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Larry Kudlow: Don’t Blame Boehner for Fiscal Cliff Debacle

By Lawrence Kudlow | @larry_kudlow |

When you lose an election, you get frustrated. When you’re sitting in a subpar 2 percent economy, and are faced with tax hikes rather than marginal rate reductions, you get even more frustrated. And when you’re staring at $47 trillion in spending over the next 10 years, and $8.6 trillion in deficits, your frustration levels climb even higher.

These are among the frustrations that led a number of House Republicans to pull back from House Speaker John Boehner’s so-called Plan B. Nobody looked good on the Republican side when Thursday night’s vote fell through. But you have to understand their frustrations. Losing an election is no fun.

I don’t blame Boehner. The Ohio Republican’s idea is the best compromise currently available. Or, put another way, it’s the least-bad option out there. It was even backed by Rep. Paul Ryan, R-Wis., and Grover Norquist.

There was the million-dollar threshold for letting the top tax rate expire and moving it back to 39.6 percent. All the other Bush tax rates remained the same. Capital gains and dividends would rise from 15 percent to only 20 percent. The estate tax would go to 35 percent, not 55 percent. And everything would be made permanent, unless and until real flat-tax reform by lowering rates and broadening the base took place.

No, there were not enough spending cuts in Plan B. But a couple hundred billion dollars in spending cuts were inserted at the last minute.

Boehner figured that if the House of Representatives passed Plan B, it could put pressure on President Barack Obama and the Senate Democrats to raise taxes less and cut spending more. A couple dozen House conservatives wouldn’t buy it. I understand that. But I still think Boehner was on a noble mission in very difficult post-election circumstances.

The demise of Plan B almost certainly will prolong the fiscal-cliff negotiations, which will spill over into the new year. But I still believe this is a game where all the players are bluffing. Washington lawmakers will not risk a recession by allowing all the Bush tax cuts to expire, thus pulling $500 billion out of the economy, and by rolling back important economic-growth incentives. I just don’t believe it.

And if the negotiations go well into January, the Treasury Department and the IRS can stall any changes in withholding rates. Then a deal can be worked out that will extend the middle-class tax cuts up to a threshold of $250,000 to $400,000. Patching the Alternative Minimum Tax will be thrown in there, too. So will the so called “doc-reimbursement fix,” some kind of unemployment insurance and some small leftover sequester spending cuts.

This will make no dent in our spending, borrowing and debt problem. But at least it will avert a recession.

For the Republicans, the sooner they can get out from under this mess, and move on to tax, spending and entitlement reform, the better off they’ll be. And for heaven’s sake, let’s finally cut the corporate tax rate. But for now, it’s time for a strategic retreat, as the economy teeters over the cliff.

One final thought: In a post Jan. 1 scenario, after Washington has temporarily gone over the cliff and all the tax rates have gone up, any bill that restores the Bush tax cuts actually becomes a bill to cut tax rates, not raise them or stop them from rising. That’s a much better dynamic for the GOP’s strategic retreat.

But alas, real reforms for taxes, spending and entitlements, and real fiscal solvency, and real economic-growth prosperity, still seem very far away.

Larry Kudlow National Review Online’s economics editor, is host of CNBC’s The Kudlow Report and author of the daily web blog Kudlow’s Money Politic$. Click here for more information, or click here to contact him.




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» on 12.26.12 @ 05:02 PM

Boehner is who and what he is.

It’s his misfortune to be ask to Speak for a wayward Tea Party majority, who seem more interested in taking the furthest Right ideas from South Carolina or Texas onto CSPAN than they do fulfilling their oath of office to govern the United States for the benefit of everyone.

As a nationally famous syndicated conservative columnist noted after last week’s
non-vote fiasco, if America were a parliamentary democracy, like Canada or Europeand this happened, the Tea Party government would have “fallen”.

The president then would have either asked other leaders in Congress to try to
form a “new government”, or to “desolve” this incompetent House, call new
elections for the House of Representatives, and hope for a better outcome.

Boehner’s problem is that as a traditional, Main Street Republican conservative,
he favors a healthy economy, a balanced budget, a strong defense, and limited
government, within a Reaganite philosophical framework that acknowledges that the federal government does serve a useful role.

The Tea imbibers in his caucus don’t necessarily even support those concepts.

Forget about Lincoln, Ike, Nixon. If Reagan or Goldwater were trying to launch
their political careers today, articulating the same values and ideas they stood
for in real life not that long ago, they’d find themselves heavily challenged in
the Party of NO! primaries by tools of the Club for Growth or the Koch Brothers.

How can Boehner succeed, when Tea Bag imbibers publicly repudiate the most basic thinking of William F. Buckley, Goldwater, Reagan?

Who wants a government anchored by Grover Norquist, Wayne La Pierre, and
Sheldon Adelson?

But Mr. Kudlow should acknowledge that America is Obama’s reponsibility, and
it intersects with Boehner only to the extent that Boehner’s caucus won’t back
him up in any kind of reasonable negotiation on anything.

Kudlow can try, but you really can’t hang this public paralysis in the House on
Barney Frank, Nancy Pelosi, Barbara Boxer, or Susan Rice.

We just had a big election, and Kudlow’s team lost. Lost the White House, lost
seats in the House, lost sure-thing “pickups” in the Senate.

If the House is about America rather than rightist ideology, it’s time for them to
find a way to move toward the middle, for the national and international good,
and stop creating public waves of anxiety for investors, bond holders, job creators, and three-hundred million average Americans. Period.

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