Kudlow: 'Subsidizing Non-Work' Hobbles Labor Market

"We still can't seem to stop the hemorrhaging of people dropping out of the labor force," asserts Larry Kudlow, the CNBC senior contributor and syndicated host of "The Larry Kudlow Show" on Cumulus Radio.

During an appearance on "The Steve Malzberg Show" on Newsmax TV, Kudlow made it clear that he isn't among the many economists who raved over the stronger-than-expected jobs report for September, which was released by the government Friday.

Kudlow noted that the labor-force participation rate fell to a 36-year low of 62.7 percent during the month.

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Baby boomers' retirement explains some of that, he said. "But a lot of it is the government subsidizing non-work. People at the margin who might grab a job have walked away because the government benefits are quite substantial."

Eligibility for these benefits has been expanded in the Bush and Obama administrations, Kudlow said. "So if you pay people not to work, they're going to be awfully picky in taking a job. And what we're seeing is they'd rather not work. That's plaguing this whole story."

The welfare state has run amok, in Kudlow's eyes. "Don't get me wrong; I'm in favor of a safety net," he said. "But what we have now is food stamps, welfare, disability insurance, and a variety of other things, such as unemployment compensation. We've gone beyond the safety net."

A key issue is boosting economic growth, Kudlow said. GDP has expanded at an annual pace of about 2.2 percent since the Great Recession ended five years ago, far below the pace of previous recoveries.

"This country needs better economic growth," he said. "Ronald Reagan taught us that weakness at home leads to weakness abroad, and that has plagued Obama for five years plus."

Kudlow believes Republicans will take control of the Senate in next month's elections. Assuming the GOP does gain a Senate majority, Congress should get two bills to President Obama within 90 days after taking office in January, he said. 

"One of those bills should be slashing the corporate tax rate from 35 to 20 percent and with that no more double tax on foreign profits," Kudlow said. 

"Number two: a Keystone XL Pipeline authorization bill. Take the power from the White House and put it back in Congress, This is how they got the Alaska pipeline through many years ago." 

Passage of those two bills would greatly benefit the economy, Kudlow said. "You will see animal spirits lifted, new incentives to promote business investment and job creation and maximization of the energy revolution," he predicted.