THE LEGAL BACKGROUND OF THE SOCIAL SECURITY ACT*
By Thomas H. Eliot, General Counsel for the Committee on Economic Security, 1935-1938
* Delivered at a general staff meeting at Social Security Administration Headquarters, Baltimore, Maryland, on February 3, 1961.
In discussing the constitutional atmosphere in which this program (social security) began, I’d like briefly to go over the three major parts of the original social security program in terms of (1) the actual governmental and political progress that had been made prior to the passage of the basic Federal Statute, and (2) the constitutional framework in which any proposals for a Federal program had to be developed.
As far as congressional action was concerned, the three-pronged approach, from the beginning in the 1930’s, was in the general fields of assistance–immediate assistance on the basis of need to certain categories, primarily the impoverished aged people of the country; second, unemployment insurance; and third, old-age insurance. Let me go over those briefly with respect to what had been happening prior to 1935.
PROBLEM OF NEEDY AGED
Old-age assistance had been the first subject of governmental action within this general area. Beginning in the early 1900’s, a number of States had started to pass State statutes designed to substitute for the old-fashioned poorhouse some kind of aid to poor people who were aged so that they could maintain their own homes. This was partly humanitarian; it was partly because soft-hearted social workers, a profession that was only just beginning, understood that many aged people couldn’t bear to be called paupers and be treated accordingly; and it was partly because when they were moved out of their homes and were put into poorhouses, It was a heart-breaking experience frequently followed by unhappy conditions. There was, however, another interest here–an influence that caused State action. It was purely economic. It was very expensive to run poorhouses. It was conceivable, or so it was argued, that it would cost less and you could treat people better by giving them cash grants, and at the same time enable them to maintain their homes and some kind of minimum subsistence. Sparking this whole drive was a private fraternal organization–the Fraternal Order of Eagles–which made old-age assistance a kind of cause for the organization–way back before World War I.
This was however, a plant of slow growth. And not until the Depression came did many States have old-age assistance laws. Then several passed them because the need was so great and the political pressure building up as a result of poverty among the aged was so effective that the legislatures had to respond. They could respond with statutes, but they didn’t have the money to back up the statutes. Even those States that ‘ had passed laws earlier found it impossible to pay anything like even the extremely modest $12-$14 a month kind of old-age assistance that they had planned to give to the aged. So we had by 1934 an average of around $7 a month in old-age assistance for aged people. Several States which had passed laws had never been able to appropriate any money at all to make those laws effective, and some States still operating their old-age assistance systems were paying elderly people sums such as $1.29 or $.71 a month to live on. It’s perfectly natural that under these circumstances the cry for better support for people who were suffering simply because they were old, not because they were at fault, should increase and become a real political factor as soon as the change in administration took place in 1933. By that time, the need was much greater and much more obvious than it had been before for two reasons.
URBANIZATION OF OUR SOCIETY
One was the obvious impact of a process which had been going on for a long time, and it has been going on steadily since–the change in our way of life in this country from essentially rural to essentially urban. In the old days, the old-age assistance problem was not so great so long as most people lived on farms, had big families, and at least some of the children stayed on the farm. It was customary when the old people got too old to do their share of the work they would stay on the farm and the sons or daughters would keep them there in the home. That pattern changed slowly but continuously
from the early part of the century as more and more of the young, rural population left the farms. The threegeneration household (aged parents, children, and grandchildren), perfectly common 50 years ago, had begun to become very rare indeed. By the time people got old, the children had already left and gone to the city. There was no one to take care of them. Hence, an increase in the problem of the needy aged.
THE CRASH OF 1929
Adding to that, in the years immediately prior to the so-called New Deal Administration, was the really quite sharp impact of the “folly” of the old people, a folly shared by the young, by the rural, by the urban, by the rich, and by the poor. The folly of gambling, or at least if you want to be cynical about it, the folly of gambling and losing.
I refer to the stock market crash of 1929– or particularly I refer to the years immediately preceding that cataclysm on Wall Street. Those were years of total madness in the lives of thousands, hundreds of thousands, perhaps even millions of Americans. Just plain madness! I remember, as a college senior, walking along the street and seeing another college senior who grabbed me and in great excitement said, “Buy Chrysler!” Well, I didn’t have any money to buy Chrysler! That is the way people were persuaded to get rich quick. I had a relative who at that time as a young man worked on Wall Street with one of the investment houses. He said a few months ago, while looking back to those days, “I can’t think of anything so insane. At the time all of us young fellows thought we were building America, and we were the great financial wizards who were going to keep America on a permanent plateau of prosperity. We would go down to Wall Street and we would meet people who’d say, ‘Perfect Circle is the stock today.’ We’d go in and take our customers’ money without any further investigation, having seen a stranger who said that to us, and, like mad, buy this particular stock. By 3 o’clock in the afternoon, we would have made, on paper, $50,000 for ourselves or for our customers or both. We would then celebrate until midnight or two in the morning. And we’d start the same racket over again the next day at ten. This we considered high finance and the sure. way to permanent prosperity in America.”
Well, this kind of fever caught up all manner of people, and among these were a great many elderly people, both on the farm and in the city, who put their savings into Wall Street and lost them when the market crashed in the fall of 1929. This again increased the problem of the needy aged–a problem which the Federal Government made no attempt to meet at least until 1933. Actually no effective attempt was made until after the passage of the Social Security Act in 1935.
In 1933, a bill was introduced to meet this particular problem at the Federal level. It was known as the Dill-Connery Bill. Its sponsors were Senator Clarence Dill of Washington and Congressman Bill Connery, an old vaudeville star and a very delightful fellow from Lynn, Massachusetts. They proposed grants-in-aid by the Federal Government to the States in amounts up to $15 a month per person to be matched by the States and to be used for the payment of old-age pensions. The bill did not get immediate attention from the Administration. As I look back, I’m rather surprised that the bill didn’t go through on its own merits because there was an obvious need. Many States were anxious for this kind of help and inevitably the politician (the Congressman) had to be aware of the fact that old people do vote and this kind of legislation, if supported, would be a good political argument in favor of the record of the man who voted for it. Why didn’t the Dill-Connery Bill go through in 1933, or even in 1934? Well, perhaps one reason was that in 1933 the immediate and extreme crisis typified by the closing of every single bank in the country, on the day that Mr. Roosevelt took office, required recovery legislation, not long-range reform of an economic system. The big thing was somehow to get the economy going quickly. In trying to meet that need, the Congress very nearly abdicated its own lawmaking function and turned it over to the dynamic new Administration, especially to the dynamic new President. That was followed, of course, by the historic 100 days when more legislation of significant substance–good or bad–was passed by the Congress than in any other comparable peacetime period in our history, by far. But it wasn’t old-age pension legislation, and it wasn’t something designed for the “long pull.” In 1934, the bill very nearly did pass and the fact that it didn’t is tied up with the attitude of the Administration, primarily of the President, toward the whole field of security for people in the United States.
