If somebody grabbed your wallet and then handed you back a $20 bill, would you be grateful? Realizing the money was yours to begin with, you would probably call the cops rather than thank the thief.

President Bush’s latest gimmick to stimulate the economy by giving back to taxpayers $800 of their own money is the Washington equivalent of the “generous” thief. The biggest fairy tale in Washington isn’t Barack Obama’s voting record on the war in Iraq, but the notion peddled by Republicans and Democrats alike that the government has a big pot of its own money that it generously gives to people by “injecting” it into the economy as a stimulus.

In fact, government has only our money or money it borrows from lenders. The problem is it costs the government a major portion of every dollar it takes from us in collecting it and paying the interest on dollars it borrows. Why not just let us keep our money in the first place?

For a real economic stimulus, look no further than the Bush 2003 tax cuts, which lowered the tax rate on capital gains and offered businesses other incentives to invest and hire more workers. Derided in the media as a “tax cut for the rich,” the 2003 tax cuts’ positive results were felt throughout the U.S. economy.

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By reducing taxes, President Bush rewarded people who worked harder and invested more, thus generating tremendous economic growth. Now, those same folks know Congress refuses to renew the Bush tax cuts, which expire in 2010. It appears that the prospect of higher taxes encourages an economic slowdown.

Last Thursday, even as Federal Reserve Chairman Ben Bernanke was reassuring Congress that the proper stimulus could head off a recession, the cold, hard numbers in the financial pages told a different story: New home construction down nearly 25 percent, a faltering Dow at its lowest level since last March, the ongoing credit crisis, and a sharp, unexpected drop in manufacturing all point to rough economic waters ahead.

The proper response to a major economic slowdown is to slash government spending and make those tax cuts permanent. That will keep far more money circulating in the productive sectors of the economy and reward savings and investment, the two pillars of new job creation.

Then, as economic growth regains vigor, politicians should stay out of the way as the market makes painful but necessary corrections that reward the prudent and punish the profligate, including those responsible for the subprime mortgage meltdown.