Kudlow’s Money Politics

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

Larry and Laffer on Batchelor Radio Tonight...


Larry and Art Laffer will appear with John Batchelor tonight on ABC Radio Network’s nationally syndicated “The John Batchelor Show” at 10pm EST tonight.

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Well Worth a Read


Great column by Ben Stein in yesterday’s New York Times.

Ben begins, “NOW for a few words about Ben S. Bernanke, inflation, the stock market, economics and fathers.”

(The best part of the column is Ben’s touching tip of the hat to his father, the late, great economist, Herb Stein.)

Ben’s father Herb was a great friend and mentor of mine.

Even when we disagreed, Herb taught me enormously. He was one of the clearest thinkers I have ever met. His book on presidential economics is a classic. His wife Mildred, was also a wonderful person, and was a distinguished economist in her own right.

When I lived on Foxhall Road in Washington, during the Reagan years, they were frequent guests at dinners and Superbowl parties.

I continue to miss them.

Jim Moran Loves Pork


Apparently, some folks on Capitol Hill really like pork…

From a column in a Sun Gazette newspaper:

“If Democrats win back control of the U.S. House of Representatives in November, U.S. Rep. Jim Moran said he would use his position in the majority to help funnel more funds to his Northern Virginia district.

Moran, D-8th, told those attending the Arlington County Democratic Committee’s annual Jefferson-Jackson Day dinner on June 9 that while he in theory might oppose the fiscal irresponsibility of ‘earmarks’ – funneling money to projects in a member of Congress’s district – he understands the value they have to constituents.

’When I become chairman [of a House appropriations subcommittee], I’m going to earmark the shit out of it,’ Moran buoyantly told a crowd of 450 attending the event.”

Click here to read the whole article.

Hooray for the Death Tax!


So the estate tax cut went down in the Senate, to the cheers of class warriors everywhere. Congratulations to Democratic senators Evan Bayh, Mary Landrieu, Ron Wyden, and Mark Pryor — all of whom voted against death-tax repeal after voting in favor of it a few years ago. At last, they’ve come to their senses!

Our rich people don’t need another tax break. No, they need higher taxes. And they should be vilified, too. That’s right: America should attack rich people. In fact, we must abolish wealth, which is a tremendous drag on our economy. It’s high time that we made the rich poor.

As for all the xenophobes who want to deport the illegal immigrants who toil in this economy, may I respectfully suggest that their generals (i.e., Lou Dobbs, Pat Buchanan, and Tom Tancredo) consider expanding their dragnet? Let’s deport rich people, too!

These rich people are bad for America. We don’t need their ingenuity, their entrepreneurship, or their capital investment. In the name of egalitarian socialism, the only thing we need from them is more tax dollars. We now tax their incomes as salary, corporate profits, dividends, capital gains, and at death. But we must do better.

Perhaps we can tax their huge contributions to charities. That’s the ticket. We can tax them when they fund the building of a new church or synagogue, or when they create another college, or when they finance private scholarships or inner-city educations.

But we can’t stop there. Let’s criminalize the entire class of successful American entrepreneurs. Let’s haul out the distributional tables from the Joint Tax Committee and the Congressional Budget Office and target all upper-end earners for special wealth taxes.

Maybe we can even impose jail sentences on rich people. No more interest income at all, just like the radical fundamentalist Muslims do it!

Here’s a thought: Let’s publish the names of all rich people in the newspapers. Even better, when fat cats venture out in public, let’s swarm them like those animal-rights advocates who throw paint on women wearing mink coats.

Simply, we must strive to make America more like France and Germany — those great income-leveling, income-redistribution states. But it’s gonna take some work. When I last checked the international tax tables, I found that the U.S. has the third highest estate-tax rate out of 50 countries. We should be ashamed. Only third? We tax estates at a 46 percent marginal rate, but Japan is the best at 70 percent, followed by South Korea at 50 percent. We are pikers. How can we dare let Japan be ahead of us on taxing rich people?

