Like most of you, I stayed up late last night reading President Biden’s speech to the House Democrats at their retreat in Baltimore. Joke. It was riveting. Another joke.
Of course he accused Republicans of raising the budget deficit by $3 trillion over the next 10 years. That’s one of his standard untruths.
He’s referring to the Trump tax cuts, which of course he hates because they were so successful. They actually made money for Uncle Sam and delivered a 6.5 percent growth economy when Mr. Biden was elected, with a 1.4 percent inflation rate.
Mr. Biden bragged about the importance and success of the $1.9 trillion American Rescue plan in March 2021, even though in his first full year in office growth plunged to 0.9 percent and inflation soared to 6.5 percent. He went on to say Republicans would cut Social Security, Medicare, Medicaid, and veterans’ benefits — all the usual Democratic pap.
He took credit for cutting the budget deficit, which as everyone knows is untrue because the temporary reduction is from emergency Covid spending that expired. Meanwhile, the CBO just scored a $20 trillion increase in budget deficits over the next decade, which Mr. Biden forgot to mention.
He started to talk about inflation and then wandered off into personal anecdotes — like how long he’s known Steny Hoyer — but inflation is proving to be very sticky, around 6 percent.
Productivity has fallen by nearly 2 percent over the past year. Unit labor costs have jumped up over 6 percent. Business inflation is coming in at 6 percent. The rise in unit labor costs will do some damage to corporate profits and the stock market.
Mr. Biden started mocking specific Republicans, as usual, but the basic point is: He will do anything not to cut any spending, which is expected to rise to nearly 25 percent of GDP — about 5 percentage points above the 50-year average.
Interest rates continue to rise and have a way to go on the upside, including mortgage rates and credit card rates, which helps explain why Americans feel they are poorer and worse off financially than a year ago.
People have jobs, but their wages are below inflation and their standards of living are falling.
Mr. Biden forgot to mention these things as well.
So, after reading Mr. Biden’s literary masterpiece about American economic decline, I set down on paper a few ideas of how to reach the kind of 3.5 percent growth that we had for 50 years following World War II. These are policy proposals with ballpark estimates, so bear with me — it’s not exact.
First up, extend the Trump tax cuts, which will add at least a half percent to real GDP. By the way, if you went to a modified flat-tax rate of 20 percent for corporate and personal income, that would add at least 2 percent to yearly GDP, according to the Tax Foundation.
Then get spending back to 20 percent of GDP — that would add a third of 1 percent to growth.
Reopen the oil and gas spigots, adding a third of a percent.
Reinstall workfare requirements, adding a third of a percent.
Index capital gains for inflation, adding at least a third of a percent.
Repeal all new Biden regulations, adding 1 percent, according to a former chairman of the Council of Economic Advisers under President Trump, Kevin Hassett.
Also, implement strict M2 control guided by commodity price level targeting to keep inflation permanently below 2 percent. There’s no telling how much that would add to growth.
All this would get you to 3.5 percent or 4 percent growth or even more.
This is not hard; it’s all common sense — but somehow it wasn’t in Mr. Biden’s speech to those Democrats yesterday.
From Mr. Kudlow’s broadcast on Fox Business News.
Larry Kudlow was the Director of the National Economic Council under President Trump from 2018-2021. His Fox Business show "Kudlow" airs at 4 p.m &. and his radio show airs on 770 ABC from 10:00 a.m. to 1:00 p.m.
