Kudlow’s Komedy Kapers (Cross-post)
Brad DeLong asked a few days ago who he should be reading on a daily basis. Following is a cross-post from my nominee, The Hunting of the Snark:
Kudlow’s Komedy Kapers
Larry Kudlow is worried that Obama is ruining the economy.
Larry Kudlow
August 5, 2011 4:30 P.M.More Obama Spending Won’t Do It
And stocks know it.There he goes again.
Because quoting Reagan is cool.
Out on the campaign trail, President Obama is proposing more federal spending as his answer to sluggish growth and jobs. That won’t do it, Mr. President.
Yes, when the private sector doesn’t provide jobs, don’t look to the government to provide jobs. That just won’t do it, Obama. That just…won’t….do!
He wants more infrastructure spending, undoubtedly in the form of an infrastructure bank. That’s a terrible idea. It’s borrowed from Latin America, where bloated and corrupt bureaucratic construction agencies have helped bankrupt any number of countries in the past.
It’s also borrowed from Roosevelt, but we all know how he secretly created the Depression by spending money.
He wants to lengthen 99-week unemployment insurance, although numerous studies have shown that continuous unemployment benefits are associated with higher unemployment.
I want to bronze that comment and turn it into an ashtray. Numerous studies have show that UI is associated with high unemployment! Obviously, the only solution is to stop handing out UI, and then we’ll have no more unemployment.
And he wants to extend the temporary payroll tax credit, which is not a permanent reduction in marginal tax rates, has no incentive effect, has not worked so far, and is really a form of federal spending — not real tax relief.
How the rich suffer so from their high taxes.
Earlier this week, when he signed the debt-ceiling bill, the president ranted on about the need to raise tax rates on successful earners, investors, and small businesses. He’s trying to bring back tax hikes as part of the phase-two special committee seeking additional deficit reduction, even though his own party rebuffed him on this in the late stages of the debt talks. All this is a prescription to grow government, not the economy.
Reagan actually raised taxes when it was necessary while Obama is just talking about raising taxes, but as we all know, the Reagan years were a bit of a blur for Kudlow.
What the economy needs, Mr. President, is a strong dose of new incentives, with pro-growth tax reform that flattens marginal rates and broadens the base for individuals and businesses. This includes moving to territorial taxation that ends the double tax on foreign earnings of U.S. companies. Plus, we desperately need a complete moratorium on federal regulations. As Sen. Barrasso recently noted, the government put out 379 new rules on business in July alone, amounting to $9.5 billion in additional costs.
Because US companies pay far, far too much in taxes. Just ask the Center On Budget and Policy Priorities (CBPP).
The U.S. corporate tax burden is smaller than average for developed countries.[1] Corporations in 19 of the member states of the Organization for Economic Co-operation and Development paid 16.1 percent of their profits in taxes between 2000 and 2005, on average, while corporations in the United States paid 13.4 percent.
Nevertheless, some have argued that U.S. corporate tax rates unduly burden U.S. companies by pointing to the country’s top statutory tax rate, which is 35 percent. For example, a recent Wall Street Journal editorial calling for corporate tax cuts noted that this is the second highest top statutory tax rate among developed countries.[2] While true, this gives the false impression that the corporate tax burden is greater here than in other developed countries. Because the U.S. tax code offers so many deductions, credits, and other mechanisms by which corporations can reduce their taxes, the actual percentage of profits that U.S. corporations pay in taxes — or what analysts refer to as their effective tax rate — is not high, compared to other developed countries.
Because the average U.S. corporate tax burden is low, many economists believe a revenue-neutral corporate tax reform that reduces statutory corporate tax rates, while broadening the tax base by eliminating costly tax breaks, could improve economic efficiency and likely benefit the U.S. economy.
Kudlow:
None of these pro-growth reforms are in sight. So the stock market is going through a nasty 10 percent correction over fears of another recession (and European debt default).
That’s definitely not a recession reading.
Yes, you read that right. Kudlow says we are not in a recession. From an earlier post
No Recession
Strong profits, easy money, and Tea Party gains argue against it.
