By Larry Kudlow
The weakest areas in the weakest recovery since World War II are investment in new plants and equipment and investment in new business startups. These are the biggest job-creators, and their slump is a key reason for the subpar labor recovery, with low participation rates and an increase in involuntarily part-time workers.
So if investment is the problem, what does Hillary Clinton go out and do? She proposes jacking up the tax on investment. It's almost inconceivably stupid.
Showing posts with label Larry Kudlow. Show all posts
Showing posts with label Larry Kudlow. Show all posts
Sunday, July 26, 2015
Saturday, June 27, 2015
Worse Than the Supremes: Obamacare Economics
By Larry Kudlow
The judicial decision to uphold all of the president's health care subsidies may be very disappointing, but the economics of Obamacare are far worse than whatever constitutional mistakes have been committed by the Supreme Court.
The economics of Obamacare are very bad. The law is inflicting broad damage on job creation and new business formation. It ruins job incentives by making it pay more not to work, thereby intensifying a labor shortage that is holding back growth and in turn lowering incomes and spending.
And across-the-board Obamacare tax increases are inflicting heavy punishment on investment — right when the U.S. economy desperately needs more capital as a way of solving a steep productivity decline.
Because of Obamacare, there's an additional 0.9 percent Medicare tax on salaries and self-employment income, a 3.8 percent tax increase on capital gains and dividends, a cap on health care flexible spending accounts, a higher threshold for itemized medical expense deductions, and a stiff penalty on employer reimbursements for individual employee health policy premiums.
The judicial decision to uphold all of the president's health care subsidies may be very disappointing, but the economics of Obamacare are far worse than whatever constitutional mistakes have been committed by the Supreme Court.
The economics of Obamacare are very bad. The law is inflicting broad damage on job creation and new business formation. It ruins job incentives by making it pay more not to work, thereby intensifying a labor shortage that is holding back growth and in turn lowering incomes and spending.
And across-the-board Obamacare tax increases are inflicting heavy punishment on investment — right when the U.S. economy desperately needs more capital as a way of solving a steep productivity decline.
Because of Obamacare, there's an additional 0.9 percent Medicare tax on salaries and self-employment income, a 3.8 percent tax increase on capital gains and dividends, a cap on health care flexible spending accounts, a higher threshold for itemized medical expense deductions, and a stiff penalty on employer reimbursements for individual employee health policy premiums.
Friday, May 22, 2015
Will Anyone Ever Defend Banks?
There are some pretty evil banksters around, mostly at the large banks, but Larry Kudlow has a point, banks do provide a number of important services, from making loans to providing ATM services. The bankster operations should be shutdown, but the banks that provide useful services should be allowed to operate without interference.
Kudlow doesn't differentiate between bankster operations and decent, honest bankers. but I can second what Kudlow says below, but only when it applies to non-bankster operations.
Those Kudlow calls out for attacking banks such as Elizabeth Warren and, well, pretty much every other politician, deserve to be called out. They are attacking all banks with out making the distinction between banks that provide services demanded in the market place and crony banksters who cozy up to government for special favors. -RW
Will Anyone Ever Defend Banks?
By Larry Kudlow
One of the interesting nuggets coming out of the conservative sweep in the British elections was the failure of bank-bashing by the Labour Party. Labour leader Miliband, who has since resigned, was anti-bank, anti-rich and anti-business. It failed. And while conservative leader David Cameron didn't necessarily defend banks, he didn't attack them either.
Now, the case for Tory economic management wasn't bad. The London Stock Exchange has been hot as a pistol. And the British economy is growing about 2.5 to 3 percent. Not great, not awful. It was enough for a handsome Tory victory. And it may be a message to British pundits that tax-the-rich, redistributionist, bank-bashing talk is old hat. Been there. Won't work.
Kudlow doesn't differentiate between bankster operations and decent, honest bankers. but I can second what Kudlow says below, but only when it applies to non-bankster operations.
Those Kudlow calls out for attacking banks such as Elizabeth Warren and, well, pretty much every other politician, deserve to be called out. They are attacking all banks with out making the distinction between banks that provide services demanded in the market place and crony banksters who cozy up to government for special favors. -RW
Will Anyone Ever Defend Banks?
By Larry Kudlow
One of the interesting nuggets coming out of the conservative sweep in the British elections was the failure of bank-bashing by the Labour Party. Labour leader Miliband, who has since resigned, was anti-bank, anti-rich and anti-business. It failed. And while conservative leader David Cameron didn't necessarily defend banks, he didn't attack them either.