The fact that 24 countries have a zero estate-tax rate, including China, should not concern us. They don’t know what they’re doing. And we do. We don’t want to be competitive in the world economy. We’d prefer to hang out a sign reading: ‘Capitalists are unwelcome in the U.S.’

This whole idea of keeping more of what you earn and own is just plain stupid. In fact, this whole capitalistic notion is just one of those bizarre global trends that undoubtedly will be reversed as people come to their senses.

The Czech Republic, Estonia, India, Indonesia, Malaysia, Mexico — they’re obviously all nuts with their zero tax rates on estates. Did I say Mexico? That’s perfect. Instead of creating thousands of new businesses and millions of new jobs in America, our rich can do this for Mexico. If we deport them, that is. What a great idea!

Forget Sen. Jon Kyl’s fallback position of a 15 percent death-tax rate, after exempting the first $5 million of an estate. That would move us too close to Canada, Australia, and Argentina, which also have zero rates. It would also promote the foolish idea that there is a link between reward and work, and reward and risk.

The ultra-right-wing idea that it must pay after-tax to work and invest is simply insane. Forget what the brilliant Arthur Laffer says. The best way to generate more saving and investment is to tax both more.

This may all sound wrong, but our soak-the-rich guys are deep thinkers. They have their fingers on the pulse of the hundred-million-strong investor class. They know that the worldwide spread of free-market economics, which was launched by Reagan and Thatcher twenty-five years ago, which has raised global prosperity to record heights, and which has caused the phenomenal growth of the middle class in places like India, China, and Russia, is absolutely nuts.

After all, capital is the enemy of labor! Forget the obvious facts that you can’t create a new job without a business and that you can’t fund a new business without capital. That’s obviously wrong.

Once again, capital is the enemy. Rich people are evil. We have to put an end to all this capitalist, supply-side nonsense.

By the way, when is Karl Marx’s birthday? I have to stop writing now, so I can go look it up. Next May? Well, at least that will give me time to prepare a triumphant celebration for the greatest soak-the-rich advocate of all time.

Tipping Point?


I really like this lead story in today’s New York Sun, America Readying Major Offensive Against Al Qaeda.

As I said on last night’s program, if all the rodents are under the sink, then we can destroy them in one spot, with one action.

It makes a lot of sense; based on the ‘treasure trove’ of information gathered in yesterday’s seventeen spot raid that accompanied Zarqawi’s bombing. Special ops troops will descend on Al Qaeda hangouts based on these newly discovered documents.

This follow-up could have a major positive impact on the Iraq insurgency, and could be a huge victory for American coalition forces.

Since almost all commentators believe the Zarqawi death (and what hopefully will be a fruitful follow-up) is not a true turning point in the war, then I am forced to believe this story could be a real tipping point.

One reason for my counter conventional point of view is my absolute confidence in U.S. military forces, their wisdom, their bravery, and their determination.

The Deeper Currents


My friend Claudia Rosett has a great op/ed today on how far we’ve come in our war on terror.

(The last paragraph really hits the nail on the head…)

“…[T]his is an excellent moment to step back and look at just how far in this war we have come. Five years ago, al-Qaeda’s commanders, from their safe haven in Afghanistan, were training thousands of terrorists and planning the Sept. 11 strike on a sleeping America. In Iraq, Saddam Hussein ruled by terror, with a record of exporting brutality and war from Baghdad at any opportunity to wherever he could reach – invading his neighbors, rewarding Palestinian suicide bombers, and openly rejoicing over Sept. 11.

Today, elected governments lead Afghanistan and Iraq, which has just completed its cabinet lineup. Bin Laden is afraid to venture out of hiding; Hussein, pulled from his spider hole, is on trial in Baghdad. And now, Zarqawi is dead, and the circumstances of his death may encourage decent people in Iraq and elsewhere to help hunt down his collaborators.

