LARRY KUDLOW: Trumponomics and the Fed, one of the two Kevins will do just fine

• Non-defense capital goods shipments (excluding aircraft) surged 9.9% at an annual rate over three months, nearly double the twelve-month rate, attributed to 100% immediate expensing in Trump's tax legislation
• Kudlow argues the Fed's traditional Phillips curve model is wrong and that supply-side policies (low taxes, deregulation, falling energy prices) enable 4-6% GDP growth without causing inflation
• Rick Rieder's candidacy for Fed Chair is questioned due to FEC records showing donations to George Soros's Act Blue and Democrats like Sherrod Brown and Hakeem Jeffries, suggesting he may not align with Trump's economic philosophy

Summary

Larry Kudlow analyzes the Trump administration's economic achievements and Federal Reserve leadership considerations. Key economic indicators show significant momentum:

Economic Data:

• Non-defense capital goods (excluding aircraft) shipments up 9.9% annually over three months, nearly double the 12-month rate
• New orders increased 8.5% (three-month rate) versus 5.5% (12-month rate)
• GDP rose 3.8% in Q2, with Q3 estimated at 4% and Q4 potentially reaching 5%
• Real wage growth exceeds core CPI (1.6%) and core PCE deflator (2.3%), worth approximately $2,000 per average family
• Corporate profits and margins at record levels

Policy Impact:

Kudlow attributes the business investment surge to the "one, big, beautiful bill" featuring 100% immediate expensing, retroactive to January 20. This aligns with increased industrial production in consumer goods and business equipment.

Market Implications:

The article advocates for "Trumponomics"—combining tax cuts, deregulation, energy production expansion, and reciprocal trade policies. Kudlow argues these supply-side reforms drive productivity growth without causing inflation, challenging traditional Federal Reserve models that limit GDP growth below 2%.

Fed Chair Considerations:

Kudlow endorses "one of the two Kevins" (Warsh or Hassett) for Fed chair, emphasizing they understand growth doesn't inherently cause inflation. He questions Rick Rieder's candidacy, citing FEC records showing political donations to progressive Democrats and "never-Trumper" Nikki Haley, suggesting philosophical misalignment with administration policies.

The analysis emphasizes maintaining economic momentum and selecting Fed leadership compatible with supply-side growth principles.