Sunday, December 31, 2006

A Remarkably Good Eulogy

(Vice President Cheney delivered an astounding eulogy for President Ford last night - just remarkable. In case you didn't catch it, here it is in its entirety. Amazing little trivia nugget - Cheney was only 34 years old when he served as Ford's Chief of Staff.)

Mrs. Ford, Susan, Mike, Jack, and Steve; distinguished guests; colleagues and friends; and fellow citizens:

Nothing was left unsaid, and at the end of his days, Gerald Ford knew how much he meant to us and to his country. He was given length of years, and many times in his company we paid our tributes and said our thanks. We were proud to call him our leader, grateful to know him as a man. We told him these things, and there is comfort in knowing that. Still, it is an ending. And what is left now is to say goodbye.

He first stood under this dome at the age of 17, on a high school tour in the Hoover years. In his congressional career, he passed through this Rotunda so many times -- never once imagining all the honors that life would bring. He was an unassuming man, our 38th President, and few have ever risen so high with so little guile or calculation. Even in the three decades since he left this city, he was not the sort to ponder his legacy, to brood over his place in history. And so in these days of remembrance, as Gerald R. Ford, goes to his rest, it is for us to take the measure of the man.

It's hard to imagine that this most loyal of men began life as an abandoned child, facing the world alone with his mother. He was devoted to her always, and also to the fine man who came into their lives and gave the little boy a name he would carry into history. Gerald and Dorothy Ford expected good things of their son. As it turned out, there would be great things, too -- in a journey of 93 years that would fill them with loving pride.

Jerry Ford was always a striver -- never working an angle, just working. He was a believer in the saying that in life you make your own luck. That's how the Boy Scout became an Eagle Scout; and the football center, a college all-star; and the sailor in war, a lieutenant commander. That's how the student who waited tables and washed dishes earned a law degree, and how the young lawyer became a member of the United States Congress, class of 1948. The achievements added up all his life, yet he was known to boast only about one. I heard it once or twice myself -- he said he was never luckier than when he stepped out of Grace Episcopal Church in Grand Rapids with a beautiful girl named Betty as his bride.

Fifty-eight years ago, almost to the day, the new member from Michigan's fifth district moved into his office in the Cannon Building, and said his first hello to the congressman next door, John F. Kennedy of Massachusetts. They belonged to a generation that came early to great duties, and took up responsibilities readily, and shared a confidence in their country and its purposes in the world.

In that 81st Congress were four future Presidents, and others who wished for that destiny. For his part, Mr. Ford of Michigan aspired only to be Speaker of the House, and by general agreement he would have made a fine one. Good judgment, fair dealing, and the manners of a gentleman go a long way around here, and these were the mark of Jerry Ford for a quarter century in the House. It was a Democrat, the late Martha Griffiths, who said, "I never knew him to make a dishonest statement nor a statement part-true and part-false, and I never heard him utter an unkind word."

Sometimes in our political affairs, kindness and candor are only more prized for their scarcity. And sometimes even the most careful designs of men cannot improve upon history's accident. This was the case in the 62nd year of Gerald Ford's life, a bitter season in the life of our country.

It was a time of false words and ill will. There was great malice, and great hurt, and a taste for more. And it all began to pass away on a Friday in August, when Gerald Ford laid his hand on the Bible and swore to preserve, protect, and defend the Constitution of the United States. He said, "You have not elected me as your President by your ballot, and so I ask you to confirm me as your President with your prayers."

What followed was a presidency lasting 895 days, and filled with testing and trial enough for a much longer stay. Even then, amid troubles not of his own making, President Ford proved as worthy of that office as any who had ever come before. He was modest and manful; there was confidence and courage in his bearing. In judgment, he was sober and serious, unafraid of decisions, calm and steady by nature, always the still point in the turning wheel. He assumed power without assuming airs; he knew how to treat people. He answered courtesy with courtesy; he answered discourtesy with courtesy.

This President's hardest decision was also among his first. And in September of 1974, Gerald Ford was almost alone in understanding that there can be no healing without pardon. The consensus holds that this decision cost him an election. That is very likely so. The criticism was fierce. But President Ford had larger concerns at heart. And it is far from the worst fate that a man should be remembered for his capacity to forgive.

In politics it can take a generation or more for a matter to settle, for tempers to cool. The distance of time has clarified many things about President Gerald Ford. And now death has done its part to reveal this man and the President for what he was.

He was not just a cheerful and pleasant man -- although these virtues are rare enough at the commanding heights. He was not just a nice guy, the next-door neighbor whose luck landed him in the White House. It was this man, Gerald R. Ford, who led our republic safely through a crisis that could have turned to catastrophe. We will never know what further unravelings, what greater malevolence might have come in that time of furies turned loose and hearts turned cold. But we do know this: America was spared the worst. And this was the doing of an American President. For all the grief that never came, for all the wounds that were never inflicted, the people of the United States will forever stand in debt to the good man and faithful servant we mourn tonight.

Thinking on all this, we are only more acutely aware of a time in our lives and of its end. And we can be certain that Gerald Ford would now ask only that we remember his wife. Betty, the President was not a hard man to read, and to his friends nothing was more obvious than the source of his great happiness. It was you. And all the good that you shared, Betty, all the good that you did together, has not gone away. All of that is forever.

There is a time to every purpose under Heaven. In the years of Gerald Rudolph Ford, it was a time to heal. There is also, in life, a time to part, when those who are dear to us must go their way. And so for now, Mr. President -- farewell. We will always be thankful for your good life. In Almighty God, we place our confidence. And to Him we confirm you, with our love and with our prayers.

Edwards Still Doesn't Get It

So, John Edwards has thrown his hat into the presidential ring.

Unfortunately, he has a losing message.

His ultra-liberal approach will elicit only a small niche of support among the ultra lefties in the Democratic Party.

Democrats know (or at least, I think they know) that their success in the 2006 midterm election was largely a function of their best efforts to imitate Republicans. It was the conservative Blue Dog Democrats who were the tail successfully wagging the entire Democratic dog.

That said, if John Edwards somehow managed to reverse this tide and win his party's nomination, he would lead his party to a crushing defeat in 2008.

For starters, he wants to cut and run from Iraq. Such an ill-conceived policy would leave this budding nation in shambles, with terrorists following us back to the United States. It would extinguish the candle of Iraq's democracy experiment -- an experiment that could still pay enormous dividends if the United States follows through with a bold, new troop surge strategy and a refurbished plan of economic reconstruction. These are the actions that will stabilize Baghdad and their democratically elected government, not cutting and running.

On the domestic side, Edwards fares just as badly. He's recycling an old page from the liberal Democratic playbook, saying that he wants to make fighting poverty the great moral issue of our time. He says he'll accomplish this by taxing the rich in order to help the poor. Oh, really?

Tax capital in order to create new jobs? Huh? Haven't we learned that you can't create new jobs (for the poor or anyone else) without healthy businesses and plentiful new business creation? And that businesses require capital in order to expand? And haven't we learned that punishing success through higher tax rates that make it pay less to work, save and invest will only reduce investment, jobs and prosperity?

Well, Edwards forgets that entrepreneurs, not government, create long-lasting jobs and growth. Rather than government spending, it is economic freedom, through a strong incentive structure inside a market economy, that opens the door to new opportunities so that the non-rich can get rich.

What's more, Edwards has failed to consider that poverty has fallen steadily for decades.

Pro-growth, market-oriented policies launched by Ronald Reagan 25 years ago unleashed record wealth creation and economic growth that continues to this very day. In fact, economist Diana Furchtgott-Roth has shown that total compensation and consumer spending for all five income quintiles have steadily increased over the past three decades.

Furthermore, Alan Reynolds has shown that the percentage of households with income (adjusted for inflation) lower than $35,000 has actually fallen from 52.8 percent to 40.9 percent since 1967. (Wait -- it gets even better.) Households with a real income higher than $50,000 rose from 24.9 percent to a remarkable 44.1 percent.

In other words, the middle class is shrinking because America's families are getting wealthier. And the reason lower-class jobs are vanishing is not due to some Lou Dobbs protectionist conspiracy theory, but because our technologically driven, knowledge-based economic pie keeps expanding.

Edwards doesn't understand that without incentives to reward successful investing, entrepreneurship and risk-taking, everyone gets poorer -- right on down the line. Additional investment taxing is precisely the wrong policy to improve wealth or poverty.

Class warriors on the left are loathe to admit it, but America's poor are also a whole lot less poor when public assistance programs like Social Security, Medicaid, the earned income tax credit and other social benefit plans are included in the poverty data. But Edwards, and others of his misguided ilk, have a nostalgic yearning for the Great Society plans of the mid-1960s. You'll recall that these policies dramatically succeeded by raising poverty and reducing wealth. What a neat idea.

