For the better part of the past year, Republicans have tried to come up with a new agenda for the American people with mixed results. However, the Tea Party is now the most potent force in Republican politics.
|John Fitzgerald "Jack" Kennedy (May 29, 1917 – November 22,
1963), often referred to by his initials JFK, was the 35th President
of the United States, serving from 1961 until his assassination in
His Inaugural Address offered the memorable injunction: "Ask not what your country can do for you--ask what you can do for your country." As President, he set out to redeem his campaign pledge to get America moving again. His economic programs launched the country on its longest sustained expansion since World War II; before his death, he laid plans for a massive assault on persisting pockets of privation and poverty.
Friday, January 20, 1961
Vice President Johnson, Mr. Speaker, Mr. Chief Justice, President Eisenhower, Vice President Nixon, President Truman, reverend clergy, fellow citizens, we observe today not a victory of party, but a celebration of freedom—symbolizing an end, as well as a beginning—signifying renewal, as well as change. For I have sworn before you and Almighty God the same solemn oath our forebears prescribed nearly a century and three quarters ago.
We dare not forget today that we are the heirs of that first revolution. Let the word go forth from this time and place, to friend and foe alike, that the torch has been passed to a new generation of Americans—born in this century, tempered by war, disciplined by a hard and bitter peace, proud of our ancient heritage—and unwilling to witness or permit the slow undoing of those human rights to which this Nation has always been committed, and to which we are committed today at home and around the world.
Let every nation know, whether it wishes us well or ill, that we shall pay any price, bear any burden, meet any hardship, support any friend, oppose any foe, in order to assure the survival and the success of liberty.
This much we pledge—and more.
To those old allies whose cultural and spiritual origins we share, we pledge the loyalty of faithful friends. United, there is little we cannot do in a host of cooperative ventures. Divided, there is little we can do—for we dare not meet a powerful challenge at odds and split asunder.
To those new States whom we welcome to the ranks of the free, we pledge our word that one form of colonial control shall not have passed away merely to be replaced by a far more iron tyranny. We shall not always expect to find them supporting our view. But we shall always hope to find them strongly supporting their own freedom—and to remember that, in the past, those who foolishly sought power by riding the back of the tiger ended up inside.
To those peoples in the huts and villages across the globe struggling to break the bonds of mass misery, we pledge our best efforts to help them help themselves, for whatever period is required—not because the Communists may be doing it, not because we seek their votes, but because it is right. If a free society cannot help the many who are poor, it cannot save the few who are rich.
To our sister republics south of our border, we offer a special pledge—to convert our good words into good deeds—in a new alliance for progress—to assist free men and free governments in casting off the chains of poverty. But this peaceful revolution of hope cannot become the prey of hostile powers. Let all our neighbors know that we shall join with them to oppose aggression or subversion anywhere in the Americas. And let every other power know that this Hemisphere intends to remain the master of its own house.
To that world assembly of sovereign states, the United Nations, our last best hope in an age where the instruments of war have far outpaced the instruments of peace, we renew our pledge of support—to prevent it from becoming merely a forum for invective—to strengthen its shield of the new and the weak—and to enlarge the area in which its writ may run.
Finally, to those nations who would make themselves our adversary, we offer not a pledge but a request: that both sides begin anew the quest for peace, before the dark powers of destruction unleashed by science engulf all humanity in planned or accidental self-destruction.
We dare not tempt them with weakness. For only when our arms are sufficient beyond doubt can we be certain beyond doubt that they will never be employed.
But neither can two great and powerful groups of nations take comfort from our present course—both sides overburdened by the cost of modern weapons, both rightly alarmed by the steady spread of the deadly atom, yet both racing to alter that uncertain balance of terror that stays the hand of mankind's final war.
So let us begin anew—remembering on both sides that civility is not a sign of weakness, and sincerity is always subject to proof. Let us never negotiate out of fear. But let us never fear to negotiate.
Let both sides explore what problems unite us instead of belaboring those problems which divide us.
Let both sides, for the first time, formulate serious and precise proposals for the inspection and control of arms—and bring the absolute power to destroy other nations under the absolute control of all nations.
Let both sides seek to invoke the wonders of science instead of its terrors. Together let us explore the stars, conquer the deserts, eradicate disease, tap the ocean depths, and encourage the arts and commerce.
