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PRICES & WAGES UNDER KENNEDY & NIXON.
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Political & economic atmosphere of their terms in office. Kennedy's use of persuasive rather than legislative means re: spending to combat unemployment. Nixon's freeze on prices & wages to combat inflation.... More...
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Paper Abstract:
Political & economic atmosphere of their terms in office. Kennedy's use of persuasive rather than legislative means re: spending to combat unemployment. Nixon's freeze on prices & wages to combat inflation.
Paper Introduction:
Prices and Wages under Kennedy and Nixon:
Persuasion vs. Mandates
Introduction:
The United States enjoyed a period of economic prosperity during World War II and the years immediately following. However, by the late 1950’s the economy was beginning to turn. A series of economic slow-downs had plagued the Eisenhower administration. It was in this economic atmosphere that Kennedy and Nixon faced off for the presidency. The big issues of the campaign were national security (the communist threat) and civil rights, but the looming economic woes- specifically rising unemployment
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[Online]. Unfortunately hissolution to inflation was to cut government spending, which did initiallyslow prices but also caused sky rocketing unemployment. Unfortunately, the increase in spending was not enough toovercome the recession his initial decrease had started (Kendrick, 2 1).In addition, the growing debt only made matters worse (Barone, 1999).Thus, the country ended up with a rare bout of stagflation (Bleiberg,1974). The effect onunemployment was so severe in fact, that no matter how much he increasedspending he could not reverse the recession. Available: http://www.cwu.edu/~millerj/writings/nixon.html Kendrick, David A. Kennedy accomplished thismandate through the highly persuasive means of seeing to it that Pentagoncontracts were awarded only to companies that did not raise prices inresponse to new union contracts (The American Revolution, 1997). (1997). With the government pumping more money into the market, demandnaturally rose. [Online].Available: http://odur.let.rug.nl/`usa/lt/1994/ch12_p7.htm. (1995). In order to slow inflation, Nixon cut back on government spending.This policy had the desired effect of slowing the economy overall. [Online].Available: http://odur.let.rug.nl/`usa/lt/1994/ch12_p1.htm. Kennedy, of course, won the election. Board of Regents,University of Wisconsin. In addition, because inflation was not agreat concern as Kennedy came to power, a policy of geared toward reducingunemployment should have taken precedence. The United States' involvement in Vietnam and theconsequential spikes in government spending had lowered unemployment, butinflation was on the rise. It was in this economicatmosphere that Kennedy and Nixon faced off for the presidency. Unfortunately, his tax cuts werestalled in Congress until after his death, in large part due to thedistrust he had built between his administration and big business. Another aspect of the price controls that added to the problem wasthe limitation on the amount of dividends corporations could distribute.This meant that in the midst of rising inflation, the return investorscould receive was capped. In fact, he was able only to push one part, an increasein the minimum wage, of his eight part plan for a New Frontier throughCongress. The short run result of the price freeze, coupled with increasedspending, was an inherent halt to rising prices and the desired effect onemployment. Transcript. Richard MilhausNixon. (2 ). Special Message to Congress on UrgentNational Needs. (1997). A series of economic slow-downshad plagued the Eisenhower administration. Theresult of the combination of tax cuts, a hike in the minimum wage and"voluntary" price restrictions did eventually lead to a drop in theunemployment rate. Outlines: Nixon. All of these factors led to the election of Nixon, who had ampleexperience with economic policy and promised to end the conflict in Vietnamand get inflation under control (Encyclopedia of American PoliticalParties, 1995).He largely succeeded in his efforts to stop inflation, but causedunemployment to soar. The impact of Kennedy's increased spending did eventually result inlower unemployment. This is in glaring contrast to Kennedy, whose policy of persuasiondid little to solve the unemployment problem but whose tax cuts dideventually succeed in boosting the economy. The bigissues of the campaign were national security (the communist threat) andcivil rights, but the looming economic woes- specifically risingunemployment did receive some lip service during the race (Debate, 196 ). References The American Revolution Project. The narrow margin with whichhe took office, however, limited his ability to introduce the sweepingeconomic policy he had dubbed the New Frontier. Kennedy, dueto an extremely close election, was unable to intervene to the extent hehad hoped. The presidential elections took place amidst agrowing unrest over Vietnam, a growing trade deficit and sky rocketingprice levels despite relatively low unemployment (Kendrick, 2 1). The increased spending did,however, bring back inflation. He was unable to get his tax cuts through before hisassassination, however they were eventually passed under Johnson. The official reason for this policy was, of course, to stopinflation and stabilize the economy. As mentioned previously, theeconomy had seen some fairly serious ups and downs during that time.Still, Nixon adamantly rejected the notion of price controls as late asJuly of 1971. By 1968, the political and economic atmosphere had heated upsignificantly. Severelycaught by stagflation, however this measure did little to stabilize theeconomy. Nixon's America. However, the long run impact of the astonishing levels ofspending Nixon convinced Congress to pass and the backlash of the pricecontrols was devastating. USNews Online. [Online]. Unfortunately, the price controls Nixon imposed had severe long termconsequences for the economy. (Sept. However, with price controls - which were placed onoutputs but not inputs - manufacturers were not able to increase supplybecause they had no way to cover the still rising costs of inputs. This persuasion rather than legislation allowed him to bypass