The Response: The perpetual increases in inflation were not predicted by standard economic models, and several policies attempted by the administration failed to curtail the trend. Following a rejected tax proposal by then-head of the Council for Economic Advisors, Alan Greenspan, Congress passed several tax cuts for individuals and businesses, as well as a one-time tax rebate. The government borrowed money heavily to sponsor the tax cuts as well as to create public service jobs, and although the federal deficit doubled twice in this period, the increased activity from the government and boost from the tax cuts had the intended effect of reducing both inflation and inspiring confidence in the private sector with the prospect of an improved economy. This in turn promoted private investment, causing the stock market to slowly regain traction.
Kyle A. Richardson is the editorial director of Promo Marketing. He joined the company in 2006 brings more than a decade of publishing, marketing and media experience to the magazine. If you see him, buy him a drink.