Tonight's Lineup

On CNBC's Kudlow & Company tonight:

A market panel discussion with RNC Genter's Dan Genter; Mike Thompson of Thompson Financial; Quentin Hardy, Forbes Silicon Valley Bureau Chief; and David Kotok with Cumberland Advisors.

Also, a special CNBC "Street Beat" panel consisting of Bob Pisani, Steve Liesman, Melissa Francis & Charles Gasparino. Topics will include the Fed and interest rates, the SEC's issuance of subpoenas, Dick Grasso and more.


TONIGHT'S POLL:

Google shares declined today after its Chief Financial Officer told investors that growth at the online search leader was slowing.

Where do you see the stock going?

$100 or $1000?

Cast your vote at www.kudlowcnbc.com.

Dubai Ports World and the Arab Boycott of Israel

The Jerusalem Post is reporting that the parent company of Dubai Ports World participates in the Arab boycott against Israel.

This is important news and it is not good. It is exactly the kind of thing that could make me withdraw my support for the U.S. deal with Dubai Ports World.

As someone who supported this deal for a variety of reasons here on my blog, and in my syndicated column, this story from the Jerusalem Post leaves me with reservations. I’m going to look for additional information and give this some more thought.

But I don’t like this at all.

Another Stain on CBS

CBS News released something they have chosen to call a "poll" yesterday, claiming Bush's ratings are at an all-time low. What they failed to acknowledge (until page 18, at the very bottom of a PDF version of the poll) was that CBS contacted substantially more Democrats than Republicans.

To be exact, the final numbers of individuals contacted were 409 Democrats to 272 Republicans. A quick mathematical exercise reveals that 40 percent of respondents were Dems, while only 27 percent count themselves among the GOP ranks.



What we’ve learned about polling from the last two presidential elections, and the ‘02 mid-term elections, is that good polling weights Democrats and Republicans equally. This goes without saying. Every pollster I’ve talked to has said this, and CBS knows this as well.

The failure of this CBS poll to weigh both parties equally just goes to show how incredibly biased this poll really is. (Kudos to the NewBusters website for picking up on this.)

It is an absolute disgrace and another black eye for CBS.

"The Year the Kaleidoscope Turned in America"

Pete du Pont, the former governor of Delaware, has an outstanding column in today's OpinionJournal.com on the economic revolution unleashed in America by Ronald Reagan's 1981 tax-cuts. Mr. du Pont's piece hits the nail square on the head.

"[W]e should remember 1981 as the year the kaleidoscope turned in America, a dividing point between the previous two decades' big-government beliefs and the individualism and market economy thinking of the next 20 years. We have seen sharply different opportunities--in jobs, incomes, economic growth and inflation--between the governmental years of the 1960s and '70s and the market decades of the '80s and '90s and the new century."

The weight of evidence supporting the clear and remarkable success of Reagan's supply-side revolution stands firm twenty-five years after it began. The heart of this mighty economic revolution was the Reagan policy of slashing the income tax rate to 28 percent from 70 percent. This reignited the economy, it put "capital" back into capitalism, and it showed (rather conclusively) that the free-market incentive model of economic growth works. The facts don't lie.

A few of the many noteworthy successes Mr. du Pont points out:

- In the 13 years before 1981, there were four recessions lasting a total of 48 months. In the next 23 years--nearly twice as long--there were just two recessions, lasting 16 months.

- Real annual growth in gross domestic product averaged just over 2.3 percent a year in the late 1960s and '70s. From 1982 to 2000, GDP grew an average of almost 3 percent a year.

- The famous "misery index"--inflation plus unemployment--annually averaged 13 percent from the late 1960s to 1982; since then it has averaged just 9 percent.

A terrific article which deserves a read, especially for the "Tax 'em to Death" crowd who, for whatever reason, still don't get it.

Tonight's Lineup

Larry returns live on CNBC's "Kudlow & Company" tonight.

Tonight's show will feature:

A market roundtable discussion with Robert Froehlich, Scudder Investments Chief Investment Strategist; Diane Swonk, Mesirow Financial Chief Economist/"The Passionate Economist" Author; Barry James, James Advantage Funds Portfolio Manager; and Dennis Kneale, Forbes Managing Editor.

Donald Trott, Jefferies & Co. Retail Analyst will discuss Lowe's.

Also, Overstock.com CEO Patrick Byrne will square off with Chris Byron, the New York Post columnist on Overstock's earnings, as well as the current SEC investigation/issuance of subpoenas to journalists.

Charles Gasparino, CNBC On Air Editor will join in the discussion.

TONIGHT'S POLL:

In an unprecedented move, the SEC issued subpoenas to two journalists, seeking information about conversations they had with stock traders and analysts. The SEC issued the subpoenas two weeks ago to Dow Jones journalists Carol Remond and Herb Greenberg. After receiving questions from the reporters last week, the SEC decided not to enforce the subpoenas or seek documents from them, at least for now.

In issuing the subpoenas, was the SEC overstepping its authority?

Cast your vote at www.kudlowcnbc.com.

"Jihadi Turns Bulldog"

There are some stories that defy imagination. This is one of them.

Apparently, the Taliban's former spokesman is now a Yale student.

(Even Michael Moore has a problem with this guy...)

Unbelievable...

Saddam's WMDs

Here's more fuel for a fire you won't see burning anytime soon on 60 Minutes or the editorial page of The New York Times: A steady stream of intelligence reports continues to reveal that Saddam did in fact have weapons of mass destruction.

Unfortunately, mainstream media continues to largely ignore the mounting evidence. Investors Business Daily (who along with The New York Sun deserve credit for staying on top of these developments) ran a fantastic editorial today cataloging the myriad pieces of evidence pointing to an active Saddam WMD program.

The first twelve hours of the recently released Saddam audiotapes--recorded in the former Iraqi leader's chambers--are showing anything but clean hands. (And there are still hundreds of hours yet to be translated). As IBD points out:

* Saddam talks openly of programs involving biological, chemical and nuclear weapons.

* While war critics have long asserted that Saddam halted his WMD programs in the wake of his defeat in the first Gulf War in 1991, and Saddam's abandonment of WMD programs was apparently "confirmed" by subsequent U.N. inspections, the facts don't back it up. In a tape dating to April 1995, Saddam and several aides discuss the fact that U.N. inspectors had found traces of Iraq's biological weapons program. On the tape, Hussein Kamel, Saddam's son-in-law, is heard gloating about fooling the inspectors.

"We did not reveal all that we have," he says. "Not the type of weapons, not the volume of the materials we imported, not the volume of the production we told them about, not the volume of use. None of this was correct."

