Oral History Interview with
Leon H. Keyserling
Member of legal staff, Agricultural Adjustment
Admin., 1933. Secretary and legislative assistant to Sen. Robert F. Wagner
(New York), 1933-37. Gen. counsel, U.S. Housing Authority, 1937-38; deputy
administrator and gen. counsel, 1938-42; acting administrator, 1941-42.
Acting commissioner, Federal Public Housing Authority, 1942. Gen. counsel,
National Housing Agency, 1942-46. Vice chairman President's Council of
Economic Advisers, 1946-50; chairman, 1950-53.
Washington, D. C.
May 10, 1971
by Jerry N. Hess
[Notices and Restrictions | Interview
Transcript | Additional Keyserling Oral History
This is a transcript of a tape-recorded interview conducted for the Harry
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but only minor emendations were made; therefore, the reader should remember
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of the Harry S. Truman Library.
Opened January, 1975
Harry S. Truman Library
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and Restrictions | Interview Transcript
| Additional Keyserling Oral History Transcripts]
Oral History Interview with
Leon H. Keyserling
Washington, D. C.
May 10, 1971
by Jerry N. Hess
HESS: To keep things in good chronological order, Mr. Keyserling, we
broke off by beginning to discuss the Wardman Park group, and you had
mentioned that before we get too far into that, we will have to analyze
how that group functioned and how it operated before we can come to the
question of how it influenced the President. Would you like to start there
this morning, sir, and just tell me how that group functioned and how
KEYSERLING: I'm sure that I said last time that one of the most remarkable
things about the group was that although it had this wide representation,
and although it dealt with such important matters, and although it met
from shortly after the 1946 congressional election to somewhat after the
1948 presidential election, a period of more than two years, and met every
Monday night for several hours, there was never at any time in all that
period, to the best of my knowledge, any information on the part of the
press that it was meeting. As a matter of fact, I don't think there was
any information about it at all until many years later when I think I
mentioned it to
Cabell Phillips of the New York Times, which I
felt I could do as it was even then more than ten years later, I suppose;
and he followed up on it at that time and made some slight reference to
it in a book that he did on the Truman administration. But I think it
is a commentary on the--I want to emphasize this because it goes beyond
personalities--and is a commentary upon the difference between the Roosevelt
and Truman administrations as I knew them during twenty years, and some
later administrations, without getting specific. Just as it is remarkable
that during the years of the Roosevelt administration, when I, as indicated
earlier in this recording, was so heavily involved in so much of the New
Deal legislation that has been really the most enduring in the broadly
significant part of the New Deal, nobody ever knew that I was doing it,
and very few people know even to this day. It is hardly entered into the
On the other hand, I have been shocked, as a matter of public policy
and public responsibility, again not dealing with individuals, at the
extent to which some of the so-called intellectuals and academicians,
especially in the Kennedy years and also the Johnson years (it's too early
to comment on this aspect of the Nixon administration)
have sought to
perpetuate themselves in the umber of the Presidents they've served, have
written unconscionable "kiss and tell" books and articles, almost before
stepping out, and would lead you to believe that but for them there hardly
would have been a Kennedy or a Johnson.
I think this represents a gradual deterioration of the morale of the
Presidency, through no fault of the Presidents involved, and it is peculiar
that the main perpetrators of these outrages have been the academicians,
who, if anybody, might have been expected to understand the nature of
the Presidency, and to understand confidences; and to realize that a man
who has the honor and trust of working for a President of the United States,
should not violate that trust, even if he thinks he has been mistreated.
I think this applies even after a President has left office. Of course,
the examples are too numerous to detail.
I suppose that one of the most striking examples was when Arthur Schlesinger,
even while Lyndon Johnson was still President, and while Dean Rusk was
still Secretary of State, sold for a big fee an article to Life
magazine to the effect that Kennedy had told him that he was going to
fire Dean Rusk one year later. Now, in the first place, if Kennedy had
told him this, it was an outrageous thing
to broadcast it when Rusk was
still Secretary of State; secondly, if it was said, it was said in confidence;
third, if it was said, it meant practically nothing, because the President
may one day say, "That man is terrible; I'm going to fire him next year,"
and the next day he may say, "He's doing a great job." It's absolutely
meaningless. And above all, it was stupid to repeat it, because if it
were true, the only person it would reflect on would be the President
that Schlesinger was purporting to honor, because in such dangerous times
as that, he had a Secretary of State who was so incompetent that he was
going to fire him, but was deliberately going to defer it until after
the presidential elections more than one year later, what a terrible commentary
that would be upon the President, if true. But, of course, I blame it
entirely on an informant who may have informed on something that never
happened. Well, I have no way of knowing it never happened, but anyway,
he magnified it beyond all reason.
The same thing happened with a book that Ken [Kenneth] O'Donnell wrote
much later on, in which he made the same kind of statements about what
Kennedy told him he was going to do after the elections.
Well, the brand of people that were involved in these meetings with Oscar
Ewing is indicated by the fact that
they didn't tell; they didn't tell
before; they didn't tell after. I certainly think it perfectly appropriate
in an oral history at this time, eighteen years after the end of the Truman
administration, to give my account of what happened at that time.
Now, the meetings were extremely informal. We were all behaving as equals,
there was no leader. Ewing wasn't the leader just because he was the host.
He was the host because he was a well-to-do man who had a nice apartment
and was generous and interested in the future of a liberal administration,
and could afford to give us a fine steak dinner every week. But there
was no leader.
The first issue that I recall discussing, and incidentally, although
this was--well, it wasn't long after I became a member of the Council,
because I wasn't appointed until the middle of 1946, and actually didn't
take office until September of '46, so it wasn't long. Anyway, this was
the first time that I ever met Clark Clifford. The first subject that
I remember discussing, or anyway, the first important subject, was whether
or not President Truman should veto the Taft-Hartley Act, which was under
consideration at that time. I very well recall that at that time every
member of the President's Cabinet, except the Secretary of Labor, was
urging him to sign
the Taft-Hartley Act, which is an interesting commentary
on itself. I presume, although I never heard their advice to him, that
they put this on political grounds that it would be bad for Truman to
Well, our discussion on the Taft-Hartley Act which probably extended
over two or three sessions, was very important and very indicative. Of
course, I was entirely interested in the substance of the matter. I had
been the main draftsman of the Wagner Act which the Taft-Hartley Act sought
to mitigate in its protections of labor. I felt especially that it would
work against further organization in the South and among the unorganized
generally, and I didn't think that any of the charges against the act
The most common charge was that it was one-sided, because it accorded
certain protections and rights to labor and accorded none to management.
But I had been through that debate during the years I was working with
Senator Wagner, and I said, "It isn't any more one-sided than a law that
establishes the rights of the parent toward the child and not of the child's
toward the parent, or the husband toward the wife, and not the wife toward
the husband; or that it establishes the obligations of security sellers
and not of security buyers." The act
didn't do anything except give labor
the right to organize and to be recognized and to bargain collectively.
The right to bargain collectively couldn't be one-sided, because the
two people had to bargain. The right to organize couldn't be one-sided
because industry and the right to organize in giant corporations; and
as we all know, the anti-trust laws have, since the original suit against
the Standard Oil Company hardly dissolved any important corporation, and
the monolithic mergers and corporate combines have gone on even to this
day. So giving labor, or vindicating the right of labor which we're supposed
to enjoy under Section 7a, was not one-sided in any way, shape or manner.
There was a correlative right for employers, which they fully enjoyed.
Well, anyhow, because of my great interest in this act, I naturally was
most familiar with the subjects, and naturally took the lead in arguing
that President Truman should veto the Taft-Hartley Act. As this proceeded,
it became apparent that the substantive arguments had to be reinforced
with political arguments.
I don't say this at all by way of criticism because a group such as this,
all members of the administration, would certainly have been derelict
and unnatural if they hadn't considered that factor. But be that as it may, I
saw that I would have to turn the argument in that direction to
make any progress with it. I argued that the actual majority of the Democratic
Party rested with the labor groups and other groups of that type; that
we wouldn't win over any appreciable number of the opposition of the Wagner
Act by the President signing Taft-Hartley, and that in view of the 1946
elections it was especially important that Truman identify himself clearly
as a lineal successor to the New Deal.
Well, anyway, this met with the universal approval of the group. So that's
how the decision was formed at that stage.
We next came to the question of how the President was persuaded. Now,
it's a little hard, certainly a little hard for me, to appraise how the
President was persuaded because we all had access to the President in
varying degrees; even as an Assistant Secretary of Agriculture, Brannan
had frequent access to him and soon thereafter became Secretary of Agriculture.
Jebby Davidson probably didn't have much access to him, but certainly
Charlie Murphy, who was then Assistant Counsel to the President under
Clifford, had access to him every day, and Truman had worked very closely
with Charlie Murphy on the Hill, because Charlie Murphy had been in the
office up there ever since 1933, long before he
knew Clifford. I had frequent access to him, as I will come to later.
