LARRY KUDLOW: Worried about recession? Cut taxes, not interest rates

At his press conference yesterday, former President Trump made it absolutely 100% clear that he was the candidate of tax cuts and Kamala Harris is the candidate of tax increases. 

Maybe she thinks she's the new Walter Mondale, who campaigned on tax hikes and lost 49 states. After all, her running mate is a far-left progressive from Minnesota, just like Mondale.  

In view of the shaky stock market, rising unemployment and a softening economy, Mr. Trump's tax cut pledge — and his fight against Ms. Harris' tax hike plan — is going to become a super important issue in the last three months of the campaign.

HOME PRICES ARE FINALLY STARTING TO FALL – AND THEY DROPPED THE MOST IN THESE 3 CITIES 

FORMER PRESIDENT TRUMP: But they always say, we're going to give you a tax increase, but in all the years of studying politics, I've never seen people get elected by saying, we're going to give you a tax increase. | And I'm going to work it out that there's no tax on Social Security for seniors. I'm also doing no tax on tips.

There you have it. That sends a very strong message to voters, especially middle-class voters, who are increasingly worried about unemployment. For example, columnist Salena Zito writing in the New York Sun reminds us that middle America, after struggling with high prices, is now faced with rising unemployment.  

In fact, while overall unemployment has gone up from 3.4% to 4.3%, unemployment for those without college education has recently hit 4.6%. It's a double whammy: high prices and job losses.  

These are typical working folks, hard hats, oil and gas workers, people that toil every day with their hands. It's an unknown species for Wall Street and Silicon Valley, but it's the backbone of America, and Trump is talking directly to them when he says, "I'm going to cut your taxes and fatten your paychecks." 

TRUMP: Our tax cuts, which are the biggest in history, our tax cuts are coming due, as you know, very soon. If they don't renew them, it's the equivalent of having a four-times tax increase from what you have right now, and it'll destroy the economy.

Remember, typical families have taken a roughly 4% pay cut during the Biden-Harris years. In fact, in order to hammer home the Kamala-nomics tax hike threat, MAGA PAC is publishing a "Kamala Tax Calculator." 

Here's one example: A married person filing jointly, under 65, making $75,000 with two children, would lose $2,828 every year under a Kamala-nomics tax hike. That's real money. Now, as far as the softening economy, which may well be on the front-end of a recession, I believe a reduction in tax rates would be much more beneficial to the economy than emergency Fed rate cuts.  

If the Fed starts slamming down interest rates and pumping up the money supply, we're going to get another bout of inflation. The last thing we need is more Fed pump priming. Already the world is over-leveraged and over-borrowed.  

The Japanese yen "carry trade" has smashed stock markets. At home, the Magnificent 7 tech stocks are over-leveraged.  

The consumer has also taken on way too much debt, while payment delinquencies are rising. The economy doesn't lack for money and debt, it lacks for free enterprise incentives, but suppose Washington is truly worried about recession, then how about an emergency reduction in business and personal tax rates that would boost economic incentives, to generate more work effort and produce more goods, which would increase growth while curbing prices?  

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Then layer on to that some "drill, baby, drill" to produce more oil and gas at lower energy prices. More growth, lower inflation.  

This is basically what Mr. Trump is talking about. Tax cuts spur growth and opportunity. Tax hikes bury us into recession. This is why Mr. Trump's tax cut message is so totally on target. 

This article is adapted from Larry Kudlow’s opening commentary on the August 9, 2024, edition of "Kudlow."