The Best and the Brightest (120 page)

The President seemed somewhat receptive to the idea of the tax increase, but did not seem to share Ackley’s sense of urgency. Ackley was telling the President he could not have three things: the war, the Great Society and no inflation. If he wanted all three, then he would need a tax increase. But if this was obvious to Ackley, it was not so obvious to Lyndon Johnson. The President feared that if he went to the Congress for the tax increase he might blow the whole thing. The Congress, Johnson told friends, would give him the war, but not the Great Society. So the President, who had sliced everything so thin, decided he would slice this one too: he would hold back on the real estimates of the war for a year—perhaps major expenditures would not be necessary after all, perhaps Hanoi would have folded—meanwhile he would push very hard to get the Great Society legislation through by early 1966, and then, once it was passed, he would concentrate on the war. Thus by the time the extent of the involvement in Vietnam was fully apparent, the Great Society would already be a fact. “I don’t know much about economics,” he told friends, “but I do know the Congress. And I can get the Great Society through right now—this is a golden time. We’ve got a good Congress and I’m the right President and I can do it. But if I talk about the cost of the war, the Great Society won’t go through and the tax bill won’t go through. Old Wilbur Mills will sit down there and he’ll thank me kindly and send me back my Great Society, and then he’ll tell me that they’ll be glad to spend whatever we need for the war.”

He knew he was cornered and he decided to negotiate what he wanted through, piece by piece, as stealthily as possible. Now there were three sets of players, each acting independently of each other: the military, who wanted major financing for what they had been told was a major war; Johnson’s domestic aides, who were pushing for the Great Society and who knew relatively little about the extent of the military planning (they were encouraged by the President to know as little as possible); and Johnson’s economic planners, who sensed the potential of the conflicts involved but did not know the extent to which decisions on military forces had already been made. The key man in all this was McNamara. The Great Society projections were relatively public, and the rest of the budget was a stable thing. It was the military projections which were based on secret information and private decisions—secret, it turned out, even to the President’s own economists.

In December 1965 McNamara began drawing up the plans for the military budget for fiscal 1967, a budget which would run from the middle of 1966 to the middle of 1967 and which would go to the Congress in January 1966. By this time he had already consulted with Westmoreland and had his darkest fears confirmed—Hanoi was reinforcing at a faster rate than we were; it would be a large war, and quite likely a long one. Westmoreland’s July 1965 estimates that we would need only 300,000 troops by the end of 1966 had been discarded; the approved figure was now 400,000 Americans by the end of 1966, and a probable figure of
600,000
by the end of 1967. Yet in making the budget, McNamara made the arbitrary assumption that the war would be over by June 30, 1967. It was in direct contradiction to the estimates he was getting from Westmoreland (and in direct contradiction to his own private estimates for Johnson at the time) but it was a plausible assumption for planning. (McNamara wanted the cutoff date left in because in Korea we had fought an open-ended war; consequently too much military equipment had been bought, and he wanted to control that. He was telling the President at this point that he could not guarantee the length of the war, but it would be the most economically fought war in history. That he would guarantee—he would really ride herd on the military.) McNamara placed the cost of the war at $10 billion for the budget. Thus Johnson would be able to propose significant increases in Great Society programs, plus the war, and thanks to the normally rising revenues natural to a growing economy, still show only a minor deficit. It looked like the work of a great economist, but it was really only a shell game. The economic experts and critics who sensed that there was a built-in dilemma looked at the budget searching for the hole and found to their surprise that the hole did not exist, it was all acceptable.

The problem, they knew, was the war, but there was Bob McNamara promising to keep it at $10 billion; and he told the President, but he did not tell the public or the Congress, that he was putting the cost of the war between $15 billion and $17 billion. For the first time there were now memos on this in the bureaucracy, though not for the public; they were private memos, of course, and they were sent over to the Council of Economic Advisers with the notation “For internal use only.” Since the Council was already becoming very skeptical about the whole thing, Arthur Okun, one of its members, noted alongside: “But not to be swallowed.” At this point the Council began meeting with McNamara and pushing him hard to get a more exact estimate of the cost, and also to get him to push for a tax increase. But they found McNamara, usually so sure, usually so filled with certitudes, very reluctant to come down with a hard figure for the cost of the war, and he gave three figures: high, low and medium. The high was $17 billion (or $7 billion over the original estimate), the medium was $15 billion, the low was $11 billion. Eventually the figure came to $21 billion, which meant that even his own medium private re-estimate for the increase was off more than 100 percent, and his estimate as far as the general public was concerned was off even more. He was not, it would turn out, quite so good a manager as he had claimed, nor his machine quite so efficient, though this did not necessarily make him any more modest. Indeed, a few months later, in discussing the forthcoming budget, he would say, “Never before has this country been able to field and support in combat so large a force in so short a time over so great a distance, without calling up the reserves, and without applying price, wage and material controls to our civilian economy.”

It was at this point, in March 1966, under increasing pressure from the Council to go for a tax increase—a modest one, 3 or 4 percent—that the President took his first tentative step. Tentative is the word. He was still worried about his domestic programs and he was wary of blowing the whole thing. Though he knew by now that the military costs were going to be greater than the estimates in the budget revealed, he kept this to himself. Instead he summoned key businessmen and members of the House Ways and Means Committee in separate meetings and asked them if he should go for a tax increase. He did not, and this was crucial, tell them how much the war was going to cost. Thus they were asked to give estimates and projections on something as important as a tax increase based on totally erroneous information. It was an extraordinary bit of manipulation; indeed, said Ed Dale, the economic correspondent of the
New York Times
in Washington, it was the single most irresponsible act by an American President in the fifteen years that he had covered Washington. Naturally, acting on this limited information, both the businessmen and the congressmen told Johnson not to go for the tax increase; this in turn permitted the President to go back to his economic advisers and tell them that he had discussed a tax increase with the congressional leaders and that they were all totally opposed, he could get no votes for it. One part of the government was lying to another part. Thus was the fatal decision made not to go for a tax increase, a decision made in early 1966 which resulted in the subsequent runaway inflation. Instead of being marginal, the deficit for fiscal 1967 turned out to be a whopping $9.8 billion.

