Larry Kudlow: I still think we are at the front of a recession


I want to begin tonight with my sincere condolences to the family of former Prime Minister Shinzo Abeo and to the people of Japan. During my three years in government I got to know him well. He was head and shoulders above all heads of state. He was a brilliant politician, a great leader of Japan. President Trump, with whom I spoke earlier today, regarded Mr. Abe as his closest friend and ally.

I once witnessed a UN bilateral meeting with Mr. Trump and Mr. Abe, the best presentation I have seen in my three years as NEC director and international Sherpa. mr. Abe calmly offered my boss a map book of about 50 pages, which clearly shows that Japan is America’s largest investor and manufacturer. Indeed, more Japanese cars are made in the US than in Japan. In fact, more Japanese cars were made in the US than several car manufacturers in the US.

Jaws fell in that room while the Japanese Prime Minister went about his business. Talk of trade protectionism was permanently set aside and instead, the Abe card book opened the door to several US-Japanese trade improvement agreements. Mr. Abe has always been kind to me personally, especially after my brief – and thankfully minor – heart attack. Where every time he saw me in the White House, at meetings of the G7, G20, UN, always came up to me to see how I was doing. I appreciated that.

Mr. Abe was a great Japanese patriot, America’s most loyal supporter and in plain English, he is what you would call a ‘great man’. Once again my condolences to his family and the Japanese nation. May God watch over him. May he rest in peace.

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National Security Adviser Robert O’Brien will join us later to tell us more about the horrific murder and its potential consequences for the free world and the US-Japan relationship.

Next on my list tonight: Today’s jobs report pretty much guarantees a 75 basis point rate hike from the Fed in three weeks and another 75 basis point rate hike in September, bringing it to 3.25%. Still well below base inflation of 6%.

The Fed is currently more determined to fight inflation than it is to recessionso says Jay Powell, who recently regained his male price stability and his daily growing new hair on his chest, but today’s jobs report wasn’t as strong as many think.

While revised nonfarm payrolls are up 300,000, the household survey is down 315,000 and down 116,000 in the past three months. This research relies more on family members and small businesses and is often a leading indicator of turning points in the economy.

Production worker wages also rose 6.4% over the past year, but that is 2 percentage points lower than CPI inflation. So working people get paid more, but it buys less and disposable income after inflation fell by 3.3% last year. So I still think we’re on the cusp of a recession, caveat emptor, which brings me to my third riff tonight.

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President Joe Biden speaks at the White House

President Joe Biden speaks about the COVID-19 relief package in the State Dining Room of the White House, Monday, March 15, 2021, in Washington. (AP Photo/Patrick Semansky/AP Images)

It’s pure folly given high inflation and a likely recession for the Biden Democrats to boost a billion-dollar investment accompanied by a trillion dollar tax hike. Spending will increase inflation and the tax hike will deepen the recession. In addition, this new scheme to extend the 3.8% net investment tax to corporations such as LLCs, wholly owned, sub-chapter S corporations, puts the money in general income and then swears up and down against the American people that really going to fund the Medicare hospital fund is a fake gimmick in my opinion.

That fund is supposed to be funded by payroll taxes, not general income. This would be a major break with the past. They’re going to have to somehow create language that would earmark or imply that this tax money would actually go to Medicare and then convince the reconciliation people to score it and that’s one of the many gimmicks likely to be in this insane BBS. come. So save America, kill the bill.

This article is adapted from Larry Kudlow’s opening commentary on the July 8, 2022, edition of “Kudlow”.

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