* As late as 2000, Saddam can be heard in his office talking with Iraqi scientists about his ongoing plans to build a nuclear device. At one point, he discusses Iraq's plasma uranium program — something that was missed entirely by U.N. weapons inspectors combing Iraq for WMD. ("What was most disturbing," said John Tierney, the ex- FBI agent who translated the tapes, "was the fact that the individuals briefing Saddam were totally unknown to the U.N. Special Commission (or UNSCOM, the group set up to look into Iraq's WMD programs").

And as for the question, what did Saddam do with these missing WMDs?

"The short answer to the question of where the WMD Saddam bought from the Russians went was that they went to Syria and Lebanon," said John Shaw, former deputy undersecretary of defense, in comments made at an intelligence summit Feb. 17-20 in Arlington, Va. "They were moved by Russian Spetsnaz (special ops) units out of uniform that were specifically sent to Iraq to move the weaponry and eradicate any evidence of its existence," he said.

I’m still not certain about the timeline here. If in fact, the Saddam tapes are talking about post-2000 WMD developments, then it’s clearly new news that supports the Bush/Cheney position, and also supports the widespread international intelligence reports. But so far, the intelligence czar Negroponte and his people keep saying it’s old news. Hopefully, people will continue to pursue this story in order to come up with a definitive answer.

This is very important stuff and has potentially explosive implications.

Hats off to IBD for staying on top of it...

Cowardice and Defeat According to Stein

My good friend Ben Stein wields his mighty pen again at The American Spectator in a well-written piece entitled, "We're Losing". In his latest, Renaissance man Ben tackles the subject of free speech in light of the Danish cartoon debacle. As always, Ben delivers the goods. Here's a snippet...

"So here's where we are: we have a first amendment guaranteeing freedom of speech and separation of church and state. That means so-called artists can make art of a crucifix soaking in urine and of holy Christian images made of animal dung and no one can stop them. That means bookstores of brick and on-line can sell Mein Kampf and the vilest writings of Hitler's lackeys. These horrible excrescences are protected and the media screams bloody murder if anyone tries to protect the sacred in Christianity and Judaism from the most putrid attacks.

But the media censors itself about the cartoons mocking the prophet of a religion many of whose adherents want to destroy our country and our way of life. We will fight to the death to protect the artists who create Piss Christ, but we'll also fight to the death to protect the feelings of the people who hate us and kill our children. We have surrendered our free expression to people who are at war with us. They kill us in the name of a religion and we bow and scrape to that religion while letting people dump on Christianity and Judaism.

There's a word for this, beyond the words Stockholm Syndrome and the words Political Correctness. The word is cowardice. Or maybe an even shorter word: defeat. Wake up, America. This is serious."

Stained Ivory Towers

Great article by Thomas Sowell on the resignation of Harvard's Larry Summers and what it portends for higher education here in America.

"Despite incessant repetition of the word "diversity" in academe, the tragic fact is that the academic world is one of the most intolerant places in America when it comes to diversity of ideas. Even the president of Harvard dare not step out of line.

Parents pay the kind of money on which whole families could live, in order to have their children "educated" at elite academic institutions, hearing only one side of a whole range of issues -- race and sex being just two.

Even if every conclusion with which students are indoctrinated were true, unless those students develop their own ability to weigh opposing arguments, these conclusions will become obsolete as new issues arise in the years ahead. These "educated" people will have developed no ability to analyze opposing sides of issues.

Students are getting half an education at inflated prices and learning only how to label, dismiss and demonize ideas that differ from what they have been led to believe. Their "educated" ignorance is a danger to the future of this country."

(Click here if you'd like to read the entire Townhall.com article.)

Crovitz Gets the Nod

Congratulations are in order for my good friend Gordon Crovitz, who was recently tapped by Dow Jones & Co. to become the new publisher of The Wall Street Journal. In his new position, Mr. Crovitz will also oversee Barron's, MarketWatch and its SmartMoney joint venture, among other responsibilities.

Crovitz is an all-around brilliant guy. He knows how to get the job done. During his tenure as president of the electronic publishing group, revenues doubled to more than $500 million. (It just so happens that he is a confirmed supply-sider—never a bad thing).

By the way, in addition to being a daily reader of the Wall Street Journal, I also make sure to follow Dow Jones’ MarketWatch. Ditto for Barron’s. So I guess I can be considered a true Dow Jones consumer.

The markets have given the Crovitz ascension a thumbs-up. Shares of Dow Jones are trading north of 3 percent on the news, flirting just under $40 dollars.

Call It What It Is

This whole brouhaha surrounding the Bush administration’s green-light to a United Arab Emirates company slated to manage six major U.S. ports has nothing to do with protecting homeland security. Allow me to give it its proper name: Islamophobia.

This UAE company-Dubai Ports World—is just a commercial administrator. They are not in charge of security. That responsibility remains tight in the hands of our U.S. Coast Guard and Customs Officials. Moreover, the Committee on Foreign Investment in the United States, (a multi-agency panel which includes seasoned representatives from the departments of Defense, Treasury and Homeland Security) has looked it over and has vetted the deal.

None of the Administration’s eager critics has furnished a scintilla of evidence showing the Administration hasn't done its due diligence. Add it all up, and I think what you’ve got here is a bi-partisan pack of protectionist politicians. Throw in some xenophobic anti-Arab feeling and you get our current state of affairs.

An amusing component of this flare-up is the dovish Democrat crowd’s sudden call to arms. Aren’t many of these vocal critics the same folks who opposed the Patriot Act? The same posturing chorus who attacked Bush and opposed NSA surveillance of al Qaeda phone calls? The same folks who want immediate withdrawal from Iraq? Why this sudden about face? This is utter nonsense.

The UAE is an American ally in an unsettled Mideast—and an important ally at that. They are exactly the kind of Arab country we need in our war effort and our ongoing, critical mission in the region—not unlike our friend Jordan. (In fact, the UAE is a lot better than Egypt and Saudi Arabia.) As the WSJ pointed out today:

“Critics also forget, or conveniently ignore, that the UAE government has been among the most helpful Arab countries in the war on terror. It was one of the first countries to join the U.S. container security initiative, which seeks to inspect cargo in foreign ports. The UAE has assisted in training security forces in Iraq, and at home it has worked hard to stem terrorist financing and WMD proliferation. UAE leaders are as much an al Qaeda target as Tony Blair.”

Could Bush have done a better job in handling all of this? Sure. The President made some clear political marketing mistakes. He should have opened up the black-box of executive review and shared it with members of Congress.

But in the end, America ought to honor its word. We have a duty to keep our promise and we should treat our neighbors fairly. There is no room for prejudice or bigotry here. And so far, no one has proven that executive branch security vetting is flawed.

