Larry Kudlow
As all the pollsters are telling us, there’s an inverse relationship between rising gasoline prices and President Bush’s falling approval ratings -- most especially his approval rating on the economy. Of course, these polls describe a certain national angst over energy that harkens back to the dreadful 1970s. But there’s a better reality out there: Namely, the upturn in gas prices simply is not stopping the economy the way it did three decades ago.

Today’s economy may be the greatest story never told. It’s an American boom, spurred by lower tax rates, huge profits, big productivity, plentiful jobs, and an ongoing free-market capitalist resiliency. It’s also a global boom, marked by a spread of free-market capitalism like we’ve never seen before.

The political resolution to the disconnect between fear (high energy prices) and reality (a great economy) remains to be seen. But as the data keep rolling in, the economy continues to surpass not only the pessimism of its critics, but even the optimism of its supporters.

Recent data on production, retail sales, and employment are stronger than expected. The latest durable-goods report shows huge gains in orders for big-ticket items like airplanes, transportation, metals, machinery, and computers -- even cars and parts. These orders suggest that the economic boom will continue as far as the eye can see. And there’s more: The backlog of unfilled orders, the best leading-indicator of business activity, gained 12 percent at an annual rate in the first quarter. With this kind of real-world corporate activity in the pipeline, highly profitable businesses will be doing a lot of hiring in the months ahead in order to expand plant and equipment capacity. Just what the doctor ordered.

As for the energy angst, President Bush recently outlined a sensible pro-market mid-course policy correction. He is suspending the ethanol tax mandate that forced gasoline distributors to switch to the corn-based fuel from the MTBE oxygenate. This ethanol regulation was one of the great energy-policy bungles of all time. Neither refiners nor transporters were anywhere near ready to implement this misguided mandate, which drove up pump prices by 50 cents in just a few weeks. Energy secretary Sam Bodman was warned by industry leaders -- like much-maligned former ExxonMobil CEO Lee Raymond -- that the ethanol-switch would be a disaster. But Bodman didn’t listen, although, according to the polls, it seems like America did.

Larry Kudlow

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