I originally posted this diary on February 11, 2007, and Volume Two a day later. I wish I could say it was to rave reviews, but, alas, it was to just the chirping of crickets. Now, after five years of increasing anger and consciousness of the repeated, multi-trillion dollar economic crimes and malfeasance by U.S. elites on Wall Street and in corporate boardrooms, I'm betting that there will be a lot more interest.
And, of course, this is the 50th anniversary of the assassination of President Kennedy. I want to present some of my thoughts on this wrenching and horrible event. Often we find, here at DailyKos and elsewhere, spirited discussion of what has gone wrong with our republic. I am always astonished when no one participating in such a discussion mentions the assassination of President Kennedy. Or his brother Bobby. Or Martin Luther King. Or El-Hajj Malik El-Shabazz (Malcolm X). For me, John F. Kennedy was a beau ideal of a politician and a statesman. When I was a kid, I tried to imitate his Boston accent. Kennedy was directly responsible for what I consider the greatest achievement I ever witnessed in my life, an achievement which should have been topped by now, but which I now think will not be surpassed in my lifetime: landing human beings on the Moon and returning them safely to Earth. Oh, it might have been a stunt designed to upstage the Soviets, as some people claim, but I don't believe that. And I also do not believe that the "space race" or the "Moon race" was a waste of money. Almost every facet of our everyday lives now is dependent on some technology or other than was originally created by or for NASA. That's just a fact of life. From miniaturized electronics to freeze dried foods, to medical devices that monitor us when we're ill, it was the space program that was the "science driver" pushing forward technological and scientific developments and breakthroughs. It is a rich technologucal and scientific legacy we have been living off of - I almost want to write "leeching off of" - for the past four decades. But now we graduate more MBAs than engineers (and have been for over a decade), and probably more Americans can tell you their astrological sign, but not the key astronomical constellations that once guided mariners and explorers across uncharted waters and territory.
So what President Kennedy represents for me is what America is supposed to be: a nation of scientifically and technologically literate citizens who honor and nurture and promote the people interested in things like astrophysics, orbital dynamics, and new ways of creating new materials. But it seems to me we have pretty much turned our backs on the Scientific Enlightenment, of which the space program was the best embodiment in my lifetime. And a society that turns its back on science - well, many of us have discussed the Republicans and conservatives in the context of this issue, and I think it is safe to predict that the consequences are going to be very, very ugly.
And, indeed, much of what came after Kennedy was ugly. Vietnam. Nixon. Watergate. Those are the uglies most people will probably rattle off. But there was more: the financialization of the economy, in which the banking and financial systems became predators that now threaten to kill the host economy. The legitimization of organized crime, in which the billions of dollars of hot money were allowed to buy control of industrial companies, setting the stage for the leveraged buy-out insanity of the 1980s and 1990s, and the credit default swaps and currency trading manipulations of the 2000s. And lest someone think I'm making a veiled reference to some conspiracy theory in which the Mafia had a hand in the assassination of President Kennedy, I point you to what I wrote about our new Secretary of Commerce in May: Penny Pritzker as an example of the criminality of our elites.
The diary consists of extended excerpts from a book by Donald Gibson, a professor at the University of Pittsburgh. In 1994, he wrote his study of the Kennedy presidency, focusing on the economic policies. It remains the best, most complete, most profound analysis of Kennedy's monetary, fiscal, and economic policies. By studying these in depth and at length, not only does Gibson show us who Kennedy really was, but also he points out who the opposition to Kennedy was. And by following that trail, he shows where the nexus of power, media control and policy-making meet. From the opening jewel of a chapter in which he examines the 1962 steel crisis, Gibson broadens his analysis to include both Kennedy's micro and macro-economic policies and how they impacted the status quo. He also includes a section on Kennedy's economic policies toward the emerging Third World, and how those policies affected the forces that opposed Kennedy at home. Gibson closes by detailing how those policies were reversed by Kennedy's enemies after he was murdered. In an exchange of emails I initiated with Dr. Gibson in early 2007, he graciously gave me permission to quote extensively from his book, far beyond what is considered "fair use."
Can anyone imagine any of JFK's successors - including President Obama - going toe to toe with the CEOs of any major industry and forcing them to bend to his will the way Kennedy forced the steel industry barons to? I can't. Read these excerpts, than answer truthfully: Can you?
The economic issues of today -- the growing gap between rich and poor, the runaway growth of CEO pay, the predominance of corporate power -- have their roots in policies going back decades. They are NOT exclusively the relatively recent result of George Bush’s economic and taxation policies. Nor can they be attributed solely to the policies of George Bush and Ronald Reagan combined. In his 1994 book Battling Wall Street: The Kennedy Presidency, University of Pittsburgh Professor Donald Gibson shows that Kennedy’s progressive economic policies were bitterly opposed by the highest ranks of the American business and banking establishment, and their mouthpieces in the business and financial press. Much of the invective flung at Kennedy 45 years ago sounds eerily similar to what we hear from the conservative noise machine today. As one anti-Kennedy business editor sputtered in 1963, “government must be restricted essentially to national defense, the maintenance of law and order, and the provision of a sound and dependable currency system.”
