Kennedy’s Keynesian Budgetary Politics and the 1962 Public Works Acceleration Act

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New Economics and Old Economics
President Kennedy and the 1962 Public Works Acceleration Act

Kennedy’s Keynesian Budgetary Politics and the 1962 Public Works Acceleration Act
Nicholas Jacobs, University of Virginia

James Savage, University of Virginia

“A free economy need not be an unstable economy--that a free system need not leave men unemployed--and that a free society is not only the most productive but the most stable form of organization yet fashioned by man.”¹
John F. Kennedy wanted to recommit America to progressive politics - a type of politics that could use the latest economic theories, an empowered presidency, and a strong central state to enhance liberty by securing the promise of economic security.
The 1962 Public Works Acceleration Act was a watershed moment in the young administration’s attempt to fulfill that goal. Yet, surprisingly few have written or studied Kennedy’s early embrace of public works expenditures as a fiscal instrument, nor the neo-Keynesian theories undergirding such proposals. Indeed, in some of the most canonical texts on the Kennedy administration, the administration’s multi-billion dollar proposals for public works are not even mentioned, and the idea that Kennedy cared about public works is often swiftly discarded.² As Arthur Schlesinger aptly summarizes the conventional understanding, “Kennedy…simply considered the expenditures route politically impossible.”³
However, when Kennedy signed the Public Works Acceleration Act (PWAA) into law on September 14, 1962, the president ended what was up to that point one of the hardest fought political battles of his administration. The $900 million authorization for public works projects was an anti-recessionary measure that predated the administration’s more discussed use of broad-based tax cuts and defense-outlays to combat recession. Significantly, the act was less than half of Kennedy’s initial $2.5 billion request – a sum that would have authorized a considerable boost in consumer demand.⁴ Even then, outlays from the 1962 authorization would continue to flow to states and localities through the rest of the 1960s, adding hundreds of millions of manpower hours into the economy.⁵
The PWAA remains an understudied component of the Kennedy legacy, and of budgetary politics in American history more generally, because it was such a disappointment to the young president and his economic advisors. Historians and political scientists gauging policy impact have unfortunately overlooked the legislative history of this important bill, Yet, as we show, even though the ultimate PWAA signed by Kennedy was a deep disappointment to the administration, in such disappointment lie important lessons in how economic ideas and constitutional institutions collided to create a consequential political contest.
In the final analysis, we argue that the PWAA should be seen as an integral part of the Kennedy administration’s comprehensive plan to address economic stability and lower unemployment rates in the early 1960s. The fight over the PWAA makes clear that Kennedy relied on and advanced post-WWII, neo-Keynesian fiscal policy through government expenditures, which justified temporary, but massive, public works program. The president and his key economic advisors all adhered to and promoted the latest, “modern” economic methods, which lauded the government’s role in running deficits to make up for slack in consumer demand during economic contractions. Additionally, White House economists overlaid these fiscal theories on top of a newly restored faith in the project of presidential-governance. It was only through the presidency that the federal government could respond promptly and effectively to fluctuations in aggregate demand. But Congress was not as eager to empower an energetic executive with these types of new budgetary tools. In short, Kennedy asked that much of Congress’ traditional appropriating power for public works projects be transferred to the executive. And even though the U.S. Senate ultimately granted Kennedy such authority, the final bill – the bill Kennedy ultimately signed – was hardly the Keynesian revolution Kennedy wanted to bring about.
Dollar amounts are perhaps the most minor component of the legislation’s significance. The PWAA began as one of the president’s chief tools to forge the modern presidency into an efficient, economic combatant. The young president fought on the side of modern, post-WWII economy theory; he defended the mantle of Neo-Keynesian counter-cyclical spending, and worked to convince a doubtful Congress, and an even more skeptical public, that modern economics, channeled through the modern presidency, could eradicate unemployment. For eradication of unemployment was the goal of Kennedy’s “New Economics.” Using the tools of modern economic theory – the calculability of full-employment potential, the measure of consumer purchasing power, the actuarial science of executive-centered budgeting – Kennedy and his economic advisors fully believed they could fulfil the government’s commitments outlined in the 1946 Employment Act to both curb inflation and provide maximum employment.
The 1962 Public Works Acceleration Act (PWAA) does not, however, embody these new commitments or strategies. Kennedy and his allies largely lost the fight to empower the modern executive with the discretionary pump-priming power they desperately sought. At issue was a major theoretical and political divide between those who wanted to empower the president with “standby,” discretionary, counter-cyclical spending authority, and those who defended Congress’ traditional role in appropriating money to areas of “chronic unemployment,” or “surplus labor.”
This back-and-forth between the Congress and Kennedy reveals much about how the Kennedy administration pursued neo-Keynesian fiscal policy before turning to a tax-cut oriented fiscal policy. Contrary to extant accounts, the importance of public works programs in Kennedy’s overall budgetary proposals helps to demonstrate that the president was not just a tax-cutter, but relied on both sides of the fiscal equation in his effort to achieve the promise of a refashioned, new liberalism. The President, along with leading economists of the day wanted to turn Keynesian economics into Kennedy economics. At the very least, we hope to shed light within a growing literature that recognizes, rightly, Kennedy’s embrace of cutting taxes, but an embrace that followed from his Keynesian faith and early policy set-backs.⁶
New Economics and Old Economics
The optimism that accompanied Kennedy’s electoral victory belied the deep economic anxieties which had been building throughout the previous decade.⁷ By 1960, faith in New Deal economic liberalism was unraveling. Economists credited war-spending, not government-backed jobs programs with economic recovery during the 1930s and 40s. They became skeptical that the country could ever maintain such large deficits into the future, or that any Congressional plan could counteract the loss of jobs due to automation, changes in resource demand, or increases in international trade. Most recognized that immediate post-war prosperity was also, in part, dependent on Europe’s destruction, not earlier investment. And with the economic revitalization of Europe by the mid-1950s, a new set of economists, including a young Milton Friedman, challenged orthodoxy that positive economic theory, as an “objective science,” could live up to its lofty promise. As Friedman would write, mass acceptance of ideas, “does not of course imply that existing economic theory deserves any high degree of confidence.”⁸
Kennedy’s ultimate embrace of Keynesian fiscal was an attempt to negotiate among the critics and adherents of New Deal economic policy. Ultimately, the opponents to Kennedy’s fiscal policy came from the “structuralist” school – as large as the Neo-Keynesians, if not larger, and certainly less controversial. Structuralist economists saw technological developments, especially those related to automation, as the key explanation for persistent unemployment – especially in areas that were “chronically unemployed.” Not only did the structuralists comport with the more traditional understanding of New Deal public works projects, they fitted within the long-standing American belief maintaining a federal balanced budget – a principle even Roosevelt only abandoned late into his presidency.
