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The 1938 Advisory Council was jointly chartered by the Social Security
Board and the Senate Finance Committee. Some members of the Senate Finance
Committee (principally, Senator Arthur Vandenberg (R-MI)) wanted an opportunity
to revisit key features of the 1935 Act (particularly the issue of reserve
funding, which Vandenberg opposed) and hoped to use the Advisory Council
to achieve this aim.
In its Report, the Advisory Council recommended a fundamental shift in
the Social Security program, away from a defined benefit retirement plan
for individual workers, to a family benefit plan, with dependents and
survivors benefits. The Council's Report went to the Social Security Board
(SSB) and to a special Select Committee of the Senate Finance Committee.
This was the starting event of a legislative process which ultimately
yielded the 1939 Amendments.
The Council's Report went to the Social Security Board (SSB), which reviewed
it and issued its own report. The Board's Report differed in some respects
from the Council's report. The Board's report concentrated on a host of
administrative issues which the Council did not consider. For example,
the SSB requested Congress to give it authority to issue subpeonas and
conduct investigations, and to make all Board decisions final, i.e., to
eliminate any appeals process in Social Security cases. These two ideas,
which were not accepted by Congress, certainly would have altered the
administrative history of the Social Security program.
On the two main policy changes, both Reports were in agreement. Both proposed
adding dependents and survivors benefits to the basic Social Security
retirement program; and both proposed advancing the date for monthly benefits
to begin from 1942 to 1940. And the Congress accepted both ideas. Both
the Council and the Board also recognized the desirability of a disability
benefits program, but neither was prepared to recommend it in 1938.
Since the Board's responsibilities extended to the whole range of programs
under the 1935 Act, their Report covered in detail issues related to unemployment,
health care and public assistance, as well as the old-age insurance program.
The 1938 Council was especially concerned about issues of financing, and
much of its report is taken up with an extended discussion of the financial
underpinnings of Social Security. Especially noteworthy in the Council's
Report is the special Appendix added to address Senator Vandenberg's concerns
about reserve funding. The issue is the same one that appears in debates
of the present day. People have always had trouble reconciling the idea
of investing the Social Security surplus in government securities. This
was the core of Vandenberg's opposition to reserve funding. The Council
did not, as Vandenberg hoped, advocate any departure from the reserve
funding, indeed it strengthened this approach by creating formal Trust
Funds to hold the Social Security reserves and, in the Appendix, basically
rejected Vandenberg's criticisms of the investment of Social Security
surpluses in government securities.
The Advisory Council of 1938 was important for two key reasons. First,
it firmly established the precedent of periodic outside advisory councils
to provide guidance to Social Security's policymakers. Secondly, it recommended
a fundamental shift in the Social Security program, away from a retirement
plan for individual workers, to a family benefit plan. Much of the agenda
of the 1938 Advisory Council and the Social Security Board's Report was
enacted into law in the 1939 Social Security Amendments.
The 1938 Advisory Council led rather directly
to the enactment of the 1939 Amendments to the Social Security Act
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