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The Fiscal Revolution in America: A Reinterpretation

Published online by Cambridge University Press:  21 June 2018

James Hillyer
James Hillyer*
Affiliation:
University College London
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Abstract:

Between the 1930s and early 1960s, U.S. economic policy underwent an important transformation, described by economist Herbert Stein as “The Fiscal Revolution in America.” During those years, policymakers utilized Keynesian ideas to promote prosperity, and the fiscal revolution reached its peak after John F. Kennedy proposed a growth-boosting tax cut despite the unprecedented peacetime consequence of running a deficit in nonrecession conditions. This article explores how that revolution developed during the postwar period. It challenges the argument that the business community shaped and consolidated the fiscal revolution in the late 1950s and early 1960s. Instead, this article shows that liberal economists played a crucial role in fashioning Keynesianism’s postwar consolidation, so much so that the brand of that doctrine implemented in the early 1960s owed much to their efforts and was significantly different to the one championed by the business community.

Keywords

KeynesianismLiberalismWalter HellerJohn F. KennedyNew Economics
Type
Article
Information
Journal of Policy History , Volume 30 , Issue 3 , July 2018 , pp. 490 - 521
Copyright
Copyright © Donald Critchlow and Cambridge University Press 2018 

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References

NOTES

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17. Morgan, Deficit Government, 39. As Price Fishback noted, measured in GNP terms these deficits were insignificant compared with those that underwrote the far more prosperous postwar era. See Fishback, , “The New Deal,” in Government and the American Economy: A New History, ed. Fishback, et al. (Chicago, 2007), 390–92.Google Scholar For further analysis, see Cary Brown, E., “Fiscal Policy in the Thirties: A Reappraisal,” American Economic Review 46, no. 5 (December 1956): 857–79.Google Scholar

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20. Roosevelt, “State of the Union Message to Congress,” 11 January 1944, APP.

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24. Hansen, After the War—Full Employment, 1–19; and “The Post-War Economy,” 14–15.

25. Margaret Weir and Theda Skocpol, “State Structures and Social Keynesianism: Responses to the Great Depression in Sweden and the United States,” International Journal of Comparative Sociology 24 (March 1983): 4–29.

26. For insightful contemporary analysis of the Full Employment bill, see Patton, James G., “A Plan for Prosperity,” New Republic (November 1944), 587.Google Scholar

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28. Bailey, Stephen, Congress Makes a Law: The Story Behind the Employment Act of 1946 (New York, 1950), 129–49;Google Scholar Collins, The Business Response to Keynes, 100–109.

29. Harry Truman, “Statement by the President upon Signing the Employment Act,” 20 February 1946, APP.

30. Collins, The Business Response to Keynes, 109; Robert Brazelton, W., Designing U.S. Economic Policy: An Analytical Biography of Leon H. Keyserling (Basingstoke, 2001), 21.CrossRefGoogle Scholar

31. Brazelton, Designing U.S. Economic Policy, 21; Norton, Hugh, The Employment Act and the Council of Economic Advisors, 1946–1976 (Columbia, Mo., 1977), 100.Google Scholar

32. James Loeb, “Draft Letter to President Truman,” 7 February 1946, Americans for Democratic Action Papers (hereafter ADA Papers), Reel 6, British Library (hereafter BL).

33. Davis, “Politics of Prosperity,” 14.

34. They both used different terms to define postwar Keynesianism, with Stein describing “commercial Keynesianism” as “misleading” because it implied the business community in general tamed postwar Keynesianism (for him, the CED consisted of “businesspeople outside the mainstream of the business community”). However, both “commercial Keynesianism” and “domesticated Keynesianism” still denoted the importance both afforded progressive business leaders in shaping a watered-down iteration of postwar Keynesianism. Thus, the use of different terminology pertained to a minor disagreement regarding who exactly in the business community outside the CED was important to this. For further discussion, see Zelizer, Julian, Taxing America: Wilbur D. Mills, Congress, and the State, 1945–1975 (Cambridge, 1998), 149 n.6;Google Scholar Stein, , “The Fiscal Revolution in America, part II: 1964–1994,” in Funding the Modern American State, 1941–1995: The Rise and Fall of the Era of Easy Finance, ed. Elliot Brownlee, W. (New York, 1996), 195n.Google Scholar Economist Robert Lekachman coined the phrase “commercial Keynesianism” in The Age of Keynes (New York, 1966), 287, and Collins embraced it in The Business Response to Keynes, 17. Stein’s quote in the main body is from page 227 of The Fiscal Revolution in America. For similar sentiment from Collins, see The Business Response to Keynes, 115–209. This article adopts the phrase “commercial Keynesianism” as it is arguably more common in the scholarly literature on postwar political economy.

