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Larry Kudlow’s daily web log of matters political and financial.

Commencement Speech, University of Rochester Simon School of Business



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On June 9, 2013, Larry Kudlow was awarded an Honorary Doctor of Laws Degree from the University of Rochester and delivered the 2013 commencement speech for the University of Rochester Simon School of Business. Below is the full text of that speech.

Thank you . . . Thank you everyone.

It is an honor to be with you all, to be here with your distinguished leaders, with the Class of 2013 and, for me, returning to my alma mater is an emotional moment.

It has been quite a while, too long, frankly, since I have been back.  But I’m honored to be here, with all of you, our graduates, and to have this opportunity to give back to a university that has meant a lot to me. Today, I would like to speak to you about two men, two leaders, who had an important impact on my life and on the life of this nation: Bill Simon, our country’s 43rd Treasury Secretary, and Ronald Reagan, our 40th President of the United States.  And I am going to speak to you, briefly, about them within the context of two ideas, which are freedom and liberty. It is often said that commencement speakers are all liberals.  Not true. I am offering you a conservative prospective and I hope you will listen and reflect on my remarks.

Let me begin with this point.  This is the William E. Simon School of Business.  I knew Bill Simon.  I knew him very well.  I enjoyed a lifelong connection with him before he passed away in 2000, and it leads me to say how proud you should be to have your degree with his name at the bottom.  Bill Simon was a great Treasury Secretary within an administration full of, forgive me, too many dopes and economic illiterates.  If they had listened to Bill, we would not have had to endure all the bloody, damn hell of stagflation within the early and middle 1970s, when I first started out in the workforce.  That is how good Bill Simon was.

After he stepped down as Secretary of the Treasury, Bill wrote two best sellers: A Time for Truth and A Time for Action, and those ideas of freedom and liberty that he championed became synonymous with his legacy. Now, my first memory of Bill began with a phone call at 6:00 a.m. in 1977, when I was staying in a hotel in Denver.

It was Bill and I heard a voice bark into the phone, “Is this Larry Kudlow?”  I said, “Yeah.”  I mean I’m sorry but it was 6 a.m. in the morning. Well, he was calling from New York, and he said to me, “I just read something you wrote.  A friend of mine passed it on. You’re a voice in the wilderness, and I want you to get back here so we can have lunch.  I have work for you to do.”  Now, mind you, I already had a job at the time. But, again, it was Bill Simon.  So, we had lunch, and I got to know him.  We played a lot of tennis and paddle tennis together, but here is the key: I got to spend hours with Bill as one of his principal speechwriters when he was out of office.

I actually did it as a hobby, because I loved it, and because I came to have such enormous respect for the man and his ideas.  I wrote most of Bill’s speeches between 1976 and 1980, including his address to Republican National Convention in Detroit in 1980.  During that speech, he set forth the credo of the GOP and of the United States and the free world with Reagan and Margaret Thatcher. He spoke about the power and ability of free people, free ideas and free markets to produce the kind of growth, prosperity and upward mobility that everyone hopes and dreams is possible in America. 

These are big picture themes, and let me add one other point. You have a Karl Brunner Award.  And I love that.  I had not known that you did. I mention this, because Brunner was also a mentor of mine, not here in Rochester, but later on, on Wall Street where I met him.  It was during that same period when I was writing speeches for Bill that Karl Brunner taught me how to do proper economic analysis.  I will always be grateful for his friendship and knowledge, and that is another reason why it is such a thrill to come back to Rochester and to speak to you.  

With that said, I am going to advance a proposition today and, while you may not agree with everything you are going to hear, I hope you will consider this: I believe the most important aspiration a great nation must have is economic growth and prosperity, and jobs and opportunity for all.  That is what we must achieve.  There is nothing more important.  Moreover, we have had too little growth in recent years.  I’ll be back to that in a moment or two. 

Economic growth comes from the application of free market economics.  I am not opposed to all of the functions of the Federal and state governments, never.  I believe in a safety net to help those who are truly in need.  But let me tell you this: the torque, the growth, the entrepreneurship, the risk taking, the innovation, and the greatness of America comes from people working and competing in the private economy. They come from people experimenting every day with new ideas, and often risking every penny that they own.

It is in this great country of ours, more than any other country on the planet, where you have the ability and the right to fail, and fail a second time, fail a third time, and then on the fourth or fifth try you will invent something, innovate something, or manage something that will create jobs and wealth not just for thousands, not just for tens of thousands, but for millions of people around the world.  The kinds of innovations that we never dreamed would be possible. And, I can think of no one who personified this reality better than Steve Jobs, who passed away in October 2011. Steve Jobs failed and then he succeeded. Then he failed again and he succeeded again.

This was the brilliance of Steve Jobs. He had extraordinary intelligence, perfectionism, and an understanding of marketing. He had all of these. But he also had the genius to persuade us about things that we needed before we even knew that we needed them, and he did that before he had even produced them. Starting with the personal computer, then all of those little smart phones that are still going strong, and, of course, the iPad.  Can America be the only country to produce these? No, of course not. There are certainly other countries. But we just seem to have a history of innovation and ingenuity. They are in America’s DNA.  And, we have a better lineup.

