(00:00:00) As you can imagine those of us who are working with Kennedy found it utterly shattering experience, and I was in a setting that was particularly traumatic the u.s. Cabinet committee on trade and economic policy was on its way to Japan. It was a joint committee with the Japanese and at six cabinet secretaries and Pierre Salinger and Mike Feldman people from all people from the White House, and we were en route from Honolulu to Wake Island in Air Force to when we first heard the terrible news that the president had been shot in Dallas. And of course you can imagine what an impact it had on this group of extremely close advisors to the president. And then we were hoping Orville Freeman was part of the group and he showed us how he'd been shot through the head in in Okinawa and had survived and we were praying and hoping that the president would survive and then about half an hour later. We heard the shattering as I say the terribly shattering news that he was dead and meanwhile Dean Rusk the Secretary of State who was in charge of the group had turned the plane around at ordered it back to Honolulu, and I'll never forget that plane just fell into total grief it I never Saw more grief-stricken group in my life. And we landed at Hickam field in Honolulu. And there were soldiers with fixed bayonets it every 20 feet along the runway because who knew whether or not it was a world conspiracy and the commander-in-chief of the Pacific forces came on the plane. We were not allowed off and we refuelled and then took a nine-hour hop non-stop to Washington. I might say one other thing was just remarkable in a sense. It was the king is dead long live the king that is once we overcame this shock and immediate sense of grief the conversation on the way back turned to what kind of a man is Linda Johnson. Where do we go from here? How do we pick up the reins (00:02:21) did any of you know Lyndon Johnson very well. (00:02:23) Well, some of us knew him rather. Well, I had been one of those in the Kennedy administration who I guess just because he was the vice president. I had not known him before. And indeed it would not have appeared that I would strike up a very warm relationship with him since I always opposed percentage depletion and all kinds of things that men from Texas are for but indeed we did develop kind of a non Tada always gave him copies of my stuff and he always sat next to him at the Press briefing conferences that we had with the president president and in the White House quarters, and so I found it rather easy to make the transition once the shock was over but yes Freeman knew him quite well several people did and it was a very useful undertaking to find out just what kind of a man Linda Johnson was (00:03:19) from the very end of the Kennedy administration. Let's go back to the beginning of it and your role. How did you happen to get into the Kennedy administration? (00:03:28) Well, thereby hangs a tale Kennedy I had been in Adlai Stevenson Man by the way and Ken He came to town and October of 1960 for the quadrennial Bean feed down at the levington. Well, he was his headquarters are at the lamington and you know that about 20,000 people waiting for him over at the auditorium and Hubert Humphrey spied me and he said Walter have you met the candidate yet? And I said no well in typical Hubert a valiant fashion. He grabbed me by the elbow sort of rushed me past the Irish mafia, you know O'Donnell and O'Brien and oh Sorenson and no cocks and so forth and rushed me into the presence and Kennedy already had his shirt off and sort of, you know, it was running late and ready to take a shower. And so and I thought he just dismissed me and say send in your ideas through Sorenson or Cox or what have you but with Hubert's introduction good old Hilbert, you know, he said Jack I want you to meet the finest Economist west of the Mississippi. Well, you know, we only made it by about six blocks. I suppose if it Bit in st. Paul, he would have found something equally appropriate and at that point Kennedy just sort of riveted me to the floor by saying, you know in the in the in the in our Democratic platform. We promised 5% a year growth and it's only been growing at two and a half percent this economy how we going to do that and then he fired a whole series of questions at me and they were so acute that even though thank heaven. He didn't know the answers. Otherwise, he wouldn't have needed an economic advisor. But even though I at that time, I didn't know that but they were so acute that I was I was pretty much converted then and there and then I found out later that people like Orville Freeman and Ken Galbraith and Hubert Humphrey had said apparently said Heller is your man and I was I was totally Thunderstruck. I had no idea that he was going to ask me to be chairman of his Council of economic advisers. (00:05:35) There was a spirit of Vitality and exuberance that characterized the Kennedy years people referred to the Kennedy magic. Can you recall an incident or two from your own personal contact with him that illustrates his character? (00:05:50) Well, I guess in part I would say that with Kennedy familiarity never breed contempt. You always went away from a meeting with Kennedy and I had several hundred of them in those thousand days. You always went away with a sense of admiration Amusement is had such a marvelous sense of humor. And he really was that that image it came through about him in his press conferences and so forth that he was self-deprecating in so many different ways. It was correct. He did not have that huge ego. Let me give you an example in the summer of 