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Kudlow’s Money Politics

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

Romney’s Optimism Will Win



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Putting aside all the voter models, there’s one overlooked point worth making with Election Day at hand. Most times in American politics, optimists win, and pessimists lose. I know that’s not always the case. And sometimes it’s hard to distinguish between the two. But in this election, I believe Mitt Romney is the optimist, and Barack Obama is the pessimist. It’s Romney’s election to win.

Read my full column here

Once Bullish, Leon Cooperman Grows Wary of Stock Valuation



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For years, famed investor Leon Cooperman has talked up stocks. But on last night’s Kudlow Report, he sounded the alarm. Cooperman, who is a widely followed investor and chairman of the hedge fund Omega, has made headlines for quite some time calling stocks “the best house in the financial-asset neighborhood.” Back in 2011, Cooperman outlined his pro-stock market thesis at length on CNBC.

But last night, Cooperman made a surprising statement that presumably reflected a shift in his outlook. He told me, “I think the stock market presently is fairly valued. I believe the profit cycle is peaking.” Cooperman went on to say that the market multiple may be too high. After noting that the market multiple is around 15, he said the growth rate over the past 50 years or so has been much more robust. So if we’re moving into a period of slower growth, Cooperman reasons that the premium investors are willing to pay for stocks will probably decline.  That’s not to say Cooperman is a seller — he’s not. “I’m not aggressively bullish or bearish,” he explained, “I’m simply saying I think the market is now fairly valued.”

And he reiterated something he’s said many times before: “If you must put money to work, I still don’t think there’s a better alternative than common stocks. The Fed has made all the alternatives very unappealing.”

Nonetheless, his commentary suggests his outlook is shifting. Cooperman also told me that he thought all the concerns about the fiscal cliff or the confluence of tax hikes and spending cuts that could go into effect as soon as January 1 are overblown. “They’ll kick the can down the road,” he said. “There’s no way a politician will allow the cliff to hit.”

Watch the video here:

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Does the Fed Have Grave Concerns about the Economy?



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On Tuesday, the Federal Reserve reaffirmed its commitment to using unconventional efforts to stimulate the economy. In the latest Fed statement, the central bank said it would keep buying $40 billion in mortgage-backed debt per month to push interest rates lower. The Fed also repeated its vow to keep interest rates near zero until mid-2015. That may seem like the Fed is sending a signal to markets that it is intent on driving the economy no matter what the cost. But that may not be the case. According to former Fed governor Kevin Warsh, the move isn’t a show of strength — it’s something far more ominous.

“I think the Fed revealed in their actions just how grave they think the economy is,” he said on The Kudlow Report. The statement shows “just how concerned they are about the economy’s prospects; just how concerned they are about the ‘fiscal cliff’ and Europe.” Warsh served as a member of the Board of Governors of the Federal Reserve System from 2006 to 2011. From 2002 to 2006, he was special assistant to the president for economic policy, and executive secretary of the National Economic Council. His take on the Fed — as someone who was once on the inside — is that the central bank feels it’s the only institution standing between the nation and a terrible downturn.

He said, “The central bankers feel they’re doing it all by themselves; that they’re not getting help from Congress or the administration.” It seems Wall Street may share the skepticism expressed by Warsh. Again both the Dow and S&P closed lower.

Obama’s Little Plan



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Under pressure from Mitt Romney, President Obama has finally released his own policy vision for a second term. And yes, it’s the same old, same old. Some are calling it a second first term.

There isn’t a single true economic-growth incentive in this scant plan. There’s no serious spending, deficit, and debt reduction, and no attempt to solve the Social Security and health-entitlement problems, which are moving us toward bankruptcy.

Nothing. Nada.

But before getting into the details of this little plan, my basic conclusion is this: Mr. Obama wants to slash defense spending, raise all other spending, and hike taxes to finance the largest government size he can possibly get.

Read my full column here.

Is Obama Buying the Election with His Welfare Explosion?



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With the unprecedented budget explosion of means-tested, welfare-related entitlements, does Team Obama think it can buy the election?

It’s a cynical question. But I wouldn’t put it past that cynical bunch.

Read my full column here

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Ryan’s Benghazi Surprise



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The irony of ironies: The Biden-Ryan debate was more about foreign policy than the economy and jobs. And yet another irony: Paul Ryan, an expert on all things fiscal, revealed a much better knowledge base of foreign policy than anyone thought existed. Shows how smart and well-rounded he really is.