Edwards just launched his campaign in New Orleans with a plea to spend even more taxpayer dollars for that beleaguered city. Well, why not -- we've already thrown $120 billion bucks at it!

Instead of Edwards' hackneyed, 1960s Great Society, anti-poverty approach to New Orleans, the United States and New Orleans would have been much better off had we made the entire city a tax-free zone -- with the tax burden limited only to what people spent or consumed, not what they invested or earned. This supply-side approach would have delivered swift currents of investment. It would have all but guaranteed a swift recovery.

But Edwards appears unable to grasp this. This class warrior fails to recognize that when you slam wealth, you raise poverty. Is that what we really want?

Friday, December 29, 2006

All Best...

We are all truly blessed to live in this great country.

I wish each and every single one of you the very best in the upcoming year.

A great, big thank you for tuning into our show, reading (and contributing to) this blog, etc, etc…

May 2007 bring you and your loved ones much peace and prosperity.

God bless…

Thursday, December 28, 2006


Contrary to the customary downbeat drumbeat of economic decline, as once again illustrated by David Wessel’s piece in today’s Wall Street Journal (this guy is the paper’s pessimist-in-chief—when he’s not waging class warfare, he is prayerfully forecasting economic gloom) the most recent numbers actually show a pickup in manufacturing and a bottoming in the housing slump

Simply put, there ain’t gonna be any recession.

Bear Stearns chief U.S. economist, John Ryding, is now predicting 2.75 percent real GDP growth in Q4. I would label that “Goldilocks plus.”

And there ain’t no inflation either, as revealed by the recent consumer price reports which showed declining inflation trends.

Bond rates have increased about 30 basis points this month, but the inflation adjusted bond spreads show that it’s a gain in real interest rates that corroborates the better tone in real GDP. Of course, the absolutely phenomenal Goldilocks stock market has been telling us this all along over the past six months.

As economist Arthur Laffer has noted, prosperity-inducing government policies remain in place: low tax rates, steady money, no re-regulation of business, and free trade.

(Speaking of Art, his appearances on CNBC’s Kudlow & Company in recent weeks have all greatly illuminated the interpretation of political and economic information. Many thanks to Mr. Laffer, as well as our many talented guests—both liberal and conservative—for their wonderful contributions.)

From the bottom of my heart, I am grateful to everyone who has worked on this show, appeared on this show, and to our viewers for giving us terrific ratings this holiday season and throughout 2006.

I’m in that kind of mood this afternoon, as the end of the year approaches. I am ever grateful. This great country of ours provides so many incredible blessings and so many wonderful opportunities.

It is a miracle.

Truly, the greatest story never told.

Steve Forbes on Corporate Taxes

From CNBC's Kudlow & Company:

"America today nominally has the highest corporate tax rate in the world - next to that of Japan. Other countries have learned the lesson: reduce the burden on companies, reduce the burden on people who want to get ahead. Guess what? They start moving forward. So we're living off of past policy. If we want to stay competitive, we've got to reduce that tax burden, not just on companies but on people, too. We should have the lowest taxes in the world. We should be number one."

Wednesday, December 27, 2006

The Ford Legacy

Gerald Ford was a good and gracious man.

He was a dedicated and honest public servant—well liked by all who knew him personally. And I think his controversial pardon of Richard Nixon was a good idea—good in the sense that it got it off the table so the country could move on.

However, President Ford was one of a long line of American executives who presided over the decline of the U.S. in both national security and economic terms. This began under LBJ and stretched out through Richard Nixon, Gerald Ford, and Jimmy Carter.

In national security terms, Mr. Ford was a détentist who accommodated the Soviet Union in a number of ways, including unverifiable arms control deals that Ronald Reagan put an end to when the Gipper assumed the presidency in the 1980’s.

The U.S.’s Vietnam retreat from the rooftop of our embassy in Saigon was one of the low points in the history of American foreign policy—a disgraceful action. Reagan, of course, changed all this in the 1980’s with his many actions to overturn and defeat Soviet communism.

In economic policy, Mr. Ford was a traditional Republican budget balancer who had no pro-growth policies. Arthur Laffer tried to persuade Ford of the merits of supply side economics to reduce marginal tax rates and grow the American economy—but Ford, acting on advice of top economic advisor Alan Greenspan, rejected this.

June Wanniski called this root canal economics and Newt Gingrich described Ford’s futile obsession with the budget deficit as simply the tax collector for the welfare state.

The combination of high inflation interacting with high marginal tax rates led to stagflation and the continued decline of the American economy. And the infamous “whip inflation now” program was nothing more than price controls and state planning.

Again, it took Ronald Reagan to reverse all this by adopting the incentive-minded growth model which slashed tax rates and reignited the U.S. economy in the 1980's - an economy whose fire still burns brightly a quarter of a century later.

At the end of the day, Ford was defeated by Jimmy Carter, who was just as baffled about stagflation and Soviet hegemony as Ford was.

Mr. Ford attempted one last play on the national political stage at the 1980 Republican National Convention in Detroit. Reagan had soundly trounced Papa Bush in the primaries to capture the nomination. But the Papa Bush forces—led by James Baker—attempted a bizarre co-presidency that would have made Ford the vice president and divided up all the executive branch responsibilities.

Reagan himself squashed this, chose Papa Bush instead, crushed Carter in the election, and went on to become one of the greatest presidents in United States history.

Thank God for Ronald Reagan.

Wednesday Night's Lineup

In light of Gerald Ford's passing, we will spend the first portion of the show looking at his legacy and contributions to our great country.

On board:

*California Congressman David Dreier (R)
*Dr. John Rutledge, chairman of Rutledge Capital and presidential advisor
*Arthur Laffer, CEO of Laffer Associates and presidential advisor to Ronald Reagan

Following the Ford roundtable, we will discuss the state of the economy and outlook for the stock market.

Mr. Laffer and Dr. Rutledge will stick around and will be joined by:

*Russ Koesterich, senior portfolio manager at Barclays Global Investors
*Jim Huguet, president of the Great Companies fund management firm
*Barry Ritlholz, chief market strategist at Ritholtz Research & Analytics

"Goldilocks vs. Gold"

Is there a statute of limitations on predictions of higher inflation?

Jerry Bowyer answers this question in his latest on NRO:

Larry Kudlow has described this as the Goldilocks economy: decent growth, low inflation. But the gold bugs continue to warn that today’s high gold prices inevitably mean higher inflation.

BuzzCharts has written extensively on the ongoing debate among supply-siders on the usefulness of gold alone as an inflation bellwether. We’ve taken the position that the inclusion of other measures, such as interest rates, helps paint a more complete picture of future inflation.

Here’s some more data that should help settle the matter:

On December 15, the Bureau of Labor Statistics released its monthly consumer-price-index data, which showed that inflation was completely flat from October to November following a half-percent drop in each of the two prior months. This falloff in inflation has taken place despite the fact that gold prices have been rising. Measures like interest rates, however, are more predictive of inflation (or, in this case, the lack thereof). The 10-year Treasury note, for example, stands at 4.6 percent, virtually unchanged from a year ago.

Although the most recent producer price index showed a quick pop-up of inflation to 2 percent, readings for the previous months showed roughly 2 percent deflation. In addition, the implicit price deflator and the PCE price deflator — two other major inflation indicators — have shown very low and absolutely flat inflation, respectively.

Is there a statute of limitations on predictions of higher inflation? Or, to paraphrase Ronald Reagan, “shouldn’t they read the score to us once in awhile?”

Jerry Bowyer is an economic advisor to Blue Vase Capital Management and the author of The Bush Boom.

Rest in Peace

From President Bush's remarks earlier this morning:

...President Ford was a great man who devoted the best years of his life in serving the United States. He was a true gentleman who reflected the best in America's character. Before the world knew his name, he served with distinction in the United States Navy and in the United States Congress.

As a congressman from Michigan, and then as Vice President, he commanded the respect and earned the good will of all who had the privilege of knowing him. On August 9, 1974, he stepped into the presidency without ever having sought the office. He assumed power in a period of great division and turmoil. For a nation that needed healing and for an office that needed a calm and steady hand, Gerald Ford came along when we needed him most.

During his time in office, the American people came to know President Ford as a man of complete integrity who led our country with common sense and kind instincts.

Americans will always admire Gerald Ford's unflinching performance of duty and the honorable conduct of his administration, and the great rectitude of the man himself.

We mourn the loss of such a leader, and our 38th President will always have a special place in our nation's memory.

President Ford lived 93 years, and his life was a blessing to America. And now this fine man will be taken to his rest by a family that will love him always, and by a nation that will be grateful to him forever.

May god bless Gerald Ford.

