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DISCUSSION
LEON H. KEYSERLING: I shall draw mainly
upon personal experience, which puts me in
a position to evaluate the work of others than
those discussed here today. This is done, not
to redistribute credit, a worthless enterprise
per se, but rather to show how the inbred
insularity of the academicians first divorced
them from much influence upon what was
done or even knowledge of who was doing
it—and later led them to do the wrong
things when their influence increased. Reference is especially to the designated followers
of Keynes, who in later years I hold to be
perverters of his teachings.
I shall list nine outstanding New Deal
programs not closely related to those mentioned here today—six of which I was
peculiarly able to observe because of my
proximity as a major or the principal draftsman, and, in some instances, the originator
of the proposal that they enacted.
First, there was the National Industrial
Recovery Act. Its provisions for trade association action under government aegis originated primarily with Gerard Swope, trade
association lawyers, and the planning ideas
of Rexford G. Tugwell. Its wage and hour
provisions and Section 7(a) for collective
bargaining were first recommended to Senator Wagner by me.
Second, there was the National Labor
Relations Act, which history may record as
the most influential vehicle of economic,
social and political change of any New Deal
program. During the long and bitter battle
for its enactment, under Senator Wagner's
leadership with my help, it was opposed by
top officials of Cabinet rank, never really
helped by the President, and accorded no
interest by top executive branch economists.
Third in my enumeration, the original
massive public spending, from which most
public spending under the New Deal emanated, was the S3.3 billion public works title
of the NIRA. This did not come from the
executive branch at all. It summed up repeated public works bills introduced by
Senators Wagner, Costigan, and LaFollette
from 1929 forward, stemming in turn from
Senator Wagner's Economic Stabilization




Act of 1929, which proposed increased public
works spending as private indexes of economic activity fell. The proposal that the
government spend more to employ people
when unemployment is very high, and thus
run a deficit, came well before Keynes was
in vogue, and cannot be attributed to any
one man or school. Nor were the main "idea
men" behind these measures among those
stressed here today.
A fourth aspect of enduring New Deal
programs was housing legislation, ranging
over FHA mortgage insurance, home loan
bank operations, and public housing. This
emerged from the work of the housing reformers of the 1920's and some practical
experts in the home financing field. I was
crucially involved in almost all of this
housing work, and vital parts of it were
viewed very unsympathetically by the executive branch.
A fifth example was the Agricultural
Adjustment Act. Despite some mistakes, the
price support program served a great and
useful purpose. The main role of most
academic economists in later years has been
to undermine the price support legislation
by largely unanalytical and unfair attacks.
A sixth aspect covered the whole field of
social security. This ran way back to European examples, and many years of work by
welfare specialists here. The main influence
of the academic economists who helped draw
up the original social security legislation was
unfortunate. Over my unavailing protests,
they started a system of old-age insurance
financed by regressive taxation, and a system
of unemployment insurance conducted separately in forty-eight states, when we needed
a national system supported by progressive
taxation.
Seventh, the liberal and so-called "cheap"
money policies of the New Deal were demanded by the times, were a trademark of
the Democratic Party, and went back at
least to the Populist movement of the 1890's.
Eighth, there was the TVA, which went
back to George Norris and Muscle Shoals.
Ninth, there was the Employment Act of
1946, to which I shall return.
134

