Thursday, June 29, 2006

Tonight's Lineup

On "Kudlow & Company" tonight:

A big, blowout panel to discuss today's Fed decision with Ben Stein, Wayne Angell, John Ryding, Mickey Levey, and Joe LaVorgna.

Another big, blowout panel to debate the market impact of the Fed's decision with Bob Froehlich, Herb Greenberg, Noah Blackstein, Ben Stein, and Peter Schiff (Euro Pacific Capital).

Mary O'Grady of the WSJ will give us a preview of the elections in Mexico.


What's the Fed's strategy for this year?

Stop @ 5.5 percent
Stop @ 5.75 percent
Stop @ 6 percent

Waiting For The Fed

Gold is up $10 and cyclical stocks are strong. Commodity stocks are up 1.5 percent as of 12:30 p.m. today. All this tells me is that no one is afraid of a quarter-point rate hike.

The rise in the gold price and the jump up in commodity stocks is not a good sign that a quarter-point hike will deflate inflationary expectations. I'd like to see some fear in the inflation stocks, but I'm seeing greed instead.

They need to make a statement. Bernanke's monetary manhood requires a strong statement.

I still believe liquidity neutrality is 5.5 percent on the funds rate, based on the Wicksell inflation-indexed bond market model. Meanwhile, low tax-rates and high profits auger for a solid economic growth performance.

Policy Focus

At the request of my friends at the Mercatus Center, here is some policy issues that need the most attention during the remainder of 2006:

The economy is still in good shape, but some of the key economic/policy issues are:

Under Hank Paulson -- the fate of the dollar. It should appreciate, not depreciate. There is an outside chance Paulson will pursue tax reform, with the principle that income should be taxed only once. The system should be fairer and flatter. The Republican Congress should be curtailing budget earmarks and tight spending policies in order to get re-elected.

Immigration is controversial, but a recent poll by Ed Goeas of Torrance shows that 70 percent of registered Republicans want a comprehensive, balanced plan with border security, temporary workers, and ultimately legalization. I agree with this approach.

On energy, Congress is taking steps to permit off-shore drilling, which is very positive. They should do more.

Finally, Congress should not regulate or tax the Internet. Net neutrality is a bad idea.

Wednesday, June 28, 2006

Tonight's Lineup

On "Kudlow & Company" tonight:

Michelle Girard, senior economist with RBS Greenwich Capital, Jared Bernstein, senior economist of the Economic Policy Institute, and Michael Darda, chief economist with MKM Partners will discuss the economy, interest rates, inflation, and the Fed.

Online pollster, Scott Rasmussen, with the results of his latest poll regarding inflation.

Our market panel will discuss the collapse of tech, oil, offshore drilling, energy stocks -- Cody Willard of CC Willard Capital Partners, Stefan Abrams of Trust Company of the West, and Jim Glassman of AEI.

Eric Ross of Think Equity will dissect the chip sector -- winners and losers.

Did the New York Times commit treason -- debate with Jim Warren of the Chicago Tribune and Terry Jeffrey of Human Events.

What I Learned Today

*The WSJ editorializes on the lousy revenue estimates at the Joint Tax Committee and the Congressional Budget Office. It's an important point because I believe the Laffer curve is still the most underrated economic growth policy tool out there. With historically low tax-rates on capital today, federal tax receipts are soaring. In fact, at roughly $2.4 trillion estimated for 2006, tax collections are way above the prior peak, which was around $2 trillion in FY 2000. This, of course, at lower tax-rates. Washington estimators always assume the economy is cyclical and governed by immutable laws. But the reality is growth would have been much slower after 9/11 without strong investment incentives provided by the Bush tax cuts on capital.

*Sen. John McCain has been campaigning around the country to cut spending and eliminate budget earmarks. He made a great speech on this point at the Reagan Library a few days ago. McCain is dead right and the GOP House and Senate should take stringent action to make earmarks transparent and votable before passage. They should also implement Sen. Judd Gregg's SOS plan, which has Gramm-Rudman-type across-the-board budget cuts and a line item veto in order to meet reduced spending targets.

*The Bernanke Fed should raise their target rate 50 basis point tomorrow to enhance their credibility and enforce their tough rhetoric on curbing inflation. Forward market price indicators like TIP spreads, gold, and the dollar have responded to Bernanke's rhetorical toughness. But now is the time for execution. The Wicksell model clearly shows that a 5.5 percent fed target rate would be a slight penalty above neutral. The central bank should go there immediately and then it may be possible to pause after that. Importantly, the Fed should be guided by forward-market prices for bonds, commodities, and the dollar to guide their liquidity policies.

*Online pollster Scott Rasmussen finds that 36 percent of Americans are very worried about inflation and another 36 percent are somewhat worried. This should spur the Fed.

*Denying White House press credentials to the New York Times for its unpardonable outing of the U.S. government's effort to track world terror funds is a very interesting proposition. I'd like to see a Congressional debate on this and I'd like to see where election-year Democrats and Republicans come out on this issue.

*Warren Buffett praises the estate tax, but of course he doesn't pay it.

*Chip stocks are getting killed. The SOX index is at an eight-month low. Until this sector shows life signs of recovery, it is doubtful that the overall stock market will rebound.

*Despite conventional wisdom that oil prices are a one-way trade higher, I still believe there is a significant chance that prices will drop $20 or more. Don't ask me when, but Milton Friedman was right 30 years ago. Markets are more powerful than OPEC. Right now production is rising, inventories are high, and consumption is flattening. I think oil is moving to $40 to $50 at some point probably in the next six months.

Tuesday, June 27, 2006

Tonight's Lineup

On CNBC’s Kudlow & Company tonight:

50 Basis Points...Yes or No? We'll have a Fed countdown and also discuss Hank Paulson's confirmation hearing today.

On board are Ed Yardeni, Oak Associates Chief Investment Strategist; Jason Furman, Center on Budget & Policy Priorities Sr. Fellow; Art Laffer, Laffer Associates Chairman/former Reagan Economic Advisor; and Kevin Hassett, American Enterprise Institute Resident Scholar.

Rep. John Peterson (R-PA) and Rep. Robert Wexler (D-FL) will debate offshore drilling as well as their perspective on the NY Times flare-up.

We’ll discuss clean coal technology with Greg Boyce, CEO of Peabody Energy.

Former Labor Secretary/UC Berkeley professor Robert Reich will battle The Wall Street Journal’s Steve Moore on a variety of political issues including The New York Times latest controversy, Warren Buffett, and the Fed.

Tonight’s Poll Question:

Do you think the New York Times committed treason by exposing the Treasury Department's Terrorist Finance Tracking Program?

Cast your vote at

Paulson's Testimony

From the early reports of Hank Paulson’s confirmation hearing to become the next Treasury Secretary, he sounds very much like a supply-sider on fiscal issues. This is a good thing.

He told the Senate Finance Committee that it would be a big mistake to raise taxes to deal with deficits and that he would like to see spending curbed. While he said tax cuts don’t pay for themselves, he does believe that tax cuts change behavior. Paulson emphasized the importance of U.S. business competitiveness and doesn’t want to see any over regulation. Amen to all that.

So far, I haven’t found any comments on the U.S. dollar. This obviously remains a big issue. If Mr. Paulson takes the poor advice given by someone like Fred Bergsten, who wants to depreciate the dollar by 20 to 30 percent, that would be a big mistake. At this stage, such a move would undoubtedly raise inflation and interest rates, posing much danger to the economy.

Working with Ben Bernanke, Paulson should appreciate the dollar to curb inflation, keep rates down, and strengthen economic recovery. I continue to watch closely for any hints on the direction of U.S. currency policy.

Paulson is a free-trader. He boasts very strong ties to China, demonstrated by seventy some odd trips there as the head of Goldman Sachs. During his testimony he said he would push harder to get Beijing to move more quickly to overhaul its currency system. I do not agree with this. China has outsourced its monetary policy to the U.S., and that has served them well. I agree with John Rutledge, Art Laffer, and a handful of others who believe that the Chinese currency should be dollarized. But virtually all of Washington disagrees.

The interesting part of this discussion is that Chinese wages are rising as a result of rapid economic growth. That is a much more effective way of equilibrating trade conditions with the U.S.

When Mr. Paulson’s name was first announced, the stock market fell significantly, as it has today. Could be a coincidence. Then again, maybe not. We will wait and see.

Not for the Supremes

The Supreme Court has agreed to hear a climate change debate at the urging of greenies, to rule on whether emissions from new cars, trucks, and power plants must be further regulated to slow climate change. This is totally wrong. This is a matter that should be decided by Congress, not the Supreme Court.

(To see the lack of consensus on this issue, read “There Is No ‘Consensus’ On Global Warming” in yesterday’s WSJ by MIT professor, Richard S. Lindzen.)

Meanwhile, President Bush acknowledged yesterday that global warming is a serious problem. But he went on to say there’s a debate whether it’s manmade or naturally caused. And he called for new technologies to deal with the problem. (Notably, he did not call for the Kyoto treaty, which would decimate economic production and raise unemployment all around the world.) Bush cited clean coal technology, hybrid auto fuels and new nuclear energy capability.

