It’s Not Ideological, Just Sound Economics

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  • 03/02/2023

"Next year's tax bill must 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 tax system."

These words could easily have been uttered by President Bush while he was campaigning for the recently enacted tax cuts, but these are not his words. Nor are they the words of a conservative ideologue or partisan politician. These words come from none other than President John F. Kennedy, as delivered at the Economic Club of New York on Dec. 14, 1962, and his words ring as true today as they did back then.

In 1962, Kennedy sponsored legislation to cut income tax rates by 20 percent and corporate tax rates by 10 percent "to increase incentives and the availability of investment capital." After these tax cuts became law, the economic growth rate expanded from 4.3 percent to 6.6 percent, and the economy created more than 1 million jobs the following four years.

During an interview at the John F. Kennedy Library last week, former President Bill Clinton acknowledged the Kennedy tax rate reductions "made sense"; however, he lashed out against the Bush tax cut saying: "The real reason for the tax cuts and their particular design in 2001 and 2003 was ideological, almost theological, the notion that we're all just put upon by this onerous government of ours taking our hard-earned money away and that there's no such thing as a bad tax cut and no such thing as a good spending program unless it lays concrete (whatever that means) or builds a missile. These tax cuts are too small in the short run to do any good and way too big in the long run to avoid harm."

These are words unbecoming any former president, but particularly Clinton, who signed a roughly 25 percent cut in the capital gains rate into law in 1997.

Clinton also cited a comment that he attributed to former President Lyndon B. Johnson: "Republicans were primarily interested in cutting taxes for their friends." If Clinton was insinuating that Bush proposed his tax cut plan to benefit his friends, Clinton is so far off base as to raise class warfare as his chief contribution to a losing issue for his party in 2004.

Kennedy did not cut taxes solely, or even primarily, for ideological reasons, but to "get this economy going again." The same holds true for Bush - not because he's a Republican, ideological, theological or anything else, but because he's right and has the interest of all Americans to be concerned about.

Ironically, when Kennedy proposed his tax plan, it was the Republican Party and conservative members of Congress who accused him of being "fiscally irresponsible." Then, as with Bush's tax plan today, the opponents of tax relief argued it would explode the deficit and cause undue burden on the national debt.

To opponents, Kennedy replied, "Our practical problem 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 revenue and achieve - and I believe this can be done - a future budget surplus."

Bush understands this intuitively and intellectually. That is why he cut income tax rates across the board, slashed capital gains and dividend taxes, increased "expensing" for small business and expanded provisions for accelerated depreciation. His tax cut is not so much like a "bigger shovel," as Clinton suggests, as much as a rope and a ladder, providing the incentive and capital with which to get the economy back on the road to growth.

In 1962, Kennedy led and Republicans begrudgingly followed. Today, Bush is leading and Democrats are reluctantly trailing in his wake. Democrats can ill afford to follow the example of class warfare and expect to lead the American family. Instead, they should learn from JFK that the road to electoral success over time is to lead, not complain, and compete and win in the battlefield of ideas, and to get back on the road to economic growth and full employment, instead of fixating on deficits. It didn't work for us in the past, and it won't work for them in the future.



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