Leon H. Keyserling Oral History Interview, May 10, 1971

Notice
This is a transcript of a tape-recorded interview conducted for the Harry S. Truman Library. A draft of this transcript was edited by the interviewee but only minor emendations were made; therefore, the reader should remember that this is essentially a transcript of the spoken, rather than the written word.

Numbers appearing in square brackets (ex. [45]) within the transcript indicate the pagination in the original, hardcopy version of the oral history interview.

RESTRICTIONS
This oral history transcript may be read, quoted from, cited, and reproduced for purposes of research. It may not be published in full except by permission of the Harry S. Truman Library.

Opened January, 1975
Harry S. Truman Library
Independence, Missouri

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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 it operated?

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

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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 history books.

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)

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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

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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

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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

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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 veto it.

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 were justified.

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

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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

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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 Legislative Counsel's

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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

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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

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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 side.

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

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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

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refrain.

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

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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

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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

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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 forces working.

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.

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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 fellows over."

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 the Boss."

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 of that.

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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

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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

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and 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 the choosing.

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 than Chapman.

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?

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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 met."

I would say that if he was confused he was the

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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 ones.

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

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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

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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

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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

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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,

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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 ever drive.

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

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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

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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

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enough 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

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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,

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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

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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

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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,

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after crusading 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

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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 Vietnam war.

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

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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 for it.

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?

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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 group?

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

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Clifford and 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 after...

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?

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Was it 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 deal.

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

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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 in it."

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

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preparation. Also what is your opinion of the general importance of calling Congress back into that special session to Mr. Truman's victory the following November? (See Appendicies)

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

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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?

KEYSERLING: No.

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.

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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 instructions.

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?

KEYSERLING: Yes.

HESS: That in itself is a real talent, isn't it?

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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 intellectual caliber.

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?

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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?

KEYSERLING: No.

HESS: We mentioned Dr. John Steelman. Did you have occasion to work with Dr. Steelman?

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

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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

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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 that right?

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

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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 list:

"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 chairman."

So he thought that the post had been offered to a number of people.

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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 in agreement.

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 conservatives?

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KEYSERLING: Yes.

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 control?

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

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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

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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

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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?

KEYSERLING: Yes.

HESS: What were those? What were your basic economic disagreements with Dr. Nourse?

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

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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

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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;

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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

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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,

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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

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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

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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

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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

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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.

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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 there.

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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

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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

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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.

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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?

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KEYSERLING: Benjamin Caplan was on our staff, a very good man.

HESS: John C. Davis?

KEYSERLING: Right.

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 at Princeton.

HESS: John P.?

KEYSERLING: John P. Lewis is correct. I thought that "C" didn't sound exactly right.

HESS: I flipped my list over and found his name.

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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

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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 by succession.

When Burns left he put in his man Saulnier, who had

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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

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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 anything.

HESS: Shall we take up here next time?

KEYSERLING: Sure.