Speaker 1: This is the seventy seven WABC Mini Cast from Wall
Speaker 1: Street to the White House. This is the Larry Gudlow Show.
Speaker 2: So we're going to talk about the economy, We're going
Speaker 2: to talk about the world, just about everything else with
Speaker 2: two dear friends, two brilliant people, and two mentors of
Speaker 2: mine down through the years, Doctor Arthur Laffer as chairman
Speaker 2: and chief Economists of Laffer Associates. He's recipient of the
Speaker 2: Presidential Medal of Freedom. His latest book is The Trump
Speaker 2: Economic Miracle with Steve Moore, Steve Forbes chairman, and I'm
Speaker 2: going to say legendary chairman, editor in chief of Forbest Media,
Speaker 2: and his latest book is Inflation, What it is, Why
Speaker 2: It's bad, and how to fix a gentleman, you honor me,
Speaker 2: coming on. I can't thank you enough, Arthur, begin with you.
Speaker 2: The state of the American economy. Mister Trump said last
Speaker 2: night in South Carolina, a very interesting speech, by the way,
Speaker 2: given Republican candidates, they're talking points, but he said, We've
Speaker 2: never had an economy this good. I don't know if
Speaker 2: i'd say never, but I would say it looks like manufacturing, construction, employment, AI, productivity, profits,
Speaker 2: a big stock market. I mean it really. The liberal
Speaker 2: media will never credit him, but I think he's onto
Speaker 2: something because the economy seems to be booming.
Speaker 3: Arthur, Yeah, well, the stock market is terrific. I mean,
Speaker 3: it really is terrific. And the unemployment rate, which is
Speaker 3: a traditional measure, is also terrific. I mean, you know,
Speaker 3: it's surely not a bad economy at all, Larry. I mean,
Speaker 3: he's coming off a prior administration that had very high
Speaker 3: inflation at bad growth, that wasn't doing well, and he's
Speaker 3: put in all the right policies, and I couldn't be
Speaker 3: more optimistic about the economy than I am. I really
Speaker 3: think we're in good shape.
Speaker 2: I'd love to see the message Steve Forbes, as we
Speaker 2: have discussed for many, many weeks, a little more pro growth,
Speaker 2: a little more pro growth. You know, middle class people
Speaker 2: don't shouldn't and don't want to pay the Biden's inflation tax,
Speaker 2: So of course we'd like to index capital gains, maybe
Speaker 2: increase the exemptions. Your idea of going after the middle
Speaker 2: income brackets, I think is a fabulous idea. Lower those brackets,
Speaker 2: in fact, take out a couple of brackets would be terrific.
Speaker 2: Tax reform, lower rates, broaden the base. I'd love to
Speaker 2: see him, you know, I'd love to see the GOP
Speaker 2: develop a futuristic growth message.
Speaker 3: Well, that's absolutely critical because what people notice right now,
Speaker 3: given the environment we're in, the gas prices are jumping
Speaker 3: all over the place, healthcare premiums are going up, their
Speaker 3: announcements are going to be big increases next year. The
Speaker 3: mortgage rates are going up. So people are saying, well,
Speaker 3: things may be good, but it looks like there are
Speaker 3: a lot of bad things brewing out there. And I
Speaker 3: think the part of the problem is, and you've been
Speaker 3: hammering this for weeks and weeks, is that the GOP
Speaker 3: hasn't come up with a positive platform that has people
Speaker 3: looking to the future. And when you have something that
Speaker 3: looks to the future, it gives more authority when you say, look,
Speaker 3: we've done some good things here and point to that
Speaker 3: waitress who doesn't have to pay her rent anymore, in
Speaker 3: effect because of the taxes she saves not having to
Speaker 3: pay tax on tips and overtime and things like that,
Speaker 3: and then those old TV commercials at night and say,
Speaker 3: but wait, there's more. And so I don't care if
Speaker 3: Congress passes the Reconciliation, which I always think sounds like
Speaker 3: a marriage bill before the elections. The key thing is
Speaker 3: to put it out on the table and say, this
Speaker 3: is what will happen if we win these elections, and
Speaker 3: give something positive people can look forward to. And the
Speaker 3: nice thing about those brackets for a middle income people,
Speaker 3: that's twenty two and twenty four percent brackets, knock them
Speaker 3: down at fifteen or even ten. Go bold. Let the
Speaker 3: Democrats start complaining about the deficit. That's rich and and
Speaker 3: and say and then say, give people something to look
Speaker 3: forward to, and everyone will do the math very quickly. Hey,
Speaker 3: if these guys get in, we're going to have bigger paychecks.
