Arthur J. Altmeyer


by Dr. Arthur J. Altmeyer
February 29, 1960

Mr. Chairman and friends. I have just been introduced as the "Father of Social Security". One time to my amazement I was introduced as "The Grandfather of Social Security". Well, I was willing to take the one, but when it came to the second I just decided that that was too much. As a matter of fact, there were a great many people whose minds focused on the development of the Social Security Act, and I was only one of many.

As I think all of us here perhaps know, some of us more intimately than others because of age or circumstance, the Social Security Act that I have been asked to talk about is in a real sense a child of the Great Depression of the Thirties. Those of us who lived through the Depression of course realize that more than those who have come on since. I remember back in the Thirties some one challenged the good social workers about this business of people actually starving in this great country of ours, and the social workers down in Texas decided they were really going to get some information. Of course we realize people don't starve in public, they crawl inside and die alone, out of sight. But the social workers in Texas decided they were actually going to find out. They discovered 101 absolutely authenticated cases of outright starvation in the state of Texas in one of those years. More than that, they got reports from the local health officers to the effect that from 1/4 to 1/3 of the deaths occurring in their areas were due to "malnutrition." This is, of course, just a politer word for starvation.

So that period of the Great Depression focused for all of us in this country the need for a program to prevent wide-spread destitution ever again descending upon this nation. At that time public relief expenditures were on a local basis, and when the Depression came along, about $36,000,000 a year was being given out from public sources. Private charity was doing about the same. In 1933 the situation had become desperate: local measures had failed, local finances had given out; a half-dozen states had set up emergency relief administrations, and they ran out of money. In 1932 the Federal Government was finally convinced, or induced, or compelled, whichever word you want to use, to provide some funds for the states. But it was insisted, and the law went through accordingly, that these funds would be in the form of loans. And of all the organizations to administer them it was the Reconstruction Finance Corporation. Now the Reconstruction Finance Corporation was set up to make loans to industry, banks, and insurance companies that were in difficulties, but nobody ever conceived of the Reconstruction Finance Corporation as a welfare agency. But fortunately, a social worker was put in charge of that particular branch of the agency, and he did a very good job, with the 300,000,000 dollars that was appropriated. But that was appropriated in 1932, and in March 1933 it was all gone. And so, when the new Administration came into office, it was necessary to cope with the stark facts that there were 13,000,000 to 15,000,000 people unemployed in this country, one out of every three persons totally unemployed. Therefore, the new Administration set up what was known as the FERA, the Federal Emergency Relief Administration, to make outright grants to the states. And then in the fall of 1933, a small group was told by Harry Hopkins, "I want a plan in one week's time that will put 4,000,000 people to work." So we had what was known as the CWA, the Civilian Work Administration, and 4,000,000 people were put to work in the winter of 1933-34. More than 20,000,000 subsisted on the earnings of the 4,000,000 persons.

Well, I can't go on to tell you about all of the emergency measures that were taken in those terrible years. The President sent a message to the Congress in June, 1934 telling the Congress that when they reconvened in January, 1935, he would have available to them a recommendation covering a program of long-range assistance for coping with the problem of subsistence, of destitution. The general idea that was developed by way of a program was very simple. The Federal Government would continue to assume responsibility for the employables. Secondly, the Federal Government would assist the states in meeting the needs of the unemployables in major categories. Third, and most important of all, there would be a contributory social insurance system providing protection against not only unemployment but old age, disability, sickness, and the death of the breadwinner as well.

That social insurance system was envisaged as being the first line of defense against destitution and public assistance as the second line of defense. Well, as the Social Security Act moved through the Congress, those ideas were accepted in the main, and, as well, something by way of social services. Maternal and child welfare services and public health activities were expanded. But most attention was given lines of defense against destitution and too little attention given, as we look back, to social services.

Included in this first line of defense was a Federal-State system of unemployment insurance. It has remained practically as it was in 1935. It came into existence because the Federal Government passed a Federal Unemployment Tax Act, providing that if the states didn't enact unemployment compensation laws, all of the money raised by that Act would go directly into the Federal Treasury. So you can imagine that the states moved rather rapidly, although some held out until the Supreme Court had upheld the constitutionality of the Social Security Act in 1937. Today we have a nationwide system of unemployment insurance financed by employers' contributions paid into state funds, but the money eventually being deposited with the Federal Government. We also included in our first line of defense against destitution an old-age insurance system. That was, and is, operated by the Federal Government directly. Because of actuarial difficulties it was considered quite impossible to attempt to function on a state-to-state basis.