At the same time in early 1966 McNamara kept meeting with the Council of Economic Advisers, and the Council kept pressing him to go for a tax increase. McNamara, however, kept pleading that he did not want to—in fact, could not—go along. He did not have a firm figure on the war, he said, and they would have to trust him. In addition, he insisted the Congress would hang him if he went up there, hang him twice. They would hang him on the war, and hang him on the financing of it. Of course the real reason he did not want to go and testify, it soon became clear, was that open testimony on how deep we were in, and how much deeper we were going, would have been the same thing as a formal announcement on the size and duration of the war. Which was the last thing the Administration wanted at that point. So in the early months of 1966, when the planning and budgeting were being done, the Administration did not go for a tax increase. Nor did it admit that the cutoff date of July 1, 1967, was an illusion. It did give up the idea within the Administration itself early in 1966. Much later, in November 1966, McNamara admitted publicly that the cutoff date had been dropped and that since the war would continue to go on, the financing would have to be greatly increased. The Korean analogy was quietly abandoned. When he did make the announcement, Ed Dale of the
Times
wrote an analysis of the decision, and noted that doubling of spending on the war; the article naturally angered McNamara, who felt that it cast doubt upon his reputation as a war manager. So he called Dale to say, with no small amount of irritation, that they had abandoned that assumption early on. Very early on, he said. And Dale answered, “Yes, sir, I know you did, and I know why you did, but you didn’t tell us publicly until now.” A minor point, of course.

As it became increasingly obvious that the war in the budget and the war in reality were two separate things, doubters and critics began to surface. In mid-1966 the economist Eliot Janeway, asked by senators to comment on the funding of the war, estimated that instead of the monthly drain of $800 million proclaimed by the Administration, the real drain was closer to $2 billion a month, and might go up to $3 billion. This did not endear Janeway to the President, who set out to silence future critics of his arithmetic. In May 1967 Ralph Lazarus, president of the Federated Department Stores and a member of the Business Council, held a press conference and publicly criticized Johnson’s war budget (he estimated that government spending on the war for the next fiscal year would be $5 billion higher than the government estimate of $21.9 billion). He was immediately telephoned by no less an economic authority than Justice Abe Fortas, who asked Lazarus to tone down his estimates because they were inaccurate; indeed, Lazarus had upset the President very much with his erroneous projections. Unfortunately, the cost turned out to be $27 billion, which meant that Lazarus was right on the nose. Similarly, the deficit for the year was about $23 billion, closely paralleling the cost of the war.

In effect, the Administration was going to war without really coming to terms with it; they were paying for the war without announcing it or admitting it. Faking it. They would barely get through the first year, but even the first year would see the start of the inflation, and it would become more virulent month by month, finally almost a living part of the economy, and the political impact of the inflation became almost as serious a political issue in 1968 as the war itself.

The Administration had slipped by in fiscal 1966, and by fiscal 1967 the deficit was almost $10 billion, but the deficit for fiscal 1968 would be even worse. In late 1966 the Council of Economic Advisers continued to put pressure on Johnson for a tax increase, and by January 1967 they found him far more amenable to their demand, largely because he already had most of his Great Society legislation through Congress, and he had less to lose and felt himself less vulnerable. In the January 1967 Budget Message he proposed the income-tax surcharge but with no date, and then in July the Council of Economic Advisers told him to go for it. In August he sent a message to the Congress. Wilbur Mills read it, made some suggestions, held some hearings, and took his time with it. In mid-1967 Johnson was not the awesome figure of 1965 who could force anything through the Congress as quickly as he wanted; instead he was already a somewhat wounded figure. Now that Johnson was ready for the tax increase, the Congress was not. It took a great deal of negotiating between the Congress and the White House before the bill was passed in July of 1968. It was, of course, all too late: the deficit for fiscal 1968 was $27 billion; as managers of the economy, the Administration’s top officials were turning out to be something less than their press clippings implied. The inflation was full-blown, the country was bitterly divided (tensions between blue-collar whites and blacks were made worse by the inflation). Cities, hospitals and schools found themselves caught in destructive, hopeless labor disputes growing out of the inflation. The irony of it all was that the cost of the war itself was not enough to destroy the economy; it never cost more than 3.5 percent of the gross national product, and there were never any real shortages. It was not the war which destroyed the economy, but the essentially dishonest way in which it was handled. In late 1967 General Westmoreland made a request for additional troops. When it came in, the White House sent it to the Council of Economic Advisers for a reading on what the economic realities were. It was the first time Johnson had ever done it, and the Council was very pleased to render its quite negative findings, though there was a general feeling that it was all very late.

Similarly, in late 1967 Tom Wicker of the
New York Times
went to see Robert McNamara. When the subject of the economic miscalculation of the war came up during the interview, McNamara dismissed it in a casual way which shocked Wicker. “Do you really think that if I had estimated the cost of the war correctly, Congress would have given any more for schools and housing?” he asked. Implicit in what he was saying, as far as Wicker was concerned, was that Congress would have given anything necessary for the war and very little for domestic legislation, so they might just as well lie. Wicker left totally appalled by the conversation.