Friday, July 30, 2010

On CNBC's Kudlow Report Tonight

Tonight at 7pm ET on CNBC:


THE GOP PLAN TO FIX THE ECONOMY
Congressman Paul Ryan (R-WI) will join us.




THE MARKETS…
STOCK MARKET UP 7% IN JULY, CAN THE JULY RALLY EXTEND INTO AUGUST?
WALL ST. EXPECTS BETTER TIMES AFTER MIDTERM ELECTIONS

LARRY'S OPTIMISM CHECK LIST
- Companies Highly Profitable
- Businesses Investing Rapidly
- Consumers Saving More
- Trade Taking Off
- Low Inflation & Low Interest Rates
- November Regime Change

Panel:

- Bill Baldwin, Forbes Editor
- Jim LaCamp, Macroportfolio Advisors Sr. VP, Portfolio Manager
- David Goodfriend, Fmr. Clinton W.H. Official; "Left Jab" Co-Host/Air America Co-Founder

TAX CUT FIGHT
CNBC chief Washington correspondent John Harwood reports.

BEWARE THE BALANCED BUDGET DEAL
- Peter Ferrara, Policy Innovation Dir. of Entitlement & Budget Policy

THE MOST LOVED CEOs
CNBC’s Jane Wells will report.

CHINA HAS OVERTAKEN JAPAN, ARE WE NEXT?

- Joel Kotnick, "The City: A Global History" author
- Zachary Karabell, CNBC Contributor/River Twice Research President
- John Rutledge, Rutledge Capital Chairman; Fmr. Reagan Economic Advisor

THE PRICE OF BLISS: A COST BREAKDOWN OF CHELSEA CLINTON’S WEDDING
NBC’s Rehema Ellis will be live from Rhinebeck, NY.

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

Thursday, July 29, 2010

Is Sen. Bayh a Supply-Sider in Donkey's Clothing?

Now here's a real Democratic supply-side reformer in the John Kennedy tradition. Sen. Bayh has explicitly chosen growth over class warfare. Hats off to him. The Democratic tax revolt is brewing. Unbelievable.












Wednesday, July 28, 2010

How to Restore American Confidence

Great debate last night on what must be changed in Washington to restore confidence and growth. Joining me were former Clinton senior advisor Richard Socarides and outspoken University of Maryland economist Peter Morici.












On CNBC's Kudlow Report Tonight

Tonight at 7pm ET on CNBC:

IS OBAMA DOING ENOUGH FOR SMALL BUSINESS?

-Peter Navarro, business school professor at UC Irvine
-Kristie Arslan, Executive Director of the National Association for the Self-Employed


AN INTERVIEW WITH SEN. EVAN BAYH … TAXES, SPENDING & THE ECONOMY

- Sen. Evan Bayh (D) Indiana

FINREG: IS GOVERNMENT IMPOSING QUOTAS ON WALL STREET?

CNBC’s Eamon Javers reports from Washington.

4 WAYS WALL STREET WILL BEAT NEW FINANCIAL REGULATIONS

- Brian Gardner, Keefe Bruyette & Woods Washington analyst

NOT AS BAD AS IT SEEMS? (JOBS THEN VS. NOW: 1/02 VS. 8/09 RECESSIONS)
Businesses Whine, But Data's Fine?

CNBC senior economics reporter Steve Liesman reports.

DID STIMULUS STAVE OFF DEPRESSION?

- Greg Valliere, Chief Political Strategist; Potomac Research Group CNBC Contributor
- Andy Busch, BMO Capital Markets

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

Monday, July 26, 2010

On CNBC's Kudlow Report Tonight

Tonight at 7pm ET on CNBC:

CAN WE MOVE FROM FEAR TO OPTIMISM?

BUSH TAX CUTS: WHO, WHAT, WHERE, WHY & WHEN
CNBC chief Washington correspondent John Harwood reports from Washington.


BUSH TAX CUTS DEBATE:
WOULD TAXING THE WEALTHY HURT THE ECONOMY?

- Howard Dean, Fmr. Vermont Governor; CNBC Contributor; Fmr. Presidential Candidate
- Steve Forbes, Forbes Chmn & CEO; Forbes Editor-in-Chief; Fmr. Presidential Candidate; "How Capitalism Will Save Us" Co-Author

OPTIMISM FROM THE CORNER OFFICE
- Sir Martin Sorrell, WPP CEO

BYE-BYE TONY HAYWARD; NINE LIVES OF BP
CNBC’s Bertha Coombs reports.

MARKETS: COMPANIES HAVE CASH, WHY AREN'T THEY HIRING?

- Michael Farr, CNBC Contributor; Farr, Miller & Washington President
- Joe Battipaglia, Stifel Nicolaus Market Strategist

PLUS … LARRY'S OPTIMISM CHECK LIST

- EARNINGS
- ZERO INFLATION
- ZERO FED RATE
- DR. COPPER: PRICES RISING AGAIN
- WASHINGTON GRIDLOCK COMING IN NOVEMBER

HEDGE FUNDS GO QUIET IN WAKE OF FIN-REG ESCAPE
CNBC’s John Carney reports.

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

Saturday, July 24, 2010

Liberal Tax Revolt Game-Changer?

The liberal tax revolt, as the Wall Street Journal is calling it, is a very important topic -- especially for investors and small-business entrepreneurs. And for new jobs.

The so-called revolt is comprised of three Democratic senators: Kent Conrad, Evan Bayh, and Ben Nelson. They want to extend all the Bush tax cuts. That includes taxes on the wealthy, or the top personal tax rate, the investment taxes on capital gains and dividends, and the estate tax.

So is this revolt a game-changer, or merely wishful thinking?

With a strong pushback against the revolt by President Obama, Treasury man Tim Geithner, and House Speaker Nancy Pelosi, right now it looks like wishful thinking. But with Democrats getting badly paddled in various polls, you never know.

When Tim Geithner told me in a CNBC interview a few weeks ago about his 20-20 rule for the top tax rate on capital gains and dividends, I blogged that this was a good thing -- in particular the story for dividend taxes, which could go to 39.6 percent. But no increase at all on investment taxes would be even better.

Let’s say you’re an investor who went long stocks in March 2009 and now has a long-term capital gain. You could sell right now at a 15 percent tax rate before it goes up to 20 percent. In a nutshell, this is the tax-hike story that has hung over the stock market this year like the proverbial Sword of Damocles. Year-end tax-related selling could still be in front of us.

So the liberal tax revolt is a very important issue for investors. It could mean a potential stock market rally in the second half of the year.

It’s also important for job seekers. Just take a look at the new Investor’s Business Daily poll by the accurate surveyor Raghavan Mayur. He notes that the average length of joblessness has soared to over 35 weeks, nearly two-times greater than the previous high for any downturn. And his polling data show that nearly one-half of households can be categorized as “job-sensitive.” That’s a huge number. These are the people who are either looking for work or fear that they may be laid off -- or both.

Regarding the direction of the country, confidence in the job market, the likelihood of a second recession, and satisfaction with federal economic policies, Mayur’s polling shows that the large job-worrying population is extremely pessimistic. Come November, that’s going to translate into votes against the Democratic Congress. And this pessimistic, jobs-sensitive group is undoubtedly thinking, along with the tax-hike-revolt Democratic senators: What sense does it make to raise taxes on anyone? Or on any business, large or small?

