George W. Bush's First Term As President of The United States - Economic Policies

Economic Policies

Federal spending in constant dollars increased under Bush by 26% in his first four and one-half years in office. Significant increases in both military and domestic expenditure, combined with tax cuts and a recession, all contributed to record budget deficits recorded during the Bush administration. The seasonally adjusted unemployment rate, based on the American Housing Survey, started at 4.7% in January 2001, peaked at 6.2% in June 2003, and retreated to 4.6% in May 2006; however the New York Stock Exchange traded for a record 61 consecutive trading sessions at above 11,000 points during Bush's presidency,

Americans received a check from the Internal Revenue Service (IRS) as "reconciliation" for having paid more tax than was necessary.

Facing opposition in Congress, Bush held public meetings across the United States to increase nationwide support for his plan for a $1.3 trillion tax cut. He and his economic advisors argued that unspent government funds should be returned to the taxpayers who had provided these funds, and with reports of the threat of recession from Federal Reserve Chairman Alan Greenspan, Bush argued that such a tax cut would have the beneficial effect of stimulating the economy and creating jobs. Five Senate Democrats crossed party lines to join Republicans in approving this $1.35 trillion tax cut program. It was one of the largest in United States history and regarded as a major political victory given Bush's controversial election.

Bush sought and obtained Congressional approval for these major tax cuts spread over three years: 2001, 2002, and 2003. They reduced taxes for almost every taxpayer in the U.S. by altering the lowest tax bracket, increasing the child tax credit and eliminating the so-called "marriage penalty". Arguably, tax cuts were distributed disproportionately to higher income taxpayers through a decrease in the marginal rates at higher income, but the change in rates was greater for those of lower income, resulting in an income tax structure that was more progressive overall. Complexity was increased, however, with new categories of income to be taxed at different rates and with the introduction of new deductions and credits; at the same time, the number of individuals subject to the Alternative Minimum Tax increased, since this remained unchanged.