In fact, Ryan’s Benghazi slam, right out of the chute, won him the debate. This terrorist attack is going to be a huge presidential-race issue. Americans are furious at the Obama-Biden-Clinton stupidity and mismanagement surrounding the tragic Benghazi deaths. They are enraged at the Benghazi cover-up. Ryan accused Biden of malfeasance in every aspect of this tragedy. It was a tremendous body slam right from the start.

Read my full column here

Sell-Off Presents Market Opportunities



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The S&P fell for the fourth day in a row on Wednesday as investors fearing a rough market ahead ran for the exits. But if you’re among those sellers running for the sidelines, you may be making a big mistake.

For the first time, I feel comfortable enough tell you that Mitt Romney is going to win big. And I firmly believe Mitt Romney is about to usher in a new era — a Reagan-like, economic-growth revolution.

His tax-reform plan alone will drive the economy into tremendous prosperity. For example, a married couple earning $143,000 whose tax rate under Romney drops from 25 to 20 percent will keep roughly $7,100 more in take-home pay.

I see opportunities galore in the market. Right here and right now.

Why wouldn’t you be out there buying energy? Romney is pro energy. He supports coal and fracking. I’d also buy industrials. Romney is going to lower tax rates. I’d also buy health care. Romney will end government-run health care.

If you expect the nation to be led by a President Romney next year, all these sectors are very attractive right now. There’s just tremendous potential. I think the stock market is missing this.

Go on Offense, Mitt



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Free advice is, well, free advice. But I would say this to Governor Romney: In your gentlemanly fashion, get on the offense quickly tonight, and put President Obama on the defense.

Play the leadership card: “No leadership on the anemic economy. No leadership on the grand-bargain talks with Speaker Boehner, where a great opportunity was blown with your last-minute $400 billion tax hike. No leadership on Simpson-Bowles. No leadership on the credit downgrade.

“And no leadership on the Benghazi catastrophe, where our ambassador was killed and dragged through the streets. Security broke down. If you had read your intel briefing, you would have seen the threat ahead of time. And then you went off to a Las Vegas fundraiser. And then came the cover-up, led by Susan Rice’s five-Sunday-talk-show lying fiasco.”

And push your tax-cut plan, Governor Romney. Across-the-board rate reductions. Don’t be afraid to sell it. Talk to the middle class, who will get a huge increase in take-home pay as a result of your tax plan, during a period when incomes are falling (as Joe Biden correctly stated) . And say that there will be no tax hikes for the middle class.

And talk growth. Growth, growth, growth.

Red line the middle-class tax deductions and explain that the tax-rate cuts for the upper end, which will spur economic and investment incentives for growth, will be balanced with a significant loss of this group’s unnecessary tax deductions.

And back all that up with a strong sell on spending cuts that along with faster 4 percent economic growth and 12 million new jobs will bring the deficit and debt GDP ratios way down.

Growth, growth, growth.

And by the way, don’t forget the corporate tax cut to 25 percent from 35 percent. And put in some sound money, too, to stop the Fed’s assault against the dollar.

Be a free-market, free-enterprise visionary. Emphasize opportunity over class warfare. Emphasize employment rather than government dependency.

Emphasize American exceptionalism, at home and abroad.

Mitt’s Tax-Cut Mulligan?



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For some unknown reason, Mitt Romney dialed back his tax-cut plan yesterday, the same day new reports showed incomes are dropping.

Last month, median household income fell by about $500, and since Obama became president, income is down over $4,500. But under Mitt Romney’s 20 percent tax-cut plan, if he truly believes it and follows through with it, a married couple making $70,000 a year would save over $2,000. And take-home pay for a middle-class married couple earning about $140,000 — with their tax rate dropping to 20 percent from 25 percent — would increase by over $7,100. Obama has no such middle-class tax cuts.

So why would Governor Romney tell an Ohio crowd on Wednesday that they shouldn’t “be expecting a huge cut in taxes, ’cause I’m also going to lower deductions and exemptions.”

What is that all about? What kind of message is he sending? Is it pro-growth take-home pay? Or is he pulling back and hedging his bet?

I wrote in my last column about the potential benefits of the Romney plan. And I suggested that Romney should give specific examples of higher take-home pay from his tax cuts. And then I suggested that he draw a red line for middle-income taxpayers, and say “you will not lose you’re your deductions.” In other words, send a true growth message. And make it clear, not muddied.

