By Steve Forbes

You'd never know it from reading the mainstream media or listening to most economists, pundits, Democrats and even some GOP politicos, but the Bush tax cuts passed in May 2003 have been a fantastic success. Yet because of Washington's idiotic way of estimating the impact of prospective tax changes, these prosperity-producing reductions are threatened with extinction. The two principal ones -- capital gains and personal dividends -- are set to expire in 2008. So far efforts to extend them or make them permanent have faltered. If these do go by the boards, anticipate a slowdown/recession in 2008 and 2009.

That Democrats would badmouth what George Bush wrought in 2003 is predictable. But that so many supposedly objective observers and business journalists badmouth that legislative act is astonishing, a manifestation of both how poisoned our politics have become and, even more alarming, of how economically illiterate or lazy so many seemingly smart people are.

The evidence of the positive impact of these cuts -- the capital gains levy was cut 25 percent; the personal dividend tax was cut 60 percent; personal tax rates were reduced; and juicy incentives for businesses, especially small ones, to boost capital expenditures were put in place -- is overwhelming.

Real GDP has blossomed, expanding more than $1 trillion, or 11 percent between the first quarter of 2003 and the end of last year. No other advanced economy has done nearly as well.

Some 5 million new jobs have been created since the tax cuts, more than in Europe and Japan put together.

Real personal incomes have mushroomed as well, expanding 5.7 percent at a real compounded annual growth rate.

For all the gnashing of teeth over U.S. manufacturing jobs, our industrial production has increased by more than $300 billion, or more than 11 percent, in the past three years.

Between the second quarter of 2003 and the end of 2005 a stunning 3.9 million new businesses have been created.

Equity values have moved up smartly (although they should be up even more given what's happening to corporate balance sheets and bottom lines). The comprehensive Wilshire Index has increased 65 percent since early 2003; the S&P 500, 55 percent; and the Dow Jones industrial average, 42 percent. What's intriguing here is that the biggest stock market rises have been with small-cap stocks. Is it a coincidence that these companies have been invested in far more heavily than their much bigger corporate counterparts? Aftertax corporate profits have exploded from $727 billion in the first quarter of 2003 to almost $1.1 trillion at the end of 2005, an increase of 46 percent.

Dividends have proliferated, rising from an annual rate of $149 billion in early 2003 to more than $200 billion today. In the S&P 500 companies there have been more than 900 increases, and over 40 companies have initiated dividends.

Business' capital spending zoomed from an annual rate of $730 billion in the first quarter of 2003 to almost $1 trillion by year-end 2005, an increase of more than 30 percent. Cash flows have grown even faster than corporate capital expenditures. There have been periods in the past when this has happened but not at the magnitude we're seeing today. In short, corporate America has plenty of juice to keep this expansion going.

So does the American consumer. The balance sheets of households in America have never been stronger. Household assets are up more than $15 trillion since the tax cuts versus an increase of only $3 trillion in household liabilities.

Foreigners have taken note of the powerful American economy. Foreign direct investment in the U.S. last year was $128.6 billion, up 90 percent since 2003. Private portfolio investment inflows are the largest ever, $686 billion last year, up 107 percent from 2003.

The overall assets of the nation have grown 30 percent in just three years to $160 trillion.

Yet the mainstream media obsesses about Washington's deficits, giving short shrift to the soaring growth in government receipts both inside the Beltway and out. Last year's tax take by Washington was up almost 15 percent. The problem on all levels of government is not inadequate revenue but obscene spending.

Housing bubble? Maybe in some local markets around the country, but the median housing price increase since 2003 is eminently reasonable -- new home prices are up 21 percent in the last three years; existing homes, 23 percent.

Trade deficit? As an indicator of financial health that number is useless; it is not, and never has been, the national equivalent of a company's making or losing money. North America has had trade deficits for 350 out of the last 400 years. Most trade involves transactions between commercial entities. Each party thinks it is getting something good from the deal. Forbes magazine has had a "trade deficit" with its paper suppliers since our inception. Yet we continue to buy paper because we believe we give readers information on it that they need and give advertisers markets they desire to reach. It is all about value-added. To obsess about one number such as the trade deficit and ignore capital inflows, personal incomes, corporate profits, the national balance sheet, etc. is almost pathological.

Our performance since 2003 has been impressive. Now just imagine how much better it would be if we ever overhauled our atrocious tax code and replaced it with a simple flat tax.

Steve Forbes is editor-in-chief of Forbes magazine.