Make no mistake about it. What is going on right now on television news channels, newspapers and the Internet is simple. It is called Islamophobia.

Tightening the Link

There's an interesting story on executive pay ("Boards Tie CEO Pay
More Tightly to Performance") on the front-page of today's Wall Street Journal.

"Amid rising complaints about excessive executive compensation, an increasing number of corporate boards are imposing performance targets on the stock and stock options they include in their CEOs' pay packages. Such targets are the latest strategy in a decades-long effort to tighten the link between top executives' bank balances and their employers' success."

It appears the number of major U.S. corporations basing a portion of the equity granted to their CEOs on performance targets is steadily increasing. Last year, 30 out of 100 corporations imposed performance targets, up from 23 in 2004 and 17 in 2003. One analyst is predicting that by the end of 2006, half of the nation's big companies will use such awards.

According to the WSJ article, NCR Corp., a maker of ATMs and other products, recruited its CEO last summer partly by offering him a $1 million salary and $500,000 guaranteed bonus for 2005. But he stands to lose 400,000 of his 650,000 options unless the company reaches an undisclosed level of cumulative net operating profit by Dec. 31, 2008. NCR directors embraced the idea of performance-linked options months before they recruited their CEO because they felt a CEO only "should win when shareholders win."

What a novel concept...

Jesse Jackson’s Worst Nightmare

Kathryn Jean Lopez wrote a terrific article over at National Review Online highlighting how a number of black Republicans are making a run for a bunch of big elections this election year.

By now you've probably heard that Steelers gridiron great Lynn Swann is shooting for Pennsylvania's highest office. Then there's Maryland's Michael Steele, who has his sights set on retiring Democrat Paul Sarbanes's U.S. Senate seat. Keith Butler, a Detroit-area pastor, is also running for Senate in his home state of Michigan.

One gentleman whose name you best remember is Ken Blackwell. He's an old friend of mine who happens to be Ohio's Secretary of State, and has all the makings of something very special.

A recent article called "Ronald Reagan's Unlikely Heir" had this to say about Blackwell:

"Ken Blackwell has so many people worried because he represents a new political calculus with the power to shake up American politics. For Blackwell is a fiscal and cultural conservative ... who happens to be black with the proven power to attract votes from across a startlingly wide spectrum of the electorate.

Born in the projects of Cincinnati to a meat-packer who preached the work ethic and a nurse who read to him from the bible every evening, Blackwell has rejected the victimology of many black activists and opted for a different path, championing school choice, opposing abortion and advocating low taxes as a road to prosperity. The 57-year-old is equally comfortable preaching that platform to the black urban voters of Cincinnati as to the white German-Americans in Ohio's rural counties or to the state's business community."

Blackwell is the real deal. Keep your eyes on this up and coming GOP star.

Good News From Texas

Harry Whittington, the 78-year-old man shot by Vice President Cheney in a weekend hunting accident, was discharged from the Texas hospital this afternoon where he was recuperating.

"We all assume certain risks in whatever we do," Whittington told reporters waiting for him outside the hospital. "Whatever activities we pursue and regardless of how experienced, careful and dedicated we are, accidents do and will happen. And that's what happened last" Saturday.

Mr. Whittington is a class act. We wish him a full recovery.

A Good Beginning

Call it the Bush-Bernanke rally.

After two days of Congressional hearings, new Fed chairman Ben Bernanke delivered a “not-too-hot” and “not-too-cold” testimony that reassured financial markets, driving up share prices by roughly one percent across-the-board, while gold, bonds and the dollar were flat.

Meanwhile, for the first time, the Senate voted 53-47 this week in favor of extending President Bush’s investor tax-cuts on dividends and capital gains. Senator John McCain, who voted against these tax cuts in 2003, voted for them this week. That is important news for the GOP Presidential frontrunner.

During his hearings, Ben Bernanke gave the Bush tax cuts credit for economic recovery. Mr. Bernanke also pledged to keep basic inflation around 2 percent or less, and he narrated a positive view of the economy.

His biggest concern on the inflation front seemed to be a spillover effect from higher energy prices. But that hypothetical thought is being overtaken by events in the energy trading pits, where gasoline prices are plummeting and crude oil has dropped below the $60 dollar a barrel threshold. With energy inventories high, lower prices will pull down inflation rates in the next couple of months.

Lower gas prices at the pump are increasing the purchasing power of rising consumer incomes from steadily impressive job gains. This is what the housing pessimists are missing. Any cooling of the home real estate market and the cash-out income value from that market is being more than offset by falling unemployment and rising income from the job creation of healthy American businesses.

The best part of Bernanke’s testimony was his reference to the Wicksellian real-interest rate model, calculated through the difference between inflation indexed bonds and cash bonds. These forward looking bond market indicators tell Bernanke that inflation worries are “well anchored,” and that the Fed’s interest rate target will move to neutrality at 4.75 percent, or more likely, 5 percent in the next couple of months.

The worst part of the Bernanke performance was his lingering references to resource utilization and “excess” economic growth above potential. Remember, in the second half of the 1990’s, unemployment dropped to 3.9 percent, while real economic growth averaged above 4 percent, without upward inflation pressures. The Fed’s aggressive over-tightening in 2000 led to a generalized deflation of commodity and equity and business investment. This was Greenspan’s biggest mistake, predicated on a short-run Phillips Curve trade-off which gave the Central Bank a very bad policy signal.

Hopefully Bernanke will stick with the bond indicators, bolstered by commodity and currency market signs, and will push the Phillips Curve into the background where it belongs. Otherwise, this old Soviet Gosplan approach to central planning will doom the recovery cycle.

Fortunately, Mr. Bernanke will be ably assisted by two new Fed board appointees--Kevin Warsh and Randall Kroszner--both of whom were unanimously approved today by the Senate Banking Committee. Full Senate confirmation will occur in due course. As I’ve been saying all along, George Bush has moved the Fed’s center of gravity toward free-market, supply-side economics.

Notably, Bernanke not only credited tax cuts for economic recovery, he also endorsed school choice and vouchers for better education performance. And he also contended that private market companies, not government, should underwrite terrorism risk insurance.

It’s safe to say that the “old guard” Fed bureaucracy--led by Donald Kohn--doesn’t like this free market assault one bit. They were the ones leaking potshots at young Kevin Warsh, (the Harvard trained lawyer, former investment banker, and senior policy advisor, who will be the only person in the Fed building with any real world financial market experience and contacts).

So, the Bernanke revolution is just beginning. No major news or radical departures were broken during his first two days in front of Congress. Stock markets are looking through the next couple of minor rate hikes toward pro-growth policies and a profitable continuance of the economic expansion.

It’s a good beginning.

