A rising tide lifts all boats

The aphorism "a rising tide lifts all boats" is associated with the idea that improvements in the general economy will benefit all participants in that economy, and that economic policy, particularly government economic policy, should therefore focus on the general macroeconomic environment first and foremost. The phrase is attributed to John F Kennedy^[1], who used it in a 1963 speech to combat criticisms that a dam project he was inaugurating was a pork barrel project.^[2][3] However the phrase has been used more commonly to defend tax cuts and other policies where the initial beneficiaries are high income earners.^[4]

Origins

In his memoir Counselor: A Life At The Edge Of History, Kennedy's speechwriter Ted Sorensen reveals that the phrase was not one of his or the president’s own fashioning. It was in his first year working for Kennedy (during JFK’s tenure in the Senate), when Mr. Sorensen was trying to tackle economic problems in New England, that he happened upon the phrase. He writes that he noticed that “the regional chamber of commerce, the New England Council, had a thoughtful slogan: ‘A rising tide lifts all the boats.’” From then on, JFK would borrow the slogan often. Sorensen highlights this as an example of quotes mistakenly attributed to President Kennedy.^[5]

Policy

JFK was not a proponent of Supply Side economic policies despite his belief in tax cuts as evidenced by his statement "Our true choice is not between tax reduction, on the one hand, and the avoidance of large Federal deficits on the other. It is increasingly clear that no matter what party is in power, so long as our national security needs keep rising, an economy hampered by restrictive tax rates will never produce enough revenues to balance our budget just as it will never produce enough jobs or enough profits… In short, it is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now." Add the fact that as president he signed legislation that lowered all marginal tax rates and his belief in the concept behind the quote is apparent.

The expression also applies to free-market policies, in that comparative-advantage production and subsequent trade would theoretically increase incomes for all participating entities. It is said to be a favorite proverb of former U.S. Treasury Secretary Robert Rubin.^[6] However, Gene Sperling, Bill Clinton’s former economic advisor, has opined that, in the absence of appropriate policies 'the rising tide will lift some boats, but others will run aground'.^[3][7]

The substantive aspect of the statement is that economic growth which raises the GDP of the entire economy will also raise the incomes of all of the individuals within the economy. However, not all industries track the overall economy, and the creative destruction process of capitalism requires inefficient industries to yield to more efficient industries. For the aphorism to be strictly true, one would never expect to see a 'going out of business' sign during a rising economy. There are many examples in economic history in which an increase in GDP per capita did not raise the incomes of large groups of individuals in the society. According to the US Census, the real per-capita GDP in the United States increased by 71% between 1980 and 2006, but median household income increased by less than 20%.^{[citation needed]} Between 1960 and 1980, the top 1% in the United States took home less than 10% of all U.S. income. In 2006, the best paid 1% took home 20.3%.^[8]

See also

• Keynesian economics
• Supply-side economics
• Trickle-down economics

References

External links

Look up a rising tide lifts all boats in Wiktionary, the free dictionary.

• Hines, James R., Hilary W. Hoynes, and Alan B. Krueger. "Another Look at Whether a Rising Tide Lifts All Boats", National Bureau of Economic Research: NBER Working Paper No. 8412, August 2001.