Arthur Laffer: US is in Recession Now

I almost fell off of my chair yesterday  when I heard Art Laffer on Kudlow say those words: "The US is in a recession now."

That’s quite a reversal. As a trader, I am quick to give credit to
those people who recognize when they are wrong and reverse themselves. I suspect Laffer is trying to distant himself from some of the more hallucinatory and reality-disconnected pundits he shares the camera with on K&Co..

For the record, I don’t think we are in the classic NABE definition of recession — yet. Elsewhere, the Leading Economic Indicators declined for the 3rd straight month, and the 5th month in 7.

click for video


Of course, Laffer is a political creature above all else, and is now blaming the recession on Bernanke. This is setting up the talking points for the election. "If I was in the White House, I would start pointing the finger at Bernanke"

And, he disagrees with Kudlow, saying it won’t be difficult to run as a Republican in a recession.

So much for the politics of personal responsibility . . .


UPDATE: January 18, 2008 11:16am

NOTE:  Laffer calling a recession is actually the video before this, which is not posted on CNBC –but I TIVO’d it, and can upload it over the weekend. 


Leading Indicators Decline 0.2%
WSJ, January 18, 2008 10:07 a.m.

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What's been said:

Discussions found on the web:
  1. Ross commented on Jan 18

    That whole group sounds like they shared a plate of magic mushrooms before the show.

    Blaming da Fed for a bunch of moronic bankers? The question I want answered is where or where were the regulators? Time for another Glass Steagal reg and a breakup of the ratings cartel.
    Laffer’s 1 + 1=3 only works at inflection points.
    Sorry for venting.

  2. The Dirty Mac commented on Jan 18

    I am a lifelong Jet fan. Bernanke reminds me of Rich Kotite.

  3. Rob commented on Jan 18

    In economics, there exists a considerable distribution of opinions, approaches and theories. Most of them reach opposite conclusions and appear very contradictory to the point where they are artsy.Buffett said that if you find the right stock, it doesn’t matter what the economy does. So in that sense we shouldn’t care about recession and economics? Words… Rob,

  4. Marcus Aurelius commented on Jan 18

    How long will it take before we realize that the talking heads don’t know any more about a given subject than the man in the street? Who is in the market for twisted information, faulty analysis, and bad advice – especially when it comes to money and finances?

    The internet gives us much better insight, unedited and on demand, than any “expert”, political or economic, on television. It also lets us check the track records of these gas bags.

    Right now, the question of whether we’re in a recession or not is equivalent to the global warming “debate.” If we are not currently in a recession, a recession (and, most likely a very painful recession) is certainly imminent. I know it, you know it, the man in the street knows it, the pundits know it, and the government knows it.

    So why the news when somebody says it?

    I wonder if Britney Spears has an opinion…

  5. scorpio commented on Jan 18

    BUSH SPEAK: i am stunned, no details, no indication Bush and Congress even remotely on the same page. so now, 2 for 2: nothing out of Bernanke, nothing out of Bush, 3-day weekend and the MidEast is once again on fire. nice.

  6. craig commented on Jan 18

    Kotite. too funny. as a Giants fan i LOVED his tenure with the jets and eagles.

  7. larry commented on Jan 18

    Why anyone tunes in Kudlow is beyond me- except when you are on Barry. CNBC should put a disclaimer on the bottom that this is a paid announcement from the Republican right wing. “stocks crashed today, our health care system collpased, China is calling in it’s loans, but other than that our economy is just great” Larry Kudlow

  8. Paul Jones commented on Jan 18

    Art Laffer has no credibility; it’s 1929 and he acts like it’s 1979.

  9. Donny commented on Jan 18

    Wholly F**K! Is the Dow gonna break below 12,000 today?

  10. Jay commented on Jan 18

    In this clip he says that the White House should start pointing the finger at Bernanke. Hilarious! Finger pointing!?! How about sticking out their tongues? Have they tried making funny faces yet?

