Research Notes & Special Studies by the Historian's Office
Special Study #1:
Abe Bortz Lecture on the History of Social Security
| This lecture, by the first SSA Historian, Dr. Abe Bortz, was developed as part of SSA's internal training program. Up until the early 1970s new employees were trained at SSA headquarters in Baltimore before being sent to assume their new duties in offices around the country. As part of this training, Dr. Bortz presented a curriculum on the history of Social Security. This lecture, developed in the early 1970s, was the core of that curriculum. It features an extensive overview of social policy developments dating from pre-history up to the passage of the Social Security Act in 1935. |
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| Abe Bortz--SSA Historian
1963-1985. |
Historical Development of the Social Security Act
By Abe Bortz, Ph.D., SSA Historian
The Quest for Economic Security-You might say that the search for security began when Adam and Eve were driven from the shelter of the Garden of Eden.
Man's quest for economic security is as old and as continuous as our records of human life itself. Evidence of it is to be found in the most primitive people's attempts to shift from a hunting economy to settled agriculture. it can be seen among early urban societies in projects to store grain for lean years. It appears in classical antiquity in policies to provide bread for the needy. It is exemplified in the middle ages by the lords assuming some responsibility for the welfare of their vassals. It is visible in early modern times in poor laws, charity workshops, poor farms and the philanthropic activities of religious organizations. In fact, the vital test of the progress of a society is the degree of security it offers its members. How well a society provides for at least the elemental needs of the unfortunate is now and has always been a test of civilization. On the other hand, you know it has not been too many centuries ago when the belief prevailed that the end of life was to serve the Lord and that the Lord could best be served by embracing poverty. Yet possibly even then, even though unconsciously, there was some feeling that the status of those who were dependents was not to be envied, so that a certain sense of superiority developed.
The English Poor Laws & Developments in Europe-Let us go back to the beginnings of the English Poor laws which significantly influenced our own thinking and action toward the poor, the sick, the lame, the blind, dependent children, and the aged.
Prior to the 16th century, the feudal system provided security--although at a low level--for a great portion of the English population, and the church assumed primary responsibility for helping others in need. Under feudalism, the obligation of the serf to work on the manor influenced his right to maintenance. With the breaking up of feudalism, the responsibility both for preventing and for relieving destitution devolved on the community.
In continental Europe the Church was powerful and poor relief remained, until comparatively recent times, almost wholly in the hands of ecclesiastical authorities. In England and Scotland, the Reformation and the dissolution of the monasteries led to the assumption of the responsibility by the State.
There the first steps--in 1531--in the development of a national system of poor relief were for the most part negative and prohibitory--the repression of begging and vagrancy, the regulation of individual almsgiving and the restriction of the movement of laborers from one parish to another; only the aged and impotent could beg and even they were restricted to their own neighborhoods. Relief of the poor was thus left to the consciences of local authorities. However, a 1536 regulation, which some claim to be the first English poor law, made local authorities responsible for the collection of voluntary contributions to be used to employ able-bodied "paupers" and to provide direct relief for others. Poor children were to be apprenticed and all begging was prohibited; relatives were to assume responsibility for the poor of all types. In 1572 a previously local compulsory poor rate or tax was made national in scope.
Of course the very recognition that widespread dependency created a grave social problem tended to reflect adversely on the dependents. An even more important factor was the presence among the group of large numbers of petty offenders, "valiant rogues" and "sturdy beggars," they were often called. The law did single out the "impotent poor" to whom in theory no blame attached and to whom it was proper to give relief; yet it is not too difficult to see how this distinction was sometimes forgotten.
The Elizabethan--Poor Relief Act--or Old Poor Law of 1601--definitely recognized the responsibility of the State for its dependent classes by insisting that each parish--(now the unit of administration)--levy a rate or tax. Such relief was to be collected by overseers of the poor appointed by justices of the peace. It also attempted to classify dependents and to provide specific treatment suitable to the needs of each group--work for the able-bodied poor, almshouse care for the infirm and apprenticeship for children. These arrangements did not work too well, for many of the poor moved or traveled from their own parish to parishes that provided better. So additional restrictions had to be imposed, including residency in the law of 1662.
Under the Elizabethan poor laws, the aged and the sick apparently received better treatment than other poor persons. On the other hand, children were often apprenticed under unsatisfactory arrangements merely to reduce the cost of supporting them on relief. Actually only feeble attempts were made to employ the able-bodied poor.
In 1732 a general act permitted parishes to refuse relief to those who would not enter a workhouse. These workhouses soon degenerated into mixed receptacles of misery, where all classes of paupers, vicious and unfortunate, young and old, sick and well, and lunatics were dumped. Fifty years later--in 1782--it was declared that to receive relief, the able-bodied had to work outside the workhouse.
In 1795 at Speem--and because of, it became known as the Speemhamland System though it was not really a system as such was adopted under which wages of laborers were to be supplemented by relief payments--or an allowance--from the public treasury--if the wages of the laborer did not provide a minimum standard of living. The result: thousands were pauperized and the Nation's expenditures for poor relief increased tremendously. On many parishes this proved to be an almost impossible burden.
At the same time the effects of the industrial revolution were beginning to be felt. So the Speemhamland System was open to even more criticism. It was argued that this was State interference with the individual's function and responsibility; that it was an undesirable influence on the moral character of the population; that it was a subsidy for the landowning class; and that it was a deterrent to labor mobility.
Consequently, a royal commission was appointed in 1832 and from its study came a new law--of 1834--the "NEW" POOR LAW. This enunciated the principle of national uniformity--that is, identical treatment of each class of destitute persons throughout the Kingdom, (2) the principle of less eligibility, which required that the conditions of the pauper be less desirable economically than that of the humblest independent laborer, and (3) a workhouse system which substituted indoor for outdoor relief. Able-bodied workers and dependents were to be granted relief only in workhouses in which they could be closely supervised and the conditions such that they would clearly prefer regular employment. The same was true for poor aged, poor sick and the poor young. The philosophy behind this was a harsh one, namely, that all the poor were poor because of their own failing or folly. The recipients even lost the right to vote and were required to wear special identification to indicate their 2nd class status.
This philosophy and legislation stemmed from the new ideas of the 17th and 18th centuries, along with the economic changes that destroyed almost entirely any concept of dependency not resulting solely from the fault of the dependent. For as economic prosperity became the mark of the Lord's approval and poverty a sign that the victim had incurred the Lord's anger, it followed that those too poor to live without alms, must be sinners in need of punishment. The economic changes which made possible the rise of many of the relatively poor to positions of affluence served to emphasize the idea of personal responsibility; the extraordinary worship of the virtues of industry, of frugality and self-help likewise cast a stigma upon the state of dependency. So this attitude, registered most clearly in the 1834 act, attempted to make conditions under which relief was given as onerous as possible for the recipient.
This view of dependency persisted long after its underlying sanctions had lost their vitality. New sanctions, however, were found in the theory of evolution and its interpretation as proof of the survival of the fittest. Although this idea modified to some extent the emphasis on punishment as remedial action, it did not destroy or modify the belief that dependents were a group inferior to the rest of society.
In identifying dependency with sin or unfitness, some exceptions were made for the "worthy poor"--even by the most ardent advocates of the survival of the fittest--who recognized the possible existence of victims of circumstances. But "worthy" seemed hard to find or were forgotten in the general belief that dependents were less well endowed morally or physically than the independent wage earner.
Beginning in the middle of the 19th century public sentiment began to change and the English Poor Law system began to be liberalized on a piecemeal basis. Some of this came about through a better acquaintance with those who sought aid--in greater part by a professional or semiprofessional group ministering to these people.
This led to a greater recognition of the role played by extraneous circumstances; a realization of the continual shift in composition of the dependent--which was no longer that of a fixed and distinct part of the population. In addition, studies of the independent wage earning group showed that many lived on the edge; a little change could send them into dependency.
Then as a more critical analysis of the workings of the economic system resulted in a knowledge of its wastes and maladjustments and, as the growing realization of the inter-dependence of the individual and society, led to a less complete acceptance of a rigid doctrine of individualism, the old attitudes toward economic dependency became less consistent with accepted common sense.
There was, however, no general renunciation and no conscious adoption of a new attitude. Rather the exceptions which had never been quite overlooked before now began to receive more emphasis. Outdoor relief became more common, separate institutions were created for women, the sick and handicapped, the victims of industrial accidents, children, the aged, and, more visitors were permitted to inspect the almshouses.
Great Britain in 1908 provided an old age pension system for the needy aged on a more humane level, while in 1911 a National Insurance Act provided sickness and unemployment insurance benefits for some workers on a contributory basis.Poverty in America-That was Great Britain, in America, the first English-speaking colonists brought with them the English poor laws. As in England, the care of the poor at first was connected with the church; in fact some of the earliest assistance provided for the support of both the poor and the parson. Copying the English principle--every colony and later, every State, early in its history enacted a law providing that when people had no other means of support, the Government must provide for their care and support. During the colonial period, relief was given to the needy largely in their own homes. It was based on local responsibility, liability of relatives for support of indigent family members, and residence laws restricting eligibility for relief to those who lived in the locality. Auctioning off the care of the poor as individuals or in groups and the indenture of both children and adults were common practices. Basically the community relied upon the household, rather than on public institutions. The poor and the insane customarily were relieved within the family, the orphan was apprenticed to a household, the criminal, after being fined and perhaps whipped, was then returned to his residence. The 18th century community had recourse to institutionalization only when some extenuating circumstance--such as debilitating illness or violent insanity--made no alternative arrangement feasible. These ad-hoc institutions that came into being during the colonial era resembled the household both in routine and construction.
It is true as already noted, that in the early years of the republic, the community always recognized final responsibility for the destitute, but as long as land was free and industry small, the number of persons who were without some means of support remained relatively limited.
It was not until after the adoption of the Constitution (and note the preamble to the Constitution which sets forth 6 purposes for its adoption and the formation of the Government of U.S., one of these being to "promote the general welfare." And among the powers conferred by the Constitution upon the Congress is the power "to lay and collect taxes for the general welfare of the U.S.") it was not until after the adoption of the Constitution that we began to differentiate among the great mass of the poor. The old poor law had made no differentiation except between the "sturdy beggars," who were to be put to work, and "the deserving poor," who were to be relieved without work.