Takes on Taxes

The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the least amount of hissing.
- Jean-Baptiste Colbert

I'm spending a year dead for tax reasons.
- Douglas Adams

Isn't it appropriate that the month of the tax begins with April Fool's Day and ends with cries of "May Day!"?
- Rob Knauerhase

Why, sir, there is every possibility that you will soon be able to tax it! (PM William Gladstone, on the usefulness of electricity)
- Michael Faraday

More on Tax Reform

The Club for Growth's Andy Roth penned a pithy column called "Tax Competition" that echoes the thoughts I recently expressed in my blog "Voting with Their Feet". Here it is:

"Do liberals believe in tax competition? Do they recognize that it exists? This is a serious question and I honestly don’t know the answer. They probably believe on some level that it does exist, but since it doesn’t mesh well with their overall philosophy, they choose to ignore it.

I bring this up because I came across this article about how the Swiss are cutting tax rates to compete against Ireland and the EU.

Consider an example: Two towns border each other. Town A has a sales tax rate of 8.125%, while Town B has a sales tax rate of 5%. Is it not common sense to assume that people will spend more money in Town B, and as a result, Town B will collect more in tax revenue? (this really happened)

Fact is, liberals need to admit that incentives really do matter. People prefer to be taxed less than to be taxed more. They don’t overpay their tax returns (not even John Kerry does that) and businesses like areas where taxes are low, even if that means going overseas.

We can move mountains if liberals concede that fact. Let’s agree to simplify the tax code and slash rates, or even abolish the income tax and move to a low national sales tax.

Once we agree on that, then we can debate the old argument about tax fairness until everyone is blue in the face. But, the point is that everyone needs to recognize that the Laffer Curve is a mathematical verity. Until then, liberals will continue to look like ostriches with their heads buried in the sand."

Extension of Bush Tax Rates Wins GOP Support

Although it was drowned out by the Bernanke hearings, the Wall Street Journal story today about the Senate sending a signal of extending Bush tax cuts is very important and very positive. In a 53-47 vote, the Senate has signaled clear support of a two-year extension of President Bush’s 15 percent rates on cap gains and dividends.

There was another vote by same margin to patch up the AMT. This is very bullish, and investors everywhere should take notice.

The bill goes into House and Senate conference and then will be voted on again on the floor of each chamber for final passage. The glitch may be that Senator Charles Grassley, who is chairman of the finance committee, has said there will have to be tax increase offsets to meet the phony static revenue forecast by the Joint Tax Committee and the Congressional Budget Office.

But where there’s a political will, there’s a political way. And for the first time the Senate has marched in the right direction on this vital pro-growth pro-Investor Class issue.

Bernanke

I haven’t parsed through the transcript of Bernanke’s Q & A before the House committee yet. I’ll do that later this evening. But in his written testimony, there was very little new information except perhaps, that future Fed actions will be “data-driven.” The rest of the written statement was designed not to make news. For what it’s worth, stock market reaction to Bernanke was muted. Bonds were flat and gold fell $7.50.

More on this later.

Voting With Their Feet

In case you didn’t see it, Barron’s published a great story called,“Revolution on Wheels”. Basically it makes the point that taxes matter to folks in choosing where to live.

“Quietly, without banners or raised fists, they are packing up their families and belongings and moving from high tax states like California and New York to lower-tax locales like Florida, Nevada and Texas.”

Ohio University economics professor Richard Vedder says over the past five years, 1.2 million people moved out of the ten highest taxed states, while an almost equal number, 1.3 million, moved into the low tax states. “It’s a stealth migration, and it’s one of the biggest, most significant yet least recognized movements of the population in American history,” says Vedder. “People are voting with their feet to say that taxes do matter.”

This trend has been going on for a long time. It has been chronicled by Art Laffer, Victor Canto, Steve Moore as well as Richard Vedder. Among the lowest taxed states are New Hampshire, Delaware, Tennessee, Alabama, both Dakotas, Florida, Texas and Missouri. Among the highest taxed states are Maine, New York, Hawaii, Rhode Island, Wisconsin, Vermont, Ohio, Nebraska and Utah, as well as Washington D.C. New York and New Jersey have huge tax bites on estates.

This is why our New York State Tax Reform Commission proposed a “five percent solution” for personal and corporate income taxes, with elimination of taxes on capital gains, estates and dividends. We noted that whether regionally, nationally or internationally, smart money and smart people move to where the tax and business environment is most hospitable.

Hillary’s 2008 Hopes

Delegates to the recent Conservative Political Action Conference in Washington overwhelmingly believe that Hillary Clinton will be the Democratic nominee for President in 2008. But, the Rasmussen poll shows her support slipping badly. Just 27 percent of Americans say they would definitely vote for the former First Lady, while 43 percent would definitely vote against her.

Personally, I don’t think that American voters want the Clinton family to repopulate the White House. Maybe in ten or fifteen years, as memories grow dim, but not now.

Incidentally, Rasmussen has President Bush’s approval rating up to 49 percent.

Taking a Page From the Celtic Tiger Miracle

Washington economist Kevin Hassett of the American Enterprise Institute shows in this week’s National Review that the Laffer Curve clearly works with corporate tax rates. Using OECD data, the U.S. has a high combined federal corporate tax and average local corporate tax that comes to almost 40 percent, but yet, we collect revenue equal to only 2.2 percent of GDP.

Ireland, on the other hand, has a corporate tax rate of only 12.5 percent, yet collects revenue equal to 3.6 percent of GDP. Of the countries represented in the study, the U.S. has the highest corporate tax rate, but collects the second lowest amount of revenue.

My thought: Our 35 percent corporate tax rate should be dropped to at least 25 percent. Ditto for our personal income tax rate. Then keep the tax rate for capital gains, dividends and estates at 15 percent. Add to that full cash expensing for businesses, unlimited universal Roth IRAs and territorial (not global) corporate tax jurisdiction, and you’d have a pretty good pro growth tax reform and simplification plan.

Then, go ahead and get rid of all the other goofy tax credits and tax subsidies. In other words, eliminate budget earmarks and tax earmarks that have so distorted our tax system and opened the door to lobbyist cash-for-earmarks corruption. Conservatives are rightly concerned with budget earmark corruption, but let’s not forget the pressing need for tax reform to eliminate tax earmark corruption. And, by the way, to grow the economy at its fullest potential—which in or high productivity world is probably 4.5 percent per year.

More on the Bush Budget

As I noted earlier, conservatives have been too quick to dismiss President Bush’s latest budget. It’s a lean budget that carves out 141 program cuts, proposes another real inflation adjusted decline in non-security spending, and also slows Medicare spending.

