Larry Kudlow on Trumponomics and the Fed: Why One of the Two Kevins Will Succeed

As President Trump returns from Davos, it’s important to highlight that he is standing on top of the world regarding American achievements and influence. Additionally, new data released today indicates that the U.S. business investment boom is gaining momentum.

Specifically, the crucial category of non-defense capital goods—excluding the volatile aircraft sector—has seen a remarkable increase of 9.9% at an annual rate for shipments over the past three months. This figure is nearly double the twelve-month rate. Furthermore, new orders have surged by 8.5% over the same period, compared to a more modest 5.5% increase over the past year. These investments encompass a wide range of sectors, including machinery, equipment, computers, and electronics.

This surge in capital expenditures, often referred to as capex, is likely linked to the immediate expensing provisions included in the significant tax reform bill that was made retroactive to Mr. Trump’s inauguration on January 20 of last year. This serves as yet another testament to the effectiveness of the President’s policies, coinciding with a notable uptick in industrial production across both consumer goods and business equipment.

The GDP has also experienced a notable spurt, rising by 3.8% annually in the second quarter, 4.4% in the third, and potentially reaching 5% in the fourth quarter. Indeed, we are witnessing a Trump boom, driven by policies focused on tax cuts, deregulation, and reciprocal free and fair trade.

While many assert that 70% of the economy is driven by consumer spending, this perspective often overlooks the fact that business-to-business spending plays a crucial role in driving economic growth. It is businesses that hire workers and pay their wages, making a healthy business economy essential for a robust consumer economy. This foundational aspect underscores the significance of Trump’s policies.

The rise in business investment is also contributing to a productivity boom. Economist Ed Yardeni notes in his recent newsletter that increased capital spending is enhancing productivity and profit margins. Corporate profits and margins are currently at record levels, providing businesses with the resources to hire more employees and offer higher wages. This sequence of tax incentives, business investment, productivity, profits, and wages is effectively addressing the so-called affordability problem, resulting in solid economic growth.

Moreover, take-home pay has risen by approximately 4%, significantly outpacing the recent 1.6% core CPI and 2.3% core PCE deflator. This increase translates to about $2,000 for the average family. It is crucial that we avoid any government shutdown that could hinder this Trump boom, which is the envy of the world. A new Fed chair who understands Mr. Trump’s assertion at Davos—that economic growth does not lead to inflation—is essential.

Traditional Fed models suggest that the economy cannot sustain growth rates of 4%, 5%, or 6%, insisting it must remain below 2%. This perspective is misguided. Jay Powell and his predecessors have often tightened policies, stifling growth. The outdated Phillips curve model, which falsely posits a trade-off between growth and inflation, should be retired.

We are entering a new era characterized by low taxes, deregulation, decreasing energy prices, and rising productivity—all of which are fueling a boom that is generating more factories and goods at lower prices. The new Fed chair should embody this Trumpian economic philosophy. Kevin Warsh and Kevin Hassett grasp the principles of Trumponomics. They can operate independently while recognizing that the supply-side productivity boom does not lead to inflation.

However, uncertainty surrounds Wall Street-er Rick Rieder, whose name has surfaced as a potential Fed candidate. While I aim to be fair, there are indications that he has contributed to the George Soros ‘Act Blue’ political campaign and has earmarked donations for various left-wing Democrats, including Sherrod Brown, Hakeem Jeffries, Jon Tester, and the never-Trumper Nikki Haley.

This does not align with the principles of Trumponomics. If I am mistaken about this information, I will gladly retract my statement, but there is Federal Election Commission evidence to support these claims. Why not stick with the best? One of the two Kevins would be an excellent choice.

As President Trump returns from Davos, it’s important to highlight that he is standing on top of the world regarding American achievements and influence. Additionally, new data released today indicates that the U.S. business investment boom is gaining momentum.

Specifically, the crucial category of non-defense capital goods—excluding the volatile aircraft sector—has seen a remarkable increase of 9.9% at an annual rate for shipments over the past three months. This figure is nearly double the twelve-month rate. Furthermore, new orders have surged by 8.5% over the same period, compared to a more modest 5.5% increase over the past year. These investments encompass a wide range of sectors, including machinery, equipment, computers, and electronics.

This surge in capital expenditures, often referred to as capex, is likely linked to the immediate expensing provisions included in the significant tax reform bill that was made retroactive to Mr. Trump’s inauguration on January 20 of last year. This serves as yet another testament to the effectiveness of the President’s policies, coinciding with a notable uptick in industrial production across both consumer goods and business equipment.

The GDP has also experienced a notable spurt, rising by 3.8% annually in the second quarter, 4.4% in the third, and potentially reaching 5% in the fourth quarter. Indeed, we are witnessing a Trump boom, driven by policies focused on tax cuts, deregulation, and reciprocal free and fair trade.

While many assert that 70% of the economy is driven by consumer spending, this perspective often overlooks the fact that business-to-business spending plays a crucial role in driving economic growth. It is businesses that hire workers and pay their wages, making a healthy business economy essential for a robust consumer economy. This foundational aspect underscores the significance of Trump’s policies.

The rise in business investment is also contributing to a productivity boom. Economist Ed Yardeni notes in his recent newsletter that increased capital spending is enhancing productivity and profit margins. Corporate profits and margins are currently at record levels, providing businesses with the resources to hire more employees and offer higher wages. This sequence of tax incentives, business investment, productivity, profits, and wages is effectively addressing the so-called affordability problem, resulting in solid economic growth.

Moreover, take-home pay has risen by approximately 4%, significantly outpacing the recent 1.6% core CPI and 2.3% core PCE deflator. This increase translates to about $2,000 for the average family. It is crucial that we avoid any government shutdown that could hinder this Trump boom, which is the envy of the world. A new Fed chair who understands Mr. Trump’s assertion at Davos—that economic growth does not lead to inflation—is essential.

Traditional Fed models suggest that the economy cannot sustain growth rates of 4%, 5%, or 6%, insisting it must remain below 2%. This perspective is misguided. Jay Powell and his predecessors have often tightened policies, stifling growth. The outdated Phillips curve model, which falsely posits a trade-off between growth and inflation, should be retired.

We are entering a new era characterized by low taxes, deregulation, decreasing energy prices, and rising productivity—all of which are fueling a boom that is generating more factories and goods at lower prices. The new Fed chair should embody this Trumpian economic philosophy. Kevin Warsh and Kevin Hassett grasp the principles of Trumponomics. They can operate independently while recognizing that the supply-side productivity boom does not lead to inflation.

However, uncertainty surrounds Wall Street-er Rick Rieder, whose name has surfaced as a potential Fed candidate. While I aim to be fair, there are indications that he has contributed to the George Soros ‘Act Blue’ political campaign and has earmarked donations for various left-wing Democrats, including Sherrod Brown, Hakeem Jeffries, Jon Tester, and the never-Trumper Nikki Haley.

This does not align with the principles of Trumponomics. If I am mistaken about this information, I will gladly retract my statement, but there is Federal Election Commission evidence to support these claims. Why not stick with the best? One of the two Kevins would be an excellent choice.