Part 1: Summary
At the outset of the 1930s, the American economy was in peril. The Great Depression had left millions of people, particularly the elderly, unemployed and impoverished. Such was the economic environment that President Roosevelt inherited in 1933, and his immediate task was to remedy the financial ailments of the country. Because the traditional modes of economic security had failed in the face of such a crisis, Americans needed a safety net. In order to respond to the situation, Roosevelt began a series of reforms collectively entitled the New Deal, part of which included the creation of a social security program.
The program designed by the act that was eventually enacted far surpassed the scope of the social security program President Roosevelt had originally envisioned. With the help of Pro-New Deal Democratic majorities in both houses, the law became “an omnibus legislative vehicle which gave a strong push toward an expanded federal role in social welfare—beyond what F.D.R. and Secretary Perkins envisioned in 1934” (Wilbur Cohen 1983, 381). The strong Democratic coalition, with high levels of party loyalty, allowed for expansive social change to take hold in America in response to an unprecedented economic situation. As scholar Wilbur Cohen (1983, 379) describes, “the far reaching law was enacted only fourteen months after F.D.R. first indicated his general interest on July 8, 1934. The entire legislative process took only seven months … a remarkable achievement for such a broad and innovative creation.” The Social Security Act of 1935, passed by the 74th United States Congress and signed into law by President Franklin Roosevelt, created a tax-funded safety net for elderly, disadvantaged, or unemployed Americans, allowing each person to contribute to their future safety net through contributing a portion of their work income through payroll tax deductions. Essentially, the current working generation would pay into the program and finance the retired generation’s monthly allowance.
The Social Security Act of 1935 revolutionized the way Americans conceive of social welfare systems, calling individuals to take responsibility for their own future assistance. Prior to this legislation, social assistance plans in the United States only occurred at the hands of the government, private citizens, or charities voluntarily doling out money, but this model was failing in the newly-industrialized nation. Martin and Weaver (2005) comment that “lost wages due to disability, death, or retirement were seen as problems not adequately dealt with by the structures of an industrial economy,” and as a result, “academic and political interest grew in social insurance plans that would smooth out the volatility of income.” The field for change was ripe with support, and Roosevelt assumed the responsibility.
Instead of the traditional voluntary, charitable model, Roosevelt proposed a system in which people contributed to their own future economic welfare through payroll tax deductions. Though Social Security Programs are now considered to be a normative aspect of American life, The Social Security Act of 1935 was quite revolutionary when it was proposed. There was vigorous debate in both chambers, and yet, both chambers passed the bill with an overwhelming majority, illustrating an arrival at a fairly strong consensus. The bill was introduced in the House of Representatives by Robert Doughton (D-NC) and David Lewis (D-MD), and in the Senate by Robert Wagner (D-NY). After sitting in committee for four months, the bill was introduced in the House and debated upon for fourteen days (Kollmann and Solomon-Fears, 2001). The Congressional Record has 350 pages detailing the House debate over the bill, illustrating the controversiality of the bill (Congressional Record, 74th Congress, 1935). However, it eventually passed with a vote of 372-33—a remarkably sweeping victory as evidenced by Figure 1 from voteview (Poole and Rosenthal 1997). After seven days of debate in the Senate, it passed with a vote of 77-6, illustrated in voteview Figure 2 (Poole and Rosenthal 1997). This debate fills 126 pages of the congressional record (Congressional Record, 74th Congress, 1935).
Despite the vote tallies being heavily in favor of the Social Security Act of 1935, the 74th Congress of the United States was anything but sure about this legislation, evidenced by the extent of the debate present (Kollmann and Solomon-Fears, 2001). Despite all of this debate, little substantive change occurred. Approximately 50 amendments were offered in the House, but none were passed (Kollmann and Solomon-Fears, 2001). In the Senate, one slight alteration successfully occurred in the form of an amendment exempting from coverage employees in firms with private old-age pension systems, but this constituted the only major alteration that occurred during consideration (Kollmann and Solomon-Fears, 2001). The passage of the Social Security Act of 1935 was characterized by skepticism, debate, compromise, philosophical musings, and eventual consensus, resulting in a revolutionary piece of legislation that bonds each of us to the collective good through the perpetual financing of the welfare of older generations by the current working generation.
