So, at one point today, stocks were down 950 points. That’s after falling 150 points yesterday.
It took a while for Fed head Jay Powell’s comment to sink in, but, as we noted last night, Powell and the Fed are aiming for recession. That’s what their new economic projections show – a 1 point rise in unemployment and a 0.5% GDP for next year. That’s as institutionally close as a central bank will ever come to letting you know in their own little “Fed-speak” way that they want a recession. Right?
Of course, recessions are bad for stocks. By the way, recessions are bad for everybody and as Art Laffer said last night, if you believe a recession is coming, well, what are you doing to prevent it? Well, the answer from Jay Powell is: “we’re not going to prevent it. We’re going to keep raising rates and cutting back on excess money.”
That’s a hell of a way to run a railroad. You know, if Powell really had hair on his chest, he would stand up on his hind legs and tell Congress to stop excess federal spending or taxing or regulating and end the war against fossil fuels.
DOW PLUNGES IN PERFECT STORM FOR STOCKS
In fact, there was a time when both Paul Volcker and Alan Greenspan as Fed chairs would actually negotiate with Congress and the White House behind the scenes that “if you cut spending and the deficit, we won’t raise rates.”
Now, Jay Powell was a cheerleader for the spending bills in 2021. He kept telling us there was no inflation problem and then it was “transitory.” Now he’s telling us there’s an intractable inflation problem and he’s going to keep tightening money into a recession. I call that swinging from one extreme to the other. It’s not healthy for a senior public servant. Actually, it’s not healthy for anybody and speaking of unhealthy behavior, well, Senator Rand Paul was dead right when he said on this show last night…
SEN. RAND PAUL: “The omnibus will be 3,000 pages, we’ll get it 2 hours before they want to pass it, no one will read it, but hidden in the 3,000 pages will be we are going to waive pay go. So, Steve Moore is right, it will take 41 votes, but the other thing is 41 votes would stop the big spending // We have completely and totally abdicated the power of the purse. Republicans are emasculated, they have no power and they are unwilling to gain that power back.”
What a wonderful clip! What a great senator! Our pal Steve Moore has argued to enforce the budget spending caps, or some combination of actions that would generate automatic spending cuts or negotiated spending cuts that might take $150 billion out of the $2 trillion monstrosity called the omnibus bill.
There are twelve appropriation committees that should be holding public hearings on the merits of spending levels and policies. There should also be a budget resolution to direct those appropriation committees in aggregate terms. This is called regular order, but there’s nothing “regular” about regular order.
The Senate bypasses it and puts a couple people in a smoke-filled room and decides to spend whatever it wants, dictating its will on 350 million Americans who may well suffer the inflationary and recessionary consequences of their usurpation of power.
This is so undemocratic it’s beyond belief. This is so unrepresentative that it’s beyond belief and it’s so antithetical to economic prosperity that it’s beyond belief.
Now, the latest news — the House has passed a continuing res. that goes to December 23. This afternoon, the Senate voted 75-20 to debate a one-week CR. Big deal. That’s just buying time for this omnibus bill, which may spend several hundred billion dollars in new money above the current services baseline.
Might stick in child tax credits without work requirements. In fact, it might put a bunch of temporary COVID spending plans and turn them into permanent mandatory spending. That’s what Democrats want to do and the Republican leadership is going along with this so far. That is pathetic.
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Rand Paul told us that the last time he proposed to enforce the spending caps, he had 3 votes plus himself in the GOP conference. Isn’t that just terrific? What’s that to do with Republican credibility on spending and inflation? The answer from our friend Senator Paul is that it “emasculates” the GOP’s credibility.
Merriam Webster dictionary defines “emasculation” as “deprival of strength, vigor or spirit.” Message to GOP senators: get your manhood back. Shut down the government if you have to but save America and kill the omnibus bill.
This article is adapted from Larry Kudlow’s opening commentary on the December 15, 2022, edition of “Kudlow.”