THE SUPREME COURT AND GRANTS-IN-AID
One thing that did not prevent the Dill-Connery Bill from being favorably considered was the constitutional question. This was just about the only bill that you could think of that wasn’t sure to run into difficulty with the Supreme Court–this matter of the Federal grants-in-aid to the States. This was the period when no matter what a State legislature did, or by what majority, and no matter what the Congress did, or by what majority, five men, or sometimes six, seemed almost certain to strike down whatever was done. But there was one thing they couldn’t strike down with any self-respect and that was a Federal grant-in-aid. Back in the early 1920’s, Congress had passed a very modest grant-in-aid program with respect to maternal and child care called the Sheppard-Towner Act. A taxpayer in Massachusetts brought suit to recover income taxes paid by her on the grounds that money which she paid in taxes was being unconstitutionally spent by the United States Government to bribe the States to have maternal and child welfare programs. The Constitution states that all powers not specifically delegated to the national Government nor denied the States are reserved for the States. The Constitution does not say that the control of or promotion of maternal and child health is delegated to the national Government; therefore, it must be reserved for the States. Yet the national Government was giving money to the States in grants-in-aid to promote maternal and child health. Thus, the national Government was spending Mrs. Frothingham’s money unconstitutionally. That was the argument of the taxpayer in Massachusetts.
At the same time, the Commonwealth of Massachusetts brought suit against the Secretary of the Treasury to enjoin the making of the grants-in-aid on the same grounds–that this expenditure by the national Government was an attack on the constitutionally-reserved powers of the States, that the States had been told they could have this power, and that the expenditure was therefore illegal. In the cases of Frothingham v. Mellon and Massachusetts v. Mellon, decided in 1923, the Supreme Court rejected both claims. It said that the taxpayer’s claim was so picayune as not to be worthy of consideration by a judicial body and that if you could figure out how much of Mrs. Frothingham’s income tax was being spent in the form of grants-in-aid to the States, the amount involved would come up to something like 1/5 of a penny. The Court was not going to waste its time with claims of that sort. But with respect
to the more serious argument put forth by the Commonwealth, the Court said, in effect, that this was not an unconstitutional promotion of health and welfare forbidden to the national Government. The national Government does have the power to tax. It also does have the power to spend; otherwise it wouldn’t have the power to tax. In this instance, it was spending for the general welfare. It was not coercing the States. It was not forcing the States to do anything. If the State didn’t want the child health program, it didn’t have to have it. If it didn’t want the Federal money, it didn’t have to take it. The court, perhaps unrealistically, said that there was no coercion in the existence of a Federal grant So the grant-in-aid approach was acceptable, judicially speaking, in a day when practically any other kind of social legislation that you could think of was likely to run into constitutional obstacles. And yet the fact that Congress had the power to tax and, therefore, the ‘ power to spend did, in the last analysis, furnish the key to the rest of the program we now know as social security.
One day early in the New Deal period, the Secretary of Labor, Miss Perkins, was at a dinner attended by one of the Justices of the Supreme Court who was not striking down statutes right and left–in other words, one of the minority judges, the late Harlan F. Stone, who later became Chief Justice. She was saying, “About all we can do apparently is make grants-in-aid. It’s the only way we can meet this problem, and I doubt if it’s going to succeed in doing the job adequately.” And he said to her, “Look at the Constitution, the taxing power, my dear, the taxing power.” The hint was taken, and it was tight as it turned out. But now what is meant by that? Of what use is the taxing power aside from just raising money which then could be offered to States, if they wanted it, for particular purposes?
Before referring to the answers to these questions, let’s dispose first of the one thing that has not been in the social security program and is not-now, and I will not say it never shall be. That’s health insurance. There was a time when responsible leaders in the whole field of social security, the early experts, the men best informed about the program of Bismarck and the program instituted in England in 1911, people most active in trying to awaken Americans to the idea that this is a function which Government can well and satisfactorily perform without costing individuals their freedom, would have predicted that the first social insurance measure in the United States, aside from workmen’s compensation, would be health insurance. After all, workmen’s compensation is pretty close to it. They would have predicted that, right up to the period when we went into World War I, and they would have had a good deal of reason to do so. Under the prevailing opinions of the Supreme Court, there was no expectation that the national Government could pass a health insurance law at that time, but bills were introduced in the State legislatures of numerous States. A contributory health insurance scheme passed the Senate in New York State in 1916 or 1917 and strong support for that bill came from a group that carried great weight in the legislatures and which, if it had continued to press for action, might have brought about State health insurance laws if World War I had not intervened. That group was a special committee of physicians set up to study this problem by the American medical Association.
The leader of the AMA health insurance advocates was Dr. Alexander Lambert and the whole body adopted his report. Then the committee dispersed because the members went off to the war. By the time the AMA got back to the subject, the whole atmosphere of politics and social thinking in the United States had changed. Harding had been elected. The AMA had come under different leadership and turned its back on its earlier beliefs. It decided this (health insurance) was a dangerous proposal and that it did contain within it seeds of great harm to the medical profession and also to the people who needed medical care. For the past 40 years it has fought pretty steadily against all proposals for prepayment, and in the old days it used to fight against even voluntary prepayment plans for the meeting of medical bills. This contest, of course, is still going on and certainly has enlisted the vast majority now of, at least, the vocal members of the medical profession. They strongly resisted what they deemed to be the unwarranted intrusion or possibly dangerous or damaging intrusion of Government into their professional field. So we can put health insurance aside as far as the 1930’s are concerned even though the Committee on Economic Security did have a study made with respect to health needs and the possibilities of meeting them. Edgar Sydenstricker and I.S. Falk, two outstanding spent-some months in Washington and wrote up a great deal of information and developed proposals which, however, never had a chance to see the light of day. The political realities were such that all those responsible for trying to get the program through the Congress did not want to jeopardize the rest of the program by having an almost certainly futile fight in behalf of any health insurance measures. The fear was that if health insurance in any form was a part of the Social Security Bill, this would arouse such vehement opposition that the whole bill would be killed. For that practical reason, aside from other reasons that might have been equally valid, health insurance was not seriously considered as a part of the social security program in 1935.