The Social Security Act of 1935 exercises continued power over our current moment. Social Security programs have been a continual source of political discourse, and the Act has been amended several times throughout its enactment almost a century ago. The act was substantially revised in the 1960s when Congress passed Medicare and Medicaid, which remain contentious political topics in electoral proceedings. Today, Medicare provides health insurance for over 55 million Americans and Medicaid tops 70 million, evidencing the profound influence the Social Security Act of 1935 wields on our present moment. Debates over the future of American healthcare are intimately intertwined with conversations about the Social Security Act of 1935, and because of this association, its continued relevance cannot be understated to a twenty-first century American audience. The Social Security Act of 1935 is perhaps the single most important social legislation in American History, forever altering our relationship with the collective good, healthcare, intergenerational responsibilities, and federalism itself.
Part 2: Background
Enacted in August of 1935, the Social Security Act constituted the most significant accomplishment of the 74th Congress. But the road to enactment was a bumpy one, and its success relied on the convergence of a social need, a party realignment, and the relative stabilization of economic conditions.
1920 marked a significant change in the demographic makeup of the United States, as for the first time in our nation’s history, more people were living in cities than on farms. Transitioning from a largely self employed agricultural economy to an individual labor, wage-based economy, America faced new challenges. “When economic income is primarily from wages, one’s economic security can be threatened by factors outside of one’s control – such as recessions, layoffs, failed businesses, etc,” describes the Social Security Website, describing the newly fragile economic status following the Industrial Revolution.
Even prior to the market crash, the Industrial Revolution inspired new visions of economic security. After noticing the profound efficiency of the German government, which rested on politicians adhering to corporate liberal ideas, Americans began to give validity to theories of corporate liberalism. Corporate liberalism “believed economic phenomena could best be understood by using statistical investigations to shape economic institutions to meet social goals through active state intervention,” describes Barbara Brents (1984, 26). Brents further articulates that “while a large majority of individuals [in the United States] in policy making positions and business leaders continued to espouse a laissez faire ideology well into the 1900s, a core of business leaders, reacting to the labor unrest and radicalism, market instability, and disorganized competition of the time were reassured by these new economic ideas that promised greater control over the economic environment,” illustrating a shifting away from traditional views of complete market freedom (Brents 1984, 27). The industrial revolution, then, inspired a wave of innovative thinking, international influence, and skepticism of a laissez faire economic model.
On the morning of October 24, 1929, the Stock Market crashed, and the weaknesses of a wage based economy posed an imminent danger to the newly urban American society. Before three months had passed, the stock market had lost 40% of its value, existing as the catalyst for the Great Depression. In response to mass unemployment, bank failures, and a declining Gross National Product, various proposals to restore economic security circulated among the populus. “With a growing business sentiment favoring state intervention, it was easier for corporate liberal leaders to gain popular acceptance and translate their ideas into laws,” describes Brents (1984, 34), showcasing the intellectually fertile political environment the Social Security Act would eventually be considered in.
Francis E. Townsend, a retired Californian doctor, developed a plan of his own, fittingly entitled The Townsend Plan. This plan “which was noncontributory, offered persons 60 and older a pension of $200 a month, provided that they did not work and that they spent the entire pension each month,” describes Patricia Martin (2005). The Townsend Plan would later come to be the primary rival of the Social Security Act, and it was widely considered a highly popular, yet clearly unrealistic remedy to the economic crisis. Upton Sinclair, a renowned socialist, similarly devised his own remedy, entitled the End Poverty in California Plan (EPIC), which became a closer precursor to social security. Sinclair’s EPIC was a socialist reform movement, and it featured proposals for state-administered economic relief and reforms throughout a number of societal institutions. As these two popular plans evidenced, calls for social welfare were in the air, and the federal government was largely failing to respond under President Hoover’s administration.
President Hoover responded to the Great Depression with a theory of volunteerism, believing that voluntary aid worked on a massive scale, and could work here as well. Though he engaged in limited federal relief efforts, his response largely relied on voluntary assistance and charity, and this was proving insufficient. President Hoover did not believe that a public responsibility existed in addressing the problems of old age, unemployment, disability, and childhood dependency, and this belief cost him reelection. Following the Great Depression, Hoover was particularly disproved by the black voting populus (whom he earlier relied on for electoral success), and Charles Martin writes that “the presidential election of 1932 well illustrated the Republican Party’s loss of support among black leaders and newspapers” (1971, 87). The desire for institutionalized economic security was only growing among the American populus, and the executive’s failure to provide an effective response constituted a political suicide.