Tuesday, December 26, 2006

More on "The Mother of All Surprises"

Great op-ed on Iraq’s booming economy (outside the Baghdad disaster zone) from Amir Taheri in today’s New York Post:

Newsweek has just hailed the emergence of a booming market economy in Iraq as "the mother of all surprises," noting that "Iraqis are more optimistic about the future than most Americans are." The reason, of course, is that Iraqis know what is going on in their country while Americans are fed a diet of exclusively negative reporting from Iraq.

Some noteworthy observations of the "growing dynamism of the Iraqi economy" from Taheri’s article:

- A steady increase in the value of the Iraqi currency;
- Civil-servants salaries have increased almost 30 percent (with another 30 percent due to come into effect early next year);
- An unexpected flow of foreign capital (spurred by the removal of tariffs and trade barriers);
- The number of private companies since Saddam’s fall has increased from 8000 to 35,000;
- A private firm marketing soft drinks has seen profits double since the end of 2003;
- The number of luxury cars imported has risen from a few hundred in 2002 to more than 20,000 this year;
- One privately owned mobile phone company is expected to report revenues of more than $500 million this year, a sevenfold increase in three years;

The next step is obviously to stabilize the Baghdad area through a troop surge.

This course of action will help secure the democratically elected government and create a more peaceful and prosperous region. General Alexander Haig on Kudlow & Company told us last week that this is a doable proposition.

Year-end question: Is everybody just too pessimistic about Iraq’s future?

Cutting Corporate Taxes

Many thanks to the Wall Street Journal’s editorial page for continuing my mantra that lower corporate tax rates will boost worker wages.

They cite economist Kevin Hassett’s worldwide study that capital migration in response to corporate tax rate relief improves economic growth, jobs, and wages.

But the editorial should have cited one additional fact - namely, 70 percent of the corporate tax cost is borne by wage earners (the remaining 30 percent is paid by shareholders).

My friend James Pethokoukis (aka “Jimmy P”) over at U.S. News & World Report has also picked up the theme of cutting corporate taxes to boost wages.

The bottom line here is that if companies paid less in taxes - or better yet none at all - then more money could be paid out to those who work at those companies.

Think of it.

A Kudlow Christmas...

Here's a rather amusing video my friend Barry Ritholz posted on his terrific blog "The Big Picture" yesterday.

Click here to watch the video.

Friday, December 22, 2006

Tonight's Lineup

On CNBC's "Kudlow & Company" tonight:

On the markets and the economy -- Nouriel Roubini, economic professor at NYU Stern School of Business and Art Laffer, chairman of Laffer Associates.

An oil/energy discussion with Dan Yergin, president of Cambridge Energy Research, Nouriel Roubini, and Art Laffer.

A political debate with Ann Coulter, author/columnist, and Peter Beinart, editor-at-large of The New Republic.

Please tune in!

We wish you all a wonderful holiday season.

Goldi's Happy

Goldilocks loves today's inflation number in the personal income and spending report.

Both the headline and core PCE deflator were flat at 0.0 over the past three months. The headline number is -2.1 percent at an annual rate and the core is 1.8 percent at an annual rate.

Two years of monetary restraint by the Fed has vanquished inflation. That's also the bond market message.

The clock is ticking for the Fed to lower its target rate by one quarter of a percentage point.

Senator Backbone

Two of the most important qualities necessary for a run to the Oval Office are decisiveness and strength of character. In recent weeks, John McCain has proven that he has more stock in these traits than most any public official today.

As American fortunes in the battle of Iraq have deteriorated, the senator has forcefully elevated the policy debate by fearlessly offering unpopular advice on how to turn the tide toward victory. In fact, McCain is several steps ahead of nearly everyone on the subject of this war. At his recent news conference, President George W. Bush said the U.S. should expand the size of its armed forces, especially the Army and Marine Corps. McCain has been saying this for years. Bush and his high command are now mulling a possible troop-force surge in Iraq; McCain has been advocating this for quite some time.

Of course, each of these positions is out of favor. But that’s not silencing McCain: “I understand the polls show only 18 percent of the American people support my position. But I have to do what’s right, what I believe is right, and what my experience and knowledge and background tells me is the right thing to do in order to save this situation in Iraq . . . In war, my dear friends, there is no such compromise. You either win or you lose.”

In the midst of the latest doubt, pessimism, and quibbling over our direction in Iraq, here is John McCain digging his heels in the sand. He is fighting the defeatist tide, and though it might endanger his presidential bid, he is entirely comfortable with his posture. I believe this is called courage. Principle. Leadership. It’s what has long described this highly decorated former Navy fighter pilot and Vietnam prisoner of war.

More kudos go to McCain for blasting the defeatist recommendations of the Baker-Hamilton Iraq Study Group.

Speaking to the Senate Armed Services Committee, he said “There’s only one thing worse than an overstressed Army and Marine Corps, and that’s a defeated Army and Marine Corps. I believe this is a recipe that will lead to our defeat sooner than later in Iraq.”

McCain specifically ridiculed the Baker-Hamilton suggestion that American combat troops withdraw from Iraq while more advisors and trainers embed with Iraqi forces. He argued that this would “put at risk a large number of American advisors” who would be subject to hostage-taking and the attacks of rogue militias or terrorists.

McCain also mocked the commission’s idea of seeking peace talks with Iran and Syria, saying “I don’t believe that a peace conference with people who are dedicated to your extinction has much short-term gain.”

The recent McCain narrative is especially important. First, in the Oval Office, the Arizonan privately urged the president to add more troops and reject the Baker-Hamilton withdrawal approach. Then, in Baghdad, McCain pleaded the same case to American generals. Along the way, he has held several news conferences, deftly using the public square to influence the outcome of events.

No public figure today could do all this with as much influence and credibility as Sen. John McCain. If in fact President Bush goes forward with a troop surge -- one that is designed to protect the fledgling Iraqi democracy and repel our enemies in the Middle East -- McCain’s steadfastness and bravery will have sealed that outcome.

Interestingly, new defense secretary Robert Gates heard a McCain-like message from the troops when he traveled to Iraq after his swear-in ceremony. “More troops might hold [the enemy] off long enough to where we can get the Iraqi army trained up,” Private Spc. Jason Green of the 101st Military Intelligence Brigade told Gates. “More troops would help us integrate the Iraq army into patrols more,” said Pfc. Cassandra Wallace of the 10th Mountain Division.

Gates at least echoed McCain in saying that a premature withdrawal from Iraq would be “calamitous.” But there it is again -- the McCain narrative. It’s everywhere.

McCain clearly would rather do the right thing in our nation’s interest than the politically correct thing. He is about leadership and character and decisiveness. He seems to have the ability to assess American national-security needs, not just for the next few weeks, but the next few decades. And he is almost single-handedly lifting our war policy towards strength rather than weakness.

McCain is standing tall against the tides of wartime fatigue, the polls, and the conventional Beltway wisdom. Whatever the outcome of the Iraq debate, and even the 2008 presidential election, the senator is behaving in a remarkably brave and steadfast manner at a time when so many of our leaders are shrinking from those crucial public duties.

A rare bird. Senator Backbone. That’s John McCain.

Thursday, December 21, 2006

Tonight's Lineup

On CNBC's "Kudlow & Company" tonight:

On the markets and the economy:

Elizabeth MacDonald, senior editor at Forbes Magazine
Joe LaVorgna, Deutsche Bank Chief U.S. Economist
Don Luskin, Chief Investment Officer at Trend Macrolytics
Lincoln Anderson, Chief Investment Officer at LPL Financial Services

A political discussion with:

Bill Press, Democratic commentator
Joel Mowbray, conservative author/columnist

Pat Buchanan, Elizabeth MacDonald, and James Glassman (resident scholar at American Enterprise Institute and editor of The American) will debate outsourcing.

Please tune in!

Wednesday, December 20, 2006

Bush on Target

President Bush delivered a very good speech today.

He said, “Our goal remains a free and democratic Iraq that can govern itself, sustain itself and defend itself, and is an ally in this war on terror.”

Bush talked about working with the new secretary of defense, Bob Gates, to permanently expand the size of both the United States Army and the United States Marines – this is another idea from John McCain’s playbook coming home to roost.

Later on in his speech, he talked about not giving up on the “hundreds of millions of ordinary moms and dads across the Middle East who want the hope and opportunity for their children that the terrorists and extremists seek to deny them.”

He reminded Americans that the “advance of liberty has never been easy” and that we cannot afford to give up in Iraq.

Later on, Bush changed course and discussed keeping the strong U.S. economy growing and the need for further tax and regulatory relief.

He touted the U.S. economy’s extraordinary growth, highlighted by a historically low 4.5 percent unemployment rate and 7 million jobs added since August of 2003.

Notably, Bush also said he would work with Congress to reduce the number of earmarks and reform the earmark process to make it more transparent and accountable. This is obviously a positive development - long overdue, but very positive.

President Bush is on target on the war and the economy.

