Kudlow’s Money Politics

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

Free Market Capitalism Moves to 7pm


In case you missed it, we announced on last night’s show that Kudlow & Company is moving up in the world. Beginning October 10th, we’re moving from 5pm ET into the 7pm slot at CNBC.

The Grey Lady’s Fall


Great column written by my good buddy Jerry Bowyer.

Take a look at the attached stock price chart and you get some idea what it must feel like to be one of the owners of the New York Times. Over the past couple of years, the poor souls who were trusting enough to buy into the New York Times Company have been repeatedly beaten with a stick. Stock in the Times Company lags the Washington Post, the Dow Jones Industrial Average and, worst of all, Rupert Murdoch’s Newscorp by a mile. No doubt you can find a worse investment, sub-prime mortgage companies perhaps, but it would hard to do so.

It’s not just a newspaper thing. The Post is a newspaper too. Yes newspapers are having a rough time, but the time is rougher for some than for others. Overall newspaper circulation is down, but The New York Times and the Los Angeles Times have taken much heavier hits than the industry as a whole. Some papers, such as the Wall Street Journal, have basically held even, and the New York Post (heavens, Murdoch again!) has actually grown…

So, if the problem isn’t the global environment, the local environment, the labor environment, technology, the subscription model or regional conditions, perhaps it’s the newspaper. Could the problem be that the New York Times has a liberal bias? Perhaps….

Click here to continue reading Jerry’s column.



Only two groups of Americans need to worry about Hillary Clinton’s new health plan: people who are healthy, and people who are sick. The healthy would pay higher insurance premiums, because Clinton would prohibit insurers from giving them a discount. The sick would suffer a few years after Clinton’s proposal became law. Her mix of subsidies, tax hikes, and regulations does nothing to control costs’”so, before too long, the government would end up imposing price controls and rationing care. (Indeed, the fine print of her plan already includes some rationing.) The public wants healthcare reform, but it does not want a government takeover of health care. Republicans ought to explain to the public that, despite Clinton’s assurances to the contrary, a government takeover is exactly what she has proposed.

From National Review “The Week…” October 8, 2007

A GOP Recipe for Electoral Disaster


In an exhaustively researched survey of 145 precincts and 175,000 votes, Richard Nadler of America’s Majority Foundation concludes that when Republicans talk about enforcement-only, deportation, and criminalization of illegal immigrants they get slammed politically.

According to Mr. Nadler, ‘Policies that induce mass fear in illegal aliens induce mass anger in legal aliens because of ties of family culture and a shared media communication.’

Because of the predominant Republican Party attitude of enforcement-only, the study indicates that Democrats will capture New Mexico, Nevada, Colorado, Florida and Iowa in the upcoming presidential contest.

Mr. Nadler goes on to say that Republicans who support comprehensive immigration reform run almost even with Democrats.

Any discussion of mass deportation or criminalization is a disaster.

This is tough stuff. GOP: Be warned.

Picking Winners & Losers


(UPDATE: Click here to watch the video of yesterday’s energy conference playing at NRO’s “Planet Gore.” Many thanks to NRO’s Kathryn Lopez for putting it up….)

Powerline ran a nice little recap of the National Review Institute’s energy and national security forum I moderated yesterday down in Washington.

My three key questions:

(1) Why not let the market decide the winners and losers rather than the government?

(2) How sure are we that man’s actions are responsible for climate change?

(3) And even if we’re quite sure that we’re behind climate change, what reason is there to believe that accelerating the movement away from traditional energy sources will have any meaningful impact in stemming global warming?

Tuesday Night’s Washington Lineup


On CNBC’s Kudlow & Company this evening:

CNBC’s Scott Wapner will deliver a quick market report from the NYSE.

HOUSING & THE ECONOMY…On to discuss today’s existing homes sales number and what lies ahead for the markets are Gary Shilling, president of A. Gary Shilling & Co. and Michelle Girard, senior economist with RBS Greenwich Capital.

Our market panel will offer their market perspective following the economic debate.