Let both sides unite to heed in all corners of the earth the command of Isaiah—to "undo the heavy burdens ... and to let the oppressed go free."
And if a beachhead of cooperation may push back the jungle of suspicion, let both sides join in creating a new endeavor, not a new balance of power, but a new world of law, where the strong are just and the weak secure and the peace preserved.
All this will not be finished in the first 100 days. Nor will it be finished in the first 1,000 days, nor in the life of this Administration, nor even perhaps in our lifetime on this planet. But let us begin.
In your hands, my fellow citizens, more than in mine, will rest the final success or failure of our course. Since this country was founded, each generation of Americans has been summoned to give testimony to its national loyalty. The graves of young Americans who answered the call to service surround the globe.
Now the trumpet summons us again—not as a call to bear arms, though arms we need; not as a call to battle, though embattled we are—but a call to bear the burden of a long twilight struggle, year in and year out, "rejoicing in hope, patient in tribulation"—a struggle against the common enemies of man: tyranny, poverty, disease, and war itself.
Can we forge against these enemies a grand and global alliance, North and South, East and West, that can assure a more fruitful life for all mankind? Will you join in that historic effort?
In the long history of the world, only a few generations have been granted the role of defending freedom in its hour of maximum danger. I do not shrink from this responsibility—I welcome it. I do not believe that any of us would exchange places with any other people or any other generation. The energy, the faith, the devotion which we bring to this endeavor will light our country and all who serve it—and the glow from that fire can truly light the world.
And so, my fellow Americans: ask not what your country can do for you—ask what you can do for your country.
My fellow citizens of the world: ask not what America will do for you, but what together we can do for the freedom of man.
Finally, whether you are citizens of America or citizens of the world, ask of us the same high standards of strength and sacrifice which we ask of you. With a good conscience our only sure reward, with history the final judge of our deeds, let us go forth to lead the land we love, asking His blessing and His help, but knowing that here on earth God's work must truly be our own.
John F. Kennedy on taxes
"It is a paradoxical truth that tax rates are too high and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now ... Cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus."
– John F. Kennedy, Nov. 20, 1962, president's news conference
"Lower rates of taxation will stimulate economic activity and so raise the levels of personal and corporate income as to yield within a few years an increased – not a reduced – flow of revenues to the federal government."
– John F. Kennedy, Jan. 17, 1963, annual budget message to the Congress, fiscal year 1964
"In today's economy, fiscal prudence and responsibility call for tax reduction even if it temporarily enlarges the federal deficit – why reducing taxes is the best way open to us to increase revenues."
– John F. Kennedy, Jan. 21, 1963, annual message to the Congress: "The Economic Report Of The President"
"It is no contradiction – the most important single thing we can do to stimulate investment in today's economy is to raise consumption by major reduction of individual income tax rates."
– John F. Kennedy, Jan. 21, 1963, annual message to the Congress: "The Economic Report Of The President"
"Our tax system still siphons out of the private economy too large a share of personal and business purchasing power and reduces the incentive for risk, investment and effort – thereby aborting our recoveries and stifling our national growth rate."
– John F. Kennedy, Jan. 24, 1963, message to Congress on tax reduction and reform, House Doc. 43, 88th Congress, 1st Session.
"A tax cut means higher family income and higher business profits and a balanced federal budget. Every taxpayer and his family will have more money left over after taxes for a new car, a new home, new conveniences, education and investment. Every businessman can keep a higher percentage of his profits in his cash register or put it to work expanding or improving his business, and as the national income grows, the federal government will ultimately end up with more revenues."
– John F. Kennedy, Sept. 18, 1963, radio and television address to the nation on tax-reduction bill
"I have asked the secretary of the treasury to report by April 1 on whether present tax laws may be stimulating in undue amounts the flow of American capital to the industrial countries abroad through special preferential treatment."
– John F. Kennedy, Feb. 6, 1961, message to Congress on gold and the balance of payments deficit
"In those countries where income taxes are lower than in the United States, the ability to defer the payment of U.S. tax by retaining income in the subsidiary companies provides a tax advantage for companies operating through overseas subsidiaries that is not available to companies operating solely in the United States. Many American invertors properly made use of this deferral in the conduct of their foreign investment."