Then there’s the confidence-threatening war between business and the White House, which is also related to the liberal tax revolt. It’s still a battle royale between the nation’s business leaders and the administration over taxes, spending, regulation, and trade.

Treasury man Geithner made lite of this war at a Christian Science Monitor breakfast this week. A Daily Caller headline read: “Geithner Bored by Complaints from Business about Obama Policies.” White House chief of staff Rahm Emanuel also doesn’t seem that concerned. In a Wall Street Journal interview with Jerry Seib, Emanuel was a bit more conciliatory about reexamining regulatory issues, but he was still inconclusive.

There are two big things that businesses want right now: One is an across-the-board corporate tax cut, including cash expensing for investment. This is the single most powerful job-creator of all. The other is a senior business executive in one of the key economic policy slots in the White House. Neither of these requests seems to be on the table. But to conclude that the White House is burying the hatchet with business you’d have to see these conditions met.

So far it ain’t happening.

Friday, July 23, 2010

On CNBC's Kudlow Report Tonight

Tonight at 7pm ET on CNBC:

LIBERAL TAX REVOLT: IS IT A GAME CHANGER OR WISHFUL THINKING FOR INVESTORS & SMALL BUSINESS ENTRENPRENEURS? PLUS … WHITE HOUSE WAR AGAINST BUSINESS: WILL THEY BURY THE HATCHETT OR MORE SKIRMISHING TO COME?


- Greg Valliere, CNBC Contributor Potomac Research Group Chief Political Strategist
- Andy Busch, BMO Capital Markets; CNBC Contributor -

KILL THE DEATH TAX?

- Michael Linden, Center for American Progress Assoc. Dir. for Tax & Budget Policy
- Jerry Bowyer, CNBC Contributor/Syndicated Columnist

EUROPEAN BANK STRESS TESTS
CNBC’s Simon Hobbs reports.

THE MARKETS

- David Kotok, Cumberland Advisors Chairman & Chief Investment Officer; CNBC Contributor
- Peter Navarro, "The Coming China Wars" Author; University Of California - Irvine Business Professor

WASHINGTON OUTRAGE: SEN. JOHN KERRY SKIPS TOWN ON SAILS TAX
- Dan Mitchell, Cato Institute Sr. Fellow

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

It's a Fiscal Problem, Not a Fed Problem

Ben Bernanke threw a curveball in his midterm report to Congress this week. The Fed view of the economy has been downgraded since it last reported in February. Although the official Fed forecast for 2010-11 is still 3 to 4 percent real growth, Bernanke sounded particularly gloomy when he characterized the economy as "unusually uncertain." And he indicated that the majority view of the Fed Board of Governors and Reserve Bank presidents is that the risks to growth are "weighted to the downside."

But here's the disconnect. With no inflation and weaker growth, including stubbornly high unemployment, Bernanke mostly talked about an exit strategy that would shrink the Fed's balance sheet by removing liquidity. This was the Fed's bias last winter when the recovery looked stronger. Now that the recovery looks weaker, the stock market was hoping to hear Bernanke hint of an easier policy that would increase liquidity if necessary. Didn't happen.

At the end of two days of testimony, Bernanke's message seemed to be this: Expect the zero-interest-rate policy to be extended for another year. Futures markets now predict free money until September 2011.

Whether the economic outlook is as downbeat as Bernanke suggests is an interesting question. The vast majority of corporate profit reports for the second quarter show better-than-expected earnings and top-line revenues. In other words, the CEOs are a lot less pessimistic about the future economy than Wall Street or Main Street. And a combination of strong profits, a zero interest rate, and a positively sloped Treasury yield curve would certainly seem to rule out a double-dip recession.

However, one year into recovery, private jobs should be growing much faster and unemployment should be a lot lower. Following a deep recession, economic growth should be closer to 8 percent than 3 percent.

But there are limits to Fed fine-tuning. The central bank can produce more money, but that doesn't mean it can produce more jobs.

Look, the Fed has already injected $1.4 trillion of new money into the economy, of which about $1 trillion of excess reserves are unused and on deposit at the central bank. Putting it another way, the economy has more liquidity than it knows what to do with. What's the problem? All that excess money is not being used. And this, I believe, is a fiscal problem, not a Fed problem.

Think of all the economic obstacles of spending, taxing, and regulating coming out of Washington. What should be done to spur growth? Keep tax rates down. And stop passing massive regulatory bills, like the bank reform Obama just signed into law.

What else? The White House and Congress should end the war between business and Washington. Listen to what the CEOs are saying. Reduce the uncertainty premium caused by massive deficit spending and 2,500-page regulatory bills. Stop the assault against entrepreneurship. Keep down the cost of new job hires. Stay focused on free-trade expansion.

And then reduce tax rates for large and small businesses across-the-board. Speed up business investment tax write-offs. And extend the Bush tax cuts for another couple of years until a true pro-growth tax reform can be developed -- one that will flatten rates, simplify the code, and get rid of unnecessary tax expenditures (which really are spending increases, not tax cuts).

In other words, since businesses create jobs, provide businesses with a new round of tax incentives. Reduce their capital costs and raise their investment returns after-tax.

Noteworthy is a move by several Democratic senators -- like Evan Bayh, Ben Nelson, and Kent Conrad -- who are calling for an extension of all the Bush tax cuts, including lower tax rates for upper-end earners, capital gains, and dividends. These brave souls are now in open revolt against the White House.

With gold near $1,200 an ounce, the Fed has done its job and then some in providing liquidity. Easier tax rates, rather than easier money, is what will spur jobs and a faster recovery.

Thursday, July 22, 2010

On CNBC's Kudlow Report Tonight

Tonight at 7pm ET on CNBC:

DID BERNANKE CHANGE HIS TONE TODAY?
CNBC’s Hampton Pearson reports.

IS THE FED OUT OF BULLETS AND/OR IS IT SHOOTING BLANKS?


- William Ford, Fmr. Atlanta Fed President; Middle Tennessee State University
- Ronald Kruszewski, Stifel, Nicolaus Chairman & CEO
- David Goldman, Senior Editor First Things Magazine

THE MARKETS

- Jim Iuorio, Options Action Contributor; Director, TJM Institutional Services
- Robert Pavlik, Banyan Partners Chief Market Strategist
- Michael G. Crofton, President and Chief Executive Officer; The Philadelphia Trust Company

DEMOCRATS DISSENT OVER BUSH TAX CUTS
CNBC chief Washington correspondent John Harwood reports.

THE FIGHT OVER EXTENDING THE BUSH TAX CUTS

- Christian Weller, Center for American Progress
- Louis Woodhill, Chairman of Digabit; Club for Growth Leadership Council

WHY IS WALL STREET AFRAID OF ELIZABETH WARREN?
CNBC’s Eamon Javers reports.

WHAT DO CEO'S KNOW THAT WE DON'T KNOW?
- Anthony Mirhaydari, Markman Capital Insight Sr. Research Analyst; MSN Money Contributor


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

Wednesday, July 21, 2010

Ben’s Curveball

Ben Bernanke threw a curveball today in his midterm report to Congress. The Fed view of the economy has been downgraded since its last report in February. This is not totally new news, since the June FOMC minutes reported this downgrade. However, “the majority saw the risks to growth as weighted to the downside.”

But here’s the disconnect. With no inflation and weaker growth, including stubbornly high unemployment, Bernanke mostly talked about an exit strategy that would shrink the Fed’s balance sheet by removing liquidity. This was the Fed’s bias last winter when the recovery looked stronger. Now that the recovery looks weaker, the stock market was hoping to hear Bernanke hint of an easier policy that would increase liquidity if necessary. Didn’t happen.

