ECONOMIC Reconciliation Act of 2001 (EGTRRA),[3] which was the

ECONOMIC POLICIES OF BUSH, OBAMA AND
TRUMP ADMINISTRATIONS

 

BUSH ADMINISTRATION
Overview

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Entering office in 2001, the
administration of George W. Bush followed a period characterized by an extended
period of economic growth. In the eight years immediately preceding the Bush
presidency, the U.S. experienced a robust economic expansion of nearly 4
percent annual growth and the creation of a record 22.7 million jobs. Through a
combination of higher revenues and decreased spending, the federal recorded a
budget surplus for the fiscal years 1998-2001. Public debt also declined,
relative to GDP, from nearly 48 percent in 1993 to 31 percent in 2001.1
Despite inheriting this positive economic environment, the fiscal position of
the U.S. during the administration of George W. Bush deteriorated first as a
result of steep tax reductions, followed by a recession coinciding with the
terrorist attacks on September 11, 2001, and later, as a result of the Great
Recession that began in 2007 and continued until the end of the president’s
second term. As a result of the tax cuts, in addition to multiple costly
military interventions in the Middle East, a prescription drug benefit and
other expenditures, the Bush administration added $5.849 trillion to the
national debt while little over 1 million jobs were created.2
A federal budget surplus of $128 billion in 2001 skyrocketed to a $1.4 trillion
budget deficit in 2009.

 

 

Proactive Policy Changes

Economic Growth and Tax Relief Reconciliation Act of
2001

Beginning in early 2001, the
Bush administration enacted a series of major tax reductions,
disproportionately targeting the highest income levels. Enter the first round
of the “Bush tax cuts,” the Economic Growth and Tax Relief Reconciliation Act
of 2001 (EGTRRA),3
which was the centerpiece of the early Bush administration’s economic policy. Signed
into law on June 7, 2001, EGTRRA reduced the rates of individual income taxes by:
creating a new 10% bracket for individuals with taxable income up to $6,000, couples
up to $12,000, and heads of households up to $10,000; reducing the 15%
bracket’s low end threshold to be indexed to the new 10% bracket; reducing the
28% bracket to 25%; reducing the 31% bracket to 28%; reducing the 36% bracket
to 33%; and reducing the 39.6% bracket to 35%. EGTRRA also expanded the child
credit and the Earned Income Tax Credit (EITC), reduced the so-called marriage
penalty, increased subsidies for education and retirement savings, eliminated
the cap on itemized deductions and phaseouts of personal exemptions, and
offered temporary relief from the alternative minimum tax (AMT).4
EGTRRA also greatly reduced the estate tax5
and certain capital gains taxes.

 

Jobs and Growth Tax Relief Reconciliation Act of 2003

In 2003, the Bush
Administration enacted The Jobs and Growth Tax Relief Reconciliation Act of
2003 (JGTRRA), another series of tax changes that, along with EGTRRA, are collectively
known as part of the “Bush tax cuts.” Signed into law on May 28, 2003, JGTRRA
accelerated certain tax changes codified in the Economic Growth and Tax Relief
Reconciliation Act of 2001, raised the exemption amount for the individual
Alternative Minimum Tax, and reduced taxes on income generated from dividends
and capital gains.6 Among
other changes, JGTRRA’s provisions included lowering the long-term capital
gains tax rate from 20 percent to 15 percent. For those taxpayers already in
the 10-15 percent income tax bracket, JGTRRA lowered the rate to 5 percent, and
then to zero by 2008. It also revamped the dividend tax rate to make it consistent
with the long-term capital gains rate. In total, the Congressional Budget
Office estimated in June 2012 that EGTRRA and JGTRRA added nearly $1.6 trillion
to the national debt between 2001 and 2011.7

Economic Performance

In January 2001, when President
Bush took office and the debate over EGTRRA began, the Congressional Budget
Office (CBO) projected a ten-year surplus of $5.6 trillion. Economic
performance during the period was negatively affected by two recessions, in
2001 and 2007-2009 – the first following the September 11th attacks
in 2001, and the second stemming from a housing bubble that led to the subprime
mortgage crisis.8 As
measured by the change in real GDP compared to the prior quarter, economic
growth averaged 1.8% from the first quarter of 2001 to the final quarter of
2008. Real GDP, which adjusts for inflation, increased by nearly 3 percent
during President Bush’s first term but an anemic 0.5% during his second term.

