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Kudlow’s Money Politics

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

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.

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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. 

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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

The Jobs Report Bad News



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Stocks loved today’s jobs report, rising well over 200 points at this writing. But equities may be suffering from a certain irrational exuberance. Yes, nonfarm payrolls rose by 163,000 in July. That’s better than the prior two months and probably signals no double-dip recession — at least for now.

But there are a lot of negatives in this report.

For one, the small-business household survey dropped 195,000. That’s what drove the unemployment rate up to 8.3 percent. These two factors virtually cancel out the better-than-expected rise in nonfarm payrolls.

By the way, the labor force shrunk by 150,000. The participation rate slipped to 63.7 percent. And the overall U-6 discouraged-workers unemployment rate increased to 15 percent.

Average hourly earnings registered a slight 0.1 percent increase. But that only adds up to a 1.7 percent increase year-on-year, which is below the rising consumer price index.

So Team Obama will undoubtedly continue to tell us that jobs and the economy are getting better, but this mixed employment report takes the steam out of that argument.

A couple of other economic reports coming out this week raise red flags. The ISM manufacturing index came in below 50 for the second straight month, and the ISM services index is barely above 50. (Below 50 signals contraction.) Meanwhile, factory orders fell 0.5 percent and are down 2.6 percent at an annual rate over the past three months. Even worse, core capital-goods orders (non-defense, excluding aircraft) fell 1.7 percent in June and have dropped 3.9 percent annually over the past three months.

In other words, business investment is still weak. So are real consumer incomes. And the unemployment rate continues to edge higher. All this springs from an economy growing no more than 1.5 to 2 percent.

Tax and regulatory threats are everywhere. From Obamacare and the EPA and the NLRB on the regulatory side, to the failure to extend all the Bush tax cuts, it’s a wonder businesses are investing and hiring at all — especially small businesses, which may have stopped dead in recent months.

My modest proposal for the worst economic recovery in modern times is threefold: Extend all the Bush tax cuts, slash the corporate tax rate, and approve and begin building the Keystone Pipeline. This is a supply-side proposal. It’s completely unlike all of Obama’s goofy, short-term, spending-and-tax-credit stimuli, which have completely failed.

Come to think of it, it’s sort of Mitt Romney’s economic platform.  

One-on-One with Mitt Romney



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Last night on The Kudlow Report, Mitt Romney unveiled his five-point recovery plan: energy, trade, a balanced budget, education, and economic freedom to keep taxes and regulations low. He also blasted Obama for “you didn’t build that” and contrasted that idea with his own free-enterprise, reward-success philosophy.

Watch the full interview here:

Reagan Praised Entrepreneurs into Recovery



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Does anybody remember, back in the depths of the recession of 1981’82, how President Ronald Reagan kept his chin up and exhorted American businesses to work hard and produce an economic recovery?

Reagan had a program of tax cuts, limited domestic spending, deregulation, and a strong defense aimed at overturning Soviet Communism. He argued in speech after speech that his domestic plan would produce higher economic growth and lower unemployment, and that prosperity would generate the resources to fund a strong national security.

Cynics proliferated. But Reagan stayed with it, praising free enterprise and entrepreneurs. And eventually, sunny skies replaced gloomy clouds. “Morning in America” appeared in 1983’84.

But here’s the key point: When Reagan praised our capitalist system and the businesses inside it, he provided a psychological lift to accompany his fiscal program. That was leadership.

Now contrast President Reagan’s performance with President Obama’s recent attack on business. Instead of exhorting entrepreneurship, Obama demonized it. Here’s the money quote: “If you’ve got a business, you didn’t build that. Somebody else made that happen.”

That’s a put down to business recovery, not an exhortation. Reagan praised entrepreneurs into recovery. Why must Obama trash them into recession?

Read my full column here

One-on-One with Alan Greenspan



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Here’s my Wednesday night interview with Alan Greenspan, in which we discuss the U.S. economy, Fed stimulus, and Obamacare:

An Interview with Eric Cantor



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Here’s my Wednesday night interview with Rep. Eric Cantor (R., Va.):

Obama’s Goose Is Cooked



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Obama needed a filet mignon in the June employment report. Instead he got a rubber chicken.

