If the smart-money folks on Wall Street think a special counsel to oversee the Russian probes spells defeat for business tax cuts, they're leaning well over their skis.
The market sold off over 300 points on Wednesday, but it may have come back to its senses with a 140-point gain on Friday. And while there's never 100 percent probability in forecasting political risk, it seems the likelihood of health-care reform by the summer and tax reform by year end (or early 2018), is quite high.
Paradoxically, special counsel Robert Mueller will provide cover for President Trump, as it will take him many months to complete his investigations. The leaks are going to dry up. By law, information on the probe must be protected. So whatever the outcome, Trump will have months without the attack headlines in which to sell his tax-cut plan.
Meanwhile, amid all the controversies, the GOP Congress knows it could get whacked in next year's midterms if it doesn't govern. A big incentive.
And Trump still has the backing of his core base, which is at least 40 percent of the electorate. These disenchanted voters may not agree with everything he says. But they still strongly believe Trump is their best chance to drain the swamp -- to overturn the Beltway elites, to deliver border security, to improve trade deals, and to cut taxes and regulations to deliver the full-fledged, deeply rooted, sustainable prosperity we haven't seen in 20 years.
Warts and all, Trump and his polices is still their vote. (He needs to go out there and rally these folks.)
And all this talk of impeachment based on obstruction of justice is just Democratic political pap. George Washington University law professor Jonathan Turley, who is no partisan, calls it "an awfully thin soup." Former federal prosecutor and NR contributor Andrew McCarthy says "the basis for claiming at this point that President Trump obstructed justice is not there." Acting FBI director Andrew McCabe told Congress there's been no interference in the FBI's investigations and no request for additional funding.
And if Comey wrote a memo about obstruction of justice, he is legally obligated to report it to the highest levels of the Justice Department. Failure to do so could invoke criminal charges.
Why did he wait until he was fired to have his leakers put this out?
Yet behind all this mess, Speaker Paul Ryan keeps telling people that Congress can walk and chew gum at the same time. He's right.
Look, the House has already passed a repeal and replace of Obamacare. And a Senate health-care working group led by Lamar Alexander and Ted Cruz is making progress resolving key issues between moderates and conservatives. There's no reason why the AHCA can't become law by the August recess.
And that opens the door for taxes.
Ways and Means chair Kevin Brady just began expert tax hearings. After the recess, Brady will likely convene a markup session.
Representative Peter Roskam, who chairs the tax-policy subcommittee, said this last week: "I'm of the view that 2017 is the year." He thinks tax reform is easier than replacing Obamacare.
So following a markup, Ways and Means can report out a bill. And because prosperity is America's Number One issue, it will pass the floor relatively easily. And that will put pressure on the Senate to get moving.
It's likely that a tax-cut working group will again convene to hash out important details. The border-adjusted tax (BAT) will have to go. But the very core of the tax bill is a simple three steps: a deep corporate-tax-rate cut, immediate expensing for new equipment of all kinds, and the repatriation of offshore cash.
This is the tonic that will restore capital formation, productivity, real wages, and growth.
Both Senate and House leaders have got to understand how flexible reconciliation is. It can be nearly anything you want it to be. The key player is Senate president Mike Pence, who can overrule the parliamentarian.
Congressional leaders should heed the words of Treasury Secretary Steven Mnuchin, who has become the administration's leading spokesperson for economic growth and lower tax rates. He told the Senate Banking Committee last week, "What I have said repeatedly is that any plan we put forward we believe to be paid for with economic growth."
He is estimating a 3 percent growth rate by 2021. I suspect it will arrive faster. And the difference between less-than 2 percent growth from the CBO and 3 percent growth is well over $3 trillion in additional revenue. It's the mother of all pay-fors.
And lowering marginal tax rates across-the-board, especially on large and small businesses, will foster the mother of all prosperities -- the one middle-class Americans in all those red counties that voted for Trump have been yearning for.
Commentary by Larry Kudlow, a senior contributor at CNBC and economics editor of the National Review. Follow him on Twitter @Larry_Kudlow.