then, in 1962, walter heller saw his chance. economy sputtered in '62 and i pushed hard for a tax cut. the treasury resisted a big tax cut. i wanted a down payment in '62 to make sure we didn't fall into a recession and go ahead in '63. he didn't buy that. in '62, he bought the idea of an across-the-boards tax cut. every dollar released from taxation that is spent or invested will help create new jobs and new salaries. these can create other jobs and salaries and more customers and more growth for an expanding american economy. although kennedy agreed with him, heller had galbraith to contend with. every now and then his shadow would fall across the white house when he'd come home to report from india. the president would say, "galbraith's been lobbying against your tax cut." i had access to the president and expressed myself with some vigor that if we passed tax cuts they would become too popular with conservatives and they would be taken up by conservatives at the cost to the expenditures that were needed on behalf of needy pe

walter heller chaired kennedy's council of economic advisors. kennedy was our first keynesian president. it isn't that others hadn't done some keynesian things, but kennedy did it in an avowed and perceptive way. he was very cautious at first. he finally saw a more liberal approach was needed to stimulate the economy. it took the form of a massive tax cut proposed in i962. this net reduction in tax liabilities of $10 billion will increase the purchasing power of american families and business enterprises in every tax bracket. but john f. kennedy didn't live to see his programs enacted. instead, on that fateful november day, lyndon baines johnson was sworn in as the 36th president of the united states. johnson pursued kennedy's economic proposals and pushed the tax plan through congress. how well did it work? perfectly. business week, which isn't exactly a liberal pro-kennedy publication, said it probably was the most successful tax cut in history. it came out of the textbooks. it went back into the textbooks as the fiscal measure that came close

when the washington policymakers and economists led by academic neo-keynesians paul samuelson and walter heller, suggested that a little inflation induced by managed currency -- say 2 or 3% -- was controllable and desirable. at the end of the 1970s, inflation had reached the annualized rate of 15%. now, since the u.s. dollar was the primary reserve currency under the bretton woods treaty, foreign central banks were, in effect, required to purchase the undesired dollars in their banking systems against the creation of their own domestic money. foreign central banks held these dollars as official reserves. they didn't bury them in vault as. they promptly reinvested these dollars in the new york money market, thus enabling americans to buy again with the original cash balances used before to buy the goods abroad. in a word, this duplication of purchasing power under the reserve current is si system of bretton woods, unassociated with the production of few output, caused aggregate demand to exceed aggregate supply. inflation must be the ultimate result. this, in a word, is what my colleague john mu