The Presidential election of 1932 constituted a major political realignment, signaling the end of the fourth party system and the beginning of the fifth party system. The Republican President Hoover lost his bid for reelection to the Democratic governor from New York, Franklin D. Roosevelt. Throughout the campaign process, Roosevelt consistently gained favor with black voters, and “as election day neaered, most Negro newspapers urged their readers to reject Hoover” due to his failure to provide aid to their communities, as minority communities experienced the effects of the depression most acutely (Martin 1971, 92). In the same election cycle, the Democratic New Deal coalition won the presidency, a supermajority in the House, and control of the Senate. With a unified Federal government, President Rooseevelt took office in January of 1933 with a clear, unobstructed path toward New Deal legislation.
Before Roosevelt could consider something as sweeping and lasting as the Social Security Act of 1935, the new President Roosevelt needed to tackle the present conspicuous state of the sinking economy. In other words, the President was in disaster management mode, rather than comprehensive legislative reform mode. “Within hours of taking office in 1933,” writes Stathis, “Roosevelt called a special session of Congress to address the economic crisis and issued a 4 day bank holiday to allow officials at the treasury department to prepare an emergency banking bill,” illustrating the urgency with which Roosevelt acted upon taking office (Stathis 2012, 240). By the end of his first 100 days, the 73rd Congress had approved 14 major laws, including the Agricultural Adjustment Act and the National Industrial Recovery Act. In this period, the executive and legislature were acting together with their eyes on the same prize, and Roosevelt met little resistance.
In March of 1934, after slightly over a year in office, Roosevelt began to suffer defeats, as Congress overrode one of his vetoes and the court began declaring portions of bills unconstitutional. The 73rd Congress, in short, responded to a precarious economic situation with a surge of legislation, and Stathis asserts this to be one of the greatest Congress’s in American History. The Social Security Act did not make it onto the agenda in this congress precisely due to the amount of problems already on its plate.
The Congressional Elections of 1934 saw the Democratic dominance only increase, with the Democratic party gaining seats in both houses. Roosevelt, at this point, began considering a more permanent response to the fragile economy, as emergency responses had been largely completed. Attracted to the plan devised by Townsend, Roosevelt aimed to provide security for those no longer capable of working, stimulate demand in the economy, and decrease the supply of labor. After the Congressional elections, Roosevelt created the Committee on Economic Security via executive order, and he instructed them to develop an old-age pension program, an unemployment insurance system, and a national health care program (though the last facet was later dropped). The committee produced a report six months later, in January of 1935, and the report encompassed a detailed legislative proposal. This legislative proposal was introduced to Congress as the Social Security Act, and it would take another six months to see the bill become law.
The political realignment evidenced the changing preferences of the American populus, and this progressive social attitude inspired the political realignment of 1932. With Democratic dominance in both houses of Congress and the executive, Roosevelt was allowed to respond to the nation-wide movement calling for economic security, both providing for present stabilization in the 73rd Congress and thinking into the future in the 74th Congress. The Social Security Act of 1935 was enacted by the 74th Congress because the 73rd Congress was far too busy – they did not have the resources to provide for future economic security while simultaneously stabilizing the current, very present dangers of modern economic insecurity. The convergence of a national movement, a political realignment, and a proactive response to emergency by the 73rd Congress allowed for The Social Security Act of 1935 to be placed on the agenda, and to ultimately succeed, in the 74th Congress.
Part 3: Member Spotlight
Huey Long’s obituary remembers that “to his supporters, he was a champion of the downtrodden, who taxed the rich in order to build 9,000 miles of concrete highways, put 600,000 free textbooks in the hands of poor students, and establish programs that taught 175,000 illiterate adults to read,” reminding citizens of the profound effect Huey Long’s life and death wielded on the world as we know it today. Moments before his final breath, Huey Long begged for more time.“God, don’t let me die. I have so much to do,” said Long, constituting the Senator’s tragic final words. While Huey Long had a lengthy political career, the final three years of his life prove the most interesting time period for review.
