Which Candidate Is Kennedy's Supply Side Heir?
August 30, 2000
Last year, a poll done for the White House Bulletin asked people whether they favored raising spending or cutting taxes with the budget surplus. A clear majority of 56.3 percent supported tax cuts, while only 31 percent wanted more spending.
Al Gore would like voters to believe the principal issue in the presidential campaign is whether George W. Bush's $1.3 trillion tax cut will use up too much of projected surpluses, overstimulate the economy, and ultimately raise interest rates.
Interestingly, Gore has not said he believes there will be any economic stimulus from the $2.3 trillion of new government spending he has proposed. Presumably, this means his spending plan, which would completely wipe-out the non-Social Security surplus, will have no impact at all on growth, inflation or interest rates.
Thus, he has unwittingly confirmed the view of supply-side economists. In the supply-side model, tax cuts stimulate growth, whereas spending increases do not.
President John F. Kennedy chose the supply-side view:
- In 1962, Kennedy was under enormous pressure to increase spending; but he believed the government "must not spend more than can be justified on grounds of national need or spent with maximum efficiency."
- By contrast, said Kennedy: "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 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."
In 1963, Kennedy put forward one of the largest tax cuts in American history, and the only tax rate reduction ever initiated by a Democratic administration.
Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, August 30, 2000.
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