JFK and the business community

[TLR]

Like most politicians, Kennedy had never shown much interest in the "dismal science." Overall, his presidency saw fairly strong growth with low inflation, though unemployment and the balance of payments remained a problem. From the beginning, he pledged to maintain a balanced budget, but eventually came to see the need for deficit spending to spur the economy. Kennedy tried to be friendly with businessmen, knowing that only a cooperative relationship between government, labor and business would have any chance of working for the whole country. (JFK and the Business Community p2-3, Jim Heath, 1969, University of Chicago)

Corporate America was not much disturbed by Kennedy's election, given both his pragmatism, the narrowness of his victory, and a Congress dominated by conservative Democrats. His promise of more spending on defense and the space program was also encouraging. Neil C. Harley, president of Thor Power Tool Co., who campaigned for JFK, predicted, "people are really going to be surprised how conservative Jack Kennedy will be." The Wall St. Journal expressed displeasure that the "statist-economist John Kenneth Galbraith, New-Dealing historian Arthur Schlesinger, Jr., utopian Adlai Stevenson, the fuzzy do-gooder Chester Bowles, the socialist-inclined Walter Reuther" would have any influence on Kennedy. But generally, business was pleased that the more radical members of the administration would be kept at the lower levels of power. There were exceptions, though; John E. Swearingen, president of Standard Oil of Indiana, warned 11/1961, "We in the business world must not abdicate our authority to the ivory-towered socialists or fuzzy-minded theorists."

Previous GOP administrations had tended to chose men from the ranks of business, while many of Kennedy's people were from think-tanks, universities and the like. Business had become more active in politics since the 1958 elections, when a Democratic sweep in Congress had spooked corporate America. Right after his election in 1960, the economy continued to head downward; the recession of 1960 was blamed partly on a long national steel strike in 1959. In the spring of '61 profits and production continued to slump. In 1962 JFK suggested to Congress that the President be given standby authority, subject to Congressional veto, to adjust personal tax rates downward to spur the economy during slow times; Congress refused to give him any such power. (Ibid. 22-4)

In his first State of the Union message, he candidly admitted that the "present state of our economy is disturbing." He sped up programs to increase jobs, building projects and distribute food to the needy. Kennedy eventually began to understand the wisdom of running a federal deficit during recessionary times to boost the economy, though he had originally wanted to maintain a balanced budget. He also feared that a tax cut to spur the economy would also jeopardize the budget.  (Ibid. 25-6)  Congress enacted a minimum wage hike, but because of business opposition did not extend it to include more workers. Most of Kennedy's anti-recession measures were enacted by June of '61. During the Berlin crisis in August, JFK considered a tax hike to pay for increased defense spending, but was talked out of it by Sorensen, Heller and Samuelson. (Ibid. 27-30)

In 1961 Kennedy was pushing an economic stimulus program through Congress to aid an economy still recovering from recession; the cost of this program was criticized by conservatives. Kennedy wrote a letter 9/5/1961 to Evelyn Lincoln: "Tell Fred Dutton to compose a letter to a fellow called Daniels, Readers Digest, challenging his statistics in the September Readers Digest on unemployment - that the program presented this year would cost the taxpayer $18 billion annually in a few years. It is wholly untrue and we ought to make him eat it."

RFK recalled in a 1964 oral history interview that JFK "never liked" the Chamber of Commerce. "He just always felt that you couldn't do anything with them; there's no way to influence them....My father thought businessmen didn't have any public responsibility. And we just found that they were antagonistic..." Under LBJ, "business acceptance of the new economics became even more pronounced, in part because businessmen felt more comfortable with Johnson; his style suited them far better than did Kennedy's intellectual manner." (Business Community p38)

Connally recalled that JFK "had alarmed business. This was reaction partly to his handling of the steel price rollback, but even more to his concept of the need for change...Businessmen were suspicious of him..." (11/24/1967 Life)

During his tax reform drive of 1962, "Savings and loan associations, using misleading advertising and scare tactics, led the assault on the withholding provision with an extensive - and expensive - grass roots campaign. Their actions angered the president, who caustically noted that only those evading taxes on dividends and interest would be affected by withholding. Kennedy heatedly criticized the savings and loan associations for deceiving the people by innuendos that withholding was a new tax or a tax increase which would harm the elderly, widows, orphans and those with low incomes." (Business Community p47) Congress responded to public opinion and eliminated the withholding provision from the Revenue Act of 1962.

