LARRY KUDLOW: There is no growth strategy right now in the political system

The more the Fed bungles inflation, the more we need Trump tax cuts, and that’s the subject of the riff. 

You know what’s bothering the stock market? The Federal Reserve has no monetary compass, and there is still confusion about whether the Trump tax cuts will be delayed. 

There is no growth strategy right now in the political system and there is no King Dollar end to Bidenflation in the monetary system, so no wonder stocks are falling day after day. 

The Dow plunged over 1,100 points today — the 10th straight daily decline, which is the largest drop since 1974. Like I said, nothing good happened in America in 1974. 

In the last days of the 118th Congress, Democrats are still pushing for massive spending boondoggles and slush funds — and Republicans haven’t yet figured out their tax and border reconciliation strategy for next year when they take over. 

TRUMP TREASURY PICK REVEALS WHETHER FED CHAIR POWELL WILL FINISH TERM

The Fed has once again misread the economy as inflation in recent months has gone up, not down, and consumer spending has been stronger than they thought. Most of the stimulus is coming from Biden’s $2 trillion per year deficit finance and the Fed keeps monetizing. Confusion reigns. 

The Trump stock market honeymoon, at least temporarily, has been broken. There have been many rumors that President Trump wants one big beautiful reconciliation package that includes tax cuts and border security, but it’s still in the rumor stage and no deal has yet been hammered out with the White House and Senate leadership. The Fed has now decided only two rate cuts next year instead of four, and now they’re predicting higher inflation. 

The market and the Fed have become the helpless led by the clueless. It’s a sad state of affairs. They bungled the jumbo rate cut in September, and they bungled the quarter-point rate cut in today’s December cut. They bungled the November rate cut. 

They bungled the forecast. They bungled managing their own balance sheet, and, by the way, they forced a 20% price increase for middle America over the past four years with never any hopes of prices ever easing lower because of their mistaken and misguided models. 

They should get rid of their excess money by chopping down the balance sheet by several trillion dollars, but they’re not doing that, and, of course, Biden-Schumer politics continues to spend insanely. Now, President Trump can fix all this. He’s going to move a tax cut bill — the question is just when. 

The DOGE brothers — aka Elon Musk and Vivek Ramaswamy — are going to dismantle the regulatory state and chop down government spending. Again, it’s just a question of when. 

Closing the border and deporting illegals to end the crime spree — that’s coming too… it’s just a question of when, but now we have to consider how to get next year’s economy into a blue-collar boom in 2025. 

I’m not worried about 2026. I’m not worried about 2027. I’m worried about 2025, which starts in a few weeks. The problem is solvable: Cut taxes immediately, along with spending and deregulation, merge that with a border-closing package into one big fat reconciliation bill — and get it done in the next 100 or 120 days. 

That will fatten middle-class wallets, rejuvenate business investment and deliver the blue-collar boom that Mr. Trump promised to his working-class coalition. That’s the riff. 

This article is adapted from Larry Kudlow’s opening commentary on the Dec. 18, 2024, edition of “Kudlow.”