35. Stein, The Fiscal Revolution in America, 227.

36. Collins, The Business Response to Keynes, 85. For a short while too (in 1944–45), under the leadership of Eric Johnston, COCUS recognized the utility of deficits as a device to counter recessions, before reverting to balanced-budget principles in the postwar era under new leadership. See Johnston, Eric, America Unlimited (New York, 1944), 140–41.Google Scholar

37. Committee for Economic Development (hereafter CED), Taxes and the Budget: A Program for Prosperity in a Free Economy (Washington, D.C., 1947).

38. CED, Monetary and Fiscal Policy for Greater Economic Stability (Washington, D.C., 1948);Google Scholar and Flexible Monetary Policy (Washington, D.C., 1953).

39. See, for example, Paul Samuelson, “Built-in Stabilizers of Our Economy,” The Reporter, 17 February 1953, 13–15; and Walter Heller, “Lectures on the Federal Budget and Taxes: Process, Prospects and Policy,” School of Banking, University of Minnesota, 27 and 28 August 1953. Copy in Hugh Gaitskell Papers (hereafter Gaitskell Papers)/C/100.22, University College London Special Collections, National Archives, Kew, UK (hereafter NAK).

40. Stein, The Fiscal Revolution in America, 227.

41. Ibid.

42. Ibid., 240.

43. Stein, , Presidential Economics: The Making of Economic Policy from Roosevelt to Clinton (Washington, D.C., 1994), 81.Google Scholar Discussing the stabilizing budget policy, Stein claimed, “The Keynesian economists thought it was pretty good for a group of businessmen and a refreshing advance beyond traditional budget balancing. But they regarded the policy as still inadequate to the goal of full employment and an insufficient acceptance of modern economic analysis.”

44. Schriftgiesser, Karl, Business and Public Policy: The Role of the Committee for Economic Development, 1942–1967 (Englewood Cliffs, N.J., 1967), 30.Google Scholar

45. For the Princeton Manifesto, see Bowen, Howard et al., “Federal Expenditure and Revenue Policy for Economic Stability,” American Economic Review 39, no. 6 (December 1949): 1263–68.Google Scholar For the quotations, see Spulber, Nicolas, Managing the American Economy from Roosevelt to Reagan (Indianapolis, 1989), 33.Google Scholar

46. See Collins, , The Business Response to Keynes, 127, 152–58;Google Scholar Stein, , The Fiscal Revolution in America, 238–40, 292–308;Google Scholar and Presidential Economics, 80.

47. Stein, The Fiscal Revolution in America, 242–80; CED, Monetary and Fiscal Policy for Greater Economic Stability; and Flexible Monetary Policy.

48. Stein, The Fiscal Revolution in America, 372–421; Presidential Economics, 80, 105–08; Collins, The Business Response to Keynes, 173–209.

49. Collins, The Business Response to Keynes, 178.

50. Ibid., 186–87; Stein, The Fiscal Revolution in America, 417–20.

51. Arthur Okun, “Measuring the Impact of the 1964 Tax Reduction,” Remarks before the American Statistical Association, Philadelphia, Pennsylvania, 10 September 1965. Copy in Walter Heller Papers (hereafter Heller Papers), Box 4, John F. Kennedy Presidential Library (hereafter JFKL).

52. Morgan, Deficit Government, 95.

53. Stein, The Fiscal Revolution in America, 3.

54. Collins, The Business Response to Keynes, 199–200. Despite making these assertions, both Collins and Stein did little to outline who held this widespread belief.

55. Morgan, “The Keynesian Consensus and its Limits,” 86–108; and Beyond the Liberal Consensus, 8–12; Hodgson, In Our Time, 75–89.

56. Collins, More, 40–98; and “Growth Liberalism in the Sixties,” 11–45.

57. Sobel, Robert, The Worldly Economists (London, 1980), 18–20.Google Scholar

58. Collins, More, 18. This passage of Collins’s text credits Chester Bowles for first focusing the nation’s attention on the economy’s potential, but it is obvious from later passages that Keyserling deserves the most credit for infusing pro-growth ideas into policy discussion.