– John F. Kennedy, April 20, 1961, message to Congress on taxation
"Our present tax system ... exerts too heavy a drag on growth ... It reduces the financial incentives for personal effort, investment, and risk-taking ... The present tax load ... distorts economic judgments and channels an undue amount of energy into efforts to avoid tax liabilities."
– John F. Kennedy, Nov. 20, 1962, press conference
"The present tax codes ... inhibit the mobility and formation of capital, add complexities and inequities which undermine the morale of the taxpayer, and make tax avoidance rather than market factors a prime consideration in too many economic decisions."
– John F. Kennedy, Jan. 23, 1963, special message to Congress on tax reduction and reform
"In short, it is a paradoxical truth that ... the soundest way to raise the revenues in the long run is to cut the rates now. The experience of a number of European countries and Japan have borne this out. This country's own experience with tax reduction in 1954 has borne this out. And the reason is that only full employment can balance the budget, and tax reduction can pave the way to that employment. The purpose of cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus."
– John F. Kennedy, Nov. 20, 1962, news conference
"The largest single barrier to full employment of our manpower and resources and to a higher rate of economic growth is the unrealistically heavy drag of federal income taxes on private purchasing power, initiative and incentive."
– John F. Kennedy, Jan. 24, 1963, special message to Congress on tax reduction and reform
"Expansion and modernization of the nation's productive plant is essential to accelerate economic growth and to improve the international competitive position of American industry ... An early stimulus to business investment will promote recovery and increase employment."
– John F. Kennedy, Feb. 2, 1961, message on economic recovery
"We must start now to provide additional stimulus to the modernization of American industrial plants ... I shall propose to the Congress a new tax incentive for businesses to expand their normal investment in plant and equipment."
– John F. Kennedy, Feb. 13, 1961, National Industrial Conference Board
"A bill will be presented to the Congress for action next year. It will include an across-the-board, top-to-bottom cut in both corporate and personal income taxes. It will include long-needed tax reform that logic and equity demand ... The billions of dollars this bill will place in the hands of the consumer and our businessmen will have both immediate and permanent benefits to our economy. Every dollar released from taxation that is spent or invested will help create a new job and a new salary. And these new jobs and new salaries can create other jobs and other salaries and more customers and more growth for an expanding American economy."
– John F. Kennedy, Aug. 13, 1962, radio and television report on the state of the national economy
"This administration pledged itself last summer to an across-the-board, top-to-bottom cut in personal and corporate income taxes ... Next year's tax bill should reduce personal as well as corporate income taxes, for those in the lower brackets, who are certain to spend their additional take-home pay, and for those in the middle and upper brackets, who can thereby be encouraged to undertake additional efforts and enabled to invest more capital ... I am confident that the enactment of the right bill next year will in due course increase our gross national product by several times the amount of taxes actually cut."
– John F. Kennedy, Nov. 20, 1962, news conference
Reverend Meza, Reverend Reck, I'm grateful for your generous invitation to state my views.
While the so-called religious issue is necessarily and properly the chief topic here tonight, I want to emphasize from the outset that I believe that we have far more critical issues in the 1960 campaign; the spread of Communist influence, until it now festers only 90 miles from the coast of Florida -- the humiliating treatment of our President and Vice President by those who no longer respect our power -- the hungry children I saw in West Virginia, the old people who cannot pay their doctors bills, the families forced to give up their farms -- an America with too many slums, with too few schools, and too late to the moon and outer space. These are the real issues which should decide this campaign. And they are not religious issues -- for war and hunger and ignorance and despair know no religious barrier.
But because I am a Catholic, and no Catholic has ever been elected President, the real issues in this campaign have been obscured -- perhaps deliberately, in some quarters less responsible than this. So it is apparently necessary for me to state once again -- not what kind of church I believe in, for that should be important only to me -- but what kind of America I believe in.
I believe in an America where the separation of church and state is absolute; where no Catholic prelate would tell the President -- should he be Catholic -- how to act, and no Protestant minister would tell his parishioners for whom to vote; where no church or church school is granted any public funds or political preference, and where no man is denied public office merely because his religion differs from the President who might appoint him, or the people who might elect him.
