LARRY KUDLOW: Big spending, industrial policy never works

Yesterday, we talked about Joe Biden’s regulatory war against America’s economy. Big hat-tip to the Wall Street Journal editorial page and American Action Forum for reminding everyone that in two years, the Bidens have slapped on 517 regulatory actions worth roughly $318 billion in total economic costs. 

Bad as that is, the socialist central planners in Washington have another 311 regs in the pipeline that can probably cost another $200 billion. That's well over $500 billion of regulatory costs on American business. Just think of that. $500 billion. What's that mean? Lower profits, lower wages, less productivity, a crushing blow to small business.

Kevin Hassett told us last night that if we got rid of all the new regs, you could conceivably increase real GDP by as much as 1% over the longer term. Think of that. And if you extended the Trump tax cuts, Or even better, went for a modified flat tax of 20% for personal and corporate income, the Tax Foundation figures you could add almost another half-percent in the long run, and that would get you well on your way to a 3.5% growth rate which is what we had between 1947 and 2000, before it slumped to only 1.8% over the last 22 years. 

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Think of the prosperity. Not only more growth from the supply-side of the economy, but you'd get less inflation. Think about a happy, blue-collar, middle-class family workforce. Think how much easier it would be to slow federal spending, balance the budget, stop the debt assault.

But now we have to contend with the exact opposite. New information from the so-called CHIPS act. Remember that? Industrial policy aimed at the semiconductor industry — $284 billion bill. Republicans and Democrats signed up for it. 

It is the exact opposite of my 3.5% growth dream. Know what's in there? Mandated day care, Davis-Bacon unionized pay scales, sharing corporate profits with the federal government.

Total coordination of unions and NEPA compliance — that's national environmental policy act — where the Bidens repeal the Trump reforms and now stretch out permits basically for years and years spanning every agency in the government — so in other words nothing new will be built. Between the greenies and the unions and the social welfareists and various interest groups — oh yeah, did I forget? One semiconductor requirement will be diversity, equity and inclusion. 

Of course it will be there. Nothing passes the Bidens without DEI or some crazy woke idea that will stop investment, new jobs, productivity and progress.

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This is a perfect illustration of the stupidity of industrial policy through massive spending as I said authorized by a third of the Republican senators along with all the Democrats. You know in Washington you get what you pay for. Big spending bills nowadays lead to big woke and that in turn blocks everything. 

Our next guest, Steve Forbes, many months ago labeled this modern socialism through the regulatory state. The Biden central planners working overtime had their way over free enterprise last summer. Republican senators who voted for this monstrosity should still be ashamed of themselves.

Big spending, industrial policy never works. For those concerned about national security and the U.S. chip industry, instead of spending nearly $300 billion for new daycare centers would’ve been a lot better off cutting individual and corporate tax rates. That would've created incentives and the opportunity to rebuild and onshore American semiconductors. 

Think of it. Instead of spending your keister off with all this social welfare DEI nonsense, we could have cut taxes, and that would have incentivized everybody to come to America and build a new, revitalized chip industry. 

Save America. Stop industrial policy. Promote growth and prosperity, not central planning modern socialism.