Noah Smith (along with a fair section of the Internet) has some concerns about Larry Kudlow as chair of the Council of Economic Advisers: he’s overconfident, too much of a partisan, and fixated on nonexistent problems (e.g., inflation).
.. This is one of the important contributions that economics can make to public policy: the understanding that the world is complicated, and the dedication to uncovering rather than masking that complexity. In a presidential administration, you would expect this perspective to come from the Council of Economic Advisers.
.. What concerns me is that he has been working as an economist for decades—that is, he makes money by thinking and talking about economic issues—yet his conception of the discipline seems limited to the simple, theoretical relationships of Economics 101.
Most of Kudlow’s thinking about economic issues appears to boil down to three ideas.
- The first is that tax cuts increase economic growth—a mantra that conservatives have repeated for decades, yet is not supported by reviews of existing research.
- The second is that expanding the money supply will necessarily generate high inflation, on which basis Kudlow predicted a “major inflationary plunge” just as the Great Recession was beginning.
- The third is that an expensive currency—what politicians call a “strong dollar,” but Kudlow calls “King Dollar” (with the capitals)—is good for the economy.
.. That’s the essence of what I call economism, the subject of my new book: a worldview that assumes that society operates according to a small set of fundamental principles, and that public policy can be shaped on that assumption.
.. With Kudlow as chair of the CEA, Donald Trump is giving up even the pretense of trying to understand economic reality, instead doubling down on a handful of abstract slogans that have little to do with our current challenges. That’s hardly surprising, given that Trump is basically just an extreme caricature of contemporary conservatism
Donald Trump’s New Appointments Shake Up Trade, Regulation
“What Trump is trying to achieve is to show business in a lot of this country they aren’t going to be ruined by absurd regulation by bureaucrats.”
.. Mr. Icahn was an early backer of Mr. Trump and urged him to support efforts to let U.S. corporations bring home offshore cash and to end the carried-interest tax break that benefits many on Wall Street.
.. Mr. Icahn, who has spent the past four decades battling big companies as an activist investor, already has been wielding influence in the president-elect’s transition team. He is playing a central role in selecting the next chairman of the Securities and Exchange Commission, said people familiar with the matter
.. “Trump seems to want to run a flat organization with no real hierarchy, which leaves open the possibility of a lot of poles of power and tug-and-pull within the administration,” said Jeb Mason, a Treasury Department official in the George W. Bush administration. “This may leave everyone guessing about who holds ultimate sway.”
.. Several liberal economists said although they oppose many of Mr. Navarro’s policy ideas, he deserves credit for challenging both Democrats and Republicans to think differently about the costs of globalization.
.. He has written several books with provocative titles, including “The Coming China Wars” in 2008 and “Death by China: Confronting the Dragon—A Global Call to Action” in 2011, and struck up a correspondence with Mr. Trump several years ago after he saw an interview in which the New York businessman spoke approvingly of Mr. Navarro’s China analysis...Mainstream economists have taken a dim view of recent articles by Messrs. Navarro and Ross that characterize U.S. trade deficits as a drag on growth, which economists say present a flawed and confused view of elementary economic principles.“Peter Navarro, a friend, is just wrong,” Lawrence Kudlow, the CNBC commentator who advised Mr. Trump earlier this year on taxes, posted on Twitter before the election.
Larry Kudlow and the Return of Supply-Side Economics
Trump’s pick to chair the White House Council of Economic Advisers is something of a throwback.
.. Observers were quick to note that Kudlow will be the unusual case of a CEA chief without a Ph.D. in economics, much less an undergraduate degree in the field. Old columns written by Kudlow also resurfaced such as one National Review in 2002 in which he lobbied for the U.S. to invade Iraq to rally the stock market or another in December 2007 in which he declared that there was no recession coming.
Trump wants to impose a whopping 35% tariff on businesses that move jobs overseas. This is why.
.. The Trump foreign economic plan most closely resembles President Herbert Hoover’s “mercantilist” approach, which tried to deal with the 1929 crash of the U.S. economy by protecting U.S. industry from foreign competition (and Mexican immigrants). The Smoot-Hawley Act of 1930 dramatically increased U.S. tariffs on imports, thereby hurting America’s trade partners. Those countries, especially the European ones, responded with trade tariffs of their own. The resulting trade war worsened economic problems, produced the Great Depression, and paved the way for Nazis in Germany. If Trump’s “close the borders” approach led to trade wars with China and others that were even half as nasty as those of the 1930s, the world would be immeasurably worse off.
.. Neoliberalism has arguably produced the conditions that are leading to its own eclipse at the hands of Trump. This suggests that it creates the conditions for its own demise, as the political and economic theorist Karl Polanyi suggested in the 1940s.
.. Equally, it is likely to lead to retaliation from other countries, and very strong opposition from multinational firms, who have often supported the Republican party in the past. If Trump and the people around him get his way, America is about to launch a vast new experiment in economic policy, with highly uncertain consequences for the US economy and the world.