As I discussed in my latest column, the Nuclear Regulatory Commission has just approved the first major commercial nuclear facility in thirty years. Construction of the $1.5 billion National Enrichment Facility in New Mexico could begin in August, and Louisiana Energy Services CEO Jim Ferland says they could be ready to sell enriched uranium (for electricity) by early 2009. Sen. Pete Domenici calls this a “renaissance of nuclear energy in this country.”

But what the Supreme Court has to do with all of this is way beyond me. This would be judicial activism on a super-grand scale.

Next thing you know, they’ll be ruling on marginal tax rates. And, after that, perhaps the High Court will promulgate new targets for Federal Reserve control of the monetary base and M2.

John Snow's Letter to the New York Times

(The NYT was nuts to go ahead and expose this program. They went way too far. And whoever leaked this in government was treasonous, no two ways about it.)

Letter to the Editors of The New York Times
by Treasury Secretary Snow

Mr. Bill Keller, Managing Editor
The New York Times
229 West 43rd Street
New York, NY 10036

Dear Mr. Keller:

The New York Times' decision to disclose the Terrorist Finance Tracking Program, a robust and classified effort to map terrorist networks through the use of financial data, was irresponsible and harmful to the security of Americans and freedom-loving people worldwide. In choosing to expose this program, despite repeated pleas from high-level officials on both sides of the aisle, including myself, the Times undermined a highly successful counter-terrorism program and alerted terrorists to the methods and sources used to track their money trails.

Your charge that our efforts to convince The New York Times not to publish were "half-hearted" is incorrect and offensive. Nothing could be further from the truth. Over the past two months, Treasury has engaged in a vigorous dialogue with the Times - from the reporters writing the story to the D.C. Bureau Chief and all the way up to you. It should also be noted that the co-chairmen of the bipartisan 9-11 Commission, Governor Tom Kean and Congressman Lee Hamilton, met in person or placed calls to the very highest levels of the Times urging the paper not to publish the story. Members of Congress, senior U.S. Government officials and well-respected legal authorities from both sides of the aisle also asked the paper not to publish or supported the legality and validity of the program.

Indeed, I invited you to my office for the explicit purpose of talking you out of publishing this story. And there was nothing "half-hearted" about that effort. I told you about the true value of the program in defeating terrorism and sought to impress upon you the harm that would occur from its disclosure. I stressed that the program is grounded on solid legal footing, had many built-in safeguards, and has been extremely valuable in the war against terror. Additionally, Treasury Under Secretary Stuart Levey met with the reporters and your senior editors to answer countless questions, laying out the legal framework and diligently outlining the multiple safeguards and protections that are in place.

You have defended your decision to compromise this program by asserting that "terror financiers know" our methods for tracking their funds and have already moved to other methods to send money. The fact that your editors believe themselves to be qualified to assess how terrorists are moving money betrays a breathtaking arrogance and a deep misunderstanding of this program and how it works. While terrorists are relying more heavily than before on cumbersome methods to move money, such as cash couriers, we have continued to see them using the formal financial system, which has made this particular program incredibly valuable.

Lastly, justifying this disclosure by citing the "public interest" in knowing information about this program means the paper has given itself free license to expose any covert activity that it happens to learn of - even those that are legally grounded, responsibly administered, independently overseen, and highly effective. Indeed, you have done so here.

What you've seemed to overlook is that it is also a matter of public interest that we use all means available - lawfully and responsibly - to help protect the American people from the deadly threats of terrorists. I am deeply disappointed in the New York Times.



John W. Snow, Secretary
U.S. Department of the Treasury

(For more commentary on this growing controversy, check out two terrific articles at The Weekly Standard: "National Security Be Damned" by Heather Mac Donald and "Leaks and the Law" by Gabriel Schoenfeld.)

Monday, June 26, 2006

Those Godless Liberals

Ann Coulter is right, Democrats really are "godless" liberals.

And, what’s more, conservatives are happier than liberals. This according to a Wall Street Journal commentary today by Arthur C. Brooks of Syracuse University’s Maxwell School of Public Affairs.

According to Mr. Brooks, polling data shows that conservatives are a happier bunch, and much better adjusted to their adult lives than liberals.

“…[T]he best data available show that conservatives have a clear edge over liberals in terms of happiness and emotional fortitude.”

Why? One not-so-insignificant reason seems to be that conservatives go to church or synagogue.

“…[R]eligion is the most important cultural faultline between the left and right: In 2000, for example, conservative Americans were twice as likely as liberals to attend a house of worship every week, and half as likely to have no religion. Voluminous research on happiness has shown that religious people are much happier about their lives and futures than nonreligious people, and that it is religious faith per se that causes at least part of this difference.”

Ann Coulter is definitely on to something. That’s why her book is number one on the New York Times bestseller list. (What a delicious irony there…)

Tonight's Lineup

On CNBC's "Kudlow & Company" tonight:

A hard look at the Fed, the economy, interest rates and inflation:

On board to offer their insights are Bear Stearns' chief global economist, David Malpass; Mike Vogelzang, president/chief investment officer at Boston Advisors; and, Mark Vitner, senior economist at Wachovia.

A look into the markets, earnings, merger activity and Warren Buffett with Michael Thompson, Director of Research at Thomson Financial; Pat Dorsey, Morningstar's Director of Stock Analysis; Barry Ritholtz, President of Ritholz Capital; and, Keith Wirtz, President & CIO-Fifth Third Asset Management.

Also, Frank Newport from Gallup Polls will set the record straight on our own "Sunday Unspun" segment. Frank will take a look at various incorrect poll statements issued by various politicians, and provide what the polls are really saying.

Tonight's Poll Question:

Should incoming Treasury Secretary Hank Paulson depreciate or appreciate the dollar?

Cast your vote at

The Beauty of Tax Cuts

Among other places, New York City and New York State are awash with budget surpluses according to the WSJ editorial this morning ("States of Plenty").

"America's governors must feel as if they've won their own state lotteries. Thanks to the snappy growth of the U.S. economy over the last three years, state treasuries are now overflowing with tax collections.

At least 40 states are in the black, and only a handful, such as the Gulf states wrecked by Hurricane Katrina and perpetually hapless New Jersey, are still spilling red ink. In 2005 state and local revenues grew by 10.5%, according to Census Bureau data, and so far this year tax receipts in most states are climbing at close to that level. California's income tax revenues in April were up an astonishing 55% from last year. Oklahoma is so flush it has exceeded its legal limit on its rainy day fund.

This is all in contrast with 2002-03 when states were scrambling to pay for the many new spending commitments they'd made in the 1990s. Consider the amazing turnaround of California and New York City. Four years ago both were teetering on insolvency, but now Governor Arnold Schwarzenegger and Mayor Michael Bloomberg are boasting multi-billion dollar surpluses. They prove that among the biggest beneficiaries of President Bush's 2003 tax cuts have been state and local governments, even though tax cut opponents predicted states would be losers...."

Remember, New York is the financial capital of the world. The key word here is “capital.” Bush’s supply side tax cuts created record low tax rates on capital, and although most of New York’s elected federal representatives voted against them, the Gotham economy is booming.

So now, the question is, with a $7.5 billion in budget surpluses, where are the tax cuts in New York? The Kudlow tax reform commission recommended abolishing state taxes on capital gains, dividends and estates, along with lower income tax rates for individuals and corporations.

With a huge budget surplus, why isn’t that money being used to slash taxes?

“Watch What Mr. Buffet Does, Not What He Says”

Here’s a great Buffett editorial from today’s New York Sun.

“…As an avowed supporter of the estate tax, Mr. Buffett could have let the government take its share of his estate after he dies. But just as Mr. Buffett has accumulated his vast wealth without paying much personal income tax, he has found a way to avoid the tax man in this maneuver as well, even writing in his letter to Bill and Melinda Gates that a condition of the gift is that the foundation "must continue to satisfy legal requirements qualifying my gifts as charitable and not subject to gift or other taxes."

On the estate tax, watch what Mr. Buffett does, not what he says….”

Need I say more?

"Upbeat Businesses Signal U.S. Economy Is Still Going Strong"

The economic boom keeps chugging right along, despite all the gloom-and-doomers out there...

Today's Investor's Business Daily:

"Jitters over slowing growth abated somewhat last week, as a slew of economically sensitive companies reported stronger results and industrial stocks rebounded.

Economic bellwether FedEx (FDX) on Wednesday headlined the week's bullish earnings. Nickel producer Inco (N) and trucker Old Dominion (ODFL) also reported healthy results and better times ahead.

..."What was driving the stock market down was the idea the economy would slow," said James Paul-sen, chief investment strategist at Wells Fargo Capital Management, which handles $175 billion.

But optimism has returned in the last week.

"The root of it is, the economy is stronger than we thought," he said...."

What Paulson Really Ought to Do

Fred Bergsten has an op-ed in the Washington Post today that basically says Hank Paulson’s main mission at the Treasury should be to depreciate the dollar by 20 to 30 percent, in order to correct trade imbalances which pose a huge threat to the American economy.

Fred is an old friend and a very bright guy. But he is totally wrong.

As I recently wrote in the Wall Street Journal, my advice to Mr. Paulson is to appreciate the dollar in coordination with the Fed in order to stop the mild upturn of inflation expectations.

He should also try to lower corporate tax rates, including full-cash expensing for equipment depreciation. And he should work with Rob Portman at OMB for a big bang spending cut program, including Senator Judd Gregg’s SOS budget reform, which includes a line-item veto, and Gramm-Rudman across the board budget cuts.

