Keynes's advice to FDR still holds overwhelmingly true for combatting our own crisis.

The Franklin D. Roosevelt President Library and Museum has put scans up of several important documents that highlight FDR's transition from trying to balancing the budget in the Great Depression to, after the crash of 1937, his ability to see that Keynesian deficit spending could help the recovery. The page that has the resources, plus a history, is located here: FDR: From Budget Balancer to Keynesian.

It includes several campaign speeches by Roosevelt as they evolved over the 1930s, and it also includes John Maynard Keynes's 1938 private letter to President Roosevelt. The Keynes letter is great. He is a model of clarity, wit, and seriousness with a towering intellect on all matters economic.

After the fiscal and monetary contraction that brought on the crash of 1937, liberals in the Roosevelt administration weren't sure what to do. Keynes, in his letter, outlined a five step plan including both what had just worked and what to continue doing until the economy healed:

This is how we should judge our current elites and opinion leaders. How well do they understand this game plan for addressing a massive crisis like the one we are in, and under what economic ideology and rationality are they deviating from it? Right now it is a full-time job trying to convince elites that this is the right program for the country, rather than rewriting federal and state law to businesses' liking and focusing obsessively on the deficit. So little has been learned, and what we've learned has been forgotten.

Keynes also noted that getting the housing market straightened out is one of the best ways to handle the Depression. "Housing is by far the best aid to recovery because of the large and continuing scale of potential demand; because of the wide geographical distribution of this demand; and because the sources of its finance are largely independent of the Stock Exchanges." Getting the housing market right is also an uphill battle for our recession and administration.

Keynes Does the Twist

There's a debate within left-liberal economic circles over the relative importance of monetary versus fiscal policy in dealing with the economic downturn. Often you hear that all the stuff Bernanke is doing, from QE to Operation Twist, is a rejection of what Keynes would advise if he was living today.

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Since we are looking at Keynes' letters to President Roosevelt, let's look at his 1933 open letter to FDR, published in the New York Times. Among other recommendations, he advises the new administration to do two things on the domestic front (my bold):

If you were to ask me what I would suggest in concrete terms for the immediate future, I would reply thus... In the field of domestic policy, I put in the forefront, for the reasons given above, a large volume of Loan-expenditures under Government auspices. It is beyond my province to choose particular objects of expenditure. But preference should be given to those which can be made to mature quickly on a large scale, as for example the rehabilitation of the physical condition of the railroads... You can at least feel sure that the country will be better enriched by such projects than by the involuntary idleness of millions.

I put in the second place the maintenance of cheap and abundant credit and in particular the reduction of the long-term rates of interest. The turn of the tide in great Britain is largely attributable to the reduction in the long-term rate of interest which ensued on the success of the conversion of the War Loan. This was deliberately engineered by means of the open-market policy of the Bank of England. I see no reason why you should not reduce the rate of interest on your long-term Government Bonds to 2½ per cent or less with favourable repercussions on the whole bond market, if only the Federal Reserve System would replace its present holdings of short-dated Treasury issues by purchasing long-dated issues in exchange. Such a policy might become effective in the course of a few months, and I attach great importance to it.

His first suggestion constitutes fiscal stimulus. But his second suggestion is urging the Federal Reserve to replace its short-term bonds with long-term bonds to bring down the rates on the long-term bonds -- just like Operation Twist! Equally interesting, instead of naming an amount of Treasuries to buy, like $800 billion or $2 trillion, Keynes says to hit a specific rate. The Federal Reserve can either set a rate or an amount, and we've been doing QE through setting purchase amounts. Maybe this other way that he suggests, having QE set a target for long-term rates, is a better way of doing QE? He's a pretty smart fellow.

Keynes "terrified lest progressives causes...suffer injury"

Going back to the 1938 letter, I find Keynes' conclusion chilling.

In this letter, Keynes is saying that if FDR didn't handle the recovery correctly the whole New Deal would be at risk. Full employment is hard to accomplish, very hard, but it isn't impossible. And the stakes are higher than just the economic recovery -- failure means that progressive governance and polices are both at "risk to their prestige" from a prolonged downturn. Taking the economic downturn "too lightly" puts all of it -- from responsibly combating global warming, to bringing fairness and justice to those working in the shadows of labor market, to making sure everyone has access to insurance against sickness and poverty in old age, to the rest of the liberal governance project -- at risk. And, as we see the years pass by, it is too easy to lose precious time.

Mike Konczal is a Fellow at the Roosevelt Institute.

The protesters' particular focus on inequality is a perfect starting place for a progressive movement revival.

Right now Occupy Wall Street has favorable polling. So did the Tea Party at its beginning. As Seth Ackerman pointed out to me, once people saw that the Tea Party wasn't a new thing but this old, arch-conservative thing, one that wants to take our global historical moment and wage total war against public sector workers and uteri, they turned against it. One symptom that it was an old thing was the books that it circulated: from Hayek's underwhelming Road to Serfdom to Bircher Cold War tracts from the types who thought Eisenhower was a member of the communist conspiracy.