This afternoon, one of the most senior people in the Romney-Ryan camp called me to say that Mitt misspoke, and that I should give him a mulligan. This person told me there’s no pull-back on the pro-growth tax-cut message, no new overemphasis on debt, and no departure from the Reagan-Kemp tradition.

Okay, even though I’m a tennis player, I’m willing to give Mr. Romney a mulligan. But I’ll say this: The growth message has to be crystal clear for the debate next Wednesday night. Mitt is slipping in the polls. People are confused about his message. He must clarify it.

Lower marginal tax rates. Higher middle-class take-home pay to offset lost income under Obama. More family financial resources. More growth and more jobs.

This doesn’t have to be so hard. 

Mitt’s Take-Home-Pay Message



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One of the reasons Mitt Romney and the GOP failed to get a convention bounce was their inability to talk tax cuts, economic growth, and jobs. In his 45-minute convention speech, Romney spent 200 words on the economy, with no mention of tax cuts. It was the same for his running mate Paul Ryan: no mention of tax cuts at the convention.

In fact, Romney and Ryan didn’t talk tax cuts leading up to the convention, and they didn’t in the weeks that followed. This has hurt them in the polls. They haven’t connected the dots between Obama’s anemic economy and the Romney-Ryan solution to improve it.

But, all of a sudden, there may have been an “aha” moment. In a 60 Minutes interview this past Sunday, Romney did mention tax cuts, and take-home pay, too. Whoa.

Read my full column here

Obamanomics Has Failed Dismally



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About thirty years ago, Paul Volcker launched a monumental monetary effort to bring down inflation. As Fed chairman, he sold bonds, removed cash from the economy, and cared not one wit about rising interest rates. And it worked. Gold plunged, King Dollar soared, and the drop-off in bank reserves and money extinguished high inflation — and actually launched a multi-decade period of very low inflation.

This week, current Fed chairman Ben Bernanke embarked on an absolute reversal of Volcker’s policy. He is launching a monumental effort to buy bonds and inject new money into the economy in order to reignite economic growth and job creation. It’s like history is repeating itself, but in reverse. Gold is soaring, the dollar is falling. Something’s wrong with this picture. 

Read my full column here

Obama’s Same Old, Same Old



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Perhaps the reason for President Obama’s flat and energy-less speech Thursday night — TV cameras panning the convention floor actually showed delegates falling asleep — was that he already knew Friday’s jobs numbers were going to be a disaster. The August unemployment report completely punctured his argument that if you just give him four more years, his policies will solve the economy.

Of course, reading through the speech, I didn’t see the word “jobs” mentioned once. In fact, though I could be wrong, I didn’t see the word “growth” mentioned once.

What I did see were constant references to government. Obama has taken to calling it “citizenship.” But it’s the same old, same old. Whether it’s more money for the teachers’ unions, or more Solyndra-like green energy, or more for infrastructure, it translates to more government spending and dependency in a second Obama term, all to somehow be financed with tax hikes on the rich. 

Read my full column here

Romney Didn’t Make the Sale



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Did Mitt Romney make the economic sale at the Republican National Convention? Did he convince people who are living at the margin or are unemployed and discouraged that he has the answers to the economy? Frankly, I don’t think so.

I do not understand why he did not talk about his 20 percent across-the-board personal-tax-cut plan that would help the middle class enormously. He never mentioned it, and he went into no detail on the business tax-cut plan. This plan is terrific for competition and global investment.

Instead, he talked about a jobs tour. I frankly have no idea what a “jobs tour” is. I do know that 23 million Americans need jobs. I don’t know that they need a president on a jobs tour to inspect them.

It concerns me that in the economic zone, he didn’t make the sale to independents, the so-called Reagan Democrats, or the Clinton Democrats. I didn’t hear anything new. I didn’t hear anything specific, and it troubles me.

I do think Romney helped himself enormously with his biographical narrative. He came off as a humble, grateful man. But on the economic front I don’t think he made the sale; I don’t think he convinced the independent voters and I don’t think he’s going in the right direction on tax policy.

