Revitalizing the Domestic Economy
With the bad press behind him, Kennedy decided to focus on the domestic economy. On May 28, the stock market collapsed. Early in 1962, Kennedy had made a goal to lower the unemployment rate, and with the latest glitch in the economy, he set out to find a way to promote economic growth. He determined a tax cut was the best way to address the issue. He proposed to Congress that corporations receive a 40 percent tax cut and that individuals with taxable income in the mid-$30,000 range receive a 50 percent reduction. Today, $30,000 is equivalent to nearly $200,000.
Kennedy's proposed plan found little support from economists or the public, who were staunchly opposed to a national debt. Only 19 percent agreed with Kennedy's plan, while 72 percent overwhelmingly believed it was a dreadful proposal, but Kennedy defended his position. At a Yale University commencement ceremony, he proclaimed that Americans were held back by an old myth that deficits create inflation. The president argued that debt could create economic growth. Kennedy's arguments did little to persuade Congress to pass his tax cuts. When they adjourned for the summer break, opposition to it was strong.
HE SAID…
“It is hard as hell to be friendly with people who keep trying to cut your legs off…. There are about ten thousand people in the country involved in this — bankers, industrialists, lawyers, publishers, politicians — a small group, but doing anything they can to say we are going into a depression because business has no confidence in the administration.”
Kennedy appealed to Wilbur Mills of the House Ways and Means Committee, but to no avail. Mills told the president it would take a recession to bring Congress around. Kennedy also sought support from business leaders. During various receptions he inundated them with information about his tax cut plan and its benefit over the current outdated economic plan. The audience was much more receptive than Mills had been.
Although Kennedy realized that he had little hope of his tax cut passing until 1963, his Trade Expansion bill was a promising resolution to the potential devaluation of the dollar from the gold drain. The bill would give him the power to negotiate lower tariffs with European countries that were part of the Common Market and it would potentially increase U.S. exports. Kennedy believed this bill would help the economy by decreasing unemployment and by helping the national economy overall. Congress agreed and passed the bill in October.