To be sure, Kennedy had much more in common with those who defended the New Deal’s commitments to federal interventionism in stabilizing employment. This does not mean, however, that the administration adopted or espoused the economic pillars undergirding the Roosevelt’s dramatic transformation of American political economy. For one, there was little solid economic theory behind the new deal, except for in Roosevelt’s words, a pragmatic approach to “above all, try something.”⁹ Or, as Herbert Stein, the leading historian of Keynesian economic theory has suggested, “Roosevelt’s choice of the fiscal-monetary path of enlarged spending and monetary expansion in 1938 was essentially a conservative choice involving the least disruption of the existing economic system and the least political struggle.”¹⁰
Many of the New Dealers remained convinced that nationally administered programs like the PWA and WPA would be able to effectively place a “stop-gap” on hemorrhaging unemployment and, at best, re-develop parts of the country that had been outmoded or left behind by technological transformations. Consider, for example, how the National Resources Planning Board justified the expansion of public works in 1942: “A fundamental attack upon the problem of unemployment would look not merely to the maintenance of the morale and work habits of workers who are unemployed, but would aim at the elimination of the conditions giving rise to the need for such action.”¹¹ It is a testament to the New Deal’s pragmatism that nowhere are the ideas of counter cyclical budgeting, deficit pump-priming, or multiplier effects mentioned – rather public works remained an instrument – vital to be sure – by which the government could address structurally depressed areas – towns and communities decimated by automation and depletion of natural resources – as well as provide job training for workers formally employed in non-viable industry and the youth.
Public works programs were central to New Deal relief efforts, but Roosevelt’s faith in infrastructure and building projects was more limited than the theory then being written by the British economist John Maynard Keynes.¹² To be sure, there were several within Roosevelt’s inner circle who ultimately came to embrace a more Keynesian optimism in fiscal policy – the ability of government expenditures to make up for slack in demand, re-correct investment attitudes, and, in a phrase “pump-prime.” Yet, even by the end of the New Deal, it would be disingenuous to suggest that the federal government was strictly Keynesian, or even half-Keynesian in its outlook. As Stein suggests, “He [Roosevelt] conceived of the economy as having some critical structural defect, related to the planning of production and the distribution of income, which prevented full employment from being sustained. Without correction of that defect stable prosperity could not be achieved.”¹³ Structure mattered, not cycles of demand.
Indeed, Roosevelt’s emphasis on chronic unemployment, labor surplus, and fundamental rifts in the American economy had a more enduring effect on American’s economic thinking than the newer Keynesian school. Moreover, in the aftermath of the Roosevelt era students of political economy were quick to point to even more structural, or institutional, barriers which would inhibit Keynes’ prescriptions of counter-cyclical fiscal policy – barriers such as decentralization, technological development, and separation of powers. At most, by the start of the 1950s, Keynesian “orthodoxy” only extended as far as recognizing that the money supply was only a partial explanation of fluctuations in the business cycle. What comprised the rest of the equation, and what government could do, was still hotly contested.
For example, structuralists argued that American federalism posed a unique political and structural challenge to the federal government’s ability to prime demand and restart consumer spending through a counter-cyclical budget or through public works. The New Deal relied heavily on grants-in-aid to states in order to put men back to work. Yet, while intergovernmental transfers brought about a new era of state-federal relations, grant-style stimulus was a political necessity, not an economic one.¹⁴ As James Maxwell summarized in 1948, “the most serious defect of grants as a countercyclical device is their flexibility…to expand the grants and commitments by supplementary authorization is possible; to contract them promptly is very difficult. And many of the federal grants for public works have been made in order to stimulate the states and localities into undertakings which appear to be desirable wholly apart from business conditions…In short, political commitments and procedures, as well as limitations inherent in certain types of projects, are obstacles to the effectiveness of a public-works scheme.”¹⁵ The choice among political economists was therefore one of abandoning a more balanced nation-state distribution of power – if constitutionally permissible – and implementing public works legislation with the full force and weight of the federal government.¹⁶
Likewise, structuralists argued that automation and changes in resource demand for industrial production were the principal economic threats to sustained American economic prosperity in the post war era. As Charles Killingsworth, an economics professor at Michigan State would later testify, public works and government spending would not be able to permanently put back to work people whose jobs were no longer relevant. “Long before we could get down to an overall unemployment rate as low as 4 percent,” he argued, “we would have a severe shortage of workers at the top of the educational ladder…automation and the changing pattern of consumer wants have greatly increased the importance of investment in human beings as a factor in economic growth. More investment in plant and equipment, without very large increases in our investment in human beings, seems certain to enlarge the surplus of underdeveloped manpower and to create a shortage of the highly developed manpower need to design, install, and man modern production facilities.”¹⁷ At least for some structuralists, it was the type of government spending that mattered, and public works fit well outside of what would keep Americans economically productive, or what would constitute a sound investment in the long-term health of the nation’s economy.
The New Economics was an attempt to overcome these institutional considerations, and to overcome the focus on economic structure, more generally. As Arthur Burns summarized, “During the 19^th Century, full employment was just a dream of a small band of reformers. Today it is a firmly established objective of public policy…what we debate nowadays is the scale, the timing, and the precise character of employment policies, not the need to strive for full employment or to use the powers of government to move the Nation toward this goal.”
Yet it is also notable that Burns, a staunch defender of the economist’s role in crafting public policy,¹⁸ also criticized the counter-cyclical “experiment” of government “constantly injecting new money into the income stream.” The primary fear was a common one – inflation. “There are limits to the amount of inflation, and the inefficiency and inconvenience associated with it, that our country will tolerate. Indeed, these limits are more severe in actual life than in my illustration. The practical significance of this is that the discontent aroused by a large inflationary experiment would be likely to lead to unemployment…it is by patient extension of the still small area of knowledge and understanding that economics has made its principle contribution…that is also the way in which new usefulness to our public policy of full employment will be found in the future.”¹⁹
The critique of public works programs as “make work” policy though transcended the left-right ideological spectrum related to the overall size of government. The New Economics of the post-war era had to contend with a more widely accepted economic perspective that emphasized structural impediments to economic productivity, and persistent fears of inflation stemming from increased government spending.