In 1926 the oil depletion allowance was enacted; this exempted from taxation 27.5% of the gross income from oil wells. It was untouched until 1969, when it was reduced to 22% because of public complaints. Texas, in the 1930s, and the federal government in 1959, began instituting production and import quotas to prop up the industry's prices, and maintain its profitability. The oil companies have argued that removing the allowance would cause prices to fall, reducing US oil exploration, and making the country more dependent on foreign oil. Standard Oil's president said in 1953, "if there should be a great improvement in the relations between the United States and the Soviet Union, and in particular a disarmament agreement, the blow to the oil industry and the rest of the economy would be terrific."

In a speech made on 17th January, 1963, President Kennedy suggested that he intended to bring an end to the depletion allowance. As he pointed out: "no one industry should be permitted to obtain an undue tax advantage over all others."

4/20/1961 Kennedy unveiled his investment incentive plan, featuring a tax credit for new investment rather than accelerated depreciation allowances. He also asked Congress for a variety of tax reforms as a first step toward a projected broad revision of the income-tax laws. "A majority of the changes suggested by Kennedy directly affected the interests of business." (JFK and the Business Community p43) Liberal and labor groups opposed the tax credit; they argued that tax relief for the middle class would do more for the economy. Not until 10/1962 did an investment tax credit and modified tax reforms become law.

5/5/1961 The Fair Labor Standards Act, signed by JFK, raises the minimum wage to $1.15 in September of 1961 and to $1.25 by September of 1963. (Almanac of American History) It also expanded coverage to include 3.6 million more workers. This week he also signed into law the Area Redevelopment Act, a program of grants and loans to aid distressed areas such as West Virginia.

In June of 1961, Fortune magazine simultaneously criticized Kennedy for being insufficiently activist in foreign policy (i.e. not fully backing the Bay of Pigs invasion of Cuba) and all too activist in domestic policy. Luce's magazine then accused the President of having 'little understanding of the American political economic system', of pursuing policies that threatened to 'undermine a strong and free economy' and of attempting to implement controls which would 'erode away basic American liberties'. (Fortune, June 1961, 'Activism in the White House', pp. 117-18).

9/6/1961 Faced with an inflation rate of 4%, JFK had won an agreement from unions to hold wage demands down if the steel industry would agree to keep prices down. On this day he wrote the heads of 12 US steel companies asking that they "heed the clear call of national interest" and "forgo a steel-price increase in the near future."

Author Michael Harrington, who spent two years with the Catholic Worker, wrote a book entitled The Other America: Poverty in the United States (New York: Macmillan, 1962), which had a powerful impact on JFK. Arthur Schlesinger recalled that the book helped crystallize Kennedy's determination in 1963 to enact an anti-poverty program (Thousand Days, p. 1010)

[TLR]

4/6/1962 Steelworkers Union agreed to federal government request to limit its wage demands to a 10-cent an hour increase.  In 1962 Kennedy had already profoundly alienated key elements of the military-industrial complex in the steel crisis. The conflict arose from JFK's preoccupation with steel prices, whose rise he believed " quickly drove up the price of everything else. " The president therefore brokered a contract, signed on April 6, 1962, in which the United Steelworkers union accepted a modest settlement from the United States Steel Company, with the understanding that the company would help keep inflation down by not raising steel prices. Kennedy phoned identical statements of appreciation to union headquarters and the company managers, congratulating each for having reached an agreement that was " obviously non-inflationary. " When he finished the calls, he told adviser Ted Sorensen that the union members "cheered and applauded their own sacrifice," whereas the company representatives were " ice-cold" to him. It was a foretaste of the future. (Theodore C. Sorensen, Kennedy (New York: Konecky & Konecky, 1966), p. 447.)

4/10/1962 On April 10, 1962, Roger Blough, chairman of U.S. Steel, asked to meet with Kennedy. At 5:45 P.M., seated next to JFK, Blough said, " Perhaps the easiest way I can explain the purpose of my visit . . . , "  and handed Kennedy four mimeographed pages. Blough knew the press release in the president's hands was being passed out simultaneously to the media by other U.S. Steel representatives. It stated that U.S. Steel, " effective at 12:01 A.M. tomorrow, will raise the price of the company's steel products by an average of about 3.5 percent . . . " Kennedy read the statement, recognizing immediately that he and the steelworkers had been double-crossed by U.S. Steel. He looked up at Blough and said, "You've made a terrible mistake. " After Blough departed, Kennedy shared the bad news with a group of his advisers. They had never seen him so angry. He said, "My father always told me that all businessmen were sons-of-bitches, but I never believed it until now. " His explosive remark appeared in the New York Times on April 23, 1962. The corporate world never forgot it. He phoned steelworkers union president David McDonald and said, "Dave, you've been screwed and I've been screwed. " (Richard Reeves, President Kennedy: Profile of Power (New York: Touchstone, 1993) , p. 296. Bradlee, Conversations with Kennedy, p. 76. Arthur M . Schlesinger, Jr. , A Thousand Days (Boston: Houghton Mifflin, 1965)  p. 635; Roy Hoopes, The Steel Crisis (New York: John Day, 1963) , p. 23, n. 1 . Reeves, President Kennedy: Profile of Power, p . 296.)

4/11/1962 The next morning U.S. Steel was joined in its price increase by Bethlehem Steel, the second largest company, and soon after by four others. In response Kennedy mustered every resource he could to force the steel companies to roll back their prices. He began at the Defense Department. Defense contracts were critical to " Big Steel, " an industry that embodied the intertwined influence with the Pentagon that Eisenhower had warned against. Defense Secretary McNamara told the president that the combined impact in defense costs from the raise in steel prices would be a billion dollars. Kennedy ordered him to start shifting steel purchases at once to the smaller companies that had not yet joined in the raise . McNamara announced that a steel-plate order previously divided between U.S. Steel and Lukens Steel, a tiny steel company that had not raised prices, would now go entirely to Lukens. Walter Heller, who chaired the President's Council of Economic Advisers, "calculated that the government used so much steel that it could shift as much as 9 percent of the industry's total business away from the six companies that had announced price rises to six that were still holding back. " The president even ordered the Defense Department to take its steel business overseas, if that were necessary to keep defense contracts away from U.S. Steel and its cohorts. (Clark Clifford, Counsel to the President: A Memoir (New York: Random House, 1991) , p. 377.)

Big Steel executives saw that Kennedy meant business, their business-and that substantial Cold War profits were already being drained away from them. Attorney General Robert Kennedy moved quickly to convene a federal grand jury to investigate price fixing in Big Steel's corporate network. He looked into the steel companies' possible violation of anti-trust laws, an investigation his Anti-Trust Division had actually begun before the steel crisis. He now ordered the FBI to move on the steel executives with speed and thoroughness. As RFK said later in an interview, "We were going to go for broke: their expense accounts and where they'd been and what they were doing. I picked up all their records and I told the FBI to interview them all march into their offices the next day. We weren't going to go slowly. I said to have them done all over the country. All of them were hit with meetings the next morning by agents. All of them were subpoenaed for their personal records. All of them were subpoenaed for their company records. " (Robert Kennedy in His Own Words, edited by Edwin O . Guthman and Jeffrey Shulman (New York: Bantam Books, 1988) , pp. 333-34.)

4/11/1962 JFK said in a press conference, "the American people will find it hard, as I do, to accept a situation in which a tiny handful of steel executives whose pursuit of private power and profit exceeds their sense of public responsibility can show such utter contempt for the interests of 185 million Americans." Steel executives suddenly found themselves being treated as if they were enemies of the people. The president then stated that they were precisely that. He opened his April 11 press conference by saying: " Simultaneous and identical actions of United States Steel and other leading steel corporations increasing steel prices by some $6 a ton constitute a wholly unjustifiable and irresponsible defiance of the public interest . . . the American people will find it hard, as I do, to accept a situation in which a tiny handful of steel executives whose pursuit of private power and profit exceeds their sense of public responsibility can show such utter contempt for the interests of 185 million Americans. "
Reporters gasped at the intensity of Kennedy's attack on Big Steel. After describing the ways in which steel executives had defied the public interest, JFK concluded with an ironic reference to his inaugural address: " Some time ago I asked each American to consider what he would do for his country and I asked the steel companies. In the last 24 hours we had their answer. "

