Here’s one story that has had a hard time muscling past the dirge of negativism on the war that dominates the front pages these days. It turns out that the Bush Boom is gaining a new wind as the economy heads into 2007, with growth running ahead of expectations, employers expanding the payroll, tax revenues cascading in from the supply-side tax cuts, the deficit projections falling, inflation in check, and the war accounting for only a sliver of our national economy. No wonder it is the war on which the Democrats are trying to put President Bush on the defensive.

No, the remarkable economic data don’t quite fit the Reid, Pelosi, Clinton, Edwards narrative. But the fact is that it is the Bush administration’s pro-growth policies that have supplied the vigor to the national economy. Inflation fears prompted the Federal Reserve Board to tighten money last year, taking some steam (or more precisely, hot air) out of the housing market. But tighter money also broke gasoline prices, which are now down some 33% from last year’s peak, as our David Lombino reported on page one here last week. Employment continued to rise, and retailers reaped a year-end bonanza as shoppers came out in force to do their Christmas buying. The year ended with the national economy humming at above the 3% annual growth average. As Bear Stearns economist David Malpass observes in the latest issue of Forbes, “employment, wages and profits are at record levels.” The federal budget deficit is far below projected levels, on a trend-line that would bring it into balance in three years – and wouldn’t that be something to see after years of left-wing maundering about the war deficit, Mr. Bush finishing his term with the deficit a mere cipher. Even inflation, which the Keynesians used to tell us was the handmaiden of growth, seems to have been contained by the Fed measures.

Why this happened is no secret. To pull the country out of the 2001 recession, Congress responded to Mr. Bush’s proposals and enacted tax cuts in 2001 and 2003 that reduced burdens on investment. The earlier reductions in the rates on capital gains and dividends were extended last May, offering taxpayers some relief from fears that this adventure in good policy might be ephemeral. It still could be, but so far, so good. Certainly state legislatures across the land have been somewhat more prudent than the last time they received a revenue bonanza.

Their profligacy when revenues were being boosted by the dot.com boom of the late 1990s landed many of them deep in red ink when the 2001 recession hit. Many are less inclined this time to put themselves out on a limb to be chopped off when the next down cycle comes. It is not clear whether Albany has learned that lesson. New York is already one of the highest taxed states in the country. It is also one of the few suffering a net outflow of population. While New York City is thriving, upstate cities and towns have less means to cope with the burdens inflicted on them by the state.

Governor Spitzer’s warning to the legislature that despite the current state budget surplus there could be big deficits ahead was certainly appropriate for a body with such a record of fiscal irresponsibility. But he has promised state aid to depressed upstate areas, a boost in education spending, and an expansion of health insurance to the uninsured. These kinds of big-ticket items are going to be hard to offset with such measures as the crackdown on Medicaid fraud he has promised. So the better thing is to take a look at the national economy and the policy measures that ignited the Bush Boom — a steady, determined drive to reduce taxes on income and capital gains and to make America a relatively better place to work and invest.