That leaves us the other two insurances. First, with respect to unemployment insurance. This had started in 1911 in England. It wasn’t anything unknown, and yet it seemed like a very queer and very radical idea as late as the days when I was going to college and law school-the late 20’s, and even the early 30’s after the Depression had begun. I remember going to a play in New York in 1931 or 1932. There was a scene that was supposed to be typical of what we would now call college beatniks, and they were parading with very radical and wild signs. Their most radical sign was, “We want unemployment insurance.” That was good for a sure laugh from the audience. Even though the British system was by that time well established, that British system was seldom spoken of as unemployment insurance. In this country it was almost always referred to as the “dole”–something unworthy. This was the attitude of a great many people and certainly of the dominant and influential organs of public opinion. Nevertheless, a few voices were raised about the good sense of having an unemployment insurance program that would provide in advance for the periods of layoffs that beset a great many workers in American industry. A number of State commissions had made studies. Nothing came of them except in one State, Wisconsin. There, after failure in the early 1920’s, the group with this idea persuaded the legislature to pass a bill in 1932 which originated in the thinking of the great labor economist, John R. Commons, and which was drafted very largely by a man who was still active in the unemployment compensation field. This man was Paul Raushenbush, and he reflected the philosophy of a great Supreme Court Justice.
THE WISCONSIN PLAN
The Wisconsin plan was a plan whereby each employer would set aside reserves for the payment of benefits to his own employees for a limited period. When the reserves reached a certain point, because of low unemployment and so few benefits being paid out of them, no further payments would have to be made into the fund unless it was drained by subsequent unemployment in that particular plant. This was the “plant reserve” system. It was designed, of course, to tide over the employees in that particular plant during a period of temporary unemployment. Underlying this plant reserve idea was the notion that temporary unemployment was the fault of the employer–that wise industrial planning could eliminate most or all of it; that you could have year-round employment in many places where you had sharp seasonal peaks and then drops where everybody was out of a job for 3 or 4 months; and that you could regularize employment if the employer had an incentive to cause him to do so. These notions were behind the thinking on the “Wisconsin Plan” of plant reserves. That philosophy of the basic responsibility of the small employer or the individual employer and the belief that he really could do something about it if he wanted to, was held by Justice Louis D. Brandeis of the Supreme Court of the United States. Justice Brandeis just happened to be Mr. Raushenbush’s father-in-law, so that the connection was fairly close. That was the only State unemployment insurance law on the books when the New Deal took office, but that law was not yet in effect. Having passed the law, the Wisconsin legislators then quite understandably responded to the anguished howls of Wisconsin employers, who were all going broke in the Depression, by postponing the effectuation of the statute. Nevertheless, the statute was on the books and a skeleton staff, headed by Mr. Raushenbush, had been set up to plan for its going into effect.
But there was a great difficulty which Wisconsin faced and which prevented the Wisconsin plan from being copied anywhere else. The difficulty was that faced by any State that acted in such a way as to impose new financial burdens on industry within its borders. It is illustrated by the story told about Phil LaFollette’s campaign for the governorship. Every day, if you were driving up from Chicago to Madison, you’d meet a big truck filled with office furniture. Obviously, a big office was being moved. And on the outside there would be a sign saying, “Forced to leave Wisconsin by LaFollette’s program of unemployment compensation.” If you went up Monday, you’d see it; if you went up Tuesday, it was still being forced to leave Wisconsin at the same hour. While this was a political trick, if it actually happened, it does illustrate one of the great difficulties that faced each State–even those State legislatures that were most anxious to take steps of economic reform within their borders. You do lose business–any community loses business–if, in the effort to render better service, it pushes its tax rates up much higher than a neighboring community where the service is not much worse. Nevertheless, the Democratic platform in 1932 included a clause that said, “We favor unemployment insurance and old-age insurance under State laws.” So the Roosevelt administration was pledged to do something about unemployment insurance–to stimulate State action. That action was taken when a glimmer of hope appeared on the constitutional front–a glimmer that became apparent around Christmas week of 1933. A different course of action was taken with respect to old-age insurance–departing from the platform’s pledge about State laws, without even a glimmer of hope, constitutionally, as far as any practical person could see. It was in that period from Christmas time 1933 until August 1935 that the Social Security Act had its real inception.
THE SUPREME COURT AND TAX OFFSETS
The constitutional law cases of Massachusetts v. Mellon and Frothingham v. Mellon have been mentioned in connection with grants-in-aid to States. Another case involving the same Secretary of the Treasury also influenced the shaping of the Social Security Act.
Back in the early 1920’s, as many of you are aware, there was a great land boom in the State of Florida. Long before people began speculating madly on the stock market, they began to speculate, even more frenziedly, in Florida real estate–much of it then under water, but selling like hotcakes. Part of the advertising accompanying that real ,estate boom designed to get people to come to Florida-especially wealthy people–was centered on the fact that the State imposed no inheritance tax. Rather surprisingly, Congress responded to the anguished claims of the States which did have inheritance taxes and passed an unusual statute early in the 1920’s. It levied a Federal estate tax which provided that up to 80 percent of that tax would be forgiven by the Federal Government if up to that amount had been paid in inheritance taxes to the State where the old person lived. Now this tax offset device, which is a method of course of equalizing conditions among the States through a Federal statute, had been contested in the Supreme Court of the United States by the much aggrieved and disappointed State of Florida. The Supreme Court held in 1926, in the case of Florida v. Mellon, that the State had no standing to sue. If it wanted to, it could pass an inheritance tax law and keep the money at home. If it didn’t want to, it didn’t have to. Nothing was being done of a coercive nature. Once again the State had no justiciable question to raise before the Court. In other words, the Federal tax offset device, in that particular case, had been upheld.
PLANNING FOR UNEMPLOYMENT INSURANCE–WAGNER-LEWIS BILL
At Christmas time 1933, the previously mentioned Paul Raushenbush and his wife, Elizabeth Brandeis, came to Washington to spend the Christmas holidays With the Justice and Mrs. Brandeis in their apartment on California Street. And the Justice, who was pretty careful not to get into politics, casually asked Paul, his son-in-law, if he had ever read the decision in Florida v. Mellon. That’s all he needed to say. Mr. Raushenbush read the decision and saw the point. The point, of course, was that pretty clearly it would be valid for the Congress to pass a new tax, a payroll tax, for unemployment insurance and forgive the Federal tax or almost all of it to those employers who were making contributions to unemployment reserves under State laws. it was a device for stimulating State action; for removing the inequalities that cause people to be afraid to undertake one-by-one, piecemeal, State action; and a device which apparently would clear the hurdle of the Supreme Court. Mr. Raushenbush then called up a number of people. He got hold of Miss Perkins. Miss Perkins got Charles Wyzanski; me, his assistant; Tom Corcoran, who was kind of the general White House lobbyist and bill drafter of the period; Corcoran’s colleague, Ben Cohen; and perhaps one or two other people over to the Brandeis’ apartment to discuss using this kind of an approach to stimulate State action in the field of unemployment compensation and to carry out that phase of the Democratic platform of 2 years before.
