PPA 419 Aging Services Administration

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PPA 419 Aging Services Administration

• Lecture 4a History of Social Security

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Pre-Social Security Period

• Traditional sources of income security.
• Assets
• Ancient Greeks Olive oil.
• Labor.
• Feudal system.
• Charity.
• Family.
• Land.

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Pre-Social Security Period

• The rise of formal systems of economic security.
• Medieval guilds mutual aid societies for
  tradesman that regulated production and provided
  a range of benefits.
• Friendly societies common trades. Evolved into
  fraternal organizations, then unions. Provided
  life insurance.
• Freemasons, Odd Fellows, Elks, Moose, Eagles.

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Pre-Social Security Period

• The English Poor Laws.
• English Poor Law of 1601 the first systematic
  codification of the responsibility of the state
  for the welfare of its citizens.
• Taxation to fund relief activities.
• Distinguished between deserving and undeserving
  poor.
• Local and community control.
• Almhouses.
• Tradition that the colonists brought with them to
  America.

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Pre-Social Security Period

• Economic security in America.
• Colonial poor laws.
• Increased complexity, diversity, and mobility put
  strain on colonial poor laws.
• Result more state financing, increasing use of
  poorhouses and almshouses.
• Relief made as unpleasant as possible.
• Outdoor relief increased, but mistrusted.
• Old age in colonial America.
• Struggle to develop adequate systems of
  retirement.
• First pension scheme Thomas Paine, Agrarian
  Justice.

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Pre-Social Security Period

• Civil War pensions Americas first Social
  Security program.
• 1862 Benefits linked to disabilities as a
  direct consequence of military duty.
• Widows and orphans also eligible.
• Service disability link eliminated in 1890.
• Old age and service became sole qualification in
  1906.
• Often induced young women to marry Civil War
  veterans for the benefit. Last civil war widow
  to receive civil war pension was in 1999.
• Military pensions a significant part of the
  federal budget, but the federal budget at that
  time not a significant part of the economy. Many
  veterans not eligible (Confederate veterans, for
  example).

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Pre-Social Security Period

• The company pension.
• The first formal company pension plan was
  introduced by the Alfred Dolge company (maker of
  pianos). Largely a failure because of worker
  mobility.
• Company provided pension plans only covered 2 of
  workers in early part of 20th century.

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Pre-Social Security Period

• Coxeys Army.
• During the depression of the 1890s.
• Coxey, an unsuccessful Ohio politician and
  industrial, called on unemployed from all over
  the country to join in a march on Washington in
  1894.
• Tens of thousands marched on Washington, but only
  500 made it. Coxey was arrested for walking on
  the grass of the Capitol building.
• Coxey a harbinger of demands for unemployment
  insurance.

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Pre-Social Security Period

• State old-age pensions.
• Following the outbreak of the Great Depression,
  poverty among the elderly grew dramatically.
• Estimates over 50 percent did not have enough
  income to be self-supporting.
• State welfare pensions for the elderly were
  virtually non-existent before 1930.
• By 1935 30 states had pension plans.
• But, only 3 of the elderly were receiving
  benefits of about an average of 0.65 per day.
• Elderly reluctant to go on welfare.
• Many states failed to implement programs.
• Many states had county option.
• 87 of the money under elderly pension programs
  were spent in California, New York, and
  Massachusetts.
• Pension laws subject to political vagaries (Huey
  Long and black pensioners in June and July).

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Pre-Social Security Period

• America changes.
• The industrial revolution.
• The urbanization of America.
• The disappearance of the extended family.
• A marked increase in life expectancy.
• The changes made economic security fragile.

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Pre-Social Security Period

• Stock market crash and the Great Depression.
• October 24, 1929 stock market crash.
• In three months, market lost 40 of its value.
  It took 25 years to return to its pre-crash
  level.
• Unemployment exceeded 25, 10,000 banks failed,
  GNP declined from 105 billion to 55 billion.
  Wages declined by 40.

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Pre-Social Security Period

• Radical calls to action.
• Every Man a King (Share Our Wealth) Huey Long.
• Confiscate wealth. Guaranteed income of 5,000.
  Limits on private fortunes, legacies, and
  incomes. Everyone over 60 would receive a
  pension.
• The Townsend Movement Francis E. Townsend
  (unemployed doctor at 66). Townsend Old Age
  Revolving pension plan.
• Pension of 200 month for everyone 60 and older
  funded by a 2 sales tax.
• Person must be retired, non-criminal, money must
  be spent within 30 days.
• Hung around on the legislative agenda until 1949.

