GOP House Will Turn to Tax Cuts

Save America. Cut the federal budget. Along the way, spending restraint would reduce deficits and borrowing. In theory, that would make it easier for the Federal Reserve to control the money supply and hold down inflation. By the way, cutting the federal budget almost always means reducing anti-business regulations — because all these programs have major strings tied to them. Think diversity, equity, and inclusion — or other anti-business actions. Just think about holding down the supply side of the economy, which itself is inflationary. There’s a lot of work to be done for pro-growth tax reform, especially extending the highly successful Trump tax cuts, and I’m sure that’s coming as the House Republicans put together their pro-growth agenda. Really, though, starting at the beginning is starting with the budget, and doing so goes to Speaker McCarthy’s excellent speech yesterday at the New York Stock Exchange that included a discretionary spending rollback to FY2022 levels and a 1 percent budget cap for annual spending growth. The package would also include clawing back $50 billion to $70 billion of unspent Covid money. One item not in Mr. McCarthy’s speech would be an attempt to repeal President Biden’s cancellation of student loan debt, which would add up to $500 billion. He did mention H.R. 1, the Lower Energy Costs Act, which I refer to as reopening the fossil fuel spigots. That’ll increase growth and reduce inflation. Another part of the package is the Reins Act, under which any regulatory action by the federal bureaucracy of more than $100 million would require congressional legislation. Think how wonderful that would be in stopping the crazy EPA tailpipe action that would basically end the internal combustion engine, without anyone ever taking a vote. The GOP package is also going to include work requirements for Medicaid, food stamps, and welfare. It would reportedly rescind the $80 billion IRS package for 87,000 new agents — which would principally go after people making under $400,000 a year. The package would also reportedly repeal the green tax credits in the misnamed Inflation Reduction Act, which has now been re-estimated to cost well more than $1 trillion. With uncapped refundable tax credits under virtually no time limit, that goofy bill could wind up costing $3 trillion to $4 trillion over the next 35 years. Believe it or not, serious people have made these guesstimates. The total savings from all these measures could be somewhere around $4.5 trillion over the next 10 years. A nice chunk of change in return for a one year increase in the debt ceiling. The final package is supposed to be voted on as early as next week. Now, one technical point: President Biden, who doesn’t want to play, who hasn’t responded to Mr. McCarthy in 75 days since their last meeting, keeps saying that the House Republicans have to come up with a budget because his administration finally put a budget out, though it was a month late. He’s just blowing smoke. Actually, the House will put out a budget resolution sometime in the next month or so, and that is the equivalent to the administration budget. Yet, as Mr. Biden knows full well, this debt ceiling package is a separate legislative item. It is not the budget resolution, which will be a 10-year item, presumably subject to reconciliation in the U.S. Senate, though it’s worth noting that the Democratic Senate has never put out a budget. Ever. McCarthy & Co., though, will have a very strong debt ceiling package with no new taxes, a nice regulatory rollback, and a decent amount of spending restraint. It’s pro-growth and counter-inflationary. It’s bullish for stocks, and for blue-collar typical working families. It will finally put an end to the frenetic Biden administration spending that has given us the first dose of serious stagflation in 40 years. Save America. Go on a second date, President Biden. From Mr. Kudlow’s broadcast on Fox Business News.

GOP House Will Turn to Tax Cuts

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