Home » John F. Kennedy, Peace Corps

John F. Kennedy, Peace Corps

John F. Kennedy was president during this time period and we were under Democratic leadership. Kennedy’s first year in office brought him considerable success in enacting new legislation. Congress passed a major housing bill, a law increasing the minimum wage, and a bill granting federal aid to economically depressed areas of the United States. The most original piece of legislation Kennedy put through Congress was the bill creating the Peace Corps, an agency that trained American volunteers to perform social and humanitarian services overseas.

The goal of the Peace Corps was to promote world peace and friendship with developing nations. However, after his initial success with Congress, Kennedy found it harder and harder to get his programs passed into law. Although the Democrats held a majority in both houses, Southern Democrats joined with conservative Republicans to stop legislation that they did not like. The Medicare bill was defeated, a civil rights bill and a bill to cut taxes were debated.

Kennedy wanted economist Robert C. Weaver to be the new secretary but this nomination was poorly received from Southern Congressman and representatives from mostly rural areas because weaver was a black man. Kennedy did win approval of a bill to lower tariffs allowing more competitive American trade abroad. Congress also authorized the purchase of $100 million in United Nations bonds, and the money made it possible for the international organization to survive financial crisis. The House Ways and Means Committee put off action on Kennedy’s revision of the tax laws in 1961.

Kennedy sent a message to Congress proposing various tax law reforms, some of them were also requested by former President Eisenhower. These tax adjustments were supposedly the first step to constructive reform. He would then send Congress a comprehensive tax reform program aiming to reverse the trend to preferential treatment of various groups by broadening the tax base and reconsidering the rate structure. To arouse additional spending for plant equipment and equipment by the U. S. industry, Kennedy proposed a tax credit for new investment.

Under the proposal if new equipment expenditures exceeded the depreciation allowance, a firm could deduct 15% of the excess, if equipment expenditures were in excess of one half of the depreciation allowance, they could deduct 6% of the excess. As a minimum credit a firm could deduct 10% of the first $5,000 of new investment. There was much opposition to this proposal in the business community but Kennedy argued its advantages over alternative incentives which were to cut in the corporation tax rate, because it would apply to individuals and partnerships as well as corporations.

A credit for all new investment would entail heavy revenue loss from those expenditures which would have been undertaken anyway or represent no new level of effort. As the U. S. national debt reached the highest fiscal year, 289,211,154,060. 05 in fiscal year 1961, congress responded to the President’s request and increased the national debt ceiling for 1962 from the permanent level of $285 billion to $298 billion. A bitter minimum wage battle ended in 1961 when Congress passed a landmark legislation both raising the hourly minimum and for the first time since 1938, extending the categories of coverage.

Kennedy came out on top with a major victory after an initial set back. Secretary of Labor said that the rate schedule was decided upon after careful study of the impact, the economic situation and the desirability of being certain the minimum rates will not adverely affect employment. Not all the 4. 3 million new employees to be covered by the bill would receive wage increases. A number of the newly protected workers who were paid less than $1 per hour would receive $242 million in increases during the first year and that by the fourth year the 1,665,000 workers currently earning less than $1. per hour would receive $896 million more.

There are some workers who were exempted from minimum wage and overtime provisions of the Federal Labor Standards Act. Kennedy proposed measures both to alleviate the distress arising from unsatisfactory performance of the economy and to stimulate economic recovery and growth. If economic development in the first quarter of that year indicate that additional measures are needed, he would promptly propose such measures. The potential of the American economy is constantly expanding. The labor force rose by 1. 5 percent per year.

Output per man rises annually by 2 percent as a result of new and better plant and equipment , modern technology, and improved human skills. These increases in manpower and productivity provide the base for a potential annual growth rate can and should be increased. A proposal was made to expand the nation’s investments in physical and human resources and in science and technology. Back then the economy had not realized even its present possible growth.

