Friday, January 29, 2010

Tax-Tax-Tax, Spend-Spend-Spend

The day after President Obama’s State of the Union, Congress went ahead and passed a $1.9 trillion — that’s right, $1.9 trillion — increase in the federal government’s debt limit. Let me tell you why this bothers me.

First, in order to avoid bankruptcy, it means future tax rates are going to have to go up. Second, Mr. Bernanke bought a lot of our debt in 2009. That brought down the dollar and hiked the gold price. So, has Washington set us up for major inflation in the years ahead?

The Obama White House saved Bernanke’s floundering re-confirmation bid with a flurry of last-minute pressure and phone calls. Does that make the Fed head Obama’s man? Forty-seven Democrats voted for him. And only 22 Republicans voted for him. Are Democrats the easy-money party? I’ll let you decide.

Meanwhile, President Obama basically stood by his agenda in his address. There was no Sen. Scott Brown burning-bush epiphany. Obama wants to raise taxes on foreign corporate profits. That’s a very bad idea. It’s bad for growth, bad for jobs, and bad for stocks. And it’s protectionist.

Obama whacked banks and is standing by his bank-tax hike, which actually will reduce bank loans in the future. He did not extend the Bush tax cuts on capital and investors. He stayed with big-government health care, implying all the over-spending and over-taxing that goes with it.

He stayed with cap-and-trade. Yet another mammoth tax hike. He even took an ill-advised and uninformed whack at the Supreme Court.

And you know what? His teensy, tiny, temporary tax credits for small businesses are not real incentives. They are just a form of government spending. That’s why they won’t produce growth and jobs.

It looks to me like we’re still on the course of tax-tax-tax and spend-spend-spend. It’s a sorry mix for stocks and economic growth.

I’d hoped to see a bigger spending freeze and real limits for small government. And I still believe a policy of across-the-board tax cuts — which Obama refuses to look at — is still the answer for jobs and growth.

On that score, check out Scott Brown’s response to Obama’s State of the Union speech:

Bold action means broad-based tax cuts for families and businesses to create
jobs and not merely targeted tax relief. Bold action also means major reform and
restructuring to actually cut spending and not just freeze it.

Well, I couldn’t have said it better myself. In fact, I have said it about a thousand times.

Tea-party, free-market populism.

Thursday, January 28, 2010

On CNBC's Kudlow Report Tonight

This evening at 7pm ET:

NBC’s Kelly O'Donnell reports from Washington.

The president did not have a burning bush moment…

- Sen. Judd Gregg (R-NH)
- Sen. Ben Cardin (D-MD)

What exactly is the exit strategy?
Hats off to Hoenig at the Kansas City Fed

- Peter Morici, University of Maryland Robert H. Smith School of Business Professor; U.S. International Trade Commission Fmr. Chief Economist
- Peter Navarro, "The Coming China Wars" Author; University Of California - Irvine Business Professor


- Robert Reich, Fmr. Labor Secretary; Author, "Supercapitalism"; CNBC Contributor; Univ. of CA., Berkeley, Prof. of Public Policy
- Steve Moore, Senior Economics Writer for the Wall Street Journal Editorial Board; "The End of Prosperity" Co-Author


- Robert Froehlich, The Hartford Sr. Managing Director
- Quentin Hardy, Forbes National Editor


- Matt Miller, The Daily Beast Columnist;Public Radio's "Left, Right and Center" Host
- James Pethokoukis, Reuters Money & Politics Columnist

Please join us. The Kudlow Report. 7pm ET. CNBC.

Thursday's Thoughts

Unpopular as he may be, Treasury man Tim Geithner did a fine job yesterday defending the government rescues of last fall -- including AIG. Geithner fought back, and I rather liked it.

Nobody likes government bailouts, least of all me. But they were a necessity at the time. The world was on the brink. But we are healing now. It’s time to move on and get over it. So I’m going to defend Geithner, as unpopular as that may be.

The question now becomes how to unwind the AIG bailout. The big banks have de-TARPed. The issue of AIG secrecy, however, still remains. But that’s not Geithner’s issue. He wasn’t part of the secrecy; he was part of the solution. (Incidentally, former Treasury man Henry Paulson will join me on The Kudlow Report on Monday night to discuss his new book and his role in the bailouts and AIG.)

Finally, the Ben Bernanke Fed announced that it is keeping its zero-interest-rate policy for an extended period. But here’s a wrinkle: Kansas City Fed president Tom Hoenig dissented. Bravo. Looks like someone at the central bank is showing some backbone.

At some point later this year, or early next year for certain, the Fed’s exit strategy and removal of the artificial stimulus, along with the scheduled tax hikes, are going to negatively impact the stock market. Investors need to be prepared.

That’s why tax rates should be lowered permanently. The Bush tax cuts should be extended. No tax hikes ought to be on the table as the Fed gets moving on what we all know it must do to protect King Dollar and hold down future inflation.

We’re facing a key moment for the stock market and the entire U.S. economy. Low tax rates will help offset the Fed’s removal of liquidity and stimulus.

Wednesday, January 27, 2010


This evening at 7pm ET:

-A pro-growth message or more bank bashing?
-Will his course correction have credibility?

Our special Washington guests this evening include:

*Sen. John Thune (R-SD)
*Rep. Paul Ryan (R-WI)
*Rep. Mike Pence (R-IN)

-What’s the stock market angle?
-The economy…taxes, business & jobs


*Michael Farr, president of Farr, Miller & Washington
*Steve Moore, Sr. Economics Writer for the Wall Street Journal Editorial Board; "The End of Prosperity" Co-Author
*Michelle Girard, Managing Director & Sr Economist RBS Global Banking & Markets
*Jerry Bowyer, CNBC Contributor/Syndicated Columnist
*David Goodfriend, Fmr. Clinton W.H. Official; "Left Jab" Co-Host; Air America Co-Founder; Fmr. Staffer to Rep. Charles Rangel & Sen. Herb Kohl

Please join us. The Kudlow Report. 7pm ET. CNBC.

On the Road to Economic Damascus?

Stocks shrugged it off yesterday, but I’d like to commend President Obama for his three-year budget freeze plan. That's right. It gave me good old-fashioned, American patriotic State of the Union pleasure to praise the president when he does good.