(Note regarding copyright: Dr. Gibson has approved the use of these extended excerpts, which obviously go beyond fair use. PLEASE NOTE that I have not asked Professor Gibson if this material could be copied from DailyKos and used elsewhere. I would urge anyone wishing to do so to contact Professor Gibson at the University of Pittsburgh; he is listed in the roster of faculty you can find on the University’s website. I believe Professor Gibson would be delighted to find that there was keen interest in his book.)
The excerpts below first describe Kennedy’s policies, then review the business and banking establishments’ furious opposition. This is a lengthy diary; almost the entirety of two chapters follow. If you do not or cannot read this diary at your computer, I suggest you hide the comments, then print the diary. To be safe, print preview first to make sure it will print OK, and that you are not getting comments.
Professor Gibson begins by outlining the April 1962 confrontation between President Kennedy and the largest steel companies in the United States, led by U.S. Steel Corp. After weeks of grueling negotiations between the United Steel Workers union on one side, and U.S. Steel and other steel companies on the other, the union had agreed, after personal intervention by the President, to accept no general increase in wages and a 2.5 percent increase in benefits. In return, the companies promised, so it was believed, that they would not raise prices. Kennedy feared that an increase in the price of steel would initiate a series of price hikes cascading through the economy, igniting inflationary pressures that would be difficult, if not impossible, to contain. Kennedy believed that the minor increase in workers benefits could be covered without increasing prices by increasing productivity in the steel industry.
On April 10 at 5:45 pm, U.S. Steel chairman Roger Blough made an unexpected visit to the White House and gave Kennedy a terse message that U.S. Steel was announcing a 3.5 percent price increase, effective at midnight. The President was outraged.
Within one day Kennedy set in motion a series of actions intended to raise
the political and economic costs to U.S. Steel and to those companies that had followed it (including Bethlehem Steel, Republic, Jones & Laughlin, and Youngstown Sheet and Tube) and to deter remaining companies from joining in. Investigations into the issue of collusion and price fixing were begun by the Federal Trade Commission and by Robert Kennedy's Justice Department. The Defense Department was instructed to review quickly its purchasing practices
and to let it be known that the government would favor companies that did not join with U.S. Steel. Kennedy also delivered a blistering attack on the steel companies in his news conference on April 11. On April 12, Attorney General Robert Kennedy announced that he had started a grand jury probe into the price-setting actions and that subpoenas were being issued for documents held by U.S. Steel.
In his press conference on April 12,
President Kennedy pointed to the effect of steel prices on the cost of consumer goods, machinery for businesses and farms, and items purchased for the national defense. He said he found it hard to accept, and the American people would find it hard to accept, "a situation in which a tiny handful of steel executives whose pursuit of private power and profit exceeds their sense of public responsibility, can show such utter contempt for the interest of 185,000,000 Americans."
Chapter Two: THE NATIONAL PROGRAM
Kennedy assumed the presidency of the United States with a program which had as its central purpose the advancement of the productive powers of the nation. This progress was to be achieved through an intense effort to expand and improve both the human and technological capabilities of the country.
During the two years and ten months that he held office, Kennedy attempted to use the power of his office and of the federal government to achieve this goal through tax measures, government programs, government spending, and monetary and credit policy. He tried to shape investment processes, educational policy, and scientific and technological developments in order to realize the country's immediate potential and to qualitatively enhance that potential in the future. Few stones were left unturned in this effort.
Kennedy's aggressiveness in pursuit of economic progress was consistent with his view of the obligations of and the potential power of a president. In an interview given during the presidential campaign, Kennedy observed:The responsibility of the President, therefore, is especially great. He must serve as a catalyst, an energizer, the defender of the public good and the public interest against all the narrow private interests which operate in our society. Only the President can, do this, and only a President who recognizes the true nature of this hard challenge can fulfill this historic function.
Immediately after his inauguration Kennedy defined his job as one of reversing the recent "downtrend in our economy," and he proposed "to expand the Nation's investment in physical and human resources, and in science and technology."
This focus on scientific and technological progress and economic growth was present in the 1960 campaign, and Kennedy's views on this were clearly reflected in the work of his economic advisers during the months leading up to the inauguration. They noted that Kennedy sought the optimum development of natural and human resources and of the productive capacity of the free world.
