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<v Speaker 1>This is the seventy seven WABC Mini Cast from Wall

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<v Speaker 1>Street to the White House. This is the Larry Gudlow Show.

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<v Speaker 2>So we're going to talk about the economy, We're going

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<v Speaker 2>to talk about the world, just about everything else with

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<v Speaker 2>two dear friends, two brilliant people, and two mentors of

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<v Speaker 2>mine down through the years, Doctor Arthur Laffer as chairman

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<v Speaker 2>and chief Economists of Laffer Associates. He's recipient of the

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<v Speaker 2>Presidential Medal of Freedom. His latest book is The Trump

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<v Speaker 2>Economic Miracle with Steve Moore, Steve Forbes chairman, and I'm

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<v Speaker 2>going to say legendary chairman, editor in chief of Forbest Media,

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<v Speaker 2>and his latest book is Inflation, What it is, Why

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<v Speaker 2>It's bad, and how to fix a gentleman, you honor me,

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<v Speaker 2>coming on. I can't thank you enough, Arthur, begin with you.

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<v Speaker 2>The state of the American economy. Mister Trump said last

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<v Speaker 2>night in South Carolina, a very interesting speech, by the way,

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<v Speaker 2>given Republican candidates, they're talking points, but he said, We've

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<v Speaker 2>never had an economy this good. I don't know if

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<v Speaker 2>i'd say never, but I would say it looks like manufacturing, construction, employment, AI, productivity, profits,

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<v Speaker 2>a big stock market. I mean it really. The liberal

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<v Speaker 2>media will never credit him, but I think he's onto

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<v Speaker 2>something because the economy seems to be booming.

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<v Speaker 3>Arthur, Yeah, well, the stock market is terrific. I mean,

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<v Speaker 3>it really is terrific. And the unemployment rate, which is

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<v Speaker 3>a traditional measure, is also terrific. I mean, you know,

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<v Speaker 3>it's surely not a bad economy at all, Larry. I mean,

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<v Speaker 3>he's coming off a prior administration that had very high

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<v Speaker 3>inflation at bad growth, that wasn't doing well, and he's

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<v Speaker 3>put in all the right policies, and I couldn't be

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<v Speaker 3>more optimistic about the economy than I am. I really

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<v Speaker 3>think we're in good shape.

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<v Speaker 2>I'd love to see the message Steve Forbes, as we

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<v Speaker 2>have discussed for many, many weeks, a little more pro growth,

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<v Speaker 2>a little more pro growth. You know, middle class people

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<v Speaker 2>don't shouldn't and don't want to pay the Biden's inflation tax,

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<v Speaker 2>So of course we'd like to index capital gains, maybe

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<v Speaker 2>increase the exemptions. Your idea of going after the middle

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<v Speaker 2>income brackets, I think is a fabulous idea. Lower those brackets,

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<v Speaker 2>in fact, take out a couple of brackets would be terrific.

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<v Speaker 2>Tax reform, lower rates, broaden the base. I'd love to

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<v Speaker 2>see him, you know, I'd love to see the GOP

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<v Speaker 2>develop a futuristic growth message.

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<v Speaker 3>Well, that's absolutely critical because what people notice right now,

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<v Speaker 3>given the environment we're in, the gas prices are jumping

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<v Speaker 3>all over the place, healthcare premiums are going up, their

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<v Speaker 3>announcements are going to be big increases next year. The

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<v Speaker 3>mortgage rates are going up. So people are saying, well,

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<v Speaker 3>things may be good, but it looks like there are

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<v Speaker 3>a lot of bad things brewing out there. And I

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<v Speaker 3>think the part of the problem is, and you've been

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<v Speaker 3>hammering this for weeks and weeks, is that the GOP

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<v Speaker 3>hasn't come up with a positive platform that has people

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<v Speaker 3>looking to the future. And when you have something that

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<v Speaker 3>looks to the future, it gives more authority when you say, look,

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<v Speaker 3>we've done some good things here and point to that

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<v Speaker 3>waitress who doesn't have to pay her rent anymore, in

