As part of our series "A Rooseveltian Second Term Agenda," a call to return to a foreign policy based in FDR's vision of shared peace and prosperity.

Even though we come from different places, we share common dreams: to choose our leaders; to live together in peace; to get an education and make a good living; to love our families and our communities. That’s why freedom is not an abstract idea; freedom is the very thing that makes human progress possible — not just at the ballot box, but in our daily lives.

One of our greatest Presidents in the United States, Franklin Delano Roosevelt, understood this truth. He defined America’s cause as more than the right to cast a ballot. He understood democracy was not just voting. He called upon the world to embrace four fundamental freedoms: freedom of speech, freedom of worship, freedom from want, and freedom from fear. These four freedoms reinforce one another, and you cannot fully realize one without realizing them all.—Barack H. Obama, University of Yangon, November 19, 2012

In his historic visit to Burma, also referred to as Myanmar, President Obama spoke at length about the journey Burma is taking from dictatorship to democracy, a transition he said has the potential to inspire people the world over as “a test of whether a country can transition to a better place.”

President Obama made it clear that his journey to Burma—the first by an American president—was inspired in part by his own desire to encourage the people and government of Burma to press ahead with their democratic reforms so that the “flickers of progress” that the world has seen will not be extinguished. The president’s visit was also notable for his repeated insistence that America was a “Pacific nation,” whose “future was bound to those nations and peoples to our West.” But perhaps the most significant aspect of his speech was his decision to frame his remarks around a concept first articulated by Franklin D. Roosevelt at one of the darkest moments of the Second World War—the need to build a world founded on four fundamental human freedoms.

At a moment when Adolf Hitler had proclaimed the onset of “a new order” in Nazi-occupied Europe, and when Japanese militarists had seized much of China and were poised to expand their grip on Southeast Asia, Franklin Roosevelt proposed “a greater conception,” a “moral order” that represented the very antithesis of the “tyranny which the dictators seek to create with the crash of a bomb.” FDR’s order was based on the idea that all people—“everywhere in the world”—deserved the right to enjoy freedom of speech and expression; freedom of worship; freedom from want; and freedom from fear.

He articulated this vision in part because of the critical need to gain the support of the American people and Congress for the passage of the Lend-Lease Bill that was pending on Capitol Hill. But the enunciation of the Four Freedoms and initiation of Lend-Lease—which would make it possible for the United States to provide arms and munitions to Great Britain free of charge—was also inspired by a much deeper conviction: that the security of the United States was tied directly to the health and well-being of other nations.

For many Americans today, World War II and the Great Depression are two separate events. But for the generation that lived through these unparalleled crises, nothing could be farther from the truth. In their minds, and in the mind of Franklin Roosevelt, the two were inextricably linked. The Great Depression, after all, was not confined to the United States, but represented a worldwide economic crisis that helped inspire anti-democratic forces in both Europe and Asia—anti-democratic forces that helped give rise to the fascist movements in Germany and in Japan that would initiate the most destructive war in human history.

In light of this, Franklin Roosevelt remained convinced that the Second World War had economic causes. Moreover, as the war progressed, he became more and more convinced that America’s security was tied to the security of the rest of the world. As such, it was not enough for the United States to rely solely on the strength of its armed forces to provide for the nation’s safety; we also had to concern ourselves with the political, social, and economic health of other regions of the world since, as FDR put it in 1944, “true individual freedom cannot exist without economic security and independence”…and “people who are hungry and out of a job are the stuff of which dictatorships are made.”

It was this basic idea that inspired not only the Four Freedoms, but also the many institutions and practices that were put in place during and after the war to foster international cooperation and a more prosperous, healthy, and peaceful world. Many of these institutions and practices—like the United Nations, International Monetary Fund, World Bank. and multilateral trading regime—are with us still, so that much of the world we live in today is the world shaped by the vision of Franklin Roosevelt.

In recent years, however, we seem to have moved further and further away from this vision to a foreign policy that is dominated largely by the use of military force—no doubt inspired in part by the advent of modern technology, such as drone aircraft. This is unfortunate, for even though President Obama has shown willingness to use other means to pursue America’s interests abroad, his foreign policy to date has remained highly militarized.

