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If capitalism is destroyed, blame Obama -- or Kudlow?
Economist and blogger Mark Thoma, defending President Obama against the talking heads who say his policies will destroy capitalism, dredged up a 2005 gem from one of Obama’s frequent assailants, CNBC’s Larry Kudlow.
In a June 2005 National Review article titled, "The Housing Bears Are Wrong Again," Kudlow waxed bullish about home builders’ shares, noting that "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."
Whoa, Larry -- you nailed it, even though you weren't trying.
Of course, every journalist and commentator (including yours truly)
wishes they could take back at least a few of the things they wrote or
said about markets leading up to last year’s cataclysm. Thoma’s point,
however, is that it's absurd to attack Obama for trying to rein-in some
of the policies that sowed the seeds of the ongoing economic and market
implosions.
As for making the financially better-off pay to help clean up the housing bubble's aftermath -- well, who else is there to pay? The already poor? Anyone have a better idea that doesn't involve trying to borrow even more money from foreigners?
Thoma notes that Kudlow concluded his 2005 piece by arguing that the same generous federal tax breaks that had long benefited home owners should be extended to new home buyers and to stock market investors as well. "If this were to come about, even more wealth would be created in America, leading to even more new business and job creation," Kudlow wrote.
Thoma’s post-mortem retort (it's at the bottom of his blog post that leads off with Robert Reich, here):
"Yes, too bad we didn't make the bubble even bigger. If capitalism is destroyed, something that's highly unlikely, it won't be Obama's fault. It will be the fault of people like Kudlow who . . . opposed any and all attempts to temper the housing bubble through regulation or any other means.
"Capitalism may change, in fact it needs to change -- the excesses that allowed the housing bubble to develop need to be tempered through regulation and other means -- but if Kudlow and company have their way and continue to assert that what's good for the rich is good for America, that regulation was the problem not the solution, and that tax cuts are the answer to every problem, the change that is needed won't happen."
-- Tom Petruno
Photo: Larry Kudlow
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Finally an article pointing this Kudlow guy out for who he is - a mouthpiece for a portion of what the Republican party stands for. I have stopped watching CNBC for financial news because while not everyone is as far right as Larry is, most of the network heavily tilts that way.
You don't have to watch his show more than once (and I do not recommend even once if you value your brain cells) to see how lop-sided his arguments are. Most of his guests spew the same ridiculous statements and many are has-beens (Art Laffer) who are still looking for a mouthpiece for their ridiculous assertions about how tax cuts and little regulations will benefit us all, even after we die.
CNBC needs to dump this guy and at least give us a hint that they can be impartial. What a joke of a station.
Posted by: James | March 04, 2009 at 11:11 PM
As a long time CNBC viewer I nevertheless have to agree with James. Kudlow is a dinosaur a few years removed from reality. ww
Posted by: ww | March 05, 2009 at 04:25 AM
No! Look back to Bush.
Posted by: InDemand | March 05, 2009 at 06:24 AM
Very well put.
Posted by: Brian | March 05, 2009 at 06:46 AM
The problem with this article is that its shows a complete lack of awareness of the consequences of the Bush tax cuts. In 1998, the republican led congress came to the conclusion that the trade deficit was a threat to the american dollar. They asked a bi-partisan commission to come up with recommendations - 3 members of the Bush administration were on that commission. Both democrats and republicans alike agreed tax cuts would be disasterous. Instead either taxes had to be increased or the rules needed to be changed to force people to save more. The democrats favored the former the republicans the latter.
Bush came in and cut taxes and didn't remove zero percent home loans. Now what did Obama have to do with that. Nothing. The tax cuts ascerbated the trade deficit and eliminated what savings the american economy had. A year ago China quit loaning us money. They had gotten all the technology they needed from us and we owed them 1.7 trillion dollars.
On top of that the movement from crts to flat screen tv's caused many companies to move out of Northern Mexico, destabilizing the region. That in turn increased illegal immigration. The Bush administration response - sorry we don't have the money to do anything about it. You know the rest.