Now, sir, let's join hands, you and me, and go for a full-throated spending and debt limitation approach that will last not three years, but many decades to come. It will keep us out of bankruptcy, re-balance our books and promote growth.

And, sir, let's you and I visit with Sen. Scott Brown, sit down and watch his ad of President John F. Kennedy talking about the need to grow the economy and create new private jobs by slashing marginal tax rates across-the-board for all families and all businesses. No class warfare. Together, we'll show the stock market what pro-growth really means.

And then sir, let's you and I visit with beleaguered Ben Bernanke. Let’s tell him to stop covering up bailout nation. Put all that behind us. Instead, Mr. Bernanke should be defending the value of King Dollar to give American families more consumer spending power in their pocketbooks. Now that will get the stock market's attention.

I want to welcome you sir, with open arms, back to the free market supply-side capitalist camp. It’s just what we talked about at George Will's house in Washington a year ago when you had dinner with a few of us.

And I renew my invitation to come on this show for further discussion. Especially since at least this week you seem to have abandoned your humongous spending, borrowing, taxing and government controlling ways.

Now I still remember when you told me at George Will's beautiful home that you really believed in private enterprise. It's been a long year sir. But it’s not too late for you to join Saul and me on the burning bush road to economic Damascus.

I look forward to this brand new gospel chapter in the brand new year.

Where’s the GOP Message of Tax-Cutting Victory?

Why did Senate Republican campaign chief John Cornyn tell me last night on CNBC that it is “almost numerically impossible” for the GOP to retake the upper chamber this November? I asked him about this twice, and he stayed with it. It came out sounding defeatist. Sort of like General Patton telling Ike, “We will never get to Berlin.”

In fact, it is numerically possible. And more to the point, it is politically possible.

There are 18 Democratic senators up for grabs. Right now, the GOP is in excellent shape to take Illinois (President Obama’s seat), Delaware (Vice President Biden’s seat), Nevada (Harry Reid’s seat), and North Dakota (Byron Dorgan’s seat). So that’s four. It would give them 45 seats. So they need six additional seats out of 14.

If Scott Brown can do it, riding the tidal wave of conservative, populist, low-tax-and-spend, free-market revolt, including tough stands on terrorism and national security, then the GOP should be proclaiming a tidal wave that could carry them to Senate victory this fall.

On top of all that, it’s not out of the question that independent Joe Lieberman of Connecticut could switch parties. Nor is it out of the question that beleaguered Ben Nelson of Nebraska could switch parties. So I was very disappointed in my friend John Cornyn for making this statement.

Similarly, the Texas senator admitted to me last night that the GOP has not mounted an across-the-board tax-cut message as per Scott Brown, and hasn’t even taken up the battle to extend the Bush tax cuts. Right now, the idea of extending the Bush tax cuts is being carried by a bunch of Blue Dog Democrats, with no real Republican support in sight.

This is a huge mistake. The party with the real growth message -- which includes smaller government and putting more money in people’s pockets to spur growth and investment (i.e., lower-tax-rate incentives) -- is going to win this fall.

As my late and dear friend Bob Novak used to say, Republicans were put on this Planet Earth to cut taxes. So where’s the message of tax-cutting-victory in November?

Tuesday, January 26, 2010

On CNBC's Kudlow Report Tonight

This evening at 7pm ET:

-President calls for 3-yr freeze
-Is the fiscal tide tide finally turning?
-Obama the supply-sider??

CNBC’s Hampton Pearson reports from Washington.

*Robert Reich, Fmr. Labor Secretary; Author, "Supercapitalism"; CNBC ContributorUniv. of CA., Berkeley, Prof. of Public Policy
*Dan Mitchell, senior fellow at the Cato Institute


Sen. Jim DeMint will join us from Washington.


*David Goldman, Senior Editor First Things Magazine
*Vincent Reinhart, American Enterprise Institute Resident Scholar; Fmr. Dir. of Monetary Affairs at the FOMC

So where's the leadership?

Sen. John Cornyn (R-TX) will be aboard.


Fortune’s Shawn Tully will address four potential asset bubbles facing investors.

Please join us. The Kudlow Report. 7pm ET. CNBC.

Monday, January 25, 2010

Time for a Change at the Fed

What exactly did Ben Bernanke promise Senate Democratic leader Harry Reid? That’s the big question right now. Reid reluctantly endorsed Bernanke after a one-on-one meeting. Here’s what Reid said, according to the Las Vegas Sun: “I made it clear that to merit confirmation, chairman Bernanke must redouble his efforts to ensure families can access the credit they need to buy or keep their home, send their children to college, or start a small business.”

So, in a desperate search for votes, is Bernanke going around the Hill making easy-money promises? Even easier money than we have had in the last year? A Wall Street Journal editorial on Monday opposing Bernanke’s nomination is spot on. Monetary quid pro quos will destroy Federal Reserve independence and could generate yet another bubble.

And while Bernanke was right to gun the printing presses in the fall of 2008, he has overstayed his easy-money welcome by at least six months. The emergency has long passed, but the emergency policies continue. Breaking a window between 2002 and 2005 -- when Greenspan and Bernanke kept rates too low for too long (especially negative real interest rates) -- and then fixing that window later on is no way to run a policy.

Bernanke’s trillion-dollar purchase of mortgage bonds and other consumer loans is a fiscal action, not an appropriate monetary policy. Over the past year, while the dollar has fallen about 10 percent, and the gold price has risen 20 percent, the consumer price index has increased 2.7 percent with producer prices jumping 4.4 percent. Bernanke’s blatant disregard for preserving a stable King Dollar, and his stubborn resistance to using inflation-sensitive market-price indicators as a monetary guide, are two important reasons why he should not be reconfirmed.

Sen. John McCain intends to vote “no” on the Bernanke nomination, saying “I believe that he must be held accountable for many of the decisions that contributed to our financial meltdown.” McCain is dead right. The Fed missed the boat in terms of monetary and regulatory policy. It is time for a change at the Fed.

And following the Scott Brown victory, Republicans have an opportunity to push for a much sounder monetary thinker for the Fed post.

On CNBC's Kudlow Report Tonight

This evening at 7pm ET:

CNBC’s Hampton Pearson will join us from Washington.

-Is Bernanke trolling for support?
-Is Bernanke changing policy just to keep his seat?

Joining us to discuss will be Sen. Jim Bunning (R-KY).