Only 80,000 new jobs were created last month, way below Wall Street expectations. It’s the fourth consecutive monthly disappointment. For a few months last winter, jobs were rising at an average of 225,000 a month. But that has sloped way down to only 75,000. The unemployment rate continues at 8.2 percent, which is the forty-first straight month above 8 percent. The U6 unemployment rate, which includes discouraged workers, is just under 15 percent.

As voters finalize their election impressions this summer, all of this is bad news for the Chicago incumbent. 

Read my full column here

John Roberts Is a Super-Taxer



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In the hours following the Supreme Court’s decision to ratify Obamacare, Romney got $4.6 million in donations from 47,000 individuals. The tide is with him. The Supreme’s are a game changer.

But Romney has to make the case. He needs to link the anemic jobs and economic situation to the Obamacare tax, spend, and regulate fiscal drag. And he has to add to that mix the dangers to our freedoms embodied in Justice John Roberts’s expansion of the power to tax our personal behavior.

Read my full column here

A Tax Is a Tax Is a Tax



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Of course the stock market dropped about 130 points. Twenty new or higher taxes across-the-board are bad for economic growth, bad for job hiring, bad for for investors, and bad for families.

A tax is a tax is a tax, according to Judge Roberts. But he forgot to say that if you tax something more, you get less of it.

Presumably Mitt Romney will make this case in a major way. Hopefully he won’t forget that Obamacare is not just a huge tax hike. It’s also a major new spending entitlement that’s already pegged at $2.5 trillion and will increase the federal debt burden much faster than the GDP expands.

In other words, tax, spend, regulate, borrow. The Obama mantra. Romney must go after it — time and time and time again.

Bankrupting the economy is not exactly a job-creator.

No Economic Miracle if Obamacare’s Overturned



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It may well be that the complex tax-and-regulatory mandates embodied in Obamacare have proven to be a deterrent for business job creation. You hear it all the time from men and women in business — especially smaller businesses, but large companies too.

However, color me skeptical that business will embark on a hiring binge if the Supremes overturn the Obamacare mandate tomorrow. Why? Because the uncertainty premium about future health-care policy is still going to be high, and it won’t be resolved until well after the election. Businesses will have almost no idea what Congress will propose if the Supreme’s strike down Obamacare.

For example, it’s going to take money and high insurance premiums to cover preexisting conditions. There also are the stay-at-home 26 year olds and the so-called health-care market exchanges among the states. There are many other issues to be resolved, but the big question is: How will they be financed?

Will there be a tax? Will there be regulations?

One thing’s for sure. A pure free-market health-care system is not going to happen. Many Republicans talk about a patient-centered consumer-choice system, which would be great. Give consumers tax credits for the same deductions that businesses now have. That also would be great. Include interstate insurance competition. Another winner. Tort reform. Another plus.

But the fiscal reality for health-care insurance and payouts to doctors in hospitals is going to be up in the air for quite some time. It’s a known unknown. And because of that, I think businesses are still going to sit on their hands until they know with greater certainty what the costs of hiring the extra worker is really going to be.

For the foreseeable future, there’s no economic miracle if the Supremes strike down Obamacare (as I believe they will).

One-on-One with Marco Rubio



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The run-up to the presidential election is really a debate about growth and taxes, Senator Marco Rubio of Florida told me on Monday’s Kudlow Report.

“Growth helps the debt be more manageable, unemployment, all of these things,” he said. “Tax increases do not lead to growth. The reason why I oppose increases in taxes is not some religious objection, or even an ideological one. It is the knowledge that increasing taxes discourages growth.”

Rubio said that taxes remove money that was going to be spent into the economy. “When the government spends that dollar, they’re going to be a lot less efficient, a lot less stimulative,” he said.

Rubio, who is being considered for the vice-presidential slot by Mitt Romney, also spoke about the debt crisis, health care, and Arizona’s controversial immigration law, on which the U.S. Supreme Court ruled Monday.

I asked him whether there could be a compromise like the one former Florida governor Jeb Bush mentioned in an earlier appearance — $10 of spending cuts for every $1 of revenue increases. Rubio held firm: “I’ve always believed that was a false choice. The goal is not to give each side what they want. The goal is to solve the problem.”

Hours after the nation’s highest court upheld one of the most controversial parts of Arizona’s immigration law — that police can make checks for immigration status — Rubio agreed with the decision. “I’ve always believed the Arizona immigration law was constitutional,” he said. Rubio, the son of Cuban immigrants, also admitted that he had “mixed feelings” about it initially.