His eloquent speech in Burma may indicate that he has decided to pursue a more progressive foreign policy agenda in his second term, one based on the recognition that the best means to keep America safe in the long term is to ensure that the hopes and aspirations of people the world over to enjoy freedom of speech and expression, freedom of worship, freedom from want, and freedom from fear stand not, as Roosevelt said, as some “vision of a distant millennium,” but as “a definite basis for a kind of world attainable in our own time and generation.”

David Woolner is a Senior Fellow and Hyde Park Resident Historian for the Roosevelt Institute. He is currently writing a book entitled Cordell Hull, Anthony Eden and the Search for Anglo-American Cooperation, 1933-1938.

President Obama spent too much time picking apart the details of his opponent's plans instead of attacking the underlying philosophy as FDR did.

Let me warn you and let me warn the Nation against the smooth evasion which says, “Of course we believe all these things; we believe in social security; we believe in work for the unemployed; we believe in saving homes. Cross our hearts and hope to die, we believe in all these things; but we do not like the way the present Administration is doing them. Just turn them over to us. We will do all of them—we will do more of them we will do them better; and, most important of all, the doing of them will not cost anybody anything.”

But, my friends, these evaders are banking too heavily on the shortness of our memories. No one will forget that they had their golden opportunity—twelve long years of it.

Remember, too, that the first essential of doing a job well is to want to see the job done. Make no mistake about this: the Republican leadership today is not against the way we have done the job. The Republican leadership is against the job's being done. — Franklin D. Roosevelt, 1936

From the moment he took office in the New York State Senate until his death as president roughly 35 years later, Franklin D. Roosevelt relished the toss and tumult of the political arena. As he once told a reporter in the midst of his early struggle with New York’s Tammany Hall political machine, “there is nothing I love as much as a good fight” – and FDR was brilliant at it.

This passion for the art of politics—and for the basic principles that underpinned his political philosophy—served FDR extremely well over the course of his public life. In fact, few politicians in the 20th century, with the exception of Ronald Reagan, Bill Clinton, and his cousin Theodore Roosevelt, ever came close to FDR’s ability to master the nation’s political discourse.

What fueled FDR was his fundamental belief in the power of government to create a more just and equitable society, and his deep knowledge—from personal experience—of the forces of wealth and privilege that had little if any regard for the plight of millions upon millions of Americans who struggled day by day to provide for their families. FDR never forgot that it was these “malefactors of great wealth,” as his cousin TR labeled them, who brought the country to ruin in 1929, and he spent the better part of his presidency in battle against the forces that wanted to return the United States to the so-called Gilded Age of unfettered capitalism.

The American people understood this, in part because they had lived through the economic collapse that brought on the Great Depression, but also because of the clear and unequivocal message that FDR delivered time and time again about the nature of struggle between those who sought to exploit the free-market system for their own ends, and those who believed, as he did, that the only way to make capitalism work in the long run was to make sure that it provided a basic measure of economic security and opportunity to all Americans, not just those at the top.

It was this conviction that led the Roosevelt administration to initiate Social Security and unemployment insurance, to guarantee bank deposits through the FDIC, or to protect investors—both small and large—through the establishment of the Securities and Exchange Commission.

The aim here was not to create “trickle-down government,” or a generation of dependents, as Governor Romney would have us believe, but rather to use government to ensure that the millions who toiled in the nation’s farms and factories might receive a decent wage and a small measure of economic security against what FDR called “the hazards and vicissitudes of life,” such as the loss of a job or poverty-ridden old age.

We now take many of these programs for granted, but in FDR’s day they aroused fierce opposition, particularly from the well-heeled conservative elite, who did everything they could to try to discredit both the president and his ideas. In their view, FDR’s philosophy of government was tantamount to socialism, an un-American attempt to subvert the Constitution and rob the nation of the individual initiative that stood at the core of its—and their—success.

