Arthur J. Altmeyer
Social Security--Yesterday and Tomorrow
By Arthur J. Altmeyer (former Commissioner of Social Security)
Presented at the 10th Anniversary Award Banquet, NASW
Honoring Wilbur J. Cohen, Under Secretary, HEW
December 9, 1965
I chose the title, Social Security -- Yesterday and Tomorrow, to emphasize the rapidity of social change which makes today, yesterday, and which makes today, tomorrow, even as we discuss the great social problems and the still greater social opportunities that confront us.
In discussing the events of yesterday, I shall try to do so only as they may serve to guide us on the long road ahead. Naturally, as a member of Franklin Roosevelt's New Deal Administration, I believe that we have much to learn from the events of that period. Of course, I am struck with the great similarity between the excitement and fervor of the New Deal era and the present day. One New Dealer was accused (probably rightly) of having said, "We shall make over America." But there is this great difference: at that time America was in a state of economic collapse with one-third of the workers out of work, banks closed and insurance companies broke. In spite of all that, social and economic planning by government was considered un-American by most of the business community and by the press. Today, we are in an era of unprecedented affluence; and governmental planning is accepted as necessary to keep it that way. The argument as regards planning is confined to the merits of specific proposals.
It must be conceded that the planning of the New Deal era did not consist of nor result in a neat over-all blueprint-of a New America. But neither is it correct to say, as has often been alleged, that New Deal programs consisted largely of emergency efforts to recover from the Great Depression and therefore are inapplicable to the needs of the present-day affluent society. Actually, a moment's thought would reveal the many long-range programs that were enacted into law in those days upon which we are now relying in our War on Poverty, among which the Social Security Act is outstanding. Moreover, even the short-range emergency programs of the New Deal era were similar to some of the programs now incorporated in the Economic Opportunity Act. Some examples are: the C.C.C. camps, the National Youth Administration, the Farm Security Administration and many of the projects under the Works Progress Administration. It could hardly be otherwise, since basic human needs are the same today as they were yesterday.
As I have said, the Social Security Act was clearly a long-range program which it was hoped would prevent human distress in the future, while the emergency programs attempted to cope with the existing widespread distress. The basic idea of President Roosevelt and his advisors was simple. It was as follows:
1. There would be established a comprehensive system of contributory social insurance providing protection against all major economic hazards likely to cause widespread distress, such as unemployment, sickness, permanent disability, old age and death of the breadwinner.
2. The federal government would make grants to the States to help them in providing public assistance to unemployable persons, consisting largely of old people and children.
3. The federal government would continue to assume responsibility for providing work for able-bodied but destitute workers.
The Cabinet Committee created to develop a legislative program incorporating these basic features was called the Committee on Economic Security, not Committee on Social Security. It gave very little consideration to health and welfare services. However, it did recommend a small appropriation to make grants to the States for public health work. It also recommended a small appropriation to make grants to the States for child health and welfare services. But, during the course of the legislative hearings, the term "social security" was used by a number of witnesses and the Ways and Means Committee used this term in reporting out a bill.
The term social security captured the public imagination not only in this country, but throughout the world. In the course of time the term came to be used in other countries in an expansive sense as a synonym for the Good Life.
In this country in the early days, we who were engaged in the administration of the Social Security Act used it to describe a specific government program to promote the economic and social well-being of workers and their families through providing protection against specific hazards which would otherwise cause widespread destitution and misery. However, gradually the term social security in this country, instead of being used in a more expansive sense, has been used in a more limited sense to refer only to the Old Age, Survivors, and Disability System. I consider this extremely unfortunate, just as I deplore using the term "welfare" to refer only to public assistance or in an invidious sense to "relief". I shall indicate my reasons later.
President Roosevelt repeatedly emphasized two principles in indicating the kind of long-range program he had in mind. One was maximum reliance on contributory social insurance to finance it instead of general taxation. The other was maximum reliance on the States to administer it. These principles were incorporated in the recommendations of his Cabinet Committee and in the law.