In the early winter of 1934, I was assigned by Miss Perkins to work with Mr. Raushenbush on the drafting of a bill.
We worked for 3 weeks. It took that long because of a very complicated phase of it which may have occurred to you. It’s all very well to say that an employer can offset against a new payroll tax the contributions which he actually paid to an unemployment compensation fund in the State. That’s all perfectly understandable and easy enough to draft, but one of the basic ideas of the Wisconsin plan was to encourage employers to regularize employment by making it unnecessary for them to make contributions if they didn’t have any unemployment. if they had a long period of regular employment and no drains on the funds that were building up, they could stop making contributions. This was the whole philosophy of the statute. This was the reward to the employer that didn’t have his men laid off all the time. What are you going to offset against the Federal tax? Under such a circumstance if you offset only the amount of money that was actually paid to the State reserve fund, then the employer was going to have to pay all the rest to the Federal Government and the whole benefit from regularizing employment would be lost to the employer. What we had to do was offset against the Federal tax not only the actual cash which the employer paid into the State employment reserve fund or his own employment reserve fund, but also the amount that he had been forgiven by the State from paying into that fund. That was a very complicated thing to explain and was a very complicated thing to draft. When I took the measure up to that wonderful little Congressman from Maryland, David J. Lewis, who introduced the bill in the House, and went over it with him, he got to that section. I explained it and said, “Congressman, is that clear?” And he looked at me and nodded and said, “Yes, clear as mud.” But it was in the bill. It was a handicap to the bill because it was hard to draft and hard to explain. I don’t rightly know why Mr. Lewis was selected; I’m awfully glad he was. He was a remarkable, devoted, selfless believer in social reform–a man of no formal education who went into the mines in Western Maryland at the age of 8.
WAGNER-LEWIS BILL IN CONGRESS
In the Senate, with much more predictability, the bill was introduced by Senator Wagner of New York. Senator Wagner had, more or less, shouldered everyone else in the Senate aside by this time as spokesman for all social legislation.
The Wagner-Lewis Bill was referred to a subcommittee of the House Ways and Means Committee, a subcommittee of which David Lewis was, I think, chairman. He held a number of meetings. It was obvious that most of the members were unimpressed, not very enthusiastic, and disinclined to do anything about this measure. President Roosevelt was finally prevailed upon by Miss Perkins to submit a letter (drafted, I think,, by me) to Chairman Doughton of the Ways and Means Committee urging that the bill be reported and acted upon. At that time, however, the Congress was becoming quite acutely aware of the nuances or the differences in emphasis in presidential messages, and the Wagner-Lewis Bill was quite obviously not on any “Must List.” The best we could do was to stimulate some interest in late March or early April by having public hearings. Here, because Mr. Lewis was chairman of the subcommittee, we had a favorable situation for scheduling the witnesses, knowing exactly when the hearings would be and who would be called upon. I was able to gather into Washington a large number of distinguished people who had shown interest in a nationally sponsored program of State unemployment compensation laws. These hearings were, on the whole, good for the bill because they brought some publicity to it. There was no sensational news engendered because people weren’t taking the measure very seriously. They were waiting to see whether Mr. Roosevelt was going to take it seriously or not. By early June, Miss Perkins said we were not going to g-et it through because the President had another idea. “I think he’s for our bill, all right. He said so. But now he thinks that the thing to do is to have one great package–one big bill. He’d like to see it as providing security for the men, women, and children of America from the cradle to the grave. He isn’t going to try for that all the way, but he’s going to come close to it. He’s going to ask for the appointment of a committee to study all phases of economic insecurity and recommend one broad program for the next Congress.”
The President apparently had made up his mind. And Congress gladly got off the hook. I think what the President may have been afraid of was that if he pushed one of these bills, then a bill like the Dill-Connery Bill would have to be enacted, too. And while the Dill-Connery Bill’s general outline of the grant-in-aid for old-age assistance was viewed with sympathy by the Roosevelt Administration, the details of the bill and the fact that it imposed almost no standards which the State had to observe, greatly disturbed the people who would now be in the Department of Health, Education, and Welfare and who were then largely in the Relief Administration and in the Department of Labor. They could not back the bill as it was written, and they were afraid that presidential support for piecemeal legislation would result in the passage of bills which they could not honestly support.
COMMITTEE ON ECONOMIC SECURITY
The President had his way. The President’s Committee on Economic Security was appointed–a cabinet committee under Miss Perkins with all members being cabinet members except for Harry Hopkins, the Relief Administrator. It hired a staff and went to work. Now the other reason why Mr. Roosevelt took this move was a practical political one. A congressional campaign was coming up in the fall of 1934. The great recovery and excitement of ’33 had faded. The National Recovery Administration, which was kind of the symbol of recovery, had turned out pretty badly. The early enthusiasm had disappeared. The Administrator of the NRA, General Hugh Johnson,-had enthused over the symbol of the NRA–the blue eagle. He had said, “Let no one trifle with that bird.” Everywhere you went you saw signs in store windows with the picture of the blue eagle and the words underneath, “We cooperate,” or “We do our part”—everybody cooperating under new regulations to bring back recovery. Well, by the summer of 1934, the recovery had stopped. The economy was in a tailspin, or mild tailspin, and going downhill again. Mr. Johnson had left the NRA, or was about to leave, to write his book entitled The Blue_Eagle From Egg To Earth, and Mr. Roosevelt was in political difficulty. A congressional campaign was on the way and here was a chance to have a big issue, namely, the security of the men, women, and children of America–a long-run, general overall economic security program, as it was always called then without having to defend the details of any one particular program. It was a made-to-order political issue. The opportunity was seized by the President. Here was a Committee designed to report–not before the election, but after the election. All he had to say was, “Well, the Committee is studying that.” He didn’t have to argue about the details of old-age pensions or unemployment insurance, or old-age insurance or anything else. Rather, just give the general picture and fight the campaign on that issue.
