I chose the title, Social Security --
Yesterday and Tomorrow, to emphasize the rapidity of social change
which makes today, yesterday, and which makes today, tomorrow, even
as we discuss the great social problems and the still greater social
opportunities that confront us.
In discussing the events of yesterday, I shall try to do so only
as they may serve to guide us on the long road ahead. Naturally,
as a member of Franklin Roosevelt's New Deal Administration, I believe
that we have much to learn from the events of that period. Of course,
I am struck with the great similarity between the excitement and
fervor of the New Deal era and the present day. One New Dealer was
accused (probably rightly) of having said, "We shall make over America."
But there is this great difference: at that time America was in
a state of economic collapse with one-third of the workers out of
work, banks closed and insurance companies broke. In spite of all
that, social and economic planning by government was considered
un-American by most of the business community and by the press.
Today, we are in an era of unprecedented affluence; and governmental
planning is accepted as necessary to keep it that way. The argument
as regards planning is confined to the merits of specific proposals.
It must be conceded that the planning of the New Deal era did not
consist of nor result in a neat over-all blueprint-of a New America.
But neither is it correct to say, as has often been alleged, that
New Deal programs consisted largely of emergency efforts to recover
from the Great Depression and therefore are inapplicable to the
needs of the present-day affluent society. Actually, a moment's
thought would reveal the many long-range programs that were enacted
into law in those days upon which we are now relying in our War
on Poverty, among which the Social Security Act is outstanding.
Moreover, even the short-range emergency programs of the New Deal
era were similar to some of the programs now incorporated in the
Economic Opportunity Act. Some examples are: the C.C.C. camps, the
National Youth Administration, the Farm Security Administration
and many of the projects under the Works Progress Administration.
It could hardly be otherwise, since basic human needs are the same
today as they were yesterday.
As I have said, the Social Security Act was clearly a long-range
program which it was hoped would prevent human distress in the future,
while the emergency programs attempted to cope with the existing
widespread distress. The basic idea of President Roosevelt and his
advisors was simple. It was as follows:
1. There would be established a comprehensive system of contributory
social insurance providing protection against all major economic
hazards likely to cause widespread distress, such as unemployment,
sickness, permanent disability, old age and death of the breadwinner.
2. The federal government would make grants to the States to help
them in providing public assistance to unemployable persons, consisting
largely of old people and children.
3. The federal government would continue to assume responsibility
for providing work for able-bodied but destitute workers.
The Cabinet Committee created to develop a legislative program
incorporating these basic features was called the Committee on Economic
Security, not Committee on Social Security. It gave very little
consideration to health and welfare services. However, it did recommend
a small appropriation to make grants to the States for public health
work. It also recommended a small appropriation to make grants to
the States for child health and welfare services. But, during the
course of the legislative hearings, the term "social security" was
used by a number of witnesses and the Ways and Means Committee used
this term in reporting out a bill.
The term social security captured the public imagination not only
in this country, but throughout the world. In the course of time
the term came to be used in other countries in an expansive sense
as a synonym for the Good Life.
In this country in the early days, we who were engaged in the administration
of the Social Security Act used it to describe a specific government
program to promote the economic and social well-being of workers
and their families through providing protection against specific
hazards which would otherwise cause widespread destitution and misery.
However, gradually the term social security in this country, instead
of being used in a more expansive sense, has been used in a more
limited sense to refer only to the Old Age, Survivors, and Disability
System. I consider this extremely unfortunate, just as I deplore
using the term "welfare" to refer only to public assistance or in
an invidious sense to "relief". I shall indicate my reasons later.
President Roosevelt repeatedly emphasized two principles in indicating
the kind of long-range program he had in mind. One was maximum reliance
on contributory social insurance to finance it instead of general
taxation. The other was maximum reliance on the States to administer
it. These principles were incorporated in the recommendations of
his Cabinet Committee and in the law.
It is interesting to note that the feature of the Social Security
Act which aroused most opposition is the one that is now the most
popular--namely, the federal old-age insurance system. The minority
members of the Ways and Means Committee said it would impose a crushing
burden upon industry and upon labor, that it would establish a bureaucracy
in the field of insurance and in competition with private business,
and that it would destroy old-age retirement systems set up by private
industries.