As the Social Security Act went through Congress and as it was enacted, it turned out to have nine programs altogether. Eight of those nine programs were state-administered. Only one, the old-age benefit program, was administered directly by the Federal Government.

As I said, unemployment insurance remains just about what it was in 1935. Unfortunately, worse so far as the adequacy of the benefits are concerned. In 1939 the average weekly benefit was 41% of the average weekly wage. Today it is only 1/3 of the average weekly wage. While there has been some improvement in unemployment insurance by way of coverage, there are still 15 1/2 million people not covered. While there has been some improvement in the duration of the benefits, still 25 to 30% of the unemployed workers exhaust their benefit rights before they find another job. Year in and year out, about one-half of the unemployed workers of this country are receiving no benefits whatsoever because, first, they were never covered to begin with, or they have exhausted their benefit rights. That situation exists today. One-half of the unemployed workers at this minute are receiving no unemployment insurance whatsoever. If you take all of these restrictions that I mention, the restriction in coverage, the inadequacy of the benefit, the inadequacy of the duration, at a very liberal estimate about twenty per cent of the total wage loss in this country due to unemployment is actually compensated under these state unemployment laws.

Now let us turn to the Federal old-age benefit system which is now called "Old Age, Survivors and Disability Insurance." Great improvement was made in this system in 1939 when benefits were started earlier, in more liberal amounts, and most important of all, survivors benefits were included. So it became old age and survivors insurance. The survivors benefits alone equaled in face value all of the private insurance written in the country at that time and they still equal all the private life insurance written in this country today, so people have double protection now, as compared with what they had before. They have the social insurance protection against the loss of family income through the death of the breadwinner, and they have their private life-insurance which has grown by leaps and bounds. I think the insurance fraternity will agree that they have written more insurance largely due to the impetus given by the Social Security Act placing a floor upon which workers and their families could provide for themselves additional protection through their own private efforts by way of life insurance.

Well, in 1950, 1952 and 1954, this Federal Old Age and Survivors Insurance system was liberalized again. In 1956 another landmark was established when permanent and total disability benefits were included. It was a tragic and onerous situation that, come age 65, you could start drawing old age insurance benefits, but at age 64 even though you were completely, permanently and totally disabled you couldn't. So Congress, in 1956, voted to provide disability benefits at age 50. If your were 49 or younger, no disability benefits were provided, nor or they provided today. But in 1958, Congress provided that there would be dependents' benefits for disabled persons, Just as there are for old age, etc.

So that is what has happened as regards these two forms of contributory social insurance included in the Social Security Act. Public assistance is also very important, and this second line of defense has also been improved. The Federal Government originally provided for matching, on a straight 50-50 basis, the expenditures made by the states for needy old age persons, needy blind, and dependent children. The states were expected to take care of the so-called residual group all by themselves because it was thought that those three categories would cover practically all of the unemployables. In 1950 when we had been urging that Congress include permanent total disability benefits under the contributory social insurance system, the Congress compromised by setting up a fourth category for which Federal grants would be made to the states: aid to the permanently and totally disabled.

The amount and the proportion of Federal matching has increased throughout the years and I think, importantly. the Federal government now matches expenditures made directly to doctors, hospitals, etc., for the needy persons in these four categories as well as matching the cash assistance given the needy persons in these four categories. The states have improved in their administrative operation of public assistance.

These programs are more adequate than they were and show more consistency throughout a given state. However, they are still very, very far from being adequate. A recent study made for the Social Security Administration disclosed the appalling fact that in half of the states these needy persons were receiving less for subsistence than the states own standard had established as the minimum necessary for subsistence. As between the states there still is great variation in the adequacy of the assistance and within states, if it is on a county administered basis, there is considerable variation.

So much still needs to be done in improving our Social Security system. Let me turn first to unemployment insurance. It seems to me that what we should aim for in the way of an adequate unemployment insurance system is this. We should extend the coverage so that 15 and a half million workers would not still be wholly without protection. We should increase by 50% the benefits which now, as I said, average only 1/3 of the wage loss. Now 50% of 33 1/3% is 16 2/3%, so only 50% of the wage loss would be compensated even with a 50% increase in the present inadequate level, if you follow my involved mathematics. The duration certainly should be extended. I believe that the average potential duration should be raised to about 39 weeks. This would go a long ways towards preventing the present unfortunate situation that unemployed workers, still unemployed, are obliged to seek public assistance in periods not only of wide-spread unemployment but in ordinary periods as well. And let's not forget unemployment is not only a mass problem, but also a very, very individual personal problem. An unemployed worker who can't find a job is just as much unemployed even though he be the only one unemployed in the whole United States. So we need these improvements in unemployment insurance, not only for periods of so-called recession, but we need them for ordinary tines as well. Now the question of how that can be done I will leave to a succeeding speaker. It's very difficult, because as you know, we have a federal-state system of unemployment insurance.

