J. Douglas Brown

The Genesis of Social Security in America

BY J. DOUGLAS BROWN


PRINTED BY SSA, DHEW With the permission of the Industrial Relations Section, Princeton University
INDUSTRIAL RELATIONS SECTION
PRINCETON UNIVERSITY
PRINCETON, N.J.
1969

Foreword

IN PUBLISHING the following historical account in its series of reports, the Industrial Relations Section is departing from a precedent of many years. Rather than presenting the results of current research, the following pages are based upon the participation of the Section through its then Director in one of the significant developments in national policy in industrial relations the initiation of our social insurance system--just thirty-five years ago.

From its earliest years, the staff of the Industrial Relations Section has sought to aid industry, trade unions, and governments in the implementation of policies and programs which thorough and objective study have shown to be sound. This has required staff members to journey far afield throughout the United States, to dozens of foreign countries, and particularly to Washington. In the two great periods of stress of the Depression in the 1930s and World War 11, the Section staff was unusually active in putting the results of intensive academic study to work in the development of national policy.

From 1930 to 1939, the Section assisted through research and staff work in a series of government efforts from President Hoover's Emergency Committee for Employment in 1930-1931 to the drafting of the report of the Advisory Council on Social Security in 1937-1938. (The latter report was first printed by the Section, almost overnight, to meet a press deadline.) The following account tells of a very brief but critical period from September 1934 to January 1935 when the likelihood of a national old age insurance program hung in the balance. The Director of the Section was but one of several participants in the struggle, but since be was drawing upon the full resources of the Section in research experience and in established confidence among its many industrial and trade union associates, it seems appropriate for the Section to publish this bit of history, much of it for the first time, as a very special report of its activities just thirty-five years ago.

The author, J. Douglas Brown, has continued his participation in the development of social insurance policy. He has served on all four earlier Advisory Councils on Social Security and is a member of the Council appointed this year. On retiring as Provost and Dean of the Faculty after twenty-one years of service, time has become available to study the extensive files deposited at the Section covering his work as a member of the old age staff of the Cabinet Committee on Economic Security appointed by President Roosevelt. Many other sources have been used, however, and he has had most valuable help from Mrs. Barbara N. Armstrong whose name appears frequently in this relatively brief summary of an eventful period.

Fredrick H. Harbison

Acting Director




The Genesis of Social Security in America

SOCIAL SECURITY has now become a common and comforting expression in the American language. More important, it has become a meaningful factor in meeting the contingencies of life for nine out of ten Americans. More precisely designated as the federal Old Age, Survivors, Disability and Health Insurance program, it provides over two billion dollars in cash benefits each month to over twenty-five million beneficiaries. It also underwrites hospital and medical services for almost every American over 65.

Thirty-five years ago, this vast enterprise in preventing hardship and dependency was but a tenuous idea in the minds of a few deeply concerned individuals. Seldom in modern times has an idea, hammered out by a small group of planners, become in a single generation such a pervasive and practical part of the way of life of a people. "Social security" is now taken for granted. In September 1934 even the term was unknown. Now thirty-five years later it is interesting to trace the way in which an idea became the basis of a great national social security system.

The winter of 1932-1933 had been a desperate time for millions of Americans. On his inauguration in March 1933, President Roosevelt set in motion a series of emergency programs to stimulate business recovery, to avoid widespread bank failures, and to alleviate destitution and distress among the unemployed. It was a time for immediate action aimed at quick results. Many of the measures were rough and ready, but the stakes were high in lifting the American people out of the discouragement and hardships of a great depression.

