Commentary: The announcement that President Trump’s pick of Larry Kudlow as his new Assistant for Economic Policy, inspired a torrent of articles critical of Kudlow’s lack of prognosticating prowess.
Kudlow is best known as a TV pundit and host of CNBS’s Kudlow Report. In that role, he had a lot of air time to fill and some of that fill took the form of predictions about the future of the economy. Many of these forecasts in retrospect turned out to be woefully wrong.
Famous is a 2007 prediction, made as part of a touting of the benefits of the Bush tax cuts, which predicted continue upward movement and prosperity, completely missing the Great Recession that was about to begin.
Then there was his prediction in 1993 that President Clinton’s tax increases would stop the recovery and depress the long run growth. Subsequent to this utterance was an eight-year expansion that brought about a balanced federal budget.
There is an underlying theme to Kudlow’s economic world view. He is a supplier side true believer. As such, he puts great stock on tax cuts as a mechanism for promoting economic prosperity. Tax cuts good; tax hikes bad. Thus, the Bush tax cuts must mean prosperity and Clinton tax increases mean stagnation. Unfortunately for Kudlow’s forecasting accuracy, the world is more complicated. Many factors influence the economy, federal income tax among them. Taxes may be important but may not be determinant in a given circumstances.
It may be, of course, that Kudlow’s views are subtler than what he demonstrated as host of a TV show, which is after all aimed at a broad audience. His supply side persona may well be more schtick than an express of truly held beliefs. Those who know Kudlow universally say he is very smart. He likely understands that simplistic policies are not likely to be effective; that there are no magic bullets.
In some sense, Kudlow’s own views are not relevant. The role of the Assistant for Economic Policy, who also serves as Director of the National Economic Council, is not so much to set policy but rather to be an honest broker of the ideas and policies put forward by others.
In this role, the ability to predict the course of the economy is among the least important skills. This is good given his poor track record at so doing. What is needed is an ability to understand how adoption of a particular set of policy will or won’t help Donald Trump achieve his policy goals.
Given Trump’s decision-making processes, which is more based on campaign promises and gut feelings than on the economic soundness of the ideas, Kudlow may not have much to do. His duties may involve coming up with economic justifications for whatever his boss is going to do anyway.
Trump is imposing tariffs on steel and aluminum in the hope of reviving employment in these industries. Most economists are skeptical that tariffs will work. Kudlow’s job is likely to be justifying tariffs regardless of the soundness of the policy.
Christopher A. Erickson, Ph.D., is a professor of economics at NMSU. He often rolls his eyes at the things that pass as economic analysis on TV shows. The opinions expressed may not be shared by the regents and administration of NMSU. Chris can be reached at chrerick@nmsu.edu.