4/12/1962 On April 12, Kennedy sent his lawyer, Clark Clifford, to serve as a mediator with U.S. Steel. The steel executives, feeling the heat from the White House, proposed a compromise. Clifford phoned the president to say, " Blough and his people want to know what you would say if they announce a partial rollback of the price increases, say 50 percent ? " " I wouldn't say a damn thing, " Kennedy replied. " It's the whole way. " (Reeves, President Kennedy: Profile of Power, p. 301; Clifford, Counsel to the President, p. 376.) Clifford was instructed to say that " if U.S. Steel persisted, the President would use every tool available to turn the decision around. " That included especially switching more defense contracts away from them to more affordable companies. There was to be no compromise. Clifford reported back to the steel heads that " the President was already setting in motion to use the full power of the Presidency to divert contracts from U.S. Steel and the other companies, " adding that "he still had several actions in reserve, including tax audits, antitrust investigations, and a thorough probe of market practices." (Clifford, Counsel to the President, p. 377.)  The president was prepared to wage a domestic war against Big Steel's price increase.

4/13/1962 Defense Dept awarded a $5 million contract to a small steel company that had not gone along with the price hike.

4/13/1962 On April 13, 1962, Big Steel's executives surrendered. The first company to yield was Bethlehem Steel, another major defense contractor. The reason, reported back to the White House, was that " Bethlehem had gotten wind that it was to be excluded from bidding on the construction of three naval vessels the following week and decided to take quick action. " Bethlehem was followed soon by the giant, U.S. Steel. The president's offensive, backed by overwhelming public support, had been too much for them. All six steel companies rescinded the entire price raise that their point man, Roger Blough, had conveyed to JFK as an accomplished fact three days before. As would be his attitude after the Cuban Missile Crisis, Kennedy, as Sorensen said, "permitted no gloating by any administration spokesman and no talk of retribution. " He was especially gracious toward Roger Blough, whom he subsequently invited often to the White House for consultations. When asked by a reporter at a press conference about his "rather harsh statement about businessmen, " JFK revised his infamous s.o.b. remark. He said that his father, a businessman himself, had meant only " the steel men " with whom he had been " involved when he was a member of the Roosevelt administration in the 1937 strike. "

This explanation would not win the hearts of business leaders. As they knew, JFK's father, Joseph P. Kennedy, Sr. , while a businessman himself, had also been President Franklin D. Roosevelt's first chairman of the Securities and Exchange Commission ( SEC ) . As a former Wall Street insider who knew the system, the senior Kennedy had cracked down on Wall Street profiteers. Some of the financial titans of the thirties regarded JFK's father as a class traitor, " the Judas of Wall Street, " for his work on behalf of FDR.3o It was in the light of Joseph Kennedy's fight to initiate government controls over Wall Street, and the opposition he encountered, that he made his all-businessmen- are-s.o.b.'s remark to JFK. That opinion of his father, President Kennedy told the press, "I found appropriate that evening [when] we had not been treated altogether with frankness. . . But that's past, that's past. Now we're working together, I hope."

[TLR]

4/19/1962 Robert Kennedy's Justice Department continued its anti-trust investigation into the steel companies. U.S. Steel and seven other companies were eventually forced to pay maximum fines in 1965 for their price-fixing activities between 1955 and 1961. The steel crisis defined John and Robert Kennedy as Wall Street enemies. The president was seen as a state dictator. As the Wall Street Journal put it in the week after Big Steel surrendered to the Kennedys, " The Government set the price. And it did this by the pressure of fear-by naked power, by threats, by agents of the state security police. " (Wall Street Journal, April 19, 1962, cited by Arthur M. Schlesinger, Jr. , Robert Kennedy and His Times (New York: Ballantine Books, 1978) , p. 437.)

4/30/1962 U. S. News and World Report gave prominence in its April 30, 1962, issue to an anti-Kennedy article on " Planned Economy " that suggested the president was acting like a Soviet commissar. (Michael Calder, JFK vs CIA: Death to Traitors: The Assassination of President John F. Kennedy-An Analysis of the Social, Political, and Economic Factors Which Led to His Assassination by the Central Intelligence Agency ( Los Angeles: West LA Publishers, 1998), pp. 106-7) Attorney General Robert Kennedy became a symbol of "ruthless power " to the business titans he treated so brusquely, whose corporations he then found in violation of the law. Media controlled by the same interests adopted the characterization of RFK as ruthless until his murder six years later.