Be that as it may, I think it would be fair to say that I deserved eighty-five
percent of the credit for pressing the issue with the Ewing group and
convincing that group, but that Clifford deserved eighty-five percent
of the credit of persuading the President. He was closest to him; he saw
him all the time; he was very aggressive, and one of the outstanding features
of Clark Clifford is his courageous independence. When Clifford became
Secretary of Defense--and here I am not saying whether I agree with him
about the Vietnam war, that's not the point. I can say a lot about that,
but it has nothing to do with the subject. But when he became Secretary
of Defense, many of my friends were naturally interested. They said to
me, "What kind of a Secretary do you think Clifford is going to make?"
And they made the point that he didn't have McNamara's administrative
knowledge and experience; that he had had almost none, if any; that it
was a big department. Would he be handled by the generals and admirals
or would they handle him, and what would his stance be?
I said, "There's one thing you can be sure of: Clifford
is going to be
independent, and whenever he becomes convinced of a position, he will,
as almost nobody I know, try to persuade his boss. He will not be a 'yes'
man, and if he thinks he's wrong, he will tell him again and again, and
he will have the gift of being able to do it in a way that will have a
good chance of influencing him."
Well, of course, as we all know, there were many forces besides Clifford;
forces of what was happening in the East, and forces among people besides
Clifford that influenced Johnson on the Vietnam war. But certainly Clifford
deserved eighty-five percent of the credit for actually persuading Truman
to veto the Taft-Hartley Act. That's about how I would divide it up.
Now, after we got through with the Taft-Hartley Act, there was the question
of sending a veto message. Clifford asked me to draft suggestions, which
I did, and sent to him. The message as it went up was moderately responsive
to my suggestions, but followed a substantially different line, perhaps
because I had been more interested in the ultimate economic importance
of the Wagner Act for the purpose of balancing the economy by strengthening
labor's wage position; and the people who ultimately drafted the message;
and as to whether Clifford drafted it or not, he certainly was in charge
of the drafting of it, was a more
legalistic document emphasizing more
legal points. So much for the Taft-Hartley Act.
Now, after the Taft-Hartley Act was disposed of, the Ewing group branched
into a wide range of other matters, which really culminated, although
many things happened over the next years, culminated in the stance of
the President in the campaign of 1948, but more particularly in the messages
which he sent to the Congress enunciating a very far flung New Deal. Now,
here again, I would say without derogation of others, that Clifford and
I were the two large factors: I on the programatic side; he on the persuasive
The heart of the whole thing was my intense interest in economic growth
and an expanding economy, and one of . the means that I used to develop
this interest aside from my dealings with the White House, which I will
come back to, was a number of lead articles that I wrote for the New
York Times, beginning as early as 1947, and there were three of them
between 1947 and 1948. I think the most important one was entitled, "A
National Prosperity Budget," and then another one was called, "A Three
Hundred Billion Dollar Economy," all emphasizing the idea of economic
expansion and economic growth, and with the economic growth, we could
afford easily all of these
various programs, whether in the field of housing,
in which I had had a long experience; the field of social insurance, in
which I had had considerable experience; the field of medical care which
was then being made the subject of bills such as Wagner-Murray-Dingle
Bill, and all the way across the board of the social programs which made
up the Truman Fair Deal. I wrote very many memoranda for the President
on this, not in my role as a member of the Council, but in my role as
sort of an accepted ally of the internal White House group, and in addition
to these memoranda, some of which went to the President and some of which
went to Clifford, I did draft several of Truman's speeches on economic
expansion and economic growth and on the whole thing.
It is interesting that even at that time, one of the big issues was that
all of these measures would be inflationary. Dr. Nourse had some feelings
in that direction: I remember one speech of the President which upset
Nourse particularly, which the President and I had written, that said,
"When the economy is limping along we can't afford any of these programs
because the economy and the budget is in trouble; and when the economy
is doing well, we can't afford any of them because it will be inflationary.
So when can we ever afford them?" This became a sort of
Another way that this was done was through the Council's reports, which
at my suggestion were separated from the President's report, his report
becoming a short document of four or five pages hitting the highlights,
supported by a very long Council document of a hundred or two hundred
pages, which went to the Congress twice a year with the President's economic
report. These incorporated many studies of economic growth, taking account
of all kinds of related issues such as needed capacities, needed steel
capacity, and how the social programs not only could be afforded if we
had economic growth, but equally important were essential elements in
achieving economic growth, because unless you made real American consumers
out of these people, you weren't going to be able to keep up with your
productive capacity. So, in all these ways, the transition was made, and
here again I would say that I dealt mostly with the substance and Clifford
was certainly the great contributor to the acceptance of it by the President.
I would say that I think that Charlie Murphy, who is a much quieter person
and much less able to advertise himself, or at least he didn't try to
do so, had a very important influence on this. This was certainly true
after the election of '48 because shortly thereafter Clifford went
into private practice, and Murphy became Counsel to the President.
Now, we come to the very important issue, much more important than whether
Clifford really believed in these things or was convinced of their political
desirability; I don't have any particular way of working that out. He
certainly gave me the impression that he believed in them. But the more
important question is, what did Truman believe?
Truman had, as a Senator, gradually veered from being an all-out New
Dealer, which everybody was in 1935, even James F. Byrnes. After all,
Byrnes was Roosevelt's leading lieutenant in the Senate. Truman had gradually
veered toward what I would call "The middle group," composed of such Senators
as Carl Hatch of New Mexico; and Sherman Minton of Indiana, whom Truman
later put on the Supreme Court; and even the Republican Harold Burton,
whom Truman also put on the Supreme Court, who was a middle-of-the-road
Republican having been Mayor of Cleveland. Truman gradually veered toward
that group. He wasn't in the Wagner-La Follette-Costigan group (I could
mention some others), and he wasn't in the Byrnes group after Byrnes became
much more conservative; or the
Dick Russell group. He was in that large
middle group, which, to a considerable degree, included Senator J. C. O’Mahoney.
Then when Truman first became President he was greatly influenced by
John Steelman and by John Snyder, and by--there was a Judge Caskie Collett
who was his adviser in the reconversion period--and various other people
during the debacle of the premature abandonment of price control before
the '46 elections, or at about that time. Lo and behold, by 1947, Truman
was an all-out liberal.
I am fully convinced that the transition was absolutely sincere as Truman
grew. I don't think there was any element of political calculation in
it beyond the normative minimum, because I think that Truman's sympathies
were really with the little man, arising partly out of his own experience
when he got caught in the squeeze with his partner out in Kansas City,
especially by the tight money policy when he went into bankruptcy.
In all my dealings with Truman he had the two most important characteristics
of a President in this situation: First, he had absolute courage and decisiveness.
And second, as I've said over and over again, despite what I have said
about the political elements and the choices, I think Truman, less than
any President I ever came into
contact with (and I came into contact with
all of them since 1933 except Eisenhower and Nixon), more than any of
the others, far more than any of the others, it never seemed to
me that he considered the politics of Harry S. Truman when he was making
what he regarded as a big decision in the interest of the country. He
very much identified the interests of the country with the interest of
the plain people.
The only other man, as I've said before, who was this way, was Senator
Wagner. Now, Senator Wagner had come up as a Tammany politician, but in
all the years that I worked with him, from '33 to '37 formally, and from
'37 to '46 informally, he just never said to me, or gave any indication
that he was thinking of the political consequences. He was always talking
about what is the right course. So I think Truman was absolutely sincere
about this. I think he felt intently all that he did; but at the same
time, I don't suppose that if he hadn't had the kind of advisers that
he had he would have gone so far so fast. He would have responded to other
Now, there was more to this than influencing Truman. I made some reference
to the conservatism of John Snyder, and the conservatism (I don't think
I've referred to it before) of Charlie Sawyer, who was Secretary of Commerce.
But I worked on them too. I remember Truman once saying to me after a
Cabinet meeting, about the time he appointed me Chairman of the Council
(which was held up quite a while because some of the people in the administration
weren't too keen about it), he said to me, "You certainly have won those
I said, "Well, I had to sell them the shirt on my back to do it."
And he laughed and said, "Oh, no, I don't think you did that at all."
Another indication (I don't know whether I mentioned it earlier), shortly
after I went on the Council, some of these people gave him a big fat book
of newspaper clippings of all the things that I had said that had appeared
in the paper. They thought this was really going to put an end to me.
So Clifford called me up and said, "I think you ought to go over and see
I walked into Truman's office. Truman had the thing on his desk. He said,
"Sit down, Leon. I read every one of these clippings. I didn't find a
single one where anybody criticized you for disagreeing with the President
of the United States. So, let's just forget about it." That was the end
HESS: All right. While we're at this point, we have mentioned the so-called
liberal or conservative leanings of Mr. Truman, and we also mentioned
Mr. Clifford in that nature. Let's just go down the list of people who
were in the Wardman Park group and could you tell me just a little bit
about each man, and their liberal leanings?
