Johnson believed lower taxes would help the economy and also help Democrats in the 1964 election. According to the White House economists, led by the Keynesian chairman of the Council of Economic Advisers, Walter Heller, a tax cut for wage earners would boost demand and stimulate growth. The GNP was growing—it increased by $100 billion between 1961 and 1964—while unemployment hovered at 5.5 percent. Corporate profits were up, personal income was rising, and overall the nation’s economy was thriving. On the day after Kennedy was assassinated, the Council of Economic Advisers had produced a memorandum that the tax reduction would increase GNP by another $12 billion in 1964 and $30 billion annually starting in 1965.12
The U.S. economy had performed well throughout the post–World War II years, but Johnson’s liberal Keynesian economists believed it had not reached its full potential and could do even better. The tax cut, they argued, would help to stimulate the economy, and there was enough room for growth that it would not cause inflation. The economists believed that short-term deficits in good economic times were a sound investment in healthy growth.
Johnson had political reasons too for wanting Congress to pass the tax cut. If it could be passed by the early months of 1964, the economy would get a boost before the next presidential election, and Americans would be walking into voting booths with more secure jobs and fatter wallets. Bill Moyers told the speechwriter Ted Sorensen, a holdover from the Kennedy administration, “These fellows all tell him the tax bill now will mean an immediate upsurge in the economy, which ought not to be delayed until next April, May, June.”13
The problem for Johnson was that while fiscal conservatives, including Wilbur Mills and Harry Byrd, the chairman of the Senate Finance Committee, had hesitantly accepted the argument that a tax cut could stimulate more economic growth, they insisted that Congress pass, and Johnson accept, big spending cuts to limit the size of the federal budget deficit. They shared a belief that the government’s budget should be balanced. In their view, balanced budgets were proof that the federal government had control over its finances. A commitment from Johnson to a tight budget would give them some evidence that the White House would not allow the deficit to spiral out of control. They argued that large deficits, by putting too much money into circulation, would inevitably cause inflation. It was also their belief, shared with the financial community on Wall Street, the Chamber of Commerce, and the National Association of Manufacturers, that federal deficits raised interest rates and discouraged private investment.
Senator Byrd let it be known that he would not allow a tax bill to leave his committee unless the president agreed to a federal budget of $100 billion or less, no more than $2 billion above the previous year’s budget. The Appropriations committees in both the House and the Senate controlled the spending side of the budget, and Byrd also wanted Johnson’s promise that he would keep his request from the House committee within the same $100 billion limit. The chairman could count on nine of the seventeen members of his committee to support him on the tax bill, including the ranking Republican on the committee, Delaware’s senator John Williams, who was known to be a zealot for balanced budgets and entirely unsympathetic to the views of Walter Heller and the other liberal Keynesian economists. If Johnson didn’t say yes to the budget figure, Byrd’s committee would say no to the tax cut.
Byrd’s demands were a direct challenge to Johnson’s advisers, who wanted him to propose a budget closer to $108 billion, which they believed was the bare minimum necessary to pay for existing programs and have some resources available for new programs.
Johnson’s experience in Congress had taught him to show deference to the southern committee chairmen who held the purse strings. He was also feeling intense pressure to have Congress pass a tax cut soon so that southerners wouldn’t be able to hold it hostage during a filibuster over civil rights. If the White House got the legislative sequence right, so that Congress passed the tax cut soon, the Senate would have no other urgent business before the summer, and the Democrats would be better able to outlast a filibuster and force Dixie to allow for a vote on civil rights.
