An independent special counsel with subpoena power is the only possible solution to the IRS mess. This counsel must find out exactly what happened and who was involved, and then come up with a fix so it never happens again.

Read my full column here.

At the end of the day, the battle over immigration reform is not about dollars and cents. It’s about the soul of a nation. President Reagan reminded us that America must remain a “beacon” and a “shining city on a hill” for immigrants who renew our great country with their energy while adding to economic growth and prosperity.

And here’s a quote from Jack Kemp: “Americans and immigrants share the same value of work, family, and opportunity. There is no reason to fear the newcomers arriving on our shores today. If anything, they will energize what is best about our country.”

It strikes me that the Republican party has lost its growth-and-opportunity message in recent years, and has replaced it with a very austere vision. Debt, deficits, and budget-cutting all have their place in the economic-policy debate. But the GOP has forgotten that strong economic growth leads to a balanced budget, not the other way around.

The GOP must reclaim the growth-and-optimism message of Reagan and Kemp. Immigration reform is part of that message. 

Read my full column here. 

The really good news from April’s employment report is that all the pessimistic, end-of-the-world, spring-swoon forecasters were wrong. It wasn’t a fabulous report. But it handily beat Wall Street expectations. Stock markets soared on the news.

The bad news, however, is that the U.S. continues to fall further behind its own long-term trends for jobs and economic growth. And lately, hours worked — a key labor measure — have begun to fall. 

Read my full column here.

In the last two days gold has plunged so deep that it’s being called the worst drop — at least in percentage terms — in 30 years. That brings us back to the early Reagan period, when falling gold was regarded as a good thing.

Back then, lower gold showed inflation coming down after the horrible 1970s. It also showed confidence in the economy recovering and greater respect for the dollar. Over the next two decades, in the ’80s and ’90s, gold basically dropped in round numbers from $800 an ounce all the way to $250. Stocks soared. So did jobs and the economy. It was one hell of a good period.

But markets have reacted a bit differently this time. On Monday, stocks fell over 200 points in tandem with gold’s $150 drop. Maybe it was tax-selling in the stock market. Or the constant rumor of Cyprus gold-selling to raise bailout cash. But investors aren’t happy. It doesn’t look like the ’80s and ’90s. And I’m hearing the usual cacophony of impending catastrophe.

But I’m not buying it. 

Read my full column here.

No matter how you slice the Obama budget pie, the inescapable fact is that the president wants to get rid of the roughly $1 trillion budget-cutting sequester and substitute in a $1 trillion-plus tax hike. In other words, more spending, more taxing. Growth-busting. The GOP should just say no.

And let me provide some counsel to my Republican friends in Washington, in particular in the House. Balanced budgets don’t create growth. This mantra is wrong. It’s growth that creates balanced budgets. 

Read my full column here. 

Many profound and detailed admiration pieces will be written about the late Margaret Thatcher, and they’ll be much deeper than this one. But I want to get on record with my own esteem for Mrs. Thatcher, whose character, philosophy, and achievements made her one of Britain’s greatest prime ministers.

Way back in the early 1990s, at a National Review conference on the eastern shore of Maryland, I had the great honor to serve on an economics panel that Mrs. Thatcher moderated. (Craig Roberts was also on that panel, although I can’t remember the name of the third panelist.) The topic was free markets and freedom, areas in which Margaret Thatcher made huge contributions, so I had a lot to live up to. And how did it go? Well, following the discussion, I got to sit next to Mrs. Thatcher during the luncheon. And she told me, “You know, Kudlow, you did rather well in that talk.” Naturally, I was thrilled.

Margaret Thatcher fought socialism in England and unyieldingly promoted the free-market views of Nobelists Milton Friedman and Friedrich Hayek. She stopped the destructive British labor unions dead in their tracks. With every bone in her body she attempted to limit government by lowering spending and taxation. She opted for big-bang financial deregulation. And she put London back on the map as a world banking center.

“Freedom” was always her watchword.

She also adored Ronald Reagan. And the two of them formed an extraordinary partnership for freedom and free markets. Working together they helped bring down the Soviet communist system. And it was a peaceful bring-down at that.

Thatcher saw Gorbachev first, and she reported to Reagan, “We can do business with him.” Reagan did, although he refused to back down on SDI. And as the American economy roared in response to Reagan’s own free-market supply-side policies, the Soviets were out-produced and eventually folded.