theadversarial Congress, and maintain the appearance of allowing the marketsto work. Rather, Kennedy madelittle progress in pushing his economic reforms through Congress before hisassassination in 1963. (2 1). [Online] Available:http://www.eco.utexas.edu/homepages/facstaff/kendrick/goalspart1.html Kennedy, John F. Thatdistrust stemmed from his imposition of "voluntary" price controls onindustry - specifically the steal industry. Theinflation rate did fall, but unemployment levels also rose. It was the first in a series of price controls that would lastuntil 1974. From 1974 to 1975unemployment rose from 5 to 9 percent (Kendrick, 2 1).Conclusion: Both Kennedy and Nixon entered the presidency facing slow economictimes. Nixon had opposed the intervention of government into price levelsdirectly for decades. This, according to the most basic law ofeconomics, translated into inflationary pressure. (Kendrick, 2 1).He had hoped to introduce sweeping economic reforms akin to FDR's New Deal,but the incredibly slim margin by which he won the election left himsomewhat crippled. 26, 196 ). However, Nixon faced inflationary pressure. Believing that the price system has a major part in the high standard of living and economic satisfaction of the American people, we are determined to strengthen it. Sept. Ironically, it was Kennedy who had hoped tofollow a policy of government expansion and who barely hesitated tointervene with his "voluntary" price guideposts. Thus, the inflationary pressure caused bythe combination of increased money in the market and shortages due to pricecontrols led to massive inflation. 3, No. Farewell to Wage and Price Controls.Transcript of Ludwig Von Mises Lecture Series, Hillsdale College. Available:http://www.usnews.com/usnews/issue/99 92 /nixon.htm. While government was able to control large corporations, the suppliersof desired products, it could not control the pricing of those products inevery small store or restaurant. Nonetheless, he was able to impact prices and wagesthrough persuasive methods. Nonetheless, Kennedy did follow a policy of increasing federalspending in order to jump start the flailing economy and pushed for taxcuts to quell inflation (Kendrick). This was a theme he repeatedly mentioned in his speeches bothbefore his election and after (Presidential Debate, 196 ; Special Messageto Congress, 1961). In fact, by 1974 the US inflation ratewas in the double digits (Bleiberg). (Barone, 1999). In other words, as the value of the dollar wasdecreasing rapidly, the value of investments was decreasing even fasterrelative to it. The policy he chose to followwas tax cuts. 7. Bleiberg, Robert M. The result was a severe drop in investment that only addedto the recessionary situation (Bleiberg, 1974). The political and economic reasons for their policychoices will be discussed, as well as the effect and success of each.Kennedy: Kennedy inherited an unstable economy that had seen several periodsof stagnation and recovery during the Eisenhower years. He left under the threat of impeachment in 1974. The relatively low unemployment rates Nixon enjoyed uponhis inauguration were in part due to those cuts. Thus Nixon continued to increase government spending, hoping thatwould spur the economy to real growth and reduce unemployment. Thestagflation continued after him, and in fact worsened as severalinternational impacts began to hit the economy as well. Outlines: Kennedy. Nixon, spurred by his fast approaching re-election campaign, waspressured to intervene more than he had apparently ever dreamed. [Online] Available:http://www.cs.umb.edu/jfklibrary/j 52561.htm Presidential Debate. Goals and Policies for the Economy.University of Texas. Theresult was widespread shortages. Eisenhower and Kennedy. Unemployment was the key concern for Kennedy, while inflation wasthe initial problem for Nixon. 2 ,1999. [Online] Available:http://us.history.wisc.edu/hist1 2/lectures/lecture25.html This was in part due to the fact that unemployment was extremelylow, and though price levels continued to creep they were not doing so atan alarming pace (Kendrick, 2 1). With the exception of a hike in the minimum wage, he did not see anyof his policies come to fruition. In response tothe spike in unemployment levels, Nixon reversed his position on governmentspending. (1961). In the end, Nixon resorted to drastic measures toquell the resurgence of inflation that by 1971 showed no signs of slowing. Even that was inspired more by social than economic concerns(Schultz, 2 ). So, in August of 1971, Nixon ordered a three month freeze on pricesand wages. At that time his head economic advisor publicly stated inresponse to one scholar's suggestion that the government freeze prices inorder to stop inflation: Believing that the price system contributes nothing to the well- being of the American people, [the professor] is prepared to suppress it. However, the politicalcircumstances under which he ended office barred him from making anysignificant economic reforms. Nixon did not remain in office long enough to bring the country outof the recession. (1999). The American Revolution Project. However, by the late195 's the economy was beginning to turn. This paper will discuss the measures both Kennedy and Nixon took todeal with the inflationary pressures present in the US economy during theirrespective terms. May 26, 1961. Prices and Wages under Kennedy and Nixon: Persuasion vs. (1974). In the short run however, his policy was asuccess. MandatesIntroduction: The United States enjoyed a period of economic prosperity duringWorld War II and the years immediately following. ImprimisJuly 1974, Vol. Nonetheless, the tax cuts he proposed dideventually pass. He had served on the President's Committee on PriceStability under Eisenhower. Transcript. [Online].Available: http://members.tripod.cm/gbrannen/jfk5.html Schultz, Stanley K. Barone, Michael. (Debate, 196 ). However, price levels managed to continue to creep updespite Kennedy's persuasiveness.Nixon: When Nixon entered office in 1968, the conflict in Vietnam and theUnited States position in the world were of greater concern than theeconomy. Encyclopedia of American Political Parties. However, there is a general consensusthat the driving force behind the price freezes was Nixon's concern overwinning the 1972 election (Kendrick, 2 1). Like Kennedy, political considerations motivated Nixon.
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