Larry Kudlow

The liberal media and the Democratic presidential candidates jumped all over the latest jobs report, which showed a rise in unemployment to 6.4 percent. Screaming for President Bush's head, liberals are trying to make the case that failure in the economy will lead to the president's re-election defeat next year -- the same fate suffered by his father over 10 years ago.

But this group of harpies -- the gang that can't shoot straight -- is overlooking a number of market-oriented signs that point to a robust economic recovery. This resurgence is likely to begin in the second half of this year, and reach full bloom in 2004.

This crowd couldn't even get the jobs report straight. Outside of that higher unemployment figure, big gains were registered by temporary workers and the self-employed, both leading indicators of better jobs performance in the future. Significantly, 251,000 people re-entered the labor force in June, a confidence sign, as hopes were raised by the new tax-cut package and its promise of new employment.

Meanwhile, Democratic presidential wannabes talk of recovery-wrecking moves such as repealing the tax cuts and using homeland security as a nationwide pork-barrel spending fund. The Democrats have also managed to block limits to non-economic medical malpractice awards, a measure that would have cut health-care costs enormously.

Always favoring government over markets, the liberals also continue to ignore the huge stock market rally. In itself, the surge on Wall Street is signaling a stronger economic growth rate in the future. But Democratic doomsayers conveniently refuse to acknowledge that lower tax rates always increase the after-tax value of equity assets, a process quickly discounted by the rising stock market.

Representing claims on the future value of American business, the boom in share prices signals improved credit quality and better financing power, two vital ingredients for stronger economic activity and new job creation. Confirming this, Goldman Sachs released a survey showing the highest confidence reading by corporate information-technology officers in two years, a sure sign that capital spending will recover. Also, the Conference Board's latest CEO survey indicates the highest confidence level since 2001.

Here's the simple formula liberals don't get: Lower tax rates increase stock prices, and those rising equity values quickly open the door to new business expansion, including job creation.

So, it's not surprising that a virtual avalanche of new merger-and-acquisition deals -- including hostile takeovers -- has followed fast on the heels of the Bush tax-cut.


Larry Kudlow

Lawrence Kudlow is host of CNBC’s “The Kudlow Report,” which airs nightly from 7 p.m. to 8 p.m.