Now, the case for Tory economic management wasn't bad. The London Stock Exchange has been hot as a pistol. And the British economy is growing about 2.5 to 3 percent. Not great, not awful. It was enough for a handsome Tory victory. And it may be a message to British pundits that tax-the-rich, redistributionist, bank-bashing talk is old hat. Been there. Won't work.
Sunday, April 26, 2015
There's No Recession in Sight
In the below column, Kudlow is correct in stating that the economy is in an uptrend. although he fails to emphasize that it is a Fed manipulated boom, and that it will end badly.He is dead wrong, though, that there is no inflation in sight. It is right around the corner. But what economic observers need to take away from this Kudlow column is the fact that it is a boom-bust cycle and that not every day is going to be a down day for the economy. -RW
By Larry Kudlow
The economy has been in a tepid, soft, slow recovery for the past five-and-a-half years. It's the weakest rebound in generations. The Commerce Department's revision of fourth-quarter GDP shows that nothing much has changed. Over the past year, real economic growth registered 2.4 percent, slightly higher than the recovery average. It ain't much.
Meanwhile, winter economic reports for retail sales, manufacturing and capital investment point to a weaker first quarter, perhaps around 1 percent. And Wall Street is talking about a possible profits recession, with expectations of a 2 or 3 percent drop in corporate earnings for the first half of 2015. So the market bears are out in full force.
Now, let's acknowledge that coming off a deep recession, the rebound should have been 4 or 5 percent, not 2 percent. By some calculations, GDP is 10 percent — or nearly $2 trillion — below its long-term trend, and jobs may be lagging by 8 to 10 million.
Government entitlement transfers pay people not to work. Family breakdown has created a poverty trap for the lowest economic groups. Upward mobility is lagging. And the government has attacked the high-end movers and shakers with tax hikes and overregulation.
And unfortunately, a damaging business psychology prevails. It says that success must be punished and that redistribution is the way to solve inadequate growth, inequality and unhappiness.
But ... all this said ... it's possible to be too pessimistic.
Let's start with profits, the mother's milk of stocks and lifeblood of the economy. The recent GDP report shows a slight profits decline in 2014, the first in years. But this is misleading.
More important, the core measure of earnings, domestic nonfinancial profits, increased 1.4 percent in the fourth quarter and 7.8 percent for 2014. On an annual basis these profits increased $262 billion and were widespread across industries.
The big problem is not the U.S., but the rest of the world, which is mostly in recession and saw profits drop $36 billion in the fourth quarter. At roughly 18 percent, profits from the rest of the world account for the smallest share of corporate earnings since 2006.
By the way, GDP profits from the National Income Accounts are far larger, and therefore more telling, than S&P 500 profits. Initial quarterly estimates from GDP cover about 9,000 companies. Over time, annual revisions will cover roughly 4 million companies. And GDP profits are benchmarked to IRS tax filings, with no accounting shenanigans.
Another economic positive is the rise of the consumer. Rex Nutting of MarketWatch reminds us that consumers got a big windfall from plunging energy prices. So far they've saved it, but that may change. Real incomes adjusted for taxes and inflation jumped at a 7.7 percent annual rate over the past three months. This could set the stage for a big boost in consumer spending.
The terrible winter has taken its toll in Q1. But family spending may jump come spring and summer. Along with this, the basic core of the private economy (consumption plus investment), which rose over 4 percent in the fourth quarter and 3.3 percent for 2014, will continue to advance.
Did somebody say King Dollar? It's holding down consumer prices and business costs (including energy). Even with a lousy world economy, U.S. exports increased 4.5 percent annually in the fourth quarter, while imports jumped 10.4 percent. So U.S. businesses are very competitive regarding export sales, and the rise in American imports from overseas will bolster the international economy.
One last encouraging point: C&I business loans have increased over 15 percent annually in the last three months and about 12.5 percent in the past year. That's a good sign, especially for Main Street business activity, which has been lagging for years.
The Fed will probably raise its target rate later rather than sooner, smaller rather than larger. I'm betting on October and December for some quarter-point rate hikes. That's consistent with high dollar and low commodity prices. I doubt long-term rates will change much at all.
