How did the US recover from the stagflation in the 1970's?

Answer 1

Defense spending. President Reagan and Tip O'Neil heated up the economy with defense appropriations. Money spent on military projects usually does the following:
1. Increase jobs. Defense contractors have large payrolls with almost all of the money going to American workers.
2. Purchase of local goods and services stimulates businesses.
3. Research and Development improves technology for military and non-military applications.
4. The weapons built and sold elsewhere are often profitable and can be used as diplomatic tools.

Answer 2

Carter tried, but screwed it up and sent us into a recession that was alleviated by Reagan whose only recourse was government spending. Thus the national debt went up.