I believe in an America that is officially neither Catholic, Protestant nor Jewish; where no public official either requests or accept instructions on public policy from the Pope, the National Council of Churches or any other ecclesiastical source; where no religious body seeks to impose its will directly or indirectly upon the general populace or the public acts of its officials, and where religious liberty is so indivisible that an act against one church is treated as an act against all.
For while this year it may be a Catholic against whom the finger of suspicion is pointed, in other years it has been -- and may someday be again -- a Jew, or a Quaker, or a Unitarian, or a Baptist. It was Virginia's harassment of Baptist preachers, for example, that led to Jefferson's statute of religious freedom. Today, I may be the victim, but tomorrow it may be you -- until the whole fabric of our harmonious society is ripped apart at a time of great national peril.
Finally, I believe in an America where religious intolerance will someday end, where all men and all churches are treated as equals, where every man has the same right to attend or not to attend the church of his choice, where there is no Catholic vote, no anti-Catholic vote, no bloc voting of any kind, and where Catholics, Protestants, and Jews, at both the lay and the pastoral levels, will refrain from those attitudes of disdain and division which have so often marred their works in the past, and promote instead the American ideal of brotherhood.
That is the kind of America in which I believe. And it represents the kind of Presidency in which I believe, a great office that must be neither humbled by making it the instrument of any religious group nor tarnished by arbitrarily withholding it -- its occupancy from the members of any one religious group. I believe in a President whose views on religion are his own private affair, neither imposed upon him by the nation, nor imposed by the nation upon him as a condition to holding that office.
I would not look with favor upon a President working to subvert the first amendment's guarantees of religious liberty; nor would our system of checks and balances permit him to do so. And neither do I look with favor upon those who would work to subvert Article VI of the Constitution by requiring a religious test, even by indirection. For if they disagree with that safeguard, they should be openly working to repeal it.
I want a Chief Executive whose public acts are responsible to all and obligated to none, who can attend any ceremony, service, or dinner his office may appropriately require of him to fulfill; and whose fulfillment of his Presidential office is not limited or conditioned by any religious oath, ritual, or obligation.
This is the kind of America I believe in -- and this is the kind of America I fought for in the South Pacific, and the kind my brother died for in Europe. No one suggested then that we might have a divided loyalty, that we did not believe in liberty, or that we belonged to a disloyal group that threatened -- I quote -- "the freedoms for which our forefathers died."
And in fact this is the kind of America for which our forefathers did die when they fled here to escape religious test oaths that denied office to members of less favored churches -- when they fought for the Constitution, the Bill of Rights, the Virginia Statute of Religious Freedom -- and when they fought at the shrine I visited today, the Alamo. For side by side with Bowie and Crockett died Fuentes, and McCafferty, and Bailey, and Badillo, and Carey -- but no one knows whether they were Catholics or not. For there was no religious test there.
I ask you tonight to follow in that tradition -- to judge me on the basis of 14 years in the Congress, on my declared stands against an Ambassador to the Vatican, against unconstitutional aid to parochial schools, and against any boycott of the public schools -- which I attended myself. And instead of doing this, do not judge me on the basis of these pamphlets and publications we all have seen that carefully select quotations out of context from the statements of Catholic church leaders, usually in other countries, frequently in other centuries, and rarely relevant to any situation here. And always omitting, of course, the statement of the American Bishops in 1948 which strongly endorsed Church-State separation, and which more nearly reflects the views of almost every American Catholic.
I do not consider these other quotations binding upon my public acts. Why should you?
But let me say, with respect to other countries, that I am wholly opposed to the State being used by any religious group, Catholic or Protestant, to compel, prohibit, or prosecute the free exercise of any other religion. And that goes for any persecution, at any time, by anyone, in any country. And I hope that you and I condemn with equal fervor those nations which deny their Presidency to Protestants, and those which deny it to Catholics. And rather than cite the misdeeds of those who differ, I would also cite the record of the Catholic Church in such nations as France and Ireland, and the independence of such statesmen as De Gaulle and Adenauer.
But let me stress again that these are my views.
For contrary to common newspaper usage, I am not the Catholic candidate for President.
I am the Democratic Party's candidate for President who happens also to be a Catholic.
I do not speak for my church on public matters; and the church does not speak for me. Whatever issue may come before me as President, if I should be elected, on birth control, divorce, censorship, gambling or any other subject, I will make my decision in accordance with these views -- in accordance with what my conscience tells me to be in the national interest, and without regard to outside religious pressure or dictates. And no power or threat of punishment could cause me to decide otherwise.
