Kudlow: An open letter to Joe Manchin

Today's inflation report was a disaster. Inflation is broadening, deepening and accelerating. 

Now, Senator Joe Manchin issued a very fine statement today about this disastrous inflation report. 

Permit me to quote: "It is time for us to work together to get unnecessary spending under control, produce more energy at home and take more active and serious steps to address this record inflation that now poses a clear and present danger to our economy. No matter what spending aspirations some in Congress may have, it is clear to anyone who visits a grocery store or a gas station that we cannot add any more fuel to this inflation fire." 

Senator, as an old friend, I want to say first how right you are, especially about getting unnecessary spending under control. Therefore, I must ask, friend to friend: why on earth are you huddling privately with Senator Chuck Schumer over a reconciliation package that could add a trillion dollars to spending and raise taxes on our small businesses? 

SKYROCKETING INFLATION FORCES SHOPPERS TO WORK OVERTIME AND CHANGE DIETS AS PRICES SOAR 

If we want to fight inflation, we should freeze domestic spending. You proposed this freeze last summer. You were right then. You were instrumental in saving America and killing the $5 trillion Build Back Better bill. All to your great credit. 

No one praised you more than I did, along with our Save America coalition. You came on this show and spoke brilliantly on the subject of spending controls and stopping inflation. Your segment ratings were through the roof. 

So, how can it be that now, suddenly, you're dancing cheek-to-cheek with Chuck Schumer? You know you're breaking my heart, but you also know that more spending will steepen inflation and deepen the recession. 

You're totally right about grocery stores and gas stations. You're totally right about not adding any more fuel to this inflation fire. This sounds like the Joe Manchin I know and respect. Heck, I wanted you to run for president on these ideas, but this Schumer-smooching has got us all in a tizzy. Say it ain't so, Joe and I might add, Senator, taxing small businesses and corporations and wealthy successful entrepreneurs will do great damage to the supply side of the economy, which will bring on more inflation. 

So, I am begging you to reconsider. We know you're a patriot. Please think about how federal fiscal policy could help the Fed and mitigate the recession by spending, taxing and regulating less. 

Take the shackles off business. Take the shackles off the oil and gas sector. Stop these regulatory agencies from running wild and making up laws— the way the Supreme Court’s decision in West Virginia v. the EPA was meant to do. 

Here's how bad the inflation report is today: you could take out food and energy,  which we shouldn't do because that's what working folks buy, but even if you took that out, inflation over the past three months is nearly 8% at an annual rate, much faster than the 12-month change of nearly 6%. 

INFLATION SURGED IN JUNE AND AMERICANS SHOULD BE FURIOUS AT THE AXIS OF IDIOCY THAT CREATED IT 

Services inflation, even without energy, is now up 8.5% for the last three months, compared to only 5.5% year on year. 

The Cleveland Fed has an important measure that removes the high and low price outliers and gives a more accurate reading of underlying inflation. That metric has gone from 2% 18 months ago to 7% today. 

The Fed's going to have to raise its target rate in a couple of weeks by a full 100 basis points. The Bank of Canada just raised its rate by a full percentage point. We're going to have to follow if we're serious about stomping out monetary inflation. 

Already, typical working families are watching their weekly wages drop over 6% in the past year and a half. Family costs are up by probably $5,000, or close to it. 68% of the CPI components are rising at 5% or faster. 

Inflation expectations are becoming embedded throughout the economy. It's going to take a couple of years to get back to the Fed's 2% inflation target, if they can even do that. 

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That's why I'm imploring you to adopt a pro-growth fiscal approach. We do not need to spend and tax more. We do need to spend, tax and regulate less. 

A supply-side boost to the economy will help working folks, avoid a catastrophic recession and calm inflation. Help us save America, Senator Manchin. Kill the bill. 

This article is adapted from Larry Kudlow's opening commentary on the July 13, 2022, edition of "Kudlow."