As early as the 1820's the Yates (N.Y.) and the Quincy (Mass.) reports criticized public outdoor relief as a source of dependency and pauperization. Like the British and their 1834 Poor Law, Americans demanded a punitive, limited public welfare system. By now its major resource was the institution and it concentrated upon two categories of dependency--the non-able bodied poor, who required long term custodial supervision and the able-bodied who found work distasteful. The workhouse test would assure that the condition for able-bodied patients would be inferior to that of the lowest paid, but independent laborer. Outdoor relief would be the responsibility of voluntary agencies, whose character building influences would prevent it from degenerating into a dole.
The almshouse, infirmary, asylum, poorhouse, poor farm, county farm, county home--whatever you want to call it, and what it was called differed in various parts of the country--was the first and for many years the only public charitable institution. In the workhouses were thrown together the petty criminals, the insane, the ne'er-do-well, the aged, the infirm, and those only temporarily in need. So that beginning about the time of the Constitution, we came to recognize the need for differentiation among the poor and for treatment of each major group among them in accordance with their peculiar conditions and needs.
In the decades after 1820, America turned with unprecedented enthusiasm and energy to the construction of custodial institutions for the poor, the insane, the orphan and the criminal. Institutionalization now became the first rather than the last resort. The institution and not the household became the preferred setting.
The use of custodial institutions in the United States seems intimately connected to the community's changing concepts of the causes of dependency. It appears that the post-Revolutionary War generations were far more prepared than their predecessors to assign a larger share of responsibility for dependent behavior to the structure of society itself rather than to individual idiosyncrasy, choosing to locate in existing social arrangements the essential causes of the problem. As they viewed it, American society was so open and unstructured--filled with limitless opportunities for achievement and vice--and its members so inadequately prepared to cope with it--since neither church nor school, nor, above all else, family provided the necessary discipline--that poverty, crime and insanity threatened the welfare of the new republic. Concomitantly, Americans during these years also seem to have shared a confidence in the ability to design an environment and construct a setting in which these faults could be eliminated and the causes of dependency thus eradicated. Their diagnosis gave them the confidence to attempt cures and reform and also enabled them to appeal successfully to private philanthropists and State legislators for the funds to construct and maintain custodial institutions. And, understandably, with the beginnings of a factory system, the institutions built after 1820 were more influenced by and more nearly resembled the factory; whereas those built before 1820 more nearly resembled the household.
Veterans & Merchant Seamen-America early made special provisions for two groups in the population--veterans and merchant seamen. In 1789, the Federal Government accepted the responsibility of providing pensions to disabled veterans of the Revolutionary War. The Act of 1790 to regulate the military establishment included pension provisions for the regular armed forces. Since that time the responsibility of the Federal Government to provide a continuing income for veterans disabled in service and for the survivors of such veterans has never been questioned. As a result of pressure generated in large measure by economic need, and in the absence of more general protection for all members of the community, veterans benefits have also been more available--at successively shorter intervals after each war--to veterans suffering from non-service connected disabilities and to their survivors--and where large numbers of the veterans of a particular war had reached retirement age, solely on the basis of age. Provisions for age were first made in connection with legislation affecting Spanish-American War veterans.
As for merchant seamen, it was 1798 when Congress established a system of health insurance for them. Compulsory deductions from seamen's wages were used to establish and maintain hospitals for the care of sick or disabled seamen in the various ports. In 1884, the payroll deduction was replaced by a tonnage tax and later by general revenue financing. The Marine Hospital Service thus established developed into the United States Public Health Service.The Industrial Revolution-Even before but certainly during and after the Civil War, the U.S. began creating a powerful productive economy. By 1890 it was the richest and industrially the most powerful nation in the world. And it was providing, in spite of its limitations, an increasingly rich material life for a majority of people. Yet industrialization took place in such a way as to create extraordinary economic and social problems for 20th century Americans.
Looking only at the economic area--there was a marked decline in competition and the establishment of monopolies. Secondly, the economic revolution created social problems of enormous magnitude--cities that grew too fast, where millions of people lived amid squalor and misery; there existed mass exploitation of women and children and a whole complex of problems caused by unemployment, illness and perilous old age. These were the human costs of rapid and uncontrolled industrialization.
Thus, a major factor in bringing on and influencing social security was industrialization.
For in an industrial economy most workers are employees, primarily dependent on wage income. Such income may be below subsistence needs, particularly if family responsibilities are substantial. In addition, income security is conditioned by the worker's ability to get and to hold a job. In a complex, interdependent, industrial economy the threats to job security are manifold. A general drop in business activity will trigger layoffs, as will changes in consumer preference, product obsolescence, or major technical change. Such unemployment is rarely the worker's fault; it is the result of forces completely beyond his control. Yet by the early years of the 20th century Americans--despite their many problems--were confident they had the ability to set aright the social and economic injustices inherited from the 19th century. Certainly this was reflected in the thinking and action of the leaders of the Progressive movement, a movement that flourished in the first two decades of the 20th century.
A concomitant of industrialization was urbanization, the movement to and the development of large cities and even larger metropolitan areas.
While on a farm, mothers and children could help with the chores and help increase family income, in the city, the mother--unless she worked--and the children until they found employment--were only additional burdens for the wage earner. At the same time, high land costs meant smaller dwelling units and less physical capacity to give care in the home to persons outside the immediate family group.
The degree and speed of urbanization was reflected in the shift of our population from rural to urban:
| 1880 |
1890 |
1900 |
1910 |
1920 |
1930 |
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| Urban | 14,129,735 | 22,000,000 | 30,000,000 | 42,000,000 approx. | 54,000,000 approx. (for lst time more) |
69,000,000 approx. |
| Rural | 36,026,048 | 41,000,000 approx. | 46,000,000 approx. | 50,000,000 approx. | 51,000,000 approx. (20 million non-farm 31 million farm) |
54,000,000 approx. (23.6 million non-farm, over 30 million farm.) |
| Age 65 & Over (in millions) |
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| 1880 | 1.7 |
| 1890 | 2.4 |
| 1900 | 3.0 |
| 1910 | 3.9 |
| 1920 | 4.9 |
| 1930 | 6.7 |
| 1935 | 7.8 |
And note what had happened to life expectancy in the U.S.: Whereas in 1900 it was 47.88 (males) and 50.70 females; By 1929 it was 57.71 (males) and about 61 for females.
Another important facet in the development of industrialization and urbanization were the vast numbers of immigrants who came to these shores. And they were most important, for it was the immigrant along with the Negro who provided the labor force the unskilled labor in the basic industries that helped make for the vast development of our industrial growth.
Between 1860 when U.S. population was 31 and one-fifth million and 1900 when U.S. population was 76 million, some 14 million immigrants arrived here. In that year, 1900, 10 1/2 million Americans had been born in Europe and 26 million were of foreign or mixed parentage. Between 1900 and 1915 - in but 15 years, as compared to the previous 40 years, 14 1/2 million immigrants arrived. All told between 1901 and 1930 - 18 1/2 million immigrants arrived.
Alongside industrialization and urbanization, there was also an agricultural revolution which was reaching new heights. An important factor was mechanization. With mechanization, based in large part on the use of interchangeable parts, the United States between 1870 and 1900 rose to the leadership of the world in the manufacture of agricultural machinery.
As a result of mechanization and other improvements, crop production per male worker increased more than 100% between 1850 and 1930. Along with this went a rapid movement of people off the land into the cities - because of depression on the farm beginning with the 70's, 80's, and 90's and into the 20th century--and for the real and supposed advantages of city living.
In the vanguard of the movement to palliate the grosser aspects of American life, the miserable living conditions of the city masses, the exploitation of women and children in industry and the degradation of submerged, unprotected workers, were priests and ministers who worked in the slums. However, a separate class of social workers, usually employed by charity organizations and settlement houses emerged in the 1890's. They constituted a growing and vociferous element in the American society after 1900. They made intensive surveys of labor conditions, causes of poverty, and means of alleviating social distress. As time passed, moreover, they became departmentalized. Some concerned themselves with care of immigrants, some with problems of labor, some with juvenile delinquency.
The leaders of the social justice movement by 1900 had gone far beyond the concept of private amelioration and were beginning to evolve ambitious new schemes of social salvation. What they now envisaged was nothing less than the systematic use of State police powers to accomplish the rearrangement of economic relationships. In other words, State Government, and later the Federal Government, should enter the battle to protect the weak - first by legislation based on investigation by social workers, next by employing social workers as agents of enforcement. This, of course, was another aspect of the Progressive movement of the 20th century.
The charity organization movement achieved a large amount of success in discrediting public welfare and inducing counties and municipalities to abolish outdoor relief. Its leaders condemned public relief or assistance as incompatible with biological and economic law as well as social stability. Only voluntary philanthropy, which combined relief with careful investigation and diagnosis of each case - could prevent widespread pauperization of the working population. Public relief was considered as superfluous; private agencies could satisfy all relief needs of the State without the necessity to levy taxes - which anyway competed with fundraising efforts. Public relief was not only unnecessary, the advocates of the charity approach argued, but inordinately expensive and a source of graft and corruption, for Government officials could afford to be generous with other people's money. Besides, the use of tax money hurt capital development.
In addition, it was argued those accustomed to relief degenerated into permanent paupers, whereas the private charity investigator who visited the poor in their homes, created a personal tie with each of these people.
From the viewpoint of private charities, there was a clear and easy division of the field - the public authorities - to maintain the public institutions, and the private societies to give the family relief.
The concept of a Bureau of Public Welfare originated in Kansas City in 1910. Really this was a revolt against a limited, negative concept of public welfare. Through centralized efficiency, attained through scientific research and the use of trained personnel, and efforts to prevent dependency, the Bureau of Public Welfare, it was contended, would redress the lack of power and prestige between the public and private sectors. Here was recognition that poverty was often attributable to social inequities rather than personal defects. It was more consistent, advocate of the B.P.W's argued, it was more consistent with democratic principles, that the poor should seek assistance from the city government than from philanthropies supported by the rich. The public social need should be met by the democracy, that is, by the people in their corporate capacity (this can and would be shifted to the national stage)--besides, the city had more resources, financial, intellectual, organizational -- than the voluntary agencies. Also, the idea of a Bureau of Public Welfare was associated with efforts to professionalize the public welfare sector.
Workmen's Compensation-In the drive for social justice, a new attitude began to reveal itself in trying to mitigate the evils of industrialization. One of these was in the area of safety. After the Civil War, numerous States attempted to establish--by statute--minimum safety standards for various types of industrial workers. In 1877, Massachusetts, which pioneered in many fields of labor legislation, passed a bill requiring employers to set up protective devices to safeguard workers around elevators, machinery, and hoists. By 1893, 14 States and territories had adopted some form of safety legislation, and by 1917, most of the others had followed suit. In this same area studies of workmen's compensation legislation in Europe were published by the United States Bureau of Labor in 1893 and 1899. Germany had enacted an industrial accident insurance law in 1884. Other European countries followed suit.