Kennedy was seeking much more than just a recovery from the recession that existed when he took office. In his 1963 State of the Union Address, after 22 months of recovery from that recession, he emphasized that the country needed a higher rate of growth. In a tax reform proposal also in 1963 he similarly argued that the growth rate was still not high enough and that productive investment, while rising, was still not adequate. Throughout his presidency, Kennedy was committed, in words and action, to higher levels of sustained economic progress. He stated in 1961 his support for "long range planning for national economic growth." (The interest in growth-oriented planning was not new. Shortly after being elected to the Senate in 1953, Kennedy made a series of speeches outlining a regional development and growth program for New England.) Kennedy consistently used his office in an attempt to inject growth-oriented planning into government policy. In the process he tried to change or strengthen the direction of government policies through a multitude of proposals, all of which were part of a coherent strategy to drive the economy forward.
Kennedy's tax reforms were tactical measures, a part of the overall strategy of using government to further economic progress. The specific proposals were never meant to be his final word, but were steps in what he viewed as a continuing process. Tax reform was intended to increase investment in plant and equipment and to stimulate economic growth. This amounted to an aggressive effort to channel the flow of money and credit away from short-term, speculative, and nonproductive investments.
Three months after taking office, Kennedy submitted a tax reform program to Congress. Part of this program was the investment tax credit, which would allow companies to deduct from their taxes part of the value of investment in plant and equipment. This tax break would be available only on new plant and equipment which was located in the United States and had an expected life of six years or more.
Even though Kennedy later also sought general tax reductions, most of his tax proposals were like the investment tax credit, that is, they were intended to mold the economy by channeling the decisions of those who controlled money and credit.
Part of the tax reform was aimed at foreign investments by large corporations and by private and institutional investors. Many big companies were in the process of increasing their foreign investments, a process which gave birth to new terminology -- the multinational, global, or transnational corporation -- and a host of new conflicts over tax revenues, the U.S. trade position, and job creation and production. Most of this would occur after Kennedy's time. In 1961 Kennedy critically assessed several tax-related aspects of foreign investments. Existing law actually encouraged U.S. companies operating abroad to keep income in those foreign countries in order to avoid paying taxes to the U.S. government. Referring to this as a tax deferral privilege, Kennedy proposed to eliminate this by taxing those foreign profits each year even if they were kept outside the U.S. (Companies would still be allowed credit for taxes paid to foreign governments.) Kennedy proposed, however, that the deferral privilege be continued for investments in developing countries. In other words, investment would to some extent be redirected from Europe and Canada to the United States and to underdeveloped areas.
Corporations operating in low-tax countries or in tax havens such as Switzerland would lose those tax advantages. Also, Kennedy pointed out, this would recover the taxes lost to the U.S. in cases where corporations were using accounting and organizational techniques to shift profits artificially to tax havens. Tax deferral privileges were to be eliminated for all profits made from non-productive foreign investments (trading, licensing, insurance, etc.), regardless of location.
Kennedy went on to propose the elimination of all tax breaks for companies set up by U.S. interests in the form of foreign investment companies. He also specifically targeted wealthy individuals who were transferring wealth abroad to avoid paying estate taxes; he proposed the elimination of the laws permitting this. In 1962 he restated his support for all of the reforms described above.
When Kennedy proposed a general tax cut in 1963, he also focused on "large oil and gas producers" who were manipulating a 1954 law to avoid taxes and gain an advantage over smaller producers. He also proposed changes in foreign tax credits which allowed U.S.-based oil, gas, and mineral companies to avoid paying U.S. taxes.
In his tax reform proposals Kennedy was willing to give breaks to businesses if they were making productive investments. He was also willing to withdraw all provisions that discouraged investment in the U.S., gave special privileges to certain companies, or simply allowed big companies to escape tax payment. His tax policy was not anti-business; it was pro-production, equitable, and nationally oriented. Changes were intended to benefit the United States as a whole, as well as small business, underdeveloped countries, and the poor. The special rights and privileges of large corporations, investors, and others were to be curtailed.
Kennedy's willingness to infringe on the prerogatives of international investors and multinational corporations carried over to other recommendations involving the wealthy and powerful. Kennedy was convinced that billions of dollars in income from interest and dividends was going unreported and untaxed each year. He proposed to use a withholding tax, as with wages, to secure those tax revenues. He suggested the elimination of a provision which allowed wealthy people to write off up to 100 percent of their charitable contributions while a 20- to 30-percent deduction was normal for the non-wealthy. He wanted a change in taxes on dividends so that those families with income over $180,000 would pay a higher rate, more like those with lower income levels. He proposed changes to prevent "high-bracket taxpayers" from concealing income gained through the use of personal holding companies. Other proposals and recommendations included the following: a modest anti-speculation provision that would require that properties be held for one year rather than the existing six months in order to benefit from capital gains tax rates; elimination of special tax preferences for wealthy individuals transferring properties as gifts; and repeal of the $50 dividend exclusion and the 4 percent dividend credit.