Stocks and bond yields are sinking as Wall Street disses the debt deal and instead focuses on a likely double-dip recession.
Everyone is gloomy. But is this pessimism getting a little overbaked?
Granted, the economy is sputtering, with less than 1 percent growth in the first half of the year. But if there is a recession in the cards, it will be the first time one occurs when the yield curve is steeply positive (an ultra-easy Fed) and corporate profits are strong.
And since we do have ultra-easy money and strong profits, I don’t believe we’re heading into a recession. Nor do I believe stocks will continue to swoon.
The principal reason for the sub-par first-half economy is the rise of inflation, which severely damaged real incomes and consumer spending. We experienced a mini oil shock, which has dampened the whole economy. Actually, it’s worth remembering that oil shocks and inverted yield curves, along with falling profits, are the most important leading indicators of recessions. We don’t have this right now.
Back to the present:
But at least we got some good news on jobs. The July jobs report came in stronger than expected. It’s not great. But at least nonfarm payrolls increased 117,000 — as the prior two months were revised upward by 56,000 — while private payrolls gained 154,000.
That’s definitely not a recession reading. But neither is it a strong performance. If the economy were really rebounding, we would be creating 300,000 new jobs a month.
In the report, the unemployment rate slipped to 9.1 percent from 9.2 percent. But that’s mostly because nearly 200,000 workers left the civilian labor force. Another negative is the household employment survey, which fell 38,000 in July after dropping nearly half a million in June. That survey measures job creation among small owner-operated businesses or the lack thereof.
Yet when looking at the new jobs report, along with reasonable gains in chain-store sales and car sales, plus the ISM Purchasing Managers reports (which stayed above the 50 percent line), I repeat my thought that we are not headed for a double-dip recession.
The US New and World Report begs to differ.
According to the latest figures, the U.S. economy created 117,000 new jobs, causing the unemployment rate to drop slightly, from 9.2 percent in June to 9.1 percent in July. But, as Jeff Cox writes over at CNBC, “there is far more than meets the eye” to this bit of economic good news, which is certainly nothing to cheer about.
The U.S. Bureau of Labor Statistics breakdown says there were 139,296,000 people working in July, compared to 139,334,000 the month before, or a drop of 38,000. That’s because, as a number of labor economists point out, the disparity is the result of something the government calls “discouraged workers”—people who don’t have jobs but were not looking for work during the reporting period.”
This is where the numbers showed a really big spike—up from 982,000 to 1.119 million, a difference of 137,000 or a 14 percent increase. These folks are generally not included in the government’s various job measures,” Cox wrote, adding that if you count those people as part of the workforce, the job creation and drop in unemployment disappear.
Other signs of continued weakness in the recovery include that the percentage of long-term unemployed remained unchanged in July and that the labor force participation rate has continued its downward trend since the beginning of the recession, dropping 0.2 percentage point to 63.9 percent in July. This is, the Congressional Joint Economic Committee reports, “the lowest labor participation rate in the United States since January 1984.” [See a collection of political cartoons on the economy.]
Addressing the weak numbers, the White House continues to point fingers almost everywhere except at itself—which is where the blame belongs. President Barack Obama, who, along with congressional Democratic leaders, promised that unemployment would not exceed 8 percent as long as the stimulus package was approved, has yet to explain how he could have been so tragically wrong.
The great thing about being a conservative is that no matter what it happening, it proves that their economic theories are correct. Kudlow:
Over two years of so-called economic recovery, growth has averaged about 2.5 percent. It fell to less than 1 percent in the first half of this year, largely from a commodity-price shock that included oil-, gasoline-, and food-price spikes. That price shock resulted mainly from the Fed’s QE2 depreciation of the dollar — a big mistake. It eroded real consumer incomes and spending.
Let’s ask Economist Online what it thinks about the dollar.
Put dollar depreciation in historical perspective
It’s a brand new year. I thought I’d have some big-picture review of what’s going on in the world economy today. Here is my first piece on US dollar.
The graph below will scare you a lot…in fact, the dollar index fall from 115 in 2002 to mid 70s at the end of 2007, that equals a 33% drop.
