This year, we’re celebrating what would have been John F. Kennedy’s 100th birthday. No matter where you go in Washington, you are reminded of this celebration. The other night, as I was passing the Kennedy Center — emblazoned with red, white and blue banners — it made me think: What would 45 think of our 35th president?
Interestingly, this administration seems to be setting an economic policy agenda that sounds vaguely similar to that of JFK.
In 1960, it was “A Time for Greatness.” In 2016, we had “Make America Great Again.” Both men understood media and the power of television to communicate with voters. JFK took office when we faced a struggling economy, rising unemployment, sinking corporate profits and a depressed stock market. In the early 1960s, the federal deficit was about .02 percent of GDP; today it is around 3.2 percent of GDP.
JFK’s solution was to increase spending on transportation infrastructure and reduce personal and corporate taxes to stimulate the economy. Sound familiar? He also proposed increasing the minimum wage and expanding unemployment and social security benefits to encourage early retirement.
Let’s compare the economy of 1963 to that of 2017. In 1963, the top marginal tax rate was 91 percent, contrasted with today’s top marginal rate of 39.6 percent. The top corporate rate was 52 percent, versus 38 percent today. After JFK’s assassination, Congress finally passed his tax-cut proposal, leading to robust growth for years afterward.
In the first 100 days of JFK’s administration, the S&P 500 grew by 18.5 percent — but we were coming out of a recession and a 22.5-percent decline in the S&P, the second largest on record. Today, the S&P is celebrating nine years of positive returns and is up 5.32 percent in the first 100 days. The economy is in its 95th month of expansion — the third longest expansion in 163 years.
While there are many similarities, it’s reckless to assume the economic policy implemented in 1963 would lead to the same results today. The economy today doesn’t need a shock; it needs a logical plan to maintain its momentum. Everyone would love to have lower taxes (sign me up). And I agree with the need for comprehensive tax reform. However, in a recent survey by the University of Chicago School of Business, virtually no economist believes lowering taxes today will result in higher revenues. Many actually called it a possible economic disaster. That’s because 2017 isn’t 1963.
Kennedy’s tax cuts targeted the middle class, which led to the tax-cut “sequel” known as Reaganomics. We are still debating these policies today. But JFK coupled tax cuts with increases in social programs that helped seniors, the disabled and the unemployed. Today, these programs are struggling, health care costs are rising and tax reform looks like it could eliminate critical deductions — including medical expenses, state and local income tax and student-loan interest.
I don’t want to get ahead of myself; the tax proposal is only a page. But if JFK’s legacy and history teaches us anything, it is that we will likely debate the legitimacy of supply-side economics until JFK’s next birthday.
Maybe someone should let President Trump know that his tax cuts aren’t from Reagan, they were taken out of the Kennedy archives. Unfortunately, as an economist, I’m skeptical we’ll see the same results.
John E. Girouard, CFP, ChFC, CLU, CFS, author of “Take Back Your Money” and “The Ten Truths of Wealth Creation,” is a registered principal of Cambridge Investment Research and an investment advisor representative of Capital Investment Advisors in Georgetown.