Although most of these measures did not survive the compromises made with congressional committees, they provided additional indicators of Kennedy's overall economic and social goals. How much of this would have been passed, given five more years in the White House, is impossible to say. The evaluation of Kennedy's policies should not rest on their success or failure alone. If they are judged to be progressive initiatives, the blame for their failure should be placed on those members of Congress who rejected them and on the business interests that felt threatened by the changes. What they indicate about Kennedy is that he felt wealth should be acquired through productive and generally beneficial investments and that he took a dim view of profits accruing from speculation, purely financial transactions, and inheritance. He never opposed in any general way the right to own property, earn profits, or expand wealth. What he did try to do with everything from global investment patterns to tax breaks for individuals was to reshape laws and policies so that the power of property and the search for profit would not end up destroying rather than creating economic prosperity for the country. In this he was very clear, consistent, and coherent.
His ideology was neither that of free enterprise nor of socialism, but one based on the idea that economic and social progress were the goals, and the power and policies of government were important parts of the means to achieve those goals.
Technology and Economic Progress
Consistent with the emphasis in his tax policies on growth and prosperity, Kennedy repeatedly focused on technological progress and industrial modernization as necessary components in a program of economic progress. In the area of electric power, Kennedy asserted in 1961 that the country needed to triple its power capacity by 1980 and that government policy and the cooperation of private industry would be needed to achieve this goal. He proposed specifically that the Atomic Energy Commission assume an important role in this by achieving the rapid development of nuclear power, in part, through the construction of various types of reactors.
When Kennedy said in 1961 that the country needed an economic growth program that "goes well beyond antirecession measures," he emphasized that his administration was making a new commitment to advances in technology He proposed that price stability should be achieved through technological progress rather than through "a slack economy." This last comment seemed to be a criticism of those who were, in Kennedy's view, inclined to check inflation by severely limiting the growth of the money supply. Specifically, he recommended the maximum development and use of water resources through the expansion of hydroelectric power and through the discovery of economically practical methods of desalinating ocean and brackish waters. He promised a redoubling of efforts to do this, and he promised to share advances in this area with any and every nation in the world. He also proposed a new commitment to the development of fusion energy.
The emphasis Kennedy placed on technological progress, even in the context of a message to Congress concerning "conservation," is completely consistent with his determination to use tax policy to channel money and credit into productive investment.
The two concerns converged in his 1963 tax proposal, which suggested that the law be changed to allow businesses to deduct immediately from their taxes any expenditures made for machinery and equipment used in research and development. At the time, tax writeoffs were allowed, but only if spread over the life of the equipment.
Although the U.S. economy was clearly the leading economy in the world the early 1960s, Kennedy emphasized the need for modernization, growth, and the acceleration of advances in productivity. If the economy were going to advance and grow in this fashion it would be necessary to upgrade and expand education to provide the technicians, engineers, and scientists who would boil create and operate new and growing systems of production. Logically, Kennedy recommended increased investment in education to match rising private and public investments in physical capital.
Relating the need for expansion of and improvement in education to the "new age of science and space" and to the goals of technological progress and economic growth, Kennedy observed that "this country reserves its highest honors for only one kind of aristocracy -- that which the Founding Fathers called 'an aristocracy of achievement arising out of a democracy of opportunity.'" In his recommendations for new educational goals and programs Kennedy
advocated expanding educational opportunities:The President's Science Advisory Committee has predicted that the dramatically increasing demand for engineers, mathematicians, and physical scientists will require that the output of Ph.D.s in these fields alone be increased two and a half times, to a total of 7,500 annually by 1970, and that the number of masters degrees awarded annually be substantially increased.... It is clearly contrary to the national interests to have the number of graduate students limited by the financial ability of those able and interested in pursuing advanced degrees.
Consistent with these concerns, Kennedy recommended raising the number of grants and fellowships awarded through the National Science Foundation from 2,800 in 1963 to 8,700 in 1964. He also sought expanded education and training of technicians and a general increase in funds for student loans, scholarships, financial assistance, and work-study programs.
He recommended a more generous program of loans and repayment for those studying to be teachers and suggested new federal insurance for private banks lending money to students for educational purposes. Finally, he recommended new programs of federal assistance to create a national system of public community junior colleges and to aid local schools to build new classrooms, raise teacher salaries in disadvantaged areas, and generate new programs in depressed rural and urban areas. Some of these proposals would be part of the Higher Education Facilities Act that was signed into law December 16, 1963.
A number of these recommendations were intended to increase equality in and improve opportunities for education. Many of the others were aimed at educating the scientists, engineers, and technicians who would both expand the productive system and provide the educated labor force that this expansion would demand. The overall thrust of this was consistent with Kennedy's other initiatives to intensify the investment in and development of an increasingly modern technological and industrial system of production.