COMMITTEE ON ECONOMIC SECURITY CREATED
The Committee on Economic Security hired a staff. It had a Technical Board on Economic Security headed by Arthur Altmeyer and composed of people already in the Government. I was on the Technical Board and I was also Counsel to the Committee on Economic Security–a perfectly absurd appointment. I was 27. And I didn’t know enough to go out and get assistants either. The research staff was headed by Professor Edwin E. Witte of Wisconsin, a perfectly fabulous man–a walking encyclopedia of everything you could possibly want to know about both labor legislation and welfare legislation in this country and in other countries of the world. I never saw such a man! He was the Executive Director and a very good one. He hired quite a large staff, mainly from the academic ranks, but excluding some of the old line fighters for social insurance. Then there was an Advisory Council on Economic Security composed of leading citizens, which met for about 3 weeks in the fall of 1934 in Washington to discuss the program. The Council was chaired by Frank Graham, then President of the University of North Carolina and later Senator from North Carolina. This group spent most of its time in discussing unemployment compensation. That was the setup, except for one other rather abortive effort to bring the public into the picture. The idea was that all the people that had worked in the field and that could not be recognized by being on any of these boards or committees or councils might like to feel that they were part of the picture by being part of a National Conference on Economic Security, in November. And so about 400 persons who had shown an interest or taken some lead in fighting for local legislation were brought in. This was a most unwise venture. They all came in thinking they were coming to write the Social Security Act. They found that they were not having any influence whatever on the Social Security Act. They were taken to the White House and greeted by the President who told them what he wanted to have in the Social Security Act. it became very clear that the cabinet committee was pretty well along with its own decisions and this was a “window dressing” operation. I think it probably was a mistaken move.
It was decided early that the program would include the welfare provisions and the insurance provisions. what welfare provisions was not perfectly certain: Old-age, yes, that was clear–old-age pensions and old-age assistance. And also pretty clear was a program of Federal aid or graftts to the States for what was then known as Mother’s Aid and is now know as ADC or Aid to Dependent Children. Some States had moved in this direction, but were unable to finance adequate programs. There wasn’t as much interest in this as there was in old-age assistance, but there were States that had such laws and it seemed likely that Congress would accept a program of grants for those families. I don’t recall, at the moment, whether aid to the blind was written in at the very start or not. I think not. I think that this was added near the very end in response to a lobby which had interested some of the congressmen who decidedly wanted to have this in the picture. There was no opposition to it, and it followed in format the grants-in-aid for the other subjects. Then there were also, without much lobbying but at the request of the Children’s Bureau of the Department of Labor, provisions with respect to maternal and child care, rather like the old Sheppard-Towner grants-in-aid which had been the subject of the contest over constitutionality in Massachusetts V. Mellon.
FEDERAL OR STATE UNEMPLOYMENT INSURANCE
On the unemployment insurance side, there was a long and bitter internal contest. There were three possible approaches. One was to junk the Democratic platform and to have a national scheme’. I have been much surprised to read recently that the decision to have a State-by-State unemployment insurance program instead of a national scheme was reluctantly made at the very last possible moment in January 1935. This is not true. The scheme was going to be a State-by-State scheme from the very beginning. The idea of a national program was supported only by a few of the minor research staff people on unemployment. it was nurtured by a gentleman named Rexford G. Tugwell, who was Assistant Secretary of Agriculture. It would have been agreeable to Tugwell’s boss, Henry Wallace, and to Harry Hopkins, Director of Relief, but they saw the impracticality of it and made no fight for it as members of the Committee on Economic Security. Actually, the thing was foreclosed and we were going to have a State-by-State system. The President, perhaps, was not bound by the party platform. Platforms don’t bind Presidents! After all, he was operating under a platform that said the Democratic Party was going to balance the budget. He was always, free to change his mind and ask for a different kind of bill to accomplish the same general result. In August 1934, and I remember it so vividly because it was my-first personal contact with him, I went to the White House with Miss Perkins. We covered a great deal of ground and in the course of it the President said, in effect, let’s not talk about unemployment insurance in national terms. We’re going to have it by States. We’ve got to have it by States. And Miss Perkins hadn’t been arguing, nor had I, that we shouldn’t. But he got quite emphatic. Obviously Tugwell or somebody else had been talking to him. And he got quite emphatic saying, “We’re going–we want to sponsor State laws. I don’t know how you’re going to do it, but this scheme that we had last winter is probably a pretty good scheme and maybe we’ll work out something like that, but it’s got to be done by the States.” It was that position that he reaffirmed with the National Conference on Economic Security in November. The question then came up, what kind of a Federal program should we have to sponsor the State laws? Here I really shouldn’t have been in the picture because I was completely committed. After all, I had helped to write the potentially important statute, the Wagner-Lewis Bill, with its tax offset device. I had a deep emotional stake in seeing that particular device used.
The opposite plan was for a very complicated kind of grant-in-aid system–a special tax, with the proceeds to be doled out to the States under a complicated formula for the grant-in-aid. This was not the typical grants-in-aid. This was a grant-in-aid to be made out of the proceeds of a special tax, which took it out of the realm of Frothingham v. Mellon. A taxpayer could easily enough point to this particular money that was going to be spent for this particular purpose. Thus it ran into a good many constitutional and political difficulties. It also was a system which was going to be even harder to gear into the Wisconsin plan with its merit rating or its forgiveness of contributions by employers who maintained full employment. How that would have worked in this “subsidy” scheme, I never did figure out.
So the Wisconsin people were very much against the so-called Subsidy Plan and in favor of the Wagner-Lewis approach. I was pretty well committed to the idea behind the Wisconsin plan with the merit rating device. And I was for it for a much stronger, sounder reason, which I could not adequately exploit. I was for it because I was absolutely convinced that the Supreme Court would uphold the Wagner-Lewis tax offset. I was convinced of that because the whole thing had started with Mr. Justice Brandeis; but I couldn’t say so. Now he’s long since gone and it’s public property. But I couldn’t say so at the time.
That was the contest which agitated the people connected with the framing of the program more than any other. Not old-age insurance, which had much more far-reaching implications, but unemployment insurance. It was finally decided at Christmas time to favor the Wagner-Lewis approach and the old Wagner-Lewis Bill, refurbished only slightly, was made title IX of the Social Security Bill of January 1935.
That leaves old-age insurance. Nobody knew, when the Committee started its work in the summer of 1934, what kind of a program, beyond old-age assistance, there might be. It was assumed that there would be grants-in-aid, like the Dill-Connery Bill. But what could you do beyond that? I found some old files, one time when I was moving years later, indicating that somebody else and myself had been trying to draft a kind of head tax law–some kind of a poll tax to finance old-age benefits as a matter of right. What you had to do was provide something the people would get as a matter of right, and how are you going to do it? Could you do it by State laws as the Democratic platform had promised? On this the research staff headed by Witte promptly said “no.” People move too much during a lifetime. It couldn’t be done on a State-by-State basis, if you’re going to do it actuarially.
