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Money & Politics with Larry Kudlow

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  Saturday, 9 Jan 2010 | 1:24 PM ET

Kudlow: Obama Must 'De-stimulate' to Spur Hiring

Posted By: Larry Kudlow

After the arrival of a disappointing December jobs report, my thought on putting America back to work is simple: de-stimulate.

That’s right. Get rid of the Obama stimulus monster, including the government takeover of health care, cap-and-trade, and all this nonsensical talk of creating green jobs.

Get rid of the increase in marginal personal tax rates and capital-gains tax rates.

Get rid of the payroll tax hike from the health-care talks.

Get rid of the spending that is a counterweight to growth.

Get rid of it, every part of it. It’s creating so much uncertainty that even profitable businesses are afraid to hire new workers and expand.

It’s like business is on hold as it waits for the next Washington shoe to fall.

Check this out. On Friday, the day of the sub-par jobs release, President Obama comes out with a new green-jobs program that will cost taxpayers $2.3 billion. He predicts targeted tax credits for all of his faddish “energy savers” — presumably determined by hoards of EPA bureaucrats — will create 17,000 new jobs. This is out of a total workforce of 153 million.

And wait, it gets better. The average cost of these alleged new green jobs will be $135,000 per job. It’s sorta like the $780 billion stimulus plan, half of which has supposedly saved 1 million jobs at roughly $200,000 per job.

And on the subject of energy-related jobs, the EPA is now going to penalize manufacturing America — or what’s left of it — with tougher standards to reduce smog. Of course, smog has already fallen 25 percent in the last three decades. And the EPA’s projected smog savings are so miniscule compared to the new costs for business that the National Association of Manufacturers, the petrochemical makers, and others are screaming bloody murder.

This little EPA beauty could cost up to $90 billion annually. All of this with a 10 percent unemployment rate, mind you. It’s another triumph for left-wing social policy over economic-growth policy.

And get this. Interior Secretary Ken Salazar recently announced that he is closing down federal lands for oil and gas drilling. This with the price of oil hovering around $83 a barrel and retail gas at the pump moving in the direction of $3 per gallon. Huh? Does anybody in Washington have any common sense at all?

Steve Moore of the Wall Street Journal just wrote a good column about tax chaos in the new year, with small-business write-offs for capital purchases expiring, the alternative minimum tax (AMT) un-indexed for inflation, and no fix in place for the estate tax, which is set to rocket from zero back to 55 percent.

And let’s not forget, as Harvard economist Greg Mankiw reminds us on his excellent blog, that the $780 billion stimulus plan was supposed to generate a peak of only 8 percent unemployment. Not happening -- at least not yet.

So my point is this: Get rid of all this government spending, taxing, regulating, and meddling. De-stimulate. Let us keep our own money as workers, small-business owners, and corporate employees. Stop any future tax hikes. Stop them. And bring down business tax rates for large and small companies, from 40 percent (federal, state, and local) to something around 25 percent. And take a cue from FedEx CEO Fred Smith, who wants to revive the manufacturing and transportation industries with immediate cash-expensing tax write-offs for investment in new equipment.

President Obama has talked about a zero cap-gains tax for small investors. But why not provide more capital access for everybody, small- and large-business investors?

In light of all the tax-and-regulatory threats, it’s too expensive to hire right now. So get rid of all the so-called stimulus plans and social policies to transform the government’s relation to the private economy. Remove these obstacles.

Now, even with an 85,000 drop in corporate payrolls in December, labor-market conditions are gradually improving, however slowly. Leading indicators like temporary-help workers, manufacturing overtime hours, and jobless claims are pointing to better job creation in 2010. But it’s painfully slow. And that’s why the tax-and-regulatory obstacles from Washington must be removed to speed up the employment-recovery process.

The economy has more than enough monetary stimulus, and corporations are profitable. The stock market rose nearly 3 percent in the first week of the new year, and is up 70 percent from the March 2009 low. The recession is over. But America must go back to work to truly get the country moving again. Unfortunately, Washington is standing in the way.

There’s a populist wave coming, but it’s from the right, not the left. Free-market populism emanating from the tea-party movement wants government out of our businesses and out of our pockets. These folks are right.

Right now, Washington is completely wrong.