By late spring in 1934, the various emergency measures in support of business and employment were beginning to have their effect. On June 8, 1934, the President sent to Congress a special message giving notice that in January 1935 he would present for its consideration a series of proposals intended to ward off in future years the corroding insecurity which economic collapse had made evident. The time was ripe for more positive and more systematic programs for the prevention of poverty than the American people would have thought necessary five years before. just as drastic emergency measures had proved acceptable in a period of deep discouragement, it was the President's hope that drastic constructive measures for the protection of our people against the hazards of unemployment, old age, and ill health would also be approved. It was important, however, that action be sought as soon as possible before the lessons of the depression began to fade. The President's sense of timing ,was astute. The difficult task was to plan the constructive, long-run programs in the short time available. just as the receding tide makes visible the hidden rocks and reefs that cause disaster, so the great depression of the early 1930s had brought clearly to light the mounting human problems of dependent old age in an industrial, urban economy. The inherent security of life on the farm had become but a romantic memory for the majority of Americans. Dependence on the earnings of growing children was a partial substitute as long as those earnings continued. With widespread unemployment, even this substitute disappeared for many. With the layoff of a working son, three generations of the family faced increasing poverty. In the cities and industrial towns, there was need to pay rent and buy food and little chance for old people to find work. The loss of savings through bank failures and depreciated investments bad reduced many self-reliant old people to dependence on relief.

By 1934, the insecurity of the aged was becoming a distinct and persistent theme within the general clamor for action against mounting hardship. Among many other campaigns for radical remedies for the plight of the aged, the Townsend movement was becoming the most effective. Started in California where many old people bad sought a pleasant and inexpensive place to live, the movement found ready response throughout the country. Especially in the rural areas, such as Northern New England and the Middle West, where older people bad been left behind as young people moved to the cities, the evangelical appeal of Dr. Townsend and the impossible miracle of his plan for $200 a month gained vigorous support. These were normally conservative people who, in their deepening anxiety, accepted an alluring gospel of economic salvation.

It is difficult, thirty-five years later, to understand the effectiveness of the Townsend movement in exerting pressure on Congress. The scheme of supporting a $200 monthly grant to all people over 65 (Ed. Note: Age 60 in the Townsend Plan) out of the proceeds of a greatly stimulated business activity caused by their expenditures was an extreme and faulty oversimplification of the function of money in a complex economy. But the compelling appeal was emotional, not economic. At its height, the supporters of the plan sent millions of postcards to their representatives in Congress. The most effective piece was a simple card depicting two scenes. One showed a forlorn old couple trudging up a snowy road with their few belongings. Underneath was the title, "Over the Hill to the Poorhouse." The other picture showed the same couple seated before a cheery fire, the old lady knitting and the old man smoking his pipe. Its title was "Comfort in Old Age." Across the bottom of the card was the clear-cut message, "Vote for the Townsend Plan."

It was against this background that a number of us were called to Washington in August 1934 to help produce the constructive proposals for the prevention of insecurity which President Roosevelt had promised the Congress. On June 29th, a Committee on Economic Security had been established by executive order. With Frances Perkins, die Secretary of Labor, as chairman, the Committee consisted of the Secretary of the Treasury, the Attorney General, the Secretary of Agriculture, and the Federal Emergency Relief Administrator. Edwin E. Witte of Wisconsin was appointed its executive director. As with similar high level committees, it was assumed that the major planning effort would be assigned to a staff of specialists assembled for the purpose.

The old age security section of the staff of the Committee on Economic Security was small by comparison to those assigned to unemployment and health insurance. This, however, proved a great boon. Barbara Nachtrieb Armstrong, a professor of law at the University of California, brought as leader of the group a brilliant legal mind, an extensive knowledge of social insurance systems abroad, and an intense concern for human welfare. Her book Insuring the Essentials was published in 1932. Murray W. Latimer had a thorough knowledge of industrial pension plans. He and I had worked earlier on a national pension plan for the railroads and he was the first chairman of the Railroad Retirement Board. I was then Director of the Industrial Relations Section at Princeton University and had served on President Hoover's Emergency Committee for Employment. Otto C. Richter from the American Telephone and Telegraph Company, assigned to the group as an actuary, took on far broader responsibilities.

