The Economic Imperative: Bush and the Republicans cannot let this drop.

The post-September 11 spirit of bipartisanship was suddenly shattered during a House Ways and Means Committee meeting, when Republicans suggested a capital-gains tax cut as an emergency economic stimulus. Charlie Rangel of New York, the ranking Democrat on the committee, embarked on a fist-pounding tirade denouncing the Republicans for exploiting the tragedy of terrorism to advance their "right-wing tax- cutting agenda." A few days later, John Spratt, the ranking Democrat on the House Budget Committee, lambasted the capital-gains discussion as "unconscionable" in a time of national crisis. Senate majority leader Tom Daschle piled on, advising the White House not to cave in to the "extreme voices" advocating a "divisive approach" to the stimulus bill. Translation: Even in a plunging economy, congressional Democrats will never abandon their quasi-religious opposition to capital-gains cuts.

Unfortunately, to preserve the veneer of bipartisanship, the White House has succumbed to these tirades. President Bush's economic advisers have always-inexplicably-been unenthusiastic about capital- gains cuts anyway, so the passionate opposition by liberal Democrats has convinced the Bush political team that it's now doubly wise to shelve the idea. In a meeting with investment icon Charles Schwab, Treasury secretary Paul O'Neill rebuffed Schwab's plea for a capital- gains cut, calling it a "deal-breaker." But it's only a deal-breaker because the Bush economic team, representing a president with an 85 percent approval rating, refuses to endorse the idea.

O'Neill's quick surrender has only emboldened the left-leaning Democratic leadership. They are now insisting that any speed-up of income-tax-rate cuts should apply only to the lower brackets, not to the highest and most punitive rates.

So the White House, which has handled the military and coalition- building aspects of the current crisis with such mastery and professionalism, is fumbling the economic-stimulus plan. Republicans are inching closer to agreeing to a stimulus plan with tens of billions of dollars in new government expenditures (which will depress the economy instead of resuscitating it), more tax rebates (which are close to being economically worthless), and targeted tax-rate cuts (which avoid cutting the rates that matter most).

One problem is that the White House apparently gets its economic advice from all the wrong places. Bush has announced that he is "listening to the voices of leading economists" in constructing a stimulus package. This is dreadful news, because the vast majority of modern business and academic economists have a wrong-headed view of how the world works. The supply-side model that Ronald Reagan and Margaret Thatcher employed to change the world in the 1980s is still in disrepute with most traditional Keynesians, who found themselves cast aside in the low- inflation, low-tax prosperity of the 1980s and '90s.

Most "leading economists" opposed Reaganomics. As a consequence, it is now Clintonite Robert Rubin and Fed chairman Alan Greenspan, not Reagan supply-siders, who are crafting the president's stimulus plan.

This administration is clearly in search of its economic orthodoxy, and it's being tugged in multiple directions. Bush has described his administration's economic philosophy as "both supply-side and Keynesian"; of late, the emphasis seems to be on the Keynesianism, as with the administration's absurd claim that the $40 billion emergency spending enacted the week after September 11 would provide a quick "stimulus to the economy." (This contention prompted Congressman Paul Ryan of Wisconsin-one of the rising stars of the House GOP-to send around a copy of a famous chapter from Henry Hazlitt's classic Economics in One Lesson. The chapter, entitled "Broken Windows," reminds us that breaking windows so as to create jobs repairing them is not an intelligent way to build prosperity.)