From the peak of the business cycle in the second quarter of 1950 to the top of the anemic recovery seven years later, gross national product grew only at an annual rate of 2. ercent. Failure to use our full capacity is the urgent economic problrem of the day. In the 1960’s, the American economy produced $503 billion of output when it was capable of producing at least $535 billion of output could have been 8 percent higher than it was. More than a million and a half unemployed ,over one third of all employed could have had jobs. The performance of the economy in the 1960’s was not only well below its full capacity but it fell short of the levels expected by the previous administration.

This could have been accomplished with readily available manpower, materials and machines, without straining productive capacity and without igniting inflation. If the economy were operating at full capacity, the existing federal revenue system would yield more than $90 billion in fiscal year 1962, instead of the 82. 3 billion now estimated, producing a large budget surplus and permitting retirement of national debt as well as the further development of federal programs to meet urgent national needs.

Debt retirement at high employment contributes to economic growth by releasing savings for productive investment by private enterprise and state and local governments. Kennedy proposed a program designed to fulfill our responsibility to alleviate distress and speed recovery, both through benefits directly available to needy persons and through desirable fiscal effects on the economy. They will sustain consumer spending and increase aggregate demand now when the economy is slack.

Many of these expenditures will automatically cease when high employment and production are restored. Both full recovery and economic growth require expansion of expenditures for business plant and equipment, for state and local governmental facilities, and for residential construction. To increase the flow of credit for these proposed, long term interest rates should decline. Futher decline in short term interest rates, under the conditions at that time, would lead to a further outflow of funds abroad, adding to the deficit in our balance of payments.

That would be particularly unfortunate at the present time, just as falling rates abroad have been narrowing the gap between our rates and those in other countries. In these circunstances, monetary policy and debt management must serve two apparently contradictory objectives. Kennedy emphasized that the solution to the economic problem requires a program that goes well beyond anti recession measuresm impoprtant as these are to the relief of distress and reversal of economic decline. Also important are measures for the longer pull to restore our economy to its full potential and to accelerate economic growth.

The measures to overcome recession, to take up the slack and to speed growth all reinforce each other. Most industries have the facilities to produce well above current levels. They lack only customers. As a nation, we lose not only $30 to $40 billion of production per yaer. We also lose vital incentives which capacity operation gives for expansion and modernization of plant and equipment. He proposed to reduce unemployment and stimulate markets will help to restore these incentives for economic growths.

Rapid technological change is resulting in serious employment dislocations, which deny us the full stimulus to growth which advancing technology makes possible. Labor and industry have demostrated cooperative initiative in working out solutions in specific plants and industries. Governmrnt action is also necessary not only to maintain an environment favorable to economic growth, but also to deal with special problem in communities and industries suffering from econmic dislocations and to help those who through unemployment are bearing an unfair share of the technological change.

Government can further help by encouraging labor and management to find ways to smooth the adjustment to technological change and thus to maintain and reenforce the favorable attitude toward economic progress that characterizes American business and labor alike. The economy was performing poorly when Kennedy took office. Just how poorly was a matter of dispute which often followed party lines. Within a matter of days in January 1961, former President Eisenhower and President gave Congress widely differing views of the state of the economy, the former cautiously optimistic, the latter pessimistic.

It was clear by the end of 1961 that the economy was picking up, although unemployment persisted near 7% until November and the continuing balance of payments deficit and gold loss caused concern. Despite the pick up, debate continued throughout the year about several important long-term problems affecting the U. S. economy. A relatively slow rate of economic growth compared with many other Western nations, the precarious state of price stability, the persistent problem of the U. S. ternational balance of payments and the continuing high rate of unemployment characterized by the tendency for unemployment to level off at a higher rate after each recession than before.

An additional problem was the widespread existence of pockets of especially heavy unemployment to which the 1961 Area Redevelopment Act had been addressed, caused in some cases by the decline of an industry, in others by decreased use of manpower as a result of technological innovation, in still others by the general economic underdevelopment of a region..

