Flashtraffic: Interview with Larry Kudlow

On President Bush's political skills-

George W. Bush is by far the most dominant politician in the country-and I mean dominant-and the most underrated. He's very clever at getting things done. The Beltway media don't get him. He's a very well organized, disciplined CEO. He follows a strict schedule that's highly sensitive to the economy and domestic politics. And he's got a tremendous energy level.

In February, seven or eight business and financial journalists were called in for a round table, on-the-record interview with the president. I was one of them. We're in the Roosevelt Room. The president comes in with his top aides. And I'll tell you, Bush looked great-tan, relaxed-while his staff all looked like they needed a six-month vacation. He talked without notes, answered questions-mostly hostile-without turning to aides.

You know, I worked in the Reagan White House [as deputy director of Office of Management and Budget]. I never bought into the myth that Ronald Reagan didn't know what he was doing and relied on his aides for everything, because I was in meetings with him. I saw how sharp he was, and how politically powerful and influential he was. And I see the same thing in Bush.

On how the tax-cut deal was done-

I've spent a lot of time in the West Wing over the last 18 months-part of an unofficial kitchen cabinet for the president-and I'd been one of the main people pushing this dividend tax-cut package on the inside for at least a year before it surfaced. When he unveiled the thing, it was widely viewed as impossible to get passed. Democrats, of course, would oppose him. But most Beltway media types thought six to 10 Republican senators would oppose him also.

Then the House and Senate had a big blowup on the tax cut bill. They were at war over the $350 billion Senate ceiling, which House Speaker Dennis Hastert didn't know about. Senate Majority Leader Bill Frist didn't keep up to speed. But one night, they all caucused-Hastert, Frist, a few others-in their formal dinner outfits for some big White House dinner. Bush took them aside and he said, "I want a bill. I want it by the end of this week. And I want it out of both houses." He looks them in the eye. He was tough. He insisted they get it done, and you know what? He got it.

After he left the room, these guys made several decisions on the spot. They decided that House Ways & Means Committee Chairman Bill Thomas was going to write this thing, not Senate Finance Committee Chairman Chuck Grassley. And they decided the newly drafted House version would prevail. This was Bush's political power in action. His war popularity has spilled over. He's moving forward, and I think more is coming.

On the president's next move-

Bush and his team have a great strategy: take what they can get, and come back for more. This is the third significant tax-cut bill in three years, and I expect a fourth, maybe this autumn. They may do tax-free savings accounts, which I've been pushing for some time. Look at the effect this one is having already. The markets are up strong. They reacted almost immediately. The long dormant deal-making business is coming back. The new change of incentives means the cost of capital is much cheaper, the return on capital is much higher, and the markets are responding.

On the 2004 presidential field-

I think Bush is going to win between 45 and 50 states. It's going to be an '84-style landslide. Even if the economy is soft, he's going to win big. Rep. Dick Gephardt (D-Mo.) or Sen. Bob Graham (D-Fla.) will be strong. Gephardt is tying himself too closely to the left-wing, liberal union base. But he's a man of strong character and good on defense. He was once a flat-tax reformer, but he won't run that way.

Graham is a canny politician. Comes from a key swing state. Going to be pesky on homeland security. He's basically running for vice president. I'm actually looking at a Gephardt-Graham ticket.