We still have work left to do in Iraq while the Goldilocks economy remains the greatest story never told.

Soaking the Rich

Illuminating editorial in today's Wall Street Journal:

Maybe our liberal friends are onto something. They keep saying the rich should pay more taxes, and it turns out the rich already are! That's one of the valuable lessons from the IRS's annual study of income tax data, just released for 2004.

Americans who earned more than $1 million in adjusted gross income paid $178 billion, or an average of $740,000 per filer, in income taxes in 2004. That's up about one-third from 2002, the year before the Bush tax cuts in marginal income-tax and dividend and capital gains rates. The wealthiest 1% of tax filers paid a remarkable 35% of all individual income-tax payments that year...

Here's a way to think of the distribution of current income-tax payments: Imagine a banquet attended by 100 random Americans. If the bill for the meal is distributed like the income tax, the richest person in the room is required to pay one-third of the tab -- or more than all 50 attendees with a below-average income. The three richest people are charged as much as the other 97. And the 30 or so lowest-income people in the room -- those with a family income of $30,000 or less -- pay nothing and eat for free....

Setback for Ahmadinejad

Positive development in Iran:

Mahmoud Ahmadinejad's opponents were poised to secure a majority on Tehran's City Council, in the first political setback suffered by Iran's president since he won the office in June 2005.

...The results show that Ahmadinejad's ``populist'' rhetoric hasn't impressed Iranians as much as he may have expected, said Mohammad-Ali Abtahi, a vice-president under Khatami. After a year-and-a-half in office, Ahmadinejad's ``lack of delivery'' on promises to raise living standards and improve economic conditions had registered with voters, Abtahi said in a phone interview in Tehran.

...A failure by his supporters to win Tehran would represent a ``big blow'' to Ahmadinejad and a ``strong endorsement for the centralists,'' Ali Ansari, reader in Middle Eastern politics at St. Andrews University, Scotland, said in a phone interview Dec. 18. Ansari was referring to Iranian politicians seeking economic liberalization and a more conciliatory approach to the U.S....

Tuesday, December 19, 2006

"The Mother of All Surprises"

Big, big news according to Newsweek:

...Civil war or not, Iraq has an economy, and—mother of all surprises—it's doing remarkably well. Real estate is booming. Construction, retail and wholesale trade sectors are healthy, too, according to a report by Global Insight in London. The U.S. Chamber of Commerce reports 34,000 registered companies in Iraq, up from 8,000 three years ago. Sales of secondhand cars, televisions and mobile phones have all risen sharply. Estimates vary, but one from Global Insight puts GDP growth at 17 percent last year and projects 13 percent for 2006. The World Bank has it lower: at 4 percent this year. But, given all the attention paid to deteriorating security, the startling fact is that Iraq is growing at all....

This is amazing stuff. We are going to lead off with this story tonight on Kudlow & Company. We hope you'll join us...

Tuesday Night Lineup

On tap tonight:

We're going to start the show with "The Mother of All Surprises" - a look at the new Newsweek article showing Iraq's economy is not only growing strong, it's actually booming in places.

On board to discuss this amazing story:

* Fred Bergsten, Director of the Peterson Institute of International Economics
* David Malpass, Chief Global Economist of Bear Stearns
* Elizabeth MacDonald, Senior editor at Forbes magazine

General Alexander Haig will offer his perspective on the next step in Iraq.

A bear vs. bull stock market debate between bullish Forbes magazine senior editor Elizabeth MacDonald and bearish Herb Greenberg, senior columnist for MarketWatch and CNBC contributor.

How to build a "terror-free" portfolio with Sarah Steelman, State Teasurer of Missouri and Forbes' Elizabeth MacDonald.

(Click here to read Ms. Steelman's recent Wall Street Journal op-ed piece on choosing to invest terror-free.)

Kudlow's Stock Club will feature stock pro Chris Brown tonight. Mr. Brown is the portfolio manager of PAX World Balanced Fund.

"Newt & the Flying Imams"

From today's New York Post:

...In the matter of the six Muslim clerics who were kicked off U.S. Airways Flight 300 last month - after they were observed engaging in such suspicious activity as invoking "bin Laden," criticizing America in Arabic, making odd requests of the flight crew and (in three cases) buying only one-way tickets - Gingrich offered two thoughts:

* "Those six people should have been arrested and prosecuted for pretending to be terrorists.

* "The crew of the U.S. Air plane should have been invited to the White House and congratulated for being correct in the protection of citizens."

Provocative? Yes.

Unwarranted? No.

Certainly, Gingrich helped focus attention on a critical issue: America's unwillingness, five-plus years after 9/11, to come to terms with the fact that Islamic terrorism has a face, and it looks very much like what the crew of US Air 300 encountered last month...

(Mr. Gingrich is dead right on all this...)

Richardson in 2008

Why aren’t more people talking up Governor Bill Richardson as the non-Hillary, real moderate Democrat in the 2008 race?

We interviewed him on the show just last week. Richardson is a very solid guy with an equally solid résumé.

Voters in New Mexico just re-elected him by huge margins; he’s a former U.N. ambassador, former House member, and former Secretary of Energy. So, unlike Barack Obama, who has only been in the Senate for a couple of years, Richardson’s obviously got a track record and wealth of experience.

This includes important areas like nuclear weapons, foreign affairs and energy.

To top it off, he’s a pro-growth, tax cutting Democrat who happens to be pro-balanced immigration. He is also fairly hawkish.

Sure, he’s more liberal than I might like, but Bill Richardson looks downright conservative when compared to lefty Obama.

Monday, December 18, 2006

Monday Night's Lineup

On tap tonight:


On board to discuss the stock market and economy:

* David Reilly, Director of portfolio strategy at Rydex Investments
* Barry Ritholz, President of Ritholtz Capital Partners
* John Rutledge, Chairman of Rutledge Capital

A one-on-one interview with Ken Starr, dean of Pepperdine University's School of Law, on the unconstitutionality of Sarbanes-Oxley.

Gallup editor-in-chief Frank Newport will sift through the spin in our weekly edition of Sunday Unspun.

A political discussion on McCain, Colin Powell, and Obama with Tony Blankley of the Washington Times and Peter Beinart, editor at large for The New Republic.

Unrest in Iran

Poor guy...

In a startling contrast to the acclaim Mr Ahmadinejad has received in numerous recent appearances around Iran, he faced chants of "Death to the dictator" as he addressed a gathering in the university's sports hall last week. Several hundred students forced their way in to voice anger over a clampdown on universities since he became president last year.

...Protesters later surrounded the president's car, prompting a security guard to fire a stun grenade to warn them off. Four cars in the presidential convoy collided in their haste to leave. Mr Ahmadinejad's staff later insisted he had remained calm and ordered that the students should go unpunished. But some of those present say he accused them of being paid United States agents who would be confronted.

"He threatened us directly, saying that what we were doing was against the wishes of the nation," said Babak Zamanian, a spokesman for Amir Kabir university's Islamic students' committee. "After that, the students protested even more sharply, calling him a lying religious dictator and shouting, 'Forget America and start thinking about us!'

"We were chanting, 'Get lost Ahmadinejad!' and 'Ahmadinejad - element of discrimination and corruption.' You could see from his face that he was really shocked. He wasn't flashing his usual smile, and at one stage I thought he was going to cry. He told his supporters to respond with a religious chant hailing Ahmadinejad, but he was so shaken he was actually chanting it himself."


Kudos to Ken Starr for his smart op-ed in this weekend's Wall Street Journal. Not only is Sarbox costing U.S. businesses untold billions of dollars, Mr. Starr argues the whole thing is unconstitutional:

The Sarbanes-Oxley Act powerfully illustrates the law of unintended consequences. Due to hasty drafting by Congress in the wake of the Enron and WorldCom scandals, Sarbox has cost the U.S. economy over $1 trillion, according to one study published by the AEI-Brookings Center. To add insult to grievous injury, it is unconstitutional.

That last point will be argued next Thursday before Judge James Robertson of the district court for the District of Columbia. The plaintiffs in Free Enterprise Fund v. Public Company Accounting Oversight Board -- a free-market advocacy organization based in Washington, D.C., and a Nevada accounting firm, Beckstead and Watts, that audits smaller public companies -- challenge the method by which the members of the all-powerful Public Company Accounting Oversight Board (PCAOB) are appointed; the Board's ability to perform executive branch functions such as regulation of public company activities in the securities markets; and the delegation of legislative powers to an independent organization...

Friday, December 15, 2006

China to Attack North Korea?

Big news story here:

China has begun drawing up plans to attack North Korea, according to the Paris-based Intelligence Online newsletter.

Hu Jintao, head of the Central Military Commission, has ordered the Chinese military to draw up the attack plan as a move "deliberately meant as a threat to the regime of Kim Jong-Il." The report said the plan was leaked to sources close to Western intelligence in Hong Kong.