Recent news reports show that the budget does in fact include personal savings accounts for Social Security reform, as well as a new dynamic tax scoring unit in the Treasury. The budget also includes investor tax cut extensions with the ultimate policy goal of making all the tax cuts permanent. It increases defense spending, including a beef up in the defense investment accounts, and the newly formed civilian operations for foreign reconstruction and stabilization for Iraq, Afghanistan and elsewhere.

In other words, it’s a pro-growth, tax cutting, strong on defense, Reaganesque budget.

Mr. Bush’s first three budgets were profligate. But his last two represent a return to smaller government along with lower taxes. In other words, in ’02 ’03 and ’04, he was a big government conservative. But in ’05 and ’06 he is morphing back into a smaller government conservative. He is maintaining his theme of ownership and personal responsibility for retirement, health care (HSAs) and education. This is the investor class theme, enhanced by home ownership, small business creation, and family net wealth expansion.

My biggest problem with this years’ budget is the lack of spending offsets to the $70 billion dollar emergency funding for Iraq and Afghanistan. And the $20 billion dollar emergency funding for Katrina. This will be the Republican challenge in this year’s budget debate, along with getting the investor tax cuts extended.

Some Fun..

A woman in a hot air balloon realized she was lost.

She lowered her altitude and spotted a man in a
boat below. She shouted to him, "Excuse me, can you
help me? I promised a friend I would meet him an hour
ago, but I don't know where I am."

The sailor consulted his portable GPS and replied,
"You're in a hot air balloon, approximately 30 feet
above a ground elevation of 2346 feet above sea level.
You are at 31 degrees, 14.97 minutes north latitude and
100 degrees, 49.09 minutes west longitude."

She rolled her eyes and yelled down, "You must be a
Republican."

"I am," replied the man. "How did you know?"

"Well," answered the balloonist, "everything you
told me is technically correct, but I have no idea
what to do with your information, and I'm still
lost. Frankly, you've been no help to me."

The man smiled and responded, "Then you must be a
Democrat."

"I am," replied the balloonist. "How did you
know?"

"Well," said the man, "you don't know where you
are or where you're going. You've risen to where
you are, due to a large quantity of hot air. You
made a promise that you have no idea how to keep,
and you expect me to solve your problem. You're in
exactly the same position you were in before we met, but,
somehow, now it's my fault."

Warsh is Right for the Job

There’s a Bloomberg news story dated February 10th, that takes a couple of pot shots at Fed nominee Kevin Warsh. I’m not sure exactly what his critics are complaining about. Former Fed vice chairman Preston Martin said, “Kevin Warsh is not a good idea…If I were on the Senate Banking Committee…I would vote against him.” But Martin doesn’t say why, though the inference is that Warsh is not an economics PhD. Perhaps another inference from some others quoted in the story is that Warsh works in the Bush White House as the executive director of the National Economic Council.

Countering these criticisms, are favorable views from former SEC chairman William Donaldson, former Bush director of the NEC Steve Friedman, JP Morgan Chase chairman William Harrison and Morgan Stanley chairman John Mack. Before coming to the White House in 2002, Warsh was an M & A banker at Morgan Stanley. Warsh graduated from the Harvard Law School in 1995. If confirmed by the Senate, Warsh would actually be the only person on the Fed board with any real world financial market experience, something all those Fed PhDs don’t have, but certainly could use.

Warsh has a lot of financial regulatory experience, as he was the White House point man for the SEC, the FDIC, the Commodity Futures Trading Commission and Sarbanes-Oxley. So here too, he brings valuable real world experience covering some difficult issues. Sources in the White House tell me that new Fed chairman Ben Bernanke wants Warsh to be the Fed’s emissary to Wall Street and to bolster Fed regulatory expertise. So it’s a good fit actually, despite the inevitable nitpicking.

On monetary matters, Warsh will undoubtedly maintain the Fed’s commitment to domestic price stability as the keystone to economic growth—a point Bernanke will emphasize in his Humphrey-Hawkins testimony before Congress this week. Equally important, Warsh is a free-market advocate who favors deregulation, lean budgets, low tax rates, and free trade.

President Bush has remodeled the Fed with six appointees to the seven-member board, most of whom strongly favor free-market economics. This is a good thing. And Warsh’s legal and regulatory background, as well as his financial market and banking experience, will make him a strong addition to the central bank panel.

There’s no law that says good central bankers have to have PhDs. This carping against Warsh is unfair. The guy is smart and has considerable economic policy experience.

Shrinking Budget Deficit

Believe it or not, the budget numbers for January showed a surplus for the second straight month. Tax receipts are coming in around 10 percent, with corporate taxes up 27 percent, individual taxes up 11 percent, and non-withheld collections (cap gains and dividends) came in plus 16 percent.

Total spending is still too high at 7.5 percent, but at this rate the FY 2006 deficit could come in around $280 billion. That is way, way below official Washington estimates.

Score one for the economy and the Laffer curve tax cut effect.

Tonight's Lineup

On CNBC's "Kudlow & Company" tonight:

An in-depth look into the markets and economy with John Augustine, chief investment strategist at Fifth Third Asset Management; Doug Kass, Seabreeze Partners Management President; Steve Leisman, CNBC Senior Economics Reporter; and Walter Williams, George Mason University Professor of Economics.

The panel will also discuss Toyota, as well as Pfizer.

We will also have a political debate centering on WMDs and wiretapping. Our guests include Alan Dershowitz, Harvard Law professor and author of "Preemption"; Jed Babbin, The American Spectator Contributing Editor; and John Loftus, former federal prosecutor/author/terrorism expert.

TONIGHT'S POLL:

Is Toyota saving the American car business?

Cast your vote at www.kudlowcnbc.com.

Thoughts on the GOP

“Conservatives Unsettled About Movement’s Future,” is the New York Times headline about the CPAC conservative conference in Washington. This is nothing new. It’s very fashionable for conservatives to grouse about one thing or another; this is a long-standing theme. Of course, I share some of this worrying about the size of government, the budget, corruption charges and the possibility that the Dems could score big in the mid-term election this November. But there is a compelling counter-argument.

First, Bush has moved the Supreme Court to the right with the ascendance of John Roberts and Sam Alito. If history serves as our guide, this positive development will be long lasting, as both men ought to serve on the high court for many, many years to come.

Second, Bush has made the Federal Reserve more supply-side with the appointments of Ben Bernanke, Kevin Warsh and Randall Kroszner. This is bullish.

Third, the Commander-in-Chief will get his deal on the Patriot Act—a favorable compromise is currently in the works.

Fourth, Bush will also get most of what he wants on the NSA surveillance of al Qaeda phone calls.

Fifth, while far from perfect, the Texan has submitted a Reaganesque budget which slows spending, cuts taxes and expands homeland and national security.