With that said, let me share with you Kudlow’s four pillars of wisdom, given to me by the two great men I worked for, William Simon and Ronald Reagan. They are: limited government, low marginal tax rates, light regulation and sound money. Together, they offer us the prescription for economic growth and prosperity. Moreover, you will all go out in whatever parts of the country where you will be working, and you will have the opportunity to exercise the freedom I am articulating today and, therefore, to help produce economic growth.

Think about those principles as they relate to our country today. There are 12 million people as we meet who should be employed based upon our historic trend line, but they are not. Also, regrettably, we are faced with over 20 million people who are either unemployed, underemployed, or discouraged and have left the workforce and given up. So many of these people have gone on to various forms of welfare, food stamps and Social Security Disability Insurance. I am not opposed to these programs. But these people need more than public assistance because, for the last dozen years, not just the last four, but for the last dozen, we have wandered off the reservation of economic freedom and economic growth. We have turned our backs on those core principles of limiting government, taxation and regulation that I mentioned before. This need not be. It should not be. It can be corrected. I hate to see this continuing.  It breaks my heart to see the United States of America working and producing beneath our potential.

The simple truth is, we know how to create jobs, opportunity and prosperity.  During the past 100 years, we have had three fabulous periods of economic growth and prosperity, which helped to boost this country into the leadership of the world.

The first was in the 1920s, the Roaring Twenties, when we created powerful growth by exercising limited government, lower taxation and more private sector entrepreneurship. Yes, all this happened under a Republican administration. But, 40 years later, in the 1960s we enjoyed tremendous growth once again. This time it was a Democrat named John F. Kennedy who rolled back 90% marginal tax rates, and rolled over his own liberal advisors by deciding the best policy would be to open up the American economy by taxing less and regulating less. People forget this. They forget that the post-war period before Kennedy was not the great economic miracle as is sometimes written. We had three recessions in the 1950s. Kennedy, the Democrat, argued that it was time to get America moving again, and he slashed tax rates and regulations. All this, again please take note, from Kennedy, a Democrat.

Continuing into the 1970s, as I said, despite the brilliant, liberty-loving Bill Simon, Republicans botched all that President Kennedy had tried to do. However, by the time we reached the 1980s, and were laboring under the burdens of stagflation, low growth and high inflation, and the country was ready for Ronald Reagan championing lower tax rates and less regulation. Success led to more success, as Reagan was later followed by Bill Clinton, so first a Republican and then a Democrat spending less, taxing less and regulating less. America showed the world that it is better to work than to receive government benefits. We embraced free trade policies under both a Republican and under a Democrat. We lifted up the global economy and, what’s more, we whipped Soviet Communism, a feat no one dreamed could ever happen. These are magnificent historic achievements and they were produced by free market economics.

Now, I worked in the Reagan Administration as I mentioned before. That is where I met my lovely wife, Judy, sitting here today. We have been married 26 years.  For both of us, Ronald Reagan was a great influence.  And I know and will tell you that what President Reagan achieved in the 1980s was a great blessing that almost no one expected.

You were not there, but if you had lived during the mid and late-1970s, and early 1980s, you would remember the pessimism of that period. It looked to many people like the Soviets were going to defeat the United States. Well, that never happened. The story had a happy ending, previewed by Reagan himself who, when asked to describe his foreign policy said, “We win, they lose.” Between Reagan, Margaret Thatcher and other free market leaders, it was the Soviets that folded and the United States that out-produced them. We won thanks to market-oriented, incentive-minded economics. Please remember that. Recognize that it was most definitely not a coincidence, but rather, one of the greatest turning points in history. We out-produced them.

Reagan told Gorbachev, “I am going to build a missile shield, because while I would like to trust you, I must verify your promises to me.” Gorbachev hated our Strategic Defense Initiative (SDI), but Reagan walked away from the Reykjavik summit in 1986, rather than surrender it and weaken our defenses.  Instead, his legacy was to build the greatest economy in the world, with growth averaging 4.2% — more than double today’s — and with over 16 million new jobs, and the United States literally out-produced the Soviet Union. Margaret Thatcher said Ronald Reagan won the Cold War without firing a shot. This was one of the most remarkable victories in American history. Free market economics was the most powerful weapon in the American arsenal.

Now, permit me to make one more point, one more important point to you. It is that individual freedom is not just about making money, but, and just as importantly; there is nothing immoral about making money. There is nothing wrong; on the contrary, it is a huge positive to be a successful venture capitalist entrepreneur. As an example, one of the greatest developments in free market history is happening in our country right now. One of my fellow awardees today is helping to finance it at JP Morgan Chase. I am speaking about the whole revolution in fracturing through horizontal drilling that is going to make the United States energy independent, and provide us with abundant cheap natural gas and cheaper energy. This transformation will bring jobs and prosperity. It will enable our industries to out-compete any other country and reclaim world leadership. When we do, we will no longer have to worry about what some in the Middle East, whom we don’t particularly care for, say about us.