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<v Speaker 3>effect because of the taxes she saves not having to

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<v Speaker 3>pay tax on tips and overtime and things like that,

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<v Speaker 3>and then those old TV commercials at night and say,

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<v Speaker 3>but wait, there's more. And so I don't care if

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<v Speaker 3>Congress passes the Reconciliation, which I always think sounds like

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<v Speaker 3>a marriage bill before the elections. The key thing is

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<v Speaker 3>to put it out on the table and say, this

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<v Speaker 3>is what will happen if we win these elections, and

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<v Speaker 3>give something positive people can look forward to. And the

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<v Speaker 3>nice thing about those brackets for a middle income people,

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<v Speaker 3>that's twenty two and twenty four percent brackets, knock them

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<v Speaker 3>down at fifteen or even ten. Go bold. Let the

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<v Speaker 3>Democrats start complaining about the deficit. That's rich and and

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<v Speaker 3>and say and then say, give people something to look

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<v Speaker 3>forward to, and everyone will do the math very quickly. Hey,

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<v Speaker 3>if these guys get in, we're going to have bigger paychecks.

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<v Speaker 3>Even if our gross pay doesn't go up, our after

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<v Speaker 3>tax pay is going to go up. That's great. Give

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<v Speaker 3>him some to look forward to.

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<v Speaker 2>You know, all right, in a great move what I'm

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<v Speaker 2>going to call spiritual humility. Steve Forbes, in an important

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<v Speaker 2>emails I think he said it on the air, has

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<v Speaker 2>offered to let Trump instead of the Forbes flat tax

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<v Speaker 2>he's offered. Steve has offered Trump flat tax. The present

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<v Speaker 2>could take credit for the flat tax that Steve Forbes

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<v Speaker 2>has fought for all these years and ran for president twice.

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<v Speaker 2>And got a lot of votes when he ran. Now,

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<v Speaker 2>how about that the Trump flat tax. You need to

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<v Speaker 2>get on the full rate.

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<v Speaker 3>Call it a beautiful Trump tax, the big beautiful Trump tax.

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<v Speaker 3>Bells the huge, big, beautiful Trump. Yeah. And what we

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<v Speaker 3>need to do is get the rate top rate down

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<v Speaker 3>to I mean, you know this is across the board.

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<v Speaker 3>Let's make it flat. Yeah, there's no reason why everyone

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<v Speaker 3>shouldn't pay one rate across the board. And if we

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<v Speaker 3>could get it down to where Reagan had it with

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<v Speaker 3>that tremendous prosperity, well, we had two tax rates twenty

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<v Speaker 3>percent and fifteen percent. That was it. Just get it

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<v Speaker 3>back down to that or maybe even a little lower,

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<v Speaker 3>and you'd have the prosperity that you wouldn't be able,

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<v Speaker 3>you would. We'd all be getting so darn rich we

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<v Speaker 3>couldn't stand it anymore. Richness.

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<v Speaker 2>And of course after one of our TV shows, are

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<v Speaker 2>these started crashing down that the life of curve doesn't work,

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<v Speaker 2>that revenues will go down. The guy at Tim Noah

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<v Speaker 2>from the New Republic said this, and now he's been

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<v Speaker 2>slapping us down for years, but he wrote one of

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<v Speaker 2>his great articles about how bad it is, and I

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<v Speaker 2>want to make another point, right when you look at

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<v Speaker 2>the numbers, This is from Grover and Request. I think

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<v Speaker 2>when you look at the numbers, seventy four percent of

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<v Speaker 2>the people who pay capital gains have incomes or combined

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<v Speaker 2>incomes of less than two hundred grand, which really gets

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<v Speaker 2>used to that indexing, and any reduction in cap gains

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<v Speaker 2>tax rate or burden would be for the middle class.

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<v Speaker 2>Three quarters of the payers are under two hundred grand.

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<v Speaker 3>Even if it weren't that, Larry, it's just wrong to

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<v Speaker 3>have people pay capital gains on just catching up with insulation.