Turning to the Federal Old Age, Survivors and Disability Insurance system, we find that about 14 million persons are receiving benefits which total between 10 and 11 billion dollars a year. The only major groups not protected are the doctors, marginal farm operators, and farm and domestic employees. The AMA hierarchy does not want to be covered. I believe, however, that these marginal farm operators, farm and domestic employees really want to be, and sorely need to be protected.

The benefits provided under Old Age, Survivors and Disability Insurance in spite of the liberalizations that I have mentioned, really have just kept pace with the increased wage level and per capita income that has occurred since 1935 in this nation. We forget when we talk about the great increase in expenditures for welfare, generally, that there are two factors that have to be taken into account: that the nation has grown rapidly, that the total income of the nation both gross and per capita, has grown tremendously, and that the cost of living has grown along with it. So, today, with all these liberalizations in Old Age, Survivors and Disability Insurance, we still only meet 1/3 of the wage loss on the average. Therefore I believe that the benefit level of this old age, survivors and disability insurance ought to be raised 50%. I know people will be shocked to contemplate such a large increase but it would only mean 90% compensation of the wage loss sustained. I believe this increase in the benefit level should come about through a change in the benefit formula and by raising the maximum wage on which benefits are calculated to at least $7,200.

Of course I believe that the minimum age 50 for disability ought to be eliminated. What an ironic thing to exclude the young families with a larger number of dependents from the protection of permanent disability benefits! The cost of the present disability benefits has been considerably less than was estimated originally. So we could do this with what was estimated would be the cost of disability benefits over age 50 without any dependent benefits, namely 1/2 of 1% of payroll. Therefore we would not have to raise the rate of contribution for disability insurance benefits as such.

Now I see a few women in the audience who, if they are typical of other women in audiences that I have addressed, are rather annoyed at what they consider inequitable treatment under the Old Age, Survivors and Disability Insurance. For example, women workers who are married, say, "why should I pay contributions? My husband has to pay, and I can draw benefits as his wife, or as his widow if he happens to die. Why should I pay?" Well, of course, I start out explaining the social theory that we are all in this thing together. This isn't private insurance and your husband isn't paying any more because he's married than if he were a single person. Just remember, you are part of a cooperative enterprise. Well, some ladies are not impressed with that particular line of argument. So what I suggest as an approach to greater equity, if you wish to put it that way, is that women workers be allowed to have one-half of their own benefits plus any benefits that they would be entitled to as a wife or widow. This is on the theory that they pay in half, their employer pays in half of the contributions that are made on their behalf. I, of course, believe that the widows are the most necessitative of the various groups that are covered under the Old Age, Survivors and Disability Insurance system. I mean of the aged recipients. So I believe that the widows' benefits ought to be increased from 75% of the husband's benefits, which it is now, to 100% so that she would draw the same as her husband drew, or could have drawn when he was alive.

Finally, to introduce a little more individual equity, I would allow at least a 2% increase in the basic benefit for every year that a person delayed retiring after reaching the minimum retirement age. Many people complain that after reaching 65, if they continue working they have to continue paying contributions, but they don't get any additional credit. So I would think that if we allowed a certain increase in benefits for every year that they did delay after 65, that would be helpful.

Now, of course, the greatest gap in our Social Security system is that we provide no protection whatsoever against the cost of medical care. There are four states that do provide protection against loss of wages due to sickness. No state, nor the Federal Government, provides any protection whatsoever against the cost of medical care. A contributory social insurance system isn't really an adequate system, if that great hazard is left unprotected. There are fifty-nine countries today that do provide that sort of protection. All of the industrial countries long ago provided that sort of protection in one way or another. I believe that in this country we ought to provide it through a system of contributory social insurance. Now people say, well, look, we've got 125,000,000 people covered under voluntary insurance. We don't need any government intervention. The government ought to keep out. Well, it may be we have 125,000,000, counting people who have a dollar policy that they bought from the newspaper. But if you look at the benefits side, and see how much of their costs of medical care are actually protected, then you find that only about 25% of the total private medical bill in this country is actually protected by all of the voluntary health insurance written in this country today.