The action follows China's displeasure at the Oct. 9 nuclear test, which Hu regarded as a snub to the International Affairs Leadership Group that he has headed since 2003...

As I wrote back in October:

[Regime change in North Korea] would be a very good thing. It even suggests that President Bush’s policies of Chinese diplomacy and U.N. trade sanctions might actually work. Under this coup plotting scenario, perhaps there would be economic liberalization in North Korea.

A Bull v. Bear Debate

Here's an interesting little back-and-forth from last night's show...

KUDLOW: I want to go to my buddy Herb Greenberg. Herb, I would say, except for possibly Dougy Kass, you have been the most pessimistic person to come on our program, and, of course, the market has gone up, up and away. What is your current thought about this market rally, which seems to have legs, it seems to have muscles, it seems to have sinews, and it seems to say that things are going to be just fine in the American economy and American wealth creation?

HERB GREENBERG: Larry, there's an old saying, "Don't argue with a crazy person." I'll add to that, and I'll say don't argue with a crazy market, and this market is still, I believe, and I know Dougy believes, in a speculative blow-off phase and if you look even at Jeff Saut's recent commentary, where he said it's an unnatural market, an unnatural market because he said there just hasn't been any correction in this latest, you know, phase, where it's going straight up.

KUDLOW: Well, Noah, look, what do you hear? I'm listening to these adjectives: speculative, unnatural. This is, you know, a family show, and I'm glad you didn't go deeper than that. Noah, can you set him straight from up there in Canada?

NOAH BLACKSTEIN: You know, I don't understand how Herb gets the moniker realist. I mean, it assumes that all of us who are optimists are deluded, suffering from a mental disorder, and something is wrong with us. I don't see it. You know, a speculative blow-off, you know.

The P/E multiple on the S&P 500 is lower now than when we started this bull market. Profits have risen much quicker than this market has risen. And really, you could argue over the last year and a half the market's been capped by the Federal Reserve really sitting on the throat of liquidity over the last little while. With the Fed pulling back here, there's a lot of room for P/E multiples to expand.

The market is discounting too much inflation and too aggressive a Fed, and so I think there is more upside. I don't see anything that would indicate this is a rampant speculative market like the late 1990s. In fact, valuations are low.

Friday Night's Lineup

On tap tonight:


*Don Luskin, Chief Investment Officer at Trend Macro
*Mike Holland, Chairman, Holland & Company
*Dan Yergin, Chairman, Cambridge Energy Research Associates

*Daniel Boone III, Portfolio Manager of Calvert Social Investment Equity Fund

*Robert Reich - Prof. of Public Policy-CalBerkeley
*Steve Moore - WSJ Editorial Board Sr. Economics Writer

*Jed Babbin, former deputy undersecretary of defense, contributor to The American Spectator
*P.J. Crowley, Director of National Defense and Homeland Security at the Center for American Progress

*Andrew Ross Sorkin, journalist at The New York Times
*Stephen Spruiell, columnist at National Review
*Jed Babbin-The American Spectator

Looking Good

Today’s inflation reading was amazing—both CPI and core CPI. This is the third straight month of zero or falling inflation. All those inflation hawks circling the sky out there—desperately searching for a rise in consumer prices—well, they just got bit in the rear.

Take a look at the last three big reports:

Retail sales: Wednesday’s beautiful retail number handily beat market forecasts. The strong showing demonstrated (once again) the remarkable resiliency of U.S. consumers. Incidentally, this development takes any hypothetical zero Q4 GDP off the table. Sorry permabears…

Employment: Last Friday’s strong employment report blew away Krugmanite recessionists. The November jobs report was stronger than expected and increased by 132,000. Unemployment remains at a historically low 4 ½ percent. There’s no recession in these numbers.

Inflation: Today’s flat report is another bright, shining, example of why the U.S. economy remains the greatest story never told. CPI is up just 2 percent in the past year, following a 0.5 percent decline in September and October. Core inflation has risen at a 1.6% annual rate in the past three months, the slowest growth since June 2005.Inflation appears contained.

Looking good - looking very good...

Thursday, December 14, 2006

Tonight's Lineup

On CNBC's "Kudlow & Company" tonight:

On the markets:
Herb Greenberg, MarketWatch senior columnist/CNBC contributor
Noah Blackstein, Dynamic Mutual Funds portfolio manager

We'll continue the class warfare debate:

Gary Gensler, former Treasury Under Secretary to President Clinton
Jared Bernstein, Economic Policy Institute senior economist
Diana Furchtgott-Roth, Hudson Institute senior fellow
Alan Reynolds, Cato Institute senior fellow

An update on Senator Tim Johnson with CNBC Chief Washington Correspondent, John Harwood.

New Mexico Governor Bill Richardson on immigration and taxes. Followed by Tamar Jacoby, Manhattan Institute senior fellow and Rep. Steve King (R-IA)

Temporary Surge

Sen. John McCain in Baghdad told reporters that the U.S. needs 15,000 to 30,000 more troops in Iraq to control the sectarian violence. I favor this position. Call it a "temporary surge".

However, the Joint Chiefs at the Pentagon seem to be lining up against this view. With all due respect, I don't see how you get the job done without more troops, including taking al-Sadr out of play.

Princess Diana

The Scotland Yard report on Princess Di's death labeled it accidental and I haven't found any new references to U.S. wiretapping. Too bad, I thought maybe she was a double agent. So far -- nothing new to report.

Our Thoughts and Prayers

I'm not going to speculate about the political implications of South Dakota Senator Tim Johnson's apparent stroke. The conservative Democrat appeared on "Kudlow & Company" last week.

He's a good man and I hope he gets well. That's the key point.

Governor Bill Richardson

In an interview taped earlier today with New Mexico Governor Bill Richardson -- who will almost certainly run for president in the Democratic primaries -- the governor made a strong defense of comprehensive immigration reform and lower taxes. He styles himself a pro-growth Democrat.

Please tune in to CNBC's "Kudlow & Company" tonight to see the interview in its entirety (5:00 p.m. EST).

Wednesday, December 13, 2006

Free to Choose

"One of the things that continues to attract me to the study of economics is that it has moral, even spiritual, overtones. The issues of personal responsibility and accountability are very much part of economics. This goes back to Adam Smith's theory of moral sentiment. And I believe tax policy plays a role in this. Individuals should be free to choose to spend and invest their own money as they see fit." -From my book American Abundance

Wednesday Night's Lineup

CNBC's Kudlow & Company will air at its regular 5pm ET time this evening.

We're going to start tonight's show with a look at today's incredibly strong retail report and its meaning for the stock market and economy.

On board:

* Joe Lavorgna, Deutsche Bank Chief U.S. Economist
* Michael Darda, MKM Partners Chief Economist
* J.J. Burns, President of JJ Burns & Company
* Quentin Hardy, Forbes Magazine Silicon Valley Bureau Chief

An interview with Republican Sen. Gordon Smith of Oregon a former supporter of the Iraq war who is now against it. (See "Republican War Critics Find Cover" in today's WSJ)

We'll continue the Iraq debate with two former generals:

*Gen. Barry McCaffrey, NBC News Military Analyst
*Gen. Wayne Downing, NBC News Military Analyst-

Also, FedEX CEO Fred Smith will join us to discuss energy and the transport sector.

Looking Good Goldilocks

Well, well, well.

Today’s remarkably strong retail report dealt a big body blow to the recession scenario.

This unexpected 1% gain is a big number. It took most people by surprise. It’s another sign pointing to the resiliency of the U.S. consumer.

The key point here is that it virtually eliminates the zero percent Q4 scenario from recession bears like Nouriel Roubini. You can't get zero here - toss that scenario in the garbage.

I’ve been saying for quite some time now that U.S. consumers are alive and well.

Back in the middle of August, I wrote in NRO, “The great American consumer has been written off so many times in the last couple of years, just like the rest of the economy. But he/she is alive and kicking. Another great story never told.”

The key themes are strong job creation, low unemployment, and rising wages.

Despite all the gloomy forecasts from the perma-bear camp, all the talk about housing, etc, the great American economy rolls on.

Tuesday, December 12, 2006

Tuesday Night's Lineup

CNBC's Kudlow & Company will air at its regular 5pm ET time this evening.

We'll begin with a Fed discussion following today's report and the outlook for the stock market.

* Wayne Angell, chief economist at Bear, Stearns & Co.
* Diane Swonk, chief economist of Mesirow Financial
* Jeff Kleintop, chief investment strategist for PNC Wealth Management
* Michael Cuggino, president and portfolio manager for the Permanent Portfolio Family of Funds

KUDLOW'S STOCK CLUB - Michael Cuggino will stick around following our market segment and offer his stock picks.

"DO-NOTHING CONGRESS" - A policy debate between Jared Bernstein, senior economist at the Economic Policy Institute and The Wall Street Journal's Kim Strassel.

