Miller Center

George W. Bush: Domestic Affairs

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Despite George W. Bush’s best intentions, his administration encountered its share of challenges: the disputed 2000 presidential election, which initially undermined its political legitimacy; the terrorist attacks of September 11, 2001, which recast its focus and priorities; the natural disaster of Hurricane Katrina in 2005; and finally the 2008 financial crisis at the end of Bush’s tenure. Few could have predicted the course of George W. Bush’s presidency based on his campaign or tenure as governor of Texas. Crises often intrude on presidential plans, and those historical moments all helped determine the shape and fate of the Bush presidency.

Bush did not take his governing decisions lightly, beginning to think of the structure of his White House more than a year before the actual presidential election. He picked a veteran vice president, Dick Cheney, to serve as a key senior adviser, and he surrounded himself with a senior staff that he trusted implicitly. Within the Bush team, Karl Rove worked on overall political strategy to ensure that the administration met its goals and was reelected in 2004, Karen Hughes oversaw how policy was communicated to the public, and Chief of Staff Andy Card facilitated decision-making and implementation by directing the rest of the staff. Bush wanted to create a flexible but tight and orderly structure from which he could obtain useful advice and through which his decisions could be effectively implemented. 

Although President Bush was not successful with all of his appointments, and some were politically controversial, his Cabinet was recognized for its overall competence, and it had a few historic standouts, including the first African American to serve as secretary of state (Colin Powell), the first African American woman to serve as secretary of state (Condoleezza Rice), and the first Asia Pacific woman to serve in a presidential cabinet (Secretary of Labor Elaine L. Chao). Bush also presided over the creation of a new Cabinet-level department when the Department of Homeland Security was created in the aftermath of the terrorist attacks of September 11, 2001.

Social Policy: Compassionate Conservatism in Practice

During the presidential campaign, Bush often used the term, “compassionate conservative,” to describe himself and his political approach. The term meant using traditional conservative ideas, such as small government and free-market principles, to accomplish social goods and help those in need. Bush had cited the phrase in his successful campaigns for Texas governor, and he employed the term on the presidential campaign trail as well.

Although “compassionate conservativism” was not a lasting tenet of his administration, one of Bush’s first actions in office reflected that philosophical approach. On January 29, 2001, with his first executive order, Bush created the Office of Faith-Based and Community Initiatives, based on the idea that local groups and non-profits could better serve people in need than the federal government in Washington. Bush believed that faith-based organizations, charities, and community groups could respond to people’s needs more effectively than government. Because federal money was given to faith-based charities, the move sparked much debate and controversy. Opponents charged that the approach violated the constitutional concept of church/state separation because it used federal tax dollars to fund the activities of religious organizations. Thousands of faith-based and community organizations received federal grants because of Bush’s new policy. 

Early in Bush’s first term, a firestorm arose over government funding for stem cell research. Medical researchers believed that stem cell lines, created from the destruction of human embryos, could be used to develop treatments for various diseases including Parkinson’s and diabetes. Congress had consistently passed the Dickey Amendment, which banned the use of federal funds for research in which embryos were destroyed. The Clinton administration, however, adopted a novel interpretation of the law, which allowed the government to fund the research as long as the destruction of the embryos was privately funded. Bush faced the decision of whether to distribute the money appropriated by the National Institutes of Health during the Clinton administration. Bush saw both sides of the argument; while he worried about the slippery slope this type of research could create, especially its relation to abortion, which he opposed, he was also reminded of his sister’s death from leukemia and appreciated the possibilities of finding cures for such diseases. 

As he had with policy decisions related to abortion, Bush’s final decision was guided by his belief that life began at conception and was to be protected. Demonstrating his views of the issue’s political power, Bush announced his decision in a rare prime-time address to the nation from his Texas ranch, in August 2001. He stated that he would authorize federal funding for embryonic stem cell research but only for existing stem cell lines. The only cells that could be used for research, in other words, were those that had come from embryos that had already been destroyed prior to his decision. The public generally supported the decision, favoring the federal funding for stem cell research in embryos already destroyed. But many in the scientific community and in the Democratic Party staunchly opposed his limits on scientific research. The discussion of stem cell research continued for the rest of his administration, with Bush vetoing two bills intended to overturn his decision in 2006 and 2007.

