The Roosevelt Administration and Social Security
By Abe Bortz, Social Security Administration Historian (1963-1985)
Note: This entry is a portion of Special Study #1, a lecture Dr. Bortz, the first SSA Historian,developed as part of SSA’s internal training program. Up until the early 1970s new employees were trained at SSA headquarters in Baltimore before being sent to assume their new duties in offices around the country. As part of this training, Dr. Bortz presented a curriculum on the history of Social Security. This lecture, developed in the early 1970s, was the core of that curriculum. It features an extensive overview of social policy developments dating from pre-history up to the passage of the Social Security Act in 1935.
Now we come to the Roosevelt Era. I am not going to go into much detail about the period or even very much about the background to the Act itself, except to touch a few high points and add some additional details. The reading given to you, particularly the Perkins and Witte selections, and the excerpts from F.D.R.’s speeches of January 4 and January 17, 1935, give a fairly good outline of what took place.
Briefly, F.D.R. won easily in the 1932 election. He was able to get through a flood of legislation in 1933, particularly the first 100 days — the N.R.A., T.V.A., A.A.A., C.C.C., getting rid of prohibition, S.E.C., relief and public works programs, etc.
[Major milestones included:]
- FDR’s speech-June 8, 1934;
- Creation of the Committee on Economic Security (CES) -June 29, 1934;
- The CES to come up with a report recommending legislation by December 1, 1934 –was delayed until January 1935;
- Addresses by F.D.R., January 4 and January 17, 1935;
- Congressional hearings, debate, approval by each house, conference committees wrangling over the Clark Amendment – and compromise on this; and signing of the Social Security Act on August 14, 1935.
Before his election it was said of F.D.R. that he is:“One of the most charming of men, but like many another very charming man, he leaves on the beholder the impression that he is also somewhat shallow and futile. It is hard to say precisely how that impression is produced. Maybe his Christian Science smile is to blame, or the tenor overtones in his voice.”
Walter Lippmann thought him the master of the “balanced synthesis,” “a pleasant man, who, without any important qualifications for the office, would very much like to be President.”
Yet they misunderstood Franklin Delano Roosevelt. His philosophy was: that Government has a positive responsibility for the general welfare. Not that Government itself must do everything, but that everything practicable must be done. A critical question for F.D.R. was whether a middle way was possible– a mixed system which might give the State more power than conservatives would like, enough power indeed to assure economic and social security, but still not so much as to create dictatorship. On top of that he believed the country needed and demanded persistent experimentation; try something. “The millions who are in want,” he said, “will not stand by silently forever while the things to satisfy their needs are within easy reach.”
Fireside addresses — what they meant — need to have lived in the period — the circumstances, the atmosphere surrounding them.
He could laugh at himself — a favorite cartoon he kept in his bedroom showed a little girl at the door of a fine suburban home, apparently tattling to her mother “Johnny wrote a dirty word on the sidewalk mommy”- the word, of course, is ROOSEVELT.
In regard to social welfare legislation, Roosevelt had been a Senator in the New York State legislature when workmen’s compensation legislation was passed.
As Governor, Roosevelt had secured a program of old age pensions, unemployment relief and labor legislation and had taken the initiative to call a Conference of Governors to discuss unemployment and relief.
F.D.R., having visited county poorhouses in his State, expressed his feeling: “Somehow it just tears my heart to see those old men and women there, more than almost anything that I know. We need a drastic revision of the poor laws, and I propose to recommend it.”
When he signed the State Old Age Pension Law, F.D.R. said: “Our American aged do not want charity, but rather old age comforts to which they are rightfully entitled by their own thrift and foresight in the form of insurance.”
In 1932 a plank in the Democratic Party platform put it this way: ” We advocate an unemployment and old age insurance under State laws.”
In this connection, the belief in State legislatures, perhaps a myth, was that the Federal system of Government encouraged experimentation (F.D.R. was one of those who believed this) and that this enabled the States to function as laboratories in social legislation. The Federal system, at the same time presumably, insured that legislation was adapted to local needs and circumstances. The experience of social insurance and pension progress demonstrated otherwise. Individual States feared to initiate legislation or to depart from established standards. Local considerations seem to have been less important in determining the content of legislation than a desire to keep expenditures to a minimum.