As a beloved Louisiana Governor, Huey Long was elected to the United States Senate in the election of 1930, but he “left the seat vacant until he could install a loyal successor to continue his reform agenda,” not quite ready to take his hands out of Louisiana politics. In 1932, Huey Long finally arrived in Washington to assume his seat, after an ally, Oscar Allen, won the Louisiana Gubernatorial election. According to Huey Long’s own website, Long continued to exercise de facto control over Louisiana state lawmaking procedures while he was in Washington, earning him many enemies within the state.
In 1932, Huey Long had supported the candidacy of Roosevelt, believing that he would agree with his populist ideas. He campaigned for him in the midwest, and “played a crucial role in securing his nomination.”
However, by 1933, rifts between Senator Long and President Roosevelt began appearing. Long made impassioned speeches on the Senate floor that largely echo modern qualms, asserting that there were too few people hoarding the nation’s wealth and that redistribution was in order. Roosevelt, in conversation with an adviser, identified Huey Long as “one of the two most dangerous men in America,” showing his dissatisfaction with the extreme political ideology of the Senator (Snyder 1975, 117). The other most dangerous man was identified as Douglas MacArthur, showcasing that what President Roosevelt feared most was political extremism – whether it be far left or far right.
In 1933, Huey Long unveiled his autobiography, Every Man a King, which is “primarily an argument for his favorite theme – redistribution of wealth.” Both his book and his congressional rhetoric evidenced a split with Roosevelt, as Long believed his approach to resolving The Great Depression was woefully inadequate and far too limited.
In February of 1934, Huey Long formally unveiled his Share Our Wealth Society in Congress, “a national organization designed expressly to redistribute the wealth of this nation” describes Snyder (1975, 119). The plan capped personal fortunes at 50 million, distributed the rest through government programs, provided for old age pensions, and spoke directly to working class Americans, and would ultimately sever Long from Roosevelt’s good graces entirely. “By the summer of 1935, Long’s share our wealth clubs had 7.5 million members nationwide, he regularly garnered 25 million radio listeners, and he was receiving 60,000 letters a week from supporters (more than the president),” writes his website, illustrating the immense breadth of support Long was beginning to receive. After all, Long’s track record with social welfare was impressive. “During the course of his governorship, he provided Louisiana with new schools and free textbooks, charity hospitals and mental institutions, paved roads and toll-free bridges, an updated university system, and many more expanded and inexpensive public services,” writes Snyder, evidencing the expertise Heuy Long had in this particular area of public policy (Snyder 1975, 121). Long, due to his expertise and proficiency as a politician, gained support for his program rapidly. “The popularity of Share our Wealth automatically transformed Huey Long from the president’s principal; critic into his foremost political rival,” notes Snyder, as Long seemed to be succeeding in ways Roosevelt was not (1975, 124). The competition between the two had never been more ripe.
Now firmly split with Roosevelt and with supporters of his own, Huey Long announced his Presidential ambitions in August of 1935, announcing that he planned to run against the incumbent President Roosevelt in the election of 1936. FDR, fearful of a rift in the Democratic Party, began to incorporate some of Huey Long’s less radical ideas into his Second New Deal, and Long’s website argues that the Social Security System was largely devised from Huey’s proposal for old age pensions.
While Long was looking towards his future in Washington, his enemies back home in Louisiana were plotting. His enemies despised his meddling in Louisiana politics, his “socialist” agenda, and his continuous habit of pushing his own bills, written with the purpose of furthering his Share Our Wealth agenda, through State congress.
In September of 1935, Long was in Louisiana pushing bills through Congress, one of which would intentionally gerrymander political opponent Judge Benjamin Pavy out of his job. On September 9, Judge Pavy’s son-in-law shot Long in the corridor of the Louisiana State Capitol. The shooter was killed on site, but Long was rushed to the hospital for treatment. That afternoon, The New York Times reported that “the condition of Senator Long is thoroughly satisfactory” on the front page, illustrating the immense concern this event caused the nation.
Unfortunately, the emergency procedures failed to stop internal bleeding, and Long died 2 days later, begging for more time with his final breath. Huey Long supported the Social Security Act of 1935, but he believed that we could do better. He wanted to be around when we did better, and he believed he could get us there. His second book, My First Days in the White House, was published posthumously, and it fantasizes about his Presidential career. He had big dreams for this nation, and perhaps if he had more time, our nation would look quite differently today.