Speaker 3: Even if our gross pay doesn't go up, our after
Speaker 3: tax pay is going to go up. That's great. Give
Speaker 3: him some to look forward to.
Speaker 2: You know, all right, in a great move what I'm
Speaker 2: going to call spiritual humility. Steve Forbes, in an important
Speaker 2: emails I think he said it on the air, has
Speaker 2: offered to let Trump instead of the Forbes flat tax
Speaker 2: he's offered. Steve has offered Trump flat tax. The present
Speaker 2: could take credit for the flat tax that Steve Forbes
Speaker 2: has fought for all these years and ran for president twice.
Speaker 2: And got a lot of votes when he ran. Now,
Speaker 2: how about that the Trump flat tax. You need to
Speaker 2: get on the full rate.
Speaker 3: Call it a beautiful Trump tax, the big beautiful Trump tax.
Speaker 3: Bells the huge, big, beautiful Trump. Yeah. And what we
Speaker 3: need to do is get the rate top rate down
Speaker 3: to I mean, you know this is across the board.
Speaker 3: Let's make it flat. Yeah, there's no reason why everyone
Speaker 3: shouldn't pay one rate across the board. And if we
Speaker 3: could get it down to where Reagan had it with
Speaker 3: that tremendous prosperity, well, we had two tax rates twenty
Speaker 3: percent and fifteen percent. That was it. Just get it
Speaker 3: back down to that or maybe even a little lower,
Speaker 3: and you'd have the prosperity that you wouldn't be able,
Speaker 3: you would. We'd all be getting so darn rich we
Speaker 3: couldn't stand it anymore. Richness.
Speaker 2: And of course after one of our TV shows, are
Speaker 2: these started crashing down that the life of curve doesn't work,
Speaker 2: that revenues will go down. The guy at Tim Noah
Speaker 2: from the New Republic said this, and now he's been
Speaker 2: slapping us down for years, but he wrote one of
Speaker 2: his great articles about how bad it is, and I
Speaker 2: want to make another point, right when you look at
Speaker 2: the numbers, This is from Grover and Request. I think
Speaker 2: when you look at the numbers, seventy four percent of
Speaker 2: the people who pay capital gains have incomes or combined
Speaker 2: incomes of less than two hundred grand, which really gets
Speaker 2: used to that indexing, and any reduction in cap gains
Speaker 2: tax rate or burden would be for the middle class.
Speaker 2: Three quarters of the payers are under two hundred grand.
Speaker 3: Even if it weren't that, Larry, it's just wrong to
Speaker 3: have people pay capital gains on just catching up with insulation.
Speaker 3: It's just not right. And the effective capital gains tax
Speaker 3: rate right now has risen frommatically since Biden was in
Speaker 3: office during and since Biden's been office because of the
Speaker 3: inflated asset values because of inflation. And you know, just
Speaker 3: offsetting that makes just all the common sense in the world.
Speaker 3: We've offset the income tax for inflation, We've offset the
Speaker 3: capital gains tax for inflation, we've offset depreciation for inflation.
Speaker 3: Now all we need to do is offset the capital
Speaker 3: gains for depreciation for inflation, and we'd be home free.
Speaker 3: And boy would we get revenues and we'd get growth.
Speaker 3: And that's what we really need.
Speaker 2: Is see the effective the real effective rate is fifty percent.
Speaker 3: On that specific asset. Yes, that is fifty percent on
Speaker 3: some assets. By the way, Larry, it's over one hundred percent,
Speaker 3: way over one hundred percent. You can pay taxes on
Speaker 3: capital gains and lose value in real terms. So that
Speaker 3: is just makes no sense. You know, the lower the
Speaker 3: return rate real return is on your assets, the higher
Speaker 3: your affection factories. They're going to be Steve Forbes and
Speaker 3: one one other thing on Arch point about a revenue.
Speaker 3: The purpose of government is not to collect revenue. The
Speaker 3: purpose of government is served with people. And if the
Speaker 3: government doesn't like the tax code, boo hoo, the key
Speaker 3: is going to make America more prosperous. I don't care
Speaker 3: about the government.