But FDR would have none of this, and in a series of withering attacks on what he called “a generation of self-seekers” he implored the American people to join him in abandoning “our tolerance of the abuse of power by those who betray for profit the elementary decencies of life.” Indeed, as he reminded the American people in the summer of 1936, it was critical that the nation reject a system of governance where “for too many of us the political equality we once had won was meaningless in the face of economic inequality,” where “a small group had concentrated into their own hands an almost complete control over other people's property, other people's money, other people's labor—other people's lives.”

For Roosevelt, the great issues of his day were not simply about whose “plan” might deliver more jobs for the American people, or provide a greater chance at reducing the deficit, but about the fundamental moral and economic structure of our society -- a society where government must remain determined “to make every American citizen the subject of his country’s interest and concern; and [where] we will never regard any faithful law-abiding group within our borders as superfluous.”

Like FDR in 1936, President Obama now faces the same sort of “powerful influences” that in Roosevelt’s words “strive today to restore that kind of government with its doctrine that that Government is best which is most indifferent.” But judging from last night’s debate, one would hardly know it. Instead of attacking the underlying philosophy behind Governor Romney’s call for the restoration of the types of policies that led to the Great Depression and the Great Recession—policies that in Romney’s words would rid the country of what he calls “the web of dependency” among the “47 percent”—the president spent too much time trying to explain the differences between the two men’s various “plans.” Given Governor Romney’s penchant for leaving out the details of his various proposals to reduce the deficit and grow the economy, perhaps this is understandable, but in doing so the president failed to capture the imagination of the American people.

This is unfortunate, for Governor Romney is correct when he says this election is about choosing very different paths for our nation. Will we embrace the type of society that was built in the New Deal? A country where the reforms of the 1930s helped the middle class flourish in the decades after World War II? Or will we embrace the philosophy of government that has become increasingly dominant in the past 30-plus years -- a philosophy of government where, as the Census Bureau recently reported, the average male worker is making the same hourly wage adjusted for inflation that he was making in 1978, while the average CEO’s pay over the same period has sextupled and the income of the people in the top 1 percent has grown by 600 percent?

For Roosevelt, the answer was obvious, and he was not afraid to state it “boldly and plainly.” As he said in his speech to the 1936 Democratic Convention:

The defeats and victories of these years have given to us as a people a new understanding of our government and of ourselves… It has been brought home to us that the only effective guide for the safety of this most worldly of worlds, the greatest guide of all, is moral principle…

We cannot afford to accumulate a deficit in the books of human fortitude.

In the place of the palace of privilege we seek to build a temple out of faith and hope and charity…

Governments can err, presidents do make mistakes, but the immortal Dante tells us that Divine justice weighs the sins of the cold-blooded and the sins of the warm-hearted on different scales.

Better the occasional faults of a government that lives in a spirit of charity than the consistent omissions of a government frozen in the ice of its own indifference.

There is a mysterious cycle in human events. To some generations much is given. Of other generations much is expected. This generation of Americans has a rendezvous with destiny.

David Woolner is a Senior Fellow and Hyde Park Resident Historian for the Roosevelt Institute. He is currently writing a book entitled Cordell Hull, Anthony Eden and the Search for Anglo-American Cooperation, 1933-1938.

Binyamin Appelbaum has an article in the New York Times about the administration’s terrible response to the housing crisis. The administration “tried to finesse the cleanup of the housing crash, rejecting unpopular proposals for a broad bailout of homeowners facing foreclosure in favor of a limited aid program — and a bet that a recovering economy would take care of the rest.” This has several responses, including David Dayen at firedoglake, as well as Ezra Klein writing about the administration's response from a balance-sheet recession and housing point of view. That got a response from Dean Baker arguing that this balance-sheet recession point of view, and the subsequent focus on mortgage debt reduction, is a distraction from better policy.

With President Obama pushing for a wider refinancing plan and the debate over refinancing and principal reduction back in the headlines due to the book Bailout and the fight over the GSEs, it might be useful to formalize the best liberal case against principal reduction. It'll give us a set of arguments to wrestle with so that we can then work backwards toward better arguments. So what is the best case? I see three broad arguments.