Part 4: Process
Senate Consideration of The Social Security Act of 1935
On June 12, 1935, Senator Pat Harrison (D-MS), the Chairman of the Finance Committee moved the senate to “proceed to the consideration” of House Resolution 7260 (Congressional Record, 74th Congress, June 12, 1935, 9191). The motion was agreed to by voice vote, and the Senate proceeded to consider the so-called “social security bill,” which was attempting to provide for the general welfare by establishing a system of old-age benefits. As decided by Harrison’s motion, substantive debate on H.R. 7260 would begin two days later, on June 14, 1935.
On June 14, Senator Harrison opened debate on H.R. 7260 by requesting “unanimous consent that the formal reading of the bill may be dispensed with and that the bill be read for amendment,” with committee amendments to be first considered (Congressional Record, 74th Congress, June 14, 9267). As there was no objection, debate on The Social Security Act of 1935 began that day.
Immediately upon initiating debate, Senator Huey Long (D-MS) began interrupting Harrison, frustrated that it would be “some time before” they could “come to the point of the introduction and consideration of any individual amendments” (Congressional Record, 74th Congress, June 14, 9267). Harrison dismissed these frustrations, and he continued asserting control over the conversation by opening with a lengthy monologue defending the necessity, constitutionality, and effectiveness of H.R. 7260 prior to offering the committee amendments. 54 amendments were offered by the committee, including a statute that a man will receive annuity only if he has retired from regular employment. He urged his senators that the bill before them “is the result of careful study by the Committee on Finance” (Congressional Record, 74th Congress, June 14, 9271).
After this spiel by Harrison, debate in the chamber ensued. Senator Alben Barkley (D-KY) suggested the absence of a quorum, prompting the presiding officer to call the roll, which indicated a quorum was present consisting of 85 Senators (Congressional Record, 74th Congress, June 14, 9283). Senator Wagner, the sponsor of the bill in the Senate, followed the quorum vote with his own defensive monologue, arguing that “the social security bill embraces objectives that have driven their appeal to the conscience and intelligence of the entire nation” (Congressional Record, 74th Congress, June 14, 9288). Later that afternoon, Senator Long announced that in a few days, he would offer a plan to remedy the problems with the existing bill, as he believed H.R. 7260 did not go far enough in protecting economic stability, resulting in a heated debate between him and Wagner. The Washington Post summarizes the first days proceeding as follows: “Attacks by Daniel O. Hastings (Republican, Delaware) who believes the program goes too far, and Huey Long of Louisiana who says it doesn’t go far enough to suit his wealth sharing plans, marked the first day’s debate.”
As the proceedings continued throughout the following week and committee amendments were being discussed, it came time for Senators to offer their own input on the bill. Though 27 amendments were offered by Senators, only 18 were adopted, and only five constituted major votes in the Senate.
The first major, controversial amendment was proposed by Long on June 17, 1935. “Mr. Long offered an amendment to liberalize the proposed old-age assistance program and delete the payroll tax provisions,” explains Kollman and Solomon Fears (2001). Long argued that the government had “only one process by which to raise a sufficient amount of money to support a pension plan … and that is by a capital-levy tax” (Congressional Record, 74th Congress, June 17, 9429). Instead of the payroll tax, Long’s amendment would substitute a share the wealth philosophy, in which states would levy a tax on wealth or property to finance the pensions. A rich debate ensued between Long and Senator Tydings (D-MD). The debate over Long’s amendment occupies a great deal of space in the Congressional Record, but Long’s substitute plan was ultimately rejected by the Senate via a voice vote.
On June 18, 1985, Senator Joel Bennett Clark (D-MO) introduced an amendment to “exempt from coverage under the old age benefits system employees in firms with private old-age pensions” (Kollmon and Solomon-Fears 2001). This proposal had been previously rejected by both the Ways and Means Committee and the Finance Committee, but Clark made one final push for the measure on the Senate floor. Supporters of the amendment believed that the government would benefit because the reserves of private annuity plans would increase investment and therefore create more income to tax, but the administration was unconvinced.
