Larry Kudlow is back touting a non-existent booming economy just like he did during Trump's first administration

 This Is the Best 'Hard Goods' Boom in Decades

... Tuesday’s industrial production report showed back-to-back gains in June and July for both total production and manufacturing production. ...

Larry is rightly happy about the increase in the durable manufacturing index. 

No doubt about it, it is up, but notice that it is still not as high as it was in Trump 2018 or Obama 2014. 

More importantly, percent change in the index for 1H2026 was 1.94, lower than the 2.28 in 1H2018 when Trump was president the first time.

But this isn't an economic boom, and neither was that. 

Those are welcome highpoints but in a long-term trend all down hill since the 1980s when Reagan was president, and no one asks why.

Kudlow & Co. never go back in the data as far as they should, even though they served in the Reagan Revolution and touted the results for the economy of the posthumous JFK tax cut in the Revenue Act of 1964, which cut the top marginal rate from 91% to 70%.

Today they use these data sets which go back only to the beginning of 1972, but even at that there is a giant durable goods growth spike of 9.02% in 2H1983 which we have been unable to reproduce since then, which should make them ask themselves, What went wrong?, but it doesn't.

Socrates said that the unexamined life isn't worth living.

So let's examine it.

Robust post-war growth is a truism which is true!

Industrial production generally, and for manufacturing specifically, grew robustly year over year, and the trend for those growth rates was itself strongly positive, as the chart for 1948 to 1984 shows.

But look at what happens after 1984. 

You still get positive growth rates year over year, but not as robust as before, and the trend for those growth rates becomes strongly negative.

Something changed in the 1980s to cause this.

I say it's the Reagan Revolution in ordinary income tax rate reductions which caused this, not because tax cuts for rich people is bad, but because Reagan unintentionally sabotaged the tax rate arbitrage which before those tax cuts existed had pushed rich people for decades to make long term capital investments here at home in order to get low capital gains taxes in return.

In other words, Reagan destroyed the negative incentives which drove domestic investment. Take away the penalty of high ordinary income tax rates, and suddenly there's no reason to plow your money into the investments which drive business, jobs, and GDP, especially as enthusiasm for regulations of all kinds began to grow and hamstring profits. 

The new tax cut windfalls freed up a lot of money to seek return wherever it could be found, and in the aftermath of the Reagan era that money increasingly went abroad. For people who lived through it, the one persistent theme of the business news was one business after another closing up shop in America and moving production overseas. After China entered the WTO, the steady departure of businesses from America became a flood.

And that's why that last chart, for 1984 to the present, looks like hell.

It has nothing to do with the U.S. Dollar being the world's reserve currency either. That is the dumbest thing I've heard in years, and I can't tell you how amusing that is coming out of the mouth of a Yalie. I guess they don't teach 'em at Yale that the dollar was the world's reserve currency 1948-1984.

I am not an economist. I do not know how to wave a magic wand of policy to make it all right again. 

I am just a scholar in the humanities who wanted to know what turned my world upside down in 2007 and why I and millions like me have never recovered.

I have made a life for myself in spite of it all, as people do, but I tell you what, America was pretty great once, so don't tell me this is an economic boom.

I knew the economic boom. The economic boom was a friend of mine. And Larry, this isn't an economic boom.

 

 

Industrial production missed the consensus estimate yesterday, so they trotted out Larry Kudlow to tell you otherwise lol

 For month over month in July, the consensus estimate was for +0.3%. Instead we got +0.2%.

Meanwhile the big picture shows, like so many indicators, that industrial production hit the big brick wall of Reaganism in 1984.

Post-war industrial production grew handsomely and its growth rate trended upward from 1948 to 1984, but not after.

Why is that?

I think it's because the incentive to invest in domestic industry went away because of the Reagan tax revolution.

Up to that time, high ordinary income tax rates had pushed owners of capital to invest in America for decades because by doing so they could take advantage of relatively much lower long term capital gains tax rates when they wanted to take income. After the dramatic Reagan cuts to ordinary income tax rates, that arbitrage disappeared. From that time onward owners of capital, now flush with cash from taking income at low ordinary income tax rates year upon year, found it more advantageous to invest abroad where low labor costs and unregulated markets promised even more fabulous returns on investment as America hobbled itself with regulation at home. The exit of businesses of all sizes from the United States to East Asia which began from this time turned into a flood after China was admitted into the WTO in 2001.

But today J. D. Vance thinks the U.S. Dollar's status as the world's reserve currency is the cause of all our problems.

If you want to know what makes me despair, that's it.

The following news story was more accurate than Kudlow. 

US: Industrial Production Up Again in July as Modest Manufacturing Recovery Continues 

I'm so old I remember when Jan 2026 full time employment at 48.79% of population was Great Recession level bad

 That whole China joining the WTO and globalization thingy has really worked out great for the American middle class amirite?

The winter trend since Jan 2023 has been DOWN:

Jan 2023: 49.32%

Jan 2024: 49.16%

Feb 2025: 48.88%

Jan 2026: 48.79%. 

 

 

 

In 2018 The Wall Street Journal was still defending China's admission into the WTO, today it pretends it wasn't part of that bipartisan folly

 Then: "The U.S. properly worked for China's inclusion".

Now: "An era of folly began in the new century. Leaders of both political parties supported China's entry into the World Trade Organization".

