Larry Kudlow, host of Kudlow on FOX Business and former Trump economic adviser, is pushing back hard against the media’s portrayal of a slowing economy under President Trump’s second term. Following a reported 0.3% decline in GDP for the first quarter of 2025, Kudlow says the narrative of economic downturn is “fake news” and fundamentally misleading.
A Different Reading of the Numbers
According to Kudlow, the official GDP report is flawed because it focuses on misleading metrics and ignores what he calls the “core economy.” Rather than relying on the headline number, Kudlow says, “if you look under the hood of the GDP report and carefully parse through the numbers, what you actually come up with is a rather strong economy that’s growing at something like 3%.”
Kudlow defines core GDP as private sector consumption plus business investment. Stripping out what he calls “fluky” trade data caused by tariff-related import spikes, he asserts the economy grew 3% in real terms.
One of the most impressive figures, Kudlow says, is business equipment and machinery investment, which jumped 22.5% in the first quarter. “There’s no recession there,” he declared, adding, “Out of the entire GDP report, 22.5% is the most important number.”
Tax Cuts Driving Investment
Kudlow attributes the strength in business spending to expectations around Trump’s upcoming economic legislation. “President Trump’s one, big, beautiful bill will pass both houses of Congress, probably around the Fourth of July holiday,” he predicted. The bill includes 100% expensing for business and factory investment, retroactive to January 20, 2025.
He also highlighted the planned drop in the corporate tax rate from 21% to 15% for goods made in America. According to Kudlow, “businesses are front-running the big beautiful tax cut that will be coming their way.”
The administration has also proposed personal tax relief aimed at tipped workers, overtime earners, and seniors who receive Social Security. Kudlow says these changes will more than offset any negative impact from tariffs.
Inflation Tamed, Fed May Cut Rates
Kudlow also pointed to signs that inflation is cooling. He noted that the personal consumption deflator for March came in at 0.0%, and the core deflator also showed no increase. The Consumer Price Index actually fell by 0.1% that month.
“All of this inflation progress sets up a Federal Reserve cut,” Kudlow said, suggesting lower interest rates could provide further support for economic growth.
“Pencil Pushers Can’t Count”
Perhaps most controversially, Kudlow accused the Commerce Department of botching the GDP math altogether. He pointed out that imports surged by $333 billion in the first quarter, while inventories only rose by $140 billion. That leaves $193 billion in goods that are unaccounted for.
“Did the roughly $200 billion gap between imports and inventories just… evaporate?” he asked. “The pencil pushers over at the Commerce Department clearly can’t count.”
Kudlow claims that if you correct for this “math error” by simply adding that $200 billion back into GDP, the real growth rate jumps to 3.2%.
Critics Push Back
Not everyone agrees with Kudlow’s optimistic analysis. Economists caution that GDP data includes a wide range of inputs and that trade imbalances can be legitimate drags on growth. Some argue that Kudlow is selectively cherry-picking data to paint a rosier picture of an economy that still faces real challenges, especially from rising interest rates and global trade uncertainty.
Others worry that relying too heavily on future tax cuts and deregulation as economic drivers could backfire if Congress fails to pass the proposed legislation or if inflation resurges.
Kudlow’s Bottom Line
Despite the criticism, Kudlow remains confident that Trump’s policies are fueling a genuine economic revival. “It’s a phenomenal story,” he said. “It’s a story of re-shoring. It’s a story of how the business tax cuts – along with the new personal tax cuts – will far outweigh any drag from tariffs.”
With major legislation on the horizon and inflation seemingly under control, Kudlow believes the economy is poised to “roar” by late 2025 and into 2026. Whether the rest of the economic establishment agrees remains to be seen.