On arriving in Washington, we soon found that, despite President Roosevelt's ringing declaration that America should provide protection against all the major causes of insecurity, the interest in plans to protect the aged was overshadowed by that in programs to protect the unemployed. This was a natural consequence of the vivid memory of all of us of the desperate conditions throughout the country when, a year or two before, thirteen million wage earners were out of work. It was reinforced, however, by the fact that state programs for unemployment insurance bad already been developed in Wisconsin and Ohio. Unemployment insurance bad in some way become an "American" idea. Old age insurance was still a foreign, and therefore, a questionable concept.

That the major attention of the Committee on Economic Security and its staff was focused on unemployment insurance proved a great advantage to those of us assigned to planning an old age security program. While vigorous debates ensued on the virtues of the Wisconsin and Ohio approaches, we were left largely alone to work out a national scheme of old age insurance. There were times during the fall of 1934 when the likelihood that a national old age insurance system would be approved by the Committee looked very dim. Ed Witte, as director of the Committee staff, showed little enthusiasm for such a system and appeared to reflect the doubts of those in authority.

Our insistence that there was need for a national contributory social insurance program to meet the need of the aged grew out of our study of the steadily rising balance of old people, compared to the working population, in the years ahead. America had become accustomed to thinking of itself as a young nation, but already the combined factors of longevity, industrialization, and urbanization were making inevitable a serious problem of support for increasing millions of people beyond 65. To attempt to meet the problem by state old age assistance programs alone offered little hope. A more constructive mechanism which would prevent a vast load of dependency among the aged was vitally necessary. The only such mechanism available was compulsory contributory old age insurance.

Among a series of memoranda which Barbara Armstrong and I exchanged for criticism in those hectic days, and which I now have in my files, is a much-edited draft that was retyped with the date of September 13, 1934. It is entitled "Plan for Federal Compulsory Contributory Pension Insurance." My file copy is a carbon. The original of this, the first rough draft of an old age insurance plan for the United States, may be lost somewhere in the vast archives in Washington. It bears the marks of being a joint effort of the two of us in trying to create a constructive mechanism to bring the vast and growing problem of old age security under some degree of control.

The purpose of the September 13th plan is stated to be: "To afford assured income to workers 65 and over for the remainder of their lives." From the very first, as evidenced by this thirty-five-year-old document, it was our conviction that any old age insurance plan in the United States should be national, compulsory, and contributory and provide benefits as a matter of right. To us, these necessary elements were obvious and came out of a kind of intuitive judgment based on deep hunches on what would work. The retirement age of 65 was, probably, a simple acceptance of an age which had become normal for retirement under American industrial pension plans. I can remember no suggestion of another age.

While convinced from the first that only an integrated, national system of old age insurance would be effective, our chief worry was: Did the federal government have the constitutional authority to impose such a system on the citizens of the United States? In 1934, there was little in the long evolution of American constitutional doctrine to justify an affirmative response.

The problem of constitutionality led us to consider all possible alternatives in the organization and development of a national system. A memorandum by Barbara Armstrong dated September 12th outlined eight possible arrangements. The September 13th plan used a combination of these arrangements which was so cumbersome, ineffective, and actuarially unsound that no further attempt was made to produce a jerry-built scheme in order to avoid a bead-on constitutional test of a truly workable system.

A summary of the organizational features of the September 13th plan makes clear in retrospect the inadequacy of clever devices in building a sound social insurance system. The plan proposed that insurance contributions would be required "of all eligible employed workers and their employers in those states and industrial groups electing to come under the scheme." The contributions would be accumulated in a federal pension insurance fund, invested in federal securities, ai-id repaid to the insured person in the form of a pension for life on attainment of age 65. In order to extend the coverage of the federal insurance scheme, it proposed that the states would elect to bring all their eligible workers under compulsory national coverage and that industry groups engaged in interstate commerce could, by a joint agreement of employers and employees, elect compulsory coverage. To encourage states and industry groups to come under coverage, it proposed that the federal government provide a supplementary pension to all persons qualifying for the basic pension payments under the scheme.