Ackerman noted that it isn't clear what will happen with Occupy Wall Street ideologically, if only because at this point the left-liberal project and progressivism more generally is chaotic and up for grabs. This makes for a fun, fascinating, and scary moment for a potentially insurgent left.

This movement is very focused on inequality. But why? A lot of different ideas have already surfaced. With so much of the debate about the 99% and the 1% framed in the context of extreme inequality, it might be worthwhile to step back and examine the liberal arguments against inequality and discuss what I see of them in Occupy Wall Street.

This is a great cheat-sheet -- a list of objections to inequality resulting from the high liberalism tradition from TM Scanlon's "The Diversity of Objections to Inequality" (article not free online, here's a summary). Liberals, in general, have five objections to inequality:

A sixth point will hopefully be added in the future: A more equal distribution creates a better economy. There's an assumption that the market, instead of creating concentrations of wealth and power that slow growth, assigns resources to where they are best used in both the short and long term. However, it is hotly contested whether income inequality causes crashes; researchers at the IMF found models where it can. And a whole other strain of research finds that equality causes growth to be more sustained (see summaries by Georgia Levenson Keohane and Brad Plumer).

As Scanlon is quick to note, only a few of these are necessarily egalitarian -- you can be concerned with relieving the suffering of the poorest without actually caring about disparity of incomes. And there is usually a huge emphasis on how the power referred to in number three is primarily a problem of electoral politics and policy instead of a problem of dominating, controlling power relations between individuals.

So where does Occupy Wall Street stand on these? What I find fascinating is that there is much more of a focus on forms of power and domination as opposed to the more general concerns of egalitarian liberalism, those focused on stigmatization and fairness. This is a healthy move for the debate.

On Oct. 23, the FDR Library presents a free forum on FDR’s foreign policy advisers. Click here to find out how you can join the conversation!

One of the major concerns you hear from people in occupations is that the political process has become fundamentally corrupted. This gets right at number three: Money has become so concentrated and such an overwhelming presence in our politics that we need some ways of reforming it at a structural level. The stakes are higher in Occupy Wall Street. The government blurs into the private sector, wealth is no longer a measure of contribution but instead rent extraction, and no party or individual can be trusted to work within the system. There needs to be a reboot. How did we get here? Hacker and Pierson's Winner Take All Politics is a good place to start when looking for the answer.

Another argument is that Wall Street itself is out of control. Having failed quite profitably in its sole responsibility -- allocating capital responsibly, not towards Pets.com, junk mortgage debt, strip-mining companies for short-term gains, and worthless housing stock nobody wants -- and then getting bailed out when it all collapsed, the sheer presence of the financial sector among the top 1% feels like a crime. This power is more ruthless than than that in the normal discussion. It drives the entire economy, and it appears to have just driven it off a cliff. For more, 13 Bankers, Econned, Age of Greed, and Wall Street from the 1990s all walk readers through this story.

What about the 99%? I've previously looked through the We Are the 99% Tumblr and found that the biggest emphasis was on debt, ranging from student loans to medical debt, and a lack of enough employment to get by month-to-month. Here inequality is less a problem related to the more traditional liberal concerns of fairness or the idea that a few are left behind, and more a problem in which inequality is making indentured peasants of a huge part of the population. Risks are shifted to individuals who are already struggling, opportunities and possibilities are ruthlessly revoked, employment is nonexistent, and month-to-month survival is a battle for more than the just the very bottom. Books such as Graeber's Debt: The First 5,000 Years approach this from an anthropological point of view. Other works include Elizabeth Warren's book on how fixed costs of the middle class drive even two-income families into poverty, as opposed to more general discretionary spending (read: "frivolous" spending), or Tamara Draut's Strapped.

This ties into traditional liberal concerns. Liberals want institutions that allow people to develop their talents and also ones that insure them against the bad luck of health and unemployment. These institutions have been unraveled, and their public nature has been replaced with debt. And when people involved in Occupy Wall Street talk about this phenomenon, they connect how debt functions as a new safety net with the experience of servitude and suffering. Not in a relative sense of inferiority and shame (although that's there too), but in actual deprivation and the feeling of powerlessness against creditors, bosses, and the top of the elite.

Indeed, these concerns are reflected in the format of the general assembly and other current, institutional characteristics of Occupy Wall Street. Without permanent, clear leaders, there is no one to arrest, corrupt, or otherwise take over. That address their concerns about political domination from sources internal and external. The focus on mass participation and consensus derives, in part, from inequality in political access. Resources and responsibilities are distributed in the most egalitarian manner because physical deprivation is just one bad month away for many in the occupations (indeed, in the country). Collective enterprises offer a potential solution to giving workers real power in the workplace, power that can be put into action across the country and isn't dependent on Obama and the Senate.

This strikes me as firmer ground on which to try and build up a resurgent left. What's your take?

Mike Konczal is a Fellow at the Roosevelt Institute.