Social Security Under New Attack on Its Birthday

President Franklin D. Roosevelt signs The Social Security Act.  Looking on are Rep. Robert Doughton (D-NC), Sen. Robert Wagner (D-NY),  Rep. John Dingell—father of the current Congressman of the same name—(D-MI),  Secretary of Labor Frances Perkins, Sen. Pat Harrison (D-MS) and Rep. David Lewis (D-MD).

Social Security has rightly been acclaimed “the most successful American anti-poverty program in history.”  Once considered so popular that proposals to altar or abolish it were widely considered the “third rail of American politics”—too dangerous to seriously advance.  But that was before years of a carefully managed drum beat of hysteria that the system was somehow “running out of money” which has convinced many folks, despite all of the evidence to the contrary, that they would never live to collect what they have been paying in for their entire working lives.

That kind of talk was the nose of the camel under the tent that allowed retirement ages to creep upward and talk of limiting or reducing future benefits become fashionable in some quarters.  Proposals to “privatize” all or part of the system in whole or in part seemed to be gaining steam.  These would allow younger workers to take part or all of their Social Security contributions and invest them in private IRA like accounts. 

The wind was kicked out of that fantasy in the recent stock market collapse, which understandably raised doubt in the safety of investment in the volatile Stock Market.

But some bad ideas just won’t stay dead.  The alleged libertarians of the Tea Party surged to real power in the House of Representatives as a voracious, disciplined block within the majority Republican caucus driving the whole party dramatically, derangedly to the right virtually overnight.

The Tea Party House Freshmen found an incumbent ally in rising Wisconsinite Paul Ryan, a devotee of Ayn Rand in all of her sociopathic glory.  Ryan, elevated to leadership in the caucus, came up with his famous Ryan budget.  And suddenly all “discretionary” social service expenditures and Medicare were in the cross hairs for either outright elimination or a slow death by a thousand cuts.  Not content, Ryan has made clear that Social Security, too, must be “reformed” virtually out of existence.

By shoring up his tepid support among right wing zealots of his party by tapping Ryan as his running mate, Mitt Romney has tied himself to the hip to the public face of the destruction of Social Security. 

That’s good politics in the short run—Tea Partiers were threatening to sit out the presidential race in sufficient numbers that Romney’s number crunchers were probably convinced that he could lose a couple of critical states and their Electoral College votes without them. 

But in the long run, it is likely the doom of the GOP’s fading hopes.  Most Americans still support—and rely upon—Social Security regardless of party affiliation.  For older voters, who have been skewing more heavily Republican in recent years, it is an especially sensitive issue.

President Obama and the Democrats can hardly believe their good fortune.  They will tie the Republican ticket to killing Social Security with the kind of relentless, dramatic and maddening attack ads that the GOP itself pioneered.  And the Republicans have no good way to counter the attacks, except by trying to divert attention to the fact that the President is an honest-to-god- Negro and to fantasies that he is a foreign born Muslim out to confiscate guns, force abortion on 13 year olds, and destroy marriage. 

The trouble is that only works on the sheep already in the fold.  Everyone else just shrugs their shoulders.  But they won’t shrug their shoulders at the dismantlement of Social Security.

Of course the demographics of a lot of Baby Boomers retiring together over the next few years in a kind of slow motion avalanche and the reduction of collection of FICA taxes since the economic collapse due to heavy unemployment and actually falling wages for those still employed has put a strain on the system, which could theoretically go bankrupt in a few years unless “something is done.”

But that something does not have to be further raises in the retirement age, reduction of benefits, privatization, or changing the system from “social insurance” to a means tested welfare program—the later program sometime surprisingly advanced by some on the right knowing that it would erode support for the system among higher income voters.  Senator Bernie Sanders, the Vermont Independent and others have pointed out that simply raising the cap on wage income subject to FICA taxes and/or levying FICA taxes on non-wage income above a certain level would make the system solvent through most of the rest of the century.

Given the situation it is not surprising that this year the anniversary of the establishment of the Social Security System has attracted more than the usual attention

On August 14, 1935 President Franklin Delano Roosevelt signed the Social Security Act into law.  It was the crowning achievement of the New Deal.     

Before it was enacted those who lived beyond their income producing years were the poorest sector of society, particularly those who could not rely on the support and/or charity of family.  And the necessity of supporting an elderly relative drove many young families into poverty because of the extra expenses and the foregone income of those who had to become caretakers. 

