The Price of Civilization_ Reawakening American Virtue and Prosperity - Jeffrey D. Sachs [21]
There are several reasons for this era of consensus during the 1940s to the 1960s. First, the nation as a whole had passed through two “near-death” experiences together and emerged as an increasingly united society. The Depression and World War II were rites of passage for the Greatest Generation, as Tom Brokaw memorably called those who grew up in the Depression and fought in the war. Second, and less widely recognized, the 1924 Immigration Act had served to reduce the flow of immigrants, so that immigration was not a political lightning rod or a source of dissension on social programs. The share of foreign-born in the U.S. population fell from approximately 15 percent of the population in 1924 to less than 5 percent of the population by 1970, when it started to rise because of revisions to immigration law.7
Third, simply and crucially, the government was viewed as highly competent and representative of broad national interests. It had nursed the nation through the Great Depression; it had led the nation to victory in World War II; it had led to the creation of postwar institutions including NATO and the European Coal and Steel Community (eventually to become the European Union) and to the recovery of Japan; it had helped the economy recover from the end of the war more swiftly than anyone imagined. Government was widely trusted and seen as a guarantor of national prosperity. It was not seen as a tribune of special interests, and particularly not the interests of the rich, who paid stiff income taxes, with top tax rates soaring to 80 percent or higher after 1940.
The apogee of government leadership of the economy was reached in the mid-1960s, immediately following John F. Kennedy’s assassination. Lyndon B. Johnson declared war on poverty in early 1964 and launched an astonishing array of legislative initiatives in 1965, including: the Voting Rights Act of 1965, the Elementary and Secondary Education Act of 1965, the Water Quality Act of 1965, the Higher Education Act of 1965, the Federal Cigarette Labeling and Advertising Act of 1965, the Solid Waste Disposal Act of 1965, the Motor Vehicle Air Pollution Control Act of 1965, and, most important in terms of size of outlays, the Social Security Amendments of 1965, which ushered in Medicare for the elderly and Medicaid for the indigent. The War on Poverty had its most lasting effect on two groups, the elderly and African Americans. Medicare and the expansion of Social Security effectively ended the persistent high poverty among those over sixty-five. In 1959, the elderly poverty rate stood at 35.2 percent; it fell to 25.3 percent by 1969 and just 9.7 percent by 2007. African American poverty rates fell from 55.1 percent in 1959 to 32.2 percent in 1969 and 24.5 percent in 2007.8
One more crucial factor made possible the surge in social programs during the period of the 1960s: the availability of existing government revenues to pay for them. Up until the mid-1960s, politicians could enact new social programs without having to raise taxes as a share of national income for a simple but powerful reason: the federal tax system that emerged from World War II and the Korean War (1950–1953) was able to collect 18 percent to 19 percent of GDP in revenues and therefore to support a roughly equivalent level of spending; as defense spending declined after the Korean War, nondefense spending had room to expand.9
The Great Reversal
As of the mid-1960s, most political observers expected a continued ascendancy of social programs in the service of promoting prosperity and fighting poverty.