Keynesianism made its biggest breakthrough under John Kennedy, who, as Arthur Schlesinger reports in A Thousand Days, "was unquestionably the first Keynesian President." Kennedy's economists, led by Chief Economic Adviser Walter Heller, presided over the birth of the New Economics as a practical policy and set out to add a new dimension to Keynesianism. They began fo use Keynes's theories as a basis not only for correcting the 1960 recession, which prematurely arrived only two years after the 1957-58 recession, but also to spur an expanding economy to still faster growth. Kennedy was intrigued by the "growth gap" theory, first put across to him by Yale Economist Arthur Okun (now a member of the Council of Economic Advisers), who argued that even though the U.S. was prosperous, it was producing $51 billion a year less than it really could. Under the prodding and guidance of Heller, Kennedy thereupon opened the door to activist, imaginative economics.
He particularly called for tax reductions—a step that Keynes had advocated as early as 1933. The Kennedy Administration stimulated capital investment by giving businessmen a 7% tax kickback on their purchases of new equipment and by liberalizing depreciation allowances. Kennedy also campaigned for an overall reduction in the oppressive income-tax rates in order to increase further both investment and personal consumption. That idea, he remarked, was "straight Keynes and Heller."