In the United States the common law rules relating to industrial accidents still governed the payment of damages. Briefly stated--under these common law rules, the injured employee was not entitled to compensation if he had willingly assumed the risks of his job, if he was himself negligent, or if his injury had been caused by a fellow worker's negligence. Moreover, in most cases the injured employee had to sue for damages and prove that he had suffered as a direct result of his employer's negligence.
A workmen's compensation bill introduced in New York in 1898, while Theodore Roosevelt was Governor, and one introduced in Illinois in 1905 were defeated, in considerable measure because of the opposition of the trade unions, which were fighting at the time for more stringent employer liability laws. The passage in 1908 of a Federal Compensation Act covering civil employees of the Federal Government provided stimulus to the movement for State laws. (It is worth emphasizing here that workmen's compensation was the earliest social insurance program in the United States and the only one in operation before the 1930's.) About this time, the A. F. of L. reversed its earlier position and began to push for workmen's compensation legislation. Earlier, to Gompers and the labor movement - workmen's compensation insurance was an insult to the labor movement, for it implied that it - the labor movement - had failed to meet the economic needs of workers. Just pay them enough, they had argued earlier, - they, the workers, will take care of themselves. On the other side of the fence, the National Association of Manufacturers favored workmen's compensation but argued for employee as well as employer contributions
The newly-organized American Association for Labor Legislation (organized in 1906) gave strong support for the workmen's compensation movement, too. It was established as a section of the International Association for Labor Legislation. Among its leaders were John R. Commons and Richard Ely from Wisconsin, and I.M. Rubinow and a whole host of economists, social workers, progressive business leaders and others from all walks of our society. John B. Andrews - who was a student of Commons' became the A.A.L.L's Executive Director - in 1908 and served in that position until his death in 1943. He was to become the leading influence in this organization. Although the A.A.L.L. had but 200 members in 1908 - its influence was far greater than that indicated by its membership rolls. The organization concentrated on the issue of accident compensation and industrial safety, unemployment and social insurance. It assisted in the drafting and enactment of many early compensation laws; subsequently, it goaded States into improving their existing legislation. It also provided model bills to be introduced into State legislatures.
At first many in the United States feared our constitution would not permit the compulsory European type of workmen's compensation legislation, so an "elective" type of compensation law was enacted. This gave both the worker and his employer the right to choose between the newly-created compensation system and the old damage suit arrangement.
Several early laws were declared unconstitutional by the State courts. The first workmen's compensation law to be upheld was enacted in 1911 in Wisconsin.
By 1920, workmen's compensation laws were in effect in 43 States and in Alaska and Hawaii, plus a system for Federal employees already noted.
Taking an overall view of workmen's compensation, it should be emphasized that business implications proved more influential in shaping it than considerations of equity and social expediency. The injured worker rather than the employer or industry, continued to bear most of the costs. European experience offered little proof that compensation had reduced accident rates, absolutely or relatively. The theory of compensation frankly recognized that all accidents could not be prevented. Instead, they were an inevitable accompaniment of economic activity.
And the influence of voluntarism shaped workmen's compensation. Private insurance companies were authorized to serve as carriers in competition with each other on State funds - and merit rating systems were introduced as a stimulus to accident prevention. Thus, a collective public institution was partly administered through voluntary organizations and competitive pressure.
Mothers & Children-
After 1900 several States also passed laws to safeguard women in industry. As late as 1896, only 13 States had attempted to limit by statute the hours worked by women, and only 3 States had enacted laws that were capable of enforcement. For some years, adverse court decisions retarded the adoption of further legislation, but after 1908, when the Supreme Court ruled favorably on an Oregon statute, progress was rapid and marked. From 1909 to 1917, 19 States for the first time adopted legislation dealing with women in industry, and 20 States strengthened existing laws. Although these laws differed from State to State, the most progressive States generally limited a woman's work day to 8 hours, forbade night work for women, and sought to protect all women in industry regardless of occupation.
Turning to children, beginning in the 1860's and 1870's, States launched vigorous efforts to remove children from mixed almshouses. Foster care came in by 1900, that is the practice of putting children into foster homes - thereby replacing asylums. The movement against institutions was aided by the programs carried out by Children's Aid Societies. These supported the idea of foster care and of differential child care. Two other developments indicated, too, the different attitude and philosophy toward child care. The beginning of juvenile courts, starting in Chicago in 1899, combined probation, separate hearings and special judges in dealing with youthful offenders. Also, getting its start in Chicago, in 1909, was child guidance, - the establishment of the Juvenile Psychopathic Institute. Linked with a Juvenile Court, the Institute, thus tied in expert diagnosis of the mental and physical condition of delinquents. On a broader scale this became the mother's pension movement, which combined two closely related principles of progressive child care - individualization and the superiority of the home to the institution.
This Mothers' Pension Movement -- cash payments to widows with young children to enable them to care for their children in their own homes, and sometimes called widow's pensions, mother's aid and mother's allowances and in our own day aid to dependent children - was part of the Progressive era in its awareness of the environmental origin of poverty and the necessity for State intervention to insure social and economic justice. It also had roots in the organized social insurance movement, which embodied the principle of public income guarantees. The Mothers' Pension Movement emerged simultaneously with the Bureau of Public Welfare (B.P.W.) idea, which as noted earlier, attempted to discredit the philosophic division of labor proposed by voluntary agencies and redefined the governmental welfare function in an industrial urban society.
However, mother's pensions coupled the old pauper laws with the principle of State control, which had been adopted for the care of the insane and of other special groups. Application for a pension was presumptive evidence of an inadequacy which differentiated the family from the community mainstream and justified intervention in the clients' personal life. Mother's pensions eliminated neither the means test nor the wide administrative discretion characteristic of ordinary poor relief. The willingness and ability of local jurisdictions to pay, rather than need, determined the substance of the program.
Interest in the welfare of the many children left orphaned, abandoned, or taken from parents who could not support them, was crystallized and given direction by the first White House Conference on the Care of Dependent Children, called by President Theodore Roosevelt in 1909. The conference gave momentum to a nationwide campaign on the part of social welfare groups and women's organizations for mother's pensions. Relatively little organized opposition was offered this campaign, for the still widely accepted association of poverty and dependency and moral delinquency was less easily applied to children. Besides, there was widespread interest in a more constructive (and less costly) solution than institutional or foster home care. The first Statewide mother's pension law was enacted in Illinois in 1911, 18 States had enacted such laws by 1913, and 39 States by 1919. With few exceptions, assistance was limited to children up to 14 or 16 years of age. By 1934, a year after the New Deal began, there were Mother's aid laws in 46 States, the District of Columbia, Alaska and Hawaii. Thus, dependent motherhood had come to be distinctly recognized as a problem of mass poverty which could not be relegated to voluntary charity. Limited at first to orphaned children, most of the laws were extended to provide aid also to children where fathers had deserted or who were without support for other reasons. The majority of the laws, however, were permissive rather than mandatory on the local units; in all but a few States the costs were borne entirely by the counties or towns, and in many areas grants were never made or were entirely inadequate.
Another aspect of society's concern with children was directed toward control of working conditions. In the first decade and a half of the 20th century, the majority of the States adopted laws that raised the minimum age of children in industry, excluded children from occupations that were hazardous to either their physical or moral well being and limited their working hours. In 1900, whereas 24 States and the District of Columbia had no minimum-age law for factory employees, 9 years later all but 6 States had adopted such legislation.
Social Insurance-
Social insurance developments in Europe, though not widely known, did influence the thinking of persons concerned with social reform in this country. Of significance is: How in France, Germany and Great Britain, there was a patchwork development. This was true elsewhere in Europe, too. It applied to the compulsory or non-compulsory features; to differences in categories of workers eligible; to proportions paid by whom -employer, employee, and Government; to regulations which differed from country to country; to the amount of benefits and to their effects. It was true of sickness insurance, workmen's compensation, old age pensions, in fact, social insurance, in general.
In Germany, Bismarck took advantage of the expanding mutual aid movement there (among trade unions - friendly societies, some few employers) and made acceptable the thesis that compulsion was inevitable, that State control of social insurance was indispensable and that State subsidies were desirable.
Germany enacted a compulsory sickness insurance law in 1883 (Workmen's compensation in 1884), followed by Austria, with a compulsory sickness insurance law in 1888; Hungary in 1891; Great Britain and Russia did the same in 1911 (Great Britain's workmen's compensation had come in 1880; the Netherlands enacted a compulsory sickness insurance law in 1913;
France did not enact a compulsory sickness insurance law until 1930, yet in 1905, it had approved voluntary unemployment insurance.
In the case of Germany and its sickness insurance law, 2/3 of the contributions were from the employer and 1/3 from the employee.
In 1889, Germany enacted compulsory old age insurance -which included invalidity insurance. Here contributions were split between worker, employer and Government. Yet, to emphasize the patchwork development, Germany did not have unemployment insurance until 1927. Other countries that enacted old age insurance were Luxembourg and Austria in 1906, France in 1910, Rumania in 1912, and Sweden in 1913.
As already noted the compulsory method spread from Germany to countries under German cultural influence. While it met with success in these States, there was considerable resistance to the method of compulsion in the Latin countries of the continent and in Great Britain.
The two most important systems -- the German and the French -- were similar in their efforts to cover the working class population, to combine old age and invalidity insurance, and to subsidize premiums through employer contributions and a State supplement to each matured pension.
They differed in their method of computing premiums, the amount of pension and administrative arrangements.
Denmark, in 1891, was the first nation to institute a national old age pension system. In 1897, France adopted an optional system of State subsidies to departments or communes which provided pensions; (it was followed in 1910 by a compulsory act). England established its national pension system the same year, climaxing three decades of discussion and yet not until 1925 did it add a system of contributory old-age insurance.
By 1911 -- despite constraints of voluntarism and the work cult England established an economic security system no less compulsory than the German. Following the return of the Liberal Party to power in 1906, Lloyd George and Winston Churchill became committed to social insurance as a means of advancing their political fortunes, while coping with the social problems of these times. True, they were unencumbered by the Federal and constitutional obstacles which existed in the United States.
As for unemployment insurance, Great Britain enacted such legislation in 1911. Incidentally, Winston Churchill also played a key role in the enactment of unemployment insurance. Between 1919 and 1927 Italy, Luxembourg, Austria, Australia, the Irish Free State, Bulgaria, Poland, Germany and several Swiss cantons followed suit.