Hmmm, a sharp drop, isn’t it? But wait a minute, have we witnessed the similar happened before? Let’s look at the following graph and have some historical perspective. From 1985 to 1989, the trade-weighted dollar index actually had a bigger fall, from 145 to 90, almost down 38%, and it fell even further until 1995.
Holy Dollar Depreciation, Batman! It fell even more under Reagan than it did during Obama!
Kudlow:
Lately, the dollar has stabilized and energy prices have come down quite a bit. That will reduce inflation and support better consumer spending. Businesses are already highly profitable and cash-rich. They are investing some of that, but not nearly enough to create sufficient new jobs. Who would, with all these Washington policies?
It’s not lack of demand, it’s politics!
Finally, the Fed remains ultra-easy with excess liquidity and a zero interest rate.
So it looks to me like we will return to the sub-par 2.5 percent growth trend rather than dip back into recession. However, at this pace, unemployment may hover around 9 percent right up to election time next year.
More spending won’t do it Mr. President. Tax and regulatory incentives will.
Cut taxes and regulations and watch the economy boom–for the very rich. Who are doing quite well now as it is.
Ken
Or 1981 for participation Rate as shown here: http://www.bls.gov/cps/cpsaat1.pdf
Ken,
I don’t know why you are posting, verbatim, some obscure (417 visits per day), smug, and unqualified (occupation: Mother) bloggers ramblings here on AB.
Nevertheless, let’s get to Kudlow:
More spending won’t do it Mr. President. Tax and regulatory incentives will.
With the debt ceiling, and the Republicans blocking tax increases, we are out of bullets. Another Obama Stimulus is not possible, even if “this time it will be different.” So quit whining that we need more government spending – it’s not possible. (I guess I am directing my comment to “Susan of Texas”).
The only stimulative things we can do without going deeper into debt are
1) suspending job-killing regulations, like the EPAs
2) Tax cuts that pay for themselves. This would be a corporate tax cut and a cut in the repatriation tax. By cutting the corporate tax rate we would actually be reversing the transfer pricing games that multinationals pay, so that they pay taxes to the US, rather than other countries with lower corporate tax rates, as well as encouraging businesses to hire in the US. A cut in the repatriation tax (35%) will encourage profits to be returned to the US for investment here, as well as generate some tax revenues where there are none since the repatriation tax is prohibitiive. Realize that corporate taxes are only 10% of the total, so if you halve it, that is only a 5% hole to fill with some good ol’ supply side.
So, Susan of Texas, you might not like those options, but they are worth a try as there are no more deficit-spending liberal bullets in the gun.
It should tell you something when a mother (former teacher) can recognize lies and manipulation from highly educated, widely read pundits–they are not trying to work from evidence, they are fitting evidence to their ideology or just making stuff up.
I see you also favor tax cuts and cutting regulation. We would be in much, much better economic situation if those methods actually worked.
—
1) suspending job-killing regulations, like the EPAs
—
That’s a great idea, since I’m planning on buying your neighbor’s land to build a hog lagoon and nuclear waste repository.
eightnine… Good one!
I will find and post MG’s comments on money flows for multinationals since that IS THE COMMON PERCEPTION. The 2004 repatriation did not result in ZUS investment nor R and D pretty much. There are many studies done byb private companies that demonstrate this. If there are tax law changes, at least use real information sammy, and also try and correct your notion that theold slogans work the way they might have in the eightys.
Snark is appropriate at times. And something to be thoughtful about. Thanks Susan.
So what am I missing regarding the rise of Kudlow. Wiki has him described as an SDS member in his early college days. Then I note that with only a BA in history he lands a job as a staff economist with the Federal Reserve. Why would I believe anything more published by FR economists if that’s the academic requirement for the job? Kudlow has virtually no significant academic credentials that might evidence a knowledge of political and economic interactions and processes. What accounts for anyone paying heed to his ramblings beyond his hob nobbing with the political hoi polloi?
I reluctantly endorse the idea of a “true” flat tax. The progressive tax system in the US is so full of favoratism that only those corporations and individuals that have connections to our government representatives have lower tax rate.