On big business, I think he needs to be more specific. It’s not about big business — it’s really about small business. And guess what? Small businesses, the LLCs and the S-corps, pay the personal tax rate. That’s another reason why I don’t understand why he doesn’t talk about the 20 percent tax cut. It helps small businesses and it’s the opposite of what Obama is offering. The current president wants to raise taxes on those people. Except for a passage on success, I didn’t hear any contrast Thursday night. The best line of Romney’s speech from an economic standpoint was this: “In America, we celebrate success, we don’t apologize for success.” That is a great line, but I wish he presented more contrast to President Obama.

A final thought: Sen. Marco Rubio’s introduction of Romney was one of the most brilliant speeches I have heard in a long time. Freedom was his key point. America is about freedom — economic freedom, political freedom, religious freedom, and faith. It was just utterly brilliant, and the guy is an absolute Republican superstar.

Too Much Debt, Not Enough Growth



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Republican vice-presidential candidate Paul Ryan gave a powerful speech Wednesday that repeatedly brought conventioneers at the Republican National Convention in Tampa to their feet. I am going to give him high marks for his delivery.

Ryan, in typical fashion, seriously and analytically ripped apart the Obama economy and what has been called Obamanomics. He ripped it to pieces, and it needed to be done. Most especially, he ripped apart Obamacare. Ryan also did his level best to defend Republicans against the usual attacks on Medicare reform, or what has been called “Mediscare.”   However, I was disappointed that his economic-growth solutions were somewhat muddled and unclear. At one point in the speech, rather than speak about Mitt Romney’s own tax-rate proposals, Ryan used the term “tax fairness,” a term frequently used by President Obama and other liberal Democrats. This was surprising to me.

Ryan cited Jack Kemp and the Reagan tax reform (and I am, of course, part of that gang). But the reality is, Ryan never mentioned tax cuts during his speech. Not the 20 percent across-the-board supply-side reduction in marginal tax rates, nor the 25 percent corporate tax rate, down from 35 percent. These pro-growth measures have been proposed by Mitt Romney, but it is a mystery to me why Ryan did not mention them.     He dwelled on debt to an extreme point. I don’t think discussing debt connects with people who are unemployed or marginally employed. I think they want a good-paying job, and debt is almost an academic abstraction. When Republicans run on debt and deficits, they almost always lose. When Republicans run on growth, limited government, lower spending, lower tax rates, and deregulation — they win. Ryan’s speech was confusing on the growth issue, and that was disappointing. I don’t want to be confused, and the American people shouldn’t be confused.

It will be left to Mitt Romney on Thursday night to clarify his growth policies. I want growth, growth, growth. Wednesday night, I didn’t get growth, growth, growth; I heard debt, debt, debt.

The Star of Last Night Was Ann Romney



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In front of a spirited crowd that packed the Tampa Times Forum Tuesday night, Chris Christie gave a solid speech. He echoed Mitt Romney’s programs, which consist of substantial budget cuts, tax cuts, and entitlement reform.

Christie pressed on the notion of what he called “principled compromise,” which is exactly how I think Mitt Romney will govern if he wins the election. In a very sharp dig at President Obama, Christie emphasized true leadership, not just governing in accordance with the polls. His line of a “second American century” — which is a Marco Rubio line — is fabulous. Basically, he means we are not going into decline.

This particular passage from Christie’s speech caught my attention:

They said it was impossible — this is what they told me — to cut taxes in a state where taxes were raised 115 times in the eight years before I became governor; that it was impossible to balance a budget at the same time with an $11 billion deficit. But three years later, we have three balanced budgets in a row with lower taxes. We did it.

He is saying you can reduce taxes, you can reduce spending, you can grow the economy, and you can have a balanced budget. And that it has been done before, in New Jersey. It’s a prediction of what Mitt Romney is going to do.

But I don’t think Christie did as good a job of setting the table as Ann Romney. She was the star of the night. She gave a brilliant speech about her life with Mitt Romney, about their love, and about how they grew up without silver spoons in their mouths. She described her work with, and empathy for, those less fortunate. Her description of Mitt as the man who “will not fail” was a terrific line.

I must confess, Ann Romney stole the show.

Paul Ryan: Pro-Growth Supply-Sider



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In the two weeks since Mitt Romney chose Paul Ryan as his running mate, the entire Republican party has been rejuvenated. Governor Romney himself has been reenergized. After losing ground in the polls this summer, he’s once again drawn even with the president. Wisconsin is now in play. Even senior voters in Florida have signaled heavy approval of Romney-Ryan.