Mrs. Thatcher famously said, “The trouble with socialists is that they always run out of other people’s money.” That dictum really stands the test of time, doesn’t it? Running out of other people’s money? Today?

The age of big government has once again, at least temporarily, reared its ugly head. It’s a great battle for all the economies around the world. That’s one of many reasons why we will miss Margaret Thatcher. She did not go wobbly. 

Apropos of my column of a week ago — “Has Bernanke Gotten the Story Right?” — this week’s paltry GDP revision again backs up the actions of the Federal Reserve chairman and his market-monetarist supporters.

Read my full column here. 

Last Saturday, I had the pleasure of interviewing Jimmy Kemp on my syndicated radio show. Jimmy is the son of the late great Jack Kemp, and he now runs the Jack Kemp Foundation. And like his dad, Jimmy is also a great advocate for free enterprise. During our talk, Jimmy and I discussed his dad, free-enterprise zones, the Reagan 1980s, and economic growth.

Here’s the transcript:

Kudlow: I was talking about Jack Kemp my mentor, the late Jack Kemp, the great Jack Kemp, my friend and mentor, and his great message of economic growth and opportunity for all.  I want to emphasize those last two words- for all.  Nobody, in my lifetime, in either party, has reached out with a message of hope, growth and opportunity to minorities better than Jack Kemp. And I want to bring in my pal, Jimmy Kemp, who runs the Jack Kemp Foundation because, Jimmy is now the keeper of the scrolls and he is also a great friend.  Jim, how are you buddy?

Kemp: I’m great Larry, how are you?

Kudlow: I’m okay uh you know, there’s some scattered, you see some scattered columns and websites that talk about where’s the Jack Kemp, the new Jack Kemp in the Republican Party but, it was Jack’s message- I gave a talk, it was very funny, I gave a talk to the Wall people, the Manhattan, New York Republican Party and I’ve done this a little bit on the Kudlow Report, we had a whole Jack Kemp segment two nights ago-

Kemp: I saw it.

Kudlow: Alright, what I remember, let’s put the tax cuts aside for a minute, as important as they are, what I remember, particularly when Jack was the Secretary of HUD, because I was one of his volunteer kitchen cabinet there; Jack wanted Empowerment Zones-

Kemp: Enterprise Zones.

Kudlow: Enterprise Zones, tax free Enterprise Zones-

Kemp: Not tax credits, but tax free, you’re right.

Kudlow: And as much home ownership as possible for minority groups.  Jack went to the projects, he actually went to the projects in Detroit, Chicago, L.A., and New York.  He worked with Charlie Rangel, the great, black Congressman in New York City and we developed what became Empowerment Zones here in New York City.  My wife’s art studio is in one, I mean am I wrong here?  Is my memory betraying me?

Kemp: No, no of course not. And part of what Dad understood is that- good policy, as great as Kemp-Roth was at cutting tax rates at that time, which was, reflecting on it, it was obvious tax rates were confiscatory. You couldn’t have them that high and have a growing economy. But he also knew at the same time, back in the 70’s, way before he was at H.U.D., but in order to have good policy it can only be policy that can be passed and in order to pass it he had to get Democrats. Larry, he was a Republican in a Democrat controlled House of Representatives and yet they had President Reagan in 1980, but he had to convince people, like Charlie Rangel, that he really did care. And that these policies that were “conservative,” he liked to call them liberal, because they were intended to free people to provide equal opportunity and knew that tax rates went along with providing that equality of opportunity in the housing sector, for people starting businesses in ghettos or barrios or poor urban areas, wherever they were. He knew that capitalism without capital is nothing but an ism, as Jesse Jackson had said and you had to get capital to people who would do something with it. He trusted people, and, as you pointed out, all people, not just rich folks who went to good schools.

Kudlow: See that’s the thing. Now the Republican Party is, some people in the Republican Party are trying to open up immigration reform. I’m all for it. Your dad believed that immigrants were a positive force.

Kemp: E pluribus unum.

