With the economy booming and the current crop of celebrities producing plenty of babies along with their CDs and movies, top fashion designers and other luxury merchants are targeting the moms and dads who have it all–and want to share it with the kids. Besides Gucci and Kate Spade, Versace, Burberry and Ralph Lauren have all introduced designer lines for little ones in the last two years. And parents are plunking down big bucks for everything from custom art works to cars, diamonds and even furs for their little mini-mes.

“Today’s generation of parents want their kids to have the best of everything and are willing to pay for it,’’ says Sharon Sternheim, owner of Zitomer, a high-end department store in New York that caters to the likes of Madonna, Sarah Ferguson, Cindy Crawford and Demi Moore. “They don’t feel like it’s going overboard–they just want to feel like they’re paying for quality they can see.’’ At Zitomer these days, they’re seeing it in a line of cashmere booties, gloves, hats and sweaters that cost up to $350 a pop. “It’s easy to go wild because everything is so cute and fun,” says Crawford, who’s bought her share of the cashmere. “You want your kids to have it all. That’s being a mother.” Ultimate celebrity mom Madonna was a regular at Life Size until her frequent trips started drawing crowds and she had to send her assistant instead. “She would buy tons of designer stuff for her daughter and stay for hours,” says a store clerk. “You could tell she was really into it.”

If celebrities are leading the way, the average new parent isn’t far behind, thanks in part to the onslaught of upscale baby magazines like Martha Stewart’s Baby and InStyle’s special baby issue, which celebrate the not-so-simple joys of spoiling your kids. “We love our celebrity following, but be clear: our average customer is an average working person,’’ says Life Size owner-buyer Stacy Robinson. “With so many style magazines and celebrities being very public with their purchases, anyone with a child wants them to have the same exact thing, no matter the cost.”

Janice Gilbert, 28, who makes about $38,000 a year as a sales associate at Macy’s in New York, spent most of one paycheck on the same Gucci diaper bag that Jada Pinkett Smith bought. ““I saw it in InStyle and knew I had to have it,” says Gilbert, whose son, Jalen, is 5 months old. Her friends said she was crazy, but those same friends had bought Gucci bags for themselves in the past. “So what’s the difference with buying it for my baby?” asks Gilbert. “That’s why I work, so I can buy what I want. And my baby should have what I want him to have.”

Of course, it’s unlikely that many average working stiffs will line up to buy Burberry’s oversize baby carriage, complete with its signature lining in burgundy and a price tag of about $5,000, set to be introduced next year. Or Gucci’s child-size white mink coat, available now, for more than $4,000. And even if a parent can afford them, who really needs such extravagant gifts? Is this sort of heavy-handed materialism bad for kids, even rich kids?

A teacher at a celebrity-heavy school in Beverly Hills doesn’t think so. “They’re living a surreal life anyway,” says the teacher, who asked that her name not be used. “So a Gucci diaper bag isn’t going to hurt or help one way or another. These are kids that are taking long trips to France or sailing to Capri for the summer. They don’t know anything else.” But she does see risks for kids whose parents are struggling to pay the rent and still buying them Gucci. “They may have some false expectations of life and may not handle it well when they can’t get those things, or want more.”

And there is always more to want. Rapper Sean (Puffy) Combs special-ordered his 2-year-old son, Christian, a miniature Mercedes Benz that looks and rides like the real thing. Price tag: $5,000. Basketball star Shaquille O’Neal bought his 4-year-old little girl, Taherea, three-carat diamond studs and a $6,000 dollhouse. “My parents gave me everything they could afford when I was a kid,’’ he says. “Now I’m doing the same for my kids. I teach them priorities, of course, but I want them to be happy. I buy myself big, expensive toys, why not them?”

But when it comes to giving kids their all, few compare with Todd Smith, a.k.a. LL Cool J. Smith hired scenic painter Chris Cumberbach to create elaborate fantasy worlds in the rooms of three of his four children at his home in upstate New York. In one room, scenes from “Alice in Wonderland” include the famous tea party, with the Mad Hatter, the Cheshire Cat and the rapper’s daughter presiding as Alice. The walls in his son’s room show his son playing basketball as a boy and then turning into a man who can slam-dunk. Frederick Douglass referees, while other well-known black historical figures sit in the stands cheering the boy on. The work costs $5,000 to $8,000 a room. “LL loves his kids and wanted them to wake up seeing they could be whatever they want to be,” says Cumberbach, who has painted rooms and offices for Puffy, Naughty By Nature and Queen Latifah. “What kid doesn’t deserve that?”

Are you listening, Santa?