I can't wait for the Wall Street Journal to admit that America's decline actually began under Reagan forty years ago, not twenty-five, because at this rate I'll be dead before they do.

 

The decline of worker hours in America

 In 1966 all the hours worked by all the full time and part time workers divided by the civilian employment level peaked at about 35.35 hours per worker per week. That's full time level work. That's prosperity.

The flood of Baby Boomers, especially Baby Boomer women under the influence of feminism and the social revolution of the 1960s, and also foreign born workers after the Immigration Act of 1965, into the labor markets after the mid-1960s reduced hours per week per worker by almost 11%, not forming a new stable bottom until the 1980s at about 31.5 hours per week.

Increased labor supply = fewer hours to go around = less prosperity.

By 1999, when peak Baby Boom had passed 40 years of age, hours per week had risen as high as 32.68 per worker per week. That was the end result of the good times kick-started by Ronald Reagan twenty years prior, which hit in four waves: 1984-85, 1989, 1995, and 1999.

But the whole subsequent period 2003-2019 inclusive fell apart.

Many, many troubles reduced hours worked per worker by almost 7% between 1999 and 2009, not the least of which were admission of China to the World Trade Organization in 2001, and the Great Recession.

Hours per week per worker have risen again as of 2022, but only to the old bottom, at around 31.57 per week.

Median real earnings per week are up just $38 since 1979.

Will that be As Good As It Gets?

 

 

 

Trump's top trade advisor is nuts, 0% tariff offer from Vietnam isn't good enough

 They're making it impossible for the world, which will end up trading with everybody except us. 

Peter Navarro says Vietnam’s 0% tariff offer is not enough: ‘It’s the non-tariff cheating that matters’

... A value added tax is a system used by many countries around the world and is in some ways similar to sales taxes in the U.S. The Trump administration’s argument that the tax should count as a trade barrier is not widely accepted.

“We have tried at the World Trade Organization since the 1970s to get VAT-tax relief, and they’ve told us no every single time,” Navarro said Monday.

The trade adviser also said Monday that the value added tax would be an issue in any negotiations around tariffs with the European Union.

The actual WTO China tariffs are 7.3%, not 67% as maintained by Trump

 

US manufacturing jobs went straight south after China joined the World Trade Organization in 2001, a development cheered by US Chamber of Commerce chairman Steve Van Andel of Michigan's AMWAY in the Chicom China Daily, US Independence Day 2001

US Chamber Backs China's WTO Entry : 

Steve Van Andel, the newly elected chairman of the US Chamber of Commerce, said on Monday that he was looking forward to China joining the World Trade Organization (WTO) sometime before the end of this year. He said this will pave the way for permanent normal trade relations between China and the United States.

"For US business, one of the best things that can happen to help confidence in the Chinese market is China becoming part of the WTO," Andel said in an interview with China Daily.

His remarks come at a time that China is hoping to enter the world trade body. The country hopes to join before a WTO ministerial meeting in Qatar between November 9 and 13.

China has concluded separate agreements with the United States and the European Union, the world's two top trading powers, in the last few weeks, promoting its WTO membership.

Although the US Congress last year voted for Permanent Normal Trade Relations (PNTR) between China and the United States, it still reviews its trade policy towards China every year until the country actually becomes part of the WTO.

"The chamber is already actively supporting normal trade relations with China again." Andel said.

The chamber, the world's largest commerce association representing 3 million US companies and 3,000 state and local chambers, has been committed to lobbying the US Congress to normalize trade relations with China.

He said he would go back to Congress soon after his visit to China to lobby for normal trade relations with China again.

A normal trade relation between China -- potentially the world's largest market with 1.3 billion consumers -- and the United States is very important to businesses in both countries, he said.

Last year, the trade volume between the two nations amounted to US$74.5 billion.

He said China's WTO entry would certainly benefit "not only better relations, but also more trade between the two markets.''

Andel said he would carry the same message during his talks with the Chinese leaders and government officials, including President Jiang Zemin over the next couple of days.

Andel will lead a US business delegation to China in September to attend a meeting organized by China's Ministry of Foreign Trade and Economic Cooperation.

"I will also next year travel around the United States again, probably to 50 to 60 different local chambers talking about the importance of trade with China to US and Chinese businesses,'' he said.

Andel, chairman of US-based Amway, the global consumer goods giant, said China's WTO accession and normal trade relations between China and United States were expected to boost his company's business in China.

Amway, which has invested more than US$100 million in China, aims to increase its business in the country to 10 percent of its global turnover in a few years from the current level of 5 percent.

(Chinadaily.com.cn 07/04/2001)

 

 

It Ain't Free Trade: Peter Navarro Rips China's Infractions of WTO Rules

Here:

The most potent of China's "weapons of job destruction" are an elaborate web of export subsidies; the blatant piracy of America's technologies and trade secrets; the counterfeiting of valuable brand names like Nike and Chevy; a cleverly manipulated and grossly undervalued currency; and the forced transfer of the technology of any American company wishing to operate on Chinese soil or sell into the Chinese market.

Each of these unfair trade practices is expressly prohibited both by World Trade Organization rules as well as rules established by the U.S. government, e.g., the Treasury Department has sanctions against currency manipulation (which, alas, the Obama administration refuses to use against China despite campaign promises to do so).

The only "candidate" who understood this was Trump. Navarro doesn't point to a replacement, but knows we need one.