1. Wealth Effect Means It Doesn't Matter

This is the approach Dean Baker takes, and I think it is influential among many liberal wonks. The housing crashed destroyed a lot of housing value, leaving us feeling poorer, which means we spend less. An important way to understand this argument is that if every house during the housing bubble was paid for with cash instead of a mortgage, and we had the same housing bubble and crash but no mortgage debt overhang, our recession and slow recovery would look virtually identical. Reducing housing debt in our situation won't help the economy as a whole (though it will help the individuals involved), because housing debt hanging on the economy isn't the drag.

Foreclosures are still bad in this argument (and Dean has been at the forefront of fighting against foreclosures), but they only need to be stopped in the sense that all bad things should be stopped; housing crisis policy will help some and hurt some, but it isn't a check on the recovery. It is not necessary and isn't effective in getting us back to full employment.

I think there are some empirical problems with this argument. The elasticities people are finding are an order of magnitude bigger than realistic expectations. Declines in housing prices are nonlinear against wealth distribution. Something else is in play. See this interview or this paper for more on these arguments. The administration seems to be moving in this balance-sheet direction. Let's say we reject this wealth effect argument -- should we change policy?

2. Fiscal and Monetary Uber Alles

Christina Romer would say no. She, like many, would argue that housing debt is probably a drag on demand, but we should respond to it with fiscal and monetary stimulus. She would stay out of the policy in the purple circle above, which is the mapping I use around here to approach how people think of the recession. Romer, from September 2011:

[One argument is that the] bubble and bust in house prices has left households burdened with too much debt. Until we deal with this problem — perhaps by providing principal relief to the 11 million households whose mortgages are larger than the current value of their homes — we’ll never get the economy going.

The premise of this argument is probably true: recent evidence suggests that high debt is holding back consumer demand. But it doesn’t follow that the government needs to directly lower debt burdens to stimulate job growth.

Recent research shows that government spending on infrastructure or other investments raises demand even in an economy beset by over-indebted consumers. Another effective approach is to aim tax cuts and government payments at households that would like to spend, but can’t borrow because of their debt loads (such as the poor and the unemployed).

History actually suggests that the “tackle housing first” crowd may have the direction of causation backwards. In the recovery from the Great Depression, economic growth, which raised incomes and asset prices, played a big role in lowering debt burdens. I strongly suspect that fiscal stimulus will be more cost effective at speeding deleveraging and recovery than government-paid policies aimed directly at reducing debt.

There's a general critique of the president's stimulus program that argues it was too focused on tax cuts instead of long-term investments, which have a better bang for the buck. The same critique can be used on spending money on principal reduction. It's money that by definition isn't spent (it was already spent), so you need second-order effects for it to go. We'd prefer just giving people money (tax cuts) over principal reduction in the same sense that we'd prefer infrastructure over tax cuts.

And one doesn't need to be a conservative worried about helping the "losers" or someone who is uncomfortable with the fairness of mortgage debt reduction to think there are better ways to spend this money. Consider having $250 billion dollars to spend, one benchmark put forward as the amount of money that could have been spent from TARP. You could hand it out in some manner to pay off underwater debts, perhaps a matching scheme with the banks. That wouldn't reduce overall mortgage debt that much because there is a lot of it.

Meanwhile, with $250 billion dollars, you could build 5,000 miles of high-speed rail. You could fund universal pre-K for a decade. You could take the 13 million people unemployed under the traditional unemployment measure and give them a basic income of almost $10,000 for two years. You could build infrastructure, create social goods designed to foster egalitarianism, or tackle poverty. These are all better investments for us to make, plus they build a better society and they get us to full employment faster. Tackling mortgage debt produces none of these benefits.

When Geithner's argued against principal reduction, saying that it would be "dramatically more expensive for the American taxpayer, harder to justify, [and] create much greater risk of unfairness," he followed it up by saying "The whole foreclosure crisis across the country now is really driven by what happened to unemployment and what happened to the income of Americans. The best things we can do now to help mitigate that risk is to help get the economy. growing again, bring unemployment down as quickly as we can, put people back to work." I view that as in line with Romer's argument.