It is interesting to note that the feature of the Social Security Act which aroused most opposition is the one that is now the most popular--namely, the federal old-age insurance system. The minority members of the Ways and Means Committee said it would impose a crushing burden upon industry and upon labor, that it would establish a bureaucracy in the field of insurance and in competition with private business, and that it would destroy old-age retirement systems set up by private industries.
This opposition continued after the law was passed and became an issue in the 1936 Presidential election. The unsuccessful candidate alleged that it was "a fraud on the working-man" and "a cruel hoax."
I believe that the admonition of President Roosevelt to place maximum reliance on the States was sound under the conditions existing at that time. In the case of unemployment insurance, there was a serious question that a straight federal system would be constitutional. There was also serious disagreement as to what the substantive provisions of an unemployment insurance should be, and there was no administrative experience to rely upon. However, because of constitutional doubts, no federal minimum benefit standards were contained in the Federal Unemployment Tax Act. This enables employers in States that pay very low benefits to claim the same offset against the Federal Unemployment Tax as employers in States that pay higher benefits. Thus, the federal law actually encourages unfair competition among the States instead of preventing it.
In the case of public assistance, the law also contains no federal minimum standards. The bill presented to Congress contained a requirement that a State old-age assistance plan must furnish assistance at least great enough to provide when added to the income of the aged recipient, "a reasonable subsistence compatible with decency and health." Due to the opposition of Senator Harry F. Byrd of Virginia, this requirement was eliminated and there is no federal minimum standard of assistance in any of the public assistance titles today.
In recommending federal matching for old-age assistance and aid to dependent children, the President's Committee on Economic Security naively stated in its report: "We believe that if these measures are adopted, the residual relief problem will have diminished to a point where it will be possible to return primary responsibility for the care of people who cannot work to the State and local governments."
It was Dorothy Kahn of Philadelphia, representing the American Association of Social Workers, who pleaded long and eloquently before the Senate Finance Committee that the so-called "residual group" was a very large group and that the categorical approach was inadequate and inequitable. Let me quote exactly her concluding words, "We believe that grants-in-aid from the Federal Government to the States and to the local governments should be general, so that attention will not be given to any one special category at the expense of others." How right she was and how unfortunate that her advice was rejected!
Of course, the great omission in the 1935 Social Security Act was health insurance. The Committee on Economic Security stated in its report that its staff had prepared a tentative plan which was being studied by several professional advisory groups which had requested an extension of time. The Committee further stated that, therefore, it could not present a specific plan. But the Committee did list what it called "broad principles and general observations which appear to be fundamental to the design of a sound plan of health insurance."
In 1938, after a conference with the President, it was decided to call a National Health Conference. The public support for a national health program which included health insurance was amazing. The President was so enthusiastic that his first inclination was to make the health program an issue in the 1938 campaign. He then said he thought it would be better to make it an issue in the 1940 Presidential campaign. World War lI then intervened.
But, before the war broke out, it was possible to secure amendments to the Social Security Act which converted the federal old-age insurance system into an old-age and survivors insurance system, providing widows' and orphans' benefits as well as benefits for aged beneficiaries and their dependents. The public assistance titles were improved by providing more liberal federal matching, by protecting the confidential character of the records and by requiring a merit system for State and local personnel. It is ironical to note that in 1935 it was not possible to get a merit system requirement in the public assistance titles because a prominent member of the Ways and Means Committee said he didn't want any damned social workers telling his people what kind of persons they had to hire. The reason for the change of heart by the Committee was due to the fact that non-civil service State and local employees were being used for political purposes, sometimes to the disadvantage of members of the Committee. This was also the reason for making the assistance records confidential.
I failed to convince the Ways and Means Committee of the desirability of varying the matching ratio for public assistance in inverse proportion to the per capita income of each State -- that is, paying a higher proportion of the cost in low income States than in high income States. It was not until 1960 that such a matching formula was included in the public assistance titles.
