President Bush doesn’t like to admit he’s made mistakes. But if White House chatter about an economic stimulus package is true, the president is about to repeat a misstep made early in his first term.

I’m talking about the 2001 tax rebates -- government handouts that arrived in the mail. Individuals got $300 and married couples received $600 -- all in hopes of stimulating the economy.

With the economy slowing again, tax rebates are back on the table for the White House -- only this time dollar amounts could be doubled -- and then some. The Associated Press reports the administration is contemplating rebate checks of up to $800 for individuals and $1,600 for married couples.

Few Americans would turn down an offer to pad their wallets so thickly. But while $800 or $1,600 might be a nice sum of money in the short term, this approach won’t help grow the economy out of a recession. That’s the disappointing lesson from the 2001 rebates.

Here’s why the earlier rebates didn’t work. The federal government, already operating in the red, didn’t have any money to pay for the rebate checks. Instead, it borrowed billions in the spring and summer of 2001. Consumer spending responded with 7 percent growth in the fourth quarter, but investment spending decreased by 23 percent. By the beginning of 2002, the rebate “fizz” was over. Consumer spending retreated to 1.4 percent annualized growth in the first quarter of 2002, and the economy was stagnant for much of the year.

“The simple redistribution from investment to consumption did not create new wealth,” concluded Brian Riedl of The Heritage Foundation, “Tax rebates ... don’t stimulate the economy.”

Riedl favors an alternative: lower tax rates on income, capitals gains and dividends, similar to the plan Bush successfully persuaded Congress to enact in 2003. That stimulus package produced an immediate turnaround in the economy. Consider these four statistics:

• Gross domestic product grew at an annual rate of 1.7 percent in the six quarters before the 2003 tax cuts. For the six quarters following the tax cuts, the growth soared to an average 4.1 percent rate.

• Non-residential, fixed investment declined for 13 consecutive quarters before the 2003 tax cuts. It has expanded for 13 consecutive quarters since then. Continued...