The Social Security Historian’s Office issued a research note detailing four major problems with this provision. First, opponents of the amendment noted that under the Clark amendment, better-financed and prosperous companies would opt out of the Social-Security system, therefore narrowing the contribution base to such a degree that the program would no longer be viable. The second objection concerned portability, as the Social Security System would be transferable from one job to another, whereas private pensions would not be. “The third concern with the Clark Amendment again involved the issue of universality,” explains the Historian’s office, as the Clark Amendment does not offer uniform eligibility rules, and as a result, companies could design problematic, arbitrary, and exploitive eligibility criteria. Finally, the administration was concerned that companies would design faulty, ineffective pension programs for the sole purpose of evading Social Security taxes. All of these objections were circulating in the air when Clark proposed the amendment to the Senate.
On June 18 and June 19 of 1935, The Clark Amendment was debated at length on the Senate floor. Senator Walter F. George (D-GA) defended the amendment at length, arguing that it was a “matter of plain common sense that the private systems will not be maintained if the employers are subjected to a tax which they must in any event pay for the purpose of setting up an exactly similar system,” using an inefficiency argument to rally support for the Clark Amendment (Congressional Record, 74th Congress, June 18, 9515). After much debate, Clark accepted an amendment to his amendment, offered by Senator Lewis Schwellenbach (D-WA), “which will provide specifically that the election to go under a private system shall not in any sense be made a condition of employment or retention of employment,” and this revision was agreed to (Congressional Record, 74th Congress, June 19, 9519-9520). After two days of debate, the amendment was adopted on the senate floor by a vote of 51-35 on June 19. As the figure on Vote View illustrates, most Republicans voted for the bill, and the Democratic sector was split fairly evenly between support and opposition. The ideological split of the Democratic Party allowed for the passage of the Clark amendment. As there was “no such provision in the House-passed version of the bill, the matter went to Conference.”
Following the Clark Amendment, the Senate body agreed to go under a strict limitation of debate until the measure reached a vote. “Discussion on each subsequent amendment,” described The New York Times, “will be limited to ten minutes to the Senator and speeches on the bill proper will be limited to fifteen minutes,” therefore making ultimate passage of the bill likely with the threat of filibuster removed. While debate over the Clark Amendment spanned two congressional days, the following three amendments all were debated and decided upon on the afternoon of June 19, 1935, following the 1 P.M. enactment of debate limitations.
On June 19, 1935, a second major vote occurred in response to a motion offered by Senator Daniel Hastings (R-DE), which would strike out the old-age benefits provisions from the bill. “Mr. Hastings stated that those provisions were an effort to write into law a forced annuity system for a certain group of people,” explains Kollmon and Solomon-Fears (2001). Senator William King (D-UT) defended this motion before the Senate, asserting that he believed the old-age benefit provision of the bill would not be sustained by the courts when constitutional questions arose (Congressional Record, 74th Congress, June 19, 9647). The amendment was called to a vote, and it was rejected by a roll call vote of 63-15. Senator George, the sponsor of the rejected amendment, would go on to vote in favor of H.R. 7260 anyway.
Another major vote on the Senate floor prior to enactment surrounded an amendment offered by Senator George which would encourage “the formation of industrial pensions as a substitute for Titles II and VIII,” therefore calling for a uniform schedule of benefits nationwide and allowing employers to operate and manage their own plans (Kollmon and Solomon-Fears 2001). This amendment was rejected by voice vote on June 19, 1935.
Not noted by Kollmon and Solomon-Fears (2001), but pertinent to this discussion of Senate proceedings, is an amendment introduced by Senator William Borah (R-ID) on June 19, 1935. His amendment would “make it certain that all persons 65 years of age and over shall receive $30 per month,” providing for financial participation by the state in Social Security Programs (Congressional Record, 74th Congress, June 19, 9631). The amendment was rejected by a roll call vote of 60-18, but its sponsor would ultimately vote in support of the bill.
At the end of the day on June 19, 1935, The Vice President called the roll call vote in the Senate on the passage of the Social Security Act of 1935. The bill passed by a vote of 77-6 in the Senate. The vote for passage in the Senate evidenced strong Democratic party loyalty, as the figure on vote view illustrates. Interestingly, though, 19 of the 24 Republican senators present also voted in favor of the bill, showcasing a fairly strong congressional consensus and a general willingness to cross party lines within the 74th Congress. Senators Harry Flood Byrd (D-VA) and Carter Glass (D-VA) were paired “no” votes, meaning that their votes were not counted in the total tally. Senator Arthur Moore (D-NJ) joined five Republicans (Townsend, Metcalf, Hastings, Hale, and Austin) in opposition, constituting the only Democratic nay vote. The five Republican dissenters were all Northeastern Senators, one from Vermont, one from Maine, two from Delaware, and one from Rhode Island. Interestingly, the one Democratic no vote was from New Jersey, also from a Northeastern constituency. Perhaps geographic ideologies contributed to this pattern of voting behavior.