This was the position taken by economists in the Eisenhower administration. To be sure, the Eisenhower administration viewed forecasted budget deficits as an actuarial anathema. In order to keep the budget balanced and avoid any threat of government-induced inflation, the administration delayed its promise to reduce the corporate income tax, worked to increase gasoline and jet fuel taxes to raise 32$ million, cut price supports for agriculture, raise postage fees, and renegotiate defense contracts to recapture excessive profiteering by non-government firms; to top it all off, the President impressed upon the Congress to give him line item veto authority to check Congress’ lack of fiscal discipline.²⁰ So long as the Eisenhower administration represents what many economists – and certainly the public – felt about balanced budgets and anti-recessionary deficit-spending in the 1950s, the animating fear was inflation. The administration’s concern for inflationary policies was evident in Federal Reserve chairman William McChesney Martin’s testimony before the Congressional Joint Economic Committee in February, 1958; warning against any “excessive hypodermic” shock to the economy, lest the federal government “prioritizes full-employment over rapid inflation in the costs of basic goods.”²¹ Eisenhower’s Council of Economic Advisors Chairman, Raymond Saulnier described the administration’s understanding of balanced budgets and government intervention as such: “The administration was alarmed over the fact that inflation had continued...This was a “new inflation” different from any experienced before and particularly ominous to conservatives who emphasized price stability as the primary requisite for economic growth and development. If Keynesian-liberal economists were willing to accept a measure of inflation as simply the cost of achieving full employment, the Eisenhower Republicans were not so inclined.”²²
Moreover, and perhaps most significantly for Kennedy, such concerns permeated the President’s own party in the Congress. Just three years prior to Kennedy’s first public works proposal, Congress began debating their own plan in response to the largest economic retraction since the end of World War II. Democrats in the House put forward a massive $2 billion public works package. Yet, it would be a mistake to consider the Democratic push for public works spending as a strictly Keynesian response. When Representative Brent Spence announced that the House Committee on Banking and Currency would take the lead in assessing and solving the nation’s worsening unemployment, there were three principle methods of attack: $2 billion communities facilities bill providing loans to states and localities, an area redevelopment bill targeting areas suffering “chronic unemployment,” and an equity capital fund for small business. Over 27 days of testimony and hearings, beginning with former President Harry Truman, state-governors, economists, and labor union heads all called upon the Congress to act immediately. Moreover, while Democrats primarily structured the hearings as a response to rising unemployment, House Republicans used the platform – and the remarkably significant amount of press coverage – to frame the issue as one of consumer inflation and a tighter money supply. Republicans not only ridiculed the political gamesmanship of Spence for calling the former president and a majority of Democratic governors, but they were quick to point to the Democrats’ highfalutin theories of government spending that seemed detached from the unique economic situation of the era.²³
Deliberate attempt not to associate to supplemental public works bill with any counter-cyclical theory.²⁴
All this is to suggest that even by 1960, the relationship between public works and unemployment was still a classic case of distributive politics and not a new type of fiscal economics. Congressional public works plans, while amounting to sizeable injection of cash, offered little coordinated stimulus in terms of raw numbers. The authorization bills were decentralized and uncoordinated and amounted to a more sophisticated pork-barrel politicking from those members representing districts of the structurally unemployed. Democrats in the House and Senate pushed public works as a way to target those areas of chronic unemployment due to surplus labor; Republicans countered that such “make work” projects would add inflationary pressure to an already extended federal budget. Or, as Senator William Knowland (R-CA) would eloquently argue, “merely going on a spending orgy is not the solution of our economic problems.”²⁵ It was a debate of New Deal proportions and talking points – one that would look decidedly different in just two years.
President Kennedy and the 1962 Public Works Acceleration Act
The incoming president was no stranger to the language circulating in Congress over public works as an instrument to relieve chronic unemployment. As a U.S. Senator in 1958, Kennedy had supported the accelerated public works plan ultimately vetoed by Eisenhower, and had proposed a bill that would standardize unemployment insurance payments and enrollment eligibility across the states. However, while Kennedy was supportive of Congressional Democrats’ 1958 economic relief efforts, he took a decidedly different stance upon entering the White House. Public works was not the only instrument pursued by the incoming administration, but faced with an increasingly fragmented Democratic Party and a deficit-weary public, it quickly became the tool the president emphasized in his promise to secure America’s economic future.
Kennedy’s “new economics” was predicated on a model of economic forecasting that measured what economic productivity could look like under conditions of full employment. Under full-employment budgeting, economists approximated the necessary amount of government spending needed to close the “gap” between potential GDP under conditions of full employment and actual GDP given cyclical variations in the business cycle. The economic goal was to build the administrative tools that were needed in order to quickly revise governmental revenues in order to make up that slack in actual and potential economic output. The political goal was to teach an unfamiliar public and fellow partisans to embrace a full-employment deficit; to admire the government’s capacity in identifying and responding with surgical-like precision to economic downturns; and to understand that these new governing responsibilities were best housed in the White House. Or, as Walter Heller himself later explained, “the power of Keynesian ideas could not be harnessed to the nation’s lagging economy without putting them in forms and terms that could be understood in the sense of fitting the vocabulary and the values of the public…men’s minds had to be conditioned to accept new thinking, new symbols, and new and broader concepts of the public interest.”²⁶
Kennedy embraced the optimism of federal interventionism that undergirded the new economics, a position summarized full heartedly by the New York Times, claiming that, “the day has been brought nearer when the specter of mass unemployment and catastrophic losses in a major depression will no longer haunt American workers, managers, investors, and the families.”²⁷ Yet, optimism was not enough – Kennedy had to sell this vision of federal interventionism to a public committed to balanced budgets as well as convince a Congress that the only way to fully realize economic theory was to extend the powers of the modern presidency.²⁸
To be sure, the 1960 election brought little clarity to the closely divided nation. With such a narrow victory, the Kennedy administration in no way could claim an electoral mandate for any sort of new, modern, or experimental fiscal policy. Even with the strong backing of the AFL-CIO and Congressional Democrats, Kennedy was compelled to address the persistent concerns of balanced-budget advocates and inflation hawks, alongside those who were committed to defending Congress’ traditional authority over taxing and spending to constrain an increasingly volatile economy.