Real GDP rose from $12.6 trillion in the first quarter of 2001 to a peak of
$15.0 trillion in the 4th quarter of 2007, before landing at $14.6
trillion in 2009, a cumulative increase of $2 trillion or 16 percent. The
unemployment rate rose from 4.3% in January 2001 to 7.2% in December 2008 at
the end of the Bush administration in the wake of the housing crash. In the
final year of the Bush presidency alone, 3.6 million individuals became
unemployed. A net total of 1.1 million jobs were created in during the 8-year
Bush administration, an increase of 1 percent, representing the weakest job
creation numbers of any president who completed at least one term.9

 

Monthly job creation from 1/01 to 12/08,
all employees, in thousands, total nonfarm, seasonally adjusted, Source: BLS10

 

 

OBAMA ADMINISTRATION

Overview

The early part of President
Obama’s term in office was focused on addressing the economic crisis inherited
from the previous administration. Obama’s first four years included the passage
of laws and regulations designed to ameliorate the consequences of the Great
Recession and subprime mortgage crisis, which began in 2007 under President
Bush. These included the American Recovery and Reinvestment Act of 2009, banking regulation, and comprehensive health care
reform (which included several tax penalties on the wealthy). Amid improving
economic conditions, the Bush tax cuts were allowed to expire for the
highest income taxpayers and a spending cap was implemented for deficit
reduction purposes in 2013. Both the stock market and corporate profits reached
record high levels during President Obama’s tenure, while inflation and
interest rates remained near record low levels. In the aftermath of one of the
worst recessions in U.S. history, the federal deficit reached a record of $1.4
trillion in the fiscal year 2009, but declined to $440 billion in the fiscal
year 2018.

 

Proactive Policy Changes

American Recovery and Reinvestment Act of 2009

Signed into law by President
Obama in February 2009, the American Recovery and Reinvestment Act was enacted
to “jumpstart our economy, create or save millions of jobs, and put a down
payment on addressing long-neglected challenges so our country can thrive in
the 21st century.”11
It included measures to modernize infrastructure in the U.S., enhance energy
independence, expand educational opportunities, improve health care, and offer
tax relief. Roughly one-third of the economic
stimulus package included tax changes designed to aid the struggling economy. In
addition to benefits for corporations, the changes for individuals included
payroll tax credits, AMT relief, a child tax credit expansion, college tax
credit expansion, sales tax deductions for large purchases, an expanded earned
income tax credit for families and a home energy credit.

 

American Taxpayer Relief Act of 2012
(ATRA)

The second series of major economic
policy changes during the Obama administration were part of the American
Taxpayer Relief Act of 2012, which resolved the so-called “fiscal cliff” caused
by the expiration of some components of the Bush tax cuts, which had been
temporarily extended in 2010. Signed
into law on January 2, 2013, ATRA made permanent much of the Bush tax cuts for
lower and middle-income individuals but retained the higher tax rate for
upper-income levels. ATRA also established caps on tax deductions and credits
for higher income earners. The new rates
for income, capital gains, estates, and the alternative minimum tax would be
made permanent. Capital gains, dividends, and estate tax rates were
also increased compared to 2003–2012 levels, which primarily affected
high-income taxpayers. In total, the bill included $600 billion over ten years
in new tax revenue.

Economic
Performance

Approximately 8.7
million private sector jobs were lost between January 2008 and February 2010
due to the Great Recession. The unemployment rate began rising from 4.7% in
November 2007 and peaked at 10.0% in October 2009 and remained relatively
static until November 2010. From that month onward, the unemployment rate began
a gradual decline, bottoming out at 4.7% in 2016. The U.S. added 11.6 million
private sector jobs from February 2009 to January 2017, and from end of the
economic recession in February 2010, a total of 15.9 million jobs were created.12 On
average, non-farm job creation was approximately 200,000 per month for each
month following October 2010, which compares to 13,000 under the Bush
administration and 236,000 under President Clinton.13

Economic growth, measured as the change in real
GDP, averaged 2 percent from the second quarter of 2009 through the end of
2016. This compares to a rate of 0.5% during the second term of President Bush.

Real GDP rose from $14.4 trillion in the first quarter of 2009 to $16.8
trillion in the final quarter of 2016, which represents a total increase of
$2.4 trillion or 16.6 percent. Real GDP per capita rose from $46,930 in 2009 to
$51,523 in 2016, an increase of $4,593 or 9.7%. Inflation and interest rates fell to historically low numbers during the
Obama administration as well. The stock
market and corporate profits reached record high levels during this time, while
inflation and interest rates remained near record low levels. Following one of
the worst recessions in U.S. history, the federal deficit reached a record of
$1.4 trillion in the fiscal year 2009 but declined to $440 billion in the final
fiscal year of the Obama presidency. Overall, 11.6 million jobs were created
during the Obama administration, while the unemployment rate dropped from 7.7
percent in January 2009 to 4.8 percent in January 2017.

 

Monthly job creation from 1/09 to 12/16,
all employees, in thousands, total nonfarm, seasonally adjusted, Source: BLS14

 

TRUMP

Overview

The economic policy of the
Trump administration is characterized by a focus on massive tax reductions for
upper-income levels and corporations, trade protectionism and the dismantling
of Wall Street regulations adopted during the Obama administration. Unlike his
predecessor, Trump entered office as the U.S. experienced historically low
unemployment rates and the longest consecutive monthly record of job growth. Despite
few major legislative achievements until December 2017, job creation averaged
171,000 per month during the Trump administration’s first year in office, which
was below the 187,000 per month average of the final full year of the Obama
administration. The unemployment rate was 4.8 percent in January 2017 and
declined to 4.1 percent in December 2017. During 2017, economic growth
increased over the prior year, with around 3% annualized growth rates in the
second and third quarters. Both the budget deficit and trade deficit were
higher than the prior year, and the stock market and household net worth continued
to increase above 2016 levels.