From the beginning it was assumed that it was going to be an actuarially sound insurance program. That could only be done on a national basis. Suffice it to say that with very little discussion at the Technical Board level, practically none at the Advisory Council level, the research staff brought in the basis of what we have today, a contributory old-age insurance system based on the taxing and spending power, a la Justice Stone. The President’s Committee accepted it in toto with very little discussion. There was one point which was raised about it. That point had to do with the rate of the tax-the rate of the old-age payroll tax. It was pointed out that the taxes and benefits combined would create a maximum reserve fund estimated at about 12 billion dollars-that this would dwindle as more people came into the system and worked longer and, therefore, got higher benefits when they retired. By 1980 the reserve fund would be down to a point where governmental contributions would have to be made to supplement the amounts collected from employers and employees. This was agreed upon by the Committee. The members of the Committee itself, with one exception, didn’t like this whole plan very much because there wasn’t sufficient general Government financial support for it. It was too self-sustaining. It was imposing what was necessarily a somewhat regressive tax, and it was putting all the cost on employers and employees as the President had wanted from the beginning. (He was always talking about a contributory system.) The Committee thought that, as in other countries, there ought to be a substantial contribution from the general income of the Government–a tripartite scheme. This was hardly that. But as it was going to become so inevitably by 1980, the decision was made.
OLD-AGE INSURANCE TO BE SELF-SUPPORTING OR NOT?
The bill was in its final stages of being very hurriedly drafted, when all of a sudden Secretary Morgenthau decided that he was betraying the future generations of Americans by making the Government pay part of the bill in 1980. It was then 1935. He went over and saw the President and sold the President on the idea that this was a wicked betrayal of the future, and the whole system would have to be changed. The rates of benefits would have to be scaled down and especially the rates of tax would have to be raised so that we would run up a reserve fund to keep it at somewhere around 72 billion dollars–a colossal amount that he was going to tie up here forever–so that the Government in general would never have to make a contribution to the fund. This appalled the Committee. He insisted on a further meeting. The Committee met and they all jumped on Morgenthau. They spoke up saying, “But Henry, but Henry.” Henry Wallace just looked at the ceiling and shook his head and laughed. It was all so hopeless. And Morgenthau banged on the table saying, “This is Henry Morgenthau, Jr., and these are his opinions.” And believe me they were his opinions, and he got the President to listen to him. Therefore, rather extraordinarily, when the bill finally was introduced, the tax rates were left blank and Miss Perkins had to testify for the bill and “duck” all questions as to what the rates should be for old-age insurance. She had to let Mr. Morgenthau carry the ball in advocating pushing them up above the level in the earlier drafts which some of the congressmen had already seen and which had been mentioned in the newspapers.
DOUBTFUL CONSTITUTIONALITY OF OLD-AGE INSURANCE PLAN
Otherwise, there was very little discussion about the general principle of an old-age insurance system—a national old-age insurance system and a contributory old-age insurance system. There were some fears. There was a great fear, which became more acute a little later, that this didn’t have a chance, constitutionally speaking. In 1933, Congress had passed the Agricultural Adjustment Act which levied a processing tax on the processing of agricultural products. It took the proceeds and paid them to farmers who agreed to cooperate to reduce production by leaving acres fallow or by not raising little pigs. The question was whether it was constitutional for Congress to take the proceeds of a particular tax and pay them over in this fashion, even for a purpose that might be said to be for the general welfare. The prediction of some of us that the Triple A–the Agricultural Adjustment Act–would be held unconstitutional was borne out a few months later. The Supreme Court struck it down 6 to 3.
You can see the parallel with what we were proposing in 1935 in the Social Security Bill. A special tax, in effect, on employers and employees and the payment of benefits to the employees made possible by the proceeds of that tax. Now we did all we ‘ could in the drafting of the bill to make a difference. We separated the tax title and the benefits title — one was title II of the bill and the other was title VIII. Nobody was being fooled by this. The idea was to give Justices, who might want some kind of an out, a legal peg to hang their hats on by saying, “Look, this is a tax over here and these are benefits over there and never the twain shall meet.” And we, of course, added a provision for investing the proceeds of the tax — not paying it out to the aged, but investing it in a special trust fund. But eventually it would get to the people who were going to get benefits.
The difficulty with this fiction was that if you looked at the taxing titles of the law and the benefit titles, all the definitions were exactly the same. The fact that the tax was certainly tied in with the benefit program could not be missed nor did we expect it to be missed. We did the best we could, as I say, to give a “wobbly” judge some kind of technical out to distinguish this law from the Agricultural Adjustment Program. On my part, at least, I had very grave constitutional doubts with respect to that program, very few with respect to unemployment compensation, and none at all with respect to the grants-in-aid for the various categorical State welfare programs.
WHY A SOCIAL SECURITY ACT?
The bill was introduced in January 1935 in both the House and the Senate, and before discussing its enactment, it might be well to discuss a number of questions. Why was the bill passed? Who wanted the Social Security Act? What about the people? I think that you can’t really answer these questions without, by a feat of either memory or imagination, bringing into focus the atmosphere of the middle 1930’s. You had then a situation where the people organized in groups or totally unorganized, dumb , or brilliant–it made no difference–knew that something had to be done. Something had to be done not only to bring back a reasonably healthy economic life in the present, in the 1930’s, but also to try to prevent a tragedy like the recurrence of The Great Depression.
What should be done was a question which divided many people and which most people felt unqualified to answer. So, it is fair to say that with respect to most people, if you counted heads all over the country, there was no informed and passionate desire for a particular kind of social security program. There was, however, an enormous political public response to the statement of the President that among our objectives we put the security of the men, women, and children of the United States first. That there was an enormous and distinctive response at that time to that statement was, I think, borne out in the congressional elections of 1934. The approval in advance, if you will, of practically anything that the Committee of Economic Security might recommend would not have been given under different circumstances in a different decade. You have to think of it in terms of a decade where 18 million people, which would be the equivalent now of 25 or 26 million people, were unemployed and seeking work and where the number of unemployed had been reduced in large part only by the provision of work relief or work projects at a so-called security wage.
Under these circumstances, you had a popular readiness to support a program if offered by people in whom you had confidence, and the confidence of the bulk of the people in the Roosevelt Administration at that particular period was still high. It remained high until the battle-over the Supreme Court in 1937. It certainly was high in 1935. So, if you had as you did then, a long study by a group of responsible cabinet officers, by a large number of so-called experts, by a group of leading citizens like the head of the top corporations and the leaders of labor organizations, and the like, you had laid the groundwork for a substantial amount of popular support.
