by Larry Kudlow
September 30, 2006

As the November elections draw near, the triumph of fact over Democratic-propelled fantasy is becoming all the more evident. On topics as diverse as national security, the economy and the legislative success of the Republican-controlled Congress, nearly all Democrat talking points are being outed for what they really are: partisan nonsense that is disconnected from reality.

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President Bush delivered another powerful speech Friday highlighting the weakness of Democrats on national security. He blasted away, saying: “Five years after 9-11, the worst attack on the American homeland in our history, Democrats offer nothing but criticism and obstruction and endless second-guessing. The party of FDR and the party of Harry Truman has become the party of cut and run.”

These sentiments are right on the money, and the Democratic response is shameful.

According to one spokesperson from the Democratic National Committee, Bush’s “failed policies have made America less safe and (have) spawned terrorism, not decreased it.”

Huh?

And then there’s Sen. Hillary Clinton, who recently stated: “I’m certain that if my husband and his national security team had been shown a classified report titled ‘Bin Laden determined to attack inside the United States,’ he would’ve taken it more seriously than history suggests it was taken by our current president and his national security team.”

The Democrats must be held accountable for such statements.

Mrs. Clinton neglects to tell us that the subject of a Dec. 4, 1998, brief received by President Clinton was “Bin Laden preparing to hijack U.S. aircraft and other attacks.” This material comes courtesy of the 9-11 commission, which President Clinton himself cited during his now infamous interview with Chris Wallace.

Additionally, terrorist expert Richard Clarke, whom the former president also cited in the Wallace interview, made it clear in an August 2002 press conference that the Bush administration had stepped up the anti-bin-Laden effort during its first eight months in power. Clarke said Bush shifted the anti-terror effort from a rollback strategy to an elimination strategy. The Bush administration also increased the anti-al-Qaida budget fivefold. Translated, Bush was tougher on al-Qaida than his predecessor.

Yes, Bush made mistakes, just as Clinton made mistakes. But for Bill Clinton to tell Chris Wallace anything different is the height of hypocrisy.

I’ll also note that it’s a pleasure to source Richard Clarke and the 9-11 commission — Clinton’s sources during the Wallace interview — in the cause of separating fact from fantasy. That beats the ex-president’s finger-wagging any day.

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A great editorial in the Chicago Tribune titled “Goldilocks and the Dow” makes the point that the Dow Jones stock average, which is near an all-time high, is reflecting solid growth with mild inflation. The editors write, “We are enjoying a goldilocks economy, not too hot and not too cold.” In other words, there’s no economic bubble out there that’s about to go “pop.”

Recent economic reports confirm this: Factory production is strong. Core inflation has settled down. Excluding energy, consumer prices haven’t moved all that much in the last three years. In the third quarter, real consumer spending is running 3.2 percent at an annual rate, ahead of the second quarter average. Non-defense capital-goods shipments (excluding aircraft) are 7.6 percent ahead of the second quarter. After-tax real disposable income is 5.4 percent higher than last year. And tax revenues are rolling in, with both states and the U.S. Treasury reporting record revenue collections.

Rising stocks, falling gas prices, low tax rates and the Goldilocks economy are powerful pluses for election-year Republicans. With so many indicators leaning positive, the Democrats aren’t even talking about the economy anymore.

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The media continue to buzz about a do-nothing Republican Congress. But I’d say this Congress held the pro-growth line in its most recent session.

First, the investor tax cuts on dividends and capital gains were extended to 2010. This underpins the Goldilocks economy with the strongest capital-formation incentives since Calvin Coolidge.

Second, Treasury Secretary Hank Paulson apparently talked Sens. “Smoot” Schumer and “Hawley” Graham out of their China-bashing 27.5 percent tariff. This could’ve been the worst anti-growth legislation since the Smoot-Hawley tariff passed in 1930.

Third, no anti-immigration legislation was passed. Over the past 20 years — the high tide of Mexican immigration — the American economy has prospered and flourished. Today, any fence-only (new-Berlin Wall) approach to immigration control would be an economic negative.

Fourth, the Republican Congress passed a detention bill that will allow us to interrogate terrorist prisoners and gain information that will protect our citizens.

I’d give this Congress good marks, even though it failed to pass a strong budget-earmark-reform bill. That said, low taxes, free trade and the free movement of labor and capital will all bolster the Goldilocks economy — aka, the greatest story never told.

— Larry Kudlow is host of CNBC’s “Kudlow & Company”, economics editor for National Review Online and a nationally syndicated columnist. He served in the Reagan Administration and on the Bush-Cheney transition team.