change -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=YTI4MjAxYjVkZGUzOGUwN2Y3MGY0MjkyNTdkNTViNGU= Are the stock market and economy taking turns for the worse? Do we really need a new stimulus plan from Washington? Let’s begin by rolling back the clock to last Thursday’s June jobs report. It was not a good report. Stocks have fallen over 4 percent since then. And here’s one reason why: plunging wages. Private hours worked continue to free-fall. Hourly wages have flattened. It was a nasty report. Job losses are still substantial. It’s a powerful and nasty combination. While I am an optimist by nature, this does worry me. It suggests a later, and weaker, economic recovery. So here’s a novel thought for all the geniuses down in Washington. Help businesses for a change. You can begin by stopping the taxing of overseas corporate profits. Do not hike the minimum wage. Back off cap-and-trade. Do not nationalize health care. Stop the anti-trust assault on phone companies, pharmas, Google, airlines, and multi-nationals. And how about a six-to-twelve-month payroll-tax holiday? That would make it cheaper to hire new workers. What about a corporate tax cut? And immediate cash expensing for business-investment write-offs? In other words, cut the tax cost of hiring, investing, and doing business. Because it’s businesses that create the jobs and the incomes for families all throughout America. And if you are still worried about the housing story or bank toxic assets, how about a capital-gains tax holiday? Does anyone in Washington understand the way the world really works? It’s called incentives. That’s what this is all about. And we’re going to need many more of them if businesses, investors, and families are to start prospering once again. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=YTI4MjAxYjVkZGUzOGUwN2Y3MGY0MjkyNTdkNTViNGU= Wed, 08 Jul 2009 12:12:16 -0400 Bigger and Better Things for Sarah America -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=ZTI3OThjMDZhYmIwOGQ1OWYzZDk2YWEyY2M0NjY2ZTc= I’m all for Gov. Sarah Palin’s move over the weekend. It’s time for her to get out of Alaska’s small-town, ankle-biting politics. Now she can take her show on the road. This is a woman brimming with charisma and raw political appeal. That’s why everyone’s afraid of her, and attacking her. In other words, Sarah Palin has the power to reinvigorate conservatism and republicanism. Here’s my debate last night with nationally syndicated columnist Deroy Murdock: <object classid="clsid:d27cdb6e-ae6d-11cf-96b8-444553540000" width="400" height="380" codebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=6,0,40,0"> <param name="id" value="cnbcplayer" /> <param name="type" value="application/x-shockwave-flash" /> <param name="allowfullscreen" value="true" /> <param name="allowscriptaccess" value="always" /> <param name="quality" value="best" /> <param name="scale" value="noscale" /> <param name="wmode" value="transparent" /> <param name="bgcolor" value="#000000" /> <param name="salign" value="lt" /> <param name="src" value="http://plus.cnbc.com/rssvideosearch/action/player/id/1173704198/code/cnbcplayershare" /><embed id="cnbcplayer" type="application/x-shockwave-flash" width="400" height="380" src="http://plus.cnbc.com/rssvideosearch/action/player/id/1173704198/code/cnbcplayershare" salign="lt" bgcolor="#000000" wmode="transparent" scale="noscale" quality="best" allowscriptaccess="always" allowfullscreen="true"></embed> </object> <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=ZTI3OThjMDZhYmIwOGQ1OWYzZDk2YWEyY2M0NjY2ZTc= Tue, 07 Jul 2009 11:50:49 -0400 A Rough Number -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=NDY0MmVkNDg0YWIzOWJlNGJhOTU2YWE0YzU2ZTg1Zjc= Non-farm payrolls fell by 467,000 in June. It’s a rough number. I write about it (and Obama’s hand in it) in <a href="http://article.nationalreview.com/?q=MjMwY2RlMjk5Y2M4OTdmMmQwZDFiYzVmZmMzMjE1OTU=">my column today</a> for NRO. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=NDY0MmVkNDg0YWIzOWJlNGJhOTU2YWE0YzU2ZTg1Zjc= Thu, 02 Jul 2009 15:06:54 -0400 Gov. Jenny Sanford? It's Got a Nice Ring to It -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=ZDFlMWY0OTFhYTJiMTRjMGI5YjIwNDcyNWUxMTA4NmU= The Business & Media Institute <a href="http://www.businessandmedia.org/articles/2009/20090630221309.aspx">picked up</a> my conversation with the WSJ’s Steve Moore last night about Jenny Sanford, South Carolina Gov. Mark Sanford’s wife, being a possible replacement for her husband in the governor’s mansion. Both Steve and I agreed that Jenny Sanford has the credentials and would make an excellent governor. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=ZDFlMWY0OTFhYTJiMTRjMGI5YjIwNDcyNWUxMTA4NmU= Wed, 01 Jul 2009 14:46:48 -0400 Madoff Sentenced, but He Didn't Sing -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=M2ZjNDAxZTQ5MWE4ODE2N2NlNjY1MGQxNzhjOTJmODk= So Bernie Madoff was sentenced to 150 years in the slammer today. He also delivered one of his now-patented non-repentant repentance speeches in the courtroom. Oh, by the way, his wife Ruth also issued a statement, and she threw him under the bus. Yet while everyone can now cheer that the greatest crook in financial history will die in jail, Madoff also may die keeping his secrets with him. So far, prosecutors have come up with very little about this case. And under the tutelage of the clever lawyer Ike Sorkin, Madoff has given almost nothing up. No singing in jail. (Maybe he should have been waterboarded.) We don’t know if his wife or two sons were part of the scam. Nor do we know where most of the money -- estimated up to $65 billion -- has gone. There’s a number being used that bankruptcy trustee Irving Picard has recovered $1.2 billion of the $13.2 billion in estimated net losses. But the strength of those numbers is somewhat in doubt. Where’s the money? Who are the accomplices? And what about some of these big-time fat cats who invested with Madoff, people we thought were victims but may turn out to be the real winners in the story? There are several reports about Jeffry Picower and Stanley Chais, two rich businessmen who may have taken $6.1 billion in returns from the Madoff fraudulent funds -- more than they put in. There’s also businessman Carl Shapiro, a close Madoff pal. And while there is yet no number as to what he took out of the funds, years ago the guy sold his garment business for $20 million and grew that sum to nearly $1 billion -- most of it from investing with Madoff. I’m using reports from the Wall Street Journal and the liberal investigative group ProPublica. I’m also using first-hand accounts from friends of mine who are circulating these rumors down in Palm Beach, Fla. They’re very close to the Madoffs, their funds, and their investors. The point is, it’s been six months since Madoff was first arrested, and the actual case against him has progressed very little from his own self-confession right at the start. Neither his wife nor his two sons have been deposed. Nor have these other characters who probable looted the funds. The thing about a Ponzi scheme is others besides Ponzi can get rich. And there are names in circulation of people who may also have gotten rich. But where’s the money? When will these people be brought in to testify under oath? The thousands of other smaller investors and charities who were totally ripped off by Madoff could recover a lot more if these big shots are finally hammered. Madoff will die in jail. And he deserves it. But the justice system has much more work to do following today’s sentencing. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=M2ZjNDAxZTQ5MWE4ODE2N2NlNjY1MGQxNzhjOTJmODk= Mon, 29 Jun 2009 16:35:22 -0400 King Dollar Liked the FOMC Statement -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=Yzg1ZjE4NDMyYTVhYTkxZTg3OWJlZDJmMTk5OWUyM2M= The Federal Reserve’s policy statement yesterday elicited a strong King Dollar reaction with its mild dose of hawkishness, which I applaud. I’m reading the Fed positively here. There was no announcement of any new debt monetization via Treasury purchases, a slightly more positive economic view, and an end to deflation worries. This all to the good. The result was a stronger dollar in world currency markets. King Dollar. This is very good. I was encouraged that the Fed cited rising commodity and energy prices. It is another nod to a market-price rule. That is clearly the best way to conduct policy, rather than the goofy Philips Curve tradeoff between inflation and unemployment. Now, the Fed is going to keep the target rate near zero for the foreseeable future. But remember, the Fed’s balance sheet has flat-lined over the last six months as it has slowed down the overworked printing presses. So, while the Fed didn’t mention an exit strategy, it may already be building one. The markets basically voted in favor of the Fed. While the Dow was off slightly on the news, the S&P gained almost 1 percent, with the NASDAQ finishing up a solid 27 points. As you know, markets conduct an up-or-down election vote every single day on the economy, Washington, and policy. It remains the most important opinion poll there is. Finally, I think this sideways market correction we’re in is nearing an end. As a result, I think this could be a strong buying opportunity for investors, who can put some of their sidelined cash back into stocks. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=Yzg1ZjE4NDMyYTVhYTkxZTg3OWJlZDJmMTk5OWUyM2M= Thu, 25 Jun 2009 12:01:52 -0400 Biden's Snares and Delusions -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=NzJhNWU5NWU5Yzc3NDRmYTY5MzNlZWZjMWIwYmFjMDA= President Obama said at his press conference yesterday that no second stimulus package is being contemplated right now. Well, I sincerely hope that’s the case, because the current package is a disaster. It spends far too much for far too little in return. All of this frenzied fiscal nymphomania is placing a tremendous burden on Treasury-bond rates and the U.S. dollar. It is undermining the confidence of key foreign investors like China, Brazil, Russia, and others who have to buy our bonds. But the worst thing I heard yesterday was the snare-and-delusion proposal announced by Vice President Biden. Apparently, Joe Biden wants to create a new government council to help laid-off autoworkers who are supposed to transition to solar, wind, and biotech industries. Huh? Are you kidding me? Look, if you really want to help manufacturing workers everywhere, then cut that ridiculously high business-tax rate by 15 to 20 percentage points. Then allow full cash expensing for immediate tax write-offs for new business investment. Heavy industries will soar. This is FedEx CEO Fred Smith’s idea, and I totally agree with it. It would boost the manufacturing, auto, and transportation sectors. And by the way, let’s move forward and deregulate the energy industry so we can drill, drill, drill and nuke, nuke, nuke. We’re talking about an enormous potential job-creator here. The fact of the matter is that alternative energy will be a tiny part of the energy calculus for many years to come. That’s just the reality. So let’s get real and eliminate all these ridiculous regulatory roadblocks standing in the way of American job-creation and energy independence. And what’s this about a sub-czar for cars? Talk about a sub-par idea. I’m sorry Mr. Biden. Personally, you’re a good man. But economically, this is a terrible idea. Tax incentives are what will help the blue-collar middle class rise out of the doldrums. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=NzJhNWU5NWU5Yzc3NDRmYTY5MzNlZWZjMWIwYmFjMDA= Wed, 24 Jun 2009 10:58:06 -0400 We Don't Need Obama's Big-Bang Health-Care Plan -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=OGE5OWFjYWU1OWNhOTMxNzAxYzQ1ZDFlMTdhN2QyNzU= It looks like President Obama’s big-bang health-care reform is going down to defeat. This is good. But my question is why do we need it at all? According to a recent ABC News/USA Today/Kaiser Family Foundation survey, 89 percent of Americans are satisfied with their health care. That could mean up to 250 million people are happy. So why is it that we need Obama’s big-bang health-care overhaul in the first place? There’s more. According the U.S. Census Bureau, we don’t have 47 million folks who are truly uninsured. When you take college kids plus those earning $75,000 or more who chose not to sign up, that removes roughly 20 million people. Then take out about 10 million more who are not U.S. citizens, and 11 million who are eligible for SCHIP and Medicaid but have not signed up for some reason. So that really leaves only 10 million to 15 million people who are truly long-term uninsured. Yes, they need help. And yes, I would like to give it to them. But not with mandatory coverage, or new government-backed insurance plans, or massive tax increases. And certainly not with the Canadian-European-style nationalization that has always been the true goal of the Obama administration and congressional Democrats. Instead, we can give the truly uninsured vouchers or debit cards that will allow for choice and coverage, and even health savings accounts for retirement wealth. According to expert Betsy McCaughey, instead of several trillion dollars and socialized medicine, this voucher approach would cost only about $25 billion a year. But the Democratic agenda has never really been about just the uninsured. And it certainly hasn’t been about real cost-cutting or true market choice and competition. Nor has it been about tort/trial-lawyer reform. Instead, the Democratic agenda has always been a class-warfare, anti-business attack on private-sector doctors, hospitals, insurance firms, and drug companies. It’s all about control, knocking down their profits, and telling them what to do. Because government planners know best, right? Wrong. Absolutely wrong. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=OGE5OWFjYWU1OWNhOTMxNzAxYzQ1ZDFlMTdhN2QyNzU= Mon, 22 Jun 2009 11:11:53 -0400 An Imperial Fed? -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=MjdhNDAxZjc3ZTJkM2IxMjA1OTJjOTY5N2QyNjYxZmQ= Does the Obama administration really want to grant a virtual dictatorship to the Federal Reserve on monetary policy and banking oversight and regulation? The Fed already has enough trouble figuring out monetary policy. So this business about the central bank engaging in systemic-risk regulation and all the accompanying regulatory bells and whistles makes no sense. A host of factors contributed to the credit crisis. But it was ultimately the Federal Reserve -- with its bubblehead policy of ultra-cheap rates, monetary explosion, and a sinking dollar -- that created it. The Fed was the chief culprit, just as it was ten years ago when it unleashed the tech bubble. It not only created this current crisis, it totally missed it as well. So why would anyone think it has the right stuff to fix it? I say put Sheila Bair and the FDIC in charge of systemic-risk regulation. Make them totally independent from the Treasury. And while we’re at it, let’s get the Fed to return to a market-price rule for money, including gold, the dollar, bond rates, and commodities. This would mark a sorely needed return to the stable-money period that stretched from the early 1980s to the late 1990s. That was before the central bank embarked on this crazy pillar-to-post stop-go-stop-go monetary-meddling insanity that completely destabilized the economy and undermined the stock market. On a related note, Washington is spending far too much time focusing on regulations right now. They’re not devoting nearly enough time to figuring out ways to truly grow our economy. It is a statist governmental approach. This great country of ours is thirsting for free-enterprise incentives and solutions. And as the latest polls show, Americans are becoming fed up with the out-of-control spending, borrowing, debt-creation, and tax increases. What we need is serious economic growth. That is priority number one. What we need is risk-taking and entrepreneurship. Of course, we need transparent markets. But it is the growth message that is being overlooked. And by the way, speaking of limits to reckless borrowing and debt, the Treasury is going to auction $104 billion in debt this week. That’s yet another record. The previous record was set a few weeks ago, which came a week after another record. Talk about the need for limits. This is total fiscal insanity. It needs to stop now. But this Fed-dictatorship proposal is a terrible idea. The Fed needs to stick to its knitting and focus on stable money. That’s what’s been missing for ten years under Alan Greenspan and Ben Bernanke. That’s why we experienced two nasty recessions. And that’s why the stock market has gone nowhere. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=MjdhNDAxZjc3ZTJkM2IxMjA1OTJjOTY5N2QyNjYxZmQ= Mon, 22 Jun 2009 10:54:36 -0400 Welch Nails It -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=NmY2ZDA3NjZjY2U2ZmU3ZDU0NGZkOWQxMzM5MDM3NGI= Former GE CEO Jack Welch discussing Obama’s financial reform plan on Squawk Box this morning: <blockquote> My whole feeling [not just on the financial reform plan] is let’s slow down. I mean, we’re touching every corner of this economy. We’re going from healthcare, 20 percent of the economy, to the environment with cap-and-trade, which touches every corner. And now this. And he’s only been in there four or five months. I hope somebody in Congress says, “Whoa, let’s discuss these things and what the implications are.” </blockquote> Amen. The latest polls reveal a growing public revolt against massive deficits and massive government intervention, especially among independent voters. We sorely need limits on spending, borrowing, debt creation, TARP-ing, bailing-out and government expansion. Limits! This limits theme was my message at the GOP Senate policy lunch on Tuesday. Washington has run amok, and folks don’t like it. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=NmY2ZDA3NjZjY2U2ZmU3ZDU0NGZkOWQxMzM5MDM3NGI= Thu, 18 Jun 2009 11:09:55 -0400 Double Dip Or Roaring Recovery? -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=YmZiNjFkMmM5OTBlNmRjMWViZTI0YWFjZDkzNTM4Y2I= Two terribly bright stock market minds joined me on last night’s Kudlow Report -- Jason Trennert of Strategas Research and Dougie Kass of Seabreeze Partners Management -- to discuss the stock market and economy. Both the video and Dougie’s recap of the discussion follow below. <object classid="clsid:d27cdb6e-ae6d-11cf-96b8-444553540000" width="400" height="380" codebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=6,0,40,0"> <param name="id" value="cnbcplayer" /> <param name="type" value="application/x-shockwave-flash" /> <param name="allowfullscreen" value="true" /> <param name="allowscriptaccess" value="always" /> <param name="quality" value="best" /> <param name="scale" value="noscale" /> <param name="wmode" value="transparent" /> <param name="bgcolor" value="#000000" /> <param name="salign" value="lt" /> <param name="src" value="http://plus.cnbc.com/rssvideosearch/action/player/id/1156206469/code/cnbcplayershare" /><embed id="cnbcplayer" type="application/x-shockwave-flash" width="400" height="380" src="http://plus.cnbc.com/rssvideosearch/action/player/id/1156206469/code/cnbcplayershare" salign="lt" bgcolor="#000000" wmode="transparent" scale="noscale" quality="best" allowscriptaccess="always" allowfullscreen="true"></embed> </object> <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=YmZiNjFkMmM5OTBlNmRjMWViZTI0YWFjZDkzNTM4Y2I= Thu, 18 Jun 2009 11:03:05 -0400 The Fed in Charge of Systemic Risk? What a Mess -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=NThhYzM2MWRjOTdkNTg1ODY3Yjg1NzA5NjRlMGJkMzQ= The big winner of the Obama financial-regulation plan appears to be the Federal Reserve, which becomes the consolidated supervisor of large, systemically important banks. This is like the fox guarding the henhouse. After all, the Fed’s overly loose money policies created the asset bubble -- including housing, commodities, and energy -- in the first place. Near-zero interest rates, huge money growth, and total disregard for the plunging dollar are what set up the housing boom and the unfortunate overleveraging by consumers, mortgage borrowers, and Wall Street securitizers. It also set up the astronomical $150 oil shock, which came alongside the Fed’s overly tight money policies to offset the prior loose policies that would cause this credit crunch and deep recession. In fact, looking back to the last two bubbles -- the tech bubble of 1999-2000 and the housing/energy bubble after that -- it was the Fed’s pillar-to-post go-stop-go-stop lurches that deserve the principal blame for the economic messes that ensued. The Great Moderation of the ’80s and ’90s has given way to extremism in Fed policy. And we may be in danger of repeating it all over again, with a new round of near-zero interest rates and a massive 11 percent growth of M2 over the past nine months. There is one positive in the Obama plan: Sponsors of securitized asset-backed bonds will be forced to put 5 percent equity-skin in the game, in order to improve incentives for more appropriate risk and responsibility in lending. But it strikes me as somewhat ironic that the Fed would be placed in charge of systemic risk. We also don’t know if any of the new regulations from the Obama White House and Treasury will deal with the moral-hazard question of “too big to fail” that was pointed out in Paul Volcker’s China <a href="http://online.wsj.com/article/SB124511733241717573.html">speech</a> last week. There will be new resolution authority to close down banks, but whether that will apply to the big banks remains to be seen. Then there’s the new Consumer Financial Protection Agency. This provision was apparently written by liberal-left Harvard professor Elizabeth Warren, a staunch foe of free markets and an overzealous supporter of consumer-as-victim rights. Among its massive powers, this agency would enforce the Community Reinvestment Act, which has for years forced banks and other lenders to throw mortgage money at borrowers who cannot afford it. And the consumer protection would reach deep into bank supervision as well. What a mess. Missing from the package is a reform that would put Fed monetary policy back on a commodity-price rule, including gold and the dollar. This rule was basically used from the early ’80s to the late ’90s, during Paul Volcker’s Fed term and the first half of Alan Greenspan’s term. This would have been the best-possible reform, but of course it’s not in the proposal. So now the Fed has become the supreme Keynesian unemployment vs. growth Philips-curve tinkerer. Until this totally mistaken policy is changed, we can have ten more reregulation plans that will not fix the real problem. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=NThhYzM2MWRjOTdkNTg1ODY3Yjg1NzA5NjRlMGJkMzQ= Wed, 17 Jun 2009 17:18:08 -0400 5 Reasons to Reject Class-Warfare Tax Policy -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=NTY3NjE5YTI2YjNmMGE3MzBlZTllODFkN2EyM2U3NDM= <a href="http://kudlowsmoneypolitics.blogspot.com/2009/06/5-reasons-to-reject-class-warfare-tax.html"></a> Cato’s Dan Mitchell just sent over his latest video explaining why President Obama’s soak-the-rich tax increases are economically foolish. He’s got the story right. Raising taxes robs incentive power from entrepreneurs, investors, and small-business owners. In other words, it is precisely the wrong recipe for recovery and economic growth. <object classid="clsid:d27cdb6e-ae6d-11cf-96b8-444553540000" width="425" height="344" codebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=6,0,40,0"> <param name="allowFullScreen" value="true" /> <param name="allowScriptAccess" value="always" /> <param name="src" value="http://www.youtube.com/v/XeXPibDuy6M&color1=0xb1b1b1&color2=0xcfcfcf&feature=player_embedded&fs=1" /><embed type="application/x-shockwave-flash" width="425" height="344" src="http://www.youtube.com/v/XeXPibDuy6M&color1=0xb1b1b1&color2=0xcfcfcf&feature=player_embedded&fs=1" allowscriptaccess="always" allowfullscreen="true"></embed> </object> <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=NTY3NjE5YTI2YjNmMGE3MzBlZTllODFkN2EyM2U3NDM= Mon, 15 Jun 2009 14:48:49 -0400 The Fed Head's Problem -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=ZmNlZjM5Y2E5ZjJmN2M5ODdkMDY3OTExNTNkNmI4ZWE= Did the Federal Reserve’s Ben Bernanke lie about pressuring the Bank of America not to back out of the Merrill Lynch merger? BofA CEO Ken Lewis made this charge to New York AG Andrew Cuomo, and basically repeated it with a bit of sugar-coating in a House hearing today on Capitol Hill. The central issue was whether Lewis would invoke the material-adverse-change clause (the MAC clause) to back out of the Merrill deal last December, when Merrill’s books showed far greater losses than were first recognized. Of course, the deal is now succeeding profitably, with the whole financial world having changed for the better since late last year. But a bunch of e-mails and documents clearly show that Bernanke was hammering Lewis, as was former Treasury man Henry Paulson. So far as I know Paulson has never denied this. But Bernanke did, and therein lies the Fed head’s problem. Last May 5, in front of the Joint Economic Committee, when asked if he pressured Lewis, Bernanke responded: “Absolutely not, that I absolutely did not in any way ask Mr. Lewis to obscure any disclosures or to fail to report any information that he should be reporting.” However, an e-mail reveals that Richmond Fed president Jeffrey Lacker spoke at length with Bernanke about all this: “Just had a long talk with Ben . . . says they think the MAC threat is irrelevant because it’s not credible. Also intends to make it even more clear that if they play that card and they need assistance, management is gone.” In other words, Bernanke acknowledged to Lacker that if BofA management disclosed to shareholders the terrible state of Merrill, even in considering a withdrawal from the deal, Bernanke would fire them. This directly contradicts the Fed head’s public statement before Congress’s JEC. At that time, Lewis was strongly considering a material-adverse-change clause to stop the Merrill deal. So Bernanke put a gun to Lewis’s head, but he won’t fess up about it. A House investigative committee will probably call Bernanke to testify on this subject. If so, the whole world will be watching. As former Reagan prosecutor Joe diGenova <a href="http://www.cnbc.com/id/15840232?video=1148491061&play=1">told me</a> last night on CNBC, the Justice Department won’t prosecute Bernanke. But his political and monetary credibility may suffer enormously. Now the question is whether the Obama White House will issue a statement strongly supporting Bernanke, as they have in the past, or whether they will let the Fed head twist slowly in the wind. Perhaps my Larry Summers/King Dollar <a href="http://kudlow.nationalreview.com/post/?q=ODUyNzk4MGJhNTY3NmM5MWM3NjQwYzEwMjE0ZDA2MDQ=">preference</a> over Bernanke for Fed head next year is not so far fetched. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=ZmNlZjM5Y2E5ZjJmN2M5ODdkMDY3OTExNTNkNmI4ZWE= Thu, 11 Jun 2009 16:36:44 -0400 King Dollar + Drill, Drill, Drill -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=MGI2MDk1YmQ1ODBmYWQ1YjFkNzdlOTEzZDE1YTZkMjE= Right now, with oil trading through $71 a barrel, Treasury bonds closing in on 4 percent, and commodity indexes up 25 percent year-to-date, inflation fears are circulating through the markets. There’s a way to nip this in the bud: First, the Treasury and Fed should work together to protect the value of the dollar. Here’s how they do it. At the Fed’s June meeting in two weeks, Ben Bernanke should put in the FOMC minutes a clear reference to an exit strategy that will curb the massive money creation that Art Laffer <a href="http://online.wsj.com/article/SB124458888993599879.html#mod=todays_us_opinion">wrote about</a> in today’s Wall Street Journal. Next, at its September meeting, the Fed should raise its target rate -- which is now 0.0 to 0.25 percent -- pulling it up to 25 basis points, the upper end of the current range. That’s a small, even tiny, move that would represent about a 12 basis-point hike. But the move would at least send a signal that the Fed has an exit strategy from excess money that it intends to implement. Just that tiny move would go a long way towards protecting the dollar and knocking down inflation fears. At the same time, the Treasury should purchase dollars in the open market to reinforce the much-neglected King Dollar scenario. In the long-run, Treasury interventions won’t work. But in the short-run, when combined with a Fed exit strategy, a dollar intervention will work. Moving together, these two agencies can resurrect King Dollar and snuff out inflation fears. These fears have helped boost the price of oil and retail gas at the pump. But there’s a second factor at work in energy. The U.S. and world economies are starting to rise. This leads to drill, drill, drill. Onshore and offshore drilling restrictions for oil and natural gas have to be removed. Deregulate the energy sector. Open the door to nuclear power. Drill the shale regions for natural gas. Exploration has dried up in the new Obama environment, which is so very anti-fossil-fuel and anti-nuke. If we are going to power our way to economic growth, fossil fuels and nuclear energy have to play key roles. Alternative-fuel technologies may grow up, but that’s gonna take several decades. Right now they’re about 2 percent of our power. That’s all. And the idea that cap-and-trade can be implemented without taking a huge toll on the economy is an Obama hallucination. Cap-and-trade would severely limit economic growth by knocking out fossil fuels. Right now, the jump in retail gas prices could really hurt the nascent economic recovery. In short, King Dollar and drill, drill, drill would be major pro-growth measures. Why not show the rest of the world that the U.S. can move from a position of strength rather than weakness? <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=MGI2MDk1YmQ1ODBmYWQ1YjFkNzdlOTEzZDE1YTZkMjE= Wed, 10 Jun 2009 16:23:01 -0400 Drill, Drill, Drill: An Interview with Sen. Mary Landrieu (D., La.) -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=MTQ4Nzg2ZDJiNDAyNzJjNGNjM2M2YmQ2ZDdjZjU0OTY= Senator Landrieu agrees with me on drill, drill, drill. She’s on the right side of this issue, with retail gas prices rising at the pump to $2.62. That’s up from $1.60 at the beginning of the year. The Conrad amendment will open up the Eastern Gulf for drilling. It’s a good start. But the White House and congressional Democrats will stand in the way. I give a lot of credit to Sen. Landrieu for hanging in there on this issue. Here’s my interview with the senator from last night’s Kudlow Report: LARRY KUDLOW: Senator Landrieu, welcome back. SEN. MARY LANDRIEU: Thank you Larry, happy to be back. KUDLOW: All right, we appreciate your time. Now as you know, though gasoline prices are way down from last year’s $4 dollars at retail, today according to AAA, they’re $2.60. They were $1.60 at the end of the year. Some folks are saying this could hurt recovery, that it’s a tax hike. It could raise inflation. What is Congress going to do about this? And isn’t it time to drill, drill, drill? LANDRIEU: Larry, it absolutely is. These prices are going north, and pretty quickly, and alarmingly because we’re trying to recover. And one thing we could do is drill more here in the United States. Not just for oil and gas, that’s important, and also reach for alternative fuels. But on the drilling issue, you’ve been right on this for a long time. And today we had a very important vote on the energy committee. We opened up a large section of the Gulf which is good, but we did not include revenue sharing which in the long run will not encourage states to drill offshore. And there are lots of resources there. KUDLOW: How much is this revenue sharing [issue] going to be a sticking point to possible legislation? I mean, I think opening up the Gulf, or the Eastern Gulf, is a terrific idea, at least as a partial solution. How much of the revenue sharing is going to stand alone as a problem? LANDRIEU: Well actually, it could be a help Larry, in the long run. Because as you know part of the reason that we don’t have a lot of offshore drilling right now in America, although we have a lot of gas, and a lot of oil off our coast we believe, is because there’s really no reason for the states, the coastal states to engage in drilling. They don’t get any direct benefit. They get indirect benefit, it helps the nation. But they don’t get any direct benefit, unlike the interior states that keep 50 percent of their revenues. So I think it’s an important partnership for production. We hope to open up drilling on the eastern seaboard in some places. We hope to open up the Eastern Gulf. But you know Larry, what we did today will open up the Destin Dome, which has 3 trillion cubic feet of gas at $10 a cubic foot. That is not small change. It’s $30 billion of value. So it’s important that the companies get a share of that, that drill. The state of Florida and the Gulf Coast states should share. And then the Treasury for deficit reduction. It makes a lot of sense to me. KUDLOW: What are you going to do -- the ban on drilling expired last September 30th if my memory serves me. Where does that stand now? Is that ban still banned and does that open the door for the kind of offshore drilling you’re talking about? LANDRIEU: Larry, the ban is still banned. But the door is opening just an inch. And in fact, about two or three weeks ago, the door was actually slammed shut by a very bad, very detrimental opinion in the DC Court that basically threw our current 5-year drilling plan into limbo. So we’re not moving forward Larry, we’re moving backwards. And the way to move forward again is to continue to present partnerships with the states for drilling. If Florida opens drilling, or North Carolina, or Virginia, let them share in the revenue. Then take that revenue, invest in energy infrastructure, invest in the coasts. Give some of those coastal communities a share of this money and it will benefit the whole nation and we’ll get more oil and gas. KUDLOW: Well cut a deal, it’ll probably be cheaper for the taxpayers… LANDRIEU: Absolutely. KUDLOW: …than bailing out those states anyway. Let me ask you though, I mean it’s a very interesting thing. Oil prices on the world market are now back to $70. They were up $2 bucks today as I’m sure you know. But natural gas prices are real cheap. $3.76. That’s a 19:1 ratio, it’s very interesting. Why not go the Boone Pickens route? He wants to develop natural gas everywhere, liquefy it, turn it into fuel for those big 18-wheelers. He wants to lift the drilling restrictions. He wants to lift the refining restrictions for heavens sake. And lift the shale restrictions. Isn’t this part of the problem? If we put more oil and natural gas on the open market, those prices are going to fall and motorists and consumers are going to be helped. LANDRIEU: Absolutely, I agree with you 100 percent. And I agree with Boone Pickens on many of his points, but I would just raise this caution. We don’t want to Larry, in America, be over reliant