"WE ARE THE PARTY OF IDEAS," says President Bush. And he has been right, at least until now. But, as he refreshes his team, he faces three years that might prove a dreary descent into irrelevance unless he also refreshes his domestic economic policies. The fact is that what worked for compassionate conservatism in 2000 won't get America where he wants to take it now, in the new world of 2006.

When George Bush rode out of Texas under the banner of compassionate conservatism, he was on to something. Most Americans style themselves conservatives: They like the opportunities and standard of living that the freemarket system has made available to them, they don't like taxes, and they generally believe we are the good guys when international disputes arise. But Americans are also compassionate: They want to share their good fortune with what the Victorians would call "the deserving poor," and since welfare reformers cleared the rolls of the most undeserving, they are content to leave most of the apparatus of the New Deal in place. Moreover, they recognize that as the country grows richer and its citizens grow older, the role of government might have to expand to include a greater commitment to easing the burdens of age and sickness, something a growing and increasingly affluent country can afford without increasing the portion of national income claimed by government.

But those signing on with Bush expected him to meet these needs while also keeping the nation's economy moving ahead, with its fiscal house

Start with tax policy. Bush was right to listen to Larry Lindsey during the 2000 campaign and endorse a tax-cutting program that would do two things: prevent an economic softening from turning into a major recession, and encourage risk-taking and job-creation with tax cuts that benefited both those in the lower middle class, and, more obviously and controversially, high earners ("the rich," to liberals) and corporations. The Bush tax cuts thus met the compassionate (many families of modest means relieved of their tax burdens and benefiting from expanded child tax credits) conservative (maximize incentives) principles that brought the Texas governor to the White House.

But that was then. Now the economy is hardly in need of any stimulus: It is growing 3 or 4 percent or more, creating hundreds of thousands of jobs every month, and exhibiting enough signs of overheating to have the Fed raise interest rates. Nor are high earners in need of further incentives to take risks and work harder. Corporations find themselves awash in cash, profits are claiming a record portion of national income, hedge fund operators are busy acquiring huge modern paintings for the whitewashed walls of their multimillion-dollar lofts, and even Wall Street deal makers can find little to complain about.