The Birth Of Social Security

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But if the President gagged at the compromise old-age funding scheme when it was first presented to him, he was evidently in process of swallowing it anyway, as a political necessity, by mid-January: it was part of the Social Security Bill introduced in Congress on January 17 by Senator Wagner and Representative Lewis, then assigned, as a tax measure, to the conservative Finance Committee of the Senate, and the equally conservative Ways and Means Committee of the House. Many proponents of Social Security thought it should have been classed a welfare measure and assigned to the liberal labor and pension committees of the two houses; and that it would have been but for White House fears that its provisions might then have been liberalized before it was reported out. The opposite happened to it in Ways and Means. It was in fact rendered as conservative a measure as it could possibly become in a season of multiplying Townsend and Share Our Wealth clubs. Moreover, the changes were inflicted for the most part by the administration itself, though this was an administration bill.

In late January, after hearings on the bill had opened, the Secretary of the Treasury came to the President to confess a change of mind: he now disapproved major parts of the committee report he had signed, and wished to propose two key revisions when he appeared as a witness before Ways and Means a few days hence. One of them repudiated the principle of “universal coverage” adopted by the committee after full discussion. Morgenthau now proposed to exclude from Social Security farm workers, transient labor, domestics, and those working for anyone with fewer than ten employees—in other words, those who, of all workers, had least security and were most ruthlessly exploited. It would be too hard to collect payments from and for people in these categories, he said. The other revision scrapped the compromise funding arrangement which the old-age group had devised and maintained against Epstein’s strictures. Morgenthau proposed a reserve fund to be built up to a maximum, not of $11 billion as originally proposed, but of $50 billion by 1980, with not a dollar of it coming from the U.S. Treasury. This of course involved heavy increases in contributory rates. The initial rate would be double that first proposed—a full one per cent each for employer and employee instead of the original onehalf of one per cent; and the rate would rise by one-half of one per cent for two successive three-year periods, following which it would jump to three per cent and remain there. Also, the initial annuities paid would be reduced considerably.

Roosevelt himself had proposed an extreme universality of coverage in private talk (“I see no reason why every child, from the day he is born, shouldn’t be a member of the social security system”). Yet he seems to have accepted without much argument Morgenthau’s restricted coverage. If somewhat more concerned over the financing revision, he promptly was soothed by assurance from Treasury economists that it would have no deleterious effect upon the general economy. The original funding proposal was “the same old dole under a new name,” he now said to the Labor Secretary, and to build up a deficit to be met by the 1980 Congress was “almost dishonest.” So the Morgenthau revisions received presidential approval.

They caused a furor when Morgen thau presented them to Ways and Means on February 5. His colleagues of the Economic Security Committee were angered by what they deemed a breach of faith. Those doubtful from the first that the administration really was committed to genuine social insurance had their doubts reinforced—a skepticism that increased as the bill languished in committee for many weeks after hearings ended on February 12, with administration forces exerting no evident effort on its behalf. When finally reported out favorably on April 5, it was in a revised form that incorporated the substance of Morgenthau’s testimony on funding and coverage while also curtailing federal authority to impose minimum pension standards—this last a concession to Southerners who feared the forced payment of pensions to aged blacks higher than local Southern whites deemed “desirable.”

Public controversy now swirled around the measure. It was attacked from the Left for not going anywhere near far enough. It was attacked from the Right as radically subversive of the American Way, bound to discourage thrift, encourage shiftlessness, destroy private initiative, and produce general economic disaster. But as the weeks passed and it became clear that Congress must enact social insurance of some kind in the current session (it would be Wagner-Lewis or something “worse”), conservative opposition became perfunctory and, at last, simply collapsed. The bill passed the House 372 to 33 on April 19, in substantially the form in which it emerged from Ways and Means. Reviewed and somewhat revised in the Senate Finance Committee, it was reported out favorably on May 7 and, after some revisionary floor debate, passed by the Senate 76 to 6. The final bill, emerging from joint conference committee, swept through both houses in early August and was ceremoniously signed by the President on August 14.