Leon Hirsch Keyserling 1908-1987
Birth: January 22, 1908 in Beaufort, South Carolina, United States Death: August 9, 1987 in Washington, District of Columbia, United States Source: The Scribner Encyclopedia of American Lives, Volume 2: 1986-1990. Charles Scribner's Sons, 1999. (b. 22 January 1908 in Beaufort, South Carolina; d. 9 August 1987 in Washington, D.C.) political economist and drafter of New Deal legislation
BIOGRAPHICAL ESSAY Keyserling was the eldest of four children of William Keyserling and Jennie Hyman. His father was a partner in MacDonald-Wilkins and Company, a cotton and mercantile enterprise in Beaufort. While growing up, Leon worked on Saturdays in one of that company's stores, where he dealt with many black employees. This association with blacks and the poverty in which they lived was to influence his later life.
Keyserling enrolled at Columbia University at the age of sixteen in 1924, and graduated with a B.A. degree in economics in 1928. He then studied at Harvard Law School, receiving his LL.D. degree in 1931. He soon enrolled as a Ph.D. candidate in economics at Columbia, where Rexford Tugwell, later a member of President Franklin Roosevelt's brain trust, was a major influence on his intellectual development. By 1933 Keyserling had completed all requirements for his doctorate except the dissertation; instead of completing the dissertation he joined Tugwell in the Department of Agriculture.
In Washington, Keyserling attracted the attention of Senator Robert Wagner of New York, who offered him a job as his legislative assistant. He would work for Wagner until 1937. Keyserling helped draft a number of famous New Deal laws, including the National Industrial Recovery Act (1933), the National Housing Act (1934-1935), the Social Security Act (1935), and the United States Housing Act (1937). The centerpiece of the New Deal legislation was the National Labor Relations Act of 1935, the so-called Wagner Act. It brought the labor movement into the Democratic party's coalition and wedded unions to the entire range of New Deal laws. Keyserling wrote most of the bill, including the famous section 7a, which institutionalized collective bargaining.
Senator Wagner was chairman of the platform committee of the Democratic party in 1936, 1940, and 1944, and Keyserling wrote the initial drafts of the platform documents in each of these years. He later played a significant role in writing the Democratic platforms of 1948, 1956, 1960, and 1976.
On 4 October 1940 Keyserling, who had moved to the U.S. Housing Agency, married Mary Dublin, an economist at Sarah Lawrence College. They had no children. The couple would subsequently have trouble with the committee headed by Senator Joseph McCarthy during his anticommunist campaign in the early 1950s.
On 1 December 1943 the Pabst Beer Company announced an essay contest on how to solve the postwar employment problem. The judges included Wesley Clair Mitchell and Beardsley Ruml. Herbert Stein, who later headed the Council of Economic Advisers (CEA) during the administration of President Richard Nixon, won the first prize of $25,000, and Keyserling captured the second prize of $10,000.
Some of the wording of the legislation creating the Council of Economic Advisers came directly from the Keyserling essay. Keyserling served on the CEA from 1946 to 1953.
The CEA's first chairman, Edwin Nourse, conceived of the CEA as an apolitical advisory board, whereas Keyserling felt that it should actively support the president. Prior to the 1949 recession Nourse was advocating an increase in taxes to reduce the rate of inflation while Keyserling was urging no change. When the recession proved Keyserling right, Nourse was forced out and Keyserling took his place, as acting chairman. A group of centrist economists opposed Keyserling's appointment, ostensibly because he did not have a doctorate in economics, but Democratic President Harry Truman stuck with him, and he became chairman in 1950.
To get the country out of the recession, Keyserling proposed a threefold increase in nonmilitary federal spending, basing this approach on his experience with the economics of World War II. Because the growth of federal spending during the war seemingly had validated the ideas put forward by John Maynard Keynes in his book The General Theory of Employment, Interest, and Money (1936), Keyserling proposed this Keynesian solution, even though he always denied Keynesian influence on his thinking. He preferred to classify himself as a "pragmatist." Eventually Paul Nitze, head of policy planning for the State Department, began to look for an economic argument for a significant increase in cold war military spending. He and Keyserling cooperated on developing such an argument in a top-secret National Security Council memorandum, NSC-68. While there was little support for this program in Congress and at the Defense Department, the Korean War, which broke out in June 1950, in effect put the military Keynesianism of NSC-68 to work.