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<v Speaker 3>It's just not right. And the effective capital gains tax

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<v Speaker 3>rate right now has risen frommatically since Biden was in

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<v Speaker 3>office during and since Biden's been office because of the

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<v Speaker 3>inflated asset values because of inflation. And you know, just

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<v Speaker 3>offsetting that makes just all the common sense in the world.

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<v Speaker 3>We've offset the income tax for inflation, We've offset the

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<v Speaker 3>capital gains tax for inflation, we've offset depreciation for inflation.

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<v Speaker 3>Now all we need to do is offset the capital

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<v Speaker 3>gains for depreciation for inflation, and we'd be home free.

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<v Speaker 3>And boy would we get revenues and we'd get growth.

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<v Speaker 3>And that's what we really need.

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<v Speaker 2>Is see the effective the real effective rate is fifty percent.

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<v Speaker 3>On that specific asset. Yes, that is fifty percent on

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<v Speaker 3>some assets. By the way, Larry, it's over one hundred percent,

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<v Speaker 3>way over one hundred percent. You can pay taxes on

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<v Speaker 3>capital gains and lose value in real terms. So that

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<v Speaker 3>is just makes no sense. You know, the lower the

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<v Speaker 3>return rate real return is on your assets, the higher

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<v Speaker 3>your affection factories. They're going to be Steve Forbes and

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<v Speaker 3>one one other thing on Arch point about a revenue.

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<v Speaker 3>The purpose of government is not to collect revenue. The

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<v Speaker 3>purpose of government is served with people. And if the

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<v Speaker 3>government doesn't like the tax code, boo hoo, the key

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<v Speaker 3>is going to make America more prosperous. I don't care

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<v Speaker 3>about the government.

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<v Speaker 2>Well, so think of this though. The government creates inflation,

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<v Speaker 2>and then the government wants to benefit from the inflation

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<v Speaker 2>that they created by milking people for tax revenues. I mean,

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<v Speaker 2>there's something profoundly wrong in that.

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<v Speaker 3>Looks like speed traps on the highway, except in the

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<v Speaker 3>government on plates.

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<v Speaker 2>Steve Forbes. Sadly before we break, Vice President Vance was

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<v Speaker 2>at it again, and he said that dollar should not

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<v Speaker 2>be the world's reserve currency because it makes it too

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<v Speaker 2>easy for consumers to buy goods and services from abroad

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<v Speaker 2>or from at home. I don't know which, but he

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<v Speaker 2>basically started flirting with ending the dollar as the world's

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<v Speaker 2>reserve currency. What to make of that one?

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<v Speaker 3>It leaves me speechless, but I can since I'm on

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<v Speaker 3>the air. But it goes right back to the nineteen

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<v Speaker 3>seventies cardonomics remember that word, and so he wants to

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<v Speaker 3>trash the American dollar. I'd hold up the Eagle and

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<v Speaker 3>the American dollar and say VP Vance wants to trash it.

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<v Speaker 3>We want to make dollars strong, not weak. We want

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<v Speaker 3>to make America strong. Strong countries don't have weak currencies, period.

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<v Speaker 2>Yeah. So economic historian Philip Magnus wasn't expecting to go

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<v Speaker 2>viral last week. He's a University of Chicago. I think's

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<v Speaker 2>good guy. He posted a twenty twenty three clip Vice

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<v Speaker 2>President JD. Vance criticizing the US dollars status as the

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<v Speaker 2>global world's reserve currency, and the thing went viral everywhere. Now,

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<v Speaker 2>I don't know Advance has changed his view. That was

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<v Speaker 2>from twenty twenty three, but he's been saying, you know,

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<v Speaker 2>he took shots at Milton Friedman and Margaret Thatcher.

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<v Speaker 3>And I think gatocracy, that's right.

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<v Speaker 2>He took shots at meritocracy, which is almost the heart

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<v Speaker 2>of Donald Trump's whole economic ideology. And I think he's

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<v Speaker 2>one of the people that pushed for higher tax rates,

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<v Speaker 2>at least upper end tax rate increases during the presidential campaign.

