At the center of the economic package President Bush unveils next week will be a tax cut that barely rated mention six months ago and that many experts rank as among the least likely to succeed in giving the economy a quick lift.
It's not that the idea of cutting the tax on stock dividends has never been floated before.
To the contrary, dividends are a favorite target for tax-cut advocates because they are taxed twice -- once when companies make profits and again when a portion of the profits are paid to shareholders -- and that's bad.
It's just that no one has ever proposed using a dividend tax cut, as the administration apparently now intends, in order to give the economy a speedy shot of adrenaline.
"In my memory, it has never been mentioned in the context of an economic stimulus," said UC Berkeley tax economist Alan Auerbach.
"It's just not something you would think about."
And for good reason, according to a variety of critics.
The dividend tax cut will be the centerpiece of a $500-billion to $600-billion package Bush is to unveil Tuesday in Chicago, which is intended to ensure the sluggish economy recovers its snap.
While details have not been disclosed, White House officials have been telegraphing the broad outlines of the proposal.
Democrats have responded by showcasing their chief line of attack: that the benefits of the $30-billion-a-year tax cut would go inordinately to the rich. But that may be the least of the proposal's problems.
As described by administration officials and others, the tax cut would work as a stimulus principally through the stock market.
By pushing up share prices and erasing some of the paper losses of the last three years, it would make people feel wealthier and therefore able to spend more, causing the economy to grow faster.
Citing some of his own work as a former professor, R. Glenn Hubbard, chairman of Bush's Council of Economic Advisors, has estimated that eliminating the personal tax on dividends would drive the market up by as much as 20%.
Analysts say there is a rich irony -- and a big danger -- in the White House picking market-bolstering tax cuts as the centerpiece of its new growth plan.
After all, it was the overheated market's success at eluding the control of the capital's other major economic manager -- the Federal Reserve -- that helped cause many of the problems the new plan is supposed to solve.
As the president begins selling tax cuts to prop up a sagging market, central bank Chairman Alan Greenspan is busily arguing that Federal Reserve-engineered interest rate hikes could not -- or should not -- have been used to tamp down the ballooning market of the late 1990s.
"It would be unfortunate if Washington got into the business of trying to bail out investors via tax policy," said Brookings Institution economist William G. Gale.
"It would mean investors wouldn't have to worry about taking risks because they'd know that the government would step in if things fell apart."
Even if one sets aside such concerns, there is still the question of whether a dividend tax cut would act as much of a stimulus, and here many economists are baffled about how the administration will make its case.
For example, even if Hubbard is right and the dividend tax cut causes the stock market to jump 20%, the immediate effects on the economy seem likely to be comparatively small.
Here's the math: The stocks of U.S. companies are now worth about $8.5 trillion, according to Fed statistics. A 20% increase would mean a $1.7-trillion jump in paper wealth. Economists estimate that consumers boost their spending 3 cents or 4 cents for every dollar of increased wealth. That would mean an extra $50 billion to $70 billion.
That's not nothing, but in a $10-trillion economy, it's not very much, either. And a wide array of analysts thinks the effects would be nowhere near this magnitude.
Part of the problem is that about half of U.S. companies don't pay dividends, so arguably their stock prices would not be immediately helped by the tax cut. And those tend to be the firms most hurt by the market collapse of recent years and therefore most in need of help -- those high-technology and telecommunications firms in the Nasdaq index, for instance.
Another part of the problem is that roughly half of the dividends that are paid don't go to tax-paying individuals, but to tax-protected pension funds and therefore would not be affected by a dividend cut.
One forecasting firm, Macroeconomic Advisers LLC of St. Louis, estimates that elimination of the personal tax on dividends would boost the stock market 8%, rather than 20%. Using that figure and the numbers above, spending would increase about $30 billion, or about the annual cost of the tax cut.
"It would have a small effect on the economy," Berkeley's Auerbach said. "But it's not the kind of effect you'd consider a stimulus."
There are hints that the White House and outside tax cut advocates may cope with weaknesses in the stimulus case by advancing other arguments for a dividend tax cut.
White House officials have already begun portraying the cut as a corporate governance reform, saying it would give firms an incentive to pay out more in dividends and rely less on the kind of stock price manipulations behind many of the recent scandals.
At an American Economic Assn. meeting Friday in Washington, Stanford economist Robert E. Hall said the cut would represent an important step in shifting the nation's tax system away from its reliance on income.
Conservatives have long sought such a shift on grounds it would make the economy more efficient. Liberals and moderates have opposed it because it would require jettisoning the nation's long-held belief that the rich should bear a heavier burden of taxes than the rest of the nation.
Hall wryly counseled the White House to not dwell on the debatable details of how the dividend tax cut would help, and "just say it is good."
The debate may yet come to that.