By Lawrence Kudlow | Commentary, tippinsights
PART I
The Boom Begins
When I sat down with Treasury Secretary Scott Bessent in front of the G20 conference at Asheville, North Carolina yesterday, my intent was to work with the secretary and promote an economic growth message. And he was more than cooperative, at the top of his game.
It’s as though he was just waiting to unleash the success of the Trump economy, and he chose the G20 and our interview to make his statement. I had no interest in pursuing the minutiae of retiring off-the-run Treasury bonds, or other debt management arcana.
Instead the big picture was the economic boom, the manufacturing boom, the construction boom, the rising animal spirits in the American economy.
Here’s how I put it to Mr. Bessent: “I want to make that as clear as I can. The most important event right now in the American economy is we are in an economic boom. We are in an economic boom, the likes of which we have not seen probably for decades, if we’re being honest about it.”
I went on to suggest that “this boom in large measure is a function of President Trump’s policies and your policies, particularly the one big beautiful bill, the tax cuts, the 100 percent depreciation. We are seeing manufacturing growth that we haven’t seen in years. We are saying construction growth that we have been seeing in years”
I could see the secretary getting warmed up. This is what he had to say in response about rising bond yields and the economy:
Larry, it’s exactly as you said. If we look at the composition of the bond yields, it’s the inflation expectations are flat to down. And this is a growth story. Growth, I believe, is re-accelerating, that we’ve had some very good discussions here over the past few days, and everyone agreed that growth has been better. Than they thought it would have been given the Iran conflict. Now, everyone is always cautious going forward, but growth has been better.
Then Mr. Bessent went on to say this: “And as you said, the U.S. sits at a very special place in the world, because we are the AI superpower, and we are pulling away the amount of compute that the U.S. has relative to global compute.”
Mr. Bessent added: “Then we reviewed the bidding because the American economic boom comes a little more than a year after Trump policies of tax cuts, deregulation, drill, baby, drill, and let’s not forget individual tax incentives on tax-free tips, on tax-free overtime, even the seniors tax relief from social security, plus taxes.”
Mr. Bessent explained that “the president’s policies have laid the groundwork for this economy. So we have regulatory certainty. The president tasked this administration with cutting the regulatory burden, and that’s part of what we’re talking about here today.”
People may be looking at bonds, but I’m looking at the fabulous stock market boom, where 156 million Americans own a piece of the rock, and it’s all being sustained by enormous profits, which are always the mothers’ milk of stocks and the lifeblood of the economy.
And then the secretary added to the economic boom story with this:
“And Larry, too, that the preamble for the manufacturing jobs are construction jobs. Right. So we are seeing, thanks to the tax bill, 100 percent expensing on equipment, 100 percent expensing on factories,” and 100 percent on agricultural structures. Plus, he added, “we are having a capex boom in factories, the precondition for that is construction jobs.”
The secretary pointed out that President Biden’s big government socialism has been restructured since Mr. Trump took office, nearly 400,000 government jobs have been eliminated, while more than 900,000 private jobs have been added. This is part of the economic boom story.
What’s more, we tried big government socialism under Biden, and it produced a 21 percent cumulative inflation rate. And to a large extent, we are still suffering the hangover from that inflation even today.
I asked Mr. Bessent about how “we’re seeing free enterprise move through this hemisphere. Very interesting. A lot of overturning of the left and socialism moving back towards free market economics.”
Mr. Bessent replied:
Larry, I thought what was most interesting, and when you talk about socialism here in the U.S., when we look at the demographic of those voters, they are over-educated and under-earning. So these are underachievers who are jealous of those who want to go and work every day.
Got that right, Mr. Secretary.
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