Before his inauguration, Kennedy’s first unofficial messages to Congress indicated that despite signs of a slowing economy, he would pursue his predecessor’s course of maintaining a balanced budget. Kennedy’s nomination of Douglass Dillon as Treasury Secretary also seemed to portend the administration’s more centrist policy outlook; after starting his career as an investment banker on Wall Street, Dillon had served as the State Department’s chief economic advisor for most of Eisenhower’s second term. Kennedy’s hesitation to spend the country out of the economy was looked at with much disdain by those on the left. As Walter Lippmann said of Kennedy just five months after his inauguration, all Kennedy had managed to accomplish was, “to carry on in all its essentials the Eisenhower economic philosophy…It’s like the Eisenhower Administration 30 years younger.”²⁹ The well-known economics columnist Bernard Nossiter offered a similar assessment, writing that, “Mr. Kennedy’s anti-recession measures differ very little from those employed by Mr. Eisenhower in the recession three years ago. To be sure, the language has changed. Mr. Eisenhower employed a conservative rhetoric to clothe liberal actions; Mr. Kennedy uses a liberal rhetoric for similar programs.”³⁰
Yet, these accounts hide the fact that Kennedy’s initial economic posture and his first budget proposal were a response to increasingly favorable economic forecasts, reported as early as February, 1961. Moreover, while Kennedy was slow to respond with calls for immediate spending increases, he was busy organizing an administration housed with experts who would spearhead the project of fundamentally reforming America’s political economy. Most significantly, Kennedy choose one of the, if not the, nation’s foremost Keynesians to be chairman of his Council of Economic Advisors, Walter Heller. Heller, already well known as one of the nation’s leading economists, was instrumental in designing the 1947 Marshall Plan to re-build Europe through loans and government investments; as an academic, he was one of the leading students of the relationship between fiscal stimulus and long-term multiplier effects. His selection was, without a doubt, an indication of the administration’s new posture toward government interventionism and embrace of cutting-edge econometric methods. Moreover, while Heller alone would have tremendous influence, the rest of Kennedy’s economic team signaled a departure away from the Democrat’s traditional reliance on organized labor sympathizers and the structuralist school. Joining Heller was the Yale economist James Tobin whose work on the consumption function assumption – a critical component of measuring the multiplier effect of government spending – had already made him one of the leading experts on government fiscal policy; Robert Solow, a professor of economics at MIT, brought to the White House a new way of calculating economic growth potential based on technological developments and capital depreciation; Kenneth Arrow soon joined the staff of the CEA and contributed his understanding of the economics of innovation and criticism of market-oriented public policy. All three of these eventual Nobel Prize laureates worked alongside other leading, “public intellectual” economists like John Kenneth Galbraith, Kermit Gordon, and Arthur Okun.³¹ As Hobart Rowen of Harper’s editorialized later that September, the President’s reliance on academic economists, “suggested that Kennedy would initiate a new economic era in which the neurotic Republican fear of deficits would be replaced by a modern fiscal policy devised by the best brains available. It would be an exciting period, dominated by men of great intellect who would be encouraged to test new ideas.”³²
Contemporaneous criticisms, and historical portrayals, of Kennedy’s initial fiscal policy also neglect to mention that soon after the creation of this economics “brain trust,” Kennedy put forward a set of sweeping proposals – “The Big Five” - that aimed at redefining the federal government’s role in managing the economy. Announcing their plan on the porch of the Kennedy’s Palm Beach home just two months after the election, Senator Paul Douglas and Kennedy announced the administration’s “Hurry-Up” plan to address the lingering recession. Douglas, an economist by training who had opposed accelerated public works in 1958, now became the new President’s spokesman for how targeted redevelopment legislation could bring up areas of chronic unemployment, and temper the business cycle across the nation’s economy. In front page news around the country, Kennedy claimed it would the “most important domestic priority” of his new administration, reminding his audience that, “the entire nation suffers when there is prolonged hardship in any locality.”³³
Some of the proposals for area redevelopment were leftovers from Kennedy’s brief time in the Senate – a minimum wage bill, an expanded housing bill, standardization of unemployment benefits. The Depressed Areas Bill reflected the legwork of Congressional Democrats back in 1958; geared towards addressing areas of chronic unemployment and industries afflicted with “surplus labor,” the proposal called for a new administrative agency (not in the 1958 plans) that would oversee targeted loans and appropriations following Congressional guidelines.³⁴ It is largely for this reason that Kennedy is often portrayed as a fiscal conservative – a careful entrant to the White House who selection of prominent Keynesian economists belied his more cautious approach in redirecting the American economy.
However, such analysis does not consider the president’s first budget proposal in full. The fifth component of the “Big Five” was a $2.6 billion public works plan, amounting to just about 3 percent of all proposed federal expenditures in 1961. Kennedy’s public works proposal was a unique creation though. While much of Kennedy’s early budgetary proposals for new government programs contained fiscal off-sets that would maintain a balanced budget, the President devised a new instrument by which Congress was to give him standby authority to allocate money for public works projects either already underway or in the late stages of planning. Such authority would kick in as soon as White House economists had calculated a sustained economic contraction. It was, in effect, a plan to bypass the legislature as soon as economic indicators spelled trouble, and remains one of the most novel components of the New Economics’ fiscal plan - one that had the potential to fundamentally transform the balance of power within the federal government.³⁵
Indeed, giving the presidency the capacity to make-up for a 0.4-percent loss in GDP at an instant’s notice would have given the president power of the economy that many voters today already ascribe to the institution. The proposal was a pure interpretation of Keynesian economic policy with an altered understanding of American separation of powers. However, while many on the left and within Kennedy’s own party were willing to ridicule the president’s inaction, many more were hesitant to grant the president greater spending authority as the economy sped up. As the Washington Post reported in the middle of April, 1961, “From a political and public relations standpoint, it now seems obvious that Congress and the country are not ready for such strong medicine…The probability, according to White House officials who have been watching this conflict between Economist Kennedy and Politician Kennedy, is that the political arguments will win out for now.”³⁶ As Congress greeted the “Big Five” with lukewarm approbation, Kennedy had to decide what parts he would emphasize. Walter Heller later remarked that, “there was a lot of discussion with the president at that time... as to what was the better political strategy: to go all out for something that would have created full employment and get slapped down by Congress…or to get a program that would in and of itself be thought to be fiscally prudent and within bounds that the public would accept.”³⁷ Or, as Gardner Ackley later recalled Kennedy saying, the fear was that, “We go up there with that and they’ll piss all over us.”³⁸
Kennedy quickly learned that it would be difficult to even wrangle his own party on board a massive public works spending increase, even if it did not come with expanded presidential powers. That April, Kennedy’s $394-million plan – one of the “Big Five” – to loan money to areas of high and persistent unemployment barely passed the House. Only when certain Southern Congressman were guaranteed aid ($94-million was set aside in direct grants to Southern states), did they push the package over the top. By late April, support in the House had turned against the remaining parts of the Kennedy fiscal plan, especially on public works.³⁹
The improving economic situation in the spring of 1961 did not help the Kennedy men seeking to try out their new ideas. As time passed, it seemed unnecessary to experiment with untested, and constitutionally dubious, plans. Furthermore, in the aftermath of the Depressed Areas Bill, Congressional Democrats who supported Kennedy’s public works plan came to see any more federal spending as a sure path to electoral defeat.⁴⁰ Yet, White House economists feared that they could overcome these fears by emphasizing that such spending was only conditional on rates of unemployment growth.