Although The Social Security Act passed the 74th Congress’s Senate with flying colors, the road to passage in the Senate was anything but smooth sailing. With a week of heated debate and 82 amendments, the consideration of H.R. 7260 on the Senate Floor was rife with contentious controversy, fruitful debate, and philosophical musings about the future of American economics. The five amendments mentioned above constitute the most contentious offerings by Senators, and though only one was adopted, the level of controversy surrounding each amendment evidenced the high stakes of this act. The Social Security Act of 1935 was important to get correct, and the amendment process ensured necessary prudence, generative debate, and substantive conversation along the path to enactment.
Part 5: Aftermath
The Social Security Act of 1935 continues to wield power over our current political moment. Due to the revisions passed in 1965, which created Medicare and Medicaid, The Social Security Act of 1935 (and its various extensions and amendments) provides health insurance for over 135 million Americans. Additionally, coverage of workers under the Social Security Act of 1935 has become nearly universal, and “the types of individuals eligible for benefits were expanded over the years, and benefit levels were increased periodically” (CRS 2021, 5). As these trends indicate, in the decades since the enactment of the Social Security Act of 1935, the revisions of the act have largely been ones of expansion.
However, scholars began to grow concerned about the long term viability of such programs in the 1970s, and the CRS notes that in this period, legislative action regarding Social Security became more “concentrated on solving persistent financing problems” (2021, 5). Despite various enactments aimed to remedy the financing issue, The Federal Old-Age and Survivors Insurance (OASI) Trust Fund needed to borrow assets from the Disability Insurance Trust Fund and the Medicare Hospital Insurance Trust Fund in 1982.
Zhe Li for the CRS reports that “current projections by the Social Security Board of Trustees show that the Social Security system has a long-range funding shortfall, and that the system will operate with annual cash-flow deficits each year through the end of the 75 year projection period” (2021, 5). These projections published by the board have catalyzed a flurry of conversation among scholars, politicians, and citizens alike regarding Social Security reform. Dawn Nuschler, a specialist in income security, notes that “public opinion polls show that less than 50% of respondents are confident that social security can meet its long-term commitments” and concludes that “these concerns, and a belief that the nation must increase national savings, have led to proposals to redesign the system” (CRS 2012, 2).
The Social Security Program is financed primarily by revenues from payroll taxes, the federal income tax, and interest from the U.S. treasury on its investments in special U.S. government obligations. Despite the cash flow deficits in previous years, once interest income was taken into account, Social Security maintained a total surplus from 2010-2020. In 2021, the trustees projected total revenues to exceed total costs, but noted that 2021 would be the last year in the 75 year projection period in which revenue would exceed costs (CRS 2021, 5-6). Demographic changes that craft an older society are among the primary reasons for the shortfall, as life expectancy increases and fertility rate decreases (CRS 2012, 11). As our society gets older, fewer workers are providing for the financial security of more retirees, highlighting a flaw in the plan designed by the Social Security Act of 1935.
“The trustees project that the trust funds will have a positive balance (asset reserves) until 2034, allowing Social Security benefits scheduled under current law to be paid in full and on time until then,” describes the CRS (2021, 6).nAlthough the Social Security fund is not under immediate threat of failure, the longevity, long term viability, and future of the trust fund is certainly in a precarious state. Due to this perceived lack of urgency, there is debate over whether modest changes or systemic overhaul would constitute the best course of action. “Lacking a ‘crisis’, the pressure to compromise is diffused and the issues and the divergent views about them have led to myriad complex proposals,” describes Nuschler (CRS 2012, 14).
The debate has evidenced two fundamentally different approaches to reform. The traditional approach, as defined by Zhe Li in 2012, would maintain the current structure of the program and make modest changes, and the general goal of this approach is “to preserve the social insurance nature of the program.” Advocates of modest reform “view enactment of long-range Social Security constraints as one way to curb federal entitlement spending,” as the cost of entitlement programs that aid the elderly will drastically increase in the future (CRS 2012, 15). To this day, it is still unclear which theory of reform will emerge victorious—the only thing that remains abundantly clear is that reform will become necessary.