Kudlow: Right. He would have been on the right side of that issue today. But, you know, Jimmy, It’s just like reaching out and saying okay we’re going to give you a green card, that’s not really the answer. I mean what I’m saying is Jack Kemp had a set of policies, besides low tax rates, he had ownership policies, he had empowerment policies, he had, let’s see, no capital gains tax if you moved a business into an Empowerment  Zone, which would attract capital and people. There was human capital and financial capital. Kemp visited the projects, I want to emphasize it, Kemp met with La Raza Hispanics. Kemp visited the projects. When we were negotiating back in , I don’t know when this was Jimmy, 1991, Jack sent me to a couple of meetings with La Raza with his Rep. to try to figure out how to get a zero capital gains tax and La Raza backed it. They actually backed it. Now, Republicans don’t do that anymore. They don’t show up in the projects, they don’t go to a La Raza meeting, they don’t get photographed with Hispanic leaders and black leaders anymore. That was stuff Kemp did, it was great stuff. Why doesn’t anybody do that now, follow his example

Kemp: Well, the greatest example and a guy we all love and respect, Paul Ryan, who worked for Dad. H made the calculated decision to focus on our incredible budget deficit and the spending that was out of control in the entitlement programs and led, Larry as you know, it took him away from the main thrust of Dad’s career. And there isn’t anybody who has jumped into that, really opportunity, the way that Dad took the reins, and there are a lot of great leaders today. I’m not discouraged. Part of our purpose at the Kemp Foundation is to help support or political leaders and we’re certainly not pessimistic because we certainly couldn’t have the name Kemp associated with us if we were. You’ve got governors who are doing the right thing, you’ve got plenty of congressmen and senators, but we do need a more robust discussion of the components of an economic policy because there should never be any discussion of a new normal, I know you hate that phrase. This country has too much capability and abilities, not only in the board rooms, but in classrooms around the country.

Kudlow: Growth should be unlimited. Just to reset the table, we’re talking to Jimmy Kemp who is the president of the Jack Kemp Foundation. I am holding up, you see these stories about Jack Kemp, one story was written, “We need entrepreneurs like Jack Kemp.” Okay, I’m fine with that, but I don’t want to miss the essential point here, the essential point; Jack’s goal was growth, in other words, if you grew the economy rapidly through lower tax rates, less regulation and sound money, if you grew the economy that was a weapon to shrink the budget deficit and the debt. That was Jack’s way out. That didn’t mean he’d vote for spending bills that were unnecessary, but he understood that debt to GDP, that Republicans obsess about all the time, you solve that, in some sense, by growing the GDP.

Kemp: Sure, you want a bigger pie.

Kudlow: Bigger pie! And secondly, with the debate about so called Republican outreach to minorities look at what Kemp did. Kemp didn’t do it just to win votes, he had a program. Let’s go through it again, it was home ownership, it was enterprise zones, it was tax-free enterprise zones. He would go to the meetings and the rallies and meet with the leadership. He already showed the way. What we need is a Kemp biography here to let people read this stuff and that’s what he did, he was a one-man band. Some Republicans made fun of him, the country club crowd made fun of him, Jimmy, but we should follow his lead now.

Kemp: Well, yeah, the Kemp Foundation has a biography in the works and then we’re also releasing, in 2013, all of his speeches, which were previously released in a volume called the American Idea. And American Renaissance, we’re going to put out as well. The American Idea will have all of the speeches that were in it previously, but a bunch added to it.

Kudlow: Who’s doing the biography Jimmy? We only have 25 seconds. Who’s doing the Biography Jimmy?

Kemp: We’ve got Mort Kondracke and Fred Barnes working on it.

Kudlow: I did the oral history. I want to see that. I want to work on that biography.

Kemp: Alright.

Kudlow: Jimmy Kemp, president of the Jack Kemp Foundation. That was Jack Kemp’s message, hope and opportunity for everybody, including minorities. I’m Larry Kudlow and we’ll be back with some budget talk on the other side of the break.

Last night on The Kudlow Report I asked Dr. Ben Carson if a run for office is in the cards with his retirement only a few months away. Is he the conservative who can save the GOP? Might he try for Carl Levin’s open Senate seat in Michigan? Here’s what he had to say:

People keep trying to put me into politics, and I really don’t want to do it. I don’t think I really fit the mold. I don’t believe in political correctness. And I certainly don’t believe in getting into bed with special-interest groups. I just don’t think I would fit.

While that sounds like a resounding “no” to a political career, he did leave the door open a little bit as the interview progressed.