As for foreign economic growth, Paulson should support supply-side tax cuts and deregulatory policies. (See today’s WSJ op/ed, “Germany Out of the World Cup” by Guido Westerwelle, chairman of the Free Democratic Party.) He has the story exactly right.

My old friend Fred is dead wrong.

Friday, June 23, 2006

Tonight's Lineup

On CNBC's "Kudlow & Company" tonight:

We'll begin the show with a political debate between Ann Coulter, Syndicated Columnist/"Godless" Author; Jim Warren, Managing Editor with The Chicago Tribune; author/nationally syndicated columnist Joel Mowbray; and Peter Beinart, author/editor-at-large for The New Republic.

Steve Emerson, NBC terrorism analyst and author of "The American Jihad," will take a look at the arrests in Miami.

An economic debate between Michael Darda, MKM Partners Chief Economist and Lincoln Anderson, LPL Financial Services CIO & Chief Economist.

A look at markets and oil with Chris Edmonds, Pritchard Capital Partners Energy Analyst; Danielle Hughes, Divine Capital Markets; and Dan Genter, RNC Genter Capital Management CEO.

Tonight's Poll Question:

Should there be a constitutional amendment to ban flag burning?

Cast your vote at

Surprise Drop in Oil?

A few days ago, Prince Turki al-Faisal, the Saudi Arabian Ambassador to the U.S., told the United States Energy Association that any U.S. conflict with Iran would threaten the Strait of Hormuz and triple the price of oil.

Perhaps Prince Turki is trying to get President Bush to rule out the military option in the Iranian standoff over weaponizing their uranium enrichment program. Of course, President Bush won’t do this, as he should not.

Direct negotiations with Iran, a good idea in my view, will proceed with any number of items on the table, including trade, investment, Iraq, human rights, and so forth. But the Iranians must know that the United States is prepared to defend its security interests if it comes down to that.

Meanwhile, back to the matter of oil prices, the more imminent reality could actually be a sizable price decline, rather than a huge increase. The Energy Department just announced that crude oil supplies rose 1.4 million barrels to 347.1 million for the week ended June 16. Analysts had been expecting a drawdown, not an increase.

Crude oil supplies in the U.S. are now at their highest level since May 29, 1998, when oil was trading around fifteen bucks a barrel. In addition, Canadian inventories are also fully stocked.

Oil tanker executives have recently confirmed that oil in storage aboard very large crude carriers, floating on the high seas, is abnormally high. And, Chevron CEO David O’Reilly informed us recently that gasoline and energy demands here in the U.S. have flattened out, and may be showing signs of declining somewhat.

The bottom line to all this is that Prince Turki’s $200 oil scenario or not, there could very well be a near-term correction in oil prices that will drop far more than anyone imagines possible. Supplies are at their highest levels in eight years, while demand appears to be falling. This of course, would be welcome news for both the stock market and the economy.

The Queen of Saboteurs

The New York Times is doing one heckuva job underming U.S. national security.

The Gray Lady’s latest attempt to thwart the men and women charged with the vital task of unearthing terrorists, and capturing them before they steal any more innocent American lives, came last night when, against the repeated requests of the White House, the paper went ahead and revealed yet another classified program designed to gather information used to foil terrorist attacks like 9/11.

The saboteurs at the Times provided secret details into the Bush administration’s use of subpoenas to gather large troves of data from the Society for Worldwide Interbank Financial Telecommunication (SWIFT), a Belgium-based consortium that handles international bank transfers. Financial data is used to identify terrorists before they get a chance to kill. It is an eminently sensible program, and one that has reaped rewards.

In one instance, the SWIFT program was used to capture a top Al Qaeda operative, Riduan Isamuddin, in Thailand in 2003.

The folks running the printing presses at the Times don’t seem to care about any of this. They went ahead and made the determination that the SWIFT program was “a matter of public interest.”

Gabriel Schoenfeld, the editor of Commentary magazine, had this to say about the New York Times in an interview with The New York Sun:

"They're courting prosecution...They're increasingly behaving like if we were in the middle of World War II and they learned of plans to invade Normandy. Because they decided it's a matter of public interest, they'd publish it. I think this is reckless and likely to encourage Attorney General Gonzales to prosecute them, if not for this story, for some of the other things they've done."

The New York Times is blinded by its hatred of George W. Bush. And, because of this, these boneheads compromise the lives of all Americans.

The Gray Lady has become the Queen of Saboteurs.
Very good, hard-hitting editorial in the Wall Street Journal today on "The Tancredo Republicans." These guys are hurting the GOP.

Kudlow on the Radio

The Larry Kudlow Radio Show can be heard live this Saturday from 10:00am until 1:00pm (EST) on New York’s 770 AM radio dial. Topics covered will be the usual blend of Washington to Wall Street. If you are located outside the greater New York area, you can tune in live to the show via the Internet at

Larry is also a regular guest every Friday night on Hugh Hewitt’s nationally syndicated radio show. Tune in at 7:20pm (EST) to catch Larry and Hugh discuss the latest political and financial news. (Check your local listings or listen live via Hugh’s website at

Thursday, June 22, 2006

Tonight's Lineup

On CNBC's "Kudlow & Company" tonight:

We have an all-star economic panel joining us tonight to discuss the Fed and the economy. Our guests include: Joe LaVorgna, Chief US Fixed Income Economist at Deutsche Bank; Jim Glassman, senior economist with JP Morgan; Michelle Girard, senior economist with RBS Greenwich Capital; and Mitch Stapley, Chief Fixed Income Officer at Fifth Third Asset Management.

The Heritage Foundation’s chief tax expert, Dan Mitchell, will join the economic panel and offer his international insights on Japan’s rate hikes, Germany’s tax maneuvering and the effect on the global economy.

Profits…profits…profts…Dirk van Dijk, Director of Research at Zacks Investment Research and Robert Keiser, Senior Research Manager of Capital Markets at Thomson Financial, will discuss the mother’s milk of the economy.

We’ll tackle the markets with Joe Battipaglia, CIO at Ryan, Beck & Co; Herb Greenberg, senior columnist for MarketWatch and CNBC contributor; and Fifth Third’s Mitch Stapley.

Finally, Rob Portman, Office of Management and Budget Director, will discuss the budget and the proposed line-item veto.

Tonight’s Poll Question:

Do you favor lifting the ban on offshore drilling?

Cast your vote at

Step Back Jack

John Murtha may have become the darling of the lefty anti-war crowd, but the man who has spent thirty-two years of his life in the House of Representatives won’t become the poster-child of any anti-corruption crusade any time soon, that’s for sure.

As The Washington Times pointed out yesterday, this cut-and-run congressman who accused Marines of murder "in cold blood" before a preliminary investigation was even complete, has more than his fair share of political skeletons in the old closet.

“Last June, the Los Angeles Times reported how the ranking member on the defense appropriations subcommittee has a brother, Robert Murtha, whose lobbying firm represents 10 companies that received more than $20 million from last year's defense spending bill. "Clients of the lobbying firm KSA Consulting -- whose top officials also include former congressional aide Carmen V. Scialabba, who worked for Rep. Murtha as a congressional aide for 27 years -- received a total of $20.8 million from the bill," the L.A. Times reported.”

More: “In early 2004, according to Roll Call, Mr. Murtha "reportedly leaned on U.S. Navy officials to sign a contract to transfer the Hunters Point Shipyard to the city of San Francisco." Laurence Pelosi, nephew of House Minority Leader Nancy Pelosi, at the time was an executive of the company which owned the rights to the land. The same article also reported how Mr. Murtha has been behind millions of dollars worth of earmarks in defense appropriations bills that went to companies owned by the children of fellow Pennsylvania Democrat, Rep. Paul Kanjorski. Meanwhile, the Center for Responsive Politics, a nonpartisan campaign-finance watchdog group, lists Mr. Murtha as the top recipient of defense industry dollars in the current 2006 election cycle.”

This is nothing new for old Jack. In fact, as the paper points out, Murtha’s questionable history extends all the way back to 1980, to the massive Abscam bribery scandal, when Mr. Murtha was named by the FBI as an "unindicted co-conspirator."

We have unfinished busines left in Iraq Jack. Step out of the way.

Judd Gregg to the Rescue

We need more Republicans like Judd Gregg.

The Senate Budget Committee chairman’s Stop Over-Spending Act (S.O.S.) is a welcome breath of fresh fiscal air. It’s exactly the sort of thing the profligate GOP needs right now to restore confidence after losing its fiscally conservative mojo in recent years.

The S.O.S. Act is a budget limit plan that essentially updates the Gramm-Rudman-Hollings Act from the mid ‘80s, and proposes a reining in of discretionary and mandatory spending, in addition to a new version of the line-item veto. Strict spending limits in the context of deficit reduction as a share of GDP are targeted. If these limits are violated, then an across the board cut is then implemented.

Judd’s plan also hits entitlement spending. One of the S.O.S provisions would set deficit targets and require budget committees to reduce entitlement spending if the deficit is expected to exceed them.

As the National Review puts it, the S.O.S. Act “is one of the most encouraging efforts toward spending discipline in years, and is eminently worthy of passage,” and “gives the GOP a chance to put itself on the record making a strong statement of its commitment to spending restraint.”

Let’s hope the Republicans finally step up to the plate on this one. It's about time.