Scholars favoring modest reform argue that a complete overhaul of the system would not increase national savings, as higher government debt resulting from the absence of current payroll taxes would offset the increased individual account savings. “They also contend that the capital market’s inflow created by the accounts would make the markets difficult to regulate and potentially distort equity violations,” notes the CRS (2012, 16). Ezra Klein, a prominent American journalist, writes that Social Security is “one of the stingiest national pension programs in the developed world,” and described it as “ill-designed for certain features and facts of the modern world” in an article arguing for Social Security reform. In the same article, Klein details a proposal drafted by Gene Sperling, the former director of President Obama’s National Economic Council. The Sperling proposal “suggests a 3 percent surcharge on all income over 200,000, which would wipe out half of Social Security’s shortfall,” and suggests that the rest could be made up through benefit cuts or tax changes. Additionally, reformers advocate for Congress to lift the wage cap, which is currently set at $147,000. “In the ensuing decades, rising income inequality has pushed more and more people above the payroll wage cap,” notes journalist Max Richtman, pointing to a desire among the populus for high wage earners to pay their fair share into the program. The calls for reform to the existing system come from the people, the politicians, the journalists, and the academics, evidencing that the concern around the survival of Social Security is present, pertinent, and consequential to our current political moment. This approach has largely been associated with the Democratic party.
Conversely, the personal savings and investment approach would “redesign the 1930s era program to create a pre funded system in which benefits would be based partially or entirely on personal savings and investments” (CRS 2021, 9). Advocates of major reform (involving privatization) argue that government-run, pay-as-you-go systems are unsustainable in aging societies, and they “prefer a system that allows workers to acquire wealth and provide for their retirement by investing in individual accounts” (CRS 2012, 15). Proponents of such major reform argue that private investments would yield larger retirement incomes, as “stocks and bonds historically have provided higher returns than are projected from the current system” (CRS 2012, 15). The privatization of Social Security has long been a policy point for Republican politicians, though not yet to any avail.
After the election of President Bush and the expansion of Republican majorities in both houses in the election of 2004, the threat of privatizing Social Security saturated political conversation. “Bush proposed incorporating private accounts into Social Security during both his 2000 and 2004 election campaigns,” describes Andrew Prokop, but these efforts failed to rally popular support in the face of competing domestic interests.
Kathleen Mckiernan (2021) argues that coupled with the problem of an aging population, the design of Social Security is also made difficult “when the country also exhibits an informal economy where workers avoid the taxation of the government and are not entitled to its benefits,” and in order to prove this claim, she examines the economics of the country of Chile. Chile, as Mckiernan describes, transitioned from a pay-as-you-go Social Security system to a privatized system and exhibits an informal sector, and by drawing this comparison, she attempts to quantify the transitional welfare impact of Social Security privatization. The results conclude that both low and high productivity workers will experience welfare gains, but that these gains come at the expense of two groups: “low productivity workers who are retired at the time of the reform and high-productivity workers within 5 years of retirement,” therefore concluding that privatization might most harm those that Social Security is designed to protect (Mckiernan 2021).
Christopher R. Tamborini, PhD, notes that “increasing socioeconomic disparities have important implications for the Social Security Program” (2022). Through developing a system for projections that estimate monthly and lifetime Social Security retirement benefits for retirees, Tamborini found a widening socioeconomic gap in projected monthly and lifetime benefits. “This divergence is associated with stagnation of benefit levels among socioeconomic status groups coupled with upward shifts among higher strata groups,” writes Tamborini, concluding that these harmful patterns could offset some of the progressivity built into the Social Security system as we move forward in time. A remedy, then, is concluded to be necessary, but Tamborini does not offer his idea of a functional alternative.
Although every Congressional term experiences proposals for Social Security reform, few substantive measures have been taken to remedy the long-term shortcomings of the Social Security fund. Stephen Goss for the Social Security Office writes that “there is no one clear solution to the problem of increased cost for retirees because of fewer workers available to support the retirees, which in turn is caused by lower birth rates.” In the coming decade, as we approach the 2034 deadline of financial viability set by the trustees, the debates over Social Security will only grow more frequent, and the decision will affect the economic security of us all as we proceed into an uncertain future.
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