While Kennedy's policy initiatives were concentrated on national economic progress, as with his educational proposals, he was also committed to reducing inequality and assisting those at the bottom. By 1962 he had succeeded in temporarily extending unemployment benefits, increasing the minimum wage, raising social security benefits, providing federal aid for dependent children of the unemployed, and increasing federal aid to depressed areas. He also suggested a review of the existing policy that required that fathers must be absent in order for children to qualify for federal assistance under the Aid to Families With Dependent Children program. These efforts were supplementary to his primary goal of raising income, reducing poverty, and reducing unemployment through generalized economic prosperity and progress. In the pursuit of those core goals he treated government spending and the size and shape of the budget as a means to an end.
The Federal Budget, Deficit Spending, and Money
Kennedy's view of the budget and deficits was consistent with his overall orientation toward government's role in the economy. Government spending, tax policy, and budgetary policy were evaluated in light of his primary commitment to promoting growth and technological progress. The questions of deficits, borrowing, and debt were important, but secondary. He was clear about this and appears to have been uninterested in any debate about whether or not he was a Keynesian. In a speech at Yale in June of 1962 he stated that debts, public and private, are neither good nor bad, in and of themselves. Borrowing can lead to overextension and collapse, but it can also lead to expansion and strength. There is no single, simple slogan in this field that we can trust.
As we have seen, Kennedy approached the major policy choices with well defined and quite specific aims, that is, increasing investment and raising real income. Both inflation and recession could undermine his central policy goals. He observed in his Economic Report of 1962:The task of economic stabilization does not end with the achievement of full recovery. There remains the problem of keeping the economy from straying too far above or below the path of steady high employment. One way lies inflation, and the other way lies recession. Flexible and vigilant fiscal and monetary policies will allow us to hold the narrow middle course.
Kennedy wanted to expand the capacity of the president to prevent recessions. Early in 1961, he took a number of actions to stimulate recovery. Included were the acceleration of federal purchases and procurement, distribution of highway funds, the return of tax refunds, and payments of veterans' life insurance dividends. Later in 1961 Kennedy accelerated spending for the space program and for national security without asking for any tax increases. In this effort he got the cooperation of the Federal Reserve and the Treasury in expanding the money supply and the supply of credit and in making money available specifically for small business and home mortgages.
In 1962 Kennedy made an attempt to formalize presidential powers to prevent economic downturns:To combat future recessions -- to keep them short and shallow if they occur-I urge adoption of a three-part program for sustained prosperity, which will (1) provide stand-by power, subject to congressional veto, for temporary income tax reductions; (2) set up a stand-by program of public capital improvements; and (3) strengthen the unemployment insurance system.
These three measures will enable the Government to counter swings in business activity more promptly and more powerfully than ever before. They will give new and concrete meaning to the declaration of policy made in the Employment Act. They will constitute the greatest step forward in public policy for economic stability since the Act itself.
(Kennedy was referring to a 1946 act, discussed briefly at the end of this chapter.)
The tax reduction authority Kennedy wanted would have allowed the president to initiate up to a five percent cut in income taxes unless it was rejected by a joint resolution of Congress within 30 days of its proposal. It would then remain in effect for six months subject to modification or renewal by either the president or a joint resolution of Congress.
The second part of that program dealing with capital improvements was described as follows:Stand-by capital improvements authority. Second, I recommend that the Congress provide stand-by authority to the President to accelerate and initiate up to $2 billion of appropriately timed capital improvements when unemployment is rising, as follows:
(1) The President would be authorized to initiate the program within two months after the seasonally adjusted unemployment rate
(a) had risen in at least three out of four months (or in four out of six months) and
(b) had risen to a level at least one percentage point higher than its level four months (or six months) earlier.
(2) Before invoking this authority, the President must make a finding that current and prospective economic developments require such action to achieve the objectives of the Employment Act.
(3) Upon such finding, the President would be authorized to commit
(a) up to $750 million in the acceleration of direct Federal expenditures previously authorized by the Congress,
(b) up to $750 million for grants-in-aid to State and local governments,
(c) up to $250 million in loans to States and localities which would otherwise be unable to meet their share of project costs, and
(d) up to $250 million additional to be distributed among the above three categories as he might deem appropriate.
(4) The authority to initiate new projects under the capital improvements program would terminate automatically within 12 months unless extended by the Congress -- but the program could be terminated at any time by the President.
The third part of his program included a series of recommendations to increase and liberalize unemployment benefits.
These proposals are of interest on several counts. Kennedy was trying to augment the presidential powers that he had already assessed prior to election as sufficient. He clearly had decided that more power was necessary. The attempt here was to shift some decision-making power away from the marketplace and, perhaps, from the Federal Reserve, to the president. He obviously felt that cyclical downturns, or recessions, were not acceptable, and he thought the economy could be made to expand continuously, or with only very minor interruptions. These optimistic views and the accompanying actions are entirely consistent with his other initiatives discussed in this chapter.