Pressure group politics, which is the usual present day way of analyzing political action, is a little harder to pinpoint. The pressure groups with respect to old-age were few aside from the Townsend Plan, and the Townsend Plan had not reached the status of a really important pressure group when the Social Security Act was passed. The labor unions were for it; welfare organizations in general we-,re for it. It was a humanitarian measure. Some of the States were for it, at least on the old-age assistance level. With respect to old-age insurance, this came out of the blue. It startled many people; it had not been preceded by trial balloons. There had been no legislation for old-age insurance on a national scale the preceding year. And the friends of old-age insurance were few; not very many people had thought much about it. The opponents rallied as soon as the bill was introduced. Those opponents were spearheaded by the U.S. Chamber of Commerce and the National Association of Manufacturers. Counsel for the latter, John Gall, made effective and strong arguments against that phase of the bill. He questioned the constitutionality of the bill. These arguments I found rather difficult to refute, and I’m glad I wasn’t really called upon to do so as a witness before the committees of Congress because I had very grave doubts at that time about the likelihood of the Court’s upholding the old-age insurance section of the bill.
The big factor, though, is that popular support here was for the President. Maybe there wasn’t great popular support for the bill. People didn’t know much about it. They liked the general purposes of the bill. Basically, it was popular support for the President. It was a period, at least through 1935, dominated by one man. And so when I do emphasize Franklin Roosevelt’s part in this, I don’t think I am distorting history for a moment. He was not an all powerful President. The bill had plenty of difficulty in getting through both Houses, but as far as popular support was concerned, it was based on public confidence that the President’s objectives were right, and that his procedure was probably as sound as could be devised. The people were for the bill and would vote against congressmen who opposed it. In general, I suppose this was a kind of political pressure that was brought indirectly upon the men and women in the House and the Senate who had to vote upon the measure.
DRAFTING SOCIAL SECURITY BILL
The original draft of the bill was a “hodge-podge.” I was responsible for drafting the bill. The job was impossible. I should have had assistance. The President’s Committee was backing and filling so much between the Wagner-Lewis offset plan of unemployment compensation and the rival so-called Subsidy Plan that it had me redrafting that part of the act about three times a week. Nothing else could get done. The welfare sections were, to a considerable degree, drafted in the Children’s Bureau by non-lawyers and were not in very good shape. The old-age insurance sections originally were drafted in a hurry with the participation of Alanson Willcox, who is now General Counsel of the Department of Health, Education, and Welfare. He was then an attorney in the Treasury Department and came over later and joined me as Assistant General Counsel of the Social Security Board. The Treasury things were hastily done. There’s no question about that.
The unemployment compensation provisions were taken over from the previous year and were carefully drafted.
People called it a “hodge-podge,” whether they knew whether the measure was technically correct or not. They called it a “hodge-podge,” in part, because of the extraordinary order in which the titles were placed. As I have mentioned, the old-age insurance titles were II and VIII–deliberately separated. Likewise, the unemployment titles. The basic unemployment tax-offset provision was in title IX of the b – ill, whereas the grants-in-aid that were involved for administrative expenses were in title III of the bill. This kind of thing, with other sections scattered around in no apparent coherent fashion, caused editorial writers to lambast me indirectly. Actually this was all very carefully done for reasons I have indicated. And I think one of the few real contributions I made, and I got this from Senator Harrison of Mississippi some months later was the decision which I made, and the President’s Committee accepted, to have title I of the bill cover grants-in-aid to the States for old-age assistance. That was the one phase of the measure which did have a general popular support and no opposition.
The humanitarian appeal, the appeal of those States that had these laws on the books and couldn’t finance them, combined to make that title a popular thing. And we started the bill off in that fashion. Harrison said later that if we hadn’t, we might have been in an awful lot more trouble. It started the congressmen off favorably inclined as they began studying each detail of the proposed legislation.
SOCIAL SECURITY BILL IN CONGRESS
The bill went through the House in April after the opposition had become focused on one phase of it. As a matter of fact, both insurances–unemployment compensation and OAI, as it was called then–ran into some difficulty in the House Ways and Means Committee. Unemployment insurance was not particularly popular with the members. They were puzzled by the tax-offset device, and in the House they struck out of the bill any possibility of the Wisconsin plan with its excusing of contributions when employment was regularized. (This was restored in the Senate.) And, as far as old-age insurance was concerned, it caused a definite split in the Committee. There was not much debate in the Committee about it. The Democrats, whether they liked it or not, were committed to it. This was the President”s program. A few like Lewis were for it on its merits. Some of the liberals were not for it because they thought it was a regressive kind of program and there should be much larger Government contributions and less burden put on the employer and the employee. They agreed with a contributory system, but they wanted more Government contributions. So there was not much enthusiasm, but no opposition, among the Democrats in the House Ways and Means Committee because of the President’s influence, because the party had just won an election based on some kind of vague promise of this sort, and because of a readiness to go along with the President. They feared that if they fought him, they’d be injuring themselves. The Republican minority in the House Ways and Means Committee lined up solidly against old-age insurance and filed a dissenting report when the measure was reported to the House. The bill passed by an overwhelming majority. Most Republicans voted for the bill, even with old-age insurance, although Dan Reed and a handful of others were so deeply opposed to old-age insurance that they voted against the entire measure after their motion to strike old-age insurance had lost.
CLARK AMENDMENT ADDED IN SENATE
The bill then went to the Senate. Again there was very little opposition to it, except on one point. This is the one time when Administration really had to fight to round up votes. And it lost that fight at first. The fight stemmed from the fact that a number of companies, prior to 1935, had instituted private plans–employer or corporation plans–for retirement of their employees. These companies, which were already making contributions to these retirement pension funds, did not want to have a social security tax added to their burden and claimed that their employees did not either. They were represented in Washington by a lobby. The lobby was not composed of the companies that had these retirement plans. It was composed of a company of about four men which sold these retirement plans–a group of insurance men and actuaries who had devised various kinds of retirement pension plans and made their living by going around selling these to employers and installing the plans. They were expert advisors as to how to have a private insurance plan. This group was headed by a great friend of my father’s, a big, tall fellow named Forster from Philadelphia, and he was a wonderful lobbyist. His intent was to exempt from the old-age provisions any employer and his employees having a reputable retirement plan in operation.