KEYNESIAN REVOLUTION—DISCUSSION
Thus, major elements in the enduring
achievements of the New Deal originated in
the Congress, and much of these were opposed or damned with faint praise by the
President and his administration. Nor, in
sheer reality, can the academic economists,
inside or outside of government, claim much
creative influence in these connections. Even
if one looks for comprehensive analysis of
the economic circumstances then pertaining,
and what needed to be done about them,
there was more of this in the Congressional
Record, committee reports, and the independent writings of economists working with
legislators than elsewhere.
In essence, the New Deal was made feasible by the political and social conditions of
the times and the advent of great leadership.
But its specific content was in the mainstream of the American experience: the
farmer-labor movement and the labor movement, the Populist movement, some aspects
of William Jennings Bryan, the reform
period of Woodrow Wilson, the distributive
teachings of Henry George, the preachments
of the Socialist parties for many years, the
large numbers of voluntary associations
devoted to a variety of social reforms, contemporary Congressional leadership, and
economists who divorced themselves from
the preoccupations of the academicians and
were all too frequently scorned and ignored
by them. With all due respect to Keynes, I
have been unable to discover much reasonable evidence that the New Deal would have
been greatly different if he had never lived,
and if a so-called school of economics had
not taken on his name.
Coming now to World War II, this crisis
caused us to rise above the traditional disputes among academic economists, and to
embark upon planning on a grand scale.
The task at hand was to establish long-range
quantitative goals for the whole economy;
determine allocations of resources and incomes toward economic equilibrium and
full employment; fuse all policies toward
these ends; and pay due regard to the priorities and social justice, called "equality of
sacrifice." The big issues were how extensive
the planning should be, how large and imagi-




135

native the goals should be, etc. And one's
views on these subjects depended upon
experience and biases, drive and imagination,
having relatively little to do with the quarrels among economists qua economists.
This brings me to the Employment Act of
1946, a greatly misunderstood and misapplied statute, which sought, with proper
modification, to benefit by the World War
II experience. My Pabst prizewinning essay
of 1944 did advocate compensatory spending, but that was not its dominant note. It
advocated, at the highest levels of the federal
government, a long-range performance budget for the American economy in action,
setting quantitative goals for resource use
and income allocation, toward maintaining
equilibrium at full resource use; that all of
the basically important national economic
and related social policies be blended into a
single policy; that equal emphasis be placed
upon distributive justice; and that the effort
be undertaken jointly by the President and
the Congress, thus seeking to provide some
of the bridge for common action which the
parliamentary system offers. The actual Employment Act of 1946 was almost an exact
fulfillment of my 1944 essay, except that it
provided for a Council of Economic Advisers, and separate rather than merged
action by representatives of the President
and the Congress. The Act opened the way
to a far more comprehensive and unified approach than any one school of economics,
Keynesian or otherwise.
In late 1944 I persuaded Senator James
E. Murray to undertake translation of my
Pabst plan into basic legislation, and to employ Bertram Gross, who had worked for me
previously, to devote his full time to organizing the details of a campaign to which I
could not devote full time as Deputy Administrator and General Counsel of the wartime National Housing Agency. However, I
participated in the drafting of the legislation. I was in the best position to obtain the
sponsorship and interest not only of Senator
Murray but also of the other three Senatorial
sponsors, Senators Wagner, O'Mahoney, and
Thomas, and also the House sponsor, Congressman Wright Patman. And because of

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AMERICAN ECONOMIC ASSOCIATION

my very close association with Senator
Robert A. Taft in housing endeavors, I was
able to help much in winning his support,
and that of some other Republican Senators,
for the kind of Employment Act which
seemed to me best. Also, I was selected to
make the case for the bill before President
Truman's Mobilization and Reconversion
Committee headed by Fred Vinson, and
this changed a lukewarm attitude toward the
bill by the Truman administration to very
vigorous support. I resisted that draft of the
bill which relied solely on compensatory
spending, viewing the equal importance of
so many other aspects of economic and social
policy. I never believed that the bill was
"watered down," and I helped with some
of what was mistakenly called "watering
down"; and I saw no meaningful difference
between "full" and "maximum" employment, as either needs to be defined as the
operators see fit. The final legislation met the
need for a plenary planning statute.
Then came, at least after the Korean war,
the evolving debacle of the Act's administration, with a real planning process not set in
motion; with long-range and unified goals
not set; and with no one unified program and
policy substituted for a congeries of scattered
and ad hoc short-range efforts. And above all,
the distributional aspects of Keynes' teachings were neglected. Fundamentally, he
found that the need for increased public
investment to compensate for inadequate
private investment resulted from the maldistribution of income and saving. Indeed, in
his summary chapter in the General Theory,
he pointed out that compensatory spending
could not possibly work without vast concentration upon improved income distribution through taxation and other measures.
Unfortunately, the official proponents of
"The New Economics," while purporting to
be Keynesian, neither planned nor focused
upon distribution. In their analysis, conclusions, and programs, they held that it
mattered not much who got the tax reductions or where the increased spending went,
and even not much whether tax reductions
or increased spending was resorted to, so
long as on paper the quantitative addition




