They must have winced, but even The New York Times felt obliged to report Sunday that "An unexpectedly steep rise in tax revenues from corporations and the wealthy is driving down the projected budget deficit this year."

Tuesday, the Bush administration estimated this year's budget deficit will be "only" $296 billion, down from last year's deficit of $318 billion and a full 30 percent below the $423 billion shortfall the White House had earlier estimated.

Why? The main reason is a big spike in corporate tax receipts, which have nearly tripled since 2003, as well as what appears to be a big increase in individual taxes on stock market profits and executive bonuses. White House officials announced Tuesday that the tax receipts will be about $250 billion above last year's levels -- $65.8 billion higher than expected from individuals and $55.1 billion higher than expected from corporations.

President Bush pointed to the mild deficit decline, contained in a mid-year review required by law, as evidence that tax cuts enacted during his first term are benefiting the economy. "The tax relief we delivered has helped unleash the entrepreneurial spirit of America and kept our economy the envy of the world," the president said in his weekly radio address on July 8.

"Tax cuts left nearly $1.1 trillion in the hands of American workers and families and small business owners," Bush added Tuesday, announcing the OMB forecast at the White House. "They used this money to help fuel an economic resurgence."

Is this all good news? No. The problem with soaring government revenues -- in addition to the obvious fact they're grabbed from the pockets of the smartest and most productive, who could otherwise be expected to invest those funds creating new jobs -- is that politicians of both parties can be expected to use these new dollars as an excuse to avoid spending reductions.

In fact, the Congressional Budget Office's monthly budget report released July 7 said spending over the first nine months of this fiscal year was 8.6 percent higher than the same period in fiscal 2005, attributing much of the increase to hurricane relief, interest on the public debt and the cost of the Medicare prescription drug benefit.

If the Congress actually reduced spending, today's soaring tax revenues could be used to pay down the government's debt, which would in turn strengthen the confidence of international investors. Instead, most in Congress choose to carry home buckets full of steaming porkfat -- borrowed money for projects neither truly necessary nor authorized for federal funding by the Constitution -- issuing "IOUs" that won't come due till they're off enjoying their own fat pensions.

Perhaps that's what Minority Leader Harry Reid had in mind when he asked on the floor of the Senate Tuesday whether a deficit "smaller than $300 billion, is that anything to brag about? I think not."

We agree, and eagerly await the Democratic plan to eliminate pork, trim entitlements and slash federal expenditures sufficient to create annual surpluses starting next year.

While it's good that Americans -- and particularly American industry -- have more income and profits to pay taxes on, the fact that more money than ever is flowing to Washington, there to fund many a counterproductive and market-warping regulatory enterprise, is not as cheery.

But make no mistake -- this vast tide of government income does highlight that the only reason there's still a deficit is because Congress is spending money hand over fist -- and because the president keeps signing off on their Christmas lists. It also bears out Republican predictions that tax cuts don't "cost" money -- even modest tax cuts stimulate more economic activity.

Problem is, the country is now about 18 months away from the first retirement wave of what will be 77 million baby boomers, triggering an explosion of Social Security, Medicare and Medicaid spending.

"No economic boom can provide even a significant fraction of the revenue needed to cover this coming entitlement spending," warns Brian Riedl, a budget analyst at the Heritage Foundation in Washington.

"One hundred percent of the reduction comes from higher tax revenue and not from any spending restraint by Congress," Mr. Riedl reiterates. "I worry about lawmakers congratulating themselves."