ABSTRACT
This chapter examines the policy debates of the 1970s stimulated by stagflation. While the period explored in Chapter 5 was remarkable, 1970s the witnessed high inflation and unemployment, combined with growing foreign competition and declining productivity. The Phillips Curve tradeoff that had been foundational to Keynesianism no longer seemed to be operative, giving rise to robust debates about economic policy. In taxation, the core claim, amplified by conservative think tanks, was that deep tax cuts could stimulate growth and increase revenues. The elite debates over tax policy were reinforced by the declining trust in government and the growing insecurity of the population that found its clearest expression in tax revolt at the state and local level. All of this set the stage for the policy changes of the 1980s.
