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shaping up to be a doozy of a Tuesday morning.
At 10 a.m. on March 3, the U.S. Federal Reserve
announces its first emergency rate cut since the
global financial crisis. Soon after, in a hastily called
press conference, Fed Chair Jerome Powell will tell
reporters—and investors watching from afar who
seem to be quickly losing faith in the healing powers
of monetary policy—that responding to what’s
nowa quasi-global coronavirus outbreak and its economic
fallout will require a “multifaceted” response
from health and fiscal authorities.
A few hours later, the 10-year Treasury will set
off alarms as its yield slips below 1% for the first
time, and President Trump’s preferred gauge of his
performance, the Dow Jones Industrial Average,
will extend its most miserable streak since 2008.
As it all unfolds, Larry Kudlow is installed at
the dining room table that serves as a desk in his
second-floor West Wing office. He remains defiantly
optimistic—and resistant to the idea that the
unfolding health crisis demands a greater economic
response from an administration for which he’s
become the camera-ready, genial face.
“We’re not there yet. First of all, the economy
is in good shape,” says Kudlow, who heads the
president’s National Economic Council, before
rattling off a flurry of recent positive statistics. “I
am aware that there are going to be some speed
bumps coming. But in talking to the president
about this, a) We’re not going to panic over this at
all, because the economy is sound, and we will get
through this, and then the virus will end. Secondly,
frankly, short-term fixes never work. You know,
these temporary tax cuts or rebates and things
of that sort. You look at the history—I mean I’ve
lived with this for decades—they just never work.”
On the wall behind him hangs a framed copy
of a 2018 Kudlow speech headlined “The Trump
Economy,” overwritten with the unmistakable black
Sharpie autograph of the president and the declaration
“Larry, So great!” On the wall facing him is a
gilt-framed canvas of a vase holding a bouquet painstakingly
rendered by his wife, Judy, a realist painter.
There are printouts of emails and briefing binders
on the table before him and newspapers on the coffee
table across the room. But nowhere in sight is a
television that might relay investors’ skeptical reaction
to the Fed’s emergency rate cut. Or a computer
to track the indexes trending down.
The only screens on view are a pair of smartphones.
When one buzzes, Kudlow picks up. It’s
Treasury Secretary Steven Mnuchin. Powell has just
held a press conference, he informs Kudlow, who
seems unaware: “Was it a presser this morning? I
didn’t see.” An aide chimes in: “He said the economy
is strong.” Kudlow tells Mnuchin, “He stayed
with our line: The market is fundamentally strong.”
“He’s a good friend and policy ally,” Kudlow says
of Mnuchin after the brief exchange. In an age of
manic news cycles and whipsawing markets, this
is how the 72-year-old Kudlow works. He’s an oldworld,
social-media-free optimist in pinstripes who
describes almost everybody as a “friend” or “pal,”
even when he’s delivering a political jab. “Biden?
Bernie? Biden is Bernie lite as far as I can tell. I’m
disappointed in Joe, who was a friend of mine,” he
says as he ruminates on the economic debate taking
shape before November’s presidential election.
As Trump squares up for a reelection bid that
leans heavily on an economic expansion that, until
recently, looked unstoppable, Kudlow occupies a
special place in the administration. He’s waged economic
policy battles, pushing for a truce in the trade
war with China, and taken a stand against such ideas
as intervening in currency markets or imposing tariffs
on cars imported from Europe. But his most
important role has been that of market magician.
The president praised his powers at the January
signing of a “phase one” trade deal with China. “We
had a day where the market went down $1 trillion.
Think of that,” Trump told a gathering of chief executives
and luminaries such as Henry Kissinger. “But
Larry Kudlow went out onto the beautiful lawns
of the White House,” the president said. “And he
started talking. And by the time he finished, I said,
‘You just made a trillion dollars. A trillion.’ Because
the market went up like 250 points. I said, ‘Larry,
what the hell did you say?’ ”
Kudlow, a former TV host on CNBC, is more
humble about his abilities. “I appreciate President
Trump’s support, but my influence on markets is
vastly overrated in this building and anyplace else.”
Kudlow is also conscious that his efforts to talk up
the markets—especially in recent days as he’s repeatedly
urged investors to “buy the dip”—have left him
open to criticism from those who say the White
House shouldn’t be offering investment advice to
the American people.
“It probably hurts his credibility to have been
in that situation in which he is talking about people
should go out and buy and we have literally the
worst week ever,” says Tony Fratto, who served as
a White House and Treasury Department spokesman
during the administration of President George
W. Bush. There’s a good reason presidents avoid
linking their fortunes to financial markets, as Trump
explicitly has, says Fratto: “They’re outside of your
control. They’re very fickle. And you don’t want that
as the measuring stick for how you are doing.”
Peter Borish, chief strategist at Quad Capital, says
Kudlow’s positivity has become a sort of trap. “It’s a
no win situation,” he says. “He needs to be an optimist
because people will discount anything he says
that is positive and will accent what is negative.”
Kudlow says all he’s doing is trying to keep
investors focused on the big picture. “I’m there
just to remind folks of President Trump’s growth
policies and our generally constructive long-term
outlook,” he says. “The seesaw was so crowded at
the bottom. I was just trying to say things are more
balanced than that.”
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