FOX Business host Larry Kudlow explains why economic growth has slowed under President Biden and discusses the importance of adopting pro-growth economic policies on “Kudlow.”
So, like most of you, I stayed up late last night reading President Joe Biden’s address to House Democrats at their retreat in Baltimore. Funny. It was riveting. Another joke. Of course, he accused Republicans of increasing the budget deficit by $3 trillion over the next ten years. This is one of his standard untruths. He’s referring to the Trump tax cuts which he naturally loathes because they were so successful. They made real money for Uncle Sam and delivered a 6.5% growth economy when Biden was elected with an inflation rate of 1.4%.
Mr. Biden boasted about how important the $1.9 trillion US Bailout plan was in March 2021 and how successful it was. Although in his first full year in office, growth fell to 0.9% and inflation soared to 6.5%. Biden went on to say that Republicans will cut Social Security, Medicare, Medicaid, and veterans benefits, all the usual Democratic platitudes. He took credit for reducing the budget deficit, which as everyone knows is untrue because the temporary reduction is due to expired COVID emergency spending.
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Meanwhile, the CBO just noted a $20 trillion increase in budget deficits over the next decade, which Mr. Biden forgot to mention. He started talking about inflation and then wandered into personal anecdotes – like how long he’s known Steny Hoyer – but inflation turns out to be very sticky around 6%. Productivity has fallen by almost 2% in the past year. Unit labor costs have jumped over 6%. And business inflation is coming in at 6%. An increase in unit labor costs will cause some damage to corporate profits and the stock market.
Biden started poking fun at specific Republicans, as usual, but the bottom line is: he’ll do everything possible to not cut any spending that’s expected to rise to nearly 25% of GDP — about 5 percentage points above the 50-year average . Interest rates continue to rise and have ways to go, including mortgage rates and credit card rates, and explain why Americans feel they are poorer and worse off than they were a year ago. People have jobs. But their wages are below inflation and their living standards are falling. Biden forgot to mention these things too.
President Joe Biden speaks about the economy to union members at IBEW Local 26, Wednesday, Feb. 15, 2023, in Lanham, Md. (AP Photo/Evan Vucci/AP Newsroom)
So after reading Biden’s literary masterpiece on American economic decline, I put down on paper some ideas about how to get to the kind of 3.5% growth we’ve had for 50 years since WWII. These are policy proposals with ballpark estimates, so bear with me that they are not exact, but they are in the ballpark. First, extend the Trump tax cuts, which will add at least half a percent to real GDP. By the way, if you follow a modified flat tax rate of 20% for corporate and personal income, this will add at least 2% to annual GDP according to the Tax Foundation. Then return spending to 20% of GDP – that would add a third of 1% to growth. Open the oil and gas ports again, adding one-third of the percentage. Reinstate labor fare requirements by adding one-third of the rate. Show capital gains for inflation, adding at least one-third of a percentage. Repeal all new Biden regulations, adding 1% (according to Kevin Hassett). And implement tight control of M2 by targeting the commodity price level to permanently keep inflation below 2%. There’s no telling how much this will add to growth.
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All of these will get you to 3.5% to 4% or even more. That’s not hard, it’s all common sense – but somehow it wasn’t in Mr. Biden’s speech to those Democrats yesterday.