12.2 Domestic Challenges: Economic Recession and "Read My Lips"

The early 1990s recession hit the US hard, with bank failures, high inflation, and rising oil prices. Bush's response included the ADA and NAFTA, but his tax hike broke a key campaign promise, damaging his credibility.

Bush's popularity plummeted as the economy struggled. His focus on foreign policy over domestic issues and perceived disconnect from average Americans' hardships contributed to his 1992 election loss to Bill Clinton.

Economic Recession and Bush's Response

Causes of 1990s US recession

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• Federal Reserve tightened monetary policy to combat rising inflation rates
• Savings and Loan crisis in late 1980s caused numerous bank failures and financial instability
• Declining consumer confidence led to reduced spending and economic slowdown
• Gulf War caused oil prices to spike, putting additional strain on the economy (gas prices)

Effectiveness of Bush's economic policies

• Americans with Disabilities Act (ADA) signed in 1990 protected disabled individuals from discrimination in employment and public accommodations
• Despite "no new taxes" pledge, Bush raised taxes in 1990 budget compromise to address growing deficits
• North American Free Trade Agreement (NAFTA) signed in 1992 aimed to stimulate economy by increasing trade with Canada and Mexico
  • Tax hikes helped reduce budget deficit but proved politically damaging to Bush's reputation
  • NAFTA faced criticism from labor unions concerned about job losses and environmentalists worried about pollution (manufacturing jobs)
  • Bush's policies seen as inadequate in tackling the recession, contributing to his 1992 election defeat (Clinton victory)

Political Fallout and Public Perception

Political impact of tax policy reversal

• 1988 campaign featured memorable "Read my lips: no new taxes" pledge, appealing to conservative base
• 1990 budget deal included tax increases, breaking key campaign promise
  • Decision sparked outrage among conservative Republicans and anti-tax advocates (Newt Gingrich)
  • Led to primary challenge from Pat Buchanan in 1992, exposing divisions within the Republican Party
  • Broken pledge became a major line of attack for Democrats in 1992 presidential campaign (Clinton's "It's the economy, stupid" slogan)

Economic challenges vs Bush's popularity

• As recession deepened and unemployment climbed, Bush's approval ratings steadily declined
• Reneging on "no new taxes" promise further damaged public trust and perception of his leadership
  • Approval fell from 89% peak after Gulf War to below 40% by 1992 election (56% disapproval)
  • Bush appeared out of touch with economic hardships faced by average Americans (grocery scanner incident)
  • Criticized for prioritizing foreign policy (Gulf War victory) over domestic issues
  • Economic woes and broken tax promise eclipsed foreign policy successes, leading to 1992 election loss (Ross Perot's independent campaign)