Tuesday, October 28, 2008

Larry Kudlow Analyzes the Election Disaster

By Michelle Hardy and Sean Radomski

“What a mess. What an awful mess,” began the renowned economist and broadcaster Larry Kudlow in his address to Fordham University on October 21st. With a shake of his head, he confessed to the crowded Keating Auditorium his fear that America will most likely “elect a socialist” on November fourth, largely due to Senator John McCain’s ineffective campaigning.

“I’ve known John McCain for 25 years,” he continued. “He’s a good man, a wonderful man. But he’s not a good presidential candidate.”

The host of CNBC’s Kudlow and Company claimed the GOP candidate slipped in the polls after his poorly judged response to the credit crisis. McCain held roughly a five-point lead coming out of the convention in St. Paul. The worsening stock market in following weeks, however, made McCain suspend his campaign to assist with the bailout initiative, which “might have made sense,” said Kudlow, “if he himself had a plan. But he did not.” This failure to offer a personal proposal for the crisis, according to Kudlow, greatly weakened his support.

In the midst of citizens’ heightened panic over this issue, the senator also announced that America’s economy was still fundamentally sound. While Kudlow agrees with this view, he feels it was an ill-timed remark.

Kudlow, although a free-market capitalist and supply-side enthusiast, does approve of the bailout bill. He feels this strategy is a necessary part of capitalism, and explained, “It’s not nationalization, and it’s not socialism. It’s a rescue.”

The bailout plan, which passed Congress on a second try after being defeated in the first attempt, allocates $700 billion to the Secretary of the Treasury to buy up mortgage-backed securities from firms. Kudlow believes that once these “toxic” assets are removed from banks’ portfolios, they will begin lending to each other again, the frozen credit markets will thaw, and foreign investment will flow in.

The speech further validated the rescue bill when Kudlow dated the first bailout initiative back to Alexander Hamilton, the first Secretary of the US Treasury. In 1790, Hamilton convinced Congress to buy $25 million in state debts in order to establish good US credit and draw in foreign capital, and the American economy has required similar methods several times since.

While Kudlow feels McCain responded ineffectively to the credit crisis, he commended two main positive actions made by the senator in recent months. The first was his advocacy for offshore drilling, which will form a bridge to the future when the US can use alternative energy sources like nuclear power. 75% of Americans agreed with this plan, and McCain’s enthusiasm was very beneficial. The second positive was choosing Sarah Palin as his running mate, which energized the conservative social issue base.

Still, the speech showed that McCain has yet to gain the majority vote in several vital groups, the most important being the investor class. “A Republican can’t win without support of the investor class,” said Kudlow. There are 100 million in this group, including citizens who own direct brokerage accounts and 401 K and pension holders. Right now, 46% of them are for Obama, while 43% support McCain. Kudlow advocated McCain’s recent call to cut the capital gains tax from 15% to 7.5%, but then citied McCain’s failure to hammer home the issue as evidence of his poor campaigning skills.

Kudlow also pointed to three main tenants that he believes if strongly emphasized by a Republican candidate, ensure election victory: low tax rates, strong national defense, and pro-life legislation. Kudlow claimed he has never seen someone with these three tickets lose an election. It is McCain’s failure to push for tax cuts and a pro-life agenda, Kudlow believes, that will ultimately cost him this election.

The concluding remarks offered a bit of hope to panicking citizens amidst the nation’s financial nightmare. “We have the most long-running, prosperous economic system, we have the most political freedom, and we have the most economic freedom out of any country in the world,” said Kudlow. “In America you can fall several times and still pick yourself up and succeed.”

Tuesday’s speech suggested American capitalists will manage to do just that. As for November 4th’s turnout, however, Kudlow isn’t so optimistic. For America’s sake, he simply prays Obama is ready.

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