Lyndon B. Johnson is without question more lovingly immersed in domestic issues, and more effective in getting his programs through Congress, than any American President since Franklin Roosevelt in his first term of office. He is, in addition, infinitely more familiar with the practical economics of domestic policy than his immediate predecessor ever was. As a successful entrepreneur of the southwestern variety, Mr. Johnson is a sophisticated student of the intricate relations between federal, state, and local agencies on the one side, and very specific business interests on the other. Indeed, no Texas politician less securely armored could long survive the claws of the ravenous oil and gas multimillionaires who dominate that state. Mr. Johnson understands—emotionally, financially, and politically—the rulings of the Tariff Commission, the Securities and Exchange Commission, the Internal Revenue Service, the Federal Trade Commission, the Federal Communications Commission, and the dozens upon dozens of other governmental instrumentalities which have a word or two to say about the conditions under which goods are produced, displayed, advertised, or sold; or the circumstances under which businesses may merge or cooperate; or the proportions in which profits must be divided between taxes and dividends; or the height to which depreciation allowances and business entertainment may be allowed to soar; or the regulations which apply to the recruitment and supervision of agricultural laborers. When businessmen, after meeting with him, comment admiringly upon his grasp of their problems, they are testifying to the unique expertise of a President steeped in the tribal lore of American enterprise. Mr. Johnson has fully earned the accolade conferred upon him by his new Secretary of Commerce, John Connor, fresh from Merck & Co., who, according to Business Week, judges that his new chief understands business and businessmen “better than any President since God knows when.” Explained Mr. Connor: “I was attracted to the job by the President's frequent statement of his philosophy—which is just what I've been saying.”
The consequence of all this is a love affair between the President and the business community which confounds the history of business treatment of Democratic administrations. For example, the highly conservative, highly Republican Monthly News Letter of New York's First National City Bank delivered itself of the following endorsement of the administration's 1965 legislative program: “. . . these reports and messages indicate a marked evolution toward a more pronounced pro-business attitude, combined with an increasing stress on free competition in the allocation process. It is clear that the administration's views on some basic policy issues have come to converge with those of the business community.” After this encomium, the writer of the News Letter barely had the heart to repeat the bank's monthly warning against the growth of federal bureaucracy. Thus it is that bankers and industrialists who hated President Kennedy because of his “anti-business” views and advisers, accept with gratitude from their new friend in the White House the investment tax credits, the liberalized depreciation allowances, the diminished progression of the personal income tax structure, and the reduced corporate income tax which stemmed from their late “enemy's” recommendations. Judged by their actions, it would be difficult to say that Mr. Kennedy was any less kind to American enterprise than Mr. Johnson. But to go by the business press, Lyndon Baines Johnson's accession to the Presidency represented the most glorious manumission of the slaves since Abraham Lincoln.
All Presidents are complex men. Mr. Johnson was born and raised a poor boy who had to scramble very hard for the best education he could afford. As a young man he worked in the National Youth Administration, where he simultaneously prepared the way for his own entry into Congress and assisted other poor boys to get their feet on the first rung of the ladder of opportunity—training and education. In his bones Mr. Johnson knows that there is poverty in the land: he was poor. In his heart he knows that success is possible: he has succeeded. As a man of sentiment and as a practical politician, he is unlikely to forget either his origins or the means by which he moved upward from them. More naturally, perhaps, than some of his other roles, the President readily plays the part of the triumphant populist.
Mr. Johnson, then, is gratified with our society—the society he has mastered. Nor does he have a quarrel with the thrusting entrepreneurs who within their own sphere of operation have learned to work the levers and controls which turn on the profits and the sales. Why should not all Americans have the same chance to share the rewards of a productive economy? In a greater America—the Great Society—the poor, the young, and the colored will all be assimilated by a working, bustling, prospering economy. If anything is clear in the President's program, it is the drive not toward the transformation of society but toward the expansion of the economic machine. This is not an ignoble vision. But it is a highly conservative one.
