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Preview: RealClearPolitics - Articles - Karl Rove

RealClearPolitics - Articles - Karl Rove

Last Build Date: Tue, 16 May 2006 00:52:42 -0600

Copyright: Copyright 2007

The Bush Economy

Tue, 16 May 2006 00:52:42 -0600

The stock market began its decline in mid-January 2000, dropping from an all-time high of more than 11,700 in the Dow to below 9,800 in early March 2000, on its way to its first calendar year loss since 1994. The bubble also burst in 2000. The Nasdaq, site of some of the largest IPOs in history, peaked on March 10th, 2000. And by December 2000, the time of our meeting in Austin, it had dropped by more than 50 percent. The economy itself began slowing in the third quarter of 2000 as GDP declined by an annual rate of 0.5 percent. And all of this took place before George W. Bush set foot in the Oval Office. The economy posted another decline in GDP growth in the first quarter of 2001: minus 0.5 percent. And March 2001 marked the recession's official start. Sluggish growth of 1.2 percent followed in the second quarter of 2000. And GDP growth declined again in the third quarter, falling 1.4 percent. As in past recessions, no one single factor caused the 2001 recession. It resulted from declining stock markets, a surge in energy prices, higher interest rates, and the collapse of the high- tech bubble. Then, on a bright September morning, came the worst attack on the American homeland in our history. Al Qaida targeted our political and financial centers, and intended to bring our economy to its knees. That didn't happen, but serious damage was done. Airports were shut. Stock markets closed. The hospitality and the insurance industries hit especially hard. The country suffered an estimated $100 billion in economic losses. And in the three months following 9/11, the American economy shed 1 million jobs. That fall, a series of corporate scandals began to come to light. Among other things, these scandals led to the largest bankruptcy in U.S. history. Confidence in the markets was understandably shaken. And the Dow Jones dropped to below 7,300, a five-year low. At the time, the Financial Times said, quote, "Forecasts of a Dow diving to 5,000, 3,000 and even below 1,000 have been receiving attention from investors who once could not believe the Dow would fall below 8,000." A faltering economy, falling markets, shaken confidence, an economy reeling, that's what America's new president faced. In times like these, the principles and values of a president come into play. This president believes the government's role is to create an environment where the entrepreneurial spirit flourishes and where small businesses can grow, where people can dream about owning their own home and have it become a reality. And he believes that economic growth is created largely on the economy's supply side. The best tax cuts create incentives for people to work and businesses to produce and companies to invest. President Bush doesn't believe government creates wealth. He understands that's done by American workers, farmers and entrepreneurs. His economic policies, then, are tied to a view of human beings that understands the role of incentives in shaping behavior. There are three important elements of these policies that I'd like to talk about today: the tax system, trade liberalization and budget discipline. The president believes when the economy falters, tax cuts will lead to economic prosperity. This reflects a deep faith in individual citizens; in their energy and common sense and capacity to make wise decisions. His view of free trade is grounded in the knowledge that American producers and workers can compete and win internationally as long as the rules are fair. And an emphasis on a responsible federal budget reflects the president's belief that, while government should actively perform its core functions, it should not impede the efforts of individual citizens and enterprises to create jobs, wealth and economic opportunity. Let me deal briefly with each one of these three: taxes, trade and spending. In response to the economic challenges the country faced, President Bush provided Americans with the largest tax relief in a generation. With the help of the Republican Congress, he has secured the path to each of five major t[...]