A most important influence on F.D.R.’s thinking on social welfare in general, and social security in particular, was Frances Perkins. Frances Perkins had been a social worker and Industrial
Commissioner for F.D.R. when he was Governor of New York. She was brisk and articulate, with vivid dark eyes, a broad forehead and a pointed chin. Usually she wore a felt tricorn hat.
Once asked, “Is being a woman a handicap in serving in the President’s Cabinet?” her crisp answer was, “Only in climbing trees.”
When the depression of the 1930’s began, the country had a system of relief that was almost exclusively locally administered and locally financed, except for the special categories of the aged and children in some States. But the rapid increase in relief loads in 1930 and 1931 placed an impossible burden on local, and particularly, municipal finances. The first shift in responsibility was to the States. By the middle of 1933, about half the States had appropriated funds for emergency relief, but State resources also were limited. Only in July 1932 was the Reconstruction Finance Corporation, which had been set up in January of that year, able to provide financial aid to agriculture, commerce and industry, given authority to make loans and advances to States for relief purposes.
By March 1933, when a new Administration took office, it had become apparent that the Federal Government must take direct responsibility for relief. The Civilian Conservation Corps, established to provide useful work for young people, was created on March 31. In May, the Federal Emergency Relief Administration (FERA) was established with authority to make grants to the States for both work relief and direct relief. Through its requirement that Federal funds must be publicly administered and its encouragement of relief payments in cash rather than in kind, the FERA exerted a lasting influence on the administration of relief in the States. (Of significance is that the FERA was providing temporary aid to nearly 3/4 of a million persons over 65 years of age.) In June 1933, Federal grants to the States for public employment offices became available under the Wagner-Peyser Act. In June, also, the Public Works Administration was created. When it became clear that the letting of contracts for regular public works projects was moving too slowly to meet the crisis before winter, the Civilian Works Agency was set up by Executive Order in November 1933 and for four months operated directly a vast Federal works relief program.Social Security Proposed-
Skipping ahead to 1934, it was in June, –June 8 to be exact — that F.D.R. really got down to the subject of social security when he said in his message to the Congress:
|“Among our objectives I place the security of the men, women, and children of the nation first. |
The security for the individual and for the family concerns itself primarily with three factors. People want decent homes to live in; they want to locate them where they can engage in productive work; and they want some safeguard against misfortunes which cannot be wholly eliminated in this man-made world of ours.
In a simple and primitive civilization homes were to be had for the building. The bounties of nature in a new land provided crude but adequate food and shelter. When land failed, our ancestors moved on to better land. It was always possible to push back the frontier, but the frontier has now disappeared. Our task involves the making of a better living out of the lands that we have.
So also, security was attained in the earlier days through the inter-dependence of members of families upon each other and of the families within a small community upon each other. The complexities of great communities and of organized industry make less real these simple means of security. Therefore, we are compelled to employ the active interest of the Nation as a whole through government in order to encourage a greater security for each individual who composes it.
The third factor relates to security against the hazards and vicissitudes of life. Fear and worry based on unknown danger contribute to social unrest and economic demoralization. If, as our Constitution tells us, our Federal Government was established among other things ‘to promote the general welfare’, it is our plain duty to provide for that security upon which welfare depends.
Next winter we may well undertake the great task of furthering the security of the citizen and his family through social insurance.
This is not an untried experiment. Lessons of experience are available from States, from industries, and from many nations of the civilized world. The various types of social insurance are interrelated; and I think it is difficult to attempt to solve them piecemeal. Hence, I am looking for a sound means which I can recommend to provide at once security against several of the great disturbing factors in life–especially those which relate to unemployment and old age. I believe there should be a maximum of cooperation between States and the Federal Government. I believe that the funds necessary to provide this insurance should be raised by contribution rather than by an increase in general taxation. Above all, I am convinced that social insurance should be national in scope, although the several States should meet at least a large portion of the cost of management, leaving to the Federal Government the responsibility of investing, maintaining, and safeguarding the funds constituting the necessary insurance reserves.
I have commenced to make, with the greatest of care, the necessary actuarial and other studies necessary for the formulation of plans for the consideration of the Seventy-fourth Congress.
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. They are the essential fulfillment of measures already taken toward relief, recovery, and reconstruction.”