Hastert's $2 Million Score

Jonathan Weisman has a story in the Washington Post today raising the heat on Hastert's home-district earmark that the House Speaker allegedly engineered for his own financial windfall. The Speaker made a $2 million profit last year on the sale of land 5 1/2 miles from a highway project that he helped to finance with targeted federal funds.

Hastert and his people are aggressively denying any wrongdoing. And we don't know for sure yet whether there's any fire behind this smoke. We'll just have to wait for the dust to settle.

That being said, this thing stinks to high heaven. It's squirrelly. Hastert's highly lucrative land deal and the home-district earmark he orchestrated are way too close for comfort. It is yet one more reason, among oh so many, why voters have had it with Congress.

It also shows, once again, why the GOP Congress must definitively stop-once and for all-this corrupt earmarking process.

In between Hastert's ridiculous defense of "Cold Cash" Jefferson, his ties to Jack Abramoff, and this latest imbroglio, well, let's just say things don't look too good for the Speaker.

Stop the earmarks; stop the corruption.

Wednesday, June 21, 2006

Tonight's Lineup

On CNBC’s “Kudlow & Company” tonight:

We will begin the show with an economic debate focusing on inflation, the Fed and the overall economic picture with Brian Wesbury, Chief Economist for First Trust Advisors and Gary Shilling, President of A. Gary Shilling & Co.

Then we'll dive right into the markets with Stefan Abrams, CIO at Trust Company of the West; Don Luskin, CIO of Trend Macrolytics LLC; and Bob Froelich, Scudder Investment's chief investment strategist.

Finally, a Washington to Wall Street discussion with Congressmen Paul Ryan (R-WI) and Harold Ford (D-TN). Other guests include WSJ editorial writer Kim Strasssel and Jared Bernstein, Economic Policy Institute Senior Economist.

Topics will include the estate tax, minimum wage, the budget and the line-item veto.

Tonight's Poll Question:

Whom would you favor as a Democratic presidential nominee?

Hillary? Al Gore? Bill Richardson? Joe Biden? John Edwards?

Cast your vote at

Forget the Economy, It’s All About the Politics Stupid!

There’s a big political hullabaloo brewing this election year over a minimum wage hike. What a surprise. This thing only seems to pop up during election years.

The economics of a minimum wage hike are terrible.

Think of fast-food restaurants and small eating establishments that hire young workers of all colors and races, especially during the summer. These students and others will be priced out of the labor market because of the higher minimum wage.

Did you know that only about 2 ½ percent of the total workforce (slightly less than 2 million people) qualify for the minimum wage according to the Department of Labor Statistics?

And did you also know that roughly four-fifths of all the minimum wage workers are un-poor? Two-thirds of the minimum wage workers actually come from families where at least one other family member has a job. (These stats courtesy of Harvard economics professor Greg Mankiw’s website.)

Think students in high school or college.

But, unfortunately, the politics may prove too compelling this election year. So here’s my thought:

Tie a minimum wage hike to a tax cut for large and small businesses. Or even a big estate tax cut.

Then, the costs of a minimum wage hike would be offset by lower tax costs. We would get another tax cut on capital that would obviously help spur the U.S. economy.

I guess my hope here is to turn a negative into a positive.

Capitalism On the Move

Poor Karl Marx; he must be tossing and turning in his grave.

The evidence is showing once again that capitalism works, and the rising global tide of free-market capitalism bears this out as ships are being raised all across the world.

According to a new report, the number of people globally with more than $1 million in net assets rose 6.5 percent last year to almost 9 million.

In South Korea, the number of millionaires jumped over 21 percent; India was up almost 20 percent, and Russia, up over 17 percent.

South Africa, Indonesia, Hong Kong, Saudi Arabia, Singapore, the United Arab Emirates and Brazil all posted robust double-digit increases. China grew almost 7 percent.

Capitalism works. It is on the move across the globe. This is a very good thing.

Tuesday, June 20, 2006

Tonight's Lineup

On CNBC's "Kudlow & Company" tonight:

We will be joined by an all-star "Shipping Panel." 85% of U.S. oil tankers will be represented when our four big shipping CEOs pay "Kudlow & Company" a visit this evening.

They are:

Morten Arntzen: CEO of Overseas Shipholding Group, Inc;
Tor Olav Troim: CEO of Frontline, Ltd;
Peter Evensen: CEO of Teekay Shipping; and,
Craig Stevenson: CEO of OMI Corporation.

Dynamic Duo: Former Labor Secretary Robert Reich and the WSJ's Steve Moore will debate deflation, minimum wage and wetlands, among other things.

Also, a markets discussion with Cody Willard of CL Willard Capital Partners; Barry Ritholtz, Ritholtz Capital Partners President; and John Rutledge, Rutledge Capital Chairman/former Reagan Economic Advisor.

Tonight's Poll Question:

Should the minimum wage be raised?

Cast your vote at

A Recipe for Recession

This news that Germany is planning on raising its value-added tax next year from 16 percent to 19 percent (the largest increase in the VAT’s forty years) is a terrible idea.


And, the fact that Japan is considering a similar tax hike is equally worrisome.

Investors Business Daily spells it out nicely today:

“...At the same time that taxes are going up, central banks — from Frankfurt to Washington to Tokyo to Beijing — are raising interest rates or otherwise clamping down on money-supply growth. If this trend of higher taxes and tighter credit continues, it could mean a massive slowdown, if not an outright recession, in the world's major economies.

We're not trying to be alarmist. Right now, conditions are very positive. But data show the world is already overtaxed. As a matter of efficiency, countries perform best when government's tax take is relatively small — about 20% of GDP. Above that level, economies start to suffer. Repeated studies bear this out.

Perhaps the most famous, by Harvard economist Martin Feldstein, found that high rates of taxation cost countries more than $1 in output for each dollar of added taxes imposed. Likewise, World Bank studies of dozens of economies going all the way back to 1983 find pretty much the same thing....”

A combination of tight money and tax hikes is a formula for recession. On the other hand, tight money and lower tax-rates is a tried and true growth formula--the Reagan model. History bears this out.

With investor tax cuts extended until 2010, and tighter money from the Fed, the U.S. is still on the right path for now. But Congress still needs to make these pro-growth tax cuts permanent.

"Bush 43 gets it"

Kudos to my good friend Rich Lowry, editor over at the National Review, who hit the nail on the head today in his column, "The Wonder of Voodoo Economics."

"Who says you can’t cut taxes, increase spending, and reduce the federal budget deficit all at the same time? That’s what the Bush administration has managed to do. Two decades after then-presidential candidate George H.W. Bush characterized Ronald Reagan’s idea that tax cuts would spur revenue-generating economic growth as “voodoo economics,” the witch doctor is again at work.

When President Bush pledged in 2004 to cut the deficit in half by 2009, critics guffawed. The Boston Globe headlined a story, “Bush’s plan to halve federal deficit seen as unlikely; higher spending, lower taxes don’t mix, analysts say.” “Fanciful,” “laughable” and “all spin,” said the critics.

Well, it turns out that 2009 might be coming early this year. The 2004 deficit had been projected to hit $521 billion, or 4.5 percent of gross domestic product. Bush’s goal was to cut it to 2.25 percent of GDP by 2009—not exactly as stirring a national goal as putting a man on the moon, but one that was nonetheless pronounced unattainable. This year, the deficit could go as low as $300 billion, right around the 2009 goal of 2.5 percent of GDP...."

Monday, June 19, 2006

"The fact of the matter is we have been safe and secure here at home. That's not an accident. It didn't happen just because we got lucky."

-Vice President Cheney speaking at the National Press Club luncheon earlier today.

Tonight's Lineup

On CNBC’s "Kudlow & Company” tonight:

David O’Reilly, CEO of Chevron, will co-host tonight’s show. Topics will include the oil industry, drilling, gas prices, and much more…

We’ll discuss the markets with stock market sage John Augustine, Chief Investment Strategist from Fifth Third Asset Management; Dennis Kneale, Forbes Magazine Managing Editor; and, John Kilduff, energy analyst from Fimat USA.

Congressman Harold Ford (D-TN) will be on to talk about offshore drilling.

Also, we will have a global warming debate between Fred Smith, President and Founder of the Competitive Enterprise Institute and David Doniger, policy director for the Climate Center at the Natural Resources Defence Council.

Tonight’s Poll Question:

Are energy companies to blame for the recent spike in oil prices?

Cast your vote at

Churchill on Taxes, Regulation and Capitalism

"Some see private enterprise as a predatory target to be shot, others as a cow to be milked, but few are those who see it as a sturdy horse pulling the wagon."

"We contend that for a nation to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle."

"If you have ten thousand regulations, you destroy all respect for the law."

The Continuing Scourge of Earmarks

Bob Novak has a great earmark column out there today.

(This is the heart of the corruption story. The GOP has not solved it, and the Dems are no better. The culture of corruption is a pox on both parties, in both the House and the Senate. Nothing has been solved, despite the Abramoff scandal, etc.)

“Jeff Flake, a 44-year-old third-term Republican congressman from Mesa, Ariz., last Wednesday burnished his credentials as "Miss Uncongeniality" in the House of Representatives. He introduced 12 amendments to the Transportation-Treasury-Housing and Urban Development appropriations bill removing earmarks of individual House members, including two by chief appropriator Jerry Lewis. All of Flake's efforts failed.

