Question

The 9-11 Tragedy deepened our 2001 recession. What type of fiscal policy did the U.S. Congress and the President carry out?

Think about and discuss what economic factors led to continuous federal deficits during George W. Bush Administration.

Answer 1

Tragedy of 9-11 did not deepen recession of 2001 substantially. It was estimated that unemployment rate of about 6 % which was considered worrisome relative to 1990s figure. But comparing before 1990, it was like full employment.

After 9-11, government increased its expenditure substantially and taxes were reduced. It was expected that it would deliver positive on economic fronts.

Following factors led to continuous rise in deficit during the G.W Bush Administration:

• Bush announced huge tax cut during his tenure.
• Bush announced war in Iraq which resulted into rise in cost of defense.
• During the recession of 2008, Bush announced $ 700 billion bailout package.

All these factors led to the rise in fiscal deficit of government during tenure of GW Bush