Kennedy (74 page)

Democrats in every state, Kennedy had unsurprisingly discovered in his pre-1960 campaign travels, favored the traditional party policy of liberalized trade only if their own state’s products were protected. The fragmentation of Congressional power along state and local lines made that body protectionist by nature, as he knew from the pressures on him as a Congressman. And in 1961 three Lou Harris Polls—in Florida, West Virginia and Illinois—had failed to find a majority supporting trade expansion.

The President in 1962 set out to get a majority. It is time we recognized, he said, that trade is “no longer a matter of local economic interest
but of high national policy.” He emphasized that the united Western economic might implicit in the bill would dwarf the Communists economically. “This bill,” he said, “by enabling us to strike a bargain with the Common Market, will ‘strike a blow’ for freedom.” Meeting frequently with those Senators and Congressmen concerned about particularly vulnerable commodities, he gradually built a majority in both houses without any compromise of principle or important loss of flexibility.

With the defeat of Republican attempts to strike out “adjustment assistance” and of all other crippling amendments, the bill passed virtually intact the same year it was offered. The following year, De Gaulle’s veto of Britain’s Common Market application slowed down progress toward Western unity and watered down the “down-to-zero” portion of the Act. Some insisted the administration should have fought for an amendment that took care of this contingency. But the President could not in 1962 have offered legislation assuming anything other than Great Britain’s acceptance, nor would he throw the whole subject open again in 1963 for a new set of Congressional pressures.

His authority over trade was still several times broader than any predecessor had enjoyed, and even as the new bargaining with Europe began—the “Kennedy round,” as the Europeans named it in 1963 somewhat to his discomfort—both our exports and our export surplus showed striking increases over their earlier levels. Nevertheless trade was only a long-range answer to the balance of payments problem. The Common Market was slow to lower its own tariff walls, particularly on agricultural products, where this country’s competitive advantages were great. (“Is the Grand Alliance going to founder on chickens?” the President asked one day in mock despair.)

In short, despite all his efforts, the payments “club” still hung over his head, limiting the size of his domestic economic program. In November, 1963, he weighed still stronger deterrents to the flow of American capital abroad, and talked of calling those of us working on the problem to an all-day planning session at Camp David.

But even had there been no balance of payments pressures, the President would not have felt free to unbalance the Federal Budget by as much as his liberal critics would have liked. He recognized that the “Administrative Budget” presented to Congress was not an accurate account of the government’s effort. He realized that a period of sizable Budget deficits would be required before the country regained its full potential of employment and growth, and he increasingly realized that the Budget was not merely a set of accounts but a powerful instrument of economic policy.
Although he looked upon his increased domestic spending in 1961 primarily in terms of the benefits offered by particular programs, instead of the benefits of Budget increases in general, by 1963 he was fitting his spending and tax policies to economic conditions, appreciating the effect of all spending on prosperity and employment. Nevertheless his political judgment told him that a period of gradual re-education would be required before the country and Congress, accustomed to nearly sixteen years of White House homilies on the wickedness of government deficits, would approve of an administration deliberately and severely unbalancing the Budget.

His success with the Congress and country depended, he felt, on weakening the traditional Republican charge that Democrats were spendthrifts and wastrels who would drown the nation in debt. Nixon in 1960 had accused him of being fiscally irresponsible, a radical whose programs would invite runaway inflation. Had the young moderates in the suburbs and other independents who switched to Kennedy believed Nixon, Kennedy would have been defeated. He felt that he had to shed the “big spender” image to get his programs through, and that restraint was also required to keep some accord with Eisenhower and other Republicans whose support he would need on foreign policy.

The widespread acceptance of the sanctity of balanced budgets, moreover, made it politically impossible to convert overnight either the voters or the Congress to the merits of Budget deficits. Even in 1963, when his combination of a tax cut with a large deficit and rising expenditures represented the boldest fiscal move in a generation, he felt inhibited by the limitations of Congressional and voter opinion. Far more money could well be spent in many domestic areas, he knew. “But it still is a large budget, a large deficit,” he told his news conference, “and I think we have done about as much as we now can do. In other years we may have to do more.” And in other years he hoped the public and Congress would better grasp the wisdom of doing more.

He approached this problem of the nation’s fiscal re-education in three different ways:

1. First, while quietly accepting the necessity of unbalanced budgets, he made clear that he was no wastrel. To the despair of the liberals, he talked the lingo of the Budget-balancers even as he incurred sizable deficits. It was Kennedy’s only means, as Paul Samuelson pointed out, of “quieting irrational opposition” to his Budget increases. He stressed his objective of balancing the Budget “over the cycle” of good years and bad combined. He said all the right phrases about getting “a dollar of service for the dollars we spend.” He stressed in 1961 that his domestic program, of and by itself, would not unbalance the Budget his predecessor left behind, in 1962 that his Budget as presented was in balance, and even in
1963 that his Budget, although in deficit due to the proposed tax cut and military and space expenditures, nevertheless reduced “civilian” spending.

While none of these statements was false, they were no more “the whole truth and nothing but the truth” than any other Presidential Budget statement in modern history. They imposed ceilings on those of us helping to prepare his budgets and legislation, but within those ceilings there were a number of ways in which the figures could be fitted without drastically altering major programs. The Budget is only a set of estimates—of how much taxes will bring in, how many contracts will be let before the fiscal year ends, at what date new programs will be started, which payments can be speeded up or deferred, and many other unknowns. Those estimates depend on other estimates—of the economy that produces the revenue, of the weather that affects the crops, of the wars that change defense spending—and those estimates are based on still more estimates.

