Wednesday's report of a 0.1 percent gross domestic product decline for the fourth quarter came as a surprise to most forecasters. But it actually masks considerable strength in the private economy.

Namely, housing investment in the fourth quarter jumped 15.3 percent annually, business equipment and software spiked 12.4 percent, and real private final sales rose 2.6 percent. All in, the domestic private sector of the economy increased 3.4 percent annually—a very respectable gain.

(Read More: The 'Best-Looking' GDP Drop You'll Ever See.)

One of the least remarked upon aspects of President Barack Obama's inaugural speech was his attempt to co-opt the Founding Fathers' Declaration of Independence to bolster his liberal-left agenda.

Sure, the president quoted one of the most important sentences in world history: "We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness." (Read More: Obama Inauguration: Second Term Kicks Off With Challenges.)

So far, so good. But he later connected the Declaration with his own liberal agenda: " ... that fidelity to our founding principles requires new responses to new challenges; that preserving our individual freedom ultimately requires collective action." (My italics, not his.)

The much dreaded budget ax is hanging over Washington.Unless Congress comes up with yet another postponement deal, the $1.2 trillion sequester will kick in on March 1^st.

That's just 31 days from now.

(Read More: US House Budget Chief: Automatic Spending Cuts 'Going to Happen')

Okay, it's official. According to the Treasury Department, the U.S. debt jumped to $16.1 trillion in 2012 from $14.8 trillion in 2011. That's a $1.3 trillion deficit for the last year. Remarkable. During President Obama's first term, the federal debt rose by roughly $6 trillion.

Now, if they are bold, House Republicans will take advantage of these dismal numbers. Bold means bold spending cuts, as in cut spending like there's no tomorrow. Bold means implementing the $1.2 trillion spending sequester. Bold means an absolute rock-solid commitment to spending cuts. A new Rasmussen survey shows that 62 percent of Americans favor across-the-board spending cuts. That includes every program of the federal government, according to the survey.

(Read More: House GOP Debt Ceiling Plan: 'No Budget, No Pay')

Will the GOP go the way of the Whigs?

Or do the Republicans just need to have a good ol' family meeting? (Read More: Conservatives Tell GOP: Don't Mess With Debt Ceiling.)

There's nothing like losing two straight presidential elections to strike some end-of-life fear into a party and the usual "the other guys are irrelevant" talk from the opposing side.

After the Democrats were whipped in three straight presidential contests from 1980 to 1988, the party embraced a different kind of candidate in Bill Clinton. He often sounded more like a free market capitalist than some Republicans do today, (Google his 1992 DNC acceptance speech sometime and you'll see what I mean), and America bought it.

In retrospect, some of President Clinton's actual economic policies often were closer to the supply-side philosophy. That not only garnered Republican support in Congress, it helped fuel the economic boom of the late 1990's. (Read More: Why the GOP Is Backing Away From Business.)

What is the sound of thousands of cars and moving vans going from Maryland to Pennsylvania?

To Pennsylvania Governor Tom Corbett it's music to his ears.

The Republican Corbett has a simple explanation for the anecdotal reports of a significant boost in Maryland-to-Pennsylvania migration: taxes.

The worst part of the Jack Lew nomination for Treasury secretary is not simply that he has no qualifications, standing, or experience in the financial world or international sphere (think G20 and European debt crisis). Nor is it simply that he doesn't have any seasoned currency opinions (under President Barack Obama, the greenback has dropped 10 percent while gold has doubled).

Yes, these are big disqualifiers. But the real problem is that Lew is a left-liberal Obama spear-carrier, whose very appointment signals a sharp confrontation with the Republican House over key issues such as the debt ceiling, the spending sequester, next year's budgets, and taxes. (Read More: Obama on Treasury Nominee: 'Jack Has My Complete Trust'.)

One cheer out of a potential three is all anyone can logically give the "fiscal cliff" deal. On the day after the bargain was clinched, the stock market gave a 300-point cheer. So be it.

In the short run, extending tax cuts up to $450,000 probably saved us from a recession. If all the tax cuts had expired, we'd have a $500 billion tax hike, plus marginal rate increases, and that would have sunk the economy. So I'm going to bet that the big stock rally was a sign of relief that the final deal wasn't worse.

Despite all the media hullabaloo about the "fiscal cliff" and a potential recession if none of the Bush tax cuts are extended, stock markets have behaved calmly throughout this whole period. In fact, as of this writing, the Dow is up about 100 points.

I'm going to guess that stocks, in their wisdom, are correctly sniffing that there will be no calamitous falling off the cliff. By that I mean there will be no $500 billion tax hike, which would be an economy killer. (Read More: House Republicans Torn on Issue of Raising Taxes.)

Instead, after speaking with prominent Republican House and Senate members, I have come to believe the following: The GOP knows that President Barack Obama has the upper hand in this post-election battle. Therefore, they are preparing a strategic retreat.

Republicans are divided. President Obama won't budge. And more and more, it looks like the fiscal-cliff deadline of December 31 will be missed.

It's now clear that Team Obama wants higher tax rates and revenue-raising tax-deduction caps to meet their $1.6 trillion revenue target. Spending cuts and entitlement reforms are vague to non-existent. In fact, it could be that Obama not only rejects the across-the-board budget sequester, but that he actively seeks to raise spending, not cut it.

I guess it stands to reason that if you puff up his $800 billion revenue increase from last year, and double it to $1.6 trillion this year, the money will be spent. The government will grow larger.

All this should be unacceptable to the GOP.

(Read More: Boehner: Obama Walking Economy to Edge of 'Cliff')

Senator Rand Paul, who may have the best idea, told me in an interview this week that he's prepared to pin the tail on Obama's tax-and-spend donkey. "In the Senate," Paul said, "I'm happy not to filibuster it, and I will announce tonight on your show that I will work with Harry Reid to let him pass his big old tax hike, with a simple majority, if that's what Harry Reid wants, because then they will become the party of high taxes, and they can own it."

Other conservatives in the Senate and House agree with Mr. Paul. And some House members are talking about a "doomsday" scenario, or what might be called a strategic retreat. Just vote present on the Democrats' tax bill to extend middle-class tax cuts and raise tax rates on income and investment.

A couple dozen other Republicans have signed a bipartisan letter suggesting flexibility on tax rates in return for some kind of entitlement reform --perhaps moving the top rate from 36 percent to 37 or 38 percent, less than the 39.6 percent Clinton rate, and possibly raising the so-called rich people's threshold to $500,000 or $700,000 from $250,000. But with a vague and un-budging Team Obama, this sounds like a triumph of hope over experience.