*John Taylor, Stanford University Economics Professor; Hoover Institute Sr. Fellow ; "Getting Off Track"
*Peter Navarro, "The Coming China Wars" Author; University Of California - Irvine Business Professor
*Don Luskin, CNBC Contributor/Trend Macro Chief Investment Officer

NBC’s Steve Handelsman reports.

-Debt-limit commission…Was Scott Brown a GOP wakeup call?
-Holy war against the banks?
-State of the Union

Joining us to discuss will be Sen. Tom Coburn (R-OK).



*Chris Edwards, CATO Director of Tax Policy
*Christian Weller, Center For American Progress
*David Kotok, Cumberland Advisors Chairman & Chief Investment Officer

Please join us. The Kudlow Report. 7pm ET. CNBC.

Friday, January 22, 2010

Bank Bashing Isn’t the Answer

Taxing and bashing banks is no way to run an economic recovery plan. Sure, banks made mistakes. And I still believe that no bank bonuses should be paid while the banks were under TARP. But they have paid TARP down. Right now we need the banks to service customers and expand loans when economic recovery moves into the credit-demand, loan-demand phase.

President Obama wants to restrict the size and activities of our biggest banks. He wants them to get out of the hedge-fund business and private equity, with no trading for their own account. Plus, he wants a tougher cap on bank-deposit market share. The only problem here is that hedge funds and proprietary trading were not the big problems in the financial meltdown. Bad loans were. This, of course, includes mortgage loans, commercial real-estate loans, credit-card loans, etc. That was the biggest problem.

The real bad apples? Lehman, Bear Stearns, AIG, Fannie Mae, Freddie Mac, and Merrill. But the big banks like JPMorgan bought the bad apples, and in the process helped save the system. And if the big banks are forced to sell off their trading securities, it may very well create another financial bloodbath.

Regarding taxpayer-insured deposits, there is a firewall that prevents them from being used for risky trading purposes. So strengthen the firewall, but don’t destroy the banks. Don’t threaten to dismantle them or break them up. Don’t tax them to death either. We need them for recovery.

This whole story smells to me like mistaken left-wing populism, a flawed attempt to respond to the rising tea-party revolt and voter outrage against big-government spending, taxing, and overreach. Bashing banks is not the answer. Smaller government and lower taxes across-the-board is. Let’s not disrupt the economy; let’s try and heal it.

Let’s put in better capital requirements. Let’s put limits on leveraged borrowing. And, most of all, let’s get rid of the too-big-to-fail doctrine. That is probably the root cause of all of these problems.

Left-wing populist bank bashing is not an economic recovery plan. It isn’t even a political recovery plan. Truth be told, with Obama policy currently in complete disarray, nobody can possibly tell what the administration’s next move is going to be. And frankly, that is a big-time contributor to this week’s stock market plunge.

Thursday, January 21, 2010

Are Republicans Listening to the Scott Brown Message?

Sen. Scott Brown’s epic victory in Massachusetts on Tuesday night dealt a crushing blow to Obamacare, cap-and-trade, card check (and other union favors), and most importantly, all the tax hikes that are lingering on the table. But does Washington really understand the Scott Brown message?

President Obama thinks his “remoteness and detachment” are the problems. This is nonsense. Obama’s tax hikes and spending explosion are what caused the populist tea-party revolt that was punctuated by Scott Brown’s extraordinary victory.

And that leads to the next question. Are the Republicans listening? Do they really understand why Scott Brown was victorious? If they do, why aren’t members of the Republican leadership loudly campaigning for an end to tax hikes, just like Scott Brown?

The cornucopia of tax hikes currently on the table includes higher levies on capital-gains, top earners, dividends, investment (via the payroll tax), carbon, millionaires, banks, stock transactions, and estates (via the death tax). It’s a long Democratic wish list of anti-growth policies, and Scott Brown’s triumph should signal the end of it. But it won’t happen unless GOP congressional leaders make a big deal about it.

For example, some Blue Dog Democrats want to extend the Bush tax cuts, rather than letting them expire next year. Republican leaders should be making a big deal about this. They need to get it front and center, making expiration a condition to any new legislation.

Remember that Brown ran on a JFK/Ronald Reagan platform of across-the-board tax cuts to promote economic growth. Take a look at what the senator-elect had to say during his victory speech Tuesday night:

This [health care] bill is not being debated openly and fairly. It will raise taxes, it will hurt Medicare, it will destroy jobs and run our nation deeper into debt . . . I will work in the Senate to put the government back on the side of people who create jobs and the millions of people who need jobs. And remember, as President John F. Kennedy stated, that starts with across-the-board tax cuts for businesses and families to create jobs, put more money in people’s pockets, and stimulate the economy. It’s that simple.

There you have it. Scott Brown could not have been any clearer. That’s the great thing about his message -- its breathtaking clarity. Across-the-board tax cuts and a revival of free-market capitalism on the supply-side.

And recall that when President Obama mocked Scott Brown for driving a pickup truck, Brown quickly responded that unfortunately, in this economy, not everyone can buy a pickup. “My goal is to change that,” he said on the eve of the election, “by cutting spending, lowering taxes, and letting people keep more of their own money.” Right on message.

And during that campaign, Brown argued that health-care reform is a tax hike and that cap-and-trade is a tax hike. This should become the Republican message, too. It’s about taxes, as well as spending.

A recent Washington Post poll showed that by 58 to 38 percent, voters want smaller government and fewer government services. This, too, should be the Republican congressional message.

It is, in fact, an economic-growth message, the likes of which we haven’t heard since Jack Kemp promoted it in the late 1970s. And the brilliance of Scott Brown was to use the JFK tax cuts -- an across-the-board reduction in marginal tax rates -- to attract Democrats and independents to his message.

An across-the-board tax cut is the fairest pro-growth message of them all. Lower tax rates for everybody. Get out of the box of rich people and class warfare. For the Ted Kennedy Democrats, that box has been a loser for decades. But for timid Republicans always on the defensive, now is the time to break out and adopt the Scott Brown theme.

This is what Reagan did. This is why the Gipper touted JFK’s across-the-board tax cuts. Republicans must now be bold and fight for across-the-board tax relief, for families, individuals, and businesses, along with smaller government, fewer services, and across-the-board spending cuts.

While Team Obama is fighting for more government employment, with trillions of dollars of spending, it is time for Republicans to fight for private free-enterprise employment by letting folks keep more of what they earn and by providing new incentives for the extra hour worked and the extra investment dollar put at risk.

