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Ryan saves GOP from itself

Friday, 13 Dec 2013 | 6:58 PM ET
Rep. Paul Ryan
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Rep. Paul Ryan

Did Rep. Paul Ryan's budget deal save the Republican party from itself? I think it did.

Everyone acknowledges that the Ryan-Murray is not a great deal. But its passage will avoid a government shutdown. That's crucial.

(Read more: Senate to start budget bill debate on Tuesday)

If the GOP wants to retake the Senate and hold the House in 2014, the key issues must be the catastrophic pitfalls of Obamacare and better economic growth. A shutdown would be a distraction. It would take the heat off Obama and Obamacare, and all the Democrats who falsely promised that if you like your insurance and doctor, you can keep them.

Obama's "like it, keep it" promise was just named the lie of the year in the annual PolitiFact survey. Reminding voters of that lie is much more important than a government shutdown, which would be blamed on Republicans, anyway.

Millions more will be uninsured over the next year than those who are newly insured. At the very least, hundreds of thousands of people who thought they enrolled in Obamacare via the website will find out they are not enrolled. Sick people will lose their doctors and probably their hospitals. Healthy younger people will by and large boycott Obamacare.

In economic terms, Obamacare taxes and regulations are holding back business investing and hiring. And I can add another 5,000 words on the flaws of this state-run health plan. But suffice it to say, those very flaws must be a key ingredient in a Republican takeover next November.

Sure, there are a lot of disappointments with Ryan-Murray. Even Ryan agrees. The worst is that only 70 percent of the sequester is left over the next two years. And although Ryan believes the caps will be restored to 90 percent, that's probably a triumph of hope over experience.

The budget caps of the last couple of years have brought down the level of spending and its share of GDP, thereby functioning as a pro-growth tax cut. Losing that discipline is my biggest problem with the deal. But if there's a Republican Senate and House in 2015, chances of restoring a large measure of budget discipline are better than if the Republicans lose both houses.

(Read more: How the Senate could kill the budget deal)

The purest path for the budget talks would have been a clean bill keeping all the sequestration budget cuts. But the votes were never there in the House. Defense hawks and others would have left that bill short by 40 to 50 Republican votes. And Democrats would never have supported it. Hence the shutdown threat.

Ryan knew all this. So he went to work with Sen. Patty Murray on a common-ground compromise that pleased no one fully but at least temporarily got the job done and took the shutdown off the table.

And in my view, the GOP got the better of this deal. The spending increases are tiny and there are no income-tax hikes. The sequester itself is not dead. And a costly extension of unemployment insurance never made it in the bill.

The Democrats wanted an end to sequestration and a big tax hike and got neither. And Ryan was able to get minor entitlement reforms with larger co-pays for federal employee retirements, and a small COLA reduction for younger military retirees who find second careers after leaving the armed forces. And the costs of the federal guarantee of private corporate pension benefits will be raised.

Yes, airport fees are going up. That's a nuisance. But the overall numbers are palatable, with $63 billion in higher spending, $85 billion in so-called fees and other spending cuts, and possible a net deficit reduction of $25 billion.

It's a political solution, not a fiscal one.

But Senate Republicans could be on the verge of a big political mistake. Sen. Mitch McConnell is leading the charge to vote against this deal. He may have a lot of support. But with all due respect, this is a hypocritical position. It was McConnell and other GOP senators who trashed Sens. Cruz and Lee and House Republicans over the defunding shutdown last summer. McConnell now wants a shutdown? Makes no sense.

(Read more: Boehner erupts at conservative groups ahead of U.S. budget vote)

Fortunately for Republicans, the Obamacare disaster erased the political downside of the shutdown. Ryan understands this. And the really strong Ryan budget—which he put forth in recent years, and includes entitlement and pro-growth tax reform—would have a lot better chance if Republicans controlled both houses of Congress and then claimed the White House in 2016. A small watering down of budget caps seems like a small price to pay on the road to controlling Washington.

Ryan says he has the presidency in the back of his mind. Well, fine. But meanwhile, in the run-up to next year's election, he may have saved the GOP from itself.

—By CNBC's Larry Kudlow; Follow him on Twitter @larry_kudlow

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  • Lawrence Kudlow is a CNBC senior contributor. Previously, Kudlow was anchor of CNBC's prime-time program "The Kudlow Report"