The Social Security Act of 1965 resulted in the passing of two bills: Medicare and Medicaid. The act provided federal health insurance for the elderly (over 65) and for poor families. While Lyndon B. Johnson (LBJ) was responsible for signing the bill, there were many others involved in drafting the final bill that was introduced to the United States Congress in March 1965.

The fight for national health insurance began in the early 1900s and greatly caught the public’s attention during Truman’s presidency. Between 1958 and 1964 controversy grew and the bill was drafted. The signing of the act, as part of LBJ’s Great Society, heralded in an era with a greater emphasis on public health issues.

The idea of national health insurance came about around 1915 when the group American Association for Labor Legislation attempted to introduce a medical insurance bill to some state legislatures. These attempts were not successful and as a result the controversy about national insurance came about. National groups supporting the idea of government health aid included the AFL-CIO, American Nurses Association, National Association of Social Workers, and the Socialist Party USA. The most prominent opponents of national medical insurance were the American Medical Association (AMA); others included the American Hospital Association, the Chamber of Commerce and the Life Insurance Association of America.

Keynes argued that the solution to depression was to stimulate the economy ("inducement to invest") through some combination of two approaches: a reduction in interest rates, and government investment in infrastructure. Investment by government injects income, which results in more spending in the general economy, which in turn stimulates more production and investment involving still more income and spending and so forth. The initial stimulation starts a cascade of events, whose total increase in economic activity is a multiple of the original investment.

A central conclusion of Keynesian economics is that in some situations, no strong automatic mechanism moves output and employment towards full employment levels. This conclusion conflicts with economic approaches that assume a general tendency towards an equilibrium. In the 'neoclassical synthesis', which combines Keynesian macro concepts with a micro foundation, the conditions of general equilibrium allow for price adjustment to achieve this goal.

The New classical macroeconomics movement, which began in the late 1960s and early 1970s, criticized Keynesian theories, while New Keynesian economics have sought to base Keynes's idea on more rigorous theoretical foundations.

More broadly, Keynes saw his as a general theory, in which utilization of resources could be high or low, whereas previous economics focused on the particular case of full utilization. However, after reading Hayek's criticism, The Road to Serfdom, he agreed that "the theory of aggregated production, which is the point of the [General Theory], nevertheless can be much easier adapted to the conditions of a totalitarian state [eines totalen Staates] than the theory of production and distribution of a given production put forth under conditions of free competition and a large degree of laissez-faire."