And how about television? Here the doctor was more optimistic:

I enjoy television, because I think it is a way to be able to reach the largest number of individuals. And I think we’re in a situation in our country right now where we need . . . reasoned voices to help educate people.

We also discussed jobs, Obamacare, education, affirmative action, taxes, and more. Watch the full interview here:

The most important point in Ben Bernanke’s Wednesday press conference was the announcement that the Fed will adjust the amount of monthly bond purchases according to economic conditions. In other words, an improving economy with stronger payrolls and lower unemployment could lead to a decline in Fed bond buying, from $85 billion a month to something gradually lower, so long as the economy keeps looking better.

It won’t happen all at once. The Fed is not convinced that the current economic upturn is truly sustainable. But Bernanke is implying that the Fed may become less easy in the second half of this year, perhaps ending QE in 2014. 

Read my full column here.

You might not know it from the acrimonious political debate on cable and broadcast TV, or on talk radio, or on websites and blogs. But here’s a counterintuitive observation: Amidst all the negativism out there, I believe optimism is in the air.

That’s right. Optimism.

Sometimes you have to search for it, or read it in the fine print. But I believe the political economy is getting better, not worse. 

Read my full column here.

House budget chairman Paul Ryan told me on Tuesday that his plan to balance the budget — in part by defunding Obamacare — is the right thing to do. By including that provision, it appears the proposal will be dead on arrival for the White House and Senate Democrats. But when I asked him if the plan was both good policy and bad politics, he responded, “Do you think we should give up our principles just because we’re submitting a budget? We believe this is a terrible law that will collapse under its own weight.”

Ryan further explained that a big part of his savings plan focuses on stopping the billions of dollars in Medicare now scheduled to be shifted out of the program and into the new health-care-reform system. But he also signaled that he may be willing to compromise on health care and many other parts of his plan.

“Do you start with your best offer when you start a negotiation? This is just the beginning,” Ryan said.

But getting to a balanced budget anytime will soon rely heavily on Republicans winning the battle on repealing large parts of the health-care law. That’s because the biggest savings in the Ryan plan come from cancelling the massive Obamacare expansion of Medicaid. Ryan says that part alone accounts for about $815 billion in savings out of the almost $5 trillion in cuts inside his proposal.

Entitlement reform is also a major focus of the Republican budget proposal. Ryan believes the same kinds of welfare reforms that succeeded in the late 1990s can be seen again, especially in the ever-expanding food-stamp program.

“We see food-stamp reform as part of welfare reform. We want to send it back to the states, and give them more flexibility,” Ryan said.

Ryan also talked about his plans for broad-based tax reform, explaining that lowering the rates and broadening the base is the best way to grow the economy and increase revenues. I agree.

Ryan did admit that he doesn’t expect to get all he wants in any negotiations with the White House. He conceded that he probably won’t be able to get the full $5 trillion in cuts he seeks, and that he would accept a “down payment” on that amount.

Finally, the congressman expressed cautious optimism about the chances of ever making a deal with Team Obama. He was positive, but realistic, about the administration’s new outreach toward Republicans.

“Trust but verify.” That’s how Paul Ryan characterizes the president’s charm offensive of recent days.

The Obama administration is whipping up hysteria over the sequester budget cuts and their impact on the economy, the military, first providers, and so forth and so on. Armageddon. But if you climb into the CBO numbers for 2013, you see a much lighter and easier picture than all the worst-case scenarios being conjured up by the administration.

For example, the $85 billion so-called spending cut is actually budget authority, not budget outlays. According to the CBO, budget outlays will come down by $44 billion, or one quarter of 1 percent of GDP (GDP is $15.8 trillion). What’s more, that $44 billion outlay reduction is only 1.25 percent of the $3.6 trillion government budget.

So the actual outlay reduction is only half the budget-authority savings. The rest of it will spend out in the years ahead — that is, if Congress doesn’t tamper with it. 

Read my full column here. 

By far the best line from this week’s dueling State of the Union messages came from Florida senator Marco Rubio. Nice and simple, and right to the point:

“Presidents in both parties — from John F. Kennedy to Ronald Reagan — have known that our free-enterprise economy is the source of our middle-class prosperity.”

That’s a brilliant summary of pro-growth policies, on the supply-side and in a free-market context.