But if the time should ever come -- and I do not concede any conflict to be remotely possible -- when my office would require me to either violate my conscience or violate the national interest, then I would resign the office; and I hope any conscientious public servant would do likewise.
But I do not intend to apologize for these views to my critics of either Catholic or Protestant faith; nor do I intend to disavow either my views or my church in order to win this election.
If I should lose on the real issues, I shall return to my seat in the Senate, satisfied that I'd tried my best and was fairly judged.
But if this election is decided on the basis that 40 million Americans lost their chance of being President on the day they were baptized, then it is the whole nation that will be the loser, in the eyes of Catholics and non-Catholics around the world, in the eyes of history, and in the eyes of our own people.
But if, on the other hand, I should win this election, then I shall devote every effort of mind and spirit to fulfilling the oath of the Presidency -- practically identical, I might add, with the oath I have taken for 14 years in the Congress. For without reservation, I can, "solemnly swear that I will faithfully execute the office of President of the United States, and will to the best of my ability preserve, protect, and defend the Constitution -- so help me God.
John F. Kennedy
Address to the Economic Club of New York
delivered 14 December 1962
Mr. Trippe, Mr. Rockefeller, General Clay, gentlemen:
I feel tonight somewhat like I felt when I addressed in 1960 the Houston Ministers Conference on the separation of church and state. But I am glad to have a chance to talk to you tonight about the advantages of the free enterprise system.
Less than a month ago, this nation reminded the world that it possessed both the will and the weapons to meet any threat to the security of free men. The gains we have made will not be given up and the course that we have pursued will not be abandoned. But in the long run, that security will not be determined by military or diplomatic moves alone. It will be affected by the decisions of finance ministers, as well as by the decisions of Secretaries of State and Secretaries of Defense; by the deployment of fiscal and monetary weapons, as well as by military weapons; and, above all, by the strength of this nation's economy, as well as by the strength of our defenses.
You will recall that Chairman Khrushchev has said that he believed that the hinge of world history would begin to move when the Soviet Union out-produced the United States. Therefore, the subject to which we address ourselves tonight concerns not merely our own well-being, but also very vitally the defense of the free world.
America's rise to world leadership in the century since the Civil War has reflected more than anything else our unprecedented economic growth. Interrupted during the decade of the 30s, the vigorous expansion of our economy was resumed in 1940 and continued for more than 15 years thereafter. It demonstrated for all to see the power of freedom and the efficiency of free institutions. The economic health of this nation has been, and is now, fundamentally sound.
But a leading nation, a nation upon which all depend, not only in this country but around the world, cannot afford to be satisfied, to look back, or to pause. On our strength and growth depends the strength of others, the spread of free world trade and unity, and continued confidence in our leadership and our currency. The underdeveloped countries are dependent upon us for the sale of their primary commodities and for aid to their struggling economies. In short, a prosperous and growing America is important not only to Americans, it is — as the spokesman for 20 Western nations in the Organization for Economic Cooperation and Development, as he stressed this week — of vital importance to the entire Western World.
In the last two years we have made significant strides. Our gross national product has risen eleven percent, while inflation has been arrested. Employment has been increased by one-point-three million jobs. Profits, personal income, living standards — all are setting new records. Most of the economic indicators for this quarter are up and the prospects are for further expansion in the next quarter. But we must look beyond the next quarter, or the last quarter, or even the last two years. For we can and must do better, much better than we've been doing for the last five-and-a-half years.
This economy is capable of producing, without strain, 30 to 40 billion [dollars] more than we are producing today. Business earnings could be seven to eight billion higher than they are today. Utilization of existing plant and equipment could be much higher — and, if it were, investment would rise. We need not accept an unemployment rate of five percent or more, such as we have had for 60 out of the last 61 months. There is no need for us to be satisfied with a rate of growth that keeps good men out of work and good capacity out of use.