Speaker 2: Well, so think of this though. The government creates inflation,
Speaker 2: and then the government wants to benefit from the inflation
Speaker 2: that they created by milking people for tax revenues. I mean,
Speaker 2: there's something profoundly wrong in that.
Speaker 3: Looks like speed traps on the highway, except in the
Speaker 3: government on plates.
Speaker 2: Steve Forbes. Sadly before we break, Vice President Vance was
Speaker 2: at it again, and he said that dollar should not
Speaker 2: be the world's reserve currency because it makes it too
Speaker 2: easy for consumers to buy goods and services from abroad
Speaker 2: or from at home. I don't know which, but he
Speaker 2: basically started flirting with ending the dollar as the world's
Speaker 2: reserve currency. What to make of that one?
Speaker 3: It leaves me speechless, but I can since I'm on
Speaker 3: the air. But it goes right back to the nineteen
Speaker 3: seventies cardonomics remember that word, and so he wants to
Speaker 3: trash the American dollar. I'd hold up the Eagle and
Speaker 3: the American dollar and say VP Vance wants to trash it.
Speaker 3: We want to make dollars strong, not weak. We want
Speaker 3: to make America strong. Strong countries don't have weak currencies, period.
Speaker 2: Yeah. So economic historian Philip Magnus wasn't expecting to go
Speaker 2: viral last week. He's a University of Chicago. I think's
Speaker 2: good guy. He posted a twenty twenty three clip Vice
Speaker 2: President JD. Vance criticizing the US dollars status as the
Speaker 2: global world's reserve currency, and the thing went viral everywhere. Now,
Speaker 2: I don't know Advance has changed his view. That was
Speaker 2: from twenty twenty three, but he's been saying, you know,
Speaker 2: he took shots at Milton Friedman and Margaret Thatcher.
Speaker 3: And I think gatocracy, that's right.
Speaker 2: He took shots at meritocracy, which is almost the heart
Speaker 2: of Donald Trump's whole economic ideology. And I think he's
Speaker 2: one of the people that pushed for higher tax rates,
Speaker 2: at least upper end tax rate increases during the presidential campaign.
Speaker 2: And you have to go in and tutor him. You know,
Speaker 2: do you know him, do you talk to him?
Speaker 3: I've only shook his hand once, but I do try
Speaker 3: to send her the Vice President's office my right, but
Speaker 3: so far they haven't gotten through yet done the same thing. No, No,
Speaker 3: I haven't talked to him at all. You know, he's
Speaker 3: from my home state of Ohio. But you know, Larry,
Speaker 3: he's a young man, he's a yalely, he's educatable. I
Speaker 3: think we should balance up with JD. Vance and try
Speaker 3: to get to him and have him see the whole
Speaker 3: supply side picture. You know. Worrying about the dollar, Steve,
Speaker 3: you and I all worry about the dollar. We want
Speaker 3: to make it as good as gold. We want to
Speaker 3: make the dollar the sound currency of the world. I mean,
Speaker 3: government money is no good unless it's controlled completely by
Speaker 3: guaranteeing its value. And you know, I think that's one
Speaker 3: thing we should get across the vans, and I think
Speaker 3: he'd understand it. And I think he'll understand that Ohio
Speaker 3: has been going to the toilet because of its tax
Speaker 3: rates relative to its neighbors. So he sees all those things,
Speaker 3: and all we need to do is get together with
Speaker 3: him and do it quietly, in fun, and I think
Speaker 3: he'll see the truth beauty in the American way clearly.
Speaker 2: Steve Forbes, before we take a break, do you think
Speaker 2: Yale is educable?
Speaker 3: Oh, I'm I'm, I'm I'm in a very Christian mode
Speaker 3: right now. So uh so, uh yes, I believe in
Speaker 3: tolerance and diversity. So we'll we'll we'll now, Larry, if
Speaker 3: I may have, before we go out, just remember your
Speaker 3: Princeton alma Mater was founded by yalely just remember that, guys.
Speaker 2: Is that true? What is important?
Speaker 3: That's the only reason worlds because we let you. Well,
Speaker 3: it shows Yale. Yeah, Yale picked early, It founded Princeton,
Speaker 3: and then uh I went down.
