Arthur J. Altmeyer
Address by Arthur J. Altmeyer--Management Seminar
University of Wisconsin
Wednesday, June 14, 1967
This is a third-person account of a speech delivered by Altmeyer.
The Regional Representative, Sam Smith, introduced Dr. Altmeyer and offered the opinion that historians would give the speaker the lion's share of the credit for the growth of the social security program because of the vital role he played in the early years of the program. Mr. Smith felt much of our success has been due to the fact the program was well conceived, well planned, well organized, and well begun.
In his opening remarks Mr. Altmeyer said he had almost forgotten those days when he was called Dr. Altmeyer. He explained the term came from his association with a "brain trust" assembled to draft the original law. The tern was used by some opponents of the proposed law in a rather sarcastic sense.
He recalled for us the conditions in our country which gave emphasis to the need for some type of protection against economic disaster. It was the worst time our country had ever seen as far as a general depression was concerned. Millions were unemployed and one of five persons was on relief. Banks and insurance companies were going broke. All areas and all classes of people were affected. He referred to these early planning years as the most exciting and at the same tine most depressing of his life.
It was in this setting that President Roosevelt said he wanted to develop a program which would guarantee this sort of thing would never happen again. The president appointed as Secretary of Labor the first woman ever to hold a Cabinet post, Frances Perkins. She was given the task of developing the program suggested by the President.
Mr. Altmeyer was Assistant Secretary of Labor, and helped with various programs including the CCC which he compared to the current Job Corp to some extent. Before becoming Assistant Secretary he had represented the Labor Department as Labor Compliance Officer under the National Recovery Administration. He described the NRA as a great undertaking to revive industry in our country. The task of the Labor Compliance Officer was to see that labor standards written into various industry codes were observed.
The economic conditions in our country during the year after President Roosevelt took office were by far the worst in our history. As a result, Frances Perkins had to consider what we might now call bizarre ideas on how to form and shape the program requested by the President.
One of these, the Townsend Plan, was to provide a revolving pension plan. The idea was conceived by an Iowa physician who had moved to California and was struck with the plight of older citizens in this haven for the retired. Townsend's idea was to put as much money into circulation as soon as possible to counteract the effects of the depression. To do this he proposed an outright payment of a $200.00 a month pension to the elderly whom everyone agreed should lead a happy life in retirement.
The tern revolving pension plan referred to Townsend's theory that if this pension were spent it would accelerate economic activity and spread purchasing power through all ranks of society. This he felt would solve the problems of economic depression overnight. This led him to place one restriction on the recipient of the pension. It must all be spent in the month received or the next months' benefit would be withheld.
Another plan with which Mrs. Perkins had to deal was the "Every Man A King" concept proposed by Senator Huey Long of Louisiana. His theory was to share the entire output of our economy equally, but he was vague about how this would be accomplished. The theory was that since everyone shared equally everyone would have purchasing power. With increased purchasing power the Gross National Product would increase, and increase, and increase. Mr. Altmeyer described the Senator as a man with a keen intellect, and as a spellbinding orator.
The former commissioner related to the group some of his experiences while serving, as Chairman of the Technical Council set up to advise the Cabinet committee assembled by Frances Perkins. The term social security was not yet being used and the group was called the Cabinet Committee on Economic Security. The emphasis was to be on maintenance of income throughout periods of sickness, unemployment, and disability as well as old age. Mr. Altmeyer described the group as the fastest working committee ever to develop a long range program. They had reported within six months after they began this huge task.
Mr. Altmeyer had enlisted the aid of a colleague and old friend at the University of Wisconsin to assist him in his capacity as advisor to the Cabinet Committee. His friend, Edwin Witte, was Professor of Economics and librarian of the Wisconsin Legislative Library. This library was rather unique at that time, and it was later used as a pattern for the present Library of Congress. Its purpose was to assist members of the legislature in writing legislative proposals. A senator, for example, could come to the library with an idea for a new law, and got assistance in translating his idea into appropriate language for a bill to be presented to the Senate. The library might also provide the senator with a summary of experiences of other countries and various alternatives and facts concerning his proposal as well as the probable consequences.