59. Brazelton, Designing U.S. Economic Policy, 18; Sobel, The Worldly Economists, 19.

60. Brazelton, Designing U.S. Economic Policy, 18, 84, 93, 134, 145–46.

61. Leon Keyserling, “For ‘A National Prosperity Budget,’” New York Times, 9 January 1949, SM7. PQHN.

62. Keyserling, , “Deficiencies of Past Programs and Nature of New Needs,” in Saving American Capitalism: A Liberal Economic Program, ed. Harris, (New York, 1948), 91.Google Scholar

63. Whereas the full-employment proposals the social Keynesians called for would have been mandatory if enacted.

64. Morgan, “The Keynesian Consensus and Its Limits,” 100–101.

65. Stein, The Fiscal Revolution in America, 197–240.

66. In 1946, for example, the former head of the Office of Price Administration, Chester Bowles, argued the government should make full use of the nation’s productive capacity to achieve a $200 billion economy (in GNP terms). See Howard Schaffer, Chester Bowles: New Dealer in the Cold War (Cambridge, Mass., 1993), 20–21.

67. Richard Lester, “Truman Economics—1950 Model,” New Republic (January 1950), 11–13. See also The Economic Report of the President, 1950 (Washington, D.C., 1950), 78.

68. Norton, The Employment Act and the Council of Economic Advisors, 122.

69. The Economic Report of the President, 1950, 6–8.

70. For more on this, see Hamby, Alonzo, Beyond the New Deal: Harry S. Truman and American Liberalism (London, 1973), 293–310.Google Scholar

71. Griffith, Robert, “Dwight D. Eisenhower and the Corporate Commonwealth,” American Historical Review 87, no. 1 (February 1982): 87–122.CrossRefGoogle Scholar

72. See Morgan, , “Managing the Economy,” in A Companion to Dwight D. Eisenhower, ed. Pach, Chester (Hoboken, N.J., 2017), 235.Google Scholar

73. “Historical Tables of the President’s Budget.”

74. See Holmans, A. E., United States Fiscal Policy, 1945–1959: Its Contribution to Economic Stability (London, 1961), 211–42;Google Scholar and Lewis, Wilfred Jr., Federal Fiscal Policy in the Post-War Recessions (Washington, D.C., 1962), 131–87.Google Scholar Both cited in Morgan, “Managing the Economy,” 235. See also Stein, The Fiscal Revolution in America, 305–6.

75. See Keyserling, “Eisenhower’s Program for America,” New Republic (February 1954), 6; and “Full Employment,” in Guide to Politics, ed. Quincy Howe and Arthur M. Schlesinger Jr. (New York, 1954), 11–13.

76. Economic Report of the President, 1955 (Washington, D.C., 1955), 22.

77. Heller, “‘Observations on Federal Tax and Fiscal Policy in 1955,’ Notes for Panel Discussion on Fiscal Policy Before the Congressional Joint Economic Committee on the Economic Report, January 28, 1955, Washington, D.C., Submitted in accordance with the invitation of the Chairman, Senator Paul A. Douglas,” Gaitskell Papers/C/100.23. NAK; and “Observations on Federal Fiscal Policy in the United States, 1955,” Statement Before the Joint Economic Committee. Reprinted in the Canadian Tax Journal 3, no. 2 (1955): 81–86. The latter was an edited reprint of Heller’s testimony. Gaitskell Papers/G/Economics. NAK.

78. See Heller, “The Economic Setting for Health and Welfare in the Sixties,” Address at the Annual PCA Conference, Harrisburg, 1 November 1960, John F. Kennedy Presidential Papers, President’s Office Files (hereafter POF), Box 73, JFKL; and “An Economic Forecast for the Sixties,” Address to the Annual Forum of the National Conference on Social Welfare, Atlantic City, New Jersey, 6 June 1960, Walter Heller Papers (hereafter Heller Papers), Box 8, University of Minnesota Archives (hereafter UM). See also Sobel, The Worldly Economists, 124.

79. Heller, “Observations on Federal Fiscal Policy,” 81–86.

80. Heller, “Economic Growth: Challenge and Opportunity,” Speech at the Loeb Awards, New York, 18 May 1961, POF, Box 73, JFKL.