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<v Speaker 2>And you have to go in and tutor him. You know,

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<v Speaker 2>do you know him, do you talk to him?

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<v Speaker 3>I've only shook his hand once, but I do try

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<v Speaker 3>to send her the Vice President's office my right, but

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<v Speaker 3>so far they haven't gotten through yet done the same thing. No, No,

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<v Speaker 3>I haven't talked to him at all. You know, he's

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<v Speaker 3>from my home state of Ohio. But you know, Larry,

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<v Speaker 3>he's a young man, he's a yalely, he's educatable. I

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<v Speaker 3>think we should balance up with JD. Vance and try

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<v Speaker 3>to get to him and have him see the whole

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<v Speaker 3>supply side picture. You know. Worrying about the dollar, Steve,

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<v Speaker 3>you and I all worry about the dollar. We want

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<v Speaker 3>to make it as good as gold. We want to

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<v Speaker 3>make the dollar the sound currency of the world. I mean,

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<v Speaker 3>government money is no good unless it's controlled completely by

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<v Speaker 3>guaranteeing its value. And you know, I think that's one

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<v Speaker 3>thing we should get across the vans, and I think

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<v Speaker 3>he'd understand it. And I think he'll understand that Ohio

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<v Speaker 3>has been going to the toilet because of its tax

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<v Speaker 3>rates relative to its neighbors. So he sees all those things,

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<v Speaker 3>and all we need to do is get together with

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<v Speaker 3>him and do it quietly, in fun, and I think

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<v Speaker 3>he'll see the truth beauty in the American way clearly.

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<v Speaker 2>Steve Forbes, before we take a break, do you think

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<v Speaker 2>Yale is educable?

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<v Speaker 3>Oh, I'm I'm, I'm I'm in a very Christian mode

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<v Speaker 3>right now. So uh so, uh yes, I believe in

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<v Speaker 3>tolerance and diversity. So we'll we'll we'll now, Larry, if

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<v Speaker 3>I may have, before we go out, just remember your

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<v Speaker 3>Princeton alma Mater was founded by yalely just remember that, guys.

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<v Speaker 2>Is that true? What is important?

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<v Speaker 3>That's the only reason worlds because we let you. Well,

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<v Speaker 3>it shows Yale. Yeah, Yale picked early, It founded Princeton,

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<v Speaker 3>and then uh I went down.

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<v Speaker 2>There we go, all right, we're going to take a

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<v Speaker 2>quick break. Here we're talking to two of the best

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<v Speaker 2>of the best individuals and economic brilliance and all the

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<v Speaker 2>rest of it Arthur Laugher and Steve Forbes. I'm Cudler.

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<v Speaker 1>We'll be right back with more Larry Cudlow from Wall

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<v Speaker 1>Street to the White House. This is the Larry Gudlow Show.

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<v Speaker 2>And we're talking to two economic legends and dear friends

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<v Speaker 2>and mentors of mine, doctor Arthur Laffer, chairman and chief

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<v Speaker 2>Economists of laugh for Associates, and Steve Forbes, chairman and

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<v Speaker 2>editor in chief of Forrest Media. Arthur Scott Bessant, who

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<v Speaker 2>is a friend of ours and we have been backers

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<v Speaker 2>of him. He announced a bond repurchase to bring down

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<v Speaker 2>long term interest rates this past week. Initially bond yields fell,

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<v Speaker 2>but then they didn't and they came back. In fact,

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<v Speaker 2>we're up on the week. Is that the best way

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<v Speaker 2>to get interest rates down, Arthur.

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<v Speaker 3>Well, I think the best way is to get inflation

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<v Speaker 3>under control. And once you get inflation under control, then

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<v Speaker 3>you have lower interest rates, but they'll all be real

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<v Speaker 3>returns on capital, which is what you want to be high.

