LARRY KUDLOW: Our unfortunate, continued dependence on big government in determining economic policy

Welcome to a new day, a new show and our unfortunate, continued dependence on big government in determining economic policy.   

The big issues are what was really said between President Joe Biden and Speaker Kevin McCarthy and what did Fed Chair Jay Powell really mean when he said, "the risk of not raising rates enough is more dangerous than raising rates too high and causing recession"? You tell me what all that means and it'd be great fun.

No one's talking about cutting taxes, which would greatly empower free people operating in a free economy and would greatly reduce the power of government, an idea I devoutly favor, and before I go any further, I want us all to take solace from my former boss Ronald Reagan, who said this:   

RONALD REAGAN: Government is not the solution to our problem, government is the problem.   

And in case that didn't sink in:  

REAGAN: The nine most terrifying words in the English language are, "I’m from the government and I’m here to help."

EX-FDIC CHAIRMAN WARNS THE FED HAS A CREDIBILITY PROBLEM: THEY'RE 'TALKING TOUGH, BUT WORDS ARE NOT ENOUGH' 

Speaker McCarthy apparently had a very rough beginning with President Biden in their White House tete-a-tete yesterday, but it lasted longer than folks thought and, reportedly, tensions eased as the meeting progressed.   

Whether they'll have a second date remains to be seen, but here's what Speaker McCarthy did say after the initial meeting.   

SPEAKER MCCARTHY: I was clear to him. I'm not, we can't — we're not going to pass a clean debt ceiling. I'm going to wait for the president to call back another day or so and hopefully we'll sit down together even further... Look, what we talked about today was about moving forward in how we move through on a debt ceiling and how we get an agreement. I believe if we're able to get to an agreement, we could have a funding agreement for the next two years. You won't see omnibuses anymore.

The absolute best thing we heard last night comes from the brilliant Sen. Mike Crapo about an agenda to restore prosperity. 

MIKE CRAPO: Revenues are not the problem. The TCJA from 2017 needs to be made permanent and we need to focus on less spending, less taxing, less regulating and less inflating and we need to get a plan to do that.  

In case you missed it, the absolute toughest thing we heard yesterday came from our distinguished guest Senator John Kennedy of Louisiana about Jay Powell's Fed.   

JOHN KENNEDY: Chairman Powell is serious as an aneurysm. He is going to raise rates as high as he has to raise them. People like Larry Summers, Jason Furman, the other Democratic economists, have said it could be as high as six, seven, eight, nine even 10%, a federal funds rate. He is going to do whatever it takes to get control of inflation, but he will not have to raise rates as high as he normally would and put so many people out of work if Congress would just stop spending money like it was ditch water.

So, this is all a big story, one that has a bunch of known unknowns in terms of how this government policy debate is going to end up affecting the economy. Interestingly, importantly, stock markets were up yesterday, in fact stock markets have had a good year-to-date run.   

So, at a minimum, investors are saying things may not so bad. I'm always excited when stocks go up, believe me, though I think the best investment strategy is to buy the index funds for the long run, but the market is saying there's no catastrophe, at least not yet, in terms of policy or an economy that's losing altitude.  

What Mr. Crapo said — he had the best voice I've heard of anybody. Crapo is the free-market, supply-side prosperity agenda that the whole country should use, and if we did, it would end the long-term economic stagnation, it would end the inflation and, yes, it would make America great. Crapo just had it so totally right. And I also believe that the wind is at Speaker McCarthy's back.   

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The country says cut spending before you raise the debt because government is too big, it's too powerful, it has too much central planning and too much socialism and Ronald Reagan was definitely right many years ago that government is the problem, not the solution. 

So, I will just end by saying, yup, you know it's coming: Save America. Stop the spending.