This is where the GOP must go. Republicans should not let another day pass without unleashing a fusillade of new tax-cutting proposals to get America moving again.

On CNBC's Kudlow Report Tonight

This evening at 7pm ET:


CNBC chief Washington correspondent John Harwood reports from the White House on the Obama administration’s new rules and restrictions for Wall Street’s big banks.

Also…Sen. Richard Shelby (R-AL; Banking Cmte Ranking Member) will join us live from Washington.

CNBC senior economics reporter Steve Liesman will be aboard.


*David Stockman, Fmr. OMB Dir. Under Pres. Reagan
*Steve Liesman, CNBC senior economics reporter
*Vincent Reinhart, American Enterprise Institute Resident Scholar; Fmr Dir. of the Federal Reserve Board's Division of Monetary Affairs

CNBC’s Brian Shactman reports from the NYSE on the selloff in bank stocks.

A look at the Scott Brown revolution & tea party tax revolt

*Rep. Jeb Hensarling (R-TX) (Budget & Financial Services Cmtes)
*Robert Reich,Fmr. Labor Secretary; Author, "Supercapitalism"; Univ. of CA., Berkeley

Please join us. The Kudlow Report. 7pm ET. CNBC.

Wednesday, January 20, 2010

On CNBC's Kudlow Report Tonight

This evening at 7pm ET:


-What Democrats & Republicans will do/should do now.
-What does this mean for ObamaCare? Financial regulation? Cap & trade?


*Mort Zuckerman, N.Y. Daily News Publisher; U.S. News & World Report Editor-in-Chief
*Art Laffer, Chief Investment Officer, Laffer Investments; Fmr. Reagan Economic Advisor
*Brian Darling, Director of Senate Relations at Heritage
*Rep. Bart Stupak (D-MI)

CNBC’s Bob Pisani reports from the NYSE.

*Andy Busch, BMO Capital Markets; CNBC Contributor
*Peter Navarro, "The Coming China Wars" Author; University Of California - Irvine Business Professor

CNBC’s Diana Olick reports from Washington.

Please join us. The Kudlow Report. 7pm ET. CNBC.

Tuesday, January 19, 2010

Special Election Edition of Kudlow Report Tonight

This evening at 7pm ET:

NBC’s Kelly O'Donnell will join us live from Boston.



*Peter Beinart, Prof of Journalism & Political Science, City University of New York; New America Foundation Sr. Fellow ; Sr Political Writer, Daily Beast
*Steve Moore , Senior Economics Writer for the Wall Street Journal Editorial Boar ; "The End of Prosperity" Co-Author
*Robert Tracinski, editor of The Intellectual Activist and


Sen. Judd Gregg (R-NH) will join us from Washington.



*Brian Gardner, Sr VP, Washington Research for Keefe, Bruyette & Woods
*Don Luskin, CNBC Contributor/Trend Macro Chief Investment Officer
*John Carney, Clusterstock

Suffolk pollster David Paleologos, will join us live from Boston with a look at all the latest election developments.

Please join us. The Kudlow Report. 7pm ET. CNBC.

Scott Brown’s Great Tax-Cut Message

I know there have been a million blog posts about the Scott Brown race for the Senate. But I want to add a couple of points to the discussion.

When I interviewed Scott two weeks ago on CNBC, before any polls were out, what struck me about him was his breathtakingly clear message: low marginal tax rates, as per President John F. Kennedy, who was the first post-WWII supply-side president. There also was the pledge to vote against Obamacare, but it was so interesting to me that Scott touted the JFK tax cuts — a) because it was a Democratic tax-cut message and b) because the Ted Kennedy Democrats in Massachusetts and nationwide not only abandoned the JFK supply-side-growth message, they actively opposed it.

So here is Scott Brown appealing to tea-party Democrats, independents, and Republicans, principally by touting the last across-the-board Democratic tax-cut plan.

There are many other successful Scott Brown messages in play, including the terrorist message and the Obamacare message. But this tax-cut message — i.e., reducing marginal tax rates across-the-board for all taxpayers — really interests me as a great message.

Democrats aren’t the only ones who have lost this message. To a large extent, so has the GOP. And today, just as during the Reagan years, and reaching all the way back to JFK, the bipartisan allure of this supply-side message has virtually been lost in the discussion of the Massachusetts election.

Pundits are missing it, and so are the Republican congressional leaders. If Republicans want Democrats and independents to come back to their side, they should think about the fairest pro-growth message of them all: lower tax rates for everybody. Get out of the box of rich people and class warfare. For Democrats, that box has been a loser. But for timid Republicans always on the defensive, that box is a loser, too.

Reagan knew this, and that is why he touted JFK’s across-the-board tax cuts.

Friday, January 15, 2010

Obama Rewards Losers, Punishes Winners

It’s not free-market capitalism.

President Obama’s misbegotten bank tax is precisely the wrong policy at precisely the wrong time. It will wind up backfiring across the board. Why? Because bank consumers and borrowers are the ones who will wind up paying this tax, creating an obstacle to economic recovery.

Obama is actually rewarding losers and punishing winners — exactly the reverse of free-market capitalism.

Who’s being rewarded? Obama’s bank-tax penalty is being used to finance the failed government takeovers of GM, GMAC, and Fannie and Freddie. And let’s not forget the $75 billion failure of the so-called foreclosure loan-modification program. To this day, no one knows where that money went. But the big banks are going to be forced to finance this through a tax that will damage lending, stockholders, and consumers.

This is sheer political favoritism. Crony capitalism at its worst, with a sub-theme of bailing out Obama’s Big Labor political allies. It’s just like his bailout of the unions by exempting them from the so-called Cadillac insurance tax until 2018, all while the rest of us may have to suffer under that tax.

Speaking of political unfairness and favoritism, mortgage giants Fannie and Freddie will not pay a nickel of this tax. These government-sponsored enterprises were at the very center of the financial maelstrom, financing the government’s quotas and targets for unaffordable mortgages.

Think about this for a second. President Obama is out there bashing away at excessive bonuses. And yet Fannie and Freddie’s CEOs stand to make $6 million in the next year or two. Huh? These are big-government-owned bureaucrats. They ought to be paid like GS-18s.

