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Case Study Assignment #2 Instructions
The Tax Cut of 1964
This case highlights the use of deficit spending created by stimulus tax cuts.
Apply the assigned readings in weeks 3 and 4 (some readings from weeks 1 and 2 may also
be useful to Q. 2 and 3 and the case facts to answer the following questions raised by the case.
Some outside research is also acceptable. Answer all questions and subparts separately. The
paper should be a minimum of 5-7 pages. See the syllabus for drafting instructions. Only the
team presenting should prepare a power point presentation.
Question #1: As demonstrated in the course readings, President Kennedy referred to the
dangers of deficit spending triggered by tax cuts a “myth.”
What is deficit spending?
How do tax cuts trigger deficit spending?
Does the use of tax cuts to trigger deficit spending actually result in economic stimulus and
growth?
Is there a negative economic impact?
Question #2: The case compares the Kennedy administration, the (New Economics), to the
orthodoxy of the Eisenhower administration, (Stimulate the Economy Through Fiscal Policy).
Explain the economic and tax differences in both philosophies.
Which one does the team think is a better approach and why?
Question #3: What is meant by the Keynesian Revolution?
How does the Keynesian philosophy tie into tax policy?
Does the team think that Keynesian philosophy is a viable tax and economic policy and why?
Question #4: Should the government be restricted in its efforts to cut taxes unless there are also
spending cuts?
Is there a better way to pay for tax cuts instead of incurring more deficits?
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