On board:

*Fritz Meyer, senior investment officer with A I M Advisors
*Jerry Bowyer, NRO Financial contributor and author of The Bush Boom.
*Herb Greenberg, senior columnist at MarketWatch/CNBC contributor.

WASHINGTON MONEY POLITICS..On to offer their take on the budget, spending, and social security are Senator Judd Gregg (R-NH), Senate Budget Committee Ranking Member and Senator Ron Wyden (D-OR), also a member of the Senate Budget Committee.

**Bob Hormats, Goldman Sachs International vice chairman will join the market panel following our discussion with the senators.

HOW THE MEDIA PORTRAYS BIG BUSINESS…Brent Bozell, president of the Media Research Center will be joined by our market panel to discuss.

Please join us at 5pm ET on CNBC for another free market edition of Kudlow & Company.

Monday Night’s Washington Lineup


On CNBC’s Kudlow & Company this evening:

CNBC’s Scott Wapner will deliver a quick market report from the NYSE.

MARKETS…Our market panel will offer their insight on all the latest news and developments affecting investors.

*Mike Holland, chairman of Holland & Company
*James Pethokoukis, senior writer at U.S. News & World Report
*John Brown, editor
*Steve Liesman, CNBC senior economics reporter

OIL, DOLLAR & THE ECONOMY…Our panel of experts will weigh in with their perspective on what lies ahead.

On board:

*Mort Zuckerman, chairman & editor-in-chief of U.S. News & World Report
*Dan Yergin, chairman of Cambridge Energy Research Associates & CNBC global energy analyst
*John Brown, editor

AHMADINEJAD, IRAN & MORE…We’ll have a one-on-one discussion with Senator Joe Lieberman (I-CT).

MONEY POLITICS…We’ll discuss the economy, Fed, tax hike threats, and more.

***House Financial Services Committee Chairman Barney Frank (D-MA) will join us once again with an update and his perspective.

***The Dynamic Duo of Robert Reich, former Clinton Labor Secretary and The Wall Street Journal’s Steve Moore will duke it out.

Please join us at 5pm ET on CNBC for another free market edition of Kudlow & Company.

Bush the Supply-Sider


At his news conference yesterday, President Bush proclaimed that he’s a supply-sider. He added that he remains determined to keep tax rates low in the face of a large-scale tax hike threat from the Democratic Congress.

In a White House meeting this past Wednesday with a handful of other conservative journalists, I heard Mr. Bush make the same supply-side claim. He was responding to a question I had asked regarding tax hike vetoes. He said, ‘Supply-side economics has worked.’

At his news conference the President did not completely describe the incentive model that is central to supply side thinking. But he did point out that economic growth and budget revenues have responded favorably to lower marginal tax rates.

He’s absolutely right. Total revenues have far surpassed the 2000 peak at lower marginal tax rates. In fact, since the mid-2003 tax cuts, revenues have grown by 45 percent. Revenue growth has averaged almost 10 percent per year since 2003 and has far surpassed the previous 2000 peak.

This sort of analysis drives liberal economists crazy. Too bad. The budget numbers are the budget numbers.

Meanwhile, the deficit has fallen substantially from about 4.5 percent of GDP to 1.5 percent of GDP under Mr. Bush’s tax cutting policies. The 2001 tax cuts were not supply-side, but the 2003 tax cuts that lowered the tax rate on incomes, capital gains, and dividends most certainly were.

Remember, the basic tenet of supply-side economics is keeping more of each extra dollar earned or invested. This makes it more profitable to work, save, invest or take risks. If it pays more, after tax, then people will respond to the incentives. As Nobel Prize winning economist Ed Prescott has put it, economic behavior responds to changing tax rates.

But give President Bush a lot of credit, even though his analysis may not be totally comprehensive.

Confidence Returns


The rally in gold in recent days is telling the Fed that the 50 basis point shock and awe rate cut is sufficient. Gold’s rally is putting a floor underneath the fed funds rate. I’m okay with that. The Treasury yield curve is now nicely upward-sloping. It is normalizing. That’s a good sign for future growth.