The Economic Club of New York is, of course, familiar with these problems. For, in this state, the rate of insured unemployment has been persistently higher than the national average, and the increases in personal income and employment have been slower here than [in] the nation as a whole. You have seen the tragedy of chronically depressed areas upstate, of unemployed young people — and I think this might be one of our most serious national problems, unemployed young people, those under 20. One out of four are unemployed — particularly those in the minority groups, roaming the streets of New York and our other great cities — and others on relief at an early age, with the prospect that in this decade we will have between seven and eight million school dropouts, unskilled, coming into the labor market, at a time when the need for unskilled labor is steadily diminishing. And I know you share my conviction that, proud as we are of its progress, this nation's economy can and must do even better than it has done in the last five years. Our choice, therefore, boils down to one of: doing nothing, and thereby risking a widening gap between our actual and potential growth in output, profits, and employment — or taking action, at the federal level, to raise our entire economy to a new and higher level of business activity.
If we do not take action, those who have the most reason to be dissatisfied with our present rate of growth will be tempted to seek shortsighted and narrow solutions — to resist automation, to reduce the work week to 35 hours or even lower, to shut out imports, or to raise prices in a vain effort to obtain full capacity profits on under-capacity operations. But these are all self-defeating expedients which can only restrict the economy, not expand it.
There are a number of ways by which the federal government can meet its responsibilities to aid economic growth. We can and must improve American education and technical training. We can and must expand civilian research and technology. One of the great bottlenecks for this country's economic growth in this decade will be the shortages of doctorates in mathematics, engineering, and physics — a serious shortage with a great demand and an undersupply of highly trained manpower. We can and must step up the development of our natural resources.
But the most direct and significant kind of federal action aiding economic growth is to make possible an increase in private consumption and investment demand — to cut the fetters which hold back private spending. In the past, this could be done in part by the increased use of credit and monetary tools, but our balance of payments situation today places limits on our use of those tools for expansion. It could also be done by increasing federal expenditures more rapidly than necessary, but such a course would soon demoralize both the government and our economy. If government is to retain the confidence of the people, it must not spend more than can be justified on grounds of national need or spent with maximum efficiency. And I shall say more on this in a moment.
The final and best means of strengthening demand among consumers and business is to reduce the burden on private income and the deterrents to private initiative which are imposed by our present tax system — and this administration pledged itself last summer to an across-the-board, top-to-bottom cut in personal and corporate income taxes to be enacted and become effective in 1963.
I'm not talking about a "quickie" or a temporary tax cut, which would be more appropriate if a recession were imminent. Nor am I talking about giving the economy a mere shot in the arm, to ease some temporary complaint. I am talking about the accumulated evidence of the last five years that our present tax system, developed as it was, in good part, during World War II to restrain growth, exerts too heavy a drag on growth in peace time; that it siphons out of the private economy too large a share of personal and business purchasing power; that it reduces the financial incenitives [sic] for personal effort, investment, and risk-taking. In short, to increase demand and lift the economy, the federal government's most useful role is not to rush into a program of excessive increases in public expenditures, but to expand the incentives and opportunities for private expenditures.
Under these circumstances, any new tax legislation — and you can understand that under the comity which exists in the United States Constitution whereby the Ways and Means Committee in the House of Representatives have the responsibility of initiating this legislation, that the details of any proposal should wait on the meeting of the Congress in January. But you can understand that, under these circumstances, in general, that any new tax legislation enacted next year should meet the following three tests:
First, it should reduce the net taxes by a sufficiently early date and a sufficiently large amount to do the job required. Early action could give us extra leverage, added results, and important insurance against recession. Too large a tax cut, of course, could result in inflation and insufficient future revenues — but the greater danger is a tax cut too little, or too late, to be effective.
Second, the new tax bill must increase private consumption, as well as investment. Consumers are still spending between 92 and 94 percent on their after-tax income, as they have every year since 1950. But that after-tax income could and should be greater, providing stronger markets for the products of American industry. When consumers purchase more goods, plants use more of their capacity, men are hired instead of laid-off, investment increases, and profits are high.
Corporate tax rates must also be cut to increase incentives and the availability of investment capital. The government has already taken major steps this year to reduce business tax liability and to stimulate the modernization, replacement, and expansion of our productive plant and equipment. We have done this through the 1962 investment tax credit and through the liberalization of depreciation allowances — two essential parts of our first step in tax revision — which amounted to a ten percent reduction in corporate income taxes worth 2.5 billion dollars. Now we need to increase consumer demand to make these measures fully effective — demand which will make more use of existing capacity and thus increase both profits and the incentive to invest. In fact, profits after taxes would be at least 15 percent higher today if we were operating at full employment.