    I can’t believe these people are asking, actually asking, whether or not the US economy is in a recession. Not only that, but suggesting that a rate cut would make CDOs look attractive. CDOs! Maybe next they should ask if the stock market is down for the year, and what denomination is best when flushing cash down the toilet.

  11. michael schumacher commented on Jan 18

    Gotta love an almost 240 pt reversal in a little over 2 hours on options day.

    It’s ovah……it was ovah once the Aug. lows broke.


  12. Stuart commented on Jan 18

    Bush’s conference. I’d say that qualified as a DUD.


  13. New Yorker commented on Jan 18

    Looks like a record volume day on the NYSE- well over 5 billion shares a comin’.

  14. michael schumacher commented on Jan 18

    correction…make that 270 pts and it’s looking to add to that as well

    How’s that dip buying??? Anyone??? Bueller??


  15. GerryL commented on Jan 18

    I am not sure what Kudlow is going to do. In the past I have pointed out that Kudlow stacks the panel with people that agree with him and when somebody says something he disagrees with he calls on another panelist that he expects to agree with him. It was really funny when Laffer didnt didnt agree with Kudlow and called a recession.

    Kudlow has stated on the Kudlow Propaganda Hour that he feels it will hurt the Republicans in 2008 if there is a recession. Does anyone really believe that he would be calling this a Goldilocks economy and the greatest story never told if this was a Democratic administration?

  16. rexl commented on Jan 18

    Rebate Bonfires

    a week ago or two, I was watching a discussion on c-span with Rubin, Martin Feldstein, M. Zandi, and a couple of others. And the rebate was promoted by Feldstein and I am thinking this is the best solution these guys can come up with, no wonder we are in such deep sh-t, no wonder these wunderkinds from Harvard are such idiots (Feldstein professor).

    So now it will become policy, the Sheriff of Nottingham says keep your pittance and be sure to spend it.

    I think we should have rebate bonfires to indicate this time we want some real solutions or at least some in depth discussions of the real problems. Not just a portion of our OWN money given back with the understanding we will spend it.

    Burn the rebate.

  17. michael schumacher commented on Jan 18

    Wait for the “oversold” people to come out soon. I can’t disagree with that observation however in the context of what is occurring now (the deflation of cheap money thrown at the market in hopes of “forstalling” -I loved it when the Fed said that- a recession) It never entered the MSM that we migh have been just a tad bit overbought throughout the entire summer???

    Remember all those 200pt + days in the summer (where volume is very low historically speaking) that seemingly came from nowhere??? Where over the last two weeks we are seeing the problems associated with that failed strategy of inflate, inflate,inflate……did I mention inflate??


  18. John commented on Jan 18

    Kudlow and the bunch of happy talking Republican shills he lines up with the occasional token realist to preserve the balance argument are really disgusting. I wonder when someone is going to sue cnbc for the boosterism we’ve heard from this crowd because yes there are silly billies out there who believe this crap. Basically his attitudes are widespread in the GOP as a cursory reading of the output from all the right wing think tanks and opinionaters easily demonstrates. I’m afraid its going to have serious consequences over the next few years for the Republican party who are probably staring at the wilderness. Basically it’s needed to get rid of all these idiots.

  19. Eric Davis commented on Jan 18

    I did ok….. 5% on monsanto…..
    now I’m short again

    MS pttttttttt..

    11,500 we get a bounce.

    I’m still long some financials

    I’ll step in if the vix hits 40… for a taist.
    we need a pool on end of the day close. I may go buy a 6pack of beer and drink this away.

  20. Eric Davis commented on Jan 18

    anyone agree with me, that the dumbest thing was saying “I’m going to cut”… by uncle ben.

    WTF would you do that? it made no sence except to prolong this….

    Seriously Why even bother cutting? if not for it’s placebo effect..