The Social Security Board was kept rather busy putting into effect the 1939 changes in the Social Security Act. But, nevertheless, it did recommend to the President in 1941, just before Pearl Harbor, that a comprehensive social insurance system be established, including not only old-age and survivors' insurance, but also temporary and permanent disability benefits, unemployment insurance and cash hospitalization benefits. The Board also recommended federal grants for public assistance to all needy persons. It is interesting to note that, although President Roosevelt said at his first press conference following Pearl Harbor that "old Dr. New Deal" had to be replaced by "Dr. Win-the-war", he included in his January 1942 Budget Message all of the recommendations the Board had made except federal aid for all needy persons.
The famous Beveridge "Cradle-to-the-Grave" report came out in November 1942 and I was able to have included in the President's State of the Union Message a few weeks later the following passage: "When you talk with our young men and women you will find that with the opportunity for employment they want assurance against the evils of all major economic hazards -- assurance that will extend from the cradle to the grave. This great Government can and must provide this assurance."
The research staff of the Social Security Board assisted Senators Wagner and Murray and Congressman Dingell in the preparation of a comprehensive social security plan. However, the President did not specifically support the Wagner-Murray-Dingell Bill and it died in Committee.
The President did continue to show his interest in a comprehensive social security program. Thus, in October 1944 he called for an Economic Bill of Rights, including:
"The right to adequate medical care and the opportunity to achieve and enjoy good health.
"The right to adequate protection from the economic fears of old age, sickness, accident, and unemployment."
In his last Message on the State of the Union in January 1945, he again urged an expanded social security program and health and education programs, saying, "I shall communicate further with the Congress on these matters at a later date." But he died three months later.
President Truman, in a message on September 6, 1945, signalling the beginning of the Fair Deal, said he favored "extending, expanding and improving our entire social security program." A few months later he sent a message to Congress outlining a broad national health program, including a federal health insurance system. Bills were introduced by Senators Wagner and Murray and Congressman Dingell to give effect to the President's program but no hearings were held until 1946.
In 1946, 1947 and 1948 the President repeated his recommendations regarding improvements in the Social Security Act. In May 1948 he sent a special message on social security. But his recommendation regarding health insurance attracted the most attention.
Republican leaders introduced rival health bills. The major difference between the Republican bills and the Administration bill was that the Republican bill provided only for grants-in-aid to the States to assist them in furnishing medical care for needy persons instead of a national health insurance system coveting the cost of medical care without applying a means test.
Extended hearings were held throughout 1946, 1947 and l948. Some health legislation resulted, notably the 1946 Hospital Survey and Construction Act and the expansion of the National Institutes of Health. But no legislative action was taken on health insurance.
Actually, for the whole decade following 1939, there was no legislation increasing the benefits or any general extension of coverage of the social insurance titles. There was a 1948 amendment to the public assistance titles increasing the federal matching ratio. But the public assistance amendment was included in a bill which narrowed the definition of "employee" under the Old Age and Survivors Insurance System so as to exclude a half million workers. This exclusion and health insurance were made issues by President Truman in the 1948 campaign when he attacked the record of what he called "the terrible 80th Congress."
This decade might perhaps be called The Lost Decade for social security as a whole if measured by actual legislation passed. But throughout that entire period the members of the staff of the Social Security Board and Social Security Administration had devoted themselves wholeheartedly to administration of the existing provisions of the Social Security Act and to research as regards its improvement. They had won the confidence of their associates in the Federal and State governments and they had won the confidence of Congressional leaders of both parties. I like to believe that this well-earned confidence, built up in this decade, contributed greatly to the legislative developments which came later
At any rate, the election of President Truman and a Democratic Congress seemed to constitute something of a mandate for social security legislation. I hoped so because I felt that the events of 1949 would be decisive as to whether the old age and survivors' insurance system would survive. Twice as many persons were receiving old age assistance as were receiving retirement benefits under this insurance system. Moreover, the average monthly assistance payment was almost double the average monthly retirement benefit. I felt that, if the old age and survivors' insurance system failed, any hope for a comprehensive social insurance covering all major economic hazards was remote indeed.
There were long drawn out hearings. But the amendments finally enacted in 1950 unquestionably represented a major advance in strengthening our social security system. Many millions of workers, including more than half of the self-employed, were brought under old age and survivors' insurance and benefits were increased by 80%. Federal matching was provided for assistance to needy persons permanently and totally disabled.
