President John F. Kennedy's Economic Policies

What Were They, and How Do They Affect You Today?

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circa 1962: American president John F Kennedy (1917 - 1963), wearing dark sunglasses, sits next to US Air Force Chief of Staff Curtis LeMay. Photo by Hulton Archive/Getty Images

John Fitzgerald Kennedy was the 35th U.S. president. He took office on January 20, 1961, and was assassinated on November 22, 1963. Every year around that time you hear a lot about his charisma, Camelot, and conspiracies. You'll also hear again about the tragic deaths of his son, wife and brother. 

Most of us have heard of the Bay of Pigs, the Cuban Missile Crisis, and the race to the moon. JFK is known more for his foreign policy than anything else.

After all, he was the American President who stood at the Berlin Gate and said, "Today, in the world of freedom, the proudest boast is 'Ich bin ein Berliner'." The crowd went wild! West Germans felt his support for their city that had just been divided by the Communists who held East Berlin.

On the domestic front, we've all heard Kennedy's famous Inaugural speech, "Ask not what your country can do for you. Ask what you can do for your country."  This was so powerful because he was creating a vision to lead the country out of the 1960 recession. He had just won a very close presidential race. The TV pundits said JFK won because he looked good on the screen and was more media-savvy than his opponent. But Vice-President Richard Nixon said years later that he lost because of unemployment.

Kennedy's inaugural speech created confidence in his leadership and direction. He cleverly moved forward a year's worth of Federal spending to jumpstart the economy without a fight from Congress.

He promised to keep spending until businesses were hiring again. He publicly stated that he didn't care about the debt, which is how he got "the country moving again."

JFK's endorsed deficit spending, mild by today's standards. It proved that government spending jumpstarts a sluggish economy. He also increased the minimum wage, improved Social Security benefits, and passed an urban renewal package.

Last but not least, he focused the nation on helping the mentally challenged. 

1960 Recession

Kennedy ran for office against Republican Vice-President Richard Nixon during the 1960 recession, which had started in April. Although today many experts say he won because of his charisma and use of media, voters at the time responded to his hard-core promise to get America moving again.

The recession was caused by contractionary monetary policy, as the Federal Reserve raised interest rates to 3.99 percent to curb a 1959 growth rate of 7.25 percent. By the time of the election in 1960,  the economy was shrinking 4.2 percent. Unemployment had grown to 6.6 percent. Nixon always said it was the unemployment rate (high for that time) that cost him the election. Find out more on the history of recessions.

Kennedy ended the recession in two ways. First, he set an inspiring vision for the country in his Inaugural Address, where he said:  

In the long history of the world, only a few generations have been granted the role of defending freedom in its hour of maximum danger. I do not shrink from this responsibility--I welcome it. I do not believe that any of us would exchange places with any other people or any other generation. The energy, the faith, the devotion which we bring to this endeavor will light our country and all who serve it--and the glow from that fire can truly light the world. 

And so, my fellow Americans: ask not what your country can do for you--ask what you can do for your country.

My fellow citizens of the world: ask not what America will do for you, but what together we can do for the freedom of man. (Source:John F Kennedy Inaugural Address January 20, 1961. Online by Gerhard Peters and John T. Woolley, The American Presidency Project. )

Second, he fulfilled his campaign pledge. In his first State of the Union Address, he said, " I will propose within the next 14 days measures aimed at ensuring a prompt recovery and paving the way for increased long-range growth."

Kennedy did this by pumping billions into the economy right away. He didn't need Congressional approval. He simply directed Federal agencies to move their budgeted spending forward as quickly as possible. In this way, JFK dumped a billion dollars in state highway aid funds into circulation. He accelerated payment of farm price supports, tax refunds and GI life insurance dividends. He created a Food Stamp program and expanded Employment Offices.

Finally, he asked the Federal Reserve to use its open market operations to buy Treasury notes, keeping long-term interest rates low.