Seen in this context, the hundreds of pages of Presidential advice to Congress emerge as rather more coherent than item-by-item analysis might suggest. Inevitably the documents which sound the major legislative themes are the Budget Message and the Economic Report. The latter begins with a commercial for past policy and rehearses the economic triumphs of 1964: “additional jobs for 1½ million persons have been created in the past year”; “Gross National Product (GNP) advanced strongly from $584 billion in 1963 to $622 billion in 1964”; “corporate profits after taxes have now risen continuously for four straight years—from a rate of $19½ billion early in 1961 to nearly $32 billion at the end of 1964”; “average personal income after taxes has reached $2,288 a year—up 17½ percent in four years”; etc., etc. “Thus,” proclaims the President in italics, “the record of our past four years has been one of simultaneous advances toward full employment, rapid growth, price stability, and international balance.” Who is responsible for such good things? All of us: “businessmen, workers, investors, farmers, and consumers.” And, as the cigarette ads are wont to put it, there has also been an extra margin of difference: “government policies which have sustained a steady, but non-inflationary, growth of markets.” “I believe,” says the President of the year in which the Civil Rights Act finally became law, “that 1964 will go down in our economic and political history as the ‘year of the tax cut.’”
From this recital of cooperative achievement and stylish public administration, Mr. Johnson drew his 1965 moral: “Purposeful expenditures, stimulative tax reduction, and economy in Government operations are the three weapons which, if used effectively, can relieve our society of the costs and consequences of waste.” This was more than rhetoric, for the President had some very concrete tax and spending benefits in mind, including the remainder of the personal income tax reductions (about $3 billion) and the corporate tax reductions (about $1 billion) scheduled in the 1964 law. In addition, the President promised a drop in excises worth another $1.75 billion to businessmen. As for “purposeful expenditures,” Social Security payments and Poverty Program appropriations were to rise, and new programs—medicare, Appalachia, aid to education—were to receive initial financing. All in all, welfare spending was slated for a $5-6 billion increase. And everything—tax benefits and spending—was to be financed out of the normal growth of an expanding economy.
This is not a program designed to reallocate the community's resources in the direction of greater public influence. On the reasonable assumption that an economy operating at 88 per cent of manufacturing capacity and 5 per cent unemployment can stand some stimulus from fiscal policy, the President plans a deficit of about the same size as the calendar 1964 figure of $8.2 billion. Now the very existence of this deficit is a significant comment on the health of the private sector of the American economy. In this, the fifth year of business expansion, it is still necessary—as it was last year and the years before—to supplement by public means the private creation of jobs and income. But once this continuing deficiency of aggregate demand is conceded, it is impossible to avoid a second judgment, on the adequacy of the administration's proposed stimulus. Here judgment has been rendered very easy by the administration's own line of argument. In their Economic Report, the Council of Economic Advisers predict that average unemployment will drop in 1965 very little if at all below the unsatisfactory level of 1964. Their analysis tends to demonstrate (some independent economists dissenting) that unemployment can be diminished only if the aggregate spending of the community, government included, rises high enough. Since Dr. Ackley and his colleagues do not believe that inflation is an imminent danger, they could safely have recommended a larger fiscal stimulus than the President's program contains. Thus, as matters now stand, the administration's major economic statement to the nation leads to a larger program of expansion than the President has offered to Congress.
Why the President halted short of an injection of spending really capable of reducing unemployment is unclear. Possibly he feared to violate the $100-billion budget taboo, even though he will surely do so in 1966, and even though most businessmen are by now capable of distinguishing between the nearly meaningless Administrative Budget and a Cash Budget which has exceeded $100 billion for some years. Conceivably, Mr. Johnson's business admirers are still so tentatively committed to the new Keynesian public finance that they prefer small stimuli to large, and moderate deficits to effective deficits. Probably they are sufficiently content with the Democratic combination of generous corporate profits and easy labor markets to oppose more stimulus than is guessed necessary to maintain the existing euphoria.
By the standards of an administration which uses liberal Democratic rhetoric, such stimulus as has been offered is peculiarly distributed. For one thing, tax reductions still receive heavy emphasis, even after the sharp slashes of 1964. Now each tax benefit is an implicit choice of private goods in preference to public alternatives, for every time a tax rate is cut, it becomes that much harder to finance adequate approaches to education, health, and housing. It appears likely that all the increases in old social programs and all the spending on new ones put together will exceed this year's tax benefits by no more than a billion dollars.
This is bad enough, but the distribution of both tax cuts and public spending raises still livelier apprehensions. A large part of this year's tax benefits, like last year's, will go to prosperous corporations and wealthy individuals. The government's share of corporate profits will therefore shrink—both because the rates on profits will fall and because the President has suspended the application of the depreciation rules in a fashion calculated to add another $700 million to corporate earnings in this calendar year. No doubt some of the excise tax reductions will be passed on to consumers, but some substantial portion will further enlarge profits which are judged satisfactory at present levels even by corporate executives.