Tax Cuts

During his campaign, Bush promised a major tax cut that he hoped would stimulate the economy. According to his economic advisers, such tax cuts would give people and businesses more money that they could reinvest, which, the President hoped, would cause economic growth and, over the long term, actually increase the taxable income of the American people. In February 2001, for instance, Bush spoke in favor of tax cuts as a way to create jobs and stimulate the economy. Opponents of such economic thinking argued that any tax windfalls for the wealthy would not be spent on reinvestment but on frivolous luxuries and risky speculative ventures.  

Bush proposed a tax plan that called for a $1.6 trillion reduction in taxes. It doubled the child tax credit, incentivized more retirement savings, and phased out federal estate taxes. All income brackets received a tax cut, including new rebates for taxes paid in 2001. Republicans in Congress moved quickly to support the bill.  Senate Democrats, however, forced a compromise that reduced the final tax cut to $1.35 trillion and made it impermanent, setting up the tax cuts to expire in 2011. Even this compromise was a major victory for the President and his economic vision.

The tax cut, however, was not accompanied by a reduction in government spending. As a result, 2001 was the last time the government had a surplus for the foreseeable future. Budget deficits soared as tax revenue declined but entitlements increased, discretionary spending grew, and the country began to fight wars in Afghanistan and Iraq.

Using the political capital gained from Republican victories in the 2002 midterm elections, Bush pushed for a second round of tax cuts. He believed that this would further stimulate the economy. The bill proposed a reduction in capital gains taxes and allowed for up to $60,000 of tax-free savings annually. Democrats believed that these actions were not attempts to bolster the economy, but an attempt to eliminate taxes on investment income and force a reduction in the size of government. The package passed narrowly after Vice President Cheney broke the Senate deadlock. Federal taxes on dividends and capital gains reached their lowest level since World War II. Bush was able to pass another modest tax cut in 2006, but it was not nearly as expansive as he desired.  

Bush’s 2001 and 2003 tax cuts constituted one of the most important domestic actions of his presidency. They reduced federal revenue by an estimated $4 trillion over a period of ten years, worsened wealth inequality in the United States, and increased the federal deficit. Meanwhile, the economy grew sporadically. In October 2007, the stock market topped 14,164, up from approximately 8,000 in 2002. Unemployment declined from 6.3 percent in 2003 to 4.7 percent by 2007. Despite these signs of progress, the United States budget remained unbalanced, and a major economic catastrophe loomed in the final months of the Bush administration.

Education Reform: No Child Left Behind

Bush had successfully reformed the Texas education system with an emphasis on standards and testing. As President, he wanted to implement such initiatives across the nation. At the Republican National Convention in 2000, Bush proclaimed that the United States had engaged in the "the soft bigotry of low expectations" by expecting lower performances from minority and underprivileged children.

The No Child Left Behind Act expanded federal funding for education, allowed more freedom for localities to spend federal funds, set federal standards for school achievement, and encouraged more freedom of choice between private and public schools. The act also mandated that 100 percent of U.S. children must have basic reading and math skills by the 2013-2014 school year: literally, no child was to be left behind. Schools that failed to meet the standards were offered help. But if they continued to fail to make the established goals, they would be penalized.

Congress overwhelmingly passed the plan with bipartisan support, including leadership from liberal stalwart, Senator Edward M. Kennedy of Massachusetts. President Bush signed the act into law on January 8, 2002. The program was controversial because of its high standards, reliance on testing, cost, and the weakening of local autonomy, a staple of the U.S. education system. By the time Bush had left office, fourth-grade reading and math scores and eighth-grade math scores had reached their highest levels in history. The program, however, remained contentious as parents and teachers complained about “teaching to the test” and administrators struggled to meet requirements and deal with the bureaucracy. Congress replaced No Child Left Behind with a new education bill in 2015 during the administration of Barack Obama.