Of course, the Federal Reserve, which is having its most profitable year ever, was probably the main culprit in all this, with its negative-real-interest-rate easy-money policy, which amounted to throwing red meat to a pack of sharks in the deepest waters. But this tax punishes and penalizes the biggest banks, institutions that have already met their obligations by paying down TARP, with interest, and by providing taxpayers with a tidy profit on the stock warrants they held.

Now, this is not to condone the major mistakes made by the big banks. They were overleveraged, borrowed way too much, and sold highly flawed mortgage bonds and other complex derivatives. And the banks should not be paying big bonuses for 2009 — not for the period during which they were TARPed. That’s their biggest mistake.

However, with the banks having paid down TARP, the U.S. government should not be waging war against them. Somebody ought to tell the White House that al-Qaeda is the real enemy, not the banks.

At the same time, taxing the living hell out of the banks will not promote economic recovery and long-term prosperity.

President Obama says he wants to stop risky bets. Well look, the way to accomplish that is through higher capital requirements, stricter limits on leveraged borrowing, and an end to the policy of “too big to fail.” Across-the-board FDIC insurance assessments are a much better way of maintaining a bank safety net.

Instead, Team Obama wants to place a 15-basis-point tax on the banks, essentially layering it on non-insured bank funding. It amounts to a tax on future lending, shareholder equity value, and the consumers of bank services who will pay the tax costs passed on by the banks. It’s just like the corporate tax: Businesses don’t pay taxes, people do.

And consider this: One dollar of bank capital generally works out to around ten dollars of potential bank loans. That means this $90 billion tax proposal could very well cut off a staggering $1 trillion of future bank lending when credit demand picks up.

That’s how this works. This tax will slow down profits and capital. And the diminished capital will mean fewer loans when loan demand picks up. It’s exactly the reverse of what we need to grow our economy.

And the unfairness continues. Insurer MetLife, a bank holding company, and the regional Hudson City Bank Corp., both of which never took a dime of TARP money, will be penalized by this tax. That just ain’t fair.

President Obama’s crony politics rewards losers and penalizes winners. He is engaging in sheer, raw, left-wing, class-warfare politics. It’s yet one more reason why the Democrats are going to get clobbered at the polls come November.

Voters know a smoked turkey when they see one. Remember, you can fool some of the people some of the time, but you can’t fool all the people all the time.

Mark my words, all of this left-wing demagoguery, political favoritism, and crony capitalism will not end well for the Obama Democrats.

On CNBC's Kudlow Report Tonight

This evening at 7pm ET:



*Mike Holland, Holland & Company Chairman; The China Fund Board of Directors
*Barbara Marcin, Portfolio Manager; Gabelli Blue Chip Value Fund
*Michael Pento, Delta Global Advisors, chief economist
*Jim LaCamp, Macroportfolio Advisors Sr. VP, Portfolio Manager


Suffolk pollster David Paleologos will join us with poll results showing GOP challenger Scott Brown moving ahead of Democrat Martha Coakley in Tuesday’s significant special Massachusetts Senate election.


On to discuss:

*Charlie Cook, Cook Political Report; Editor & Publisher
*Larry Sabato, Director, University of Virginia Center for Politics; "A More Perfect Constitution" author

Please join us. The Kudlow Report. 7pm ET. CNBC.

Thursday, January 14, 2010

On CNBC's Kudlow Report Tonight

This evening at 7pm ET:

CNBC chief Washington correspondent John Harwood reports.

Plus…a recap of the exclusive interview with Treasury Secretary Geithner.



*Brian Gardner, Senior Vice President, Washington Research for Keefe, Bruyette & Woods
*Mark Calabria, Director of Financial Regulation Studies at the Cato Institute
*David Goodfriend, Fmr. Clinton W.H. Official; "Left Jab" Co-Host/Air America Co-Founder

David Goldman, Senior Editor First Things Magazine


*Peter Cohn, National Journal's Congress Daily Tax Reporter
*Jimmy Pethokoukis, Reuters Money & Politics Columnist


*Peter Navarro, "The Coming China Wars" Author; University Of California - Irvine Business Professor
*Quentin Hardy, Forbes National Editor

Please join us. The Kudlow Report. 7pm ET. CNBC.

Can We Stop the Attack on Bankers?

The financial crisis being investigated down in Washington right now, with bankers on the hot seat amidst huge media coverage, has been over for six months now — at least. That’s one reason why the KBW bank index has recovered 140 percent over the last 10 months.

It’s important to take a hard look at the numerous causes of the crisis. There’s no question that bankers made big mistakes in overleveraging and borrowing to buy and sell various mortgage-related securities and other complex derivatives. They know it. That’s why they fessed up, almost semi-groveling, at the hearing yesterday. But the big boys have paid down their TARP, and they’ve turned a tidy taxpayer profit in the process.

So, is it possible that we can put an end to this obsessive national attack on bankers? Ultimately, the bankers will play a key part in the economic-recovery solution. Al Qaeda is our enemy. Not the bankers.

Now take a look at the following chart. It looks more complicated than it really is. What it shows is job losses during all the post-WWII recessions, two years after the jobs peak.

You’ll see that all the post-war cycles had employment rising by now. But, as this chart clearly shows, it’s still falling. That’s the issue for America right now.

Will someone please explain to me how raising taxes on banks — or anybody else for that matter: rich people, capital gains, whatever — will make the jobs line go up instead of down? Someone please explain to me how we’re going to tax our way out of this jobs decline?

Bank taxes? What a terrible idea. Raising personal income taxes, health-care related taxes, capital-gains taxes? All terrible ideas. It’s totally nuts. These tax hikes are not going to create jobs here in America, they will take jobs away.

And as far as the financial crisis is concerned, I’m still waiting for the commission to investigate the critical role the Greenspan & Bernanke Fed played in creating the bubble that led to the meltdown. As Stanford economist John Taylor has said numerous times on the show, the Fed held rates down too low for too long. Moreover, we must also explore the role government policy played in mandating unaffordable mortgages and then financing them through Fannie Mae and Freddie Mac.

Wednesday, January 13, 2010

On CNBC's Kudlow Report Tonight

This evening at 7pm ET:

NBC’s Brian Mooar reports.

Plus…CNBC’s David Faber gets the reaction from various bank CEOs.