Kennedy slashed tax rates and held down the budget. So did Ronald Reagan, who borrowed Kennedy’s ideas: smaller government, lower tax-rate incentives, and a thriving middle class, where the economic pie grows ever larger.

In short, the Kennedy-Reagan policies were growth policies.

On the other hand, while President Obama quotes John F. Kennedy, he doesn’t draw the dots to Kennedy’s supply-side tax reforms. He does mention the phrase “tax reform,” but he’s not talking about lowering rates across the board while broadening the base to reduce deductions. Rather, he means penalizing companies that operate overseas and favoring companies at home that do what he wants them to do. 

Read my full column here. 

Today’s report of a 0.1 percent GDP decline for the fourth quarter came as a surprise to most forecasters. But it actually masks considerable strength in the private economy. Namely, housing investment in the fourth quarter jumped 15.3 percent annually, business equipment and software spiked 12.4 percent, and real private final sales rose 2.6 percent. All in, the domestic private sector of the economy increased 3.4 percent annually — a very respectable gain.

And here’s one for the record books: Working ahead of year-end tax hikes, individuals shifted so much money to the fourth quarter at the 35 percent top rate that personal income grew by 7.9 percent annually — a huge number. And there’s more: In order to beat the tax man, dividend income rose 85.2 percent annually. You think tax incentives don’t matter? Guess again.

Now, all this private-sector strength occurred despite the fact that government spending — namely military spending — dropped 6.6 percent. Inventories also lost ground and the trade deficit widened.

But here’s a key point: Military spending has now fallen virtually to its lower sequester-spending-cut baseline. It did so in one quarter by about $40 billion. So the brunt of the impact over the coming years has already been felt. (Normally, as of recent years, military spending has been virtually flat.)

Which leads me to another key point: Even with the fourth-quarter contraction, the latest GDP report shows that falling government spending can coexist with rising private economic activity. This is an important point in terms of the upcoming spending sequester. Lower federal spending, limited government, and a smaller spending-to-GDP ratio will be good for growth. The military spending plunge will not likely be repeated. But by keeping resources in private hands, rather than transferring them to the inefficient government sector, the spending sequester is actually pro-growth.

Big-government Keynesians think big spending provides big growth. They are wrong. This has been a 2 percent recovery — the worst in modern times — dating back to 1947. So let’s try something different. Let’s shrink government. Let’s let the private sector breathe and generate entrepreneurship and risk-taking.

Spending is the true tax measure of the economy, according to Milton Friedman, Friedrich Hayek, and others. Even a modest sequester spending cut of maybe $60 billion in 2013, and perhaps more than $1 trillion over ten years (most of which will come from a slower spending growth rate, not real reductions), will be the best thing to inspire business and market confidence as well as international credibility. And it maybe even shave a point or two off the spending share of GDP.

On March 1 the spending sequester is supposed to kick in by law. If Congress wants to help the U.S. economy, the best thing it can do right now is implement this sequester. Then it can round out an even larger growth package, including large- and small-business tax reform and adjustments to stop entitlements from going bankrupt.

One of the least remarked upon aspects of President Obama’s inaugural speech was his attempt to co-opt the Founding Fathers’ Declaration of Independence to bolster his liberal-left agenda.

Sure, the president quoted one of the most important sentences in world history: “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.”

So far, so good. But he later connected the Declaration with his own liberal agenda: “ . . . that fidelity to our founding principles requires new responses to new challenges; that preserving our individual freedom ultimately requires collective action.” (My italics, not his.)

He fleshed this out with his trademark class-warfare, income-leveling rationalizations. Such as: “The shrinking few do very well and a growing many barely make it.” He also talked about “Our wives, mothers, and daughters that earn a living equal to their effort.” He followed that up with, “The wages of honest labor liberate families from the brink of hardship.”

Here’s what I take away from all this: Mr. Obama is arguing counter to the Founding Fathers that the pursuit of happiness is the pursuit of equality of results, not the equality of opportunity, and that he will do what he can to use government to make everybody more equal in terms of their income and life work.

Read my full column here.

Last week on The Kudlow Report, I asked Republican Senator Ted Cruz if he’d go with a government shutdown if it came to it on the debt-ceiling debate. His answer: “I think we have to be prepared to go so far as to shut the government down — if we don’t get some serious policies to stop the out-of-control spending, to tackle the debt, and to get economic growth.”

