ABSTRACT
The political views on the effects of fiscal deficits have changed over the years. The Great Depression marked a period of transition from sound finance to Keynesian principles, as enshrined in the Kennedy-Johnson tax cut of the mid-1960s. The 1960s were the culmination of the prosperity of the post-World War II period, known as the Golden Age of capitalism. Rates of growth in the Western World were the highest on record, unemployment rates were historically low, and although great inequalities still existed, the gap between the rich and poor narrowed, both within and between countries. This period can be seen in the Western World, in part, as the result of a tacit accord between social classes, according to which progressive taxation financed an expanding Welfare State and a set of social rights, which in turn translated in a relatively low degree of social confrontation.