1962. We and the council have been lobbying hard for a tax cut and I wanted the first installment. In 62 and let the rest of it come on later. He decided against that first installment but made a commitment for a major tax cut in 1963 and gave a television address about it in mid August of that year and I was sitting just off camera and the Oval Office and as you do, you know at the end of something like that I rushed up to him and I said Gee that was great. Mr. President. He said no it wasn't it was dull he'd been using a pointer and some charts we drafted for, you know gotten up for him instead of using some professional PR outfit to do it. And he that was it. He just said it he recognized he was he was a realist about himself and that never had that towering ego. However, I don't want that misunderstood because he was very jealous of the office of the presidency one time. He went into the East room. This was after the steel crisis, by the way. He went into the East room of the White House and over 200 members of The Business Council there and they didn't get up for the president of the United States. When he came in and I happen to be waiting for him in the Oval Office when he came back and he said those, you know expletive deleted guys did not get up for the president of the United States. He hell he held the presidency in great esteem, but he himself did not have that great ego (00:07:54) you mentioned a little bit ago about his promise to get the economy growing at an annual rate of 5% twice as fast as it had been ongoing in the past. The economic program was of course largely the result of of your recommendations. What did you think about getting the economy moving at that time big tax cuts were just not very common that (00:08:16) well as a matter of fact, we tried to persuade him early in 61 to have a tax cut because we were still in the so-called, you know Eisenhower and Nixon recession and the thing Kennedy said to me it was a more or less conclusive. He said You think I can come into this office of the presidency on a platform calling for sacrifice and is a very first thing hand people a tax cut. He says no way I can do it and he says besides dick Nixon would jump on us he for that first year was very very conscious of the criticism from Richard Nixon and the and the Republicans and so it was pretty much ruled out for 1961. But when we got into 62 got into considerable slowdown of the economy and so forth and as the educational process took hold and and after all he came from Fairly conservative Moorings his father while a Maverick was a pretty conservative Maverick, but gradually as he was conditioned, I'd like to say in considerable part by us in the Council of economic advisers. He became more and more sympathetic to the idea of a tax cut and the by the spring of 1962. We were We'd made our impact on the president and it was pointing out that with 91 percent income tax rates. We still had marginal rates of 91% at the top of the income tax and with the over burden of the tax and with his not being able to get his spending programs through Congress. There was simply too much of a drag on the economy through that tax system. And so we persuaded him that he should go for a tax cut. We were arguing for a twelve billion dollar tax cut doesn't sound like much today, but you got to remember the gross national product was one sixth of what it is today. And the treasury was arguing. Well, no, we only need you know, 234 billions to lubricate tax reform. Well thank heaven. He appointed me as the head of a cabinet committee on growth and we hammered out a compromise in the second half a 1962 and came up with the tax cut of 12 billion dollars, which is the kind of compromise that that I like (00:10:33) wasn't there a lot of concern then is Is know about tax cuts leading to deficits. (00:10:37) Yes indeed there was and you're right. It was absolutely unprecedented. The economy was already moving up. It was not reseeding anymore. It was nowhere near its potential but it was already moving up and there was a big deficit by those by the standards of those days. And so, you know, I ran against all sort of the tradition of budget balancing through thick and thin and against the tradition of not doing anything to stimulate a rising economy. So we had an uphill battle and we had a very difficult time persuading Congress and the business Community by the way here with Humphrey was one of the early ones to be persuaded and he understood the case and some of the business community did but it was it was rough going. I remember an early 63 Martha Griffiths congresswoman from Michigan saying to me, mr. Heller, why is it do you think that the American people are not? Are rising up to support this tax cut and I inadvertently just said well, maybe it's the Puritan ethic and the next day a congressman burns the Republican very bright republican from Green Bay said, I'd rather be a Puritan and a Heller. I had that fitted right in with a sort of humor of the the Kennedy days. But finally it was after Kennedy's assassination, but largely through the efforts that he had made and then Lyndon Johnson pursued it we of course got that tax cut and it stimulated the economy without stimulating inflation. (00:12:09) What do you suppose turned his own view on that tax cut as you mentioned. He was reluctant to go along with it the first year partly because of politics partly because it was own upbringing and so on what caused them to turn the (00:12:21) corner. Well, as I say, I'd like to believe that the educational process had something to do with it. And after all he was the first American President