KEYSERLING: They were all decidedly liberal people.
HESS: All decidedly liberal.
KEYSERLING: No question about it.
HESS: One question on that, Mr. Oscar Chapman, who was Under Secretary
of the Interior at that time, did he ever attend any of the meetings?
KEYSERLING: So far as I can recall (it's a little hard for me to say
that anybody never attended), but he was not a part of the group
and I don't remember his being there.
HESS: Wasn't that a little odd that he was not? He was usually regarded
as one of the liberals during the Truman administration, was he not?
KEYSERLING: No, I don't think it was odd, because I think it was a deliberate
intent, since the meetings were held
under the aegis of Ewing, although
as I say, we were all equals, and Ewing did not have at that time, and
never attained, Cabinet status. I think there was a deliberate effort
not to have any Cabinet members in that group.. Now, Howard McGrath dropped
by very rarely, more in his role as Chairman of the Democratic National
Committee than in his role as Attorney General. But I would tend to explain
the absence of Chapman on the grounds that this was not a Cabinet group.
HESS: Now, McGrath was Attorney General after the '48 election. He was
Senator from Rhode Island.
KEYSERLING: Well, then it was in his role as Chairman of the Democratic
National Committee, yes.
HESS: And also I noticed that the Department of the Interior in Mr. C.
Girard Davidson, did have a representative. It looks like each major department
or most of the major departments had one representative, and usually that
representative was an assistant secretary; Davidson was Assistant Secretary
of the Interior; David A. Morse was Assistant Secretary of Labor; Charles
Brannan was Assistant Secretary of Agriculture. Was that by any design?
KEYSERLING: Yes, I think the idea was to get the most influential
knowledgeable and important people representing the departments that dealt
with economic and social affairs, but not to make it a Cabinet group.
Making it a Cabinet group would have had all kinds of difficulties.
HESS: At this time, Mr. Chapman was not Secretary; he was Under Secretary.
KEYSERLING: Well, then, my memory failed me on that, and that is not
the explanation. Be that as it may, it was Davidson and not Chapman who
was a member of the group.
HESS: Was Davidson at this time considered by the group the most active
liberal in the Department of the Interior, more active than Chapman?
KEYSERLING: I wouldn't be prepared to say that. I had nothing to do with
HESS: Who did?
KEYSERLING: I presume it must have been Ewing and Clifford, but I don't
know. It never crossed my mind at any time as to why it was Davidson rather
HESS: I don't know if we have it down on tape or not, but could you tell
me about your invitation to attend the dinners?
KEYSERLING: My invitation first came in the form of a call from Don Kingsley
on behalf of Oscar Ewing.
HESS: Did Mr. Kingsley usually attend most of the meetings?
KEYSERLING: Yes, all of them.
HESS: Since we have been mentioning Mr. Truman's stand, I just want to
mention briefly in passing what Cabell Phillips says on page 163 of his
book, The Truman Presidency: "Where did Truman stand in this ideological
cross fire? No one was quite certain, including Truman himself?" Do you
think that Mr. Truman at this time was as confused as to what his stands
were on the various issues as Mr. Phillips says in his book? He says,
in effect, Mr. Truman, himself, did not know where he stood in
the liberal-conservative cross fire.
KEYSERLING: Well, all I can say is that from 1947 to 1953, which is a
period of six years, it would be amazing if a confused man was so utterly
consistent without exception, and I would paraphrase what Acheson said
in his book in answer to the claim that Mr. Truman was a little man. Acheson
says, "If Truman was a little man, he was the biggest little man I ever
I would say that if he was confused he was the
clearest, most consistent
confused man that I ever met, because never once from '47 to '53, did
he deviate in the slightest. Furthermore, I have further evidence, which
I am not yet in a position to reveal, in maybe twenty letters of great
length which I received from Mr. Truman after he left the Presidency,
expressing himself absolutely without reserve about whoever happened to
be President, and about all the policies they were dealing with, and they
were all consistent.
HESS: We hope someday, many years in the future, that those letters will
be available at the Library.
KEYSERLING: I have some of them on the walls, but only the more discrete
HESS: Not the sensitive ones.
Mr. Truman's stand in civil rights is sometimes pointed out by people,
the so-called revisionists, as a stand of inconsistency. They would mention
the fact that he might make a very liberal pronouncement on setting up
the Committee on Civil Rights, but that the people that he would appoint
to run that committee were known to have views opposed to civil rights.
In other words, he would cut the ground out from under a movement before the
movement even had a chance to get underway. This has been pointed
out by some historians as an example of possible duplicity on Mr. Truman's
part. Do you have anything to say on that?
KEYSERLING: Well, in the first place, Mr. Truman's appointment of me
as Chairman of the Council, which he certainly did not have to do, and
which a lot of people didn't want him to do, wouldn't be an indication
in that direction. My real answer would have to be, although I was intensely
sympathetic to every aspect of the civil rights battle, I was never drawn
to it in any way. I don't recall ever having talked to Mr. Truman about
it, except when we were reading his messages I usually was called over
to sit around the table with them when they read his various messages
to the Congress, because there were so many things in them that I had
prepared and was interested in. But I had no dealings with Mr. Truman
or the White House on civil rights, and am, therefore, not in a position
to form any judgment, except to say as I have said, that this interpretation
would not be consistent with what I experienced; but I know nothing about it.
HESS: We have briefly touched on this this morning, you mentioned the
constantly expanding economy. I would like
to quote two paragraphs from
Cabell Phillips' book, page 163, that are part of Mr. Phillips' chapter
on the Wardman Park group. He says:
"These imperatives called for a liberal approach to domestic problems
of the nation. But this was not a liberalism focused on poverty and
inequality, as in the New Deal. Rather, it was a liberalism focused
on the creation and equitable distribution of abundance, which now loomed
as an attainable reality. What this group sought, in a word, was political
implementation of the theory of a constantly expanding economy."
"This was a daring concept in 1947. It collided squarely with
the orthodox conservative view that the rate and direction of economic
growth could be determined only in the marketplace, uncontaminated by
the hand of government."
When I saw that in the book, the words "constantly expanding economy"
I thought of you. You were one of the leading exponents of that particular
theory of economics, is that right?
KEYSERLING: Well, I was a voice in the wilderness for many years and
I think I ought to go into that in some detail, because it involves the
policies of the Truman administration. After all, there was a great deal
more to it than the Wardman Park group.
First let me say that I have an extremely high regard for Cabell Phillips.
He was the one who brought me together with the New York Times
on all these articles, and
I think he's a great person, and absolutely
sincere, and a true liberal. But this statement that you read is half
correct and half incorrect. The incorrect half of it is saying that we
were not interested in the abolition of poverty and the other New Deal
things, but were interested, in Cabell Phillips' own words, "in the more
equitable distribution of income." Now, goodness Almighty, you couldn't
have poverty in the United States with a truly more equitable distribution
of income. That's the whole meaning of it. Who would you more equitably
distribute the income to except the poor people. You wouldn't more equitably
distribute it to me. This is entirely antithetical not only to my whole
philosophy, but to what was attempted during the Truman administration:
Expansion of Social Security and the effort to get a comprehensive health
care; the effort to expand the minimum wage; the effort to maintain the
original vigor of the Wagner Act, the National Labor Relations Act; the
persistent effort to greatly expand the Public Housing Program. They were
all distributive. They were all for the people lower down, so there's
nothing to any idea to the contrary.
You know, people like gadgetry. I've said this before. They like to capsule
things and they like to say--like the historians who talk about a first
and a second
New Deal, as if there was a change in philosophy in two camps.
It wasn't that at all. Roosevelt switched to the second New Deal, which
switched from the measures like the Agricultural Adjustment Act and the
NRA, he switched to a campaign of pillorying business through the royalist
phraseology and through the death of the holding companies. This was a
political switch associated with his 1936 campaign. Then later on he switched
to "Mr. New Deal is dead; we now have Mr. Win the War." But these things
didn't represent philosophies and schools; they were more or less opportunistic
depending on who had his ear at the time.
But not only did we maintain, and not only did I always
maintain, I've always said that if I wrote on the left wall here the policies
most needed for economic growth, and on the right wall wrote the policies
most needed for distributive justice, they'd come to the same thing. I
have indicted the economists for never seeing this. Now, the Council of
Economic Advisers has said in recent reports under Democratic administrations,
we are neutral on the subject of income distribution. This is perfectly
preposterous. Every tax decision and every money decision and every farm
decision is not neutral on that subject. It's making decisions on that subject,
and to pretend that there is "neutrality" or a kind of scientific
objectivity in economics is ridiculous, and in national economic policy
it is not even a correct description of what is being done. But the bulk
of economists never have realized that the whole problem, the whole American
economic problem, is ultimately the improved distribution of income. If
we solve that, we solve all of the problems. That's all the inflationary
problem really is, because it doesn't matter if prices are going up through
programs which improve the distribution. If we had had the price inflation
that we have had in the last few years through policies which created
full employment and did justice to the old people, and cleared slums and
renewed our cities and cleared up polluted air and water, the same amount
of inflation purchased at that cost would be the best bargain you could
The criminal thing about the recent inflation is that it has been achieved
through programs which have rejected all of these policies, and achieved
through creating unemployment deliberately, and idle plant deliberately,
and sacrificing our priorities deliberately, and impounding billions of
dollars of funds for social purposes even after the Congress voted them.
