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Larry Kudlow: 100-Day Lurch to the Left
In the early 1980s, Ronald Reagan’s popularity and policies moved U.S. politics firmly to the right. In only 100 days, Barack Obama’s politics and policies have shifted America way to the left.
The president is seeking to change the whole relationship between the government and the free-enterprise private sector. He is steering the country away from democratic capitalism and toward his big-government command-and-control vision. We are witnessing a triumph of government bureaucrats over entrepreneurs, investors and small businesses.
And with Sen. Arlen Specter switching from Republican to Democrat, Obama now can move the nation even further to the left. A filibuster-proof Senate will mean even greater economic restructuring, with expanded government control of health care and energy and increased unionization.
This looks very much like a war against investors, businesses and entrepreneurs. Shareholder rights are being eviscerated. Political decisions are replacing the rule of law, the rule of bankruptcy courts and free-market principles.
We are witnessing more spending, deficits and debt-creation than anyone ever imagined. Bailout Nation has run amok. It started under George W. Bush, but Obama is raising the stakes exponentially.
The latest federal budget would double the debt in five years and triple it in 10. For some perspective, that debt level is higher than the combined debt levels generated under every president from George Washington to Bush. According to the Congressional Budget Office, federal debt held by the public as a percentage of gross domestic product under Obama is projected to rise to 82 percent in 10 years. The budget deficit itself never drops below $670 billion and closes the period at $1.2 trillion. That’s nearly a 6 percent share of the economy.
All of this certainly will lead to large tax-rate hikes that will rob incentive power from entrepreneurs, investors and small-business owners. Just look at Britain, where the top tax rate has been raised to 50 percent from 40 percent. The Thatcher Revolution is being repealed over there. Unless current trends are reversed, the Reagan Revolution will be repealed over here.
The Obama budget already will raise taxes on overseas corporate earnings and oil and gas companies at home. It will elevate taxes on capital gains and dividends for investors and will lift the top tax rate for successful earners. And more is coming.
But this is the wrong direction for economic growth. Instead, business tax rates should be slashed — which, by the way, would repatriate corporate earnings for domestic investment. We need a capital-gains tax holiday. We should be flattening individual tax rates across the board. All manner of loopholes and special-interest deductions should be repealed to broaden the taxable-income base.
Nowhere is the Obama vision of government interference more evident than on the banking front. The White House and Treasury are using TARP as a bullying club to force government control on the country’s financial institutions. There is no exit strategy — no endgame in sight. Quite the opposite: News reports suggest that six major banks could be subjected to government ownership, putting them in the same club as Fannie Mae, Freddie Mac, AIG, GM and Chrysler. This reminds one of Francois Mitterrand, the former socialist president of France. It’s way outside the U.S. economic tradition.
TARP itself is riddled with criminal-enterprise undertones. According to Special Inspector General Neil Barofsky, the $700 billion TARP program — which has ballooned to more than $3 trillion in spending, loans and loan guarantees — is “inherently vulnerable to fraud, waste and abuse.” Barofsky already has opened 20 separate TARP-related criminal investigations and six audits into whether taxpayer dollars are being stolen or wasted. Rest assured that they are.
Economic recovery is still likely in the second half of the year. President Obama will claim victory for his big-spending policies. But the reality is much different. Massive Federal Reserve pump-priming is moving the economy from deep recession to some kind of recovery. Meanwhile, the combination of deficit spending and easy money increases the threat of stagflation.
Will Republicans take advantage of the wide opening created by Obama’s 100-day lurch to the left? So far the GOP has produced only fragmented policy alternatives and no central spokesperson. That’s not unusual for the party out of power. But the Specter defection underscores the GOP’s sagging fortunes.
Right now, the most promising Republican leader — at least in a policy sense — is former Vice President Dick Cheney. His attack against the release of the CIA interrogation memos and his forceful call for the release of the information gathered during those interrogations — intelligence that helped keep America safe after the Sept. 11, 2001, attacks — clearly rattled Team Obama. Cheney should now launch a counterattack on Obama’s tax-and-spend New Deal/Great Society enlargement of government power.
It would make for delicious irony, but Cheney may be most effective spokesman the GOP has.
Larry Kudlow is the founder and CEO of Kudlow & Co. LLC, an economic research and consulting firm in New York City, and host of CNBC’s Kudlow & Company. Click here for more information, or click here to contact him.
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» on 04.29.09 @ 09:22 PM
GET A LIFE, LARRY - then GROW UP! The Gentleman in the Oval Office is trying to UN-DO the quite considerable, wide-ranging, penetrating, long-lasting damage over three decades (!) of GOP mismanagement, misogony and misfires—from The White House to control of Congress. Cut him some slack!
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» on 04.30.09 @ 08:44 AM
Mr. Kudlow forgets that Reagan began his administration with the most ferocious
recession before this one. Forgets that Reagan’s “stimulatory” tax cuts quadrupled
the federal budget deficit. Forgets that, unlike Bush II, Reagan’s conservative rhetoric and his pragmatic action were often quite different.
