(PAI) – Social Security celebrates its 75th birthday this month, and in a familiar position: It’s the most beloved federal program, and the leading source of retirement funds for millions of people. But it’s under attack – again – and defended by organized labor – again.
The program, enacted by Congress as one of the capstones of the New Deal, was signed into law by President Franklin Delano Roosevelt on Aug. 14, 1935. The movement for Social Security had been building for two decades, but the enormous destitution of the Great Depression pushed it over the legislative finish line.
“There is no tragedy in growing old, but there is tragedy in growing old without means of support,” Roosevelt told his advisory committee on economic and social security, which was drafting the legislation, the previous November.
Social Security was a massive and fundamental change in government’s role in providing for the needy. Before the Depression, in the U.S., that task was left to private charity. As the late AFL-CIO President Lane Kirkland once told Congress, before Social Security, “the poorhouse” was the destination for the indigent elderly, and most elderly were poor. He asked lawmakers if they wanted to go back to that.
“We can never insure 100 percent of the population against 100 percent of the hazards and vicissitudes of life, but we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age,” FDR added when he signed the Social Security Act.
But he also warned the Social Security law, which also included jobless benefits, aid to the blind and disabled, and what was then Aid to Dependent Children, “represents a cornerstone in a structure which is being built but is by no means complete.”
FDR’s Labor Secretary, Frances Perkins – the first woman Cabinet member – chaired the advisory panel that drafted the legislation, and she campaigned for it. Even then, she said Social Security was part of retirement, with along pensions and savings.
“As I see it, we shall have to establish in this country substantially all the social-insurance measures which the Western European countries set up in the last generation,” Perkins said. “But they do not promise anything like complete economic security. More important than all social-insurance devices together is employment.”
In a throwback to the 1930s, organized labor now echoes Perkins then. AFL-CIO President Richard Trumka repeatedly points out Social Security’s alleged looming deficits disappear when people are put back to work and pay taxes into its trust fund.
As might be expected in the 1930s, business and the right wing vehemently denounced Social Security for its threat of government intervention. Some leftist voices – such as Upton Sinclair, Francis Townsend and Sen. Huey Long, D-La. – felt it didn’t go far enough. The left’s opposition has stopped. The right’s never has.
“Industry has every reason to be alarmed at the social, economic and financial implications,” GM President Alfred Sloan said then.
“Never has any measure been brought in here so insidiously designed to prevent business recovery, to enslave workers and to prevent the possibility of employers providing work,” added Rep. John Taber, R-N.Y.
They wanted to rely on charity or the private sector – which wasn’t there.
“As late as 1932, only about 15 percent of the labor force had any kind of potential employment-related pension,” a history of Social Security says. “Because pensions were often granted or withheld at the option of the employer, most of these workers would never see a retirement pension. Indeed, only about 5 percent of the elderly were in fact receiving retirement pensions in 1932.” Another 3 percent had state-guaranteed pensions. Almost nine of every 10 in that group lived in New York, California and Massachusetts.
But there were so few Republicans in Congress and the Depression so discredited their economics that though 95 of the 96 House Republicans and 12 of 19 GOP senators voted to kill the old-age section of the Social Security Act, it – and the entire legislation – sailed through. They were overwhelmed by the Democrats.
Roosevelt did make one key concession: He funded Social Security as a social insurance program, through payroll taxes – even though his more liberal advisors pointed out the tax would fall proportionately more heavily on the poor, as it still does.
FDR later conceded the liberals were right economically, but politically the payroll tax cemented Social Security in everyone’s minds. That’s because all contribute, he said – and all get “a moral, legal and political right to collect their pensions … With these taxes in there, no damn politician can ever scrap my Social Security program.”
There were other changes over the years: expansion of Social Security from just workers to their survivors and dependents, in 1939; the first-ever benefits increase, in 1950 – Congress periodically raised benefits from then until it instituted permanent cost-of-living increases in 1972; rising payroll tax rates; taxation of benefits in 1983.
In 2009, for the first time since cost-of-living adjustments began, inflation was so low there was no rise in benefits.
Labor stopped GOP President George W. Bush’s partial privatization scheme in 2005.
But before that, the combination of high unemployment and high inflation hit in the late 1970s and early 1980s. Moreover, looking down the road, the “baby boomers” were going to start retiring. Social Security’s reserves had to be rebuilt and bolstered.
In 1982-83, “Social Security was in crisis,” says retired Rep. Barbara Bailey Kennelly, D-Conn., then a member of the House Ways and Means Committee, which crafts Social Security legislation. “We didn’t know if the checks would go out the next several months. And the ‘baby boomers’ were coming.”
“So we had to increase payroll taxes to have people pre-fund their own retirement,” adds Kennelly, now head of the National Committee to Preserve Social Security and Medicare. A bipartisan commission, including Kirkland, crafted the legislative solution, which also included a gradual increase in the retirement age.
In 1940, the first year Social Security started paying monthly benefits, 222,488 elderly and dependents received a total of $35 million. In 1950, when the first-ever benefit hike kicked in, 3.48 million elderly received $961 million. In 2009, more than 51 million people received $659 billion in Social Security old age and survivor payments.
With numbers like that, the right wing has raised its voice again, repeating the old argument, first uttered in the 1935 debate, that payroll taxes would not bring in enough to fund Social Security. But now they have a platform to preach to: Democratic President Barack Obama’s commission charged with finding ways to reduce future federal deficits. It says “everything is on the table,” including Social Security benefits..
The system shouldn’t face benefit cuts, because it’s part of the deficit solution, not part of the problem, reply Trumka, Service Employees Executive Vice President Eliseo Medina and other defenders of Social Security. They noted the system has $2.6 trillion in reserves. What they did not say is that much of its money is tied up in IOUs from the rest of the government, thanks to deficits mostly accumulated under GOP rule.
“There was a crisis” in 1983, contends Ed Coyle of the Alliance for Retired Americans. “There is no crisis today.” But Obama’s budget projections show a deficit. His budget estimates for the five years starting this Oct. 1 show Social Security would take in $3.82 trillion over that time in payroll tax receipts, and pay out $4.03 trillion.
The Economic Policy Institute retorts, in a study released July 26, that the rest of the government must pay interest to Social Security on those IOUs it holds – and that pushes the system’s annual revenue strongly into the black. EPI calculates the Social Security surplus will rise to $4.3 trillion in 14 years. That keeps its benefits coming.
“We can’t allow anti-worker interests to destroy the one guarantee all Americans have to provide a basic and reliable income when we retire,” Medina concludes.