to the total potential spending stream was
adequate to restore full employment.
All of this reminded me of the man who
drove his car up to a filling station and said,
"fill her up." When the attendant asked,
"Shall I pour oil into the tires, or water into
the gas tank, or gas into the radiator?" the
answer was, "What difference does it make,
just fill her up. Haven't you heard of Lord
Keynes?"
In sheer fact, the highly unsatisfactory
upward movement from 1961 to 1964 was
largely "autonomous" and hardly better
than the two upward movements after the
first two Eisenhower recessions. The $20
billion annual rate of misdirected tax reductions gave the economy a big boost from
1964 to 1966. But due to aggravation of
distortions in resource use and income allocation, a serious shrinkage in the real economic growth rate commenced from 1966
forward, although not noticed by many until
the advent of an absolute recession in 19691970, which is a commentary in itself.
Further, we would have had an absolute
recession by 1966 but for vast and unanticipated increased spending for Vietnam. All
this set the stage for the evolving combination of inflation and stagnation during
1969-1971, even though the Nixon administration has learned how to double these
errors in spades.
The second great error of the "New
Economics" was that its policies worked
directly counter to the needed shifts from
the private to the public sector. Even apart
from social values, for technological and
other reasons, the three great goals of growth,
priorities, and justice interpenetrate, and
adequate programs for any one of the three
would be about the same as for the other two.
Further, the main function of the federal
budget is not to help stabilize the economy,
although that should be important, but
rather to achieve, by allocation to the public
sector, that adequate public supply of those
goods and services which the nation needs
but cannot otherwise obtain. If this had
been recognized, we would never have undertaken an orgy of misdirected, regressive, and
largely wasteful tax reduction, 1962-1971.

KEYNESIAN REVOLUTION—DISCUSSION
The noisy quarrel between the fiscal and
monetary enthusiasts seems to me largely a
misplacement of emphasis. The real travesty
is that the prevalent monetary policy has
fed the fat and starved the lean, restrained
the essential and had little effect upon the
overexuberant, and since 1952 transferred
more than $400 billion in the wrong direction
by all economic and social criteria. Even part
of these transfers, more sanely allocated,
could have completely wiped out poverty
and serviced adequately all of the great
priorities of our domestic needs, contributed
much more to economic growth, and been
anti-inflationary rather than highly inflationary, which the excessive cost of money
actually is. Yet, almost none of the leading
economists has stressed these distributional
aspects.
The amount of inflation we have suffered
even during the most recent years has not
been unbearable by historic or other pertinent tests; what has really been unbearable
has been the obsessionary preoccupation
with inflation. This has led to policies which
have redistributed resources and income in
the wrong directions, stifled economic
growth, spawned idleness of plant and manpower, and neglected the great priorities.
The same amount of inflation, generated by
policies serving these three great purposes,
would have been a wonderful "tradeoff."
Thus, the proper treatment of inflation is
really a distributional task, and very few
are saying so. Moreover, the empirical evidence since 1952 demonstrates quite clearly
that there is an inverse rather than a positive
correlation between the performance of the
economy and the amount of price inflation.
We should at once embark upon vigorously
stimulative fiscal and monetary policies,
targeted toward full resource use by late
1973. On the record, this would be the surest
way to curb inflation, aside from its overwhelming importance on other grounds.
The narrowness of recent and current
Keynesians has led operations under the
Employment Act to concentrate mainly
upon fiscal policy. But what about the
equivalent importance of social security,
housing, urban renewal, resource develop-