All of this legislation and the experience gained from it were observed and studied by Americans interested in getting such laws enacted and systems established in this country.
I believe it can be said without too much fear of contradiction that the concept of social insurance in America had its real beginnings in the 20th century -in a wage centered, industrial economy. Social insurance was proposed as an alternative to the existing but inefficient system of economic assistance. Operating independently of the poor law, it would respond predictably and adequately, said its proponents, in the event of an individual's exposure to the long and short term risks which interrupted income flow--accident, sickness and maternity, old age and invalidity, unemployment or death resulting in impoverished dependency. So the social insurance movement tried to transfer the function from the private to the public sector and provide a new definition of the role of Government in American life.
Why was social security so long in coming to the United States? Federalism does complicate the whole issue in the United States, yet, the Imperial Germany of Bismarck was also a Federal State and there it had not been much of a barrier to hurdle.
Political and social factors contributed to the lag in the United States. By the beginning of the 20th century, the concept of individualism had become so well entrenched that any social action seemed a threat to personal liberty. Voluntary effort was regarded as more appropriate and more in accordance with national character.
Social insurance proposals, therefore, were not considered simply in the light of the needs they served, but as an entering wedge in the process of extending State power that would ultimately curtail individual freedom.
Yet, as we know today when enacted, social security neither damaged the liberty of the citizen nor eliminated the voluntary aspects of community action. Instead, it provided a support that invigorated both.
But earlier in this century, social insurance had to contend with the idealization of voluntary institutions which are deeply rooted in the United States. Voluntary associations performed the function of mediating between the individual and mass society and Government.
Private charitable, philanthropic and mutual aid societies flourished in the context of voluntary association. They were often tied to sectarian and ethnic group aspirations and they helped mediate between the immigrant and the strange, often hostile, American environment. It led to the assumption by private groups, of responsibility for collective action which in other countries was delegated to Government or elite groups. It was in the broadest sense an alternative to politics and governmental action. It made it possible for groups of all kinds to exert an influence and seek their distinctive goals without resort to the coercive power of Government. Thus, it served a number of indispensable educational, social and moral ends.
Social insurance, it was argued, places an excessive burden on industry or the state, or both. It results in demoralization, lack of foresight, destruction of the habit of saving and even deliberate malingering. The latter is especially true for unemployment and sickness - for these may more easily be simulated than industrial accidents, old age or widowhood.
Besides, social insurance, it was argued, was an alien importation - if not a foreign conspiracy, from Germany and even had Marxian taint. In addition, it was a threat to industry established funds, trade union benefit funds and fraternal, mutual and commercial insurance, went the argument.
Social insurance advocates tried to point out that compulsory insurance was inevitable. Voluntary groups had been strong in Europe, yet there they, too, were forced to turn to compulsory insurance to help solve their problems.
Social insurance proponents interpreted the compulsory factor in social insurance in a technical, instrumental sense simply as a device to maximize coverage and cost distribution, a means to protect those who most needed but could least afford insurance. Critics, however, invested the term with moral attributes.
Another facet inhibiting the movement toward social security or social insurance came from our pioneering tradition-- the unusual emphasis placed upon individual initiative and self-reliance -- the unprecedented accumulation of surplus wealth. So long as the large reserves of surplus wealth could be canalized into social services, there existed neither the demand nor the inclination to develop the agencies of public welfare.
Moreover, the growth of centralized public welfare service was prevented by the existence of a high degree of local government autonomy and by the early suspicious attitude of social workers toward governmental relief and particularly outdoor relief, a position traceable in large part to the corruption of American politics and to the lack of opportunity for trained social workers to participate in and direct the Government services.
New organizations and leaders in the 1920's, too, aided the movement for social justice. Among these were the Fraternal Order of Eagles, I.M. Rubinow and Abraham Epstein. The Eagles established many local committees, carried on legislative and publicity campaigns and exerted grass roots pressure and offered legislation that was introduced in Montana, Rhode Island, Ohio and elsewhere.
Isaac Max Rubinow was an outstanding if not THE outstanding American theoretician on social insurance. He was the author of several outstanding works in the field.
Abraham Epstein served as research director of the Pennsylvania Commission on Old Age Pensions for 1920 and except for 1922-1923, when he was employed by the Eagles, worked for the Pennsylvania Commission on Old Age until 1927. In that year with the demise of the Pennsylvania Commission, he organized the American Association for Old Age Security which broadened its program in 1933 and became the American Association for Social Security. (So far as we know, this is the FIRST TIME the term social security was really used in modern times.) Mr. Epstein, too, was the author of several important works in the field of social insurance.
We might note here an acceptable definition of the term "social security" might be this: a specific Governmental program designed to promote the economic and social well being of individual workers and their families through providing protection against specific hazards which would otherwise cause widespread destitution and misery.
Unemployment Insurance-
Turning to another area, unemployment insurance emerged as an issue in American social politics during the 19th century. Agrarianism, the movement led by labor radicals from the 1870's to the 1890's were both associated with numerous proposals for Government public work programs. These were significant in their emphasis upon Federal responsibility, and in their implication that society owed citizens the right to work.
Relief agencies and charity organization societies endorsed no such principle as the right to work. Even in a depression, relief had to be restricted and controlled, not extended through vast public expenditures. The 1890's, like previous depression eras, witnessed a proliferation of public and private, regular and emergency, relief programs. The period was distinctive for its experiments in work relief, as a supplement to relief in money or commodities. However, it was argued by many leaders, work relief, if offered, should not be allowed to compete with the private market.
Fear of the pauperizing effects of relief was intensified by an increase in the army of tramps, vagrants and beggars. For their numbers swelled in the 1890's with long strikes adding to the total. Also, talk began to be heard of the effects of heredity and eugenics as factors affecting those who were unemployed.
After the turn of the century, it was discovered that feeblemindedness constituted a source of poverty, pauperism and crime.
In trying to understand an alternative toward unemployment relief, remember, we were a people who drew many of our economic virtues from the mores of an agricultural economy. On the farm and in the village, the sources of minimal living were ever present and usually cheap. Thrift was closely reflected in physical action and tangible resources-- a well kept farm and house, and a cellar well stocked with food. The man who faced want had failed to exercise thrift and since labor was usually scarce, he could trade work for food with those who were more farsighted.
In 1914 the American Association for Labor Legislation sponsored two national conferences on unemployment at a time when the United States was hit by a recession.
1. It proposed public employment exchanges to help prevent unemployment.
2. A plea for regular and emergency public works programs in periods of economic decline.
3. And, this was its dominant theme of the 1920's, The American Association for Labor Legislation called for the regularization of industry.
4. It proposed social insurance as a technique to control unemployment.
Both the United States and the British launched public employment exchanges-- United States on the State level actually as far back as the 1890's, and during World War I, and the British even earlier. Yet, the idea of labor market adjustment through public employment exchanges proved a failure. In both countries employment offices came to function as adjuncts to unemployment insurance - rather than the reverse as anticipated.
So, by the 1920's -- it was recognized that prevention would not be achieved through a national public exchange system. Attention turned to public works contracts as a countercyclical device. It was estimated that by 1928-1929, public works amounted to 35% to 40% of all public and private construction and totaled some 3 1/2 billions dollars.
In retrospect the public employment and public works ideas were significant for their emphasis upon cooperative Federal-State arrangements. Like the vocational rehabilitation and maternal and child care programs of the 1920's, they helped familiarize Americans with techniques adopted for the relief and social security programs in the 1930's.
As just noted, employment stabilization emerged as the leading technique of prevention in the 1920's. Job security through efficient industrial management was proclaimed as the outstanding American contribution to the theory and prevention of unemployment. Yet regularization proved to be the exception rather than the rule in American business in the 1920's.
A few companies and several union plans paid unemployment benefits. Some 106,000 employees in 1928-1929 were covered by voluntary unemployment insurance plans; 1/3 of these depending on union rather than on company benefits. By 1931, during the depression employees covered under these plans was only 116,000.
Unemployment insurance was discussed in Congress during the 1920's, however, unemployment insurance did not become a real issue until after 1930. One important factor, hindering its development was the position taken by organized labor. The A.F. of L. had long opposed compulsory unemployment insurance. This was inherent in its rejection of compulsory insurance for any risk except work-connected injuries or disease. Even as the depression began to swell the ranks of the unemployed, resolutions endorsing unemployment insurance that were introduced at the 1930 and 1931 conventions of the A.F. of L. were opposed on the grounds that such legislation would tie workers to their jobs, open the door to discrimination against union members and be less effective than limitation of hours or work sharing. In 1932, however, with millions of workers unemployed, the A.F. of L. finally reversed its position and endorsed compulsory unemployment insurance. The report adopted by the convention indicated that a single national system would be preferable, but to avoid the constitutional question, urged State legislation which met specified standards.
Unemployment compensation measures were introduced in a number of States before 1935, but enactment was blocked by fear on the part of individual States of putting their employers at a competitive disadvantage. A device to overcome this difficulty was embodied in a bill introduced in Congress as the Wagner-Lewis Bill in February 1934, which provided for a Federal excise tax on employer payrolls, to be offset by employer contributions to State unemployment insurance funds. It remained stalled in Congress.
Meantime, in the States an unemployment compensation law had been introduced in the Wisconsin legislature at every session since 1921 - the Huber Bill, which had been devised by John R. Commons - was finally passed in 1932, as the Groves Act. Groves was also a former student of Commons and Professor at Wisconsin. A major role in formulating this piece of legislation was played by Paul Raushenbush and his wife, Elizabeth Brandeis (daughter of Supreme Court Justice Louis D. Brandeis.) This law was designed on the workmen's compensation analogy - to give employers an incentive to stabilize employment by setting up individual reserve funds for each employer, with no pooling of risks, and with exclusive employer financing.
Delayed for some time, Wisconsin's Groves Act finally went into effect in July 1934. Contributions equaled 2% of payroll for the first two years and continued until an employer's reserves averaged $55 per employee; at which time the contribution rate then dropped to 1% until the reserve averaged $75 per employee. Then contributions terminated. This part was limited to businesses with 10 or more employees. No one making over $1,500 a year was covered. There was a two-week waiting period with benefits running for but 10 weeks and with a $5 minimum and a $10 maximum. Requirements called for a 2-year State residence and 40 weeks of employment to qualify.
The Wisconsin plan had political leverage in comparison to the pooled insurance system - to which reference will shortly be made. It possessed an incentive to prevention, appealed to businessmen's competitive instinct and was compatible with the profit motive in a free enterprise system.
Turning to its chief competition, in 1932, the Ohio Commission on Unemployment, reflecting I.M. Rubinow's thinking and philosophy, proposed a pooled unemployment insurance fund jointly financed by employers and employees. (Organized labor opposed the employee-contribution.) Unlike the Wisconsin Plan, the Ohio plan called for a $15 a week maximum (as against $10 for Wisconsin) for 16 weeks (as compared to 10 for Wisconsin). A merit rating provision was included in the Ohio proposal, allowing employer contributions to range from 1 to 3 1/2%. However, it had not been enacted into law by the time the Social Security Act was passed in August 1935.
The controversy between the proponents of these two types of legislation had much to do with the subsequent adoption of a Federal-State rather than a national system of unemployment insurance.
The Problem of the Aged-
The problem of the aged became a more important one in the industrial age because, among other things, the capacity of the aged for self-support was being undermined. Changes in economic organization and family structure had relegated them to a marginal status in the modern industrial society. Modern industrial techniques had hastened economic superannuation by using up human energy at greater speed within a shorter period of time. No longer was there this patriarchal family, as in the primitive agricultural community when one large family existed and where all starved or prospered together.
Lacking both authority and a significant economic function, the aged were also affected by the spatial mobility of the modern nucleated family. For the economic system depended on this mobility, but it loosened home ties and family solidarity in the process.
Thus the aged could no longer rely upon the institution of the family as a buffer which had protected them against dependency in pre-industrial societies. Yet, protection through voluntary thrift or insurance was more impractical than in the case of any other risk.
In contrast to other areas, where preventive efforts lessened risk, improvement in hygiene seemed to aggravate it rather than relieve it. Old age was a long term rather than a transitory condition. So the amount of savings required was more than most workers could afford. Nor could anyone time, or predict, the duration of old age. Besides, the very remoteness of the risk tended to discourage saving.
Would children support their aged parents? In all too many cases, no, for many workers could barely support their own families. And as for those aged without children, this had no relevance at all.
Since the end of the 19th century, the increasing number of industrial workers left without an income in old age had been a matter of growing public concern. In the 1890's a number of trade unions established homes for their aged members and shortly afterwards began to experiment with retirement benefit systems. About the same time, first the railroads, then a few of the large corporations, set up private pension plans for their employees. By 1929, railroads, public utilities, the metal trades, ore, banking and insurance, along with electrical apparatus and supply industries, accounted for more than 80% of the employees covered.
It was estimated that in 1930 only 3 1/2 million persons were covered, and by 1932 about 140,000 persons were receiving such industrial pensions, with less than 15% of all wage and salaried employees being covered.
Keep in mind that the industrial pensions were often poorly funded -- most were discretionary, implying a moral rather than a legal obligation on the part of the employer.
Jumping ahead a bit, it should be noted that a special national retirement system for railroad workers, which, in effect, took over the pension obligation of their railroad companies, was enacted in 1934 but declared unconstitutional the following year. A revised act, designed to overcome the objections raised by the Supreme Court was adopted in August 1935.
A bill introduced in the Massachusetts legislature in 1903 was probably the first to offer assistance to the aged on a State level. It did not pass. The general attitude, here as in most of the United States, however, was that the thrifty and worthy did not become destitute and that to take from children the obligation of supporting their parents would destroy the family. Before the 1920's Arizona was the only State to enact an old age pension measure, and, since it was declared unconstitutional, an Alaska pension law of 1915 was the only one in operation until 1923.
In the 1920's, old age pensions became a leading issue. A number of State survey commissions were set up--with the Pennsylvania commission of 1920-1927 the first to take a clear-cut position in favor of State assistance to aged persons without responsible relatives. Between 1923 and 1933, the majority of States enacted old age pension legislation, with Pennsylvania, Montana and Nevada taking the initiative in 1923. However, Pennsylvania's law was declared unconstitutional in 1924, and Nevada's measure was converted from a compulsory to an optional one. Other States did follow soon after and, in summary, by 1928, 11 states had enacted pension laws and between that year and 1933 -- more were added, making a total of 28 States, with 23 mandatory on the localities and 15 that provided State financial aid.
The measures in effect up to 1929 were optional and locally financed. Like similar mother's pension legislation, they were either inoperative or defective. Many States had long residence requirements and other restrictive eligibility conditions. By 1932, only 102,000 persons were receiving pensions with $22,000,000 the annual cost of assistance.
A trend toward mandatory laws with State financial aid to the localities began in 1929 with the enactment of such a law in California.
On the federal level it is true that old age pension legislation had been introduced in Congress earlier than 1920. Representative William B. Wilson of Pennsylvania (later to become Secretary of Labor) prepared a bill in 1909 providing for pensions of $120 a year to the aged who satisfied the property or income qualifications. The bill was never reported out of the Committee on Military Affairs. Interesting enough the A.F. of L. endorsed this measure.
In 1911, Congressman Victor L. Berger, a socialist from Wisconsin, introduced a bill which provided for pensions up to $4 a week for those aged whose income was less than $10 a week. It, too, failed but it did attract attention.
Pressure was exerted and legislation was proposed for a retirement annuity plan for Federal workers. Strong agitation began to make itself felt in 1914 and success was finally achieved in 1920-- with the Sterling-Lehlbach Act. It covered some 300,000 Federal employees and its passage added impetus to State measures.
On the State level, major growth in the development of State and municipal pensions for policemen, firemen and teachers occurred after 1910. Massachusetts, in 1911, was the first to establish a compulsory retirement program for State employees. By the late 1920's municipal retirement systems for firemen and policemen were practically national, and teacher's pensions were common. As time passed and experience was gained, there was an increasing preference for contributory systems and more concern shown for actuarial soundness.
A shift in the content of proposed Federal legislation occurred in the late 1920's and early 1930's. A measure introduced in 1927 by Representative William L. Sirovich of New York, which had been prepared by the American Association for Old Age Security, substituted the Federal grant-in-aid technique for direct Federal pensions. A similar bill was introduced in 1932 by Senator Clarence Dill and Representative William Connery, Jr. It was reported favorably by the House Labor and Senate Pensions Committees, but it failed to come to a vote before the congressional session ended. These proposals and the precedents established in Vocational Rehabilitation and maternal and child care during the 1920's helped pave the way for the Federal categorical assistance programs later included in the Social Security Act.
It should be emphasized that there was never, prior to the 1930's, any serious consideration of compulsory, contributory, old age insurance in the United States. The pension approach was more expedient, it avoided the onus of compulsion, was simple to administer, and it bypassed the problem of workers already retired or nearing old age. As an assistance rather than an insurance program, pensions could be made conditional and work incentives could be protected.
Health Insurance-
Now let us turn to another area-- health insurance. Here the American Association for Labor Legislation, encouraged by the rapid success of the workmen's compensation movement, and influenced by the adoption of health insurance in Germany in 1883 and Great Britain in 1911, and in other foreign countries, turned in 1913 to the promotion of health insurance. Between 1915 to 1920 --11 State commissions studied the subject of health insurance, 6 favored compulsory health insurance, 5 issued majority reports against it. Health insurance bills, based on a model developed by the American Association for Labor Legislation, with the cooperation of a committee of the American Medical Association, and providing both cash benefits and medical services, were introduced in Massachusetts, New Jersey, and New York in 1915 and in 12 States in 1917. In spite of the early sweep of the movement, none of the bills was enacted into law. The closest that came to enactment --New York State-- was passed by its Senate in 1919, but it failed in the lower house.
The health insurance movement was vigorously opposed by the commercial insurance companies, particularly those writing industrial insurance, by employer organizations, by the American Medical Association after 1920, and in effect by the A.F. of L. For although a number of international unions and State Federations of Labor supported health insurance, Samuel Gompers and a majority of the Executive Council of the A.F. of L. preferred the goal of higher wages through economic action.
The health insurance movement was hastened to collapse by the strength of the post-war reaction against all measures of social reform, especially those labeled "made in Germany."
The issue of health insurance transcended the distribution of cost or tax burdens, for it entailed innovations in the financing and organizing of medical services, changes in the status of social responsibility of the medical profession and a substantial enlargement of the power and welfare role of Government.
One special public health program-- Federal grant of funds to the States to help support child health centers in rural areas (Sheppard-Towner Act)-- was passed in 1921, largely the result of the stimulus given by the Second White House Conference on Child Welfare, called by President Wilson in 1919. All but 3 States were receiving grants under this act in 1927, when, partly as a result of opposition to the program by the American Medical Association, the Appropriations Committees of Congress announced their intention of making no further appropriations after the following year.Though health insurance did not become an important public issue in the 1920's, the rising cost of medical care did cause concern as to the ability of low income families to pay for medical services. In 1927, a small group of leaders in the field of medicine, public health, and the social sciences, organized the Committee on the Costs of Medical Care to study the economic aspect of medical services. The Committee issued its final report in November 1932, recommending a number of changes in medical practice and medical education, the strengthening of basic public health services and group prepayment of the costs of medical care, either through insurance or taxation, or both. A majority of the members of the Committee signing the report indicated a preference for voluntary insurance, preferably linked with group practice. The others urged the immediate adoption of compulsory health insurance. Eight physicians and one layman issued a minority report (later approved by the American Medical Association) opposing both voluntary and compulsory medical care insurance but stating that if any form were adopted "the sensible and logical plan would be ... a compulsory plan under Government control." This report, and the research studies of the Committee, led to a renewed interest in the problem of prepayment of medical care.
One other group that should be mentioned was made up of the blind. They early gained special recognition when State laws authorizing specific pensions for them were adopted in Ohio in 1898, in Illinois in 1903, and gradually thereafter in a number of other States. The programs enacted related to primary education and vocational training (principally for children). Workshops were established for adults, extending to them medical assistance and help in procuring employment and giving them cash grants. By August 1935, 27 States had laws providing for such cash payments.
The Great Depression-
To go back to the depression itself-later generations have no first hand experience of the depths of despair into which the depression, beginning in 1929, had thrust the nation, and the excitement and eagerness with which people greeted the New Deal. You know many critics not only have denied that anything constructive could have come from the New Deal but they have even succeeded in creating the impression in the prosperous years since 1945 that the depression really did not amount to much.
How bad it was is worth remembering, since this is a means of gauging the enormous pressure for change.
As for the causes of the depression underlying it all:
1. Among the most important was the unequal distribution of income -- wages through the 20's remained fairly stable, profits continued to rise and the economy in large measure depended on continued investment by the wealthy.
2. Our trade balance following World War I, we became a creditor -- rather than a debtor -- nation. Countries owed us more than we owed them a huge export trade balance -- we were exporting much more than we were importing. Yet continued balance depended on continued loans by United States investors. When this began to decline, as it did -- POOF!!!