81. Stein, The Fiscal Revolution in America, 310.

82. For further elaboration, see Heller, Memorandum for Robert D. Calkins and Richard Goode, “Some Thoughts on a Study of the Federal Tax Crediting Device,” 18 September 1959, Heller Papers, Box 8, UM.

83. Heller, “The Impact of Federal Fiscal and Monetary Policies on State and Local Governments,” Statement Before the Joint Economic Committee, 1 February 1957, Heller Papers, Box 4, UM.

84. Later referred to as “revenue-sharing,” Heller outlined this idea in a 1957 article. See “US Budget Surpluses and Tax Policy,” Canadian Tax Journal 5 (Summer 1957), cited in Welborn, David M. and Burkhead, Jesse, Intergovernmental Relations in the American Administrative State: The Johnson Presidency (Austin, 1989), 289 n.4.Google Scholar A higher growth rate would also cause state-local revenues to increase naturally, which is another reason Heller favored stronger growth.

85. Heller, “The Impact of Federal Fiscal and Monetary Policies on State and Local Governments.”

86. This compared to a Korean War–affected rate of 4.7 percent in the early 1950s. See Morgan, “Managing the Economy,” 229.

87. Pechman, Joseph, “Walter Heller, 1915–1987,” Brookings Papers on Economic Activity 18, no. 2 (1987): ix.Google Scholar

88. Heller, “CED’s Stabilizing Budget Policy After Ten Years,” American Economic Review 47, no. 5 (September 1957): 634 n.2.

89. Ibid., 644–45 (645).

90. Ibid., 637.

91. Heller, Memorandum for the Files, “Conversation with Senator Kennedy on Economic Issues,” 4 October 1960, Heller Papers, Box 4, JFKL.

92. Eisenhower, Dwight D., The White House Years: Waging Peace, 1956–1961 (London, 1966), 310.Google Scholar

93. “Historical Tables of the President’s Budget.”

94. See Sloan, John, Eisenhower and the Management of Prosperity (Lawrence, Kans., 1991);Google Scholar and McClenahan, William M. and Becker, William H., Eisenhower and the Cold War Economy (Baltimore, 2011).Google Scholar Interestingly, Sloan commended Eisenhower’s attempt to balance the FY 1960 budget, describing it as “the most remarkable budget achievement in the history of the United States” (80). A more qualified assessment of Eisenhower’s economic management is Morgan, Eisenhower Versus “The Spenders”: The Eisenhower Administration, the Democrats, and the Budget, 1953–60 (London, 1989).

95. Bach, George L., Making Monetary and Fiscal Policy (Washington, D.C., 1971), 102.Google Scholar

96. Heller, Excerpts from “A Positive Approach to Economic Policy,” Address to the Annual Convention of the Independent Bankers Association, Denver, 25 May 1960, Heller Papers, Box 9, UM.

97. Heller, “Observations on Federal Fiscal Policy,” 83.

98. Ibid.

99. In his 1955 Joint Economic Committee testimony, Heller remarked that “tax reduction can help to put $20 million of unused resources to work and thus help the United States to realize its full economic potential” (ibid., 84). See also Heller, “Economic and Fiscal Outlook,” Statement for Spring Management Conference, Chicago, 19 May 1958, Heller Papers, Box 5, UM. For Keyserling’s views, see the following reports that he penned for the Conference on Economic Progress, a liberal think tank he founded and chaired in the 1950s: The “Recession”: Cause and Cure (Washington, D.C., 1958); Inflation: Cause and Cure (Washington, D.C., 1959); and The Federal Budget and “the General Welfare” (Washington, D.C., 1959)

100. See Arthur Upgren, “Will Heller Urge Trying Tax Cuts?” Minneapolis Star, 26 December 1960, n.p., copy in Heller Papers, Box 9, UM; and “How Affluent Will the Sixties Be?” Paper given at Annual Meeting of the Midwest Economics Association, 28 April 1960, copy in Heller Papers, Box 9, UM. For Schultze’s views, see his statement before the Joint Economic Committee, December 1960, in Current Economic Situation and Short-Run Outlook, 86th Cong., 2nd sess. (Washington, D.C., 1961), 114–31. See also Davis, “Politics of Prosperity,” 45–48, 51–52.