Posted by: Jack Murphy, Fairfax, Virginia | March 05, 2009 at 06:54 AM
Its amazing after 8 yrs at the helm with free reign to deregulate and destroy the financial system that these engineers of financial destruction are not laughed out of existence.These free market clowns have proven with the financial implosion that their philosophy is a complete utter failure and fatally dangerous to capitalism.
Posted by: danz m | March 05, 2009 at 07:10 AM
Where the Republicans and Wall Street went wrong was being unable to sort out the political versus the economic sides of their ideology. Political conservatives should have been able to see that deregulation and consolidation of power in the hands of ceo hirelings rather than shareholders was just pandering to a class of powerful donors rather than keeping the capitalist system healthy. Fiscal conservatives should have been able to see that anti-government rhetoric was part of a package of attitudes embraced by political conservatives resentful of their minority status which didn't reflect the realities of how capitalism needed to work in an advanced industrial society. And both interests should have been able to see that neocon militarism and religious fundamentalism were cancerous perversions not to be encouraged. Kudlow and his right-wing colleagues at CNBC belong to that class of delusional Reagan babies who never had to do the math to see whether radical free-market theory added up in the real world...
Posted by: Rich | March 05, 2009 at 08:03 AM
Kudlow is ground zero on capitalism, its collapse and wholly responsible for its demise. He is the talking head from the Clinton years who said that if Clinton would just let Wall St. do its business unimpeded, Pres. Clinton wouldn't have a thing to worry about on the economy. Clinton's administration took a hands off policy toward Wall St. and that is how History was made.
Whether it will be written is a question that will have to wait...it's sink or swim time. We have to bailout a ton of trash investments Wall St. dumped into our collective boat for the World to stay afloat.
Posted by: Rex | March 05, 2009 at 08:25 AM
I am certain that if the Republican party and all their Dittohead followers had privatized Social Security and that money ran out this year and made things even worse for the average American...it would still be "Obama's fault".
Posted by: Ron | March 05, 2009 at 08:54 AM
Are you people completely blind? Housing is the single most socialized segment of the economy. Taxpayers, through Fannie and Freddie, owned or guaranteed half the moartgage market, $5 trillion worth. Free markets haven't failed in the housing industry. They haven't even been tried. Socialism, as has been proven time and time again, creates perverse and destructive incentives that are a great party for a while but of course always lead to the same destination.
Let Wall Street do what they want on their own dime, and let them go bankrupt when they fail. Wall Street was greedy with Enron, but taxpayers didn't care because no one expected the government to guarantee the value of energy trades. Wall Street was greedy with the dot-coms, but taxpayers didn't care because no expected the government to guarantee the value of Pets.com. But with housing, it's as though we handed the national credit card over to Wall Street and said "here you go, go nuts, just make sure we can issue plenty of press releases about increasing home ownership." The answer is simple. Kill Fannie and Freddie and every other support to housing. Then let the free market do what it does best: create real value.
Posted by: Dave | March 05, 2009 at 09:19 AM
Capitalism is the ownership of the means of production by private individuals who then hire workers to do the work. At least if I remember correctly from my college Marxism class. What we have had in this country, at least on Wall St. does not fit well with that definition. What we have, with CDO's and CDS's is something which would be called "financialism," the results of investments are not actually the means of production, money is made simply by handling money.
Another issue to be addressed, is that there is absolutely no mention of capitalism in our constitution. We have built our "capitalist" system on a very brief mention of private property. The "free" economic system Krudlow espouses does not exist!! All money in this country is issued by the government, the Fed only deals with a special group of banks who transfer the money to the general economy. Anyone who thinks that political influence has no power over the flow of money is naive.
The US has used "financialism" to control the flow of goods and services. This is what money is ultimately all about, deciding who gets to control the resources, doing a good job with the resources means you make money and you get to do it again. Unfortunately, in my view, we have done a poor job of handling resources, and the world to whom we are in debt, especially China, may start acting like the credit card agencies.
I hardly watch CNBC anymore, it is populated with very arrogant people who all talk over one another. Krudlow and his cohorts have been very well rewarded by our system. The problem is that they seem to have forgotten the number one rule for leaders, take care of the troops first!!
