JFK on tax reform, growth & jobs
The U.S. unemployment rate was 6.6 percent and rising when President John F. Kennedy was inaugurated on Jan. 20, 1961.
On Dec. 14, 1962, in his address to the Economic Club of New York, he outlined a course of action to confront the nation’s economic problems, focusing especially on tax cuts.
The economy could do better, he asserted: “We need not accept an unemployment rate of 5 percent or more, such as we have had for 60 out of the last 61 months. There is no need for us to be satisfied with a rate of growth that keeps good men out of work and good capacity out of use.” He highlighted people younger than 20: “One out of four is unemployed, particularly those in the minority groups, roaming the streets of New York and our other great cities, and others on relief at an early age … .”
Higher economic growth was required, he maintained, adding that “the most direct and significant kind of federal action aiding economic growth is to make possible an increase in private consumption and investment demand — to cut the fetters which hold back private spending.”
This goal of increased business investment, consumer spending, growth and employment would not be best accomplished by “increased use of credit and monetary tools” or by “increasing federal expenditures more rapidly than necessary,” Kennedy argued. Instead, the “best means of strengthening demand among consumers and business is to reduce the burden on private income and the deterrents to private initiative which are imposed by our present tax system; and this administration pledged itself last summer to an across-the-board, top-to-bottom cut in personal and corporate income taxes … .”
He wasn’t “talking about a ‘quickie’ or a temporary tax cut,” he explained, saying our “present tax system, developed as it was, in good part, during World War II to restrain growth, exerts too heavy a drag on growth in peacetime; … it siphons out of the private economy too large a share of personal and business purchasing power; … it reduces the financial incentives for personal effort, investment, and risk-taking.”
Kennedy’s economic program called for more private enterprise, not more government: “The federal government’s most useful role is not to rush into a program of excessive increases in public expenditures, but to expand the incentives and opportunities for private expenditures.”
Consumer spending under Kennedy’s proposal would increase by way of cuts in personal income taxes and higher take-home pay, thereby “providing stronger markets for the products of American industry” and resultant increases in profits, business investments and hiring. Similarly, “corporate tax rates must also be cut to increase incentives and the availability of investment capital,” he maintained.
“Our true choice is not between tax reduction, on the one hand, and the avoidance of large federal deficits on the other,” he contended. “An economy hampered by restrictive tax rates will never produce enough revenue to balance our budget just as it will never produce enough jobs or enough profits.”
Ralph R. Reiland is associate professor of economics emeritus at Robert Morris University and a local restaurateur ([email protected]).