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Pre-Social Security Period

• Radical calls to action (contd.).
• Father Charles E. Coughlin.
• Radio show host with 35-40 million listeners.
• Enemies included devil, FDR, international
  bankers, communists, and labor unions. Described
  them interchangeably.
• Social reforms included inflation of currency and
  nationalization of all banks. Anti-Semite and
  isolationist.
• Upton Sinclair (EPIC).
• EPIC a 12-point program.
• Issuance of scrip currency, creation of state-run
  bartering enterprises, tax on idle land, and
  state bond of 300 million. Point 10 provided a
  pension of 50 a month to all needy persons over
  60 who had lived in California for at least three
  years.
• EPIC movement captured Democratic party and
  Sinclair became the Democratic candidate for
  Governor in 1934. Received 37 of the vote,
  another progressive candidate received 13 and
  the Republican candidate received 48.

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Pre-Social Security Period

• Radical calls to action (contd.).
• Ham Eggs (Robert Noble).
• Call for state government to issue special script
  each week to every unemployed Californian 50 and
  older.
• Almost adopted by initiative in 1938. Endorsed by
  Democratic candidate for Governor, Cuthbert
  Olson.
• Bigelow plan (Reverend Herbert S. Bigelow).
• Guaranteed income of 50 per month to those over
  60 who are unemployed in Ohio. 2 tax on land,
  increase in income tax. Would have cost more
  than the existing state budget for two years.

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Pre-Social Security Period

• Radical calls to action (contd.).
• General Welfare Federation of America (Arthur L.
  Johnson).
• Denounced Social Security, called for a pension
  plan to those over 60. with the simple
  stipulations that that they not engage in gainful
  employment, spend their pension for American
  goods and services, and that they not maintain
  able-bodied dependents between 30 and 60. Not
  less than 30 and not more than 60. Financed by
  gross income tax.

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Pre-Social Security Period

• Radical calls for action (contd.).
• Technocracy.
• Technocracy held that all politics and all
  economic arrangements based on traditional
  economic theory were antiquated and that the only
  way to run the country was to let engineers and
  other technology experts run the country on
  engineering principles.
• Retirement by 45 due to increased productivity.
• Rejected political geography, referring to states
  by their coordinates.
• Rejected names.
• Guess which movement is the only one to still
  exist today.

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Pre-Social Security Period

• Establishment response.
• Do nothing.
• Situation would right itself as it always had.
• Presidents Hoovers volunteerism.
• Advocated voluntary efforts based on his
  experiences in the post-World War I period.
• Problem Volunteerism difficult when total wealth
  has been cut in half.
• Expand welfare.
• Initial efforts focused on expanding traditional
  old age pensions, but generally too restrictive
  and limited.
• The New Alternative.
• Social insurance work-related contributory
  system in which workers would provide for their
  own future economic security through taxes paid
  while employed.
• Alternative to radical plans and conservative
  do-nothing approach.

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The Social Insurance Movement

• Original concept developed by Otto von Bismarck,
  Chancellor of Germany in 1899.
• Adopted by 34 European countries by 1934.
• Basic features.
• Insurance principle a group of persons is
  insured against a defined risk.
• Social element The program is shaped in part by
  broad social objectives, rather than the
  self-interest of the individuals in the group.

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The Social Insurance Movement

• Social insurance can cover a number of different
  conditions including disability, death,
  unemployment, and old-age.
• Social insurance attempts to solve the problem of
  economic security by pooling risk assets from a
  large social group and providing income to those
  members of the group whose economic security is
  threatened.
• One of the earliest advocates of social insurance
  was Theodore Roosevelt who succeeded in getting a
  social insurance plank in the Progressive Party
  platform in 1912.

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The Threshold of Change

• In 1934
• U.S. in throes of Depression.
• Social changes from Industrial Revolution
  irreversible.
• Traditional sources of economic security (assets,
  labor, family, and charity) had all failed.
• Radical proposals for action were springing up
  like weeds.
• A new president and social insurance movement
  would produce a social revolution.

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The Social Security Act Passage and Development

• The Committee on Economic Security appointed by
  FDR in June 1934. Issued report in November
  1934.
• Result Social Security Act of 1935.
  Controversial, but signed into law on August 14,
  1935.

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The Social Security Act Passage and Development

• Major provisions of the Act.
• Old age insurance.
• Unemployment insurance.
• Aid to dependent children.
• Old age assistance.
• Grants to states to provide medical assistance.
• The provisions that affected the elderly included
  Old Age Insurance and Old Age Assistance.
• In the original act, benefits paid only to
  primary worker.
• Social insurance provision (Title II) based on
  contributions.
• Income assistance provision (Title I) based on
  need and intended to be temporary.