on any one fuel. We want more of it all. We need more oil. We need more gas. We need to develop solar and wind. But in the right way. And so what I cautioned Boone Pickens about, and I have had this discussion with him personally, we don’t want America to be overly dependent on natural gas. We have many resources that we can use, even though I’m a big proponent of drilling. So let’s, you know, let’s go forward with our brains and our heart, and I think we can. KUDLOW: Well the other thing is refiners aren’t refining. I mean there’s all kinds of restrictions about refining… LANDRIEU: Yes. KUDLOW: …It seems to me that’s got to be changed. And I want to ask you Senator Landrieu, will you be voting against the tax hike on oil and gas? I can’t imagine how a tax hike on oil and gas is going to encourage anybody to produce, invest and explore. LANDRIEU: Absolutely. I will be not only voting against it, but I am lobbying against it. I am doing everything I can to convince this administration that they’re wrong. We don’t want to discourage energy production. We want to encourage it, as well as new production, wind and solar. But you don’t want to step on the traditional industry that is doing everything it can to produce energy, despite the fact that Congress keeps putting bans, keeps raising taxes. We’ve got to reverse our policies. You know, President Obama has an opportunity. I hope that he will take it. KUDLOW: But has not -- last question Senator -- has not President Obama really tilted the playing field against this? I mean he seems to be opposed to drilling -- whether it’s oil, whether it’s natural gas, whether it’s shale. He’s ruling out nuclear because he hasn’t funded the Yucca mountain nuclear waste disposal. And I wonder, has the White House weighed in on this bill from the energy committee that’s going to open up the Eastern Gulf? LANDRIEU: They have not weighed in yet. But again, I remain hopeful. You’re right. President Obama’s team out of the box has not looked good on these issues. But they have time to adjust. And we’re hoping they will. I am against the taxes on oil and gas. I think the President will hear those objections, not just from me, but from many. I think the President wants to be open to nuclear and to find a way to dispose of this waste. Even if we don’t do Yucca, Larry, there are other ways that we can take care of that waste. I think the President has made it clear that he wants a goal of energy independence. And one more thing Larry, one of the guys you should interview, he’s a great guy on this, is Ken Salazar. Secretary of Interior. KUDLOW: Mmm-hmm. We’ve talked to him. LANDRIEU: [He’s] very balanced, wants America to be energy secure. And I think he knows it can’t be done without oil and gas, as well as alternative fuels. So let’s keep talking. KUDLOW: All right, we’ll go after him. Drill, drill, drill. LANDRIEU: Allright, thank you. Drill, drill, drill. KUDLOW: Thank you ever so much Senator. LANDRIEU: Thank you. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=MTQ4Nzg2ZDJiNDAyNzJjNGNjM2M2YmQ2ZDdjZjU0OTY= Wed, 10 Jun 2009 14:22:34 -0400 Summers vs. Bernanke? I'd Take Summers -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=ODUyNzk4MGJhNTY3NmM5MWM3NjQwYzEwMjE0ZDA2MDQ= The New York Times ran a front-page <a href="http://www.nytimes.com/2009/06/08/us/politics/08team.html?_r=1&hpw">story</a> today on personal tensions between Larry Summers and other top Obama economic advisors. Parsing through it, it looks like Austan Goolsbee, who argued against the Chrysler bailout, has the cheekiest relationship with Summers. Christina Romer takes a shot at Summers. Geithner does not, though the Treasury man says he’s not afraid to push back against the former Clinton Treasury official and Harvard president. It’s hard to know what to make of stories like this. Conceivably, White House chief of staff Rahm Emanuel planted it as a Summers put-down, because the latter is getting too powerful. But I truly do not know the meaning of this part of the story. In the Reagan days we had plenty of internal economic tensions, which I think are good for policymakers -- not bad. But the most interesting part of the Times story, at least to me, is the speculation about Summers vs. Bernanke. With Bernanke’s term expiring in January 2010, President Obama will make a decision about the Fed head before year-end. So given the choice between those two, who do I like? Well, meaning no disrespect to Mr. Bernanke, I think I’ll go out on a limb and choose Summers. Why? Because during the Clinton years, when Summers held several Treasury posts (including Treasury secretary), a strong-dollar policy was in place. Back then I called it King Dollar. And I frequently praised Robert Rubin and Larry Summers for backing King Dollar. And since I believe in a price-rule approach to Fed policy, where the dollar should be stable and the Fed head should watch open-market prices such as the dollar, gold, and commodities in order to promote price stability and economic growth, Larry Summers’s résumé as a Clinton-Rubin alumnus is closer to my liking. And in terms of Mr. Summers’s so-called prickly personality, that might be an excellent credential for a truly independent Fed chairman. Paul Volcker had a prickly personality, but he was the inflation slayer (with Ronald Reagan’s help). Ben Bernanke, on the other hand, seems to be targeting the unemployment rate, and he has never given much emphasis to a stable dollar as a key Fed-policy variable. Right now the bond markets are pricing in five or six Fed tightening moves as the economy shifts toward recovery. And at least until recently, the dollar was soft and gold was strong. But if Mr. Bernanke targets the unemployment rate, the Fed will overstay its easy-money welcome and inflation will shoot up in the years ahead. Now, I can’t be sure that Summers would stick to a dollar-related price rule. But if history is any guide, he might. Of course, I can think of some other names that I would prefer to take over the Fed: Robert Mundell, Steve Forbes, Art Laffer, David Malpass. There’s even the late Milton Friedman, who after all said a computer should run the Fed. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=ODUyNzk4MGJhNTY3NmM5MWM3NjQwYzEwMjE0ZDA2MDQ= Mon, 08 Jun 2009 16:32:29 -0400 Now on Twitter -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=NzQ2OTJlM2Y4ZjgyMGMyYjFkYzFjMTE3NTljNmRiYTQ= A quick programming announcement for all of you Twitter fans out there in cyperspace: Yours truly, Larry Kudlow, is now officially on Twitter. You can now follow all of my latest pithy thoughts, Kudlow Report updates, and more throughout the day at <a href="http://twitter.com/larry_kudlow">@larry_kudlow</a>. I’ll be Tweeting away. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=NzQ2OTJlM2Y4ZjgyMGMyYjFkYzFjMTE3NTljNmRiYTQ= Fri, 05 Jun 2009 15:08:25 -0400 Yesterday's Story -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=OWYxNDY4MGU2MTc3YzVlZTU3NjU3NDE4NmFjYTliYzY= Isn’t it fascinating that stocks rallied over 200 points today, despite Obama’s command-and-control government takeover of General Motors? I think it’s because GM’s old-economy operation is yesterday’s story. The new economy doesn’t need GM. We’re only talking about 25,000 employees left in the car company’s domestic operation. Compare that to the millions of workers at new-economy companies like Intel, Microsoft, Cisco, Wal-Mart, Home Depot, Apple, and on and on. Obama’s so-called GM rescue is a needless intrusion at huge taxpayer expense, and a political payoff to the union movement that helped elect him. And the central-planning mandate to produce little green cars at a domestic plant almost guarantees that taxpayers will never get their money back. Apparently GM cannot make these little green cars in China or Mexico and then have them shipped back to the U.S. for assembly and sale. And we do not know the total compensation per hour for UAW workers -- both salary and benefits -- under the new agreement. That number hasn’t been published. So we can’t compare it to the compensation figures of the foreign transplants in order to measure competitiveness. The U.S. now owns a whole portfolio of companies -- AIG, Citi, Fan, Fred, and now GM. The long arm of the government has never reached deeper into the private sector. I have no doubt that American entrepreneurs could produce great cars if they weren’t saddled with greenie regulations and outsized union compensation levels. That’s why the preferred route here would have been a real Chapter 11 bankruptcy, where GM assets could have been taken over by someone like Wilbur Ross, who would then bring in the best and brightest to make great cars and trucks. Rasmussen reports that only 21 percent favor the GM bailout plan while 67 percent oppose it. And only 18 percent favor a national sales tax to pay for Bailout Nation, national health care, and who knows what else, while 68 percent oppose a VAT tax. By the way, 62 percent say Bush, not Obama, should be blamed for the economy. Most regrettably, it was W. who launched Bailout Nation in the last months of his administration. But new statistics showing economic recovery is on the way provided the much bigger news for stocks today. The ISM manufacturing index rose for the fifth-straight month. And the new-orders component moved to 51.1 -- an actual recovery. Meanwhile, private construction surged in April by 1.4 percent. That includes a 0.7 percent monthly gain for housing and a huge 1.8 percent increase for commercial building -- the third-straight monthly rise. China’s manufacturing index gained, too, showing the third-straight month above 50. That’s a big recovery signal. These are the things stocks are looking at. All that Fed pump-priming, plus some old-fashioned Keynesian stimulus, is moving us into some kind of economic recovery. We are still a free-market economy. Even though Team Obama is moving the wrong way on a number of fronts, there still is room for American entrepreneurship and technological advances. This GM thing really is yesterday’s story. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=OWYxNDY4MGU2MTc3YzVlZTU3NjU3NDE4NmFjYTliYzY= Mon, 01 Jun 2009 16:28:38 -0400 My Interview with Dick Cheney -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=YzM4ZGM1N2MyMTlhNTVmYTFlMTRjZTk0OWQyZDkxYzI= In an interview that aired on the Kudlow Report last night, Dick Cheney told me that Obama’s big-government-bailout-nation-TARP-GM rescue efforts were a big mistake. He compared them to Nixon’s wage-and-price controls. He also inferred that former Treasury Secretary Henry Paulson drove the process, not the White House. And Mr. Cheney himself totally opposed the GM bailout. He also welcomed Colin Powell back inside the GOP tent, but with strict conditions. And he said that Team Obama is totally nuts to de-fund the missile-defense program in the face of North Korean nuclear developments. Here’s the complete transcript: <blockquote> LARRY KUDLOW: Mr. Vice President, welcome back to the Kudlow Report. FORMER VICE PRESIDENT DICK CHENEY: Well, it’s good to see you again, Larry. KUDLOW: Thank you, sir. Let me begin. I want to talk about the economy and business and perhaps we’ll get to the foreign policy troubles in the back end. Despite a torrent of conservative criticism over President Obama’s economic policies, there are, nonetheless, unmistakable signs of economic recovery. In fact, in the news this morning, we had home sales rising. We’ve had leading indicators rising, we’ve had better credit spreads. The stock market is up about 35 percent from its lows in early March. Let me ask you, sir, is there an economic recovery out there in your view? CHENEY: Well, Larry, I’m reluctant to tell an economist what’s going on in the economy. KUDLOW: It never stopped you in the past. CHENEY: Well, that’s true. It never stopped me before. No, I’ve always been impressed with the tremendous resilience of the American economy. I think over the years, over the decades, it’s demonstrated this tremendous ability to take severe body blows, if you will, and bounce back. And I think what we’re seeing here at some point the recession’s going to end, at some point we’re going to enter into recovery, and I think I see, as you do, some signs out there that are positive. I follow the stock market, home sales and unemployment numbers and so forth, and they all seem to indicate that we’re -- if we aren’t at the bottom, we’re getting close. KUDLOW: All right. Will President Obama, therefore, get credit? Again, with the barrage of criticism coming from conservatives and so forth, if there is an economic recovery, isn’t he going to get a lot of credit for it? Isn’t that going to be a very powerful political plus for him? Regardless of causality, nonetheless, that’s the way this game works, does it not? CHENEY: Well, I think that’s the way it’s worked in the past, to some extent, but I -- the thing I’m concerned about and the thing that I think ultimately is the most important set of issues or concerns, if you will, in terms of how this economy’s being managed is what the long-term consequences are of the policies that have been put in place by the Obama administration. And we have short-term swings in the economy. I have, you know, if the economy turns up now, we come out of the recession, that’s fine, it’s all to the good. I hope that happens and, if he had something to do with it, he deserves some of the political credit for it. The problem -- the big problem I have, though, is that I think the recession we’ve been through is being used by the administration in ways that fundamentally change the relationship between government and the private sector. That’s what worries me most. KUDLOW: You know, this business of unprecedented interference in the private sector, as you’ve just described, I mean, we can walk through the issues. Basically, the government’s going to own General Motors. Some people call it Government Motors, that’s a big story on the front pages today. They’re going to take 70 percent of the new General Motors. The government already owns AIG. The government owns Fannie Mae. The government owns Freddie Mac. There’s a lot of discussion about the government interfering, intervening in the tax-free municipal bond market to help states run money. Mr. Obama himself told C-SPAN over the weekend, in an interview, that the U.S. was out of money because of the unprecedented spending and borrowing. Now, is that what you’re referring to? And I want to be direct here, some conservatives say Mr. Obama is a socialist or a socialist-light, and he’s running socialist type policies. Do you agree with that criticism? CHENEY: Well, I agree with the criticism without using the labels. I don’t want to get into trying to label President Obama. He’s our president. At this point, he’s the only one we’ve got. He won the election, and he obviously is entitled to pursue those policies that he wants to pursue. My concern is that we entered this period with a big, big problem, with the whole area of entitlements, Social Security, Medicare, the expectation that we were going to run out of money not too far down the road in terms of keeping those basic commitments. Nobody even talks about that anymore. And what we’ve been seeing, though, and what’s been advocated by the president and what looks to be in store if he’s successful is that we’re seeing a vast expansion, not only the power of the federal government over the private sector, but also in terms of spending. Massive, massive amounts of new spending and presumably new taxes to pay for it that I think will do fundamental, long-term damage to the country. And I do think it’s a more liberal agenda, if you will, than any in recent memory. KUDLOW: But, in truth, isn’t it fair to say that many of these policies, central planning policies, command and control interference policies, whether it’s socialism-light or European market social kinds of policies, they really began under the Bush-Cheney administration, did they not? I mean, after all, Fannie Mae and Freddie Mac are under government ownership 80 percent. That began under your administration. The first General Motors loan began under your administration. And, of course, the great TARP program to allegedly prop up the banking system, which has turned out to be partly bank ownership, we don’t know the last story on that. No one knows when TARP is going to ended. All these things really began under your administration. At what point President Bush, I believe, said we have to -- we have to stop -- we have to suspend free market capitalism in order to save free market capitalism. What’s your take on that? How much blame of this shift to the left do you think the Bush-Cheney administration bears? CHENEY: Well, I would -- I would bust it up into two segments, Larry. I think there’s no question but what the tail end of the Bush administration, Bush-Cheney administration, that we took steps specifically geared to try and free up the financial sector. There was the view reporting from economists, from the Fed, from Treasury and so forth that the credit system of the country had, in effect, frozen up or was close to it, and when you get into that kind of situation, the government is the only area of last resort with respect to trying to deal with those issues. You can’t fall back on the private sector and say, ‘You take care of the nation’s banking system.’ That’s a fundamental function of the government, the Federal Reserve, the Treasury and the FDIC, etc. All of those agencies have a major role to play there. KUDLOW: But if I may... CHENEY: If it’s not working, then the federal government has to deal with it. KUDLOW: But did you anticipate the degree of government control over the banks? No question throwing a safety net from Federal Reserve liquidity was appropriate. I don’t think any economist left or right disagrees with that. On the other hand, what we’ve seen now is that this Congress has moved in to declare, for example, compensation and pay limits, repurchase agreements, dividend policies, merger and acquisition policies. You yourself know these things because you were a CEO of a big company once upon a time. Did you anticipate how Congress would move in to take control of the banks when you made these initial loans? CHENEY: No, I don’t believe we did. I don’t recall any debate within the administration. There may have been some over at Treasury or someplace that focused on the extent of which government would try to control these institutions once they provided financing for them. You know, I’ve got experiences going back to the wage price controls in the Nixon administration where, in effect, we had what I think was a terrible mistake, in that case a Republican administration, where moved in and tried to control the wages, prices and profits of every enterprise in America. It was a huge mistake. We finally got out of it, but it took a long time to do it, and it does a lot of damage. One of the things we see now, you mentioned it, is the fact that government, in some cases Congress, in some cases the Obama administration, telling General Motors they’ve got to fire Rick Wagoner, making decisions that traditionally and historically have been made by the private sector. KUDLOW: And running roughshod in the bankruptcy proceeding with Chrysler, running roughshod over the bond holders... CHENEY: Mm-hmm. KUDLOW: ...thereby abrogating contract rights. I mean, did you think, for example, when you made the first loan to GM and Chrysler, at the end of the administration, of your administration, did you think at that time the government would wind up owning 70 percent of General Motors? Some people are now calling it Government Motors. CHENEY: Well, some of us at the time wanted GM to go bankrupt, go to Chapter 11. KUDLOW: Were you in that camp? CHENEY: I was. The decision was made that, in the final analysis, since our administration was almost over and a brand-new team was about to take over that the president wanted, in effect, not to take a step that wasn’t necessarily going to be followed by his successor, but rather to set up a situation which the new guys could address that issue and make a decision about what the long-term policy was going to be. And we came up with a short-term package, in effect, that got us through the -- through the inauguration. KUDLOW: What would you do differently now? Again, you, in some sense, I think a clear sense, that the Bush-Cheney administration laid the groundwork for this big government intervention. Mr. Obama is taking it further probably, perhaps, than you all might have, although one will never know. But what would you be doing differently right now? CHENEY: Well, I think the budgets he submitted are way out of whack. I think what it does not only to the short-term deficit but long-term debt situation is very objectionable. I think the notion that we’re going to get up to a point where the debt equity ratio for the country’s going to be what, over 50 percent, 60 percent? I’ve seen even 80 percent at the end of a 10-year period of time. KUDLOW: Some people are worried the United States is going to lose its AAA credit rating. CHENEY: Well, that’s got to be of concern. The last time that we had debt to equity ratios, or debt to GDP ratios was 1950... KUDLOW: Yeah. CHENEY: ...at the end of World War II after we’d fought a major war and obviously had major governmental obligations as a result of that. So I don’t hear anybody in the administration expressing concern over that massive growth in the national debt and what’s that going to mean long-term in terms of our currency, in terms of inflation. KUDLOW: Is it going to lead to a general sales tax? Big story in the Washington Post this morning about talk of a national sales tax or a VAT, a value added tax, which will ultimately be brought in play -- it’s a European-style tax -- to finance all the spending and borrowing. Do you think there’s a VAT tax in America’s future? CHENEY: I would hope not. We’re at a point now where to look at the levels of spending that are being contemplated, six hundred and some billion dollars, for example, in unfunded planning with respect to their medical reforms, somebody’s got to pay for that in some fashion. It’ll be paid for either by printing more money or raising taxes. He’s already talking about a set of policies that I think grossly undermine the notion that the way you grow the economy is to stimulate the private sector, to minimize government’s role in the private sector, to cut taxes as much as possible, to minimize the regulatory burden that the government imposes on the private sector. All of those principles that I think a lot of us believe in are now pretty much being ignored in favor of a much larger government, a much greater involvement in the society -- you say ownership of General Motors, etc. -- so that we’re seeing some very, very fundamental changes with the important political as well as economic consequences. KUDLOW: Speaking of political, I guess you’re trying to outline a message for the Republican party here to limit government and limit taxation and so forth. You kind of took a shot at General Colin Powell the other day, said you didn’t know he was still a member of the Republican party. He responded to you by saying that you were mistaken. He is a member of the Republican party, and he regards himself a, quote, "Jack Kemp Republican," end quote. Could you react to what Mr. Powell is saying? CHENEY: Well, we’re happy to have General Powell in the Republican party. I was asked a question about a dispute he was having, I think, with Rush Limbaugh, and I expressed the consent, the notion I had that he had already left since he endorsed Barack Obama for president. But I meant no offense to my former colleague. I wasn’t seeking to rearrange his political identity. KUDLOW: So you welcome him back into the party. CHENEY: We’re in the mode where we welcome everybody to the party. What I don’t want to do, in the course of trying to expand the overall size of the Republican party and expand our base, is to talk away from basic fundamental principles. I think it’s very important that we remind people out around the country what it is that we stand for, that we do believe in a strong national defense, in low taxes and limited government; and giving up on those principles, in order to try to appeal to people who are otherwise going to vote Democratic, seems to me is a -- would be a fundamental defeat for those of us who are essentially conservative, who’ve been long-time supporters of the Republican party. KUDLOW: Let me just in the remaining moments go back to another headline, unfortunately, and that is North Korea’s launching all these nuclear missile tests. Last evening they launched some more. I do know intelligence agencies may or may not have expected this barrage. What is your comment on this? And how in the world are we going to deal with North Korea, which has become a long-term and vexing problem? CHENEY: It is one of the biggest problems out there today. It’s a difficult one that we dealt with, obviously, and the Obama administration’s now facing a major test. They’ve set off another nuclear device. They have been proliferators in the past, both of nuclear technology and missile technology. They did, of course, build a nuclear reactor in the Syrian desert designed to produce plutonium for the purposes of having Syrian nuclear weapons and that got shut down when the Israelis bombed it. The fact is the North Koreans are one of the worst operators in the world today, and you’ve got to find some way to change the course they’re on or they’re going to be a major threat. One of the things that I think is a wrong thing to do is, at this particular time, to cut our program for missile defense in the Defense Department. That’s more important than ever when you’ve got a rogue nation out there, like North Korea, that operates in accordance of a whole different set of standards than normal people do, with the possibility that they can ultimately deploy a weapon that could hit the United States. KUDLOW: Why do you reckon that Secretary of Defense Gates, himself a Republican, served under numerous Republican administrations, is going along with this? CHENEY: I don’t know. I haven’t talked to Bob about it. Bob stayed on because he was asked to stay on. I thought it was a good thing that he did continue in office, but, obviously, somebody made the decision and he’s supporting it to reduce the amount of money that we devote to missile defense. We’ve gotten a long way on missile defense. We know how to do it. We know how to take down incoming warheads, but we need to do a lot more work in order to be -- to deploy a system that’ll defend the United States against those kinds of limited strikes that might be possible by a nuclear armed North Korea or Iran. KUDLOW: Isn’t the absolute key at the end of the day China? And couldn’t the U.S., working together with China, essentially defund, definance what’s left of North Korea’s economy and stop the power flow into North Korea, just cut off their power all together? Beyond that seems like it’s more empty talk to me. UN conferences and resolutions seem to have virtually no meaning. Isn’t this China the key here? CHENEY: I think it is. I think you’re absolutely right, Larry. The Chinese have got a long international border with North Korea. They have more commerce with North Korea than anybody else. They clearly are in a position, if anybody is, to try to put the screws to the North Korean economy to get them to change their behavior. So far, they’ve been willing to enter into the six party talks, but that’s about the end of it. There have been no real sanctions, no penalties imposed on North Korea for their past behavior. And every time they go through one of these cycles, then they go out and demand -- the North Koreans demand more concessions in order to get -- go back to the table again to resume the talks. But, through this process, we’ve had numerous missile tests, we’ve had now two tests of nuclear weapons in ’06 and then again now. We’ve had them building the reactor in Syria for the Syrians. These are probably today the worst proliferators in the world of nuclear weapons technology to rogue regimes or to terrorist-sponsored regimes. KUDLOW: Is there’s one -- final question -- is there one piece of advice you would give President Obama right now to deal with this North Korean problem? CHENEY: Well, going forward, I’d say insist upon the North Koreans keeping their commitments, and when you say you’re going to impose sanctions, impose sanctions, make them stick. And again you’ve got to work with the Chinese if you’re going to try to do this peacefully. I think you also need to emphasize the fact, and I think it is a fact, that -- and this is an argument to be made with the Chinese as well as others in the region -- that if the North Koreans are successful in deploying a significant nuclear capability, that others in the region who have the capability, the technical capability, are going to want to do the same. The Japanese are going to have to reconsider their no nukes policy. Taiwan could be in that camp, certainly South Korea. All of these states living in an area where you’ve got a North Korean government that has nuclear weapons and is as irresponsible as it has been for decades are going to have to reconsider what they require for their own security. China needs to understand that the whole region is likely to become less stable. KUDLOW: Hm. CHENEY: And I can’t believe that it’s in their interest to have any of those developments occur that ought to give the Chinese the incentive to work with us to get the North Koreans to stop. KUDLOW: We’re going to have to leave it there. Mr. Vice President, I can’t thank you enough for this interview and I wish you all the best. CHENEY: Well, it’s good to see you again, Larry. KUDLOW: Thank you, sir. CHENEY: Good luck. </blockquote> <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=YzM4ZGM1N2MyMTlhNTVmYTFlMTRjZTk0OWQyZDkxYzI= Thu, 28 May 2009 09:43:29 -0400 The VAT Cat Is Out of the Bag -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=YjAwMGMxZWYzZGFiNWNmYjY5MWU4N2M1OThlMTVhNDM= Everyone should closely read today’s Washington Post <a href="http://www.washingtonpost.com/wp-dyn/content/article/2009/05/26/AR2009052602909.html">story</a> on the value-added tax, or VAT. The cat is now out of the bag. For months I have argued that Team Obama and the Democratic Congress were going to be forced to consider a VAT in order to pay for their extravagant spending. Now borrowing almost 50 cents on every new dollar spent, the Democrats will at some point begin to deal with the politics of deficit reduction as a way of countering Republican criticisms about deficit expansion. And the VAT’s part of their answer. Senate Budget Committee chair Kent Conrad calls the VAT “fundamental tax reform,” and he argues for a VAT plus high-end income-tax hikes. The WaPo story talks about a White House conference earlier in the year where “a roomful of tax experts pleaded with Treasury Secretary Timothy F. Geithner to consider a VAT.” Budget chief Peter Orszag hired prominent VAT supporter Ezekiel Emanuel -- the brother of White House staff director Rahm Emanuel -- as an adviser. Of course, President Obama blew an even bigger budget hole into long-run planning with a cap-and-trade proposal that would exempt 85 percent of the tradable emissions warrants from any auctions. In other words, it’s a free lunch, making a bad idea even worse. But the Democrats are going to want to hang on to their massive increases in social-spending transfer payments, along with the big expansion of health care and who knows what else. Now remember, this VAT tax would come on top of existing income, payroll, and business taxes. This is how the European countries and many others do it. And the VAT is a tax imposed throughout the economic food chain, at all levels of production, finally ending up inside the consumer pocketbook. The VAT is a sure way to permanently depress economic growth. It’s also a sure way to Europeanize the American economy. But at some point, after the economy gains at least some cyclical economic-recovery traction, the Obama Democrats will want to re-label themselves as deficit-reduction fiscal hawks. Hence the VAT, a real bad idea. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - <a href="http://www.cnbc.com/id/15838446"><img src="http://www2.nationalreview.com/ads/images/ad_kudlow_cheney_052709.jpg" border="0" alt="" width="300" height="300" /></a> <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=YjAwMGMxZWYzZGFiNWNmYjY5MWU4N2M1OThlMTVhNDM= Wed, 27 May 2009 14:06:57 -0400 My Commencement Address to Monmouth University in New Jersey -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=M2FhZjIxN2MxNDhkMWU3YTcwZjAxNDBhY2U0NWYwY2I= Here’s the footage of my commencement address to Monmouth University’s graduating class Wednesday where I received an honorary Doctorate of Laws. I delivered an optimistic message to the graduates who I exhorted to go out there and make their way in the world. There are opportunities galore in this great country of ours, as long as we keep it free. One man, one woman, can make a huge difference. I loved doing it. It was a great honor. <object classid="clsid:d27cdb6e-ae6d-11cf-96b8-444553540000" width="400" height="380" codebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=6,0,40,0"> <param name="id" value="cnbcplayer" /> <param name="type" value="application/x-shockwave-flash" /> <param name="allowfullscreen" value="true" /> <param name="allowscriptaccess" value="always" /> <param name="quality" value="best" /> <param name="scale" value="noscale" /> <param name="wmode" value="transparent" /> <param name="bgcolor" value="#000000" /> <param name="salign" value="lt" /> <param name="src" value="http://plus.cnbc.com/rssvideosearch/action/player/id/1129575008/code/cnbcplayershare" /><embed id="cnbcplayer" type="application/x-shockwave-flash" width="400" height="380" src="http://plus.cnbc.com/rssvideosearch/action/player/id/1129575008/code/cnbcplayershare" salign="lt" bgcolor="#000000" wmode="transparent" scale="noscale" quality="best" allowscriptaccess="always" allowfullscreen="true"></embed> </object> <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=M2FhZjIxN2MxNDhkMWU3YTcwZjAxNDBhY2U0NWYwY2I= Fri, 22 May 2009 10:02:34 -0400 A Well-Earned Rally for the Investor Class -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=YzlkNjFhNmRmMTI1NDI2NzZkZjMxODg1YjFkODg1ODY= Stocks had a huge rally today, including a Dow gain of 235 points. This is a very important signal of economic-recovery confidence. At least that’s how I’m reading it. The brief correction appears to be over. And all sorts of important technical breakouts were registered in today’s bullish trading. Despite the future threats from Team Obama about command-and-control economics, corporate tax hikes, nationalized health care, and the cap-and-trade tax, the most important reality for share prices is still the near-term expectation of a cyclical economic recovery. Long-term prospects are not nearly as good because of the administration’s lurch to the left and war against capital. But the stock market has in its sights a second-half economic rebound that will carry through next year. Most of this rebound is a function of massive Fed liquidity pump-priming and the steeply upward-sloping Treasury yield curve. These factors will stimulate total spending in the economy, coupled with bank profitability. Other good news out there: The communists were put to rout in the Indian elections. This suggests that India will take new steps to liberalize its economy, including foreign investment, free trade, privatization, and tax cuts. This is a big plus for global economic recovery. And the Indian elections may well have triggered the stock rally right from the opening bell this morning. Plus: Morgan Stanley will probably de-TARP, along with Goldman Sachs, JPMorgan, and perhaps others. No one knows for sure, but I think of de-TARPing as a kind of falling of the Berlin Wall. Let economic freedom ring. Let banks get out from under the yoke of government controls. Yes, there will be shareholder dilution as the banks raise new equity capital. But the thought of banks freeing themselves from Team Obama way offsets any near-term dilution issues. And out on the Left Coast, California voters look set to deny big state-government taxing-and-spending initiatives in tomorrow’s election. It’s a Prop 13-like vote. And it suggests that the Tea Party movement is in fact indicative of a tax-and-spend revolt going on around the country. All of this combined to give the investor class a well-earned rally in today’s stock market. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=YzlkNjFhNmRmMTI1NDI2NzZkZjMxODg1YjFkODg1ODY= Mon, 18 May 2009 16:41:34 -0400 From TARP to Obama to Command-and-Control -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=NGI4ZjE1ZDZlZTc2ZTRlNTRlODUzN2IzMTUwNjQyZTY= Speaking near Albuquerque, New Mexico, at a town-hall meeting on Thursday, Pres. Obama said the federal debt load is unsustainable and warned of skyrocketing interest rates. He neglected to say that his massive spending-and-borrowing policies are directly causing this problem. Now, I have a thought. Stop this massive spending and borrowing. It’s making George W. Bush, Lyndon Johnson, and FDR look like fiscal conservatives. We are borrowing 50 cents for every federal dollar we spend. And deficit spending combined with excess money-creation by the Fed is a surefire way to create slow recovery growth combined with higher inflation. Perhaps this is why the stock rally has stalled. And raising taxes on entrepreneurs, investors, businesses, and the entire energy economy through cap-and-trade is no way to promote growth. Nor is unprecedented command-and-control intervention in the economy. In other words, a war on capital with an unlimited welfare safety net will do us in. Plus, Mr. Obama’s massive health-care expansion plans will end up bankrupting the entire nation. This is his responsibility; he owns the problem now. When will he stop? And speaking of command-and-control intervention, the public-interest group Judicial Watch secured hundreds of pages of documents from the Treasury Department through the Freedom of Information Act which show how former Treasury man Henry Paulson crammed $750 billion in taxpayer money down the throats of our largest banks last October. Some of them didn’t even want it. But it was crammed down anyway. In my view, the TARP capital injection did more harm than good. What unfroze credit markets was FDIC interbank loan guarantees, FDIC guarantees of long-term bond borrowing by banks, the guaranteeing of money-market funds by the FDIC, the Fed, and the Treasury, and of course the Fed’s own massive printing-press liquidity injections, which generated a steeply positive yield curve and large-scale money-supply growth. TARP was originally supposed to rid banks of some of their toxic assets through a reverse -- or Dutch -- auction. But the subsequent Paulson decision to use the $750 billion TARP to purchase capital in the banks amounted to a duplicitous bait-and-switch. And that gave the government substantial control over bank compensation, dividends, repurchase agreements, and other operations that rode roughshod over investor-shareholders. And it ain’t over yet. In today’s news, there’s more TARP coming for insurers -- a particularly bad idea, as <a href="http://kudlow.nationalreview.com/post/?q=YmVlMTMxNTYzZTM1ZTcyZmZjNjA3MjQ0ODU4MzFlY2E=">I wrote</a> a month ago. Additionally, TARP may be used to backup the tax-exempt municipal-bond market and might even be used to help bailout the pension plan of America’s biggest trucker, YRC. And FDIC chair Sheila Bair told Bloomberg News that some bank CEOs will be replaced -- despite shareholder votes to keep them. So Paulson’s TARP has morphed into a command-and-control economic tool used by the Obama administration to exercise unpredicted intervention into the American economy. Oh, and did I mention that the latest auto fix from Team Obama will blow off bondholder contract rights in the GM deal, just like Team Obama did with Chrysler? And just think: We owe it all to TARP. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=NGI4ZjE1ZDZlZTc2ZTRlNTRlODUzN2IzMTUwNjQyZTY= Fri, 15 May 2009 15:48:14 -0400 It's Official . . . -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=NTMwYWY0ZjdjYzVhMjY1NTkwNDczNjMyNzMyNWRiNzE= <img src="http://www2.nationalreview.com/images/pic_kudlow_051409.jpg" alt="" width="201" height="113" /> I have successfully infiltrated <a href="http://boards.cannabis.com/current-events/171187-kudlow-says-pot-legalization-push-cover.html">every last crevice</a> known to man on the Internet. Incidentally, I’d just like to note that I oppose legalizing pot under any fiscal circumstances. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=NTMwYWY0ZjdjYzVhMjY1NTkwNDczNjMyNzMyNWRiNzE= Thu, 14 May 2009 16:45:49 -0400 Get Them Stoned, then Tax Them to Death ... Heck, They'll Never Remember -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=NGY2MjAxMGE2MjBlZTkyMWU5Nzc3NjA5NjAzYTljNzY= That seems to be the message coming from California Gov. Arnold Schwarzenegger, who is considering legalizing marijuana in his state. Basically, Mr. Schwarzenegger just wants to tax it so he can balance his state’s out-of-control budget. We debated the Governator’s controversial proposal on last night’s Kudlow Report. <object classid="clsid:d27cdb6e-ae6d-11cf-96b8-444553540000" width="400" height="380" codebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=6,0,40,0"> <param name="id" value="cnbcplayer" /> <param name="type" value="application/x-shockwave-flash" /> <param name="allowfullscreen" value="true" /> <param name="allowscriptaccess" value="always" /> <param name="quality" value="best" /> <param name="scale" value="noscale" /> <param name="wmode" value="transparent" /> <param name="bgcolor" value="#000000" /> <param name="salign" value="lt" /> <param name="src" value="http://plus.cnbc.com/rssvideosearch/action/player/id/1121626103/code/cnbcplayershare" /><embed id="cnbcplayer" type="application/x-shockwave-flash" width="400" height="380" src="http://plus.cnbc.com/rssvideosearch/action/player/id/1121626103/code/cnbcplayershare" salign="lt" bgcolor="#000000" wmode="transparent" scale="noscale" quality="best" allowscriptaccess="always" allowfullscreen="true"></embed> </object> <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=NGY2MjAxMGE2MjBlZTkyMWU5Nzc3NjA5NjAzYTljNzY= Wed, 13 May 2009 16:00:22 -0400 President Obama's Deferral Proposal Hamstrings U.S. Companies & Reduces Jobs -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=YzI3MDFlZWFkM2ZiNTQ2NThlMWY4NTcyNDY4YTQzZmI= Last week, President Obama proposed to severely restrict “deferral,” supposedly to “eliminate tax breaks for companies that move jobs offshore.” In other words, he basically blasted American-based international corporations as tax cheats and is launching a big tax hike on all of them. Yet, as my friend Dan Mitchell explains in this new video from the <a href="http://www.freedomandprosperity.org/">Center for Freedom and Prosperity</a>, America’s current tax laws are already very punitive for American companies that compete in the global marketplace. The president’s proposal will make a bad situation even worse. <object classid="clsid:d27cdb6e-ae6d-11cf-96b8-444553540000" width="425" height="344" codebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=6,0,40,0"> <param name="allowFullScreen" value="true" /> <param name="src" value="http://www.youtube.com/v/pTXiadVpS4M&color1=0xb1b1b1&color2=0xcfcfcf&feature=player_embedded&fs=1" /><embed type="application/x-shockwave-flash" width="425" height="344" src="http://www.youtube.com/v/pTXiadVpS4M&color1=0xb1b1b1&color2=0xcfcfcf&feature=player_embedded&fs=1" allowfullscreen="true"></embed> </object> <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=YzI3MDFlZWFkM2ZiNTQ2NThlMWY4NTcyNDY4YTQzZmI= Mon, 11 May 2009 13:05:22 -0400 Enough Corrosion and Corruption -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=NDk4NzgxNzA2NWIyMzVlMTlmZTQwMDViYjZiNGU0ZDM= This week on CNBC’s Kudlow Report I repeatedly called for the resignation of New York Fed chairman Steve Friedman over his blatant conflicts of interest with Goldman Sachs. I was not alone. Among others, two banking-industry heavyweights -- former FDIC chairman Bill Isaac and former Cleveland Fed head Lee Hoskins -- both agreed with my resignation call on Wednesday night’s show. So I was delighted to learn last night, just before going on-air, that Friedman had resigned his position at the New York Fed effective immediately. I’ve known Mr. Friedman for many years. He is a good man. But he demonstrated extremely poor judgment and made a bad ethical mistake. According to the Wall Street Journal, during his tenure at the New York Fed, Friedman was also a director on Goldman’s board and had a large holding in Goldman stock. Of course, this was a violation of Fed policy due to Goldman’s status (as of September 2008) as a bank holding company. The New York Fed asked for a waiver, which the Fed, for some unknown reason, granted. To make matters worse, while weighing this request, Friedman purchased an additional 37,000 Goldman shares which have since risen almost $2 million in value. It’s clear that Friedman crossed the line. A very bright line. No director of any regional Fed bank should have any connections with regulated financial institutions like Friedman had with Goldman Sachs. That’s a huge conflict of interest. So my hat goes off to Steve Friedman for stepping down. Good for him. The American capitalist system must never be rigged for the benefit of a bunch of insiders. There must be a firm zero-tolerance policy against such self-dealing shenanigans. It poisons the system and sends entirely the wrong message to Main Street about Wall Street’s relationship with its regulators. I would like to tip my hat to the Wall Street Journal’s Jon Hilsenrath and Kate Kelly. They deserve a big gold star for shining the light on this important story. They did what good journalists do; they served as disinfectants to the system. Both ought to be commended. A parting thought: This whole Friedman episode looks like yet another unfortunate example in a long line of growing TARP corruption. Make no mistake: TARP is a corrosive, corrupting, and demoralizing influence on our banks and the rest of the economy. It is a symptom of the slippery slope we are sliding into with Team Obama’s big-government, bailout-nation vision and agenda. The Friedman mess is merely symptomatic of this growing problem inside our system. It is time we all opened our eyes to the mess before us. Enough already. We can do much better. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=NDk4NzgxNzA2NWIyMzVlMTlmZTQwMDViYjZiNGU0ZDM= Fri, 08 May 2009 14:55:24 -0400 Gangster Government: An Interview with Tom Lauria -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=Y2ZkMmNmZWVjZmYyZDA3MDI3MjhjMmRhMzZkYWUyYTU= Hat tip to my friend Michael Barone, who coined the term “gangster government” to describe Team Obama’s bullying threats against the senior bondholders in the Chrysler bankruptcy, where constitutionally backed contract rights have been overturned. It shows the corruptive nature of the whole TARP program and the government’s control along with it. This is corroding the animal spirits of democratic capitalism, which rely on the rule of law. Here’s my interview with Tom Lauria from last night’s Kudlow Report. Lauria represents the senior bondholders who were trampled on by Team Obama. LARRY KUDLOW: We have a CNBC exclusive -- the head of the financial restructuring and insolvency group at the great law firm, White & Case, Mr. Thomas Lauria. Mr. Lauria thanks very much for coming on. THOMAS LAURIA: Thanks. KUDLOW: I want to ask you, in these bondholder meetings, with the White House automobile task force, Rattner and Bloom, did they bully? Did they threaten? Did they threaten IRS investigations? SEC investigations? What is your take on this? I heard your radio interview. I played it on my radio show on WABC. It’s tough stuff. I think this is TARP criminalism, but you tell me. LAURIA: Well, there are a lot of things going on here that really aren’t in keeping with the way you’d expect a negotiation to go to save a company like Chrysler, much less one involving the government. I’m kind of in no comment mode on the whole Perella-Weinberg situation. But I can elaborate on things that have happened through the process and with respect to my current clients. KUDLOW: I mean was there bullying in those meetings? I have heard from other sources that there was. And some of this stuff is pretty mean and nasty. And that ain’t the American way. What is your take? LAURIA: Well let me tell you. With respect to the group of investors that I represent, the irony is there really wasn’t any negotiation, or any direct contact with the task force, until after the bankruptcy was announced. We were negotiating with the steering committee of the first lien lenders. There were eight lenders on that committee, four of whom were TARP recipients and four who were not. And you know, we repeatedly reached out through that steering committee to try to get into Washington to sit down with people, to get into an environment where we could find a commercially reasonable resolution. And you know, we got the “Heisman.” You know, every time we sent a proposal, it was leaked to the press. The negotiation was you know, political falderal. It wasn’t really ever a business conversation. And when we got to the last minute, there was a separation of direction between the TARP recipients and the non-TARP recipients. I think there’s probably room for some speculation about that. KUDLOW: But did they threaten? Let me go through some of the threats that have been out there in the blogosphere, and on the Internet, and from your own radio interview. Look, did they threaten for exampl e, to release the names of the bondholders who wouldn’t go along with their plan? Did they threaten to do that? LAURIA: Well I’ve heard that. KUDLOW: You didn’t hear it specifically? LAURIA: Just to be clear, my direct contact with the task force was limited to Wednesday night and Thursday morning… KUDLOW: Right. LAURIA: …before the chapter 11 case was filed. KUDLOW: Did they do it then? Did they threaten to release the names of the bondholders then? LAURIA: No. KUDLOW: All right. Did they threaten to invoke an IRS or SEC investigation? Because I have heard from other sources that they did. An IRS investigation. An SEC investigation. This is like Richard Nixon Redux. LAURIA: Well I did call my accountant to make sure everything was on the up and up. KUDLOW: Sorry? LAURIA: I did call my accountant to make sure everything was square. KUDLOW: So are you telling us that they made those threats? LAURIA: No. KUDLOW: You don’t know that for a fact? LAURIA: Correct. KUDLOW: All right, let me go on. Regarding the issue of the bondholders themselves, has this Team Obama -- Rattner and Bloom and so forth -- have they violated constitutional principles by trampling on contract rights of the bondholders? LAURIA: Well I think they’ve done so flagrantly. I don’t think that there’s any question about it. They have cooked up a scheme to try to end run contractual and statutory priority. And you know I got to tell you, I wouldn’t be dismayed about this -- so much of it was a private party and private parties try things in deals and negotiations and litigations all the time. But I think when a branch of the government that is charged with enforcing the Constitution, I think intentionally and knowingly tries to get around the law in order to advance what I think are political interests over clear contractual and legal interests, I think that’s a real problem. And I do think it calls into question the Constitution. KUDLOW: I mean they’re using bailout nation and TARP as their lever. That’s what they’ve done from day one. And when I read Neil Barofsky -- he’s the special inspector general for TARP -- and I looked around, I mean to some extent this whole TARP process has degenerated into corruption. You have a thought on that? You’re describing corruption! We are corrupting the Constitution and contract law. LAURIA: Well I’d like somebody to point out to all of us what statutory scheme the government is acting under when it takes control of an auto manufacturer, as has happened here. TARP applies to financial institutions, and Chrysler is not a financial institution. I think we all know that. And Chrysler is not with any other regulatory scheme of the government that allows it to effectively take over the corporate governance of the company. But that has effectively happened here... KUDLOW: How about this irony -- I’ve got to ask you this Tom. According to the White House, “we must save the American auto industry.” But we are giving Chrysler away to an Italian car company. Do you find that ironic? Or bizarre? LAURIA: I think it’s both. And I don’t think it has much to do with the truth. KUDLOW: Right. What is the truth? What is the truth? Was the UAW bailed out? Is that the truth? LAURIA: Well if you look at the numbers in terms of the dollars that the government has put into Chrysler, and you look at the dollars that are being paid out to labor-related interests -- including the pension, VEBA, other benefit programs, etcetera -- it’s interesting that the two amounts roughly match up. About $10 billion going in, and $10 billion going out. It seems like Chrysler is just a vehicle for the government to pay its labor friends. KUDLOW: Is this redistribution from bondholders to union health trusts? Is that what’s going on? LAURIA: That’s it. That’s it. KUDLOW: Tom Lauria, thank you for coming on. We appreciate it sir. LAURIA: Thank you very much. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=Y2ZkMmNmZWVjZmYyZDA3MDI3MjhjMmRhMzZkYWUyYTU= Thu, 07 May 2009 14:20:32 -0400 Seeking GOP Recovery: A Conversation with Sen. Jim DeMint -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=ZGQ0MDEwNDQ1N2E5NjZmYzE5YTNjYjcwYTRjMDNhN2Y= Who’s going to lead Republicans out of the wilderness? I discussed this question and much more on last night’s Kudlow Report with South Carolina Sen. Jim DeMint. <object classid="clsid:d27cdb6e-ae6d-11cf-96b8-444553540000" width="400" height="380" codebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=6,0,40,0"> <param name="id" value="cnbcplayer" /> <param name="type" value="application/x-shockwave-flash" /> <param name="allowfullscreen" value="true" /> <param name="allowscriptaccess" value="always" /> <param name="quality" value="best" /> <param name="scale" value="noscale" /> <param name="wmode" value="transparent" /> <param name="bgcolor" value="#000000" /> <param name="salign" value="lt" /> <param name="src" value="http://plus.cnbc.com/rssvideosearch/action/player/id/1114945366/code/cnbcplayershare" /><embed id="cnbcplayer" type="application/x-shockwave-flash" width="400" height="380" src="http://plus.cnbc.com/rssvideosearch/action/player/id/1114945366/code/cnbcplayershare" salign="lt" bgcolor="#000000" wmode="transparent" scale="noscale" quality="best" allowscriptaccess="always" allowfullscreen="true"></embed> </object> <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=ZGQ0MDEwNDQ1N2E5NjZmYzE5YTNjYjcwYTRjMDNhN2Y= Wed, 06 May 2009 16:23:40 -0400 Geithner Is the Wrong Messenger -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=MTBiMDdmYWQyOGEwNDgxMjQwOTUzYjVmZGI1ZjNlNTE= Why on earth did President Obama ask Timothy Geithner to talk about tax cheats during his overseas tax-plan announcement yesterday? I received a ton of e-mails and comments from folks totally baffled by all of this. I have no idea why Obama did this. Here’s an excerpt from Mr. Geithner’s remarks: <blockquote> Today we are taking another important step toward those goals by ending indefensible tax breaks and loopholes which allow some companies and some well-off citizens to evade the rules that the rest of America lives by. </blockquote> Huh? Let’s take a look back at Geithner’s “non-answer” answer to a simple question posed by Sen. Jim Bunning during Geithner’s confirmation hearing. <blockquote> SEN. BUNNING: Would you have paid your 2001 and 2002 tax had you not been nominated to be the treasury secretary? GEITHNER: Senator, as I said initially, I should have asked more questions when I concluded that audit at the time, and I didn’t. When I think back on that, I regret not having done that. But I should have done it at that point. </blockquote> Hmm. Incidentally, it’s worth remembering that Geithner was working at the IMF when he dodged his taxes. The IMF itself is a tax haven. The income is tax-free. All you’ve got to do is pay your payroll taxes, which is precisely what he failed to do until he was nominated back in December. Clearly, Timothy Geithner is not the guy to be talking about tax evasion. All this did was remind people that our current Treasury secretary -- the individual charged with overseeing the IRS -- was guilty of a multi-year delay in paying his taxes. Some people are speculating that Mr. Geithner has a limited shelf life as Treasury secretary. The thought is that Rahm Emanuel, Obama’s current chief of staff, will eventually replace him. More to be revealed. But the bottom line here is that Obama demonstrated very poor judgment in using Geithner for this particular attack. I don’t know why he did this. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=MTBiMDdmYWQyOGEwNDgxMjQwOTUzYjVmZGI1ZjNlNTE= Tue, 05 May 2009 16:41:16 -0400 'Larry Kudlow Resists Obama's War on Capitalism: Interview' -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=ZjAyNzhiZTViNWMwYTc5MWZiOWI2ZDJjNjdlYTY2ZWE= <blockquote> When it comes to fighting for free markets and railing against government intervention in the economy, no one on TV does it better or more passionately than economist Larry Kudlow of CNBC. The anchor of “The Kudlow Report” (7-8 p.m. EST) and co-anchor of “The Call” (11-12 p.m. EST), is a former Reagan administration economics adviser and now CEO of Kudlow & Co., an economic research firm. A nationally syndicated columnist, he also has his own blog, Kudlow’s Money Politic$ and is a regular contributor to National Review and National Review Online. On Friday, at the end of a week in which we saw Chrysler start down the road to bankruptcy and learned that the Gross Domestic Product had fallen 6 percent over the last six months, I called Kudlow at his office in New York to see if he was still upbeat about the chances for a short-term economic recovery. Q: You specialize in finding signs of recovery -- “mustard seeds,” as you call them. Did the 6 percent GDP percent drop or any of the other events of this week dent your overall optimism? A: No. There are cross currents. The best part of the story is the economic statistics coming out of Washington are looking better. You’re right about GDP, but inside the report, consumer spending was actually stronger - up 2 percent - and inventories really crashed - over a $100 billion decline. So it looks like the consumer is stabilizing or even improving, because gasoline prices are so low it’s boosting consumer incomes and boosting purchasing power. Even though the unemployment rate is going up, still over 90 percent are still working. I think that was a big plus. You’ve got some other reports…. Business orders are rising. Manufacturing is improving. Some of the regional manufacturing reports from the Chicago Fed and the Richmond Fed showed strong improvement. It’s all pretty good stuff, actually. I think it’s safe to say that the worst is over. There’s another report I want to cite: We’ve had now three or four weeks of declining jobless claims. That’s a leading indicator of the economy. For the first time it’s starting to roll over and go back down, and that’s very important. Q: In the short run, you said on TV this week we might hit 10,000 in the Dow by summer? A: Yeah, I think so. I think the stock market is recovering. You’re up about 30 percent from early March. I don’t know whether it gets to 10,000 or not, but 10,000 is a good benchmark. I think that’s part of the recovery story. I think behind that the key factors -- the key “mustard seeds” for me -- have always been this six-month, seven-month narrative of mine: The Fed is pumping in new money like crazy. Energy prices have just crashed from a year ago or last summer - most importantly, gasoline prices. That’s like a tax cut for the economy. So easy money and lower gasoline prices and, more recently, lower mortgage rates, are all very helpful. That’s like another tax cut. From energy and mortgage rates alone, some people have guestimated a $500 billion tax-cut effect. And the Fed has created about $650 billion of new M-2 (the amount of money in circulation) and the Fed’s balance sheet - which is the ultimate measure - has risen by over $1 trillion. That’s a lot of money, my friend. I don’t think much of Obama’s so-called stimulus plan. I don’t think government spending stimulates the economy. There are some tax credits in there that probably will help in the short run. They’re not real tax cuts because they don’t change marginal rates, but there is a cash effect that will help low-end consumers. But it’s a very weak impacter. But I think easy money from the Fed, lower gasoline prices and lower mortgage rates set the stage for recovery. I think GDP will be positive in the third and fourth quarters. I think they are going to be stronger than people think. I don’t see this as a long-run story. It’s just a little cyclical rebound. Q: In the long run, shouldn’t we be terrified by the prospect -- or the near certainty -- of serious inflation because of all that money being pumped into the economy? A: No doubt about it. It’s down the road -- you’re talking about maybe two years. My view is that we’ll cross that bridge when we get to it. Ultimately, you may be right. There’s no question that the longer-run threat of inflation is something to think about. In terms of what we saw this week, look: President Obama is waging war on investors. He’s waging war against businesses. He’s waging war against bondholders. These are very bad things. Obama’s team is riding roughshod over bond contracts, over any private-property contracts. They are riding roughshod over shareholders. They have a complete disregard for investors, and this is very bad. It is going to create a reluctance to invest. It drains the animal spirits. It hurts risk-taking. These are very bad things. Q: You are very critical of the president ‘s overall direction, right? A: Really, the broad-based issue here, besides waging war against investors, is an unprecedented effort to control the economy. It’s industrial planning. It’s intervention on a grand scale. It’s a lurch to the left. It’s really an attempt to reverse Ronald Reagan’s deregulation and low-tax policies that lasted for close to 30 years. He’s trying to change the Reagan agenda into a very substantial government regulation of business and the economy. Secondly, the tax hikes on investors and upper-end individuals and overseas business profits is a bad idea, in my opinion; it reduces incentives to work and invest. But also I think you are going to see many more tax-hike proposals from Team Obama. I wouldn’t be at all surprised before the year is out if we didn’t see a proposal for a value-added tax, because he’s running just gigantic spending and borrowing plans. I looked at the Congressional Budget Office numbers and really I’m not usually a deficit hawk because I think you can grow your way out of it, particularly if you are reducing tax rates. But I think these are numbers that are beyond the pale. You are looking at an average deficit that is about 6 to 7 percent of GDP in the next 10 years -- each and every year. In the immediate year it’s going to be way above that. It’s going to be 12 or 13 percent. Then it comes down to 6 or 7 percent; that’s a bad number. And the debt burden grows to 80 percent of GDP, according to the CBO, in the next five to 10 years. I think that -- plus the effort to control business and the breaking up of these bond contracts, which you see with the fight over General Motors and Chrysler -- are anti-growth. Every one of them is anti-market. These things are really going depress our long-run potential to grow. That’s what really concerns me. It’s my biggest issue. Q: Obama has such an array of spending plans. Is there any single one that worries you? A: The single biggest thing I worry about is cap-and-trade, because that would be massive regulation of businesses and massive tax increases. The cost structure of business in the whole country will go up by somewhere between 30 and 40 percent, according to estimates. It will slow down the economy and will really hurt corporate profits and will really damage consumer spending. Q: If you had had a chance this week to ask President Obama a really tough, scolding, loaded question at his press conference about one of his economic policies, what would you have asked him? A: I would have asked him why he thinks government ownership of banks or car companies or Fannie Mae or Freddie Mac is better than bankruptcy courts. I would have asked him why he believes that the White House can pilot these stressed areas better than the market. I regard bankruptcy courts as part of the market process to restructure failed enterprises. That’s what I would have asked him. I would also have asked him -- and this may have come up -- whether there is an end game to this or whether it is unlimited. He claims there is an end game, but he has given us no evidence of that. The next step is going to be gigantic intervention into health care, gigantic intervention into energy, gigantic intervention -- possibly -- into unionization, because I think they are going to make a run at the so-called “card-check” bill, which stops the secret ballot for unionization. I think that is a huge negative for productivity and growth. Q: You were very critical of President Obama’s handling of the Chrysler bankruptcy deal -- you called it “left-wing demagoguery.” A: Yeah. His attack on investors and bondholders is shameful, absolutely shameful. He says he wants people to save more, and yet he doesn’t want them to save through investment. I know many of these bondholders personally. I talk to them. These guys represent teachers and firemen and police and widows -- the whole nine yards. Their job is to invest their clients’ money. Why is that bad? Q: On your show, you are an unabashed cheerleader for capitalism, but there seem to be so few people like you in the media, in business -- even on CNBC, which isn’t crawling with leftists. But they are not too many Larry Kudlows, either. A: Yeah, we cover the gamut. But I continue to argue that economic freedom is vital, and that free market capitalism -- with all of its faults and the possibilities that we do have recessions from time to time -- is nonetheless the most efficient growth engine out there. I think that Obama is moving us away from free markets and towards government controls. That’s the bottom line, and I don’t like it one bit. And I think there’s a limit to the stock market rally. That’s the key. I usually argue for a long-run view, but right now I think investors have to be more activist in managing their portfolios because I don’t think you can just invest for the long run. You have to be rather cautious. Q: Republicans seem pretty stupefied. They have no leader. They seem afraid to stick up for the market in a lot of ways. Do you see any “mustard seeds” in the future of the GOP? A: I think the party is really dead. I am sure that there are “mustard seeds,” in the sense that you can look at individuals who have some good ideas about trying to roll back Obama’s regulations -- in the Senate people like DeMint, Coburn, Kyl. Over on the House side, you’ve got some terrific young people -- Paul Ryan or Jeb Hensarling. But they are just individual House members and senators. You don’t have any national figures -- perhaps Mitt Romney. Ok, he’s a classy guy and perhaps Mitt is destined for greater things. But at the moment, I wouldn’t say he is a force. I actually take the view that the most important Republican spokesman right now is Dick Cheney. An odd view, perhaps, but I think that what Cheney did on the CIA interrogation issue was very interesting, when he pushed back and said, “A), releasing these memos is a terrible idea; and B), if you are going to go there, let’s release the good information that helped keep us safe.” He really rattled the Obama White House by doing that because of his own force and his intellect. I think that on economic policy we are going to see Dick push back also. Q: And Cheney would get the attention from the media? A: Exactly. Exactly. So therefore I am quite interested in what he is intending to do. Q: Is there anything that can happen that would turn you into a pessimist -- a doom-and-gloomer -- when it comes to the fate of free market capitalism? A: Well, if you let market forces go, you’re going to be fine. If you let them play out, if you leave them alone, you’re going to be fine. But the more we attempt to regulate the market and stifle these incentives, the worse we’re going to do. The country will survive. We’ll see in the elections in 2010, I think, a lot of opposition to Obama’s policies. Obama’s approval ratings are good but they are not great. They are about in line with many prior presidents. He’s more popular than his policies are. I think if Republicans mount a good campaign next year they’ll hopefully pick up a number of seats and slow this thing down. But right now we are moving in the wrong direction. It’s that simple. We will get a cyclical economic rebound but I don’t think it is going to be anything to write home about. Bill Steigerwald is a former columnist and associate editor at the Pittsburgh Tribune-Review who’s also worked at the Pittsburgh Post-Gazette and the Los Angeles Times. E-mail Bill at <a href="mailto:bsteige@verizon.net">bsteige@verizon.net</a>. </blockquote> <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=ZjAyNzhiZTViNWMwYTc5MWZiOWI2ZDJjNjdlYTY2ZWE= Tue, 05 May 2009 16:38:13 -0400 Don't Turn America into France -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=NWYzMGUyMmU2OWQwODc4OGZiYjNlMzQyODZmNWY4NDE= My friend Dan Mitchell from the Center for Freedom and Prosperity sent me his latest video