F.D.R.’s Executive Order No. 6757, June 29, 1934, created the Committee on Economic Security (C.E.S.). The purpose of the Committee was to make recommendations on a comprehensive program relating to old age security, unemployment, sickness and health insurance.
The Cabinet Committee was made up of Frances Perkins as Chairman, Henry Wallace of Agriculture, Homer Cummings the Attorney General, Henry Morgenthau of Treasury, and Harry Hopkins of the FERA, and was assisted by a Technical Board headed by Arthur J. Altmeyer— then second Assistant Secretary of Labor, and a number of advisory groups representing employers, employees, the interested professions and the public. Mr. Altmeyer later became a member of the Social Security Board, then Chairman, and for the years until 1953 played a key role in shaping social security, especially as to how the Act was administered. Much of this appears in his book, The Formative Years of Social Security .
The Executive Director of the Committee was Edwin E. Witte from Wisconsin. He had long experience with the Wisconsin legislative reference library — from 1922 to 1933. He was an excellent draftsman of legislation. The emphasis in his job as Executive Director was on speed, for the Committee on Economic Security was not to do original work — but to bring in proposed legislation. His book, The Development of the Social Security Act, is a vital source of what took place between July 1934 and August 1935.
The old age group was made up of Murray Latimer of the Industrial Relations Counselors who was an expert on private annuity programs; Professor Barbara Armstrong of the University of California Law School who was an expert on social insurance and constitutional law, and Professor J. Douglas Brown of Princeton who was an expert economist.
Old age benefits, it was soon recognized, had to be nationally administered, or else a man 65 would be getting checks from a dozen States — this was impossible with 48 State reserves, actuarial controls and benefit structures. Besides to operate such a system would seriously affect mobility.
NOTE: In the legislation to be proposed the only link between financing and benefits was the wage record. Note, the taxes were separated from benefits — Titles II & VIII, and III and IX, to help avoid the Act being declared unconstitutional by the Supreme Court.
In the C.E.S. deliberations, the important issue was unemployment insurance. In Congress the greatest interest would be on public assistance for the aged, and especially in restricting Federal control over it. In that connection, note that Tom Eliot — a young lawyer for the Department of Labor and later the General Counsel of the Social Security Board — who helped in fashioning the Bill put public assistance in as Title I.
You have F.D.R.’s annual message to Congress on January 4, 1935. It launched a second New Deal. Social Justice was the new goal. Reform was declared to be inseparable from recovery.
A report of the Committee on Economic Security was transmitted to Congress on January 17, 1935, together with a bill carrying out its recommendations. In its report, it should be noted, the Committee pointed out that maximum employment was the first objective of a program of economic security. It regarded outside its jurisdiction, however, either measures designed specifically to promote private employment or a public works program. Federal policy in this latter area was embodied in the Emergency Relief Appropriation Act of April 1935. In setting up the W.P.A., the N.Y.A., and the Resettlement Administration, and in continuing the C.C.C., the Federal Government in theory took over responsibility for employable persons, leaving to the States provision for unemployables other than the special categories for whom federal financial aid to the States was then under discussion. In practice, Federal appropriations were never sufficient to provide adequately for all the needy unemployed.
Following the recommendations of the Committee on Economic Security, the Economic Security Bill, introduced as the Wagner-Lewis-Doughton bills, provided for a threefold attack on the problems of old age security: Federal grants-in-aid to the States to help finance the cost of non-contributory old age pensions for those already old and without means; a national contributory old age annuity system for workers in industry and commerce; and voluntary Government annuities purchasable in small denominations and designed especially for professional and self-employed persons not covered by the compulsory system. (Congress later threw this feature out.)
The Committee on Economic Security recommended a State-administered system of unemployment insurance, based on the Federal tax-offset device, with Federal handling and investment of all reserve funds to assure their utilization consistent with the general fiscal policies of the Government, and almost complete latitude to the States in regard to benefit specifications, type of fund, and method of financing. The Committee further recommended Federal grants-in-aid –maternal, child health and welfare services, more funds to the Public Health Service and to the Federal Office of Vocational Rehabilitation for public health activities and vocational rehabilitation.