So there's no such
dichotomy of that kind in my mind, and there was nothing
of that kind of dichotomy in what we people were recommending to Truman.
As a matter of fact, Truman understood the problem of income distribution
even better than he understood the problem of economic growth. It's a
more fundamental problem; it has a longer historic lineage, and it's more
part and parcel of what the fundamental cleavage between the Democratic
presidential party as such and the Republican presidential party has been
ever since the time of Woodrow Wilson or Andrew Jackson. This is what
it was all about. The phrase that was commonly used was, "Will we water
the economic tree at the top or at the bottom." Well, that's distribution.
Coming over to economic growth in particular, everybody talks about the
influence of Keynesian economics. The Keynesian economics is really a
static economics. It doesn't deal with economic growth at all. Furthermore,
it was developed at a time of worldwide depression. Even Ken Galbraith,
in an article in the New York Times a couple of years ago, when
he was talking about the influence of scan economics, mentioned me specifically
as the one who had introduced the fundamental new factor of the dynamics
of economic growth.
Now, as I say, I started this circa 1947, and there
are these two articles
in the New York Times on it, but I became more vitally interested
in it when we came to the time of the Korean war, because there was a
furious battle within the Truman administration as to how to handle that
war, partly under the influence of Mr. Bernie Baruch, who was really semi-senile
by that time, but who was regarded as a great man because he had made
money in Wall Street, and because he had done a good job for Wilson, thirty
odd years earlier, as Industrial Mobilizer during World War I. And I don't
know what part of that job was performance and what part was advertising,
because he was the greatest publicist that ever lived.
But be that as it may, Mr. Baruch, as of the time of the Korean war,
wanted to freeze everything. This was his first idea, "Freeze everything.
We haven't got enough to go around. Freeze everything." And there was
a tremendous drive in that direction on the part of others. Let us remember
that I'm talking about the period before the Chinese intervention, when
the war was really a moderate engagement.
I said, "First of all, we are told correctly, 'This isn't just an engagement;
this is a long, cold war. If we're going to have a long, cold war, we've
got to build a mobilization base. We've got to expand production
to support a defense burden of great duration and size, even while we
do not too heavily penalize the American consumer in the long run.’"
This talk about guns and butter is silly, because if you analyze it realistically,
you always have to have guns and butter. If by butter you mean civilian
supplies, and by guns you mean defense, you always have both; even during
World War II you had both. I said, "Aside from that, you are not going
to be able to maintain the support of the American people for an enduring
distant war in which they are not really involved, if you penalize them
too severely. When they read the casualty lists, if they are being excessively
penalized, not because this is essential to fight the war, but because
we are not calling forth what I called, 'The great non-secret weapon of
the economy: its ability to expand."'
So, we had that battle, and my side under my leadership completely won
that battle, and we undertook a great expansion program. In consequence
of that expansion program, while there was considerable inflation for
a short period of time, prices had stabilized before 1952 and they remained
stable for a considerable time thereafter because we had built the mobilization
base; and we could combine the support of the Korean engagement with the
growth of living standards at home. I don't know where
we would have been
by now if we had listened to the advice of those who had said that the
Korean engagement should have been financed entirely out of the existing
product, or out of the slow rate of growth; or the argument was that if
we did the opposite it would be inflationary. And they were saying that
inflation was a greater danger to us than Stalin, which was ridiculous.
We've had some more of that recently. So that was one great battle.
But that battle for economic growth was also related to the war itself.
I have become a critic of the way they conducted the Korean war, because
I regarded it as a demonstrative war, and what I meant by a demonstrative
war was: the greatest power on earth had attempted to demonstrate that
it was strong enough to effectively resist aggression. So I was a de
facto member of the Cabinet and a de facto member of the Security
Council, and every week we would be briefed by [Lieutenant General] Alfred
Gruenther of the Defense establishment.
Here we were: We had been told before the war that we didn't have to
worry about others having more manpower; we had the industrial capacity
and we could out-gun and out-fly anybody anywhere in the world. Well,
here we were. The opposition had more planes than we had, they had faster
planes and it wasn't because of the logistics,
because they were coming
from Russia, and they had to come just as far as for us to get them there.
It was because there was this tremendous resistance to really expanding
and really mobilizing.
I also got this through my participation in what were called the NSC
discussions, which again, was top secret then, but it can't be top secret
eighteen years later.
There was this tremendous resistance. You had a lot of it in the Government.
Charlie Wilson was a part of it, as Mobilizer; Bob Lovett was a part of
it from Brown Brothers-Harriman, who was first Assistant Secretary of
Defense, and then became Secretary of Defense; the man that Truman called,
"The greatest living American," George Marshall, was a part of it, because
strangely George Marshall got a lot of his thinking from business leadership,
just as Eisenhower did.
So I sat opposite George Marshall at a Cabinet meeting, when they were
talking about the cutbacks during the latter part of the war, the tiredness
came. George Marshall looked at me and he said, "Young man, you haven't
had the experience. I had the experience in World War II. Sometimes we
got the crates there [you know, the bodies of the planes] before the engines;
sometimes we got the engines there before the crates; this time we've got to
go slow, so we don't have that waste."
I said, "General, war is wasteful, and a fire engine is wasteful, but
you've got to get to the fire."
And Truman, in this instance, of course, could not understand or didn't
grasp that we were not talking about military strategy but about economics.
He couldn't understand a young man questioning the "greatest living American"
on how to fight a war, you see. He didn't say anything, but as frequently
happened he and Marshall and somebody went into his office after the meeting
was over and they affirmed the cutback. So, I had this battle all the
way through on the economic growth, both as a means of vigorously prosecuting
the war and as a means of preparing for the long run, and as a means of
maintaining domestic progress, which was certainly essential for that
kind of struggle.
Now, maybe we can shed a little more light on it if I carry it a little
further. Then you have the Eisenhower administration; then Kennedy came
in. Kennedy's entire campaign in 1960 was based on only two themes: One
was the economic growth theme of getting America moving again; and the
other was tight money and rising interest rates. Both of these had been
picked up lock, stock and barrel not only from my initial interest in
these matters when I
was with the Truman group, but after I came out of
the Government and founded the Conference on Economic Progress. I was
putting out these pamphlets all over the country on economic growth and
tight money and rising interest rates. Some people think it only happened
in the last two years. I had a pamphlet out on tight money in 1960, in
1957, and the growth thing every year.
So Kennedy picked up both of these things and he played them for "Fare
Thee Well." Unfortunately, after he got elected, he won by a very narrow
majority, so he construed his majority of only one half of one percent
to mean that he had to swing to the right. Now, he forgot, and I had occasion
to talk with him about it much later, that when you're elected President,
you're one hundred percent President; and if the election is close, then
the Congress is the balance wheel. Actually, the Democrats had done better
in Congress than he did. I told him, I said, "The real reason that you
won by only one half of one percent--it's no fault of yours--it's because
you are young and because you are a Catholic and other reasons. The liberal
Democratic tradition was stronger than you were, and it was proved by
the congressional elections." But he didn't see it that way.
So after he got elected and before he became President,
all over the country against the tight money policy, he announced that
he was going to reappoint J. Edgar Hoover and William McChesney Martin.
This I couldn't understand. I can understand political compromise, but
Woodrow Wilson or Franklin Roosevelt would never have put in charge of
the money power of the Government a man who is fundamentally antithetical
to their whole position and the whole tradition of their Party. Kennedy
looked at me--this was in '62, near Labor Day, that I was talking with
him over at the White House--he said, "Leon, you talk about my appointing
[Clarence Douglas] Dillon and this and that," he said, "you don't realize
that I only got elected by one half of one percent."
I said, "Mr. President, I suppose that if Dick Nixon had been elected
by one half of one percent, he would have appointed me Secretary of the
Treasury to please the liberals."
Well, he was a gentleman, he threw back his head and laughed and said,
"I see you've got a point there."
But nothing more came of it. Now, for two years after Kennedy took over,
'61 to '63, almost nothing was done to reactivate economic growth. They
had picayune little manpower programs and I testified on the Hill. I said,
"They're sending up a pygmy's program to do a giant's
job," which I state
mostly to indicate my point that during the Truman administration and
at other times there was a difference between being political in the sense
of "My Party, right or wrong," and being political in the sense of saying,
"Well, sure, I’m for my Party, and I want it to win, but you've got to
stand for what you believe in."