The existing library and the knowledge of those who served with Mr. Altmeyer and Professor Witte played a vital part in the effort to draft a long range comprehensive program in such a short time. The subgroup assembled by Edwin Witte were knowledgeable men who knew the problems, alternatives, and the location of research materials needed for such a project.
The proposals of this subgroup were adopted by the Cabinet committee and presented to the President and the Congress.
Mr. Altmeyer described the program as a very simple one which is still essentially in the same form. He explained that the basic proposal was to set up two distinct lines of defense against destitution.
The first line of defense was to be a contributory system of social insurance. The speaker recalled there were many examples of such a system in the industrial countries of the world. Another example for study was the Workman's Compensation (unemployment insurance) provisions in effect in the State of Wisconsin.
The committee also recognized the possibility that there would be a significant segment of the population who would never acquire the necessary credits to benefit from an insurance system. The second line of defense against destitution was established to offer protection to those persons.
This protection which is known as Public Assistance differed significantly from the old style relief by providing for a cash benefit. Previously, most relief programs provided only a bag of groceries, a bag of coal, a rent slip, etc. The theory provided for a free choice in spending the cash benefit once a family budget had been established.
In addition to social insurance and public assistance, the act provided for several constructive social services. Among these were: Public Health Service, Maternal and Child Health, Welfare Services, Vocational Rehabilitation. The Ways and Means Committee which reported the bill decided these various programs made the term Economic Security entirely to narrow. They labeled the proposal the Social Security Act and provided for a Social Security Board to administer the law.
Mr. Altmeyer told us he had served one year as a member of the board and about fifteen years as chairman.
Throughout his address the former commissioner referred to magic or angel words as opposed to devil words. He explained the importance of choosing the proper word during the early history of the program, and went on to tell how the term social security had been such a good choice of words, it has passed into the language of most other countries.
Mr. Altmeyer did express some regret that the term has narrowed in popular use to refer only to the program we administer to the exclusion of all others. He voiced the hope that some day in the future the term will again refer in the popular usage, to the broad comprehensive program envisioned by those who developed the original law.
It is ironic, he said, that the very part of the law (retirement insurance) which now is in itself referred to as Social Security was responsible for the great probability the entire comprehensive proposal would be lost. It was this part of the proposal which became the focal point of discussion. There was so much opposition to this section of the law in Congress that many felt it might cause the loss of the whole program.
It was at this point the speaker digressed from his topic to compliment the Social Security Administration on the fine spirit with which they try to administer the law. He also said that in general, people will forgive us our mistakes because they feel they are truly mistakes and not intended to keep from them something which is rightfully theirs.
Social Security became a major issue in the 1936 campaign for the Presidency. It was labeled by the Republican candidate as a "cruel fraud and a hoax on the working people", and pledged repeal of the law if he were elected. He made this statement only a few days before the election.
Mr. Altmeyer recalled for us one of the steps taken to counteract this move by those opposed to the law. They had previously printed fifty million pamphlets which described very simply and accurately the retirement benefit system. These were to have been used later in the year (1936) in connection with the assignment of account numbers. They decided to release these at once and enlisted the help of labor unions to distribute the entire printing. Within twenty-four hours the entire stock had been shipped to every part of the country and distributed to the voters.
Many of the newspaper editors agreed with the Republican candidate, and printed stories not favorable to the law. Mr. Altmeyer read some excerpts from a copy of one of these newspapers "Here's proof of deceit in payroll taxes--money not set aside for pension--wage cut program includes tags and numbers for all--your personal life will be laid bare--your religion and the church you attend will be listed--your physical defects will go down in black and white--your life will be an open book your former employer's reason for discharging you will be given--your union affiliation will be stated--all the wage you ever earned, however small, will be shown--even your divorce if you have ever had one will be included--you are to be regimented, cataloged--put on file--this is what the Roosevelt Administration did not intend to have you know until after the election."
The newspaper from which he read was dated Monday, November 2, 1936, the day before the election. In addition to newspaper coverage such as this, the Republican Industrial Committee or Republican National Committee released pay envelope slips which gave the impression of having been released by the Social Security Board. These slips informed workers a pay deduction would be taken from their wages beginning January 1, 1937. It did not mention a word about future benefits.
The same opponents were also attacking the plan as unconstitutional and there was some indication the court would take this view. In each case where other "New Deal" measures (six or seven) had been challenged in the Supreme Court, they had been declared unconstitutional.