whoever was willing to say that there could be such thing as a good deficit. In other words that there were bad deficits when they resulted in over stimulating the economy and generating inflation, but if the private economy was lagging then it was up to the the federal government to provide some purchasing power some money to move the economy up and he gradually became persuaded of that but more than that, he was a great believer in the potential of the American economy. And he felt that that potential should be used and as his initial question to me way back when and the lymington hotel indicated. He was tremendously committed to economic growth. He was tremendously committed to and and partly for reasons that I don't you know, specially Advocate Dave Lee he didn't want the Soviets to beat us and so forth and so on but he wanted it also for its own sake and as a consequence he realized that since he couldn't get his expenditure programs to stimulate the economy the way to go was the Next cut and of course, it did work like a charm (00:13:35) one of the crises that President Kennedy faced fairly early on was over steel prices. He had one wage concessions from steelworkers a few days later. The steel industry came along and said we're going to raise prices. He had a bit of a crisis on his hands. (00:13:51) Well, it was more than a bit that I never saw that Irish temper rise as as it did in that occasion and it had quite a long history. We had a 1961 decided to keep a close eye on steel prices because there were threats by the steel industry to raise prices, you know in the midst of a recession and with only 60 to 65% of their steel production capacity and use and so on and way back then Kennedy had written to this heads of the steel industry a letter that we drafted for him saying in effect. Well, if you kind of cool it on the price increases we will do our best. S to hold wage increases in check to in try to influence that process and we in the council Drew up the wage price guide posts and they were announced to an unsuspecting World in January of nineteen sixty two and we thought we had it you see this is the thing that that made it such a emotional crisis Kennedy thought he had a gentlemen's agreement with Roger Blau the head of United States Steel that if we manage to persuade through Arthur Goldberg the Secretary of Labor who was very close to labor and very close to steal had been their counsel after all if we arranged through him to have a relatively modest steel wage increase in goodness. It was only two and a half percent which by standard since then was a very modest settlement that we had a commitment unspoken that still would not raise its prices. So when Blau you know in what I consider a terrific public Relations goo from his standpoint laid on the president's desk in April of 1960 to a document which was a press release that had already gone to the Press saying that we're raising this deal price is six dollars a ton a ton and the did it the night before a scheduled presidential press conference. I thought he you know that had all the makings of a direct confrontation and I remember that night we had I had to go to a dinner at the German Embassy and came back in my black tie with some others and went to work and we drafted a strong statement for the president to give the next morning and one Steel company came in after the other which raised the president's I are still more, you know first it was u.s. Steel and then Republic and then Bethlehem and right down the line and they all fell in line which made him just furious with the same amount to Lenore. All the same amount, of course. Well, that's sort of the nature of that industry. It isn't necessarily collusive. It's just price leadership but to him it look elusive. Well in the morning, we had our breakfast briefing session before his press conference, each of us had drafted a statement and he brushed them all aside and said there there there too Meek to mild to week and he had Ted Sorensen draft is simply Barn Burning statement about a small band of willful man and so forth. Well not to go into too much detail about it. But how do you how does an Administration cope with a thing like that? Well Arthur Goldberg and some people in the labor department went to u.s. Steel but we in the council felt that if we could hold out some of the small steel companies that we could break the price increase and we did we got about 15 percent. We got Armco and Inland steel and a couple of others to hold out. And three days later the price increase was rescinded, but it left a very bad taste in the mouth of business. And that was the famous incident where he had said, my father always told me that big businessmen are SOB's and so forth and you remember businessmen went around wearing great big SOB Badges and it was a period of very great strain between the administration and I don't know on that balance. I think it helped seat as it were helped establish the wage price guide post and really did help restrict wage and price increases and maintain price stability after all it was a one point two percent per year inflation, which is no inflation really 4 1961 through 1965. So it had a very favorable effect I think for the economy, but it sir sure didn't have a favorable effect on the business community's you of Kennedy. (00:18:29) How did you get the business Community to go along with that is Actually voluntary program after it was so clear at least in the minds of business that the administration was not on their side. (00:18:41) Well, it's a question partly of public opinion what we did when we issued the guideposts