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!