It was a bold statement. Watch the full video here:

One cheer out of a potential three is all anyone can logically give the fiscal-cliff deal. On the day after the bargain was clinched, the stock market gave a 300-point cheer. So be it.

In the short run, extending tax cuts up to $450,000 probably saved us from a recession. If all the tax cuts had expired, we’d have a $500 billion tax hike, plus marginal rate increases, and that would have sunk the economy. So I’m going to bet that the big stock rally was a sign of relief that the final deal wasn’t worse. 

Read my full column here. 

Despite all the media hullabaloo about the fiscal cliff and a potential recession if none of the Bush tax cuts are extended, stock markets have behaved calmly throughout this whole period. In fact, as of this writing today, the Dow is up 100 points.

I’m gonna guess that stocks, in their wisdom, are correctly sniffing that there will be no calamitous falling off the cliff. By that I mean there will be no $500 billion tax hike, which would be an economy killer.

Instead, after speaking with prominent Republican House and Senate members, I have come to believe the following: The GOP knows that Obama has the upper hand in this post-election battle. Therefore, they are preparing a strategic retreat.

Republicans don’t want to be the party of rich people and let Obama maintain his hold on the middle class. Republicans also don’t want to be the party of recession. So if no comprehensive deal is reached by President Obama and Speaker John Boehner, Republicans will not block an extension of the so-called middle-class tax cuts, which are roughly three quarters of the total.

It’s hard to know how this story will work itself out. There may be deals on upper-end tax rates, say 37 percent instead of 39.6 percent. And maybe even some lower tax penalties on capital gains and dividends.

Ideally, the GOP can get solid promises on spending cuts and entitlement reforms in return for a tax package. That tax package may include a dollar limit for tax deductions along with the rise in upper-end tax rates. Entitlement reform is also on the table. And so is a roughly $60 billion 2013 spending cut, which carries over from the across-the-board sequester. That is still possible.

But what is not possible is that House Republicans give up their constitutional prerogative to set the debt ceiling. That is their biggest point of leverage. And that leverage will carry over into 2013 as lawmakers once again attempt an across-the-board effort for pro-growth tax reform (flatter rates, broadening the base), serious structural entitlement reform, and more discretionary spending cuts. This will be the battle royale of next year.

As I said, no one knows how all this is going to play out in the next two weeks. But from the standpoint of the economy and the stock market, a worst-case tax-hike scenario that would sink GDP is not likely to happen.

There will be a deal to extend most of the tax cuts. And while higher tax rates on successful earners, small-business owners, and investors are most definitely not pro-growth, at least the across-the-board tax-hike calamity will be avoided. 

Once again, President Obama dodged the key fiscal-cliff issues at a campaign rally/press conference Wednesday morning. Campaign-style, he argued that the middle-class tax cuts (below $250,000) must be renewed in order to prevent a $2,200 average tax hike from hitting middle-class folks. He added that a middle-class tax hike would cost consumers $200 billion in spending power.

Okay, fine. But no one wants to raise middle-class taxes. That’s not the issue. And even if those numbers are right, they dodge one of the key points in the dialogue between President Obama and House Speaker John Boehner. Namely, what to do about top income-tax rates, which include capital gains, dividends, and inheritance taxes?

The president once again avoided the term “tax rate” in his latest round of fiscal-cliff comments. He basically said, Let’s get this done before Christmas in a fair and balanced way. But what is balance?

Read my full column here. 

Right after the election, it was all peaches and cream and conciliatory common-ground language when President Obama met with congressional leaders to discuss the fiscal cliff. Of course, the president campaigned on tax hikes for the rich, by which he meant raising top income-tax rates and extending the Bush tax cuts for incomes below $200,000. And the president’s first meeting post-election was with his union and liberal-interest-group supporters, all of whom want to raise the top rates and then some. But instead, the newly reelected president spoke about “new ideas,” as long as they provided a balance of spending cuts and tax increases on the most successful upper-end earners.

Now, however, stalemate may be just as likely as solution. Why? Well, it was former Bush advisor Keith Hennessey who discovered a big obstacle in all this. Team Obama wants a gargantuan $1.6 trillion tax hike over the next ten years to finance larger government. And Hennessey surmised — and I agree — that the reason the president couched his language in terms of higher tax “revenues” rather than tax “rates” is that he essentially wants both. Raise the top rates and cap or eliminate a number of tax deductions for more revenues. This is going to be a big problem. It could well be a deal-breaker.