Meanwhile, led by Jeff Flake, Mike Pence, Tom Coburn and John McCain, Congress is moving toward earmark reform to further cut the budget and deal with the corruption problem. In fact, this year’s budget and last year’s budget mark a turn-a-round toward fiscal restraint after the overly expansionary budgets in the prior four years. Hopefully the Washington Republicans will execute this budgetary move toward smaller government and less spending (along with lower taxes).

Also interesting to note is that Dem Senate Leader Harry Reid has been fingered (see the AP story) as a tool of Jack Abramoff’s corrupt lobbying. So, despite the Main Street Media’s insistence on this being strictly a GOP problem, the weight of evidence shows corruption lies on both sides of the aisle.

Finally, the economy is strong, with jobs going up and unemployment coming down. Naturally, challenges still remain in all these areas, especially with the course of the battle of Iraq and the growing threat of a nuclear ambitious Iran. But there are always challenges and political uncertainties. Nevertheless, pro-growth, low-tax, low-budget and strong defense policies are good for the nation and good Republican politics. If Mr. Bush can communicate and merchandise these policies—and admittedly this is always a big “if”—then conservative values and politics are in better shape than most folks seem to think.

Tonight's Lineup

On CNBC's "Kudlow & Company" tonight:

A market panel consisting of Herb Greenberg, Marketwatch Sr. Columnist; Noah Blackstein, Dynamic Mutual Funds Vice President & Portfolio Manager; Barry Ritholtz, Ritholtz Capital Partners President; and Susan Byrne, Westwood Holdings Group Chrmn. & CEO.

Stephen Kamman, CIBC World Markets Networking Analyst will discuss Cisco.

A political debate between Star Parker, CURE President/Scripps Howard Columnist and Katrina vanden Heuvel, The Nation Editor & Publisher.

TONIGHT'S POLL:

Who's the bigger draw to Satellite radio: Stern for Sirius or Oprah for XM?

Cast your vote at www.kudlowcnbc.com.

When Howard Dean Speaks, People Cringe

This morning on ABC's Good Morning America, DNC head-honcho Howard Dean attacked President Bush for turning the United States into Iran. (No, that is not a typo.)

Dean muttered the following: "All we ask is that we not turn into a country like Iran where the President can do anything he wants."

Hmmmm...

This latest unhinged quote from the former Vermont governor adds to his burgeoning basket of virulent, out-to-lunch remarks which include:

"I hate the Republicans and everything they stand for."

"The idea that the United States is going to win the war in Iraq is just plain wrong.”

"This is a struggle of good And evil. And we’re the good." (Dean on Dems vs. Republicans.)

With sophomoric enemies like Howard, who needs friends?

Shame on You Yahoo (Part II)

It looks like Yahoo is at it again.

According to the latest news reports, Yahoo went ahead and provided Chinese officals evidence that led to an eight-year prison sentence for a Chinese Internet user interested in joining the dissident China Democracy Party. This is the second known time Yahoo has aided Chinese officials in managing their crackdown on free speech by supplying the communist government with user information.

Here's my take:

Human rights should be a great rallying cry for all Americans, from the President on down. This includes American corporations, and all of us as individuals. Ronald Reagan's support of the Soviet refusenicks is an example that comes to mind.

In today's world of increasing globalization, the quest for freedom remains just as important. Neither Yahoo nor Google will be permitted to dominate China cyberspace. They will be permitted only a small slice of that pie. But China needs American business participation as much as we need them. That is the reality.

So I continue to believe that compamies like Yahoo and Google will make their deals with the People's Republic of China, but on the issue of human rights and free speech--which are core American values we export to the rest of the world--these companies should not go quietly into the night without first raising our flag and championing the rights of the refusenick prisoners.

Tonight's Lineup

On CNBC's "Kudlow & Company" tonight:

We will discuss the recent lawsuit questioning the constitutionality of Sarbanes-Oxley with Fmr. Labor Secretary Robert Reich and Steve Moore, WSJ Editorial Board Sr. Economics Writer.

Michael Carvin, Sarbox Suit Attorney will join in the discussion.

Also, a bonds debate with Joe LaVorgna, Deutsche Bank Chief Fixed Income Economist & Managing Director, and David Goldman, Cantor Fitzgernald Global Head of Fixed Income Research.

We will also explore which companies are poised to benefit from the recent budget bill.

TONIGHT'S POLL:

Is Sarbanes-Oxley good or bad for business?

Cast your vote at www.kudlowcnbc.com.

Think Outside of Sarbox

Sarbanes-Oxley has some angry hounds on its tail. And it looks like these dogs have a lot of bite accompanying their bark.

The Free Enterprise Fund filed a federal lawsuit yesterday challenging the constitutionality of the 2002 law, claiming that the Public Company Accounting Oversight Board (PCAOB) a.k.a. “Peek-a-boo”, (the quasi-private agency that Sarbox established to oversee the auditing of public companies), violates the Appointments Clause of the U.S. Constitution.

For those of you unfamiliar with the Appointments Clause, the clause gives the power to appoint our nation’s officers to the President, with the advice and consent of the Senate. The clause ensures that regulatory agencies are accountable to elected officials, who are in turn accountable to voters.

The problem, as pointed out in the WSJ today, is that, “[U]nder Sarbox, the President can neither appoint nor remove Peekaboo members. Sarbox requires that the appointed Securities and Exchange Commissioners themselves appoint the oversight Board. Similarly, only the SEC can remove Board members, and then only if they can be shown to have willfully violated federal laws. Nowhere in any of this is there a role for the elected executive.”

“Sarbox lacks a "severability" clause, which means the entire law is held unconstitutional if even one part of it is. And if history is any guide, the courts would give Congress limited time to "fix" the Appointments violation. Yet even this would be an opening for Congress to rethink what Sarbox has wrought. A growing number of Members are concerned about the impact of Sarbox, especially on smaller business and the capital markets, and a finding of unconstitutionality would reopen the debate.”

My basic spin is that Sarbox was a bad, over-regulatory idea in the first place. It has cost companies and their shareholders unspeakable amounts of money. Anything that can be done to change Sarbox, remedy it, improve it, abolish it, whatever, is fine by me. We already have plenty of laws on the books to deal with corporate corruption, both civil and criminal. The trick is to haul people off to court and bust them when they do wrong. After all, free-market capitalism requires the rule of law if it is too work properly. But market economics must not be stifled by over regulation.

This strikes me as a very clever lawsuit with very smart players, Ken Starr in particular—relying on the so-called Appointments Clause to overturn the Peek-a-boo accountability board. By the way, this board is imposing tax fees on companies across the spectrum. So, not only is it an over regulator, it is an overtaxer as well. And if Starr is right, and SarBox lacks a severability clause, so that the entire law is thrown out because of the appointments clause, then he’ll be doing the Lord’s work as far as I’m concerned.