This opposition continued after the law was passed and became an
issue in the 1936 Presidential election. The unsuccessful candidate
alleged that it was "a fraud on the working-man" and "a cruel hoax."
I believe that the admonition of President Roosevelt to place maximum
reliance on the States was sound under the conditions existing at
that time. In the case of unemployment insurance, there was a serious
question that a straight federal system would be constitutional.
There was also serious disagreement as to what the substantive provisions
of an unemployment insurance should be, and there was no administrative
experience to rely upon. However, because of constitutional doubts,
no federal minimum benefit standards were contained in the Federal
Unemployment Tax Act. This enables employers in States that pay
very low benefits to claim the same offset against the Federal Unemployment
Tax as employers in States that pay higher benefits. Thus, the federal
law actually encourages unfair competition among the States instead
of preventing it.
In the case of public assistance, the law also contains no federal
minimum standards. The bill presented to Congress contained a requirement
that a State old-age assistance plan must furnish assistance at
least great enough to provide when added to the income of the aged
recipient, "a reasonable subsistence compatible with decency and
health." Due to the opposition of Senator Harry F. Byrd of Virginia,
this requirement was eliminated and there is no federal minimum
standard of assistance in any of the public assistance titles today.
In recommending federal matching for old-age assistance and aid
to dependent children, the President's Committee on Economic Security
naively stated in its report: "We believe that if these measures
are adopted, the residual relief problem will have diminished to
a point where it will be possible to return primary responsibility
for the care of people who cannot work to the State and local governments."
It was Dorothy Kahn of Philadelphia, representing the American
Association of Social Workers, who pleaded long and eloquently before
the Senate Finance Committee that the so-called "residual group"
was a very large group and that the categorical approach was inadequate
and inequitable. Let me quote exactly her concluding words, "We
believe that grants-in-aid from the Federal Government to the States
and to the local governments should be general, so that attention
will not be given to any one special category at the expense of
others." How right she was and how unfortunate that her advice was
rejected!
Of course, the great omission in the 1935 Social Security Act was
health insurance. The Committee on Economic Security stated in its
report that its staff had prepared a tentative plan which was being
studied by several professional advisory groups which had requested
an extension of time. The Committee further stated that, therefore,
it could not present a specific plan. But the Committee did list
what it called "broad principles and general observations which
appear to be fundamental to the design of a sound plan of health
insurance."
In 1938, after a conference with the President, it was decided
to call a National Health Conference. The public support for a national
health program which included health insurance was amazing. The
President was so enthusiastic that his first inclination was to
make the health program an issue in the 1938 campaign. He then said
he thought it would be better to make it an issue in the 1940 Presidential
campaign. World War lI then intervened.
But, before the war broke out, it was possible to secure amendments
to the Social Security Act which converted the federal old-age insurance
system into an old-age and survivors insurance system, providing
widows' and orphans' benefits as well as benefits for aged beneficiaries
and their dependents. The public assistance titles were improved
by providing more liberal federal matching, by protecting the confidential
character of the records and by requiring a merit system for State
and local personnel. It is ironical to note that in 1935 it was
not possible to get a merit system requirement in the public assistance
titles because a prominent member of the Ways and Means Committee
said he didn't want any damned social workers telling his people
what kind of persons they had to hire. The reason for the change
of heart by the Committee was due to the fact that non-civil service
State and local employees were being used for political purposes,
sometimes to the disadvantage of members of the Committee. This
was also the reason for making the assistance records confidential.
I failed to convince the Ways and Means Committee of the desirability
of varying the matching ratio for public assistance in inverse proportion
to the per capita income of each State -- that is, paying a higher
proportion of the cost in low income States than in high income
States. It was not until 1960 that such a matching formula was included
in the public assistance titles.
The Social Security Board was kept rather busy putting into effect
the 1939 changes in the Social Security Act. But, nevertheless,
it did recommend to the President in 1941, just before Pearl Harbor,
that a comprehensive social insurance system be established, including
not only old-age and survivors' insurance, but also temporary and
permanent disability benefits, unemployment insurance and cash hospitalization
benefits. The Board also recommended federal grants for public assistance
to all needy persons. It is interesting to note that, although President
Roosevelt said at his first press conference following Pearl Harbor
that "old Dr. New Deal" had to be replaced by "Dr. Win-the-war",
he included in his January 1942 Budget Message all of the recommendations
the Board had made except federal aid for all needy persons.