At one point today stocks were down 165 points, though they finished better, falling only 109 points. Gold fell $7 to $1,184, and the greenback rallied a bit. Bond rates continued to slide lower.

But I have a different view of this story. The Fed has injected $1.4 trillion of new money into the economy, of which about $1 trillion of excess reserves are unused and on deposit at the central bank. So, in other words, the economy has more liquidity than it knows what to do with. What’s the problem? All that excess money is not being used. This, I believe, is a fiscal problem, not a Fed problem.

Think of all the economic obstacles of spending, taxing, and regulating coming out of Washington. What should be done to spur growth? Keep tax rates down. And stop passing massive regulatory bills, like the bank bill Obama signed today.

What else? Reduce tax rates for large and small businesses across-the-board. Then speed up business investment write-offs for tax purposes.

In other words, since businesses create jobs, provide businesses with a new round of tax incentives. Reduce their capital costs and raise their investment returns after-tax.

With gold near $1,200 an ounce, the Fed has done its job and then some in providing liquidity. Easier tax rates, rather than easier money, would spur jobs and a faster recovery.

On CNBC's Kudlow Report Tonight

Tonight at 7pm ET on CNBC:

WILL BERNANKE’S PESSIMISM CONTINUE TO ROIL THE MARKETS?

- Steve Liesman, CNBC senior economics reporter
- Andrew Busch, BMO Capital Markets; CNBC Contributor
- Jim LaCamp, Macroportfolio Advisors Sr. VP, Portfolio Manager

…INSIDE THE HEARING
- Sen. Judd Gregg (R) New Hampshire; Senate Budget Committee Ranking Member

STIMULUS SURPRISE: THE GOVT'S JOBS CREATION SOLUTION WAS MASSIVE SPENDING & STIMULUS - IS IT WORKING? DO COMPANIES ACTUALLY PULL BACK WHEN GOVERNMENT SPENDS?

- Joshua Coval, Harvard Business School professor
- Robert Reich, Fmr. Labor Secretary; Author, "Supercapitalism"; CNBC Contributor; Univ. of CA., Berkeley, Prof. of Public Policy

OBAMA SIGNS FIN-REG INTO LAW:
WHAT DOES IT MEAN FOR BANKS? DOES IT REALLY END TOO-BIG-TO-FAIL?


-CNBC’s Eamon Javers reports.

- Ronald Kruszewski, Stifel, Nicolaus Chairman & CEO
- Camden Fine, President & CEO Independent Community Bankers of America

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

Tuesday, July 20, 2010

On CNBC's Kudlow Report Tonight

Tonight at 7pm ET on CNBC:


APPLE CRUSHES FORECASTS
CNBC’s Bob Pisani will report.




ARE WE FACING A DOUBLE-DIP RECESSION OR NOT?

- Gary Shilling, president of A. Gary Shilling & Co.
- Milton Ezati, Lord Abbett Sr. Economist & Market Strategist

FED ON TAP TOMORROW … BERNANKE HEADS TO THE HILL

-Vince Reinhart, former director of the Federal Reserve Board's Division of Monetary Affairs, resident scholar at the American Enterprise Institute
- Gary Shilling, president of A Gary Shilling & Co.
- Milton Ezrati, Lord Abbett Sr. Economist & Market Strategist
- Peter Navarro, economics professor at UC Irvine

WASHINGTON TAX ATTACK
Senator Jim Demint (R-SC) will join us.

UNCERTAINTY FROM WASHINGTON …
THE WASHINGTON STORY IS NOT CREATING CONFIDENCE IN THE MARKETS/ECONOMY … WHERE'S THE PRO-GROWTH MESSAGE? WILL THE UNEMPLOYMENT EXTENSION HELP OR HINDER JOB CREATION?

- Jeffrey Miron, Senior Lecturer and Director of Undergraduate Studies in the Department of Economics at Harvard University
- Richard Socarides, former senior adviser to former President Bill Clinton

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

Monday, July 19, 2010

On CNBC's Kudlow Report Tonight

Tonight at 7pm ET on CNBC:

OBAMA GOES AFTER REPUBLICANS … THE PRESIDENT PUSHES FOR UNEMPLOYMENT EXTENSION

CNBC chief Washington correspondent John Harwood reports from Washington.


NO JOBLESS CLAIMS EXTENSION; DRUG TESTS FOR RECIPIENTS?
Sen. Orrin Hatch (R) Utah; Senate Finance Cmte

GOP PROPOSES BRAVE NEW BUDGET

- Rep. Tom Price (R-Georgia)
- Roger Altman, Evercore Partners Chairman; former Clinton Deputy Treasury Secretary

GOLD DEBATE: IS THE PRECIOUS METAL A GOOD INVESTMENT?

- James Altucher, Formula Capital Managing Director
- Don Luskin, CNBC Contributor; Trend Macro Chief Investment Officer

TAX ATTACK: AIRLINE FEE TAX?
- Ben Baldanza, Spirit Airlines Pres. & CEO

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

Friday, July 16, 2010

On CNBC's Kudlow Report Tonight

Tonight at 7pm ET on CNBC:


THE MARKETS & ECONOMY
Plus a look at the Goldman Sachs settlement and financial reform.



- Joe Battipaglia, Stifel Nicolaus Market Strategist
- Michael Cuggino, Permanent Portfolio Family of Funds President & Portfolio Manager; Permanent Portfolio Fund (PRPFX)
- Lee Munson, Portfolio Asset Management; Chief Investment Officer
- Steve Moore, Senior Economics Writer for the Wall Street Journal Editorial Board; "Return to Prosperity" co-author

THE APPLE IPHONE BROUHAHA
- Jon Fortt, Senior Writer, Fortune Magazine

WASHINGTON TO WALL STREET: THE ECONOMY & TAXES

Sen. Tom Coburn (R-OK)
Sen. Byron Dorgan (D-ND)

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

Business Knows More than Obama

With a bad-blood, confidence-destroying battle royale going on between Team Obama and business, you would think a highly publicized White House jobs summit would have produced some kind of positive announcement that gives a nod to the business point of view.

After all, as part of his so-called "business charm offensive," the president is arguing that "it's the private sector that has always been the source of our job creation, our economic growth and our prosperity; and it's our businesses and workers who will take the reins of this recovery and lead us forward."

He also says "the free market depends on a government that sets clear rules that ensure fair and honest competition," and that "too much regulation or too much spending can stifle innovation, can hamper confidence and growth, and hurt business and families."

But uncertainty over the regulatory-and-tax rules of the road is exactly what has buffaloed business and stifled the animal spirits that are so necessary for investment and job creation.

The clash between business and the administration has become the high-drama news story of the summer. Business leaders have slammed the White House over policies they regard as hostile to jobs, including taxes, trade and all manner of new regulations. And amidst a subpar and virtually jobless recovery, their grievances have resonated with the electorate.

A clear majority now thinks the president is "too liberal" to govern effectively. In one poll, an astonishing 55 percent say Obama's a socialist. It seems the more the CEOs blast Obama for being anti-business, the more the president's poll numbers drop.

