Could George W. Bush pull an FDR?
One good thing about 2008 is that after that year, no matter what happens, Bush is out of the White House. He can't win a third term because he can't run for one. But what would happen if he could?
Even with the able assistance of Karl Rove, he'd lose if he ran again. Presidents' popularity usually benefits from the incumbent's advantage after the first term, then takes a dive during the second. The only president who ever got nominated for a third consecutive term, Franklin Roosevelt, did win, but with a significantly diminished popularity following his 1932 blowout and his 1936 superblowout. (And when he ran for a fourth term in 1944, his popularity was diminished even moreso.)
Bush barely squeaked in in 2004 and didn't even win in 2000; he'd be kicked to the curb if he were the nominee in 2008. Hell, I doubt his own party would allow him to seek a third term. (Grover Cleveland got the same denial in 1896, but I'm sure Bill Clinton wouldn't have been denied the nomination in 2000, if he'd been allowed to run. And he would have won—also with a diminished popularity, of course.)
As things stand, Bush has hurt the Republicans' chances in 2008. Sure, that has something to do with his poor performance, but it also has to do with the fact that he's a Republican, and voters will probably view the 2008 Republican nominee as an incumbent, whether he's ever run for president before or not. That's the way voters tend to look at these things, fair or not.
A Republican candidate like Senator John McCain (R-Arizona), if he survives the primaries, could follow Bush into the White House. McCain has name recognition and many Democrats still perceive him as a moderate who works across the aisle—though his performance has never borne that out. He's just more moderate than Bush, but that doesn't mean much of anything. I mean, who isn't more moderate than Bush? (Okay, there's Agosto Pinochet—maybe.) A Republican candidate like Senator Chuck Hagel (R-Nebraska) really is a touch more moderate in some ways, and might have a decent shot at becoming president if the current president were a Democrat. But Hagel, who has far less name recognition than McCain, probably wouldn't win this year, even if he did get the nomination.
Of all the possible Republican candidates, John McCain is the Democrats' strongest possible opponent; he'd eat into their natural advantage better than any other candidate. The Democrats do have a deeper bench for 2008, and I'd say John Edwards is probably the most likely nominee. Edwards, like McCain, has wide name recognition, and has cross-party appeal, too. He's got that populist tinge, he's a good speaker, he's from the South and the new primary schedule favors him. Iowa and New Hampshire are toward the front, as usual, but Nevada has been inserted between those two states, which is expected to give Edwards a boost. Then it's on to Edwards' native South Carolina, and then depressed Michigan. With Edwards talking so much about poverty, more than any other presidential candidate in years, he's likely to resonate in Michigan and in other states where things aren't as good as they've been in the past.
If the Republicans nominate John McCain (whom they'd choose over Bush, even if Bush could legally run for a third term,) this would be a close election. Will they? That's hard to say. Some predict that if the Republicans lose the House this year, they could be facing a civil war—and that if they lose both the House and the Senate, chances of that civil war would be greater. I'm not convinced that a civil war would ensue, but on the other hand, a presidential nomination is where the direction of the party is often decided, so that may well come to pass. If the Republicans stay unified, there's a good chance they'll rally around the more "electable" John McCain. But if they start with the infighting, all bets are off.
I'd say a McCain vs. Edwards contest is the most likely for 2008, as of right now. But it's too early to say how that contest would turn out. Stay tuned.