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Could Washington Threats Spell Double-Dip?

Friday, 5 Mar 2010 | 12:50 PM ET

There’s a lot of loose talk on Wall Street right now about the risk of a double-dip recession.

I’m not buying it.

Now, I’m the first to admit there’s a good debate about the overall strength of the recovery rebound. But the recession ended last June, and I’m still thinking a 4 percent growth rate in 2010 is likely. That could spell another large rally in stocks.

We had pretty strong numbers yesterday on retail chain-store sales, as well as a welcome drop for unemployment claims. That was followed up by this morning’s better-than-expected loss of 36,000 jobs in the February report. Consensus was for a loss of 65,000 jobs. And don’t forget the ISMs earlier this week were both pretty solid. Stronger business profit performance remains a key stimulus to the U.S. economy. That’s a lot more powerful than this phony Washington government spending and borrowing. Meanwhile, the power of easy money from the Fed is still an active propellant for economic growth.

We do need to remain vigilant over Washington’s tax, spend, and regulate threats to economic growth, jobs, and investment. Higher tax rates to deal with the monster deficits may be lurking in the not-too-distant future. Big tax hikes will really hurt the economy longer-term.

This country is not currently on the supply-side model of growth. At least not yet.

Smaller government and lower tax rates across the board, along with a stable King Dollar, would give me much more confidence about the economy’s long-term future. Perhaps sweeping political changes in Washington come November will move us in the supply-side direction.

Incidentally, I just loved Dan Henniger’s Wall Street Journal column yesterday, “Bring Back the Robber Barons.”He nailed it. We should be rewarding the great entrepreneurs who will build new American businesses and create millions of American jobs.

That’s right, reward them, not punish them. Are you listening Washington?

Think Carnegie. Think Rockefeller. Think Vanderbilt. Think about creating new Oracles, new Microsofts, new Fed-Exs. That’s what they’re doing in places like China, Brazil, and India. They don’t eat their rich in those places. But that’s not what we’re doing here at home.

Fortunately, the political tide may be turning toward the supply-side. Never forget: We cannot and will not have strong and vibrant capitalism without capital and capitalists.

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