By itself, I think this is correct. But one important response to that is that principal reduction can often pay for itself, especially in situations where a borrower is at risk. A lender will want a consistent, if lower, payment stream rather than to take ownership of an abandoned house in a depressed market. As Lew Ranieri said, "You are almost always better off restructuring a loan in a crisis with a borrower than going to a foreclosure." So it is good economics, especially in a distressed market. Another response is that few people propose just giving money away, but instead want to tie it to some sense of risk and reward, or reaccounting of the banks' balance sheets. So how does that play out?

3. Upsides and Downsides

One reason giving away money to pay off underwater debts is a bailout, and thus politically unpopular, is that there would be a disconnect between who absorbed the costs on the downside and who gains the potential value from the upside. If taxpayers just paid off mortgage debts, banks and homeowners would gain a windfall that isn't directly shared with taxpayers. One way to deal with this is either to force creditors to eat a cost upfront -- they absorb the downside and then can benefit from the upside. The other is for taxpayers to gain from the upside, usually through the mass purchase and/or refinancing of mortgages. Let's look at the first way.

Why aren't bank servicers doing writedowns? There's a mix of bad incentives and poor resources that result in bad practices. The administration hasn't been aggressive with using financial fraud, like the range of practices including robosigning and documentation fraud, to force reform here, instead focusing on removing legal liabilities from the banks. Maybe that task force will someday do something, but from my read even sympathetic observers think it was a wasted opportunity. 

But even if policy is centered on forcing servicers to clean up their fraud, there's a lot of creditor free-riding in ad hoc debt writedowns that becomes problematic. Is writing down first mortgages good policy even if junior mortgages, often held by the biggest banks, are untouched? If home equity lines of credit are acting as a last line of income maintenance and credit for households in this weak recovery, is it wise to push policy to extinguish them to adjust first mortgages? If you wipe out both, isn't that a giant transfer to other creditors like auto lenders, private student loans, and credit card companies? Should we be concerned about moral hazard from the debtor's side? You need some mechanism to coordinate and bind the collective behavior of creditors while preventing free riding and also bringing in impartial adjudication, which is a traditional function of bankruptcy. Bankruptcy reform was famously not pushed by the administration, and to me that was its biggest mistake.

The other approach to avoid a bailout is for the government to gain a share of the upside for taking on the downside. This is one reason writedowns for the GSEs make sense: we gain the upside, as we own the GSEs, and we're already on the hook for the downside, so the risk on the downside isn't a "bailout" but prudent policy.

When it comes to dealing with the broader housing market, a lot of the programs proposed, like revitalizing HOLC or Senator Merkley's plan on refinancing, would have taxpayers put up money but gain in the upside. Even the IMF is now encouraging the United States and other countries to investigate bringing back something like an HOLC. The two counter-arguments would be that HOLC still had a high redefault rate, a rate that would have a lot of people crying foul. The second is the problem of what to pay for the mortgages. Recent attempts to use eminent domain to purchase mortgages at below-market rate in order to compensate taxpayers for absorbing these risks in a terrible market also have a lot of people crying foul.

My general thought is that moral hazard can be a problem, but the misery and wasted lives of mass unemployment is a much bigger problem. That said, bankruptcy and these government programs eliminate most moral hazard concerns. Bankruptcy can be done in such a way to hit homeowners as well; for the government program you'd want people to be trying to take advantage of them. That's why so many people have been shocked that the administration hasn't pushed on either.

What I find interesting is that all these articles about what could have been done with housing take the way TARP played out as given. But starting a HOLC program, rebooting the broken servicing model, or otherwise writing down mortgage principal would have been significantly easier if the banks were put into a receivership in early 2009. TARP policy, which was to protect the banks' balance sheets at all costs, worked counter-productively, putting administration resistence to enacting even the lowest-hanging policy fruit. Receivership would have cost more upfront, but it would have been significantly easier to tackle these problems. There is a major debate to have on this topic.

Mike Konczal is a Fellow at the Roosevelt Institute. Follow or contact the Rortybomb blog: