… American Progressives and European fascist theorists admired each other and exchanged ideas. From William James to Georges Sorel, from eugenics to the militarization of society (”War on Poverty” anyone? It was William James who penned the “Moral Equivalent of War” in 1906), both the American left and European fascists sought to remake society using crises to urge action to justify bigger government at the expense of individual liberty.

Ronald Reagan had it right in 1981, when he remarked that Roosevelt’s New Deal had much in common with Mussolini’s fascism, including frequent words of praise from Roosevelt’s brain trust directed towards Italy in the 1930s.

Absolutely nothing controversial here from the Tea Party perspective, and the “words of praise” line is accurate. But how will this play in a state that in 2008 gave Barack Obama the biggest Democratic landslide margin since FDR in 1936?

At one point in her book, in fact, Shlaes actually concedes that Roosevelt’s Keynesian experiment succeeded when he tried it. “The spending was so dramatic that, finally, it functioned as Keynes … had hoped it would,” she writes about 1936, “Within a year unemployment would drop from 22 percent to 14 percent.” So Keynesian policy worked, and the main fiscal problem with the New Deal was that Roosevelt made too many concessions to the right. Here we are in agreement. So can conservatives stop carrying around The Forgotten Man like it’s Mao’s Little Red Book? Can we all go home now?

The problem with the Republican arguments for a combination of deep tax cuts and spending cuts is that no one can point to a recession that this program ended. Tax cuts and spending, yes. Tax increases and meddling with interest rates, yes. But the homespun wisdom of Republicans like Gov. Mark Sanford (R-S.C.), that the government should cut back spending just like an average family is doing, is not backed up by anything.

President Franklin D. Roosevelt signs the Tennessee Valley Authority Act in 1933. (tva.gov)

President-elect Barack Obama is confronting a cascading economic crisis, which seems to worsen by the day, not the week. As venerable banking houses collapse, once-mighty industries teeter on the brink of oblivion and unemployment mounts, the air thickens with recollections of the Great Depression of the 1930s, and comparisons between Obama and President Franklin D. Roosevelt.

But let’s define our terms. So what exactly was the Great Depression, and what did FDR do about it?

Illustration by: Matt Mahurin

The short answer is: The Great Depression was a rare political opportunity, and Roosevelt made the most of it — to the nation’s lasting benefit.

A longer answer would acknowledge that the Great Depression was a catastrophic economic crisis that Roosevelt failed to resolve – at least not until World War II came along, some eight years after he took office.

A still longer answer would recognize the connection between FDR’s short-term economic policy failure and the New Deal’s long-term political success. Much misunderstanding surrounds this matter.

“At the heart of the New Deal,” the distinguished historian Richard Hofstadter once wrote, “there was not a philosophy but a temperament.” In a kind of caricature of Hofstadter’s view, a New York Times writer not long ago said that Roosevelt “threw a slew of policies at the wall, and whatever stuck became the New Deal.”

That accepted view of the New Deal — as a kind of harum-scarum frenzy of random, incoherent policies that failed to slay the Depression demon — has become deeply embedded in our national folklore. But it is woefully and mischievously mistaken.

The fact is that Roosevelt purposely forged in the crucible of the nation’s most harrowing economic crisis a set of reforms that cohered in a more systematic pattern than is dreamt of in most philosophies. The essential logic of that pattern fairly leaps from the pages of the historical record. It can be described in a single word: security.

A Great Depression bread line, as depicted at the FDR Memorial in Washington, DC (Flickr: Tony the Misfit)

It is altogether fitting and proper that the New Deal’s most durable and consequential reform bears that very word in its title: the Social Security Act of 1935. A even greater measure of security was the New Deal’s gift to millions of Americans — farmers and workers, immigrants and blue-bloods, children and the elderly, as well as countless industrialists, bankers, and merchants, not to mention enormous tracts of forest, prairie, and mountain.

Forget about the colorful creations of the decidedly frenzied and much ballyhooed Hundred Days — like the Civilian Conservation Corps and the National Industrial Recovery Act. Most of them were attended by much sound and fury, but signified little, and strutted the briefest of hours on history’s stage.

But all the New Deal reforms that endured – the Federal Deposit Insurance Corp., the Securities and Exchange Commission, the Federal Housing Administration, the National Labor Relations Board, the Fair Labor Standards Act and, above all, the Social Security Act — had a common cardinal purpose. Roosevelt’s goal was not simply to end the immediate crisis of the Great Depression, but to make life less risky, to temper for generations thereafter what FDR repeatedly called the “hazards and vicissitudes” of life.

The New Deal provided more assurance to bank depositors (FDIC), more reliable information to investors (SEC), more safety to lenders (FHA), more stability to relations between capital and labor (NLRB), more predictable wages to the most vulnerable workers (FLSA), and a safety net for both the unemployed and the elderly (Social Security).

Those innovations re-wove the very fabric of national life. They profoundly shaped the fates of Americans born long after the crisis of the Great Depression had passed. With the exception of the FDIC, none dates from 1933.