Rubio said, “I understand why Arizona did it. I understand why the people of Arizona are frustrated. I believe they have the 10th Amendment right to pass that law.”

Part of the law that was upheld instructs law-enforcement officials to verify the immigration status of anyone they detain. But Rubio said the federal government needs to fix the problem with several steps: “Secure the border, have an electronic verification system in place, and modernize our legal immigration so it reflects the 21st century needs of our country.”

Weighing in on health care, Rubio said he would like to see Obamacare replaced with a free-market system in which insurance companies compete for consumers’ dollars.

“I think once there’s more choice, once the consumer is in charge of their health-care dollars, the market’s going to meet that demand,” he said. “Now, all of a sudden, companies are going to try to figure out how to make themselves more attractive so that you choose them over somebody else. Right now they don’t have to do that.”

Rubio added, “From the point of view of the marketplace, insurance companies, if they want my business, if I control my health-care dollars, and I get to choose from any insurance company I want, I’ll go to you and say, ‘Hey guys, I would love to buy your insurance, but I have a kid who is sick. Will you cover them as well? Because this other guy will cover them, and I’ll go with them if you don’t do the same.’ I think that now the consumer is empowered to make that argument.”

Rubio said that for chronically ill Americans, state governments could create high-risk pools to provide insurance. “I think that’s the one focused, narrow place where government — state government — can be helpful to folks,” he said.

Watch the full video here:

A Global Recession?



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Is it possible that we are already in a global recession but just don’t know it yet? And is the U.S. itself — still the epicenter of the world economy — standing on the front edge of another recession?

I sincerely hope I’m wrong. But warning signs are everywhere.

Read my full column here

Why Stocks Love Scott Walker



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You didn’t see it in the mainstream financial media Wednesday morning. But stocks loved Governor Scott Walker’s spanking of public-sector unions and Democrats in Wisconsin. The Dow jumped about 165 points right at the opening on Wednesday, and was up over 200 points later in the day. There really was no other news. There was some speculation about central bank stimulus in Europe and the United States. Blah, blah, blah. But there was nothing specific or concrete.

So it’s an easy point to make: Markets love the Scott Walker landslide.

Tuesday night on The Kudlow Report, two investment gurus predicted a bullish market if Walker won. Art Hogan of Lazard Capital and Mike Ozanian of Forbes both forecasted a Walker rally. And that’s just what we got Wednesday morning.

The logic? Well, mainly, a big Walker win opens the door to a Wisconsin victory for Mitt Romney this fall. Think of Walker as the leading indicator for November.

Noteworthy in the Walker victory was a huge GOP get-out-the-vote ground game, set up by Reince Priebus, the Wisconsin native and Republican National Committee chairman. Priebus said he was confident that the superior ground game will be there in November for Romney. And if Romney takes Wisconsin, it could by Katy bar the door for a national GOP landslide.

But the other bullish point is that stock market investors prefer low taxes to high entitlement spending. The grassroots taxpayer tea-party revolt that carried Scott Walker to victory is alive and well around the country. (By the way, in California, San Diego and San Jose just voted in government-union pension cuts.) Collective-bargaining restraint, higher co-pays for pension and health-care benefits, and an end to mandatory dues-paying for Big Labor’s political slush funds are all bullish policies that come out of the Scott Walker win. So is a huge drop in government-union membership in Wisconsin.

Public-sector unions are in retreat.

The stock market is a gauge of future economic growth. Balanced budgets without income-tax hikes in Wisconsin, plus lower property taxes as a result of Scott Walker’s leadership in curbing government-union excesses, is a national message for economic growth.

And at the national level it seems clear that Mitt Romney gets all this. He gets smaller government, Social Security and Medicare reform without tax hikes, and quite possibly pro-growth tax reform. In other words, Romney understands the game-changing nature of the Scott Walker victory.

Remember this: Stock owners who make up the massive investor class — roughly 100 million people — are among those most likely to vote in the November election. That’s what history shows. So a union-rollback, low-tax, limited-government, pro-growth message is just what the investor class wants. That is a Romney message, not an Obama one.

Romney is almost universally regarded as the market-friendly, pro-business candidate. He got a big leg up Tuesday night with Scott Walker’s dramatic win. That’s why stocks surged on Wednesday.

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