So, I said that they were sending up a pygmy to a giant's job and Kennedy
was very upset and the economists were very upset. It wasn't until '63,
when this had gone on and on, employment had gotten worse, that they proposed
a tax bill. Well, I opposed that. We all know now that it was the wrong
thing. They should have spent more money for the interest of the people.
They gave the tax reductions to the wrong people, and it produced growth
for a little while. But by '66 we were headed toward another recession,
and then the New Frontier economists were saved by the bell of the expanding
Now, as we've gone on into later years, it's the same old thing again
now in 1971. We're in another stagnation since '66, another recession.
And the other very important thing that developed during the Truman administration
was dissent from the idea that a higher rate of economic growth and a
lower level of unemployment is more inflationary. This is
still the stock
and trade of the economists, but it's been proved wrong over and over
again. I've got about six pamphlets on it. It was mostly recently proved
wrong from '66 to '71 as the more the economy became slack, and the more
unemployment we had, the more inflation we had. They said it's a time
lag, but you can't have a time lag for four years. If it's supply and
demand it would operate right away. And there were very definite reasons
So I am equally concerned about the problem of economic growth as I was
then. I mean, we have a great Nation; we've got international burdens;
we've got domestic burdens; we're arguing against fulfilling out international
responsibilities on the grounds that it doesn't permit us to clear slums;
and we're arguing against clearing slums on the ground that we're in an
international situation. So we fall down on both.
HESS: All right, just a couple of more questions about the Wardman Park
group. Would you say that you were the principal economic theorist of
the Wardman Park group?
KEYSERLING: That isn't claiming very much.
HESS: That isn't claiming very much? How come?
KEYSERLING: Well, I think that would be a correct statement. I was the
President's economic adviser. I was the person in the group operating
in this field.
HESS: Did you have any difficulty of convincing some of the other members
to go along with some of your views sometimes? You mentioned that they
were all good liberals, but were there times when they did not, perhaps,
understand your economic theories?
KEYSERLING: I think we were amazingly harmonious.
HESS: You mentioned that you wrote the economic portions of the 1948
platform. Did you discuss your writing of that platform with this group?
KEYSERLING: Well, I had to, because they were the people--with this
HESS: With this group?
KEYSERLING: No, I don't believe it came before this group. After all,
I worked with Clifford and Murphy all the time and David Bell. This was
apart from--I may not have mentioned that before. Presidential messages
did not come before this group. The help I gave to presidential messages
was an entirely separate unofficial capacity, working with
Murphy, and then I'd get invited over...
HESS: ...directly in the White House.
KEYSERLING: ...that's right, and then I'd get invited over to sit at
the table where these messages were gone over. So you see, it is possible
in ways to overemphasize the importance of this group. It was very important,
but a lot was going on all the time as a part of the general processes
of the Presidency.
HESS: Perhaps we could discuss for a few minutes the writing of presidential
messages, working in the White House, and just how those messages are
written. We've mentioned the 1948 platform, and the economic section thereof,
did you write that with the advice of Charles Murphy or any of the people
in the White House?
KEYSERLING: Well, Clifford was still there then. He didn't get out until
HESS: Let's see, Murphy was Administrative Assistant.
KEYSERLING: Yes, but he was sort of an assistant general counsel.
HESS: Just how did you go about writing the economic section?
similar to ones that had appeared in previous platforms? You mentioned
that you had written those.
KEYSERLING: There was more emphasis on economic growth, much more. How
I went about it, the White House never surrendered control of the writing
of the President's messages just as Wagner never surrendered control except
in the case of the Social Security Bill, of the writing of the legislation
that he introduced. Clifford was in charge. He would assign out--first
of all, he would ask the various Government departments for memoranda;
and of course, he turned heavily to me. He would usually send David Bell
or David Stowe or David Lloyd. You see, those were three very good liberals
in the White House who had a lot of influence. David Stowe, David Bell--David
Bell is now a vice president of the Ford Foundation. David Lloyd died.
But they were all over there as anonymous assistants. They helped a great
Well, they would come over or I would be asked by Clifford on the phone,
and I would draft things and I would send them over; then I'd go over
and talk to them about it. I was usually invited in when they were considering
the whole draft.
I'll tell you an amusing story: When Truman was in
trouble right after
the Republican victory, there was a Party dinner--I don't know whether
it was called Jefferson--Jackson or Jackson that year--Clifford said,
"We've really got to have a talk to give the Boss a lift." In this case
I was asked to write it. I wrote a talk and it had a refrain in it every
page or so, it would repeat a refrain--I don't even remember what the
refrain was. Clifford said to me, "This is great; this really has something
Truman gets up at the meeting, and this was before he got his elocution
lessons. Well, he read the refrain the first time; every other time he
skipped it. Clifford and I were sitting at the same table and we got glummer
and glummer because the whole thing fell flat without the refrain. So
I said to Clifford later, I said, "Clark, why did the President do that?"
He said, "Well, when the President came to it the second time, he thought
it was a typographical error."
HESS: He saw that refrain appearing too many times?
In the papers of Samuel I. Rosenman at the Library there is an unsigned
memorandum, dated June 29, 1948, entitled "Should the President call Congress
back." I have a copy of that memo here this morning. After looking it
over could you tell me if you know anything about its
what is your opinion of the general importance of calling Congress back
into that special session to Mr. Truman's victory the following November?
KEYSERLING: I do not recall this specific memo, and my guess would
be that it was prepared at the White House--perhaps by Clifford. However,
the memo in substance is so close to the "political" phases of the agreements
reached by the Ewing group that I am confident that it may be fairly said
that the memo derived from the deliberations of that group.
HESS: Well, before we move too far on from the Wardman Park group, just
how would you evaluate its impact on the events of 1948? Just how important
was it in the President's victory that year, 1948?
KEYSERLING: Well, first of all, you're comparing something you know about
with something you don't know about, because nobody can know if there
hadn't been a Wardman Park group what part of this would have happened
anyway because of my natural contacts with Truman and Clifford and the
White House people, and so forth, and so on. But I think it was very important.
I think it was very important.
HESS: We've mentioned some of the speeches, but did you
help write any
of the speeches that Mr. Truman gave during the campaign trips in '48?
KEYSERLING: I did not go on the campaign trips. And most of the speeches
were written on the trains. I was in contact with them and I helped with
some of them. Material I had written was often used in some of them.
HESS: Just what form would your help take?
KEYSERLING: It would take two forms: One form would be facts; the other
form would be drafts of passages.
HESS: While we've mentioned several people who worked in the White House,
David Stowe, David Lloyd and Mr. Bell, let's mention just a few of the
other people who worked in the White House at that time. Did you ever
have occasion to work with Donald Dawson, who was Administrative Assistant?
HESS: George Elsey?
KEYSERLING: Oh, yes. George Elsey I would put in the same classification
as Bell and Stowe and Lloyd. In fact, George Elsey frequently was the
one who came over to my office to bring me things or to take things or
to pick things up.
HESS: He worked quite closely with Clark Clifford through the years,
did he not?
KEYSERLING: Yes. Really, Elsey and the three Davids, Stowe, Lloyd and
Bell, were de facto, sort of Clifford staff people, really.
HESS: Even though they held the title of Administrative Assistant, they
did more or less work for Clifford?
KEYSERLING: They worked for the President, but I feel that Clifford was
in many ways their leader, and that, to a degree, they carried out his
HESS: We've mentioned Mr. Murphy and we've mentioned Mr. Clifford and
their different styles.
KEYSERLING: Now, in some ways, David Bell and David Lloyd were more "idea
men," in a conventional sense, than Mr. Clifford was. Clifford was, without
equal, the synthesizer and operator.
HESS: Presenter of ideas?
HESS: That in itself is a real talent, isn't it?
KEYSERLING: Oh, of course. Nor would I deny that he was an "idea man," too.
HESS: In mentioning Mr. Murphy, did he seem to be less of a presenter
of other people's ideas rather than an idea man himself? Was he more
of an idea man?
KEYSERLING: Well, none of these people were non-idea men. It's all relative.
Everything in life is a matter of degree.
Maybe the much hackneyed and misused word, "intellectual" explains it.
I would say David Lloyd and David Bell fell more in the classification
of "intellectuals" than the other two. They fell more in the classification
of operators, although this does not mean that they were of lower
HESS: Did those two men operate the office of Special Counsel in any
noticeably different manner? I suppose they did.
KEYSERLING: Only in the sense that Clifford was somewhat more aggressive
and more daring, in my view.
HESS: Did you have any occasion to work with any members of the press
office? The two men there for the longest periods of time were Charles
Ross first, and after he died, Joseph Short?
KEYSERLING: I knew them both well. I had no basis for working with them.
HESS: Did you ever work with General Harry Vaughan, who was Military Aide?