That brought to 26 earmarks unsuccessfully proposed by Flake for removal from appropriations bills since May 24. There was no close vote and no serious debate. Republican and Democratic leaders alike voted to preserve earmarks…

While Flake had dozens of earmarks he could challenge, he chose two submitted by Appropriations Committee Chairman Lewis: $500,000 for swimming pool renovations in Banning, Calif. (affirmed 365-61), and $500,000 for a Crafton Hills College athletic facility in Yucaipa, Calif. (affirmed 368-58).

On the day before these votes, Lewis was reported by Roll Call newspaper to have hired a Los Angeles white-collar criminal lawyer to represent him in a federal investigation of his connection with a lobbying firm specializing in congressional earmarks. That did not inhibit Lewis from taking the House floor to browbeat Flake: "[Flake] seems to have much more confidence in bureaucrats downtown than he has in the members of the House."

…Appropriators stalk the House taking names of colleagues who dare disrupt logrolling. Every time, however, a coterie votes against pork. Their ranks include conservative reformers Jeb Hensarling of Texas, Mike Pence of Indiana, John Shadegg of Arizona and Paul Ryan of Wisconsin. They can kiss goodbye goodies for their districts.

At Charlie Palmer's restaurant on Wednesday, assembled GOP campaign contributors cheered as John Boehner was introduced as the majority leader who never has sponsored an earmark. Later that day, Boehner voted against each of Flake's attempted earmark removals. In the House, one conservative reformer said to another seated beside him: "With this leadership, we never will get rid of earmarks."

An Unfortunate Wager

John Fund delivers yet another cogent column this morning, arguing that the Dems "keep betting on failure in Iraq."

"...Not every Democrat believes there's no progress in Iraq. Democratic strategist Bob Beckel, who managed Walter Mondale's 1984 campaign, had the honesty to tell Fox News Channel last Friday: "Yes, we're winning, but we're not winning fast enough." Imagine what would have happened if in the middle of the fight against Nazi Germany and Imperial Japan, Franklin Roosevelt had been accused of not rolling back the Axis fast enough. Mr. Beckel went on to conclude "This war is just--it's stupid politics."

...If President Bush has staked the future of his administration on the outcome in Iraq, Democrats appear to have placed their political bets on the war continuing to go badly. Given the death of Zarqawi, the formation of a unity government in Baghdad, and possible developments in the search for WMD material, that is starting to look like a risky wager.

Democrats might recall they made similar bets that they could win the political debate over Iraq in both 2002 and 2004. They lost both times, and last week's Iraq debate in Congress shouldn't give them confidence that they have any better approach in this election year."

Friday, June 16, 2006

More Good News From Iraq:

"The first handover of security responsibilities to Iraqi forces is set to go ahead next week, the first concrete step towards the withdrawal of coalition troops..."

Tonight's Lineup

On CNBC's "Kudlow & Company" tonight:

John Stossel, anchorman of ABC's 20/20 and author of "Myths, Lies, and Downright Stupidity" will stick around for the whole show and address a host of topics.

We will take a thorough look into the stock market with John Augustine, Fifth Third Asset Management Chief Investment Strategist and Herb Greenberg, senior columnist for MarketWatch and CNBC contributor.

Backdating stock options/CEO Compensation: We'll discuss these issues with Sen. Charles Grassley (R-IA).

We'll tackle Amtrak's ongoing problems with former Reagan budget director, Jim Miller and Rep. James Oberstar (D-MN).

The legendary Boone Pickens will talk oil and energy.

Myths vs. Truths: John Stossel will square off with the writer and political strategist, David Sirota.

Tonight's Poll Question:

Do you think Amtrak should be privatized?

Cast your vote at

Good News from Iraq

Another great article by Ralph Peters.

"IRAQ's government just released the first insider documents captured from terrorists in the raids surrounding Abu Musab al-Zarqawi's death. The contents will horrify America haters in our media but won't surprise Post readers:

We're winning.

Yeah, the good guys. Our troops. And the Iraqi army. We're winning. We were winning big even before we nailed Zarqawi. The terrorists themselves said so. In their state-of-the-troubled-union message to themselves.

...For patriotic Americans and freedom lovers everywhere, for the enemies of terror and the friends of tolerance, for the people of Iraq and of the United States, the captured terrorist documents contained nothing but great news - confirmation that we're winning, that terror is being defeated and that Iraq is on the road to recovery.

As for me, as I wrote this column yesterday afternoon, I pledged to myself that I was going to pick up The New York Times this morning. The Times has been reporting terrorist propaganda as Gospel truth for three years. Now I can't wait to see how the shady Gray Lady spins the truth the terrorists told each other.

Betcha we'll start hearing that the captured documents are all forgeries - so a badly burned "mainstream" media can get back to reporting "the truth" about Haditha, Guantanamo and Abu Ghraib. In the meantime, our troops will continue to win this war."

Kudlow on the Radio

The Larry Kudlow Radio Show can be heard live this Saturday from 10:00am until 1:00pm (EST) on New York’s 770 AM radio dial. If you are located outside the greater New York area, you can tune in live to Larry’s show via the Internet at

Larry is also a regular guest every Friday night on Hugh Hewitt’s nationally syndicated radio show. Tune in at 7:20pm (EST) to catch Larry and Hugh discuss the latest political and financial news. (Check your local listings or listen live via Hugh’s website at

Thursday, June 15, 2006

Tonight's Lineup

On CNBC's "Kudlow & Company" tonight:

The always controversial author Ann Coulter will be on tonight's program to discuss her new book, "Godless: The Church of Liberalism." The West Wing's executive producer Lawrence O'Donnell will be aboard in what will surely be a heated political debate.

Also, the incomparable Renaissance man Ben Stein will visit the show, and offer his unique perspective on a host of economic and political issues.

The smartest man in the midwest, John Augustine, chief investment strategist from Fifth Third Asset Management will discuss the stock market.

ETFs - How can investors use ETFs to outperform the markets? On to discuss is Chairman of WisdomTree Investements and author of "No Bull: My Life In and Out of Markets" Michael Steinhardt; Jonathan Steinberg, CEO of WisdomTree; and Jeremy Siegel, WisdomTree senior strategy advisor and Wharton School professor.

Sen. Bill Frist (R-TN) will also join Larry to address a variety of hot topics, including net-neutrality, backdating options, asbestos, taxes and more.

Tonight's Poll Question:

Do you agree or disagree will Ann Coulter's comments about the four 9/11 widows from New Jersey?

Cast your vote at

Lower Taxes Work

When you tax something more you get less of it. When you tax something less you get more of it.

The AP pointed out this week that, "…The Congressional Budget Office is forecasting that this year's deficit will be around $300 billion, significantly below a previous estimate of $350 billion, reflecting significant increases in tax revenues, reflecting the strong economy. Through the first eight months of the current budget year, which began on Oct. 1, government revenues have totaled $1.545 trillion, up 12.9 percent from a year ago….”


Looks to me like Art Laffer’s counterintuitive, low-tax approach to maximizing economic growth, while simultaneously generating enormous revenues in Uncle Sam’s coffers is still alive and well. To think otherwise defies history and common sense.

Higher after-tax returns to work, invest, and take entrepreneurial risks promotes greater capital formation, employment, and wealth. To put it simply: Americans produce more when it pays.

Unfortunately, (despite a mountain of evidence to the contrary) most Democrats still stubbornly cling to this idea that Americans needs higher taxes. Why these tax-crazed zealots refuse to acknowledge the resounding success of lower tax rates throughout the years is beyond me.

In the 1920s, the Harding-Coolidge-Mellon tax cuts produced the Roaring Twenties. But repeated tax increases by Hoover and FDR (along with that protectionist stain, “Smoot-Hawley”) sent the economy to the basement in the Great Depression.

JFK got the economy booming again by cutting taxes in the 1960s, following the lethargic growth of the high-tax Truman-Eisenhower years. Fast-forward a couple decades to the Reagan Revolution, when “The Gipper” entered the Oval Office and bid fond farewell to stagflation by slashing taxes. Reagan cut the top personal tax rate from 70 percent to 28 percent, allowed Americans to keep more of what they worked hard to earn, and unleashed an economic boom whose reverberations are still being felt today.

Bill Clinton raised taxes in his first term, but lowered them in his second. These tax cuts led to an unmistakable burst of investment and growth. Consider this: In Clinton’s first four years, the economy increased at a 3.2 percent annual rate. After his second term tax cuts, the economy grew at a 4.2 percent clip. Coincidence? I think not.

Why Democrats remain committed to reaching further into our pockets, and refuse to finally admit that lower taxes strengthen the link between effort and reward is beyond my pay grade. Our capitalist free-market system has proven that tax cuts work, time and time again.

Just look at history.

Some Reagan Gems

"My philosophy of life is that if we make up our mind what we are going to make of our lives, then work hard toward that goal, we never lose - somehow we win out."

"Republicans believe every day is the Fourth of July, but the democrats believe every day is April 15."

"Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it."

"The problem is not that people are taxed too little, the problem is that government spends too much."

Wednesday, June 14, 2006

Bush Regains His Mojo

Things are looking rather good right now for the President.

I’m sure he has been savoring this steady stream of good news. With some new, talented faces behind him in the West Wing, a powerful and resurgent White House team is welcoming a string of successes here at home and in Iraq. There is a new, unmistakable bounce in the President's step. Bush is confident, he is on message, and he is fighting the good fight.