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The Social Security Act Passage and Development

• Social Security Board 3 members.
• Provided employers, employees and the public with
  info on how earnings were to be reported, what
  benefits were available and how they were to be
  provided. Replaced in 1946 by the Social
  Security Administration.
• Early work Social Security Numbers.
• The first task was to register employers and
  workers by January 1, 1937, when workers began
  acquiring credits toward benefits. Contracted
  with Post Office Department to do this. First
  established account record was to John David
  Sweeney, Jr., of New Rochelle, New York.
• Established 151 field offices by June 30, 1937.
• Trust funds.
• The first Federal Insurance Contributions Act
  (FICA) taxes were collected, beginning in January
  1937 and put in special trust funds. Over the
  years, 4.5 trillion has been paid in and 4.1
  trillion has been paid out. The balance is the
  surplus.

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The Social Security Act Passage and Development

• First payments.
• First payments between 1937 and 1940 were lump
  sum. Ernest Ackerman retired one day after the
  Act went into effect, paid a nickel in, and
  received 17 cents in retirement benefits.
• 1939 Amendments.
• Added dependents benefits and survivors benefits.
  Turned the program into a family-based program.
• Also increased benefits amounts and accelerated
  start of benefits from 1942 to 1940.

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The Social Security Act Passage and Development

• Monthly benefits.
• Payments began in January 1940 and authorized for
  retired workers, aged wives, and widows, children
  under 18, and surviving aged parents.
• First retirement check issued to Ida May Fuller
  for 22.54. Started collecting at 65 and lived
  to 100. Paid in 24.75 and received 22,888.92.

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The Social Security Act Passage and Development

• 1950 Amendments.
• Benefits increased making the program more
  valuable than old age assistance for the first
  time.
• The story of COLAs.
• 1940 to 1950 no increases. 1952 another
  increase. Doubled benefits.
• Legislated increases until 1975 when automatic
  cost of living increases keyed to the CPI kicked
  in.

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The Social Security Act Passage and Development
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The Social Security Act Passage and Development
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The Social Security Act Passage and Development

• Disability.
• Social Security Amendments of 1954.
• Disability insurance program Disability freeze
  1954-1956.
• Full disability insurance program 1956 ages 50-64
  and disabled adult children. All disabled 1960.
• Medicare other changes.
• 1962, Mens eligibility reduced to 1962 (women in
  1956).
• 1965, Medicare. Extended health coverage to
  nearly all Americans 65 and older.

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The Social Security Act Passage and Development

• SSI.
• Supplemental Security Income.
• Originally, partially federally funded program of
  aid to the needy aged, blind, and disabled.
  Mostly state and local funding and
  administration. Considerable variation.
• SSI nationalized program

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The Social Security Act Passage and Development

• 1972 1977 Amendments.
• 1972.
• SSI and COLA changes, minimum retirement benefit,
  adjustment in male benefit formula to equalize it
  with women, extension of Medicare to disability
  recipients, extension to sufferers of chronic
  renal disease, liberalization of retirement test,
  and delayed retirement credits.
• 1977.
• Addressed financing raised payroll tax,
  increased wage base, reduced benefits slightly,
  decoupled wage adjustment from price adjustment.

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The Social Security Act Passage and Development

• 1983 Amendments.
• Taxation of benefits, first coverage of federal
  employees, increase in retirement age.

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The Social Security Act Passage and Development
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The Social Security Act Passage and Development

• Independence for SSA.
• 1994 SSA moved from DHHS to independent status
  by President Clinton.
• Legislative changes in 1996 1997.
• Contract with America Advancement Act.
• Elimination of drug addiction and
  alcoholism-based disabilities from Social
  Security Disability.
• Personal Responsibility and Work Opportunity
  Reconciliation Act of 1996.
• Terminated SSI eligibility for most non-citizens.
  Limited eligibility for children.
• Omnibus Consolidated Rescissions and
  Appropriations Act of 1996.
• Electronic funds transfers mandatory.
• Department of Defense Appropriations Act, 1997.
• Identification-related documents.
• Balanced Budget Act of 1997.
• Restored SSI eligibility for most non-citizens.

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The Social Security Act Passage and Development

• Work incentives.
• Ticket to Work and Work Incentives Improvement
  Act of 1999.
• Ticket to work for SS disability recipients and
  incentives to employers to hire them.
• Repeal of Retirement Earnings Test.
• First exempted in 1950, 75 and older, then 72
  (1954), 70 in 1977.
• Repealed altogether in 2000.

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The Social Security Act Passage and Development

• Bush Administration.
• Appointment of Commission to Strengthen Social
  Security.
• Principles.
• The President directed the Commission to propose
  Social Security reform plans that will strengthen
  Social Security and improve its fiscal
  sustainability, while meeting several principles
• Modernization must not change Social Security
  benefits for retirees or near-retirees.
• The entire Social Security surplus must be
  dedicated to Social Security only.
• Social Security payroll taxes must not be
  increased.
• Government must not invest Social Security funds
  in the stock market.
• Modernization must preserve Social Securitys
  disability and survivors components.
• Modernization must include individually
  controlled, voluntary personal retirement
  accounts, which will augment the Social Security
  safety net.