On CNBC.com:

Questions? Comments, send your emails to: lkudlow@kudlow.com

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  Thursday, 7 Jan 2010 | 3:24 PM ET

John Taylor vs. Ben Bernanke

Posted By: Larry Kudlow
The Real Crisis Culprit
Insight on whether monetary policy is not the problem, with John Taylor, Stanford University economics professor.

Was the lack of regulation chiefly to blame for unleashing the housing bubble?

Or was it the Fed's easy money, low interest rate policy?

Joining me to discuss on last night's Kudlow Report was distinguished Stanford economics professor John Taylor, creator of the Taylor Rule.

On CNBC.com:

Questions? Comments, send your emails to: lkudlow@kudlow.com

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  Thursday, 7 Jan 2010 | 1:57 PM ET

Are Free Market Forces on the Comeback Trail?

Posted By: Larry Kudlow

Here’s my latest Money Politics message: the midterm elections are going to be crucial in determining the outlook for pro-growth, free market policies includes lower taxes, lower spending, ending bailouts and diminishing federal control over our economic freedom.

Some commentators fret that high-tax & regulate big government will undermine the stock market boom, and the fledgling economic recovery that I call a mini-boom. Those are good worries. But my counterpoint is this: there is a new revolution going on against big government controls.

It started with the tea party movement. And it now seems to be making its way through the ranks of the Republican Party. The new New Deal may be over. As a result, the longer-term outlook may actually be more optimistic for supply-side capitalism, entrepreneurship, and economic growth.

Some recent news items...with oil prices hovering at a 14-month high around $83, why in the world is Interior Secretary Ken Salazar creating high regulatory hurdles that will make it virtually impossible to drill for oil and natural gas on federal lands? Why is he doing this? We need to deregulate energy. We need drill, drill, drill—plus nuclear. It’s time to unleash energy entrepreneurship here in America. We need free market forces, not government regulations, to dominate our energy markets. It could be a truly phenomenal source of jobs creation.

Elsewhere, the ISM services index rebounded nicely. ADP job losses continue to decline. Layoff announcements are at 9-year lows. This is all part of my mini-boom scenario.

Finally, we can't have free market prosperity without a sound King Dollar. We surely don't need another commodity and asset bubble arising from ultra-low rates, ultra-easy money, and a declining dollar.

It’s unbelievable that December’s Fed minutes are still talking about buying more bonds and creating more money. This is a big reason why oil and gold are soaring. Something is amiss here. Bernanke is not on the right path. Free-market capitalism needs steady money and a sound dollar.

On CNBC.com Now:

Questions? Comments, send your emails to: lkudlow@kudlow.com

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  Thursday, 7 Jan 2010 | 11:41 AM ET

Dem Reforms Not Attack on Wealthy: House Majority Leader

Posted By: John Harwood

Democratic reforms, like rolling back Bush tax cuts and the health care bill, are not an attack on the wealthy, house Majority Leader Stony Hoyer (D-Md.) told CNBC Thursday.

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  Tuesday, 5 Jan 2010 | 11:32 AM ET

Can Scott Brown Win Teddy Kennedy's Senate Seat?

Posted By: Larry Kudlow
Supply-Sider in Chief
A look at the JFK-Reagan tax cutting message from Scott Brown, (R) Massachusetts Senate candidate, and whether it will lead to a big political upset.

Upset of the new decade in the works?

Could the JFK-Ronald Reagan tax-cutting message lead the GOP to a huge political victory in Massachusetts?

Republican Senate candidate Scott Brown joined me last night to discuss.

Questions? Comments, send your emails to: lkudlow@kudlow.com

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  Tuesday, 5 Jan 2010 | 11:27 AM ET

10 Best Dressed Men of 2009

Posted By: Larry Kudlow

Another year, another amusing award bestowed upon yours truly by hard-hitting political consultant and fashion aficionado Roger Stone.

Last year, I finished in second place, just behind President Obama.

This year I slipped a spot courtesy of actor Jude Law, but still managed to stay ahead of George Clooney.

Questions? Comments, send your emails to: lkudlow@kudlow.com

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  Wednesday, 30 Dec 2009 | 6:40 PM ET

Have Faith in Free-Market Capitalism, Will Prosper

Posted By: Larry Kudlow

Despite the historic expansion of the federal government’s involvement in, intervention in, and control of the economy (including Bailout Nation; takeovers of banks, car companies, insurance firms, Fannie, Freddie, AIG, GM, Chrysler, and GMAC; large-scale tax threats; overregulation; an attempted takeover of the health-care sector; ultra-easy money; a declining dollar; and unprecedented spending and debt creation) -- despite all the things that would be expected to destroy the economy -- (all this socialism lite and the degrading of incentives and rewards for success) -- despite all this, the U.S. economy has not been destroyed.