The famous Beveridge "Cradle-to-the-Grave" report came out in November
1942 and I was able to have included in the President's State of
the Union Message a few weeks later the following passage: "When
you talk with our young men and women you will find that with the
opportunity for employment they want assurance against the evils
of all major economic hazards -- assurance that will extend from
the cradle to the grave. This great Government can and must provide
this assurance."
The research staff of the Social Security Board assisted Senators
Wagner and Murray and Congressman Dingell in the preparation of
a comprehensive social security plan. However, the President did
not specifically support the Wagner-Murray-Dingell Bill and it died
in Committee.
The President did continue to show his interest in a comprehensive
social security program. Thus, in October 1944 he called for an
Economic Bill of Rights, including:
"The right to adequate medical care and the opportunity to achieve
and enjoy good health.
"The right to adequate protection from the economic fears of old
age, sickness, accident, and unemployment."
In his last Message on the State of the Union in January 1945,
he again urged an expanded social security program and health and
education programs, saying, "I shall communicate further with the
Congress on these matters at a later date." But he died three months
later.
President Truman, in a message on September 6, 1945, signalling
the beginning of the Fair Deal, said he favored "extending, expanding
and improving our entire social security program." A few months
later he sent a message to Congress outlining a broad national health
program, including a federal health insurance system. Bills were
introduced by Senators Wagner and Murray and Congressman Dingell
to give effect to the President's program but no hearings were held
until 1946.
In 1946, 1947 and 1948 the President repeated his recommendations
regarding improvements in the Social Security Act. In May 1948 he
sent a special message on social security. But his recommendation
regarding health insurance attracted the most attention.
Republican leaders introduced rival health bills. The major difference
between the Republican bills and the Administration bill was that
the Republican bill provided only for grants-in-aid to the States
to assist them in furnishing medical care for needy persons instead
of a national health insurance system coveting the cost of medical
care without applying a means test.
Extended hearings were held throughout 1946, 1947 and l948. Some
health legislation resulted, notably the 1946 Hospital Survey and
Construction Act and the expansion of the National Institutes of
Health. But no legislative action was taken on health insurance.
Actually, for the whole decade following 1939, there was no legislation
increasing the benefits or any general extension of coverage of
the social insurance titles. There was a 1948 amendment to the public
assistance titles increasing the federal matching ratio. But the
public assistance amendment was included in a bill which narrowed
the definition of "employee" under the Old Age and Survivors Insurance
System so as to exclude a half million workers. This exclusion and
health insurance were made issues by President Truman in the 1948
campaign when he attacked the record of what he called "the terrible
80th Congress."
This decade might perhaps be called The Lost Decade for social
security as a whole if measured by actual legislation passed. But
throughout that entire period the members of the staff of the Social
Security Board and Social Security Administration had devoted themselves
wholeheartedly to administration of the existing provisions of the
Social Security Act and to research as regards its improvement.
They had won the confidence of their associates in the Federal and
State governments and they had won the confidence of Congressional
leaders of both parties. I like to believe that this well-earned
confidence, built up in this decade, contributed greatly to the
legislative developments which came later
At any rate, the election of President Truman and a Democratic
Congress seemed to constitute something of a mandate for social
security legislation. I hoped so because I felt that the events
of 1949 would be decisive as to whether the old age and survivors'
insurance system would survive. Twice as many persons were receiving
old age assistance as were receiving retirement benefits under this
insurance system. Moreover, the average monthly assistance payment
was almost double the average monthly retirement benefit. I felt
that, if the old age and survivors' insurance system failed, any
hope for a comprehensive social insurance covering all major economic
hazards was remote indeed.
There were long drawn out hearings. But the amendments finally
enacted in 1950 unquestionably represented a major advance in strengthening
our social security system. Many millions of workers, including
more than half of the self-employed, were brought under old age
and survivors' insurance and benefits were increased by 80%. Federal
matching was provided for assistance to needy persons permanently
and totally disabled.