As a further stimulus to elected coverage by employers, we added for good measure a "shotgun wedding" device which our colleagues working on unemployment insurance programs were finding attractive. This was a payroll tax to be levied on all wages paid to eligible employees by employers engaged in interstate commerce with the proviso that all sums paid as contributions by such employers to the federal pension insurance system would be credited against their tax payments.

One shudders to think what the present Social Security system would be today if any such combination of state and industry election, encouraged by both subsidies and tax incentives, had received any further consideration. If frozen into law, the idea would leave resulted in a monstrous patchwork of coverage, with impossible problems of assuring adequate and equitable benefits, actuarial and -financial stability, or progressive improvement.

With the firm conviction that there was no alternative to a fully integrated national old age insurance system, we sought the advice of the best scholars in constitutional law in the country in seeking ways to give such a system a reasonable chance to survive attack on constitutional grounds. We received valuable help from Professor Thomas Reed Powell of Harvard, Professor Dudley 0. McGovney of the University of California, Professor Edwin S. Corwin of Princeton, and Professor Douglas B. Maggs of Duke. Powell, especially, came to our aid when constitutional objections within the staff seemed to block the way.

By November 9, 1934, a dated memorandum indicates that our staff and our academic advisers, as well as Alexander Holtzoff, the assistant to the Attorney General, were convinced that a bold approach in basing the system on the taxing and appropriation powers of the federal government was safer than any indirect taxing device for Putting pressure on the states or on industry groups to come under a nationally developed program. Our staff recommendation of that date was clear-cut. It read: "It is recommended that . . . contributory old age insurance, resting on the federal taxing power, be instituted on a national scale, covering all workers for whom it can be practically administered. . . ." This was a critical turning point in the development of social security legislation in this country. It was, however, the beginning of a long battle, not the end.

The position to which we had now come is summarized in a preliminary draft of the official report on the work of the old age security staff:

"In its consideration of the advantages of old age insurance, the staff is fully aware of the limitations imposed upon the Federal Government by our Constitution which would affect the adoption of such a program. The staff is convinced, however, that it should first seek out the most constructive proposals for old age security adapted to American economic and social conditions and then, and only then, test as far as possible whether such proposals can be made effective within our legal system. Since law is a living science, it is reasonable to assume that if a sound program of old age security can be projected, our system of constitutional law will evolve in time to support that program. In the meantime, adjustments may be necessary to mold such a program to existing legal precedents."

It is significant that the more cautious editors of the printed version of our report struck out this passage for fear of adverse use. It is far more significant that by 1937, under the leadership of justice Cardozo, the United States Supreme Court did demonstrate that American constitutional law is a living science. Our staff, with the help of the best legal minds in the country, had found a formula which would, if needed, permit the Court to move with the changing concerns of the American people.

The firm conviction of our little group in the old age section of the staff of the Committee on Economic Security that an old age insurance system should be completely national was not shared by our colleagues concerned with unemployment insurance. The Wisconsin unemployment insurance plan had strong supporters in the Committee staff. The protection of workers was, by long tradition in America, a function of the several states. We were, therefore, not only facing the precedents of the Supreme Court of the United States, but the predispositions of our immediate colleagues. To convince them of the soundness our position required awesome descriptions of the complexities of forty-eight separate old age insurance system Suppose, we would postulate, a wage earner develop earnings credits during his working years under the old age insurance schemes of a dozen states. Would he, o retiring, need to cash the checks he received from twelve state funds each month to have enough to pay his bills Further, how, short of requiring full reserves under ea state system, could a worker be sure that his benefit would be paid many years later? Full reserves for forty-eight state systems would accumulate to a vast total sum which would far exceed the federal securities available for investment. Could the states be trusted to invest pension funds I their own securities? Would not the effect of the vast accumulation of reserves be deflationary, on the one hand and an encouragement to unwise and uneven liberality, on the other? How would a single state be able to estimate its pension liability years in advance, given the mobility of the American wage earner and the constant shift in age distribution? Would the estimates for Vermont, California, Mississippi, or Florida bear any semblance of what developed forty years later in terms of contribution-benefit balance? Even exact estimates would result in divers ratios. In the absence of much study of old age insurance on the part of our opponents, our lurid picture of forty eight diverse state systems usually closed the debate. For good measure, we argued that unemployment insurance should also be established on a completely national basis The slow and spotty progress of unemployment insurance over the years has, I am convinced, fully justified our counter-argument.

