Larry Kudlow

Did you know that just over the past 11 quarters, dating back to the June 2003 Bush tax cuts, America has increased the size of its entire economy by 20 percent? In less than three years, the U.S. economic pie has expanded by $2.2 trillion, an output add-on that is roughly the same size as the total Chinese economy, and much larger than the total economic size of nations like India, Mexico, Ireland and Belgium.

This is an extraordinary fact, although you may be reading it here first. Most in the mainstream media would rather tout the faults of American capitalism than sing its praises. And of course, the media will almost always discuss supply-side tax cuts in negative terms, such as big budget deficits and static revenue losses. But here's another suppressed fact: Since the 2003 tax cuts, tax-revenue collections from the expanding economy have been surging at double-digit rates, while the deficit is constantly being revised downward.

For those who bother to look, the economic power of lower-tax-rate incentives is once again working its magic. While most reporters obsess about a mild slowdown in housing, the big-bang story is a high-sizzle pick-up in private business investment, which is directly traceable to Bush's tax reform. It was private investment that was hardest hit in the early decade stock market plunge and the aftermath of the 9-11 terrorist bombings. So team Bush's wise men correctly targeted investment in order to slash the after-tax cost of capital and rejuvenate investment incentives.

The move paid off. Investors now keep nearly 50 percent more of their after-tax capital returns -- an enormous increase that has resulted in a remarkably profitable and highly productive business sector. While the overall economy has grown by one-fifth since mid-2003, private business investment has expanded by 37 percent.

The dirty little secret here is that record low tax rates on capital are leading to continued job and income gains, as businesses continue to expand.

"But," you might respond, "I thought job gains were soft." Well, the marquis employment report for June may have showed "only" 121,000 new non-farm payroll jobs, below Wall Street expectations. But this leads to another factoid that the mainstream media largely ignores: The household survey of job creation has been booming at a much faster clip than headline corporate payrolls.

When this last happened in 2003-04 (remember the "jobless recovery" election-year rant of Democrats?), it was corporate payrolls that caught up to the more entrepreneurial household survey -- which more accurately records job creation by small-business owner-operators. This is the source of the bulk of American job creation.

Larry Kudlow

Lawrence Kudlow is host of CNBC’s “The Kudlow Report,” which airs nightly from 7 p.m. to 8 p.m.