Medicare and Social Security Reforms

Bush worked tirelessly toward his vision of an “ownership society” of personal responsibility that he announced in his second Inaugural Address. He called for increased ownership of houses, businesses, retirement accounts, and health insurance. Bush’s health care initiative was designed, in part, to prevent a more robust federal plan from being enacted, something like to what was passed as the Affordable Care Act during Barack Obama’s presidency. Bush intended to create private “health savings accounts” to be used in combination with health insurance plans, which would have high deductibles and would thereby be more affordable. He wanted people to be able to make more decisions for themselves about their health plans while controlling some of the costs of health care. Health savings accounts highlighted Bush’s larger proposal to reform Medicare and the health care system. 

Bush argued that Medicare, the government program to provide health insurance for people over 65 years old or disabled, was outdated and heading toward bankruptcy. His ideas for reform included an option for prescription drug benefits that would only be delivered through private insurance plans. Senior citizens who desired the new benefit would have to purchase private insurance plans from private companies. Bush hoped that this proposal would increase competition and allow market forces to regulate the health care system. Under Bush’s plan, the government-run program would compete with private plans. On December 8, 2003, Bush signed the Medicare Modernization Act of 2003 into law in the DAR’s Constitution Hall near the White House. The bill was viewed as a quasi-victory for Bush. It created new benefits and competition increased, but it was the largest expansion of Medicare benefits since the program’s creation in 1965, and more funds were spent on the program than the administration had anticipated.

Beginning in 2003 and focusing most seriously after the 2004 reelection, President Bush pursued the partial privatization of the Social Security system, which provides benefits to disabled, unemployed, and retired people. The popular program, a response to the Great Depression, began in a vastly different time when retirements (and lives) were shorter and there were more workers per retiree to pick up the tab. By the early 2000s, projections indicated that entitlements, including Social Security, would constitute 70 percent of the federal budget by 2030. Social Security’s revenue had fallen below its forecasted rate, due to an aging population that retired in its 60s but would live for decades longer than retirees did in the 1930s. Social Security expenses would soon exceed the amount being paid into the system, which would drive the system into debt and eventual bankruptcy. Many in Washington wanted to reform the system to make it sustainable for the long term, but what form those changes were to take was the subject of great disagreement.

Bush called for a fundamental reform that allowed younger workers to divert a portion of their payroll taxes, which funded Social Security, into private savings accounts. Although Democrats were resistant, Bush believed that he could convince the American people through a “60 Stops in 60 Days” nationwide tour. Democrats vowed to block any discussion of Social Security reform until Bush removed private accounts from the table. Along with strong opposition, Bush’s proposal faced another problem; his plan’s fatal flaw was the conspicuous absence of how to maintain funding for those currently receiving Social Security benefits when the program’s funding was reduced as workers opted for private retirement accounts. Bush spent any political capital he had received from reelection on this losing cause. With no serious hope for passage, the administration dropped the proposal in 2005. Bush later wrote, “The collapse of Social Security reform is one of the greatest disappointments of my presidency.”

Supreme Court Appointments

Shortly following his election, Bush ordered his advisers to produce a list of potential candidates for the U.S. Supreme Court, stipulating that the list include women, minorities, and people with no previous judicial experience. Bush utilized this list when Justice Sandra Day O’Connor notified him that she wanted to retire to take care of her ailing husband in the summer of 2005. Bush narrowed his list to five candidates including both future appointees John Roberts and Samuel Alito. Roberts emerged from the short list, presenting Bush with a baseball analogy for the role of judges, which resonated with the former owner of the Texas Rangers. Bush wrote in his autobiography, Decision Points, that Roberts explained, “a good judge is like an umpire, and no umpire thinks he is the most important person on the field.” 