The Social Security Board had decided to wait until after the election to issue account number cards and were very concerned about the success of this phase of the program after the bitter election campaign and the question of the constitutionality of the law had been so widely publicized.
Mr. Altmeyer said they were again careful to select angel words to describe the process of assigning account numbers. They decided on the term "account numbers" because it was commonly used at the time in many department stores to describe their credit system. He said they also took advantage of the reputation of the Post Office Department as well as their established system to distribute applications for accost numbers to every family in the nation.
Following the election in which he was re-elected, President Roosevelt asked the Congress to approve the appointment of additional Justices to the Supreme Court. He rationalized this by saying that the elderly justices should be relieved of such heavy responsibility by the additional Justices. Members of both parties rejected the plan and the cry of court packing died down.
In the spring of 1937 following the failure to appoint additional Justices, the court ruled the Social Security Act as constitutional. This prompted one newspaper writer to quip "a switch in the saved nine."
The former commissioner went on to tell us that they now turned their attention to the problem of establishing a central record-keeping system. They had available only what would now be termed very crude record-keeping equipment and faced what seemed to be an almost impossible task.
To help solve this problem they engaged one of the outstanding experts in the field of insurance. After several months of study, he reported his findings to the Board. It was his opinion the system could not function and he recommended they go to the Congress and admit frankly the system was administratively impossible. Since the Board would not accept this, he suggested the alternative of establishing twelve independent regional accounting systems. Again the Board rejected his suggestion because they would have still required a central index to provide cross reference for those persons who moved from region to region. He told the Board a blizzard of white slips would descend on them to bury them deeper and deeper.
After much consideration they decided on twelve separate production lines in one central location to be backed up by a flying squad to assist any line which might fall behind. Mr. Altmeyer recalled the original system provided for a separate report for each worker. Primarily due to pressure from industry, this system was abandoned in favor of a combined report on many workers by one employer.
Mr. Altmeyer described for us the Coke Warehouse which was converted to the headquarters building. He recalled the female employees snagged hose on rough tables made of plywood laid on saw horses. This building, known as the Candler Building, served as our headquarters until 1958.
After meeting other challenges, the commissioner turned his attention to establishing local offices. He appointed a task force to study the problem and recommend the number of local offices needed and where they should be situated. After several months of study they presented him with colorful charts, graphs, and data to support their finding of a need for two thousand one hundred twenty-five local offices. Since the entire budget was only one million dollars he immediately rejected this number as excessive. Mr. Altmeyer smiled as he recalled his alternative proposal. In the evening following receipt of the task forces' recommendation he examined a map of the State of Wisconsin. After a rather casual glance he determined there was need for perhaps ten or eleven local offices in that state. He consulted another reference and found that Wisconsin industrial activity accounted for approximately one-fortieth of the nations' industrial output. He multiplied eleven times forty, rounded the answer to five hundred and determined there should be only that number of local offices. He approached the Board and explained that after very careful study and consideration, he recommended they budget for only five hundred local offices. As the program developed, it was not until 1945 that we needed all five hundred offices.
Mr. Altmeyer told the audience they would be collecting taxes to support the Social Security System today had those who formed the original law been sure the Supreme Court would find it constitutional. At that time there was no other system which provided for a separation of the functions of paying benefits and collecting contributions. The rationale behind this separation was to rely on one established precedent to collect taxes and on another to make grants. There was no precedent for a social insurance system in United States law. Eventually, the Supreme Court looked squarely at the issue and declared a social insurance system constitutional. Since our system of separation of functions has proven successful, some other countries have changed to the system. In the early years there were some problems of coordination between our agency and the Internal Revenue Service over interpretation of the separate titles. These have been well handled and few remain. He recalled that as late as 1938 or 1939 leaders in the Internal revenue Service offered to let him take over the collection of contributions.
In those early years they paid only very small lump sum refunds and regular monthly benefits were not to be paid until January, 1942. Administrative expenses were running as high as thirty-three percent of benefits paid and Mr. Altmeyer was afraid this would be questioned by those unfriendly to the program .
