So, the beat goes on concerning debt ceiling negotiations between Joe Biden and Kevin McCarthy. They took pot shots at each other over the weekend, but apparently, they are scheduled to take in a drive-in movie today in the White House at 5:30 p.m.
That drive-in movie part is a joke, but they are scheduled to meet. My great hope is that Speaker McCarthy holds the line on the Republican plan to cut almost $5 trillion over 10 years using budget caps, plus work requirements, plus permitting reform, at a minimum. The GOP House has the only plan in town to raise the debt ceiling. It's the only one around and it should be the baseline for all negotiations.
Senate Democratic leader Chuck Schumer is suddenly quiet as a mouse. The Senate Republicans are backing McCarthy and I think one of the key arguments should be: passing the plan will reduce inflation, keep interest rates lower than otherwise would be the case and increase economic growth.
Passing the McCarthy plan might, just might, spare us a recession with high inflation. Of course, in Hiroshima, Japan at the G-7, President Biden couldn't help himself and started taking pot shots at McCarthy. Here is another pot shot:
JOE BIDEN: "It's time for Republicans to accept that there is no bipartisan deal to be made solely, soley on their partisan terms. They have to move as well."
I don't even know what that means, because, for two years plus, we haven't heard a bipartisan word out of Joe Biden, but then he launches into tax policy with this non sequitur.
JOE BIDEN: "There's a lot of things that they refuse to look at in terms of tax generation, as well as what kinds of people we're going to increase taxes for...We went from having roughly 740 billionaires to about a thousand billionaires in America. They're paying an average tax rate of 8%."
First of all, this 8% number that Biden constantly uses is another bottomless Pinocchio, just like his claim that he's cut $1.7 trillion from the budget deficit. The White House geniuses have calculated what unrealized capital gains revenues would come to if they were the law, but they are not the law. Only realized capital gains tax revenues can be counted and, by the way, capital gains receipts have fallen significantly because of last year's bear market in stocks, largely a function of Bidenomics and his 33% approval rating.
The CBO, the Joint Tax Committee and IRS numbers all show that the wealthiest people in the country pay roughly 42% of total tax revenues. No other group comes even close and if Hunter Biden's tax returns were counted, then the wealthiest 1% would pay an even larger percentage and, unlike President Biden, I'm glad the United States is producing more and more billionaires. That's a sign of prosperity. They are great job creators.
On the better side, Speaker McCarthy over the weekend drew a red line in the sand over spending cuts:
KEVIN MCCARTHY: "I do not think it's extreme that we simply say we should spend less than we spent this year."
Good for Kevin McCarthy! Incidentally, while White House and Republican congressional staffers did meet today without any breakthroughs, the big issues are which baseline to use, FY 2022 or 2023, or some place in between. They are bickering over the speed limit for budget caps and whether to apply them for 2 years or 10 years.
Former Senator Phil Gramm writes in the Wall Street Journal today that FY ‘24 discretionary spending adjusted for inflation is projected at $1.86 trillion, a 10% real increase from the pre-pandemic estimate, but get this: non-defense outlays, domestic outlays, have risen 18.8% over the same period, that’s adjusted for inflation, while defense outlays have dropped about a quarter of 1%.
Do Democrats really believe that nearly 20% growth in real domestic discretionary spending doesn't deserve to be slowed down? Save America. Pass the bill. It's the only bill.
This article is adapted from Larry Kudlow’s opening commentary on the May 22, 2023, edition of "Kudlow."