White House economic advisor Larry Kudlow speaking on FOXBusiness

White House economic advisor Larry Kudlow is on FOXBusiness. He says:

  • US economy still in freefall from pandemic shut down
  • US cannot spend its way out of pandemic downturn
  • May see some better economic numbers, glimmers
  • Not saying we've turned the corner yet after shut down
  • Economy is essentially still in freefall
  • He wants incentive oriented torque for economy
  • Cutting corporate tax rate in half for companies moving production back to the US is something to look at
  • White House not jumping into joint negotiations now
  • In a few weeks perhaps White House will negotiate on economic relief package
  • Economic relief must focus on incentives such as payroll tax cuts
  • No coronavirus relief package should go through without some form of liability protection
  • US and China is still working on trade

The interesting spin is the cutting of the corporate tax rate in half for companies moving production back to the US. Clearly there is an economic incentive for companies to be overseas from a cost standpoint. However the coronavirus situation and impact on supply chains is making corporations more aware of the other risks from being overseas.

I would expect that the Trump administration will also cite national security as a reason to move production back to the US.

The nationalistic talking points will increase vs. globalization with Kudlow, and in particular Navarro being the leading cheerleaders.

To incentivize businesses and lower the overall costs of such a move back to US borders, cutting corporate tax rates is an idea. However, one has to wonder as taxes move lower and lower, if the lower tax revenues will be offset by a stronger economy, or will deficits continue to soar. A payroll tax cut was a favorite stimulus idea from Pres. Trump earlier, but was sharply criticized as not addressing those that were being hurt the most. (i.e., small businesses and lower waged workers).

With the economy reopening, and it being an election year, the time it seems right for the favorite tax cut to be reignited.

The US deficits were already rising ahead of the coronavirus as a result of the higher tax cuts. Of course administrative officials would have you believe that ultimately the impact of the tax cuts would flow through down the road into increased tax revenues. We will never know (as is mostly the case all the time in a dynamic ever-changing economy).