And I would point to the new book from Amity Shlaes, "Coolidge," about former president Calvin Coolidge. Silent Cal was a manic budget cutter who slashed the level of the budget. And he presided over a tremendous U.S. economic boom. In fact, Coolidge's budget cuts and Treasury Secretary Andrew Mellon's tax-rate cuts were a one-two punch that serves as an example of how to fix our ailing economy today.
And here's an important point: Despite all the pessimism these days, spending as a share of GDP has actually come down in recent years. Part of this is a result of the moderate recovery, as spending on income security and other counter-cyclical measures has slowed down. But part of it is the continued battle over actual spending reductions. Most of that battle has been waged by the Republican House in post-election 2010, 2011, and 2012, right up to the current sequester (which was Obama's idea). Including spending fights over continuing resolutions and debt-ceiling increases, the GOP has actually done better than it thinks.
(Read More: Why Sequestration Will Hit Housing on Several Fronts)
Here are the numbers: Federal outlays as a share of GDP peaked at 25.2 percent in fiscal-year 2009, fell to 24.1 percent in 2011, and came in at 22.8 percent in 2012. The long-term historical norm is about 19 percent, so spending is still way too high. But some progress has been made. And if the GOP sticks to its guns and implements the current sequester, a lot more progress will be made, opening the door to a stronger economy.
In other words, lower spending and limited government are the exact right medicine for free-market prosperity. The sequester cuts are pro-growth. Finish the job, please.
—By CNBC's Larry Kudlow; Follow him on Twitter