Kennedy’s Keynesian Budgetary Politics and the 1962 Public Works Acceleration Act
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The PWAA as Law To be sure, the 1962 PWAA was only a spending authorization bill; Congress still had to approve each of the President’s follow up requests for the money, giving the Appropriations Committee one last say in directing the funds. Commerce Secretary Luther Hodges, who Kennedy placed in charge of coordinating the administration’s requests, estimated that 26 Federal agencies already had a list of some $1.3 billion worth of projects ready for completion in the upcoming year. Even though the final bill restricted ultimate disbursement to areas chronically “depressed,” or, as Kennedy phrased it while signing those bill, those areas that “have failed to share fully in the economic gains of the recovery,” many in the administration still pushed for, and publicly articulated the need to distribute the money as widely as possible.97 Of the $900 million authorized by Congress, it would take another month for the spending appropriations to make its way to the White House. By that time, Congress, now considering the entirety of its $5.2 billion in appropriations, was more reserved in releasing all of the PWAA monies at once. For the remaining fiscal year, the White House could allocate up to $400 million of the total monies, and by Election Day, the White House had disbursed just over a quarter ($165 million) of that total. Clearly the president’s concerns for a lagged effect were being brought to fruition. By the close of the year, administration officials were quickly revising their FY 1963 estimates. The previous January, shortly after Kennedy allies introduced standby authority, the Bureau Budget was estimating a $500 million surplus, driven in large part by a dramatic increase in GDP and government tax receipts. Those estimates had fallen to a $7.8 billion deficit, driven, in part, by a 6.4 percent increase in government expenditures and only a 5.2 percent increase in revenues. Such a deficit would be the third largest since the end of World War II, surpassed only by the 1959 budget and government spending at the end of the Korean War. Yet, the Bureau confidently stood by its previous assessments writing that, “if the economy in recent years had been operating closer to its potential, with an unemployment rate of about 4 percent, existing tax laws would produce an administrative budget surplus of about $2,000,000,000 this year.” Unemployment currently stood at 5.5 percent and the report stressed that, “under current conditions of economic recovery, significantly slower than assumed in January, the present 1963 budget estimates reflect generally accepted fiscal requirements…with the existing level of unemployment and unused plant capacity, the deficit is neither inflationary nor dangerous to our balance-of-payments position.”98 As the year ended, the White House had allocated another $197.6 million – $119.1 million to state and local projects – for its revised list of accelerated public works.99 But with only $55.4 million remaining under the authorization bill, the President would have to wait until the new Congress returned to Washington and see if they appropriated any of the remaining $500 million still waiting. Yet, even then, White House authorization still did not mean that those dollars would immediately enter the economy and provide relief. In short, by the start of fiscal year 1963 – over one year after the signing of the PWAA – Congress had eventually appropriated $850 million for a variety of local, state, and federal projects, at the president’s request. Yet, in FY 1963, government receipts indicated that only $62.5 million (7.35 percent) had cleared. Even though Congress had restricted the list of projects eligible for funding to “shovel-ready” improvements, and even some already under way, most of the spending – $653.4 million – took place in fiscal years 1964 and 1965.100 As intended by members of Congress, in part because of the large degree of involvement on behalf of state governors and administrators in promoting the legislation, the majority of the PWAA’s final obligations went to state and local infrastructure projects. Of the eventual $884 million eventually authorized by the Congress, state and local projects claimed $602.7 million in obligated funds, while federal projects claimed just $152.5. By the end of 1971, just over $836 million dollars had finally cleared as registered expenditures in the U.S. federal budget – just over one-third of Kennedy’s initial $2.5 billion proposal put forward ten years earlier. As