A political debate between syndicated columnist Joel Mowbray and political commentator Bill Press.

More absurd news from these America hating imams.


These guys should be deported.

Monday, December 11, 2006

Monday Night's Lineup

CNBC's Kudlow & Company will air at its regular 5pm ET time this evening.

The Stock Market...Economy...Fed...and Dollar...all will be covered by our all-star panel to begin tonight's show.

Our guests:

* Gary Shilling, president of A. Gary Shilling & Co
* David Reilly, director of portfolio strategy at Rydex Investments
* Stefan Abrams, CIO at Trust Company of the West
* Michelle Girard, senior economist at RBS Greenwich Capital Management

Sunday Unspun...Frank Newport, editor-in-chief of Gallup will sort through all the spin and hype in our weekly segment.

A political roundtable looking at Sen. Barack Obama and more...

*Terry Jeffrey, Human Events editor
*Larry Sabato, political scientist at University of Virginia
*Peter Beinart, editor at large of The New Republic

A debate on income inequality between Diana Furchtgott-Roth, columnist and senior fellow at Hudson Institute and Dean Baker, co-director of the Center for Economic and Policy Research.

The Audacity of Hype

Barack Obama is causing quite a big stir.

The mainstream media is enthralled with him. His recent trip yesterday to New Hampshire brought out large crowds. He’s forcing Hillary to accelerate her presidential campaign schedule. And of course, his new book is selling very well.

Behind the Obama story is a very liberal left voting record. Here are the key votes and positions of the possible presidential contender:

· Voted against extending the Bush tax cuts on capital gains and dividends.
· Voted against permanently repealing the Death Tax. (Called the cuts a "Paris Hilton” tax break for "billionaire heirs and heiresses”)
· Voted against CAFTA.
· Voted YES on raising the minimum wage to $7.25 rather than $6.25.
· Opposed the lifting of $0.54 per gallon tariff on cheaper Brazillian ethanol. Said, "ethanol imports are neither necessary nor a practical response to current gasoline prices."
· Voted against the bankruptcy abuse bill.
· Opposes privatizing Social Security
· Voted against drilling in ANWR.
· Voted against confirmation of Sam Alito AND John Roberts as chief justice.
· Voted against extending the PATRIOT Act's wiretap provision.
· Opposed any bans on partial birth abortions.

Is this the liberal left direction Dems really want to go in 2008?

Sure, they took Congress this year by sounding like Republicans on the campaign trail. But Obama would be a rather big u-turn from that centrist strategy.

Debunking Populist Mythology

** Be sure to read Diana Furchtgott-Roth's op-ed in today’s New York Sun where she debunks the myth of stagnating real median incomes.

This is the liberal left populist Lou Dobbs mythology perpetuated by so many Democrats in the last election.

Americans are richer than they think according to the former chief economist at the Department of Labor.

(A couple weeks ago, she wrote another great piece showing that differences in per-person spending by the lowest and highest quintiles of income-earners are not all that different.)

She will be joining us on tonight's show...

** Also, check out Alan Reynolds' terrific new book Income and Wealth which debunks the same myths.

Friday, December 08, 2006

McCain Has it Right

More kudos to Sen. John McCain for opposing the Iraqi Surrender Group’s recommendations.

McCain continues to stand tall, taking courageous positions which at the present moment may not be politically popular, but in the long run, are absolutely essential to bolster our national security.

Some quotes of his from yesterday’s Senate Armed Services Committee hearing:

"There's only one thing worse than an overstressed Army and Marine Corps, and that's a defeated Army and Marine Corps. I believe [the ISG report] is a recipe that will lead to our defeat sooner or later in Iraq,"

On negotiations with Iran and Syria: "I don't believe that a peace conference with people who are dedicated to your extinction has much short-term gain."

McCain is showing us that he has the right stuff.

Friday Night's Lineup

CNBC's Kudlow & Company will air at its regular 5pm ET time this evening.

We're coming out of the gates tonight with an economic-stock market bang...

We will start with today's strong, better than anticipated jobs number. What does it signal for the stock market, the economy, and the Fed?

On board with their take:

*Joe LaVorgna - chief U.S. economist at Deutsche Bank
*Brian Wesbury - Chief Economist at First Trust Advisors
*James Smith - professor of finance at the University of North Carolina
*Jason Trennert - chief investment strategist at Strategas Research Partners LLC

Kudlow's Stock Club - Brian Barish, president and director of research for Cambiar Investors will weigh in with his stock picks.

A Washington to Wall Street debate on the budget, free trade, taxes and more.

*Jim McTague - Barron's editorial staff
*Gary Gensler - former Undersecretary of the Treasury
*James Glassman - publisher and editor in chief of The American
From National Review's "The Week", 12/18/06:

A Saudi Couple living in Aurora, Colo., were convicted of enslaving their Indonesian nanny, taking her passport, forcing her to live in the basement, and paying her less than two dollars a day. The husband, Hamaidan al-Turki, also made her a sex slave, abusing and raping her. Hamaidan’s wife plea-bargained down to 60 days in jail and $90,000 in restitution, but Hamaidan got 28 years to life. “The state has criminalized these basic Muslim behaviors,” he told the judge. And rightly so. Justice wobbled at the end when, at the urging of the State Department, Colorado’s attorney general John Suthers flew to Riyadh to brief King Abdullah on the matter. Better to have followed the example of Sir Charles Napier, a British general in India, when local Hindus complained of a prohibition on suttee. “You say that it is your custom to burn widows. Very well. We also have a custom: When men burn a woman alive, we tie a rope around their necks and we hang them. Build your funeral pyre; beside it, my carpenters will build a gallows. You may follow your custom. And then we will follow ours.”

Goldilocks Rules

Liberal New York Times columnist Paul Krugman took it on the chin today as the November jobs report was stronger than expected and increased by 132,000. The unemployment rate stayed at a historically low 4.5 percent.

The Goldilocks economy is producing large job gains in services—think retailers, healthcare, financial companies, business, professional and other areas.

Housing and manufacturing are still soft after two years of tight money from the Fed, and of course, higher energy prices have dampened things until recently. But the housing and manufacturing sectors are really just about 10 percent of our GDP. That means 90 percent is still hitting on all cylinders.

Even softer homes prices couldn’t hold back a new record gain in family net wealth. This hit another all-time high of over $54 trillion dollars on the strength of the roaring stock market.

Incidentally, that Goldilocks stock market is pointing to a solid growth rate in 2007.

And, let’s not forget, over the past 12 months, workers wages are up 4.1 percent. That development, along with lower gasoline prices and a negative CPI, suggest middle income families will have plenty of spending power this Christmas holiday season.

Oh by the way, did I mention lower tax rates on capital gains and dividends have helped drive stocks and the economy higher?

Mr. Krugman’s model doesn’t include supply-side tax cuts.

President George W. Bush will look with satisfaction at today’s employment numbers. He will realize once again the important connection between lower marginal tax rates and a strong economy.

Thursday, December 07, 2006

Thursday Night's Lineup

CNBC's Kudlow & Company will air at its regular 5pm ET time this evening.

**I'll be hosting tonight's show live from Washington D.C.

We'll begin with my interview with Sen. John Kerry. Topics will include the economy and the war in Iraq.

Next - we've assembled a first-rate panel to dissect what's ahead for the dollar, the economy, and the stock market.

Our guests include:

*Martin Baily, senior adviser at McKinsey & Co. and former Chairman of the Council of Economic Advisers
*Arthur Laffer, supply-side economist and president of Laffer Associates
*Craig Columbus, chief market strategist, Advanced Equities Asset Management

An interview with possible presidential candidate Sen. Sam Brownback (R-KS) on what's in store in the next Congress.

And finally, a jobs report preview with Joe LaVorgna, chief U.S. economist at Deutsche Bank and Michael Darda, chief economist and director of research for MKM Partners.

Turtle Bay's Lilliputians

John Bolton is a good man. He did a great job and didn't deserve his fate. My friend, ace journalist Claudia Rosett sums up this latest U.N. saga rather nicely...

"John Bolton's resignation this week as ambassador to the United Nations was hardly the result of his being - as some have charged - ineffective, or a bully, or abrasive. The real problem is the shrunken character of the U.N.

Bolton was a Gulliver dispatched to Lilliput, a truth-teller in a den of diplomats. As a principled man in a dishonest institution, he was a threat to a whole raft of special interests that feed off the U.N. system.