During the months from September to December 1934 Barbara Armstrong, Murray Latimer, Otto Richter, an I hammered away at shaping an old age insurance system appropriate for the United States. There were repeated conferences within the staff of the Committee, with Technical Board of governmental officers chaired by Arthur Altmeyer, with a representative Advisor Council chaired by Frank P. Graham, and with many other interested and qualified persons. In a meeting on November 15, 1934, our ideas were reviewed by Abraham Epstein, long a leader in promoting old age security, and by I. M. Rubinow, whose book on The Quest for Security, published in 1934, had aroused the interest of President Roosevelt. The day before, the Committee on Economic Security lead started a national conference at the Mayflower Hotel with a reception at the White House. The printed program of the conference lists unemployment insurance, but makes no mention of old age insurance. The latter was still a doubtful starter in the minds of those in authority.

It does not take long for the academic scholar caught up in the vast machinery of national government to realize that a good idea needs public attention to find its way to realization. To give momentum to his campaign for economic security, President Roosevelt used the occasion of the November 14th Conference to address the nation concerning his plans. The substance of the address, as is customary, was prepared by the Executive Director and the Chairman of the Committee on Economic Security. Since neither Ed Witte nor Secretary Perkins possessed the zeal for old age insurance which had by now possessed our staff group, the President's address focused on unemployment insurance and played down the early likelihood of any old age security program: "I do not know whether this is the time for any federal legislation on old age security."

Our staff group was so distressed by this setback that we took desperate measures. Through Max Stern, a friend of Barbara Armstrong in the Scripps-Howard newspaper chain, our concern found its way into a sharply written editorial criticizing the President's failure to give his whole-hearted support to old age insurance. Louis Stark in a lead article in the New York Times strongly emphasized the general letdown. By the time the newspapers reached Warm Springs, where the President bad gone for the weekend, the telephone wires to Secretary Perkins became hot. The Secretary soon communicated the President's displeasure to Ed Witte who in turn hurried to the office which Barbara Armstrong and I shared. Much excited, he asked us if we knew how and why the speech had received such a bad press. From then on, the President seemed to take a greater interest in old age insurance. Ed Witte, as a long-time professional in government, was always a bit dismayed by the free-wheeling tactics of the academics on his old age security staff. Somehow, we were more influenced by our own convictions than by the decisions of those in authority.

Apart from that of determining a constitutional basis for a national, compulsory old age insurance program, the stickiest problem we faced was finding a workable plan for financing the system over the decades ahead. It was here that our actuarial colleagues, Otto C. Richter and Robert J. Myers, served valiantly in developing a complex series of financial projections and in making clear the alternatives faced. Richter and Latimer brought to bear their thorough knowledge of industrial annuity programs. To pay even reasonably modest benefits to those already approaching retirement required the assumption by the system of a heavy accrued liability. While current contributions would be fully sufficient to meet these early benefits, how far should this accrued liability be recognized by the gradual building of reserves to meet it when younger contributors became eligible for their benefits? In private individual insurance, a full reserve would be considered essential. Even in group annuity programs set up by private firms, accrued liability bad to be funded over time. In social insurance, however, we were convinced, such a full reserve was not only unnecessary, but an impossible incubus on the national economy. Not only would the accumulation of the reserve be deflationary and a temptation to unwise use, but, in 1934, there was no prospect that there would be enough federal securities in which to invest it. In place of a large reserve, we were convinced, an eventual government contribution to the system would be necessary.

