The Definitive Larry Kudlow Take Down

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As long as any of us has known there was someone named Larry Kudlow, we’ve repeatedly heard him say the same thing: tax cuts will increase economic growth and economic growth will reduce the federal budget deficit.

Whether he was Office of Management and Budget Director David Stockman’s chief economist at the start of the Reagan administration or a television/radio host at CNBC, Kudlow has always had the same unyielding, if theoretical, mantra.

So it was anything but a surprise when Kudlow last week again repeated the same thing when he was interviewed on Fox Business Network.

After all, this is the same Kudlow who has been publicly preaching for close to four decades that tax cuts are the magic elixir for whatever ails you.

And this was Fox Business.

And Kudlow is now a very high-level member of the Trump administration for which facts aren’t as important or required as blind belief.

But this latest recitation of the Kudlow tax cut mantra was different from all those that came before because it disagreed with what the rest of the Trump administration is saying. In making his statement, Kudlow effectively said that the work produced by current Office of Management and Budget Director Mick Mulvaney (a Trump favorite who is again being mentioned as a possible replacement for chief of staff John Kelly) was some combination of shoddy, incompetent, ideologically impure and totally wrong.

Take a look at Table 1.1 from the Historical Tables document that Mulvaney published as part of the Trump’s fiscal 2019 budget released earlier this year. It shows the deficit rising precipitously over the next few years — from $585 billion in 2016 to very close to $1 trillion in 2019 and 2020 — rather than, in Kudlow’s words, “coming down rapidly.” It’s only in 2021 that Mulvaney projected it would start to fall, and that’s based on spending cuts that the Republican Congress has already mostly rejected.

Mulvaney made these projections assuming substantial annual economic growth of about 3.0 percent.

In other words, Kudlow was off the Trump reservation saying that Mulvaney’s growth estimates, which were made after the tax bill was enacted, were way too low. Because of that, Mulvaney’s projected deficits were way too high.

This too is not a surprise position for Kudlow to take. He basically did the same thing during the Reagan administration when he was part of the economic team that produced the “Rosy Scenario” that allowed the White House to lie about the positive deficit impact of the that year’s tax cut so it could be enacted more easily.

Kudlow’s statement is even more absurd when compared to the latest Congressional Budget Office forecast (take a close look at Table B-1) that shows both much lower growth and, as a result, annual deficits of close to or way above $1 trillion every year from 2019 through 2028.

Of course, Kudlow would say that CBO’s economists aren’t true believers so its numbers can’t be trusted. Apparently, he thinks the same thing about the rest of the Trump administration as well.

 

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