  21. Costa commented on Jan 18

    but MS its expiration date today. I hope we break those Aug lows but I just can’t see that happening on expiration day.

  22. The Dirty Mac commented on Jan 18

    “it’s 1929 and he acts like it’s 1979”

    Its 1347 I tell you.

  23. Pat Gorup commented on Jan 18

    “reality-disconnected pundits he shares the camera with on K&Co.”

    Kudlow IS that pundit, day in and day out.

    “Art Lafffer has no credibility; it’s 1929 and he acts like it’s 1979.”

    That whole “supply side” argument that was Kudlow & Laffer “in the good old Reagan days” lacks credibility and is exposed for the ruse it really was in Wikipedia. Well at least, Laffer is in the acceptance stage.

  24. Ross commented on Jan 18

    Dirty Mac, 1347??????

    Bring out your dead.

  25. bluestatedon commented on Jan 18

    Anyone who believes that a recession isn’t going to absolute poison to Republican candidates at all levels of government isn’t familiar with American electoral politics.

    That isn’t to say that all Democrats are blameless, or that the collective actions of financial services companies and mortgage lending companies can be laid directly at the feet of the person in the White House. The average American voter will want to blame someone, and the party that’s been in the White House for the last two terms will take the heat. The fact that the Dems have been in nominal control of Congress since ’06 will make a difference only to the most diehard GOP supporters, and they’ll vote Republican regardless.

    If it had been Al Gore for the last two terms and the economic situation was the same as it is now, it would be the Democrats up shit creek. (That’s begging the question of whether the situation would be remotely the same with a Gore Administration, but that’s another argument altogether.)

  26. Screwed Saver commented on Jan 18

    Here you guys go with the politics again…look out for Barry.

    The country is in trouble with the Paulson Lazear tag team going on right now.

    They look and sound like a couple of cue balls clacking together. Here comes the recession.

  27. frank carney commented on Jan 18

    NBER in Cambridge, MA not the NABE call recessions.

  28. lurker commented on Jan 18

    Dip buying has now taken on an officially new meaning: Only the Dips are doing any buying.

  29. John commented on Jan 18

    I say you take whatever Laffer has to say with a grain of salt. He’s as Disingenuous as the rest of them… Last night he wanted to point the Big Finger (A New York Bronx Salute???) at Bernanke for not pandering to the Markets’ Temper Tantrums with a Full Percentage Point emergency cut in the Fed Funds rate…
    Paulson and David Lazear speaking now on Bush’s (so called) economic “stimulus” plan…part of the same team that never saw the ongoing domino effects from the SubPrime shakeout caused by Financial Deregulation of banks and other financial institutions regarding Home lending requirements. And subsequent Credit Market turmoil…
    Not 3 months ago we were in the GoldiLocks (2.0) economy and everything was Pie in the Sky Peachy Keen with these Clowns…
    I Feel Safer Already…

  30. Costa commented on Jan 18

    I meant on NDX, also my broker stinks and i can’t get realtime qoutes.
    MS do you have an email address I contact you at, always had some questions to ask about your trading and of course the fed dumps etc.

  31. Eric Davis commented on Jan 18

    Always being optimistic, I always think that we will get beyond thinking that somehow the business cycle is “To Blame”

    Certainly one can blame bad policies, political pork… but that is our system.

    Recessions happen.

    If we had honest metrics for measuring the economy, instead of “electioneering them”

    and we stopped pointing fingers about Clinton recession, Carter stagflation(which started in 1974, figure that one out). Reagan Boom… which lead to recession…

    Get over the politics of it, get some good economic metrics, so we can know what is going on and manage the economy…

    Maybe realize that the economics of narcissism vs. Inefficient Government. both need to be managed.

    Then we can get a Real Goldilocks going.

    But My life is a series of managing my optimism with my pecimism..

