Those decades of free-market machinations are now paying off, as a quintet of Ronald Reagan administration alumni — Kudlow, Laffer, Forbes, Moore and David Malpass—united by undying affection for each other and for laissez-faire economics, have the run of Washington once more. Members of the tight-knit group have shaped Trump’s signature tax cut, helped install each other in posts with vast influence over the global economy, and are working to channel Trump’s mercantilist instincts into pro-trade policies. Blasted by their critics as charlatans and lauded by their acolytes as tireless champions of prosperity, there’s no denying that the quintet has had an enduring impact on decades of economic policy.
Most recently, in late March, and partly at Kudlow’s urging, Trump announced his intention to nominate Moore to one of two open seats on the Federal Reserve Board of Governors, the body that sets the tempo of the global financial system.
The announcement prompted protests from economists across the ideological spectrum—George W. Bush’s top economist, Harvard’s Gregory Mankiw, said Moore lacked the “intellectual gravitas” for the job—who warned that appointing Moore, a think-tanker with no Ph.D., would politicize the Fed. Soon, it emerged that Moore had made a mistake on a 2014 tax return that led the IRS to place a disputed $75,000 lien against him, and CNN dug up scathing comments Moore had made about Trump during the presidential primary.
Whether Moore can survive the scrutiny and pass muster with the Senate will be a test of the supply-siders’ renewed cachet. They believe they can pull it off.
“I understand there are imperfections,” Kudlow told POLITICO. “I think it can be worked out.”
Moore described some of his recent conversations with Trump, which often turn to Fed Chairman Jerome Powell.
“I think his criticism of Powell is excessive and could be counterproductive,” Moore said, because it could actually provoke Powell to prove his independence by defying Trump’s wishes. Generally speaking, Trump wants Powell to keep interest rates low to decrease the chances of any economic slump before the president faces voters again next November.
Moore also recounted how he and Laffer, who began advising Trump in 2016, helped place Kudlow in his current posting.
Roughly a year into Trump’s term, as Trump’s first NEC director, Gary Cohn, prepared to depart the post, the duo sprang into action. Moore said that during this period, whenever he and Laffer engaged in their semiregular consultations with Trump, they would have some version of the following exchange:
“You know, Mr. President, you’re missing one thing,” Laffer or Moore would say.
“What is that?” Trump would ask.
“Larry Kudlow,” Laffer or Moore would tell him.
“We just drilled the message over and over,” Moore recalled. “‘Larry, Larry, Larry, Larry.’”
During that same period, following the 1974 midterms, Laffer first drewhis famous Laffer Curve — a representation of the idea that at a certain level of taxation, lowering taxes would theoretically spur enough growth that government revenue would actually rise—at a meeting near the White House with Wanniski, Dick Cheney, then an aide to President Gerald Ford, and Grace-Marie Arnett, another free marketeer active in Republican politics.
Reagan would go on to fully embrace supply-side theory, a shift from the party’s traditional emphasis on fiscal discipline, appointing Laffer to his Economic Policy Advisory Board.
Then as now, supply-side economics was criticized for favoring the rich and derided by critics as unrealistic “Voodoo Economics.” The critics got an early boost from a 1981 Atlantic cover story in which Reagan’s budget director, David Stockman, aired his doubts that this novel theory was working in practice.
The piece ruined Stockman’s standing with Reagan—Laffer calls him “the traitor of all traitors”—but Stockman’s young aide, Kudlow, now 71, remained a loyal supply-sider and struck up a relationship with Laffer.
Reagan would go on to appoint Forbes as the head of the Board of International Broadcasting, which oversaw Radio Liberty and Radio Free Europe, and Moore worked as the research director for Reagan’s privatization commission. Malpass, meanwhile, worked in Reagan’s Treasury department. Representatives for Forbes and Malpass said they were not available for interviews.
In the 1988 presidential primary, another supply-sider, the late New York congressman Jack Kemp, lost out to George H.W. Bush, curtailing the crew’s influence within the party.
But they stuck together. Moore, now 59, first became close with Laffer and Kudlow in 1991, after he recruited them to participate in an event celebrating the 10-year anniversary of Reagan’s first tax cuts for the libertarian Cato Institute.
In 1993, Kudlow and Forbes teamed up to craft a tax cut plan for New Jersey gubernatorial candidate Christine Todd Whitman, who went on to unseat incumbent Democrat James Florio.
Meanwhile, Kudlow hired Malpass to work for him at Bear Stearns, where he had been flying high as the investment bank’s chief economist.
The next year, Kudlow crashed to earth—he left the bank and entered rehab for alcohol and cocaine addiction. Laffer stuck by Kudlow, hiring the investment banker to work for his consulting firm in California when he emerged.
In 1996, Forbes, backed by Moore, entered the Republican primary and lost out to Bob Dole, but the group takes credit for getting Kemp picked for the bottom half of that year’s ticket, which lost to incumbent Bill Clinton.
And they have not stopped partying since. Members of the group have continued to actively socialize with each other over the decades, with some spending New Year’s eves together. At one birthday party for Laffer in New York, they presented the aging economist with a signed poster of the Jedi master Yoda. “I’m short, a little bit fat. I’ve got big, green ears,” Laffer explained. “I look sort of like Yoda.”
In 2015, Forbes, Laffer, Kudlow and Moore created the Committee to Unleash Prosperity, a group intended in part to counter the emergence of the “Reformicons,” a rival gang of Republican eggheads who felt the party had gone too far in the direction of laissez-faire policies favoring the rich.
