LARRY KUDLOW: President Trump kept business alive with low taxes

So, the stock market staging an impressive rally today – up almost 400 points and they're heading for a weekly gain.  After plunging 20% at one point last year, the Dow has managed a 3.5% gain so far this year.  

I love it when we have these big rallies because it's good for the Kudlow trust and for the roughly 135 million investor-class owners of defined contribution and tax advantaged retirement accounts, along with the old-fashioned defined benefits still used by so many backward-looking unions. Prosperity is always good. Somebody once said that free market capitalism is the best path to prosperity. So, let's celebrate the astonishing success of the Trump corporate tax cuts, which are virtually the only true stimulus the economy has seen during the dreary Bidenomics years. 

Of course, Mr. Biden has tried continuously to repeal the Trump tax cuts.  He's always railing on about tax cuts for the rich and how they don't work.  He prefers big government socialism and the top-heavy government regulations of the Green New Deal, but once again, Biden has been proven wrong. This time, by an interesting panel of experts.   

A recent study from the prestigious National Bureau of Economic Research authored by economists from Harvard, Princeton, the University of Chicago and the U.S. Treasury – take a deep breath folks, sometimes that crowd gets it right – argued that the largest corporate tax deduction in U.S. history was a roaring success and nearly all of those corporate tax cuts are still in place.   

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In short, the key conclusions of this gilt-edged economic panel is that the Trump corporate tax cuts generated more business investment, more growth, more wages for workers and – as lower corporate taxes generated an expanding economy – there was no impact on government revenues.   

Folks should keep that in mind as the tax cuts are now starting to expire, at least for business expensing and in early '25 for the individual tax cuts, and all the liberal scorekeepers in Washington will tell you that extending the Trump tax cuts will cost $3 trillion or even more.   

Don't believe them. They're always wrong and, importantly, the heart of Mr. Trump's corporate tax cut, which dropped the marginal rate from 35% to 21%, is actually permanent. Unless, of course, the Democrats overturn it through new legislation.  Hat tip to Wall Street Journal's James Freeman for flagging this pro-growth supply-side story and another hat tip to my great friend and Trump administration colleague Tyler Goodspeed for picking up new revisions to the economic estimates of the Trump years.  

Actually, the economy beat 3% growth in 2019, along with several quarters of better than 4% growth along the way and there was no inflation! All is not well in the world of Bidenomics because the Federal Reserve finally got around to tightening the monetary screws, the inflation rate has fallen in recent months, but while yearly inflation has come down, the level of prices has remained up.   

The CPI, for example, has jumped nearly 18% during Biden's term. Grocery prices up 20%, energy costs up nearly 40%. So, again, inflation has come down, but prices have gone up. That has made life unaffordable for working class folks. Real wages continue to decline.  Couple that with the catastrophe at the southern border with 8 million illegals flooding into the interior of the U.S.. You have sinking real wages along with decades-high interest rates including an 8% mortgage rate.   

This is why Bidenomics polls in the mid-20's and why a recent survey by Bankrate and YouGov shows that 50% of voters think their financial situation has gotten worse. Only 21% see it improved and 26% see it unchanged.  

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Meanwhile, today's Michigan consumer survey fell again and inflation fears jumped up again. Fed head Jay Powell told us yesterday, after he shooed a bunch of obnoxious climate protestors out of the room, that the Fed may not be finished raising interest rates because they haven't reached their 2% target. Fortunately, while Israel wipes out the Hamas murderers, the Saudis have kept their powder dry and there has been no oil price explosion.    

So, how about a big hat tip to former President Trump for keeping business alive with low taxes? I'm always happy with a little stock market prosperity for all of us. That's my riff.    

This article is adapted from Larry Kudlow’s opening commentary on the November 10, 2023, edition of "Kudlow."