A continuous expansion of the economy, and most certainly an expansion based on real growth in production, would require an adequate growth in the money supply and a growing availability of credit at low interest rates. Kennedy observed in 1961 that ways must be found and can be found to increase the flow of credit, at declining rates of interest, for long-term loans for productive investment. (Kennedy was concerned with an emerging problem of increasing deficits for the U.S. in international transactions and with a resulting loss of gold reserves. In light of this, Kennedy reached an agreement with Federal Reserve Chairman William McC. Martin to attempt to keep long-term rates low to encourage investment while short-term rates would be high enough to keep money in the U.S.) In that context he referred, without explanation, to measures already being taken in 1961 to achieve this. This may have been a reference to the accelerated expenditures and increased funds for small businesses and mortgages which were discussed earlier.
While Kennedy actively solicited, and perhaps temporarily gained, the cooperation of the Federal Reserve Board, he was alert to any chance of increasing his own influence over the money supply and interest rates. (In 1963 Kennedy seems to have made an effort to increase the money and credit supply by injecting money into the economy through the Treasury in a way that bypassed the Federal Reserve.) The Commission on Money and Credit, sponsored by the private Committee for Economic Development, made a multitude of recommendations in its 1961 report entitled Money and Credit. While Kennedy was not very receptive to this study, he did quickly accept one of its recommendations, which would allow the incoming president to designate a chairman who served the same four years as the president. The existing policy, then and now, is that the chairman is picked by the president from the Board members, but the timing of the selection is not coordinated with the presidential term of office.
Kennedy's concerns with growth and investment shaped his policies in the areas of spending, deficits, and money. He was committed in principle to economic progress, not to either balanced budgets or deficits. He enthusiastically embraced deficits, however, in order to prevent an interruption of the increasing rates of investment and growth. He sought to increase the capacity of the president to take action to counter economic downturns. He wanted the Federal Reserve's cooperation in making sure there was enough low-interest credit available and he looked for other means to achieve this.
The Program as a Whole
What has been reviewed here are the many pieces of an overall strategy to drive the U.S. economy forward. The whole would be greater than the sum of the parts, as each specific policy would reinforce and intensify the other initiatives. The tax credit for investment and the numerous changes designed to shift capital from non-productive to productive investments would contribute to and be reinforced by the programs to develop and expand various forms of energy production. The educational policy would generate the creators and operators of a growing and more productive economy. Taking tax privileges away from the very wealthy and from large oil and mineral companies would not only express the democratic intentions of the administration, but would also make productive investment in the nation more likely. Deficits were not sought so that Kennedy could claim to be a Keynesian, but rather as a way to facilitate and intensify the effects of his other policies and to prevent recession from wiping out the gains made during recovery. Maintaining an adequate growth in money and credit and keeping interest rates down would allow for improvements in and expansion of the productive base of the economy. Budget and monetary policy would enhance the effects of the tax policy and other initiatives. In short, the combined effects of all these initiatives would be synergistic, having a greater impact than would be expected based on an evaluation of each part simply added together.
As noted in the Introduction, Kennedy has been described as cautious, hesitant, and fiscally conservative. It has been said that the essence of his philosophy was the "free-market economy" and that he was uninterested in and had no plans or goals for the nation. As this chapter should suggest, these remarks are nowhere near the truth.
Certainly, Kennedy's economic strategy could be compared to Roosevelt's Economic Bill of Rights, but Kennedy's program went beyond Roosevelt's statement of goals to an actual program to achieve those goals. Roosevelt's Bill of Rights read as follows:The right to earn enough to provide adequate food and clothing and recreation;
The right of every farmer to raise and sell his products at a return which will give him and his family a decent living;
The right of every businessman, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies at home or abroad;
The right of every family to a decent home;
The right to adequate medical care and the opportunity to achieve and enjoy good health;
The right to adequate protection from the economic fears of old age, sickness, accident and unemployment;
The right to a good education.
These rights were meant as goals and were apparently Roosevelt's statement in 1944 of more general ideas discussed within his administration as early as 1941. Much of Kennedy's program was aimed at achieving these goals, but his program was focused to a much greater degree on generating the economic progress that would be necessary, and it included an aggressive set of policies to produce that progress.
The Democratic platform in 1960 did more than just hone Roosevelt's ideas although it did not give full expression to what would be Kennedy's policies. What role Kennedy played in shaping that platform is difficult to determine. Two points are fairly clear. Much of Kennedy's policy was included (or the platform became his policy), and he went beyond this ambitious statement of
In the process of elaborating on and adding to Roosevelt's Economic Bill of Rights, the 1960 party platform included many of the initiatives later taken by Kennedy. There was a strong general commitment to economic growth, greater productivity, and full employment. There were recommendations to expand loans to small businesses, to provide loans in depressed areas, and to make efforts to keep interest rates down and expand credit. Proposals were made for energy development, resource development, and an effort to achieve desalinization of ocean water. There was also a general policy of closing tax loopholes that favored privileged groups.