HESS: We mentioned Dr. John Steelman. Did you have occasion to work with
KEYSERLING: Oh, yes, because in the first place, Steelman always sat
in at all of the meetings around the President's table when we went over
messages or when we went over the economic reports. Technically, Steelman
was on the economic side in the White House. So technically, originally,
Steelman was the White House man responsible for the liaison to the President
on the economic reports.
I had an experience with Steelman in that connection. When the Council
prepared its first economic report, which was for January 1947, we sent
it over to the White House, and Steelman, or Steelman and his boys, completely
rewrote it and sent it back to us. This I regarded as entirely improper,
quite aside from the fact that they did a job inferior to ours. I thought
it was a basic issue.
I was only vice chairman of the Council then. Nourse
was inclined not
to fight on it, but we did make a fight on it, though a pleasant one.
We rewrote it again and brought it back to what we had in mind. But this
was the only time that Steelman ever attempted that.
Steelman did try to set up a rival publication in the form of some kind
of mobilization reports that he got out, I think, four times a year, but
he was never a rival, and he was never an effective fly in our ointment.
And he never challenged us openly. Steelman was very suave, and he wanted
to be on everybody's side, but I should say that after this first experience,
really, certainly by '48, and certainly during the years that I was Chairman,
I really operated and the President really operated and the economic reports
really operated in the Clifford-Murphy-Bell, and so forth, context, and
not in the Steelman context at all; although Steelman always sat in.
Steelman was also the President's man on the recruitment of economists
and I had had contact with Steelman when I was first appointed. He was
the one who called me up and asked me to come over and see him, and told
me that the President was going to appoint me, the impression created
being that I owed my job to John Steelman. So I did have a contact with
him in that way. He also told me that he was the one who persuaded the
President to appoint
me vice-chairman at the start. I do not want to appear
to denigrate John Steelman. He was a terrific worker, devoted to Truman,
and always got along with him very well.
Then when there were vacancies on the Council when Nourse left and various
stories grew up about how the President had offered the job to other people,
this is categorically false. Truman didn't break his word; Truman assured
me he was going to appoint me as soon as Nourse left, and the other succeeded
in delaying it, but I had that assurance from Truman from the beginning.
It was never offered to anybody else. Steelman got up lists of other people.
He had other candidates.
HESS: It was Steelman's list and not the President's list, is
KEYSERLING: Well, I don't know whose lists you'd call them; Steelman
made up the lists, but I knew categorically that the President offered
me the job right away, and in fact, the President said spontaneously when
he got Nourse's letter of resignation, because Clifford told me this,
he said, "Now, we can appoint Leon." Then these other forces came in,
and they did succeed in delaying it, but there was never any offer to
anybody else. In fact, as it progressed, even Steelman assigned me the
task of going
and talking to people about who the third member might be.
In that connection I went and visited the distinguished economist, John
Maurice Clark in New York, but he wasn't interested. Then it was really
I and my colleague, John Clark, who recommended Roy Blough for the third
job, and Roy Blough got the third job.
HESS: While we're on this point, I'd like to read for the record just
a paragraph from Mr. Nourse's book where he refers to this particular
"On September the 26th, I had another luncheon conference with
Steelman in which he alluded to my having 'stayed longer than I originally
committed myself to the President,' and that they 'could not expect
me to go on indefinitely.' This seemed to have been the quality of a
face-saving formula inasmuch as no period had been mentioned at the
time I accepted the post. The White House staff had now assembled a
list of names of prominent economists who had been mentioned in connection
with various government posts. It included a number of the most eminent
men in the profession. I added three or four names, and discussed also
the possibility raised by Steelman of promoting one of the outstanding
members of the Council's staff. This seemed impracticable, and I was
skeptical also that any of the thirteen on Steelman's list who clearly
were competent would be willing to accept under all the circumstances.
The post was in fact offered to quite a number of them and declined--sometimes
pretty brusquely. Thus when I left the Council office on November 1,
no appointment had been made and the vice-chairman automatically became
So he thought that the post had been offered to a number of people.
KEYSERLING: Well, he's absolutely wrong about that. First of all, Nourse
was in an unfortunate frame of mind when he wrote that book. He says many
things about Truman that are unfair. I think he's sobered down since.
In any event, we've become very friendly. I had him over to the house
to dinner just a few weeks ago.
Now, he may have gotten the impression--you know, Steelman was calling
up people and talking with them, and he may even have asked them whether
they'd be willing to accept. I mean, how can anybody really piece that
out. Truman promised me the job as soon as Nourse resigned and the fact
is that I was appointed despite all this speculation. Furthermore,
if Truman had wanted to appoint someone else, it's a big country. There
may have been some who would have been reluctant, but he could have found
somebody. Further still, people like Snyder and Sawyer supported me for
the job, despite our differences on some policies. Before Truman actually
named me as chairman, he checked it at a Cabinet meeting, and all were
HESS: And a while ago when we were mentioning the liberal or conservative
stand of some of the members, did you put John Steelman over with the
HESS: In Mr. Nourse's book he mentions a time in 1948 when Steelman was
delegated the task of settling a railroad strike: "Also, Steelman set
up a special committee in his office under Robert Turner to study the
need of further economic controls." It sounded in his book as if Mr. Nourse
was quite apprehensive about Steelman setting up such a committee.
KEYSERLING: This might be.
HESS: And in sort of competition, really, with the Council of Economic
Advisers. Were there other times that Steelman set up committees in the
White House for economic control? Were there times that it seemed like
he was in competition, infringing on matters that were really under your
KEYSERLING: I never really had trouble with Steelman. As a matter of
fact, by the time I came in as Chairman, Steelman had been so completely
licked by Clifford that it was an academic issue. Steelman by that time
was helping around the White House mainly with administrative matters.
The President wasn't listening very much to him on policy. Now, settling
a railroad strike is a different kind of thing, because Steelman had been
the top conciliator
over in the Department of Labor. This was his special
field. He did get into these strike issues. The Council never got into
them at all, and I'm sure there was considerable reliance placed on him
in that connection, but he was never a rival to me; he was never a real
problem to me; and he was never a real contender with me.
HESS: Did you mention that there was a certain amount of rivalry between
Clark Clifford and Dr. Steelman?
KEYSERLING: Oh, that's well known.
HESS: Do you think Mr. Clifford came out the winner in that?
KEYSERLING: That's well known.
HESS: All right, now you have discussed the selection of Dr. Nourse and
yourself to the Council, but one question on that that entered my mind
when I saw how these selections were made, you and Mr. Clark were selected
before Dr. Nourse was selected?
KEYSERLING: We were announced before Dr. Nourse.
HESS: You were announced?
KEYSERLING: Yes. We were announced by rumor. In other words, the story
appeared in the Washington Post with our
pictures that we were
going to be appointed. The actual appointments were made simultaneously.
HESS: That's what I mean, yes, the announcements were made. But in a
case like this, isn't it, or is it, the standard thing to do, is to appoint
the chairman first, and to get his, not necessarily approval, but recommendation
of who he thinks he would be good in the other positions, rather than
appoint the members first?
KEYSERLING: Well, first of all, let's clarify what happened, and then
let's talk about what the standard thing is, and then let's talk about
what the right thing is.
First of all as to what happened in this instance, there was a story
in the Washington Post that Clark and I were going to be appointed.
The formal announcements, the appointments by the President, were made
simultaneously. I have no way of knowing or believing that Nourse had
not been approached and accepted before this story appeared in the Washington
Post. I just don't know. But if in fact he accepted after that, it
would show that his avowed dissatisfaction with us as selections grew
out of his subsequent malcontent and didn't arise initially. But I don't
know, it's all speculation with me.
I know that even in his book he says that at the time
of the appointments
he thought it was a pretty well-rounded Council. His troubles arose later,
and actually, as I said last time, they did not arise out of the economic
issues, they arose out of the question of whether we should represent
the President on the Hill.
HESS: You mentioned that there were only, I believe you said one or two,
basic economic points where you disagreed. Is that right?
HESS: What were those? What were your basic economic disagreements with
KEYSERLING: Well, one of them was at the time shortly before the Korean
war when Louie Johnson as Secretary of Defense was trying to make a great
record of economy in national defense. I think at that time the Defense
budget was something like twelve or thirteen billion dollars. Truman was
considering raising it by a billion dollars or two. Clark and I took the
position, first, that we could not be experts on whether the Defense budget
should be twelve billion dollars or thirteen or fourteen; that all we
could tell the President was that if the Defense budget were fifty or
seventy-five or a hundred, there could come
a point where it could jeopardize
the economy. Even then, you'd have to consider the competing objectives.
But that as between twelve, thirteen or fourteen an economist was doing
a disservice if he tried to use economic analysis to prove that the American
economy could not stand a fourteen billion dollar defense budget. In that
sense we said to the President, "We assure you as economists that this
will not place a strain upon the American economy. Nourse took the opposite
position. In fact, Nourse was working at that time with either--whoever
the Director of the Budget was, it may have been Frank Pace--no, I don't
think it was Frank Pace, I think it was the man who became the Space Administrator.