101. Schultze, Statement before the Joint Economic Committee, 121. For an example of other Keynesians using this concept, see Cary Brown, “Fiscal Policy in the Thirties: A Reappraisal,” 857–79; Heller, Memorandum for the Files, “Conversation with Senator Kennedy on Economic Issues”; and Upgren, “Will Heller Urge Trying Tax Cuts?”

102. Schultze, Statement before the Joint Economic Committee, 114–31.

103. Stein, The Fiscal Revolution in America, 364–65; Davis, “Politics of Prosperity,” 46.

104. For Harris’s views, see “Transcript: Hyannis Economics Conference,” 3 August 1960, John F. Kennedy Pre-Presidential Papers, Presidential Campaign Files, 1960, Box 1052, JFKL; and Harris, Memorandum for Archibald Cox, “Re: Some Ideas and Material for Senator Kennedy’s Speech on Growth,” 19 July 1960, Democratic National Committee Papers, 1960 Campaign (hereafter DNC-1960 Papers), Box 205, JFKL. For Lester’s views, see Lester, “Suggestions for Improving Economic Growth,” Summer 1960, DNC-1960 Papers, Box 205, JFKL.

105. See John Kenneth Galbraith, “Fiscal Policy and Economic Prospect,” Statement before the Joint Economic Committee, 28 January 1955, copy in Heller Papers, Box 5, UM. Galbraith also argued that Americans had wasted too much wealth on private consumption. This necessitated the use of discretionary measures to redistribute private consumption to the public sector. See Galbraith, The Affluent Society (London, 1958).

106. Tobin, James, “Defense, Dollars, and Doctrines,” Yale Review, no. 47 (March 1958), reprinted in Tobin, National Economic Policy (New Haven, 1966), 57.Google Scholar

107. Ibid., 68–69.

108. Tobin, Memorandum for Richard Goodwin, “Growth, Full Employment and Inflation,” 16 June 1960, James Tobin Papers, Box 1, JFKL.

109. Ibid. See also Tobin, “Growth Through Taxation,” New Republic (July 1960), 15–18; and “The Need for Faster Economic Growth,” 14 June 1960 (attached to ibid). For Samuelson’s views, see “The Growth of the Economy: Views of Prof. Paul Samuelson,” Summer 1960, DNC-1960 Papers, Box 205, JFKL.

110. Importantly, unlike Tobin, both Eckstein and Douglas primarily viewed high taxes as essential to curb inflation rather than to control consumption. For Eckstein’s views, see Staff Report on Employment, Growth, and Price Levels, 86th Cong., 1st sess. (Washington, D.C., 1959), 422. For Douglas’s, see his and Howard Shuman’s article “Growth Without Inflation,” New Republic (September 1960), 16–22.

111. Collins, , The Business Response to Keynes, 173–77;Google Scholar Stein, , The Fiscal Revolution in America, 335.Google Scholar

112. See “‘Anti-Recession Policy for 1958,’ A Statement by the Program Committee of the Committee for Economic Development,” March 1958, ADA Papers, Reel 92, BL.

113. Davis, “Politics of Prosperity,” 37 n.60.

114. Stein, Herbert and Denison, Edward, “High Employment and Growth in the American Economy,” in Goals for Americans: Programs for Action in the Sixties, ed. Wriston, Henry et al. (New York, 1960), 189–90.Google Scholar

115. Heller, “Taxes and the State of the Economy,” Challenge 12, no. 8 (May 1964): 22. See also Collins, The Business Response to Keynes, 190.

116. Indeed, although he features in much of the key literature on economic policy in the early 1960s, these works often portray Heller as a secondary actor. See, for example, Bernstein, Irving, Promises Kept: John F. Kennedy’s New Frontier (New York, 1991), 118–57;Google Scholar Guns or Butter: The Presidency of Lyndon Johnson (New York, 1996), 27–43, 82–117; Matusow, Allen, The Unraveling of America: A History of Liberalism in the 1960s (New York, 1984), 1–59, 97–131, 153–80;Google Scholar and Norton, , The Employment Act and the Council of Economic Advisors, 170–91.Google Scholar

117. Heller, Memorandum for the President, “The Economics of the Second-Stage Recovery Program,” 17 March 1961, POF, Box 73, JFKL.

