Tuesday, February 14, 2017

Larry Kudlow Pleads: Somebody Needs to Sit Down With the President

Larry Kudlow knows full well that President Trump's inclination, to slap on tariffs or some type of border adjustment tax, and also execute plans to weaken the dollar, are just horrific ideas.

Kudlow writes:
[O]ne of the keys to President Trump's economic success will be strong and clear guidance, and I'm not completely sure the president is receiving such solid advice right now. Someone needs to explain to the president the actual consequences of his fiscal plans. Cause-and-effect scenarios need to be mapped out, at least so there are no surprises down the road.

For instance, Trump is talking about lower trade gaps and a weaker dollar. Well, if his lower tax and regulatory policies go through and work as I believe they will, the reverse will occur. The dollar will strengthen and trade gaps will widen. Somebody needs to sit with the president and say, "Think about this. Here are some charts that show what happened in the past when across-the-board tax cuts and regulatory reforms were put in place."

History shows that growth-driven trade deficits are merely the flip-side of massive capital inflows from around the world. That's a good thing, not a bad one. Additionally, a strong and stable King Dollar will generate investment confidence at home and abroad and will also hold down inflation. Another good thing.
This is great advice. Unfortunately, Trump is surrounded by anti-free traders. And thanks to the Goldman Sachs crony, Gary Cohn, who is now head of the President's National Economic Council, Kudlow won't be telling the president anything directly.

Cohn killed the idea of Kudlow becoming head of the Council of Economic Advisers. This is as near a crime against America as you can get without facing charges. It has left Trump surrounded with economic advisers who do not appear to understand comparative advantage and probably not even basic supply and demand curve analysis.

It's a horror. When trade gets screwed up and the dollar nosedives, blame the Fed, Trump and Cohn.


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