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  Sunday, 27 Dec 2009 | 3:17 PM ET

House Backers of Public Insurance Option May Yield

Posted By: AP

Two House Democrats who favor a government insurance plan, a central element of health care legislation passed in their chamber, acknowledged Sunday it might have to be sacrificed as negotiators work out a final agreement with the Senate.

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  Tuesday, 22 Dec 2009 | 4:50 PM ET

The Yield Curve Is Signaling Bigger Growth

Posted By: Larry Kudlow

What’s a yield curve and why is it so important?

Well, the curve itself measures Treasury interest rates, by maturity, from 91-day T-bills all the way out to 30-year bonds. It’s the difference between the long rates and the short rates that tells a key story about the future of the economy.

When the curve is wide and upward sloping, as it is today, it tells us that the economic future is good. When the curve is upside down, or inverted, with short rates above long rates, it tells us that something is amiss -- such as a credit crunch and a recession.

The inverted curve is abnormal, the positive curve is normal. We have returned to normalcy, and then some. Right now, the difference between long and short Treasury rates is as wide as any time in history. With the Fed pumping in all that money and anchoring the short rate at zero, investors are now charging the Treasury a higher interest rate for buying its bonds. That’s as it should be. The time preference of money simply means that the investor will hold Treasury bonds for a longer period of time, but he or she is going to charge a higher rate. That is a normal risk profile.

The yield curve may be the best single forecasting predictor there is. When it was inverted or flat for most of 2006, 2007, and the early part of 2008, it correctly predicted big trouble ahead. Right now it is forecasting a much stronger economy in 2010 than most people think possible.

So there could be a mini boom next year, with real GDP growing at 4 to 5 percent, perhaps with a 6 percent quarter in there someplace. And the unemployment rate is likely to come down, perhaps moving into the 8 percent zone from today’s 10 percent.

The normalization of the Treasury curve is corroborated by the rising stock market and a normalization of credit spreads in the bond market. I note that as the curve has widened in recent weeks, gold prices have corrected lower and the dollar has increased somewhat. So the edge may be coming off the inflation threat. If market investors expect the economy to grow, inflation at the margin will be that much lower as better growth absorbs at least some of the money-supply excess created by the Fed. My hunch is that inflation will range 2 to 3 percent next year.

It also could be that the health-care bill about to pass in the Senate is less onerous from a growth standpoint -- and certainly less onerous than the House bill. For example, the Senate bill does not contain a 5.4 percent personal-tax-rate surcharge, which also would apply to capital gains. So if the Senate bill becomes the final bill, it will be less punitive on growth. That could explain the fall in gold and the rise in the dollar. We’ll still be stuck with a tax hike from the expiration of the Bush tax cuts, but at least we won’t have a tax hike on top of that. That’s the optimistic view, at any rate.

But really, pessimists have missed the big rise in corporate profits, the resiliency of our mostly free-market capitalist economy, and the monetarist experiment from the easy-money Fed. The optimal policy mix on the supply-side is low tax rates and King Dollar. We don’t have that. So as good as 2010 may be, with investors moving to beat the tax man, it could be a false prosperity at the expense of 2011.

But let’s cross that bridge when we get there. Right now, rising stocks and a wide and positive yield curve are spelling strong economic growth in the new year.

More on CNBC.com including;

Questions? Comments, send your emails to: lkudlow@kudlow.com

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  Tuesday, 22 Dec 2009 | 10:53 AM ET

Economy 2010: A Recovery By Any Other Name

Posted By: Albert Bozzo

Economists are busy upgrading their economic forecasts for 2010, but don’t start the “Happy New Year” cheers just yet.

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About Money & Politics with Larry Kudlow

  • Here at Money & Politics we still believe that free market capitalism — on the supply-side — is the best path to prosperity. Here you’ll find Larry Kudlow’s thoughts and perspective on all the hot topics moving Washington and Wall Street.

Contact Money & Politics with Larry Kudlow

 

  • Lawrence Kudlow is a CNBC senior contributor. Previously, Kudlow was anchor of CNBC's prime-time program "The Kudlow Report"

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