Get Bush Off Campaign Trail

Proposing ways to deal with the prospect of recession is a job requirement for presidential candidates, and every one of them — from John Edwards to Ron Paul to Mitt Romney — is offering some antidote or other.

The surprise is that one of the largest projects under discussion comes from a man who isn't running for office at all. His name is George W. Bush.

Ok, so the president would probably call the package of ideas that he was hinting at recently in Chicago "economic stimulus," not "political logrolling." And it is true that the economy has troubles. There is the subprime mess. The dollar's slide suggests that the relative competitiveness of America may be in jeopardy. Americans save too little. Then there is the jump in unemployment to 5%, and the looming structural deficits from entitlements. Everyone wants a less bumpy future.

But some of the devices that Mr. Bush has apparently been thinking about in recent weeks aren't worthy of him. They are so targeted, so temporary, and so political that they could come out of Hillary Clinton's playbook. They contain too little for long-term growth to make them welcome, even to fellow Republicans before the Michigan primary trying to explain away foreclosure on a ranch home in Flint.

The first idea on the Bush table is bonus depreciation, something similar to what was once called accelerated depreciation. This would let companies deduct half the purchase price of capital equipment, such as computers or machine tools.

So far, so good. Such depreciation would curtail the over-taxation of corporations, one of the great American disadvantages and a concern of Treasury Secretary Hank Paulson.

But the plan also may give disproportionate benefit to one industry, autos, at the expense of another, say, financial services. What makes the proposal downright unappealing is that it is temporary, for 2008. A one-year break will make businesses shop like crazy in response for 12 months and then stop abruptly. That amounts to more bumps, not fewer.

Second, the administration is apparently discussing giving a $600 rebate to families with taxable income of less than $100,000. Under review is a wider program that reaches even families who pay no income tax, handing out $400 per household.

Another idea is to reduce the bottom tax rate to 1% from 10%, a full nine percentage points. Any one of these, the estimates suggest, would cost about $100 billion. And again, the break lasts just one year, 2008.

The general concept of the temporary rebate is reminiscent of Jimmy Carter's $50 per head rebate in 1977. It is also similar to something Mr. Bush did early on in his first administration, giving families checks of as much as $600 in the summer of 2001.

But rebates are off-point. As mentioned, saving, not spending, is what Americans need to be doing nowadays. The very risibility of the concept killed the 1997 proposal. Barber Conable of New York, the leading Republican from New York on the Ways and Means Committee, likened rebates to "dropping money out of airplanes."

As for Mr. Bush's rebate, scholars Matthew Shapiro and Joel Slemrod of the University of Michigan found that consumers didn't spend the cash as politicians hoped for, but saved it. How perverse of them! More important were the income, capital gains and dividend tax cuts that the Bush administration and Congress made law in the first term.

A final proposal on the table is a refundable tax credit for first-time home buyers. In other words, you get money even if you pay no taxes. This idea overlooks the role of easy credit in the subprime disaster.

The worst thing about the stimulus fad overall is that it steals political capital from good projects, such as making the Bush income tax cuts permanent. Indeed the only way to justify the abovementioned concepts is as a giveaway to Democrats in exchange for permanence for Bush's cuts.

What else is going on? Staffers at the Treasury Department recently produced serious proposals to address that corporate tax problem. They suggested replacing the corporate income tax with a form of value-added levy that rewards investment. Staffers also talked about simply cutting corporate tax rates. And they proposed expanding depreciation permanently.

These last thoughts reflect the broad proud culture that is Mr. Bush at his best. The Bush administration has after all achieved a lot, with historically low unemployment and many dozens of months of strong growth.

My own guess is that the consumerite package — whatever form it eventually takes — isn't even what Mr. Paulson believes in. It is what one, maybe two, political advisers want. To paraphrase a worse economist than Mr. Bush, Richard Nixon, we are not all Keynesians now. When it comes to the economy, the president would do better if he just stayed off the campaign trail.

Miss Shlaes, a senior fellow in economic history at the Council on Foreign Relations, is a columnist for Bloomberg News.