137

ment, agriculture, and the war against
poverty, treated only in perfunctory fashion?
To illustrate: We have witnessed the forced
transfer of scores of millions of people from
farm to urban areas, accompanied by the
general degradation of the farm population
and the virtual ruination of the cities. We
have permitted the war against poverty to
degenerate into a Babel of countless "community action" programs, substituting chaos
for genuine participatory democracy, and
being responsible for much of the civil and
social unrest resulting from promises without performance. An effective war against
poverty, distributional in nature, should
and could have been limited to a full employment program, universal income supports, adequate minimum wage and social
security legislation, and adequate federal aid
to housing and education.
As another example of the dearth of
planning, most of the Keynesians now support limiting average annual increase in real
wages to only 3 percent under the Phase II
Guidelines. But even allowing for the additions to wages through reemployment, how
in the world can the economy regain reasonably full resource use, which calls for an
annual real economic growth rate of about
7.5 percent for two years, if real wage rates
grow only 3 percent a year?
Still another indication of these defaults is
the prevalent substitution of antirecessionary or counter-cyclical efforts for a longrange, positive, pro-prosperity program under national economic budgeting. "Fine
tuning," in its practical application, has
usually turned out to be the frequent substitution of one error for another, and usually
starting too late. And conditioning all of
these derelictions is the failure to distinguish
sufficiently between goals and forecasts at
the official action level, and to overstress
the latter at the expense of the former.
Policies in response to morbid forecasts
often tend more toward accepting than
toward overcoming them.
The time is long overdue for the American
Economic Association to start to help overcome the dismal poverty of American
economics, for which it and its cherished

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AMERICAN ECONOMIC ASSOCIATION

literature are so largely responsible, and to
commence promoting the real purposes of
the Employment Act of 1946. Let's get on
the track.
I am aware that I may have offended
some of your sensibilities, but I hope that I
may have also appealed to your saving
common sense.
ROBERT R. NATHAN: I agree with the
excellent paper by Alan Sweezy, especially
with respect to the inhibitions that made it
exceedingly difficult to apply Keynesian
policies in full measure in the 1930's. There
was deep concern about being tagged with
the title of "spender." Harry Hopkins wrote
a book entitled Spending to Save but he was
attacked over and over as one who was
interested only in spending. Then, of course,
there was the concern about deficit financing
and the rising national debt. It was almost
impossible to soothe the nerves and the
frantic objections of those who were distressed by the horrible image of a rapidly
rising debt.
Even though there appeared to be no
danger of inflation whatsoever, the specter
of inflation was brought up from time to
time by the non-Keynesians and those who
felt that traditional contractionist policies
were the only true ways to overcome the
ravages of the depression and to restore
prosperity. It was a time when national
economic policies found few supporters in
the business community or even in the
press.
I find Dr. Jones' paper to be excellent. It
is a remarkable digest of a huge number of
events and forces at work. It has not been
possible for him to do justice to all of the
issues and all of the applications of Keynesian policies which took place during that
period, but within the time limit available
he has carried out his task most competently.
I would suggest that there are three gaps
in Dr. Jones' paper. One concerns the expansion in basic capacity in 1940; the second
involves the preparation of the "Victory
Program" in 1941; and the third concerns
fiscal policy once full employment was approached and reached.
Insofar as the 1940 expansion was con-




