Pro Con: Is Larry Kudlow a good choice to be Trump’s top economic adviser?

PRO: Kudlow’s skills will keep U.S. economy rolling in fast lane

Just as baseball season approaches, President Donald Trump hits it out of the park with his appointment of economist Larry Kudlow to head the White House’s National Economic Council.

Kudlow has a deep knowledge and understanding of businesses on Main Street and Wall Street, qualities the president needs in his top economic adviser.

During President Ronald Reagan’s first term, Kudlow was associate director for economics and planning at the Office of Management and Budget. After that, he started his own successful economic research firm, Kudlow & Co.

For the past two decades, Kudlow has also been a fixture on business TV, hosting or co-hosting his own programs on CNBC and as a frequent guest. He proved he could direct lively yet civil discussions with business people and politicians of various viewpoints.

Over the decades, Kudlow’s focus has been on building American prosperity by calling out government policies that harm American entrepreneurs, investors and consumers.

Though he is most known for his advocacy of tax cuts — and many of his ideas were incorporated in the recently enacted tax reform law, the Tax Cuts and Jobs Act — Kudlow has also stressed the importance of minimizing regulatory and trade barriers.

He was an early critic, for instance, of the Sarbanes-Oxley accounting mandates signed into law by President George W. Bush in 2002.

He rightly pointed out that by substantially raising auditing costs, the law was making it much more difficult for entrepreneurs to take small companies public, which in turn deprived middle-class investors the opportunity to grow wealth with these firms.

Kudlow has also criticized regulations that burden American energy exploration. He praised Trump’s 2017 decision to pull out of the Paris Climate Accord, arguing that this action effectively ended “the war on fossil fuels.”

And when it is necessary, Kudlow has shown that he can get down in the weeds of policy minutiae and highlight the technical-sounding yet destructive rules that need to be pruned.

In 2010, Kudlow had me on his CNBC program “The Kudlow Report” to discuss how Obamacare’s stealth “medicine cabinet tax” restricts consumers from purchasing over-the-counter drugs through health savings accounts and, in the process, limits choices and raises health care costs.

Finally, the Kudlow choice is a home run because Kudlow has not been afraid to point out his areas of disagreement with Trump. He has warned Trump publicly that trade protectionism could turn Trump into a “21st century Herbert Hoover.” Hopefully, Trump and members of Congress will heed Kudlow’s knowledge and wisdom on trade, taxes and regulation.

CON: Kudlow’s fossilized beliefs could lead Trump further astray

Last week the Trump administration announced that it was picking Larry Kudlow as the new head of the National Economic Council.

Kudlow was a mid-level official in the Reagan administration before moving to Wall Street, but his greatest notoriety came as an economics talk show host for two decades.

Kudlow made no bones about his views on his show. (Full disclosure: I was an occasional guest.)

He began each segment by proclaiming his belief in free markets, free trade and free enterprise.

Kudlow is an ideologue. This could be a serious problem with a president who often shoots from the hip without seriously considering the ramifications of his policies. Rather than trying to get Trump to consider various perspectives, Kudlow may just reinforce Trump in his ill-considered plans.

To take an important but largely overlooked area of policy, Kudlow shares Trump’s view that global warming is a hoax. In Trump World, the myth of global warming was invented by China to get the United States to waste a huge amount of money reducing its greenhouse gas emissions, thereby making its industry less competitive.

We might hope that we had an economic adviser who would call Trump’s attention to the vast amount of evidence that global warming is very real and is already having serious consequences in the U.S. and elsewhere.

We might also want an adviser who would point out that China is spending more than anyone, relative to the size of its economy, to reduce its emissions.

There is a similar story with taxes. Trump always wants to give more tax breaks, with the rich getting the biggest chunk. It would be good to have an adviser who could point out that the rich are already doing just fine and really don’t need more money in tax breaks. Kudlow is not that person.

It would also be good to have an adviser who could point out the importance of regulating the financial sector. Like most of the economics profession, Kudlow completely missed the housing bubble and the financial crisis that was caused by its collapse.

Unlike many economists, Kudlow seems not to have changed his view of financial regulation as a result of the Great Recession. This could reinforce the current drive in Congress where we allow banks to take ever greater risks, knowing that if they get into trouble they can count on a taxpayer bailout.

This path also opens the door for the proliferation of predatory finance.

With the Consumer Financial Protection Bureau largely neutered, and other regulatory agencies regularly siding with industry, there are again big bucks to be made in ripping off consumers. Any believer in free markets should expect the financial industry to take full advantage of the opportunities presented.

There is one important area where Kudlow does present a welcome departure from Republican orthodoxy. When it comes to Federal Reserve Board policy, most Republicans have been anxious to see the Fed raise interest rates in order to head off any risk of inflation.

The cost of higher interest rates is slower growth and fewer jobs. High interest rates discourage people from buying homes and cars, and discourage businesses and governments from investing.

Kudlow strongly disagrees with the standard Republican view, as he recently argued in a Wall Street Journal column. He is likely to push Trump to make appointments to the Fed who are more interested in supporting growth and reducing unemployment than containing inflation.

This is a really huge deal since better policy from the Fed can mean millions of additional jobs. It also will mean more bargaining power for workers who already have jobs, giving them the opportunity to get higher wages.

If Kudlow can help move the Fed toward policies for promoting employment, that will be a great accomplishment, but I would still rather have him back hosting his TV show.

This story was originally published March 22, 2018 at 1:04 PM with the headline "Pro Con: Is Larry Kudlow a good choice to be Trump’s top economic adviser?."