118. The Bretton Woods agreement of 1944 had fixed the dollar to the price of gold (at $35 an ounce) to ensure that the United States could flood postwar world markets with a strong currency and a steady flow of liquidity. This enabled foreigners to build up substantial dollar surpluses by 1960, to the extent that any hint that the United States would deploy activist measures to spur its economy sparked concerns among foreign-dollar holders that this would trigger a balance-of-payments crisis and prompt dollar devaluation. In turn, they threatened to cash in their dollars for gold. For more on this, see Davis, “Politics of Prosperity,” 64–73.

119. Morgan, Deficit Government, 87–88. Importantly, the findings of a task-force investigation overseen by Allan Sproul, the former chair of the New York Federal Reserve, helped heighten JFK’s concerns about this issue. See “The Economic Situation and the Balance of Payments,” in Hearings Before the Joint Economic Committee on the January 1961 Economic Report, 87th Cong., 1st sess. (Washington, D.C., 1961), 722. Second, the efforts of Treasury Secretary Douglas Dillon, who missed few opportunities in early 1961 to remind the president that fiscal activism could create a run on gold, also heightened JFK’s concerns. See Heller, “Handwritten Minutes of Cabinet Meeting, 26 January 1961,” Heller Papers, Box 6, JFKL.

120. For contemporary discussion, see No Name (hereafter n.n.), “Wooing Support from Business,” BusinessWeek, 18 February 1961, 23. For further elaboration, see Matusow, The Unraveling of America, 33.

121. Matusow, The Unraveling of America, 45; Schlesinger, Arthur M. Jr., A Thousand Days: John F. Kennedy in the White House (London, 1965), 543;Google Scholar and Sorensen, Theodore, Kennedy (London, 1965), 395, 399.Google Scholar

122. For Heller’s activities on this score, see Davis, “Politics of Prosperity,” 146–51.

123. As Heller put it, he was “proud of getting presidential approval” for the 1962 Economic Report. Heller to Andreas Papandreou, 29 January 1962, Heller Papers, Box 49, JFKL.

124. As Tobin later noted, the term “new economics” first appeared in reference to Heller and the Kennedy administration on 16 July 1962, in a Newsweek article. Tobin, The New Economics: A Decade Older (Princeton, 1972), 7. What was essentially “new” about the “new economics” was the willingness of its proponents to sanction the use of a deficit even though the economy was not in a recession.

125. Economic Report of the President, 1962 (Washington, D.C., 1962), 46.

126. Schultze, Statement in Current Economic Situation and Short-Run Outlook, 86th Cong., 2nd sess., 114–31. For evidence of other Keynesians using this concept, see Heller, Memorandum for the Files, “Conversation with Senator Kennedy on Economic Issues”; and Upgren, “Will Heller Urge Trying Tax Cuts?”

127. Economic Report of the President, 1962, 78–83.

128. Collins, The Business Response to Keynes, 173. In his study, Collins later acknowledged that Heller did play an important role in utilizing the full-employment surplus concept, but he downplayed Heller’s contribution by stressing how this was a concept familiar to the business community, which had recognized the potential of a high employment surplus under the stabilizing budget policy as early as the late 1940s. See 189–90. This, however, neglects how vigorously liberal economists pioneered the concept in the early 1960s.

129. Stein, The Fiscal Revolution in America, 414.

130. Tobin, The New Economics, 9.

131. Economic Report of the President, 1962, 50.

132. Bernstein, Michael, A Perilous Progress: Economists and Public Purpose in Twentieth-Century America (Princeton, 2001), 134–35.Google Scholar

133. Heller, , “Kennedy Economics Revisited,” in Economics in the Public Service: Papers in Honor of Walter W. Heller, ed. Pechman, and Simler, N. J. (New York, 1982), 240–46.Google Scholar Importantly, this helps to refute the argument that the 1964 tax cut was a supply-side measure akin to that passed by Ronald Reagan in 1981, something advanced by several scholars. See Domitrovic, Brian, Econoclasts: The Rebels Who Sparked the Supply-Side Revolution and Restored American Prosperity (Wilmington, Del., 2009), 64–73;Google Scholar and Winant, Howard, Stalemate: Political Economic Origins of Supply-Side Policy (New York, 1988), xi.Google Scholar