cerned, it was the Keynesians who really
took the lead in trying to get increased
capacity in the steel, aluminum, machine
tool, copper, and some other bottleneck industries. By and large, the industrialists
were against expansion, fearful that after a
mobilization effort we would return to the
depressed conditions of the 1930's. Seeing
idle capacity and fearing excess capacity
after the war, they felt that increases of war
production should come out of existing idle
capacity, and if defense or war did require
more production than could be supplied by
the capacity then unused—which they
thought unlikely—they wanted additional
requirements to be met by diverting capacity
from civilian production rather than by
expansion. In any case, a major battle was
mounted by the Keynesians to obtain expansion of capacity, with the result that
President Roosevelt adopted the policies
they advocated and threatened the steel
industry with Government's undertaking to
expand capacity if the industry did not do
so. As a result of these pressures and policies
a sizable expansion did occur in the steel
industry and much larger capacity expansion was undertaken in the aluminum, machine tool, and copper industries as well.
This was a major effort well worth careful
analysis.
In the middle of 1941, when France fell,
one of the truly great strategists and operators of this century came to the United
States. He was Jean Monnet, who came as
Deputy Director of the British Ministry of
Supply, even though he was a French
national. He had already established an
excellent reputation in Europe.
Never have I worked with anyone who
had a greater sense of management and
maneuver than Monnet. He used to sell
ideas to President Roosevelt through his
close advisers and draft the President's
messages to Winston Churchill; and then he
would sell the ideas to Churchill through
his close associates and would draft the
answers to Roosevelt. It was strange but
everyone knew what he was doing and they
were all thrilled with his effort and his
results.
In the middle of 1940, Jean Monnet knew

KEYNESIAN REVOLUTION—DISCUSSION
that the key to winning the war was American production and he tried to figure out
how to get American production increased.
It was very hard to find out what military
requirements were so he finally sold Roosevelt and Churchill on the idea of getting the
military committed to what they would need
to win the war if there were an all-out war.
The military did not take the exercise too
seriously, but they did put forward many
figures on critical items.
A few of us worked on this project very
closely with Monnet and we translated requirements into steel, which was a key material in the total effort, because it included
merchant shipping and tanks and heavy artillery. We also translated the requirements
into aluminum because this reflected the airplane program. Then the requirements were
translated into copper because this was the
bottleneck for ammunition. Then, finally,
the needs were translated into dollars and
we came up with what we thought the ultimate gross national product potential would
be and the proportion that might be devoted
to the war.
Out of all these efforts, which extended
over some months in the early fall of 1941,
we finally submitted to Roosevelt a set of
goals for 1942 and 1943. Lord Beaverbrook
was visiting at the White House when this
memorandum went to Roosevelt and he
urged Roosevelt to push the figures up a
little more. Then came Pearl Harbor and
soon thereafter the President announced the
huge targets for 1942 and 1943, which many
criticized as unattainable. This was the
Victory Program and it was fortunate that
the job had been done and finished not long
before Pearl Harbor.
It was really the Victory Program which
led to the excessive expansion in budgets
and orders and goals by the Army that
brought on the feasibility dispute which is
discussed in Dr. Jones' paper.
The third gap in Dr. Jones' paper concerns
fiscal policies after it was clear that the idle
resources would be and were fully utilized.
Dr. Jones spends quite a bit of time telling
about the views of the Keynesians in trying
to resist higher taxes as long as there was
substantial unused capacity. That was a




139

good policy and appropriate for the time.
But once the capacity utilization was nearly
full then efforts were made to increase taxation. But they did not fully succeed. The
conflicts and the problems on this aspect of
policy should be developed.
There are many other phases of the war
program, especially relating to conversion
and to other matters, but I do think that
the highlights have been dealt with. If the
gaps I have mentioned can be filled, then we
do have an interesting and significant history of wartime economic development
which reveals the importance of the Keynesian contribution.
LAUCHLIN B. CURRIE: I am, of course,
most appreciative of the kind things said
about my work of thirty-five and forty years
ago. Alan Sweezy's paper evoked memories
of a very exciting period of my life, when I
was a member of a dedicated group working
for ends that we thought tremendously
important. The New Dealers numbered
probably no more than 200 or 300 people,
mostly young and mostly lawyers and economists, with a scattering from other fields,
and mostly in the second and third ranks of
the governmental hierarchy. That we were
able to make such an impact was not only,
as the old saying has it, because our cause
was just, but also because we worked
prodigiously at it.
What must be kept in mind in assessing
our work in retrospect is that we were
pragmatists, and extremely policy conscious.
In my own case, my theoretical approach
had been influenced by Keynes since my
London School of Economics days in 192225, and at Harvard throughout the Depression I had bootlegged his heretical views on
fiscal policy, so that in Washington a large
part of my time was spent in learning and
practicing the arts of persuasion and of getting views, already mostly formed, accepted
and implemented. My formal output in
theory was small and was mostly buried in
memoranda and occasional speeches. We
had, I am afraid, not too much respect for
our academic colleagues, who were still
mostly budget balancers, and the people
we were trying to influence were nonaca-