So moderate growth, rising core profits and a still-accommodative Fed set the stage for a better stock market as the year goes on. I'm still in the "buy the dip" camp. We're not going to get the kind of growth that America is capable of producing until we get tax and regulatory relief and a better attitude about free-market capitalism. But I wouldn't get too pessimistic.
There's no recession or inflation in sight, and America is a very resilient place.
Don't bet against it.
Larry Kudlow is CNBC's Senior Contributor and author of American Abundance: The New Economic & Moral Prosperity
.
By Larry Kudlow
The economy has been in a tepid, soft, slow recovery for the past five-and-a-half years. It's the weakest rebound in generations. The Commerce Department's revision of fourth-quarter GDP shows that nothing much has changed. Over the past year, real economic growth registered 2.4 percent, slightly higher than the recovery average. It ain't much.
Meanwhile, winter economic reports for retail sales, manufacturing and capital investment point to a weaker first quarter, perhaps around 1 percent. And Wall Street is talking about a possible profits recession, with expectations of a 2 or 3 percent drop in corporate earnings for the first half of 2015. So the market bears are out in full force.
Now, let's acknowledge that coming off a deep recession, the rebound should have been 4 or 5 percent, not 2 percent. By some calculations, GDP is 10 percent — or nearly $2 trillion — below its long-term trend, and jobs may be lagging by 8 to 10 million.
Government entitlement transfers pay people not to work. Family breakdown has created a poverty trap for the lowest economic groups. Upward mobility is lagging. And the government has attacked the high-end movers and shakers with tax hikes and overregulation.
And unfortunately, a damaging business psychology prevails. It says that success must be punished and that redistribution is the way to solve inadequate growth, inequality and unhappiness.
But ... all this said ... it's possible to be too pessimistic.
Let's start with profits, the mother's milk of stocks and lifeblood of the economy. The recent GDP report shows a slight profits decline in 2014, the first in years. But this is misleading.
More important, the core measure of earnings, domestic nonfinancial profits, increased 1.4 percent in the fourth quarter and 7.8 percent for 2014. On an annual basis these profits increased $262 billion and were widespread across industries.
The big problem is not the U.S., but the rest of the world, which is mostly in recession and saw profits drop $36 billion in the fourth quarter. At roughly 18 percent, profits from the rest of the world account for the smallest share of corporate earnings since 2006.
By the way, GDP profits from the National Income Accounts are far larger, and therefore more telling, than S&P 500 profits. Initial quarterly estimates from GDP cover about 9,000 companies. Over time, annual revisions will cover roughly 4 million companies. And GDP profits are benchmarked to IRS tax filings, with no accounting shenanigans.
Another economic positive is the rise of the consumer. Rex Nutting of MarketWatch reminds us that consumers got a big windfall from plunging energy prices. So far they've saved it, but that may change. Real incomes adjusted for taxes and inflation jumped at a 7.7 percent annual rate over the past three months. This could set the stage for a big boost in consumer spending.
The terrible winter has taken its toll in Q1. But family spending may jump come spring and summer. Along with this, the basic core of the private economy (consumption plus investment), which rose over 4 percent in the fourth quarter and 3.3 percent for 2014, will continue to advance.
Did somebody say King Dollar? It's holding down consumer prices and business costs (including energy). Even with a lousy world economy, U.S. exports increased 4.5 percent annually in the fourth quarter, while imports jumped 10.4 percent. So U.S. businesses are very competitive regarding export sales, and the rise in American imports from overseas will bolster the international economy.
One last encouraging point: C&I business loans have increased over 15 percent annually in the last three months and about 12.5 percent in the past year. That's a good sign, especially for Main Street business activity, which has been lagging for years.
The Fed will probably raise its target rate later rather than sooner, smaller rather than larger. I'm betting on October and December for some quarter-point rate hikes. That's consistent with high dollar and low commodity prices. I doubt long-term rates will change much at all.
So moderate growth, rising core profits and a still-accommodative Fed set the stage for a better stock market as the year goes on. I'm still in the "buy the dip" camp. We're not going to get the kind of growth that America is capable of producing until we get tax and regulatory relief and a better attitude about free-market capitalism. But I wouldn't get too pessimistic.
There's no recession or inflation in sight, and America is a very resilient place.
Don't bet against it.
