Larry Kudlow, the economic guru and former adviser to President Ronald Reagan, said waning productivity is holding back U.S. growth. Corporate profitability is growing the most since 2011, but gross domestic product has barely risen.

“We had big, big profits numbers in the S&P 500. Most of that was overseas, internationally driven,” Kudlow said on CNBC. “If you take out that and the banks, the actual profits are much less.”

He cited yesterday’s GDP report as indicating broader company profitability was waning even as the economy grew by 1.2 percent.

“You got a GDP report that shows profits at large, 4 million to 5 million companies in there. Those are so-called ‘IRS profits,’ and can’t be fudged. And they are falling 5.6 percent on a year over year basis,” he said. “They are falling because the balance between cost and prices has not been favorable for quite some time. The