The Committee on Economic Security gave considerable time to the risks to security arising out of ill health. It recommended immediate enactment of a nationwide preventive public health program, including Federal grants to the States to support State and local public health activities and a strengthening of the United States Public Health Service. It endorsed “the application of the principles of insurance” to the risks of ill health, and suggested that cash wage loss benefits and medical care benefits be separately administered, but indicated that it was not making specific recommendations for a system of health insurance pending the completion of studies and negotiations that were then going on with medical, public health, dental, nursing and hospital groups. In February 1935, a special session of the House of Delegates of the A.M.A. took a position against compulsory health insurance, whether administered by the Federal Government or the States. It suggested as an alternative the development of voluntary plans under the control of State and county medical associations. The A.M.A. further influenced the American College of Surgeons to abandon the position it had taken the previous year in favor of health insurance and effectively silenced some of the more liberal of the State and local medical societies. As a result, no attempt was made by the Administration to include health insurance provisions in the Social Security Act. It is interesting to note that the Committee on Economic Security’s medical advisory committee included the President of the A.M.A., the President of the American College of Surgeons, and the Vice-President — since the President was a Canadian — of the American College of Physicians. It was never again possible to bring such a group together.
The Economic Security Bill was not the only proposal being offered to solve the problems of the aged.
The Townsend, Long, Social Justice, Epic, Ham and Eggs and other similar-type movements, provided strong competition. (More on these a bit later.) In addition they focused greater attention on the problems of the aged and on those aspects of the Social Security Bill dealing with the aged. Besides, there was the European influence, their experience helped show Americans what must be done, what could be done and the various ways of doing it. In passing, it is worth noting that in the rest of the world in 1935, approximately 28 countries had social security systems of fairly broad scope in operation. All but six were in Europe. The others were Australia, Chile, Japan, New Zealand, the Union of South Africa and Uruguay.
Another factor to be considered was the depression itself, for it certainly sensitized the American public, affected its social conscience by what it was doing to many groups, and especially to the oldsters.
Other factors affecting the form and passage of the Social Security Act:
a. The proof that many individuals would not save systematically unless compelled to do so, or that no matter how much saving, the individual could not save enough for such a catastrophe as a long-term depression.
b. A declining birth rate in these years — even before and during the depression. This meant smaller families, with fewer children to care for parents in later years.
c. Another factor tended to make the elderly less solvent and self-sufficient. In 1890, when they comprised approximately only 3% of the population, a mere quarter of them were gainfully employed, but by 1930 — when they made up 5 1/2%, more than 2/5 – 40% — of them had quit their jobs.
d. The belief that unemployment was just another type of industrial hazard, whose whole cost the victim should not be asked or have to bear alone.
e. A spreading conviction that industry ought not to exploit labor for huge profits during flush times and then throw on society the whole burden of unemployment and threadbare old age.
Perhaps the most important competition to the Economic Security Bill came from: The Townsend Movement —Townsend Old Age Revolving Pension Plan
It mushroomed with startling speed. In September 1933, seven months after Roosevelt’s New Deal started, a doctor, Dr. Francis E. Townsend, sent his plan to a local newspaper in Long Beach, the Press-Telegram. Within a year, he claimed millions of followers.
Striking deep roots in the subsoil of discontent, it had the indispensable material for a protest movement–a leader who symbolized a cause, a concrete program directly related to old people’s needs and indigenous to the American way of life, scorning radical and “unchristian” methods.
Townsend was a lean, bespectacled oldster, who had struggled long years homesteading in Kansas and doctoring folks in the Black Hills. He finally migrated to Long Beach, California, where he was Assistant Health Officer. A change of administration in 1932 cost Townsend his position. Then 66 and with less than $100 in savings– his plan called for a governmental allowance of $200 a month to every citizen 60 or older. The pension was to be funded by a 2% sales tax and the money had to be spent within 30 days. The argument ran that such a wave of spending would result in a business boom and the sales tax could therefore be borne by our economy.
A bill incorporating the Townsend Plan was introduced by Representative John McGroarty, poet laureate of California. It never got too far.
In the hearings on the Social Security Bill, Townsend was put on the stand so as to discredit him — to demonstrate the unsoundness of his thinking; air the squabbles among the leaders of the movement; the unsavory character of some of them — and, most of all, to frighten Congress into accepting something less– the Economic Security Bill– which became the Social Security Bill in April when the House Ways and Means Committee sent the Bill on to the House for debate.