3. There was -- as John Kenneth Galbraith put it --considerable corporate thimble rigging, shenanigans.
4. The stock market boom -- The stock market represented confidence or the lack of it-- in the economy --Yet the stock exchange was not policed, controlled, etc. (Harding died owing his broker $180,000.) So you could hardly look for controls with that kind of a President. There was also considerable margin-buying -- which would help upset the apple cart all the sooner, once things started going bad.
5. Our weak banking system--It was unable in time of crisis or emergency o expand or contract--despite the establishment of the Federal Reserve System in 1913.
Well, between October 1929 and March 1933 -- old America literally fell apart -- She was tired, she was wheezy, her spirit sagging, her wealth deeply slashed.
The number of unemployed ranged up to 13 million out of a labor force of 52 million. Even that figure is still a guess -- it could have been much higher. One in four wage earners was without any means of support for himself or his family. Of these 13 million unemployed, only about a quarter were receiving any kind of assistance. Between 1929 to 1932 -our GNP fell by more than 28% -- the manufacturing level fell from 110 to 57; dividends fell by 56.6%. Wages paid by 1932 were 60% less than in 1929 -- salaries by 40%. The National income dropped from 81 billion in 1929 to 68 billion in 1930; to 53 billion in 1931 to 41 billion in 1932; then started up-- 55.6 billion in 1933 and 100 billion in 1940.
Other statistics on what happened between 1929 and 1932: Marriages--off 22%; the birth rate dropped sharply; suicide rate went up 40% over 1929.
But, these are just figures. More important, the depression shook the very foundation of our economic system as well as our political system. American capitalism seemed almost a matter of touch and go. Could it deal effectively with this depression? Earlier in other depressions, the view had been that being thrown out of work by periodic "bad times" was considered inevitable and the occasion for charity rather than statesmanship. But now, remember this was a worldwide depression -- countries were turning to dictatorship for a way out. In America, many persons - including leaders from many fields-- people who believed in our political democracy and our capitalistic system -- felt we had come to the end of the trail. Some new system would have to do the trick since this one had failed so miserably. No question we were fast becoming a demoralized people, completely bewildered. To so many there seemed to be no rhyme or reason to it all. The old idea of working hard and well; believe in yourself and you would be rewarded by good fortune -- all of this appeared to be sheer mockery now.
Perhaps the worst thing about this depression was its inexorable continuance year after year. Men who had been sturdy and self-respecting workers can take unemployment without flinching for a few weeks, a few months, even if they have to see their families suffer; but it is quite different after a year, two years, three years. Among the miserable creatures curled up on park benches or standing in dreary lines before soup kitchens in 1932 were men who had been jobless since the end of 1929. This traumatic experience marked millions of people for the rest of their lives, and made them security conscious.
In some ways, what was worse perhaps, were the signs that law and order were beginning to crumble. There was also the Bonus March of World War II to Washington in 1932. General MacArthur fired on them-- several veterans killed. People began to understand, as they moved through the second and third sharp winters of despair, the full impact of the truth evoked by Daniel Willard, President of the B&O Railroad, when in a speech at the Wharton School of Finance in 1931, he said "I would steal before I would starve."
And people did die of starvation; many others died where hunger was largely contributory. You've already read of people fighting over garbage and then eating it.
No wonder the American people were willing--hoping-- for lasting changes to take place affecting their economic and political institution.
And yet, despite all the grim statistics, in many ways America did not look different. These were some of the signs: Many untenanted shops; beggars and panhandlers were much in evidence. One might see bread lines here and there; Hoovervilles in vacant lots at the edge of town (a Hooverville was groups of tar paper shacks inhabited by homeless people-- sleeping under their Hoover blankets (newspapers) eating Hoover hogs (Jack-rabbits); railroad trains were shorter with fewer Pullmans; and there were many factory chimneys out of which poured no smoke. But, otherwise, there was little to see. Great numbers of people were sitting at home trying to keep warm and conserve their strength.
It was the day of the apple salesmen. In 1930, the International Apple Shipper's Association found itself with an over-supply of apples, and had the bright idea of selling them on credit to unemployed men, at wholesale prices for resale at 5 cents a piece. Suddenly there were apple salesmen shivering on every corner in American towns -- New York City alone soon had 2,000 -- but, this didn't last long either.
Occasionally one might see bankrupt business with--in grim humor-- notices on the door of their closed businesses-- marked "Opened by Mistake." Other humor of the times reflected attempts to be optimistic or a certain bravado.
"Did you hear about the fellow who engaged a hotel room and the clerk asked him whether he wanted it for sleeping or jumping?" "No, but did you hear about the two men who jumped together hand-in-hand because they held a joint account."
When the hit song of the day was "Happy Days Are Here Again," -- but, of course, they weren't. On the other hand, the words to this song were quite significant: "Once I Built a Railroad, Made it run, Made it race against time, Once I Built a Railroad, Now It's Done - Brother Can You Spare a Dime?"To the disillusionment and bewilderment and despair--many were repeating Rudy Vallee in George White's "Scandals" in 1931-"Life is Just a Bowl of Cherries; Don't Make it Serious; Life's too Mysterious." Then, there were the barbs against Hoover. To Hoover's earlier prediction of a "chicken in every pot" and a "Car in Every Garage," came roaring back the answer "Who Had the Pot to Cook It; Who Had A Garage?" And Hoover to Secretary Mellon -- "Can You Lend Me a Nickel to Call a Friend?" Mellon to Hoover -- "Here's a Dime, - Call Both of Them."
As for the President, despairing people in pre-New Deal years feared that Herbert Hoover had forgotten them and did not recognize the seriousness of their plight. As a matter of fact, he had, more than any other depression president in American history, taken steps to try to bring recovery. But, he had functioned largely through giving aid at the top to prevent the further collapse of banks and industries and the concentric rings of further collapses and unemployment which would then ensue. Also he had continued to pin his faith on individual action. He felt that too great Federal intervention would undermine the self-reliance, destroy the "rugged individualism" of the American people, (some called it ragged individualism). Hoover felt that it would create Federal centralization, thus paving the way for socialism.
President Hoover was consistent in his thinking, and he was humane. But it was hard to explain to people grubbing on a Chicago garbage heap, why--when the Government's Reconstruction Finance Corporation was loaning $90,000,000 to a single Chicago bank, the President would veto a bill to provide Federal relief for the unemployed, asserting "never before has so dangerous a suggestion been seriously made in this country." (It was not until July 1932 that he approved a measure permitting the Reconstruction Finance Corporation to loan $300 million for relief purposes.) And it was as hard for people to understand President Hoover could recommend an appropriation to allow the Department of Agriculture to lend money for a program of providing seed and feed for animals, but fight against any aid by the Federal Government to feed human beings.
Herbert Hoover-- as he revealed in his memoirs-- had long been interested in both old age and unemployment insurance, but always such schemes were to be worked out through private insurance companies or at best with the States-- never under the auspices of the Federal Government.
The Roosevelt Era-
Now we come to the Roosevelt Era. I am not going to go into much detail about the period or even very much about the background to the Act itself, except to touch a few high points and add some additional details. The reading given to you, particularly the Perkins and Witte selections, and the excerpts from F.D.R.'s speeches of January 4 and January 17, 1935, give a fairly good outline of what took place.
Briefly, F.D.R. won easily in the 1932 election. He was able to get through a flood of legislation in 1933, particularly the first 100 days -- the N.R.A., T.V.A., A.A.A., C.C.C., getting rid of prohibition, S.E.C., relief and public works programs, etc.
[Major milestones included:]
- FDR's speech-June 8, 1934;
- Creation of the Committee on Economic Security (CES) -June 29,
1934;
- The CES to come up with a report recommending legislation by
December 1, 1934 --was delayed until January 1935;
- Addresses by F.D.R., January 4 and January 17, 1935;
- Congressional hearings, debate, approval by each house, conference committees wrangling over the Clark Amendment - and compromise on this; and signing of the Social Security Act on August 14, 1935.
Before his election it was said of F.D.R. that he is:"One of the most charming of men, but like many another very charming man, he leaves on the beholder the impression that he is also somewhat shallow and futile. It is hard to say precisely how that impression is produced. Maybe his Christian Science smile is to blame, or the tenor overtones in his voice."
Walter Lippmann thought him the master of the "balanced synthesis," "a pleasant man, who, without any important qualifications for the office, would very much like to be President."
Yet they misunderstood Franklin Delano Roosevelt. His philosophy was: that Government has a positive responsibility for the general welfare. Not that Government itself must do everything, but that everything practicable must be done. A critical question for F.D.R. was whether a middle way was possible-- a mixed system which might give the State more power than conservatives would like, enough power indeed to assure economic and social security, but still not so much as to create dictatorship. On top of that he believed the country needed and demanded persistent experimentation; try something. "The millions who are in want," he said, "will not stand by silently forever while the things to satisfy their needs are within easy reach."
Fireside addresses -- what they meant -- need to have lived in the period -- the circumstances, the atmosphere surrounding them.
He could laugh at himself -- a favorite cartoon he kept in his bedroom showed a little girl at the door of a fine suburban home, apparently tattling to her mother "Johnny wrote a dirty word on the sidewalk mommy"- the word, of course, is ROOSEVELT.
In regard to social welfare legislation, Roosevelt had been a Senator in the New York State legislature when workmen's compensation legislation was passed.
As Governor, Roosevelt had secured a program of old age pensions, unemployment relief and labor legislation and had taken the initiative to call a Conference of Governors to discuss unemployment and relief.
F.D.R., having visited county poorhouses in his State, expressed his feeling: "Somehow it just tears my heart to see those old men and women there, more than almost anything that I know. We need a drastic revision of the poor laws, and I propose to recommend it."
When he signed the State Old Age Pension Law, F.D.R. said: "Our American aged do not want charity, but rather old age comforts to which they are rightfully entitled by their own thrift and foresight in the form of insurance."
In 1932 a plank in the Democratic Party platform put it this way: " We advocate an unemployment and old age insurance under State laws."
In this connection, the belief in State legislatures, perhaps a myth, was that the Federal system of Government encouraged experimentation (F.D.R. was one of those who believed this) and that this enabled the States to function as laboratories in social legislation. The Federal system, at the same time presumably, insured that legislation was adapted to local needs and circumstances. The experience of social insurance and pension progress demonstrated otherwise. Individual States feared to initiate legislation or to depart from established standards. Local considerations seem to have been less important in determining the content of legislation than a desire to keep expenditures to a minimum.
