President-elect Donald Trump’s plan to shake up Washington’s entrenched orthodoxies by hiring the very sort of people who have labored to dig those trenches deeper and keep them filled to the brim with mucilage isn’t the sort of thing that suggests a big payoff is coming to America’s beleaguered working class. But that doesn’t mean it’s not paying off for somebody. And according to some reports, one person who may be next to hit the jackpot is CNBC contributor and Trump media booster Larry Kudlow.
Of course, as has often been the case during this transition process, such reports may be premature.
Still, the whole idea of Larry Kudlow chairing the White House Council of Economic Advisors is an intriguing prospect. And it could work, provided the scenario involves periodically releasing Kudlow from a box, getting his advice, stuffing him back inside, and then doing exactly the opposite of his suggestions.
See, beyond being a poster child for ancient conservative ideas on tax policy and supply-side economics, Kudlow is best known for being wrong about the economy. And magnificently so. He’s no mere firework in the sky; he’s the 2012 Port of San Diego pyrotechnic disaster of economic forecasting.
Kudlow’s economic assessments ahead the 2008 financial crisis were an utter spectacle of Panglossian optimism and nearly perfect error, captured for posterity by Salon’s Andrew Leonard, who had the occasion to collect Kudlow’s increasingly averse-to-reality forecasts in 2010, when a movement to draft the CNBC host into a Senate challenge of incumbent Sen. Charles Schumer (D-N.Y.) briefly became a thing.
As Leonard notes, the most infamous of Kudlow’s economic pronouncements was the one that dug his crash-years hole in the first place, a 2005 National Review piece entitled “The Housing Bears Are Wrong Again.” It opens like so:
Homebuilders led the stock parade this week with a fantastic 11 percent gain. This is a group that hedge funds and bubbleheads love to hate. All the bond bears have been dead wrong in predicting sky-high mortgage rates. So have all the bubbleheads who expect housing-price crashes in Las Vegas or Naples, Florida, to bring down the consumer, the rest of the economy, and the entire stock market.
As it happened, Sin City and the Sunshine State were two of the places hit hardest by the collapse of the housing market, so this take hasn’t aged well. But you’d have been a fool to short Kudlow’s ability to churn out one bad prediction after another.
“Too much is being made of both the sub-prime credit problem and the housing downturn,” Kudlow wrote in November 2007. Come December, Kudlow was mired in echolalia. “The recession debate is over,” he wrote on a Wednesday. “There ain’t no recession,” he said the next day. “There is no recession,” he wrote, rounding out the week on Friday.
I tell you, for a debate that was “over,” Kudlow felt the strongest need of anyone to go on debating it. As Leonard points out, “The National Bureau of Economic Research later determined that the recession officially began in December 2007.”
In February 2008, Kudlow assayed some troubling economic signs and quickly dismissed them. “Free market capitalism doesn’t mean we’re going to be recession-free. Maybe we are going to have a mild correction,” he wrote, before adding, “We are in a slow patch. That’s all. It’s nothing to get up in arms about.” Two days later, he continued to press the matter: “The greatest threat facing this country is not subprime.”
In March, Bear Stearns was sent to money heaven, after which, recessions ― to Kudlow’s mind, anyway ― suddenly became “therapeutic.” “If anything, recessions make for clean starts,” he wrote. Well, for millions of ordinary Americans, the freshest start was still to come. But Kudlow nevertheless kept his rose-colored glasses firmly affixed, writing in late July, “It’s a pity the mainstream media keeps searching for more and more pessimism. The reality is a possible upturn in the housing trend, and at the very least we are getting a bottom.”
We got that bottom, all right. In September 2008, Lehman Brothers followed Bear Stearns into the Great Beyond, causing an economic crisis that liquidated the wealth, homes, and job opportunities of millions of middle- and working-class Americans. As Leonard recalls:
In September 2008, the month that the economy effectively collapsed, Kudlow posted a prediction that falling oil prices would serve as a “tax cut” that would “solve” the problem of weak consumer purchasing power. That, in turn, would boost the overall economy and “for those of us who prefer to look ahead, through the windshield, the outlook for stocks is getting better and better.” Incredibly, amazingly, almost hysterically wrong.
(In the same post, Kudlow also predicted that Sarah Palin would strengthen McCain’s presidential campaign. Maybe we’ll give him that one.)
While Kudlow’s record of pre-crash wrongness is perhaps the most fitting example of the quality of economic advice he might give a president, it’s really just a taste of what Kudlow offers. For example, in 2012, when 16 banks (including Bank of America, JPMorgan Chase and Citigroup) were being investigated for rigging the Libor benchmark interest rate, Kudlow weighed in.
As The Huffington Post’s Bonnie Kavoussi reported at the time, banks use Libor to “set and use to lend money to each other.” It’s the “basis for hundreds of trillions of dollars’ worth of loans and derivatives,” she continued, and “its manipulation possibly cost some cities and states millions of dollars.” Kavoussi also reported that Rolling Stone columnist Matt Taibbi suggested that Kudlow was not in any way “sane,” after hearing his reaction to the Libor scandal, which went a little something like this:
“All those mortgages, I happen to have one, that float against Libor, benefited. Homeowners benefited. I daresay probably state and local governments benefited,” Kudlow said.
Kudlow even said that Barclays, which agreed to pay more than $450 million last month to settle charges that it had rigged the Libor rate, was the victim.
“Maybe you’re right, the victim was the lender, that was Barclays,” Kudlow said. “The Justice Department says this could be a criminal prosecution. I don’t get that. Who are the victims? Who are the victims?”
Over at Slate, an incensed Eliot Spitzer piled on: “This is Alice in Wonderland logic: saying the criminal is a victim.”
And way back in 2006, Kudlow wrote a column that insisted that whatever you might think about the chaos in the Middle East, there was no cause for concern because the stock market was still doing fantastic. “And while you might not know it from today’s magnified headlines about war, terrorism, higher oil prices, and rising interest rates, the stock market message is one of reasonable hope, confidence, and optimism about the state of the world.”
Columbia Journalism Review’s Gal Beckerman responded with fitting bemusement:
Leaving aside the wisdom of the economic analysis, the claim that stock market investments are some kind of marker of how people feel about Israel’s campaign against Hezbollah is beyond weird. Every journalist reaches a point when he has covered a beat for so long that he begins to think his subject matter ― whether it be the stock market in New York or a Pygmy tribe in Africa ― is what makes the world spin. Usually, that’s about the time when the journalist gets institutionalized, or at least moved to a place where he can do less damage.
Beckerman offered a fairly good assessment of Kudlow’s overall worldview: “Kudlow’s contention seems to be that there is some elite, super-prescient investor class, smarter than the rest of us slaves to the media, who get it, while we stay glued to Wolf Blitzer’s mug.”
Let’s review. Kudlow is the sort of economic forecaster who refuses to contend with any reality that does not suggest that the Great And Holy Market is in any way a failure. He will argue that the wrongdoers in the financial world are really its victims. And he holds to the notion that the “elite, super-prescient investor class” can do no wrong. These are things that should count against him serving as a president’s economic adviser.
Sadly, presidents of recent vintage have always found a home for such men. But really, there was never a better match than Larry Kudlow and Donald Trump. If he ends up not getting the post, it’s basically Destiny’s dream deferred.
Jason Linkins edits “Eat The Press” for The Huffington Post and co-hosts the HuffPost Politics podcast “So, That Happened.” Subscribe here, and listen to the latest episode below.
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