Before September 2001, Bush tended toward isolationism, preferring to focus on domestic rather than international issues. His administration held positions not typically associated with traditional conservatism, such as increased spending for education. More specifically, he worked to improve public schools by strengthening local control and insisting on accountability. Also, more in fitting with a stereo-typical Republican agenda, he supported strengthening the military with increased pay and better equipment, but before the terrorist strikes of 11 September 2001, he initiated a review of military defense programs before supporting major spending increases. In the aftermath of 11 September, Bush named Republican governor of Pennsylvania, Tom Ridge, to head a new cabinet-level position for homeland security.
Battling a weakened economy, Bush instituted a tax rebate for most taxpayers and he initiated changes to Social Security and Medicare. He also took a strong stand in his support of capital punishment while also supporting traditional family values, including a movement called "True Love Waits" in which teenagers are encouraged to abstain from sex before marriage.
While his quick launch of the "War on Terrorism" generally enjoyed widespread support, other actions were not as popular with the general public. In what some observers characterized as a shift in philosophy, Bush supported expanded subsidies for a number of industries, including energy, steel, and agriculture. His stand in favor of drilling for oil in the wilderness of Alaska and snowmobiling in the national parks angered environmentalists. His administration distanced itself from the need for reform in the accounting industry after the giant energy firm, Enron, collapsed, partially due to questionable accounting practices that went unchallenged by the auditing firm Arthur Andersen.
The United States economy began to falter in 2001, and by mid-2003, unemployment stood at 6%, the economy was expected to grow by only 2.2%, and the budget deficit was estimated at $200 billion (down from a surplus of $127 billion in 2001). In preparing for the 2004 presidential election campaign, Bush needs to avoid his father's fate; President George H.W. Bush successfully initiated the 1991 Gulf War, but failed to win reelection in 1992, largely due to a perceived inability to deal with a poor economy. As of mid-2003, George W. Bush's main domestic policy initiative, a $726 billion tax cut (to be added to the $1.35 trillion tax cut passed in 2001), was geared to stimulate the economy and create jobs by eliminating taxes on stock dividends, among other provisions. By mid-2003, the House of Representatives had adopted a $550 billion figure, while the Senate approved a bill cutting taxes by some $350 billion, although it retained the president's proposal for the cut in dividend taxes. Bush considered the votes to be a victory, and awaited a final bill to emerge from both houses.