May 1962 The depth of corporate hostility toward Kennedy after the steel crisis can be seen by an unsigned editorial in Fortune, media czar Henry Luce's magazine for the most fortunate. The editors of Fortune knew the decision to raise steel prices had been made by the executive committee of U.S. Steel's board of directors. It included top-level officers from other huge financial institutions, such as the Morgan Guaranty Trust Company, the First National City Bank of New York, the Prudential Insurance Company, the Ford Foundation, and AT&T. (Hoopes, Steel Crisis, p. 17. Also Donald Gibson, Battling Wall Street: The Kennedy Presidency (New York: Sheridan Square Press, 1994), p. 17.

When Roger Blough handed U.S. Steel's provocative press release to the president, he did so on behalf of not only U.S. Steel but also these other financial giants in the United States. The Fortune editorial therefore posed an intriguing question: Why did the financial interests behind U.S. Steel announce the price increase in such a way as to deliberately " provoke the President of the U.S. into a vitriolic and demagogic assault ? " (" Steel: The Ides of April, " Fortune (May 1962), p. 98) With the authority of an insider's knowledge that it denied having, Fortune answered its own question: "There is a theory-unsupported by any direct evidence-that Blough was acting as a 'business statesman' rather than as a businessman judging his market. " According to "this theory, " Kennedy's prior appeal to steel executives not to raise prices, leading to the contract settlement between the company and the union, had "poised over the industry a threat of 'jawbone control' of prices. For the sake of his company, the industry, and the nation, Blough sought a way to break through the bland 'harmony' that has recently prevailed between government and business. " In plainer language, the president was acting too much like a president, rather than just another officeholder beholden to the powers that be. US Steel on behalf of still higher financial interests therefore taunted Kennedy so as to present him with a dilemma: he either had to accept the price hike and lose credibility, or react as he did with power to roll back the increase and thereby unite the business world against him. His unswerving activist response then served to confirm the worst fears of corporate America: "That the threat of 'j awbone control' was no mere bugaboo was borne out by the tone of President Kennedy's reaction and the threats of general business harassment by government that followed the 'affront. "' Fortune gave Kennedy a deadly warning of its own by the title of its editorial: " Steel: The Ides of April. "

5/8/1962 As John Kennedy became persona non grata to the economic elite of the United States, his popularity increased elsewhere. He said on May 8, 1962, to a warmly welcoming convention of the United Auto Workers: " Last week, after speaking to the Chamber of Commerce and the presidents of the American Medical Association, I began to wonder how I got elected. And now I remember. " I said last week to the Chamber that I thought I was the second choice for President of a majority of the Chamber; anyone else was first choice. " He told the U.A.W. : " Harry Truman once said there are 14 or 15 million Americans who have the resources to have representatives in Washington to protect their interests, and that the interests of the great mass of other people, the hundred and fifty or sixty million, is the responsibility of the President of the United States. And I propose to fulfill it."

After the steel crisis, President Kennedy felt so much hostility from the leaders of big business that he finally gave up trying to curry their support. He told advisers Sorensen, O'Donnell, and Schlesinger, "I understand better every day why Roosevelt, who started out such a mild fellow, ended up so ferociously anti-business. It is hard as hell to be friendly with people who keep trying to cut your legs off. " If Fortune's editors were right in seeing a deliberate provocation of Kennedy, the instigators had succeeded in alienating the business elite from the president, and vice versa. JFK joked about what his corporate enemies would do to him, if they only had the chance. A year after the steel crisis, he learned before giving a speech in New York that elsewhere in the same hotel " the steel industry was presenting Dwight D. Eisenhower with its annual public service award." "I was their man of the year last year, " said the president to his audience. "They wanted to come down to the White House to give me their award, but the Secret Service wouldn't let them do it. " (Schlesinger, Thousand Days, p. 641.; 42. Kenneth P. O 'Donnell and David F. Powers, "Johnny, We Hardly Knew Ye " (Boston: Little, Brown, 1970), p. 407.)