Proactive Policy Changes

Tax Cuts and Jobs Act of 2017

In addition to administrative
deregulatory actions, the signature economic policy achievement of the Trump
administration was the Tax Cuts and Jobs Act of 2017, a massive package of tax
cuts for higher-income taxpayers and corporations as well as the repeal of a
key Affordable Care Act component, the individual mandate. Signed into law on
December 22, 2017, the Tax Cuts and Jobs Act’s core features are a reduction in
the corporate tax rate from 35 percent to 21 percent beginning in 2018. The top
tax rate for individuals drops to 37 percent. In addition to cutting income tax
rates, the law doubles the standard deduction and eliminates personal
exemptions. The individual tax changes expire at the end of 2025, but the corporate
cuts are permanent.

 

The independent Joint
Committee on Taxation (JCT) found that the Trump tax law will increase the debt
by $1.4 trillion over a decade. The Congressional Budget Office (CBO) found
that lower-income groups would incur net costs
as part of the changes, either as a result of paying higher taxes or receiving
fewer government benefits: those under $20,000 by 2019. Up to 13 million fewer individuals
would have health insurance compared to prior law, as a result of repealing the
Affordable Care Act’s individual mandate requiring health insurance. The Tax Policy Center (TPC) estimated that
the bottom 80% of taxpayers (income under $149,400) would receive 35% of the
benefit in 2018, 34% in 2025, and none of the benefit in 2027, with some groups
incurring costs. TPC also estimated 72% of taxpayers would be negatively
impacted beginning in 2019 if the revenue lost from the tax reductions are offset
for by future spending cuts on social programs.

 

Economic Performance

During 2017,
economic growth continued at a pace similar to the final year of the Obama administration,
with around 3 percent annualized growth rates in the second and third quarters
of the year. Annual job creation was slightly lower in 2017, however, the
unemployment rate continued to decline. Stock market values and household net
worth continued to grow, while the number of uninsured individuals increased
for the first time since the implementation of the Affordable Care Act. Despite job numbers that fell below expectations, the
Dow Industrials average increased 220 points or 0.9%, the S 500 increased
by 19 points or 0.7% and the NASDAQ increased by 58 points or 0.8%. The
unemployment rate declined to 4.1%, which is the lowest since December 2000, the
final full month of the Clinton Administration. Hourly earnings increased by
2.5 percent in the year to year comparison, from $25.98 to $26.63 per hour.

This compares to wage growth of 1.7% to 2.9% per year over the previous nine
years.

 

Monthly job creation from 1/17 to 12/17,
all employees, in thousands, total nonfarm, seasonally adjusted, Source: BLS15

 

 

OVREALL JOB GROWTH & FEDERAL BUDGET
PERFORMANCE: 2001 – 2017

 

 

Monthly job creation from 1/01 to 12/17,
all employees, in thousands, total nonfarm, seasonally adjusted, Source: BLS16

 

 

 

 

Bush         Obama
     Trump17

 

 

 

 

 

 

1

Power of Progressive Economics: The Clinton Years

2
https://www.washingtonpost.com/news/the-fix/wp/2015/01/07/the-story-behind-obama-and-the-national-debt-in-7-charts

3
https://www.gpo.gov/fdsys/pkg/PLAW-107publ16/html/PLAW-107publ16.htm

4 https://www.brookings.edu/research/the-bush-tax-cut-one-year-later/

5

The Bush Tax Cut: One Year Later

6 https://www.congress.gov/bill/108th-congress/house-bill/2

7
https://www.cbo.gov/sites/default/files/cbofiles/attachments/06-07-ChangesSince2001Baseline.pdf

8
https://www.cbo.gov/sites/default/files/111th-congress-2009-2010/reports/2010-12-02incometaxchartbook.pdf

9 https://www.vox.com/2015/11/7/9684780/unemployment-rate-obama

10 https://data.bls.gov/pdq/SurveyOutputServlet

11 https://obamawhitehouse.archives.gov/recovery/about

12 https://www.bls.gov/news.release/archives/empsit_03052010.pdf

13 http://www.businessinsider.com/number-of-jobs-created-per-month-by-george-bush-2012-5

14 https://data.bls.gov/pdq/SurveyOutputServlet

15 https://data.bls.gov/pdq/SurveyOutputServlet

16 https://data.bls.gov/pdq/SurveyOutputServlet

17 Office of Management and Budget, Historical
Tables, Table 1.3; http://www.whitehouse.gov/omb/budget/Historicals/