However, my request that specific language be included in the public
assistance titles to authorize federal matching of the cost of welfare
services, in addition to matching of public assistance administrative
costs, was not accepted. The Ways and Means Committee did put in
its report a statement that there was already "ample authorization
for Federal sharing in the cost of welfare services to applicants
for and recipients of State-Federal assistance." But, unfortunately,
this authorization would not extend to services to persons who might,
as a result, not need to apply for financial assistance. As you
know, explicit language and 75% federal matching was not included
until 1962. Thus, 12 precious years were lost in the effort to expand
constructive social services.
In 1952 there was a small increase in the old-age and survivors'
insurance system and further liberalization of the federal matching
ratio under the public assistance titles. But due to the opposition
of the American Medical Association it was not possible to get an
effective provision that would at least protect the previously acquired
old-age and survivors' benefit rights of disabled workers. However,
in 1954 a provision protecting these rights was included; in 1956
disability benefits were provided at age 50; in 1958 dependents
of disabled persons were allowed the same benefits as dependents
of aged beneficiaries; in 1960 disability benefits were made payable
at any age; and this year benefits have been made payable, if the
disability is likely to continue for more than six months.
While the 1950 amendments had indicated that there was wide-spread
acceptance of a contributory social insurance with benefits related
to previous earnings, it was not clear what the attitude of the
Administration taking office in 1952 would be. Three minority members
of the Ways and Means Committee, in a report on the 1950 amendments,
had attacked the old-age and survivors' insurance system as "totally
unmoral." Senator Taft and other leading Republicans had also expressed
themselves as favoring a flat uniform pension. And the Republican
Platform declared that "we shall make a thorough study of universal
pay-as-we-go pension plans."
A disturbing development was the appointment of a sub-committee
of the Ways and Means Committee, chaired by Congressmen Carl T.
Curtis, who was one of the three members who had called the existing
old-age and survivors' insurance system "totally unmoral." Incidentally,
Mr. Curtis, who later became a Senator, was one of the most bitter
opponents of Medicare in subsequent years.
Congressman Curtis proceeded to hold hearings for four months.
The one at which I was subpoened to testify was a particularly stormy
one. So much opposition was built up by labor groups, State and
local welfare officials and social workers that Congressman Curtis
or the subcommittee never even made a formal report.
When Congress reconvened, President Eisenhower sent a message on
social security in which he called the old-age and survivors' insurance
system "the cornerstone of the Government's programs to promote
the economic security of the individual." I felt then that after
20 years this great social insurance system had ceased to be a partisan
issue. Later on, Senator Goldwater learned this, to his sorrow.
Congress proceeded to extend the coverage of this social insurance
system to farm operators, and to regularly employed farm workers
previously excluded. Every Congress since 1954 has continued to
expand its coverage, improve the benefit provisions, and liberalize
the eligibility requirements.
As contrasted with the progressive improvement in the federal Old-Age,
Survivors' and Disability Insurance System, the history of the Federal-State
Unemployment Insurance System has been most unsatisfactory. There
still are no minimum benefit standards in the Federal Unemployment
Tax Act. In fact, the only major change has been to extend its coverage
to include employers of 4 or more workers, instead of employers
of 8 or more.
Upon the basis of this brief chronological discussion of the development
of the Social Security Act, let me attempt a brief appraisal of
the extent to which we have achieved the dream of President Roosevelt
of "assurance against the evils of all major economic hazards --
assurance that will extend from the cradle to the grave."
There is no question that President Roosevelt wanted this assurance
to consist primarily of contributory social insurance. We do have
a nation-wide old-age, survivors' and disability system and also
a nation-wide unemployment insurance system. However, the benefits
provided are far from being adequate and they do not protect all
workers.
The average monthly benefit now being awarded to a retired worker
who has been regularly employed in insured employment represents
only 30% of his monthly wage loss. If he has a wife who has also
reached the minimum retirement age his monthly benefits increased
by 50%. While benefits have been increased throughout the years
to keep pace with the increased cost of living, they have not kept
pace with the increased wage level. In my opinion, the benefit level
should be raised by at least a third.