5/28/1962 US stock market plunged; biggest one-day loss since the crash of 1929. RFK recalled later that his brother complained, "When the market went down, it's the Kennedy stock market; and when it goes up, it's the free enterprise system."

6/8/1962 In mid-1962 the tone of LIFE's examination of Kennedy's domestic policy changed, and he was criticized for treating economic problems as 'technical' problems, thereby giving too little attention to the overall importance of economic 'freedom'. (LIFE, June 8, 1962, 'How to Put More Zing in the Economy', p4) In keeping with its normal rhetoric, LIFE accused Kennedy of interfering with the free flow of international investments with his proposal to increase taxes on purchases by Americans of foreign securities." (Life, August 2, 1963, 'Misery with the Dollar or Happiness?, p.4)

10/11/1962 JFK signed into law the Trade Expansion Act which lowered tariffs. He called it the "most important international piece of legislation since the Marshall Plan."

10/16/1962 JFK signed his investment incentive plan to encourage business to buy more equipment and expand factories. He called it a "good start on bringing our tax structure up to date," though some of his reform ideas had been eliminated by Congress. The same month, there was a sharp increase in orders for machine tools. By the spring of 1963 companies cited his tax plan as an important reason for increased business investment. (Business Week 4/27/1963) Kennedy was able to persuade Congress to pass an act that removed the distinction between repatriated profits and profits reinvested abroad. While this law applied to industry as a whole, it especially affected the oil companies. It was estimated that as a result of this legislation, wealthy oilmen saw a fall in their earnings on foreign investment from 30 per cent to 15 per cent. Kennedy decided to take on the oil industry. On 16th October, 1962, Kennedy was able to persuade Congress to pass an act that removed the distinction between repatriated profits and profits reinvested abroad. While this law applied to industry as a whole, it especially affected the oil companies. It was estimated that as a result of this legislation, wealthy oilmen saw a fall in their earnings on foreign investment from 30 per cent to 15 per cent.

10/15/1963 The Wall St Journal was even more harsh in its condemnation of the president's policies than it had been at the outset. On October 15, 1963 it accused the Kennedy administration of giving 'mere lip service to economic freedom' while pursuing a foreign aid program that favored socialism and a domestic program that led to bureaucratic control of the economy. The paper charged that Kennedy's policies reflected a hostility to 'the philosophy of freedom'. (Wall Street Journal, Oct. 15, 1963, 'Search for a Purpose', p. 16).  "Concerning foreign aid, the *Journal* had repeatedly accused Kennedy of encouraging state planning, statism and/or socialism." (Wall Street Journal issues: 8/6/62 'No Cause for Celebration', p. 6;  3/26/63 'Too Much Money, Too Little Thought', p. 18; 8/15/63 'When Friends Become Foes' p8)

11/19/1963 During the final week of Kennedy's life, the Wall St Journal acknowledged that there was general prosperity, but claimed there was an uneasiness about Kennedy attributable to his attempts to control the economy, as well as to excessive spending and the growth of government. (x Wall Street Journal, Nov. 19, 1963, 'The Anti-Business Image', p. 18) In a separate article it said that Kennedy's foreign aid had often fostered 'statist and socialistic institutions.'" (Wall Street Journal, Nov. 19, 1963, 'Blunt Talk on a Blunt Tool', p. 18)."

4/28/1964 LBJ had business leaders over for a black-tie dinner. They included William Battens of J.C. Penney, Roger Blough of US Steel, Gussie Busch of Anheuser-Busch, Henry Ford II, Crawford Greenewalt of E.I. duPont, Frederick Kappels of AT&T, Tom McCabe of Scott Paper, David Rockefeller, James S. Rockefeller, Bob Stevens (formerly in the Eisenhower administration), Walter Touhy of C&O Railway. (White House Diary p127)

4/21/1965 William H. Orrick, head of the Antitrust Division of the Justice Department testified before the Senate that "concentration of industrial power may lead to the police state. Can anyone doubt that the prewar experience of Germany, Japan and Italy have proven the wisdom of the nation's concern over concentration of economic power?"

[Cutty]

You've been a busy beaver, TLR. Thank you!

I'm wondering which steel companies weren't mentioned. My father was a union steel worker from '43 to '72.

[TLR]

Cool, looks like the pasting problem is fixed. Now to repair these old posts.