Three Eisenhower Recessions, and one other thing

My Google Search: "the eisenhower years" "three recessions" in quotes like that. The search results led me to this bit of text, exactly what I was looking for, from Wikipedia's "Presidency of Dwight D. Eisenhower":

There were three recessions during Eisenhower's administration—July 1953 through May 1954, August 1957 through April 1958, and April 1960 through February 1961, caused by the Federal Reserve clamping down too tight on the money supply in an effort to wring out lingering wartime inflation.[169][175]

Note 169: Frum, David (2000). How We Got Here: The '70s. New York, New York: Basic Books. p. 296. ISBN 978-0-465-04195-4.

Note 175: Barone, Michael (2004). Hard America, Soft America: Competition Vs. Coddling and the Battle for the Nation's Future. New York: Three Rivers Press. p. 72. ISBN 978-1-4000-5324-7.

I didn't need the recession dates. I needed someone to say the recessions were caused by the Federal Reserve. I needed confirmation. Furthermore, to be clear, I didn't need them to say the Federal Reserve caused the recessions on purpose. I needed it said that the Fed's purpose was to fight inflation; and I need it understood that recession is a likely outcome when the Fed is fighting inflation.

Checking the reference: On page 296 of the Frum book we read: "President Eisenhower ... accepted three recessions over his presidency to wring out the last of the wartime inflation." 

I got what I needed.

A second search-result caught my eye:

The 1960s and President Kennedy's Successful, Supply ...
American Enterprise Institute
https://www.aei.org › carpe-diem
Aug 17, 2013 — And during the Eisenhower years, the economy grew at a subpar 2.4% yearly rate, including three recessions. But then came the 1960s, the ...

The link is "Let’s Not Forget the Decade the Liberals Love to Hate: The 1960s and President Kennedy’s Successful, Supply-side Tax Cuts" at AEI. When I saw the long version of the title, it didn't look so interesting anymore. Then I saw the article was written by Mark J Perry, and I got even less interested.

Perry quotes Larry Kudlow:

From 1944 to 1960, with a top tax rate of 91 percent, the U.S. economy expanded at an anemic 2.1% annual pace. And during the Eisenhower years, the economy grew at a subpar 2.4% yearly rate, including three recessions.

I am distracted, losing sight of "three recessions" because Kudlow makes an argument by implication. He suggests that US economic growth was "anemic" and "subpar" because the top tax rate was so high. Kudlow does not use the word "because" in that excerpt, but he doesn't have to. By putting the idea of high taxes and the idea of subpar growth together, he suggests to the reader that the high tax rate caused the slow growth.

Kudlow does not force this conclusion on his readers; he allows readers to reach their own conclusion. But his technique makes the conclusion more personal and quite possibly stronger, despite the absence of evidence. 

If growth was slow in the Eisenhower years, it is because three recessions dragged the average down.

In the AEI article, Mark J Perry hints at a series of tax-rate reductions beginning in the 1960s:

In ... 1962 ... the highest marginal individual income tax rate was 91% and ... by 1964 the top personal tax rate was 77%, dropping further to 70% in 1965.

Confirming Perry's hint, FRED has a dataset that shows a 30-year trend of tax-rate reduction:

Graph #1: Hover over the Graph at FRED to See the Tax Rates
https://fred.stlouisfed.org/series/IITTRHB

 
Now, about that one other thing. Perry and Kudlow want us to think that the Kennedy tax cut made the economy great in the 1960s. But as Graph #1 shows, tax rates are far lower now than they were in the 1960s. Yet our economy is not booming now.

I know: It doesn't feel like tax rates are low. But that's because our economy is so bad. A decent wage is hard to find. Something is wrong with the economy. When people like Perry and Kudlow say that tax rates are high, many people say yeah, that must be it.

That's not it. (The problem is the cost of excessive finance; the cause is economic policy; the reason is either (a) politicians still think that credit is good for growth and debt is not a problem, or (b) politicians are rich and make a lot of money by lending. I'm not sure which.)

Economic growth is definitely slow now. Here's a graph showing "peak growth" of Real GDP. It shows long-term decline with very few interruptions:

Annual US Real GDP Growth Rate and the Trend of Peaks  1948-2023

On this graph,

• The lows don't go low in the 1960s, possibly because of the Kennedy tax cut.
• The lows don't go low in the 1980s, possibly because of the Reagan tax cuts.
• The lows don't go low in the 1990s, despite the Clinton tax increase. And
• The overall trend of economic performance is downhill, as the red line shows.

Yeah, growth was good in the 1960s. Perry is right about that. But growth was also good in the 1950s, except when recessions slowed things down. By my count, 27 of Eisenhower's 96 months in office were recession months.

By contrast, under JFK and LBJ combined there was just one month of recession: February 1961, the last month of the third Eisenhower recession. 

It wasn't high tax rates that slowed growth in the 1950s. Fighting inflation slowed growth.