At a meeting with his economic advisers, Johnson told Walter Heller that liberals would have to swallow hard and accept a budget that was closer to $100 billion than $108 billion. The budget bureau director, Kermit Gordon, responded that the only way they could render the budget acceptable to Byrd would be to make severe cuts in popular programs, and he chose as an example the rural electrification program, which Johnson had long cherished for the benefits it had brought to his poor Texas constituents when he was in Congress.14 Heller complained that the president should stick with their $108 billion budget as an “irreducible minimum,” but Johnson pushed back. He said, “Unless you get that budget down around $100 billion, you won’t pee one drop.”15 Johnson displayed to the group a memo Heller had written in which he outlined how deeper spending cuts would harm domestic programs. He said he agreed with Heller but needed to make very practical choices: “You have to give something to buy off Byrd.”16
Two days later, on November 27, Johnson delivered his first presidential address to a joint session of Congress. His purpose was to restore confidence that the nation would get through the crisis of the assassination and that Lyndon Johnson was up to his new job. Speaking from a black loose-leaf notebook filled with typewritten text and some handwritten notes he had jotted down at the last minute, the president emphatically connected his administration to that of his deceased predecessor. “Let us continue,” he said, and proceeded to highlight his intention to get the civil rights legislation and the tax cut through Congress. He focused on the tax cut and devoted most of the speech to explaining what it would accomplish. “No act of ours could more fittingly continue the work of President Kennedy than the early passage of the tax bill for which he fought all this long year. This is a bill designed to increase our national income and Federal revenues, and to provide insurance against recession. That bill, if passed without delay, means more security for those now working, more jobs for those now without them, and more incentive for our economy.”
In December, in an effort to accelerate the deliberations in the Appropriations Committee, Johnson invited Senator Byrd to the White House for lunch to talk over the numbers. When he got the call, Byrd told a journalist with whom he happened to be meeting at the time, “He wants to work on me a little bit.” Before they dined, Johnson gave the chairman a personal tour of different rooms in the White House, including the “little room where he gets his rub,” the senator reported later. As they started in on dessert—vanilla ice cream—Johnson asked Byrd if he would accept a budget that came in under $107 billion. Byrd quickly replied, “Too big, Mr. President, too big.” Johnson offered a lower figure. Byrd said nothing. Johnson said, “Just suppose I could get the budget somewhere under $100 billion. What would you say then?” Byrd said that if the president could reach that number, he would still not be able to support the bill publicly. As one of the most fiscally conservative members of the Senate, he could not openly sign on to the deficit that would come even with a budget as low as $100 billion, nor did he want to back down from earlier statements that using taxes to manage the economy was the wrong way to go. He would, however, allow the bill to come to a vote in the committee and would signal to his colleagues that they could vote in favor of it without incurring his wrath.17
By the time the New Year started, Johnson’s staff had been able to reduce the size of the federal budget, through actual program cuts and some accounting trickery, to under $100 billion. Kermit Gordon had worked hard to trim the budgets of agencies or reduce the size of individual programs to get to the total $100 billion figure Johnson needed. Gordon also estimated some expenditures at levels that would add up to the desired numbers, even when there was every reason to believe the numbers would actually be much higher. When Heller suggested to Johnson that they confirm the figures with Secretary of the Treasury Douglas Dillon, the president dismissed the
idea. “Dillon is down vacationing on Hobe Sound,” Johnson said, “and if he wants to have his rest or his leisure on Hobe Sound he can have it, we’re going ahead.”18 With this kind of manipulation, which Johnson continued to employ throughout his presidency, his staff came up with a budget so frugal that it fundamentally contradicted his bold promises about fulfilling Kennedy’s agenda, not to mention creating a second New Deal. But Johnson figured that when he got the tax cut he wanted, and when he harvested the political benefits of that, he would win the presidency on his own merits and plunge ahead with his big legislative plans.
On January 7, the day before his State of the Union address, Johnson called key members of Congress to inform them that his budget proposal would be $97.9 billion, just slightly higher than the federal budget when Eisenhower left office in 1961.