*Robert Reich, Fmr. Labor Secretary Author, "Supercapitalism"; CNBC Contributor; Univ. of CA., Berkeley, Prof. of Public Policy
*Bill Isaac, Fmr. FDIC Chairman; Chairman of The Secura Group of LECG

Interest rates too low for too long?

*Richard Clarida, Pimco Global Strategist
*Lee Hoskins, Fmr. Cleveland Federal Reserve President

CNBC chief Washington correspondent John Harwood reports.

*Rep. Peter Welch (D-VT)
*Reuters columnist Jimmy Pethokoukis

Plus…Did the $787 billion stimulus package really save 2 million jobs as the White House claims?

Please join us. The Kudlow Report. 7pm ET. CNBC.

Google Leaving China?

Google's chief legal officer David Drummond joined me last night to discuss dramatic reports that the internet giant is considering exiting China following “highly sophisticated” cyber-attacks aimed at human rights activists.

Did I Say Dumb Tax Policy?

The S&P 500 dropped for the first time in 2010 yesterday, falling nearly 1 percent and ending a six-day New Year’s rally. You want to know why? It wasn’t China’s mild credit-tightening move to raise reserve requirements on their banks. That’s actually a good idea. It may help calm the threat of Chinese overheating. What knocked stocks down (including a 2 percent drop in the bank index and big losses all around for the major banks) is the new White House proposal for a $120 billion tax hike on banks.

Just look at the slaughter across the board: BofA, Citi, Morgan Stanley, Goldman, JPMorgan — all of them down 2.5 to 3.5 percent. This had nothing to do with China. What it’s all about is a ridiculous bank-tax proposal that is anti-growth, anti-capital, anti-profits, anti-shareholders, and anti-bank-lending.

The worst part about the proposal is that at the end of the day it’s going to be bank consumers who wind up paying the tax. Banks will pass the tax along.

But there are many more problems with this absurd bank-tax-hike proposal. Think of this: The U.S. government bailed the banks out with TARP. Then the banks repaid TARP last year, including the stock warrants that provided a handsome taxpayer profit from the banks. And now the government wants to tax them? In other words, help the banks get healthy, and then punish them? I don’t understand it.

And here’s yet another ridiculous part of this story: The largest banks that de-TARPed, and are regaining their health, are now, with this tax, supposed to cover the government-owned failures like GM, GMAC, AIG, and Fannie and Freddie, which are running up huge deficits because they may be on the taxpayer dole in perpetuity. In other words, the healthy banks that made good decisions and paid down TARP are now getting taxed so that the government can finance the bad actors. This makes no sense at all.

Look, the big guys have de-TARPed. Now it’s time to get off their backs. As I wrote yesterday, bankers should not get bonuses for the period in which they were TARPed. But for the new year, since the bankers met their TARP obligations, Team Obama should leave them alone. Let the bankers help the economy grow, create wealth, and create jobs.

It gets worse. On top of all this bank-tax stupidity, House and Senate Democrats now want to apply a Medicare payroll tax hike to fund Obama’s health-care plan. This would include taxing investments like capital gains and dividends rather than just wages. The wage hike is bad enough. And Obama’s health plan is bad enough. But applying this tax to investments simply raises the cost of capital, lowers the return on risk-taking, and damages prospects for economic-recovery growth.

What is Team Obama thinking?

I’ve never seen anything so dumb. No wonder stocks sold off yesterday, especially bank stocks.

If these tax hikes actually get through Congress and the White House in the weeks ahead, the stock market is going to sink no matter how good the fourth-quarter profits picture.

We cannot, and will not, tax our way into prosperity. It won’t happen.

Did I say dumb policy?

Tuesday, January 12, 2010

On CNBC's Kudlow Report Tonight

This evening at 7pm ET:


CNBC chief Washington correspondent John Harwood reports.

On to debate:

*Steve Moore, WSJ senior economics writer
*Michael Linden, Center for American Progress


Stanford economics professor John Taylor will join us.

CNBC’s Hampton Pearson will preview tomorrow’s hearing.


*Jay Eisenhofer, co-managing partner of Grant & Eisenhofer
*Tom Curran, Ganfer & Shore Attorney

Also…Florida GOP Senatorial Candidate Marco Rubio will be aboard.

Please join us. The Kudlow Report. 7pm ET. CNBC.

My Solution to the Banker Bonus Brouhaha

I have a few thoughts concerning the burgeoning public backlash against big banker bonus announcements expected in the weeks ahead. This backlash of course stems from taxpayer fury over banks which were rescued by taxpayer-financed TARP money.

A recent Rasmussen poll revealed that 61 percent believe the government should regulate the level of pay and bonuses for company executives who were on the public dole. However, if the bailed out banks do pay their money back, then another 64 percent say the government should actually stay on the sidelines and not regulate compensation.

Here's my thought: the banks need to step up the plate, fess up, and thank the American taxpayers for their largesse. It’s a public relations move. They’ve never really done that. Taxpayers deserve a thank you. That's point number one.

Point number two: in June of last year, JPMorgan and Goldman Sachs, joined by eight other banks, all paid down TARP. So, my humble opinion is that these banks ought to receive their bonuses, whatever that number may be, for the second half of the year, but not the TARP-ed up first half of the year.

As for the other big banks like Citi, Bank of America, and Wells Fargo, they didn't de-TARP until the end of 2009. So why should they get any bonuses at all? And if they do get any bonuses, these bonuses should be minuscule.

In other words, let the banks that paid back their TARP money in June take a half-year bonus. The ones that didn’t should forego 2009, and look forward to 2010.

Bernanke’s Days May Be Numbered

Will Fed Vice Chairman Donald Kohn replace Ben Bernanke? It's certainly possible, because Bernanke currently has four Senate holds on his nomination. In other words, there may not be a vote by January 31st when his term as chairman expires.

Take a look at what Senators Judd Gregg and Chris Dodd had to say on CNBC's Squawk Box Monday morning:

Gregg: I think a point which listeners might be interested in is what happens to Bernanke’s position if he’s not confirmed by the end of January?

Dodd: By the end of January, if we don’t confirm him, then he could not serve as chairman. He could serve as a member of the board, but you’d then have to have the vice chairman become the chairman.

Bottom line is Bernanke's got trouble because of the four senators who have placed a hold on his nomination. That means a floor debate about Bernanke that will require a 60 vote cloture roll call even before they get to vote up or down on the actual nomination. In other words, they’ve got to vote on closing down the debate. So it could delay a full vote well past January 31st when Mr. Bernanke’s term expires.