For all these reasons, next year's tax bill should reduce personal as well as corporate income taxes: for those in the lower brackets, who are certain to spend their additional take-home pay, and for those in the middle and upper brackets, who can thereby be encouraged to undertake additional efforts and enabled to invest more capital.
Third, the new tax bill should improve both the equity and the simplicity of our present tax system. This means the enactment of long-needed tax reforms, a broadening of the tax base, and the elimination or modification of many special tax privileges. These steps are not only needed to recover lost revenue and thus make possible a larger cut in present rates, they are also tied directly to our goal of greater growth. For the present patchwork of special provisions and preferences lightens the tax loads of some only at the cost of placing a heavier burden on others. It distorts economic judgments and channels undue amounts of energy into efforts to avoid tax liability. It makes certain types of less productive activity more profitable than other more valuable undertakings. All this inhibits our growth and efficiency, as well as considerably complicating the work of both the taxpayer and the Internal Revenue Service.
These various exclusions and concessions have been justified [in the past] as a means of overcoming oppressively high rates in the upper brackets, and a sharp reduction in those rates — accompanied by base-broadening, loophole-closing measures — would properly make the new rates not only lower, but also more widely applicable. Surely this is more equitable on both counts.
Those are the three tests which the right kind of bill must meet — and I am confident that the enactment of the right bill next year will in due course increase our gross national product by several times the amount of taxes actually cut. Profit margins will be improved, and both the incentive to invest and the supply of internal funds for investment will be increased. There will be new interest in taking risks, in increasing productivity, in creating new jobs and new products for long-term economic growth.
Other national problems, moreover, will be aided by full employment. It will encourage the location of new plants in areas of labor surplus — and provide new jobs for workers that we are retraining — and facilitate the adjustment which will be necessary under our new trade expansion bill, and reduce a number of government expenditures.
It will not, I'm confident, revive an inflationary spiral or adversely affect our balance of payments. If the economy today were operating close to capacity levels with little unemployment, or if a sudden change in our military requirements should cause a scramble for men and resources, then I would oppose tax reductions as irresponsible and inflationary — and I would not hesitate to recommend a tax increase, if that were necessary. But our resources and manpower are not being fully utilized, the general level of prices has been remarkably stable, and increased competition — both at home and abroad — along with increased productivity, will help keep both prices and wages within appropriate limits.
The same is true of our balance of payments. While rising demand will expand imports, new investment in more efficient productive facilities will aid exports, and a new economic climate could both draw capital from abroad and keep capital here at home. It will also put us in a better position, if necessary, to use monetary tools to help our international accounts. But most importantly, confidence in the dollar in the long run rests on confidence in America, in our ability to meet our economic commitments and reach our economic goals. In a worldwide conviction that we are not drifting from recession to recession with no answer, the substantial improvement in our balance of payments position in the last two years makes it clear that nothing could be more foolish than to restrict our growth merely to minimize that particular problem, because a slowdown in our economy will feed that problem rather than diminish it. On the contrary, European governmental and financial authorities with almost total unanimity, far from threatening to withdraw gold, have urged us to cut taxes in order to expand our economy, attract more capital, and increase confidence in our future.
But what concerns most Americans about a tax cut, I know, is not the deficit in our balance of payments but the deficit in our federal budget. When I announced in April of 1961 that this kind of comprehensive tax reform would follow the bill enacted this year, I had hoped to present it in an atmosphere of a balanced budget. But it has been necessary to augment sharply our nuclear and conventional forces, to step up our efforts in space, to meet the increased cost of servicing the national debt and meeting our obligations — established by law — to veterans. These expenditure increases, let me stress, constitute practically all of the increases which have occurred under this administration, the remainder having gone to fight the recession we found in industry — mostly through the Supplemental Unemployment Compensation Bill — and in agriculture.
We shall, therefore, neither postpone our tax cut plans nor cut into essential national security programs. This administration is determined to protect America's security and survival, and we are also determined to step up its economic growth. And I think we must do both.
