Kudlow's Corner

Message matters: Trump succeeded, Yellen failed


Most political reporters are fixated on the presidential horserace rather than the message the candidates are sending to voters. Message wins every time. Message moves polls. Message raises money. Message determines elections.

Most of all, a clear message tells voters what a candidate believes and where he or she wants to take the country.

Former President Ronald Reagan was the master of the message. Campaigning on just a few key points, he told America how he was going to rejuvenate the economy and defeat Soviet communism. He didn't spend much time on detail. But, over and over, he repeated his strategic message. And it worked.

Donald Trump announces his candidacy for the U.S. presidency at Trump Tower in New York City.
Christopher Gregory | Getty Images News | Getty Images

The two biggest events this past week were Donald Trump's landslide victory in the New Hampshire Republican primaries and Janet Yellen's testimonies before Congress. Trump's message succeeded. Yellen's failed.

An unlikely pair to be sure. But let's give a quick thought to why Trump got it and Yellen did not.

First up, Janet Yellen. At the end of last year, the U.S. Federal Reserve raised its target interest rate, with a lot of hawkish talk about three years of sequential rate hikes. Markets crashed in response. And now the Fed is in full retreat.

This is not a clear message. This is not leadership.

Before the House this week, Yellen acknowledged that the Fed's forecasts and policies may not be working. (What an understatement.) She pointed to stock market declines and higher credit-risk interest rates. And when asked whether the Fed was changing its upbeat economic view that would lead to more rate hikes, she replied: "Maybe, but the jury is out."

Janet Yellen, Chairwoman of the Federal Reserve Board of Governors
Samuel Corum | Andolu Agency | Getty Images

Oil prices and inflation are falling. So are profits. No clear message.

The next day before the Senate, not only did Yellen back off additional Fed rate hikes, she raised the issue of pushing short-term interest rates into negative territory. Woah. The flip-flop of flip-flops.

That policy hasn't worked in Europe or Japan, and it won't work here. It would destroy savers, again. Banks will go into short- and medium-term Treasuries, which at least have a positive yield, rather than make loans. And negative rates will crush net interest margins for banks.

The Dow fell 231 points following Yellen's stellar performance. Year to date, the S&P 500 is off nearly 8 percent. And banks are off 18.5 percent. You're not going to breed economic confidence when the Fed leaves everyone in confusion.

Now let's leave Ms. Yellen in the emergency room and move on to a patient who has healed in the message department.

Donald Trump is today mastering the art of the positive. Coming out of an Iowa loss, campaign manager Corey Lewandowski told him bluntly, according to the Wall Street Journal, "We can knock on every door and call every resident. But most important: If we remain positive and focus on our message, we can win New Hampshire."

Win indeed.

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When I interviewed Trump on the day before the primary, he emphasized his positive message of optimism, growth, and national security. In recent weeks, he has talked about how America has been losing key battles around the world, whether it's the terrorist group that calls itself Islamic State, Russia, Iran, China trade, immigration, or the declining economy. And he has loudly proclaimed: If you elect me, we will start winning again. Everywhere.

Asked what a President Trump would do about the risk of recession, he reeled off a series of tax cuts, deregulations, and federal budget cuts. He knows the country is in revolt against Washington, D.C., and he plays to that with his program.

He talks about oil independence and opening up federal oil fields.

He talks about bombing IS oil trucks.

He mentions Anthony Scalia and Clarence Thomas as models for Supreme Court appointments.

He talks about creating jobs -- over and over.

He talks about strong border controls to fix the illegal immigration problem.

He talks about a strong military and renewed support for our military veterans.

He proposes a total repeal of Obamacare, with HSAs and crossing state lines for more competition.

Perhaps most interesting, he is railing against big corporations and their big money deposited in super PACs. Unlike a typical Republican, he hangs out Big Oil, Big Pharma, Big Insurance, and Big Lumber as examples of the corrupt monetary influence on American politics.

I asked him if he intended to change the Republican party. He snapped, "You bet I do. It needs changing."

There are soft spots in Trump's proposals, most particularly on China trade. His tariff threat is worrying Wall Street and pro-growth free-traders like myself. More work on that will come.

But apart from even these details, Trump's message is clear: America must start winning. And yes, we must make America great again.

Positive and optimistic. Growth. Leadership. Clarity. It worked in New Hampshire.

Janet Yellen, on the other hand, nearly fell off the financial ladder.

Message matters. There's a lesson here for all of us.

Commentary by Larry Kudlow, a senior contributor at CNBC and economics editor of the National Review. Follow him on Twitter @Larry_Kudlow.