To do so, however, they needed to change public works legislation that was pending before the Senate. Senator Joseph Clark (D-PA) had already introduced legislation for a $1-billion public works package in immediate unemployment relief. However, Clark’s bill also differed significantly from Kennedy’s proposed public works plan in that it was significantly smaller, relied on unemployment rates rather than the rate of change, and failed to give the president complete discretion in directing the public works programs. The debate over Clark’s plan demonstrates how contentious public works policies remained. On the one hand, Keynesian econometricians viewed this as little more than a subtle alteration of Congress’ traditional pork-barrel politics and not legitimate counter-cyclical spending.⁴¹ On the other, conservatives ridiculed the economic assumptions justifying accelerated public works. As Charles Stewart, testifying as the Chamber of Commerce’s chief economist, recognized, “because of the long delays in [implementation], this program would not prove countercyclical in effect. It would be necessary to discontinue grant contracts many months before unemployment falls to 4 percent in order for the program to discriminate between recession and prosperity. Unfortunately, the ability to forecast unemployment rates accurately even a few months ahead is yet to be developed.”⁴²
White House economists sympathized with Stewart’s lament that a public works package tied to the Congressional appropriations process would fail to act as an economic stabilizer, but they would continue to stress that presidential authority could. When Labor Secretary Arthur Goldberg testified before the same committee on the Clark plan, he praised the possibility of public works as a “constructive approach to providing employment” and that there was “little doubt that…accelerated public works programs can do much to relieve the impact of the recession upon our workers and the communities in which they live.” However, while the administration also had a more optimistic view of the current economic forecast, Goldberg pushed the administration’s line that Congress should not have the ultimate authority as to when and how much government should spend. “If the Congress considers it desirable or appropriate to enact such a bill on a standby basis,” Goldberg added, then “we believe that that the most it should do is to authorize the President to put the programs into effect when he finds economic conditions to be such as to warrant such action. If recovery from the recession should be halted and the economy again take a serious downward turn with unemployment soaring, I am assured that the administration will take immediate action to do something about it.”⁴³
The president’s emphasis on White House control received new purchase when a highly publicized report of the special Commission of Money and Credit issued a set of recommendations for controlling cyclical unemployment – “The role of fiscal policy in economic stabilization is far better understood today than it was during the depression of the thirties,” the report read, but “…discretionary fiscal policy requires speed of decision and effect and can only be successful if temporary and reversible fiscal changes for stabilization purposes are disassociated from permanent and structural changes…[Therefore] Congress should grant to the President limited conditional power to make temporary countercyclical adjustments….”⁴⁴ The Clark plan for accelerated public works was an incremental improvement over the plans put forward in 1958, and the Kennedy administration seized on each of these reports to introduce their most concrete plan by the end of the summer.
By August, 1961 – just 7 months after his inauguration – Kennedy began to formally lay down plans for his administration’s first big economic fight to institutionalize the New Economics. Writing Clark, the President asked him to wait and press for standby authority in the next session. “I intend to embody the principle of standby authority for capital improvements projects in my legislative program,” Kennedy’s note read. And, while the President demurred on the need for additional stimulus given the economic forecast, he agreed with Clark that unemployment “may exceed earlier expectations,” but that, in such an event, standby authority housed in the Executive would ensure that Americans would not have to “learn to live with prolonged and severe unemployment, with all that it means in human suffering and economic waste.”⁴⁵
“The Time to Repair the Roof is When the Sun is Shining”
Soon after Kennedy’s inauguration, the President’s plan for stand-by authority was met with skepticism and delay. Republicans lambasted the president’s first set of proposals as inflationary and conservative Democrats denounced them as actuarial gimmicks.⁴⁶ Kennedy was only successful in getting his area redevelopment bill through the Congress, and by the autumn recess, had seemingly given up on pursuing the remaining four proposals of the “big five.”
However, the release of December’s sales receipts and unemployment numbers re-stoked fears of an economic slowdown once again. Kennedy, despite his advisors more optimistic reports on unemployment, returned to his set of proposals and continued to suggest that the Congress could hedge on the experts’ analyses by authorizing him to pump billions of dollars into the economy, if and when the White House deemed it necessary.⁴⁷ The push now was even riskier than it was when Kennedy first came to office. Republicans were well poised to make a dent in the Democratic majority in November’s midterm elections, and conservative Democrats, especially in the House following Rayburn’s departure, increasingly felt fatigued responding to the administration’s other New Frontier priorities. As one Democratic Senator anonymously confessed to the Wall Street Journal, “We were looking forward to a honeymoon then at the beginning of the new Administration; now the honeymoon is over, and it wasn’t much of a honeymoon at that.”⁴⁸
Yet just 11 days into the new year, Kennedy stood before the joint-session of Congress to deliver his State of the Union address, asking the legislators to give him just that. Kennedy implored them saying, “pleasant as it may be to bask in the warmth of recovery – let us not forget that we have suffered three recessions in the last 7 years. The time to repair the roof is when the sun is shining – by filling three basic gaps in our anti-recession protection.”⁴⁹ The first proposal concerned stand-by presidential authority, but over tax-rates; the third was a continuation of Kennedy’s own legislative work in 1958 on unemployment insurance. The second was a re-worked version of the previous summer’s proposal to keep $2 billion dollars in reserve for accelerated public works.
Using modern economics to make good on an old proverb, Kennedy’s task was to convince a Congress jealous of its traditional prerogatives that policymakers had finally developed the tools for measuring gross demand and supplementing consumer purchasing power; but fiscal administration would need to overcome political constraints. As Kennedy stood before the Congress peddling his plan, he was adamant – legislative deliberation was the problem, executive authority was the solution.