In short, he has regained his mojo.

Not everyone is happy about these developments. Those poor Democrats, they don’t know what to do with themselves. In between all their bickering, they just can’t seem to figure out what to do about Bush’s momentum and success.

Look no further than national security. In our critically important war on terror, without a doubt the most pressing issue of our time, the Dems have not changed their tune one bit. They remain off-key and more than a little suspect in protecting our safety and freedom.

Take this latest welcome blow to Al Qaeda, with the well-deserved death of their murderous leader/thug/enemy of peace and fomenter of violence, Al-Zarqawi; or the growing cohesion in Iraq’s nascent government, where Prime Minister Nuri al-Maliki’s cabinet shows increasing signs of promise. Observe the surge of American support for our vitally important Iraqi campaign in the polls.

All of this is great news. Or so you’d think.

But not for the Democrats. These positive developments have them wringing their hands, lost somewhere in outer space.

Instead of praising our progress in the war on terror, instead of getting firmly behind our Commander-in-Chief and signaling their commitment to finishing what we began, all we get is more bad ideas and a lot of head scratching from these folks. Just look at their leaders:

John “Flip-Flop” Kerry has raised the rhetoric for troop withdrawal;

Harry Reid too—he gave a talk at a lefty blogger convention this past Saturday echoing Kerry’s cut and run call;

(Murtha? Well, you know where he stands);

Hillary Clinton thinks a timetable is a bunch of nonsense (good for her). But Hillary is a minority in the party. The Senator from New York was greeted with a chorus of thunderous boos yesterday by a bee’s nest of Democratic activists. (In case you were wondering, John Kerry, who also spoke, was cheered wildly when he advocated his cut and run plan.)

The point here is that the wishy-washy Democrats still don’t have a real message. They are still running for cover. At this pivotal time in our nation’s history, a time when strong, effective leadership is needed to defeat these enemies of peace and democracy, the Democrats offer no game-plan, no leadership, and no consensus. They are defeatists.

Things don’t look much better for the Dems on the economic front. (No real surprise there.) Try as they may, they still can’t manage to kick their tax and spend habit.

As Karl Rove reminded everyone in New Hampshire yesterday, Democrats want to raise our taxes; Republicans want to reduce them. Democrats want an increase in spending; Republicans want a reduction. And, until they move towards pro-growth tax and spending reform, Democrats are not going to win elections.

The fact is that the Laffer curve tax-cut paradigm remains the most powerful policy weapon in American politics. When you tax something more, you get less of it. JFK and LBJ both adhered to this principle, as did Ronald Reagan. Papa Bush deserted it and got whooped. Bill Clinton originally opposed it, and the Dems lost Congress as a result. When Clinton finally embraced it during his second term (with a cap gains tax cut) he did well.

George W. Bush successfully used tax cuts in 2003 to re-ignite the American economy, and lead the GOP to big election victories in 2002 and 2004. And the President and Karl Rove are going to use it again in 2006. But, as long as the Dems keep banging their heads against the Laffer curve brick wall, they are doomed to defeat.

There is still a lot of time left between now and November. But, given Bush’s resurgence, Democrats’ dissension, continuing good news from Iraq and our war on terror, a continued strong economy with historically low unemployment, and the fact that Bush is on message and looking stronger than ever, well, you’ve got to reassess the conventional wisdom about the Dems picking up any seats in November.

Sure, the Dems have an opportunity to gain some ground, but it is an opportunity they will likely squander. Their message remains poor. As John Kasich pointed out recently on “Kudlow and Company,” nobody ever won a close race by promising tax hikes. And, as the President correctly stated at his news conference, this is exactly what these guys will do.

No matter how they dress it up, no matter how they cut it, Democrats are angling yet again for tax hikes.

The stubborn fact remains that the Republican Party is the party of optimism and growth, while the tentacles of pessimism are still tightly wrapped around the Democrats. It remains the party of defeat and decline. They lack Ronald Reagan’s sunny vision of America and the policy ammunition to effectively nationalize these races with an attractive message. This is the real political problem for the Dems. And until they get a new message, they’re toast.

It's only June, but right now, with the way things are shaping up, it's looking more and more like a GOP Congressional hold to me.

Did I mention that the President regained his mojo?

Tonight's Lineup

On CNBC's "Kudlow & Company" tonight:

We will have a political discussion with Rep. Xavier Becerra (D-CA); Rep. Eric Cantor (R-VA); Terry Jeffrey, Human Events Editor; and Tony Coelho, former Congressman and Al Gore Campaign Manager.

A debate on fast food regulation between Jim Glassman of the American Enterprise Institute and Charlie Wilson from the book, "Fast Food Nation."

A look into the net-neutrality controversy with Rutledge Capital's and former Reagan economic advisor, John Rutledge.

Cody Willard will be aboard to talk tech.

John Augustine, Chief Investment Strategist at Fifth Third Asset Management, will discuss the overall stock market.

Tonight's Poll Question:

Should the government regulate fast food?

Cast your vote at

Kristol on Zarqawi’ Death

(You can read Bill’s entire column at The Weekly Standard)

“…What are the implications for the war in Iraq? That depends on some factors that we can't yet know with any confidence--the resilience of al Qaeda's leadership in Iraq, for one thing, and the true sentiment among the Sunnis of Iraq. But it also depends on what we do. Do we take advantage of this opportunity politically and militarily? Do we pursue the enemy aggressively now when it may be rattled and divided? Or do we do look on this as an excuse to begin to get out--as John Kerry and many others are already advocating? If we do the latter, we will give Zarqawi a victory in death that he could not achieve in life.

What needs to be done now seems clear: a renewed offensive to wipe out what remains of Zarqawi's organization and to defeat the insurgency…

But whatever operational choices are made, now is the time to take our best shot at really improving the situation on the ground in Iraq. If this requires 90 percent of the president's time, if it requires stressing the Pentagon and shaking up business as usual elsewhere in the administration--so be it. There is no other successful path forward for the Bush administration than victory in Iraq….”

Mark Cuban Launches Stock-Fraud Website

This is a great story...

A Reader Responds

(Here's a pithy email we received in response to my recent column, “Hooray for the Death Tax!”)

Dear Larry,

Your article is interesting and illuminating.

I am considered one of those “rich” people in my small Southern town, and I'm bewildered by the class envy I encounter.

I was born to a poor family not far from where I now live, and my husband and I have EARNED every dime we have.

We live in a Southern mansion we re-built ourselves (I climbed on the roof to put on shingles), but the residents of our town have forgotten that, and just seem to be blinded by the fact that we now have something they don't.

We have a gate on our driveway, but I drew the plans for it and contracted a welder (a community business man)to create it. My husband and I took OUR tractor and mounted it. He did the wiring. But people only see the gate.

I feel so like the Little Red Hen.

No one is here when we do the work to make our lives better, but they see the result of our labor and resent our self-created wealth.

We do community service projects to better the lives of others, and we give HEAVILY to charity. We are also taxed heavily. These funds go to the government, who in turn help the poor, who resent us for having enough to give something to others.

I guess it's so much easier to sit and curse the dark than to get up and light a candle.

I've bent your ear enough. I enjoyed the article.

Thank you.

Tuesday, June 13, 2006

Tonight's Lineup

On CNBC's "Kudlow & Company" tonight:

Art Laffer, Chairman of Laffer Associates and former Reagan Economic Advisor, will be co-hosting tonight’s program with Larry.

Is President Bush getting his MOJO back?

Our guests weighing in on recent positive developments at 1600 Pennsylvania Avenue include Fox political commentator John Kasich, Newsweek columnist Jon Alter, and Rep. Bill Pascrell (D-NJ).

THE GREAT "ECONOMIC" DEBATE: Barry “The Brain” Ritholtz will square off against Art Laffer in all things economic.

MARKETS/MAKING MONEY IN TOMORROW'S MARKETS: Quentin Hardy, Forbes Magazine Silicon Valley Editor and Wendell Perkins, Chief Investment Officer, Johnson Asset Management will offer their perspectives.

Bear Stearns' retailing analyst Dana Telsey will join the discussion and address retail.

A budget debate between former Labor Secretary Robert Reich and the Wall Street Journal’s Steve Moore.

Tonight’s Poll Question:

Has President Bush and the G.O.P turned a political corner?

Cast your vote at

Art Laffer

My dear friend and mentor, Art Laffer, will join me on the set of CNBC’s “Kudlow & Company” tonight as co-host.

Art and I, along with the rest of our guests, will dive headfirst into all the latest economic and political developments—paying particular attention to inflation, interest rates, the Fed, and the crazy markets, here and abroad.

As Bush’s lower tax rates bring in record revenue streams, I thought it would be fitting to put up a graph of Art’s famous “Laffer Curve.” It’s right out of the Laffer playbook.

(Now all we need is for those pork aficionados down in D.C. to show some fiscal responsibility for once...)
We are pleased to report that CNBC’s “Kudlow & Company” will be broadcast twice each night this week.

We will air live at our usual 5pm EST slot, and once again at 8pm EST, for those of you unable to catch the earlier show.

Sprinting to the End

President Bush’s surprise trip to Iraq to meet newly named Prime Minister Nouri al-Maliki is just what the doctor ordered. Americans need to be reminded of the progress we’ve made, and the high stakes of finishing what we started.