    Look at that market hold a bid…. Unreal… take your eyes away and somehow the sky doesn’t fall……


  32. John F. commented on Jan 18

    Of course, Laffer is a political creature above all else

    Unlike who, your hero Paul Krugman? Laffer has been consistent in praising policies consistent with his economic philosophy, no matter where their source. He’s had nothing but positive things to say about the economics of Bill Clinton, for whom he voted twice. Contrast with Krugman’s flexibility on issues like the urgency of fixing social security, depending on who’s in or running for office. Love ‘ya Barry, but you’re showing a huge blind spot here!

  33. Ross commented on Jan 18

    WoW…. Uncle Sugar going to give the hoi ploi exactly $145 billion and no sense.

    Eh, it’s an election year. I just feel somehow despoiled being bribed with my own money. Have they no shame?

  34. The Dirty Mac commented on Jan 18

    “I just feel somehow despoiled being bribed with my own money. Have they no shame?”


  35. Terry commented on Jan 18

    I’ve also noticed a Luskin-Kudlow opinion divergence lately as well. Maybe they rename the show Kudlow & Boyer and they can pat each other on the back for 60 minutes? But I really enjoy when Dennis Kneale is on…. watching him read his cheat sheet….. that’s comedy gold. Just keep telling everyone to buy financials Dennis.

  36. Stuart commented on Jan 18

    You’d think even Dennis Kneale could catch on to this. How can someone possibly begin to think of buying financials when we are so far away still from being able to realistically price their balance sheets. Hundreds of billions (that we know) tied to models. More L3 assets not tied to anything, all based on the real estate market that is still falling. Their models will continue to deteriorate until housing stabilizes, or until we get clarity that can then be used for input. Moreover, the factors pressuring real estate downward are still intensifying, not to mention, it now appears the commercial market is starting to roll over. Until real estate stops sliding and finds its new equilibrium between supply and demand, there’s no way in hell to value the banks’ balance sheets other than to extrapolate that between now and that point when real estate stabilizes, they will drift materially lower. Period. End of story. This is not difficult yet no one has countered Dennis Kneale et al with this.

  37. Estragon commented on Jan 18


    Thanks for the link to the Don Coxe call. I always enjoy reading his “basic points” pieces.

  38. New Yorker commented on Jan 18

    Excellent comment Stuart. It seems that past is not always prologue, and we are into fairly uncharted waters.

  39. Stuart commented on Jan 18


    keep that link in that case. He updates the same link every friday 1:00 with that morning’s conf call. Don is one of the good ones that gets it.

  40. John commented on Jan 18

    Many comments here about the presumed foolishness of Kudlow and his group of permabulls. Some suggest the show is not worth watching, but I disagree. I think you have to always consider the fact the television program is a product that has to maintain a certain level of viewers in order to generate revenues. What I find interesting (but not surprising) is that host who might be generally bearish would not get ratings, but a host is almost fanatically bullish generally will.

    It would be very interesting to know how Kudlow manages his own money; I suspect he can be much more defensive than one would guess based on his admonitions as host of Kudlow & Co. I still enjoy the show. Kudlow has made available the views of Doug Kass, Joe Battipaglia, Barry Rithotlz (where have you been lately?), A. G. Schilling and others. Even though it’s hard to hear the dissenting voices at times, you have to give Kudlow credit for inviting them on. (You also have to admire the dissidents who do appear, it must be frustrating to be shouted down so frequently.)

  41. David Lukton commented on Jan 18

    In defense of Larry Kudlow, he DOES give at least 40% of the time to the bears.

  42. Eric Davis commented on Jan 18

    Kudlow is the only place on CNBC that you can hear the bear case…

    since they booted Schiff, Kass can barely talk. it just leaves gartman going

    Short of gold, long of wheat.

    I still remember the last time I saw Schiff on CNBC, he scared the hell out of Melissa Lee.
    and she responded
    “your just a Giant bummer, aren’t you?”