If anything, Bolton was polite in a setting where bullying and abrading hardly count as sins. This is the U.N. where Secretary-General Kofi Annan, when queried last year about the Mercedes on which his son saved a bundle by making false use of U.N. perquisites, chose to bully the reporter - and avoid answering a good question. This is the U.N. whose deputy secretary-general, Mark Malloch Brown, set out this past spring, in violation of the U.N. charter, to meddle in U.S. politics - insulting a number of right-wing media outlets and sneering at their audience in the "heartland." This is the U.N. whose "excellencies" this past September applauded the histrionics of Venezuela's Hugo Chavez and Iran's Mahmoud Ahmadinejad - behavior that in civilized quarters might well be deemed abrasive.

This is the U.N. that in recent years has incubated such scandals as oil-for-food, procurement bribery, and peacekeeper rape. This is the U.N. whose "reforms," in answer to these scandals, have consisted largely of demands for more money, and a revamped so-called Human Rights Council that has devoted itself entirely to condemning Israel. This is the U.N. system that still does not provide coherent accounts of how it spends about $20 billion per year, about one-quarter of that supplied by U.S. taxpayers...."

Click here to read the whole article.

On My Way To Washington...

I’m getting ready to hop aboard a train down to D.C. – heading down to Washington to shoot tonight’s show.

I’ll be doing a sit-down, one-on-one interview with Sen. John Kerry later this afternoon. We’ll discuss the war in Iraq and the economy.

We’re also going to interview possible presidential candidate Sen. Sam Brownback (R-KS).

The big theme for tonight’s show (and future shows) is that despite the mess in Iraq, the U.S. economy is doing just fine. During the Vietnam period in 1965 through the 70's, the U.S. was a mess with runaway inflation (as high as 11 percent in 1974) with stocks getting clobbered, but the new economy now is holding up beautifully.

In fact, the stock market’s five-month rally is soldiering on, even though Iraq has slid downhill.

Gold and oil have stabilized at lower levels. And while the dollar is a little softer, it really hasn't moved much since late 2004. In fact, global stock indexes show that world growth is still good and free market capitalism and wealth creation are doing well.

In other words, it's an Iraq problem, not a U.S. problem.

The Baker Boys Proposal

Strong words from Frank Gaffney, president of the Center for Security Policy, on last night's Kudlow & Company:

I think unfortunately it has the makings of a prescription for defeat. I call it the Iraq Surrender Group because I think what you see at the core, wrapped around language of defeatism, is a plan for trying to extricate the United States from Iraq with the help of Iran and Syria--as you say, our archenemies.

The likelihood that Iran, which has made it clear in the words of its president, that it seeks a world without America, that it seeks to wipe Israel off the map--that these guys, who have done as much as anybody to destabilize Iraq and to make it impossible, if they could, for us to have a secure, stable, functioning country there, let alone a democracy--are going to help us in any way is, I think, not only silly, but reckless. And that's why I think it is going to lead to a strategic defeat for this country if these proposals were to be adopted.

It comes down to this: Punish your friends and reward your enemies. That's exactly backwards. We should be making it clear that if you stand with the United States, if you stand for the things we do, you get our loyal and long-standing support. You're not going to have us abandoning you.

And if you are our enemy, if you're killing Americans in Iraq as the Iranians are, if you're trying to take over Lebanon as the Iranians are, if you're building nuclear weapons with a threat to destroy Israel as the Iranians are, and you say, as a stated policy of your president, that you want to bring about a world without America, that's not something you're going to be rewarded for.

Stability in Iraq is all well and good to talk about, but the Iranians want it on Iranian terms. And that means a loss for us, a loss for Israel, a loss for Iraqi people, for freedom in the world, and I think it is a terrible mistake.

"Irrational Hysteria"

"In 1995, I published a short paper in the academic journal Science. In that study, I reviewed how borehole temperature data recorded a warming of about one degree Celsius in North America over the last 100 to 150 years. The week the article appeared, I was contacted by a reporter for National Public Radio. He offered to interview me, but only if I would state that the warming was due to human activity. When I refused to do so, he hung up on me.

"I had another interesting experience around the time my paper in Science was published. I received an astonishing email from a major researcher in the area of climate change. He said, "We have to get rid of the Medieval Warm Period." "The Medieval Warm Period (MWP) was a time of unusually warm weather that began around 1000 AD and persisted until a cold period known as the "Little Ice Age" took hold in the 14th century. ... The existence of the MWP had been recognized in the scientific literature for decades. But now it was a major embarrassment to those maintaining that the 20th century warming was truly anomalous. It had to be "gotten rid of."

"In 1999, Michael Mann and his colleagues published a reconstruction of past temperature in which the MWP simply vanished. This unique estimate became known as the "hockey stick," because of the shape of the temperature graph. "Normally in science, when you have a novel result that appears to overturn previous work, you have to demonstrate why the earlier work was wrong. But the work of Mann and his colleagues was initially accepted uncritically, even though it contradicted the results of more than 100 previous studies. Other researchers have since reaffirmed that the Medieval Warm Period was both warm and global in its extent.

"There is an overwhelming bias today in the media regarding the issue of global warming. In the past two years, this bias has bloomed into an irrational hysteria. Every natural disaster that occurs is now linked with global warming, no matter how tenuous or impossible the connection. As a result, the public has become vastly misinformed." - Excerpts from David Deming, associate professor at the University of Oklahoma and an adjunct scholar with the nonpartisan, nonprofit National Center for Policy Analysis (NCPA), who testified yesterday morning at a special hearing of the Senate Environment and Public Works Committee.

Wednesday, December 06, 2006

***Five times a day or off with your head...

Tonight's Lineup

CNBC's Kudlow & Company will air at its regular 5pm ET time this evening.

We'll begin with a response and debate to the Iraq Study Group report.

Joining us tonight are Frank Gaffney, founder and CEO of The Center for Security Policy and Joseph Cirincione, senior vice president for national security at the Center for American Progress.

Additional response to the ISG report and the future of Iraq with Sen. Kay Bailey Hutchison (R-TX) and Sen. Mark Dayton (D-MN).

A Fed debate between former secretary of labor/UC Berkley professor Robert Reich and Steve Moore, member of the Wall Street Journal editorial board.

Dow Chemical CEO Andrew Liveris will discuss energy.

And finally, David Sowerby, portfolio manager with Loomis Sayles & Co. will return to Kudlow Stock Club to review his last stock picks and offer some new ones.

American Credibility

"If you live in Tikrit, and Ramadi and Fallujah, the Iraq war is about Iraq. But if you live anywhere on the rest of the planet, the Iraq war is about America and about America's credibility. And to choose to lose another war would be devastating. It would mean that Vietnam was not an exception, but the rule. And that would end--I believe that would end any American credibility in the world." - Mark Steyn, conservative commentator and author of America Alone: The End of the World as We Know It on last night's Kudlow & Company

Tuesday, December 05, 2006

McCain Stands Tall

“I understand the polls show only 18 percent of the American people support my position. But I have to do what's right, what I believe is right and what my experience and knowledge and background tells me is the right thing to do in order to save this situation in Iraq… In war, my dear friends, there's no such thing as compromise. You either win or you lose.” –Sen. John McCain

In the midst of all the latest doubt, pessimism and arguing over our direction in Iraq, along comes John McCain, digging his heels in the sand and standing up for what is right. John McCain is fighting the tide.

The tide is defeatist.

The tide is asking us to throw our arms into the air and allow iniquity to win the day.

The tide is asking us to allow ruthless and evil totalitarians in Iran and Syria to seize victory.

The tide is asking us to blow American credibility for fifty years.

Fortunately, in the middle of all this, in the middle of James Baker's wishful thinking Iraq Study Group fog, along comes John McCain, reminding Americans we have two choices: win or lose.

That’s called courage. That’s called principle. That’s called leadership.

Now I may not agree with McCain on every single issue, but I am completely behind him on national security. This includes a much bigger Pentagon budget, as well as a beef up in the troop volume for the American Army and Marine Corps.

The New York Times reported this morning that retired Marine Corps General Anthony Zinni—who originally opposed the Iraq war—now agrees with McCain on the need for more troops in Iraq. Zinni believes it would be a catastrophic mistake for American foreign policy if we bail out now. He said, “This is not Vietnam or Somalia or those places where you can walk away. If we just pull out, we will find ourselves back in short order.”

Tradesports has McCain leading the field of 2008 GOP presidential nominees with 48.5 percent. His closest competitors—Gov. Mitt Romney and Rudy Giuliani—both come in around 14.5 percent. Sen. McCain also leads the actual Presidential vote with 28 percent to Hillary Clinton’s 26 percent.

My guess is that Americans trust McCain.

He’s standing tall.

Tonight's Lineup

CNBC's Kudlow & Company will air at its regular 5pm ET time this evening.

On tonight's show, we'll cover the Washington to Wall Street beat beginning with:

THE CONGRESSIONAL OUTLOOK - Iraq, spending and the budget...

*Sen. Tom Coburn (R-OK)
*Sen. Jim DeMint (R-SC)
*Sen. Tim Johnson (D-SD)
*Sen. Jeff Bingaman (D-NM)

A POLITICAL DEBATE - Iraq, bipartisanship and more...