a result of the implementation lag, policy analysts have found it near impossible to attribute any substantive effect to the PWAA as a fiscal stimulus. Indeed, like the Kennedy historians, few have even recognized the PWAA as a significant achievement in financing needed infrastructure improvements, or in ameliorating unemployment. In fact, in one of the few studies of the PWAA, David Ott and Attiat Ott use the PWAA to highlight the inefficiency of public works projects as fiscal stimulus. As they write, “for one thing, construction projects frequently take a long time to complete, yet once started they must be finished; half a bridge is worthless. Perhaps even more important is the time it takes to get the projects started.” Using the data reported above, they conclude that, therefore, “discretionary fiscal policy has in the past and will continue in the future to rely on both tax and expenditure changes to achieve its objectives.”101 However, calculated expenditure changes through accelerated public works has not appeared to be a salient tool of federal budgetary politics. With the exception of President Obama’s 2009 fiscal stimulus, no presidential candidate has actively sought to establish a doctrinaire position on counter-cyclical expenditures in the way that Kennedy advocated and publicized in his attempts to educate the public. Instead, variations in tax receipts dominates discussion of fiscal policy. Yet, it is clear that such emphasis on tax rate variation as a tool for counter-cyclical stabilization, or economic expansion, followed from the failures of the Kennedy administration to push a sizeable standby public works package through the Congress. The pitched political battle over the legacy of the New Economics began in the debate over the PWAA and in the immediate aftermath of the bill’s signing. Given how far the administration had to capitulate in order to secure Congressional approval, it hardly constituted a “win” for president’s plan to fundamentally empower the president’s control over American fiscal policy. None other than former-President Eisenhower said as much, arguing several months later that, “it is obvious that the "'new economics" out of which the Administration has drawn its plans is not new at all; in the end it can be nothing more than the age-old shot-in-the-arm, inflation, dressed up in fancy modern terms. It is the irresponsible, easy road of debt, a road which through history has lured nations to financial misery and economic disaster.” Taking one last dig at the Kennedy “brain trust,” he added, “Of course, the country must have economic growth, but when so-called experts say that it must be a certain number of percentage points per year. I just think they don't know what they are talking about. It's like saying that each and every child should grow the same number of inches a year. And when they say that government spending should be the controlling factor in expansion. I regard this as a pernicious myth.”102 Nevertheless, as Seymour Harris lamented, it was not necessary that the administrative shortcomings of the PWAA eventually overshadowed the political impact of Kennedy’s new economics. It was mainly due to the president’s allies, according to Harris, that the attacks on the entirety and the novelty of the new economics took hold. “The critics gave the President little credit for the revolutionary change in his economic thinking and in his proposals,” Harris wrote. “By concentrating on unemployment and neglecting or underestimating the gains in growth…the liberal critics did the President and injustice.”103 Even more optimistic portrayals of the Kennedy-Johnson administrations, such as Walter Heller’s, would come to neglect the emphasis placed on standby public works early in the administration. While suggesting that “John F. Kennedy and Lyndon B. Johnson stand out, then, as the first modern economists in the American Presidency,” Heller had to, of course, emphasize the tax cuts that eventually passed Congress in 1964, while neglecting to mention that for the first two years of the new economics, the administration placed its trust, in part, in public works.104 Conclusion What can we make of a policy whose economic effect was limited and whose history was deemed unimportant, even by those who created it? We argue that it is the policy “counterfactual” – in this case, the disconnect between the president’s plan and the final bill, or the could-have-been outcome – and the political battles fought over this negotiation, which provide important lessons about the Kennedy administration and the history of Keynesian economic thought in