Trumponomics and the Fed, One of the Two Kevins Will Do Just Fine

Now I’m going to leave the Minneapolis situation to President Trump and Tom Homan and others who know far more about it than I do.All I wish to do is reaffirm my support for the police and law and order. And I want to reaffirm my opposition to left-wing groups who are constantly opposed to the police and law and order.Instead, as Mr. Trump returned from Davos, I want to emphasize first that he is standing on top of the world, in terms of American achievements and influence.And second, new numbers coming out today showing the American business investment boom continues to intensify.In particular, the key category non-defense capital goods excluding volatile aircraft, which is really the core measure of business investment, is now up 9.9 percent at an annual rate for shipments over the past three months. Nearly double the 12-month rate.And new orders are up 8.5 percent over the past three months, compared to 5.5 percent over the past year.A Federal Reserve board member, Kevin Warsh, left, and Treasury Secretary Timothy Geithner, center, in 2010 at Busan, South Korea. Chung Sung-Jun/Getty ImagesThese investments cover machinery, equipment, computers, and electronics, among others.I’m certain that this surge in what’s called capex is related to the 100 percent full cost immediate expensing embodied in the One, Big, Beautiful Bill, that was made retroactive to Mr. Trump’s inauguration back on January 20 of last year. It’s another example of the success of the president’s policies. And this goes hand in hand with the pickup of industrial production, both consumer goods and business equipment.And the spurt in GDP, which rose 3.8 percent annually in the second quarter, 4.4 percent in the third, and perhaps 5 percent in the fourth.That’s right, there’s a Trump boom going on. And it’s based on his policies of tax cuts, deregulation, “drill, baby, drill,” and reciprocal free and fair trade.People always say 70 percent of the economy is consumer spending, well that might be technically true, but they miss the fact that when you look under the hood, it’s actually business to business spending that drive the largest share of economic growth, simply because it’s businesses who hire the workers and it’s businesses who pay their wages.You can’t have a strong consumer economy unless you have a healthy business economy. And that’s why the Trump policies are so foundational.Advancing business investment is also helping to drive a productivity boom. As economist Ed Yardeni notes in his late newsletter, all that capital spending has been paying off by boosting productivity and profit margins. Indeed corporate profits and margins are running at record levels, and that of course gives businesses the wherewithal to hire more and to pay higher wages.So this whole sequence of tax incentives, business investment, productivity, profits, and wages is blowing up the so-called affordability problem. Basically it’s just good solid economic growth.The Federal Reserve chairman, Jerome Powell, on December 10, 2025, at Washington. AP/Jacquelyn MartinAnd finally, take-home pay rising roughly 4 percent is running well above the recent 1.6 percent core consumer price index or the 2.3 percent core personal consumption expenditures deflator. It’s worth about $2,000 for an average family.So we surely don’t want any kind of government shutdown to get in the way of this Trump boom, which is the envy of the world.And we surely do want a new Fed chairman who understands what Mr. Trump said at Davos, that economic growth does not cause inflation.The old Fed models believe the economy can’t grow at 4 percent, 5 percent, or 6 percent. But instead must remain under 2 percent. Well, they’re wrong.So the Fed chairman, Jay Powell, and many of his predecessors would tighten policy and stop the boom. They are wrong.The old Phillips curve model of a phony trade-off between growth and inflation, should be mothballed. We have a new world order of low taxes and deregulation, and falling energy prices and rising productivity, all stimulating a boom that is producing more factories and more goods at lower prices.The new Fed chairman should embody the new Trumpian economy. Kevin Warsh and Kevin Hassett understand Trumponomics. They can be independent, but still understand that the supply-side economic boom does not cause inflation. No one can be sure, though, about Wall Streeter Rick Rieder, whose name has popped up for the Fed. I want to be fair here, but there is evidence that he donated to the George Soros “Act Blue” political campaign, and variously earmarked contributions to ultra-left-wing Democrats, like Senator Sherrod Brown, Congressman Hakeem Jeffries, Senator Jon Tester, or the never-Trumper, Governor Nikki Haley.This doesn’t sound like Trumponomics to me. And if I’m wrong about this information, I’ll happily recant, but there is Federal Election Commission evidence.Why not stay with the best? One of the two Kevins will do just fine.From Mr. Kudlow’s broadcast on Fox Business Network.

Trumponomics and the Fed, One of the Two Kevins Will Do Just Fine

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