Just look at how tax much GE, Google, Microsoft, Bershire each pays. They all pay a different tax rate. How can any small businesses, salaried workers, and people actually pay their income taxes compete with our congressional endorsed tax system?
Everytime I heard the word “tax the rich!” I cringe for our middle class… Everytime a tax is imposed by our congress, it’s on people actually pays their taxes! It’s time to demand every company, every person in the US to start paying taxes, no exceptions, no excuses.
To those that thinks government will loose the ability to stimulate the economy under a flat tax system, there is a thing called government spending… But at least everyone, every corporations in the US will pay the same tax!
Sammy,
With all due respect, I remember back in early 2008 after I began explaining what was different about the (then) current recession, for some reason getting e-mails from what I believe were several different people insisting that we weren’t in a recession because Kudlow said we weren’t. In fact, he kept insisting we were in a Goldilocks economy until about November of 2008, as I recall.
Since you talked about credentials, as I recall, he doesn’t have any real training in economics or background in business… He was a political appointee to a number of things, including the advisory board for Freddie Mac before it got privatized, and he parlayed that into an economist position Bear Stearns. He was also an alcohol and coke addict. None of those things are an automatic negative, but it does seem like he associated with failure an awful lot and never really had much to do with success. All of which qualified him to give opinions which are doozies (e.g., the goldilocks economy).
Pax
a simple tax, yes. a flat tax, no.
it is simply the case that someone making 20k per year cannot pay a 10% tax say, as easily as someone making 100k per year can pay a 20% tax, or someone making a million a year can pay a 30% tax.
so lets say a simple graduated income tax without appeals to “tax the rich (only)” or “don’t tax capital” or “dont’ tax me tax the other guy” or give me a tax break because what i do is so important.”
i’m pretty sure a way could be found, and the economy would adjust to it, that was “reasonably” fair and proportional… except that everyone and his congressman is looking for a dodge, and has an excellent rationalization.
oh, for those who have trouble with the concept…
that 20k guy paying 10% gets to keep 18k
that 100k guy paying 20% gets to keep 80k
that 1M guy paying 30% gets to keep 700k
and yet they all pay the same for a loaf of bread…
except that some liberals think the 1M guy should pay 10 dollars a loaf and the 20k guy should be given 10 dollars for buying a loaf…
meanwhile some “conservatives” “think”
that they all got exactly what they earned
and taxes is theft
so no one should have to pay taxes at all
especially the rich guy who makes it all possible
like god.
There is at least another obvious question besides how he got hired. What do you have to be wrong about to get fired at cnbc anyway? How often? For how long?
Mike,
as I recall, he doesn’t have any real training in economics or background in business…
Echoing Susan of Texas, it doesn’t take a PhD in Economics from Harvard to realize that:
1) EPA …regulations, electricity prices would rise by a nationwide average of 12 percent by 2016 – and reduce employment by 1.4 million by 2020, killing four jobs for every one job created. http://www.cnsnews.com/news/article/economic-study-shows-epa-regulations-inc
2) Senior Obama administration officials concluded the federal moratorium on deepwater oil drilling would cost roughly 23,000 jobs http://online.wsj.com/article/SB10001424052748704488404575441760384563880.html
are bad things.
And that this:
If they bring the money home, it’s taxed the full 35 percent. If they leave it overseas, the IRS can’t touch it. In other words, the tax law all but forces companies to keep their money out of the country, indefinitely. ….The total amount of money U.S. companies have trapped overseas is $1.2 trillion. Chambers is advocating for a one-time tax break to allow them to bring that money home at a rate of, say five percent. That would, he says, stimulate the economy and create jobs.
http://www.cbsnews.com/stories/2011/03/25/60minutes/main20046867_page4.shtml
represents an opportunity.
Even the WH admits “We don’t create jobs.” Well then at least get out of the way of those who do!
Kudlow graduated from University of Rochester in Rochester, New York with a degree in history in 1969. In 1971, Kudlow attended Princeton University’s Woodrow Wilson School of Public and International Affairs, where he studied politics and economics. Kudlow began his career as a Staff Economist at the Federal Reserve Bank of New York. http://en.wikipedia.org/wiki/Lawrence_Kudlow
Coberly:
It is too late to wish for a simple tax system. It is because of the progressive system that everyone asked their representatives in congress to “represent” them! Everyone felt they deserve a tax incentive. So you ended up with different tax rate for everything!
