JFK’s New Frontier laid the foundation for the greatest growth in government welfare and regulatory agencies since the New Deal. Indeed, the 1960s began an era of increased government handouts and government spending that locked people into poverty as they became more dependent on government money while losing any incentive to find work for themselves. Moreover, increased government spending resulted in higher taxes for millions of employed Americans, eroding the economic security of the American family. With less money to spend, save, and invest, the economy suffered and ordinary Americans became more susceptible to politicians who preyed on economic insecurity by proposing welfare programs for the middle class as well as the poor. In this way, politicians literally bought the votes of millions of Americans. As the number of welfare programs increased, politicians were reluctant to continue raising taxes for fear that they would not be reelected.
Thus, the government began to run large deficits, spending more money than it was taking in. By selling bonds, known as Treasury Bills, the government began a huge borrowing program in which it borrowed money from the American people in order to fund its expenses. In the past, such borrowing had been used to pay for needed internal improvements or national defense, but now this money went to welfare programs. By the mid-1960s, the government would be operating on credit. In addition, the Treasury Department and the Federal Reserve System encouraged the creation of more money. In effect, paper dollars were printed that were not backed by adequate goods and services. Ever since the United States went off the gold standard in 1933, the government has been able to create such excess money, leading to the problem of inflation. By living beyond its means, borrowing large amounts of money, foolishly expanding credit, and printing excess money, the government created a false prosperity.