The Fed also lowered the Fed funds rate from 4 percent to 1.98 percent to lower short-term rates.  For more, see GDP by Year

Most important, Kennedy made clear that he would continue government spending as long as needed to not only end the recession but get the recovery off to a solid start. He made good on his word, battling a rising 6.1 percent unemployment rate.   (Source: "On the Issues," Kennedy.)

Deficit Spending

Between 1961-1963, Kennedy added $23 billion to the national debt. This was a moderate 8 percent increase to the $289 billion debt level at the end of Eisenhower's last budget. His deficit spending ended the recession and contributed to an expansion that lasted until 1970. To see how he compares to others, see U.S. Debt by President.

In addition to spending, JFK also advocated tax cuts. In his address to the Economic Club of New York in December 1962, he discussed spending more on education, expanding R&D, and cutting taxes. At that time the income tax rate was 91 percent, which he wanted to wanted to lower to  65 percent. (Sources: "Address to the Economic Club of New York," JFK Presidential Library and Museum, December 14, 1962. "The Myth of JFK as a Supply-Side Tax Cutter," U.S. News, January 26, 2011.)

Defense and the Vietnam War

Kennedy's primary military concern was defending U.S. interests against the Soviet Union's expansion of Communism. In February 1961, he authorized the disastrous Bay of Pigs invasion. It was a failed attempt to overthrow the communist leader Fidel Castro.

In June 1961, JFK met with Soviet leader Nikita Khrushchev, who threatened to cut off U.S. access to Berlin. The USSR was given East Berlin at the end of World War II. In response, Kennedy added to the defense budget by increasing intercontinental ballistic missile forces, the Air Force and Reserves, as well as adding five new army divisions.

On August 13, 1961, the Soviet government erected the Berlin Wall, forbidding its citizens in the eastern side of the city to travel to the German west side. Two years later, Kennedy gave his famous speech at the wall, promising to support freedom and oppose communism.

In October 1962, Kennedy found out that the Soviets were building nuclear missile sites in Cuba. He authorized a blockade of the island, and the USSR removed the sites. For more, see Cuban Missile Crisis.

In August 1963, South Vietnamese officers discussed the U.S. reaction to a potential coup of President Diem government.  JFK had increased American aid and U.S. military advisers to more than 16,000.  In November 1963, Diem was assassinated. The military took over, confident in U.S. support. (Source: "Vietnam," JFK Presidential Library.)

Kennedy and Mental Health

On October 24, 1963, President Kennedy signed the Maternal and Child Health and Mental Retardation Planning Amendment to the Social Security Act to provide funding to states to improve their programs. October 31, he signed the Mental Retardation Facilities and Community Mental Health Centers Construction Act.

Upon signing the Act, Kennedy said,"…The mentally ill need no longer be alien to our affections or beyond the help of our communities.” He was especially sensitive to their needs, since his younger sister Rosemary was born with intellectual disabilities. 

The Act funded community mental health centers to provide better care than mental hospitals. Or, at least, that was the plan. Instead, states closed their mental hospitals. Funding was inadequate, and later cut, for the community centers. Only 5 percent of patients treated at the centers were psychotics. Over time, many mental hospital patients were sent to nursing homes funded by Medicare and Medicaid. Find out more about the consequences of deinstitutionalization.   (Source: "Treatment Disorder," The Wall Street Journal, November 4, 2013.)

Kennedy's Early Years

John F. Kennedy was born on May 29, 1917. He received a BA in political science from Harvard College in 1940, graduating cum laude. He joined the Navy from 1940-1945 to fight World War II. He commanded a PT-109 boat their boat was sunk by a Japanese destroyer. He received a Purple Heart and Navy and Marine Corps Medal by swimming four hours to save one of his men.

He became a U.S. Congressman from Boston before becoming a U.S. Senator from Massachusetts in 1953. He received the Pulitzer Prize in history for his books Profiles in Courage

In 1956, Kennedy just missed the Democratic Vice-President nomination, but became the Presidential candidate in 1960.  He described his vision of America's "New Frontier" in that speech. He beat Vice-President Richard M. Nixon  by a very narrow margin by promising to end the recession. (Source: "John F. Kennedy," WhiteHouse.gov.) 

Other Presidents' Economic Policies