Prescription for a Stronger Economy: Marriage

by Larry Kudlow

I spoke at the Calvin Coolidge Memorial Foundation dinner last week.  Nationally syndicated columnist Cal Thomas wrote this column about my remarks:

At a dinner sponsored by the Calvin Coolidge Memorial Foundation last Thursday (I am an unpaid national advisory board member), there was a debate about wealth redistribution. A team of Canadian students who think government should “spread the wealth around” faced off against a team of American students who think government has no business doing any such thing.

The theme continued when former Sen. Phil Gramm, Texas Republican, debated Chrystia Freeland, a member of the Canadian Parliament. While all of this was informative, civil, interesting and at times entertaining, the final speaker, CNBC commentator Larry Kudlow, may have uttered the most profound thought of the evening.

While Mr. Kudlow takes the traditional conservative position when it comes to economics, he said what would help individuals as well as the nation the most is for people to “get married.” He said it loudly, and the super-sophisticated New Yorkers in the room fell momentarily silent. When the shock wore off, many heads began to nod. 

Mr. Kudlow’s point was that marriage gives people a reason to work, a home one hopes is stable, and children for whom two parents feel responsible.

Sociologists have reached the same conclusion over many years. In her book “One Marriage Under God: The Campaign To Promote Marriage in America,” sociologist Melanie Heath writes, “Married people” — for whatever reason — “are happier, healthier, and better off financially.”

The point I took from the speakers at the Coolidge dinner was that the real power to influence a life does not lie in or emanate from Washington, D.C., whichever party is in power. Instead, it comes from the millions of personal decisions each person makes for his or her own life.

How many politicians today would dare to admonish people who are living together to get married? Yet for not just economic reasons, doesn’t it seem the wisest course for most to take when one considers the benefits? Cohabiters may look at their divorced parents as an excuse not to marry, but that is an excuse, not a sufficient reason. One might better consider successful marriages, instead of failed ones, and emulate what made the good ones work.

At the Coolidge dinner, the organization’s chairman, Amity Shlaes, passed out buttons that said “Coolidge in ‘16.” Although the 30th president died in 1933, his ideas and philosophy of life are being given new life by events like these. If his ideas worked — and Coolidge’s did because they were born from a Puritan ethic that founded and sustained America well into the 20th century, making the 1920s roar economically — why not reconsider those ideas, updating them as necessary and applying them to solve today’s problems, rather than skipping from one failed policy to another?

Back to marriage. The Coolidges had an unusual relationship, but it worked for them. Grace was vivacious and outgoing; her husband quite the opposite. And yet there was genuine love.

Few men have ever uttered more noble words about their wives than what Coolidge said of his: “She has borne with my infirmities, and I have rejoiced in her graces.”

Mr. Kudlow seemed to be suggesting — and I would agree with him — that you don’t get that kind of affirmation outside of a committed marital relationship, which also makes for stronger families, economies and nations.

– Cal Thomas is a nationally syndicated columnist. His latest book is What Works: Common Sense Solutions for a Stronger America (Zondervan, 2014).

On Mike Pence

Bernanke’s Loose Lips

Thanks and Gratitude

Fort Lee Mayor Says Christie’s Story Lacks Credibility

An Interview with Scott Walker

Ryan: Obamacare’s Foundation ‘Not Workable’

by Elizabeth Schulze

House Budget Committee chairman Paul Ryan says Obamacare’s glitches are here to stay. In an exclusive interview set to air on tonight’s Kudlow Report, Ryan said the problems with the Affordable Care Act extend far beyond website malfunctions.

“It’s more than the website,” Ryan said. “It’s because this law itself is built from an architecture, a foundation, that’s just not workable.”

Ryan said he sat through several House Committee Oversight meetings in which the administration failed to answer fundamental questions on the rollout of the Affordable Care Act. “The point is, they said, ‘Everything is fine, the law is going to be okay. We are ready to roll it out. We won’t have any problems.’” But House Republicans knew better, Ryan said.

“People should know that we tried to prevent this from happening in the first place by fighting a law we did not intend,” Ryan said, referring to the Republican-led House’s 46 attempts to repeal the law. “Then we tried giving people relief from the law by delaying it until 2013. That was rejected and now we are living with this law.”

Frustrated with the Senate’s rejection of attempts to defund and delay the law, Ryan shifted to the GOP’s most plausible tactic to end the Affordable Care Act: winning elections.

“We owe the American people an alternative,” Ryan said. “We want to win elections by saying this is not working for you and there are better ways in keeping with the country’s principles that puts you in charge of your heath-care future.”

Ryan dismissed criticism that the Republican party is in a “civil war” following failed attempts to delay Obamacare as part of the government shutdown and debt-ceiling negotiations. “We’ve had disagreements with each other on tactics,” he said. “These aren’t principles. I don’t know a Republican that doesn’t support comprehensive reforms to replace Obamacare with patient-centered health care.”

