Kudlow’s Money Politics

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

Surprise Drop in Oil?


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A few days ago, Prince Turki al-Faisal, the Saudi Arabian Ambassador to the U.S., told the United States Energy Association that any U.S. conflict with Iran would threaten the Strait of Hormuz and triple the price of oil.

Perhaps Prince Turki is trying to get President Bush to rule out the military option in the Iranian standoff over weaponizing their uranium enrichment program. Of course, President Bush won’t do this, as he should not.

Direct negotiations with Iran, a good idea in my view, will proceed with any number of items on the table, including trade, investment, Iraq, human rights, and so forth. But the Iranians must know that the United States is prepared to defend its security interests if it comes down to that.

Meanwhile, back to the matter of oil prices, the more imminent reality could actually be a sizable price decline, rather than a huge increase. The Energy Department just announced that crude oil supplies rose 1.4 million barrels to 347.1 million for the week ended June 16. Analysts had been expecting a drawdown, not an increase.

Crude oil supplies in the U.S. are now at their highest level since May 29, 1998, when oil was trading around fifteen bucks a barrel. In addition, Canadian inventories are also fully stocked.

Oil tanker executives have recently confirmed that oil in storage aboard very large crude carriers, floating on the high seas, is abnormally high. And, Chevron CEO David O’Reilly informed us recently that gasoline and energy demands here in the U.S. have flattened out, and may be showing signs of declining somewhat.

The bottom line to all this is that Prince Turki’s $200 oil scenario or not, there could very well be a near-term correction in oil prices that will drop far more than anyone imagines possible. Supplies are at their highest levels in eight years, while demand appears to be falling. This of course, would be welcome news for both the stock market and the economy.

The Queen of Saboteurs


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The New York Times is doing one heckuva job underming U.S. national security.

The Gray Lady’s latest attempt to thwart the men and women charged with the vital task of unearthing terrorists, and capturing them before they steal any more innocent American lives, came last night when, against the repeated requests of the White House, the paper went ahead and revealed yet another classified program designed to gather information used to foil terrorist attacks like 9/11.

The saboteurs at the Times provided secret details into the Bush administration’s use of subpoenas to gather large troves of data from the Society for Worldwide Interbank Financial Telecommunication (SWIFT), a Belgium-based consortium that handles international bank transfers. Financial data is used to identify terrorists before they get a chance to kill. It is an eminently sensible program, and one that has reaped rewards.

In one instance, the SWIFT program was used to capture a top Al Qaeda operative, Riduan Isamuddin, in Thailand in 2003.

The folks running the printing presses at the Times don’t seem to care about any of this. They went ahead and made the determination that the SWIFT program was ‘a matter of public interest.’

Gabriel Schoenfeld, the editor of Commentary magazine, had this to say about the New York Times in an interview with The New York Sun:

They’re courting prosecution…They’re increasingly behaving like if we were in the middle of World War II and they learned of plans to invade Normandy. Because they decided it’s a matter of public interest, they’d publish it. I think this is reckless and likely to encourage Attorney General Gonzales to prosecute them, if not for this story, for some of the other things they’ve done.”

The New York Times is blinded by its hatred of George W. Bush. And, because of this, these boneheads compromise the lives of all Americans.

The Gray Lady has become the Queen of Saboteurs.
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Fri, June 23rd - 8:44 AM


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Very good, hard-hitting editorial in the Wall Street Journal today on “The Tancredo Republicans.” These guys are hurting the GOP.

Step Back Jack


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John Murtha may have become the darling of the lefty anti-war crowd, but the man who has spent thirty-two years of his life in the House of Representatives won’t become the poster-child of any anti-corruption crusade any time soon, that’s for sure.

As The Washington Times pointed out yesterday, this cut-and-run congressman who accused Marines of murder “in cold blood” before a preliminary investigation was even complete, has more than his fair share of political skeletons in the old closet.