However, my request that specific language be included in the public assistance titles to authorize federal matching of the cost of welfare services, in addition to matching of public assistance administrative costs, was not accepted. The Ways and Means Committee did put in its report a statement that there was already "ample authorization for Federal sharing in the cost of welfare services to applicants for and recipients of State-Federal assistance." But, unfortunately, this authorization would not extend to services to persons who might, as a result, not need to apply for financial assistance. As you know, explicit language and 75% federal matching was not included until 1962. Thus, 12 precious years were lost in the effort to expand constructive social services.
In 1952 there was a small increase in the old-age and survivors' insurance system and further liberalization of the federal matching ratio under the public assistance titles. But due to the opposition of the American Medical Association it was not possible to get an effective provision that would at least protect the previously acquired old-age and survivors' benefit rights of disabled workers. However, in 1954 a provision protecting these rights was included; in 1956 disability benefits were provided at age 50; in 1958 dependents of disabled persons were allowed the same benefits as dependents of aged beneficiaries; in 1960 disability benefits were made payable at any age; and this year benefits have been made payable, if the disability is likely to continue for more than six months.
While the 1950 amendments had indicated that there was wide-spread acceptance of a contributory social insurance with benefits related to previous earnings, it was not clear what the attitude of the Administration taking office in 1952 would be. Three minority members of the Ways and Means Committee, in a report on the 1950 amendments, had attacked the old-age and survivors' insurance system as "totally unmoral." Senator Taft and other leading Republicans had also expressed themselves as favoring a flat uniform pension. And the Republican Platform declared that "we shall make a thorough study of universal pay-as-we-go pension plans."
A disturbing development was the appointment of a sub-committee of the Ways and Means Committee, chaired by Congressmen Carl T. Curtis, who was one of the three members who had called the existing old-age and survivors' insurance system "totally unmoral." Incidentally, Mr. Curtis, who later became a Senator, was one of the most bitter opponents of Medicare in subsequent years.
Congressman Curtis proceeded to hold hearings for four months. The one at which I was subpoened to testify was a particularly stormy one. So much opposition was built up by labor groups, State and local welfare officials and social workers that Congressman Curtis or the subcommittee never even made a formal report.
When Congress reconvened, President Eisenhower sent a message on social security in which he called the old-age and survivors' insurance system "the cornerstone of the Government's programs to promote the economic security of the individual." I felt then that after 20 years this great social insurance system had ceased to be a partisan issue. Later on, Senator Goldwater learned this, to his sorrow.
Congress proceeded to extend the coverage of this social insurance system to farm operators, and to regularly employed farm workers previously excluded. Every Congress since 1954 has continued to expand its coverage, improve the benefit provisions, and liberalize the eligibility requirements.
As contrasted with the progressive improvement in the federal Old-Age, Survivors' and Disability Insurance System, the history of the Federal-State Unemployment Insurance System has been most unsatisfactory. There still are no minimum benefit standards in the Federal Unemployment Tax Act. In fact, the only major change has been to extend its coverage to include employers of 4 or more workers, instead of employers of 8 or more.
Upon the basis of this brief chronological discussion of the development of the Social Security Act, let me attempt a brief appraisal of the extent to which we have achieved the dream of President Roosevelt of "assurance against the evils of all major economic hazards -- assurance that will extend from the cradle to the grave."
There is no question that President Roosevelt wanted this assurance to consist primarily of contributory social insurance. We do have a nation-wide old-age, survivors' and disability system and also a nation-wide unemployment insurance system. However, the benefits provided are far from being adequate and they do not protect all workers.
The average monthly benefit now being awarded to a retired worker who has been regularly employed in insured employment represents only 30% of his monthly wage loss. If he has a wife who has also reached the minimum retirement age his monthly benefits increased by 50%. While benefits have been increased throughout the years to keep pace with the increased cost of living, they have not kept pace with the increased wage level. In my opinion, the benefit level should be raised by at least a third.
