The interstate highway system tax rates became even

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(The Interstate Highway System) Tax rates became even more static with the passage of the Internal Revenue code of 1954. This set a progressive tax structure based on taxable income and set standards which would remain unchanged through the remainder of the decade. (Taxes 1954) 11
ECO 202 Fiscal Policy Actions: Expenditures • Government expenditures spiked during the Korean War, and remained high for the remainder of the decade because of the Cold War. • Defense spending was the highest expenditure throughout the decade. • Another major project was the beginning of the Interstate Highway system in 1956. 0 100 200 300 400 500 600 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 Defense spending (in billions of constant FY2009 dollars) Instead of turning away from big public works projects like many in his party wanted, Eisenhower instead invested federal money in the Interstate Highway System this was one of the most significant public spending projects in the country's history. The interstate construction project was mainly funded through increases in gasoline taxes, established by the Highway Revenue Act 1956. (The Interstate Highway System) Additionally, military spending was increased throughout the decade as a result of the Cold War , never returning to the peacetime levels at the beginning of the decade. Military buildup became normal and totaled the single largest government expenditure of the decade. (Military) 12
ECO 202 Fiscal Policy Impact US Deficit 1950-1959 Year Total (millions) 1950 -3,119 1951 6,102 1952 -1,519 1953 -6,493 1954 -1,154 1955 -2,993 1956 3,947 1957 3,412 1958 -2,769 1959 -12,849 -15000 -10000 -5000 0 5000 10000 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 US Deficit & Surplus 1950-1959 (millions) As you can see in the graph above, both administrations managed to keep the economy very stable throughout the decade. Taxes were relatively high compared to today, but this helped offset the increased domestic and defense spending seen during the time, thus bringing the budget close to balance in most years. The only significant outliers were the recessions in 1953-1954 and 1958-59. Even following these two events, the budget was tight to balance or even running a surplus shortly thereafter. One striking example not illustrated in the graph was the government returning to a surplus in 1960, following the largest deficit of the decade in 1959. Economically speaking, the 1950's was a relatively slow period, compared to the 30's and the 40's. The 1950's, being a quiet period, explains why the economy did not experience any major problems or breakthroughs. However, this gradual growth led to the US being at peak economic strength in the early 1960's. There were also a significant number of occurrences and trends that were important both during this decade, and as a contributor to future events. Inflation ( As already outlined in slide #10) Inflation was an important issue during the 1950s because of two significant waves of inflationary conditions that swept the country at this time. The first followed the end of World War II, and the second at the onset of the Korean War in 1950. Post-World War II America waited expectantly for the United States to suffer a postwar economic collapse.

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