Then, there was Huey Long’s Share Our Wealth Program. He, too, had clubs — which grew to ominous dimensions by 1935. Long demanded that the Federal Government guarantee an income of $5,000 per year to every family, thus making “Every Man A King.” He took on the name Kingfish — which he got from a character in the Amos and Andy radio show. This pill was sweetened for conservatives by limitations on private fortunes to $50,000,000, legacies to $5 million and income per year to $1,000,000. There was to be an old age pension for all over 60, although no specific amount was indicated.
Huey Long — a young man with a snub nose, dimpled chin and wavy red hair, was a farm boy from the piney woods of North Louisiana. A lawyer, he became Governor of Louisiana in 1928, moving on to the United States Senate in 1932.
In Louisiana he had ruled the State with an iron hand, smashing opposition ruthlessly. One historian had noted he was “Blatant, profane, witty, unscrupulous, violent, possessed of the habit of promising the impossible, together with the ability to provide good roads, better schools, free school books, free hospitals and a generally better standard of living for the poor — black and white — and, at the same time, to keep the State government solvent.”
In the propaganda his movement put out — Wall Street was the source of capitalism’s iniquities and the administration was pictured as being its tool. One ditty went:
“Black Sheep, Wall Street, have you any gold, Yes, sir, Yes sir, All I can hold, Thanks to the New Deal, I’ve made a billion more, And I’ve stuck it all away in my little chain store.”
Long was assassinated in September 1935.
A third competitor was the Social Justice Movement –led by the eloquent Father Charles E. Coughlin — of Royal Oak, Michigan — who, in 1934, organized the National Union for Social Justice. Coughlin advocated a program of social reform that was specific in its support of silver inflation but vague on most other points. At first he favored F.D.R. and his policies, but he soon turned against him and his ire was directed against international bankers, communists, and labor unions. He attracted a huge national radio audience – by 1934 -he estimated from 30 to 45 million listeners. As I recall, he spoke early Sunday afternoon.
Another movement was: EPIC — End poverty in California — tied in with Upton Sinclair (of Jungle and later of fiction Lanny Budd series fame.) He proposed a $50 a month pension to the needy over 60 years of age — do it by income and inheritance taxes and a tax on idle land. He was defeated for Governor in 1934.
Another, from California, too, was called: Ham and Egg $30 every Thursday Plan. Organized by Roy Owens and Lawrence and Willis Allen and Robert Noble. Their plan — all unemployed in California over 50 to get a pension each week– a 2 cent stamp was to be put on one dollar warrants before spending them. The proposal was narrowly defeated in the State election of 1938.
Congressional Consideration of Social Security Bill-Following extensive hearings before the House Ways and Means Committee and the Senate Finance Committee, the Social Security Bill was brought to each Chamber for debate and vote. Debate was not long though, at times, quite heated. For example, there were these prophets of gloom and doom.
Representative John Taber of New York — “Never in the history of the world has any measure been brought here as insidiously designed as to prevent business recovery, to enslave workers and to prevent any possibility of the employers providing work for the people.”
Congressman Daniel Reed, New York — member of House Ways and Means Committee — “The lash of the dictator will be felt and 25 million free American citizens will for the first time submit themselves to a fingerprint test.”
Congressman James W. Wadsworth, also of New York: “This bill opens the door and invites the entrance into the political field of a power so vast, so powerful as to threaten the integrity of our institutions and to pull the pillars of the temple down upon the heads of our descendants.”
The vote on the Social Security Act: In the House it was 371 – 33. In the Senate, it was 76 to 6 .
Of more significance was the vote on re-committal, that is– sending the message back to committee and its eventual death: In the House all of the Republicans who voted, except one, approved the motion for re-committal as recommended by Representative Treadway of Massachusetts, the ranking Republican member of the House Ways and Means Committee.
In the Senate, Senator Hastings, Republican of Delaware of the Finance Committee, who predicted that the bill might “end the progress of a great country and bring its people to the level of the average European,” proposed to strike out the old age insurance provisions. 12 of 16 Republican members voting were for taking this step. (There were 19 Republican Senators in all.)