The political backlash was well-foreseen by the Kennedy team. The following day, the GOP Senate leader Everett Dirksen lambasted the administration’s litany of proposals as “a Sears Roebuck catalog with the old prices marked up,” adding that “one thing is certain and that is that these requests will make the new frontier blaze with controversy.”⁵⁰ Days later, as Kennedy officially submitted his first complete budget, fiscal hawks appeared vindicated by what they saw. To be sure, the president’s estimates, while representing an all-time peace-time high for government spending, were balanced. But these figures were dependent on a 9.6 percent increase in output of American goods and services (a $50 billion dollar increase in 1962 dollars). Such estimates are what allowed Kennedy’s budget to exceed Eisenhower’s spending proposals by $11.6 billion (or a 14.25% increase in government outlays).⁵¹
Out of the $93 billion proposed, most attention was paid to the near doubling of space-outlays and a $8.5 billion increase in defense spending. Yet, tucked away inside the 1,171-page proposal was the mechanism that would help keep it all afloat if the economy began to slow down. The entire plan depended on highly optimistic growth rates (2% per quarter) – a figure that seemed improbable in a country still reeling from two economic contractions in the previous five years and with the prescient threat of rising unemployment. In order to ensure that the government’s tax bill grew and remained high, the administration needed a stable economy and a consumer-workforce that felt optimistic about its future. But for Kennedy’s economists, optimism was not the right word – it was not optimistic if such gains in output were predictable, nor was it optimistic if the levers of government could remain free and ready to respond to any negative signs in the economy. As Heller would soon testify before Congress’ Joint Economic Committee, “such budgetary flexibility is part and parcel of the stabilization policy of this administration…economic policy has to be flexible and to be prepared for the unexpected…if he [the President] had standby authority for well-timed and well-paced public capital improvements, which could be invoked upon the development of a recession – in that event we would certainly be much better buttressed against adverse economic developments.”⁵²
While it is true that much of the president’s budget predicted economic growth as a function of proposed tax cuts, increased defense outlays, and tariff adjustments, White House economists made clear that none of those programs would be able to function if unemployment rose or if consumer sentiment fell. So, while the $2 billion standby authority to initiate and accelerate spending on capital improvements was a small component of the New Frontier, it was its keystone. As Arthur Goldberg testified before Congress that January, “As the President has emphasized many times, this administration will not sit idly by when unemployment rises…when unemployment rises and other economic developments indicate a weakness in our economy, the Government must have the authority and funds to assure that sufficient jobs are created rapidly enough to put the unemployed back to work, thus creating necessary consumer purchasing power to reverse the trend.”⁵³
Both Democrats and Republicans, big business and organized labor, criticized Kennedy’s insistence on standby authority. The disagreement ranged from issues over Constitutional permissibility, the government’s general effectiveness at identifying economic needs, and a fundamental disagreement over the structure of the post-war economy. George Hagedorn, Director of Research of the National Association of Manufacturers, denied the possibility that public works would help, because the problem was structural, not cyclical. “The reason for the underutilization of resources and the suppression of growth, he argued, “is not a temporary cyclical one. It is a cumulative result of wage increases in excess of productivity eating into profits and reducing the incentives for growth, and for utilizing resources freely.”⁵⁴ Emerson P. Schmidt, Economic Consultant for the Chamber of Commerce, agreed, adding that “Nearly every student who has closely examined the use of public works, as a contracyclical weapon has found it an awkward and largely unsuited weapon for this purpose. Furthermore, it is not likely that the Congress would like to stand idly by while the administration operators at the public works control levers try to provide more jobs through more public works. While the President’s request as of this year is limited to $2 billion in practice we might get some multiple of that figure including congressional authorizations and appropriations for public works which are not easily turned on and off to fit neatly in some valley of recession.”⁵⁵ Even big labor opposed the president’s plan for standby authority, arguing that the time schedule was inadequate and that Congress should vote for immediate spending appropriations.”⁵⁶
While Congress debated the legislative proposals, Kennedy did not demure. He responded to Congressional critiques – especially Everett Dirksen’s complaints⁵⁷ - by trying to convince members that the issue was not only of politics or constitutionalism, but policy. In an open letter to Congress, the President wrote, “Experience has shown that the timing of these Federal actions, both Executive and Congressional, can make a substantial difference in severity and duration of any particular recession.” However, the president added, spending “implemented only after the normal legislative processes, may be too late to achieve an ameliorating effect on the recession sufficient to justify the increase in budget expenditures.”⁵⁸
In the face of such opposition, Kennedy worked with Joseph Clark in the Senate to adapt the proposal, decreasing the overall amount requested by half, and dividing the now $1.2 billion bill into two parts. The first would authorize $600 million in immediate spending authority for area re-development in line with the 1958 spending requirements and grant policies of the newly established Area Redevelopment Administration.⁵⁹ The remaining funds would comprise the now significantly limited standby authorization Kennedy had hoped for.⁶⁰
Two days later, on March 26^th, the House Committee on Public Works followed Clark’s lead and began its open-door work on merging the president’s proposal with a public works plan targeting depressed areas. The House bill kept the original funding request at $2 billion, but tacked on an additional $600 million in immediate public works. Still, the revised bill’s intent was in the president’s favor – it was to “enable the President to take quick and effective action to stimulate the economy by inaugurating a program of needed capital improvements.” ⁶¹ And the two bills, H.R. 10113 and H.R. 10318 collectively merged Congress’ earlier public works proposals with the president’s proposal for standby authority, respectfully. Whereas four years earlier, among many of the same individuals, the economic diagnosis of the day was chronic-labor surplus, automation, structural change in the economy – now all signs pointed to full-employment through counter-cyclical mechanisms, at least in committee. As the bill’s sponsor John Blatnik suggested in introducing the bill, “the only item of budgetary expenditure that can be varied countercyclically, and that by its very nature calls for such variation, is a public works program.”⁶²
However, it was also immediately clear, that while most Members were willing to embrace a more “modern” language of counter-cyclical fiscal stimulus and sell the bill as one that would pump dollars into a slack economy, they were hesitant to give the president to sole authority to decide when to disburse federal monies. Taken from unused, or unobligated, funds housed in five federal agencies – Housing and Home Finance Agency, Federal Home Loan Bank, FDIC, Federal Savings and Loan Insurance Corporation, United States subscription to the International Bank for Reconstruction and Development – the executive would transfer funds as a type of “interim financing” to accelerate already approved, many already in progress, public works. But as David Bell, Director of the Bureau of the Budget, was quick to point out, this was not a simple mechanism of transfer authority. Rather, it was deliberately designed to “unbalance” the budget and incur a fiscal deficit. Responding to several members’ collective confusion about their future role in the public works program should the bill pass, Bell told them that they were simply “not needed,” because the standby authority “would make no change in the existing volume of obligational authority which the Congress had already voted.” “But,” he added, “you see, any given time there are some tens of billions of dollars of unobligated authority…which may never be spent.” In effect, since that money never entered the economy, but Congress had authorized it, the President could bypass the appropriations process, transfer those funds, and inject the economy with a shot of additional money by accelerating public works.⁶³
The justification for bypassing the normal appropriations process and giving the president this authority made sense in the language of neo-Keynesian stimulus – timing was everything. As Bell put it, “the reason for it is because of the difficulty of anticipating,” adding that, “at the time the President wanted to use these funds it would be important to move quickly under the assumed conditions of the beginning of a recession, and it might very well be that Congress was not in session at the time;”⁶⁴ Perhaps the out-of-session excuse was a nice way of telling Members of Congress that they were just too slow. Secretary of Labor Arthur Goldberg was slightly more direct in his testimony, telling members that “the proposal for authority to begin such programs now at the present level of unemployment is a recognition that, since we did not have standby authority when needed, we must take prompt and effective action now.”⁶⁵
Kennedy’s economists took to Capitol Hill to testify in favor of the now merged public works program, but even their well-coordinated campaign and explanations of counter-cyclical budgeting could not persuade members, even those originally sympathetic to the president’s plan. Fellow Democrats started to realize that without appropriating power following the authorization, there was no guarantee that federal monies would flow into their own districts. Republicans also questioned the Executive’s control and intent in seeking standby authority – even if staffed by experts, there existed the deep suspicion that monies could flow to areas that were electorally vulnerable, tipping the scales towards the president’s party. While the $600 million in immediate authority would go to those areas designated under the Congressionally-approved Area Redevelopment Act, none of the $2 billion in standby authority was pre-determined; it was, after all, to remain deliberately under-determined.