It was no surprise when Tom Donahue of the U.S. Chamber of Commerce held a jobs summit that slammed the White House. But after calling in Bill Clinton to help with the business CEOs (and Obama's pal Warren Buffett), it was a great shock when the White House could only manage to send a letter from Valerie Jarrett, a supposed Obama business-staff adviser, and Rahm Emanuel to the Chamber expressing disappointment at the public complaints of the business community.

The fact is, major corporations are sitting on a near $2 trillion cash hoard that along with rising profits could become the greatest private-sector stimulus plan ever. Banks are also stockpiling cash -- about $1 trillion in excess reserves that could finance the greatest job-creation program in history. Three trillion dollars of private money dwarfs the piddling $50 billion in deficit-creating taxpayer money being debated on in Congress.

But all business is asking for is some clarity and certainty regarding government intentions, especially on taxes and regulation. Take, for example, the new 2,300-page bank-regulation bill, which spreads 243 new regulatory provisions across 10 agencies. No one really knows what's in this document, or what the unintended consequences will be. Until people figure this out, it could freeze bank lending for years.

The Obamacare health bill similarly includes tax hikes and regulatory overreach that not only adds to business hiring costs but could put a freeze on the expansion of one of America's most vibrant private-sector industries. Meanwhile, threats of EPA carbon regulations only add to the cost burden for business.

An overwhelming consensus of business executives is now pleading for tax relief. FedEx CEO Fred Smith has been leading the charge for a lower corporate tax rate to make America more competitive. Eli Lilly CEO John Lechleiter says America has lost its innovation advantage, falling way behind firms in other nations, especially in Asia.

The business community also wants an acceleration of business investment-tax write-offs. Studies show that $1 of faster depreciation for investment in plants and equipment increases gross domestic product by nearly $10. Team Obama has granted this to the very tiniest companies, but won't universalize it for all companies.

This, even while the president concedes that business investment creates jobs. So why is the administration stubbornly opposing a tax incentive that could ignite dormant animal spirits and unleash a wave of job-creating investment?

The best thing to come out of the administration this summer was Treasury Secretary Tim Geithner's pledge to me in a CNBC interview to place a 20-20 limit on tax rates for investor capital gains and dividends. No one, most of all me, wants to see any increase in these tax rates. But at least the Geithner pledge means investment tax rates will stay low. The stock market took a turn for the better right after the interview.

The moral of the story? Federal taxes and regulations matter. Instead of demonizing business, Obama and his crowd should start listening and acting on the recommendations of our business leaders. Most of these people are not politically partisan. They're trying to do good for the economy and the country.

Frankly, they know more about this than the president does.

Thursday, July 15, 2010

On CNBC's Kudlow Report Tonight

Tonight at 7pm ET on CNBC:

GOLDMAN SACHS SETTLES WITH THE SEC

- Harvey Pitt, Kalorama Partners, CEO & Founder; Former SEC Chairman
- Andrew Ross Sorkin, The New York Times Deal Book Editor; NYTimes Chief Mergers & Acquisitions Reporter; "Too Big to Fail" Author
- Jim LaCamp, Macroportfolio Advisors Sr. VP, Portfolio Manager
- CNBC’s Kate Kelly

BP: OIL HAS STOPPED FLOWING INTO GULF
CNBC’s Bertha Coombs reports.

WILL FINANCIAL REFORM BILL HURT SMALL BUSINESS LOANS AND JOBS?
PLUS .... A LOOK AT THE GOLDMAN SACHS SETTLEMENT

- Sen. Kit Bond (R-MO)

HOW DO YOU FIX CALIFORNIA'S JOBS AND FISCAL CRISIS?

- Meg Whitman, CA Gubernatorial Candidate; Fmr. eBay CEO
- Jerry Brown, California Attorney General; CA Gubernatorial Candidate

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

Bad Blood Between Business and the White House?

Media mogul Mort Zuckerman and the Washington Post's Steven Pearlstein joined me last night to offer their perspective on whether there is bad blood between President Obama and the business community and how to restart the U.S economic growth and jobs engine.



Wednesday, July 14, 2010

On CNBC's Kudlow Report Tonight

Tonight at 7pm ET on CNBC:


KUDLOW JOBS SUMMIT: BUSINESS LEADERS & POLICYMAKERS TO TACKLE OUR NATION'S NUMBER ONE CHALLENGE: CREATING JOBS AND REVIVING ECONOMIC GROWTH


- Rep. Brad Sherman (D) California; Budget Committee; financial services cmte
- Rep. Paul Ryan, (R) Wisconsin; Budget Cmte Ranking Member; President Obama's Fiscal Commission

OBAMA'S CREDIBILITY CRISIS

- Steven Pearlstein, Washington Post Economics Columnist
- Mort Zuckerman, N.Y. Daily News Publisher; U.S. News & World Report Chairman & Editor-in-Chief

FINANCIAL EARNINGS PREVIEW

CNBC’s Mary Thompson reports.

SHOULD CONGRESSIONAL PAY BE CUT?

- Rep. Jason Chaffetz (R-Utah)

BUSH TAX CUTS & THE DEFICIT MYTH
Is runaway government spending, not declining tax revenues, the reason the U.S. faces dramatic budget shortfalls for years to come?

- Brian Riedl, Heritage Foundation Senior Policy Analyst in Federal Budgetary Affairs

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

Tuesday, July 13, 2010

Geithner Pledge Is Paying Dividends

When Treasury man Tim Geithner told me last week in a CNBC interview that the Obama administration wanted a 20-20 limit on the tax rates for investor capital gains and dividends, it may have turned stock markets around 180 degrees from the nasty bear correction that began in late April. No one, most of all me, wants to see any increase in these tax rates. But the Geithner pledge created a lot more certainty, especially on dividends, which will not go up to the 40 percent personal tax rate on ordinary income.

So capital costs will only rise slightly after-tax, and investment returns will only decline slightly post-tax. Investors are breathing easier. This was a very constructive development, putting an end to all kinds of fears. Mr. Geithner deserves at least a tip of the hat.

Stocks, up today about 150 points, have rallied for six consecutive sessions. Plus, today’s trade figures showed a more powerful economy, at least in the month of May. While the trade gap widened slightly, exports are rising by 21 percent and imports by 29 percent. Both capital and consumer goods are booming on foreign sales and purchases. And the early profits reports are beating the street for the second quarter — including tech bellwether Intel, which surpassed estimates for both earnings and sales revenue.

There may be a slow patch in the economy, but in my view, at least the double-dip scenario has a very low probability. Plus, the news out of Europe is improving for both interbank funding markets and longer-term bond financing.

Really, over the next few months, the stock market outlook may be better than the economic-growth outlook.

But turning back to Mr. Geithner and his boss President Obama, the big question is whether the administration is calling a truce in its battles with business, banks, and investors. The language is certainly more private-sector, free-enterprise oriented. And allegedly, according to news reports, the White House is meeting with its critics from the Business Roundtable on trade and regulatory issues. Top BRT lobbyist John Castellani was quoted in the WSJ saying the administration gets an A+ for reaching out and an incomplete for policy.

I’ll have more to say on this when I put together a full column.

On Tonight's Kudlow Report

Tonight at 7pm ET on CNBC:

STEINBRENNER R.I.P: THE LEADERSHIP MODEL
CNBC’s Darren Rovell reports.

INTEL SOARS AFTER THE BELL
CNBC’s Dennis Kneale reports.


THE MARKETS: BULL VS. BEAR

- Danielle Hughes, Divine Capital CEO
- Ned Riley, Riley Asset Management Investment Strategist

AMERICA'S GROWING INNOVATION GAP
An interview with Eli Lilly Chairman & CEO John Lechleiter.