American political development.105 First, by studying how the Kennedy administration discussed this bill as a part of their larger economic philosophy, we can better understand the influence that the Kennedy presidency had on the “political discourse” of Keynesian budgetary politics.106 If we take the Kennedy administration’s push to pass the PWAA seriously – indicated by several high-profile speaking engagements, hours of Congressional testimony and research, and its position in the legislative agenda – then it is clear that despite the administration’s own retrospective evaluation, the Kennedy White House viewed public works as an essential fiscal policy tool. To fully understand the intellectual influences that informed the Kennedy administration, including the President’s ultimate embrace of tax cuts as an expansionary mechanism, we must situate the entirety of his economic agenda alongside this early push for a $2.5 billion public works plan. Therefore, the current portrayal of Kennedy as just a “tax-cutter” is woefully simplistic. Second, by studying the PWAA from its conception to its final implementation, we can better understand the complexities of demand-side budgeting, as realized by a massive public works plan. This includes also making sense of how Kennedy’s public works proposals dramatically differed from Congress’, both in 1958 and in 1962. The PWAA demonstrates the different political incentives that bear down on the legislative and executives branches. Both seemingly have a stake in the economic health of the country – both are at least penalized for rising unemployment rates – but the Congress strongly objected to the White Houses’ demands for a particular type of fiscal plan, standby authority. The PWAA changed from a $2 billion authorization that would have granted full control to the presidency in allocating funds, to a $900 million, decades-long spending bill that was essentially a giant piece of distributive pork. Moreover, the presence of Conservative Democrats weary of federal deficits does not explain the whole story. Therefore, one of the major lessons of the PWAA is the disconnect between Keynesian counter-cyclical ideas, and American political institutions. Under separate institutions sharing power, the type of rapid, flexible response needed for expenditure and receipt adjustments is difficult. Yet, Kennedy’s attempt to overcome this structural feature was met with stiff resistance. Additionally, it is important to note that given how important governors were in the design and implementation phases, a great deal of the political pressure to guard Congress’ taxing and spending authority emerged from the statehouses. Ultimately, the clear majority of federal funding for accelerated public works funneled through the states, thereby reinforcing American federalism and local-state-federal inter-dependability in fiscal policy. Finally, because the PWAA was only a limited success, its effect on the budgetary politics of the Democratic party is noticeable for the road not traveled. If Franklin Roosevelt’s party eventually came to embrace an interventionist stance in America’s political economy, Kennedy sought to complete the “fiscal revolution” and equip the modern presidency with the power to command the American economy with the tools of modern economics. It was both an embrace of Roosevelt’s “enlightened administration” that sought to replace party politics with expert-negotiated, top-down policymaking, while at the same time relying more on economic ideas than managerial or political ones.107 In 1946, the full-employment budget came to represent the federal government’s commitment to secure the nation’s economic growth in times of crises, and in times of normal economic contraction; both Democrats and Republicans recognized the awesome power of federal fiscal policy, and yet, Kennedy wanted to distinguish the Democratic party as the modern, expert-driven party, which was not fearful of unbalanced-budgets or a little debt, but rather understood the nuances of federal fiscal policy.108 In the final analysis, this was a dream short-lived. Even though many of the Kennedy economists remained in the Johnson administration, including Heller, Johnson did not speak with the same Keynesian language or attempt to teach the American people in the way Kennedy recognized as necessary. Indeed, as expenditures skyrocketed with both the Great Society and the Vietnam War, it was all too easy to lampoon the Johnson administration as one who had very little sense of fiscal restraint, or as one who scantly understood the relationship between massive expenditures and price