Our true choice is not between tax reduction, on the one hand, and the avoidance of large federal deficits on the other. It is increasingly clear that no matter what party is in power, so long as our national security needs keep rising, an economy hampered by restrictive tax rates will never produce enough revenues to balance our budget — just as it will never produce enough jobs or enough profits. Surely the lesson of the last decade is that budget deficits are not caused by wild-eyed spenders but by slow economic growth and periodic recessions, and any new recession would break all deficit records.
In short, it is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now. The experience of a number of European countries and Japan have borne this out. This country's own experience with tax reduction in 1954 has borne this out. And the reason is that only full employment can balance the budget, and tax reduction can pave the way to that employment. The purpose of cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus.
I repeat: our practical choice is not between a tax-cut deficit and a budgetary surplus. It is between two kinds of deficits: a chronic deficit of inertia, as the unwanted result of inadequate revenues and a restricted economy, or a temporary deficit of transition, resulting from a tax cut designed to boost the economy, increase tax revenues, and achieve, I believe — and I believe this can be done — a budget surplus. The first type of deficit is a sign of waste and weakness; the second reflects an investment in the future.
Nevertheless, as Chairman Mills of the House Ways and Means Committee pointed out this week, the size of the deficit is to be regarded with concern, and tax reduction must be accompanied, in his words, by "increased control of the rises in expenditures." This is precisely the course we intend to follow in 1963.
At the same time as our tax program is presented to the Congress in January, the federal budget for fiscal 1964 will also be presented. Defense and space expenditures will necessarily rise in order to carry out programs which are demanded and are necessary for our own security, and which have largely been authorized by Members in both parties of the Congress with overwhelming majorities. Fixed interest charges on the debt also rise slightly. But I can tell you now that the total of all other expenditures combined will be held at approximately its current level.
This is not an easy task. During the past nine years, domestic civilian expenditures in the national government have risen at an average rate of more than seven-and-one-half percent. State and local government expenditures have risen at an annual rate of nine percent. Expenditures by the New York State government, for example, have risen in recent years at the rate of roughly ten percent per year. At a time when government pay scales have necessarily risen — and I take New York just as an example — when our -- when our population and pressures -- when our population and pressures are growing and the demand for services and state aid is thus increasing, next year's federal budget, which will hold domestic outlays at their present level, will represent a genuine effort in expenditure control. This budget will reflect, among other economies, a 750 million dollar reduction in the postal deficit. It will reflect a savings of over 300 million dollars in the storage costs of surplus feed grain stocks — and as a result of the feed grain bill of 1961, we will have two-thirds less in storage than we would otherwise have had in January 1963 — and a saving[s] of at least 600 million dollars from the cancellation of obsolete or unworkable weapons systems. Secretary McNamara is undertaking a cost reduction program expected to save three billion dollars a year in the Department of Defense, cutting down on duplication and closing down nonessential installations. Other agencies must do the same.
In addition, I have directed all heads of government departments and agencies to hold federal employment under the levels authorized by congressional appropriations, to absorb through greater efficiency a substantial part of this year's federal pay increase, to achieve an increase in productivity which will enable the same amount of work to be done by less people, and to refrain from spending any unnecessary funds that were appropriated by the Congress.
It should also be noted that the federal debt, as a proportion of our gross national product, has been steadily reduced in the last years. Last year the total increase in the federal debt was two percent — compared to an eight percent increase in the gross debt of state and local governments. Taking a longer view, the federal debt today is 13 percent higher than it was in 1946, while state and local debt is 360 percent higher than it was in 1946 -- and private debt by over 300 percent. In fact, if it were not for federal financial assistance to state and local governments, the federal cash budget would show a surplus. Federal civilian employment, for example, is actually lower today than it was in 1952, while state and local government employment over the same period has increased 67 percent.
It is this setting which makes federal tax reduction both possible and appropriate next year. I do not underestimate the obstacles which the Congress will face in enacting such legislation. No one will be satisfied. Everyone will have his own approach, his own bill, his own reductions. A high order of restraint and determination will be required if the "possible" is not to wait on the "perfect." But a nation capable of marshaling these qualities in any dramatic threat to our security, is surely capable, as a great free society, of meeting a slower and more complex threat to our economic vitality. This nation can afford to reduce taxes, we can afford a temporary deficit — but we cannot afford to do nothing. For on the strength of our free economy rests the hope of all free nations. We shall not fail that hope — for free men and free nations must prosper and they must prevail. Thank you.
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