HESS: James Webb.
KEYSERLING: James Webb, all right. Well, Nourse and James Webb were on
the economy binge along with Louie Johnson. In fact, Nourse, when he first
entertained the other two members of the Council for dinner at his house,
he also had James Webb there. They formed a clique. And I was working
against it in the sense that I didn't feel that we would be doing anything
but misleading the country if we told him that if he thought from the
viewpoint of national defense we needed a military defense budget one
or two billion dollars higher, that we had any right to frighten him as
economists on the ground that the country couldn't afford it. This was
the first disagreement. I believe we wrote separate memos to the President
on that, Clark and I writing one and Nourse writing the other.
The second instance was entirely technical, picayune; it was much later.
It was some difference in construction as to the interpretation of the
economic outlook. But aside from that, it was amazing the extent to which
Nourse and Clark and I agreed.
After all, we did sign our names to numerous Council reports. We never
proposed sending memoranda in connection with the President's reports.
We put out, even while Nourse was there, in '47 and '48 and '49, six Council
reports or Midyear reports. We put out separate Council publications at
the end of each year, beginning in 1946, to which we all signed our names.
So there was enormous agreement.
The disagreement was on an issue which had nothing to do with economics,
which I covered fully last time. It was the issue of whether the President's
economists were a part of the President's administration, whether they
should be trustee for his reports on the Hill, and I reviewed that all
fully last time, and that's water over the dam because every Chairman
after Burns has done this;
the Democratic chairman and the Republican;
nobody could support the President more than [Paul W.] McCracken, under
Nixon, and so forth and so on. So the realities of the situation have
prevailed, just as I foresaw they must.
HESS: Let's go back for just a few moments and discuss the reduction
of the armed forces, the cutback in the budget that particular year when
the armed forces were reduced, and then when the Korean episode hit we
were inadequately prepared. Do you recall what Mr. Truman's view was on
this? Some historians say that the fault lies with Louis Johnson in the
reduction of the armed forces.
KEYSERLING: No, you can't do that under my philosophy. The President
makes the decision. The President made the decision. If there was a mistake,
it was his in the final analysis.
HESS: Was he after a balanced budget at that time?
KEYSERLING: Truman was very conservative on a balanced budget. You can
go and look at those two letters hanging on my wall. Much later on, John
Kennedy called me over, because when John Kennedy proposed his tax reductions,
Truman was taking one of his walks in New York and the press were following
him and he said that you couldn't spend money that you
didn't have, and
so forth. So Kennedy called me over and said, "Well you try to get Truman
to change his position?"
I said, "I'm not going to be able to succeed, Mr. President." This was
before the details of the tax reduction, some kind of tax reduction, I
said, "I'll contact the President; the answer is out on my wall.
The President said, "Leon, you are the greatest persuader I ever knew,
but nobody can ever convince me that the Government can spend a dollar
that its not got. I'm just a country boy..." That's right out there on
the wall. But my intervention accomplished our purpose because he wrote,
"In order not to embarrass the President or you, I will not make any further
reference to it." It's right out there on the wall.
HESS: Some historians have given Louis Johnson the blame for the reduction
in that particular budget; other people mention James Webb, the Director
of the Budget. I just wanted to get your views.
KEYSERLING: Well, they share the blame. I mean, they share a large part
of the blame. After all, saying that the President can't avoid it doesn't
mean that they're not to blame, too. If I gave the President wrong economic
advice and he took it, I'm to blame. All I'm saying is,
in the final analysis,
this was Truman's decision.
HESS: After the Korean invasion when we needed to build our forces up,
we had the Defense Production Act of 1950, I think we have alluded to
some of these events this morning, but did you take an active role in
seeing that more money could be allotted for building up the armed forces
after the Korean invasion?
KEYSERLING: Well, after the Korean invasion, and after the Chinese intervention
there wasn't any problem like that in the early stages. The issue was
a different one. The issue was whether we should obtain the resources
for the war by drastic and extreme cutbacks on the domestic economy, or
whether we should obtain them by expanding the industrial base. And that
was a big fight.
HESS: This was before the Chinese came in, is that right?
KEYSERLING: Even after the Chinese came in, because after all the Chinese
did come in within a few months. This fight continued, and we won it.
One of the big influences in winning it was a Council report that I wrote,
not a report of the Council that went to the Hill with the President's
economic report, but a separate on the Council, which I wrote after Dr.
Nourse left. December 1950, that is a
few months after the start of the Korean war.
HESS: "The Economics of National Defense."
KEYSERLING: Yes. That's where I set forth my whole position on expanding
the mobilization base in production most fully.
HESS: This is the "Fifth Annual Report on the President from the Council
of Economic advisers, December 1950." It was very widely acclaimed and
reprinted in one or more textbooks on mobilization.
KEYSERLING: I wrote that.
HESS: We have a copy for the Library.
KEYSERLING: Now, another issue that came up at that time, on which my
position was not fully understood and is sometimes distorted, and it's
not completely understood in fashion with... In this battle between a
freeze of everything and organizing production, you see, because I was
mostly for the organization of production and allocations and all that,
planning, growth. So the issue came up immediately whether we should start
with the freeze. Some people were for that; I was against it. But not
because I was against controls. I was against it as a delusory solution
taken by itself, and that it would soon get in such a turmoil
on the intricacies
of controls that the basic planning and organization of the defense effort
on the positive side should come first and that the controls should be
allied to that. We won that battle also. Truman delayed on the imposition
of controls. Some say he delayed too long. Well, that's arguable. But
then later on, when the controls were put on, I was on a battle on the
other side being for stronger controls than the controllers, because they
wanted to roll forward as well as to roll back, and I didn't want that,
and they won the battle.
HESS: The next topic that I'd like to take up is the problem of staffing
the Council. Do you have a few minutes more?
KEYSERLING: Sure. I want to take up the canard story that at the end
of my tenure on the Council the Congress cut off our funds because of
the unpopularity of the Council on the Hill. That is a one hundred percent
lie. In fact, what happened was an extraordinary and unique support of
the Council. To illustrate that story, I've got to go back a little bit.
The first chairman of the Joint Economic Committee after I became Chairman
of the Council was Robert A. Taft, because this was just after the '46
elections. I had served, as I believe I indicated last time, by Taft's
choice, as his sole adviser on housing for many, many years. We were very
close. In fact, just before I was put on the Council, I was a candidate
for appointment as head of the Public Housing Agency, and Taft wrote a
letter warmly endorsing me for that job.
HESS: Here's a copy of a letter from Mr. Taft in 1946. [See Appendicies]
KEYSERLING: Oh, yes, oh, yes. Well, Taft told me at the time that he
had never recommended anybody for a top appointment in a Democratic administration,
because he didn't believe that as a leading Republican Senator he should
do that. He said, "Of course, if you have a tariff commission which has
Republican members, I would recommend a Republican member to the President."
He said, "Of course, you have a district judge being appointed in my district,
I will recommend somebody if it's turn for a Republican to be appointed,
but I have never recommended a Democrat or anybody to a top position,
as the head of an agency, in a Democratic administration." He said, "I'm
making an exception in your case."
When the Council was appointed, Taft immediately called me up and said
that he hoped we would have very friendly relations, and that of course,
he expected us to be testifying before the Joint Economic Committee. He said
we could do it in open sessions or closed sessions, as we preferred.
Very shortly thereafter, Nourse got in touch with him and said that he
didn't want to appear; that he didn't think the Council should appear,
and Taft, like the President, finessed the issue. I think in Taft's case,
properly, he said, "I'm not going to interfere. Let the President decide
what he wants you to do." So we didn't appear. I say this merely as an
indication of my friendliness with a number of the Republicans.
Then later on when I started appearing in '48, and incidentally, Clark
and I, although we were the majority, and this should go by majority rule,
because on a tripartite group, the chairman is first among equals. You
take a vote if there's a difference, the majority should rule. And although
Nourse didn't abide by our vote, we never said anything about it publicly,
and we never appeared. We went along with him until mid-1948. And even
though we went along with him, he tried to make an issue of it by going
around the country saying that we wanted to appear, and that this was
"political." So, finally, in '48 it became so impossible that we did appear,
first before the Banking and Currency Committee. Well, thereafter I appeared,
and of course I appeared as Chairman.
I always had a wonderful relationship with Bob Taft and the other Republican
members, and likewise with the Democratic members, on the Joint Economic
Committee. Never once in all the time I was Chairman, did the Congress
cut back the appropriation of the Council by a single penny. Never once
in the reports of the Joint Economic Committee, either the Democratic
members or the Republican members, was there any criticism of the Council.
Naturally, they divided. The Republican members didn't agree with all
of the President's recommendations. There was never any criticism of the
Council. We had a perfect harmonious relationship.