Larry Kudlow is CNBC's Senior Contributor and author of American Abundance: The New Economic & Moral Prosperity
.Saturday, January 24, 2015
Obama's Call for Raising Taxes on Capital Ignores Comonsense Economics
By Lawrence Kudlow
It's too easy to label President Obama's State of the Union as more tax-the-rich and redistribution. We know that. Rather than name-calling, Republicans must draw a clear line in the sand between their worldview and Obama's. I'd call that line commonsense economics.
First, you can't create a new business or sustain an existing one without the seed corn and nourishment of capital investment.
Second, only businesses create jobs. You can't have a job without a business.
Third, jobs create all incomes, including middle-class incomes.
Fourth, incomes create family and consumer spending.
OK? This is not complicated. It's common economic sense.
University of Chicago economist Casey Mulligan states this in a simpler way: Growth starts with investment and ends with consumer spending.
Regrettably, Obama doesn't get this. That's why he's proposing the third capital-gains tax hike of his tenure. He started at 15 percent, went to 20, with Obamacare took it to 23.8, and now wants 28 percent. This damages business, jobs, and middle-class incomes.
Ironically, history shows that lower capital-gains tax rates produce higher revenues.
Obama also proposes to raise the tax burden on capital by increasing inheritance and estate taxes. And he's making another attempt to tax banks — only this time he is adding in asset managers and insurance companies. Ironically, a huge part of Obama's base — police officers, firefighters, teachers — might suffer a serious depreciation of pension-fund stockholdings.
So, taxing capital will hurt the very middle-class workers and incomes Obama claims he wants to help. His so-called middle-class economics doesn't work.
A related point: Obama's SOTU made no mention of cutting corporate tax rates. Instead the president trashed the top 1 percent and slammed companies for keeping profits abroad and using unfair loopholes and deductions.
So there's a lesson here for congressional Republicans and some of my fellow conservatives: Do not get sucked into this class-war politics. You will never outbid the Democrats on middle-class benefits.
Former CEA chair Glenn Hubbard argues that "free community college, an enhanced tax credit for child care and higher taxes on high-income earners and large financial institutions" will not generate "growth, work and opportunity."
Good advice, Republicans.
Larry Kudlow is CNBC's Senior Contributor and author of American Abundance: The New Economic & Moral Prosperity.
It's too easy to label President Obama's State of the Union as more tax-the-rich and redistribution. We know that. Rather than name-calling, Republicans must draw a clear line in the sand between their worldview and Obama's. I'd call that line commonsense economics.
First, you can't create a new business or sustain an existing one without the seed corn and nourishment of capital investment.
Second, only businesses create jobs. You can't have a job without a business.
Third, jobs create all incomes, including middle-class incomes.
Fourth, incomes create family and consumer spending.
OK? This is not complicated. It's common economic sense.
University of Chicago economist Casey Mulligan states this in a simpler way: Growth starts with investment and ends with consumer spending.
Regrettably, Obama doesn't get this. That's why he's proposing the third capital-gains tax hike of his tenure. He started at 15 percent, went to 20, with Obamacare took it to 23.8, and now wants 28 percent. This damages business, jobs, and middle-class incomes.
Ironically, history shows that lower capital-gains tax rates produce higher revenues.
Obama also proposes to raise the tax burden on capital by increasing inheritance and estate taxes. And he's making another attempt to tax banks — only this time he is adding in asset managers and insurance companies. Ironically, a huge part of Obama's base — police officers, firefighters, teachers — might suffer a serious depreciation of pension-fund stockholdings.
So, taxing capital will hurt the very middle-class workers and incomes Obama claims he wants to help. His so-called middle-class economics doesn't work.
A related point: Obama's SOTU made no mention of cutting corporate tax rates. Instead the president trashed the top 1 percent and slammed companies for keeping profits abroad and using unfair loopholes and deductions.
So there's a lesson here for congressional Republicans and some of my fellow conservatives: Do not get sucked into this class-war politics. You will never outbid the Democrats on middle-class benefits.
Former CEA chair Glenn Hubbard argues that "free community college, an enhanced tax credit for child care and higher taxes on high-income earners and large financial institutions" will not generate "growth, work and opportunity."
Good advice, Republicans.
Larry Kudlow is CNBC's Senior Contributor and author of American Abundance: The New Economic & Moral Prosperity
.
Tuesday, August 26, 2014
What Is Obama Doing with All Those Multi-Billions in Bank Fine Money?