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demics, which explains our preoccupation
with matters of semantics and presentation.
I am a little concerned that a listener or
reader of Alan Sweezy's excellent paper may
fail to keep in mind our concern with persuasion and reassurance of the layman, and
may impute to us the rather naive ideas that
the analogy of "pump priming" suggests. An
early draft of his paper sent me back to
yellowed files I had not looked at for many
years and I was delighted to come across
a memorandum of early 1935 explicitly
entitled "Pump Priming"—delighted because the theory therein appears, even after
thirty-five years, fairly sophisticated. For
example, it contained an attempt to set
guidelines for spending by using Kuznets'
recent investment figures for 1928 as a
benchmark for full employment investment
or savings, with modification for changes in
prices and in productive capacity since
then; it distinguished between the income
impact of different types of government
spending; it recognized the multiplier (or
secondary spending) but was cautious in its
use; it analyzed investment spending in
terms of durable goods, inventories and
construction, with causal interrelationships,
and the current impasse in housing; it listed
nine factors militating against a "natural
recovery"; and it advocated a relatively high
monthly deficit of $400-$500 million, not to
fall below $300 million "as long as it does
not appear that recovery has gathered
momentum on its own account." These high
figures were doubtless the reason its circulation was restricted, as one could not at that
time advocate publicly such magnitudes as
$5 or $6 billion a year and remain respectable. I would add to the obstacles Sweezy
mentioned the sheer difficulty of finding
acceptable ways to spend. One must remember that total federal expenditure had fallen
to little more than $2 billion by 1932, and
to spend even $1 billion was extraordinarily
difficult.
Something which unmistakably dates the
memo and, I trust, attests to its authenticity,
and brings back a flavor of the times, is that
it devoted two pages to demonstrating that
the national debt of the United States was
low in relation to that of the United King-




dom and Australia and in relation to the
national income, so that there was no danger
in its increase. The necessity of doing this
would never have occurred to one after the
war.
As Alan Sweezy remarked, adherence to a
strict pump-pumping analogy might lead
to a belief that an initial burst of spending
was all that was required to set in motion
forces leading to full recovery, which would
then continue. My 1935 memorandum,
however, postulated that spending should
continue as long as necessary, which I
thought would be when there was "a real
spurt in privately financed construction."
The line between permanently larger spending and spending for as long as necessary
is rather a fine one. The memo was silent on
the question of balancing the budget over
the cycle. On the permanence of the recovery
it merely said that "there is more assurance
of income-producing expenditure continuing
for a considerable period in the future . . . if
the recovery is based on construction," which
has a fairly modern ring.
In retrospect, I was not as alarmed at the
time over the decline in the net contribution
in late 1936- early '37 as I should have been,
but I can only plead that it is always dangerous to give great importance to one series
when one does not know what is happening
to other series, and we had little current
data at that time.
My unpublished memorandum on The
Causes of the Recession of 1937 had wide

circulation and, I think, considerable influence. It stressed the abrupt decline in
the net contribution in conjunction with
bottlenecks, sharp wage rises, and an inventory boom as leading factors in the subsequent recession. Eighteen years later our
chairman, Walter Salant, made an excellent
analysis of this episode, in the American
Economic Review, March 1955, which, I am
happy to say, tended to confirm my earlier
analysis.
The investment analysis became more
firmly based after 1937 when I could make
use of George Terborgh's data on capital
goods expenditures, and V. L. Bassie's on
consumption and inventories, both of which
I had initiated at the Federal Reserve, but