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<v Speaker 3>You want inflation premium to be very low. That's what

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<v Speaker 3>you really want. Now when you look at what Scott

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<v Speaker 3>Besson did, in my view, and I've known secretaries of

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<v Speaker 3>the Treasury from George Humphrey on to the President. Literally,

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<v Speaker 3>I mean I have I think he's about as good

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<v Speaker 3>as a Treasury secretary as anyone's ever been, and that

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<v Speaker 3>includes George Schultz was my mentor. I just think Scott

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<v Speaker 3>Besson's the greatest thing ever. Just remember he works for

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<v Speaker 3>the President of the United States, and as such he

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<v Speaker 3>carry out the President's ideas and wishes. So I would

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<v Speaker 3>argue that this is really a Trump administration, the Trump

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<v Speaker 3>White House Plan, much more than it is separate, separately

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<v Speaker 3>coming and originating in the Treasury. I just really think

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<v Speaker 3>it's a Trump idea.

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<v Speaker 2>Not necessarily, I think that's probably exactly right. President Trump

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<v Speaker 2>always wants lower interest rates. Steve Forbes, you know, it

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<v Speaker 2>seems to me if you aim for a strong dollar,

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<v Speaker 2>strength that FEDS a balance sheet to moluntary base control,

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<v Speaker 2>the money supply my sply is actually rising in about

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<v Speaker 2>eight or nine percent right now. Anyway, those are things

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<v Speaker 2>that would bring down inflation expectations and now would bring

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<v Speaker 2>down long term interest rates.

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<v Speaker 3>Yes, it would. And one of the things that I

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<v Speaker 3>hope Kevin Warsh is he tries to battle that infernal

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<v Speaker 3>institutioning now heads is to announce that our goal is

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<v Speaker 3>a stable value for the dollar, and make it explicit.

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<v Speaker 3>We don't want to weak a strong overly strong. We

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<v Speaker 3>want a stable dollar. And one of the things when

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<v Speaker 3>they interview to intervene in the markets that try to

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<v Speaker 3>prop up the end, they should announce maybe a range.

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<v Speaker 3>We want the end to be one fifty to one

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<v Speaker 3>fifty five. Because one of the crazy things that the

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<v Speaker 3>governments do is they go in buy their currency to

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<v Speaker 3>prop it up and then in effect put the money

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<v Speaker 3>back in to the economy. So they waste their reserves

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<v Speaker 3>and the money supply, the base money supply doesn't change.

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<v Speaker 3>It's like taking a bucket of water from one end

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<v Speaker 3>of the pool and then pouring it in the other.

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<v Speaker 3>It's a crazy exercise. And so one of the things

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<v Speaker 3>I hope Pessant does in the future, because Japan is

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<v Speaker 3>in trouble with its currency for a lot of reasons,

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<v Speaker 3>is to have them do a real reduction of the

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<v Speaker 3>monetary base and make it clear we want stability. Use

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<v Speaker 3>that word. No central banker in the world ever uses

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<v Speaker 3>the words currency stability. It's astonishing.

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<v Speaker 2>Yeah, you know, ar the rise and rates, looking at

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<v Speaker 2>the CPI break evens in the tips market. It's mostly

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<v Speaker 2>the rise in real rates from a stronger economy, isn't it.

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<v Speaker 3>I think so, And that's what I really like in

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<v Speaker 3>this world. I mean, well with Kevin Warsh as head

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<v Speaker 3>of the FED, and absolutely what Steve Forbes said is right.

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<v Speaker 3>I think. I think Kevin is very clear on his

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<v Speaker 3>bit ability and wishes to really control inflation and to

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<v Speaker 3>get it stabilized, in fact, not stabilize at two percent.

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<v Speaker 3>I think he really wants a stable dollar going forward,

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<v Speaker 3>and I think he's been about as clear as he

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<v Speaker 3>possibly could be on that in the marketplace. It'll take

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<v Speaker 3>him some time to get ready control over the FED board,

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<v Speaker 3>but that will happen, and I think he'll be as

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<v Speaker 3>good as FED chairman as Vulgar was. I'm just really

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<v Speaker 3>excited about that.

