Bush entered the White House in January of 2001 amid a 10-year span of the greatest economic expansion in the history of our great nation. The unemployment rate was at its lowest level since the 1960's and President Clinton had managed to serve his entire term without incurring an economic recession, the first President to do so since Lyndon Johnson. Unfortunately for President Bush, he would enter office at a time when the economy was swiftly moving toward its first recession in over 10 years. In this essay, I will evaluate President Bush's economic plan and conclude whether it has aided or hindered the US economy's downward spiral towards recession. .
President Bush campaigned with an economic plan centered on an enormous $1.3 trillion dollar tax cut that would take place over the next 10 years. This strategy is reminiscent of President Ronald Reagan's economic policy of slashing income taxes and shrinking the overall size of the Federal Government. This economic policy is often referred to as "supply side- economics. However, President Bush's plan differs from supply side economics in the sense that his plan asserts that tax cuts should be accompanied by government spending cuts, also known as fiscal responsibility. This contrasts in the sense that the conventional supply-side economists believe that taxes should be cut, but spending cuts and deficits are not important considerations. An important thing to remember is that, prior to the supply-side revolution, economists taught that increased demand raised output, but that sooner or later costs and inflation would rise as the economy reached full capacity and employment. However, supply-siders disagreed, contending that tax reductions that raise the returns to labor and capital increase aggregate supply. In fact, many economists point to this "supply side- revolution as the basis of the Clinton-era economic prosperity, while others attribute the prosperity to the deficit-reduction passage Clinton was able to push through Congress in his first year in office.