SMALL BUSINESS OPTIMISM DROPS SHARPLY
Amilya Antonetti, Chairman and CEO at AMA Enterprise

SHOULD SOCIAL SECURITY ELIGIBILITY AGE BE INCREASED TO 70?

- Jim MacDougald, The Free Enterprise Nation; "Unsustainable: How Big Government, Taxes and Debt are Crushing America" Author
- Barbara Kennelly,National Committee to Preserve Social Security and Medicare President & CEO

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

Monday, July 12, 2010

On CNBC's Kudlow Report Tonight


Tonight at 7pm ET:

CONGRESS RETURNS. WHAT’S IN STORE?

CNBC chief Washington correspondent John Harwood reports.


IMMIGRATION DEBATE

- Steve Moore, Senior Economics Writer for the Wall Street Journal Editorial Board; "Return to Prosperity" co-author
- Mark Krikorian, Center For Immigration Studies Executive Director

EARNINGS LOOK AHEAD

CNBC’s Matt Nesto reports.

ONE-ON-ONE WITH DOUG KASS

- Doug Kass, Seabreeze Partners Management Inc.

IS THE TIDE TURNING ON UNIONS?

- Tony Fratto, CNBC Contributor; Fmr. White House Deputy Press Secretary
- Teresa Ghilarducci, The New School for Social Research Economics Professor

THE BP OIL DISASTER...CAPPING THE WELL...A BP ASSET SALE?

CNBC's Bertha Coombs reports.

TOO RICH TO LIVE? DEATH TAX TO SURGE ON JANUARY 1ST

- Jimmy Pethokoukis, Reuters Money & Politics Columnist

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

Friday, July 09, 2010

A SPECIAL EDITION OF THE KUDLOW REPORT: GETTING AMERICA BACK ON THE PATH TO PROSPERITY

Tonight at 7pm ET on CNBC:

CHINA: FREE TRADE VS. PROTECTIONISM

- John Rutlege, Rutledge Capital Chairman; Fmr. Reagan Economic Advisor
- Peter Morici, University of Maryland Prof; U.S. International Trade Commission Fmr. Chief Economist

AN INTERVIEW WITH CHARLIE CRIST
OIL SPILL; UNEMPLOYMENT INSURANCE; HOW HE PLANS TO WIN THE RACE

- Gov. Charlie Crist (R) Florida

STATE OF STATE DEFICITS: IS STIMULUS THE ANSWER?

- Christopher Edley Jr., Fmr. Policy Advisor to President Clinton
- Mark Calabria, Director of Financial Regulation Studies at the Cato Institute

SHOULD UNEMPLOYMENT BENEFITS BE EXTENDED?

- Mark Walsh, "Left Jab" Host (Sirius show); Fmr. Sr. Vice President at America Online; Fmr. Vertical Net CEO; Fmr. DNC Advisor
- James Sherk, Heritage Foundation Senior Policy Analyst

MARKETS: DOUBLE DIP OR NOT? LOOKING AHEAD TO EARNINGS NEXT WEEK
WHAT DOES OBAMA NEED TO DO TO PROVE HE'S A PRO-BUSINESS PRESIDENT?


- Don Luskin, CNBC Contributor; Trend Macro Chief Investment Officer
- Michael Pento, Chief Economist; Delta Global Advisors

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

Thursday, July 08, 2010

The Geithner Charm Offensive: Does He Really Believe in Private Sector Free Market Capitalism?

Tim Geithner has undoubtedly become one of the top advisors in the Obama administration, not just in the Treasury, but in the Obama White House. While he and I disagree on a host of key policy issues, I loved the back-and-forth exchange we had during yesterday's interview. Incidentally, Mr. Geithner stated that the Obama administration hopes to keep the top tax rate on dividends and capital gains capped at 20 percent. Be thankful for small blessings.

Click here for the full transcript.



An Interview with Treasury Secretary Timothy Geithner


***CNBC's "The Kudlow Report" 7/7/10

LARRY KUDLOW, host:

We welcome to THE KUDLOW REPORT Treasury Secretary Tim Geithner.

Thank you very much.

Secretary TIM GEITHNER: Good to be here, Larry.

KUDLOW: Let me begin with this. Is there bad blood now between the
administration and business, and was the president's free trade speech today
designed to calm business with a pro-growth message? I mean, stocks are up
275 points, the speech may have had something to do with it. Were you trying
to speak to your business critics?

Sec. GEITHNER: We have a pro-growth agenda. Part of the agenda is growing
exports. They're central to our future. What the president today is to say,
that is important to the United States, we're going to be committed to making
sure we're that we're expanding opportunities for American business
everywhere. Now, this president understands deeply that governments don't
create jobs, businesses create jobs. And our job as government is try to make
sure we're creating the conditions that allow businesses to prosper so they
can hire people back, get this economy going again.

KUDLOW: All right, I hear you. I hear you, I get what you're saying to me.
But as you know, you've had tremendous criticism from the leaders of the
Business Roundtable, the Business Council, you see this criticism with the
small business surveys. They're worried about stimulus spending, taxing, cap
and trade, fin reg, health care, the costs of doing business. Some have
characterized it as a bad environment for investment in jobs.

Sec. GEITHNER: Business...(unintelligible)...

KUDLOW: So how do you react to that? And so, you know, changing the rules of
the game.

Sec. GEITHNER: Look...(unintelligible)...

KUDLOW: This is overregulation. How do you react?

Sec. GEITHNER: I think businesses are doing now what businesses always do,
which is they want their taxes lower and they'd like to operate with less
regulation, as they always do. Our job, though, is to make sure, again, we're
creating the conditions that make this economy work better for the country as
a whole. Now, just remember, when the president stepped into this job,
business of America was out of business. People could not borrow.

KUDLOW: All right. All right.

Sec. GEITHNER: They were cutting deeply into the bone of the productive
capacity of this country. They were completely out of commission. It was
almost lights out. And what the president did is to take on the tough things
early to bring stability to an economy that was falling off the cliff. And
businesses across this country are in a much, much stronger position today
because of the actions he was willing to take. Now, people don't like change,
they don't like these reforms, but he took on things that are absolutely
critical to our capacity to grow in education, in health care costs and in the
financial system. And by taking those tough choices early, we're in a much
stronger position now to make sure we can prosper going forward.

KUDLOW: Why is it, then--I mean, you've got--first of all, let's talk about
spending, stimulus spending. It's like public enemy number one. I mean, you
see it in all the opinion polls, public enemy number one. Now, you
recommended more spending at the G-20, and you're recommending more spending
here at home on unemployment compensation and so forth.

Sec. GEITHNER: That's not quite--can I just...(unintelligible)...

KUDLOW: Yes, please.

Sec. GEITHNER: OK.

KUDLOW: Please.

Sec. GEITHNER: Our basic job now, as I know agree with this, our basic
responsibility right now is to make sure this economy is growing again.

KUDLOW: Yeah.

Sec. GEITHNER: We have a recovery led by private demand, private investment,
private recovery. That is the most important thing we can do right now. Now,
as part of that, we want to make sure that governments around the world are
working with us to make sure we're strengthening growth. In the United
States, what the president does propose a series of very targeted measures to
support business investment, credit for small businesses, help stay--keep
teachers in the classrooms. Those are very sensible--those are good policy
for the country. But of course, we recognize that if we're going to have
growth in the future we also need to be--make people confident that we're
going to have the will as a country here in Washington to act to bring those
deficits down over time as growth strengthens, recovers. But our job now is
about growth. Now, all the government can do is to make sure we're providing
a bridge to the recovery in private demands.