By November 9, according to an "Outline of Old Age Security Program Proposed by Staff," we had come to realize that a compromise between a "pay-as-you-go" plan of financing and a reserve plan was necessary. By November 16th a formal staff report indicated, with some diplomatic subtlety, that an advisory actuarial board and the representatives of the Treasury "have combined to convince [sic] the staff that a straight reserve system is out of the question because of the enormous reserves it would involve." It warned, however, that "a predominantly pay as-you-go scheme entails the disadvantage of sudden large and increasing contributions from the government about 25 years from the date of initiating the insurance." The compromise plan we proposed provided for a gradually increasing contribution rate starting at of 1 pe cent and reaching 2 per cent each on employers an employees by 1956. The federal government was called upon to contribute an amount sufficient to maintain a eleven billion dollar reserve, once this was attained.

The provision for an eventual government subsidy t the system seemed to us to be the only possible way o paying reasonable benefits in the early years, and, at that same time, of avoiding a huge invested reserve. In our words at the time, this "should not be a dangerous venture . . . provided the annual pension burdens are anticipated and planned for." With both contribution rates and benefits now far higher than we had ever dreamed, the issue of an eventual governmental subsidy to the system is still unresolved.

There were many other problems to be solved in those hectic months in the fall and early winter of 1934-1935. In error, we followed European precedent in proposing the exemption from coverage of non-manual workers earning in excess of $50 a week. Congress, fortunately, was wiser in covering the first segment of earnings regardless of the occupation of the employee. Departing from European tradition, we proposed the use of a uniform percentage of wages in determining the amount of contribution rather than a flat dollar amount or a series of amounts by wage classes. Our reason was the need to adapt the social insurance system to the wide range of wage level throughout the United States and to American accounting

procedures. The decision, which seemed obvious at the time, has resulted in far greater advantages in the development and administration of the system than we could then realize.

In that pre-electronic age, the best idea we could suggest to assure full collection of insurance contributions was to use special revenue stamps. A British stamp book which I displayed before the House Ways and Means Committee in January so intrigued the members that they ordered that it be reproduced in the official record of the hearings, where it can be seen today. Despite the awe-inspiring complications of such a collection system, as one looks back, I still feel that my learned explanation of its use made an insurance system seem more feasible to congressmen in 1935. In selling an automobile, an understandable gadget may have more appeal than the design of a motor.

From the first, we assumed that contributions to old age insurance should be "in equal shares by employer and insured employee" as stated in the September 13th draft. A "-fifty-fifty" ratio seemed to us to be justified by an cc esthetic" logic difficult to controvert. I remember proposing this ratio to William Green, then president of the American Federation of Labor, as we were going to the White House for the President's reception on November 14th. He agreed that labor should co along with an equal sharing of the cost of old age insurance, but he insisted that workers "should not pay a cent" for unemployment insurance. His simple justification was that every one got old, but that it was the employer who laid men off. There never was any objection from the labor movement against equal contributions to old age insurance.

Our early ideas on benefit structure were necessarily tentative. It was the Advisory Council on Social Security in 1937-1938 which developed the basic pattern of benefits which is now incorporated in the system. We proposed "a larger relative annuity for lower-paid workers by weighting more heavily the first $15 of weekly wages." Weekly benefits were to start after five years of contributions with a modest minimum per cent of average covered wages, supplemented by a per cent of average wages related to years of coverage. We were so anxious to keep within the financial limitations then assumed necessary that the maximum weekly benefit for persons then employed would have been but $14.00 after 20 years of coverage! It must be remembered that the maximum old ace assistance grant contemplated at the time was less than $7.50 a week. Also, the contribution rate proposed was, at the start, but one-half a per cent each on employer and employee up to a maximum coverage of $35 a week.

Our staff group may have been radical in proposing a national social insurance system, but it could not have been accused of financial irresponsibility in proposing fancy benefits. While quite inadequate and too long delayed, the benefits then proposed were far less important strategically, we were convinced, than the establishment of the principle of old age benefits as a matter of right, related to past contributions to a national system. Three years later, with constitutionality assured, and a far greater opportunity to study the complex financial and actuarial aspects of the system, the Advisory Council of 1937-1938 was able to take advantage of a higher contribution rate to provide for far more adequate benefits without the long delay we thought to be necessary. In December 1934, time was short, Congress was about to assemble, and a bill had to be drafted or we would miss the boat. Our desperate hope was to get a compulsory, contributory national system of old age insurance through Congress. We assumed that no benefits would be paid for five years and this would give our successors plenty of time to work out a better benefit structure.