134. Economic Report of the President, 1962, 12, 26, 62, 65, 106, 132, 160–62.

135. Ibid., 118–20, 190. For more on the development of Human-capital theory and the way in which liberal economists pioneered it in both the late 1950s and the early 1960s, see Biddle, Jeff and Holden, Laura, “Walter Heller and the Introduction of Human Capital Theory into Education Policy,” November 2014, https://liberalarts.utexas.edu/_files/ms37643/Holden-Biddle_for_Hamerama.pdf.Google Scholar See also Brauer, Carl, “Kennedy, Johnson, and the War on Poverty,” Journal of American History 69, no. 1 (June 1982): 107.CrossRefGoogle Scholar

136. Economic Report of the President, 1962, 188–90.

137. Stein, The Fiscal Revolution in America, 383.

138. Shreve, “A Precarious and Uncertain Liberalism,” 248.

139. Economic Report of the President, 1962, 6, 86–91.

140. See Seib, Charles B., “The Mild-Eyed Liberals: David Bell and Walter Heller,” in The Kennedy Circle, ed. Tanzer, Lester (Washington, D.C., 1961), 102.Google Scholar

141. Heller, Memoranda for the President, “Details on Federal Reserve Operations and Policy,” and “Interest Rates,” both 30 January 1961, POF, Box 73, JFKL.

142. See Heller, , Interview in The President and the Council of Economic Advisers: Interviews with CEA Chairmen, ed. Hargrove, Erwin C. and Morley, Samuel A. (London, 1984), 172.Google Scholar

143. See, for example, Heller, Memorandum for the President, “Paris Report No. 1: Why Europe Grows Faster than the U.S.,” 5 May 1961, Heller Papers, Box 5, JFKL; Heller, Memorandum for the President, “What It Takes to Get to Full Employment,” 3 March 1962, Kermit Gordon Papers (hereafter Gordon Papers), Box 38, JFKL; Heller, Memorandum for the President, “The Slowdown in the Recovery and Its Implications for Policy,” 21 March 1962, Gordon Papers, Box 38, JFKL; Heller, Memorandum for the President, “What Does Western Europe Have That We Don’t Have?” 3 March 1962, POF, Box 74, JFKL; Heller, Memorandum for the President, “Report on Rome Monetary Conference (of the American Bankers Association),” 20 May 1962, POF, Box 74, JFKL; Heller, Memorandum for the President, “The Future of the Dollar,” 15 September 1961, Gordon Papers, Box 38, JFKL; Heller, Memorandum for the President, “The Balance-of-Payments Dilemma,” 28 November 1961, Heller Papers, Box 16, JFKL.

144. See Heller, Memorandum for the President, “What It Takes to Get to Full Employment”; and Heller, Memorandum for the President, “The Slowdown in the Recovery and Its Implications for Policy.”

145. See Morgan, Deficit Government, 91–92.

146. As Theodore Sorensen told Kennedy, it was pointless “to appease those who will never support us.” Sorensen, “The Kennedy Administration and Business,” 20 June 1962. Theodore Sorensen Papers (hereafter Sorensen Papers), Box 29, JFKL.

147. See Matusow, The Unraveling of America, 47; Morgan, Deficit Government, 91–92; Sobel, The Worldly Economists, 130–31; Bernstein, Promises Kept, 146; and Davis, “Politics of Prosperity,” 249–52.

148. Stein, The Fiscal Revolution in America, 408–11; Presidential Economics, 105. See also McQuaid, Uneasy Partners, 120.

149. n.n., “Report on Meeting with President Kennedy in White House on 23rd May 1962,” no date, Heller Papers, Box 21, JFKL.

150. Ibid.

151. Cited in Heller, Memorandum for the President, “Care and Feeding of Inflation,” 8 May 1962, Gordon Papers, Box 38, JFKL.

152. Heller, Memorandum for the President, Untitled, 26 May 1962, POF, Box 74, JFKL.

153. Tobin, The New Economics, 24.

154. Kennedy, “Commencement Address at Yale University,” 11 June 1962, APP.

155. Kennedy, “Radio and Television Report to the American People on the State of the National Economy,” 13 August 1962, APP.

156. Collins, The Business Response to Keynes, 179; and Stein, The Fiscal Revolution in America, 412–21; and Presidential Economics, 106.

157. Kennedy, “Address and Question and Answer Period at the Economic Club of New York,” 14 December 1962, APP.

158. Heller and Kermit Gordon, Interview with Larry Hackman and Pechman, 14 September 1972, 60, JFKL, Oral History Collection. In this, Heller was reading from handwritten notes he made on the day before JFK’s Economic Club of New York address.

