compiled & edited by Daniel Hagadorn

What would JFK do (about taxes)?

What would JFK do?

President John F. Kennedy appeared to have an excellent grasp of fiscal reality and perhaps ALL members of Congress would do well to heed his advice concerning the immutable relationship between raising taxes and ruining the economy.

…The gains we have made will not be given up and the course that we have pursued will not be abandoned. But in the long run, that security [of our nation] will not be determined by military or diplomatic moves alone. It will be affected by the decisions of finance ministers, as well as by the decisions of Secretaries of State and Secretaries of Defense; by the deployment of fiscal and monetary weapons, as well as by military weapons; and, above all, by the strength of this nation’s economy, as well as by the strength of our defenses.

America’s rise to world leadership in the century since the Civil War has reflected more than anything else our unprecedented economic growth… The economic health of this nation has been, and is now, fundamentally sound.

“…On our strength and growth depends the strength of others, the spread of free world trade and unity, and continued confidence in our leadership and our currency… In short, a prosperous and growing America is important not only to Americans, it isof vital importance to the entire Western World.

“…You have seen the tragedy of chronically depressed areas…of unemployed young people–and I think this might be one of our most serious national problems, unemployed young people, those under 20… this nation’s economy can and must do even better than it has done in the last five years.

“…One of the great bottlenecks for this country’s economic growth in this decade will be the shortages of doctorates in mathematics, engineering, and physics–a serious shortage with a great demand and an undersupply of highly trained manpower.

“…But 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… If government is to retain the confidence of the people, it must not spend more than can be justified on grounds of national need or spent with maximum efficiency.

“…The final and 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 to be enacted

“…I am talking about the accumulated evidence of the last five years that our present tax system…exerts too heavy a drag on growth in peace time; that it siphons out of the private economy too large a share of personal and business purchasing power; that it reduces the financial incentives [sic] for personal effort, investment, and risk-taking. In short, to increase demand and lift the economy, 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.

“…in general, that any new tax legislation enacted next year should meet the following three tests:

“First, it should reduce the net taxes by a sufficiently early date and a sufficiently large amount to do the job required. Early action could give us extra leverage, added results, and important insurance against recession. Too large a tax cut, of course, could result in inflation and insufficient future revenues–but the greater danger is a tax cut too little, or too late, to be effective.

“Second, the new tax bill must increase private consumption, as well as investment… But that after-tax income could and should be greater, providing stronger markets for the products of American industry. When consumers purchase more goods, plants use more of their capacity, men are hired instead of laid-off, investment increases, and profits are high.

Corporate tax rates must also be cut to increase incentives and the availability of investment capital… Now we need to increase consumer demand to make these measures fully effective–demand which will make more use of existing capacity and thus increase both profits and the incentive to invest. In fact, profits after taxes would be at least 15 percent higher today if we were operating at full employment.

For all these reasons, next year’s tax bill should reduce personal as well as corporate income taxes: for those in the lower brackets, who are certain to spend their additional take-home pay, and for those in the middle and upper brackets, who can thereby be encouraged to undertake additional efforts and enabled to invest more capital.

Third, the new tax bill should improve both the equity and the simplicity of our present tax system. This means the enactment of long-needed tax reforms, a broadening of the tax base, and the elimination or modification of many special tax privileges… For the present patchwork of special provisions and preferences lightens the tax loads of some only at the cost of placing a heavier burden on others. It distorts economic judgments and channels undue amounts of energy into efforts to avoid tax liability. It makes certain types of less productive activity more profitable than other more valuable undertakings. All this inhibits our growth and efficiency, as well as considerably complicating the work of both the taxpayer and the Internal Revenue Service.

“…Profit margins will be improved, and both the incentive to invest and the supply of internal funds for investment will be increased. There will be new interest in taking risks, in increasing productivity, in creating new jobs and new products for long-term economic growth.

“…In a worldwide conviction that we are not drifting from recession to recession with no answer…nothing could be more foolish than to restrict our growth merely to minimize that particular problem, because a slowdown in our economy will feed that problem rather than diminish it.

But what concerns most Americans about a tax cut, I know, is not the deficit in our balance of payments but the deficit in our federal budget.

“We shall, therefore, neither postpone our tax cut plans nor cut into essential national security programs. This administration is determined to protect America’s security and survival, and we are also determined to step up its economic growth. And I think we must do both.

“…It is increasingly clear that no matter what party is in power, so long as our national security needs keep rising, an economy hampered by restrictive tax rates will never produce enough revenues to balance our budget–just as it will never produce enough jobs or enough profits.

In short, it is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now. The experience of a number of European countries and Japan have borne this out. This country’s own experience with tax reduction in 1954 has borne this out… The purpose of cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus.

I repeat: our practical choice is not between a tax-cut deficit and a budgetary surplus. It is between two kinds of deficits: a chronic deficit of inertia, as the unwanted result of inadequate revenues and a restricted economy, or a temporary deficit of transition, resulting from a tax cut designed to boost the economy, increase tax revenues, and achieve, I believe–and I believe this can be done–a budget surplus. The first type of deficit is a sign of waste and weakness; the second reflects an investment in the future.

“…the size of the deficit is to be regarded with concern, and tax reduction must be accompanied, in his [Chairman of the House Ways and Means Committee] words, by “increased control of the rises in expenditures.”

In addition, I have directed all heads of government departments and agencies to hold federal employment under the levels authorized by congressional appropriations, to absorb through greater efficiency a substantial part of this year’s federal pay increase, to achieve an increase in productivity which will enable the same amount of work to be done by less people, and to refrain from spending any unnecessary funds that were appropriated by the Congress. [underlined emphasis mine]

“…Federal civilian employment, for example, is actually lower today than it was in 1952…

“…nothing. For on the strength of our free economy rests the hope of all free nations. We shall not fail that hope–for free men and free nations must prosper and they must prevail.”

I remain hopeful that both Democrats and Republicans will ask themselves WWJFKD? and follow his example. [1]

[1] Michael E. Eidenmuller, transcription, “Top 100 American Speeches”, American Rhetoric: Online Speech Bank. John F. Kennedy, Address to the Economic Club of New York, 14 December 1962.

One Response

  1. Oooh, you’re such an inspiration. I love this blog!

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