The likelihood of gaining the support of the Cabinet Committee for our proposals was still in doubt. At this critical time, December 1934, help came from an unexpected source, the industrial executives on the Committee's Advisory Council. Fortunately included in the Council were Walter C. Teagle of the Standard Oil Company of New Jersey, Gerard Swope of General Electric, and Marion Folsom of Eastman Kodak and others well acquainted with industrial pension plans. Their practical understanding of the need for contributory old age annuities on a broad national basis carried great weight with those in authority. They enthusiastically approved our program. just as the newspaper writers had carried us through the November crisis, the support of progressive industrial executives in December ensured that a national system of contributory old age insurance would be recommended to the President and the Congress. Even last minute concerns on the part of Secretary Morgenthau and President Roosevelt on the financing of the system failed to reverse the momentum gained. By this time, the Townsend pressure for an impossible panacea for old age security was encouraging belated interest in a constructive, contributory insurance system.

For some of us, the submission of our staff recommendations was the beginning and not the end of association with the development of the American social security system. Appearance in Congressional hearings, participation in committee executive sessions, and many conferences on strategy were interspersed with weeks of anxious waiting. Barbara Armstrong and I had earlier explained the proposed old age insurance plan to Senator Wagner, who supported it valiantly. Outside of Washington, hard work was necessary to convince industrial executives, generally, of the soundness of a single contributory national plan which could become a solid uniform floor for private supplementary pension plans in contrast to any arrangement for "contracting out" from coverage.

On August 14, 1935, the Social Security Act became law. The next step was to assure its constitutionality. It was a rewarding experience to help Charles E. Wyzanski, Jr. who presented the case for the Government. There was need also to help both the new Social Security Board and the Treasury in getting the program under way. On May 24, 1937, justice Cardozo delivered the decision of the Supreme Court sustaining the old age insurance parts of the Act.

In the same month, an Advisory Council on Social Security was appointed. At the suggestion of Gerard Swope, I was elected Chairman of the Council. The Social Security Board was now a going concern and had bo staff and time to think out problems which were left u solved in the fall of 1934. After more than a year of stud the twenty-five member Advisory Council hammered o a benefit structure which provided, in addition to bas pensions, protection for wives, widows, and surviving children starting in 1940, Our staff report bad, in 193 indicated the inevitability of this step. The Council 1937-1938 also approved, in principle, disability benefit and established basic guidelines on coverage and financing, including that of an eventual government contribution to the system as recommended by our staff.

From these beginnings, the social security program the United States bas in thirty-five years taken on dimensions and scope which no one could visualize in 193 One out of eight Americans is receiving benefits and nine out of ten are eligible for coverage. Over a hundred mi lion workers have survivorship protection. Ninety-two p cent of those reaching 65 in 1969 are eligible for old age annuities. Nineteen out of twenty children and the mothers would be eligible for monthly benefits if the bread winner of the family should die. Virtually all of the twenty million persons now over 65 are eligible for hospital ben fits and ninety-five per cent of these are enrolled in the supplementary medical insurance program. The scope an coverage of the Old Age, Survivors, Disability and Heal Insurance system is, indeed, overwhelming.

The financial dimensions of the program have reached awesome figures. At the end of 1968, benefits were being paid at the monthly rate of $2,100,000,000 to 24,600,00 people. The accumulated reserve of the old age and survivors insurance segment of the program exceeded $25 billion. Separate additional reserves were held for the other parts of the system.