KUDLOW: Well...

Sec. GEITHNER: As I said earlier, it's businesses that create jobs,
governments don't create jobs.

KUDLOW: But--all right, Secretary, I--that--it's a great--it's a great point.
But what you hear, for example, let me raise this. Unemployment insurance is
back on the table, whatever, $30 billion. It would make it up to two years.
Some people say that's a deterrent to working, but I'm not going to debate
that. Why not couple that with something that would help business investment,
again, large and small? For example, Japan and Britain have lowered their
corporate tax rates. We now have the highest in the world, we're not
competitive. Why not couple the unemployment bill with a lower corporate tax
reform? Why not couple it with full cash expensing for business investment,
which some people like Fred Smith of FedEx say is the absolute best bang for
the buck? In other words, can you lower tax burdens for business even while
you're trying to prop up the safety net for those who are truly needy?

Sec. GEITHNER: We're going to have to take a look at comprehensive tax
reform for the corporate sector. I agree with that. I think it's going to be
important for us going forward. That's one of the things that this fiscal
commission is going to look at. Now, it's important to recognize, Larry, that
the effective tax rate that US businesses pay now is about the average of what
companies face around the world. Our priority right now, and this is what the
president is doing, is to make sure that we're extending tax cuts that go to
benefit more than 95 percent of businesses in America.

KUDLOW: But what about the capital--what about the capital...

Sec. GEITHNER: And as...

KUDLOW: ...and the investment tax hike?

Sec. GEITHNER: And--but we're for that. And as part of that, we want to
make sure that businesses are getting continued incentives to invest. So
there's a bill right before the Senate, it's called the small business
package, but it includes some very important, targeted incentives: zero
capital gains rate on investment in small business, extension of expensing,
this bonus depreciation thing. So those are things we think are very good
policy, very good--they're sensible things.

KUDLOW: But aren't...(unintelligible)...

Sec. GEITHNER: Those are things you support.

KUDLOW: I--yes, I do. But again, why not universalize them? They're very
narrowly targeted.

Sec. GEITHNER: No, but...

KUDLOW: They don't help the majority of companies, both large and small.
We're running at a competitive disadvantage. I mean, for example, in Asia, as
you know, they really tax capital less than we do. And here's what I hear all
the time from my interviews, people on the street. We're going to see the
Bush tax cuts expire, at least for the top end, next year. Tax hikes on
capital gains dividends stay.

Sec. GEITHNER: Just for the top end.

KUDLOW: Personal income...

Sec. GEITHNER: Just for the top end.

KUDLOW: Yeah, but this is a big chunk.

Sec. GEITHNER: Right.

KUDLOW: I mean, those are those most likely to invest and save and take
risks. Why penalize them? Why not reward them? Why not say there's a
moratorium on tax hikes in an uncertain economy?

Sec. GEITHNER: Well, let me tell you what the president's going to fight for
and propose. We're going to make sure that we extend and leave in place tax
cuts that will go to benefit more than 95 percent--not just of individuals in
this country, but of businesses across the country. We think that's good
policy, good for the country, sensible policy. We're going to make sure that
we keep at 20 percent the existing rates on dividends and capital gains. We
think that's good policy, too. But...

KUDLOW: For the--for the--but not for the top end.

Sec. GEITHNER: For dividends. Just for the high end. No, for the high end.
We're proposing to make sure that...

KUDLOW: For the high end?

Sec. GEITHNER: ...that 20--and 20/20 on dividends and capital gains. Now,
that's the president's proposal. Now, you're right, we're also proposing to
allow the tax cuts that President Bush put in place that go to the top 2 to 3
percent of the most affluent, most fortunate Americans in this country, we're
proposing to let those expire. But when they expire, Larry, they're going to
go back to the rates that prevailed in the second half of the '90s. And as
you know, that was a period where we had the best record of growth in private
investment, in productivity, broad-based gains of income. That was a record
that was the envy of the world in terms of...

KUDLOW: I...

Sec. GEITHNER: ...innovation and...(unintelligible).

KUDLOW: Touche. I agree, absolutely. I mean, I supported most of Clinton's
policies, to tell you the truth. Maybe not the tax--certainly the lower
capital gains tax, his free trade policies, his welfare reform. But I want to
ask, you know, going after the top 2 or 3 percent, look, Arthur Brooks, the
head of AEI's got a book out now. He says there's a war going on between the
culture of entrepreneurship on the one side and statism and redistributionism,
as he calls it, on the other. When people hear you say we're going to
penalize the top earners, those who really make the most income and have the
most successful investments, it sounds like social policy, not economic
growth. It sounds like ideology, not economic growth policy.

Sec. GEITHNER: We're going to be on the side of the entrepreneur, because
there is no plausible strategy for this country to grow that doesn't recognize
that that growth has to come from private businesses investing and innovating
in this country. That has to be the centerpiece of any successful strategy
for this country. But as you know, we inherited a kind of a big mess...

KUDLOW: Yes.

Sec. GEITHNER: ...on the fiscal side. And part of growth in this country,
part of making sure interest rates are low over time so people have their--are
able to invest, is to make sure that people understand that we're going to
start to dig our way out of that fiscal hole over time. So we think the
responsible thing to do--and we don't do this with pleasure--is to make sure
we are beginning to take the steps that allow us to dig out of that fiscal
hole. And part of that, we think it's responsible to allow those tax cuts
that benefited just those 2 to 3 percent of Americans to expire. But again,
it only--they only go back to the level, Larry, that prevailed in a period
where we had terrific outcomes for the American entrepreneur.

KUDLOW: Well, I think one issue is that when people look at this oversized
spending and deficits and borrowing, they don't believe you're going to stop
there on tax rates. Now, how do you respond to that? I mean, it's sort of
like, to tell you the truth, the country is getting a fiscal product from
Washington that it is scared to death about. I mean, that shows up in all the
opinion surveys. You know this as well as I do. So if you're running 10
percent of GDP deficits, if the debt-to-GDP ratio is on its way from 60 to 80
to maybe 100 percent according to the Congressional Budget Office, then folks
think this is the first of many future tax hikes to come, and it causes them
to freeze. And they worry about the regulatory impact of these huge bills.
What do you--how do you react to that? This is the heart of the business
worry. I think it's the heart of the mainstream worry.

Sec. GEITHNER: I think if you listen to people across the country today,
businesses and average working Americans, you hear people worried about two
things: growth and jobs, and our long-term fiscal problems. And I think we
should find--we should--I would be optimistic about the broad recognition
you're seeing in the country today that our deficits are too high and they're
going to have to come down. Remember, there was a long period of time where a
lot of people in this country believed that deficits didn't matter and we
could borrow our way forever.

KUDLOW: Yeah. Loose talk.

Sec. GEITHNER: And that...

KUDLOW: Very loose talk.

Sec. GEITHNER: And that was not a responsible strategy for the country.

KUDLOW: Right.

Sec. GEITHNER: And I would say it's a good thing people recognize now that
these are going to have to come down over time. And I think that recognition
is the beginning. Now, it's going to require some difficult choices. Our
challenge is going to be the way to make sure we dig out of that fiscal hole
in a way that is good for growth, good for incentives for investment, but
still regarded as fair to the average American that doesn't want to have to
bear a larger burden of paying for things governments have to do. That's
going to be the challenge.