Posted by: Gary Noel | March 05, 2009 at 09:25 AM
When Gods fail, their priests are bewildered. They are unmoored from their most basic realities. Some, like Larry Kudlow, cling even more strongly to their faith. It’s hard not to be sympathetic.
The Gods of laissez faire free market Capitalism and trickle-down economics have failed. Americans know it. The world knows it. Larry, Rush, Sean and their angry shrinking flocks may not know it, but unregulated Capitalism will never regain its former role as the model of the future.
I am a lifelong Yellow Dog Texas Democrat, and I am not a Socialist, a Communist or a fellow-traveler. I don’t know a single Democrat who is any of these things. We distrust all-powerful government as much as conservative Republicans do. We recognize the essential need for a strong private sector, apparently better than many conservative Republicans do.
The real American Dream is not the dream of unconstrained wealth. The real American Dream is that ordinary Americans who work hard and play by the rules will succeed for themselves and see their children surpass their achievements. The real American Dream is rooted in our sense of fairness, our belief in balance between ambition and social responsibility, and our understanding that we are, in fact, our brothers’ keepers.
I owned a successful small business for many years. I continue to be self-employed. I believe in Capitalism, and I am angry that the irresponsibility of its self-proclaimed high priesthood has damaged it in ways Karl Marx could never have imagined and Al Qaeda could never have hoped for.
Capitalism cannot survive unregulated oligopoly, concentrations of economic power so great ‘we can’t allow them to fail’, unchecked greed, unprotected consumers, untaxed wealth and impotent government. It cannot survive a world economy in which the middle class of developed nations is decimated by exporting jobs to developing nations that have no laws protecting workers rights, child workers, society or the environment.
The current world-wide economic disaster has proved that. In November, the American people voted to change directions, not out of Socialist tendencies or ideological purity, but out of desperation. These are desperate times, and they call for desperate measures.
The American people know these desperate measures may fail. Economists and financial experts know these new measures may fail. President Obama knows these new measures may fail.
But to wish them to fail because success would contradict your ideology is to wish for President Obama and the American people to fail. That is beneath the millions of patriotic conservative Americans who call themselves Republican.
So, Mr. Kudlow, I urge you to lead, follow or get out of the way.
Posted by: John In Texas | March 05, 2009 at 10:10 AM
There are some terrific comments here. My compliments and kudos go to the respondents.
Posted by: martscan | March 05, 2009 at 11:36 AM
It's Obama's fault that Citi is at a buck, Ford and GM are under 2 bucks, and they are going to be forced into restructuring and laying of tens of thousands. Nice work for less than 60 days on the job. He's much more effective than Bush at getting things done, we should clone him, a half dozen should do.
I was figuring a 6500 Dow was the bottom about 5 months ago but now... 5K Dow coming to a headline near you soon.
Been in MM since Aug 07. Suggested to my employees to move their retirement to MM in Jan 08. They didn't and watched it drop, they are in it for the "long term". Makes no sense to me. I can buy 2x or 3x more quality stock when it's over. Watch the rubber band effect as totally oversold (it is stretching soooo slow) becomes a giant stock rush. So much money just waiting. Back to 20-30 P/E ratios in no time. Anybody want to bet on a 1500 point up day on the Dow when it pops?
This is not investing, it gambling. If you lost your shirt, your probably deserved it. If you kids lost their college fund, support state schools. They could get a job... It's the "easy money" trap. Got a big piece of everybody this time.
Turn off the TV. It's not the news, it's all an ad. The people on TV are not your friend. They are paid by advertisers. They say what the advertisers what them to say or more like, don't say what the advertisers don't want them to say.
READ the news (use the eyes, not the ears), lots of it, different places, world wide. You will see it coming long before it happens. There are people who see it coming and warn you, they just are not on TV.
Posted by: Bob | March 05, 2009 at 02:51 PM
Bob:
You are the exception to my earlier comment.
Posted by: martscan | March 05, 2009 at 08:55 PM
Dave is the only voice of reason on this thread.
