Remember, the tax cuts of 2003 contained strong supply-side incentives to work and invest. The top marginal rate on individual income was lowered to 35 percent from 39.6 percent. Even a more powerful incentive-boost came from the cut on the tax rate for investor dividends, which plunged to 15 percent from 39.6 percent. And let?s not forget the capital-gains tax cut that lowered the top rate to 15 percent from 20 percent. Fortunately, Congress?s new budget extends the tax cuts on dividends and cap-gains from 2008 to 2010.

For work and investment, Uncle Sam keeps a lot less nowadays, while individuals keep a lot more. Private capital goes up, while the government?s take goes down. Consequently, the private economy has a much stronger growth engine today. Quarterly GDP may bounce up and down, but the trend line has improved markedly in recent years.

As for inflation, Alan Greenspan?s favorite measure, the chain-weighted price index for personal consumption spending, increased only 2.2 percent in the first quarter. Excluding energy, it was up only 1.8 percent over the past year, a pace that is lower than the 1998-2002 average, according to Washington economist Alan Reynolds.

Meanwhile, commodity prices are weakening and the air is gradually coming out of the oil bubble. As former Fed governor Wayne Angell notes, the recent commodity slump shows that the central bank has done its job well by gradually slowing the money supply and raising its target rate. Bond yields remain near 45-year lows, more evidence of quiescent inflation. But as real-time market-price indicators stabilize, it is time for the Fed to cease tightening.

If you listen too hard to pessimistic pundits you can get all lathered up over the risks of stagflation -- slower growth and higher prices. Don?t go there. This is not the 1970s. Money is sounder, tax rates are lower, productivity and profits are much higher, and world trade is more open. Today?s technology-streamlined and deregulated economy is not inflation-prone.

So long as the Bush administration and Congress control spending, keep tax rates low, and avoid the growth-slowing pitfalls of trade protectionism, non-inflationary prosperity can continue for years to come. Economic policies matter, and right now they are pro-growth.