| The 3-Legged
Stool Metaphor
Social Security benefits are considered to
be only one part of a complete approach to retirement planning.
In contemporary parlance, Social Security benefits are described
as the "foundation" upon which individuals can build additional
retirement security through company or personal pensions and through
savings and investment.
For many years, an older metaphor was used
to make this point. Social Security benefits were said to be one
leg of a three-legged stool consisting of Social Security, private
pensions and savings and investment. The metaphor was intended to
convey the idea that all three approaches were needed to provide
stable income security in retirement.
The question has been raised as to the origins
of the three-legged stool model and whether President Roosevelt
used this metaphor in his conception of Social Security.
The Origin of the Metaphor
President Franklin Roosevelt is not the source
of this metaphor, nor was anyone else associated with the creation
of the Social Security program in the 1934-35 period. The earliest
use of this metaphor which we have been able to document was by
Reinhard A. Hohaus, who was an actuary for the Metropolitan Life
Insurance Company. Mr. Hohaus, who was an important private-sector
authority on Social Security, used the image in a speech in 1949
at a forum on Social Security sponsored by the Ohio Chamber of Commerce.
Hohaus, however, had a slightly different "stool" in mind
than came to be understood in later years. His three-legged stool
consisted of: private insurance; group insurance; and Social Security.
In his 1949 speech Hohaus stated:
"The
first in order of time is individual insurance . . . the second,
a variety of employee benefit plans of which Group insurance
is an outstanding American contribution; and the third, social
security--designed by the government for the well-being of
our fellow citizens . . . Each has its own function to perform
and need not, and should not, be competitive with the others.
When soundly conceived, each class of insurance can perform
its role better because of the other two classes. Properly
integrated, they may be looked upon as a three-legged stool
affording solid and well-rounded protection for the citizen." |
A Familiar Concept
Although Hohaus appears to be the creator
of the three-legged stool metaphor, the basic concept which the
metaphor expresses was clearly understood and widely shared by the
creators of the Social Security program. In fact, in a 1942 speech
before the 37th annual meeting of the American Life Convention in
Chicago, Hohaus approvingly quoted Social Security Board Chairman
Arthur Altmeyer as expressing the core idea: "A social insurance
system does not and need not undertake to furnish complete protection
to all whom it covers under all circumstances. The social insurance
approach is to assure that the benefits would provide a minimum
protection, leaving to the individuals the responsibility of buying
additional protection from private sources through their private
means."
Although President Roosevelt apparently never
used the "three-legged stool" metaphor, he clearly had
this concept in mind when he created the Social Security program,
and he expressed the idea, in other words, several times over the
years.
"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...This
seeking for a greater measure of welfare and happiness does
not indicate a change in values. It is rather a return to
values lost in the course of our economic development and
expansion. Ample scope is left for the exercise of private
initiative."
MESSAGE TO CONGRESS REVIEWING THE BROAD OBJECTIVES AND ACCOMPLISHMENTS
OF THE ADMINISTRATION-June 8,1934 (This message announced
the President's intention to offer a Social Security proposal
to Congress.) |
"In
the important field of security for our old people, it seems
necessary to adopt three principles: First, non-contributory
old-age pensions for those who are now too old to build up
their own insurance. It is, of course, clear that for perhaps
thirty years to come funds will have to be provided by the
States and the Federal Government to meet these pensions.
Second, compulsory contributory annuities which in time will
establish a self-supporting system for those now young and
for future generations. Third, voluntary contributory annuities
by which individual initiative can increase the annual amounts
received in old age. It is proposed that the Federal Government
assume one-half of the cost of the old-age pension plan, which
ought ultimately to be supplanted by self-supporting annuity
plans."
MESSAGE TO CONGRESS ON SOCIAL SECURITY- January 17,1935
(This message transmitted the Administration's legislative
proposal to Congress. Note that the original proposal included
a third system of voluntary annuities [like IRAs] as a supplement
to Social Security. This aspect of the Administration's proposal
was not adopted by Congress. It is also interesting to note
that the President clearly intended that the Social Security
program, supplemented by voluntary annuities, would eventually
eliminate the need for welfare programs for the elderly.) |
"We
can never insure one hundred percent of the population against
one hundred percent of the hazards and vicissitudes of life,
but we have tried to frame a law which gives some measure
of protection to the average citizen and his family against
the loss of a job and against poverty-ridden old age."
STATEMENT BY PRESIDENT FRANKLIN ROOSEVELT ON SIGNING THE SOCIAL
SECURITY ACT -- August 14,1935 (This is FDR's most famous
one-line summary of the intent of Social Security.) |
"Because
it has become increasingly difficult for individuals to build
their own security single-handed, Government must now step
in and help them lay the foundation stones .
The Act does not offer anyone, either individually or collectively,
an easy life--nor was it ever intended so to do. None of the
sums of money paid out to individuals in assistance or in
insurance will spell anything approaching abundance. But they
will furnish that minimum necessity to keep a foothold; and
that is the kind of protection Americans want. . ."
PRESIDENT ROOSEVELT'S RADIO ADDRESS ON THE THIRD ANNIVERSARY
OF THE SOCIAL SECURITY ACT -August 14,1938 (In this radio
address President Roosevelt reflected on the accomplishments
and purpose of Social Security.) |
"I
cannot too strongly urge the wisdom of building upon the principles
contained in the present Social Security Act in affording
greater protection to our people, rather than turning to untried
and demonstrably unsound panaceas. As I stated in my message
four years ago: "It is overwhelmingly important to avoid
any danger of permanently discrediting the sound and necessary
policy of Federal legislation for economic security by attempting
to apply it on too ambitious a scale before actual experience
has provided guidance for the permanently safe direction of
such efforts. The place of such a fundamental in our future
civilization is too precious to be jeopardized now by the
extravagant action."
We shall make the most orderly progress if we look upon social
security as a development toward a goal rather than a finished
product. We shall make the most lasting progress if we recognize
that social security can furnish only a base upon which each
one of our citizens may build his individual security through
his own individual efforts."
A MESSAGE TRANSMITTING TO THE CONGRESS A REPORT OF THE SOCIAL
SECURITY BOARD RECOMMENDING CERTAIN IMPROVEMENTS IN THE LAW.January
16, 1939. (This message transmitted the Administration's
legislative proposal which became the pivotal 1939 Amendments.
It is also FDR's clearest expression of the idea of Social
Security as a foundation upon which the individual can build
their own retirement security.) |
Prepared
By:
Larry DeWitt
SSA Historian's Office
May 1996 |