Kudlow: Tax hikes undermine supply side of economy
‘Kudlow’ host discusses how small business owners will suffer due to Biden’s Build Back Better agenda.
Just a quick word before I get to the budget and the economy.
My congratulations to young Kyle Rittenhouse for his across-the-board acquittal and complete exoneration of all charges. In this country, thankfully, the right of self-defense is protected by our constitution as an integral part of the rule of law. In this difficult trial, justice was done.
And my hat's off to the jury that performed their civic duty seriously and valorously in the face of threats to their well-being. And I want to tip my hat to the judge also facing threats to his well-being who ran a tough courtroom.
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In a few moments, we'll talk to Wisconsin senator Ron Johnson about the trial and the budget.
Now, we know this Triple B – Bankrupt, Benefit and Bureaucracy bill – is a disaster for the economy and should've been killed. Right? Save America. Kill the bill.
As for the CBO scorecard, they have done what their Democratic House "masters" ordered them to do.
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But the scoring is a complete gimmick-prone scam – one or two year phase-outs for entitlements and transfers that should be scored as 10 years because that's the political intent of the big government socialists. Meanwhile, 10 years of taxes have in fact found their way into the bill and its scoring. I can't really blame CBO because they're doing what they were told to do.
But I sure can blame the left-wing progressives who were behind this. And by the way, the U.S. public sees right through this scam. They know full well that there's really $5 trillion dollars of spending intended by the woke progressives. Not $1.6 trillion, but $5 trillion.
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And these phony baloney estimates of a $367 billion deficit with a couple hundred billion of phony IRS tax cheat revenues leading to a phony deficit of $160 billion — and no it doesn't pay for the whole package as promised. But all these crazy budget numbers amount to all chaff and no wheat, all hat and no cattle – no meaning whatsoever. It's the underlying policies that matter, and those policies are terrible.
Modeling from Penn-Wharton, and Committee for a Responsible Federal Budget — by the way, these are certainly not supply-side shops — but their modeling gets you to $5 trillion of spending. Given raging inflation, which I fear is now in a new take-off phase, with massive federal spending, and massive money printing to finance it, we truly have too much money chasing too few goods, as Milton Friedman put it seven decades ago.
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Poll after poll shows inflation is public enemy number one and voters identify big government spending with rising inflation. So with all their gimmicks and trickery and jiu-jitsu policy somersaults to hide the truth – this will cost Democratic House members major losses in next year's election.
And speaking of a new Republican House, Republican leader Kevin McCarthy gave a brilliant speech last night. Absolutely brilliant. I think it's the single best speech from a congressional Republican leader in at least three decades. Take a listen to some of it:
"From bank surveillance to bailouts, this bill takes the problems President Biden and the Democrats have created and makes them much worse."
"How can you look at your constituents in the eye, with one party rule, in one year, You've created inflation we haven't seen in 31 years. You've made gas prices higher than it's been in seven. You're passing a bill that gives amnesty to illegals."
"You're charging more than 5 trillion dollars with this bill. More than 2000 pages. Enough."
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Now here's the thing: Among a slew of terrific policy points, Mr. McCarthy talked about welfare without workfare, higher energy costs from the Green New Deal, a bigger inflation tax on the middle class, IRS snooping in your bank accounts with new agents roaming around the country trying to find alleged tax cheats, the federal government trying to replace parents and families — whether it's child rearing or education, or work. Mr. McCarthy talked about left-wing "social engineering" and printed money leading to massive runaway inflation, paying people not to work.
And I’ll just conclude with this quote: "Republicans believe the family is the foundation of a strong society. But we also know work establishes purpose, and there is no government substitute for a job and an earned income." Again, hats off to Kevin McCarthy.
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And speaking of taxes, as Kevin Hassett will tell us later in the show, massive tax hikes will undermine the supply side of the economy. Economic growth incentives are punished everywhere. Minimum corporate taxes at home and overseas, surtaxes on successful earners, which really means small business owners who are the job creators in our economy. Tax burdens on business capital investment so vital for productivity and higher real wages to the middle class aimed at new plants, equipment, tech advances. Worker training will all be slammed in this bill.
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Long-run capital investment will shrink by 8%. According to Penn-Wharton, potential GDP would fall by 2.5 percentage points over time, and the Biden bill will even let foreign countries determine American corporate tax burdens.
Ya know, I once worked for a president whose last name was Trump, who believed in America first and told us many times in the Oval that the only people who can decide how to tax American businesses are American voters, not foreign governments.
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Then there's welfare payments to illegal immigrants, amnesty measures without real immigration reform, and then the bill strikes down the 45-year old Hyde Amendment that prohibits federal funding of abortions. And once again I want to underscore the debilitating policies whereby transfer payments from welfare, nutrition, unemployment, child allowances, paid leave, pre-K and other areas are not exchanged for work. This may be the most debilitating policy of all.
And summing it up, I invoke Steve Forbes' idea of "modern socialism," where the government doesn't physically take over steel mills, car factories, iron foundries and so forth like Leninists-Stalin in the 1920's and 30's. "Modern socialism" is the humongous regulatory overreach that controls all industries. like banking, oil and gas, health care, and many, many more. Will this monstrosity be stopped in the Senate? I sure hope so.
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The big question is whether Joe Manchin will stand his ground on inflation. As inflation has moved from 2% to 4% to 6%, now even to 8%, Manchin has said no more spending. He's calling for a pause, at least until inflation starts coming down.
Janet Yellen says inflation doesn't peter out until the second half of next year at the earliest.
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So my point is not only must Manchin and Sinema stop welfare without work, stop destroying fossil fuels and our energy economy, stop crippling tax hikes, but they need to fight for a complete pause in new spending until at least the second half of next year. There should be no new spending bill at all.
Save America. Kill the bill.
And that's my riff.
This article is adapted from Larry Kudlow's opening commentary on the November 19, 2021 edition of "Kudlow."
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