By Larry Kudlow
The $16.65 billion settlement by Bank of America over financial-crisis-era mortgage securities "highlights a pattern of the government extorting the banks," Dick Kovacevich said on CNBC this week. Kovacevich is the former Wells Fargo chairman and CEO. I've known him for years. He ran a great bank. He kept Wells Fargo clean during the credit meltdown. And, unusual for a big-bank CEO, he strongly supports free-market principles.
Kovacevich went on to say, "It's definitely politics. It has nothing to do with justice or restitution to the innocent victims. In fact, more of the money is going to the coffers of the states and various departments than the victims." He then concluded, "Why are we charging the stockholders instead of going after the people who did wrong? Corporations don't engage in criminal behavior. People do."
Kovacevich is right on target. These huge bank settlements are election-year ATMs for the Obama administration. It was $12 billion for JP Morgan, another $7 billion for Citigroup and on and on. It's a real shakedown.
In fact, no one even remotely knows how these penalty-payment numbers are calculated. And the federal government's disbursement of these funds is equally mysterious. As the Wall Street Journal editorial page has pointed out, a lot of money has gone to
The $16.65 billion settlement by Bank of America over financial-crisis-era mortgage securities "highlights a pattern of the government extorting the banks," Dick Kovacevich said on CNBC this week. Kovacevich is the former Wells Fargo chairman and CEO. I've known him for years. He ran a great bank. He kept Wells Fargo clean during the credit meltdown. And, unusual for a big-bank CEO, he strongly supports free-market principles.
Kovacevich went on to say, "It's definitely politics. It has nothing to do with justice or restitution to the innocent victims. In fact, more of the money is going to the coffers of the states and various departments than the victims." He then concluded, "Why are we charging the stockholders instead of going after the people who did wrong? Corporations don't engage in criminal behavior. People do."
Kovacevich is right on target. These huge bank settlements are election-year ATMs for the Obama administration. It was $12 billion for JP Morgan, another $7 billion for Citigroup and on and on. It's a real shakedown.
In fact, no one even remotely knows how these penalty-payment numbers are calculated. And the federal government's disbursement of these funds is equally mysterious. As the Wall Street Journal editorial page has pointed out, a lot of money has gone to
Monday, June 2, 2014
Bernanke's Loose Lips
Note: Kudlow gets it mostly correct, as I have been pointing out in the EPJ Daily Alert, the Fed is not serious at at all about slowing money growth. That said, I believe that price inflation at some point in the not too distant future will begin to accelerate. Kudlow doesn't focus on this, other then to say that the Fed will allow price inflation above target, I believe the price inflation could get way out of control.-RW
By Larry Kudlow
Are Ben Bernanke's loose lips the real cause of surging stocks and plunging interest rates?
Here's the backstory: The so-called smart money on Wall Street had
By Larry Kudlow
Are Ben Bernanke's loose lips the real cause of surging stocks and plunging interest rates?
Here's the backstory: The so-called smart money on Wall Street had
Saturday, April 12, 2014
Yellen's Low-flation Nonsense
Note: Larry gets it mostly correct here, but we don't need Taylor rule inflation either. The money printing should simply stop, beginning and end of story-RW
By Larry Kudlow
Will somebody please explain to me how rising inflation is somehow going to extricate us from the tepid economic recovery? I don't get it.
It used to be hypothesized that low inflation was the key to high economic growth. For everybody in the economy, low inflation was a tax cut. Conversely, rapidly rising prices were thought to penalize the economy by placing a tax-hike effect on investors, businesses and families. It was this logic that spurred Paul Volcker (especially) and then Alan Greenspan to labor mightily in the 1980s and 1990s to bring inflation down.
The Fed's favorite inflation measure — the personal consumption deflator — has risen about 1 percent over the past year, as has the consumer price index. When I grew up professionally in the 1970s
By Larry Kudlow
Will somebody please explain to me how rising inflation is somehow going to extricate us from the tepid economic recovery? I don't get it.
It used to be hypothesized that low inflation was the key to high economic growth. For everybody in the economy, low inflation was a tax cut. Conversely, rapidly rising prices were thought to penalize the economy by placing a tax-hike effect on investors, businesses and families. It was this logic that spurred Paul Volcker (especially) and then Alan Greenspan to labor mightily in the 1980s and 1990s to bring inflation down.
The Fed's favorite inflation measure — the personal consumption deflator — has risen about 1 percent over the past year, as has the consumer price index. When I grew up professionally in the 1970s
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