Even the design of the expenditure programs leads to some questions about exactly who will benefit—high, middle, or low. The proposed rent subsidies are a fair example. They are to be extended not to the poor, but to a very large group of families earning between $4,000-6,500, a category well above the poverty line. The other likely gainers are builders and landlords, rarely to be found on the welfare rolls. Or consider the Appalachian program. The most expensive of the plans in the new legislation is a major road-building effort (once again roads are playing their role as the public-works project which unites all Americans). Now in the long-run, new roads in the right places may open the region to the tourist trade, promote the internal mobility of labor, and encourage industrialists to establish new plants. However, in the short run it is the contractors who reap the principal gains. Not even the poverty program is exempted from this general design of dispensing largesse to the rich. Major corporations like Litton Industries, Philco, and International Telephone & Telegraph have signed up as operators of new job camps. One of Litton's executives remarked, “We got into the poverty war for two reasons. One was the opportunity to serve the community. The other was the business opportunity.” So, too, with aid to education. The new Act, while taking account of schools in deprived areas, also promises relief to parents who send their children to private and parochial schools. And even the medicare measure contains its accommodations to the AMA and the insurance companies.
Is it any wonder, then, that reasonable businessmen should smile approvingly upon the President's housing, medical, education, poverty, and regional development proposals? The total outlays involved are small enough to be unalarming. The prosperous have something to gain. Frequently the programs are so designed as to enlist the enthusiastic cooperation of builders, lenders, insurance companies, contractors, and landlords. It all seems to prove that the business community has belatedly achieved the minimal intellectual sophistication necessary to recognize the benefits to business of tax relief for all, and social welfare programs which incidentally offer a chance or two for an honest profit. If organized opposition to the administration program finally manifests it-self, its logical locus is among the members of AFL-CIO unions rather than the Union League Clubs of the land. But there is enough ideological confusion in both places to make this desirable clarification rather unlikely.
In short, the administration's programs can be appraised realistically only within the limits of its commitment to a consensus whose terms are defined by the business community. How quickly, for example, can we expect to construct adequate quantities of low-income housing? How rapid is to be the destruction of urban slums and their replacement by something better? The major Johnson answer is contained in the message on cities. The problem, proclaims the President, is huge:
In the remainder of this century . . . urban population will double, city land will double and we will have to build in our cities as much as all that we have built since the first colonist arrived on these shores. . . . Yet these overwhelming pressures are being visited upon cities already in distress. We have over nine million homes, most of them in cities, which are run down or deteriorating; over four million do not have running water or even plumbing. Many of our central cities are in need of major surgery to overcome decay. . . . The old, the poor, the discriminated against are increasingly concentrated in central city ghettos.
Fair enough. What then is to be done?
As is apparent, not very much. Not that some of the President's recommendations are not in themselves sensible. The proposed Department of Housing and Urban Development might give the cities a stronger bureaucratic voice. The notion of a Temporary National Commission on Codes, Zoning, Taxation, and Development is also a perfectly good one. Cities do need better advice on community renewal programs and perhaps, as the President proposes, the taking of the advice should be the condition upon which federal funds are released. As for rent subsidies—the one substantially new idea in the President's message—they are fine in the abstract, if not in the plan for their distribution.
How much can the major cities anticipate from this new approach? This year and next they promise almost nothing to the residents of the barren inner ghettos. New York City can expect no more than 3500 units a year of low-income construction, and as Mrs. Hortense Gabel has noted, the federal government means to spend less on all housing programs in New York City than it did four years ago. What is needed is precisely what the administration has no intention of providing: a huge and coordinated program of urban renewal and public housing. The past failures of urban renewal, lovingly recounted in Martin Anderson's The Federal Bulldozer1 derive partly from the perversion of the program into a series of subsidies to commercial interests, and partly from the fact that adequate quantities of public housing—attractively designed, socially mixed, and suitably located—were never supplied. In New York, at the end of a generation-long boom in private construction, there is still no decent place for most Negroes and Puerto Ricans to live.
The administration program here is minute, far below Senator Taft's goals for a smaller population nearly twenty years ago. Here is the key Johnsonian passage on public housing:
The public housing program should be continued with an authorization ample enough to permit an increase in the number of units as well as to conduct a program of rehabilitation.
