The Birth Of Social Security

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The Social Security Act of 1935 was, as Arthur Schlesinger, Jr., has written, “far from a perfect piece of legislation.” It was even, in several major respects, “an astonishingly inept and conservative piece of legislation,” as William E. Leuchtenberg has said. It excluded from coverage those who needed it most. Even by Depression standards its initial benefit payments to the aged covered were minimal (they ranged from ten dollars to a maximum of eighty-five dollars a month). It required a person over sixty-five to retire from all gainful employment in order to receive the annuity that properly would be his by right of purchase (he would have paid for it by his direct contribution to the system plus the indirect ones he would have made via his employer’s contributions) once the system was thoroughly established—a palpable injustice, dictated by a desire to remove the elderly from the labor market in order to provide jobs for younger workers. Its hodgepodge of state and federal jurisdictions made it an administrative nightmare, especially with regard to unemployment insurance. Its financial “self-sufficiency,” insisted upon by Roosevelt, involved complete dependence upon a regressive tax, which did grave damage to the economy only two years later. (In June, 1937, the coincidence of a drastic slash in government spending and the collection of $2 billion in Social Security payroll taxes triggered what became justly known as the “Roosevelt Recession”—sharp declines in industrial production and security values, equally sharp rises in unemployment.)

Nevertheless, the ceremonial signing of the act marked one of the major turning points of American history. No longer could “rugged individualism” convincingly insist that government, though obliged to provide a climate favorable for the growth of business profits, had no responsibility whatever for the welfare of the human beings who did the work from which profit was reaped. The flood thus loosed was of irresistible weight and irreversible direction.

Moreover, much that was deplorable in the act was offset by the quality of its initial administration. The act established, as an independent administering agency, a three-member Social Security Board, appointed by the President. Roosevelt chose for chairman a former Progressive Republican governor of New Hampshire, John G. Winant, whose marked leadership qualities included an ability to inspire in associates a disinterested commitment to the general good. The other two appointees were an Arkansas lawyer named Vincent Myles and, most importantly, Arthur Altmeyer, who promptly demonstrated a genius for organization and administration. It was largely due to Altmeyer that, despite enormous complexities, sound procedural patterns soon were established and have been followed ever since. Within two years all forty-eight states had adopted the needed implementing legislation and Social Security had become what it since has remained, a governmental agency remarkable for the smooth efficiency of its operations: no private insurance company functions with so small a proportionate overhead cost.

By that time, too, Social Security had survived two crucial tests. The first was the presidential campaign of 1936, in which the Republican party made Social Security a major campaign issue and lost. The second was the Supreme Court ruling in late May, 1937, seven to two, that Social Security was constitutional.

Through the years since then, Congress has amended the act in ways that have improved Social Security’s operating efficiency, expanded its coverage, and greatly increased both contributions and benefit payments. In 1940, survivor benefits were added to retirement benefits. A few years later, coverage was extended to the self-employed. In 1954, disability benefits were added. In 1965, against strong AMA opposition, Medicare was established, providing hospital and medical insurance for the aged. Also enacted in 1965 was Title 19, establishing Medicaid, a new departure of great significance in that it was financed not by contributory payments but out of general revenues. Through matching grants it distributed benefits to (in effect) all medically needy persons under twenty-one and over sixty-five, and to the blind, the disabled, and ADC (Aid to Dependent Children) cases. It was generally ignored until April, 1966, when New York’s state legislature saw its possibilities (the law permitted each state to make its own definition of “medically indigent”) and adopted the required enabling legislation.

“When it was suddenly realized that New York’s plan alone would cost over a billion dollars a year in combined Federal, state, and local payments,” wrote Ben B. Seligman two years later, “the legislature in Washington was stunned. They hurriedly tried to amend the law, but it seemed too late—the welfare state had barged through the cautious legislative barriers with a resounding crash.” And indeed it had. Soon all states had legislated themselves into Medicaid; medical associations and drug companies were making sure the program would be as profitable for them as it was costly to taxpayers; and it was clear that, from this new departure, there was no turning back. Nor is there today much possibility that any part of Social Security can be even slightly contracted in scope of operation, much less wholly eliminated: each and every part has been woven into the essential fabric of our collective and individual lives.