Since the middle of the twentieth century, two schools of economics have dominated the American sociopolitical landscape. The first, championed by such figures as Milton Friedman, is the Austrian. It holds that a free and unfettered market allows a nation to actualize its full fiscal potential. This means minimal tax rates, no tariffs, trade embargoes, or even minimum wage floors. The second, advocated by scientists such as Paul Krugman, is the Keynesian. This entails the government stabilizing the economy during hard times by infusing it with capital financed by higher tax rates for higher earners. More often than not, these are accompanied by tax cuts for the non-wealthy in order to spur mass growth in the market.
Historically, certain aspects of both schools have been incorporated into America's mixed economy. During the World War II era, the military required so much funding and personnel that private companies (and consumers) were subjected to strict supply rations; too, many of the unemployed found jobs through conscription. The government was employing so many people, and those who had never held a job before forced to take the place of soldiers, that suddenly money was everywhere. The wealthy were heavily taxed, as was most of the middle class, but so many people suddenly had so much cash that the economy was booming again.
Of course, the good days did not last forever. By the early 1960s, President John F. Kennedy was promoting income tax cuts and a Treasury, rather than Federal Reserve, -bound monetary policy. By easing governmental burdens and attacking inflation, he reasoned that capital would flow without obstruction. After Kennedy's assassination, his successor, Lyndon B. Johnson, reversed course and attempted to eradicate poverty by stimulating poor areas with grossly expensive public works projects. Dubbed the Great Society, his program was a colossal failure.
Richard Nixon, the next occupant of the Oval Office, shared Johnson's Keynesian ideas. However, he was more moderate in approach and managed to get a great deal done, including fostering commerce with communist China and setting vigorous price controls for both the private and public sectors. He was ousted on corruption charges, sadly, and the next two presidents in line did even sadder jobs of stabilizing the economy, which quickly spiraled into a drain of inflation. As a result of the election of Ronald Reagan, Austrian-like ideas flooded back to Capitol Hill. He slashed taxes and regulations while spending more on national defense concerns. Such a strange combination paved the way for a financial boom during the 1980s, but this busted spectacularly in the later part of that decade.