Kudlow Is a Sign Republicans Are Out of Economic Ideas

Trump's new top aide shows the GOP has little to offer beyond tax cuts for high earners.

A tax cut? Thumbs up.

Photographer: CNBC/NBCU Photo Bank via Getty Images

Why did President Donald Trump choose Larry Kudlow, a man who disagrees strongly with the president’s tariff policy, to be the new head of his National Economic Council? Kudlow will replace Gary Cohn, who walked off the job after failing to prevent Trump from embracing protectionism. Why would Trump replace one dissenter with another?

Perhaps it’s because Kudlow is a cable-news commentator, and Trump watches a lot of cable news. But more fundamentally, it’s because the Republican brain trust’s bench is getting thin. Kudlow isn’t an economist, and his record of economic predictions is extremely poor. But it also seems like there are just so few credible economic thinkers willing to stand up and sign their name to the Trump economic agenda.

Trump’s planned tariffs on imported steel and aluminum are one reason for that. A recent survey found that there are essentially no reputable economists who like the policy:

What Do Economists Think of the Following Question?

"Imposing new US tariffs on steel and aluminum will improve Americans’ welfare."

Source: University of Chicago Booth School

But the whole Republican agenda of tax cuts always and everywhere -- a doctrine Kudlow wholeheartedly embraces -- also gets poor marks from economists:

And Economists Are Skeptical of Tax Cuts

"If the US enacts a tax bill similar to those currently moving through the House and Senate — and assuming no other changes in tax or spending policy — US GDP will be substantially higher a decade from now than under the status quo."

Source: University of Chicago Booth School

This isn’t to say there are no heavyweight economists who supported the tax reform bill -- there are a few. But the set of economists who are so enamored of tax cuts that they’d be willing to bite their tongues and accede to the rest of Trump’s economic agenda, including tariffs and other forms of protectionism, is surely quite small. Hence, Kudlow, who will probably be willing to suppress his skepticism of tariffs in exchange for a chance to push Trump to cut taxes even more.

But the Republicans’ real problem isn’t finding economic advisers to toe the Trumpist line. It’s the broad unpopularity of the entire GOP economic program. The corporate tax reform passed in December is no longer quite as unpopular as it was during the debate leading up to its enactment, but tax cuts usually garner much more public support than this one has. In addition to being uneasy about increasing federal deficits, voters probably realize -- as most economists do -- that the power of additional tax cuts to generate economic growth is fading as the strategy is applied again and again.

Republicans probably know how unpopular their infinite-tax-cut agenda is. In the final weeks leading up to yesterday’s special House election in Pennsylvania, the Republicans stopped touting their tax overhaul (the Republican candidate seems to have lost the election anyway, by a slim margin). Indeed, dissatisfaction with the trickle-down approach is probably what made Republican primary voters turn away from orthodox free-market Republican candidates and embrace a protectionist like Trump in the first place.

The problem is, Trump’s style of protectionism isn’t very popular with the broader electorate either. A recent CBS News poll found that 50 percent of the general public disapproves of Trump’s steel and aluminum tariffs, while only 33 percent approve. Among independents, the numbers are similar -- 48 percent to 33 percent.

What kind of economic policies would the general public embrace? Large majorities want to see the rich pay higher taxes -- exactly the opposite of what Kudlow wants. Infrastructure investment is popular too, as are minimum wage hikes and a variety of antipoverty programs. In other words, an agenda that looks more like that of the Democrats than the GOP. People want more government help for the poor, the working class and the middle class. They want government investment in productive infrastructure. And they want the rich to pay for more of that stuff than they now do.

Given that the GOP has committed itself to an unpopular policy program, why not hire a tax-cutting cheerleader and cable-TV personality to head the National Economic Council? The Republican bench of advisers is down to people like Kudlow because the Republican reserve of economic ideas is down to things that so many people -- including most academic economists -- don’t really want.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

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