Larry Kudlow Tells Us Why He Sees Stagflation on the Horizon

BUCK: Is the choice, Fox’s Peter Doocy asks, $5 a gallon gasoline or a $60,000 electric car?

BUCK: The White House doesn’t have a good answer. Maybe our next guest does. Larry Kudlow is with us now, the Fox News host and former senior economic adviser under the Trump administration. Larry, thanks for coming back.

KUDLOW: You know, Buck, I could be had. I could support Build Back Better, but I want the top-of-the-line Tesla. I want the $150,000 one.

BUCK: Is that the plaid, I think? It’s fancy.

KUDLOW: If they just give one to me, you know, I might reconsider.

BUCK: So, what happens now, Larry? Gas prices, the administration’s got… I think Teslas are cool, too, I gotta say and now that Elon may be single-handedly trying to save free speech on the internet at some level, I’m even more of a Tesla fan. But it can’t all be on his shoulders, and he obviously can’t do much about the gas prices. The Biden regime says they can do something about the gas prices, which is funny to me because a couple of weeks ago they were saying they couldn’t. So, which is it? And where is this going? Where are they going wrong?

KUDLOW: Well, you could start with yesterday’s meetings, okay, which was bait-and-switch. Biden chose to make with the window makers in the Roosevelt Room in the White House, and he sent his underboss, Jennifer Granholm, to meet with the CEOs of the oil and gas companies, in the energy department, all right? So, there’s a statement right there. The boss won’t even meet with the top guys.

And I know from friends of mine who were at that meeting, the energy meeting, not the window meeting. I know that they got nothing. I mean, it was a nice meeting. At least Granholm didn’t attack them or berate them or insult them the way Biden usually does. But other than that, they asked for all kinds of waivers for these onerous regulations that have stopped permitting and hence stopped fracking and drilling and pipelining and any new refining. They asked for wavers, and she couldn’t give it to them.

BUCK: That’s a part of this that I think more and more of the American people are just seeing clearly, which is that on the one hand, the Biden regime — people like Kerry, who is their climate czar — will come out and say, “You know, this is a good opportunity for everybody to really focus on the real issue, which is climate change,” while people can’t afford gas to get to work, to go pick up their kids, and live their lives.

Granholm says it a little bit more delicately than that but similar things. It can’t on the one hand that the Biden administration is willing to invoke the Defense Production Act for solar panels and on the other unwilling to waive regulation, as you just pointed out. And they don’t have an underlying ideological hostility to fossil fuel production; that’s a huge problem right now. It just doesn’t all add up.

KUDLOW: Well, they do have an underlying hostility, the administration. I mean, the administration is dominated by the radical climate change ideology, right? This is part of their woke progressive program which is so terribly unpopular in the country and why they’re gonna lose the Congress in November. The oil guys want to negotiate in some good faith. Look, this is their business, and they do it better than anybody in the world. And, by the way, we make the cleanest oil and natural gas and the cleanest gasoline in the world.

That’s why our carbon emissions have been falling for years and they continue to fall. So, all they really wanted was some sense that the administration would waive some of these onerous regulations, including the — here’s the thing for folks to think about. Leases are one thing. You can buy a lease. Some leases you get oil and gas, some you don’t. But if you don’t have a permit, then you can’t drill. And the administration is withholding permits everywhere. It started with the Keystone pipeline, but lately they’ve even the stopped permitting…

They promised they would go through it then they canceled it in Alaska and the Gulf of Mexico — Gulf of Mexico, by the way, is cheapest oil in the world, $30 break even. So, they wanted some sense, the oil guys, and they didn’t get it. And so that’s that. There’s nothing else they can do. Their current refineries, Buck, are 95% operating capacity. They can’t get any more out of them. And it’s not easy to start one up anyway. But the point is, if Biden would be willing to let up on these permits, you would see the futures markets, oil prices would come down and therefore gasoline prices would come down. You’d see probably a 25, $35 drop right away from a hundred, whatever, a hundred and change down to at least 75 bucks.

BUCK: Larry Kudlow of Fox News and former senior Trump adviser. Larry, just one more for you. Do you think that we are…? Are we in a recession even though it’s obviously not official by the numbers yet? And are we going deeper into whatever this economic malaise is? I mean, I’m hearing people use the word “recession” a lot more but also stagflation and people are saying growth is going to really stall out. What does it look like as far as you can tell under this Biden administration for the Fnext six to 12 months?

KUDLOW: Well, I think we’re in the front end of a recession. We’re not seeing it yet in the jobs markets, but we are seeing it with the decline in real wages and we’re seeing it in a decline in real retail sales. So, those are very important statistics. And real incomes are falling. So, I’d see we’re on the front end. I think Jay Powell, the Fed head, basically told us in his hearings in the Senate and House this week that we’re going into recession. That was one of his messages. And it’s too bad, because if we’d slash taxes and we’d slash regulations on oil and other industries, we might avoid it.

Or at least we’d pave the way for a growth recovery. But we’re not doing that. So, I think you’ve got inflationary recession. That was a Milton Friedman term many, many years ago. Some people call it stagflation. In other words, output is gonna go down, the economy’s gonna sink, and the inflation rate is gonna stay high, at least for another year. So, it’s an unholy combination. But I think that’s the problem. And I think this election is gonna be all about inflation. It’s not gonna be about Roe v. Wade. It’s gonna be about inflation and then recession.

BUCK: I think you’re right. I think the Democrats wish it would be about Roe v. Wade, but that’s not gonna bail out Biden. I don’t see it. Larry Kudlow, everybody, Fox Business. Go check out Kudlow on Fox Business. Great show. Larry, always appreciate you making the time for us.

KUDLOW: Thank you. Anytime. Bye-bye.