was to say here is The Logical interplay of weight of wages and prices costs and and and and returns and we have to rely on an informed public opinion to serve as the enforcers. It was a voluntary program. As you know, Kennedy would not have accepted in dire circumstances adopted any kind of mandatory wage price controls of the kind that Nixon put in and 71 but the idea was to educate to influence and to use some occasional government contracts and so forth either granting them are not granting them some little sanctions, but it was mostly by the force of public opinion and it's quite remarkable as you look it over as you look back. And you study it statistically or economically you find that they did work and I can't tell you how many businessmen told me that and indeed a lot of enlightened labor leaders that they were just as well off as having wages chasing prices and prices chasing wages here wage increases were keeping roughly in step with productivity increases. Everybody was better off (00:19:59) the tax cut to get the economy moving at a more rapid rate was one part of the president's domestic program. Certainly another big part was the anti-poverty program. What was your role in that (00:20:13) this of course the anti-poverty program which resulted in part from Kennedy's visit to the to Appalachia to the Kentucky coal fields and so forth which where he was so struck by the Dismal level of Well being and the poverty and so forth was really finally put in full motion by Johnson, but Kennedy was committed to it and I had originally I had the best poverty Economist in the country Bob Lampman from the University of Wisconsin. Now my staff and I asked Bob to put together after the president had been in Kentucky kind of a dossier on what our situation was on poverty and in the spring of 1963 began a government-wide effort to put together what might be called what we then called an attack on poverty, which later on Lyndon Johnson called in his inimitable style the war on poverty and my last meeting with Kennedy before the assassination on November 19th. I was heading to Japan on that Hill. Paid admission but was essentially on the poverty program because we had a big group working throughout the government and I wanted a commitment from the president that he really was going to put that into his 1964 program and indeed he made that commitment. He said I don't know how much I'm going to spend on it. But rest assured that it's going to be an important part of my 1964 program and this was in addition to the ad hoc things. He'd already done (00:22:02) both the tax cut and much of the anti-poverty program were passed after his assassination. Right? Do you think the that his death was a catalyst or moving it along? (00:22:13) Let me say this. I think that both the tax cut and the anti-poverty program would have been enacted had he not died but it is absolutely true that Lyndon Johnson did a masterful job of what should I say? Utilizing and it's kind of a rough thing to say but you know, utilizing the assassination as a lever to get some action. I don't mean that Johnson couldn't have done it on his own but I think that with that combination probably we got the program's somewhat faster perhaps somewhat larger than we otherwise would have but I am persuaded that Kennedy would have gotten the programs and that he would have been re-elected by a huge margin. (00:23:07) What do you think was so special about the Kennedy administration? (00:23:12) It's pretty clear to me that the very first thing was its competence. Now this may sound self-serving. But let me assure you one of the most joyful things about working with Kennedy was that you knew you were working with Top Notch people throughout and I think that sense of Excellence at government and the fact that people weren't backbiting and the fact that there was kind of a consistent policy. You didn't have somebody popping up on this side of the White House saying one thing and somebody popping up on the other side saying another thing but beyond all that it was the president's incandescent personality. I think it was I think it was Dean Rusk who said that his incandescents lit fuses all around him everybody in that Administration almost without exception was an enthusiastic participant and a competent one and I think that and and young the Youth of the administration I think got across And with that kind of spirit, I think it's fair to say that although the history books will say well, you know, look at look at the legislative record. It wasn't all that impressive civil rights got started a lot of things happen, but you know, not an enormously impressive record, but I do think it's the last time that we really thought that government was good in this country. I think it was there was faith on the part of the young people in their government. There was a loyalty to the country. I don't mean, you know, wrapping the flag around yourself, but there was a confidence in government and a willingness to serve. The Peace Corps is a perfect example of that and I think those three assassinations the to Kennedy's and and and King were just shattering to that and I really believe this is a case where personalities made a very great difference in history this Here to the 60s later 60s might have been very different had Kennedy (00:25:16) lived. Well Vietnam certainly had a lot to do in the minds of many observers with the resulting lack of trust in government and Vietnam did get started to a large extent under Kennedy. Do you think hand he lived that he would have pursued that policy to the extent that mr. Johnson did (00:25:34) well, I