KEYNESIAN REVOLUTION—DISCUSSION
the analysis prior to 1937 was hardly as
simple as the pump-priming analogy suggests.
Perhaps I may be permitted a few words
on my activity after 1937 and up to the war.
Through 1938 and 1939 I was very active in
promoting public spending in various ways
on a continuing basis outside the budget, and
in agitating to convert the social security
system to a greatly enlarged pay-as-you-go
basis, which represented longer term interests of both Marriner Eccles and myself. I
tried out the predictive value of Keynes's
multiplier with disappointing results, and
placed more faith in the analysis of "leading"
and "following" sectors of investment which
I presented in the TNEC hearings in 1939,
particularly emphasizing the exogenous role
of housing, and the unresponsiveness of
business capital expenditures to changes in
the rate of interest.
My first coup at the White House in 1939
consisted in having a substantial volume of
excess capital funds of government corporations recalled, which reduced the legal or
accounting deficit, while leaving the net
contribution unaffected, which pleased
Roosevelt.
Although I considered myself a Keynesian
from way back, I felt (and still feel) that we
had little to learn for policy purposes from the
General Theory. We did not, I fear, appreciate fully its novelty or importance for
theory. In any case, sometime in 1938 I
believe it was, we welcomed Alvin Hansen
with open arms as our most important
recruit. I recall very well arranging for him
to be our star witness in the TNEC hearings,
rehearsing together our testimony and going
over a long list of "good" and "bad" words
prepared for the use of the government
witnesses by Stuart Chase. Unfortunately,
somebody slipped the list to the press,
which had great fun with it. It was ironic
that despite our efforts, a semantic tag
invented by the opposition, "The LendSpend Bill," helped defeat our bill with its
accurate but uninspired title, "The Works
Financing Act of 1939," which was to have
been our main reorientation in fiscal policy.
The fact that this occurred as late as 1939




141

may indicate to you the strength of the opposition to spending in the early years of
the New Deal.
Sweezy raised an interesting question.
What would have happened if the war had
not intervened and changed the problem?
It might have taken longer, but I think we
were winning the fiscal policy-employment
battle.
By 1939 I had become the first economist
in the White House and we were becoming
a formidable group. I had recruited Dick
Gilbert and his group—V. L. Bassie, Rod
Riley, and the rest—for Harry Hopkins at
Commerce, which gave support to Bob
Nathan, long a lone outpost in hostile
territory. I had turned my post at the Federal Reserve over to Emile Despres. I was, I am
happy to say, responsible for bringing Ken
Galbraith to Washington and for getting
Gerhard Colm placed in the Bureau of the
Budget, now moved to the Executive Office
of the President. Walter and Bill Salant,
Griff Johnson, Alan Sweezy, Arthur Gayer,
Malcolm Bryan, George Eddy, Albert Hart
and Martin Krost were my former students
or associates and were occupying key posts.
Our position in the Treasury was getting
stronger as Harry White gained influence,
and we had close working relationships with
Gardner Means and Tom Blaisdell in the
NRPB and the members of the Board,
and with Ezekiel and Louis Bean in Agriculture, with Isador Lubin in Labor and, of
course, with Leon Henderson and Jerome
Frank in the SEC. Hansen was winning
converts outside. We didn't sleep much, but
when we did, the General Theory kept working. With the Works Financing Act of
1939 and our long discussions on a major revision of the Social Security System, Roosevelt finally acquired a firm grasp of the
theory.
I think, therefore, that even if the war
had not intervened, victory was assured.
The 1936-37 experience suggests, however,
the difficulty of securing full employment
with stability when there were so many
emerging bottlenecks to break. So today's
problems would have become acute much
earlier.


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