*Mark Steyn, political columnist and cultural critic, author of "America Alone"
*Peter Beinart, editor-at-large for The Nation

A WASHINGTON TO WALL STREET discussion with Al Hubbard, head of the National Economic Council.

An ECONOMIC DEBATE between Joe LaVorgna, chief U.S. economist at Deutsche Bank Securities and Michelle Girard, senior economist at RBS Greenwich Capital Management.

Economic Illiteracy in Hollywood

Thomas Sowell has some words for the Hollywood elite at RealClearPolitics:

...If economically illiterate Hollywood busybodies and other mindless crusaders succeed in establishing more costly pay scales without regard to productivity, that will undoubtedly lead to fewer jobs, just as similar policies do in other countries. There is no free lunch in the Third World, any more than there is elsewhere.

The net result will be people feeling good about themselves in Hollywood, in academia and in the media, while leaving havoc in their wake among the Third World people they claim to care about.

What the Third World needs are more multinational corporations, not less.

As more multinational corporations move into a poorer country, the people there not only get additional economic opportunities, they acquire skills and job experience that raise their productivity and earnings potential, even if that outrages the economically illiterate in Hollywood.

Monday, December 04, 2006

Double Dose

***Please note that I will be guest hosting CNBC's "On The Money" tonight at 7:00 p.m. EST.***

Monday Night's Lineup

CNBC's Kudlow & Company will air at its regular 5pm ET time this evening.

We'll begin tonight's show with a look at John Bolton's (unfortunate and undeserved) U.N. resignation. We will also take a look into the state of affairs in Iraq.

Joining us tonight are:

* General Barry McCaffrey, retired general, NBC News military analyst
* Jed Babbin, former deputy undersecretary of defense
* P.J. Crowley, senior fellow at the Center for American Progress
* Rowan Scarborough, Washington Times reporter

Frank Newport, Gallup Poll editor-in-chief, will sift through media distortions in our weekly "Sunday Unspun" segment with an emphasis on the war in Iraq.

An economic debate between supply-side superstar and economic guru Art Laffer and James Smith, University of North Carolina at Chapel Hill finance professor.

And finally, a global warming debate between the Wall Street Journal's Kim Strassel and Jared Bernstein, senior economist at the Economic Policy Institute.

More on Sarbox...

The drumbeat for Sarbanes-Oxley reform gathers steam...

As my friend John Fund writes in today's, Congress is putting Hong Kong and London in a position to surpass New York as the financial capital of the world.

Fund writes that our foreign competitors "are taking advantage of our curious refusal to reform our financial markets, which could make the U.S. a global also-ran. As one leading Hong Kong businessman told me, "Your current policies amount to unilateral disarmament in the contest for IPO's. The next year or so will be a test for whether you can wake up in time."

(Tip of the hat to BizzyBlog for putting up the original post.)

Just Say No to Hillary?

Sen. Hillary Clinton is apparently consulting with her New York congressional colleagues about her presidential prospects.

Here's a thought - what if one or more of these colleagues tell her no?

Don’t ask me who it might be—but I’m thinking here about one Charles Rangel.

Hillary’s obviously running faster now because of the Obama wild card. So I’m wondering whether Charlie Rangel prefers Obama over Hillary? If Rangel does, and he steps behind Barack, what would it mean to Hillary?

Would she pull out?

Readers here are invited to choose a N.Y. congressperson who would just say no to Hillary.

Friday, December 01, 2006

Krugman's Recession

Paul Krugman is pessimistic about the economy.

Citing our friend Nouriel Roubini—NYU economics professor and head of his own forecasting firm—who has been predicting a housing led recession, Mr. Krugman points to the bond market and the fact that interest rates on long term bonds have fallen below rates on short term paper—in other words, an inverted yield curve.

Believe it or not, I actually agree with Mr. Krugman—insofar as the inverted Treasury curve suggests the Federal Reserve is too tight. Presently, the central bank’s benchmark rate is 5.25 percent. Bernanke & Co. should lower their target rate to around 4.75 percent or even 4.5 percent. The curve is predicting continued economic softness, as is the current decline in the exchange rate of the U.S. dollar.

However, I disagree with Krugman on the record-breaking stock market. He believes stocks are “a notoriously bad indicator of the economy’s direction” and cites Nobelist Paul Samuelson, who once quipped that the stock market had predicted 9 of the last 5 recessions.

But, as we discussed on last night’s Kudlow and Company, the strong, across the board, 5-month rally in stocks cannot possibly be predicting a recession. While the stock market can sometimes emit false positives on recessions, rarely does it give off false negatives. In fact, I think it is predicting a Goldilocks soft landing for the economy.

A glaring omission from Krugman’s analysis is the staggering rise in corporate profits. These are the tax return profits recorded for the IRS—rest assured that no CFO overestimates them. Corporations’ pre-tax profits are up a remarkable 31 percent through the third quarter—25 percent after tax. These are serious numbers and are the mother’s milk of business and the economy.

A question for Mr. Krugman: when in the history of humankind have we had a recession when business profits are rising by 30 percent?

Profitable U.S. businesses clearly have the resources to grow their operations and continue hiring new workers. This, in turn, is the biggest factor sustaining the historically low 4.4 percent unemployment rate, as well as the strong gains in employment and consumer incomes.

Over the past three months corporate payrolls have increase by an average of 157,000. The number of individuals employed as measured by the household survey has grown by an average of 319,000 during the period. It’s no surprise that these jobs gains have significantly increased personal incomes. It has pushed real consumer spending roughly 3 percent at an annual rate above the 3rd quarter average. This also suggests a decent 4th quarter GDP growth rate may be in store.

Meanwhile, inflation readings continue to ease as the overall consumer price index has dropped to 1.3 percent over the past year, following tighter Fed money and the plunge in energy prices. This gives consumers even more purchasing power in the malls and on the Internet for the holiday shopping season. What's more, the big rally in homebuilders stocks suggests that the economic drag from housing is starting to peter out.

Markets are better forecasters than economic pundits or economic models.

Helped by lower energy prices, spectacular profits, and rock bottom tax rates on capital, the message from rising stocks is a soft landing growth scenario for next year’s economy. The message from lower bond rates is lower inflation and an easier Fed next year.

So, I’m still betting on Goldilocks.

Sarbox Reform

(From last night's Sarbox discussion on Kudlow & Company)

Kudlow: There's a statistic out there, 700 corporate crimes have been punished with 250 million in fines since 2002, since Enron, essentially. Now all of that is based on pre-Sarbox laws and regulations. All of that is based on existing laws on the books of the United States. So I just want to ask why is it that we needed Sarbanes-Oxley in the first place?

...The problem with Sarbanes-Oxley is that it's too big, too many regulations, too many costs. Some conservatives like myself would call that the law of unintended consequences. Whenever you have these massive federal regulatory bills coming out of Congress, you get unintended consequences. It's the same story with spending and entitlements. So here we are, you're trying to tweak this system a little bit. I think business people, particularly men and women operating in small business, I think they really want bigger than a tweak...

Mike Holland: I'd like to put a fact in here. Before Sarbanes-Oxley, 50 percent of all IPOs around the world listed in the United States. Would anyone, including Herb, like to guess how many since Sarbanes-Oxley have listed in the U.S.?

Herb Greenberg: Give me the number.

Mike Holland: It's 8 percent. And the last 25 largest IPOs, they all listed abroad. I was in Europe a couple weeks ago--they're talking about erecting statues to Sarbanes and Oxley in London's financial center.

Kudlow: Yes. Absolutely. We tore down the statue of Lenin and they're putting Sarbox up in Red Square and Moscow. That's what people don't understand. We're going to lose competitiveness.

Early 2007 Thoughts

∙ Surprisingly, the Democratic takeover of Congress will probably result in greater budget restraint, as Republicans try to re-establish their limited government principles and Democrats hew to the center.

∙ President Bush may also veto overspending bills.

∙ Republican conservatives in the House may reach out to conservative blue-dog Democrats for spending caps.

∙ Both parties will attempt to woo budget-balancing independent Ross Perot voters.

∙ There may be a short-term indexing fix for the alternative minimum tax.

∙ Entitlement reform efforts by Treasury Secretary Henry Paulson will come to nothing.

∙ There could be a breakthrough on broad-based immigration reform.

∙ The Bush tax cuts on investment will stay in place.

∙ As the economy moves toward a Goldilocks soft landing, the Bernanke Fed will lower their policy target rate several times.

∙ On the Iraq war -- more U.S. troops are likely in 2007, along with additional U.S. military advisors embedded in Iraqi units. There is a strong chance that the CENTCOM generals will be replaced. Also, Iraq Prime Minister Maliki will likely be eased out.