A key point in all this is that many believe Donald Kohn—a brilliant economist—is nonetheless, even more dovish than “Helicopter Ben.”

Adding fuel to the flames, in yesterday's Wall Street Journal, distinguished Stanford economist John Taylor who joined me on the Kudlow Report last week, pushed back against Bernanke's Taylor Rule criticism from two Sunday's ago, when Bernanke attempted to absolve the central bank from any easy money bubble culpability earlier in the decade.

The Taylor Rule clearly shows that the Fed's target interest rate was way too low in 2002-2005. Too low, too long. In fact, real interest rates during that period were negative. As far as Wall Street trading risk and borrowing leverage is concerned—that was of course all part of the meltdown—negative real interest rates are like throwing gobs of bloody red meat to a pack of hungry sharks.

This Bernanke reconfirmation story gets trickier and trickier with each passing day. More to be revealed.

Monday, January 11, 2010

On CNBC's Kudlow Report Tonight

This evening at 7pm ET:



*Clusterstock’s John Carney
*The New York Times’ Andrew Ross Sorkin
*Carlos Gutierrez, former United States Secretary of Commerce
*Bill Isaac former FDIC chairman and current chairman of LECG's global financial services

-Bloomberg story - Bank Profits Means Stocks at 15% Discount to S&P 500

*Mike Holland, chairman of Holland & Company

*Peter Navarro, UC-Irvine business professor
*Mark Calabria, director of financial regulation studies at the Cato Institute


*Jim Paulsen, chief investment strategist of Wells Capital Management

*John Kilduff, partner at Round Earth Capital


Give us a call! 800-800-CNBC. Phone lines open up at 7pm ET.

Please join us. The Kudlow Report. 7pm ET. CNBC.

Enough Is Enough—Time to De-stimulate

We’ve got to get America working again. That's the message in my latest column, De-stimulate. That's right. De-stimulate. As in get rid of higher taxes, regulations, healthcare mandates, EPA mandates, spending and borrowing worries, etc, etc. This big government morass is creating so much uncertainty and confusion that even our profitable businesses are afraid to hire new workers. Why? Because government is muddying the water and making it too darn expensive.

That’s the problem.

President Obama's green jobs plan announced this past Friday? It’s an outrage. $2.3 billion dollars for 17,000 jobs? Do the math. That comes to a whopping $135,000 per job! Un-be-lieve-able. We’re going to wind up paying for this flood of ineffective stimulus spending in higher taxes down the road. Let us keep our own money thank you very much.

Here’s another outrage: Stop the EPA from its new $90 billion dollar smog regulatory plan that frankly, will be infinitesimal in whatever benefits it generates. And why haven’t we reversed the ban on oil and gas drilling, with crude at $83 and retail gas edging closer to $3 bucks a gallon? We should be embarking on an all-out drill, drill, drill campaign. Guess what? That would create jobs.

My friend Steve Moore at the WSJ has been talking about tax chaos. He’s exactly right. Why don't we just lower tax rates for individuals, businesses, and capital gains? That would be real stimulus. That's the missing link, that’s the invisible hand that has worked so well, and so often in the past. But it has been flatly rejected by Team Obama.

Look, we have enough monetary stimulus from the Fed. Plenty. We have very profitable corporations. Stocks are rising. There is an economic recovery taking place right now, but it's only half a recovery loaf if more people aren't going back to work.

That is precisely why I want to get rid of the whole loaf of these anti-jobs polices pouring out of Washington. It’s time to de-stimulate.

Friday, January 08, 2010


After the arrival of a disappointing December jobs report, my thought on putting America back to work is simple: de-stimulate. That’s right. Get rid of the Obama stimulus monster, including the government takeover of health care, cap-and-trade, and all this nonsensical talk of creating green jobs. Get rid of the increase in marginal personal tax rates and capital-gains tax rates. Get rid of the payroll tax hike from the health-care talks. Get rid of the spending that is a counterweight to growth. Get rid of it, every part of it. It’s creating so much uncertainty that even profitable businesses are afraid to hire new workers and expand.

It’s like business is on hold as it waits for the next Washington shoe to fall.

Check this out. On Friday, the day of the sub-par jobs release, President Obama comes out with a new green-jobs program that will cost taxpayers $2.3 billion. He predicts targeted tax credits for all of his faddish “energy savers” -- presumably determined by hoards of EPA bureaucrats -- will create 17,000 new jobs. This is out of a total workforce of 153 million.

And wait, it gets better. The average cost of these alleged new green jobs will be $135,000 per job. It’s sorta like the $780 billion stimulus plan, half of which has supposedly saved 1 million jobs at roughly $200,000 per job.

And on the subject of energy-related jobs, the EPA is now going to penalize manufacturing America -- or what’s left of it -- with tougher standards to reduce smog. Of course, smog has already fallen 25 percent in the last three decades. And the EPA’s projected smog savings are so miniscule compared to the new costs for business that the National Association of Manufacturers, the petrochemical makers, and others are screaming bloody murder.

This little EPA beauty could cost up to $90 billion annually. All of this with a 10 percent unemployment rate, mind you. It’s another triumph for left-wing social policy over economic-growth policy.

And get this. Interior Secretary Ken Salazar recently announced that he is closing down federal lands for oil and gas drilling. This with the price of oil hovering around $83 a barrel and retail gas at the pump moving in the direction of $3 per gallon. Huh? Does anybody in Washington have any common sense at all?

Steve Moore of the Wall Street Journal just wrote a good column about tax chaos in the new year, with small-business write-offs for capital purchases expiring, the alternative minimum tax (AMT) un-indexed for inflation, and no fix in place for the estate tax, which is set to rocket from zero back to 55 percent.

And let’s not forget, as Harvard economist Greg Mankiw reminds us on his excellent blog, that the $780 billion stimulus plan was supposed to generate a peak of only 8 percent unemployment. Not happening -- at least not yet.

So my point is this: Get rid of all this government spending, taxing, regulating, and meddling. De-stimulate. Let us keep our own money as workers, small-business owners, and corporate employees. Stop any future tax hikes. Stop them. And bring down business tax rates for large and small companies, from 40 percent (federal, state, and local) to something around 25 percent. And take a cue from FedEx CEO Fred Smith, who wants to revive the manufacturing and transportation industries with immediate cash-expensing tax write-offs for investment in new equipment.

