Trump's Economic Adviser Has Been Wrong About Everything Important
In the wake of Gary Cohn's departure from the National Economic Council, President Donald Trump chose conservative economic analyst and TV personality Lawrence Kudlow -- both a longtime friend and early supporter of Trump's presidential bid -- to head up the council.
The Washington Post reported Wednesday that Kudlow officially accepted Trump's officer late that afternoon.
But there is growing concern that Trump would opt for a man who has been wrong on virtually every economic prediction he has made.
> Kudlow is described by White House officials as someone who clicks with the president personally and politically, although Kudlow has been averse to Trump’s hard-line approach to trade policy. Trump now sees that kind of close rapport as central to his presidency, especially after clashing with Tillerson and others who have worked in the administration over the past year but have since departed, the people said.
Apart from hosting "The Kudlow Report" on CNBC and making his rounds on other networks, Kudlow advised Trump during the 2016 presidential campaign and also worked with Treasury Secretary Steve Mnuchin on an early version of the Republican tax plan.
Kudlow has made no secret of his staunch support for supply-side economic theory, dating all the way back to his time in the Reagan White House.
Jonathan Chait, who has written extensively on the subject of supply-side economics, is concerned that Trump has chosen a man who's been wrong about nearly every economic issue the U.S. has faced over the past few decades.
> The purest supply-siders, like Kudlow, go further and deeper in their commitment. Kudlow attributes every positive economic indicator to lower taxes, and every piece of negative news to higher taxes. While that sounds absurd, it is the consistent theme he has maintained throughout his career as a prognosticator.
To what extent has Kudlow been wrong?
Kudlow attributed the economic boom under Bill Clinton to Ronald Reagan's tax cuts:
> In 1993, when Bill Clinton proposed an increase in the top tax rate from 31 percent to 39.6 percent, Kudlow wrote, “There is no question that President Clinton’s across-the-board tax increases … will throw a wet blanket over the recovery and depress the economy’s long-run potential to grow.” This was wrong. Instead, a boom ensued. Rather than question his analysis, Kudlow switched to crediting the results to the great tax-cutter, Ronald Reagan. “The politician most responsible for laying the groundwork for this prosperous era is not Bill Clinton, but Ronald Reagan,” he argued in February, 2000.
And when economic growth began to slow?
> “The Clinton policies of rising tax burdens, high interest rates and re-regulation is responsible for the sinking stock market and the slumping economy,” he mourned, though no taxes or re-regulation had taken place since he had credited Reagan for the boom earlier that same year.
What about Kudlow's predictions leading up to the 2008 financial crisis?
> He began to insist that the housing bubble that was forming was a hallucination imagined by Bush’s liberal critics who refused to appreciate the magic of the Bush boom. He made this case over and over (“There’s no recession coming. The pessimistas were wrong. It’s not going to happen. At a bare minimum, we are looking at Goldilocks 2.0. (And that’s a minimum). Goldilocks is alive and well. The Bush boom is alive and well.”) and over (“The Media Are Missing the Housing Bottom,” he wrote in July 2008). All of this was wrong. It was historically, massively wrong.
One of the more dire situations created by Kudlow's insistence on the merits of supply-side economics happened in Kansas, where he advised former Governor Sam Brownback on sweeping tax cuts that Kudlow claimed would lead to faster economic growth:
> This was wrong. Alas, Brownback’s program has proven a comprehensive failure, falling short of all its promises and leaving the state in fiscal turmoil.
Kansas is still mired in financial difficulties as state officials attempt to dig their way out of Brownback's mess.
Chait sees Kudlow's appointment as proof that the Republican party is off its rocker when it comes to sound economic policy:
> This was the Trump agenda even with the relatively moderate Gary Cohn running the National Economic Council. Now that true believer Lawrence Kudlow is taking the helm, the dawn of fiscal sanity in the GOP is receding ever farther into the distant future.