As reported in this morning’s Wall Street Journal, credit markets have revived following the Fed move. Bond sales are resuming. Yields on corporate bonds and loans have moved lower. The commercial paper market is improving. The LIBOR rate has dropped by 35 basis points.

Confidence is returning.

Inflation indexes are running around 2 percent for the CPI, PPI, and imported prices. World stock markets surged on the Fed rate cut. In the US, if stocks truly believed big inflation was on its way, they’d be falling not rising. After all, the capital gains tax is not indexed for inflation.

Right now the dollar is soft and gold is strong. This is more a liquidity warning sign than anything else. Over time, as US growth and investment picks up, there will be stronger dollar demand. Additional capital formation will soak up any liquidity excess. In other words, a growth solution.

Meanwhile, low unemployment claims suggest something like 100,000 new jobs per month.

The story looks just fine to me. And I’m waiting for Europe and England to lower their own interest rates.

Wednesday Night’s Washington Lineup


On CNBC’s Kudlow & Company this evening:

**Tonight’s show will broadcast live from Washington

CNBC’s Bob Pisani will start us off with a market report from the NYSE.

THE MARKETS…Our panel will debate yesterday’s Fed action and what it means for the markets going forward.

On board:

*Joe Battipaglia, market strategist at Stifel Nicolaus
*Jon Smith, Haverford Trust Co. Chief Investment Officer
*Jim Lacamp, portfolio manager & financial adviser for RBC Dain Rauscher

HOUSING & THE MARKETS…Brian Montgomery, the Housing and Urban Development assistant secretary who heads the FHA will join us in the studio. Messrs. Battipaglia & Lacamp will also join in the discussion.

OIL & THE MARKETS…Red Cavaney, President & CEO of the American Petroleum Institute will be aboard to offer his perspective along with the market panel.

INTERVIEW WITH CHUCK GRASSLEY…A Washington to Wall Street interview with Senator Charles Grassley (R-IA).

YOUR MONEY, YOUR VOTE…CNBC Chief Washington Correspondent John Harwood will deliver a report on Sen. Obama’s economic plan.

On to debate Obama’s plan will be Austan Goolsbee, professor of economics at the University of Chicago & economic advisor to Sen. Obama along with Dan Clifton from Strategas Research Partners.

Please join us at 5pm ET on CNBC for another free market edition of Kudlow & Company.

Invitation from The National Review Institute


(Click on the image to view the details.)

The Big Easy’s Money Pit


Looks like the Forbes folks agreed with my take on Uncle Sam’s billion-dollar boondoggle down in New Orleans. (From the October 1st issue).

Editor-in-chief Steve Forbes:

Bravo, Mr. Bernanke


Ben Bernanke’

***Tuesday Night’s Special Lineup***


On CNBC’s Kudlow & Company this evening:

CNBC’s Scott Wapner will start us off with a report on today’s 336-point Fed-fueled stock market rally.

FED GURUS…Former Federal Reserve Governor Wayne Angell will join us along with former Atlanta Fed Governor Bill Ford to discuss today’s strong Fed move.

STOCK MARKET PANEL…Our panel will weigh in with their take on today’s news.

On board:

*Michael Metz, chief investment strategist at Oppenheimer & Co.
*Dennis Kneale, managing editor of Forbes magazine
*John Rutledge, chairman of Rutledge Capital
*Don Luskin, CIO at Trend Macro

ECONOMIC GURUS…On to debate today’s Fed move are Deutsche Bank chief U.S. economist Joe LaVorgna and Bob Stein, senior economist at First Trust Advisors.

STOCK MARKET DRILLDOWN…Our market mavens will sort out today’s impact on stocks. Joining us are Michael Cuggino, portfolio manager at the Permanent Portfolio Family of Funds and Stefan Abrams, Bryden-Abrams Investment Management managing partner.

Please join us at 5pm ET on CNBC for another free market edition of Kudlow & Company.

