'BEAUTIFUL’: Former Trump economic adviser left astounded

Key Concepts

• Supply-Side Economics: Economic policies focused on reducing barriers for businesses and individuals, believing this will lead to increased production and economic growth.
• Capital Expenditures (Capex): Funds used by a company to acquire, upgrade, and maintain physical assets such as property, plants, buildings, and equipment.
• Industrial Production: A measure of the output of the industrial sector of the economy.
• Deregulation: The removal of government rules and restrictions in a particular industry.
• Keynesian Economics: An economic theory advocating for government intervention in the economy, particularly during recessions.
• Federal Reserve (The Fed): The central banking system of the United States, responsible for monetary policy.
• Trumpian Revolution: The idea that Donald Trump’s economic policies are inspiring a global shift towards growth-oriented, deregulation-focused strategies.

Economic Boom Under Trump: A Discussion of Growth, Policy, and the Federal Reserve

The discussion centers around a perceived economic boom in the United States, attributed largely to the policies of the Trump administration. The conversation, between Larry Kudlow and Steve Moore, details positive economic indicators and expresses concern about potential threats to continued growth, particularly regarding the future leadership of the Federal Reserve.

I. Positive Economic Indicators & Policy Attribution

Kudlow initiates the conversation by highlighting a series of robust economic figures. Non-defense capital goods shipments (excluding aircraft) are up 9.9% over the last three months, double the 5.1% growth of the previous year. Orders are also increasing, rising 8.5% annually. Furthermore, industrial production of both consumer and business goods is booming, alongside productivity and profits. Kudlow posits that continued growth at this rate will alleviate affordability concerns and reduce debt and deficits.

Moore expands on this, noting the significant drop in gasoline prices ($2.69 a gallon) and the increase in exports under the Trump administration, leading to a reduction in the trade deficit. He attributes this positive trend directly to Trump’s policies, specifically tax cuts and the allowance for businesses to reduce taxes on capital goods, which spurred investment. Moore also emphasizes the record levels of oil and gas production in the US, and the administration’s commitment to deregulation – 100 deregulations for every new regulation. He characterizes Trump’s economic approach as akin to a “third and fourth term of Ronald Reagan,” mirroring the economic resurgence seen during Reagan’s presidency.

II. Challenging Conventional Economic Models & Growth Potential

Both Kudlow and Moore challenge the conventional economic wisdom regarding the relationship between economic growth and inflation. Trump, during a speech in Davos, argued that “economic growth does not cause inflation,” and that the Federal Reserve’s models predicting a tradeoff between low unemployment and high inflation are flawed. Moore echoes this sentiment, stating that “there are no limits to growth” when the right policies are in place, coupled with American innovation and a productive workforce.

Kudlow illustrates this point by highlighting the economic struggles of other nations, noting that the average German’s per capita income is now lower than that of the average resident of Arkansas, the poorest US state. He predicts a “Trumpian revolution” spreading globally, citing examples in Central and South America, and anticipating a rise of populist figures like Nigel Farage in Britain, and a rejection of “arrogant, out-of-touch Keynesian politicians” across Europe.

III. Concerns Regarding the Federal Reserve & Potential Appointments

A significant portion of the discussion focuses on the upcoming appointment to lead the Federal Reserve. Kudlow expresses concern about the potential nomination of Rick Reer, citing FEC data showing donations to George Soros’s ActBlue and candidates opposed to Trump, including John Tester, Sherrod Brown, Hakee Jeffries, and even Nikki Haley. He questions the suitability of someone with this political history, advocating for a candidate who embraces supply-side economics.

Moore strongly urges Trump to appoint either Kevin Hasset or Kevin Warsh, both of whom he describes as “outstanding economists” with a strong understanding of the Fed. He reminds Trump of a past conversation where Trump acknowledged making a “big mistake” with his previous Fed appointment, Jerome Powell. Moore emphasizes that these candidates can reestablish a strong and stable dollar and potentially “clean house” at the Fed.

IV. Supply-Side Economics & Independent Thought at the Fed

Kudlow reiterates the importance of appointing someone who, while independent, still subscribes to supply-side economic principles, a model he, Moore, and Arthur Laffer have championed for decades. He acknowledges the possibility of being wrong about Reer’s donor history but stands by the available FEC information.

V. Conclusion

The conversation paints a picture of a thriving US economy under Trump’s policies, driven by investment, deregulation, and increased production. However, it also underscores the importance of maintaining this momentum through careful selection of Federal Reserve leadership, prioritizing candidates who understand and support supply-side economics and are committed to fostering continued growth without succumbing to outdated inflationary fears. The core takeaway is a strong belief in the potential for limitless growth when the right policies are implemented, and a warning against allowing conventional economic thinking to stifle economic progress.