To one who has participated in the planning of the social security system since its inception, the most remarkable outcome over the years is the degree to which fundamental concepts, hammered out in 1934, have guide the development of one of the largest ventures in social engineering in the world. The system remains basically, national, compulsory, and contributory. Benefits are a matter of right. Coverage is almost universal for workers outside of government. Contributions are a percentage of wages, with equal shares paid by employer and employee. A pay-as-you-go plan of financing is coupled with a limited contingency reserve invested in federal securities. It is in a greatly improved benefit structure that the system has moved farthest from the limited proposals of our small staff in 1934. Even if time were then available, I doubt that we could have anticipated what experience has shown to be feasible in building a more adequate social security system.

In 1934, the American people greatly needed a constructive program for the prevention of poverty in old age. The experience of the depression prepared the way for a drastic new step. A great President, when convinced of the feasibility of the program, was ready to take bold advantage of a uniquely favorable political situation to push through legislation. The need was for a workable plan which matched the predispositions of the American people, if not the constitutional precedents of the country. In a few short months, a plan was developed, based upon ideas rather than on vast statistical studies or extensive scientific research. Those ideas, tested over a third of a century, have proved to be sound and acceptable as the guidelines of a vast enterprise in the enhancement of the welfare of a people.


Selected Readings on the Beginnings of Social Security

1. Abbott, Grace, From Relief to Social Security: The Development of the New Public Welfare Services and Their Administration University of Chicago Press, Chicago, 1941, 388 pp.

2. Altmeyer, Arthur J., The Formative Years of Social Security, The University of Wisconsin Press, Madison, 1966, 314 PP.

3. Brown, J. Douglas, An American Philosophy of Social Security: Evolution and Issues, Princeton University Press, Princeton, 1972, 244 pp.

4. Cohen, Wilbur J., "The First Twenty-Five Years of the Social Security Act; 1935-1960", Social Work Year Book 1960, National Association of Social Workers, New York, 1960, pp. 49-62.

5. Epstein, Abraham, Insecurity: A Challenge to America: A Study of Social Insurance in the United States and Abroad (3rd revised edition), Random House, New York, 1936, 821 pp.

6. Haber, William, and Cohen, Wilbur J., (eds.) Readings in Social Security, Prentice-Hall, Inc., New York, 1948, 643 pp.

7. Lampman, Robert J., Social Security Perspectives: Essays by Edwin E. Witte, University of Wisconsin Press, Madison, 1962, 419 pp.

8. Lubove, Roy, The Struggle for Social Security 1900-1935, Harvard University Press, Cambridge, 1968, 276 pp.

9. McKinley, Charles, and Frase, Robert W., Launching Social Security: A Capture-And-Record Account 1935-1937, The University of Wisconsin Press, Madison, 1970, 519 PP.

10. Mitchell, Broadus, The Economic History of the United States, Vol. IX, "Depression Decade: From New Era Through New Deal, 1929-1941" Rinehart and Co., New York, 1955, 463 PP.

11. Perkins, Frances, The Roosevelt I Knew, Harper and Row, New York, 1964 (paperback edition), 409 pp.

12. Rubinow, I. M. The Quest For Security , Henry Holt and Company, New York, 1934; 683 pp.

13. Schlabach, Theron J., Edwin E. Witte: Cautious Reformer, State Historical Society of Wisconsin, Madison, 1969, 290 pp.

14. Schlesinger, Arthur M., Jr., The Age of Roosevelt-The Coming of the New Deal, Houghton-Mifflin Co., Boston, 1958, 669 pp.

15. Social Security In America:The Factual Background of the Social Security Act as Summarized From Staff Reports to the Committee on Economic Security, Social Security Board Publication No. 20, Government Printing Office, Washington, 1937, 592 pp.

16. Witte, Edwin E., The Development of the Social Security Act, The University of Wisconsin Press, Madison, 1962, 220 pp.


EDITORIAL NOTE:

About 10 publications are expected to be printed in the series captioned "The Beginnings of Social Security." This publication is in that series. In addition, the selected, annotated bibliography entitled Basic Readings In Social Security, published by SSA's Office of Research and Statistics, contains many additional readings relating to the beginnings of social security.