The Wisconsin congressman said the GOP will have a chance to showcase its common principles in budget negotiations set to begin Wednesday. He rejected hopes for a “grand bargain” deal, which he said would include pro-growth tax reform, a balanced budget, and entitlement reform.

“I don’t think we’ll get a grand bargain, and we’re not talking about getting a grand bargain,” he said. “Because then, one party will require that the other compromise their core principles, and we won’t get anything done.”

The GOP’s key bargaining chip, Ryan said, is the sequestration, the automatic spending cuts Democrats are seeking to repeal. “If we can’t get anything better than the sequester, then we’ll keep the sequester,” Ryan said. “That’s our base case to begin with.”

Ryan insisted that increased tax revenue was out of the question, calling Keynesian stimulus programs “sugar-high economics.” He said, “We’re not in this business to raise taxes. We’ll take the spending cuts we have and work with those.”

Instead, he said he was willing to negotiate on the “smarter” cuts to replace sequestration. “If we get a down payment on this debt and deficit in exchange for short-term relief, we’ll take it,” he said. “But it has to be on net a positive, meaning we will take the spending cuts right now.”

Ryan said substituting entitlement reform in place of broad spending cuts under sequestration would enable long-term growth in the U.S. economy. “If smart entitlement reforms could replace this crude across-the-board sequester, it would do a couple things,” Ryan said. “It would show the world that America is getting ahead of its problems. We’re not just going to be victims of circumstances. We’re not just going to fall into a debt crisis like Europe, but we’re going to get out of it.”

Entitlement should be at the top of the budget agenda, Ryan said.

“The question is not if we deal with entitlements,” Ryan said. “The question is if we are going to do it before the debt crisis or after the debt crisis. We would like to do it before so that we can shape events in this country instead of having events shape us.”

The congressman said that, ultimately, his job is to find common ground in budget negotiations among Republicans and Democrats. “I would argue that in this very difficult time that we are in, wouldn’t it be nice to show that this American divided government can at least govern?”

Watch the interview here:

– Elizabeth Schulze is a CNBC producer.

Republicans Must Get Wise to Obama’s Hard-Line Fiscal Strategy

by Larry Kudlow

Judging from the speech Obama gave following the deal to end the government shutdown, Republicans better get wise to the president’s next fiscal gambit when the three-month stop-gap budget and debt measures come due. As was the case with his hard-line defense of Obamacare, the president likely will be inflexible on ending sequestration budget caps, pushing for massive tax hikes, and permitting only the most inconsequential entitlement reforms.

Obama is interested in busting the GOP in 2014. He’s not interested in true budget restraint or other economic-growth measures.  

Read my full column here

Republicans Must Get Wise to Obama’s Hard-Line Fiscal Strategy

by Larry Kudlow

Judging from the speech Obama gave following the deal to end the government shutdown, Republicans better get wise to the president’s next fiscal gambit when the three-month stop-gap budget and debt measures come due. As was the case with his hard-line defense of Obamacare, the president likely will be inflexible on ending sequestration budget caps, pushing for massive tax hikes, and permitting only the most inconsequential entitlement reforms.

Obama is interested in busting the GOP in 2014. He’s not interested in true budget restraint or other economic-growth measures.  

Read my full column here

Senator McConnell: White House Meeting ‘Unproductive’

Commencement Speech, University of Rochester Simon School of Business

A Kemp Growth Plan for Detroit

by Larry Kudlow

With Detroit filing for Chapter 9 bankruptcy, everybody knows major root-canal cutbacks are coming. Cutbacks of out-of-control government spending, pensions, and health benefits. Major cutbacks. We know that.

We also know that the downfall of Detroit is again proof positive that the public-union collective-bargaining model has utterly failed. Unions just loot the benefit lock box at taxpayer expense. That was the message of Governor Scott Walker’s victorious crusade in Wisconsin. If any good comes out of the Detroit debacle, it will be the spread of that message across the country.

But there’s another important point here. If Detroit is to truly recover, a growth program of tax-free investment incentives must be part of the process. Specifically, Detroit should be made a tax-free enterprise zone, along lines proposed years ago by the late Jack Kemp. 

Read my full column here

Bernanke’s Bumpy Ride

by Larry Kudlow

No matter how many monetary officials try to sugarcoat it with damage control, the fact remains that the Ben Bernanke Fed wants to end its quantitative-easing bond-buying operations over the next year. That was Bernanke’s statement at his last press conference, and I’ve seen nothing to contradict it.

As everyone knows, stocks and bonds collapsed right after Bernanke let the cat out of the hat. Fortunately, markets have stabilized since then. But my hunch is that unless the economy really falls back into a quasi-recession, the Fed is going to go ahead and end its bond purchases.

The central bank will more than likely begin to taper in September. And it will do so based on roughly 175,000 new jobs each month, which is consistent with a 2 to 2.5 percent economy.

But as the Fed implements this policy, there’s going to be a lot more volatility in the financial markets, with significant downside risks for stock prices and upside potential for longer-term interest rates. 