The present Federal-State unemployment insurance system is quite
inadequate both in its benefit provisions and in its coverage. The
average weekly benefit paid compensates for only 35% of the average
weekly wage loss. Actually, a smaller proportion of the weekly wage
loss is compensated today than when these laws were first enacted,
because the maximum wage upon which benefits are based has not been
increased to keep pace with the increased wage level. One unemployed
worker out of four exhausts his benefits before he can find another
job. Moreover, 20% of the workers are not insured. The combined
result of all these limitations is that only about 20% of the total
wage loss resulting from unemployment throughout the country is
compensated. Because of this, Congress was obliged to enact the
Temporary Extended Unemployment Compensation Act of 1961, which
paid benefits out of the United States Treasury to unemployed workers
who had exhausted their benefit rights.
This situation has developed largely because, as has already been
explained, the Federal Unemployment Tax Act does not protect employers
in States that may desire to have an adequate unemployment insurance
law from unfair competition by employers in other States that have
inadequate laws, which was the basic intent of the Act. I am of
the opinion that, if the present Federal-State system is continued,
the Federal Unemployment Tax Act should be amended:(1) to include
minimum benefit standards which would increase the benefit level
by 50%; and (2) to provide Federal grants-in aid to States whose
benefit expenditures exceed a certain percentage of covered payroll.
I also believe the coverage under the Federal Unemployment Tax
Act should be extended to include all types of employment covered
by the Old-Age, Survivors' and Disability Insurance System.
The great gap in our present Social Security Act is its failure
to include two forms of social insurance which are found in the
social security systems of practically all other industrialized
countries: insurance to cover wage loss resulting from temporary
disability and insurance to cover the cost of medical care for all
workers. I believe both of these forms of social insurance should
be included under the Federal Old-Age Survivors' and Disability
Insurance System.
The question of including a general health insurance system in
the Social Security Act is far more controversial today than it
was when the Act was passed. Many people believe that it is no longer
necessary to adopt general health insurance because they think the
new medicare law will protect older persons and they think most
of the younger persons are already protected by private insurance.
However, only about one-fourth of the nation's expenditures for
personal health care are covered by private insurance. Actually,
the expenditures by the Federal, State and local governments for
personal health care (exclusive of research and public health activities)
are almost as much. Moreover, the lower income groups which have
the most sickness, are the very groups which have the least insurance
protection.
To a considerable extent the inadequacies of our present social
insurance system are responsible for the fact that we still have
8,000,000 destitute persons in this country who are obliged to seek
public assistance. However, almost half of this number are receiving
aid to dependent children, and two-thirds of these children are
in need because of the breakdown of the family, resulting from divorce
or separation of the parents, or desertion of a parent, or illegitimacy
of the child. Only the third who are needy because of the death
or disability of a parent could have been protected under social
insurance. Moreover, a large number of the adults receiving public
assistance are low wage-earners or chronically unemployed. Social
insurance which provides benefits related to wage loss cannot be
adequate when the wage itself is inadequate.
Therefore, even if we had a far more adequate contributory social
insurance system, it would still be essential that we have an adequate
and humane system of public assistance. Unfortunately, this is not
the case. Actually, three-fourths of the States according to their
own standards do not meet the full needs of recipients in one or
more of the federally-aided categories. The situation is even worse
in "general assistance" which is not federally-aided.
As has already been suggested, the Federal government should make
grants to the States to assist them in providing aid to all needy
persons, regardless of whether they fall within circumscribed categories.
The States should be required to meet 100% of a standard of need
compatible with decency and health. The States should also be required
to eliminate all State residence requirements.
Unfortunately, throughout the years the Federal Government has
shared in the cost of administration of public assistance on a far
less liberal basis than it has in the cost of the assistance given
to needy persons. Apparently, Congress and also State legislatures
have looked upon administration as simply overhead expense. The
result has been that State Welfare agencies have not had sufficient
funds to provide constructive social service to help needy persons
cope with their many problems and, if possible, become self-supporting.
However, at long last, in 1962 Congress did provide for liberal
federal sharing in the cost of rehabilitative services not only
to recipients but also to applicants for public assistance and to
persons likely to become applicants. I am convinced that the long-range
results of this change in emphasis will be very great, if ample
funds are made available.
I believe that if our social insurance system were improved in
the ways I have suggested, it would prevent most normally self-supporting
persons from becoming destitute because of interruption of earnings
due to the major personal economic hazards. I also believe that
an improved public assistance system would relieve in an effective
and humane manner the destitution that does arise, so that all Americans
would be able to purchase the necessities of life.
