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A Bullish Tea-Party Revolt

This past week I gave a speech to a group of investors. The organizer of the event e-mailed me the night before, asking that I please try to be optimistic. Well, that's my usual habitat. But optimism has been hard for me this year. Our muddle-through economy and lackluster stock market, challenged by so many taxing, spending, and regulating problems coming out of Washington, are the reasons why.

#ad#In fact, until recently, I've been advising people to take profits in the stock market, rather than buy-and-hold. You should keep your money before the Obama IRS takes it from you.

But following the tea-party primary victories in Delaware, New York, and New Hampshire this week, I'm once again getting energized.

Free-market capitalism is on the comeback trail. That's one of the key tea-party messages. And make no mistake about it: The free-market power of the tea-party political revolt is totally bullish for stocks and the economy.

In short, this is a revolution.

The political elites in both parties don't get it. Nor do the mainstream media. But the tea-party movement is stopping Obamanomics dead in its tracks. And it will overturn the Keynesian big-government planning effort now in full force in our nation's capital. The tea parties are Reaganism reincarnate, and then some.

It's all there in the Contract from America: Limited government, individual liberty, economic freedom. Defund Obamacare. No tax-and-nationalize energy scheme. Stop the tax hikes and move to a flat-tax system. No special favors and subsidies. No crony capitalism.

Oh, and let me underscore the tea-party revolt against runaway government spending and debt-creation. No TARP. No stimulus. No Obamacare. No Bailout Nation for GM, Fannie, Freddie, and AIG. Instead of federal spending running up to 25, 26, or 27 percent of GDP, look for our new tea-party representatives to move it back to 20 percent of the economy, or even less.

There's a great story in Friday's Wall Street Journal called 'Tea Party's Rise Gives Business Pause.' The thrust is that big businesses and their K Street lobbyists are worried that special tax breaks and subsidies for Wall Street, timber, fast food, road building, energy, farming, autos (such as cash for clunkers for the car lobby), and housing (including homebuyer tax credits for the realtor and homebuilder lobbies) will be blown away by the new tea-party representatives. Well, they should be worried.

#page#Quoted in the article, Raul Labrador, the tea-party-backed House candidate from Idaho, says he opposes all government programs that help one segment of business over another. 'I'm against all of them,' he tells the Journal. 'I don't think the government should be picking winners and losers. We should have taxes low for everybody, and not just for a particular industry or segment.'

#ad#In other words, this is not going to be your father's Congress. Nor is it going to be your father's Republican party. The party of George W. Bush and George H. W. Bush is about to be totally transformed. Constitutional spending limits. Low flat-tax rates. Slam-downs on budget baselines. Pitchforks maybe, but not pork.

A few months ago I wrote about the emergence of a new free-market nucleus, motivated by tea-party ideals, in the Republican caucus of the Senate. That nucleus is set to grow. And that's exactly why I'm getting more optimistic.

The new blood includes Carly Fiorina from California, Ken Buck from Colorado, Pat Toomey from Pennsylvania, Rand Paul from Kentucky, John Boozman from Arkansas, Mike Lee from Utah, Marco Rubio from Florida, Joe Miller from Alaska, Kelly Ayotte from New Hampshire, John Raese from West Virginia, and Linda McMahon from Connecticut. And who knows, maybe even Christine O'Donnell from Delaware.

They will join free-market Senate stalwarts like Jim DeMint, Tom Coburn, John Thune, Jon Kyl, Richard Shelby, and Jeff Sessions. Again, I repeat, this will not be your father's Republican Senate. This is a new transformational breed. This is a free-market revolution powered by the tea party. Along with a likely Republican takeover in the House, we could be looking at a free-market Congress, something I never dreamed possible.

The new tea-party breed in Washington will unleash entrepreneurship and capitalism by holding back the government tide. In other words, folks, tea-party economics are very bullish.

-- Larry Kudlow, NRO's Economics Editor, is host of CNBC's The Kudlow Report and author of the daily web blog, Kudlow's Money Politic$.

Full post as published by Bench Memos - National Review Online on September 17, 2010 (boomark / email).