One week ago today marked the 53rd anniversary of JFK’s assassination.
His legacy is dominated by this, specifically the deluge of theories about his death. When one thinks about the actual JFK Presidency, a few things jump to mind: The Bay of Pigs invasion, the Cuban Missile Crisis, the Berlin Wall, the space program, calling for the Civil Rights Act, and his escalation of the Vietnam War.
Much of this has been long discussed already, so I want to a focus on a neglected aspect of the JFK legacy, his economic policy. I have almost always heard JFK’s economic policy explained in two words: Tax cuts. Kennedy called for the top income tax rate to be cut from 91% to 65% and the corporate tax rate to be cut from 52 to 47%. He made it clear these would not be temporary, but permanent. In 1964 Kennedy’s vision became reality when President Lyndon Johnson signed a bill cutting the top income rate from 91 to 70% and corporate from 52 to 48%.
This has often been praised by conservatives, supply siders and libertarians, and cited as proof their ideas work. Last year Presidential candidate Ted Cruz went so far as to say JFK would be a Republican today, again citing his tax cuts as a reason.
The recent anniversary of Kennedy’s death reminded me of this comment, as well as previous ones of a similar note, and it motivated me look deeper into the economics of JFK. I was surprised to learn there is far more to it than the tax cuts. It’s a great disservice to paint his economic ideas with such a simple brush stroke, and it’s inaccurate to believe he was some proto-Reagan, supply side conservative. In fact, I would say Kennedy had a bold, liberal economic agenda.
First, the dominant belief at the time was that of balanced budgets, and avoidance of deficits, even if it meant keeping the top tax rate at 91%. In fact conservatives and many business leaders were opposed to the idea and Barry Goldwater, an original champion of the modern limited government movement, voted against the JFK inspired tax cuts. While some deficit fluctuation was understandable perhaps during a recession, as Kennedy made clear these were to be permanent tax cuts, with little care if it produced a longer run deficit. He called the concept of balanced budgets “outdated” and “misleading mythology”.
As seen below, from 1948 to 1960 the government budget heads towards deficit during recessions and the Korean War, but otherwise trends towards surplus. It was under Kennedy the budget went to a continuous deficit despite the lack of recession or war.
In his 1962 speech to the Economic Club of New York, Kennedy made it known he believed a budget deficit isn’t an inherently bad thing, as long as it comes from investment in the future, and that strong growth would naturally take care of the deficit. All this was quite a break from the orthodoxy of the time.
While this does indeed sound like a precursor to supply side economics, two points must be made. First, despite the focus paid to the top rate, the JFK tax cut was across the board. Every rate saw a cut, and Kennedy “sought a tax cut that showered most of its direct benefits upon working class and middle class Americans” Second, the intent was not to boost supply, but demand. By putting more money into the hands of people, especially those who were more likely to spend it, the tax cut was expected to boost demand through consumption by the masses. In fact, it seems Kennedy and company believed whatever supply side impacts may occur would be a result of demand fueled growth itself. This is no conservative economics. It’s also possible the pro wealthy/business tax cuts were more for political reasons than economic: A way to sell the cuts to skeptical conservatives, and assuage hostility between the business community and Kennedy.
However there was more than just the tax cuts. Kennedy increased the minimum wage and expanded its coverage. He increased Social Security benefits and extended jobless benefits. Kennedy started the food stamps program, (originally a pilot program but was later made permanent), passed a bill to invest in economically depressed areas, a public works program and a housing bill. Kennedy also directed Federal agencies to accelerate their allocated spending, [Sorenson. 396-404] basically behaving as a stimulus package.
This spending was not insignificant. $800 million was spent on extended jobless benefits, $200 million on welfare to children of needy parents, over $1 billion released for highway funds. [Sorenson] Nearly $400 million spent on economically depressed areas, $100 million for a jobless youth training program, $900 million for the public works program. $4.9 billion was allocated for the housing bill. Kennedy’s aim was large scale and long term. He didn’t want to just quickly end the recession, but achieve “full recovery and sustained growth” and lamented that employment and production never reached their pre 1957-58 recession levels before the next hit.[Sorenson] He was concerned about economically distressed areas, both rural and urban, as well as people being left behind during economic growth. Kennedy said to Congress, “Large scale unemployment during a recession is bad enough…large scale unemployment during a period of prosperity would be intolerable”.[Sorenson]
Kennedy also took on the steel industry, where some powerful executives were planning on raising prices. He felt this was not only collusion, but a violation of the deal between labor and industry he facilitated. Unions in major steel companies agreed to accept no wage increase and minimal benefit increase while executives would not raise steel prices. Kennedy was enraged, and refused to simply accept it. He took on the very powerful industry by publicly chastising them, and using a host of public and private means to try an break the price hike. [Sorenson 443-59] Kennedy was successful, the price hike was called off. This was barely over a year into his Presidency.
Kennedy signed an executive order granting Federal employees the right to collective bargaining, greatly increasing the number of unionized federal workers and emboldening state and local employees to bargain as well. He also signed a bill dictating Federal employees be paid a salary comparable to that of private sector counterparts as well as the Equal Pay Act, requiring equal pay for equal work regardless of gender. While the impact of this act on gender pay equality can be debated, it can’t be denied JFK sought to close the gap with this legislation.
To conclude, the economic legacy of John F Kennedy is one that has been understated and inaccurate. Most discussion of the topic focuses on his proposed tax cuts for the wealthy, while small government conservatives have tried to portray him as a champion of their ideology. The former misses the point, the latter is flat out wrong. Kennedy pushed for tax cuts across the board, and spent greatly during a recession, increased welfare and invested in areas he felt were being left behind even as the economy recovered. From comments and policies, it’s clear JFK didn’t just believe the government should provide a shot in the arm while sick, but try to improve deficiencies while healthy. He threw away the orthodoxy of the time, that government budgets must be balanced as much as possible. John F Kennedy’s economic legacy was neither hands off or conservative, it was in fact bold and liberal.
“Kennedy: The Classic Biography” by Ted Sorenson