Had economic health been miraculously restored in the fabled Hundred Days, a swift return to business as usual might have meant politics as usual as well — and none of those landmark reforms would have come to pass. Indeed, there would have been no New Deal as we know it.

Roosevelt understood this. He was a deeply strategic political actor and an astute student of history. He keenly appreciated what the engines of history had wrought and what they might be made to yield in the uniquely enabling circumstance of the Depression.

FDR had sketched the broad outline of his grand design well before the Great Depression descended. Proposals for old-age pensions, for example, dated back to the platform of the Progressive Party in 1912, which nominated for president his beloved cousin and political role model, Theodore Roosevelt. FDR publicly endorsed the idea as early as 1930.

But FDR also told his fellow Democrats throughout the 1920s that his comprehensive reform agenda must wait “until the Republicans had led us into a serious period of depression and unemployment.” He eventually confronted a more dangerous depression than he could have anticipated — but he realized the opportunity that it afforded.

The Chinese character for “crisis,” we are told, is a melding of the characters for “danger” and “opportunity.” FDR did not read Chinese, but he appreciated the logic of that etymology.

In his extraordinary second Inaugural Address, delivered Jan. 20, 1937, Roosevelt crowed about the actually quite modest recovery since 1933. “Our progress out of the depression is obvious,” he said. Then he added something altogether novel in the annals of presidential addresses: “Such symptoms of prosperity may become portents of disaster!” Roosevelt went on to describe the “one-third of a nation ill-housed, ill-clad, ill-nourished,” whose plight made a mockery of the American dream.

The context made it clear that he was not then speaking about the victims of the transient depression crisis, which he saw as ending, but about the accumulated social and human deficits spawned by more than a century of let-‘er-rip, swashbuckling, unregulated American capitalism — deficits not yet fully redeemed.

Solving that problem was what he meant when he said that “this generation of Americans has a rendezvous with destiny.”

“We are going to make a country,” Roosevelt once remarked, “in which no one is left out.”

In that unadorned sentence, Roosevelt summed up his highest purposes and his lasting accomplishments. The New Deal’s legacy was to give countless Americans, who until then had never had much of it, a strong sense of security. And with it, Roosevelt gave them a deeper sense of having a stake in their country and a bond with their countrymen.

Obama’s chief of staff, Rahm Emanuel, seems to have taken this essential history lesson on board. “You don’t ever want a crisis to go to waste,” he said recently. “It’s an opportunity to do important things that you would otherwise avoid.”

Like Roosevelt, Obama faces an urgent economic crisis. Like Roosevelt, Obama must use the (now considerably greater) powers of government to restore economic health. But like Roosevelt, Obama will ultimately be judged not simply on whether or how he ended this crisis, but on how he used it.

We have our own accumulated social and human deficits. Some, like the lack of universal health care, have been begging for attention since Roosevelt’s time. Others, including a crumbling infrastructure, struggling public schools, climate change, energy dependence, environmental degradation, widening income disparity and illegal immigration, have been festering merely for the last several decades.

If this generation is to have its own rendezvous with destiny, and if Obama wants to stand in FDR’s company, those matters can no longer be avoided.

David M. Kennedy is the Donald J. McLachlan Professor of History at Stanford University. He won the 2000 Pulitzer Prize for History for “Freedom From Fear: The American People in Depression and War, 1929-1945.”

For example, here’s one such idea today, in The Wall Street Journal. It’s called a Shared Appreciation Mortgage, or SAM. Lenders would take a loss as they wrote down a borrower’s mortgage debt. But should the home appreciate in value eventually, lenders would then share in the gains. The notion was described by four economics and law professors, Andrew Caplin, Thomas Cooley, Noel Cunningham and Mitchell Engler. Here’s more:

A homeowner unable to support payments on a house purchased for $200,000 that today is worth only $150,000 might be offered a write-down of up to $50,000. But this would not be a free lunch.

With the SAM, once the value began appreciating above $150,000, the mortgage holders would be due their share. The details of the write-down and the appreciation sharing could be tailored to different circumstances. But one way to give lenders a share of the upside would be to pay back some of the write-down if the house is later sold, in the scenario above, for more than $150,000. This is a model in which both parties benefit, preventing default while giving future taxpayers a fighting chance at some real upside to the investment we’re forcing on them.

The authors contend the government needs to tackle a bold solution, and this would fit that bill.

So far, the government has been making bold moves — but only when it comes to rescuing banks. Will it do the same for homeowners? The SAM authors say there’s precedent for the government to act:

Almost 75 years ago, in the depths of the Great Depression, the nation faced a housing market collapse even more brutal than today. The federal government responded with a strategy that allowed homeowners to keep their homes and kept the bottom from falling out of the real-estate market. Unprecedented at the time, the 30-year fixed rate mortgage has since become the gold standard in markets around the world.

Today, facing a similar collapse, the federal government needs to be equally bold. SAMs are the new deal in housing that our children need.