Roosevelt's ideas apparently inspired this platform, which went beyond those basic statements. Perhaps this platform inspired Kennedy's program for economic progress. A great deal of it was there in specific or general terms, but Kennedy went beyond the platform. There was one obvious difference. The platform strongly emphasized the necessity of balanced budgets with surpluses in good times offsetting deficits during recession. Kennedy would wind up proposing deficits in the midst of recovery. There were also other ways in which Kennedy would move beyond the platform while being faithful to its spirit.
On a general level, Kennedy's speeches and messages to Congress contained an even stronger focus on scientific, technological, and industrial progress than was present in the platform. His educational policy had a greater emphasis on natural sciences and technical areas than did the platform. Specifically, he went beyond the platform in the following: tax proposals to redirect the foreign investments of U.S. companies; distinctions in tax reform between productive and non-productive investment; eliminating tax privileges of U.S.-based global investment companies; cracking down on foreign tax havens and other proposals to eliminate tax privileges enjoyed by the wealthy; his tax proposals concerning large oil and mineral companies; his version of the investment tax credit; and expanding the powers of the president to deal with recession. In these areas, Kennedy took what was already an active and growth-oriented party position and extended and deepened it.
He treated the platform proposals in the same way he treated his proposals to Congress and his actions as president, as part of an ongoing, open-ended process of change to achieve economic and social progress. This orientation was also reflected in Kennedy's references to the Employment Act of 1946. In a 1962 message to Congress he said that his proposal to expand presidential powers to reverse recessions would give "new and concrete meaning" to that act. Even before taking office he expressed his intention to "return to the spirit as well as the letter of the Employment Act of 1946." By emphasizing the spirit of that act rather than the letter, Kennedy may have been referring to the fact that while the act suggested goals of full employment and expanding national wealth (the "spirit"), the language of the act was weak and perhaps contradictory (the "letter"). By "spirit" he may also have had in mind the stronger and more ambitious wording of earlier versions of the act. One draft version, December 18, 1944, had stated that every American has a "right to useful and remunerative" work, that the government has a "responsibility" to "guarantee that right," and that the government shall undertake programs "to contribute to the national wealth."
In office, Kennedy moved beyond the specific proposals of the Democratic platform, which already provided dynamic and growth-oriented prescriptions for the next Democratic president. His proposals would be consistent with the goals of Roosevelt's Economic Bill of Rights and the spirit of the Employment Act of 1946. His separate policies formed a coherent whole that included aspects of Keynesian economic theory but also provided much greater focus on expanding and improving the productive base of the economy and included many specific actions not derived from Keynes. This is clearly true if Keynesian policy is defined as an attempt to increase employment and prevent or end economic downturns through deficit spending by government. The Keynesian goal of maintaining adequate demand in the economy is very general and nonspecific in terms of substantive economic goals. Kennedy's proposals were focused on scientific and technological progress, increased productivity, and expanding production. The program as a whole and in its specifics was both different from and more than standard Keynesian policies.
Kennedy was intensely committed to the national interests of the United States. His policies were intended to preserve and enhance the economic position of the U.S. in the world economy. He did not, however, view the progress of the United States as in any way at odds with the progress of other nations, nor did he seek such progress for the purpose of world domination. His goals for other nations and other peoples were completely consistent with his goals for the United States, even if his capacity to affect global trends was more limited. In the next chapter we see that Kennedy's foreign policy was an extension of his domestic policy, even though the ambiguities of particular situations rendered clear and consistent action difficult.
THE ENTIRETY OF CHAPTER 3, “The International Policy” has been SNIPPED (left out of these excerpts)
Chapter Four: KENNEDY'S OPPONENTS
President Kennedy was well aware of the significant opposition to his policies. This was reflected in public comments and in remarks in private conversations. This chapter examines Kennedy's own, generally accurate, identification of those opponents, in banking and big business, and in the media organizations aligned with those interests.
After an appearance before the Business Council, made up of leaders of top banks and corporations, Kennedy later privately observed that this was the only audience that did not "rise to its feet upon the entrance of the President of the United States." This organization, known as the Business Advisory Council until 1962, was created in 1933 and had a semi-official relationship with the government until a dispute arose with the Kennedy administration over this special relationship. Kennedy felt that it was improper for this elite group to have special access to government officials and information that other businesses and the public did not have. Meetings between government officials and Council representatives continued after this disagreement, but on a less formal and less frequent basis.
Whether Kennedy disliked bankers in general, as suggested by Irving Bernstein, he was concerned about their attitudes toward him and their ability to affect his policies. Kennedy indicated to Sorensen, apparently in 1962, that he had reason to think that in 1960 American bankers had triggered a run on gold that was timed to undermine him politically, by suggesting a possible panic upon his election. He was determined not to be vulnerable to such tactics in 1964.