Speaker 2: There we go, all right, we're going to take a
Speaker 2: quick break. Here we're talking to two of the best
Speaker 2: of the best individuals and economic brilliance and all the
Speaker 2: rest of it Arthur Laugher and Steve Forbes. I'm Cudler.
Speaker 1: We'll be right back with more Larry Cudlow from Wall
Speaker 1: Street to the White House. This is the Larry Gudlow Show.
Speaker 2: And we're talking to two economic legends and dear friends
Speaker 2: and mentors of mine, doctor Arthur Laffer, chairman and chief
Speaker 2: Economists of laugh for Associates, and Steve Forbes, chairman and
Speaker 2: editor in chief of Forrest Media. Arthur Scott Bessant, who
Speaker 2: is a friend of ours and we have been backers
Speaker 2: of him. He announced a bond repurchase to bring down
Speaker 2: long term interest rates this past week. Initially bond yields fell,
Speaker 2: but then they didn't and they came back. In fact,
Speaker 2: we're up on the week. Is that the best way
Speaker 2: to get interest rates down, Arthur.
Speaker 3: Well, I think the best way is to get inflation
Speaker 3: under control. And once you get inflation under control, then
Speaker 3: you have lower interest rates, but they'll all be real
Speaker 3: returns on capital, which is what you want to be high.
Speaker 3: You want inflation premium to be very low. That's what
Speaker 3: you really want. Now when you look at what Scott
Speaker 3: Besson did, in my view, and I've known secretaries of
Speaker 3: the Treasury from George Humphrey on to the President. Literally,
Speaker 3: I mean I have I think he's about as good
Speaker 3: as a Treasury secretary as anyone's ever been, and that
Speaker 3: includes George Schultz was my mentor. I just think Scott
Speaker 3: Besson's the greatest thing ever. Just remember he works for
Speaker 3: the President of the United States, and as such he
Speaker 3: carry out the President's ideas and wishes. So I would
Speaker 3: argue that this is really a Trump administration, the Trump
Speaker 3: White House Plan, much more than it is separate, separately
Speaker 3: coming and originating in the Treasury. I just really think
Speaker 3: it's a Trump idea.
Speaker 2: Not necessarily, I think that's probably exactly right. President Trump
Speaker 2: always wants lower interest rates. Steve Forbes, you know, it
Speaker 2: seems to me if you aim for a strong dollar,
Speaker 2: strength that FEDS a balance sheet to moluntary base control,
Speaker 2: the money supply my sply is actually rising in about
Speaker 2: eight or nine percent right now. Anyway, those are things
Speaker 2: that would bring down inflation expectations and now would bring
Speaker 2: down long term interest rates.
Speaker 3: Yes, it would. And one of the things that I
Speaker 3: hope Kevin Warsh is he tries to battle that infernal
Speaker 3: institutioning now heads is to announce that our goal is
Speaker 3: a stable value for the dollar, and make it explicit.
Speaker 3: We don't want to weak a strong overly strong. We
Speaker 3: want a stable dollar. And one of the things when
Speaker 3: they interview to intervene in the markets that try to
Speaker 3: prop up the end, they should announce maybe a range.
Speaker 3: We want the end to be one fifty to one
Speaker 3: fifty five. Because one of the crazy things that the
Speaker 3: governments do is they go in buy their currency to
Speaker 3: prop it up and then in effect put the money
Speaker 3: back in to the economy. So they waste their reserves
Speaker 3: and the money supply, the base money supply doesn't change.
Speaker 3: It's like taking a bucket of water from one end
Speaker 3: of the pool and then pouring it in the other.
Speaker 3: It's a crazy exercise. And so one of the things
Speaker 3: I hope Pessant does in the future, because Japan is
Speaker 3: in trouble with its currency for a lot of reasons,
Speaker 3: is to have them do a real reduction of the
Speaker 3: monetary base and make it clear we want stability. Use
Speaker 3: that word. No central banker in the world ever uses
Speaker 3: the words currency stability. It's astonishing.
Speaker 2: Yeah, you know, ar the rise and rates, looking at
Speaker 2: the CPI break evens in the tips market. It's mostly
Speaker 2: the rise in real rates from a stronger economy, isn't it.
Speaker 3: I think so, And that's what I really like in
Speaker 3: this world. I mean, well with Kevin Warsh as head
Speaker 3: of the FED, and absolutely what Steve Forbes said is right.
