The Myth of JFK as Supply Side Tax Cutter

Kennedy was a Keynesian, not a a Reagan forerunner.

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This is a big year for iconic presidential anniversaries. Fifty years ago last week, John F. Kennedy was sworn in as president, an inspiration, especially for liberals. A century ago next month, Ronald Reagan was born, a centenary that is spurring extended celebration and reverence on the right.

[See a photo gallery marking Reagan's 100th birthday.]

Kennedy has been correctly called the first Keynesian president (of which more in a moment). Reagan was the first chief executive disciple of supply-side economics, the tax-cut monomania that now dominates the GOP. Over the years, however, a strange connection has grown up between the two men, at least in the minds of some on the right. Because JFK advocated a tax cut to stimulate the economy, conservatives have adopted him as an early prophet of the supply-side religion.

The notion of Kennedy as tax-cutting hero dates at least to the 1970s, when then Rep. Jack Kemp was writing the tax-cut legislation that Reagan would sign in 1981. Since then, political ads contrasting clips of JFK advocating tax cuts with the target Democrat of the moment have appeared regularly. See, for example, Scott Brown in Massachusetts and Linda McMahon in Connecticut last year.

[See 2010: The Year in Cartoons.]

The argument that JFK's economic policies are more closely aligned with the modern GOP than Democrats is doubly attractive for conservatives. They can paint their tax cut-centric policies as having a rich bipartisan past abandoned by the modern left—and tweak liberals by absconding with one of their icons.

The notion of Kennedy as supply-side forerunner is a powerful myth, but it is a myth. Context is key. Conservatives love to quote a speech Kennedy gave at the Economic Club of New York in December 1962. Here's one quote—I've italicized the crucial part often left out: "Our present tax system, developed as it was, in good part, during World War II to restrain growth, 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." JFK was not expounding an implacable economic philosophy; he was speaking about a very specific circumstance. The top marginal tax rate was 91 percent, which JFK wanted reduced to a "more sensible" 65 percent. Compare that with today's 35 percent top rate, and ask: If supply-siders are so enamored of JFK's tax policies, would they advocate a return to a "more sensible" 65 percent top rate? Applying Kennedy's tax talk to the current structure, JFK biographer Robert Dallek says, is like comparing "apples and watermelons."

[See editorial cartoons about the economy.]

Another important piece of context is the thinking behind the tax cuts. Kennedy's economic policies were rooted in a Keynesian belief in the stimulative effects of budget deficits. While FDR and his aides had embraced countercyclical deficits as necessary in times of recession or depression, Kennedy was the first to advocate planned deficits in a time of neither war nor economic emergency. The aim was for the tax cuts to stimulate demand, driving the economy from the bottom up.

Republicans, by contrast, argued that while tax cuts were desirable, running an $11 billion deficit, "with no hope of a balanced budget for the foreseeable future, is both morally and fiscally wrong." That balanced-budget fixation was the ruling GOP philosophy until the rise of supply-side economics, which saw tax cuts as a way to boost investment (the supply side versus the Keynesian demand side) by helping the wealthy and business. Deficits were handled with the magical declaration that tax cuts pay for themselves.

It's a notion that the new House GOP majority has taken to bizarre and irresponsible extremes, eliminating "pay-go" rules mandating that new tax cuts or new spending be offset by tax increases or spending cuts. Instead the House now has "cut-go" rules, which require only that new spending be offset with spending cuts—tax cuts need not be offset and tax increases don't count as offsets. This from the party that oversaw deficit explosions in the Reagan and George W. Bush years, then claimed the mantle of fiscal responsibility in last year's elections. At least JFK and his partisan descendants are intellectually honest about deficits.