Kudlow for CEA?

December 16th, 2016 at 10:08 am

A few people have asked me about the rumored pick of CNBC host Larry Kudlow to head the Council of Economic Advisers in the incoming Trump administration (I’m never sure if that’s supposed to be an ‘e’ or an ‘o’ in Advis_rs; the WaPo piece just cited has ‘o’ in the headline and ‘e’ in the text!). Larry consulted with the president-elect during the campaign, so this isn’t a surprise.

I’ve been a good friend of Larry’s for 30 years and, as a CNBC commentator myself, have been on his shows (TV and radio) more than any others, I suspect. I enjoy arguing with Larry more than many of the millions of people with whom I argue about economic policy. So I’m not going to throw any shade his way. I will, instead, say a few words about how he thinks about this stuff.

–As hard as I’ve tried, and believe me, I’ve really tried, I’ve never been able to budge Larry one bit off of his belief in the growth effects of “supply-side” tax cuts. In fact, in almost every argument we’ve had–and if we’re talking, we’re (respectfully) disagreeing–at some point he maintains that whatever problem we’re arguing about–budgets, growth, inequality, jobs, wages–would be solved with a big tax cut on capital. At this point in time, with all the evidence my side has mustered against this case, I consider his position, one that I’m sorry to say is very widely shared in conservative DC policy circles (for obvious reasons), a matter of faith, not fact. Thus, the interaction between Larry at CEA and team Trump’s plan for a big, regressive, wasteful tax cut is a fiscal accident going out to happen.

–Outside of this faith-based position, Larry is not immune to data, knows his way around budget tables, and more than most, thinks about the interaction between financial markets and the real economy. However, another big source of disagreement here is his conflation of a rising stock market and actual positive economic outcomes. Extracting from bubbles, a rising stock market isn’t a problem, of course, but neither does it tell us squat about how working people are doing. And don’t give me that bunk about how everybody’s now invested in the market: 50% of the value of the market (stocks and mutual funds) is held by the top 1%; 91% is held by the top 10%.

–He’s become pretty dovish re monetary policy. That’s probably the one area we’ve agreed upon in recent years.

–That said, he’s been bitten by the gold-bug and has at times (not for awhile, however) argued that the gold standard would stabilize the business cycle, which, like the tax cut thing, is just totally bass-ackwards.

–I must say, the argument against him that he’s not of the academic economist community neither moves nor surprises me at all. Look around at the Trump personnel process, people! And, channeling Dean Baker, government and Fed economists have missed a great deal in recent years, and I say that as someone who was a gov’t economist at various points in recent decades. If any group should be humble…

So, let’s see what happens, and if Larry does fill that slot, good luck, dude! And call me before you do anything rash!

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13 comments in reply to "Kudlow for CEA?"

  1. Gerald Scorse says:

    “Outside of this faith-based position [on the growth effects of supply-side tax cuts], Larry is not immune to data.” Too bad that this single position could be the most important position any economic adviso(e?)r might take.


  2. rjs says:

    they’re essentially interchangeable…advisor is for use in titles and headlines, while adviser is for every day advice, so the WaPo probably got it right…


  3. Jill SH says:

    Have you ever asked Kudlow — or any other supply-sider for that matter — to give you one instance when their policy worked? I feel like we’ve had decades of it NOT working.

    What do they say? That we’ve never made the really big cuts needed? That we’re still spending too much on social programs and the deficit is a huge drag?

    They don’t seem to want to look at the facts you and Dean Baker and others rely on. What is their alternative proof it works?


  4. Jeffrey Stewart says:

    I don’t think I’ll ever understand how a liberal could ever be friends with someone who consciously, consistently and relentlessly advocates policies that literally hurt the poor, elderly and working class.


  5. Clarence Signor says:

    We can at least be confident that Kudlow does not want to blow the system up. He wants to change parts of it but he is intimately in it. Once upon a time not being a nutcase didn’t qualify one for an influential federal government position. Times change.


  6. Leading Edge Boomer says:

    My goodness, that is the nicest piece I could imagine anyone writing about Kudlow. In my limited experience, he is a perversely reliable indicator, just short of Billy Kristol. Whatever either says, the opposite is likely to be true.


  7. Greg Leisner says:

    At this point, I expect incompetence in any Trump Administration appointee. The ones that are stable, intelligent and rational will only keep the SS Trump afloat a short while longer than otherwise. The longer Trump is at the helm, the greater the probability of serious death and destruction. It would be better for American and the world if the Trump Administration never figured out how to exit the restrooms after the Inaugural Balls.


  8. Procopius says:

    If I recall correctly, and I may have him confused with another gold-bug, Kudlow is also heavily invested in the belief that the Panic of 1921 ended by itself and after that everything was roses. Well, my grandfather and father lived through that and told me about it, and those weren’t roses — maybe thistles. Farm prices were depressed throughout the 1920s and just got much worse with the collapse of the banking system in 1929-32.


  9. lawrence e stirtz says:

    His supply side solutions may be accurate in the right circumstances, tax rates are probably not high enough to get the right amount of bang for his buck that was obtained in the past. All things are relative.
    We need a VAT of 6%-10% to go along with the big income tax cut otherwise he cannot lower taxes enough.


  10. Jim Burns says:

    I have listened to Kudlow for years and never heard him say anything that made any sense. He will the economy onto the rocks like Bush II or worse


  11. Raven Onthill says:

    You’re too cautious in your thinking. The combination of Kudlow (CEA) and Mulvaney (OMB) is going to be some sort of disaster; the only question is which sort.

    Brad Delong is furious, and rerunning a number of his previous articles on Kudlow, who, he reminds us, got the housing bubble entirely wrong. Start with this one and read the next, and the next:
    http://www.bradford-delong.com/2016/12/monday-smackdown-no-larry-kudlow-is-not-an-economist.html


  12. reason says:

    Lawrence e stirtz
    No – there is no evidence at all that these tax cuts have supply side effects at all at current rates. It has nothing to do with their size. (Note a tax rate cut will have an aggregate demand effect – all other things equal. This effect however is not what we are talking about. The problem is that if the spending that is cut removes high velocity money from the economy and the tax cut replaces it with low velocity money, it will actually have a negative aggregate demand effect. But even allowing for this the aggregate supply effect is elusive, in theory there are offsetting income and substitution effects whose net outcome is uncertain.)

    Plus there is this: http://www.fresheconomicthinking.com/2016/11/company-tax-confuses-economists.html



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