  43. Francois commented on Jan 18

    “where or where were the regulators?”
    Remember Die Hard III with Bruce Willis and Samuel Jackson?
    If you’re going to rob the gold, make sure the cops are elsewhere and impotent to intervene.

    So, the regulators were exactly where the Republican trifecta and their allies wanted them to be, that is nowhere. The bank “robbery” has been successful so far, and their masterminds sent home with 100Mil+ severance package.

  44. BG commented on Jan 18

    Amen John! I am watching Krudlow (lots of crud and very low) and Commarade and it blows my mind that Doug Kass and Gary Shilling would come on this (Republican pep rally for idiots)and put up with Larry, Boyer & Luskin’s crap! Doug and Gary are (and have been) for the most part correct on their forcasts and it is absolutely driving Larry and his contract “Yes” men nuts!

    Before it is over, this slick Willie and “Company” will be taking credit for everything that has come to pass. I wonder what Lusking and Boyer do during the week, floss their teeth and look in the mirror until showtime. They make me sick. It is so obvious that their views are totally political and have no basis what-so-ever in economic terms and then Larry steps in and gives their speaking points credence when everyone knows it is total BS. I am so glad I am out of the market. If Larry doesn’t already sell snake oil, I would like to know why the hell not? He is the master of sleaze.

    There are so many of his persuation who think the working man doesn’t deserve anything for actually doing the work, while, these sleaze buckets want to get on TV and defy reality for hopes of financial gain. The DEMS are going to swab the decks with these bast*&ds and you know they deserve every bit of it! That is sad to say because I have voted Republican during the last (2) Presidential elections; but that Party no longer represents the good of what this Country was founded on. It has morphed into the party of sleaze and disinformation. This Country needs to get back to telling the truth and treating people honestly again (quit trying to screw everyone around you as your natural defense). I have lost all respect for Larry. He is the king of slick Willie. And even now, this crowd is begging for Corporate tax cuts now that the national debt has gone from below $2T to north of $9T during a time when most good blue-colar jobs have been outsourced to the same Countries we are now begging for capital to save us from ourselves? Do any of these clowns have any children or grand-children? Greedy SOBs. Within a few more years, greed will have completely consumed this entire Country, fought and died for by our own blood relatives.

  45. VJ commented on Jan 18


    Laffer has been consistent in praising policies consistent with his economic philosophy, no matter where their source. He’s had nothing but positive things to say about the economics of Bill Clinton, for whom he voted twice.

    Eh, how would President Clinton’s “economics” be “consistent” with Laffer’s “economic philosophy” ?

    The Clinton administration pushed legislation through Congress that raised federal income taxes on the top 1.2% of wealthiest taxpayers, as well as raised the corporate income tax, yet federal income tax receipts skyrocketed.

    That’s completely contrary to Laffer’s “Curve”, as well as his economic philosophy.


    the urgency of fixing social security…

    What urgency, and what needs fixing ?

    Social Security is more financially sound today than it has been throughout most of its 72-year history.

  46. Thomas Shawn commented on Jan 19

    Don’t we have to see negative economic growth to call it a recession? Is there no such thing as a slowdown?

  47. Todd commented on Jan 19

    I vividly remember Dennis Kneale strongly criticizing the shrewd analyst from CIBC who downgraded Citibank when it was at 40, saying it would go to the low 30s and would cut the dividend, which turned out to be not pessimistic enough but was shocking at that moment. Kneale called it a market overreaction to an absolute nobody at CIBC, and people were crazy to be selling Citibank because of it. Kneale is a total moron who drank the Steve Forbes Koo-Aid to the max. How can CNBC keep this man on the air. PATHETIC !

  48. Adrian commented on Jan 19

    So did he say which day the recession actually started on and does he know which day it will end?

    I wonder how long before they start calling a recession in the UK, they keep saying there won’t be one and economy is too strong etc, but it is following a very similar pattern in UK as US, except debt levels here, HPI, etc.. are so much higher than US.

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