The present Federal-State unemployment insurance system is quite inadequate both in its benefit provisions and in its coverage. The average weekly benefit paid compensates for only 35% of the average weekly wage loss. Actually, a smaller proportion of the weekly wage loss is compensated today than when these laws were first enacted, because the maximum wage upon which benefits are based has not been increased to keep pace with the increased wage level. One unemployed worker out of four exhausts his benefits before he can find another job. Moreover, 20% of the workers are not insured. The combined result of all these limitations is that only about 20% of the total wage loss resulting from unemployment throughout the country is compensated. Because of this, Congress was obliged to enact the Temporary Extended Unemployment Compensation Act of 1961, which paid benefits out of the United States Treasury to unemployed workers who had exhausted their benefit rights.
This situation has developed largely because, as has already been explained, the Federal Unemployment Tax Act does not protect employers in States that may desire to have an adequate unemployment insurance law from unfair competition by employers in other States that have inadequate laws, which was the basic intent of the Act. I am of the opinion that, if the present Federal-State system is continued, the Federal Unemployment Tax Act should be amended:(1) to include minimum benefit standards which would increase the benefit level by 50%; and (2) to provide Federal grants-in aid to States whose benefit expenditures exceed a certain percentage of covered payroll.
I also believe the coverage under the Federal Unemployment Tax Act should be extended to include all types of employment covered by the Old-Age, Survivors' and Disability Insurance System.
The great gap in our present Social Security Act is its failure to include two forms of social insurance which are found in the social security systems of practically all other industrialized countries: insurance to cover wage loss resulting from temporary disability and insurance to cover the cost of medical care for all workers. I believe both of these forms of social insurance should be included under the Federal Old-Age Survivors' and Disability Insurance System.
The question of including a general health insurance system in the Social Security Act is far more controversial today than it was when the Act was passed. Many people believe that it is no longer necessary to adopt general health insurance because they think the new medicare law will protect older persons and they think most of the younger persons are already protected by private insurance. However, only about one-fourth of the nation's expenditures for personal health care are covered by private insurance. Actually, the expenditures by the Federal, State and local governments for personal health care (exclusive of research and public health activities) are almost as much. Moreover, the lower income groups which have the most sickness, are the very groups which have the least insurance protection.
To a considerable extent the inadequacies of our present social insurance system are responsible for the fact that we still have 8,000,000 destitute persons in this country who are obliged to seek public assistance. However, almost half of this number are receiving aid to dependent children, and two-thirds of these children are in need because of the breakdown of the family, resulting from divorce or separation of the parents, or desertion of a parent, or illegitimacy of the child. Only the third who are needy because of the death or disability of a parent could have been protected under social insurance. Moreover, a large number of the adults receiving public assistance are low wage-earners or chronically unemployed. Social insurance which provides benefits related to wage loss cannot be adequate when the wage itself is inadequate.
Therefore, even if we had a far more adequate contributory social insurance system, it would still be essential that we have an adequate and humane system of public assistance. Unfortunately, this is not the case. Actually, three-fourths of the States according to their own standards do not meet the full needs of recipients in one or more of the federally-aided categories. The situation is even worse in "general assistance" which is not federally-aided.
As has already been suggested, the Federal government should make grants to the States to assist them in providing aid to all needy persons, regardless of whether they fall within circumscribed categories. The States should be required to meet 100% of a standard of need compatible with decency and health. The States should also be required to eliminate all State residence requirements.
Unfortunately, throughout the years the Federal Government has shared in the cost of administration of public assistance on a far less liberal basis than it has in the cost of the assistance given to needy persons. Apparently, Congress and also State legislatures have looked upon administration as simply overhead expense. The result has been that State Welfare agencies have not had sufficient funds to provide constructive social service to help needy persons cope with their many problems and, if possible, become self-supporting. However, at long last, in 1962 Congress did provide for liberal federal sharing in the cost of rehabilitative services not only to recipients but also to applicants for public assistance and to persons likely to become applicants. I am convinced that the long-range results of this change in emphasis will be very great, if ample funds are made available.
