It was the eve of the biggest economic collapse since the Great Depression. Many on Wall Street worried that a recession loomed and that the housing bubble was bursting.
And then there was Larry Kudlow, the man President Trump just tapped to be his top economic adviser.
“Despite all the doom and gloom from the economic pessimistas, the resilient U.S. economy continues moving ahead,” Kudlow wrote on Dec. 7, 2007, in National Review, predicting that gloomy forecasters would “wind up with egg on their faces.” Kudlow, who previously derided as “bubbleheads” those who warned about a housing bubble, now wrote that “very positive” news in housing should “cushion” falling home sales and prices.
“There’s no recession coming. The pessimistas were wrong. It’s not going to happen,” wrote Kudlow. “ . . . The Bush boom is alive and well. It’s finishing up its sixth consecutive year with more to come. Yes, it’s still the greatest story never told.”
If that was the greatest story, this should be a close runner-up: Trump has just put the country’s economic fate in the hands of the man who has arguably been more publicly and consistently wrong about the economy than any person alive.
Kudlow’s tendency to err has been nearly flawless, as Jonathan Chait lays out in New York magazine. But never has Kudlow been as spectacularly wrong as he was before the signal economic event of our time. If you heeded Kudlow’s advice in the months before the 2008 crash, you would have been ruined.
Even as trouble became clear, Kudlow, a CNBC pundit who is not trained in economics, wrote a Feb. 5, 2008, column in National Review saying he was “still betting on and buying Goldilocks [a just-right scenario] for the long run.” He wrote, “Maybe we are going to have a mild correction. Maybe not,” adding: “I’m going to bet that the economy will be rebounding sometime this summer, if not sooner. We are in a slow patch. That’s all. It’s nothing to get up in arms about.”
Move along. Nothing to see here.
When the economy didn’t rebound and housing continued its collapse, Kudlow pronounced, in a CNBC column on July 24, 2008, that he saw in the data “an awful lot of very good new news, which appear to be pointing to a bottom in the housing problem; in fact, maybe the tiniest beginnings of a recovery.” Stocks lost nearly half their value in the coming months.
All of this is to say Kudlow should fit right in with his new colleagues in the Trump administration.
This is the same president, after all, who tapped to be the chief scientist at the Agriculture Department a talk-radio host who is not a scientist, named a brain surgeon to run the Department of Housing and Urban Development and floated the idea of his personal pilot as head the Federal Aviation Administration. A party planner, a bartender, a Meineke Car Care branch manager and a cabana boy all found plum administration jobs.
And those were Trump’s first choices. With Kudlow now replacing Gary Cohn, the impeccably qualified former Goldman Sachs executive, the second-stringers could make their predecessors look like Camelot.
Even a stopped clock is right twice a day, they say. But Kudlow’s misfires just keep coming, as Chait documented.
1993: Kudlow proclaims in a speech: “There is no question that President Clinton’s across-the-board tax increases on labor, capital and energy will throw a wet blanket over the recovery and depress the economy’s long-run potential.” The economy goes into an eight-year expansion and adds 21 million jobs.
2001: Kudlow writes in National Review about the George W. Bush tax cuts: “Faster economic growth and more profitable productivity returns will generate higher tax revenues at the new lower tax-rate levels. Future budget surpluses will rise, not fall.” Tax revenue falls, and the budget goes from surplus into deep deficits.
2002: Kudlow, arguing for war in Iraq, writes in National Review: “The shock therapy of decisive war will elevate the stock market by a couple-thousand points.” The market falls and the Dow Jones doesn’t get that couple-thousand-point elevation for years.
2009: Kudlow says in an interview: “President Obama is waging war on investors. He’s waging war against businesses.” In a piece in the Washington Times he warns that inflation could “ratchet higher.” The stock market and corporate profits climb to records, while inflation remains historically low.
Now, history is repeating itself. Writing in National Review in December, Kudlow embraced the Trump tax cuts, dismissed “dreary mainstream” forecasts and predicted annual growth as high as 5 percent. Echoing almost word for word his failed 2002 prediction, he forecast that “faster economic growth will generate much higher tax revenues.”
What could possibly go wrong?