Chap. 25: Taking Back Trump's America Serialization

V-Shaped Kudlow Nonsense in a K-Shaped World

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[White House economic advisor Larry] Kudlow claims US is in “a strong V- shaped recovery” despite Wall Street selloff. NEC director doubts recovery depends on “so-called second stimulus package.”

Fox News, September 21, 2020

Even as Tyler Goodspeed and I were working with Mark Meadows to try and move POTUS’ $2 trillion package, National Economic Council Director Larry Kudlow was doing everything in his considerable powers to put the brakes on any Phase IV bill. His repeated comments about a V- shaped, rocket ship of an economic recovery were emblematic of his mindset. Such an alleged V- shaped recovery made it totally unnecessary in Kudlow’s mind to engage in any further stimulus.

For months, Kudlow had been preaching this false gospel of a V-shaped recovery when, in fact, this recovery resembled far more of an anemic K-shape. In this K-shaped recovery, only some sectors of our economy were recovering smartly.

These booming sectors included, sadly alcoholic beverages; curiously, bicycle production; and most intuitively, telemedicine. And in this economist’s alphabet soup, these and other buoyant and growing sectors were evidenced by the upward sloping portion of the letter K.

On the other hand, plummeting sectors of the economy – think, for example, the airlines, cruise ships, the oil patch, restaurants, commercial office buildings, and brick and mortar retail – were all being hammered by the pandemic and heading straight into a ditch. Of course, this carnage was evident in the downward sloping portion of the letter K.

Now here’s the broader point and buried lead:

The problem with Kudlow preaching his V-shaped nonsense in a K-shaped world was that it created a false sense of security at the same time that it significantly undermined any public perception of the real urgency of passing an additional Stimulus and Relief package.

It’s not for nothing that both Tyler and I found Larry’s rose-colored V-shaped rhetoric on TV, at Senior Staff meetings, and in the Oval Office to be frustrating and counterproductive.

Here, it must be said that of the five worst days I had during my four years serving in the Trump administration, the day I heard that Larry Kudlow had been hired to replace Gary Cohn as NEC Director was certainly one of those days. It was March 14^th, 2018 to be exact and beware of anything that close to the Ides of March.

Frankly, I was astonished that the Globalist Kudlow had been hired for the most powerful policy position in a putatively Nationalist White House. I was astonished because I had been all-too- familiar with Larry’s anti-Trump rants during the 2016 campaign. Just consider this little poison pill in the Never-Trump National Review, and you will quickly get my drift:

Given the recent rise of presidential candidate Donald Trump, we should all be thankful that stocks haven’t plunged. Trump’s agenda of trade protectionism, dollar devaluation, and immigrant deportation is completely anti-growth. It’s like Fortress America in an economy that is completely globalized and where the U.S. must compete in the worldwide race for capital and labor. Trump’s policies don’t fit.¹⁹⁵

Even after Trump was elected, Larry continued his Globalist harangues, particularly after POTUS began implementing tariffs on both steel and aluminum as well as China. So I thought that based on Larry’s Never-Trump history – other candidates for administration positions had been vetoed for much less – Kudlow would never be allowed to join the administration.

I thought this to be particularly true after the President’s crash and burn experience with the traitor in our midst Gary Cohn. Surely one Wall Street Globalist and obnoxious airhead as NEC Director was enough for a first presidential term. Silly me.

It Is Really Hard to Be That Wrong That Often

In light of Kudlow’s star-crossed love affair with a V-shaped recovery that didn’t exist, I should also note that Larry had a well-established and long-standing reputation as one of the worst economic forecasters to ever walk the streets of New York and pontificate on such matters.

For example, while I was warning of a catastrophic collapse in the housing market in 2005, Kudlow was calling people like me “bubbleheads for expecting that housing-price crashes in Las Vegas or Naples, Fla., would bring down the consumer, the rest of the economy and the entire stock market.”¹⁹⁶ Of course, that’s exactly what happened. Score one for the bubble heads.

And then there is also this: While I was warning my investment newsletter subscribers in November of 2007 to cash out of the market, Kudlow was confidently declaring:

Here’s the obvious question for historians: Just how can you be that wrong that often and wind up as the top economic cop in the White House? And why would anybody on Wall Street or Main Street – much less in the White House – ever take a Larry Kudlow V-shaped recovery forecast seriously after Larry’s well-publicized serial screw ups?

The answer to the first question is very simple. POTUS loved Larry, and he loved him for one simple reason. Despite his reputation for almost always being wrong in his predictions, no one could give pleasure to the stock market better than the golden-throated Kudlow.

With a voice made ever more deep and resonant by his chain-smoking– the easiest way to find Larry at the White House was to go to the canopy outside the West Wing where he would often catch a smoke – Larry was the fluffer of all time when it came to getting on television and getting the Dow Jones Industrial Average up.

In one story the President loved to tell – it pained me every time I had to listen to it – Larry had done a star turn on Fox Business and moved the Dow up 500 points. Of course, in order to move the Dow up like that, Larry often had to undermine our entire China negotiating strategy.

Here, the scenario was always the same. Our US Trade Representative Bob Lighthizer would take a hard line in the Communist China negotiations, and the markets would fall. The next day, Larry would get on the tube and start freelancing about how our side might be willing to lift the tariffs or get back to the bargaining table if only China were willing to do this or that or whatever it was Larry could come up with that day.

Of course, the markets would rally on Kudlow’s rosy scenario. And of course, Larry’s gambit would also significantly weaken Lighthizer’s negotiating position with the Chinese.

In a perfect world, the Boss would have hired Larry as the Director of the Office of Communications rather than the National Economic Council. Just let Larry do a weekly White House TV show, interview the Boss once a month, and, in between, Larry could go out to the cameras on the North Lawn of the White House and pimp the latest economic data.

Instead, the Boss put the anti-tariff, open border Kudlow Fox in charge of the White House trade policy henhouse. This was not just a headache for me. It was a full-blown, two-year migraine for Lighthizer and the Trump trade agenda.

The problems Bob and I would have beating back Larry’s anti-tariff gambits would be further complicated by the fact that Larry’s second-in-command, Andrew Olmem, was a holdover from

the Gary Cohn regime. Olmem, a D.C. lobbyist, was a one-man wrecking crew when it came to getting in the way of Trump trade policy.

With Larry in poor health much of the time he served – first a heart attack and then hip surgery – and with Larry often spending long Friday through Monday weekends at his home in Connecticut, Olmem became the de facto NEC Director. That gave Olmem and his junior Globalist henchman Francis Brooke, wide latitude to do all manner of mischief.

In my In Trump Time memoir, I explained how Larry’s role as a “Virus Denier” on TV and in other public appearances would make it very difficult for the administration to appear credible on the issue of taking the virus seriously. Kudlow would, in fact, be one of the key reasons why our approval rating on the pandemic was so abysmal in the months leading up to the 2020 election.

Yet, in the case of his strident V-shaped recovery opposition to the Phase IV Stimulus and Relief Package, Larry Kudlow may ultimately have done even more damage to POTUS.

So, ever wanting to bask in the glow of the Boss’ praise for driving up the Trump market, Kudlow was like a little terrier with a V-shaped toy in his mouth. He simply wouldn’t let go of that toy no matter what the data said.

At times, when I saw him on TV or had to listen to him in Senior Staff meetings, I wanted to at least figuratively smack Larry right in his big, fat, full of bull market mouth.

Instead, Tyler and I simply held our tongues and worked behind-the-scenes to push Mark Meadows towards a quick and workable $2 trillion resolution with Congress per the Boss’ wish and command.