Three days before the confirmation hearing for Roberts in September 2005, however, the President received the news that Chief Justice William Rehnquist had died. Bush decided that Roberts would be the perfect fit for the now vacant position of chief justice and switched his appointment. The U.S. Senate confirmed Roberts by a wide majority, and the administration began searching for a suitable candidate to replace O’Connor.  

Bush believed that a woman should fill the position, and he nominated Harriet Miers, a Texas lawyer and friend who was currently serving as White House counsel and had participated in the Roberts search. The pick shocked the political world, and many of Bush’s own supporters waged a campaign against Miers who had no previous experience as a judge and was thought to be an unreliable conservative. The President was forced to withdraw her nomination and then chose Samuel Alito, who was confirmed after a contentious confirmation hearing. Robert’s replacement of Chief Justice Rehnquist did not have a measurable and immediate impact on policy, but Alito’s conservative vote replaced O’Connor’s more moderate voice and moved the Court’s rulings to the right.

Hurricane Katrina

On August 29, 2005, the nation’s costliest natural disaster struck in the form of a hurricane named Katrina that battered Louisiana and the Gulf Coast. Before Katrina made landfall, the President put the Federal Emergency Management Agency (FEMA) on its highest level of alert. Relief supplies were readied, and the military made preparations for the emergency. These federal efforts were intended to support state and local officials in their relief efforts. Bush also signed an emergency declaration allowing Louisiana to use federal resources to pay for the state’s disaster-response preparations. Mayor Ray Nagin ordered a voluntary evacuation of New Orleans, but many residents of the city did not respond. Bush pushed for Louisiana’s Governor Kathleen Blanco to force Nagin to order a mandatory evacuation. By the time the evacuation came, it proved too late for many of the city’s residents, especially the poor, sick, and elderly.

As water from Lake Pontchartrain began pouring over New Orleans’ levees and flooding the historic city, eventually covering 80 percent of the city, tens of thousands of residents were stranded, especially in low-lying areas like the Lower Ninth Ward. People were stuck on roofs or carried away in the flood. Thousands gathered for shelter at the Superdome and the New Orleans Convention Center. It was later reported that conditions at the Superdome had deteriorated with leaking roofs, no air conditioning, and broken restrooms. Widespread looting and violence soon broke out in the streets. The city and the whole area were hampered by lack of electrical power, not enough rescue workers or supplies on the ground, and confused and overwhelmed relief efforts.

Bush and his administration were accused of negligence, incompetence, and even racism for the response to Katrina. Bush argued that when natural disasters occur, it was commonly accepted by law and precedent that state and local authorities lead the response, while the federal government supports their efforts. Local and state authorities in Louisiana were ill prepared and bickered over how to respond to the disaster. President Bush flew over the destruction, and photographs were released of him peering out the window of Air Force One. The images backfired as they made Bush seem detached and distant from the suffering. For many citizens, this image represented the failure of the federal response to Katrina and Bush’s lack of concern for the victims. 

The federal response to Katrina paled in comparison to the dramatic measures that Bush took to aid and comfort those in need following 9/11. Even fellow Republicans questioned his approach with former Speaker of the House Newt Gingrich wondering how Bush’s leadership could have eroded so substantially. Bush was frustrated with the results of the relief efforts but did not take measures to improve them. He praised the coordinator of federal efforts, famously stating to Mike Brown, head of the Federal Emergency Management Agency, “Brownie, you’re doing a heck of a job.” Despite the failures, Bush’s language seemed to indicate that he either did not care or did not understand what was happening. He later wrote, “As the leader of the federal government, I should have recognized the deficiencies sooner and intervened faster…I made an additional mistake by failing to adequately communicate my concern for the victims of Katrina.” 

Local police were unable to control crime in the city. By August 31, about four thousand National Guard troops were in place. The Guard, under the command of the governor, was overwhelmed; Bush, realizing the problem, proposed the deployment of federal troops to assist. However, the concept of federal intervention was not popular in the Deep South, and the Posse Comitatus Act of 1878 prohibited members of the U.S. military from conducting law enforcement within the United States. During his visit on September 2, President Bush unsuccessfully tried to convince Governor Blanco to consent to the use of federal troops, federalizing the relief efforts. A second plan was faxed to Blanco for approval the following day. She, once again, declined. Bush then decided to send in more than seven thousand troops to New Orleans, but without law enforcement powers. Bush later explained, “I decided that sending troops with diminished authority was better than not sending them at all.” 