Kennedy in his first economic report told Congress that the American economy in 1961 regained its momentum and the recovery should carry the economy further toward full employment and full production in 1962. He used this report to amplify the economic philosophy that the Federal Government has a reponsibility to play an active role in fostering and sustaining the nation’s economic growth. The U. S. economy rebounded in 1961 not fron one recession but from two. Throughout the year the federal budget had played its proper role as a powerful instrument for promoting economic recovery.

Tax proposals were presented as a first step in reforming the U. S. tax system . The major uncertainty in the revenue picture was predicting how the nation’s GNP would perform over a period ending 18 months from the time the budget was submitted. Since corporate income in particular was extremely sensitive to GNP flucuations, the assumption that the nation’s output in goods and services would perform over a period ending 18 months from the time the budget was submitted.

Since corporate income in particular was extremely sensitive to GNP fluctuations, the assumptions that the nation output in goods abd services would increase at least 8 percent during fiscal 1963 was generally regarded as the most likely threat to the President’s precarious budget balance. Congress in 1963 was unable to complete action on an $11. 1 billionb omnibus tax reduction and reform bill, but passage appeared assuredly by summer 1964 or so. Tax revision was Kennedy’s top priority legisllative request in January, and shared that position with civil rights after mid-year.

The President’s tax program called for across the board reductions in personal and corporate income taxes and a variety of other reforms in the tax structure that would have reduced Government revenues by 10. 3 billion annually. Kennedy initially urged enactment by summer so that the tax cuts would be made effective beginning July 1. The impossibility of meeting this schedule became evident as the House Ways and Means Committee’s hearings on the proposals stretched from February to March. Weeks of executive sessions followed before the Committee began to make decisions on specific proposals.

The Committee did not finish drafting the bill until September. It was reported three days later and passed by the House by a roll call vote. Congress in 1963 failed to complete action an Administration backed bill establishing two programs to provide employment for youths aged 16 through 21. Although passed by the Senate and reported by the House Education and Labor Committee, the bill was blocked from reaching the House floor in 1963 by the House Rules Committee’s failure to grant it a rule for floor debate.

A similar Administration bill had suffered the same fate in 1962 in the House Rules Committee. The literature in economics during 1963 reflected policy questions of the day. Kennedy proposed tax cuts of $11,000,000,000 stimulated discussions concerning fiscal theory, and continuing deficits in the U. S. balance of payments focused attention on international liquidity. The notion that a tax cut is an effective weapon for raising the level of employment and economic growth stems from the fiscal theory that originated in the 1930’s as part of the macroeconomic analysis of J. M. Keynes.

Starting from the principle that employment and national income depend on total demand, which in turn depends on the sum of private and public spending, Keynes advocated increases in public expenditure to fill the gap left by private spending. In contrast with the Keynesian emphasis on increased public expenditure, the 1963 fiscal programs were signed to encourage private spending. Reduced personal income tax rates raise personal disposable income and enable individuals to use more for consumption; reductions in corporate income tax rates increase after tax profit rates and provide an incentive, for business to invest in planned equipment.

Deficit spending generates income and employment reduces the gap between potentila and actual cost of national production. In both formulations deficits are viewed as temporary since the rise in national income is expected to bring an increased yield which will eventually balance the government budget. In 1963 the President’s Council of Economic Advisors pointed out that recoveries from World War II had been characterized by progressively higher unemployment rates at the peak of successful expansions.

Kennedy’s speech in 1962 put forth the basic arguments for his still secret tax program that he and Administration spokesman were to repeat throughout 1963. The central problem in the economy was that our tax system then exerts too heavy a drag on growth. Slow economic growth and unused productive capacity since 1957 was proof of this excess in public expenditures. I think that Kennedy was an exceptional President and the economic contributions he made to our country are still appreciated today.

I think that for the minority population he stated an upward trend as it relates to more jobs, more minority appointments and the opportunity for black owned businesses. In spite of the resistence he encountered, he still perservered. Making structural changes in the tax system was a major complication in the administration’s tax program. Kennedy stressed the tax reform would be an important part of his program. When the economy remained sluggish there were some feelings that the administration might be willing to trade reform for early enactment of an economy stimulating tax cut.

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