“Ample” seems hardly the word for 35,000 units of public housing each year for the entire country. As for urban renewal, “we will continue to use urban renewal to help revitalize the business and industrial districts which are the economic base of the central city. But this program should be more and more concentrated on the development of residential areas.” An intelligent shift of emphasis, if it were not so apparent that the residential communities to be created are highly unlikely to include the inhabitants of Harlem.
Looked at coldly, the housing proposals seem admirably calculated to please the construction industry, aid middle-income families, enlarge banking profits, and leave in much their present situation the mass of wretchedly housed urban dwellers. Like most of the social-welfare measures of the postwar era, this one discovers that the poor are too difficult and too expensive to cope with. To do something substantial about their plight would disturb far too many interests, among them the construction unions happy with their discriminatory apprenticeship policies; banks which are unwilling to make loans for low-cost construction; homebuilders frightened by the prospect of a massive public addition to the housing stock; landlords no longer able to count on a tight housing market as the sufficient reason for poor maintenance and rent gouging; and respectable middle-class citizens of areas like Queens, worried about an influx of Negroes and Puerto Ricans coming to live in public-housing projects. There is nothing in the Johnson program, either in its size or its shape, which menaces any of these vested interests. It represents perfectly the consensus of the successful—the middle-class welfare state in action.
There are warnings to be posted even about the impending triumph of medicare. In the form that it has been given in the House Ways and Means Committee by Congressman Mills, the administration bill (HR 6675) is an omnibus measure which increases Social Security benefits by 7 per cent, expands the Kerr-Mills Act's assistance to the indigent aged, offers larger sums for child health and other welfare programs, and, of course, finally turns into legislation the Kennedy request for hospital treatment of the elderly under Social Security. But the bill goes yet further. It tacks on to the hospital aid provision a voluntary supplementary insurance plan designed to cover many of the medical costs of treatment at home and in physicians' offices. The central provisions of the basic plan extend hospitalization benefits up to 60 days for each illness and post-hospital care in nursing homes and the like up to 20 days for each illness; up to 100 home health care visits by nurses or other qualified people may also be made in each year. This voluntary plan, originally proposed by Republican members of the House Ways and Means Committee as a substitute for the administration scheme, pays 80 per cent (after an annual deduction of $50) of the costs of medical and surgical services provided in hospitals, clinics, homes, or offices.
In 1967, the first full year of operation, the whole medicare program, according to administration estimates, will cost about $6 billion—$2.2 billion for the basic health care plan, an additional $1 billion for the supplementary plan (on the assumption that 80 per cent of those eligible will participate), $2.3 billion for increased Social Security cash payments (retroactive to January 1 of this year), and the remaining $500 million for the expansion of existing public assistance programs.
When the American Medical Association loses a battle, men of good will rejoice. In this instance jubilation might appropriately be moderated by the reflection that the AMA did not after all come away quite empty-handed. The hospitalization provisions specifically exclude the fees of diagnosticians and consultants: only the services of interns and residents on the regular hospital staff will be free to the covered patient. Coverage, moreover—particularly of psychiatric disorders—is limited. Nor have the private insurance companies, frequently the allies of the AMA, quite lost their lucrative share of the health protection business, for the measure as it stands directs the Secretary of Health, Education, and Welfare to contract out much of the administration of the voluntary program to the insurance companies, including the calculation of rates of payment and the actual disbursement of benefits.
Throughout, the financing of the program is exceedingly conservative. Thus premium rates on the voluntary plan will rise with medical costs. Judging by the postwar history of Blue Cross rates, the elderly must look forward to a rapid increase in the $3 monthly premium. Other portions of the program will be financed overwhelmingly by increases in payroll taxes—which will reach 5.5 per cent each for employer and employee by 1980. And these taxes will be levied on the first $6,600 of income instead of on the current $4,800. This is bad because payroll taxes are what is technically called regressive in the sense that as incomes go up, the percentage paid in tax declines. But that is not the worst of it. If the current bill sets the precedent of dependence on payroll taxes, it will be very difficult to extend the benefits of this program to other age groups, for any further increase is likely to be resisted by workers, on whom the major burden would fall.
Of this Congress's unusually long legislative agenda, the Education Act may in the end prove the most significant item. Certainly as a feat of applied legislative magic, it has no contemporary rival. Mr. Johnson has granted enough to parochial schools to elicit such words of praise from Catholic quarters as America's comment that “this law is more than a milestone in the progress of education in the United States. It is a distinct turn in the road which opens new vistas.” In the new Act, America sees a “promise for the future of a truly pluralistic school system.” On the other side, the President has moderated the opposition of many antagonists of past proposals to assist parochial and private schools, and even to convert a number of them, by putting assurances into the Act of public-school controls over shared-time instruction and public-school ownership of textbooks. It must be said further in the Act's favor that the allocation formula promises rather more to the big cities than Congressional custom usually allows.