By the time Bush returned to the Gulf Coast on September 5, order was returning to the area as people were evacuated, search-and-rescue operations were completed, and water was being pumped out of New Orleans. During the following months, President Bush worked with Congress to secure $126 billion in funding to rebuild the battered region. Long before that, however, the political damage had been done. The federal response to Hurricane Katrina was one of the most widely criticized events of Bush’s tenure, and his popularity dropped accordingly.

Financial Crisis of 2008

The U.S. economy began to decline in late 2007. Economic concerns drove the Federal Reserve to lower the Federal Funds Interest Rate, which it did seven times. The financial giant, Bear Stearns, headed towards failure, which led the federal government to guarantee $29 billion of their assets with government funds in hopes of avoiding the repercussions of its failure. In February 2008, President Bush responded to the economic slowdown with a $168 billion stimulus package, which was passed by the Democrat-controlled Congress and gave $130 million directly back to taxpayers. In September 2008, the financial giant, Lehman Brothers, declared bankruptcy. The stock market then collapsed with the Dow Jones Industrial Average plunging from a record high of 14,164 in October 2007 to 8,577 in October 2008; consumer spending fell, and the economy seemed to grind to a halt as hundreds of thousands of people lost their jobs.  

The root of the problem was a bubble in the housing market, which made the sale of mortgages extremely profitable. Large deregulated banks bundled mortgages into supposedly low-risk collateralized debt obligations and sold them to investors and to other large institutions. These transactions proved extremely profitable because of inflated real estate prices and lax regulation. Chairmen of the Federal Reserve, Alan Greenspan, and his successor, Ben Bernanke, had taken a hands-off approach with the market, believing that it would regulate itself. Federalized loan agencies, Fannie Mae and Freddie Mac, lowered standards for mortgages due to pressure from Congress to increase home ownership among the poorer sectors of society. When lower-income borrowers began defaulting on their loans, the housing bubble finally burst; the number of repossessed houses doubled in a year’s time.

Banks were trapped; they possessed trillions of dollars in toxic assets. When Lehman Brothers declared bankruptcy in September 2008, it caused more panic in an already unstable market. Credit began to seize up, threatening a cataclysm, similar to the Great Depression of the 1930s. The federal government took over the mortgage giants, Fannie Mae and Freddie Mac, to prevent the two companies from failing. Although Bush generally opposed too much government involvement in the economy, he was supportive of a strong government response to the economic crisis, and he worked with Secretary of the Treasury Henry Paulson to propose legislation. In October, President Bush signed the Emergency Economic Stabilization Act, which established the Troubled Assets Relief Program (TARP). TARP authorized $700 billion of expenditures to stabilize banks, restart credit markets, support the U.S. auto industry, and help Americans avoid foreclosure on their homes. Along with the tax cuts and the wars in Afghanistan and Iraq, the financial crisis caused the federal deficit to skyrocket. The Obama administration maintained and grew the stimulus efforts, but the recession continued to hobble the American economy well into the next presidential term.

Citation Information

Consulting Editor

Gary L. Gregg II 

Professor Gregg is the director of the McConnell Center at the University of Louisville. He also holds the Mitch McConnell Chair in leadership. His writings include: 

Considering the Bush Presidency. (with Mark J. Rozell, Oxford University Press, 2004)

Thinking about the Presidency: Documents and Essays from the Founding to the Present. (Rowman & Littlefield, 2005)

Securing Democracy: Why We Have an Electoral College (2nd ed.). (ISI Books, 2008)

America's Forgotten Founders (2nd ed.). (with Mark D. Hall, ISI Books, 2012)

The consulting editor wishes to thank Connor Tracy and Travis Wilson for serving as research assistants on this project.