Let's start with Barney Frank and Chris Dodd who demanded that Fannie and Freddie make these toxic loans. Not that Bush was not part of the problem, but it is the Legislature that enact and change laws. Enormous pressure was brought to bear on these GSE's by the aforementioned senators, one of whom was the recipient of a "VIP" mortgage deal from Counrywide.
Why can't we see where the real problem is, i.e., in Congress? They just don't get that they work for US and that it's NOT their money they're printing and spending!! Would that we could vote them ALL out in the next cycle, and start all over with a clean slate. The way things are going, it just might happen. Senator Rick Santelli, anyone?
Posted by: lioness | March 06, 2009 at 09:12 AM
I'd say its about 9 to 5 that Kudlow never reached the 12th step in his Alcoholics/Narcotics Anonymous program. It was at the height of his coke addiction that he became a Laffer disciple and changed religions. Nuff said.
Posted by: martscan | March 06, 2009 at 09:23 AM
Dave and Lioness:
Do a bit more reading than Rush's talking points. Fannie and Freddie only accounted for 25% of mortgage securitization market in 2006. They did account for roughly 60% in 2000. What happened? Wall street jumped on the securitzation bandwagon. In addition Fannie and Freddie at least had some standards in terms of underwriting. Wall Street had none. They relied on models that were created with a short time line of data to assess risk. We all know what happened to Bear Sterns, Morgan Stanley, Merril Lynch et. al. These guy stole the market from Fannie and Freddie and were the most egregious offenders.
So if you are blind to what Wall street did and you only want to blame Fannie and Freddie, you do not understand the crisis. Go back and do a little more diverse reading than your right wing talking points. Here's a start:
http://www.time.com/time/business/article/0,8599,1822014,00.html
http://krugman.blogs.nytimes.com/2008/07/16/why-fannie-and-freddie-got-so-big/
http://www.econbrowser.com/archives/2008/07/did_fannie_and.html
http://economistsview.typepad.com/economistsview/2009/02/john-stewart-explains-economics-to-john-sununu.html
Posted by: Cl Oregon Girl | March 06, 2009 at 10:37 AM
Dave siad:
"Then let the free market do what it does best: create real value."
So AIG, doing what the free market does, insured over $450 billion of mortgage backed securities WITHOUT SETTING ASIDE A DIME FOR A RESERVE FUND TO BACK THIS INSURANCE. Think about that for one moment. This is our largest insurance company in the world. It should know a little about how insurance works. However, in its free market wisdom, did not create any kind of fund to back the assets it was insuring. So you might ask why wouldn't it do this? The answer is there was no regulation to make it do this. The derivatives markets were barred from being regulated by the Commodity Futures Modernization Act authored by none other than SenatorPhil Gramm (R) texas.
So something is missing in the free market if an insurance company forgets how insurance works. How can it be creating value if left to its own devices if it insures something that is entirely risky and then sets aside NOTHING to back that risk? Stunning. The "free market" in all its glory.
Posted by: Cl Oregon Girl | March 06, 2009 at 10:50 AM
Recently the LA Times reported that 20% (over two million) of all LA County residents are recieving financial aid and the number is projected to go higher. Unemployment is at levels beyond all recent memory and climbing. What will the victors do with the spoils?
What! would'st thou have a serpent sting thee twice'? He hath eaten me out of house and home. Sharper than a serpents tooth it is to have a thankless child. Shakesphere..
With the finger pointed to those that lived beyond their means as the cause, begs the questions, How did they get there in the first place? and Why? The 60's warned of commercial disaster, over population and spoke the words "Americans are being oversold and lied to", the tipping point was globalization and the easy exploitation those of us with unquenching appetites for toys and gatgets, layered in the conviction that if you are not rich there is definetly something wrong with you! and the only one to blame is yourself. A firm conviction that rich was good.
It was capitalism's answer to helping the needy. The rich became very rich, the middle class, lived as the upper and the poor got poorer. Today the rich are getting richer the middle clss is sinking into and abyss and the poor as always, get poorer.
If wealth and money is the final objective, then what is the hope for all. Where will the Midas touch be found? or is it mythology, ancient as the greek and repeated by the loss of virtuous restraint in a fire of greed and hubris.
Posted by: tom | March 06, 2009 at 07:44 PM