I know vice presidents are not supposed to be so influential. Political scientists say the top of the ticket is what matters. But Paul Ryan is disproving that.

And yet I hear and read some grousing from conservative supply-side colleagues that Ryan is no longer the Jack Kemp, supply-side-growth guy he once was. Instead, they say he has become a root-canal Republican who obsesses about entitlement debt bombs and deficit reduction. They say he’s wedded to the Congressional Budget Office in a kind of budget-austerity, Stockholm syndrome.

The whisperers say this happened to Dave Stockman years ago at OMB. Now they say it’s happening to Paul Ryan at the head of the House Budget Committee.

Read my full column here

These charges are completely false. 

One-on-One with Paul Ryan



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On last night’s Kudlow Report, Paul Ryan talked to me about pro-growth policies and the American idea. He defended his Medicare option as a bipartisan plan going back to the Clinton era. He talked supply-side tax reform, along with spending reduction, deregulation, energy, and sound money. Preventing the fiscal-cliff recession threat will be Romney-Ryan’s first action. 

Ed Klein: Hillary Turned Down Veep Spot



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According to Edward Klein, author of The Amateur, Obama has put out feelers to Hillary Clinton about accepting the VP spot on the ticket, but Hillary has said no. 

In an interview on The Kudlow Report last night, Klein told me why Clinton is reluctant to take the number-two spot:

Klein: Until just a couple of weeks ago, the White House was putting out feelers to see if Hillary would accept the vice-presidential nod and replace Joe Biden. Bill Clinton was, I’m told, urging his wife to accept the number-two slot. He saw this as a great launching pad for her for running in 2016. But then Hillary had lunch in the White House a couple of weeks ago with Valerie Jarrett, Michelle’s best friend, senior adviser to both the first lady and the president. 

Kudlow: Just about the biggest lefty in the White House. 

Klein: That’s right. She told Valerie she would not accept the vice-president spot. The lunch was ostensibly about other matters, but it came up. The vice-presidential thing came up. Hillary felt burned out after four years as secretary of state. But I’m told there were more important reasons for her not accepting. 

Watch the full video here:

No July Recession



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While the fiscal-cliff tax hike still hangs like the recessionary sword of Damocles over the economy, the economic stats for the month of July do not show it. In fact, key data points suggest there is no double-dip recession. All in all, it’s still an anemic 2 percent economy — the worst recovery in modern times dating back to 1947. But at least for the sake of the country, there is no recession in sight for now.

The 163,000 jobs gain for July — even with a lot of weakness inside the report — was a move away from recession. Retail sales had dropped for three-straight months, which made a recession look perilously close. But the July number came back at 0.8 percent. And today’s industrial-production report also surprised on the upside, with a manufacturing gain of 0.5 percent. That sums to 1.7 percent annually over the last three months and 5 percent over the past year. Prior to these releases, the ISM reports hovered around 50, which does suggest ongoing weakness. But it’s not yet a true recession signal.

Finally, the consumer price report for July shows zero inflation for the second straight month. The CPI is actually rising only 1.4 percent over the past year. Energy prices have fallen 22 percent annually over the past three months while food prices are up only 1.1 percent during that period. The Midwestern drought could drive up the food-price component, but it looks like it will be a manageable event — not a catastrophe.

Now, a roughly 2 percent economic growth rate is only half the growth we ought to be having. In fact, Mitt Romney’s economic plan targets 4 percent growth. And supply-side tax cuts, spending restraint, lighter regulation, and a stable dollar could surely revive the animal spirits to get us back to that 4 percent number.

But that’s for the campaign trail. All I’m saying here is that the July economy does not show recession. For the sake of the country, that’s a good thing. But surely we can do better.

A lot better. 

The Reagan in Romney



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While some of my conservative colleagues are criticizing the Romney campaign for one thing or another, I want to make a distinct point that is largely being overlooked: Mitt Romney is the most fiscally conservative Republican standard-bearer since Ronald Reagan.

Looking back through his speeches, interviews, and programmatic proposals, I see an emphasis on economic freedom, free enterprise, low tax rates, deep federal spending cuts, and free trade, and a free-market approach to tough social problems, such as health care, education, and poverty. Meaning no disrespect to George W. Bush, John McCain, Robert Dole, and George H. W. Bush, not one of these former Republican leaders was the consistent and comprehensive free-market advocate that Romney has been.

Read my full column here

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