Mr. Kudlow could consider that since Bush II’s economic and passive regulatory
oversight policies - and concurrent deficit financing of two wars - coupled with tax
cuts for the rich, drove the American economy and federal government further right
than any administration since the Gilded Age.
So what Kudlow sees as Obama’s shift way “left”, others might consider simply moving back more toward the center, which the economy and Washington’s role
held as recently as Bush I and Clinton’s first term.
I’m trying to recall when and where Kudlow predicted that the bottom would fall
off the national economy from the recent, unregulated orgy of greed-driven risk
taking BEFORE it happened, but I can’t do it. Is it possible that the mess Obama
is currently mired in resulted from the previous administration following policies
suggested most fervently by ... Wall Street’s Mr. Kudlow?
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» on 04.30.09 @ 10:39 AM
Explain to me Dave how what Obama is doing is helping our country? Larry was talking about a lurch to the left – more government control of free markets. How is that helping? The left seems to think that the GOP is responsible for the greed on Wall Street and the breakdown of our financial institutions, yet the controls were undone by two democrat presidents. The melt down of the housing market was aided and abetted by prominent democrat leaders under Clinton and Bush who pushed for bad loans. The answer by the “gentleman in the Oval office” is to bring about his uber liberal vision of a European socialist system. So, Dave, is chronic 10% unemployment the goal? Rationed health care? A weak, infantile, institutionalized population with no ambition? Cranking up immigration in order to generate more revenue to pay for ever increasing entitlements, while revenue generating business is choked off. Go talk to the regular folks in Europe, not the institutionalized elites who socialism protects, and see if that is what you want. I’m going to assume you are not a “wealthy elite” so you will not be “institutionalized” into the upper class elite, but rather dragged down to the level of the rest of the equalized population.
Keep in mind that all other world nations no matter their internal economies survive because there is a free market America to pick up the slack. When your man is done destroying that where or where will the world go for help then?
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» on 04.30.09 @ 01:02 PM
It would make for delicious irony, but Cheney may be most effective spokesman the GOP has.
IRONY?? That’s like saying it’s ironic that the Pope speaks for Catholics.
Dick Cheney, Sarah Palin, Michelle Bachmann, Larry Kudlow ... this what the Republican Party has become. With only 21% of Americans now identifying as Republicans, no one with a shred of decency or integrity is left
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» on 04.30.09 @ 01:27 PM
And with Sen. Arlen Specter switching from Republican to Democrat, Obama now can move the nation even further to the left. A filibuster-proof Senate
If only. A filibuster-proof Senate would mean that a minority of ignorant and/or corrupt ideologues could no longer block democratic majority-based decision making, and this country could put into place the policies that it needs to recover. But as Kudlow well knows (but won’t say because he doesn’t have an honest bone in his body), Specter’s move was strictly opportunistic, because he would lose the Republican primary—he has been quite explicit and clear about—and he’s not going to vote any differently just because of his party affiliation. And, as Kudlow knows, there aren’t 60 Democrats because Al Franken hasn’t been seated. And, as Kudlow knows, there’s a sizable “blue dog” Democrat contingent that doesn’t vote with the party on numerous issues. This blather about a filibuster-proof Senate is grossly dishonest, nothing but a cheap Republican Party political tactic—the NRCC is already sending out fundraising letters saying “good riddance” to Specter but at the same time trying to scare people into supporting Republican candidates—no matter how vile—so as to block this “filibuster-proof Senate” bogeyman. Yeah, by all means fill Congresses with geniuses like Michelle Bachmann, who says she’s not blaming Obama (then what’s her point?) but it’s an “interesting coincidence” that the last swine flu outbreak happened under another “Democrat President”, Jimmy Carter—except that anyone with more than two functioning brain cells knows that it was Gerald Ford who was President, and that his mishandling of the issue played a significant role in losing the 1976 election ... to Jimmy Carter.
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» on 05.02.09 @ 04:23 AM
Dave,Marcel and Publius thank you for putting forth the facts. I think Mr.Kudlow blames everything on government and believes that the unregulated free market is always the answer. Unfortunately, human behavior is such that there needs to be oversight. The lack of enforcement of existing laws and the watering down of many has caused the problems we have today. Investing in education, the environment, energy, infrastructure and healthcare will make us stronger in the long run. I for one am very impressed with Obama and the many things he has already accomplished in these areas and others.
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» on 05.02.09 @ 10:37 AM
With excellent posts like those of DAVE, Publius, Marcel and local, I won’t add my cents. But then, here I am because I cannot read/hear the conservative fantasy about how the Bush/Cheney/Gonzales torture plan “helped keep America safe after the Sept. 11, 2001 attacks” without thinking about the joke of the man on a street corner shredding newspaper into bits and tossing them up into the wind. “What are you doing that for?” asked a bystander. “It keeps the elephants away,” was the reply, to which the bystander said, “But there aren’t any elephants here in the city!” “Pretty effective, huh?” said the man. For as long as nothing bad happened after 9/11, the torturists claimed success for their unconstitutionality. Pretty effective, huh?
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