using consumer demand incentives. Their preference was derived from the belief that high growth rates in other industrialized nations during the 1950s had eroded U.S. hegemony.
The position taken by Dillon and Roosa does not fit a liberal interpretation of the administration's fiscal policies. Investment must occur in market-oriented societies before all citizens can have the economic resources needed to satisfy their values. The owners of investment capital, a small group within society, must therefore be the first citizens to have their interests met. The supply-side aspect of the Kennedy administration's 1962 and 1964 tax policies increased the profit margin for investors in order to negate the uncertainties arising from calculations of the marginal efficiency of capital. The administration was able to extend this offer without fear of generating societal conflict because across- the-board tax cuts gave the appearance of variable sum gains for all wage-earners. There was no guarantee, however, that investors would respond to such fiscal incentives in a manner that promoted the attainment of the general welfare. While the administration's investment incentives automatically benefited the interests of both the business and Wall Street financial communities, the broader gains for society from increases in investment are sufficiently unclear to ask, though liberal theorists have not, if the state's autonomy from special interest was compromised by Kennedy's fiscal policies. 22
Liberal theory is also challenged by the administration's balance-of-payments policies. Those policies interrupted the movement toward a liberal postwar international economic order to such a degree that the view of the administration as an advocate of free trade and capital movements must be amended. The implementation of trade protectionism and capital restraints violated liberal tenets. The government's efforts were directed to regaining the economic preeminence of the United States in the Bretton Woods system. Yet its refusal to acknowledge the dollar's weakness in the system and its willingness to further increase the short-term foreign liquid liabilities of the country were indicative of a desire to maintain hegemony over the international financial system rather than to construct a viable domestic economic basis on which to build such an international role. In fact, the administration reversed the relationship by setting solutions to the balance-of-payments deficits as a top priority over recovery from domestic recession. Dillon and Roosa played instrumental roles in setting the priority, once again advancing the interests of the financial community and thereby limiting the utility of liberal theory in explaining the political economy of the United States during Kennedy's presidency.