Economy

Now Even Larry Kudlow Sounds Like Andrew Yang

Larry Kudlow
Credit: Jonathan Ernst / Reuters - stock.adobe.com

If you can detach yourself for a minute from the tragedy of Covid-19, the massive toll in human lives from the disease and the economic devastation wrought by the initial response to the virus around the world, it has brought about some interesting phenomena. One of those is that some ideas that were seen as heretical by mainstream politicians and establishment figures just a few months ago are now being widely embraced.

Last month, for example, I wrote that Fed Chair Jerome Powell was starting to sound like Andrew Yang. Today the same can be said of White House Advisor Larry Kudlow.

In an interview with CNN over the weekend, Kudlow said that the next round of coronavirus relief would include a generalized cash handout. “There’s a $1,200 check coming, that’s going to be part of the new package,” said Kudlow.  With most experts believing that the pandemic will run well into next year and with the last round of stimulus checks being paid three months ago, it is beginning to sound like this administration is in favor of regular payments.

I suppose that in a presidential election year, it should come as no surprise that the White House wants to hand out money and, let’s face it, any relief bill is better than nothing. However, if something is worth doing, it is worth doing properly. The kind of half-hearted implementation of Universal Basic Income (UBI) that Larry Kudlow is talking about may provide some temporary relief, but it will create its own problems.

The concept of UBI, a cornerstone of Yang’s unsuccessful bid for the Democratic presidential nomination, is an interesting one. It starts with the observation that the economic realities are changing. Globalization and automation have accelerated the trends towards income and wealth disparity, with an increasingly large percentage of wealth in this economy being concentrated in ever fewer hands. It doesn’t take a genius to realize that that is unsustainable.

The answer, according to Yang and other proponents of UBI, is to accept that everyone in society has a role in wealth creation, even if just as a consumer, so everyone should share in the proceeds by way of a universal income check. It would be like Kudlow’s $1200, only without restrictions and it would come regularly, even when an election was a long way off.

Oh, and there is one other crucial difference between the Yang plan and the White House’s current watered-down version: Yang had a way to pay for his.

The thing that makes UBI unacceptable for some people is that in order to pay for it, taxes on the very wealthy would have to be raised. One can argue that the tax hike would discourage investment and wealth creation, probably enough to at least offset the stimulative benefit of putting money in the hands of people who will spend it. There is a debate to be had there, but in Yang’s defense, he never pretended otherwise. Further into the interview on Sunday, on the other hand, Kudlow talked about tax credits for businesses that were in the proposal, which would also cut tax revenue. Nobody seems to care anymore about a Federal debt of $26.5 trillion and rising.

I understand that this is a temporary situation, brought on by a (hopefully) one-off crisis, but these things can be remarkably sticky, and crises often prompt long-lasting changes in outlook. After all, the income tax was introduced in 1861 as a “temporary” measure. The regulation of capital markets following the crash of 1929 ushered in a remarkable period of prosperity in the U.S., not the suffocating socialism that its opponents claimed it would. In both cases, it soon became clear that some regulation and some taxation was a good thing.

Desperate times call for desperate measures but sometimes, once something that looks desperate is actually implemented, it starts to look sensible. The debate now over income taxes and regulation of financial market is about how much is appropriate, not whether they should exist at all. Is it possible that before too long, the same could be said of some kind of UBI?

I know it is wishful thinking, but wouldn’t it be great if we could just have a sensible conversation about UBI, without insults being hurled, and without accusations of indifference to death and suffering on one side and some kind of communist takeover on the other? If we did, we may find that this crisis has simply amplified an existing problem that needs a solution. The answer may not be UBI, but unless we can take a page out of the book of Kudlow and Powell and accept the basic idea, we will never know.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Martin Tillier

Martin Tillier spent years working in the Foreign Exchange market, which required an in-depth understanding of both the world’s markets and psychology and techniques of traders. In 2002, Martin left the markets, moved to the U.S., and opened a successful wine store, but the lure of the financial world proved too strong, leading Martin to join a major firm as financial advisor.

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