As witness after witness from the administration testified in favor of the president’s standby authority, some Members grew noticeably agitated. Asking the head of the FAA about his enthusiasm for the president’s plan, Representative Edwin Dooley (R-NY) asked whether he, “found the Congress to be derelict or slow in functioning,” while also reminding the witness that “as a matter of urgency, the Congress could be called back in a matter of 24 hours.” William Cramer (R-FL), chastised the administrator of the Area Redevelopment Administration, condemning the plan as “one of the most brazen Presidential power grab proposals ever presented to the Congress,” continuing on to question the need for the immediate appropriations given the ARA’s “failure”.⁶⁶ Likewise, after being told by Michigan Governor John Swainson that in, “periods of severe economic hardship, we cannot wait for the laborious congressional and legislative machinery to grind out a solution to the problem,” Representative James Harvey (R-MI) demanded to know when Congress had been so ineffective in responding to the needs of his own, shared constituents.⁶⁷
On the other side of the Capitol, Senator Prescott Bush (R-Conn.) denounced any plan focused on public works as a “grandiose but largely empty gesture,”⁶⁸ adding that all the energy spent on its planning represented “an extraordinary confession of failure by the Administration…[because] it diverts our attention from the real causes of the problem, further delays a genuine solution, and makes the job problem even more acute by inducing inflation.”⁶⁹ The Republican Minority Whip, Thomas Kuchel, challenged the plan on constitutional grounds, arguing that standby authority “makes a mockery out of the constitutional processes; replete with serious vices. Robbing Peter to pay Paul has been discredited doctrine for 2,000 years, yet that is precisely the theory of this bill…It is too much power for a good man to have or a bad man to want.”⁷⁰ However, unlike Bush, but like many of his Senate colleagues, Kuchel nevertheless remained supportive of a public works program that was subject to the traditional appropriations process.
On April 17^th after two days of closed hearings and five days of expert testimony, the Senate Public Works Committee approved the combined package on pure party-line vote. Just several weeks later, however, on May 1^st, the public works plan suffered its deepest setback as the House Democratic leadership leaked that they were scrapping the standby authority due to the objections primarily from liberal Democrats; as a concession, they proposed a $900 million authorization bill fully controlled by Congress.⁷¹
With news of a split Congress, and as the debate spilled out into the public at large,⁷² Kennedy did not sit on the sidelines and leave the fight to the economics professors. As Walter Heller noted shortly after stepping down as chairman of the CEA, the Kennedy administration was keenly aware of the public relations battle they would have to win. “We had to sell modern fiscal policy to an unbelieving and highly suspicious public…Here we sold them deficit financing…” Heller recalled.⁷³ Kennedy, who had already vigorously courted organized labor to back the plan, traveled to the AFL-CIO annual convention in Atlantic City to press the necessity of standby authority using as many different angles as possible – new economics, national security, anti-corporatism. “Every year brings new problems that are unsolved,” the President proclaimed, but, “Our basic task here at home is to attempt to develop an economy which is not subject to the violent fluctuations where we saw the recession of 1958 and the recession of 60 and even today have too many people unemployed. We have suggested three programs to give us standby power…so that if we see the economy turning down we can move quickly without having to wait till it runs its course over a period of months.”⁷⁴
Yet, even with the President’s added support, Democratic leadership in the Senate feared that Republicans and Southern Democrats would overcome the limited support for the spending bill as financed. The Wall Street Journal seemed to account for both objections: “From the Administration’s point of view this is a wonderful scheme. The sum of $2 billion, for distribution at the President’s discretion, could represent a persuasive political instrument. But from any other standpoint the plan is indefensible…It is bad enough when appropriated tax funds are spent on make-work project of dubious value. It would be infinitely worse if money were “borrowed” from Government trust funds for that purpose. The least Congress can do is to bar the way to any attempts at this sort of back-door spending.”⁷⁵ Following suit, Democratic leaders revised the bill’s funding mechanism so that it would not rely on the unused funds from the five federal agencies. As such, the new Senate bill would amount to just $1.5 billion, with half dedicated to immediate area redevelopment and the other half set aside in a standby reserve, subject to annual renewal.⁷⁶
While it was only the middle of May, the administration became increasingly concerned that time was running out as Congressional midterms approached. Republicans labeled the plan as the Democrat’s “ski lifts, swimming pools, and golf courses” bill, and renewed their concern that deficit spending was the main driver of price inflation. The House Republican Policy Committee, chaired by John Byrnes (R-WI) solidified the party’s opposition to the bill, arguing that even without standby authority. “billions of dollars already authorized for such use going unspent;” with $1.6 billion in urban renewal funds, $400 million in community facility funds, $300 million for veteran’s housing, and $89 million in Area Redevelopment. Kennedy claimed that the new economics could precisely measure fiscal stimulus; conservatives responded that the technocrats could hardly count.⁷⁷
Ultimately, the administration’s efforts paid off in the Senate, but not without the help of a little intra-party wrangling. The Senate passed the $1.5 billion public works program 44 to 32.⁷⁸ However, the standby provision given to Kennedy barely made it into the final bill. Clearly it was the most controversial element, and an amendment to scrap the standby authority would have passed if the Senate leadership had not convinced two Democrats to vote “pairs,” or essentially abstain, at the last minute; the amendment to remove presidential stand-by authority failed just narrowly, 36-37.⁷⁹
With the Senate bill passed, fiscal conservatives turned their attention to the House vote. If there was to be a public works program, they conceded, they would make their fight one over standby authority. Having lost the Senate vote, Barry Goldwater (R-AZ) started to pen several high-profile, recurring letters in the national dailies lamenting how “an enormous extension of executive power for the President is wrapped up in the administration’s public works program.” “If adopted,” he warned, “it would hand the President more spending power than Congress has ever before delegated to a Chief Executive for such purposes…There would be no possible recall by Congress, regardless of what circumstances might develop. The purse strings would not reside in their customary place, with the people’s representatives in the Congress, but in the White House.”⁸⁰ Former President Eisenhower, now working to help the GOP in the upcoming midterms, made the public works bill – and the pseudo-science backing it - a central feature in his stump speeches. “Cheers, whistles, and hurrahs,” greeted Ike as he lambasted Kennedy’s plans, suggesting that the president was “floundering aimlessly and desperately” behind a front of “sophistication.” “It is always necessary to examine critically those appropriating,” Eisenhower said, “and to stop assuming that mere spending means increased strength…sophistication will indeed destroy all hope of a balanced budget…[sophistication is] a planned economy – that is, that the central government should undertake to fix prices, determine the appropriate level of profits, control wages…in all such matters is a Federal club of reprisal to be held over the heads of citizens, ready for instant use, with or without sanction of law. Is the only authority needed for the club’s use an executive assertion that this is in the public interest?”⁸¹