KUDLOW: All right, I hear you.

Sec. GEITHNER: But can I--I want to go back to what you said.

KUDLOW: Of course you--of course you may.

Sec. GEITHNER: The president, again, he took on, right when he took office,
a set of very challenging reforms in education, in health care and in the
financial system. Those things are important to every business operating in
this country. Education because you want to make sure you have a
well-educated work force able to produce the things we need as a country,
provide the ideas we need to grow. Health care because rising costs are
killing American business. And the--and a financial system that was not good
for American business. Now, reg reforms...

KUDLOW: (Unintelligible)...get to fin reg in a minute.

Sec. GEITHNER: Yeah.

KUDLOW: But you know businesses is worried that the Obamacare health plan is
going to layer on more costs and more taxes. It's not a popular plan,
Secretary.

Sec. GEITHNER: But you have--you have to look at what the independent
analysts say about health care costs, and they say this plan will make a
substantial contribution to slowing the rate of overall growth of health care
costs, and that is very encouraging. Now, it's a beginning. It won't solve
all problems. And a very difficult thing to do, particularly at a time when
people have so little faith in government getting things right, but it goes in
the right direction and I think it's enormously important to the business of
America, not just to our long-term...(unintelligible).

KUDLOW: All right. Now I just got a couple of real fast ones, then I want to
close on bank regulation, financial reg. First of all, what is your economic
outlook right now?

Sec. GEITHNER: I think this economy is healing. We're repairing the damage
caused by the crisis. We're growing, and we've been growing now for 12 months
now. We've had six months of sustained growth in private sector jobs. Coming
out of the last recession, it took us almost two years before we had a
sustained set of month-to-month increase in private sector jobs, so that's
very encouraging. I think the most likely thing is you're going to see an
economy that is growing at a moderate pace, hopefully strengthening over time.
And this growth now you're seeing is being led by business investment, by
exports, by manufacturing. That's very encouraging, too. And again, if you
look across American industry today, you see the great strength of America.
You see our companies competing in the technologies that the world needs. And
we are exceptionally good as a country at making things that are very
important to growth around the world, and that will serve us well.

KUDLOW: Will the unions allow these free trade agreements to go through? The
president talked about South Korea, Colombia and Panama today. These are very
important, lots of jobs could be created, beneficial to consumers. The unions
have been an obstacle in the Democratic Party and, frankly, in the Republican
Party. Can any of this stuff get through in this session?

Sec. GEITHNER: I think people want to see these agreements will come on
terms that are fair and good for American business and American workers. So
if the president can present--I believe he can--agreements that we think do a
good job of protecting those interests, then I think we're going to find
support for them.

KUDLOW: All right.

Sec. GEITHNER: It's very important we do, because we need to be able to be
back in the game...

KUDLOW: No, I agree.

Sec. GEITHNER: ...of trade, expanding opportunities, because we will benefit
hugely from them.

KUDLOW: All right, the clock is ticking. We might run over a minute.
Financial regulation. All right, you've--this has been one of the hearts of
your whole existence. First of all, the criticism is, as you know, that the
five or 10 largest banks are still too big to fail, and that this bill
therefore fails to remove the moral hazard of excessive risk-taking. Your
response to too big to fail?

Sec. GEITHNER: Disagree with that. What this bill does is very important.
It gives us the authority to constrain risk-taking, limit leverage, force much
more conservative capital requirements, liquidity requirements, on these large
institutions, so they are much less vulnerable to mistakes, much more able to
withstand the shocks that could come from the future, future recessions,
wherever they come from. But what it also does, and this is fundamental, what
it also does is make sure that if they mess up in the future, if they make
mistakes and they can't survive without the government coming in, then we will
be able to put them out of existence safely, without the taxpayer being
exposed to...(unintelligible)...

KUDLOW: The biggest. The biggest, top five, top 10?

Sec. GEITHNER: The biggest institutions, exactly. So this--what happens is
if you--like if AIG were to happen in the future, Lehman, AIG, Bear Stearns,
the government would have the ability to come in and dismember it--and only
this, not to preserve them to live another day, but to dismember them safely,
break them up, wind them down without the taxpayer being exposed to loss and
without the fire spreading to a bunch of better managed, solvent institutions.
That's what this bill does, and it's very important we do it.

KUDLOW: All right. One way or the other, the banks are going to continue to
trade derivatives. But the corporations, again, Business Roundtable folks are
saying the end users of derivatives who want to hedge, what, currencies or
energy or farm products, they're going to have to pay a trillion dollars more
because of this bill, and therefore they're being enormously penalized.

Sec. GEITHNER: No...

KUDLOW: Your reaction?

Sec. GEITHNER: No basis for those estimates or those concerns, in my view.
What this bill does, it preserves the capacity not just for financial
institutions but for American businesses to hedge the risks they face in their
business. It allows them to continue to do that in ways that meet their
specific needs, but to make sure the system as a whole is safer. That stuff
happens in the light of day with transparency and disclosure. That's why
these reforms are so important in derivatives, so that we don't face the
situation again where all this stuff operates in the shadows, where firms like
AIG can take on huge risks without the capital to back them up.

KUDLOW: And of course, everyone is up in arms about nothing being done with
Fannie and Freddie. And, you know, it's a couple of hundred billion dollars
right now. It's off the budget, it's actually exacerbating the deficit, as
you well know, running the Treasury. People are throwing up their hands, how
can we exempt Fannie and Freddie? They were a crucial element of the problem.

Sec. GEITHNER: No one is going to feel more strongly about reforming those
institutions, fixing what's broken, than I am. I'm the one that has to live
with trying to clean up that basic mess we inherited. And we're going to
propose a sweeping set of reforms that'll end what was broken in that basic
model, remove the moral hazard from it, fix the basic things that caused that
risk, and we are going to move quickly to do that once we have this financial
reform bill in place and behind us. We've had a very thoughtful team of
people looking at alternatives, and we're going to cast the net very broadly
across the aisle to get the best ideas so we can fix what's broken. This is
very important we do it. We couldn't do everything at once, and we decided to
do it--try to fix these other problems first. But we're going to move very
quickly to reform Fannie and Freddie.

KUDLOW: Personal question, and my final one. And you've been terrific today
and I appreciate your time. You had a slow start, but you have become a
crucial player in the Obama team, his economics teams. You've come--everyone
says that about you. So my question is, will you continue to serve as
Treasury Secretary beyond the midterm elections?

Sec. GEITHNER: As long as the president wants me to serve, it is my
privilege and honor to help him fix what's broken and make this country
stronger. I'll do it as long as he asks me to.

KUDLOW: He backed you, and you're backing him.

Sec. GEITHNER: Absolutely.

KUDLOW: All right.

Sec. GEITHNER: Absolutely.

KUDLOW: Secretary Tim Geithner, we appreciate it very much.

Sec. GEITHNER: All right. See you.

KUDLOW: Terrific stuff and I thank you.

Sec. GEITHNER: Good to see you, Larry.

Wednesday, July 07, 2010

On Tonight's Kudlow Report


Tonight at 7pm ET on CNBC:

Please join me for an exclusive interview with Treasury Secretary Timothy Geithner.