According to WSJ editorial, “Most of the post-Enron prosecutions have been made with pre-Sarbox laws. Since 2002, there have been more than 700 federal corporate fraud convictions, and some $266 million in restitution, fines and forfeitures.” Think about it. A lot of famous people have been tossed behind bars.

As we all know, jail is just the wrong kind of pinstripes. Nothing concentrates corporate minds better than the horror of an ill-fitting, unbespoked prison uniform. But that has nothing to do with Sarbox. It has to do with prosecuting our existing laws.

So, with a tip of my hat, I wish the plaintiffs all the best in the Free Enterprise Fund lawsuit challenging Sarbox.

May the hounds get the fox.

A Few Poignant Quotes

"And he gave it for his opinion, that whoever could make two ears of corn, or two blades of grass, to grow upon a spot of ground where only one grew before, would deserve better of mankind, and do more essential service to his country, than the whole race of politicians put together."
~ Jonathan Swift

"When a new source of taxation is found it never means, in practice, that an old source is abandoned. It merely means that the politicians have two ways of milking the taxpayer where they had only one before."
~ H. L. Mencken

"You cultivate the essential virtues: high purpose, intelligence, decency, humility, fear of the Lord, and the passion for freedom."
~ William F. Buckley, Jr.

Tonight's Lineup

On CNBC's "Kudlow & Company" tonight:

Steve Forbes, Forbes Inc. President & CEO/Forbes Magazine Editor-in-Chief will be co-hosting with Larry this evening as we engage in an exhaustive Washington to Wall Street discussion on issues including inflation, taxes, budget, markets and much more.

Our guests include:

John Augustine, Fifth Third Asset Management Chief Investment Strategist;

Tom Herman, The Wall Street Journal Columnist;

Senators Byron Dorgan, (D-ND) and Jon Kyl, (R-AZ); and,

Representatives Robert Wexler, (D-FL) and David Dreier, (R-CA).

TONIGHT'S POLL:

Steve Forbes is predicting the worst inflation in 25 years.

Do you agree or disagree?

Cast your vote at www.kudlowcnbc.com.

Where There's Smoke

According to the front page of today’s New York Sun, The House Permanent Select Committee on Intelligence is studying twelve hours of audio recordings between Saddam Hussein and his top advisers that may finally shed some light on the whereabouts of Iraq's weapons of mass destruction.

The HPSC has already confirmed through the intelligence community that the recordings of Saddam's voice are authentic, according to its chairman, Rep. Peter Hoekstra of Michigan, who would not go into detail about the nature of the conversations or their context. They were provided to his committee by a former federal prosecutor, John Loftus, who says he received them from a former American military intelligence analyst.

Mr. Loftus will make the recordings available to the public on February 17th at the annual meeting of the Intelligence Summit, of which he is president. On the organization's Web site, Mr. Loftus is quoted as promising that the recordings "will be able to provide a few definitive answers to some very important - and controversial - weapons of mass destruction questions."

It should be noted that John Loftus is a highly credible player. I have spoken with him many times on John Batchelor’s ABC nightly radio program that I co-host on Tuesday nights. Loftus comes out of the Intelligence community and has maintained strong ties within this community. Furthermore, Eli Lake of The New York Sun is a darn good investigative reporter. Very sharp. Lake was instrumental in breaking the U.N. Oil-for-Food scandal.

This story comes on the heels of top former Iraqi air force general Georges Sada’s recent claims that Saddam used civilian airplanes to ferry chemical weapons to Syria in 2002. According to Sada, the flights - 56 in total - attracted little notice because they were thought to be civilian flights providing relief from Iraq to Syria, which had suffered a flood after a dam collapse in June of 2002.

Fueling further suspicions was Secretary of Defense Rumsfeld's statements last week to the National Press Club that, “We found a bunch of jet airplanes buried in Iraq. Who buries airplanes? I mean, really.”

This story is still flying underneath most radar screens and has the makings of something big. Investor’s Business Daily ran an editorial on it recently while the Sun has been leading the charge. I blogged this unfolding WMD story twice within the past couple weeks as well. But what is bothersome about this story is that the Main Street Media players like The New York Times and The Wall Street Journal haven’t covered any of it. This is bothersome and ultimately shameful.

Knowing Saddam and all his evil mischief; knowing Bashar Assad and all of his evil mischief; and knowing that the ruling Baathist parties in Iraq and Syria were first cousins, this whole story has a highly plausible ring to it. It has to be taken seriously.

Stay tuned. This could get very, very interesting…

Tonight's Lineup

On CNBC's "Kudlow & Company" tonight:

A Washington to Wall Street Panel with --

Paul Begala, "Take It Back" Author and former Senior Clinton Advisor

John Fund, WSJ Opinion Journal.com columnist

Rich Karlgaard, "Life 2.0" Author and Forbes Publisher

Brian Rogers, CIO, T. Rowe Price

Gary Shilling, President, A. Gary Shilling & Co.

Also Elon Musk, CEO of SpaceX to talk about his unique venture and the defense industry.

Bush's Budget

On Monday the president will submit a tough budget, with about $65b in medicare savings derived mainly from hospitals,nursing homes and other providers. There will also be higher premiums from upper-income beneficiaries.

Non-security discretionary accounts will again be held below inflation, with 141 programs targeted for elimination. In 2005 this area declined by 1%.

Investor tax cuts, now set to expire in 2008, will be extended for the duration of the five-year budget planning period.

There will also be a request for a line-item veto or enhanced rescission authority to deal with pork-barrel earmarks. According to White House sources, the administration wants to eliminate the nearly $30b of 2005 earmark spending.

However, these sources tell me that the 2006 projected budget deficit will be $423b, or 3.2% of GDP. This would be about $100b above last year's total.

This number is going to be a big political problem, especially for legislative passage of the investor tax cut extensions for dividends and capital gains. Moderate Republicans in the Senate like Olympia Snowe, Susan Collins, Mike Dewine George Voinovich and others will gag over the deficit estimate even though lower tax-rates on capital have generated much higher tax collection revenues according to the Congressional Budget Office.

Sen. John McCain, the 2008 GOP presidential frontrunner, is widely expected to oppose tax cut extensions.

Office of Management and Budget sources also tell me that the Treasury is projecting only 6% tax receipt growth, much lower than the 14.5% growth of the past year. This is hard to understand with the economy expected to rise by 3% or better.

Even assuming better revenue growth, the big problem behind the $423b deficit is a series of extra budget requests for Iraq, Afghanistan, Katrina and avian bird flu that will total about $90b.