In late 1952, when our budget was up for the next fiscal year, it was
unanimously approved by the House Appropriations Subcommittee, when it
got out on the House floor late one evening, there was an economy drive,
and a couple of people, one was a Congressman [John] Phillips from California,
who had always been opposed to the Council, got up on the floor and proposed
that our budget be cut by one third. But this was as part of action which
did the same thing for the budget of the Labor Department, the budget
for the Bureau of Labor Statistics, and many others. There was no voice
vote, and this passed in the evening when there were not many members
I then went up on the Hill, and I replied mostly on the Republican Senators,
specifically [Leverett] Saltonstall, but also on Senator Burnet Maybank
of South Carolina, who was the Democratic chairman of the Appropriations
Subcommittee dealing with the Council. I also went to see people in the
House: Albert Thomas, who was head of the House subcommittee, and Senator
O'Mahoney, and Senator Taft, and some other Republicans besides those
two. I don't remember who. O'Mahoney said this--and incidentally, as proof
of how the Council stood on the Hill, no relief was mentioned at that
particular time to the other agencies who had been cut. O'Mahoney said
this, he said, "Look, why make a battle of this? We will change the provisions
of the appropriation act so that you can spend the money in the first
three quarters of the fiscal year, i.e. through March 1953, so you won't
have to cut anybody; we won't have any fight; and by March there'll be
a new President, because Truman has already said he isn't going to run.
You won't be there, and the new President will decide what budget he wants
for the Council."
So, Eisenhower came in early in January. The budget for the Council ran
through March 1953. Now, nobody in his right mind can conceive that a
Congress that wanted to injure me would put in an effective amendment that
didn't require me to furlough anybody; and that had to take effect
two months after I most certainly wouldn't be there, even if there were
a new Democratic President. But Eisenhower in January--he had three months
until the end of March on the Council, because the budget ran until the
end of March instead of the end of June--didn't want a Council; Sherman
Adams didn't want a Council. There was conflicting advice; there was confusion.
The member on the Hill got different advice, and the man who persuaded
Eisenhower to continue the Council was again Robert A. Taft. In the meantime,
Eisenhower had taken Burns to the White House; the whole thing was snaffled
up. Then finally Eisenhower decided he wanted a Council, and they got
their money. This episode, partly through lack of knowledge, and partly
through deliberate design, was transmuted into the idea that the Congress
had been operating against Keyserling by taking action that would take
effect two months after I had left. Burns took advantage of that by firing
practically every member of the staff who had held over, even though--this
was a despicable thing--even though none of those people had been appointed
by me politically; I didn't know whether they were Republicans or Democrats.
Some of them were Republicans, and others of them that he had fired had
been favorite employees of his in the Bureau of Economic Research, including Walter
Salant who now works for Brookings. So they took that excuse to
fire all of these people, so that they could put their "friends" in on
a purely political basis.
HESS: What were the problems of staffing when you first started operation?
KEYSERLING: There were no large problems of staffing. We got a very excellent
staff. In fact, as another indication of the unjustification of some of
Nourse's later discontents, we relied very heavily on him for the staffing,
because as a professional economist, who was the head of Brookings and
so forth, he knew a lot of the people. Most of the people who came in
were on his original recommendation. So he got an excellent staff. We
got Paul Homans who had been the managing editor of the American Economic
Review; we got Walter Salant who was a very high-standing economist;
we got Fred [Frederick] Waugh, who had been an agricultural economist
with the Department of Agriculture; we got, at my suggestion, Gerhard
Colm, who was the outstanding one of the whole lot and had been a top
economist in the Bureau of the Budget, and who much later became the chief
economist for the National Planning Association; and a variety of others.
It was a very high-class staff. We retained longer tenure on the average
than has been retained since.
I think one of the worst things that has happened recently, both among
the Council members and among the staff, is the frequent rotation. They
seem to think that they come in and they burnish their reputation a little
bit, then they go out and capitalize.
Now, I could never have conceived as Chairman of the Council (I was voted
out), I could never have conceived of leaving that job voluntarily to
go somewhere else, because that was my feeling about the importance and
challenge that the job offered. I could never understand these fellows
that would come in to be Chairman of the Council for two years and then
run away to somewhere else.
HESS: And Bertram M. Gross was Executive Secretary.
KEYSERLING: He was Executive Secretary, and he was the man whom I had
placed with Senator [James Edward] Murray to work up a full employment
bill, and he had been working for me in housing before that.
HESS: So he was fully conversant with the ins and outs of the Council
of Economic Advisers?
KEYSERLING: Very much so. We had an excellent staff.
HESS: Just a few names that I had jotted down: Benjamin Caplan?
KEYSERLING: Benjamin Caplan was on our staff, a very good man.
HESS: John C. Davis?
HESS: Joseph Fisher?
KEYSERLING: Right. Joseph Fisher is now the head of the--to show you
the caliber of the staff--Joseph Fisher is now head of Resources of the
Future. He was a young man then who had just come in.
I brought in John C. Lewis, I think it was his first job. I thought so
well of him--he was recommended by Alvin Hansen--I thought so well of
him that after a year I made him my special assistant and built a little
office for him outside of mine. John C. Lewis later was the head of our
Economic Mission in India. He was appointed to the Kennedy Council, and
he is now the head of the Woodrow Wilson School of Graduate Administration
HESS: John P.?
KEYSERLING: John P. Lewis is correct. I thought that "C" didn't sound
HESS: I flipped my list over and found his name.
KEYSERLING: Burns retained only two of the entire staff that was left
there. One was a man by the name of David Lusher who has since died, who
came in, as I recall, it was in the last few months of my tenure, and
a lady by the name of Frances James, who was really not an economist,
and did our statistical and chart work, and she is still there.
HESS: I have a lot more, but it's almost noon. Shall we shut it off?
KEYSERLING: Let me cover one thing and then we can pick up again some
other time, which I don't believe I covered. Did I cover the matter of
who selected the members of the Council? You raised the question a while
ago today about whether the general custom wasn't for the President to
appoint the chairman, and then let him choose the others. Let me cover
it now, because I'm not sure I covered it before.
I think that Truman was the only one who picked the Council in the right
way. He picked them all. Regardless of the personalities, regardless of
whether Nourse, or Keyserling or Clark were the right people, he had a
real concept of what the Council was, what kind of people you should have.
Look what he did: He picked one man who was, what they call a "professional
economist," whatever that
means. I don't think it means anything, but
anyhow... Nourse had been president of the American Economics Association
and he was head of the Economic Institute at Brookings, that was one;
he picked me who had had more experience than anybody in the actual development
and operation of Government programs dealing with the economy, which is
what the Council was all about, that's two; then he picked John D. Clark.
John D. Clark had started out as a lawyer in Wyoming; he had been a member
of the Wyoming legislature; he had then gone into business and become
vice president of Standard Oil of Indiana; he was once cited by James
W. Girard, our former Ambassador to Germany, as one of the twenty wealthiest
men in America; then in 1929, John D. Clark, before the crash, got out
of all of his business interests, moved his family to Johns Hopkins, took
a Ph.D. there in economics, then became the dean of the Business School
of the University of Nebraska.
Now these are the three men Truman appointed. That's a balanced Council.
It's never been that way since. In effect, the Council hasn't been appointed
by the President; the Council has been chosen by the economists, and usually
When Burns left he put in his man Saulnier, who had
been working for
him, and who was his colleague at Columbia; when Heller left he put in
his man Ackley; when Ackley left he put in his colleague Okun, and McCracken
was brought back (he had been on the Council before). Further, it has
been left to the Chairman of the Council in practical effect, although
the President has to send up the names, to pick the other two members,
which is wrong for two reasons: First, it makes it too inbred; and second,
it means that there is really only one member. You can argue that the
Council should be a one-man body. Then let it be a one-man body. I think
there are advantages in a three-man Council, provided there are really
three men. I think it's the right kind of setup for that kind of organization.
It is as if the chairman of the Federal Reserve Board picked the other
six members. So, it's utterly wrong.
Second, there is nothing more mistaken than the idea that a purely academic
background provides the best kind of training for being a member of the
Council. This is not because of the distinction between practical and
academic. The academic teaching of economics and the academic study of
economics has very, very little to do with the real world of economics,
and you can even see it by reading Paul Samuelson's textbook. It just has
nothing to do with it.
HESS: Why has it become so divorced from real life?
KEYSERLING: Well, it's a long process. I was teaching economics as an
instructor at Columbia for a year or two. One of the reasons I left there--I
might have come into the New Deal anyway--was that I saw the way it was,
and I was working with Tugwell, and he was different. He wrote a textbook;
in fact, I wrote the last edition for him, although my name never got
on it, which he called American Economic Life and the Means of its
Improvement, which is the real way to teach economics, and it was
used at Columbia. But even the graduate economists at Columbia looked
upon Tugwell as sort of a non-economist, because he wanted to train citizens
for the problems of economic life and not train them into formalistic
theorems, non-empirical in nature, which really have nothing to do with
HESS: Shall we take up here next time?
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