A most important influence on F.D.R.'s thinking on social welfare in general, and social security in particular, was Frances Perkins. Frances Perkins had been a social worker and Industrial Commissioner for F.D.R. when he was Governor of New York. She was brisk and articulate, with vivid dark eyes, a broad forehead and a pointed chin. Usually she wore a felt tricorn hat.
Once asked, "Is being a woman a handicap in serving in the President's Cabinet?" her crisp answer was, "Only in climbing trees."
When the depression of the 1930's began, the country had a system of relief that was almost exclusively locally administered and locally financed, except for the special categories of the aged and children in some States. But the rapid increase in relief loads in 1930 and 1931 placed an impossible burden on local, and particularly, municipal finances. The first shift in responsibility was to the States. By the middle of 1933, about half the States had appropriated funds for emergency relief, but State resources also were limited. Only in July 1932 was the Reconstruction Finance Corporation, which had been set up in January of that year, able to provide financial aid to agriculture, commerce and industry, given authority to make loans and advances to States for relief purposes.
By March 1933, when a new Administration took office, it had become apparent that the Federal Government must take direct responsibility for relief. The Civilian Conservation Corps, established to provide useful work for young people, was created on March 31. In May, the Federal Emergency Relief Administration (FERA) was established with authority to make grants to the States for both work relief and direct relief. Through its requirement that Federal funds must be publicly administered and its encouragement of relief payments in cash rather than in kind, the FERA exerted a lasting influence on the administration of relief in the States. (Of significance is that the FERA was providing temporary aid to nearly 3/4 of a million persons over 65 years of age.) In June 1933, Federal grants to the States for public employment offices became available under the Wagner-Peyser Act. In June, also, the Public Works Administration was created. When it became clear that the letting of contracts for regular public works projects was moving too slowly to meet the crisis before winter, the Civilian Works Agency was set up by Executive Order in November 1933 and for four months operated directly a vast Federal works relief program.Social Security Proposed-
Skipping ahead to 1934, it was in June, --June 8 to be exact -- that F.D.R. really got down to the subject of social security when he said in his message to the Congress:
| "Among our objectives I place the
security of the men, women, and children of the nation first. The security for the individual and for the family concerns itself primarily with three factors. People want decent homes to live in; they want to locate them where they can engage in productive work; and they want some safeguard against misfortunes which cannot be wholly eliminated in this man-made world of ours. In a simple and primitive civilization homes were to be had for the building. The bounties of nature in a new land provided crude but adequate food and shelter. When land failed, our ancestors moved on to better land. It was always possible to push back the frontier, but the frontier has now disappeared. Our task involves the making of a better living out of the lands that we have. So also, security was attained in the earlier days through the inter-dependence of members of families upon each other and of the families within a small community upon each other. The complexities of great communities and of organized industry make less real these simple means of security. Therefore, we are compelled to employ the active interest of the Nation as a whole through government in order to encourage a greater security for each individual who composes it. The third factor relates to security against the hazards and vicissitudes of life. Fear and worry based on unknown danger contribute to social unrest and economic demoralization. If, as our Constitution tells us, our Federal Government was established among other things 'to promote the general welfare', it is our plain duty to provide for that security upon which welfare depends. Next winter we may well undertake the great task of furthering the security of the citizen and his family through social insurance. This is not an untried experiment. Lessons of experience are available from States, from industries, and from many nations of the civilized world. The various types of social insurance are interrelated; and I think it is difficult to attempt to solve them piecemeal. Hence, I am looking for a sound means which I can recommend to provide at once security against several of the great disturbing factors in life--especially those which relate to unemployment and old age. I believe there should be a maximum of cooperation between States and the Federal Government. I believe that the funds necessary to provide this insurance should be raised by contribution rather than by an increase in general taxation. Above all, I am convinced that social insurance should be national in scope, although the several States should meet at least a large portion of the cost of management, leaving to the Federal Government the responsibility of investing, maintaining, and safeguarding the funds constituting the necessary insurance reserves. I have commenced to make, with the greatest of care, the necessary actuarial and other studies necessary for the formulation of plans for the consideration of the Seventy-fourth Congress. These three great objectives-- the security of the home, the security of livelihood, and the security of social insurance-- are, it seems to me, a minimum of the promise that we can offer to the American people. They constitute a right which belongs to every individual and every family willing to work. They are the essential fulfillment of measures already taken toward relief, recovery, and reconstruction." |
The Cabinet Committee was made up of Frances Perkins as Chairman, Henry Wallace of Agriculture, Homer Cummings the Attorney General, Henry Morgenthau of Treasury, and Harry Hopkins of the FERA, and was assisted by a Technical Board headed by Arthur J. Altmeyer-- then second Assistant Secretary of Labor, and a number of advisory groups representing employers, employees, the interested professions and the public. Mr. Altmeyer later became a member of the Social Security Board, then Chairman, and for the years until 1953 played a key role in shaping social security, especially as to how the Act was administered. Much of this appears in his book, The Formative Years of Social Security .
The Executive Director of the Committee was Edwin E. Witte from Wisconsin. He had long experience with the Wisconsin legislative reference library -- from 1922 to 1933. He was an excellent draftsman of legislation. The emphasis in his job as Executive Director was on speed, for the Committee on Economic Security was not to do original work -- but to bring in proposed legislation. His book, The Development of the Social Security Act, is a vital source of what took place between July 1934 and August 1935.
The old age group was made up of Murray Latimer of the Industrial Relations Counselors who was an expert on private annuity programs; Professor Barbara Armstrong of the University of California Law School who was an expert on social insurance and constitutional law, and Professor J._Douglas Brown of Princeton who was an expert economist.
Old age benefits, it was soon recognized, had to be nationally administered, or else a man 65 would be getting checks from a dozen States -- this was impossible with 48 State reserves, actuarial controls and benefit structures. Besides to operate such a system would seriously affect mobility.
NOTE: In the legislation to be proposed the only link between financing and benefits was the wage record. Note, the taxes were separated from benefits -- Titles II & VIII, and III and IX, to help avoid the Act being declared unconstitutional by the Supreme Court.
In the C.E.S. deliberations, the important issue was unemployment insurance. In Congress the greatest interest would be on public assistance for the aged, and especially in restricting Federal control over it. In that connection, note that Tom Eliot -- a young lawyer for the Department of Labor and later the General Counsel of the Social Security Board -- who helped in fashioning the Bill put public assistance in as Title I.
You have F.D.R.'s annual message to Congress on January 4, 1935. It launched a second New Deal. Social Justice was the new goal. Reform was declared to be inseparable from recovery.
A report of the Committee on Economic Security was transmitted to Congress on January 17, 1935, together with a bill carrying out its recommendations. In its report, it should be noted, the Committee pointed out that maximum employment was the first objective of a program of economic security. It regarded outside its jurisdiction, however, either measures designed specifically to promote private employment or a public works program. Federal policy in this latter area was embodied in the Emergency Relief Appropriation Act of April 1935. In setting up the W.P.A., the N.Y.A., and the Resettlement Administration, and in continuing the C.C.C., the Federal Government in theory took over responsibility for employable persons, leaving to the States provision for unemployables other than the special categories for whom federal financial aid to the States was then under discussion. In practice, Federal appropriations were never sufficient to provide adequately for all the needy unemployed.
Following the recommendations of the Committee on Economic Security, the Economic Security Bill, introduced as the Wagner-Lewis-Doughton bills, provided for a threefold attack on the problems of old age security: Federal grants-in-aid to the States to help finance the cost of non-contributory old age pensions for those already old and without means; a national contributory old age annuity system for workers in industry and commerce; and voluntary Government annuities purchasable in small denominations and designed especially for professional and self-employed persons not covered by the compulsory system. (Congress later threw this feature out.)
The Committee on Economic Security recommended a State-administered system of unemployment insurance, based on the Federal tax-offset device, with Federal handling and investment of all reserve funds to assure their utilization consistent with the general fiscal policies of the Government, and almost complete latitude to the States in regard to benefit specifications, type of fund, and method of financing. The Committee further recommended Federal grants-in-aid --maternal, child health and welfare services, more funds to the Public Health Service and to the Federal Office of Vocational Rehabilitation for public health activities and vocational rehabilitation.
The Committee on Economic Security gave considerable time to the risks to security arising out of ill health. It recommended immediate enactment of a nationwide preventive public health program, including Federal grants to the States to support State and local public health activities and a strengthening of the United States Public Health Service. It endorsed "the application of the principles of insurance" to the risks of ill health, and suggested that cash wage loss benefits and medical care benefits be separately administered, but indicated that it was not making specific recommendations for a system of health insurance pending the completion of studies and negotiations that were then going on with medical, public health, dental, nursing and hospital groups. In February 1935, a special session of the House of Delegates of the A.M.A. took a position against compulsory health insurance, whether administered by the Federal Government or the States. It suggested as an alternative the development of voluntary plans under the control of State and county medical associations. The A.M.A. further influenced the American College of Surgeons to abandon the position it had taken the previous year in favor of health insurance and effectively silenced some of the more liberal of the State and local medical societies. As a result, no attempt was made by the Administration to include health insurance provisions in the Social Security Act. It is interesting to note that the Committee on Economic Security's medical advisory committee included the President of the A.M.A., the President of the American College of Surgeons, and the Vice-President -- since the President was a Canadian -- of the American College of Physicians. It was never again possible to bring such a group together.
The Economic Security Bill was not the only proposal being offered to solve the problems of the aged.
The Townsend, Long, Social Justice, Epic, Ham and Eggs and other similar-type movements, provided strong competition. (More on these a bit later.) In addition they focused greater attention on the problems of the aged and on those aspects of the Social Security Bill dealing with the aged. Besides, there was the European influence, their experience helped show Americans what must be done, what could be done and the various ways of doing it. In passing, it is worth noting that in the rest of the world in 1935, approximately 28 countries had social security systems of fairly broad scope in operation. All but six were in Europe. The others were Australia, Chile, Japan, New Zealand, the Union of South Africa and Uruguay.
Another factor to be considered was the depression itself, for it certainly sensitized the American public, affected its social conscience by what it was doing to many groups, and especially to the oldsters.
Other factors affecting the form and passage of the Social Security Act:
a. The proof that many individuals would not save systematically unless compelled to do so, or that no matter how much saving, the individual could not save enough for such a catastrophe as a long-term depression.
b. A declining birth rate in these years -- even before and during the depression. This meant smaller families, with fewer children to care for parents in later years.
c. Another factor tended to make the elderly less solvent and self-sufficient. In 1890, when they comprised approximately only 3% of the population, a mere quarter of them were gainfully employed, but by 1930 -- when they made up 5 1/2%, more than 2/5 - 40% -- of them had quit their jobs.
d. The belief that unemployment was just another type of industrial hazard, whose whole cost the victim should not be asked or have to bear alone.
e. A spreading conviction that industry ought not to exploit labor for huge profits during flush times and then throw on society the whole burden of unemployment and threadbare old age.
