ABSTRACT
This chapter introduces the debate between the stimulus view and the austerity view of economic recovery. It explores the supply-side argument that cutting marginal income tax rates improves incentives and increases investment. The problems led to a wave of conservative political action and support for conservative economic theories. Supply-side economics was most important in the 1980s, but the remaining supply-side economists were among those who attacked the Obama stimulus. Progressives respond that there is no evidence that supply-side economic theory really works in practice. In addition to the outpouring of economic criticism of the Obama stimulus, there was a tidal wave of money from the wealthy and the large corporations attacking it in the media through advertisements. The chapter concludes with a discussion of the political obstacles to a fast and strong fiscal policy to fight recession and unemployment. Automatic fiscal policies are built into the law, so they continue every year without further decisions by Congress.
