CNBC's Kudlow to McCain: Americans Need an Economic Enema
The American economy is in recession and according to Larry Kudlow, that is a cause for celebration. On Friday, the National Review regular and CNBC host praised three months of job losses as "an economic cleansing" and beamed that "recessions are therapeutic." And by all indications, Kudlow's prescription of an economic enema for the American people is one shared by John McCain.
Given the confluence of grim economic news, Kudlow's flippant "let them eat cake" attitude was all the more jaw-dropping. On Friday, unemployment surged to 5.1% as companies shed 80,000 more jobs in March on top of the 63,000 slashed in February. While a barrel of oil remains above $100, prices at the pump reached record highs. Those developments came just two days after Federal Reserve Chairman Ben Bernanke, still battling the twin crises of the collapsing housing market and a near-meltdown of the American financial system, told Congress "a recession is possible." It's no wonder that an unprecedented 81% of Americans believe the country is on the wrong track.
Almost all of which brought rejoicing from Larry Kudlow. As it turns out, the suffering of more and more Americans, buffeted by job cuts, stagnant wages, home foreclosures and spiraling health and energy costs, is not only natural. It's desirable.
"Recessions are part of capitalism. They happen every so often...Recessions are therapeutic. They cleanse excess from the economy. Think about excessive risk speculation, leverage, and housing. Recessions are curative: They restore balance and create the foundation for the next recovery."
Of course, Kudlow is extremely concerned about the plight of one group of economic players:
"On the other hand, domestic corporate profits are down 20 percent from their peaks of late 2006. Since profits are the mother's milk of stocks, businesses, and the economy, we will need to see profit improvement before the recovery-turn can be called."
Kudlow, arguing that no pain is no gain for the American people, predictably calls for more tax cuts for the wealthy and slashing corporate taxes. And to be sure, under no circumstances should government intervene to help the millions of Americans at risk of losing their homes. As Kudlow declared on March 31:
"It seems like nowadays in Washington nobody is allowed to fail at anything. Of course, as Friedrich Hayek taught us years ago, free-market capitalism is about success and failure. But that view is very unpopular in this election year."
Which is what John McCain learned in the wake of his widely panned economic speech last week. McCain, whose meager pronouncements on the economy have been limited to cutting corporate tax rates and endorsing the wildly irresponsible Bush tax cuts he once opposed, blamed the credit crisis on "rampant speculation." And like Kudlow, McCain adamantly opposes action by the federal government:
"Some Americans bought homes they couldn't afford, betting that rising prices would make it easier to refinance later at more affordable rates," he said. Later he added that "any assistance must be temporary and must not reward people who were irresponsible at the expense of those who weren't."
Mercifully for the American people, Congress and even President Bush are passing John McCain by. While the self-proclaimed economic neophyte McCain follows the counsel of Kudlow and Phil Gramm (who both as a Senator and late UBS vice chairman was a key player in the sub-prime mess), a bipartisan consensus is emerging on Capitol Hill behind a relief package spearheaded by Barney Frank (D-MA).
For his part, the born-again supply-sider John McCain appears to be listening to the likes of supply-side zealot Kudlow. Which means that at least for now, the McCain agenda calls for an economic enema for the American people. To be sure, Americans now know what they are going to get - and where - from President McCain. And his cure won't be pleasant.
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