The huge reserves contemplated in the early years gave some spark to the amendments passed in 1939. Those who favored the program felt the need for improvements in the law, and the estimates of these tremendous reserves helped swing some to vote for more liberal benefits. One senator questioned what could be done with an anticipated reserve almost three times the size of the entire national debt. Mr. Altmeyer used this feeling to his advantage and proposed to begin paying benefits on January 1,1940 instead of waiting until January 1, 1942 as provided in the original law. The amendments in 1939 also provided for larger benefits and added survivors benefits for widows and orphan children. He recalled with amusements the difficulties he encountered in appearing before the Ways and Means Committee which was chaired by a member who was almost deaf. No sound system was provided and he shouted at the top of his voice. In spite of these difficulties his proposals were passed.
Also incorporated into the law in the 1939 amendments was a provision for an appeals process. Although the original Act required the states to provide an appeals process under the Public Assistance program, none had been written into Title II. Mr. Altmeyer expressed the opinion that a good appeals system is vital to good administration. He also felt the elaborate provisions written into the 1939 amendments has been partially responsible for the good public relations our agency has maintained.
The long dry spell is the term the speaker used
to describe the years 1940 to 1950. He recalled that nothing constructive
was done during this period. The Congress did vote to delay the
proposed increase in contributions to prevent accumulation of
huge unnecessary reserves.
During the pre-election months of 1950 there were some prominent persons who still favored the Townsend Plan. Among these was Paul McNutt who served as Federal Security Administrator (equivalent to present Secretary of HEW). Prior to Roosevelt's decision to seek a third term in office, Mr. McNutt had been active in seeking the Democratic nomination. It was during this time Mr. McNutt sent Mr. Altmeyer an advance copy of a speech which he planned to deliver coming out for the Townsend Plan. After a hurried conference with the President, a messenger was dispatched to inform Mr. McNutt he could not give the speech. The speaker recalled the incident with a smile but expressed his sincere sympathy for Mr. McNutt who was left in the wings only minutes before his appearance with no prepared speech.
Mr. Altmeyer again referred to these years as the dry spell and skipped in time to the election of President Truman. In his opinion Mr. Truman was in favor of needed improvement in the system but put most emphasis on Health Insurance. As a result of the emphasis, the American Medical Association became more active in opposition and little was accomplished.
There were two actions during Mr. Truman's first term in office. The Gerhart Resolution substituted the more restrictive common law definition of employee for the more liberal economic gain concept. This had the effect of excluding from coverage several hundred thousand persons who had formerly contributed to the system. The second action was the appointment of an advisory committee which later recommended liberalization of benefits and extention of coverage.
The former commissioner referred to the 1950 amendments as very liberal. Benefits were increased, and coverage was extended to agricultural workers and to most self-employed persons,
Mr. Altmeyer spoke briefly of the 1952 amendments and the "phony disability freeze." In the election of 1952 there was a change of administration from Democratic to Republican. During the pre-election months the Townsend Plan was still a factor although not a major issue.
The former commissioner said that with the change of Administration, Mrs. Hobby became Federal Security Administrator (later Secretary of Health, Education and Welfare) and he became an ex-bureaucrat. He recalled the re-organization to Cabinet status also eliminated the Office of Commissioner for Social Security and created the Office of Commissioner of Social Security. Since he had been Commissioner for Social Security he was at that point unemployed.
Mr. Altmeyer concluded his address by referring to the years 1934 through 1954 as the formative years. He expressed some pleasure in closing by quoting President Eisenhower as saying Old Age and Survivors Insurance was the cornerstone of a Social Security system. He seemed very happy to say that this indicated after twenty years the Social Security System had finally become nonpartisan.
In response to his invitation to ask questions he was asked his opinion of what changes remain to be made in the program. He outlined his reply as follows:
I. Raise the benefit level by one-third at once.
II. Bring all workers under coverage, excepting only a few groups who have a separate system and truly integrate these.
III. Establish a Federal temporary disability system.
IV. Provide health insurance coverage for all beneficiaries at once and later to everyone.
V. Combine Health Insurance Parts A and B and pay hospitals and physicians directly--eliminate third parties.
VI. Adjust the contribution schedule so that employees pay on a maximum of at least $15,000 and employers on their entire payroll.
VII. Add monies from the general revenue to contributions to finance a really effective program.
Several other questions were answered briefly and the session closed with a standing ovation by the group.