Most observers probably missed it, but President Bush and the Republicans in Congress scored a significant victory this week. The latest economic numbers show the federal deficit is at a four-year low, thanks to higher than expected federal revenues. Bush correctly points out that this cash infusion is a result of his hard-fought tax cuts.

In a news conference this week, the president said he had already made good on his 2004 promise to the American people to cut the deficit in half over five years. “Today I'm pleased to report that we have achieved this goal, and we've done it three years ahead of schedule,” he said. The President went on to point out that the deficit is lower than it has been for 18 years. It was the tax cuts, said the President, that helped make this happen.

“Tax revenues grew by $253 billion in 2006,” said Bush. “That's an increase of 11.8 percent. Over the last two years, we've seen the largest back-to-back increases in tax revenues ever, and the largest percentage increase in 25 years. In other words, when you put policies in place that cause the economy to grow, tax revenues increase.”

The President and his Republican backers in Congress deserve credit for getting it half right. Indeed, the tax cuts helped spur a higher than expected growth in federal revenues this year. But meanwhile, as analyst Stephen Slivinski points out on the Cato at Liberty Website, the other side of the equation – the growth of government spending – has not slowed.

“Although the deficit is certainly smaller, it’s not because the White House and Congress suddenly have a newfound respect for spending discipline,” writes Slivinski. “Federal spending grew in excess of 7 percent this fiscal year. That’s faster than the expected growth in GDP of 6.5 percent…And unfunded liabilities of entitlement programs continue to grow. Remind me again how this is progress?”

Slivinski is right to point out the elephant in the room: Medicare and Social Security. In only two years the baby-boomer generation will begin retiring and start to strain an already burdened entitlement system. According to the Senate Budget Committee, “Long-term entitlement obligations will overwhelm federal resources when Baby Boomers retire. Within the next 75 years, federal obligations will cost U.S. taxpayers $46.4 trillion. To put that in perspective, our nation has collected $40 trillion in taxes over the last 217 years combined.”

In other words, if Congress and the Administration are not able to do something about the long-term costs of these programs, a minor cut in the deficit today won’t matter at all when our children are paying our debts in the future. Senate Budget Committee Chairman Judd Gregg, who has introduced legislation (the Stop Overspending Act of 2006) to rein in the unchecked expansion of these programs, in a Senate floor speech described what will happen if these problems go unaddressed.

“Basically, it would mean our children would be unable to afford a better lifestyle,” said Gregg. “They probably could not send their kids to college, buy a house or purchase a car the way our generation has been able to do because they would be sending so much of their money to the Federal Government … It is not a tolerable proposal for our country. We cannot say, as one generation, that we are going to put on the books obligations that make the next generation pay so much in taxes that they essentially would not be able to live the quality of life we have. We would undermine their quality of life, and it is not fair to them.”

Gregg’s argument is more than just economical: it is moral. So while it is good to see that tax cuts are working (by providing increased revenues), it is shortsighted to claim victory when it comes to the long-term vitality of our economy. Unless the administration and Congress – Republicans and Democrats alike – can get serious about this looming disaster, press conferences touting a shrinking deficit will be half right and half wrong.

Unfortunately, future generations cannot afford for us to get it half wrong.