Low ceilings, in short, can still permit several rooms. The best example was the badly unbalanced “balanced” Budget President Eisenhower left behind for Kennedy’s first full fiscal year. It assumed prosperity revenues at a time of recession. It recommended projects and programs for which no funds were included. It assumed, contrary to all experience, that a proposed postal rate increase would be approved by the Congress and in effect within ten weeks. It greatly underestimated expenditures for farm price supports. It proposed, with tongue in cheek, that Congress would terminate or sharply cut back several basic housing, airport, REA and other programs which everyone knew Congress would expand. And it omitted certain financial obligations to which the Federal Government was wholly committed. I can truthfully say that no Kennedy Budget ever resorted to this extreme to feign fiscal responsibility.

But to the surprise of many of his appointees, President Kennedy not only talked but acted the role of true economizer. His two chief tasks upon taking office were to revive the economy and shore up our defenses, and neither could be accomplished by slashing a wholly inadequate Budget. But he regarded deficits necessitated by excessive unemployment as wholly different from deficits produced by uncontrolled spending, and he had no intention of permitting the latter. “Washington is filled,” he observed, “with dedicated men and women who feel that government funds should be spent for one purpose or another,” and he intended to make certain they were his purposes. Leaving most program funds relatively untouched, he was suspicious of all personnel requests, and he was willing to start with the White House, cutting back on the grounds and service personnel and keeping expenses down. (Judging from his delight over a letter Thomas Jefferson had written requesting White House gardeners
who could double as musicians after dinner, he may have had similar proposals in mind.)

He personally scrutinized every agency request with a cold eye and encouraged his Budget Director to say “no.” From the amounts requested by the individual agency heads and service chiefs, the President and his Budget Director (aided, in the latter case, by his Defense Secretary) cut as much as $20-25 billion before each Budget was submitted to the Congress. He increased funds actually allocated for true social and economic benefits faster than his predecessor; but, by reducing the postal deficit through higher rates, by avoiding higher storage costs for surplus grain and cotton, by selling mortgages and other Federal financial assets to private creditors, by increasing automation in the Post Office and other agencies, by putting the Interstate Highway program back on a self-financing basis through increased truck and gas taxes, by requiring the agencies to absorb through other reductions nearly half the cost of their Federal pay raise, by clamping down on personnel increases, by abolishing unnecessary operations and offices, by not spending all the moneys appropriated by the Congress, and by holding the cost of new domestic programs to the lowest possible level, he was able to show in 1963 a cumulative increase in “domestic civilian expenditures” over his three years smaller than the increase over the preceding three Eisenhower years. To do that, while adding new programs and expanding old ones, was quite a feat. The reduction in domestic spending proposed in January, 1963, had, in fact, been accomplished only four times in the preceding fifteen years.

He learned anew, however, that most members of Congress favored economy only where it did not impinge upon their own interests. Many of those who forced him to ask constantly for increases in the artificial ceiling on the public debt were far more willing to vote unwanted funds for military or farm programs than to raise postal rates, close tax loopholes, charge barges for their use of Federally financed waterways or restrict farm surpluses. Fiscal years 1962 and 1963 produced deficits, instead of the balances predicted, largely because of lagging recession revenues and increased defense and space spending, but also because of Congressional opposition to Kennedy’s farm and revenue measures.

President Kennedy’s largest and most controversial savings were in the area of his largest expenditure increases—national defense. The Budget Bureau estimated that the first-year costs of our entire new legislative programs in 1963 were not so great as the annual savings already being achieved in the Pentagon. Those savings were achieved through more efficient logistics, organization and procurement, through the reduction of civilian personnel to their lowest levels since pre-Korean
days, through the termination of obsolescent or unworkable weapons systems and bases, and primarily through the managerial genius of the Secretary of Defense and the political courage of the President who backed him.

Robert McNamara found a chaotic budget situation when he entered the Pentagon. In practice each service submitted and received individual budgets largely unrelated to each other, with no logical analyses of how much fire power was actually needed. He found no internal consistency—no matching of our available forces with all the elaborate NSC planning papers, war plans and contingency plans, no correlation between ground forces and air support, or between munitions and men. He began immediately to question, to study, to plan, and he began to build and to cut simultaneously.

On occasion Kennedy’s budget, science and other White House advisers would press for even more reductions in weapons systems than the Secretary would support. McNamara, while acknowledging the possibility of surplus destructive capacity or “overkill” in his recommendations, frankly told the President that neither of them could count on the continued confidence of the service chiefs if much more was cut. As it was, the Air Force, its contractors and friends in the Congress resented the cutback in the B-70, the phase-out of the B-47 and Snark missile and the cancellation of further Titan missiles, of Skybolt and of the nuclear-powered plane; the Army and its friends resented the limitations on the Nike-Zeus antimissile missile; and the Navy and its friends resented his hostility to more carriers.

The “military-industrial” complex, of which Eisenhower’s farewell message warned in one of his greatest services as President—a complex combining powerful economic and political pressures on behalf of these military projects—brought constant pressure on the President and Secretary through unions, community leaders, businessmen, scientists, politicians and magazine advertisements. “I see nothing wrong with that,” said the President in his December, 1962, panel telecast.

A few months later he felt differently, as a Senate investigation tried unsuccessfully to force a change in McNamara’s awarding of the contract for a new TFX aircraft. “What we are really dealing with in the TFX investigation,” read an internal government memorandum,