Indeed, the attack on technocratic economics was central to Republicans’ message. In another letter, Goldwater joined Eisenhower’s critique of the New Economics, calling on Republican voters to send a message to Kennedy to replace his “brain trusters” with “hard-headed business men” who actually understood the economy.⁸² Dirksen and Halleck in their weekly press conference said that only a Republican Congress could successfully declare a moratorium on Kennedy’s “economic novelties” – return to “fiscal sanity,” and abandon this “old scheme to cover up extravagant government spending.”⁸³
It was around this time that Kennedy began to turn his attention to the possibility of an extensive tax cut, an idea floated during the Eisenhower years, but which had failed to fully galvanize both balanced budget hawks and liberal politicians. Yet, even while announcing tax cuts at a White House press conference, Kennedy prodded Congress to give him standby authority, telling reporters that, “there is surely more cause now than ever before for making such authority available.”^⁸⁴ In short, even with tax cuts on the table, the White House pressed down for standby public works. The political debate had heated up so much to the point where Gunnar Myrdal opined in the New York Times that Americans needed to finally abandon their “favorite superstitions” – balanced budgets, losing gold – only by shedding themselves of these “self-imposed limitations” could the U.S. allow its economy to “get going again.”⁸⁵

Four days after the House Rules Committee barely released the bill for a full vote,⁸⁶ Kennedy took the “bully pulpit” in order to provide some clarity on the administration’s mixed fiscal policy message. In one of the most iconic moments of the Kennedy administration, the President stood in front of a lectern during prime time, and pointing to various graphs and charts explained to the American people the status of the economy. The first message explained why he would delay a tax cut until at least the upcoming year. But then the President argued that, even though the economy was in full recovery, there was no need for the federal government to rest on its laurels. “Employment, income, profits, construction, and investment,” the President declared, “must all move up more quickly than they have been doing this summer; and the greater wages and profits which full capacity could bring to all our American citizens must soon replace the most extravagant waste – which is to have men searching for jobs which they cannot find and factories which have a percentage of their machines unused.” Educating the public in the logic of full-employment budgeting, Kennedy then called on the “the help of the Congress and the American people in pushing to enactment before adjournment those measures which I think would speed up our economy, which are designed to give us more jobs and more growth.” After calling for an investment tax credit, the President turned full attention to the pending public works plan. “We need enactment of the bill to step up help to local and federal works,” he declared, “increasing the yearly building of those products in parts of our country which most urgently need them where many of our fellow countrymen are out of work and there is still a good deal to be done.” In the President’s own hand, the words need were underlined, along with the phrase, “this year.” Kennedy praised the Senate version, hoping that the same bill – the bill with standby authority – would soon pass the House. The President, understanding the novelty of the proposal, instructed his listeners that stand-by authority, be it for cutting taxes or building roads and bridges, would allow his administration, “to be ready with swift, flexibly and forceful action to cope with any future recession…should the economy in the short-run take an unforeseen turn for the worse which cannot await the full-scale review and reform which the long-run requires.” ⁸⁷

The next morning, Kennedy called a breakfast meeting for Democratic congressional leaders, urging them to push thru his proposals outlined the evening earlier. Senate Democratic leader Mike Mansfield (D-MN) told reporters that prospects looked better, that the Congress, now “whole-headedly in support” of the President’s plan, would “do its best,” now that Kennedy had “laid the facts before the people.”⁸⁸
Despite this confidence, opposition stemming from the Southern and Western wing of the party forced House leadership to offer to amendments to the now just $900 million package. The first change scrapped the bill’s creation of a new administrative agency that would coordinate local, state, and national development projects; Republicans pointed to the potential of a new public works “czar” as proof of the political ploy motivating the Democrats’ push for public works. Such erasure thereby ensured that the federal government would remain, in part, dependent on existing state agents to disburse the monies, especially in the West where many Democrats already bemoaned the Interior Department’s aggressive reclamation projects. The second change, primarily aimed at quelling Southern fears, prohibited any of the money to be used for school construction, lest it further extend the federal government’s role in aiding local education or furthering school desegregation. Even with these changes, Speaker McCormack was still forced to the chamber’s full debate, predicting that up to 50 Democrats would vote to oppose the bill, while estimating that – given its political implications with a midterm election pending – only 15 to 20 Republicans would vote “aye.”⁸⁹
The full floor debate following from Kennedy’s prime-time address sparked the energies of dozens of Congressmen. Yet, not a single speech on the House floor debated the bills merits as an instrument of counter-cyclical budgetary policy. Indeed, the only time such Keynesian rhetoric emerged was in suggesting that the current economic predicament was not cyclical, but structural; therefore, public works was an inadequate solution to start.⁹⁰ Ultimately, the final vote, 221-192, secured passage of the House plan that authorized $900 million in accelerated public works funding, but without any presidential standby authority.⁹¹
As time ran out, Democratic leadership agreed that it was best to pursue passage of the House bill, rather than seek standby authority in conference committee. A brief clerical error,⁹² gave House and Senate Republicans one more chance to scuttle the bill and send it back to committee, but nine Senate Republicans, largely supportive of the House measure, which was, after all, a reduction in overall spending authority, backed the plan to send it to the President’s desk, 45-22.⁹³ As a last minute move to placate Republican fears (or partisan posturing), and to demonstrate the scientific objectivity of the public works plan, Senator Robert S. Kerr (D-OK), who had managed the floor fight in the Senate, introduced a “sense of the Senate” resolution, that would make it clear that “this bill be administered on a basis that will be free of any partisan favoritism by any agencies of Government having responsibilities under it;” Hubert Humphrey, the Democratic leader, voiced concern suggesting that such a move somehow legitimated Republican charges of playing politics – rather than acknowledging the new economic basis of such legislation.⁹⁴
In the aftermath of the compromise bill, those that had originally supported the plan back-peddled their enthusiasm. Coming so close to Election Day and devolving into partisan rancor, the new spending authorization seemed less like the New Economics promised and more like the old economics that pre-dated even the New Deal. As the New York Times editorialized, “Its avowed intention is to counter unemployment and stimulate economic activity, but the bill is still redolent of the pork barrel. The Administration had sought a new flexible approach to public works, one that would give the President standby authority to accelerate or restrain spending based on prevailing economic conditions…This appeared a commendable experiment, but the Senate insisted on following its traditional pork-barrel approach...Congress is against any change in the pork barrel system, which is aimed at producing votes rather than jobs.”⁹⁵ Several days later, they seemed more willing to target Kennedy himself, suggesting that “unfortunately, the Administration has demonstrated more foresight than force in its demands.”⁹⁶ Even the best laid plans cannot overcome political reality.

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