The greatest weakness of the United States in this war has been our tendency, within our own domestic debate, to quickly dismiss our victories and dwell on each al-Qaeda bombing or beheading as a sign of impending defeat. The death of Zarqawi needs to be understood as a sign that the deeper currents are running our way.”

Talking with Iran


A week ago, I wrote a post (“To My Friends on the Right”) where I argued that the U.S. should attempt, in good faith, to strike a trade and investment deal with Iran, along with strict weapons restrictions and inspections.

I also stated that I was convinced by the arguments of my brilliant friend, Tom Barnett, who strongly believes that connectivity is vitally important, even in the darkest corners of the world.

Well, from the looks of things, some folks in the White House appear to be coming around to Mr. Barnett’s out-of-the-box approach with Iran.

Here’s an excellent recent blog entry from Tom.

Hoping on the Iran offer

That the Iranians haven’t dismissed Bush’s package offer yet is indeed a hopeful sign, as Bush himself noted. So the undisclosed package of economic and diplomatic connectivity, in combination with the offer to start direct talks for the first time since 79, must be substantial. If Tehran says yes by suspending (but not terminating) its uranium enrichment program, then the potential for direct talks to spill over to other security issues (something the stay-in-our-lanes crowd with this administration usually loathes to do in a weird definition of non-linkaging) is at least raised–and that alone would be cause for real optimism that the soft-kill option can work itself out over time (and administrations).

You can check out his blog here.

Good Things


Whether Zarqawi’s death represents a real turning point in the Iraq war remains to be seen. But it sure is a good thing.

U.S. and coalition forces have cleaned out Saddam; cleaned out his sons; cleaned out virtually all of the Saddam hierarchy; and now cleaned out Zarqawi and a bunch of his henchmen. This too is a real good thing.

Iraq, the United States and the rest of the world will benefit.

I’m very interested in the 17 bombing sortie missions that accompanied the Zarqawi action. I’m also very interested in the ‘treasure trove’ of intelligence information that has been secured. More will be revealed on these fronts.

Let’s not overlook that the new Iraqi government has filled the key security positions of defense, energy and national security. This is another big positive.

So, when you consider the great news of Zarqawi’s demise, definitive progress in Iraq’s government, plus the fact that Iran’s Ahmadinejad is ready to talk, well, it strikes me that risk premiums in world financial markets, including oil, could decline as a result of these important events.

Here’s hoping.

Good Riddance...


Protect the Dollar


My old friend, and frequent Kudlow & Company guest, Brian Wesbury, basically has the economic story right in today’s Wall Street Journal. (’Economic Rehab’)

I’m not so sure about a 6 percent fed funds rate being ‘monetary policy nirvana’ however.

Right now, futures markets are saying 5.25 percent is adequate, and this could drop to 5-percent by the end of next year. But this whole debate is just a trifle; the reality is we’re in an economic boom. It’s still the greatest story never told.

And if the Fed drains cash to remove inflationary money, in order to protect the value of the greenback, then I’m a happy camper.

Remember, the Reagan economic growth model is all about low tax rates to spur growth, and a steady, stable, firm dollar to contain inflation. The Bushies got the tax rates right, but they have neglected the dollar.

So long as Mr. Paulson and Mr. Bernanke protect the dollar, then this boom will continue along for years to come and stocks are undervalued.

Some Wisdom from Milton Friedman


“Nobody spends somebody else’s money as carefully as he spends his own. Nobody uses somebody else’s resources as carefully as he uses his own. So if you want efficiency and effectiveness, if you want knowledge to be properly utilized, you have to do it through the means of private property.”

“The greatest advances of civilization, whether in architecture or painting, in science and literature, in industry or agriculture, have never come from centralized government.”

“Underlying most arguments against the free market is a lack of belief in freedom itself.”