The first year of the Korean War produced a surplus in the federal budget as previously unemployed wage earners went back to work and paid taxes. It also produced the Federal Reserve-Treasury Accord of March 1951, which returned the monetary policy of the Federal Reserve system to its pre-World War II activist role, despite Keyserling's opposition. In contrast to the situation after World War II, there was little increase in the national debt or evidence of pent-up demand after the Korean War. In fact, prices fell after the removal of wartime price controls during the administration of Republican President Dwight Eisenhower.
Keyserling left the CEA after Eisenhower's election, in line with his belief that its chairman should reflect the views of the administration in power. In 1953 he became a private consulting economist. He continued to criticize U.S. economic policy in a series of books issued by his Conference on Economic Progress, a tax-exempt, nonprofit foundation he set up in 1954.
When the Democrats returned to power under President John F. Kennedy in 1961, Keyserling continued to criticize the so-called New Economics of Walter Heller, whom Kennedy chose to head the CEA, as being too conservative with respect to growth and too worried about inflation. Keyserling and the economist John Kenneth Galbraith, who had been dispatched as U.S. ambassador to India, were the principal critics of commercial Keynesianism on the part of the Kennedy CEA.
Keyserling was more tolerant of the policies of Kennedy's successor, Lyndon Johnson; he resigned from Americans for Democratic Action in 1968 as a result of its criticism of Johnson and the war in Vietnam. During the administration of Democratic President Jimmy Carter, Keyserling, who had retired from private practice in 1971, helped write the Full Employment and Balanced Growth Act of 1978, usually referred to as the Humphrey-Hawkins full employment bill as a tribute to U.S. Senator Hubert Humphrey, a cosponsor of the bill, who died before it was enacted.
This act set a goal of 4 percent unemployment and required a statement annually by the CEA as to when this goal could be expected to be reached. A few years later, when achieving 4 percent unemployment seemed more and more unlikely and the so-called natural rate of unemployment was considerably in excess of this target, the practice ceased. There was still a requirement that the Federal Reserve chairman report his goals for increasing the monetary supply in biannual appearances before congressional committees. But even this was vitiated by Federal Reserve chairman Alan Greenspan's decision, in the mid-1990s, to abandon monetary aggregates as leading indicators of possible inflation. Keyserling developed liver cancer in 1987. He died in Washington and is buried in Beaufort, South Carolina.
Although Keyserling always declined to classify himself as a Keynesian, he was generally regarded as such by acknowledged Keynesians. It was mainly the stagnation hypothesis of Alvin Hansen, Keynes's foremost disciple in the United States, that he rejected. Unlike Hansen, Keyserling was convinced that rapid growth was still possible in the advanced capitalist system as a result of stimulative monetary and fiscal policies. He was always in favor of reducing the discretionary powers of the Federal Reserve system and consistently advocated lower interest rates, as had Keynes. -- Lynn Turgeon FURTHER READINGS Keyserling's writings include Toward Full Employment and Full Production (1954), a critique of Eisenhower's non-Keynesian economic program; Progress or Poverty (1964), a critique of Walter Heller's "New Economics"; The Toll of Rising Interest Rates (1964), on the tight monetary policy under Chairman of the Federal Reserve Board William McChesney Martin, Jr.; and Goals for Full Employment and How to Achieve Them Under the Full Employment and Balanced Growth Act of 1978 (1978), an explanation of the rationale for the Humphrey-Hawkins legislation. Robert Sobel, The Worldly Economists (1980), contains a long chapter on Keyserling's economics. Donald Pickens, "Leon Keyserling and the Rise and Fall of Integrative Liberalism," is the first installment of a biography of Keyserling. Keyserling's papers from the years with Senator Wagner are at Georgetown University. An obituary is in the New York Times (11 Aug. 1987). SOURCE CITATION "Leon Hirsch Keyserling."The Scribner Encyclopedia of American Lives, Volume 2: 1986-1990. Charles Scribner's Sons, 1999. Reproduced in Biography Resource Center. Farmington Hills, Mich.: Thomson Gale. 2005.