Bush in Baghdad is a big deal.

And, looking at the news recently, things certainly appear to be looking sunnier for the Bushies.

Bright spots:

1. Zarqawi dead.
2. Iraqi government getting it together – key cabinet positions filled.
3. USA Today/Gallup poll shows huge boost in public confidence over Iraq.
4. Bush's poll numbers climbing.
5. Rove cleared…
6. Goldman’s Hank Paulson signs on at the Treasury.
7. Tony Snow’s masterful job at press secretary.
8. Chief of Staff Josh Bolten showing command.
9. Investor tax cuts extended.
10. Deficit is narrowing, revenues are soaring.

Earlier this spring, I was asked to join a handful of journalists to an Oval Office morning meeting with the President. Someone asked Mr. Bush whether he was in danger of becoming a lame duck.

Bush responded, “I’m going to sprint to the end.”

Like him or not, the President is a fighter, he's running hard, and there's a lot of time left on the clock...

Larry and Laffer on Batchelor Radio Tonight...

Larry and Art Laffer will appear with John Batchelor tonight on ABC Radio Network's nationally syndicated "The John Batchelor Show" at 10pm EST tonight.

Please click here for more information.

Monday, June 12, 2006

Tonight's Lineup

On CNBC's "Kudlow & Company" tonight:

Rep. David Dreier (R-CA) will discuss the latest political developments on Capitol Hill, including the death of the the death tax.

Mike Holland, Chairman of Holland & Company, and Jim Paulsen, Chief Investment Strategist with Wells Capital Management, will be aboard to discuss the markets.

A discussion on the recent news of suicides at Guantanamo Bay. Jed Babbin, former Deputy Undersecretary of Defense; PJ Crowley, Senior Fellow at the Center for American Progress; and Mat Whitecross, co-director of "The Road to Guantanamo" will offer their perspectives.

Joe Battapaglia, chief investment officer of Ryan Beck, will drop in to address Guantanamo's effect in the marketplace.

A discussion centering around the growth of new media. Our guests include: Cody Willard, of CL Willard Capital Partners; Jordan Rohan, RBC Capital Markets analyst; and Jim Warren, Chicago Tribune Deputy Managing Director.

Tonight's Poll Question:

The Bush administration is under renewed pressure at home and abroad to close the detention camp at Guantánamo Bay, Cuba, after the weekend suicides of three prisoners at the facility.

Should Gitmo be closed?

Cast your vote at

Well Worth a Read

Great column by Ben Stein in yesterday's New York Times.

Ben begins, "NOW for a few words about Ben S. Bernanke, inflation, the stock market, economics and fathers."

(The best part of the column is Ben's touching tip of the hat to his father, the late, great economist, Herb Stein.)

Ben’s father Herb was a great friend and mentor of mine.

Even when we disagreed, Herb taught me enormously. He was one of the clearest thinkers I have ever met. His book on presidential economics is a classic. His wife Mildred, was also a wonderful person, and was a distinguished economist in her own right.

When I lived on Foxhall Road in Washington, during the Reagan years, they were frequent guests at dinners and Superbowl parties.

I continue to miss them.

Jim Moran Loves Pork

Apparently, some folks on Capitol Hill really like pork...

From a column in a Sun Gazette newspaper:

"If Democrats win back control of the U.S. House of Representatives in November, U.S. Rep. Jim Moran said he would use his position in the majority to help funnel more funds to his Northern Virginia district.

Moran, D-8th, told those attending the Arlington County Democratic Committee's annual Jefferson-Jackson Day dinner on June 9 that while he in theory might oppose the fiscal irresponsibility of “earmarks” - funneling money to projects in a member of Congress's district - he understands the value they have to constituents.

“When I become chairman [of a House appropriations subcommittee], I'm going to earmark the shit out of it,” Moran buoyantly told a crowd of 450 attending the event."

Click here to read the whole article.

Friday, June 09, 2006

Hooray for the Death Tax!

So the estate tax cut went down in the Senate, to the cheers of class warriors everywhere. Congratulations to Democratic senators Evan Bayh, Mary Landrieu, Ron Wyden, and Mark Pryor -- all of whom voted against death-tax repeal after voting in favor of it a few years ago. At last, they’ve come to their senses!

Our rich people don’t need another tax break. No, they need higher taxes. And they should be vilified, too. That’s right: America should attack rich people. In fact, we must abolish wealth, which is a tremendous drag on our economy. It’s high time that we made the rich poor.

As for all the xenophobes who want to deport the illegal immigrants who toil in this economy, may I respectfully suggest that their generals (i.e., Lou Dobbs, Pat Buchanan, and Tom Tancredo) consider expanding their dragnet? Let’s deport rich people, too!

These rich people are bad for America. We don’t need their ingenuity, their entrepreneurship, or their capital investment. In the name of egalitarian socialism, the only thing we need from them is more tax dollars. We now tax their incomes as salary, corporate profits, dividends, capital gains, and at death. But we must do better.

Perhaps we can tax their huge contributions to charities. That’s the ticket. We can tax them when they fund the building of a new church or synagogue, or when they create another college, or when they finance private scholarships or inner-city educations.

But we can’t stop there. Let’s criminalize the entire class of successful American entrepreneurs. Let’s haul out the distributional tables from the Joint Tax Committee and the Congressional Budget Office and target all upper-end earners for special wealth taxes.

Maybe we can even impose jail sentences on rich people. No more interest income at all, just like the radical fundamentalist Muslims do it!

Here’s a thought: Let’s publish the names of all rich people in the newspapers. Even better, when fat cats venture out in public, let’s swarm them like those animal-rights advocates who throw paint on women wearing mink coats.

Simply, we must strive to make America more like France and Germany -- those great income-leveling, income-redistribution states. But it’s gonna take some work. When I last checked the international tax tables, I found that the U.S. has the third highest estate-tax rate out of 50 countries. We should be ashamed. Only third? We tax estates at a 46 percent marginal rate, but Japan is the best at 70 percent, followed by South Korea at 50 percent. We are pikers. How can we dare let Japan be ahead of us on taxing rich people?

The fact that 24 countries have a zero estate-tax rate, including China, should not concern us. They don’t know what they’re doing. And we do. We don’t want to be competitive in the world economy. We’d prefer to hang out a sign reading: “Capitalists are unwelcome in the U.S.”

This whole idea of keeping more of what you earn and own is just plain stupid. In fact, this whole capitalistic notion is just one of those bizarre global trends that undoubtedly will be reversed as people come to their senses.

The Czech Republic, Estonia, India, Indonesia, Malaysia, Mexico -- they’re obviously all nuts with their zero tax rates on estates. Did I say Mexico? That’s perfect. Instead of creating thousands of new businesses and millions of new jobs in America, our rich can do this for Mexico. If we deport them, that is. What a great idea!

Forget Sen. Jon Kyl’s fallback position of a 15 percent death-tax rate, after exempting the first $5 million of an estate. That would move us too close to Canada, Australia, and Argentina, which also have zero rates. It would also promote the foolish idea that there is a link between reward and work, and reward and risk.

The ultra-right-wing idea that it must pay after-tax to work and invest is simply insane. Forget what the brilliant Arthur Laffer says. The best way to generate more saving and investment is to tax both more.

This may all sound wrong, but our soak-the-rich guys are deep thinkers. They have their fingers on the pulse of the hundred-million-strong investor class. They know that the worldwide spread of free-market economics, which was launched by Reagan and Thatcher twenty-five years ago, which has raised global prosperity to record heights, and which has caused the phenomenal growth of the middle class in places like India, China, and Russia, is absolutely nuts.

After all, capital is the enemy of labor! Forget the obvious facts that you can’t create a new job without a business and that you can’t fund a new business without capital. That’s obviously wrong.

Once again, capital is the enemy. Rich people are evil. We have to put an end to all this capitalist, supply-side nonsense.

By the way, when is Karl Marx’s birthday? I have to stop writing now, so I can go look it up. Next May? Well, at least that will give me time to prepare a triumphant celebration for the greatest soak-the-rich advocate of all time.

Tipping Point?

I really like this lead story in today’s New York Sun, America Readying Major Offensive Against Al Qaeda.

As I said on last night’s program, if all the rodents are under the sink, then we can destroy them in one spot, with one action.

It makes a lot of sense; based on the “treasure trove” of information gathered in yesterday’s seventeen spot raid that accompanied Zarqawi’s bombing. Special ops troops will descend on Al Qaeda hangouts based on these newly discovered documents.

This follow-up could have a major positive impact on the Iraq insurgency, and could be a huge victory for American coalition forces.

Since almost all commentators believe the Zarqawi death (and what hopefully will be a fruitful follow-up) is not a true turning point in the war, then I am forced to believe this story could be a real tipping point.

One reason for my counter conventional point of view is my absolute confidence in U.S. military forces, their wisdom, their bravery, and their determination.

The Deeper Currents

My friend Claudia Rosett has a great op/ed today on how far we've come in our war on terror.

(The last paragraph really hits the nail on the head...)

"...[T]his is an excellent moment to step back and look at just how far in this war we have come. Five years ago, al-Qaeda's commanders, from their safe haven in Afghanistan, were training thousands of terrorists and planning the Sept. 11 strike on a sleeping America. In Iraq, Saddam Hussein ruled by terror, with a record of exporting brutality and war from Baghdad at any opportunity to wherever he could reach - invading his neighbors, rewarding Palestinian suicide bombers, and openly rejoicing over Sept. 11.