Read my full column here.

Putting aside all the voter models, there’s one overlooked point worth making with Election Day at hand. Most times in American politics, optimists win, and pessimists lose. I know that’s not always the case. And sometimes it’s hard to distinguish between the two. But in this election, I believe Mitt Romney is the optimist, and Barack Obama is the pessimist. It’s Romney’s election to win.

Read my full column here. 

On Tuesday, the Federal Reserve reaffirmed its commitment to using unconventional efforts to stimulate the economy. In the latest Fed statement, the central bank said it would keep buying $40 billion in mortgage-backed debt per month to push interest rates lower. The Fed also repeated its vow to keep interest rates near zero until mid-2015. That may seem like the Fed is sending a signal to markets that it is intent on driving the economy no matter what the cost. But that may not be the case. According to former Fed governor Kevin Warsh, the move isn’t a show of strength — it’s something far more ominous.

“I think the Fed revealed in their actions just how grave they think the economy is,” he said on The Kudlow Report. The statement shows “just how concerned they are about the economy’s prospects; just how concerned they are about the ‘fiscal cliff’ and Europe.” Warsh served as a member of the Board of Governors of the Federal Reserve System from 2006 to 2011. From 2002 to 2006, he was special assistant to the president for economic policy, and executive secretary of the National Economic Council. His take on the Fed — as someone who was once on the inside — is that the central bank feels it’s the only institution standing between the nation and a terrible downturn.

He said, “The central bankers feel they’re doing it all by themselves; that they’re not getting help from Congress or the administration.” It seems Wall Street may share the skepticism expressed by Warsh. Again both the Dow and S&P closed lower.

Under pressure from Mitt Romney, President Obama has finally released his own policy vision for a second term. And yes, it’s the same old, same old. Some are calling it a second first term.

There isn’t a single true economic-growth incentive in this scant plan. There’s no serious spending, deficit, and debt reduction, and no attempt to solve the Social Security and health-entitlement problems, which are moving us toward bankruptcy.

Nothing. Nada.

But before getting into the details of this little plan, my basic conclusion is this: Mr. Obama wants to slash defense spending, raise all other spending, and hike taxes to finance the largest government size he can possibly get.

Read my full column here.

With the unprecedented budget explosion of means-tested, welfare-related entitlements, does Team Obama think it can buy the election?

It’s a cynical question. But I wouldn’t put it past that cynical bunch.

Read my full column here. 

The S&P fell for the fourth day in a row on Wednesday as investors fearing a rough market ahead ran for the exits. But if you’re among those sellers running for the sidelines, you may be making a big mistake.

For the first time, I feel comfortable enough tell you that Mitt Romney is going to win big. And I firmly believe Mitt Romney is about to usher in a new era — a Reagan-like, economic-growth revolution.

His tax-reform plan alone will drive the economy into tremendous prosperity. For example, a married couple earning $143,000 whose tax rate under Romney drops from 25 to 20 percent will keep roughly $7,100 more in take-home pay.

I see opportunities galore in the market. Right here and right now.

Why wouldn’t you be out there buying energy? Romney is pro energy. He supports coal and fracking. I’d also buy industrials. Romney is going to lower tax rates. I’d also buy health care. Romney will end government-run health care.

If you expect the nation to be led by a President Romney next year, all these sectors are very attractive right now. There’s just tremendous potential. I think the stock market is missing this.

Free advice is, well, free advice. But I would say this to Governor Romney: In your gentlemanly fashion, get on the offense quickly tonight, and put President Obama on the defense.

Play the leadership card: “No leadership on the anemic economy. No leadership on the grand-bargain talks with Speaker Boehner, where a great opportunity was blown with your last-minute $400 billion tax hike. No leadership on Simpson-Bowles. No leadership on the credit downgrade.

“And no leadership on the Benghazi catastrophe, where our ambassador was killed and dragged through the streets. Security broke down. If you had read your intel briefing, you would have seen the threat ahead of time. And then you went off to a Las Vegas fundraiser. And then came the cover-up, led by Susan Rice’s five-Sunday-talk-show lying fiasco.”

