Title: Inflation in the 60's
Headings: Inflation in the 60's
Inflation in the 60's
Content: Johnson's desire to maintain the Great Society domestic programs while fighting the war in Vietnam contributed further to federal debt. The production requirements which the war effort necessitated also pushed the economy beyond the careful constraints the Council of Economic Advisors had suggested to promote non-inflationary growth. By 1966, the government wage and price controls were breaking down. This, combined with rising interest rates signaled the end of non-taxationary solutions to control inflation. After an economically painful 1966, Johnson was forced to overcome his resistance to taxes. On January 10, 1967, in his State of the Union Address, Johnson said, "I recommend to the Congress a surcharge of 6 percent on both corporate and individual income taxes—to last for 2 years or for so long as the unusual expenditures associated with our efforts in Vietnam continue." Congress did not pass the tax until 1968, at which point the legislation levying a tax also required a reduction in government expenditures. On June 28, 1968, Johnson signed the Revenue and Expenditure Control Act into law, with its $10 billion tax increase and a $6 billion spending reduction. Many Great Society supporters were concerned that the spending reduction would threaten domestic social programs. Nevertheless, Congress was unable to cut the full $6 billion from the budget, and the fiscal 1969 budget ended up with a $3.2 billion surplus and intact Great Society programs.