Today, those over 65 are the least likely of all age cohorts to live in poverty. 

The battle for Federal retirement insurance was a long one.  The first such scheme was advocated as early as the 1820’s by trade unionists and socialists in Europe.  German Chancellor Otto Von Bismarck implemented the first old age insurance plan in 1889 in the hope of achieving social stability in the new German Empire and uniting the loyalties of citizens of the various principalities he had brought together.  The German system provided contributory retirement benefits and disability benefits as well. Participation was mandatory and contributions were taken from the employee, the employer and the government.  It would become essentially the model for F.D.R.’s initiative. 

Social security plans had spread over Europe but were resisted as unwanted government interference in business in this country.  Social security, along with unemployment insurance, a government medical plan, the eight hour day, and limits to child labor were key platforms of Eugene V. Debs’ Socialist Party platform of 1912.  It was widely supported by most of the labor movement, although some craft unions which had wrung private pension plans from employers were opposed. 

Roosevelt’s Secretary of Labor Frances Perkins spearheaded the drive for Social Security for the administration.  Republicans in Congress bitterly opposed the program, decrying it as socialist, un-American, unconstitutional, and a business destroying tax burden.  Sound familiar?   

But the program was still wildly popular with voters, who elected large majorities of Democrats committed to the program in both houses of Congress.  Some compromises, however, had to be made and the original system was far from perfect.  Nearly 50% of all workers were excluded from coverage including workers in agriculture, domestic service, government employees, and most teachers, nurses, hospital employees, librarians, and social workers. The act also did not cover those who worked intermittently including most seasonal workers. 

These provisions fell especially heavy on women and minorities who were disproportionately engaged in these occupations.  90% of all domestic workers were women and 2/3 of all employed Black women worked in domestic service.  And Southern Black men were predominately engaged as agricultural workers.  For these reasons the NAACP actually opposed the legislation that reached Roosevelt’s desk call it, “a sieve with holes just big enough for the majority of Negroes to fall through.”

Most women qualified for old age insurance only through their husbands or children.  Mothers’ pensions based entitlements on the presumption that mothers would be unemployed. 

The Social Security Act also established the Aid to Dependent Children, a welfare program designed to support children in unemployed families who had exhausted unemployment insurance.  Management of these programs was left to the States, at the insistence of Southern Democrats who did not want to “disturb the racial status quo.”  As a result Southern states routinely adopted rules making it difficult or nearly impossible for Black families to quality. 

This became one of the major reasons, along with increased employment opportunities as the country geared up for war later in the decade, for the Great Migration of rural Southern Blacks to Northern cities. 

In 1937 the Social Security withholding tax went into effect and the system began building reserves to make the first payments to retirees, originally scheduled for 1942.  Some economists charged that the income taken out of circulation by the tax was responsible for the 1937 “Roosevelt Recession.”  Others have pointed to drastic reductions in Federal spending because of budget concerns and because key elements of the New Deal had been declared unconstitutional as being the real culprit in the downturn.  Some felt that building a huge reserve before beginning to make pay-outs was a drag on the economy. 

So in 1939 Social Security was amended to begin making payout two years earlier than planned.  This caused the plan to become de facto as “pay as you go” system with current workers supporting the immediate benefits to retirees instead of relying of a large accumulated fund.  The amendments did establish a trust fund for any surplus funds managed by the Secretary of the Treasury. The money could be invested in both non-marketable and marketable securities. 

But because this trust fund became a Treasury Department asset, Congress later began to borrow against it to fund current spending.

Amendments to the act also tied women’s benefits more closely than ever to their husband’s income. The amendment added wives, elderly widows, and dependent survivors of covered male workers to those who could receive old age pensions. These individuals had previously been granted lump sum payments upon only death or coverage through the Aid to Dependent Children program. 

While this rescued many widows from poverty, the amendments also devalued the value of benefits a woman could receive from her own labor.  If a married wage-earning woman’s own benefit was worth less than 50% of her husband’s benefit, she was treated as a wife, not a worker and the dependents women who were covered by Social Security benefits were ineligible for her benefits.  Changes were also made to the Aid to Dependent Children program, including raising the age of eligible children to 18. 

Despite being far from perfect, the first monthly payment was issued on January 31, 1940 to Ida May Fuller of Ludlow, Vermont.