’Last June, the Los Angeles Times reported how the ranking member on the defense appropriations subcommittee has a brother, Robert Murtha, whose lobbying firm represents 10 companies that received more than $20 million from last year’s defense spending bill. “Clients of the lobbying firm KSA Consulting — whose top officials also include former congressional aide Carmen V. Scialabba, who worked for Rep. Murtha as a congressional aide for 27 years — received a total of $20.8 million from the bill,” the L.A. Times reported.’

More: ’In early 2004, according to Roll Call, Mr. Murtha “reportedly leaned on U.S. Navy officials to sign a contract to transfer the Hunters Point Shipyard to the city of San Francisco.” Laurence Pelosi, nephew of House Minority Leader Nancy Pelosi, at the time was an executive of the company which owned the rights to the land. The same article also reported how Mr. Murtha has been behind millions of dollars worth of earmarks in defense appropriations bills that went to companies owned by the children of fellow Pennsylvania Democrat, Rep. Paul Kanjorski. Meanwhile, the Center for Responsive Politics, a nonpartisan campaign-finance watchdog group, lists Mr. Murtha as the top recipient of defense industry dollars in the current 2006 election cycle.’

This is nothing new for old Jack. In fact, as the paper points out, Murtha’s questionable history extends all the way back to 1980, to the massive Abscam bribery scandal, when Mr. Murtha was named by the FBI as an “unindicted co-conspirator.”

We have unfinished busines left in Iraq Jack. Step out of the way.

Judd Gregg to the Rescue


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We need more Republicans like Judd Gregg.

The Senate Budget Committee chairman’s Stop Over-Spending Act (S.O.S.) is a welcome breath of fresh fiscal air. It’s exactly the sort of thing the profligate GOP needs right now to restore confidence after losing its fiscally conservative mojo in recent years.

The S.O.S. Act is a budget limit plan that essentially updates the Gramm-Rudman-Hollings Act from the mid ‘

Hastert’s $2 Million Score


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Jonathan Weisman has a story in the Washington Post today raising the heat on Hastert’s home-district earmark that the House Speaker allegedly engineered for his own financial windfall. The Speaker made a $2 million profit last year on the sale of land 5 1/2 miles from a highway project that he helped to finance with targeted federal funds.

Hastert and his people are aggressively denying any wrongdoing. And we don’t know for sure yet whether there’s any fire behind this smoke. We’ll just have to wait for the dust to settle.

That being said, this thing stinks to high heaven. It’s squirrelly. Hastert’s highly lucrative land deal and the home-district earmark he orchestrated are way too close for comfort. It is yet one more reason, among oh so many, why voters have had it with Congress.

It also shows, once again, why the GOP Congress must definitively stop-once and for all-this corrupt earmarking process.

In between Hastert’s ridiculous defense of “Cold Cash” Jefferson, his ties to Jack Abramoff, and this latest imbroglio, well, let’s just say things don’t look too good for the Speaker.

Stop the earmarks; stop the corruption.

Forget the Economy, It’s All About the Politics Stupid!


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There’s a big political hullabaloo brewing this election year over a minimum wage hike. What a surprise. This thing only seems to pop up during election years.

The economics of a minimum wage hike are terrible.

Think of fast-food restaurants and small eating establishments that hire young workers of all colors and races, especially during the summer. These students and others will be priced out of the labor market because of the higher minimum wage.

Did you know that only about 2

Capitalism On the Move


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Poor Karl Marx; he must be tossing and turning in his grave.

The evidence is showing once again that capitalism works, and the rising global tide of free-market capitalism bears this out as ships are being raised all across the world.

According to a new report, the number of people globally with more than $1 million in net assets rose 6.5 percent last year to almost 9 million.

In South Korea, the number of millionaires jumped over 21 percent; India was up almost 20 percent, and Russia, up over 17 percent.

South Africa, Indonesia, Hong Kong, Saudi Arabia, Singapore, the United Arab Emirates and Brazil all posted robust double-digit increases. China grew almost 7 percent.

Capitalism works. It is on the move across the globe. This is a very good thing.

