The 1957 launch of Sputnik, the Soviet satellite all too visible in the evening sky as it passed over the United States, heightened worries that the Soviet Union was pulling ahead in an economic race widely regarded as a referendum on the merits of rival political systems, Kennedy played on those fears in the 1960 presidential race, promising to increase economic growth to an annual rate of 5 percent - roughly twice the average pace during the second half of the 1950s.
He had few fixed ideas about how to deliver on that promise. As a senator, he had wrangled an appointment to the prestigious Joint Economic Committee and then skipped almost every meeting. During the campaign, he told advisers he had earned a C in his only college economics class, so they should start at the beginning and explain everything. Kennedy did, however, have fixed ideas about professors: he collected them, respected them, and sometimes even listened to them. He hired the best available minds and asked for directions. When the Yale economist James Tobin expressed reluctance to sign on because he was "an ivory-tower economist," Kennedy responded, "That's all right, professor. I am what you might call an ivory-tower president." Samuelson, who served as an informal adviser, plaintively asked a presidential aide whether Kennedy could be prevailed upon to stop calling him "professor".
The economist most responsible for shaping the Kennedy administration's policies was a tall, clean-cut midwesterner named Walter W Heller. He was forty-five years old in 1960, a tenured professor at the University of Minnesota and a well-regarded expert on taxation, but he was not on anyone's list of the nation's top economists - he was described by one contemporary as "a colonel in the Keynesian army" - and he very nearly missed his train to prominence. When Kennedy swung through Minneapolis for a campaign rally in October 1960, Heller decided at the last minute to put on a suit and head downtown. In the lobby of the old Leamington Hotel, he ran into Hubert Humphrey, then the state's senior senator, who took him to meet the candidate
Kennedy was changing his shirt when the two men walked in. Humphrey introduced Heller by joking that some smart people lived west of the Mississippi River; Kennedy started asking questions. Was it realistic to promise 5 percent growth? How could small changes in fiscal policy affect the economy? Why was West Germany prospering despite high interest rates? "He just stood there scratching his chest while we talked and everybody else fell away," Heller recalled.
A few months later, Kennedy asked Heller to lead his Council of Economic Advisers. Kennedy liked the economist's quick wit and conversational style, and Heller's midwestern roots counted as diversity in the Kennedy White House. But it was not obvious that Heller would play a particularly significant role, Economists never had. One acquaintance innocently asked Heller, "Will you handle this from Minnesota, or will you have to go to Washington?"
Heller, the son of German immigrants, was born in Buffalo in 1915 and raised in Wisconsin, where his father, an engineer, moved the family in search of work. He completed his doctorate at the University of Wisconsin in 1941, writing his dissertation on the administration of state income taxation. Rejected by the army for bad eyesight, he took a job at Treasury working on the same project as Milton Friedman: the administration of federal income taxation. After the war, he settled in Minnesota, raising a family and developing a reputation as a lucid expositor. President Johnson once brandished a teller memo, telling the rest of his advisers, "That's the way I want you all to write your memos." Heller's tongue could cut, too, as in his later description of President Reagan as "charming, disarming, and sometimes alarming."
In Washington, Heller argued relentlessly that the government should cut taxes to promote job growth. The economy was growing, but he said it could be growing more quickly if the government left people with more money to spend. Heller described the difference between actual economic growth and the frontier of what was possible as an "output gap," and he made an impression by telling Kennedy the gap was roughly the size of the Italian economy.