I believe that if our social insurance system were improved in the ways I have suggested, it would prevent most normally self-supporting persons from becoming destitute because of interruption of earnings due to the major personal economic hazards. I also believe that an improved public assistance system would relieve in an effective and humane manner the destitution that does arise, so that all Americans would be able to purchase the necessities of life.
The proportion of the gross national product now used for the social insurances and public assistance in this, the most affluent nation in all history, is 5-1/2%. The proportion that would be needed to provide adequate cash benefits under a comprehensive social insurance system and a comprehensive public assistance system would be 8% (including workmen's compensation). A universal comprehensive health insurance system would require an additional 4%.
These percentages of our gross national product do not represent an added expense to the nation. The loss of family income -- resulting from unemployment, sickness, permanent disability, old age and death -- is a fact, whether or not protection is provided against it. The cost of medical care is a fact, whether or not protection is provided against it. Moreover, to the extent that this protection reduces dependency and stabilizes purchasing power, it actually increases our gross national product.
Thus, I believe that it is possible to abolish destitution in this country almost overnight through the establishment of a comprehensive contributory social insurance system, supplemented by a comprehensive public assistance system. We have not only the resources but we have the experience to do so. I have no doubt that eventually we will achieve the national consensus to act on the basis of that experience.
I believe we should place maximum reliance on contributory social insurance. It seems to me that it fits in best with our economic and social institutions, because of the close relationship between benefits, contributions and wages. Thus we can maintain individual equity by paying differential benefits to take account of variations in wage loss, at the same time that we make certain that social adequacy is achieved by paying higher proportionate benefits to low-wage earners.
In order to achieve these twin objectives, I believe it is desirable that at least a third of the cost of social insurance benefits should be financed out of general revenues.
As I have said, I believe that it is possible to abolish destitution in this country almost overnight through the establishment of a comprehensive contributory social insurance system, supplemented by a comprehensive public assistance system. I do not mean to suggest that we would then have abolished the root-causes of poverty arising out of the inability of individuals to find jobs which pay them enough to maintain themselves and their families in decency and health.
The causes of this inability are both impersonal and personal. Neither contributory social insurance nor public assistance is a substitute for gainful employment at adequate wages. Furthermore, its receipt cannot abolish discrimination or automatically endow workers with the training, education and other personal qualities necessary to take advantage of available employment opportunities.
But contributory social insurance can spread the wage-income of normally self-supporting workers over periods of non-earning, as well as over periods of earning. Both contributory social insurance and public assistance can furnish the income necessary for decency and health while these root-causes of poverty are being eradicated. This income can be provided in a manner that maintains self-respect and promotes the desire to be self-sufficient. It can be accompanied by constructive social services, which make certain that all of a community's resources, both governmental and non-governmental, including health and educational facilities, low-cost housing, day care centers, are actually used to enable recipients to be self-supporting.
The responsibility for marshaling a community's resources to enable recipients of public assistance to enjoy a satisfying and useful life rests, of course, upon the public welfare agency administering public assistance. But that same agency which already exists in every town, city and county throughout the nation, can and should be used to marshal these resources for all citizens of the community who need them. Given public support, the public welfare agency can be the central factor in the "War on Poverty."
It has come as a shock to the people of America that there should be so much poverty during this unprecedented period of prosperity. While much poverty has been prevented or mitigated because of the programs included in the Social Security Act, too much remains. Moreover, the same factors that have created our affluent society, such as increasing mechanization, industrialization and urbanization, are responsible for most of this poverty.
The great changes that have occurred and will occur arise out of the very nature of a highly dynamic society based upon a system of free enterprise. Our problem is to retain all the advantages of a dynamic free enterprise system while we seek to eliminate its disadvantages.
I am sure that this great nation will succeed in solving this problem and that an improved social security system will be a main factor in the solution. We are indeed fortunate, in this land of ours, that we have the economic resources to achieve the good life for all our citizens. What we need to do is perfect our social organization to take full advantage of these resources.
In seeking to perfect our social organization, I am sure we shall keep in mind that our goal is simply a redistribution of welfare, whereby every citizen is assured genuine freedom of opportunity -- which is both the promise and the challenge of our democratic way of life.