A Recipe for Recession


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This news that Germany is planning on raising its value-added tax next year from 16 percent to 19 percent (the largest increase in the VAT’s forty years) is a terrible idea.

Terrible.

And, the fact that Japan is considering a similar tax hike is equally worrisome.

Investors Business Daily spells it out nicely today:

’…At the same time that taxes are going up, central banks ‘” from Frankfurt to Washington to Tokyo to Beijing ‘” are raising interest rates or otherwise clamping down on money-supply growth. If this trend of higher taxes and tighter credit continues, it could mean a massive slowdown, if not an outright recession, in the world’s major economies.

We’re not trying to be alarmist. Right now, conditions are very positive. But data show the world is already overtaxed. As a matter of efficiency, countries perform best when government’s tax take is relatively small ‘” about 20% of GDP. Above that level, economies start to suffer. Repeated studies bear this out.

Perhaps the most famous, by Harvard economist Martin Feldstein, found that high rates of taxation cost countries more than $1 in output for each dollar of added taxes imposed. Likewise, World Bank studies of dozens of economies going all the way back to 1983 find pretty much the same thing….’


A combination of tight money and tax hikes is a formula for recession. On the other hand, tight money and lower tax-rates is a tried and true growth formula–the Reagan model. History bears this out.

With investor tax cuts extended until 2010, and tighter money from the Fed, the U.S. is still on the right path for now. But Congress still needs to make these pro-growth tax cuts permanent.

“Bush 43 gets it”


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Kudos to my good friend Rich Lowry, editor over at the National Review, who hit the nail on the head today in his column, “The Wonder of Voodoo Economics.”

“Who says you can’t cut taxes, increase spending, and reduce the federal budget deficit all at the same time? That’s what the Bush administration has managed to do. Two decades after then-presidential candidate George H.W. Bush characterized Ronald Reagan’s idea that tax cuts would spur revenue-generating economic growth as ‘voodoo economics,’ the witch doctor is again at work.

When President Bush pledged in 2004 to cut the deficit in half by 2009, critics guffawed. The Boston Globe headlined a story, ‘Bush’s plan to halve federal deficit seen as unlikely; higher spending, lower taxes don’t mix, analysts say.’ ‘Fanciful,’ ‘laughable’ and ‘all spin,’ said the critics.

Well, it turns out that 2009 might be coming early this year. The 2004 deficit had been projected to hit $521 billion, or 4.5 percent of gross domestic product. Bush’s goal was to cut it to 2.25 percent of GDP by 2009′”not exactly as stirring a national goal as putting a man on the moon, but one that was nonetheless pronounced unattainable. This year, the deficit could go as low as $300 billion, right around the 2009 goal of 2.5 percent of GDP….”

Mon, June 19th - 3:49 PM


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The fact of the matter is we have been safe and secure here at home. That’s not an accident. It didn’t happen just because we got lucky.”

-Vice President Cheney speaking at the National Press Club luncheon earlier today.

Churchill on Taxes, Regulation and Capitalism


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“Some see private enterprise as a predatory target to be shot, others as a cow to be milked, but few are those who see it as a sturdy horse pulling the wagon.”

“We contend that for a nation to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”

“If you have ten thousand regulations, you destroy all respect for the law.”

The Continuing Scourge of Earmarks


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Bob Novak has a great earmark column out there today.

(This is the heart of the corruption story. The GOP has not solved it, and the Dems are no better. The culture of corruption is a pox on both parties, in both the House and the Senate. Nothing has been solved, despite the Abramoff scandal, etc.)

’Jeff Flake, a 44-year-old third-term Republican congressman from Mesa, Ariz., last Wednesday burnished his credentials as “Miss Uncongeniality” in the House of Representatives. He introduced 12 amendments to the Transportation-Treasury-Housing and Urban Development appropriations bill removing earmarks of individual House members, including two by chief appropriator Jerry Lewis. All of Flake’s efforts failed.

That brought to 26 earmarks unsuccessfully proposed by Flake for removal from appropriations bills since May 24. There was no close vote and no serious debate. Republican and Democratic leaders alike voted to preserve earmarks’

An Unfortunate Wager


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John Fund delivers yet another cogent column this morning, arguing that the Dems keep betting on failure in Iraq.”