Friday, July 02, 2010

Business-Power Neglect

This whole debate about government stimulus versus austerity, and the impact of these policies on economic growth, misses a key point: It is business, not government, that creates jobs.

The economic power of business is the missing link in the faux debate that is now raging over spending and deficit policies. A brief look at the recent jobs report for June tells this story. After spending more than $1 trillion through so-called government stimulus, we are at best experiencing a grinding and anemic jobs recovery. Private payrolls are growing slowly. The workweek is again shrinking. And average hourly earnings have declined. The unemployment rate dropped to 9.5 percent, but that’s because 650,000 people left the labor force.

Most troubling, the household survey, which captures small owner-operated business employment, dropped 300,000 following a decline last month. In other words, this leading indicator is moving in the wrong direction. More generally, recent economic data suggest that the rate of recovery could be slowing to only 2 percent, or even less. Some fear a double-dip recession.

So what about all this stimulus spending? Well, it hasn’t worked.

When you look at the recent GDP reports, you find that the government contribution to economic growth has been about zero. This is because transfer payments don’t contribute to the output of goods and services. We’ve had three recovery quarters where inflation-adjusted GDP growth averaged a sub-par 3.5 percent. But the federal contribution has been only two-tenths of 1 percent, while the state and local government contribution has been a small drag of three-tenths of 1 percent. In other words, a wash.

Liberal-left Nobel Prize winners like Paul Krugman and Joe Stiglitz believe government spending should be increased substantially. But if it hasn’t worked up to now, why should we believe it will ever work? Taxing or borrowing from Peter to pay Paul does not create new investment or jobs. Nor do extended unemployment benefits.

Businesses create investment and jobs. I call it business power. And this power has been totally ignored in the debate over economic policy.

In a watershed study, former Treasury economists Gary and Aldona Robbins argued a few years ago that tax cuts aimed at capital and business produced the biggest economic benefits. For example, for every tax-cut dollar on capital gains, $10.61 of new GDP is created. For every dollar of accelerated business-investment tax write-offs, $9 of new GDP is created. And for every dollar of corporate tax cuts, $2.76 of new GDP is created.

This bang-for-the-buck analysis contrasts sharply with estimates for increased government spending. According to the White House, every dollar of new government spending creates about $1.50 of new GDP — much weaker than the effects of business tax cuts. And the White House analysis looks like a stretch. The IMF has a model that says every additional dollar of government spending creates only $0.70 of new GDP. So you have to borrow a buck to get 70 cents back. Not a good trade.

Clearly, neither of these spending multipliers holds a candle to the benefits of lower business tax rates. Incidentally, for deficit worriers, corporate tax cuts pay for themselves, as do lower tax rates on capital gains.

Fred Smith, the CEO of FedEx, does not have a Nobel Prize in economics. But he founded from scratch a gigantic global transportation and delivery company that has employed tens and tens of thousands of workers, something the Nobelists have never done. And Smith argues that the best job-creating measure would be a significant reduction in the corporate tax rate and a move to full expensing for business-investment tax write-offs. He’s exactly right.

Japan intends to cut its corporate tax rate. So does Great Britain. But the U.S. corporate tax rate of 35 percent, or 40 percent when states are included, is not even remotely competitive anymore. So why aren’t people talking about the economic benefits of unleashing business power? The rapidly growing Asian economies treat capital and business better than they’re treated in the United States. Same for Europe. What are we waiting for?

During the Reagan 1980s, when a deep recession led to a 10.8 percent unemployment rate, the Gipper cut domestic discretionary spending, lowered tax rates across-the-board (including corporate tax rates), and sped up tax write-offs for business investment. The first two years of that recovery generated nearly 8 percent growth, with hundreds of thousands of new jobs created monthly.

Right now, we are facing one of the largest tax hikes in U.S. history, scheduled for 2011. Taxes on investor capital and business will go up significantly. So will individual income-tax rates. This is exactly the wrong medicine.

When will Washington come to its senses, and unleash the power of capital and business to end all this pessimism and move us toward real prosperity?

Thursday, July 01, 2010

David Stockman, Wrong; Ezra Klein, Right

Don’t you just love political cross dressing? Last night on CNBC my old boss David Stockman was totally root-canalled as he called for higher taxes and lower spending. Right on spending, but wrong on taxes. Not even a mention of flat-tax reform. And he rejected business tax cuts. Oh my gosh.

Then on the same show left-of-center Washington Post blogger Ezra Klein agreed with me on the need to strengthen the economic power of business to invest and create jobs. Twice I called for a lower corporate tax rate and full cash expensing to unleash businesses large and small. Twice Ezra Klein agreed with me (though he favors more federal aid to state and local governments), and twice Dave Stockman disagreed with me.

If that makes Ezra a pro-growth Democrat, good for him. But Dave Stockman’s deficit obsession is not pro-growth.

Yes, we must curb deficits and borrowing. Absolutely. So let’s have some government austerity. But the growth message has to be part of the story. Flattening business tax rates and speeding up investment-tax write-offs for large and small companies would do more good than anything I can think of to grow the economy and speed up the anemic jobs recovery. I’d like Dave Stockman to have a long dinner with Fed Ex CEO Fred Smith, who has the story right on business and jobs.

Meanwhile, stories coming out of Washington suggest that the Bush tax cuts will not be settled until after the elections in November. This is good news. A tea-party Republican sweep in the midterms might just avoid job- and investor-killing tax hikes.

At the same time, cap-and-trade looks to be off the agenda for now. And deficit-commission honcho Erskine Bowles — who was Bill Clinton’s former chief of staff, and who worked well with the Gingrich Congress to draft a budget-cutting and capital-gains-tax-cutting deal — said yesterday that the government-spending share of GDP should be brought down to 21 percent from 24 percent. That’s progress.

On Tonight's Kudlow Report

Tonight at 7pm ET on CNBC:

TODAY’S TOP MONEY HEADLINES

- ISM
- Alan Greenspan and the “invisible wall”
- Gold plunges $40 in 6 hrs; commodities in free-fall
- Ford/GM - U.S car sales up

THE EFFECT OF KING DOLLAR
CNBC’s Rick Santelli reports.

"SMART MONEY" TRADE - MAN AGAINST MACHINE
Do you dare trade against the computers?

CNBC’s Herb Greenberg reports.

MARKETS & ECONOMY
What’s moving markets? Double-dip or not?

- Barry Ritholtz, Fusion IQ CEO, Director of Equity Research
- Art Laffer, Chief Investment Officer, Laffer Investments; Fmr. Reagan Economic Advisor
- Quentin Hardy, Forbes National Editor

IS GOLD LOSING ITS LUSTER?

CNBC’S Sharron Epperson reports.

- Scott Redler, T3live.com; Chief Strategic Officer, will join the market panel.

DEFENDING THE AMERICAN DREAM: THE LOBBYIST THREAT … FANNIE/FREDDIE

CNBC's Diana Olick reports.

OBAMA'S FISCAL FANTASYLAND?
CAN YOU SPEND YOUR WAY TO PROSPERITY? (THE RAHN CURVE)

- Richard Rahn, Senior Fellow Cato Institute
- Matt Miller, Center for American Progress; The Daily Beast Columnist; Public Radio's "Left, Right and Center" Host

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Harry Reid's Replacement?

Here's my interview with Tea Party-backed Nevada GOP Senate hopeful Sharron Angle on last night's Kudlow Report. She explains why voters should put Democratic Majority Leader Senator Harry Reid on extended unemployment benefits.