inflation. Likewise, Carter’s zero-base-budgeting was a return to the principles of efficiency and accountability, not counter-cyclical adjustment; Clinton’s legacy was secured not because of a deficit investments, but because he left office with a budget surplus; Obama’s stimulus was an emergency measure grounded in pragmatism and not macro-economic theory. Kennedy and the new economists wanted to change that image, and they relied on a rather traditional instrument of public works to accomplish that goal. While the PWAA has an odd place in the history of the Kennedy presidency, it is nevertheless an important one as it reveals how seriously the young President took the lessons of modern economics, and how adamantly he worked to transform the presidency in order to accomplish its most lofty promises. 1 John F. Kennedy, 1962 State of the Union Address. 2 As a list of “canonical texts” on Kennedy and Kennedy’s presidency that do not mention the PWAA as significant, we include: Robert Dallek. 2004. An Unfinished Life: John F. Kennedy, 1917-1963. New York, NY: Back Bay Books; Ted Sorensen. 1965. Kennedy. New York, NY: Harper & Row; Richard Reeves. 1994. President Kennedy: Profile of Power. New York, NY: Simon & Schuster; Ray Canterbery. 1968. Economics on a New Frontier. Belmont, CA: Wadsworth; Henry Fairlie. 1973. The Kennedy Promise: The Politics of Expectation. Garden City, NY: Double Day Press; Bruce Miroff. 1976. Pragmatic Illusions: The Presidential Politics of John F. Kennedy. New York, NY: David McKay. 3 Arthur M. Schlesinger. 1965. A Thousand Days: John F. Kennedy in the White House. Boston, MA: Houghton Mifflin, 1003. 4 The PWAA would, in 2016 dollars, amount to over $4.8 billion spent between 1963 and 1970; Kennedy’s initial request would have amounted to approximately $13.87 billion in 2016 dollars. 5 David J. Ott and Attiat F. Ott. 1977. Federal Budget Policy. Washington, D.C.: Brookings Institution. 6 For example, see: Lawrence Kudlow and Brain Domitrovic. 2016. JFK and the Reagan Revolution: A Secret History of American Prosperity. New York, NY: Penguin Books; Brian Domitrovic. 2012. Econoclasts: The Rebels Who Sparked the Supply-Side Revolution and Restored American Prosperity, Wilmington, DE: Intercollegiate Studies Institute; Iwan Morgan. 2009. The Age of Deficits: Presidents and Unbalanced Budgets from Jimmy Carter to George W. Bush, Lawrence, KN: University Press of Kansas; Daniel Mitchell. 1996. “The Historical Lessons of Lower Tax Rates.” Washington, D.C. Heritage Foundation Reports, Washington, D.C.: The Heritage Foundation. 7 Contemporary portrayals of policy development in the 1950s seems to overlook the growing tension building between liberals and conservatives in their respective wings of both parties, suggesting that it is only with the 1960s election that politics once again becomes paramount in American society. See, for example: see: James MacGregor Burns, The Deadlock of Democracy: Four-Party Politics in America (Englewood Cliffs, N.J.: Prentice-Hall, 1963); James L. Sundquist, Politics and Policy: The Eisenhower, Kennedy, and Johnson Years (Washington, D.C.: Brookings Institution, 1968). See alternatively though, David Mayhew, “The Long 1950s as a Policy Era,” in Jeffery A. Jenkins and Sidney M. Milkis (ed.), The Politics of Major Policy Reform in Postwar America (Cambridge, UK: Cambridge University Press, 2013). 8 Milton Friedman, “Part I – The Methodology of Positive Economics,” in Essays in Positive Economics (Chicago, IL: University of Chicago Press, 1953): 43. 9 Franklin D. Roosevelt. May 22, 1932. “Address at Oglethorpe University. Reprinted in The Public Papers and Addresses of Franklin D. Roosevelt, Vol. 1, 1928-32, (New York City: Random House, 1938), p. 639. 10 Herbert Stein, The Fiscal Revolution in America (Chicago, IL: University of Chicago Press, 1969), 461. 11 National Resources Planning Board, 1942, “Security, Work, and Relief Policies,” Washington, D.C. 12 John Maynard Keynes. 1936. The General Theory of Employment, Interest, and Money. London, UK: Palgrave McMillan. 13 Stein. 50 14 James T. Patterson. 1969. The New Deal and the States: Federalism in Transition. Princeton, NJ: Princeton University Press 15 James A. Maxwell. 1948. The Fiscal Impact of Federalism in the United States. Cambridge, MA: Harvard University Press, 179. 