Johnson’s decisions about federal spending created some tension over the dramatic State of the Union address he delivered on January 8, 1964. He acknowledged that his administration would have to stick to a tight budget, then proceeded to outline the domestic programs he envisioned. Speaking about an “unconditional war on poverty,” Johnson said, “It will not be a short or easy struggle, no single weapon or strategy will suffice, but we shall not rest until that war is won. The richest Nation on earth can afford to win it. We cannot afford to lose it.” He also named hospital insurance for the elderly, federal funding for schools, food stamps, and several other programs he intended to pursue in the coming year. But, in a nod to Byrd and his allies, Johnson promised that his agenda could be accomplished on the cheap: “It can be done with an actual reduction in federal expenditures and federal employment.” He pledged a “progressive administration which is efficient, and honest and frugal.” Most of the reductions in his budget would take place in Defense (through base closings), the Atomic Energy Commission, the Post Office Department, and the Agriculture Department. The president had already instructed all federal agencies to slow down hiring and find additional ways to trim their budgets.
Senator Barry Goldwater, who was preparing to run for the Republican nomination in 1964, didn’t believe the president’s budget promises. He asked how Johnson could propose such grandiose programs and still reduce the budget. “Republicans are ugly as hell,” Johnson said to the House majority leader, Carl Albert. “I thought that they could approve of a reduction like that.”19
Some liberals too expressed disappointment, albeit for different reasons. Many liberals were already unhappy that Johnson was starting his term with a tax cut. They understood the promise of giving workers more money to spend on the goods they needed and strengthening the economy in the process, but they also realized tax cuts were hard to reverse and could leave the government with less money for domestic initiatives in the next few years. As Tennessee’s senator Al Gore Sr. warned, “Once taxes are cut, they are not likely to be re-imposed . . . Congress will always be ready to cut taxes, never ready to raise them.”20 One of the most powerful labor leaders in the AFL-CIO, James Carey, said that Johnson’s promise to support a frugal budget contradicted the aims of the promises he was making on domestic policies.21 In the Wall Street Journal, the reporter Alan Otten concluded, “President Johnson’s November election strategy is emerging ever more clearly: To keep the nation’s conservatives happy without sending his labor-liberal cohorts off sulking into their tents.”22
Though it was clear to all that there was a gap between potential costs of the programs the president was calling for and the fiscal message he presented before Congress, the overall size of the budget he promised had its intended political effect. Byrd called Johnson to say, “That was an eloquent speech you made. You’ve made a good start.”23 Byrd would tell reporters in no uncertain terms that he would not obstruct the bill “in any way.”24
Now that Johnson had agreed to spending levels that satisfied the chairmen of the tax-writing committees, Byrd and Mills allowed the tax bill to move forward. In the middle of February, the House and the Senate passed the Revenue Act of 1964, which cut tax revenues by a total of about $11 billion by reducing high and low rates from 91 and 20 percent in 1963, to 77 and 16 percent in 1964, and to 70 and 14 percent in 1965 (the rates would continue to fall from there, with the high rate reaching 44.6 percent by 2013). Corporate tax rates were lowered from 52 percent in 1963 to 48 percent in 1965. In a nationally televised speech, Johnson called the bill “the single most important step that we have taken to strengthen our economy since World War II.” The bill, he promised, would raise the income of millions of Americans and “encourage the growth and the prosperity of this land that we love.” Congress would also pass spending bills to fund Johnson’s programs at the low levels the president requested.
THE CHALLENGES TO COME
The first two months of Johnson’s presidency had changed the attitude and atmosphere of the White House. Gone were the diffidence and trepidation of the Kennedy period. Anyone who knew Johnson understood that he had determination and tenacity that were rare in Washington; he was serious about a second New Deal, even if he would have to wait a little while before he could get it started.
