When JFK became President, he inherited rising unemployment, depressed stock prices, and declining profits. His goal was to avoid a deeper recession to “get America moving again.” The business community was highly skeptical, but in the two and a half years of his presidency, the country began an amazing economic turnaround. By November 1963, when Kennedy was assassinated, employment was beginning to boom and stocks were rapidly rising as investors went crazy over mutual funds.
What did Kennedy have to do with the nation’s economic upturn? Most historians agree that JFK’s policies encouraged the mid-1960’s golden era – one of the greatest economic expansions in American history. Had he lived, Kennedy might have been in his fifth year of presidency in 1966 and would have seen an economy with a growth rate of 6.6 percent and an unemployment rate of just 3.8 percent. The recovery has been attributed to Kennedy convincing Congress to pass “liberal” policies including:
- Increasing the minimum wage
- Expanding unemployment benefits
- Boosting Social Security benefits to encourage earlier retirement
- Spending more federal money on highway construction.
Additionally, JFK pushed for much lower tax rates, which conservatives still praise fifty years later.
Kennedy spoke at the Economic Club of New York in 1962, saying he was committed to “an across-the-board, top-to-bottom cut in personal and corporate income taxes.” He said that the tax system, which was mostly designed during World War II, “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 for personal effort, investment, and risk-taking.” This view worried many lawmakers who thought that reducing taxes without cutting spending would ultimately create huge budget deficits. Kennedy countered with “a rising tide lifts all boats,” insisting that his proposed tax cuts would generate widespread growth.
In early 1964, three months after Kennedy’s assassination, Congress finally approved the tax cuts he had recommended. The federal budget deficit shrank the following fiscal year. The Dow Jones industrial average nearly doubled between 1962 and 1966. Investors were thrilled. Conservatives still see this as proof that cutting taxes will result in higher revenues.
However, liberals counter that conditions were very different in the early 1960s. The top marginal tax rate was then 91 percent. The Kennedy-era tax cuts lowered that rate to 70 percent. They say that cutting today’s top tax bracket would not have the same effect. David Shreve, an economic historian who wrote in 2013 about the JFK-era tax cuts, said that “you can only go to the well so many times before you lose effectiveness.” Shreve also pointed out that Kennedy’s largest tax cuts benefitted average wage earners to encourage them to spend more. He added that conservatives had suggested “supply-side” cuts to target the marginal tax rates for wealthier individuals, encouraging them to invest more and increase output. While liberals and conservatives debate, Allen Matusow, author of The Unraveling of America: A History of Liberalism in the 1960s, sees the message as clear. Matusow reports that marginal tax rates never returned to the 1960s’ extremely high levels; “these were permanent tax cuts.” “The cuts were game changers.”
In addition to Kennedy’s fight for lower tax rates, he fought inflation. He directed Labor Secretary Arthur Goldberg to mediate steel-industry labor negotiations in 1962. Ultimately, the steelworkers’ union agreed to not strike, even though no raises were offered for that year. Kennedy praised the contract as “obviously non-inflationary” and the negotiators as having “industrial statesmanship of the highest order.” Within days, U.S. Steel CEO Roger Blough announced an immediate 3.5 percent steel price hike. As other companies followed, JFK condemned the “irresponsible” businessmen for showing “utter contempt” for the nation. As a result, the price-hike companies rolled back the increases; inflation remained low and stable during Kennedy’s presidency.
Another aspect of Kennedy’s economic legacy was the foundation he set for the eventual passage of the 1964 Civil Rights Act and the Medicare program in 1965. Together they reduced discrimination in access to hospital care for minority Americans and improved health for many American workers. Matusow, however, writes that Medicare helped drive up medical costs as hospitals raised prices, assured that the government would reimburse them. “Medicare originated as a social welfare program, but it has had economic consequences.”