If you look at sales tax, it is a form of flat tax because everyone will have to pay! Obviously we have loopholes because of interstate commerice but it tax everyone the same. Don’t give me that the poor deserve better or the rich should pay more. The country is bankrupt by favoritism!
FDR gave everyone a job to do, there was no complaining. No work, no food!
I am neither conservative or liberal. It just needed to be fair. As for truely desitute, you can still have food stamp, welfare programs. For the rich, you can follow the Hong Kong example. Their income tax is 15%, corporate tax is 17% but if you buy a luxury item… A Bently… It’s taxed at 100%. If Tiger Woods buys a 30 million dollar yarcht, he pays 60 million total…
“We’ve got an uncompetitive rate,” ____________ told a crowd at the Aspen Ideas Festival on Saturday, Politico reports. “We tax at 35 percent of income, although we only take about 23 percent. So we should cut the rate to 25 percent,
__________ also offered his thoughts on corporate tax policy on Thursday, June 30, when he spoke out in favor of a corporate tax holiday, which would allow companies to repatriate overseas profits at reduced tax rates.
In an interview with Bloomberg Television,__________ said that a tax holiday would be welcome “under certain circumstances.” He suggested a tax rate of 20 percent for companies bringing in offshore cash — less than the current rate of 35 percent, but more than the Republicans’ proposed rate of 5.25 percent. __________ recommended that the tax rate fall to 10 percent if corporations “reinvest [the offshore profits] in increasing employment in America.”
Who fill in the blank as to who is the speaker here? Some conservative tool of big business I’ll bet.
Nope, it’s Bill Clinton. http://www.huffingtonpost.com/2011/07/05/clinton-corporate-tax-rate_n_890166.html
Political score-keeping distracts us from the greater problem.. It does no good to promote one party over the other if both are trying to consolodate power and squeeze the middle class until it chokes to death.
MG
this should have been directed to Mike, but since you seem to disagree, i’ll point it at you.
it really doesn’t matter what Kudlow’s credentials are. There are plenty of highly credentialled,and even brilliant, people running around saying stupid things.
and a few people with no credentials at all who stumble on the truth.
oh, Sammy, you keep missing the point.
even if it were true that EPA regulations and not drilling would cost jobs… and imaginary money… if that’s what it takes to save your life, that’s what we’ll have to do.
money is not the measure of all things. in fact a wise man once said you cannot serve both god and mammon . he had some reason for saying that. but people forget.
as for the WH not creating jobs, that’s flat wrong. and “get out of the way of those who do” is a sick joke.
if both are trying to consolodate power and squeeze the middle class until it chokes to death.
What economic theory is this?
coberly,
Agreed. I’ve been making that point myself for a long time. But Sammy presented a specific target, and I responded to that piece of the target. I prefaced that portion of my comment with: “Since you talked about credentials, “
It’s political, not economic, theory. Winner take all.
Who fill in the blank as to who is the speaker here? Some conservative tool of big business I’ll bet.
Nope, it’s Bill Clinton. http://www.huffingtonpost.com/2011/07/05/clinton-corporate-tax-rate_n_890166.html
A conservative tool of business and Bill Clinton are one in the same. Only Bill is a bit more clever about keeping his conservative bona fides under wraps as he plays his part in the game. Bill is what was once recognized as a moderate Republican. The Republican Party found it much easier to control the Congress and the Presidency if it allowed its slightly more moderate members to parade as Democrats and so established the Democratic Leadership Council. It even sounds Republican. So now our two party system, which is in fact just two branches of the Corporate Party, can appear to the public to be debating what is best for the country. The current impasse, if it is even that, is only the short term result of the conservative branch of the party allowing a few fundamentalists to get a foot in the door. With the die now cast and the future looking a bit too bleak that too may soon change.
Mike
you are correct. i recognized that but I had already made my point and i didn’t want Sammy to miss out.