Bernanke Gets It Right


Once in a while you get it right. One time in a row.

I talked about this in my last column, Goldilocks 2.0.

The Bernanke Fed made a good strong move this afternoon. The stock market applauded loudly with a 250-point rise in the Dow. Essentially, the Fed followed Treasury market rates lower. The 4 percent Treasury bill rate had been urging the Fed to make this move.

By itself, this action will not heal the credit markets overnight. But it will help. Lowering the cost of money will — over time — raise asset values across-the-board. New cash injections at the new target rate of 4.75 percent will raise the low 2 percent growth of the monetary base in order to accommodate the banking system’s unusually high cash demands.

Adjustable rate mortgage holders will get almost immediate relief.

This is a confidence-inspiring move by the Fed. Lenders will be more apt to lend and investors will be more apt to take risks.

Importantly, President Bush should now make it very clear that he will veto any tax hike proposals. With tax rates on capital remaining low, and a modest easing move by the Fed, the outlook for next year’s economy improves markedly.

We should see this first in the financial markets (like today’s stock rally) and then with a lag, we will see stronger economic activity.

I also suspect that over time, the improved economic growth outlook for the U.S. will actually strengthen the dollar’s exchange rate, in part because the interest tax on money has been lowered.

And while gold did rally immediately after the Fed move, I would look for some gold weakness along with a better dollar. In my view, rumors of stiff U.S. actions against Iran have been boosting oil and gold prices. Depending on world events, these two commodities are important barometers of political risk.

All that said, the Fed has followed the Treasury market message of lower rates. This is a very positive development that will strengthen the financial system and the economy.

Anchored by low tax rates, increasing economic growth will hold down inflation as stronger investment absorbs the Fed’s additional cash reserves.

They got this one right.

Smearing a General


From Richard Cohen’s article, “Hillary Missed Her MoveOn Moment” in today’s Washington Post:

“It is an odd standard Clinton has when it comes to smears. When the entertainment mogul David Geffen, once a Clinton supporter, called both Bill and Hillary liars, Hillary not only decried the remark as a particularly vivid example of the “politics of personal destruction,” but she demanded that Barack Obama do the same — and return a $2,300 donation Geffen had given him. Yet when Clinton herself was asked to repudiate the abuse of Petraeus, she either saw no reason to do so or, much more likely, was afraid to alienate an important constituency, the 3.3 million members of, who stand symbolically at the frontiers of New Hampshire and Iowa. She would, it seems, rather be president than right.

…The ad was the moment for Clinton to rise above hackdom. It was a moment for her to insist that the business of politics, not to mention governing, is made even uglier and more difficult when people who merely differ with one another resort to insult. It was a moment for her to say that an Army general, under orders and attempting to fulfill a mission, should not be so casually trashed — especially since she herself has been on the other side of the Iraq War issue and said things she must now regret. And it was a moment for her to trot out her favorite phrase and use it, not in her own defense for once, but in defense of someone else. That moment is gone now — maybe because for Hillary Clinton it never arrived in the first place.”

Instead, Mrs. Clinton told the highly decorated four-star general that his report on the surge required “a willing suspension of disbelief.”

Supply-Side Battle


How About Reagan and Thatcher?


Washington and Wall Street are all atwitter over Alan Greenspan’s new book, The Age of Turbulence. Of course, the mainstream media are headlining Greenspan’s criticism of President Bush and the Republican Congress. Hastert and Company spent way too much and Mr. Bush failed to use his veto pen. Who can argue with that? Supply-siders and all conservatives have made this point.

But Greenspan points a finger at today’s Democrats as well. Greg Ip’s Wall Street Journal article, ’Greenspan’s Dismay Extends Both Ways,’ makes this case.

In an interview with the WSJ, Greenspan remarked that ‘The Clinton administration was a pretty centrist party. ‘

Goldilocks 2.0


(My latest syndicated column.)

A batch of economy-wide stats was released Friday morning, covering retail sales, industrial production, import prices, and consumer confidence.