Speaker 3: I think. I think Kevin is very clear on his
Speaker 3: bit ability and wishes to really control inflation and to
Speaker 3: get it stabilized, in fact, not stabilize at two percent.
Speaker 3: I think he really wants a stable dollar going forward,
Speaker 3: and I think he's been about as clear as he
Speaker 3: possibly could be on that in the marketplace. It'll take
Speaker 3: him some time to get ready control over the FED board,
Speaker 3: but that will happen, and I think he'll be as
Speaker 3: good as FED chairman as Vulgar was. I'm just really
Speaker 3: excited about that.
Speaker 2: Steve Forbes is another issue. Scott Besson on Monday is
Speaker 2: going to announce even stronger economic sanctions on Iran. President
Speaker 2: Trump calls it economic d Day do Buy Good editorial
Speaker 2: in this morning to Wall Street Journal. The UAE and
Speaker 2: China are the two biggest issues. They're still trading with Iran,
Speaker 2: particularly the UAE, which is not subjected to the naval blockade.
Speaker 2: Now the UAE has come out with a statement saying
Speaker 2: they will cease any exchanges, trading or banking with you
Speaker 2: rad But this is it's a big gamble. I think
Speaker 2: it's though it's the right gamble. Steve Forbes, well.
Speaker 3: I think eventually you're going to see Iran say will negotiate,
Speaker 3: but unfortunately with this regime, they're going to stretch it out.
Speaker 3: They'll make an agreement violated. Remember we've had several cease
Speaker 3: fires since April. Ultimately, I think the president has to
Speaker 3: make the decision we have to go back and pick
Speaker 3: up where we left off in April with this regime,
Speaker 3: so they will look like they're capitulating, but they never will.
Speaker 3: They have to go period.
Speaker 2: Yeah, there's got to be at some point regime changes
Speaker 2: to make any changes, any fundamentals.
Speaker 3: How do you do that though, Larry, let me ask
Speaker 3: you that question. How do you guarantee that? I mean,
Speaker 3: do we put troops in the ground?
Speaker 2: No?
Speaker 3: No, Well how do we do it? How do we
Speaker 3: get a regime change?
Speaker 2: I mean really you have to think. You have to
Speaker 2: think about the Reagan policies going way back. You start
Speaker 2: with COVID operations, You put assistance money, maybe military maybe
Speaker 2: you know arms, you find the dissonance inside and you
Speaker 2: help them. You do it on me.
Speaker 3: Let me let me ask you. Let me push you
Speaker 3: a little bit on this if I can. With Reagan,
Speaker 3: I mean, Reagan was very good in the beginning. We
Speaker 3: got the hostages released when he took the oath of office,
Speaker 3: and that really saved it ran from an attack from
Speaker 3: the US. I believe. We also did Praying Mantis, which
Speaker 3: was there with the submarines and all that. But Reagan
Speaker 3: didn't go and finish the job that he should have
Speaker 3: done in the rock. You know we all do back then.
Speaker 3: It was a real problem.
Speaker 2: He wasn't good on you r we withdrew.
Speaker 3: But the key thing is there are plenty of dissidents
Speaker 3: still in the army, even though the Revolutionary Guard's trying
Speaker 3: to have purged them. And Ramosad and the CIA know
Speaker 3: who the good guys are. But what the good guys
Speaker 3: have to know is we're not going to pull the
Speaker 3: rug out from under them and then start negotiating with
Speaker 3: these evil people again. And these if people student's feel
Speaker 3: these evil people are going to have a chance to
Speaker 3: stay in power. They're not going to risk their lives
Speaker 3: and families unless they know we're in it all the way,
Speaker 3: and that's the key they do that. I mean, sorry,
Speaker 3: I'm sorry. Really good topic and I love listening to
Speaker 3: the two of you.
Speaker 2: Think what Reagan helped Lek Wallassa in Poland when he
Speaker 2: was a dissident and he was underground, he was fighting
Speaker 2: the Communist That's really the model here, and the MOSAD
Speaker 2: and the CIA know what they're doing. Anyway, we got
Speaker 2: to jump out. Thank you, gentlemen, Thank you very much.
Speaker 2: Art Laugher and Steve Ford's terrific stuff. Folks will take
Speaker 2: a break and talk on the economy. John Carney and
Speaker 2: Michael Falkender coming up.