Tim Geithner has undoubtedly become one of the top advisers in the Obama administration — not just in the Treasury, but in the Obama White House. While he and I disagree on a host of key policy issues, I loved the back-and-forth exchange we had during yesterday’s interview. Incidentally, Mr. Geithner stated that the Obama administration hopes to keep the top tax rate on dividends and capital gains capped at 20 percent. Be thankful for small blessings.

Don’t you just love political cross dressing? Last night on CNBC my old boss David Stockman was totally root-canalled as he called for higher taxes and lower spending. Right on spending, but wrong on taxes. Not even a mention of flat-tax reform. And he rejected business tax cuts. Oh my gosh.

Then on the same show left-of-center Washington Post blogger Ezra Klein agreed with me on the need to strengthen the economic power of business to invest and create jobs. Twice I called for a lower corporate tax rate and full cash expensing to unleash businesses large and small. Twice Ezra Klein agreed with me (though he favors more federal aid to state and local governments), and twice Dave Stockman disagreed with me.

If that makes Ezra a pro-growth Democrat, good for him. But Dave Stockman’s deficit obsession is not pro-growth.

Yes, we must curb deficits and borrowing. Absolutely. So let’s have some government austerity. But the growth message has to be part of the story. Flattening business tax rates and speeding up investment-tax write-offs for large and small companies would do more good than anything I can think of to grow the economy and speed up the anemic jobs recovery. I’d like Dave Stockman to have a long dinner with Fed Ex CEO Fred Smith, who has the story right on business and jobs.

Meanwhile, stories coming out of Washington suggest that the Bush tax cuts will not be settled until after the elections in November. This is good news. A tea-party Republican sweep in the midterms might just avoid job- and investor-killing tax hikes.

At the same time, cap-and-trade looks to be off the agenda for now. And deficit-commission honcho Erskine Bowles — who was Bill Clinton’s former chief of staff, and who worked well with the Gingrich Congress to draft a budget-cutting and capital-gains-tax-cutting deal — said yesterday that the government-spending share of GDP should be brought down to 21 percent from 24 percent. That’s progress.

Here’s my interview with Sharron Angle, the tea-party-backed GOP Senate hopeful from Nevada. She explains why voters should put Democratic Majority Leader Harry Reid on extended unemployment benefits.

Stocks took a real drubbing today, with the Dow off 268 points and the major indexes basically falling 3 percent. Call it the double-dip trade.

But are we really heading for a double-dip recession? I think not. And I say this as someone who has been advising investors to take profits this year before the IRS takes them next year, as taxes on capital gains, dividends, estates, and top incomes are all scheduled to rise in 2011 — unless, of course, a tea-party Republican Congress overturns all this following the midterm elections.

Investors are worried about China and Europe in addition to a U.S. double-dip. Consumer confidence plunged this morning, but that largely may be a function of the BP oil spill, as the Gulf states reported the biggest confidence drops. And then there’s Team Obama, which shows no sign of spending restraint. Nor do they see any need to call off the tax hikes. In fact, bank taxes are going up.

Whatever the reason for today’s market drubbing, economists like John Ryding and Michael Darda do not see a double-dip. The manufacturing sector is still displaying a V-shaped recovery, while profits continue to rise across-the-board. And private-sector incomes have begun to rebound, despite the jobless recovery. This is because hours worked are being extended while hourly wages increase modestly.

Of course, the Fed remains ultra easy with a steep upward curve. And corporate balance sheets are pristine, with net corporate cash flow standing at about $1.7 trillion.

If you bet on the profits story, the price/earnings multiple on the S&P 500 stands just over 11-times earnings, which translates to an 8.8 percent earnings yield, much higher than the 6 percent corporate bond rate and the incredibly shrinking 3 percent 10-year Treasury rate.

So as a final thought, if you bet on profits and the tea-party movement, the big stock market correction is probably overdone. However, let me reiterate, unless tax policy changes, investors should sell into relief rallies in order to take profits before the Tax Man does.

As the G-20 meets in Toronto, I want to make a point: Stop the crazy spending and borrowing and stocks will start rising again while economies pick up recovery speed.

In the U.S. and around the world, stocks have fallen about 11 percent this spring. It’s a signal of lost confidence. Out-of-control deficit spending has swept the world toward a leftist vision of big government. We need a return to free-enterprise incentives in order to speed up recovery.

My simple point: Get off this left-wing Keynesian treadmill of deficit spending. Get off it. In fact, cut spending and borrowing, hold down tax rates, and try restoring confidence in private enterprise for a change.

Team Obama will give the G-20 that old-time liberal religion of more and more spending. It’s wrong. Meanwhile, the new Tory government of David Cameron in Britain is cutting $170 billion out of the deficit. In Germany, Chancellor Merkel is cutting $100 billion. They’re not taking our advice. Good. Japan is slashing its corporate tax rate to 25 percent. Why don’t we do this?

Create investment and jobs rather than deficits and welfare. Instead of mangled multipliers, let’s have some new economic-growth incentives to spark real world economic recovery.

