Thanks to Greg Mankiw for this. President Kennedy explains quite eloquently his reasoning in 1962 for a tax cut – good old Keynesian stimulus to get the economy back to full employment. Which makes the fact that Greg has fallen for this free lunch supply-side spin so puzzling!
Update: Andrew Roth provides the transcript:
The worst deficit comes from a recession, and if we can take the proper action in the proper time, this can be the most important step we could take to prevent another recession. That is the right kind of a tax cut both for your family budget and the national budget resulting from a permanent basic reform and reduction in our rate structure, a creative tax cut creating more jobs and income and eventually more revenue. And the right time for that kind of bill, it now appears in the absence of an economic crisis today-and if the job is to be done in a responsible way–is January 1963. Such a bill will be presented to the Congress for action next year. It will include an across the board, top to bottom cut in both corporate and personal income taxes. It will include long-needed tax reform that logic and equity demand. And it will date that cut in taxes to take effect as of the start of next year, January 1963. The billions of dollars this bill will place in the hands of the consumer and our businessmen will have both immediate and permanent benefits to our economy. Every dollar released from taxation that is spent or invested will help create a new job and a new salary pool sides inflatable. And these new jobs and new salaries can create other jobs and other salaries and more customers and more growth for an expanding American economy. Instead of being permanently saddled with excess plant capacity and the budgetary deficit that is created by this means, our goal must be fuller capacity and full employment and the budgetary surpluses that that kind of employment and capacity can produce.
As soon as the supply-side silly crowd read the word “recession” – maybe they should have paused and actually think about what President Kennedy was saying. The President was clearly talking about aggregate demand events with a reference to the Keynesian multiplier. At the time this speech was delivered, the unemployment rate was 5.5%. In his post just before putting up this YouTube video, Andrew Roth noted that the unemployment rate for March 2007 was 4.4%. These Bush cheerleaders want to argue that we are near full employment now, but they also want to claim that JFK would be making the case of a tax cut today. I have to wonder if Andrew Roth was able to either read or listen to what JFK was saying. Or is this crowd really this incredibly stupid as to the distinctions that Mark Thoma made. President Kennedy understood the difference but the Le Club for Rich People apparently do not.