Walter Heller served as President of the Council of Economic Advisors under the Kennedy and Johnson Administrations. The famous Kennedy Tax Cut of 1964 is attributed to Heller.
Contrary to the concerns of opponents, the tax cut succeeded in causing a boom in the US economy. After his tenure as President of the Council ended in 1964, he served as consultant to President Johnson for another five years.
Heller helped develop the theory of revenue sharing, which asserted that state and local governments were more efficient at spending federal tax revenues than the federal government.
He taught at the University of Minnesota, eventually achieving emeritas status.
Life and career
Heller was born in Buffalo, New York, to German immigrants, Gertrude (Warmburg) and Ernst Heller, a civil engineer. After attending Shorewood High School in Shorewood, Wisconsin, he entered Oberlin College in 1931, graduating with a B.A. degree in 1935. Heller received his masters and doctorate degrees in economics from the University of Wisconsin.
As a Keynesian, he promoted cuts in the marginal federal income tax rates. This tax cut, which was passed by President Lyndon B. Johnson and Congress after Kennedy’s death, was credited for boosting the U.S. economy. Heller developed the first “voluntary” wage-price guidelines. When the steel industry failed to follow them, it was publicly attacked by Kennedy and quickly complied. Heller was one of the first to emphasize that tax deductions and tax preferences narrowed the income tax base, thus requiring, for a given amount of revenue, higher marginal tax rates. The historic tax cut and its positive effect on the economy has often been cited as motivation for more recent tax cuts by Republicans.
The day after Kennedy was assassinated, Heller met with President Johnson in the Oval Office. To get the country going again, Heller suggested a major initiative he called the “War on Poverty”, which Johnson adopted enthusiastically. Later, when Johnson insisted on escalating the Vietnam War without raising taxes, setting the stage for an inflationary spiral, Heller resigned.
In the early phases of his career, Heller contributed to the creation of the Marshall Plan of 1947, and was instrumental in re-establishing the German currency following World War II, which helped usher an economic boom in West Germany.
Heller was critical of Milton Friedman’s followers and labelled them cultish: “Some of them are Friedmanly, some Friedmanian, some Friedmanesque, some Friedmanic and some Friedmaniacs.”
Heller joined the University of Minnesota faculty as an associate professor of economics in 1945, left for a few years to serve in government, and returned in the 1960s, eventually serving as chair of the Department of Economics. He built it into a top-ranked department with spectacular hires, including future Nobel Prize winners Leonid Hurwicz (2007), Edward C. Prescott (2004), Thomas J. Sargent (2011) and Christopher A. Sims (2011).
Heller died in Silverdale, Washington on June 15, 1987 at the age of 71. In 1999, the University of Minnesota renamed the Management and Economics Tower, located on the West Bank of their Minneapolis campus, Walter W. Heller Hall in honor of the late Walter Heller. The building houses student advising services in addition to providing classroom space.
- “Shorewood School District to honor alumni, ex-teachers”, Milwaukee Journal Sentinel, May 7, 2003. Accessed September 17, 2007. “The other honorees are Walter Heller (class of ’31), an economic adviser to Presidents Kennedy and Johnson and a professor at the University of Michigan…”
- Memorandum to William Carmichael as quoted on page 206 of Valdes, Pinochet’s Economists.
- Douglas Clement, “A Golden History”, College of Liberal Arts, University of Minnesota
- Heller, Walter. Monetary vs. Fiscal Policy (a dialogue with Milton Friedman). 1969.
- Heller, Walter. New Dimensions of Political Economy. 1966.