16 Ardent New Dealers also expressed similar concerns. For example, eventual Kennedy economist John Kenneth Galbraith, in his report on public works during the New Deal, argued that “The question of flexibility presents…something of a dilemma. Promptness in beginning operations is important if public works construction activity is viewed as a counterbalance for cyclical fluctuation; it is less important if such activity is designed to meet a condition of enduring employment. Moreover, demand for a rapid rate of prosecution would be markedly less significant if we had a public works program which received approval at the most propitious time. As it has happened in recent year (in 1933 and 1938 particularly), the legislative appropriation for an expanded public works program was delayed until long after a serious unemployment situation had developed. Once the appropriation was made, there was great pressure for results…had legislative provision been made further in advance or had action by the administrative agency been contingent upon the development of unemployment and the need for action, the pressure for flexible projects would have been much less.” In John K. Galbraith. 1940. “The Economic Effects of the Federal Public Works Expenditures, 1933-38,” National Resources Planning Board, Washington, D.C., 2-15. 17 Charles C. Killingsworth, Statement before the Senate Committee on Labor and Public Welfare, U.S. Congress, Senate, Hearings on Nation’s Manpower Revolution, Subcommittee on Employment and Manpower, 88th Congress, 1st Session, 1963, 1161-1483. 18 See Arthur Burns, 1957, “An Economist in Government,” Columbia University Forum 1 (Winter): 4-6. 19 Arthur Burns, April 18, 1963, “Economics and Our Public Policy of Full Employment.” Lecture delivered at Rice University, reprinted in Edgard O. Edwards (ed.) The Nation’s Economic Objectives, Chicago, IL: University of Chicago Press, 1964. 20 See, Dwight Eisenhower, Annual Budget Message to the Congress-Fiscal Year 1959, January 13, 1958; Wall Street Journal, January 14, 1958, p. 13. 21 Martin’s views are reported in New York Times, February 7, 1958, p. 1; the administration’s concern for inflationary policy is well documented in the Report of the Joint Economic Committee, on the January 1958 Economic Report of the President with Supplemental and Dissenting Views. 22 Raymond J. Sauliner, “Interview,” in Erwin C. Hargrove and Samuel A. Morley. The President and the Council of Economic Advisers: Interviews with CEA Chairmen (Boulder, CO: Westview Press, 1984). 23 As the Republican House Whip told the press, Spence’s high-profile push for public works was “nothing more nor less than political dramatics for Democrat propaganda purposes.” New York Times, April 10, 1958, p. 19. 24 U.S. House of Representatives, Committee on Banking and Currency, Legislation to Relieve Unemployment: Hearings before the Committee on Banking and Currency, 85th Cong, 2nd sess., 25, 77, 81, 275, 1220. 25 Chicago Daily Tribune, February 19, 1958, p. 6. Wall Street Journal, February 19, 1957, p. 3. 26Walter Heller, New Dimensions of Political Economy (Cambridge, MA: Harvard University Press, 1967), 27. 27 New York Times, March 29, 1958, p. 1. 28 The noted liberal economics columnist Hobart Rowan offered a such a portrayal of the public mood in the shadow of the Eisenhower years: “For lasting growth…we need substantial changes in our attitudes toward public expenditures. After eight years of brainwashing by the Eisenhower Administration on the sins of deficit-spending, however, any proposal substantially in increase government spending will encounter enormous political opposition.” In Hobart Rowan, “Let’s Spend More,” The New Republic (May 25, 1963), 13-16. 29 Cited in, Seymour E. Harris, “Economics and the Kennedy Years,” in Aїda DiPace Donald (ed.), John F. Kennedy and the New Frontier (New York, NY: Hill and Wang, 1966). 30 Washington Post, February 8, 1961, p. A7. 31 KERMIT GORDON on “Troika” oral interview page 11 32 Hobart Rowen. September 1, 1961. “Kennedy’s Economists: What They War, Where They Disagree, Where the Power Lies, What They are Likely to Do.” Directory: uploads uploads -> 587 Return function, r i(X) r i(0) r i(1) r i(2) r i(3) 1 0 2 4 6 Thermal Station, I 2 0 1 5 6 3 0 3 5 6 10 uploads -> Department of science and humanities department of mathematics part-a questions and answers uploads -> The Case Against the nypd’s Quota-Driven ‘Broken Windows’ Policing What Is It? uploads -> For want of a nail uploads -> Ownership Models There are two different types of ownership models uploads -> Police Militarization uploads -> City of rising star regular meting thursday, july 14, 2016 uploads -> Township of winfield uploads -> Stop Militarizing Law Enforcement Act of 2014 uploads -> The Black Panther Party’s Ten-Point Program What We Want Now! Download 172.32 Kb. Share with your friends:
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