So what exactly is the real message of the tea parties? And how large an impact will they have on the upcoming elections? These are just a couple of the questions I posed to my old friends Rick Santelli and Lou Dobbs on last night’s Kudlow Report. (Of course, Rick’s rant on CNBC a little over a year ago helped launch the whole tea-party movement.) We also welcomed David Webb to the show for the first time. David, the co-founder of TeaParty365, is a big tea-party player. I guess you could call it a tea-party trifecta.

Click below to watch last night’s fireworks.

FedEx’s terribly smart and successful front-man, Fred Smith, joined me to discuss his take on how to keep America number one, and whether Washington is standing in the way of true economic recovery.

The latest batch of lousy economic data took a sharp turn for the worse this morning with an awful report on new home sales for the month of May. New home sales plunged a record 33 percent to a record four-decade low. In addition, the April sales number was revised lower while inventories jumped from 5.8 months in April to 8.5. This ain’t good.

Making matters worse, existing home sales surprised on the downside yesterday with a 2 percent decline. Before that, we had big drops in housing starts and retail sales, and an upward tilt to weekly jobless claims. So it’s really no surprise that there’s a growing debate over whether we’re muddling through a soft patch, or whether a double-dip recession lies ahead.

Housing does look particularly vulnerable to a double-dip. All of these temporary, goofy, big-government tax credits, mortgage modifications, and other forms of temporary stimulus merely steal economic activity from the future. They are shortsighted thieves. As the late Milton Friedman successfully argued in his permanent-income theory decades ago, these measures simply do not work. Friedman’s work, of course, won him a Nobel Prize in economics.

The only bright spot out there? A V-shaped recovery in manufacturing.

It’s been about six weeks since I first recommended that investors take some stock market profits off the table, before the IRS does it for them next year. Since then, the market has roiled around a 10 percent correction. I’m still sticking to my call. The Tax Man is coming. Take profits on up days.

The Fed will announce its interest-rate policy decision later this afternoon. Here’s one conundrum: I believe market prices are smarter than Fed computer models. The very strong King Dollar is suggesting a deflationary trend in the economy which would call for a Fed easing. And yet, the soaring gold price is suggesting an inflationary trend calling for a Fed rate hike. So what will the Fed do? In the short run, until it levels out, the deflationary rising dollar is a bigger influence on the economy. Longer run, gold is screaming for a normalized Fed policy.

One particularly interesting story I’ll be paying attention to is that of hawkish Kansas City Fed chief Thomas Hoenig. Will Hoenig abandon his tightening stance in light of all this lousy economic data? Now that would be a big deal.

As for me, I remain in the slow-growth camp. No double-dip, just slow, muddied growth. I also think an overly strong dollar — neglected by many on Wall Street — is interrupting the rate of recovery.

Christie gets it. There’s some good news in the Gulf. Blame Washington, not China. And maybe sell some of those stocks.

Read all about it in my latest column.

All eyes in Washington, Wall Street, and Main Street were turned yesterday to the congressional show trial featuring beleaguered BP CEO Tony Hayward. Hayward was a disaster. He played dumb. He stonewalled. And he never got honest about BP’s colossal failure of human judgment that caused this catastrophe.

But folks, seriously, what did you expect? Before this thing is all said and done, Hayward and BP may very well be criminally indicted by the Justice Department. Hayward could eventually do hard time for all I know. So, of course, he stonewalled.

Hayward was lawyered to the gills. Now that doesn’t make anyone happy, including me. And that’s precisely why these congressional show trials leave me bored, tired, and depressed after watching them.

What Hayward should have done is talk about the progress being made in capping the spill rate, which is gradually going down. He should have talked about the rig drilling the relief well, which could be up and running in less than a month, to end this disaster. That would be great news for America, and her economy and stock market. Plus, he could have mentioned that BP is hiring thousands of workers to fill new jobs in the cleanup effort.

Because the rest of the BP story is a total outrage.

And oh, by the way, what’s the role of Congress in this catastrophe? What exactly is it doing besides presiding over these show trials? Doesn’t it have oversight authority when it comes to the Minerals Management Service that utterly failed to regulate the safety of BP’s deep-water drilling? Why aren’t more people talking about this?

And why in the world hasn’t Congress suspended the Jones Act? What is it waiting for? We’re basically two months into this never-ending disaster. The Gulf cleanup could have been greatly aided by at least 15 foreign countries that were instead spurned after offering tankers and other equipment. Why aren’t we accepting these offers for help?

Making matters worse, Obama’s $20 billion so-called remedial fund is a complete violation of constitutional due process. The government has no right interfering with the financial decisions of a private, shareholder-owned corporation. This sounds like GM and Chrysler all over again. It could end up having a serious and chilling effect on corporate investment. Look, at least BP already agreed to pony up. They waved the cap. Why should the government control this?

So, if BP is dirty, and if BP is incompetent, then so is Congress. And so is the White House, as far as I’m concerned.