This threw a panic into the insurance-minded people who had helped to devise the original old-age insurance program in the bill. This, they pointed out, would destroy its actuarial soundness. It would exempt many of the so-called best risks from the plan and would throw all their calculations out of kilter. Another thing that did worry a good many people was the possibility that companies could get out of the old-age insurance requirements and, at the same time, have a “phony” retirement plan. Too often during those weeks we were brought into contact with people who gave us the evidence that they, as employees, had been covered by a voluntary retirement plan which promised them a retirement pension when they reached 65 in the companies which employed them and who had been fired a week before their 65th birthday so that the company didn’t have to pay them any benefit after all. How were you going to prevent this, even if you wanted to do what Mr. Forster and Senator Bennett Clark of Missouri wanted to do? How were you going to prevent the fly-by-night plan from destroying the old-age insurance system? How would you avoid exempting large numbers of employees who weren’t really making adequate provision for their employees?
That was the question. And the big battle in the Senate was over the so-called Clark Amendment to exempt private pension plans.
The Clark Amendment did not adequately safeguard the interests of the employees or of the Government. It did not close the door to the “phony” plans. It did, as it was intended to do, permit the reputable plan to work outside of the old-age insurance system and to exempt the people that were covered by the reputable plan; but it also permitted disreputable plans to exist. It was a very hard thing, purely from a technical standpoint, to draft something to close all the loopholes and to distinguish between the valid and “phony” plans. It was a battle! The President got indirectly involved. Three of us, the President’s legislative liaison man, Charlie West, a former congressman; Tom Corcoran, whom I mentioned earlier, a man working on legislation; and myself, each were assigned four senators. Forster was lobbying like fury. He told my father later that he spent $50,000 in entertaining members of Congress. He wasn’t fighting. He was educating them. He had materials–perfectly legitimate stuff–to explain how the various plans would be hurt if the old-age insurance system didn’t exempt them. This was an entirely legitimate operation and I greatly respected him and his ability, but we certainly fought on the other side. Tom took four senators, I took four senators, and Charlie West from the White House took four senators. The outcome was, I think, the measure of our skill as lobbyists. Charlie West got nobody. All of his senators voted wrong. They all voted for the Clark Amendment. I got two and lost two. Corcoran got all his four. But the Senate, in spite of all our efforts, adopted the Clark Amendment. It had a very great appeal. Why do you want to destroy these good pension plans? We lost in a close vote. The bill then went to conference.
CONFERENCE COMMITTEE ACTION
There were a good many differences, and these were battled over for a month. Eventually all differences were settled except whether or not the Clark Amendment should be included in the bill. Here the President did bring pressure on the House leadership which was much more amenable to his leadership and influence than was the Senate. The House was solidly against the Clark Amendment and indicated that it would never vote for the bill if the Clark Amendment was in it. The Senate was equally obdurate in insisting that the Clark Amendment stay in the bill. Eventually Harrison’s assistant, Leonard Calhoun, a counsel from St. Louis brought in by Senator Clark, a very able fellow named Bill Woodward, and I were designated by the conference committee to see if we could redraft the Clark Amendment to close all the conceivable loopholes so that only the really reputable private pension plan could be exempted from the national scheme. We spent 2 weeks of very hard work. We could not close the loopholes. This was going to be an exceedingly difficult job. We had to learn absolutely everything about the possibilities in this old-age pension retirement plan system kind of thing, and we just couldn’t do it in the short time that had been given us. We finally signed a report to that effect and agreed to continue to meet if the Senate wanted us to and to have a new version of the Clark Amendment ready sometime the following winter or spring. With that understanding, the Senate dropped its insistence on the Clark Amendment. The conferees agreed, and on August 14 the bill was passed and signed by the President.
CLARK AMENDMENT DROPPED
Now an interesting little-addition to that issue is what happened the next winter. I was by then General Counsel and Leonard Calhoun was one of my assistants. He talked to me about this. I called up Senator King, who was Acting Chairman of the Finance Committee, and said, “Look, you were one of the people who was most active for the Clark Amendment, and you remember that Leonard and I and Bill Woodward pledged ourselves to do our best to write a new Clark Amendment. When do you want it? It’s getting on into March now, and Congress isn’t going to sit forever. When do you want the amendment? We haven’t heard from you. ” He laughed and he said, “Oh! Mr. Forster was in the other day. You can forget the amendment. Mr. Forster said he’d made a terrible mistake. He thought that the passage of the old-age insurance bill would ruin his business of selling private pension plans. Instead the passage of the Social Security Act has got everybody thinking about pension plans. He doesn’t want any Clark Amendment. You can forget it forever.” So that’s why there isn’t an exemption for private pension plans in the present social security law.
SETTING UP TO ADMINISTER ACT
After the bill was passed, we went through the period of organizing, always with the constitutional shadow over our heads. The cases were expedited. We had the political shadow, too, as you may know, of the 1936 campaign. In the last frantic days it degenerated into a wild hassle over the Social Security Act. The people’s vote, when every State went for the President except Maine and Vermont, seemed to close that as an issue. It’s never been revived in a presidential election since in the same fashion.
We still had the judicial hurdle. The cases were expedited, and by now the President was on the warpath fighting the Supreme Court. Whether that had any effect on the outcome, I don’t know. As I had forecast with confidence, the unemployment compensation tax, with its tax offset provision, was upheld, and as I had not forecast (although I was getting more hopeful because of the swing in the court), the old-age insurance provisions were likewise upheld, actually with 6 votes and not just 5 and for reasons that I’ve never been able to discover.
The tremendous job of administration, especially of the old-age insurance program, was embarked upon with extraordinarily little fanfare and extraordinarily little difficulty, considering the results.
QUESTION: Just what do you think caused the Supreme Court to reverse itself in its decision to declare the Act constitutional?
ANSWER: What happened in 1937 was that in February the President came out with a scheme to it pack” the Court. No one knows, and there is some dispute about it, but I think that probably it’s fair to say that the Court was not unmindful of this attack. Two Justices, Hughes and Roberts, were very alarmed for the future independence of the Court. They were, especially Hughes, anxious to prevent the bill (Court packing bill) from going through. However that may be, the fact is that in April the National Labor Relations Act came before the Court for decision while the President’s bill to pack the Court by adding six new justices was still being considered by the Senate. Hughes and Roberts joined three liberal justices, who had been voting in favor of the New Deal legislation, to uphold the National Labor Relations Act–even though in doing so they seemed to be repudiating their own opinions in earlier cases. Whether they did this in order to save the Court from defeat in the Senate I don’t know, but it may be so. After that break, it was not altogether unexpected that the old-age insurance provisions would likewise be upheld. I think the unemployment compensation provisions were fairly safe all the way along because of the earlier decision. I don’t know whether this is right or not. There were nine justices on the Supreme Court; one or two of them had to change their positions pretty fundamentally to thwart the threat of that number of nine being added to by six new justices appointed by the President. The old saying about that particular change of front is that, “A switch in time saved nine.”
Source: Social Security History Online: https://www.ssa.gov/history/eliot2.html