Read my full column here.

Deflationary Rate Hike?

by Larry Kudlow

In the aftermath of Ben Bernanke’s announced timetable for ending Fed bond purchases, long-term interest rates have jumped up while stock prices have cratered down. As I wrote yesterday, I think the Bernanke plan is premature — especially in a 2 percent economy with falling inflation and inflation expectations.

But just to get a little wonky on the interest-rate story, it’s noteworthy that 10-year Treasury notes have moved up about 70 basis points year to date. Currently they’re around 2.50 percent.

Most of that rate rise — more than 50 basis points — is coming from a jump in Treasury inflation-protected securities, known as TIPS. Now that could be a good thing, as rising real interest rates signify a stronger economy. The trouble is, on balance, it’s real hard to find strong evidence of a stronger economy. Instead, as economist David Goldman has noted, investors are bailing out of TIPS because they’re not worried about inflation — which, by the way, is running about 1 percent.

So selling TIPS bonds has raised market interest rates. And that, in turn, has done considerable damage to the stock market and perhaps will pinch the economy.

But the story doesn’t end there. So called inflation break-even spreads have been narrowing significantly. This includes 10-year TIPS implied inflation, as well as 5-yr 5-yr forward inflation expectations. They’ve all dropped about 60 basis points, which is roughly equal to the rise in real interest rates.

So one could argue — as a warning to Mr. Bernanke — that rising rates is a deflationary event, not a growth event. And if the Fed is too hasty in tapering its bond purchases — and after all, tapering is really tightening — interest rates may continue to rise for the wrong reasons, namely deflation rather than faster economic growth.

There is no doubt that the Fed has got to end its bond purchases and eventually figure a way out of its oversized bond portfolio. In recent months I have commended Mr. Bernanke for producing low inflation, after many of us wrongly predicted higher inflation. But as St. Louis Fed head James Bullard said this morning, the low-inflation trend may be too much of a good thing. And bond-purchase tapering — excuse me, I mean tightening — could generate deflationary impulses that could damage the economy.

As an old gold-watching guy, I am obliged to note that the crash in the gold price is moving side by side with the decline in inflation expectations.

All this is why I believe the Fed should move extremely slowly in shifting policy in our still fragile economy.

Bernanke Jumps the Gun

by Larry Kudlow

Without intending to — and perhaps without even realizing it — the normally cautious Fed head Ben Bernanke may have launched a major tightening policy during his news conference on Wednesday. The de facto policy shift immediately sparked a rout on Wall Street, with stock, bond, and gold prices all plunging. And it’s going to shake up confidence even more, perhaps even slowing the already anemic recovery.

Mr. Bernanke has stumbled into a major policy mistake.

Read my full column here

Scandals, Jobs & the Economy

Tax Reform Is the IRS Fix

by Larry Kudlow

Apart from criminal prosecution, the best way to strip the power of politics and corruption from the IRS is to initiate broad-based, pro-growth tax reform and simplification. It’s the complexity of the tax code that nurtures the corruptness of the IRS.

There’s a buzz in Washington about this possibility, where both Democrats and Republicans are interested in reform. We need a simpler and flatter tax code. We need to get rid of the crony-capitalist insider deductions and exemptions, which have given the IRS so much power. These deductions and exemptions are precisely what nurtured the political corruption that led to a major scandal. 

Read my full column here

No Less Than a Special Counsel

by Larry Kudlow

An independent special counsel with subpoena power is the only possible solution to the IRS mess. This counsel must find out exactly what happened and who was involved, and then come up with a fix so it never happens again.

Read my full column here.

Immigration Reform Is Pro-Growth

by Larry Kudlow

At the end of the day, the battle over immigration reform is not about dollars and cents. It’s about the soul of a nation. President Reagan reminded us that America must remain a “beacon” and a “shining city on a hill” for immigrants who renew our great country with their energy while adding to economic growth and prosperity.

And here’s a quote from Jack Kemp: “Americans and immigrants share the same value of work, family, and opportunity. There is no reason to fear the newcomers arriving on our shores today. If anything, they will energize what is best about our country.”

It strikes me that the Republican party has lost its growth-and-opportunity message in recent years, and has replaced it with a very austere vision. Debt, deficits, and budget-cutting all have their place in the economic-policy debate. But the GOP has forgotten that strong economic growth leads to a balanced budget, not the other way around.

The GOP must reclaim the growth-and-optimism message of Reagan and Kemp. Immigration reform is part of that message. 

Read my full column here

April Jobs Aside, We’re Falling Behind

by Larry Kudlow

The really good news from April’s employment report is that all the pessimistic, end-of-the-world, spring-swoon forecasters were wrong. It wasn’t a fabulous report. But it handily beat Wall Street expectations. Stock markets soared on the news.

The bad news, however, is that the U.S. continues to fall further behind its own long-term trends for jobs and economic growth. And lately, hours worked — a key labor measure — have begun to fall. 

Read my full column here.