The verdict? It’s a 2 percent economy. Call it Goldilocks 2.0.

Might the current financial turmoil throttle back growth a little more in the next six months? Yes, perhaps. Will there be some negative earnings surprises, especially from financial companies? Sure.

But the bears would have us believe the sub-prime credit virus heralds the end of the world. They are wrong. Remember this: Our free-market capitalist economy is resilient and durable. It has proven time and again that it can take a punch.

Sure, recession probabilities have increased. But so what? We’ve had virtually uninterrupted prosperity for twenty-five years, going back to the supply-side economy and technological boom launched by President Ronald Reagan. Since then, we’ve experienced 93 positive GDP quarters and only 5 negative ones. That makes for a truly phenomenal batting average.

Consider this: Marginal tax rates are low. Inflation is low. Interest rates are low. And the world economy remains strong. The stock market ‘” which I still believe is the best barometer of the health of business and the economic future ‘” has behaved surprisingly well during this difficult stretch of turbulence. In fact, the sum total of the so-called ‘bear assault’ is only a 4.5 percent correction from Dow 14,000 and other index peaks registered two months ago.

Yes, profits are getting sloppy. And yes, there are some credit shocks out there yet to be revealed. However, the Federal Reserve will reduce the cost of money by bringing down its basic target rate on Tuesday. President Bush will veto any Democratic tax hikes. And at the margin, the Iraq War story is taking a turn for the better. Meanwhile, American entrepreneurs are still working hard.

Speaking of next Tuesday, the best thing the Fed can do is deliver a big-bang, shock-and-awe rate cut that would bring the basic fed funds target 50 basis points lower to 4.75 percent. At the same time, it should lob a full percentage point off the discount lending rate, cutting it from 5.75 to 4.75 percent. This would be a confidence-inspiring move for all concerned: borrowers, lenders, businesses, consumers, and mortgage holders. Not only will slashing the cost of money add significant new liquidity to the economy, it will raise asset values across the board.

The Fed also might think about setting up a special facility for non-bank lending institutions that are experiencing a liquidity squeeze. Perhaps also a temporary liquidity facility for commercial paper lenders. The asset-backed commercial paper market is vital to funding many of the daily operations of businesses across the country, and it’s this market that has been hardest hit.

Such monetary front-loading would be very powerful, indeed. However, if the Fed goes small with only quarter-point reductions for fed funds and the discount rate, many investors will have an incentive to withhold money while they wait for interest rates to finally bottom at much lower levels later this year or next. In other words, a timid Fed action might actually prolong and deepen the economic slowdown.

This is not a time for small-ball. It’s time for Bernanke and Company to go big.

And let’s not forget that taxes are just as important as money. President Bush and Treasury man Henry Paulson should absolutely squash all the Washington rumors of tax hikes, in particular a cap-gains tax increase. If investors expect a hike in the cap-gains tax, they will have every incentive to launch a massive wave of stock market selling. Needless to say, this would be utterly calamitous for the whole economic picture.

The animal spirits may have had their wings clipped a bit by the credit crunch, but with the right tax and money policies there is still plenty of sizzle and juice in this story. It’s very easy to be totally pessimistic and bearish right now, but that’s precisely why I will avoid falling into that trap.

Optimists are winners. Pessimists are losers.

Goldilocks 2.0.

The Free Market Hall of Fame


Just received an email from my old pal Mark Skousen. He’s the founder of FreedomFest, which bills itself as ‘The World’s Largest Gathering of Free Minds.’ They put together terrific, thought provoking conferences out in Las Vegas once a year.

Turns out they’re also putting together a “Free Market Hall of Fame.” It’s a “who’s who” of all the folks contributing most to the success of free markets and free people around the globe.

(Incidentally, yours truly was nominated.)

Categories include:

1. Academic economists
2. Journalists and writers
3. Business leaders
4. Legislators and government officials
5. Think tanks

Click here to vote for your favorite free market advocates.

And remember: Free market capitalism is the best path to prosperity!


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