Bernanke’s Back on Message


Ben Bernanke got back on message with his strongly worded statement yesterday that, ‘maintaining low and stable inflation is essential for achieving both parts of the dual mandate assigned to the Federal Reserve by the Congress. In particular, the evidence of recent decades’

The Terrorism Front


Nobody seems to believe me, but I continue to think that this terrorist sting by Canadian authorities has jolted the American stock market and reawakened the deep-seated fear about homeland security and the potential for another terrorist attack.

A couple of the would-be Canadian bombers came from Georgia. And, we know from terrorism expert Steve Emerson and others that there are a lot of terrorist cells operating in the U.S.

In fact, a new CBS report claims that a number of U.S. officials believe recent incidents point to an imminent threat, perhaps by the end of 2006.

This of course is why electronic surveillance is so incredibly important.

This is why we must give our security and law enforcement people wide latitude.

We are blessed that nearly five years have passed since 9/11 without another successful terrorist attack; several potential attacks have been thwarted. But this Canadian story brings home the ongoing danger and our vital need to remain vigilant.

Larry on Batchelor Radio Tonight


Larry will co-host with John Batchelor tonight on ABC Radio Network’s nationally syndicated “The John Batchelor Show” from 9:00pm – 1:00am EST.

Please click here for more information.

Lowry on Haditha


My old National Review buddy Rich Lowry has some insightful thoughts on the growing Haditha imbroglio.

“No military in the history of the planet has ever been as observant of the rules of warfare and as discriminate in its use of force as ours. But no large organization can be utterly free of weak or evil men. In their rush to find a broader meaning in such horrible events, liberals weirdly attenuate their own ability to condemn the perpetrators.

…A combat environment presents stresses unimaginable to the civilian, and perhaps no combat is more difficult than fighting an urban insurgency. But tens of thousands of American troops have faced it without going door to door killing people in cold blood. Pointing to Haditha and saying that it means we have to leave Iraq would be a little like pointing to the New York City police officer who sodomized a suspect with a broomstick and saying that the NYC Police Department should exit New York because the stresses on its officers are too great.

If Marines in Haditha did what they are accused of, it’s a terrible crime unrepresentative of the American military. Period.”

Click here to read the whole NRO article.

The Enemy is Still Out There


This story about seventeen Canadian Muslims caught plotting an Al Qaeda terror campaign is an eye-opener.

It ought to serve as a serious wake-up call here at home.

While the evidence is still being gathered, one thing looks clear: These thwarted thugs wanted a lot of innocent blood.

These evildoers had their hands on three tons of ammonium nitrate’”three times the amount used in Oklahoma City, when the Murrah Federal Building was blown up injuring 800 people and killing almost 200.

Fortunately, officials from Canadian intelligence and law enforcement were all over them. Hats off to them for preventing what could have been a horrible loss of lives.

Back here in the states, we know that these monsters are already among us. We know their cells are growing. And, most of them arrive here legally through visas. (Terrorism expert Steve Emerson has been warning us about this for many years.) So, calls for tightening the borders isn’t going to keep us safe. We are already in danger.

What we need to do is get behind the G-Men who are charged with the enormous responsibility of protecting American lives. We need to get behind the NSA. We need to get behind the Patriot Act. We need to pay particular attention to the schools and mosques where these evil elements grow like weeds planning their terror strikes against innocents. And this includes wiretapping, and other forms of surveillance where necessary, like the Internet monitoring successfully used by the Canadian authorities to ferret out these latest terrorists.

All this lefty ACLU carping about privacy violations, government intrusion and Fourth Amendment violations is a bunch of garbage’”much ado about nothing. And the liberal mainstream media have their heads in the sand on this issue as usual.

The fact is, these anti-terror programs are precisely why we haven’t had another attack on American soil since 9/11. They have been a tremendous success.

We need to reaffirm our commitment to unearthing terrorists here in the U.S.