It interested President Kennedy that there was hostility toward him even though the economy as a whole and most businesses did extremely well during his presidency. (Paper (pp. 151, 153) says that the evidence shows that most businessmen did not view the administration as antibusiness, but there was considerable hostility among business leaders "on Wall Street and elsewhere." This is generally accurate, but vague.)
In one of his last speeches, delivered to the Florida Chamber of Commerce on November 18, 1963, Kennedy discussed the fact that "many" businessmen believed that his administration was anti-business. In part, he said the following:The hard facts contradict these beliefs. This administration is interested in the healthy expansion of our economy. We are interested in the steady progress of our society, and it is in this kind of program, in my opinion, that American business has the largest stake. Why is it that profits are at an all-time high in the nation today? It is because the nation as a whole is prospering. It is because our Gross National Product is rising from $500 billion to $600 billion, a record rise of $100 billion in three years -- thirty-six months. It is because industrial production in the last three years has increased 22 percent and personal income 15 percent. It is because, as the Wall Street Journal pointed out last week, the United States now leads most of Western Europe in the rate of business expansion. For the first time in many years, in the last eighteen months our growth rate exceeds that of France and Germany. It is because, as Fortune magazine recently pointed out, corporate profits in America are now rising much faster than corporate profits overseas. It is because these profits have not been eaten up by an inflationary spiral. And finally, it is because we have reversed the dismal trend toward ever more frequent recessions, which are the greatest enemy of profits. By next April, with the indispensable help of the pending tax cut bill, the United States will be sailing with the winds of the longest and strongest peacetime economic expansion in our nation's entire history.
I do not say that all this is due to the administration alone, but neither is it all accidental. The fiscal and monetary policies which we have followed are the key factors in whether the economy moves toward a path of expansion or restriction. In the last three years, American business and industry have directly benefited from a host of our legislative and administrative actions, which increased corporate flow, increased markets at home and abroad, increased consumer purchasing power and increased plant modernization and productivity. And still other steps have been taken to curb the wage-price spiral. In the first six months of 1963 there was less time lost in strikes than in any other period since the Second World War.
I do not say that these actions were taken for the benefit of business alone. They were taken to benefit the country. Some of them were labeled pro-business, some of them labeled anti-business, depending upon the viewpoint of the opposing groups. But that kind of label is meaningless. This Administration is "pro" the public interest. Nor do I say that all of these policies could please all American businessmen all of the time. So long as the interests and views of businessmen frequently clash with each other, no president could possibly please them all.
Most businessmen, though perhaps not most business spokesmen, are associated with small business. They ask the government for assistance to protect them against monopoly, to assure them of reasonable credit, to enable them to participate in defense contracts. And both large and small business work with the various arms of the administration every day on trade, transportation, procurement, balance of payments, and international business affairs. They do not show the hostility, which is so often described, or find that our policies and personnel are so incompatible with their own.
(Many of us have probably been made cynical about the use of this sort of rhetoric and about political leaders' claims that the country is doing well. But as the evidence shows, Kennedy's claim that the country was enjoying an unusually high level of economic progress was accurate.)
The hostility came, in the president's view, not from the majority of businessmen, but from certain segments of big business and from "business spokesmen." Whether he was referring to organizations such as the Business Council or to the media, or to both, is not clear. As for the media, there is some irony in his use of Fortune magazine and the Wall Street Journal in his own defense. Not only had Kennedy reportedly expressed displeasure and anger with both of these publications, but they were, in fact, two of the most hostile critics of Kennedy and his economic policies. Both spoke for leading financial and business interests. Both were related in numerous ways to the two most influential financial groups in the United States -- Morgan and Rockefeller. Those connections will be discussed after we examine the assault on Kennedy that appeared in Time-Life-Fortune and the Wall Street Journal.
Tomorrow: The Opposition to Kennedy, continued: David Rockefeller, the Morgan banking interests, Henry Luce's media empire, and The Wall Street Journal
POSTSCRIPT: Since I am a book dealer, soon after I began reading Battling Wall Street: The Kennedy Presidency (ISBN 1-879823-10-1), I wondered if the publisher has other similarly interesting titles. However, I was unable to find any internet presence for the publisher. When I asked Dr. Gibson if he had copies available, he told me that the publisher had been forced out of business by the staggering costs of defending itself against a libel suit brought by an arms dealer who is a friend of George W. Bush. I don’t think that the legal battle with an arms dealing friend of the Shrub has anything to do with this particular book; it is just a very interesting fact I deem worthy of passing along. There is a link for the libel suit here:
Mohammed Radi Abdullah V. Sheridan Square Press, Inc., http://www.uniset.ca/...
(Note regarding copyright: Dr. Gibson has approved the use of these extended excerpts, which obviously go beyond fair use. PLEASE NOTE that I have not asked Professor Gibson if this material could be copied from DailyKos and used elsewhere. I would urge anyone wishing to do so to contact Professor Gibson at the University of Pittsburgh; he is listed in the roster of faculty you can find on the University’s website.)