“…Not every Democrat believes there’s no progress in Iraq. Democratic strategist Bob Beckel, who managed Walter Mondale’s 1984 campaign, had the honesty to tell Fox News Channel last Friday: “Yes, we’re winning, but we’re not winning fast enough.” Imagine what would have happened if in the middle of the fight against Nazi Germany and Imperial Japan, Franklin Roosevelt had been accused of not rolling back the Axis fast enough. Mr. Beckel went on to conclude “This war is just–it’s stupid politics.”

…If President Bush has staked the future of his administration on the outcome in Iraq, Democrats appear to have placed their political bets on the war continuing to go badly. Given the death of Zarqawi, the formation of a unity government in Baghdad, and possible developments in the search for WMD material, that is starting to look like a risky wager.

Democrats might recall they made similar bets that they could win the political debate over Iraq in both 2002 and 2004. They lost both times, and last week’s Iraq debate in Congress shouldn’t give them confidence that they have any better approach in this election year.”

Fri, June 16th - 3:11 PM


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Good News from Iraq


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Another great article by Ralph Peters.

“IRAQ’s government just released the first insider documents captured from terrorists in the raids surrounding Abu Musab al-Zarqawi’s death. The contents will horrify America haters in our media but won’t surprise Post readers:

We’re winning.

Yeah, the good guys. Our troops. And the Iraqi army. We’re winning. We were winning big even before we nailed Zarqawi. The terrorists themselves said so. In their state-of-the-troubled-union message to themselves.

…For patriotic Americans and freedom lovers everywhere, for the enemies of terror and the friends of tolerance, for the people of Iraq and of the United States, the captured terrorist documents contained nothing but great news – confirmation that we’re winning, that terror is being defeated and that Iraq is on the road to recovery.

As for me, as I wrote this column yesterday afternoon, I pledged to myself that I was going to pick up The New York Times this morning. The Times has been reporting terrorist propaganda as Gospel truth for three years. Now I can’t wait to see how the shady Gray Lady spins the truth the terrorists told each other.

Betcha we’ll start hearing that the captured documents are all forgeries – so a badly burned “mainstream” media can get back to reporting “the truth” about Haditha, Guantanamo and Abu Ghraib. In the meantime, our troops will continue to win this war.”

Kudlow on the Radio


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The Larry Kudlow Radio Show can be heard live this Saturday from 10:00am until 1:00pm (EST) on New York’s 770 AM radio dial. If you are located outside the greater New York area, you can tune in live to Larry’s show via the Internet at www.wabcradio.com.

Larry is also a regular guest every Friday night on Hugh Hewitt’s nationally syndicated radio show. Tune in at 7:20pm (EST) to catch Larry and Hugh discuss the latest political and financial news. (Check your local listings or listen live via Hugh’s website at www.hughhewitt.com.)

Lower Taxes Work


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When you tax something more you get less of it. When you tax something less you get more of it.

The AP pointed out this week that, “‘

Some Reagan Gems


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“My philosophy of life is that if we make up our mind what we are going to make of our lives, then work hard toward that goal, we never lose – somehow we win out.”

“Republicans believe every day is the Fourth of July, but the democrats believe every day is April 15.”

“Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”

“The problem is not that people are taxed too little, the problem is that government spends too much.”

Bush Regains His Mojo


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Things are looking rather good right now for the President.

I’m sure he has been savoring this steady stream of good news. With some new, talented faces behind him in the West Wing, a powerful and resurgent White House team is welcoming a string of successes here at home and in Iraq. There is a new, unmistakable bounce in the President’s step. Bush is confident, he is on message, and he is fighting the good fight.

In short, he has regained his mojo.

Not everyone is happy about these developments. Those poor Democrats, they don’t know what to do with themselves. In between all their bickering, they just can’t seem to figure out what to do about Bush’s momentum and success.