The doctors are very much concerned, and I think if I were a doctor I would be concerned, too, that the quality of service would not suffer under any government plan that might be devised. But they do confuse what I am talking about, contributory social insurance, with what they call socialized medicine. Now socialized medicine means state medicine, where the doctor and other functionaries are hired and paid a salary by the state itself. Incidentally, we do have a considerable amount of socialized medicine in this country. It's growing as we talk about extending our contributory social insurance system and it will continue to grow because if we do not meet this real social problem one way, we are going to meet it another. Today, the Federal, state and local governments are actually paying out for medical care more than all the private medical insurance arrangements put together. So we have more socialized medicine today, if you want to put it in terms of protection provided, than we have by way of voluntary health insurance.

Again let me say that we must distinguish between protection against loss of income and protection against the cost of medical care. So far as protection against loss of income is concerned, that could be done in one of two ways. We could amend the Federal Unemployment Tax Act to require the states to provide protection against wage loss because of unemployment due to sickness as well as the wage loss due to lack of work. Then we'd have a federal-state system providing protection against income loss through sickness. Or we could amend the Federal Old Age, Survivors and Disability Insurance System to include protection against wage loss due to temporary disability as well as permanent and total disability. That is what it seems to me we ought to be doing in so far as wage loss is concerned. In so far as protection against medical care is concerned, the least that we should do is provide protection against the cost of medical care to those drawing cash benefits under the Federal Old Age, Survivors and Disability Insurance System. That's a manageable program. It's the most needed of all of the sectors in so far as the cost of medical care is concerned. The administrative organization already set up in Baltimore and throughout the United States could be used. I consider it feasible and long overdue to at least make a start in this way.

So far as public assistance is concerned, it seems to me that we need to provide Federal matching more closely related to the financial ability of the various states, and we should provide Federal matching for all needy persons, whether they fall within these magic four categories of aged, blind, disabled, or dependent children. There are at the present time a million, or a million and a quarter needy persons who fall outside those categories, and the state and local governments must take care of them as best they can. I think that the Federal government should insist upon more consistency, however, and insist upon the states meeting their own standards, if the Federal government is going to do more than it is doing now in so far as public assistance is concerned.

Now you say, well, this is wonderful, all these things, but who is going to pay for them? What about the cost of all these governmental grants that you have talked about? Well, the cost of improving public assistance is not great if we don't pour so much Federal money into the high income states. The cost of this total program that I mentioned is not great either. Surprisingly enough, we are spending today just about the same percentage, namely, six per cent of our gross national product, for health and welfare as we did back in 1934-35. We could provide all of these improved benefits including benefits for the beneficiaries under Old Age & Survivors Insurance for about 8 to 9 per cent of our gross national product, and if we included a complete system of health insurance, the cost might run 12 to 13 per cent of our gross national product. But in a very real sense, this isn't a cost. Certainly the cost of medical care is with us, whether or not we spread the cost through private or social insurance. And likewise, all these other costs are with us. We're talking about a method of spreading existing costs, not adding new costs so far as the nation as a whole is concerned.

Let me emphasize that all we really would have after all this was done would be a basic protection upon which the people of this country would have a greater opportunity to build a more desirable protection through savings, home ownership, private insurance and all the other devices that are available. And as we seek to achieve these objectives, we must provide, and I emphasize must provide, constructive social services of many, many kinds in order to reduce not only the economic but the non-economic hazards which have increased as a result of the tremendous economic and social changes during the last quarter of a century. Lonely old people, neglected children, juvenile and adult delinquency, broken homes, frustrated and bewildered human beings are not confined to the economically disadvantaged people of this nation. We find them everywhere. I am thinking that we might find some of them right here in this room today. We are told that one-sixth of our fellow citizens are so disturbed mentally that they can't carry on effectively their personal lives or community relationships. Therefore, because these problems affect all individuals, all communities, we must provide community-wide social services under both governmental and non-governmental auspices. And in so doing may I observe that we are fortunate that in this great land of ours we have the economic resources and the economic organization to achieve the Good Life for everyone. What we need to do is to perfect our social organization to achieve this goal, which is both the promise and the challenge of our democratic way of life. Thank you.