But had Congress changed? The conservative coalition that had stifled Kennedy remained as powerful as ever, and even the dynamic, motivated, and seasoned legislator who was now president wouldn’t be able to compel legislators to do what he wanted. “I’ve watched the Congress from either the inside or the outside, man and boy, for more than forty years,” Johnson said, “and I’ve never seen a Congress that didn’t eventually take the measure of the President it was dealing with.”25 To get his stimulus tax cut, he had surrendered to Harry Byrd’s budget demands, and he would have very little money for new programs in the next year—an inauspicious position for a president who aimed to launch a second New Deal. He had downplayed the costs of what he was hoping to accomplish; he had no idea of how massive—and expensive—the Vietnam War would become; and he had created expectations in the public and Congress based on these underestimations of the sacrifices his actions would ultimately require.
The only area of policy where Johnson believed things could be different was civil rights. Over nine decades, Congress had passed only inconsequential civil rights bills, but recently lobbying and grassroots pressure by the civil rights movement had dramatically altered the political situation; a sizable number of congressmen in both parties were demanding the passage of Kennedy’s civil rights bill, and they were willing to challenge the southern Democrats to get the job done.
Johnson too wanted the civil rights bill to pass. He believed that segregation should end, and he agreed with the basic objectives of civil rights leaders. He thought that the measure that Kennedy had proposed would be good for the country and could be the foundation for more legislation to address voting rights and employment discrimination.
The civil rights debate in Congress would determine not only what Johnson could do for civil rights but what he would be able to do for the rest of his term. If he failed to get the civil rights bill through Congress, his presidency could be ravaged by racial conflict in the months leading up to the 1964 election; a civil rights bill stalled in the House or the Senate could stall every other piece of legislation he wanted to pass. But if he got a significant civil rights bill passed—and it now appeared there was a pretty good chance that he would—and then won the election, he would have a clear road ahead of him for the grand policy agenda he wanted to drive forward. Knowing exactly what was at stake, he set out to test just how much Martin Luther King, Clarence Mitchell, and other civil rights activists had changed the situation on Capitol Hill.
CHAPTER FOUR
LEGISLATING CIVIL RIGHTS
Senator Richard Russell, the dean of the southern Democrats, privately acknowledged that Lyndon Johnson was likely to succeed in getting substantive civil rights legislation through Congress. The civil rights movement had taken hold, and the Georgian could see that his side was fighting a last-ditch effort with depleted
forces. Russell was even uncertain whether some younger southern colleagues, such as Al Gore Sr. of Tennessee and William Fulbright of Arkansas, would stick with the southern caucus, because they were not as invested in protecting racial segregation as they were in promoting the economic vitality of their region.1 Publically, Russell said, “Despite overwhelming odds, those of us who are opposed to the bill are neither frightened nor dismayed.”2 Russell was also well aware that elected officials who spoke too vehemently against the civil rights bill in this debate would risk alienating African American voters who were growing in numbers, despite the laws designed to perpetuate their disenfranchisement. “I realize there is a group in the South and in some places in Georgia that is yielding to overwhelming force even if they don’t like the trend,” Russell said.3
Russell’s only hope was that if southerners could use the two procedural weapons that remained at their disposal—the House Rules Committee and the Senate filibuster—the civil rights coalition in Congress would agree to amendments that significantly weakened the final legislation. “Bear in mind,” warned the columnist Roscoe Drummond, “that no filibuster on civil rights legislation has ever been broken before its principal purposes were achieved.”4
BEATING JUDGE SMITH
The House Judiciary Committee had passed the civil rights bill at the end of October 1963, but in December the bill was still stuck in the Rules Committee, the hostage of the committee’s chairman, Howard Smith. Born and raised in a plantation home built by slaves in the Shenandoah Valley, Smith, a former judge, was hostile toward almost everything liberal. When it came to civil rights, he was still fighting the Civil War. The tall and lanky Smith was a courtly gentleman who could charm you over a mint julep and then destroy you in committee a few hours later. He had once prevented the Rules Committee from reviewing a civil rights bill by leaving Washington to assess fire damage to one of his barns back in Virginia. “I knew Howard Smith would do anything to block a civil rights bill,” Speaker Sam Rayburn had quipped, “but I never suspected he’d resort to arson.”5
The Fierce Urgency of Now Page 9