Among the other 29 committee members listed in a press release were both Malpasses, Kevin Hassett, now chairman of Trump’s Council of Economic Advisers, and Andy Puzder, who was Trump’s initial pick for labor secretary until allegations of domestic abuse unearthed by POLITICO derailed his nomination.
The group sought, with considerable success, to vet Republican presidential candidates for their supply-side credentials and to influence their platforms, holding large private dinners at Manhattan venues such as the Four Seasons and the 21 Club, so that committee members and other notable invitees—like Rudy Giuliani and Roger Ailes—could feel out the candidates.
Before meeting with the larger group, candidates would huddle with the committee’s founders to receive economic tutorials. Or in the case of Ohio Governor John Kasich, to give one. “We were all sitting there, and he would talk for an hour,” Moore recalled. “We’re like, ‘No, we’re supposed to be talking to you,’ and he’s talking to us.” Moore called the episode “Classic John Kasich.”
Though the events were supposed to be off the record, journalists often attended, and an otherwise lackluster February 2015 dinner for Wisconsin Governor Scott Walker made headlines when Giuliani barged in, proclaimed he did not believe that President Barack Obama “loves America,” and insisted a POLITICO reporter could print the quote.
Already, critics note that Mnuchin has selected another Democratic donor, Craig Phillips, for a top position within the department. He told senators at his confirmation hearing that he supports parts of the controversial Volcker Rule, which prohibits banks from making some bets with their own money — an anathema to conservatives who want to scrap stricter banking laws.
.. “For conservatives, Mnuchin is a missed opportunity because he is not conservative. He will not drive the kind of tax reform we want, nor will he be strong on fixing Dodd-Frank,” the donor added.
.. Allies of Cohn and Powell, both former Goldman Sachs executives like Mnuchin, say their opponents, led by Bannon, are attempting to plant stories about Cohn and those around him to discredit their standing with conservatives and with Trump himself.
.. These include allegations that Cohn is pushing a carbon tax and for keeping the U.S. in the Paris climate accords and was behind a visit to the White House by Zeke Emanuel, an architect of Obamacare.
.. Cohn has proven himself among the few West Wing advisers able and willing to contradict the president. One person close to the matter said the NEC director regularly pushes back in meetings with the Trump. “It’s always done in a respectful, ‘Can I just make my point?’ kind of way. He’s not interrupting him,” this person said.
.. Cohn has also been positioning himself as the leader of any upcoming tax reform process. This month, he met with Ways and Means Republicans and his top tax policy adviser, Shahira Knight, to give a broad overview of how the White House views tax reform
.. “We believe in free trade. We are in one of the largest markets in the world. …Trade has been good for us. It has been good for other people,” he said. “Having said that, we want to re-examine certain agreements.”
.. once the health care fight is over they should be able to take center stage.”
.. Advocates of the Bannon wing, which also includes senior adviser Stephen Miller, argue that pursuing this kind of centrist approach, either at Treasury or inside the White House, would be a rejection of Trump’s voters who elected him on a clear platform of changing trade policy to benefit Americans, building a wall with Mexico, cracking down on illegal immigration and preventing travel to the United States from nations associated with terrorism.
.. Conservatives have applauded a few of Mnuchin recent picks for top Treasury jobs, including David Malpass, a former Bear Stearns economist, for the undersecretary of international affairs and Drew Maloney, Rep. Tom DeLay’s former legislative director, for the assistant secretary for legislative affairs. Among others, Treasury also added Dan Kowalski, Stephen Miller’s deputy on the Trump campaign, as a counselor.
This administration operates under the doctrine of Trumpal infallibility: Nothing the president says is wrong, whether it’s his false claim that he won the popular vote or his assertion that the historically low murder rate is at a record high. No error is ever admitted. And there is never anything to apologize for.
.. American politics — at least on one side of the aisle — is suffering from an epidemic of infallibility, of powerful people who never, ever admit to making a mistake.
.. More than a decade ago I wrote that the Bush administration was suffering from a “mensch gap.” (A mensch is an upstanding person who takes responsibility for his actions.) Nobody in that administration ever seemed willing to accept responsibility for policy failures, whether it was the bungled occupation of Iraq or the botched response to Hurricane Katrina.
.. Later, in the aftermath of the financial crisis, a similar inability to admit error was on display among many economic commentators.
.. the open letter a who’s who of conservatives sent to Ben Bernanke in 2010, warning that his policies could lead to “currency debasement and inflation.” They didn’t. But four years later, when Bloomberg News contacted many of the letter’s signatories, not one was willing to admit having been wrong.
.. one of those signatories, Kevin Hassett — co-author of the 1999 book “Dow 36,000” — will be nominated as chairman of Mr. Trump’s Council of Economic Advisers. Another, David Malpass — the former chief economist at Bear Stearns, who declared on the eve of the financial crisis that “the economy is sturdy” — has been nominated as undersecretary of the Treasury for international affairs.
.. less to do with ideology than with fragile egos
.. inability to engage in reflection and self-criticism is the mark of a tiny, shriveled soul
.. Many Americans no longer seem to understand what a leader is supposed to sound like, mistaking bombast and belligerence for real toughness.
.. we can at least hope that watching Mr. Trump in action will be a learning experience — not for him, because he never learns anything, but for the body politic.
Analysts expect those cash-management steps will allow the Treasury to pay bills that come due without issuing new debt until this fall, depending on the strength of Treasury receipts this spring and summer. After that, Congress would need to raise the borrowing limit or risk the U.S. missing certain payments.