Today, elected governments lead Afghanistan and Iraq, which has just completed its cabinet lineup. Bin Laden is afraid to venture out of hiding; Hussein, pulled from his spider hole, is on trial in Baghdad. And now, Zarqawi is dead, and the circumstances of his death may encourage decent people in Iraq and elsewhere to help hunt down his collaborators.

The greatest weakness of the United States in this war has been our tendency, within our own domestic debate, to quickly dismiss our victories and dwell on each al-Qaeda bombing or beheading as a sign of impending defeat. The death of Zarqawi needs to be understood as a sign that the deeper currents are running our way."

Thursday, June 08, 2006

Talking with Iran

A week ago, I wrote a post ("To My Friends on the Right") where I argued that the U.S. should attempt, in good faith, to strike a trade and investment deal with Iran, along with strict weapons restrictions and inspections.

I also stated that I was convinced by the arguments of my brilliant friend, Tom Barnett, who strongly believes that connectivity is vitally important, even in the darkest corners of the world.

Well, from the looks of things, some folks in the White House appear to be coming around to Mr. Barnett's out-of-the-box approach with Iran.

Here's an excellent recent blog entry from Tom.

Hoping on the Iran offer

That the Iranians haven't dismissed Bush's package offer yet is indeed a hopeful sign, as Bush himself noted. So the undisclosed package of economic and diplomatic connectivity, in combination with the offer to start direct talks for the first time since 79, must be substantial. If Tehran says yes by suspending (but not terminating) its uranium enrichment program, then the potential for direct talks to spill over to other security issues (something the stay-in-our-lanes crowd with this administration usually loathes to do in a weird definition of non-linkaging) is at least raised--and that alone would be cause for real optimism that the soft-kill option can work itself out over time (and administrations).

You can check out his blog here.

Good Things

Whether Zarqawi’s death represents a real turning point in the Iraq war remains to be seen. But it sure is a good thing.

U.S. and coalition forces have cleaned out Saddam; cleaned out his sons; cleaned out virtually all of the Saddam hierarchy; and now cleaned out Zarqawi and a bunch of his henchmen. This too is a real good thing.

Iraq, the United States and the rest of the world will benefit.

I’m very interested in the 17 bombing sortie missions that accompanied the Zarqawi action. I’m also very interested in the “treasure trove” of intelligence information that has been secured. More will be revealed on these fronts.

Let’s not overlook that the new Iraqi government has filled the key security positions of defense, energy and national security. This is another big positive.

So, when you consider the great news of Zarqawi’s demise, definitive progress in Iraq’s government, plus the fact that Iran’s Ahmadinejad is ready to talk, well, it strikes me that risk premiums in world financial markets, including oil, could decline as a result of these important events.

Here’s hoping.

Good Riddance...

Wednesday, June 07, 2006

Protect the Dollar

My old friend, and frequent Kudlow & Company guest, Brian Wesbury, basically has the economic story right in today’s Wall Street Journal. (“Economic Rehab”)

I’m not so sure about a 6 percent fed funds rate being “monetary policy nirvana” however.

Right now, futures markets are saying 5.25 percent is adequate, and this could drop to 5-percent by the end of next year. But this whole debate is just a trifle; the reality is we’re in an economic boom. It’s still the greatest story never told.

And if the Fed drains cash to remove inflationary money, in order to protect the value of the greenback, then I’m a happy camper.

Remember, the Reagan economic growth model is all about low tax rates to spur growth, and a steady, stable, firm dollar to contain inflation. The Bushies got the tax rates right, but they have neglected the dollar.

So long as Mr. Paulson and Mr. Bernanke protect the dollar, then this boom will continue along for years to come and stocks are undervalued.

Some Wisdom from Milton Friedman

"Nobody spends somebody else's money as carefully as he spends his own. Nobody uses somebody else's resources as carefully as he uses his own. So if you want efficiency and effectiveness, if you want knowledge to be properly utilized, you have to do it through the means of private property."

"The greatest advances of civilization, whether in architecture or painting, in science and literature, in industry or agriculture, have never come from centralized government."

"Underlying most arguments against the free market is a lack of belief in freedom itself."

Tuesday, June 06, 2006

Bernanke's Back on Message

Ben Bernanke got back on message with his strongly worded statement yesterday that, “maintaining low and stable inflation is essential for achieving both parts of the dual mandate assigned to the Federal Reserve by the Congress. In particular, the evidence of recent decades…supports the conclusion that an environment of price stability promotes maximum sustainable growth….”

He specifically mentioned the mild upcreep of recent inflation reports over the past 3-6 months as being, “unwelcome developments.”

Stock markets have been jolted downward, and this correction will run its course. But more rate hikes from the central bank as they drain excess cash from the economy will in the medium and longer run, be very positive for the economy and stock market.

In effect, Bernanke is reaffirming his numerical inflation target of 1 percent to 2 percent. Basically this is a price rule that will conquer long run inflation expectations. It’s a good thing.

Meanwhile, the economy is much stronger than Wall Street and media demand-siders are telling us. Profitability is high; productivity is strong; business is healthy; jobs are rising; and tax rates are low. Commodity stocks are plunging as the dollar is recovering.

This is as it should be, as markets discount a slower pace of dollar creation. When dollars are scarce, the greenback rises. Before long, this will spread to rising financial assets, especially stocks. Commodity assets are sold. This forms the basis of the market correction.

But the health of business will carry the day after the correction is completed.

It is good to see Mr. Bernanke regain his footing. His monetary manhood is back. He is putting away his Neville Chamberlain umbrella.

Inflation appeasement is over.

The Terrorism Front

Nobody seems to believe me, but I continue to think that this terrorist sting by Canadian authorities has jolted the American stock market and reawakened the deep-seated fear about homeland security and the potential for another terrorist attack.

A couple of the would-be Canadian bombers came from Georgia. And, we know from terrorism expert Steve Emerson and others that there are a lot of terrorist cells operating in the U.S.

In fact, a new CBS report claims that a number of U.S. officials believe recent incidents point to an imminent threat, perhaps by the end of 2006.

This of course is why electronic surveillance is so incredibly important.

This is why we must give our security and law enforcement people wide latitude.

We are blessed that nearly five years have passed since 9/11 without another successful terrorist attack; several potential attacks have been thwarted. But this Canadian story brings home the ongoing danger and our vital need to remain vigilant.

Larry on Batchelor Radio Tonight

Larry will co-host with John Batchelor tonight on ABC Radio Network's nationally syndicated "The John Batchelor Show" from 9:00pm - 1:00am EST.

Please click here for more information.

Lowry on Haditha

My old National Review buddy Rich Lowry has some insightful thoughts on the growing Haditha imbroglio.

"No military in the history of the planet has ever been as observant of the rules of warfare and as discriminate in its use of force as ours. But no large organization can be utterly free of weak or evil men. In their rush to find a broader meaning in such horrible events, liberals weirdly attenuate their own ability to condemn the perpetrators.

...A combat environment presents stresses unimaginable to the civilian, and perhaps no combat is more difficult than fighting an urban insurgency. But tens of thousands of American troops have faced it without going door to door killing people in cold blood. Pointing to Haditha and saying that it means we have to leave Iraq would be a little like pointing to the New York City police officer who sodomized a suspect with a broomstick and saying that the NYC Police Department should exit New York because the stresses on its officers are too great.

If Marines in Haditha did what they are accused of, it’s a terrible crime unrepresentative of the American military. Period."

Click here to read the whole NRO article.

Monday, June 05, 2006

The Enemy is Still Out There

This story about seventeen Canadian Muslims caught plotting an Al Qaeda terror campaign is an eye-opener.

It ought to serve as a serious wake-up call here at home.

While the evidence is still being gathered, one thing looks clear: These thwarted thugs wanted a lot of innocent blood.

These evildoers had their hands on three tons of ammonium nitrate—three times the amount used in Oklahoma City, when the Murrah Federal Building was blown up injuring 800 people and killing almost 200.

Fortunately, officials from Canadian intelligence and law enforcement were all over them. Hats off to them for preventing what could have been a horrible loss of lives.

Back here in the states, we know that these monsters are already among us. We know their cells are growing. And, most of them arrive here legally through visas. (Terrorism expert Steve Emerson has been warning us about this for many years.) So, calls for tightening the borders isn’t going to keep us safe. We are already in danger.

What we need to do is get behind the G-Men who are charged with the enormous responsibility of protecting American lives. We need to get behind the NSA. We need to get behind the Patriot Act. We need to pay particular attention to the schools and mosques where these evil elements grow like weeds planning their terror strikes against innocents. And this includes wiretapping, and other forms of surveillance where necessary, like the Internet monitoring successfully used by the Canadian authorities to ferret out these latest terrorists.

All this lefty ACLU carping about privacy violations, government intrusion and Fourth Amendment violations is a bunch of garbage—much ado about nothing. And the liberal mainstream media have their heads in the sand on this issue as usual.

The fact is, these anti-terror programs are precisely why we haven’t had another attack on American soil since 9/11. They have been a tremendous success.

We need to reaffirm our commitment to unearthing terrorists here in the U.S.