George W. Bush has been talking generally about the cumbersome U.S. tax system, and his desire to reform or simplify it, since the 2000 campaign. During his administration, Treasury Secretary Paul O’Neill, Council of Economic Advisers Chairman Glenn Hubbard and others tried to put meat on bone of this campaign slogan. O’Neill, for one, called in leading tax experts from around the country to analyze the issue. In 2002, efforts coordinated by Assistant Treasury Secretary Pam Olson –- one of the country’s leading tax experts –- produced several reports assessing a variety of reform options for presentation to the President. This cogent document, with a cover note from Pam Olson to O’Neill, is the blueprint, constructed to guide discussions by economic policy principals and the President about how to fundamentally change the U.S. tax system.

During the fall of 2002, the Bush administration was busy developing plans for an invasion of Iraq. As a part of this effort, the Treasury Department was directed to study the possible economic impact of a Middle East war. The briefing was not intended for the president, however, but for Vice President Cheney, who was coordinating Iraq policy. Treasury's research resulted in a September 11, 2002, memo to Secretary O'Neill preparing him for his meeting with Cheney. The document, written by assistant secretary Richard Clarida, found that a war was unlikely to "derail the expansion," but it did project a worst-case scenario that could reduce GDP growth by 0.9 percent, raise unemployment by three-tenths of a point, and increase inflation. Clarida's forecast, however, deals only with the impact from fluctuations in the price of oil. Not until the last two paragraphs of the four-page memo does he acknowledge that the economic impact of war might not be limited to rising oil prices. War could have unpredictable consequences for the American economy. Consumer confidence and financial markets, he writes, might also fall at the outbreak of hostilities. "For large declines in confidence," he wrote, "it seems likely that consumer spending would be affected over and above what is shown in the previous table. Likewise, the effects on equity markets, corporate credit markets and currency markets are hard to project but could be important." Indeed, they would be important. Starting in the mid-summer of 2002, when the administration began to build its public case for war, investor and consumer "confidence" -- that ineffable quotient that drives the U.S. economy -- has been linked to the situation in Iraq. It some ways, it still is. Read the document here.

In the chaos following the September 11 terrorist attacks, President Bush's advisers scrambled to put together a stimulus package to keep the economy from stumbling. Within days of the attacks, long before the fallout could be assessed, Larry Lindsey and some Republican congressmen had come up with their stimulus plan: another deep tax reduction, this one an immediate cut of $150 billion. As the proposal was about to be launched in Congress, Mark Weinberger, the assistant secretary of the Treasury for tax policy, wrote a Sept. 17, 2001, memo to Secretary O'Neill, detailing his reservations about a tax cut plan that seemed to carry forward an ideological, anti-tax agenda. Weinberger objections were not so much to the substance of the bill, but how the White House was angling to ram it through Congress in the wake of a national tragedy. By pushing the stimulus too aggressively, he wrote, "we risk causing more national harm than good." Doing so, he felt, would endanger the sense of unity following the attacks. "I believe that any large tax cut proposal that is not a product of consultation with Democratic leadership will begin to unravel the fragile trust and bipartisanship we are currently experiencing," Weinberger wrote. After opposition from O'Neill, Greenspan and former Treasury Secretary Bob Rubin to acting before facts about post-Sept. 11 economic effects became clear, a cut of $48 billion was passed six months later. But an internal administration debate about whether the Sept. 11 attacks should be used to carry forward a partisan agenda had begun. See the memo here.

After Sept. 11, a bipartisan group of political leaders and economic policy heavyweights met at the Capitol to discuss ways of helping the national economy after the terrorist attacks. The group included Alan Greenspan, former Treasury secretary Robert Rubin, presidential adviser Larry Lindsey, and Congressional leaders from both parties. Secretary O'Neill did not attend the summit, but afterwards received a detailed report -- including verbatim quotes -- from Treasury official Chris Smith. According to the report, a divide quickly emerged in the meeting. Greenspan and Rubin wanted to hold off on a stimulus bill until a clearer picture of the economic impact of the attacks had emerged, while Lindsey pushed for immediate action. Lindsey wanted a cut in corporate income taxes, while Rubin felt that any eventual stimulus should be aimed at "low income people." Read the full report here.

Now that Alan Greenspan has ignited an election year debate over how to fix Social Security, we've drawn from the Bush Files two documents that show the administration's plans for Social Security during the only time -- the fall of 2001 -- when the President was fully engaged on the issue. Read them here.

In this Jan. 22, 2001 memo to the newly inaugurated President, Treasury Secretary Paul O'Neill outlined a plan to get the president's tax cut swiftly passed by Congress. In this hard-edged political memo, O'Neill advised the president to stick to the tax cuts he promised in the campaign, and to resist attempts by members of Congress to tack on "targeted" tax cuts for their pet projects.

