s not growing fast enough or - and this is an equally important calculation, although one that is perhaps not talked about as much) - when unemployment is too high. By increasing spending, cutting taxes, or cutting key interest rates, a government leaves individuals and businesses with more money to purchase goods or invest in new equipment. There is not a perfect correlation, of course, between such government actions and reduced unemployment, of course, for reducing unemployment by cutting taxes depends in no small measure on which taxes are cut as well as in what sectors of the economy spending is increased; Keynes would not have been surprised that unemployment today is as high as it was under Herbert Hoover because of the structure of the current series of tax cuts as well as the fact that almost all of the increased government spending has been limited to the defense sector, as Watkins (1995) suggests is the logical outcome of the current government policies.
It should be noted that the federal government has followed all of these steps during the curr
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