John F. Kennedy on Budget & Economy

Moving away from New Deal means tax cuts & strong dollar

Father served as 1st Securities & Exchange Commission chair

Concept of balanced budget is misleading mythology

Heavy deficit spending to recover from 1961 recession

While most of Kennedy's administrative moves added to the deficit--some by billions of dollars--none of them had to wait for legislation or appropriations. The money was paid out when the economy needed it most. He made clear--and this may have had the most important effect of all--that he would not cut back Federal spending when the recession reduced Federal revenues, or permit a tightening of credit when recovery began.

1961 recession plan: prompt recovery toward long-term growth

Presided over strongest economic expansion in modern history

All presidents outspend their predecessors

Steady rise in expenditures as economic stimulus

The sources of this triumph can be briefly enumerated. The steady rise in expenditures, averaging over $5 million a year, contributed basic economic stimulus. The investment tax credit and the liberalized depreciation allowances encouraged investment.

Economic stimulus took us from recession to recovery

We are gratified--but we are not satisfied. Too many unemployed are still looking for the blessings of prosperity. As those who leave our schools and farms demand new jobs, automation takes old jobs away.

Since 1958 recession, the American economy is in trouble

Business bankruptcies have reached their highest level since the Great Depression. Since 1951 farm income has been squeezed down by 25%. Save for a brief period in 1958, insured unemployment is at the highest peak in our history.

Our recovery from the 1958 recession, moreover, was anemic and incomplete. Our Gross National Product never regained its full potential. Unemployment never returned to normal levels. Maximum use of our national industrial capacity was never restored.

In short, the American economy is in trouble. The most resourceful industrialized country on earth ranks among the last in the rate of economic growth. Since last spring our economic growth rate has actually receded. Business investment is in a decline. Profits have fallen below predicted levels. Construction is off.

Gold outflow results from obligations abroad

NIXON: Well, the first thing we have to do is to continue to keep confidence abroad in the American dollar. That means that we must continue to have a balanced budget. Secondly, we have to increase our exports, as compared with our imports.

KENNEDY: The difficulty, of course, is that we do have heavy obligations abroad, that we therefore have to maintain not only a favorable balance of trade but also send a good deal of our dollars overseas to pay our troops, maintain our bases, and sustain other economies. In other words, if we're going to continue to maintain our position, we have to maintain a sound monetary and fiscal policy. We have to have control over inflation, and we also have to have a favorable balance of trade.

More interested in federal programs than in cutting deficit

Q: You call for expanding some of the welfare programs for schools, for teacher salaries, medical care, and so forth; but you also call for reducing the federal debt. And I'm wondering how you would go about paying the bill for all this.

I think you have heavy obligations which affect our security, which we're going to have to meet.

NIXON: I think that it should be pointed out that of course it is not possible, particularly under the proposals that Senator Kennedy has advocated, either to cut the national debt or to reduce taxes. As a matter of fact it will be necessary to raise taxes.