today from -- of all places -- an Internet café in France. It explores how “President Obama and many other politicians want to expand the burden of government and make America more like France.” The video features Veronique de Rugy of the Mercatus Center. She explains that the U.S. should not emulate the policies of her native country: <object classid="clsid:d27cdb6e-ae6d-11cf-96b8-444553540000" width="471" height="310" codebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=6,0,40,0"> <param name="allowFullScreen" value="true" /> <param name="allowscriptaccess" value="always" /> <param name="src" value="http://www.youtube.com/v/Z74Akf1WUbU&hl=en&fs=1" /><embed type="application/x-shockwave-flash" width="471" height="310" src="http://www.youtube.com/v/Z74Akf1WUbU&hl=en&fs=1" allowfullscreen="true" allowscriptaccess="always"></embed> </object> <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=NWYzMGUyMmU2OWQwODc4OGZiYjNlMzQyODZmNWY4NDE= Thu, 30 Apr 2009 16:32:05 -0400 Specter's Switcheroo and America's Lurch to the Left -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=Mjc3YTk4YzhmNjFiZmRkNTU1ODQyMmQ4ZGUzYWJiYjc= My initial thought on Arlen Specter jumping the GOP ship is Katy bar the door. This is just the latest indication of a lurch to the left in Washington. It does not bode well for investors, businesses, and entrepreneurs. Meanwhile, GOP political prospects are looking increasingly grim. Just this past Friday, Republicans in upstate New York conceded defeat in a hotly contested battle for a congressional seat where the Republican, James Tedisco, held a 25-point lead at the start. His opponent, Democrat Scott Murphy, credits Obama with his come-from-behind victory. Out in Minnesota, Norm Coleman is all but guaranteed to lose to Democrat Al Franken. Sure, pollster Scott Rasmussen shows the GOP even in the generic congressional race, but it’s getting difficult to find concrete evidence of this. Here’s the problem right now: Republicans lack a clear and defining alternative message on the economy, spending, and the unchecked growth of big government. They have been sorely ineffective on TARP, and sorely ineffective on bank-and-auto Bailout Nation, where Team Obama is threatening to take over six U.S. banks -- not to mention GM and Chrysler. This is on top of the already consummated union of Fannie, Freddie, and AIG into the government fold. Strange as it may seem, the best GOP spokesman right now appears to be former Vice President Dick Cheney. He has taken the Obama administration to task over its declassification of CIA torture memos. He says Team Obama has made America less safe. He’s right. Perhaps he can rally the party? Perhaps we won’t have a lurch to the left. But my worry remains that with Republican ranks dwindling, and the specter of a filibuster-proof majority in sight, we could soon be faced with unprecedented government control over healthcare, energy, and unionization. Moreover, if this massive, anti-business, regulatory apparatus otherwise known as cap-and-trade ever sees the light of day, we’ve got problems. It is a huge, unwieldy tax and an economic depressant. How about card check and ending the secret ballot for unions? Oh my goodness. Wal-Mart, retailers, tech companies, banks, and financial services all will feel the union assault. And how about the nationalization of health care? That will bankrupt the budget, if it hasn’t happened already. It will worsen services and jack up costs. And let’s not forget the threat of higher tax rates. Great Britain has already gone from 40 percent to 50 percent to finance its gigantic spending appetite. In the name of balancing the already humongous budget here, we are headed in the same direction. Guess what? Big tax hikes will only inhibit growth and slow the economy down. Unfortunately, all this looks like the polar opposite of 1981 -- when Ronald Reagan began to move the nation progressively to the right. Today, Obama is tugging the country left. It appears that he is more popular than his policies, but that he is effectively using this popularity to simultaneously move his agenda forward and increase the strength of his party. The Democratic machine is gathering steam and looming large in Washington. None of this is good. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=Mjc3YTk4YzhmNjFiZmRkNTU1ODQyMmQ4ZGUzYWJiYjc= Wed, 29 Apr 2009 16:38:58 -0400 Geithner: The Fox Guarding the Henhouse? -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=NGY4Y2JjNTBiNmMwNjQxNjYwZWJhMGFkZThjOGE5MzE= What is going on in this country? The government is about to take over GM in a plan that completely screws private bondholders and favors the unions. Get this: The GM bondholders own $27 billion and they’re getting 10 percent of the common stock in an expected exchange. And the UAW owns $10 billion of the bonds and they’re getting 40 percent of the stock. Huh? Did I miss something here? And Uncle Sam will have a controlling share of the stock with something close to 50 percent ownership. And no bankruptcy judge. So this is a political restructuring run by the White House, not a rule-of-law bankruptcy-court reorganization. Meanwhile, top Obama adviser Valerie Jarrett opened the door wide on CNN yesterday to bank nationalization and CEO firings. Unfortunately, my <a href="http://kudlow.nationalreview.com/post/?q=ODBkY2Y4ZDdkNzUxZjRkMzZmNWNkMDVmZjdlMTYzYTQ=">take</a> that the economic stress tests are a political stalking horse for more government ownership, more government control of the banks, and more government disruption of shareholder rights and normal corporate governance looks to be coming true. Then there’s today’s huge New York Times <a href="http://www.nytimes.com/2009/04/27/business/27geithner.html?_r=1&hp=&pagewanted=all">story</a> about Tim Geithner. It starts on the front page and goes on and on for thousands of words. Yes, he missed early signs of the crisis. But he was altogether too cozy with the New York banks, especially Citibank -- and Robert Rubin along with Sandy Weill. In fact, at one point Weill asked Geithner to be Citi’s new CEO. And Geithner joined the board of a Weill-run non-profit to help inner-city high-school students. There were numerous lunches and dinners with Rubin and Weill and other Wall Street luminaries. With Geithner running the Treasury and the potentially criminal enterprise called TARP, is his incestuous relationship with Wall Street bigwigs a perfect example of the fox guarding the henhouse? Was he too cozy to keep a critical eye on the very institutions that blew up later? By the way, Geithner sometimes worried about derivatives. But he also worked hard for a plan that would reduce the amount of capital banks were required to keep on hand. You just have to wonder about this cozy relationship with a trillion dollars of TARP money at stake -- essentially a second government budget for Bailout Nation run by a young guy who is in bed and under the covers with the leading bankers he’s supposed to regulate, all while the TARP inspector general is launching 20 criminal probes into how all this taxpayer money is going to be spent. I don’t usually agree with Nobel economist Joe Stiglitz, but he talks about how mindsets can be shaped by people you associate with and that “you come to think that what’s good for Wall Street is good for America.” I know Stiglitz, Krugman, and the other lefties want to nationalize the banks, and allegedly Geithner does not. But frankly, backdoor nationalization is coming and Mr. Geithner’s independence is suspect. No, the Times article doesn’t mention Geithner’s failure to pay back taxes until just before he was nominated for Treasury secretary. But it seems that at this point in history we need a strong, credible, and independent TARP and bank regulator. The New York Times really makes me wonder all over again about Mr. Geithner. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=NGY4Y2JjNTBiNmMwNjQxNjYwZWJhMGFkZThjOGE5MzE= Mon, 27 Apr 2009 16:18:07 -0400 A Damaging First 100 Days -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=NGY5ZTU5M2QxOWE1ZjdiYzZkOGEzOGM4YTQxNTgyMjM= President Obama’s first 100 days are nearly over and his supporters are already suggesting that he is the greatest president of all time. Hmm. Of course, only history will tell. But my single-greatest concern remains the fact that Mr. Obama is moving the country away from democratic free-market capitalism and toward a big-government, command-and-control vision of our nation’s economy. What we are witnessing is a triumph of government bureaucrats over entrepreneurs, investors, and small businesses. President Obama has spent more money in his first 100 days than any president in U.S. history. In fact, the Pelosi-Reid budget Congress just passed with Obama’s blessing doubles the debt in five years, and triples it in ten. To give some perspective, that debt level is higher than the combined debt levels generated under every president from George Washington to George W. Bush. This will almost certainly lead to much higher tax rates down the road. Incidentally, all this talk of raising tax rates on investors and businesses, especially offshore companies, robs the incentive power from entrepreneurship. Over on the banking front, Team Obama is using TARP as a bullying club to force government control on the country’s financial institutions. There is no exit strategy; no endgame in sight. TARP itself is riddled with criminal-enterprise undertones. According to Special Inspector General Neil Barofsky’s report released earlier this week, the $700 billion program is “inherently vulnerable to fraud, waste and abuse.” The proof is in the pudding: Barofsky says he has already opened up 20 separate criminal investigations and six audits into whether taxpayer dollars are being stolen or wasted. Rest assured that they are, and that more will be revealed on that front. As for President Obama’s cap-and-trade-and-tax proposal, it represents perhaps the most massive big-government restructuring of our economy in American history. It is a radical, regulatory, command-and-control nightmare. If this tax experiment passes, it will choke and kill the economy. Universal health care is another illustration of big-government intrusion, and it potentially could result in a government takeover of 16 percent of the economy. It would give government unprecedented power to set prices and allocate resources. And yes, the threat of rationing would be very real. All of these are worrisome threats to our long-run economic future. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=NGY5ZTU5M2QxOWE1ZjdiYzZkOGEzOGM4YTQxNTgyMjM= Fri, 24 Apr 2009 15:45:16 -0400 An Interview with Senator Jon Kyl: Is Government Taking Over the Economy? -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=NmQyN2MzN2ZjMGY5YTY2NDVkZTA0ZDE2OWNiNzQyOTk= On last night’s Kudlow Report I asked Sen. Jon Kyl (R., Ariz.) his thoughts on President Obama’s first 100 days in office and whether he believes that government is taking over the economy. LARRY KUDLOW: All right, back to our theme of the night, Obama’s first one hundred days almost over. Is the government taking over the economy? Well we’re honored to welcome back Republican Whip, Senator Jon Kyl from Arizona. Hello Mr. Kyl, thank you sir. SENATOR JON KYL: Hi Larry. KUDLOW: All right no one does this better than you do. I want to run the table on four or five really important issues. First of all, we’re coming down to the first one hundred days, Obama’s supporters are saying he’s the best president in history. You got a quick thought on that one? It’s an easy one. KYL: Well, if the test is has he spent more money than any president in history, the answer is yes -- in the first one hundred days. How about increasing the debt? Yes. As a matter of fact, the budget that both the House and Senate have passed doubles the debt in five years; triples it in ten years. More debt than every president from George Washington through George W. Bush, just in one Obama budget. I would say that he’s really accomplished a lot on his agenda. KUDLOW: All right, let me go on to expansion of TARP. And by the way, the TARP Inspector General himself says this thing could be a whole totally corrupt program. $3 trillion dollars, it’s a separate budget. But the expansion of TARP, throwing out GM CEO Wagoner, we may see some bank CEOs thrown out -- we don’t know that yet but that’s a possibility. What is your take? Is this a state takeover of the economy? Are they riding roughshod over investors and shareholders? KYL: Yes, and yes. And this is what you get when you have a lot of government involvement in your life. Good lesson: Don’t invite the government in, the government will take over. Now, TARP originally was intended to provide credit to the markets. That’s a good thing. But, it has been expanded beyond its original intent -- especially with regard to bailing out, for example, the auto companies. And as quickly as these banks can get out from under it, they need to do so. KUDLOW: Are you ready to bailout the Boston Globe and The New York Times with more TARP? KYL: No. KUDLOW: I was shocked to hear you say that. Okay. What about the next step in this, cap-and-trade. The president was out there on earth day yesterday in Iowa. Now to me, cap-and-trade, I’m obviously not a supporter. It would be one of the most incredible restructurings of our economy in the nation’s history… KYL: It would kill the economy, kill it… KUDLOW: Will cap-and-trade pass though? KYL: No. No I don’t think so. It’s flopped in Europe. The president has now gone to a version of it that is simply, or primarily, a revenue raiser. That was not what was intended. And no, I don’t think it will pass. Even my colleague John McCain from Arizona, who supports a version of cap-and-trade, said not this version. All this does is provide the president with a big source of money to perhaps pay for something like healthcare. What’s the sense in that? KUDLOW: Is anybody talking about an exit strategy from TARP that we were talking about a moment ago? KYL: Yes indeed. And incidentally, just to go back on the cap-and-trade, when the president talked about reducing taxes on 95 percent of America, remember, this is a tax increase for everybody. Well not everybody, if you turn on a light switch, it’s a big tax increase. If you use any energy, it’s a big tax increase. As the president has said, under his cap-and-trade program, “energy prices will skyrocket”. That’s a quote from the president. Exit strategy from TARP? Those that are under it right now can’t get out from under it fast enough. I think what we’re going to try to do is promote in the Senate a way for them to get out of it as quickly as they can without any residual obligations. And incidentally, when they repay the money, not to have it go back into a revolving fund, but to go back to the Treasury to reduce the debt. KUDLOW: What about the rumor that Senator Schumer and Senator Dodd want some kind of emergency freeze or immediate disclosure so that the credit card companies cannot raise rates or increase charge offs. We’ve been talking about it. Mr. Frank, Barney Frank, and the House has a much better version. But have you heard anything about this immediate emergency cap on the credit card companies? KYL: No I haven’t. But there is a lot of talk about it. They need to be careful about the way that they raise their rates and the kind of disclosure they give to their users and so on. But hopefully we’ll have time to do whatever we do in a sensible way so that it doesn’t kill the very industry that provides us the credit that we need to continue to buy things. KUDLOW: All right what about universal healthcare insurance -- the big expansion, Medicare, Medicaid, the threat of rationing and the threat of allocation of resources? KYL: The threat of rationing is very, very real. And if you want the government to get in between you and your doctor, if you want the government bureaucrats to delay or to deny you coverage, then I think supporting the kind of thing that we’ve heard is predicted to come out of the administration is what you want to support. KUDLOW: Can Republicans stop it sir? KYL: Oh I think we can. I am sure that the American people can stop a program that puts bureaucrats in between patients and their doctor, and that delays and denies care to them. Yes. KUDLOW: It’s a big issue. When’s this going to heat up? When’s it going to come down to votes? KYL: This will take a while Larry. I think that you’ll see through the month of May, the legislation being written in the Senate. Not sure when it will come to the Senate floor. It’s actually pretty quick. But there is at least some time to try and stop this kind of “healthcare reform.” KUDLOW: And Senator Kyl can you stop an overseas tax on business profits which could be decimating to business? Can you stop it? KYL: I hope so. Because people do not realize that when we ask our companies to go abroad and do business, they have to make money. And when they do they shouldn’t be taxed on all of it. Bottom line is I hope we can. KUDLOW: Senator Jon Kyl, nobody does it better sir. We really appreciate your time. KYL: Thanks Larry. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=NmQyN2MzN2ZjMGY5YTY2NDVkZTA0ZDE2OWNiNzQyOTk= Fri, 24 Apr 2009 12:04:11 -0400 TARP, the Criminal Enterprise? -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=ZTlmMTBiY2RjZGIwYmFkN2Q1ZTE3ZTI1NTI1NzEwMGQ= Is the whole TARP plan a criminal enterprise? Sounds farfetched, I suppose. But after reading about Special Inspector General Neil Barofsky’s <a href="http://www.sigtarp.gov/reports/congress/2009/April2009_Quarterly_Report_to_Congress.pdf">report</a>, it may well be that TARP is just one big criminal problem. Listen to this: Barofsky’s investigators reported Monday that they have opened 20 criminal probes into possible securities fraud, tax-law violations, insider-trading, and mortgage-modification fraud related to TARP. Yup, those are criminal probes. Barofsky is the special IG overseeing the bailout program. And for some reason the mainstream media refuses to report this on the front pages where it belongs. Barofsky’s report spans 247 pages. And it says that the very character of the bailout program makes it “inherently vulnerable to fraud, waste and abuse, including significant issues related to conflicts of interest facing fund managers, collusion between participants and vulnerabilities to money laundering.” By the way, one of Barofsky’s recommendations is for Treasury to abandon its whole plan of buying toxic assets from banks and investors. The IG’s report also notes that what started last October as a single-purpose $750 billion effort to buy toxic securities has morphed into twelve separate programs that cover up to $3 trillion in direct spending, loans, and loan guarantees. In other words, TARP is nearly equal in size to the entire federal budget. Now, Geithner & Co. has said very little about this. Even in yesterday’s TARP oversight hearing, very little was said about the Barofsky critique. That’s too bad, because this is a crucial area of investigation. TARP is badly in need of reform -- or maybe better yet, badly in need of termination. Think about this: TARP, which is now linked to substantial criminal activity, has ballooned to the size of a second federal budget and represents the biggest government-directed intrusion into the economy in history -- vastly bigger than the New Deal. And not only is there TARP for banks, insurance companies, and non-bank financial institutions, but also for GM, Chrysler, and various auto suppliers, and perhaps soon enough for credit cards, newspapers, and other sectors of the economy. This is why <a href="http://article.nationalreview.com/?q=ZWMwOGU1NGNhOTU3MDUyZGJmZTczOTM5YzUwOTVhZWU=">I believe</a> the era of democratic free-market capitalism is coming to an end. It is being replaced by state-directed corporatism on a grand scale. This is central planning that goes way beyond the American tradition. Now we will wait and see if the investigative process for TARP turns into a judicial process, and whether this criminal enterprise puts the long arm of the law onto specific, individual criminals. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=ZTlmMTBiY2RjZGIwYmFkN2Q1ZTE3ZTI1NTI1NzEwMGQ= Wed, 22 Apr 2009 16:20:37 -0400 An Interview with Congressman Jeb Hensarling on Tim Geithner, TARP & Team Obama -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=ZDVkODdkNTExYWQxYzc4ODdiNjZjNWExNjRmZmY2ZmQ= On last night’s Kudlow Report I spoke with Rep. Jeb Hensarling (R., Tex.) about his thoughts on Treasury Secretary Tim Geithner’s TARP testimony and Team Obama’s overall handling of the banking system and economy. LARRY KUDLOW: Earlier I spoke with the chairman of the Republican Study Committee, that’s Congressman Jeb Hensarling of Texas. He also serves on the Congressional Oversight Panel on TARP. I asked him what did he take away from Tim Geithner’s testimony today. Here’s what he said. REP. JEB HENSARLING: Well what’s more important Larry is what I didn’t take away. What I didn’t take away is any kind of measurement of success for the program. What I didn’t take away is any exit strategy. What I didn’t take away is any plan for these firms that have taken money to be able to pay it back when they want to pay it back. And what I didn’t take away was any commitment to ensure that we don’t have federal control of our financial institutions, that TARP is being used as kind of a backdoor for control. That’s what I didn’t take away. KUDLOW: Let me ask you this, this is a very key point -- the payback of TARP. Yesterday the market plunged 300 points on fears of a backdoor nationalization, no TARP payback. Now today Mr. Geithner said he would welcome some payback, but then he went on to say the final decision will depend on overall credit conditions in the economy. That sounded like a hedge to me. I don’t think that answered the question. What was your instinct and impression on this? HENSARLING: My impression was that Secretary Geithner -- and I respect the man -- but in this case he gave a couple of different answers to the same question. On the one hand, he said, ‘well if the firm has met its regulator’s criteria for safety and soundness they can pay it back.’ Later he went on to say, ‘well, maybe there are macroeconomic considerations we have to take into consideration.’ What I took away is those who took the money, and let’s face it Larry, a lot of them didn’t want to take the money. They either had a proverbial gun put to their head, or somebody wrapped them in an Old Glory and said ‘you have to do this for the country.’ You know they ought to be able to give the money back, and the taxpayer wants his money back. And if Treasury won’t allow that to happen, it raises questions. Why not? KUDLOW: Does Team Obama want to maintain control over the banking system? Is this some kind of newfangled, state-directed capitalism, state-directed economy? Something like Western Europe had for so many years, the so-called social market economy that gave them such slow growth? Is that where we’re going here? HENSARLING: Well, I fear so. Now Secretary Geithner wouldn’t admit to that. And I suspect the administration wouldn’t either. But where was the exit strategy? And why won’t they take off the table this conservatorship option in perpetuity that will allow them to essentially tell Detroit what kinds of cars to manufacture; tell our financial services industry what kinds of loans they have to make, which by the way is what got us into this trouble in the first place with Fannie and Freddie and the affordable housing mission and all that. They won’t take it off the table Larry. And so a lot of people are rightfully concerned, including myself. KUDLOW: Well look, absolutely, you’ve got control of the banks, control of General Motors and Detroit; control of the housing market; maybe control of the healthcare markets; maybe control of American industry through cap-and-trade coming down the road. But I mean, I think the big question here is some critics are saying this is socialism. Some critics are saying this is fascism. I want to get your take. I have a problem with [the suggestion] of fascism, because we are not a dictatorship, we are a democracy. We don’t own the means of production, which is socialism. But we are seeing a deeper government involvement in the economy than anything we’ve ever seen in the American tradition. What is you reaction to that? HENSARLING: Well I don’t know what label to apply to it Larry. But if you like the way the federal government is running AIG, I’m sure that you’ll love the way that they run the rest of the financial services industry. And let’s remember something about TARP in the first place. Assuming the press reports can be believed, I mean, TARP was written in one case to help one bank, one specific bank in America. And it was also written in such a way to help for example Detroit. You’ve got Washington picking winners and losers. And so all of a sudden, decisions are being made on what helps politicians, not what helps the economy. Some will call it socialism. Some will call it a command-and control economy. Whatever it is, it’s antithetical to the American experience. And it is the opposite of the dynamic of entrepreneurial capitalism which is the best housing program, nutrition program and healthcare program in the history of the world. KUDLOW: I mean, looking at the management of this thing, I don’t know what your impression was of Mr. Geithner, whether you think he is a capable guy or not. But you’ve got the TARP inspector general Barofsky coming out today, he says they have opened twenty criminal probes. He says now, what was a $750 billion dollar TARP program has morphed into a $3 trillion dollar program of direct spending, loans and loans guaranteed. Do we believe that either the Treasury or the US government can actually manage this gargantuan program? HENSARLING: Well absolutely not. I mean it’s not humanly possible. I mean that’s why we need the dynamic of entrepreneurial capitalism. Listen, I wish economic growth only went in one direction. It doesn’t. There are economic downturns. They’re painful, they’re harmful, and they hurt families. The question is how do we best get out of it? And history shows us that if we reduce the capital gains tax, put capital in the hands of the job engine of America -- small business -- if we’ll get tax relief to working families, historically that’s the recipe. That’s not theory, that’s history we have on my side. And that’s what we need to do. KUDLOW: Well look, Mr. Geithner said today regarding TARP, and the housing assistance and all the rest of it, $3 trillion dollars worth according to [Inspector General] Barofsky, he said this is better than any of the other alternatives. What’s your response to that? HENSARLING: Absolutely not. I would zero out the capital gains tax for any transaction done in the next year. We need the voluntary capital of investors, not the involuntary capital of taxpayers to help solve this problem. Second of all, I would bring down our corporate tax rate, the second highest in the industrial world, to at least the average of the EU. Next, I would create a greater tax deduction for the mortgage interest, to try to get some of the excess housing on the market. This is not the best plan. And again, I fear it is the slippery slope to European style socialism. Listen, if the people in my district wanted to live in France, they’d move to France. KUDLOW: [laughter] All right, House member Jeb Hensarling, head of the Republican Study Committee, I can’t thank you enough sir. HENSARLING: Thanks for having me Larry. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=ZDVkODdkNTExYWQxYzc4ODdiNjZjNWExNjRmZmY2ZmQ= Wed, 22 Apr 2009 13:27:19 -0400 Want Less Corruption? Shrink the Size of Government -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=MDNhMGVlMzRjMzQxOTQyMDA0MTM2NWMxZGYxYjVjOTI= Big government facilitates corruption. That’s the key point policy expert Dan Mitchell makes in this new video from the <a href="http://www.freedomandprosperity.org/">Center for Freedom and Prosperity</a>. I happen to agree. <object classid="clsid:d27cdb6e-ae6d-11cf-96b8-444553540000" width="425" height="344" codebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=6,0,40,0"> <param name="allowFullScreen" value="true" /> <param name="src" value="http://www.youtube.com/v/SovALlOhSg8&color1=0xb1b1b1&color2=0xcfcfcf&feature=player_embedded&fs=1" /><embed type="application/x-shockwave-flash" width="425" height="344" src="http://www.youtube.com/v/SovALlOhSg8&color1=0xb1b1b1&color2=0xcfcfcf&feature=player_embedded&fs=1" allowfullscreen="true"></embed> </object> <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=MDNhMGVlMzRjMzQxOTQyMDA0MTM2NWMxZGYxYjVjOTI= Tue, 21 Apr 2009 10:42:56 -0400 Backdoor Path to Bank Nationalization -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=ODBkY2Y4ZDdkNzUxZjRkMzZmNWNkMDVmZjdlMTYzYTQ= A big New York Times <a href="http://www.nytimes.com/2009/04/20/business/20bailout.html?_r=1&hpw">story</a> this morning strongly suggests that Team Obama is about to up the ante in an effort to control the banking system for as long as the eye can see. White House and Treasury officials are now talking about turning government TARP loans into common stock for the 19 biggest banks. It’s clearly a backdoor path to nationalization, as Uncle Sam would be the largest shareholder in these institutions. What’s more, it’s not at all clear that the administration will even let certain banks pay down their TARP loans. This is government intervention into the private sector on a grand scale. It is financial/industrial policy. Banks will be kept on a very short leash regarding compensation, loans, credit-card issuance, mergers, acquisitions, and all the rest. Not surprisingly, stocks opened down 200 points today -- with banks leading the freefall -- and finished down about 300 points. Government control of the banks is going to get worse. Team Obama won’t let go without a fight. And the hook may well be the so-called economic stress tests that will show certain big banks in need of more capital. The Treasury (a.k.a. the taxpayer) already owns 36 percent of Citigroup’s common stock, a position that comes with full voting rights. Now it looks like more of this is on the way. As a political excuse, the White House says it’s not going to get more TARP money from Congress, so its next best step is to convert TARP into common-stock government ownership. But there’s a clear agenda here: to keep banks under the heavy boot of the government policymakers. On the Sunday talk shows Larry Summers did not deny any of this. He was cagey about de-TARPing, and he left the door open for new federal action following the release of the stress tests early next month. Summers also turned up the burner on credit-card controls, bashing the banks for being unfair to consumers. But if consumer credit-card defaults are rising, any risk-based credit-card issuance would have to tighten rates or charges. Otherwise banks will just cut out the middle-income credit-card holders and stay with the top income earners. Is that what Congress wants? Is that what Obama wants? Is that what taxpayers want? Tougher credit-card terms are a solution -- that is, if banks are still profit-maximizing institutions. The irony here is that earnings reports from the banks have been very good. This is one of the key factors in a dramatic six-week stock market rally that foreshadows economic recovery later this year. But that rally was stopped dead in its tracks today by a new threat of bank nationalization. Once again, the investor class got shafted. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=ODBkY2Y4ZDdkNzUxZjRkMzZmNWNkMDVmZjdlMTYzYTQ= Mon, 20 Apr 2009 17:10:50 -0400 Stress-Test Uncertainty -- By: Larry Kudlow webmaster@nationalreview.com (Larry Kudlow) http://kudlow.nationalreview.com/post/?q=ZDEwNTIzOGEwNzRkZDM1MTI1ZDNmZDFjODU0MzlmMWE= Big news today for the banks: The White House and Treasury <a href="http://www.bloomberg.com/apps/news?pid=20601103&sid=aTJal.ypxqE4&refer=us">announced</a> that the economic stress-test results for the 19 largest banks will in fact be made public on May 4. This whole stress-test business has opened up a Pandora’s box of difficult issues. No banks are going to fail, per se, but some will do better than others. We’ve already seen strong earnings reports from Wells Fargo, Goldman Sachs, and today JPMorgan Chase. Everyone is now waiting for Citigroup and Bank of America, two that are often regarded as weak sisters. Will the stress-test results slam banks and the overall stock market, pushing each way down? Could the results wind up killing confidence, erasing the confidence-progress of the past two months? There’s no question that once the government decided to run these stress tests to model worst-case economic scenarios, that the banks would be forced to report the results. New regulations by the SEC insist on transparency. It’s called the 8-K SEC filing. Individual banks may get their own results out before the Treasury does. That’s another issue, and presumably the stronger ones will do this. But the whole story is a cautionary tale for investors right now. JPMorgan CEO Jamie Dimon said today that he wants to get out from under TARP, which he regards as “a scarlet letter.” Goldman Sachs is also ready to pull the de-TARP trigger. So is Wells Fargo. But here’s a key question: Will the de-TARPed banks move completely out from under government control? Paying down TARP may not be the last word. Many of the big banks have issued large bond offerings under FDIC guarantees. Of course, the offerings sold easily since government backing makes the bonds risk-free at cheaper rates. But will the onerous TARP restrictions on compensation, H-1B foreign-visa hiring, and dividend- and share-buyback policies all be suspended with a TARP pay-down, or will the government’s bond guarantees keep these banks under those restrictions? No one knows. So one really big question is whether Team Obama will relinquish control over most of these banks, or whether the bureaucracy will do everything it can to maintain control. I still believe the best bailout policy for the banks is the upward-sloping Treasury yield curve created by the Fed’s easy-money policies. Borrowing short at near-zero interest and lending long at 5 or 6 percent is the ultimate solution to the credit crunch. Most of these banks will have the capacity to earn their way out of the toxic-asset problem. And the scoring of those toxic assets has been made somewhat easier as a result of mark-to-market accounting reform from FASB and the SEC. However, Jamie Dimon said today that his bank will not play in the Public-Private Investment Program (PPIP) created by the Treasury. That probably means his strategy is to earn his way out of the toxic-asset value problem. It also means he wants to stay away from any government programs that will interfere with the running of his bank. So the stress-test issue is going to unlock a lot of these questions. But it also adds considerable uncertainty to the answers. <hr width=100% size=2> http://kudlow.nationalreview.com/post/?q=ZDEwNTIzOGEwNzRkZDM1MTI1ZDNmZDFjODU0MzlmMWE= Thu, 16 Apr 2009 14:45:33 -0400