President Obama has talked about a zero cap-gains tax for small investors. But why not provide more capital access for everybody, small- and large-business investors?

In light of all the tax-and-regulatory threats, it’s too expensive to hire right now. So get rid of all the so-called stimulus plans and social policies to transform the government’s relation to the private economy. Remove these obstacles.

Now, even with an 85,000 drop in corporate payrolls in December, labor-market conditions are gradually improving, however slowly. Leading indicators like temporary-help workers, manufacturing overtime hours, and jobless claims are pointing to better job creation in 2010. But it’s painfully slow. And that’s why the tax-and-regulatory obstacles from Washington must be removed to speed up the employment-recovery process.

The economy has more than enough monetary stimulus, and corporations are profitable. The stock market rose nearly 3 percent in the first week of the new year, and is up 70 percent from the March 2009 low. The recession is over. But America must go back to work to truly get the country moving again. Unfortunately, Washington is standing in the way.

There’s a populist wave coming, but it’s from the right, not the left. Free-market populism emanating from the tea-party movement wants government out of our businesses and out of our pockets. These folks are right.

Right now, Washington is completely wrong.
This evening at 7pm ET:

Obama's Clean Tech Jobs
with CNBC's John Harward

with CNBC's Steve Liesman

How to Get America back to Work
*Peter Navarro, Univ. of California/Irvine business professor
*Robert Reich, Former Labor Secretary
*Victor Davis Hanson, Sr. Fellow Hoover Institution
*Steve Moore, WSJ Sr. Economics Writer

Weather Report -- Florida in Deep Freeze

Why the Jobs Report is Bad for Dems, but Good for the Country in the Long Run
*Mark Walsh, Founding CEO at Air America
*James Pethokoukis, Reuters Money & Politics Columnist


Give us a call! 800-800-CNBC. Phone lines open up at 7pm ET.

Please join us. The Kudlow Report. 7pm ET. CNBC.

Thursday, January 07, 2010

On CNBC's Kudlow Report Tonight

This evening at 7pm ET:


*Kellyanne Conway, The Polling Company President & CEO
*Craig Shirley, "Rendezvous with Destiny" author; Shirley & Banister Public Affairs President

Will Republicans seize the opportunity or will they blow it?

*CNBC’s Rick Santelli
*Matthew Continetti, Weekly Standard Staff Writer
*Kellen Giuda, National Coordinator for Tea Party Patriots; St. Anselm College; New Hampshire Institute of Politics

CNBC’s Mary Thompson reports.


*CNBC’s Rick Santelli
*Ron Insana, author, "How to Make a Fortune from the Biggest Bailout in U.S. History"

Messrs. Santelli and Insana will weigh in.


Give us a call! 800-800-CNBC. Phone lines open up at 7pm ET.

Please join us. The Kudlow Report. 7pm ET. CNBC.

John Taylor vs. Ben Bernanke

Was the lack of regulation chiefly to blame for unleashing the housing bubble? Or was it the Fed's easy money, low interest rate policy? Joining me to discuss on last night's Kudlow Report was distinguished Stanford economics professor John Taylor, creator of the Taylor Rule.

Wednesday, January 06, 2010

On CNBC's Kudlow Report Tonight

This evening at 7pm ET:

CNBC chief Washington correspondent John Harwood will report.


GOP candidates on board:

*Linda McMahon, former chief executive of World Wrestling Entertainment
*Fmr. Rep. Robert Simmons
*Peter Schiff, President, Euro Pacific Capital

Democratic CT Attorney General Richard Blumenthal will join us.

NBC’s Steve Handelsman reports.

Is the Fed messing with the Taylor Rule?

Joining us to discuss will be John Taylor, creator of the so-called Taylor Rule for guiding monetary policy. Mr. Taylor is a Stanford University economic professor.


Give us a call! 800-800-CNBC. Phone lines open up at 7pm ET.

Please join us. The Kudlow Report. 7pm ET. CNBC.

Tuesday, January 05, 2010

On CNBC's Kudlow Report Tonight

This evening at 7pm ET:


*Matthew Continetti, Weekly Standard
*Robert Reich, former Labor Secretary; "Supercapitalism" Author

CNBC chief Washington correspondent John Harwood reports.


*Dan Gross, Newsweek Columnist
*Steve Moore , Senior Economics Writer for the Wall Street Journal Editorial Board; "The End of Prosperity" Co-Author

Plus, pending home sales plunge while factory orders rise—what's it mean for the economic road to recovery?

*Dan Mitchell, senior fellow at the Cato Institute
*Christian Weller, senior fellow ar Center For American Progress


Give us a call! 800-800-CNBC. Phone lines open up at 7pm ET.

Please join us. The Kudlow Report. 7pm ET. CNBC.

Can Scott Brown Win Teddy Kennedy's Senate Seat?

Upset of the new decade in the works? Could the JFK-Ronald Reagan tax-cutting message lead the GOP to a huge political victory in Massachusetts? Republican Senate candidate Scott Brown joined me last night to discuss.

Monday, January 04, 2010

On CNBC's Kudlow Report

This evening at 7pm ET:

-Will stocks push the Fed to raise rates sooner rather than later?
-What did we learn from Bernanke's speech yesterday?

On board:

*Peter Navarro, UC-Irvine business professor and author
*Vince Reinhart, AEI resident scholar; former director of the Federal Reserve Board's Division of Monetary Affairs


*Steve Forbes, editor-in-chief of Forbes; president/CEO of Forbes Inc
*Amity Shlaes, author of "The Forgotten Man"; senior fellow in economic history at the Council on Foreign Relations


*Bob Froehlich, senior managing director at The Hartford
*Ron Kruszewski, chairman and chief executive of Stifel Financial Corp


Massachusetts Republican Scott Brown will join us.


Give us a call! 800-800-CNBC. Phone lines open up at 7pm ET.

Please join us. The Kudlow Report. 7pm ET. CNBC.

10 Best Dressed Men of 2009

Another year, another amusing award bestowed upon yours truly by hard-hitting political consultant and fashion aficionado Roger Stone. Last year, I finished in second place, just behind President Obama. This year I slipped a spot courtesy of actor Jude Law, but still managed to stay ahead of George Clooney.