In an early sign of infighting on the President's economic team, National Economic Council chairman Larry Lindsey sent a January 25th memo to White House Chief of Staff, Andrew Card, attacking the performance of the Treasury Department's nonpartisan Office of Tax Analysis. The memo had a not-so-hidden-subtext: O'Neill's Treasury was not sufficiently loyal to the new President, while Lindsey was dutifully carrying forward Bush's agenda. O'Neill scrawled an angry reply in the margin: "Larry: This is bureaucratic chicken----. You must have something better to do with your time than send me memos such as this one."

President Bush inherited a projected budget surplus of $5.6 trillion from President Clinton. In a Feb. 20 fax to O'Neill, Office of Management and Budget (OMB) director Mitch Daniels discussed how the administration would handle that record sum. Even after deducting the $1.6 trillion President Bush had promised in tax cuts, Daniels reckoned that $4.4 trillion remained for Social Security, debt repayment, and "additional needs." The outlook, he wrote, could become even brighter -- "there are very large opportunities and contingencies that could expand that surpluses over these 10 years." Daniels's assumptions proved wildly off-the-mark. By February, 2004, the budget surplus had disappeared, and the United States was running a $500 billion annual deficit.

Some of the opposition to President Bush's 2001 tax cut came from within his own party. On March 13, 2001, Secretary O'Neill was scheduled to meet with a group of centrist senators that included several moderate Republicans who had qualms about the size of the tax cut. The secretary needed to pull off a delicate balancing act: placate the GOP moderates without actually committing to any changes in the president's plan. The memo, preparing O'Neill for his meeting, spelled out the administration's strategy. "You should demonstrate to them that the lines of communications are open between Capital Hill [sic] and the Treasury, and listen to their ideas. However, it is not time to negotiate." O'Neill -- who'd spoken candidly at his confirmation that the $1.6 trillion tax cut would bring little immediate stimulus to the economy -- did negotiate. He felt a stimulus was needed, and suggested a $125 billion tax rebate, angering many in the White House, who feared it would be seen as a replacement for the larger tax cut. A rebate of $100 billion was eventually enacted, giving the economy a well-timed boost.

In early 2001, an energy crisis plunged California into turmoil. Prices skyrocketed, and several utilities teetered on the brink of insolvency. The Bush administration studied a wide variety of responses to the crisis. On Feb. 1, the White House requested that Treasury study the possibility of a bailout of the state's utilities, similar to the Chrysler bailout in 1980.

Shortly after taking office, the Bush administration grudgingly agreed to extend a Clinton-era order that required energy companies to sell gas to California's cash-strapped utilities. In the middle of its energy crisis, a cut-off of gas supplies could have crippled the nation's largest state. Energy companies, however, including Goldman Sachs subsidiary J. Aron, feared they would never be repaid for the gas they were forced to provide. Goldman Sachs CEO Hank Paulson sent an angry note protesting the orders to Energy Secretary Spencer Abraham, copied to Paul O'Neill. "Paul," wrote the CEO, "This is hardly the new administration's finest hour!" The orders were allowed to expire after the California state legislature approved a bond issue to support the state's utilities.

Michele Davis, an assistant secretary of the Treasury, had the thankless, and futile, chore of trying to keep O'Neill on-message in his public appearances. The Treasury secretary rarely kept to the talking points favored by the White House political operation headed by Karl Rove and Karen Hughes. Before the unveiling of the President's budget, on Feb. 27, Davis pleaded with O'Neill to stick to the script. "This event, more than anything you've participated in to date, requires that you be monotonously on-message."

A few words from Alan Greenspan can plunge the markets into chaos or propel them to new highs. In public pronouncements, the Chairman of the Federal Reserve is famously judicious. In private, however, Greenspan often takes contentious positions. In a memo written March 4, 2002, Greenspan mounts a scathing critique of corporate governance in America, using simple declarative sentences the public almost never hears from the chairman. "Absent a fundamental change in the perception of the duty to disclose, firms will continue to have incentives to continue to game the accounting system," he wrote. "Changes in critical areas of governance to align CEO interests more closely with those of shareholders in our judgment are essential and, indeed, overdue."

In February, 2002, Secretary O'Neill sent the president a memo recommending major changes to corporate governance in America. The memo represented the conclusions of the President's working group on corporate governance that had been chaired by O'Neill. Among many suggestions, the group called for firms to be required to disclose all relevant financial information, not just the minimum necessary under accounting rules. "Corporate leaders should disclose the kind of information that occupies their days, and that keep them up at night," O'Neill wrote. "There must be a proactive obligation to disclose information sufficient to enable investors to make informed investment decisions."

In the summer of 2002, below-forecast tax receipts forced the Bush administration to ask Congress to raise the federal government's debt ceiling. Without the leeway to borrow more, the government would run out of cash. A June 10, 2002, memo to O'Neill outlines the "state of play" on the request to raise the debt ceiling, and prepares the secretary for a meeting with the President to discuss the issue. Only a year earlier, the government had been in surplus, but tax cuts, war, and a slowing economy had turned the surplus into deficit. In a draft memo to the President, O'Neill warned that the consequences of failing to raise the debt ceiling "are too serious to comtemplate."