U.S. Economic Model is Working

One of America's leading economic pundits, Larry Kudlow, believes a recession is possible, but he is convinced it's more probable that the country can avoid an economic downturn.

Kudlow is founder and CEO of Kudlow and Company LLC, and host of CNBC's popular "Kudlow & Company" program. He is well-known for his pointed opinions on the free market and politics and for his insights into Wall Street and Washington.

He told NewsMax that the U.S. has nothing to fear from globalization, the dollar is actually undervalued, the housing market decline is not a serious problem, and he foresees no change in interest rates.

On the political front, he said he is "disappointed" with the Democratic candidates for president in 2008, and declares that Hillary Clinton has been "all wrong" on the economy.

Recession: "I would say it is possible. I just don’t see the evidence of it yet," Kudlow said.

Even so, he observed, "I'd have to see a collapse in jobs, and new jobs are holding up nicely.

"I've never seen a real recession with so much healthy profits and business cash flow, corporate cash flow. It's phenomenal. I also believe that lower tax rates are another underrated factor. Lower tax rates help create a more efficient economy, and they also help create very low capital costs and very high investment returns. That is another reason why I don't think the recession is coming."

"But I confess that I have some uncertainties about it. I think some of the signs are mixed. But it kind of looks to me like it is a 2 percent economy rather than a negative economy."

Kudlow firmly believes the U.S. is prepared for globalization. "We've always been ready,” he affirmed. "We have a great labor force in this country. We have phenomenal productivity in this country. We have the greatest financial services industry, we have capitalists, we have labor. We have nothing to fear but fear itself. This paranoia is wrong! We have nothing to fear from foreign trade.

"The key point is not out-sourcing or in-sourcing because both are going up. The key point is not wages or jobs. Here is the key point: Going back 25 years, Ronald Reagan restructured and rejuvenated the free capitalism model. In the last 25 years, the U.S. has had five negative GDP quarters and 95 increases. So we've been in recession 5 percent of the time since 1982. If you go back in the prior 15 or 20 years, we were in recession one-third of the time with two-to-three times the inflation.

"Capitalism, deregulation, lower tax rates, dis-inflation and free trade have transformed us, transformed our economy to a prosperity machine. That model is spreading, and imitation is the sincerest form of flattery. It is boosting the world economy."

Read More Here: MoneyNews.com

Listen to the Podcast:

Talk Show America 5/04/2007

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