Decision Points

the massive surplus I inherited. That never made sense. Much of the surplus was an illusion, based on the mistaken assumption that the 1990s boom would continue. Once the recession and 9/11 hit, there was little surplus left.
    By the end of 2002, the recession was technically over, but the economy remained sluggish. In early January 2003, I called on Congress to accelerate the tax cuts from 2001, which had not fully taken effect, and to pass further tax cuts that would encourage business investment and job creation.
    While the 2001 tax cuts passed with bipartisan majorities—as did a modest tax cut in 2002 focused on small businesses—the 2003 version ran into serious opposition. The left denounced the plan as “tax cuts for the rich.” That charge was false. The Bush tax cuts, when fully implemented, actually
increased
the portion of the income tax burden that fell on the wealthiest Americans. **
    Other critics opposed the tax cuts because they would drive up the deficit. It was true that tax cuts increase the deficit in the short term. But I believed the tax cuts, especially those on capital gains and dividends, would stimulate economic growth. The tax revenues from that growth, combined with spending restraint, would help lower the deficit.
    The tax relief bill made it through the House by a vote of 231 to 200. The tally in the Senate was deadlocked at 50. Dick Cheney went to CapitolHill to break the tie in his constitutional role as president of the Senate. Fortunately, he voted yes. He joked that he didn’t get to cast many votes as vice president, but when he did he was always on the winning side.
    I signed the tax cuts into law in late May 2003. By September, the economy had started adding jobs again. It didn’t stop for 46 consecutive months. After reaching a peak of 6.3 percent in June, the unemployment rate dropped for five of the next six months and averaged 5.3 percent during my presidency, lower than the averages of the 1970s, 1980s, and 1990s. Some argued that the timing of the recovery right after the tax cuts was a coincidence. I don’t think so.

    Amid the economic growth, I was mindful that the country was running deficits. I took my responsibility to be a good fiscal steward seriously. So did my four budget directors—Mitch Daniels, Josh Bolten , Rob Portman , and Jim Nussle . As a wartime president, I told them I had two priorities: protecting the homeland and supporting our troops, both in combat and as veterans. Beyond those areas, we submitted budgets that slowed the growth of discretionary spending every year of my presidency. For the last five years, my budgets held this spending growth below the rate of inflation—in real terms, a cut.
    I worked closely with Congress to meet my spending targets—or, as I called it, the overall size of the pie. I didn’t always agree with how Congress divvied up the pieces. I objected to wasteful earmarks inserted into spending bills. But I had no line-item veto to excise pork barrel spending projects. I had to either accept or reject the bills in full. So long as Congress met my bottom line, which it did year after year, I felt that I should hold up my end of the deal and sign the bills.
    The results have been a subject of heated debate. Some on the left complain that tax cuts increased the deficits. Some on the right argue that I should not have signed the expensive Medicare prescription drug benefit. It is fair to debate those policy choices, but here are the facts: The combination of tight budgets and the rising tax revenues resulting from economic growth helped drive down the deficit from 3.5 percent of theGDP in 2004, to 2.6 percent in 2005, to 1.9 percent in 2006, to 1.2 percent in 2007.
    The average deficit-to-GDP ratio during my administration was 2.0 percent, below the fifty-year average of 3.0 percent. My administration’s ratios of spending-to-GDP, taxes-to-GDP, deficit-to-GDP, and debt-to-GDP are all lower than the averages of the past three decades—and, in most cases, below the averages of my recent predecessors. Despite the costs of two recessions, the costliest natural disaster in history, and a two-front war, our fiscal record was strong.
    BUDGET COMPARISON TABLE ***
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    At the same time, I knew I was leaving behind a serious long-term fiscal problem: the unsustainable growth in entitlement spending, which accounts for the vast majority of the future federal debt. I pushed hard to reform the funding formulas for Social