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Yesterday’s Story

A Commentary By Lawrence Kudlow

Isn’t it fascinating that stocks rallied over 200 points on Monday, despite Obama’s command-and-control government takeover of General Motors? I think it’s because GM’s old-economy operation is yesterday’s story. The new economy doesn’t need GM. We’re only talking about 25,000 employees left in the car company’s domestic operation. Compare that to the millions of workers at new-economy companies like Intel, Microsoft, Cisco, Wal-Mart, Home Depot, Apple, and on and on. Obama’s so-called GM rescue is a needless intrusion at huge taxpayer expense, and a political payoff to the union movement that helped elect him. And the central-planning mandate to produce little green cars at a domestic plant almost guarantees that taxpayers will never get their money back. Apparently GM cannot make these little green cars in China or Mexico and then have them shipped back to the U.S. for assembly and sale. And we do not know the total compensation per hour for UAW workers — both salary and benefits — under the new agreement. That number hasn’t been published. So we can’t compare it to the compensation figures of the foreign transplants in order to measure competitiveness. The U.S. now owns a whole portfolio of companies — AIG, Citi, Fan, Fred, and now GM. The long arm of the government has never reached deeper into the private sector. I have no doubt that American entrepreneurs could produce great cars if they weren’t saddled with greenie regulations and outsized union compensation levels. That’s why the preferred route here would have been a real Chapter 11 bankruptcy, where GM assets could have been taken over by someone like Wilbur Ross, who would then bring in the best and brightest to make great cars and trucks. Rasmussen reports that only 21 percent favor the GM bailout plan while 67 percent oppose it. And only 18 percent favor a national sales tax to pay for Bailout Nation, national health care, and who knows what else, while 68 percent oppose a VAT tax. By the way, 62 percent say Bush, not Obama, should be blamed for the economy. Most regrettably, it was W. who launched Bailout Nation in the last months of his administration. But new statistics showing economic recovery is on the way provided the much bigger news for stocks yesterday. The ISM manufacturing index rose for the fifth-straight month. And the new-orders component moved to 51.1 — an actual recovery. Meanwhile, private construction surged in April by 1.4 percent. That includes a 0.7 percent monthly gain for housing and a huge 1.8 percent increase for commercial building — the third-straight monthly rise. China’s manufacturing index gained, too, showing the third-straight month above 50. That’s a big recovery signal. These are the things stocks are looking at. All that Fed pump-priming, plus some old-fashioned Keynesian stimulus, is moving us into some kind of economic recovery. We are still a free-market economy. Even though Team Obama is moving the wrong way on a number of fronts, there still is room for American entrepreneurship and technological advances. This GM thing really is yesterday’s story.


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Views expressed in this column are those of the author, not those of Rasmussen Reports.

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