Alan tells of his first meeting with then President-elect Bush on Dec. 18, 2000, at the Madison Hotel in Washington. I recall this breakfast meeting very well, especially Alan's comments on the state of the economy. The Fed chairman told the president-elect and our team that America faced the real possibility of a recession in the wake of the collapse of the late 1990s technology sector bubble. Alan's prediction proved correct: In the final months of the Clinton administration, the nation began an economic slowdown that turned into a recession.
The combined effects of recession and national emergency could have been devastating for America's economy. Yet President Bush's tax cuts -- following through on a promise he had made to the voters -- resulted in a shallower recession, a faster recovery, and a platform for growth that remains sturdy to this day. The fact is that in a time of unprecedented challenge, the United States has experienced nearly six years of uninterrupted economic growth and added more than eight million new jobs since August 2003 -- more than all other major industrialized nations combined.
The economic growth encouraged by the president's tax cuts is now producing sharply increased federal tax receipts -- up by nearly 15% in fiscal year 2005 alone, nearly 12% in fiscal year 2006, and projected to rise nearly 7% in the fiscal year that will end this month. That is the highest growth in tax receipts in consecutive years since 1981. As a result, tax revenue as a percentage of our economy is now above the 40-year historical average. Under the circumstances, it's pretty hard for anyone to argue that the American people are under-taxed. Even at a lower rate of taxation, the hard work and productivity of Americans is generating more tax dollars than ever before.
On the spending side of the ledger, I can't dispute Alan's general notion that the federal government is too big and spends too much money -- we've agreed on that point since we both worked in the Ford administration more than 30 years ago. President Bush feels the same way, and that's why he has steadily reduced the annual rate of growth in non-security discretionary spending. In contrast, the last budget enacted during the Clinton/Gore administration increased that category of spending by a staggering 15%. President Bush has pressed hard to keep that spending under control -- and this year's increase will actually be lower than the rate of inflation for the third year in a row.
It's worth noting, as well, that President Bush has committed significant resources to rebuilding our military after the draw-downs of the 1990s. In addition, this new era has also demanded far larger support for intelligence, law enforcement and homeland security. Our administration has met those urgent priorities. Yet we've also managed to bring this year's projected deficit down to 1.5% of GDP -- well below its historical average over the past four decades.
Alan has long argued, correctly, that fiscal discipline is a long-term obligation requiring honesty and a willingness to make tough choices. Here again, we agree. And on this measure, President Bush's record is superb. He has proposed reforms in Medicare and Medicaid -- and has repeatedly asked Congress to reform Social Security and place it on firm financial ground. Though Congress has failed to act, no other president has spent more time or political capital trying to avert a fiscal disaster that everyone knows is coming.
I've enjoyed Alan Greenspan's company, and benefited from his wisdom, for most of my career. For his part, Alan credits me in his book for my "intensity" and "sphinxlike calm" -- and it's in a spirit of friendship that I offer him these gentle reminders of the Bush record.
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