Question

Why did President Bush lower taxes/tax rates when we were in a recession in 2001? What kind of policy is this? How is this policy different from what President Roosevelt did to get us out of the Great Depression?

Answer 1

During the recession of 2001, President Bush lowered the tax rates, as a part of expansionary fiscal policy aimed at increasing consumer net income in hand, and thus their purchasing power, thereby increasing consumer demand for goods and services, pulling the economy out of recession.

Comparing this to the policies adopted by President Roosevelt during the Great Depression, he instituted a New Deal, which included a set of bold policy actions aimed at increasing consumer and investor confidence in the economy. He assured people of the safety of banks by reorganizing some banks, closing some banks. Banks were closed for 4 days to stop excessive withdrawals. He also initiated several agriculture relief programs, social security act and union protection programs. All these involved increasing government expenditure in the economy in order to increase consumer confidence and pull the economy out of the depression. This is also a type of expansionary fiscal policy.