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<v Speaker 2>Steve Forbes is another issue. Scott Besson on Monday is

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<v Speaker 2>going to announce even stronger economic sanctions on Iran. President

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<v Speaker 2>Trump calls it economic d Day do Buy Good editorial

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<v Speaker 2>in this morning to Wall Street Journal. The UAE and

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<v Speaker 2>China are the two biggest issues. They're still trading with Iran,

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<v Speaker 2>particularly the UAE, which is not subjected to the naval blockade.

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<v Speaker 2>Now the UAE has come out with a statement saying

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<v Speaker 2>they will cease any exchanges, trading or banking with you

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<v Speaker 2>rad But this is it's a big gamble. I think

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<v Speaker 2>it's though it's the right gamble. Steve Forbes, well.

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<v Speaker 3>I think eventually you're going to see Iran say will negotiate,

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<v Speaker 3>but unfortunately with this regime, they're going to stretch it out.

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<v Speaker 3>They'll make an agreement violated. Remember we've had several cease

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<v Speaker 3>fires since April. Ultimately, I think the president has to

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<v Speaker 3>make the decision we have to go back and pick

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<v Speaker 3>up where we left off in April with this regime,

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<v Speaker 3>so they will look like they're capitulating, but they never will.

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<v Speaker 3>They have to go period.

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<v Speaker 2>Yeah, there's got to be at some point regime changes

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<v Speaker 2>to make any changes, any fundamentals.

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<v Speaker 3>How do you do that though, Larry, let me ask

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<v Speaker 3>you that question. How do you guarantee that? I mean,

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<v Speaker 3>do we put troops in the ground?

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<v Speaker 2>No?

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<v Speaker 3>No, Well how do we do it? How do we

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<v Speaker 3>get a regime change?

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<v Speaker 2>I mean really you have to think. You have to

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<v Speaker 2>think about the Reagan policies going way back. You start

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<v Speaker 2>with COVID operations, You put assistance money, maybe military maybe

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<v Speaker 2>you know arms, you find the dissonance inside and you

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<v Speaker 2>help them. You do it on me.

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<v Speaker 3>Let me let me ask you. Let me push you

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<v Speaker 3>a little bit on this if I can. With Reagan,

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<v Speaker 3>I mean, Reagan was very good in the beginning. We

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<v Speaker 3>got the hostages released when he took the oath of office,

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<v Speaker 3>and that really saved it ran from an attack from

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<v Speaker 3>the US. I believe. We also did Praying Mantis, which

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<v Speaker 3>was there with the submarines and all that. But Reagan

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<v Speaker 3>didn't go and finish the job that he should have

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<v Speaker 3>done in the rock. You know we all do back then.

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<v Speaker 3>It was a real problem.

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<v Speaker 2>He wasn't good on you r we withdrew.

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<v Speaker 3>But the key thing is there are plenty of dissidents

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<v Speaker 3>still in the army, even though the Revolutionary Guard's trying

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<v Speaker 3>to have purged them. And Ramosad and the CIA know

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<v Speaker 3>who the good guys are. But what the good guys

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<v Speaker 3>have to know is we're not going to pull the

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<v Speaker 3>rug out from under them and then start negotiating with

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<v Speaker 3>these evil people again. And these if people student's feel

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<v Speaker 3>these evil people are going to have a chance to

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<v Speaker 3>stay in power. They're not going to risk their lives

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<v Speaker 3>and families unless they know we're in it all the way,

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<v Speaker 3>and that's the key they do that. I mean, sorry,

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<v Speaker 3>I'm sorry. Really good topic and I love listening to

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<v Speaker 3>the two of you.

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<v Speaker 2>Think what Reagan helped Lek Wallassa in Poland when he

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<v Speaker 2>was a dissident and he was underground, he was fighting

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<v Speaker 2>the Communist That's really the model here, and the MOSAD

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<v Speaker 2>and the CIA know what they're doing. Anyway, we got

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<v Speaker 2>to jump out. Thank you, gentlemen, Thank you very much.

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<v Speaker 2>Art Laugher and Steve Ford's terrific stuff. Folks will take

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<v Speaker 2>a break and talk on the economy. John Carney and

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<v Speaker 2>Michael Falkender coming up.