have a view on it but nobody can say with any any confidence. I you know, if you ask me about some of the domestic program, I would proceed with a little bit more confidence again 11 days before the assassination November 11th of 1963. Kennedy said to me first we'll get your tax cut and then we'll get my expenditure programs and I rather think he would have now on Vietnam. The thing I am willing to say is this now I know that some of the people have written about Kennedy say for sure he would have cut it off and so forth. All I can say is on the basis of my three years with Kennedy. That decisions were made in a rational way on the basis of information which was processed carefully by people like Ted Sorensen on the domestic side and others on the on the defense and foreign policy side and you had a president with a with a head with a mind with a willingness to think things through and to get command of the facts and it seems to me that any man in the presidency who had such a rational process of decision making and who was willing to look at the facts would have cut that wore off sooner than it was cut off. That's the only thing I would say just the and that's as I say referring to the to the process the competence and so forth that I believe would have led to a more rational decision on that score (00:27:01) people criticize Kennedy for his involvement in Vietnam. They criticized him to some extent for his buildup of us defenses after all he campaigned on the base. To the missile Gap and did increase the US strategic strength quite a bit was he wrong in building up the the defense department of that extended? What impact would that have on the economy? And on his domestic (00:27:24) program? Well, you know, I'm glad you raised that question because there's I've seen some of these sort of easy statements that Kennedy build up the defense establishment build up our military expenditures and that that's what really stimulated the economy. I don't see how that myth got started the expenditures for defense dropped from 10 percent of gross national product at the end of the and anybody can go back and look at these numbers of the Eisenhower Administration to about seven and a half percent before escalation in Vietnam started. And as a matter of fact Kennedy and McNamara were both quite proud of this now true. The dollar amounts went up the gross national product. Rising but as a proportion of the budget and as a proportion of the gross national product defense actually declined so when you put it in perspective it it's very hard to accept the proposition that this was a war hawk who was building the defense establishment and thereby stimulating the economy. (00:28:36) He was according to what you're saying able to get both some guns and some butter. (00:28:41) Well that's possible because the economy started in 1960 when he became 61 when he became president. He was running about 10 percent below its potential in other words at that time. And these numbers seem is as I said earlier seems so small the economy was running at 500 billion dollars of output per year. It's now running it 3,500 three trillion 500,000 and it was capable of producing about 10% more about 550 billion dollars. So what was Opening was that there were some stimulus and especially by the tax cut. But remember there was also a first installment of that tax cut kind of a supply-side tax cut in 1962 when they put in speedier write-offs for business and the investment tax credit and so forth, but there was some stimulus and so the economy was rising and so it was possible out of a rising pot to accommodate both some improvements in the civilian level of income and civilian programs and some increase in the dollar amount of military programs and sometimes you know that's gets twisted around by by critics of the far left and the far right and they you know, they all say oh, well you were just trying to expand the economy to make it possible to fight a war. Well, obviously that was not our purpose nor was it Kennedy's? (00:30:02) Dr. Heller? We're almost out of time but in just a couple of minutes, could you tell us what you think might be any Kennedy Legacy that is Send us today. Any any of the things that happened then that have a direct impact on our lives today. (00:30:16) Well sticking, you know primarily to the economic part of it, you know, I'd like to believe apart from the economics of it. I'd like to believe that Kennedy represented a spirit of government and a method of managing government that we could aspire to and get back to but in my area he shifted economics from old-fashioned really old economics to the new economics. He is the first president who recognized the role of the deficits could play the role truly that fiscal and monetary policy could play in the economy and he was really the first modern president in economics and set a new tone which I think succeeding presidents have tried to do I don't think any of them quite as well as Kennedy (00:31:16) and I'm sure Enjoy your experiences in those days. (00:31:19) Well, it was a no one can persuade me. I'm still emotionally and intellectually committed to Kennedy, and I was not a Kennedy man to start with after all with the middle name of off gong. I wasn't part of the Irish mafia, and I sure wasn't part of the defense of the of the Eastern establishment, but I became just thoroughly and completely devoted to him, and I believe had he lived for a second term. He would have gone down in history as a great president. (00:31:49) Dr. Walter Heller. Thank you very much for sharing your Recollections with us today. (00:31:53) It's been a pleasure.