Mon, June 5th - 8:34 AM


“We who live in free market societies believe that growth, prosperity and ultimately human fulfillment, are created from the bottom up, not the government down. Only when the human spirit is allowed to invent and create, only when individuals are given a personal stake in deciding economic policies and benefitting from their success — only then can societies remain economically alive, dynamic, progressive, and free. Trust the people. This is the one irrefutable lesson of the entire postwar period contradicting the notion that rigid government controls are essential to economic development.”
- Ronald Reagan

More Than Half Full


You can’t win with the economic pessimists.

The cult of the bear reigns supreme on Wall Street these days, as those who want to tear down the economy continue manufacturing reasons to justify their declinist philosophy. If jobs reports come in above expectations, naysayers predict inflation. If reports come in below, they predict recession.

So, today’s 75,000 increase in non-farm payrolls was greeted derisively, despite the fact that over the past 33 consecutive months, 5.3 million new jobs have been created. Over the year ending in May, 1.9 million new jobs have been created and the unemployment rate moved down to 4.6 percent, the lowest in nearly five years’”below the average jobless rate of the last 45 years.

But wait, there’s even more: the household survey, which focuses on self-employed owner-operators of new entrepreneurial businesses showed a booming May jobs report of 288,000. I have not heard a peep anywhere about this.

In fact, all this year, the entrepreneurial household sector has produced 1.2 million new jobs (including 326 thousand self-employed) compared to only 730,000 from the corporate establishment payroll survey.

Historically, when a big spread opens up between these two series, it is the payroll survey that gets revised upward, or that catches up in future months. This was particularly the case in 2003 and 2004, when Democrats who proclaimed a jobless recovery had to eat crow.

Studies done by the Labor Department acknowledge the importance of the household survey, which is where the unemployment rate is derived. Economists at the Bureau of Labor Statistics have offered a ’split the difference’ rule of thumb to reconcile the two surveys. Using that approach, you get 964,000 new jobs year-to-date, or 193,000 per month.

The economy is so strong that more and more people are still entering the labor force to get jobs. The civilian labor force has expanded by 838 thousand this year. Meanwhile, those not in the labor force but who want to work is up 400 thousand. Discouraged workers are down 128 thousand.

Right now, total employment in the U.S. stands at a record high of 144 million. This is a big number, just as 4.6 percent unemployment is a low number. In fact, the number of unemployed has dropped by 2.2 milllion since the mid-2003 peak and by 400 thousand this year.

Over the past three years alone, real GDP in the U.S. has been averaging 4 percent annually. After tax business profits, the mother’s milk of business and the stock market are at a record high. And, despite rising gas prices, consumers are still spending according to the May report or comparable same store retail sales. (‘Consumers Shop with Enthusiasm in May’ according to the AP. Here’s a second one ‘Retailers Report Solid May Sales as Department Stores Stand Out’ from the Wall Street Journal)

Consumers are spending because jobs are rising and incomes are expanding. Average hourly earnings in the May jobs report are running 3.7 percent above a year ago; while average weekly earnings are growing at 4 percent. Both are running well ahead of inflation, even including the gas spike.

Most important, the workforce is earning their salary gains through record productivity. Non-financial business output per hour is rising at 3.7 percent which means that productivity adjusted labor costs are actually falling by nearly one percent per annum.

In other words, the workforce is getting raises that do not interfere with business profitability. And, record low tax rates on capital formation point to a continuation of this highly favorable economic scenario for years to come.

You know what? The real economic truth is that it doesn’t get much better than this.

Put politics aside, leave the Bush-bashing alone for just a moment, and a thorough examination of all the economic statistics plainly shows that in fact, we’ve never had it so good. This is a long-playing story that goes back to the Reagan revolution 25 years ago which reformed resurrected and streamlined the free market entrepreneurial capitalism system in America. Nitpickers and ankle-biters will always see the economic glass as much less than half empty.

I continue to view it as much more than half-full.

Kudlow Radio


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

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

Babbin on Haditha


Jed Babbin is right on the mark with Haditha.


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