In the beginning of his term, George Bush was faced with national debt left by the former president, Ronald Reagan. Primary economic policy of George Bush was to curb the deficit which was essential to secure his position as world leader.
His immediate task was to convince both the political parties to come into a consensus on reduction of deficit. While the Republicans believed that curtailing of government spending was best way of reducing deficit, the Democrats wanted to adopt a strict revenue policy for the same. In lieu of democratic majority, George Bush enforced a stronger tax policy. His policy alienated him from the republican congressmen and also reduced his popularity among masses, which bore the burden.
At the end of the 101st Congress, congressional members reached a decision of adopting a marginal tax increase rate. This would also terminate exemptions for taxpayers belonging to the higher income group.
In following financial year, the United States of America was faced with mild recession that continued for a period of six months. Several government programs on welfare were initiated and successful. The president agreed to provide more benefits to unemployed workers, the margin of which continued to increase in subsequent phase. Reorganization of several industries led to the lay off of several employees who were now unemployed.
While serving his second year in the office of the president, George Bush hardly engaged in furtherance of his economic policies. The year 1992 witnessed low inflationary rates and interest rates although unemployment problem had aggravated and reached 7.8%, the highest recorded since 1984. According to reports of Census Bureau, 14.2% of citizens of America were under the poverty line.
With the ECB meeting and US jobs data the key events of the week, it is understandable the August US trade balance, due out Friday, is not drawing much attention. However, the combination of the growth differentials, favoring the US, and the strong dollar lead to some concerns that trade will act as a drag on GDP.
Professor at Columbia University. Recipient of the Nobel Memorial Prize in Economic Sciences in 2001 & the John Bates Clark Medal in 1979. Author of "Freefall: America, Free Markets", "The Sinking of the World Economy", "Globalisation and its Discontents" & "Making Globalisation Work".
Chancellor of the Exchequer of the United Kingdom from 1992 to 2007. Prime Minister of the UK between 2007 and 2010. Inaugural 'Distinguished Leader in Residence' at New York University. Advisor at World Economic Forum
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James W. Harpel Professor of Capital Formation and Growth at the John F. Kennedy School of Government in Harvard University. Director of Program in International Finance and Macroeconomics at the National Bureau of Economic Research.