Perhaps the most important competition to the Economic Security Bill came from: The Townsend Movement --Townsend Old Age Revolving Pension Plan
It mushroomed with startling speed. In September 1933, seven months after Roosevelt's New Deal started, a doctor, Dr. Francis E. Townsend, sent his plan to a local newspaper in Long Beach, the Press-Telegram. Within a year, he claimed millions of followers.
Striking deep roots in the subsoil of discontent, it had the indispensable material for a protest movement--a leader who symbolized a cause, a concrete program directly related to old people's needs and indigenous to the American way of life, scorning radical and "unchristian" methods.
Townsend was a lean, bespectacled oldster, who had struggled long years homesteading in Kansas and doctoring folks in the Black Hills. He finally migrated to Long Beach, California, where he was Assistant Health Officer. A change of administration in 1932 cost Townsend his position. Then 66 and with less than $100 in savings-- his plan called for a governmental allowance of $200 a month to every citizen 60 or older. The pension was to be funded by a 2% sales tax and the money had to be spent within 30 days. The argument ran that such a wave of spending would result in a business boom and the sales tax could therefore be borne by our economy.
A bill incorporating the Townsend Plan was introduced by Representative John McGroarty, poet laureate of California. It never got too far.
In the hearings on the Social Security Bill, Townsend was put on the stand so as to discredit him -- to demonstrate the unsoundness of his thinking; air the squabbles among the leaders of the movement; the unsavory character of some of them -- and, most of all, to frighten Congress into accepting something less-- the Economic Security Bill-- which became the Social Security Bill in April when the House Ways and Means Committee sent the Bill on to the House for debate.
Then, there was Huey Long's Share Our Wealth Program. He, too, had clubs -- which grew to ominous dimensions by 1935. Long demanded that the Federal Government guarantee an income of $5,000 per year to every family, thus making "Every Man A King." He took on the name Kingfish -- which he got from a character in the Amos and Andy radio show. This pill was sweetened for conservatives by limitations on private fortunes to $50,000,000, legacies to $5 million and income per year to $1,000,000. There was to be an old age pension for all over 60, although no specific amount was indicated.
Huey Long -- a young man with a snub nose, dimpled chin and wavy red hair, was a farm boy from the piney woods of North Louisiana. A lawyer, he became Governor of Louisiana in 1928, moving on to the United States Senate in 1932.
In Louisiana he had ruled the State with an iron hand, smashing opposition ruthlessly. One historian had noted he was "Blatant, profane, witty, unscrupulous, violent, possessed of the habit of promising the impossible, together with the ability to provide good roads, better schools, free school books, free hospitals and a generally better standard of living for the poor -- black and white -- and, at the same time, to keep the State government solvent."
In the propaganda his movement put out -- Wall Street was the source of capitalism's iniquities and the administration was pictured as being its tool. One ditty went:
"Black Sheep, Wall Street, have you any gold, Yes, sir, Yes sir, All I can hold, Thanks to the New Deal, I've made a billion more, And I've stuck it all away in my little chain store."
Long was assassinated in September 1935.
A third competitor was the Social Justice Movement --led by the eloquent Father Charles E. Coughlin -- of Royal Oak, Michigan -- who, in 1934, organized the National Union for Social Justice. Coughlin advocated a program of social reform that was specific in its support of silver inflation but vague on most other points. At first he favored F.D.R. and his policies, but he soon turned against him and his ire was directed against international bankers, communists, and labor unions. He attracted a huge national radio audience - by 1934 -he estimated from 30 to 45 million listeners. As I recall, he spoke early Sunday afternoon.
Another movement was: EPIC -- End poverty in California -- tied in with Upton Sinclair (of Jungle and later of fiction Lanny Budd series fame.) He proposed a $50 a month pension to the needy over 60 years of age -- do it by income and inheritance taxes and a tax on idle land. He was defeated for Governor in 1934.
Another, from California, too, was called: Ham and Egg $30 every Thursday Plan. Organized by Roy Owens and Lawrence and Willis Allen and Robert Noble. Their plan -- all unemployed in California over 50 to get a pension each week-- a 2 cent stamp was to be put on one dollar warrants before spending them. The proposal was narrowly defeated in the State election of 1938.
Congressional Consideration of Social Security Bill-Following extensive hearings before the House Ways and Means Committee and the Senate Finance Committee, the Social Security Bill was brought to each Chamber for debate and vote. Debate was not long though, at times, quite heated. For example, there were these prophets of gloom and doom.
Representative John Taber of New York -- "Never in the history of the world has any measure been brought here as insidiously designed as to prevent business recovery, to enslave workers and to prevent any possibility of the employers providing work for the people."
Congressman Daniel Reed, New York -- member of House Ways and Means Committee -- "The lash of the dictator will be felt and 25 million free American citizens will for the first time submit themselves to a fingerprint test."
Congressman James W. Wadsworth, also of New York: "This bill opens the door and invites the entrance into the political field of a power so vast, so powerful as to threaten the integrity of our institutions and to pull the pillars of the temple down upon the heads of our descendants."
The vote on the Social Security Act: In the House it was 371 - 33. In the Senate, it was 76 to 6 .
Of more significance was the vote on re-committal, that is-- sending the message back to committee and its eventual death: In the House all of the Republicans who voted, except one, approved the motion for re-committal as recommended by Representative Treadway of Massachusetts, the ranking Republican member of the House Ways and Means Committee.
In the Senate, Senator Hastings, Republican of Delaware of the Finance Committee, who predicted that the bill might "end the progress of a great country and bring its people to the level of the average European," proposed to strike out the old age insurance provisions. 12 of 16 Republican members voting were for taking this step. (There were 19 Republican Senators in all.)
Concluding Thoughts-A few random thoughts: Special note, too, should be taken of the difference between public assistance in Title I of the Act and Federal Old Age Benefits in Title II. The latter is social insurance (which is work-related and a contributory program, and because of the contributory feature carried a contractual right.) The principle; that an insurance benefit is a contractual right and obligatory and does not require evidence of need -- which is unqualifiedly true of private insurance and was carried over into the field of social insurance. And unlike public assistance, it was also designed to prevent dependency before it happened. In contrast, public assistance involved neither contributions nor labor force participation, and was and is contingent upon need as determined by a means test. The crucial difference between the two techniques of income maintenance concerned the degree of administrative discretion which governed eligibility and benefits-- minimal in social insurance, but paramount in public assistance.
Remember, that monthly maximum benefits in the original Social Security Act were set at $85.00, the minimum of $10. A lump-sum payment equal to 3 1/2% of the employee's total wages was to be paid to those reaching 65 without qualifying for monthly benefits. A death payment of a similar amount was provided subject to deductions of any benefits the worker might have received during his lifetime.As you know, the 1939 Amendments changed the benefit formula by substituting average earnings for lifetime cumulative earnings and weighting it somewhat in favor of lower income groups and most of all provision was made for dependent and survivors allowances which materially changed the Act altogether.
NOTE: Of considerable importance was Section 702 -"The Board shall have the duty of studying and making recommendations as to the most effective methods of providing economic security through social insurance, and as to legislation and matters of administrative policy concerning old age pensions, unemployment compensation, accident compensation and related subjects."
Historians have called the Social Security Act "a new landmark in American history, a tremendous break with the inhibitions of the past." One historian has called it "revolutionary." F.D.R. himself, called it "the supreme achievement of his administration."
The Social Security Act provided coverage to replace reliance upon charity and public relief. It was thus more orderly, dignified and reliable. Here, of course, we are speaking of old age benefits through contributions by the beneficiaries.
At the same time, it may well be asked -- did the Social Security Act retard, set back or kill off the development of an old age movement, one that would have moved off with considerable -- and growing strength -- to new and more radical nostrums?
Yet Social Security was also a weak and hesitant piece of legislation in many ways:
1. It relied on regressive taxation. Yet, perhaps, there was something more to this: As F.D.R. put it some years later: "I guess you're right on the economics. But the taxes were never a problem of economics. They are politics all the way through. We put the payroll contributions there so as to give the contributors a legal, moral and political right to collect their pension and their unemployment benefits. With those taxes in there, no politician can ever scrap my social security program."
2. It withdrew vast sums to build up reserves.
3. It denied coverage to numerous classes of workers, including those who perhaps needed it most - farmer laborers and domestics, most or all of whom have since been provided coverage or the chance to do so.
4. The full impact of old age benefits was not even to begin to be felt for more than 6 years; contributions were to begin in 1937, with monthly benefits not until January 1942-- a long time considering the obvious needs.
5. Health insurance was ignored.
6. The unemployment insurance system was not provided with adequate national standards.
Thus the Social Security Act was really a compromise. It reconciled the philosophy of individualism with the facts of economic interdependence. It involved acceptance of the premise that a Government has a certain responsibility for the welfare of its people --one consistent with humanitarian principles and with the tradition of democratic Government. It would have been more radical had the Government assumed responsibility to assure continuity of income and a minimum level of economic well being to those citizens whose income had been interrupted or curtailed by certain risks or events. This, as you know, is under serious consideration today.
The Social Security Act only slightly modified the distribution of wealth and it did not alter at all the foundations of our capitalistic and individualistic economy. Nor does it relieve the individual of primary responsibility for his own support and that of his dependents. It does not dampen initiative nor render thrift outmoded. Eligibility and benefits both in the contributory old age and unemployment insurance titles were closely work-related, Government contributions were omitted, and fiscal conservatism prevailed in the emphasis upon reserves and the equity principle of private insurance.
The concept of differential benefits related to wages and the duration of earnings is essentially a conservative element in our social insurance philosophy. In America we still believe that a man should be rewarded for his own efforts. An established differential in one's earnings and living standards is a precious asset, not only to the individual, but to the society in its progress toward a better world. Perhaps this attitude is changing, perhaps not.
To conclude, we have seen how social welfare responsibilities passed into the hands of Federal and State Governments. Private organizations still have a function to perform, but principally to supplement Governmental services. This was a complete change for the United States. Yet it was more democratic than the old approach; it lifted the financial burden from philanthropy and distributed it equitably among all tax paying citizens. This is an earmark of a maturing society -- no longer leaving things to chance generosity -- but doing them in the boldest humanitarian ways.