Larry Kudlow

House Speaker John Boehner is playing a heroic role right now. In his efforts to prevent the Bush tax cuts from expiring, Boehner is aggressively taking on President Obama's leadership ineptitude on the economy.

In essence, Boehner is pushing a Republican policy to wrap up a debt-limitation bill (SET ITAL) and (END ITAL) extend the Bush tax cuts in one fell swoop (SET ITAL) before (END ITAL) the election -- and before all the last-minute, crisis-oriented political machinations that would come in a lame-duck Congress, threatening another credit downgrade and leading to a business-hiring freeze and plunging stock market, all of which happened last year.

Tax-cut certainty is so vital right now because the anemic economic recovery may be moving toward (SET ITAL) deflation. (END ITAL) That's the message of a gold price that has collapsed by near 20 percent, falling from around $1,900 an ounce to the mid-$1,500s. With a risk-averse economy at home, and with the Greek and European financial crises abroad, the demand for dollars seems to exceed the dollar supply printed by the Fed. This could be solved by more quantitative easing. But a better approach for a system already oversupplied with unused liquidity would be the extension of tax-rate growth incentives, not more monetary pump-priming.

The uncertainty over the Bush tax cuts already has caused a number of business leaders to threaten a hiring freeze and a dampening of investment until they can figure out the after-tax cost of capital and rate of return on investment. Hiring has slowed noticeably in recent months. And a number of Wall Street economists are marking down the anemic recovery even more, suggesting that the 3 percent growth at the end of last year, which faltered to 2 percent growth in the first quarter, could be even less in the period ahead.

A bunch of CEOs have even formed their own march on Washington. Eighteen of them just wrote to Treasury man Timothy Geithner, begging him to oppose tax-rate hikes on dividends (from 15 to 45 percent) and capital gains (from 15 to near 30 percent, taking the "Buffet Rule" into account). "Equity capital is the life blood of investment and job creation for U.S. companies," they wrote. And they argued that the administration's tax-hike plans would do great harm to American competitiveness and capital formation.

According to accounting firm Ernst & Young, the top U.S. integrated tax rate on corporate profits and dividends is on course to hit 68.6 percent, significantly higher than all other Organization for Economic Cooperation and Development countries, as well as Brazil, Russia, India and China. Capital gains would rise to 56.7 percent.

Larry Kudlow

Lawrence Kudlow is host of CNBC’s “The Kudlow Report,” which airs nightly from 7 p.m. to 8 p.m.

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