The President's triumph represents not the solution but the disposal of a church-state issue which, it had become increasingly evident, neither of the major contending parties—Catholics or militant separationists—was strong enough to settle on its own terms. Now that federal aid to education on a general basis has begun, it can only increase. The issues which remain have to do with the emerging shape of public and private education in America. The shared-time provisions of the Act (under which parochial schools will be allowed to use such public-school facilities as science laboratories, woodworking shops, and gyms) will relieve the financial strain on Catholic, Lutheran, and other church-financed schools. Whether this tangible assistance will stimulate the expansion of existing religious schools and even the establishment of new ones is an open question. If this should turn out to be the outcome, American education may come to approximate the Dutch tripartite division among Protestant, Catholic, and secular schools. Some, welcoming the prospect, will emphasize the diversity of choice offered. Others, devoted to the primacy of public education, will stress the dangers of fragmentation in the new situation. At a minimum the Johnson program has introduced a major educational uncertainty. At the maximum the unintended consequence of Presidential success in bypassing the old and acerbic church-state argument, may be a transformation of elementary and secondary education as we have heretofore known it in the United States.
The President's rather remarkable message on Natural Beauty fits snugly into the familiar pattern. The sentiments are admirable. To cope with blighted cities and ruined countrysides “will require a new conservation. We must not only protect the countryside and save it from destruction, we must restore what has been destroyed and salvage the beauty and charm of our land. Our conservation must be not just the classic conservation of restoration and innovation. Its concern is not with nature alone, but with the total relation between man and the world around him. Its object is not just man's welfare but the dignity of man's spirit.” This is good rhetoric and it is bolstered by some good proposals. The President seeks to regulate billboards and disperse junkyards, construct additional parks, improve wilderness trails, beautify commercial districts, and so on.
But what of the critical conservation problems—those involving the sort of water and air pollution which affects the costs and the profits of the manufacturers who dump industrial wastes into flowing streams, the public utilities which deface sites noted for their beauty, farmers whose promiscuous use of insecticides menaces fish and people, landlords whose chimneys belch black smoke, and auto manufacturers whose proud products emit clouds of pollutants into the air? As one scans the message anxiously for solutions to these problems, one finds a disquieting emphasis upon that contemporary synonym for inaction, “research.” Here is the President on pesticides:
In order that we may better understand the effects of these compounds, I have included increased funds in the budget for use by the Secretaries of Agriculture, Interior, and Health, Education, and Welfare to increase their research efforts on pesticides so that they can give special attention to the flow of pesticides through the environment. . . .
. . . the 1966 budget includes funds for the establishment of university institutes to conduct research and training in enviromental pollution problems.
We need legislation to provide to the Departments of Agriculture and Interior authority for grants for research in environmental pollution control. . . . I have asked the Secretary of Interior to submit legislation to eliminate the ceiling on pesticide research.
Mr. Johnson must be making new friends in the science departments of every state university in the land.
Such is social welfare, business-style, social welfare on the cheap. If the aim is consensus forever, quite possibly the Johnson approach will be successful. But if the aims are restoration of the cities, integration of minorities into the labor force, relief of youth unemployment, elimination of the culture of poverty, and solution of the complex problems of matching the skills of the labor force with tomorrow's demand for labor—then the approach must fail. That a few will benefit there is no reason to doubt. The youths trained in job camps, the small number of adults retrained under the manpower retraining programs, and the families moved to better homes will have reason for gratitude. For the rest, however, it will be possible to take the President's program seriously when the vacancy rate in Manhattan begins to rise. And it will be possible to take it even more seriously when the poor begin to stir on their own behalf.
On one level the difference between the President's limited recommendations and a genuine assault upon poverty and alienation is the difference between a little money and a lot of money; on another level it is the distinction between business as usual and business harnessed to social objectives; on still a third level it is the contrast between a commitment to enlarge the size of the economy and the intention to improve the quality of the society. Although there is no special reason to condemn a conservative politician for choosing the path of conciliation, there is every reason to avoid confusing rhetoric with the program of social action that is desperately needed.
1 See also “The Failure of Urban Renewal” by Herbert J. Gans in last April's COMMENTARY.