“A Used-Car Salesman, Both in Demeanor and Honesty”: Wall Street Isn’t Sold on Larry Kudlow’s Economic Delusions


Has Larry Kudlow, Trump’s director of the National Economic Council, finally lost it? That’s a question many people on and off Wall Street have after his seemingly inane, overly optimistic predictions, on national television, about the direction of the U.S. economy.

For instance, on Sunday, he told CNN’s Jake Tapper that the economy is getting better, fast. “I don’t think the economy is going south,” he said. “I think it’s going north. And I think that there’s a bunch of indicators.” He was just getting revved up. “You’re in a housing boom right now,” he continued. “You’re in a retail-sales boom right now. You’re in an auto car boom right now.” (Actually, on July 29, GM, for one, reported second-quarter U.S. vehicle sales fell to 492,000 from 747,000 a year earlier, a roughly 34.1% decline). “Manufacturing—look at the ISM indexes—all are booming,” he continued. “New business applications are skyrocketing. Apple mobility index”—requests for directions on Apple maps—“is very strong. And the jobs picture remains strong.” Economic recession? “I don’t buy it,” Kudlow said.

He wasn’t even remotely done spreading the gospel. “Most economists,” Kudlow told Tapper, “Wall Street, elsewhere, are suggesting we are in a self-sustaining recovery. Now, you can argue about the speed of it. I get that. I don’t deny that some of these hot spot states”—for instance, Florida, Texas, Arizona, and California, where the coronavirus is rampant—“are going to moderate that recovery. But, on the whole, the picture is very positive. And I still think the V-shaped recovery is in place. I still think, Jake, there is going to be 20% growth rate in the third and fourth quarter.” The next day, on Fox Business, Kudlow said pretty much the very same thing.

Kudlow, 72, has long been a controversial figure on Wall Street. In 1984, after Kudlow’s stints as an analyst at Paine Webber and Bear Stearns and as an economist in Ronald Reagan’s Office of Management and Budget, Alan Schwartz, a rising star at Bear Stearns—he served as Bear’s last CEO 24 years later—rehired Kudlow. Together, they traveled the country, meeting with clients. Kudlow shared his views about how to profit from economic trends. They were a big hit, in large part because Bear Stearns gave their advice away. When Bear Stearns started charging clients to speak with Kudlow, he was still popular and traveled nearly constantly. But all that activity took its toll; Kudlow developed an addiction to drugs and alcohol. Later, in 1994, after Kudlow resigned from Bear Stearns for missing an important meeting with institutional investors, he admitted to his weaknesses in an emotional interview with the New York Times and overcame his addictions.

In November 2001, Kudlow began a long run as regular host or cohost of various shows on CNBC. He was forever making predictions about the direction of the economy on CNBC, and elsewhere, such as National Review Online, where he served as the economics editor for much of the 2000s. In 2005, in National Review, Kudlow wrote a piece “The Housing Bears are Wrong Again” in which he dismissed “All the bubbleheads who expect housing-price crashes in Las Vegas or Naples, Florida, to bring down the consumer, the rest of the economy, and the entire stock market.” Of course, as economist Justin Wolfers tells me, “That is quite literally what subsequently happened.” In December 2007, in a piece titled “Bush Boom Continues,” he predicted the economy would continue to expand for years; in reality, that was the month many people think the Great Recession began. “Over his entire career, I can’t recall a single forecast that he made that was accurate,” says a banker who worked with him at Bear Stearns. “You know, there’s the old joke about the economist that predicted seven out of the last four recessions. Kudlow makes that guy look good.”

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