Economist Ruth B. feels that too much reliance on government intervention through fiscal policy is hazardous to our nation’s future economic health. “We’ve seen the automatic stabilizers work in the past,” she contends. “Why not let things take their course? Government spending is high enough right now to keep the economy functioning well without so much steering on our part. It may well do better without us.” Which of the following probably BEST describes the way today’s economists would view Ruth’s argument in this scenario?
When President Kennedy took office in 1961, he inherited an economy marked by high unemployment. His advisers, led by Walter W. Heller, pushed hard for a tax cut to deal with the problem. Ultimately, after much consideration and deliberation, Kennedy agreed to the strategy, and the tax cut of 1964 became a reality just months after Kennedy’s assassination. Which of the following BEST describes the impact of the 1964 tax cut, as today’s analysts see it?