159. Ibid., 60.

160. See Heller, , New Dimensions of Political Economy (Cambridge, Mass., 1966), 35.CrossRefGoogle Scholar

161. Collins, The Business Response to Keynes, 180–87; Stein, The Fiscal Revolution in America, 412–14.

162. Heller and Gordon, Interview with Hackman and Pechman, 60.

163. Gordon, “Notes on Meeting with the President, Friday 28 September 1962,” 29 September 1962, Heller Papers, Box 6, JFKL.

164. Ibid.

165. As James Giglio noted, Kennedy’s attempt to build bridges with business started as far back as the aftermath of the steel price fiasco and the stock market crash. However, it continued and gained momentum throughout the fall of 1962. Giglio, , The Presidency of John F. Kennedy (Lawrence, Kans., 2006), 134–35.Google Scholar

166. Heller, Memorandum for Pierre Salinger, “Suggested Talking Points for Opening Remarks at the White House Conference of Business Editors and Publishers,” 25 September 1962, Heller Papers, Box 33, JFKL; Heller, “Address to the National Association of Business Economists, Washington, D.C.,” 26 October 1962, Heller Papers, Box 33, JFKL; “Address to 49th Annual Convention of the Mortgages Bankers Association,” 1 October 1962, Heller Papers, Box 11, JFKL; and Letter to Malcom Forbes, October 1962, Heller Papers, Box 11, JFKL.

167. Heller, “Fiscal and Monetary Policy for Economic Stability and Growth,” Address to the Conference on Fiscal and Monetary Policy of the President’s Advisory Committee on Labor-Management Policy, 14 November 1962, Heller Papers, Box 34, JFKL; Heller, Memorandum for the President, “Business Views on the Economic Outlook and Tax Cuts,” 10 November 1962, Gordon Papers, Box 38, JFKL; Heath, Jim, John F. Kennedy and the Business Community (London, 1969), 19;Google Scholar Heller, “Why We Must Cut Taxes,” Nation’s Business (November 1962), 40, Heller Papers, Box 22, JFKL.

168. Schlesinger Jr., A Thousand Days, 565. Schlesinger’s comment was actually made in reference to the fact that Heller started making overtures toward the business community earlier in 1962, but it is also equally applicable to the CEA chairman’s efforts in the latter part of that year.

169. Ibid., 565. For more on Heller’s efforts, see Rowen, Hobart, The Free Enterprisers: Kennedy, Johnson, and the Business Establishment (New York, 1964), 124.Google Scholar

170. Henry Bund to Heller, 31 October 1962, Heller Papers, Box 33, JFKL. For similar views from another businessman on Heller’s efforts, see R. J. Eggert to Heller, 30 November 1962, Heller Papers, Box 48, JFKL.

171. Sorensen, Kennedy, 430.

172. Kennedy, “Address and Question and Answer Period at the Economic Club of New York.”

173. n.n., “Executives Applaud Kennedy’s Tax Speech,” Wall Street Journal, 17 December 1962, 3; Hans Widenmann to Heller, 28 December 1962, Heller Papers, Box 50, JFKL.

174. Gordon, Memorandum for the President, “More on CED Tax Proposals,” 10 October 1962, Gordon Papers, Box 38, JFKL. For Heller’s opposition to FY 1964 budget reductions, see the CEA document, “The Treasury’s Tax Cut Proposals,” 3 December 1962, Sorensen Papers, Box 40, JFKL.

175. Collins, The Business Response to Keynes, 180–88.

176. Ibid., 178–79 (quotation); Stein, The Fiscal Revolution in America, 385–97. Notably, this part of Stein’s study focused more on discussing the way the CEA sought to sell its ideas to the public in 1961–62, not JFK. Only later in his career did Stein show a greater appreciation of how the CEA educated Kennedy. See Presidential Economics, 89–108.

177. Cited in Giglio, The Presidency of John F. Kennedy, 121.

178. Heller, interview in Hargrove and Morley, The President and the Council of Economic Advisers, 197–98.

179. Bell, The Liberal State on Trial; Landon Storrs, The Second Red Scare and the Unmaking of the New Deal Left (Princeton, 2013); Badger, “Albert Gore Sr., Liberalism and the South in the 1960s,” 163; Brinkley, The End of Reform.

180. Delton, Rethinking the 1950s; Mattson, When America Was Great.