Sunday, October 19, 2014

JFK 1962 speech about urgent need for growth of private sector and tax cuts

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12/14/1962,  "Pres. John F. Kennedy Address to the Economic Club of New York," Waldorf Astoria Hotel, American Rhetoric Online Speech Bank

"You will recall that Chairman Khrushchev has said that he believed that the hinge of world history would begin to move when the Soviet Union out-produced the United States. Therefore, the subject to which we address ourselves tonight concerns not merely our own well-being, but also very vitally the defense of the free world. 
 
America's rise to world leadership in the century since the Civil War has reflected more than anything else our unprecedented economic growth. Interrupted during the decade of the 30s, the vigorous expansion of our economy was resumed in 1940 and continued for more than 15 years thereafter. It demonstrated for all to see the power of freedom and the efficiency of free institutions. The economic health of this nation has been, and is now, fundamentally sound.

But a leading nation, a nation upon which all depend, not only in this country but around the world, cannot afford to be satisfied, to look back, or to pause. 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. The underdeveloped countries are dependent upon us for the sale of their primary commodities and for aid to their struggling economies. In short, a prosperous and growing America is important not only to Americans, it is -- as the spokesman for 20 Western nations in the Organization for Economic Cooperation and Development, as he stressed this week -- of vital importance to the entire Western World.


In the last two years we have made significant strides. Our gross national product has risen eleven percent, while inflation has been arrested. Employment has been increased by one-point-three million jobs. Profits, personal income, living standards -- all are setting new records. Most of the economic indicators for this quarter are up and the prospects are for further expansion in the next quarter. But we must look beyond the next quarter, or the last quarter, or even the last two years. For we can and must do better, much better than we've been doing for the last five-and-a-half years.


This economy is capable of producing, without strain, 30 to 40 billion [dollars] more than we are producing today. Business earnings could be seven to eight billion higher than they are today. Utilization of existing plant and equipment could be much higher -- and, if it were, investment would rise. We need not accept an unemployment rate of five percent or more, such as we have had for 60 out of the last 61 months. There is no need for us to be satisfied with a rate of growth that keeps good men out of work and good capacity out of use.


The Economic Club of New York is, of course, familiar with these problems. For, in this state, the rate of insured unemployment has been persistently higher than the national average, and the increases in personal income and employment have been slower here than [in] the nation as a whole. You have seen the tragedy of chronically depressed areas upstate, of unemployed young people -- and I think this might be one of our most serious national problems, unemployed young people, those under 20. One out of four are unemployed -- particularly those in the minority groups, roaming the streets of New York and our other great cities -- and others on relief at an early age, with the prospect that in this decade we will have between seven and eight million school dropouts, unskilled, coming into the labor market, at a time when the need for unskilled labor is steadily diminishing. And I know you share my conviction that, proud as we are of its progress, this nation's economy can and must do even better than it has done in the last five years. Our choice, therefore, boils down to one of: doing nothing, and thereby risking a widening gap between our actual and potential growth in output, profits, and employment -- or taking action, at the federal level, to raise our entire economy to a new and higher level of business activity.


If we do not take action, those who have the most reason to be dissatisfied with our present rate of growth will be tempted to seek shortsighted and narrow solutions -- to resist automation, to reduce the work week to 35 hours or even lower, to shut out imports, or to raise prices in a vain effort to obtain full capacity profits on under-capacity operations. But these are all self-defeating expedients which can only restrict the economy, not expand it.


There are a number of ways by which the federal government can meet its responsibilities to aid economic growth. We can and must improve American education and technical training. We can and must expand civilian research and technology. 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. We can and must step up the development of our natural resources. 


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. In the past, this could be done in part by the increased use of credit and monetary tools, but our balance of payments situation today places limits on our use of those tools for expansion. It could also be done by increasing federal expenditures more rapidly than necessary, but such a course would soon demoralize both the government and our economy. 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. And I shall say more on this in a moment.


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 and become effective in 1963.


I'm not talking about a "quickie" or a temporary tax cut, which would be more appropriate if a recession were imminent. Nor am I talking about giving the economy a mere shot in the arm, to ease some temporary complaint. I am talking about the accumulated evidence of the last five years that 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 incenitives [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.


Under these circumstances, any new tax legislation -- and you can understand that under the comity which exists in the United States Constitution whereby the Ways and Means Committee in the House of Representatives have the responsibility of initiating this legislation, that the details of any proposal should wait on the meeting of the Congress in January. But you can understand that, under these circumstances, 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. Consumers are still spending between 92 and 94 percent on their after-tax income, as they have every year since 1950. 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. The government has already taken major steps this year to reduce business tax liability and to stimulate the modernization, replacement, and expansion of our productive plant and equipment. We have done this through the 1962 investment tax credit and through the liberalization of depreciation allowances -- two essential parts of our first step in tax revision -- which amounted to a ten percent reduction in corporate income taxes worth 2.5 billion dollars. 

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. These steps are not only needed to recover lost revenue and thus make possible a larger cut in present rates, they are also tied directly to our goal of greater growth. 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."...


"An excerpt from John F Kennedy's address to the Economic Club of New York on 14 December 1962. Text & audio of the full speech here: http://www.americanrhetoric.com/speec..."...

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Comment: Tax rates were higher in 1962 but the speech was about much more and with great spirit. He speaks with an excitement about America that would be considered shameful today by a major political figure. Following his death in 1963, this country changed quickly and violently. It's impossible to believe that events would have played out as they did if he'd been leading the country at the time. He wouldn't have stood by for it. The hatred and destruction of the American culture that flourished in the 60's became permanent. Every president has stood by and let it get worse and worse. Unfortunately, Ted Kennedy became a powerful negative force for many years. This isn't to say JFK was a saint, it's that listening to his words today is shocking.




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