I have never bought into the Rubinomics view that deficits crowd out economic growth. Nor do I believe that deficits are correlated to interest rates.

Instead, economic behavior responds to changing tax-rate incentives and regulations on business. Of course, federal overspending can drain private resources for inefficient government use, exerting a drag on the economy.

And it is monetary policy that determines inflation and interest rates. Excess money creation by the Federal Reserve, not budget deficits, causes prices and rates to rise.

But it is the politics of the Bush deficit that may drag stocks and the economy lower. The deficit could crowd out tax cuts in the current political environment in Washington, D.C.

Deeper budget cuts and a lower deficit may be necessary to win over moderate votes for pro-growth tax cut extensions.Then, stronger investment markets and a larger economy will do the rest of the deficit-cutting job as tax collections keep surprising on the upside.

Can the Washington Republicans do it? They'll get no help from most Democrats. But the fate of the election-year economy and stock market will hang in the balance.

Tonight's Lineup

On CNBC's "Kudlow & Company" tonight:

Secretary of Labor Elaine Chao will discuss the job numbers report.

Ben Stein, Economist/Actor/Author will be on board to offer his take on a host of issues including the economy, politics and the stock market.

We will also have David Tice, The Prudent Bear Fund Portfolio Manager, and Frank Gannon, AIG Chief Investment Strategist, to discuss what they think lies ahead in the economy and politics.

TONIGHT'S POLL:

Will Rep. John Boehner turn things around for the GOP?

Cast your vote at www.kudlowcnbc.com.

Boehner's Baton

It has turned into an absolutely marvelous afternoon here in Manhattan. The morning rain has tapered off, the skies are baby-blue, and the temperature reading is—get this—61 degrees. If I didn’t know any better I’d think June was just around the corner.

This welcome change in the weather here in New York has me thinking about political change in Washington. As you’re well aware, I’ve been beating the drum for quite some time regarding the need for dramatic reform from Republicans. Simply put, the GOP has lost its way. Reagan’s party has been sitting on the principled, conservative playbook for way too long. Common sense is missing. Spending restraint is missing. Priorities are missing. And it has been like this for quite some time.

The congressional mad dash for the earmark cookie jar has been going on for ten solid years now. This shameful lack of fiscal responsibility has resulted in a tenfold increase of these wasteful pork-projects; from 1400 to 14,000. This willful and reckless disregard of taxpayer dollars is a stain on GOP leadership and has a distinct possibility of crowding out tax cut extensions on dividends and capital gains. Enough is enough already.

Yesterday’s news that John Boehner will fill ousted Tom DeLay’s House Majority Leader shoes is a positive sign. While I’m not ready to suggest that Boehner will be a miracle cure for what ails Republicans, I will say that Boehner sure beats Blunt. Of course, I would have liked to have seen John Shadegg—the true-reform minded candidate—get the tip of the GOP hat. Shadegg is a small-government conservative who voted against the 2005 Transportation Bacon-Bill and the Medicare prescription-drug bill. He’s a member of the maverick Republican Study Committee and an ardent believer in William F. Buckley’s truism that, “There is an inverse relationship between reliance on the state and self-reliance.”

But the House has spoken. It has given Boehner the baton. It is now up to him and Speaker Hastert to knock some sense into the GOP and get them back to core principles. Will they have what it takes to crack down on earmarks? Will they be able to lead the GOP from the wasteful spending wastelands and engineer true and lasting budgetary and lobbying reform? Time will tell.

In the meantime, I’ll just enjoy this gorgeous springlike afternoon.

Set Up the Microphones Already

All the economic pessimism over 1.1 percent 4th quarter GDP was blown away by a very strong jobs report this morning. Including revisions, January’s employment level is a huge 317,000 above the initial December level reported a month ago. In fact, over the past three months, non-farm payrolls have averaged 229,000 increases per month. That’s explosive. And worker wages are picking up steam with back-to-back gains of 4/10ths of 1 percent in December and January, giving us 3.3 percent wage growth over the past year. With falling gasoline prices, consumer purchasing power and retails sales are also being boosted.

I’m waiting for a strong statement from Salesman-in-Chief George W. Bush. It’s 11:30 am; the jobs report is now three hours old, but still no Rose Garden appearance by the president to report the strong data (which includes an impressive 4.7 percent unemployment rate). I’m also waiting for him to make a strong case for investor tax cut extensions on dividends and cap gains which, along with lower income taxes, have a great deal to do with our prosperous economy.

What are they waiting for? What’s up with this?

Tonight's Lineup

On CNBC's "Kudlow & Company" tonight:

We will be joined by Robert Reich, Fmr. Labor Secretary and Steve Moore, WSJ Editorial Board Sr. Economics Writer, in a political discussion on a panoply of topics including Rep. John Boehner's victory as House Majority Leader.

Richard Dugas Jr., Pulte Homes CEO on the housing market.

Anne Stevens, Ford COO to discuss Ford's direction.

Lou Ann Hammond, Carlist.com CEO will add her take on the auto industry.

And Doug Kass, Seabreeze Partners President and John Calamos Sr., Calamos Investments Chairman, CEO & CIO, will offer their views on the economy and markets.

TONIGHT'S POLL:

Will ethanol from corn, "woodchips, stalks or switchgrass" end our addiction to Middle East oil?

Cast your vote at www.kudlowcnbc.com.

Get Out of the Way

This whole thing about an American addiction to oil misses the point. The emphasis ought to be on economic growth and prosperity. We have to produce more energy wherever economics and profits dictate.

We don’t need any central planning. And we don’t need any budget or tax subsidies. What we need is for Uncle Sam to get out of the way. Allow the private sector to sort the details out. In fact, if government really and truly wants to lend a hand, then they can start by eliminating all these unnecessary regulatory roadblocks, hoops and hurdles. Get rid of the barriers. Give the market freedom to work.

Put an end to all this talk about energy independence and start backing it up with action. Give the green light for new refineries. Open up drilling in ANWR and the Outer Continental Shelf. And stop threatening oil companies for making too much money. Enough posturing already. These are the same companies who labored under sub-$20 dollar oil thoroughout much of the 1990’s. The ridiculous attacks aimed at Big Oil and the triple taxing of oil company profits must come to an end. It does the exact opposite of its intended purpose and serves to undercut true energy independence.

As I recently wrote, Bush’s energy plan for hydrogen and hybrid batteries, ethanol from woodchips, stalks and switch grass -- all that 1970’s Jimmy Carter-Greenie stuff -- is perfectly fine. If the markets want this, if they think it makes financial sense, well at $70 dollars a barrel they can do it all profitably without government subsidies. The same thing holds true for nuclear, LNG, coal-conversion or oil sands, etc.

But at the end of the day, Washington needs to get out of the way