If you're tossing and turning at night, drenched in cold sweats over inflation's relentless assault on your purchasing power, Larry Kudlow has a diagnosis - and more importantly, a prescription to break the vicious cycle.
The renowned conservative economist and former Trump adviser is pointing an accusatory finger at President Biden's policies as the principal inflationary culprit behind today's price miseries. And Kudlow is convinced the proven Trump economic game plan of energy dominance, tax cuts and deregulation represents the most efficacious treatment.
"The Trump agenda is not inflationary," Kudlow asserts, pushing back against critics trying to falsely conflate the previous administration's pro-growth medicine with Biden's fiscal rot. "Over Trump's four-year term, consumer prices rose just 1.9% annually. But under Biden so far, it's been a scorching 6.1% annually."
So where exactly did Biden's team go wrong in letting the inflationary genie escape the bottle? For Kudlow, it starts with the free-spending binge of $2 trillion annual deficits juxtaposed against a 4% unemployment rate that conventional economic wisdom views as consistent with maximum employment.
"Even John Maynard Keynes would turn over in his grave at massive deficit spending with high inflation and low unemployment," Kudlow quips, suggesting Biden's fiscal bacchanalia represents an ideological betrayal of established economic principles.
But beyond the sheer dollars-and-cents profligacy, Kudlow sees a more pernicious supply-side rot setting in - both in America's energy policy shackling domestic production, as well as regulatory disincentives suffocating business investment and productivity enhancements.
"Were we energy dominant today instead of relying on enemies like Russia and Iran, oil prices would be closer to $40 than $80," calculates Kudlow. Lower energy costs would then radiate disinflationary effects throughout the economy on everything from consumer goods to health care services.
Kudlow similarly torches Biden's regulatory overreach as sapping business return-on-investment and incentives to expand productive capacity - the lifeblood of keeping price pressures contained. Inversely, the Trump formula of broad deregulation and corporate/individual tax cuts represents the counter-inflationary impulse of increasing supplies of labor, capital and output.
"Lower marginal tax rates increase production, raise real wages and enhance productivity," notes Kudlow matter-of-factly. "When rates were slashed under JFK, Reagan and Trump, inflation never uttered a serious peep."
With economic drags from immigration and trade policy also under the microscopepe, the overall Kudlow thesis holds up under scrutiny: Biden's fiscal and regulatory overindulgence short-circuited post-COVID supply responses, setting the stage for runaway inflation. But if Trump's economic model from 2017-2020 could be re-engaged, the free market's self-correcting forces would help restore price stability, expanding capacity ahead of demand.
In Kudlow's telling, if it was the hair of the dog that first induced America's inflationary hangover, perhaps a bigger dose of the same capitalistic elixir can induce the healing.