And push your tax-cut plan, Governor Romney. Across-the-board rate reductions. Don’t be afraid to sell it. Talk to the middle class, who will get a huge increase in take-home pay as a result of your tax plan, during a period when incomes are falling (as Joe Biden correctly stated) . And say that there will be no tax hikes for the middle class.

And talk growth. Growth, growth, growth.

Red line the middle-class tax deductions and explain that the tax-rate cuts for the upper end, which will spur economic and investment incentives for growth, will be balanced with a significant loss of this group’s unnecessary tax deductions.

And back all that up with a strong sell on spending cuts that along with faster 4 percent economic growth and 12 million new jobs will bring the deficit and debt GDP ratios way down.

Growth, growth, growth.

And by the way, don’t forget the corporate tax cut to 25 percent from 35 percent. And put in some sound money, too, to stop the Fed’s assault against the dollar.

Be a free-market, free-enterprise visionary. Emphasize opportunity over class warfare. Emphasize employment rather than government dependency.

Emphasize American exceptionalism, at home and abroad.

For some unknown reason, Mitt Romney dialed back his tax-cut plan yesterday, the same day new reports showed incomes are dropping.

Last month, median household income fell by about $500, and since Obama became president, income is down over $4,500. But under Mitt Romney’s 20 percent tax-cut plan, if he truly believes it and follows through with it, a married couple making $70,000 a year would save over $2,000. And take-home pay for a middle-class married couple earning about $140,000 — with their tax rate dropping to 20 percent from 25 percent — would increase by over $7,100. Obama has no such middle-class tax cuts.

So why would Governor Romney tell an Ohio crowd on Wednesday that they shouldn’t “be expecting a huge cut in taxes, ’cause I’m also going to lower deductions and exemptions.”

What is that all about? What kind of message is he sending? Is it pro-growth take-home pay? Or is he pulling back and hedging his bet?

I wrote in my last column about the potential benefits of the Romney plan. And I suggested that Romney should give specific examples of higher take-home pay from his tax cuts. And then I suggested that he draw a red line for middle-income taxpayers, and say “you will not lose you’re your deductions.” In other words, send a true growth message. And make it clear, not muddied.

This afternoon, one of the most senior people in the Romney-Ryan camp called me to say that Mitt misspoke, and that I should give him a mulligan. This person told me there’s no pull-back on the pro-growth tax-cut message, no new overemphasis on debt, and no departure from the Reagan-Kemp tradition.

Okay, even though I’m a tennis player, I’m willing to give Mr. Romney a mulligan. But I’ll say this: The growth message has to be crystal clear for the debate next Wednesday night. Mitt is slipping in the polls. People are confused about his message. He must clarify it.

Lower marginal tax rates. Higher middle-class take-home pay to offset lost income under Obama. More family financial resources. More growth and more jobs.

This doesn’t have to be so hard. 

One of the reasons Mitt Romney and the GOP failed to get a convention bounce was their inability to talk tax cuts, economic growth, and jobs. In his 45-minute convention speech, Romney spent 200 words on the economy, with no mention of tax cuts. It was the same for his running mate Paul Ryan: no mention of tax cuts at the convention.

In fact, Romney and Ryan didn’t talk tax cuts leading up to the convention, and they didn’t in the weeks that followed. This has hurt them in the polls. They haven’t connected the dots between Obama’s anemic economy and the Romney-Ryan solution to improve it.

But, all of a sudden, there may have been an “aha” moment. In a 60 Minutes interview this past Sunday, Romney did mention tax cuts, and take-home pay, too. Whoa.

Read my full column here. 

About thirty years ago, Paul Volcker launched a monumental monetary effort to bring down inflation. As Fed chairman, he sold bonds, removed cash from the economy, and cared not one wit about rising interest rates. And it worked. Gold plunged, King Dollar soared, and the drop-off in bank reserves and money extinguished high inflation — and actually launched a multi-decade period of very low inflation.

This week, current Fed chairman Ben Bernanke embarked on an absolute reversal of Volcker’s policy. He is launching a monumental effort to buy bonds and inject new money into the economy in order to reignite economic growth and job creation. It’s like history is repeating itself, but in reverse. Gold is soaring, the dollar is falling. Something’s wrong with this picture. 

Read my full column here.