The proportion of the gross national product now used for the social
insurances and public assistance in this, the most affluent nation
in all history, is 5-1/2%. The proportion that would be needed to
provide adequate cash benefits under a comprehensive social insurance
system and a comprehensive public assistance system would be 8%
(including workmen's compensation). A universal comprehensive health
insurance system would require an additional 4%.
These percentages of our gross national product do not represent
an added expense to the nation. The loss of family income -- resulting
from unemployment, sickness, permanent disability, old age and death
-- is a fact, whether or not protection is provided against it.
The cost of medical care is a fact, whether or not protection is
provided against it. Moreover, to the extent that this protection
reduces dependency and stabilizes purchasing power, it actually
increases our gross national product.
Thus, I believe that it is possible to abolish destitution in this
country almost overnight through the establishment of a comprehensive
contributory social insurance system, supplemented by a comprehensive
public assistance system. We have not only the resources but we
have the experience to do so. I have no doubt that eventually we
will achieve the national consensus to act on the basis of that
experience.
I believe we should place maximum reliance on contributory social
insurance. It seems to me that it fits in best with our economic
and social institutions, because of the close relationship between
benefits, contributions and wages. Thus we can maintain individual
equity by paying differential benefits to take account of variations
in wage loss, at the same time that we make certain that social
adequacy is achieved by paying higher proportionate benefits to
low-wage earners.
In order to achieve these twin objectives, I believe it is desirable
that at least a third of the cost of social insurance benefits should
be financed out of general revenues.
As I have said, I believe that it is possible to abolish destitution
in this country almost overnight through the establishment of a
comprehensive contributory social insurance system, supplemented
by a comprehensive public assistance system. I do not mean to suggest
that we would then have abolished the root-causes of poverty arising
out of the inability of individuals to find jobs which pay them
enough to maintain themselves and their families in decency and
health.
The causes of this inability are both impersonal and personal.
Neither contributory social insurance nor public assistance is a
substitute for gainful employment at adequate wages. Furthermore,
its receipt cannot abolish discrimination or automatically endow
workers with the training, education and other personal qualities
necessary to take advantage of available employment opportunities.
But contributory social insurance can spread the wage-income of
normally self-supporting workers over periods of non-earning, as
well as over periods of earning. Both contributory social insurance
and public assistance can furnish the income necessary for decency
and health while these root-causes of poverty are being eradicated.
This income can be provided in a manner that maintains self-respect
and promotes the desire to be self-sufficient. It can be accompanied
by constructive social services, which make certain that all of
a community's resources, both governmental and non-governmental,
including health and educational facilities, low-cost housing, day
care centers, are actually used to enable recipients to be self-supporting.
The responsibility for marshaling a community's resources to enable
recipients of public assistance to enjoy a satisfying and useful
life rests, of course, upon the public welfare agency administering
public assistance. But that same agency which already exists in
every town, city and county throughout the nation, can and should
be used to marshal these resources for all citizens of the community
who need them. Given public support, the public welfare agency can
be the central factor in the "War on Poverty."
It has come as a shock to the people of America that there should
be so much poverty during this unprecedented period of prosperity.
While much poverty has been prevented or mitigated because of the
programs included in the Social Security Act, too much remains.
Moreover, the same factors that have created our affluent society,
such as increasing mechanization, industrialization and urbanization,
are responsible for most of this poverty.
The great changes that have occurred and will occur arise out of
the very nature of a highly dynamic society based upon a system
of free enterprise. Our problem is to retain all the advantages
of a dynamic free enterprise system while we seek to eliminate its
disadvantages.
I am sure that this great nation will succeed in solving this problem
and that an improved social security system will be a main factor
in the solution. We are indeed fortunate, in this land of ours,
that we have the economic resources to achieve the good life for
all our citizens. What we need to do is perfect our social organization
to take full advantage of these resources.
In seeking to perfect our social organization, I am sure we shall
keep in mind that our goal is simply a redistribution of welfare,
whereby every citizen is assured genuine freedom of opportunity
-- which is both the promise and the challenge of our democratic
way of life.
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