Think of it!  This is the Steve Jobs story in energy. Almost nobody saw it coming until it came. But entrepreneurs did.  Entrepreneurs saw it, understood it, financed it and put it together.  They are the unsung heroes. So, no, I am not opposed to success and wealth and making money, and I do not want you to be opposed to success and wealth and making money.

The great universities that are your peers were founded and funded by private money, not government money. I have nothing against government money, but our universities, museums, libraries, theaters and art that flourish more abundantly here than in any other country were built by private entrepreneurs. They are the people whom we must rely upon, and that will mean embracing free market economics, which includes the moral notion that it is not just ok, but it is right and good to reward success.

The very font and founder of capitalism in the 18th century was Adam Smith. His classic tome, The Wealth of Nations, was written in 1776. However, he wrote an even better book in 1766 called the Theory of Moral Sentiment, in which he argued that free markets are moral. They are colorblind. They are gender blind.  And they do not discriminate. They must operate within the law and, Adam Smith, good churchman that he was, argued that we all have a moral responsibility to heed our consciences and to make the marketplace work.

In that same amazing year, 1776, Thomas Jefferson wrote in the Declaration of Independence that we hold these truths to be self-evident that all men are created equal and all are endowed by our Creator with the inalienable rights to life, liberty and the pursuit of happiness. That was Jefferson and the Founders. In the next century, when Abraham Lincoln was struggling to hold the Union together, he would recite that passage from the Declaration time and again.  Ladies and gentlemen, these great leaders were speaking about free market economics, and the moral right to exercise it and use it for good to help people find opportunity and to create better lives. We must never forget that. That is my message to you.

Some of you may agree with me and some of you may not.  For years on my show, on the Kudlow Report on CNBC, I have repeated the phrase that “free market capitalism is the best path to prosperity.” This is not a Republican phrase. It is not a Democratic phrase. It is an American phrase.  It is a philosophical, moral and economic phrase, and I hope as you make your way in the world, you will consider the phrase and the moral and economic antecedents behind it.

Now, let me close with one piece of advice that I would ask you to consider. My thoughts go all the way back to when I was a young man, about your age, and keep in mind that I graduated from the University of Rochester in 1969. Judy and I did the math on the flight up and it was 44 years ago, 44 years ago.  So, it has been 44 years since I got my degree, and now I am more than twice as old as most of you here in this audience. But that is ok, because it has been a great journey.

So then, my advice to you, gleaned from all of those years is simple, very simple. When you graduate and get your jobs, work like you have never worked before. And, after you have worked like you have never worked before, I urge you, Class of 2013, to work even harder.  That is the challenge that faces us. Work like you have never worked before. Work each day the way that God wants you to work, work with all your talent, skills, and training. The discipline of work and the morality of work and the goodness of work will make you free, and you, in turn, will make America stronger, more prosperous and more free.

I started my career in 1973 at the Federal Reserve Bank of New York. We were living in one of the worst recessions in the history of the U.S – double-digit inflation and plummeting growth. As for me, I was not truly qualified. In fact, I have never been truly qualified for any of the jobs I’ve held throughout my career. That is God’s honest truth, including the job that I hold now. But I learned, and I learned because I worked.  And I would not take “no” for an answer. And, I would not blame the economy on this or on that. I want you to have that attitude. That is why I want you to work like you have never worked before, whatever the work is that you are going to do. And, then I want you to be optimistic. I want you to cease worrying, and I want you to see the positive potential and possibilities in all that you do. Please cease worrying. Just work and see the positive. Be an optimist. Optimism is even more American than cherry pie. So, be an optimist, work like you’ve never worked before, and then work even harder as you make your way in life.

And I want you to start today, in whatever you are doing, and I ask you not to let up, because our country needs you. Right now, this country needs you more than it has needed smart young, motivated graduates in decades. We need you. I need you. The nation needs you. The people without jobs need you. The businesses that have failed need you. The governments that are spending too much and borrowing too much need you. You have an awesome responsibility.

America is still the greatest country in the world. I believe that profoundly. This is the greatest country in history. In fact, in the history of history. This is a country that has created so many opportunities for success. It is staggering. And, yes, we have taken a few bumps in the last dozen years. So what! We will recover from this, just as we have in the past. For your part, go to work. Go to work. No excuses. Go to work and work hard. Be optimistic. Fulfill your potential. Fulfill your potential and use your God-given talents.

That is the advice I will leave you, and please take it from somebody who has had his ups and downs through the years, many ups and downs. Take advantage of the opportunity of liberty and freedom in the greatest country in the world, which William Simon wrote about so eloquently in his books, and spoke to me about when I was a young man and first met him.  How deliciously ironic it is that I can return to this great business school, named after this great man, and who represented those great moral imperatives. So, I say to you, good luck, I say to you, God bless, and I say to you, thank you Class of 2013.



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