Old-time liberals have been aghast in recent years because revisionist historians have been portraying their hero, John F. Kennedy, as a center-right president.
First there was Ira Stoll’s 2013 book, JFK: Conservative, which evaluated Kennedy's record and achievements and concluded that he had more in common with Ronald Reagan then with Lyndon Johnson.
“Kennedy's tax cuts, his domestic spending restraints, his military buildup, his pro-growth economic policy, his emphasis on free trade and a strong dollar, and his foreign policy driven by the idea that America had a God-given mission to defend freedom,” Stoll observed, “make JFK, by the standards of both his time and our own, a conservative.”
Now there’s “JFK and the Revolution a Secret History of American Prosperity,” by CNBC senior economist Larry Kudlow and historian Brian Domitrovic. Kennedy’s tax cutting legacy is the subject of their book.
When Kennedy was sworn in as president in January 1961, he inherited a national economy that had been sluggish, at best, during the previous decade.
Between 1949 and 1960, the nation fell into recession four times. Economic growth during President Dwight Eisenhower's two terms (1953-1960) averaged a mediocre 2.3 percent per year. At the tail end of his presidency, 1957-1960, the economy grew at only 1.5 percent per year.
Candidate Kennedy in 1960, promised to outperform the Eisenhower record and obtain 5 percent annual growth without raising taxes. When asked to explain how that lofty goal could be achieved, he gave this trenchant reply: “Let me say that I don't believe that there is an intimate relationship between raising taxes and economic growth. In fact, under present conditions, I can imagine nothing more deflationary than to increase taxes.” He went on to open the door to a tax cut saying, “taxes affect not only revenue but also growth, and a new administration must review carefully, but with imagination, our entire tax policy to see that these objectives are being met.”
Kudlow’s and Domitrovic’s readable and engaging book, describes how Kennedy in the first two years of his administration was caught between two schools of economic thought: high tax, big government spending Keynesians, led by Paul Samuelson versus Treasury Secretary C. Douglas Dillion, a registered Republican, who “was in favor of managing the gold standard well and overhauling the nations fiscal and tax policy in the direction of cleanness, simplicity and efficiency.”
At first Kennedy went along with the Keynesians, increasing federal spending by 15 percent in his first two budgets. But, by the end of 1962, having realized stimulus spending failed to deliver economic growth, he decided to cast his lot with Dillion.
In August 2013, in a nationally-televised speech, Kennedy declared, “our tax rates are so high as to weaken the very essence of the progress of a free society, the incentive for additional return for additional effort.” He called for permanent and significant tax rate cuts “to remove a serious barrier to long-term growth.”
Fighting for his tax plan, Kennedy warned Congress that failure to act “increases the chance of recession.” Tragically, his efforts were cut short by an assassin's bullet on Nov. 22, 1963.
Although Kennedy's successor was a New Deal Democrat, Johnson believed he had an obligation to advance JFK’s tax plan. Hence, he engineered a deal that “took the 24 rates of the income tax down from the range between 20 percent and 91 percent to between 14 percent and 70 percent, phased in over two years.” The corporate tax rate declined from 52 percent to 48 percent.
The upsurge: economic growth between 1965 and 1969 averaged 5 percent annually; median family income grew at a “pace 50 percent higher than in the previous eight years;” automobile sales went up by 60 percent; and the flow of capital out of tax shelters fueled a boom in new business formation.Also, the federal tax cuts, contrary to Keynesian predictions, resulted in over a billion dollars in new tax receipts and “state and local revenues went up by 40 percent over the standard baseline, inflation plus population growth from 1963 to 1969.”
Sadly, Kennedy’s tax reforms were undone by Johnson, Nixon, Ford, and Carter causing recessions and stagflation in the 1970s.
Kennedy's efforts, however, were not in vain. His policy inspired the supply-side economics of the Reagan Administration that brought federal income tax rates down to two brackets, 28 percent and 15 percent, the corporate rate down to 34 percent, and produced 4 percent average annual growth, a stock market that went up 15 fold, and 44 million new jobs between 1983 and 2000.
In the final chapter of “JFK and the Reagan Revolution,” Kudlow and Domitrovic persuasively argue that the pro-growth Kennedy-Reagan model that worked in the 1960s, the 1980s and 1990s, can work again to jumpstart our anemic economy and in the words of JFK, “get this country moving again.”
George J. Marlin, a former executive director of the Port Authority of New York and New Jersey, is the author of "The American Catholic Voter: Two Hundred Years of Political Impact." He also is a columnist for TheCatholicThing.org and the Long Island Business News. Read more reports from George J. Marlin — Click Here Now.
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