Look no further than national security. In our critically important war on terror, without a doubt the most pressing issue of our time, the Dems have not changed their tune one bit. They remain off-key and more than a little suspect in protecting our safety and freedom.

Take this latest welcome blow to Al Qaeda, with the well-deserved death of their murderous leader/thug/enemy of peace and fomenter of violence, Al-Zarqawi; or the growing cohesion in Iraq’s nascent government, where Prime Minister Nuri al-Maliki’s cabinet shows increasing signs of promise. Observe the surge of American support for our vitally important Iraqi campaign in the polls.

All of this is great news. Or so you’d think.

But not for the Democrats. These positive developments have them wringing their hands, lost somewhere in outer space.

Instead of praising our progress in the war on terror, instead of getting firmly behind our Commander-in-Chief and signaling their commitment to finishing what we began, all we get is more bad ideas and a lot of head scratching from these folks. Just look at their leaders:

John ‘Flip-Flop’ Kerry has raised the rhetoric for troop withdrawal;

Harry Reid too’”he gave a talk at a lefty blogger convention this past Saturday echoing Kerry’s cut and run call;

(Murtha? Well, you know where he stands);

Hillary Clinton thinks a timetable is a bunch of nonsense (good for her). But Hillary is a minority in the party. The Senator from New York was greeted with a chorus of thunderous boos yesterday by a bee’s nest of Democratic activists. (In case you were wondering, John Kerry, who also spoke, was cheered wildly when he advocated his cut and run plan.)

The point here is that the wishy-washy Democrats still don’t have a real message. They are still running for cover. At this pivotal time in our nation’s history, a time when strong, effective leadership is needed to defeat these enemies of peace and democracy, the Democrats offer no game-plan, no leadership, and no consensus. They are defeatists.

Things don’t look much better for the Dems on the economic front. (No real surprise there.) Try as they may, they still can’t manage to kick their tax and spend habit.

As Karl Rove reminded everyone in New Hampshire yesterday, Democrats want to raise our taxes; Republicans want to reduce them. Democrats want an increase in spending; Republicans want a reduction. And, until they move towards pro-growth tax and spending reform, Democrats are not going to win elections.

The fact is that the Laffer curve tax-cut paradigm remains the most powerful policy weapon in American politics. When you tax something more, you get less of it. JFK and LBJ both adhered to this principle, as did Ronald Reagan. Papa Bush deserted it and got whooped. Bill Clinton originally opposed it, and the Dems lost Congress as a result. When Clinton finally embraced it during his second term (with a cap gains tax cut) he did well.

George W. Bush successfully used tax cuts in 2003 to re-ignite the American economy, and lead the GOP to big election victories in 2002 and 2004. And the President and Karl Rove are going to use it again in 2006. But, as long as the Dems keep banging their heads against the Laffer curve brick wall, they are doomed to defeat.

There is still a lot of time left between now and November. But, given Bush’s resurgence, Democrats’ dissension, continuing good news from Iraq and our war on terror, a continued strong economy with historically low unemployment, and the fact that Bush is on message and looking stronger than ever, well, you’ve got to reassess the conventional wisdom about the Dems picking up any seats in November.

Sure, the Dems have an opportunity to gain some ground, but it is an opportunity they will likely squander. Their message remains poor. As John Kasich pointed out recently on ‘Kudlow and Company,’ nobody ever won a close race by promising tax hikes. And, as the President correctly stated at his news conference, this is exactly what these guys will do.

No matter how they dress it up, no matter how they cut it, Democrats are angling yet again for tax hikes.

The stubborn fact remains that the Republican Party is the party of optimism and growth, while the tentacles of pessimism are still tightly wrapped around the Democrats. It remains the party of defeat and decline. They lack Ronald Reagan’s sunny vision of America and the policy ammunition to effectively nationalize these races with an attractive message. This is the real political problem for the Dems. And until they get a new message, they’re toast.

It’s only June, but right now, with the way things are shaping up, it’s looking more and more like a GOP Congressional hold to me.

Did I mention that the President regained his mojo?

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