The Mother of All Policy Cycles

Larry Kudlow is all over the emerging details from Bush's Tax Reform Commission. He hedges but his key impression is that the cost of capital should be coming down, which is good. I am less a believer in the business cycle (under-capacity yielding to overcapacity and back again) as I am in the policy cycle (good policy yielding to bad policy and back again). The policy cycle is much more dangerous as policy is less responsive to reality, often refer to as market forces, as the business cycle is and bad policy will persist alot longer than overcapacity ever will. And tax policy is the mother of all policy. If this commission gets it right and the Great Sausage Factory doesn't butcher its recommendations too badly, we could see the mother of all policy cycles unleashed to the upside. Low tax burdens and more transparent rules would be an undeniable plus for the economy and the stock market, but more importantly the effect would have a more lasting effect as it would take tremendous political energy to reverse the policy cycle. The cycle could be measured in decades rather than years.