Social Insurance for U.S.
February 25, 1935 — radio address on the creation of the Social Security Act
I have been asked to speak to you tonight on the administration’s program for economic security which is now, as you know, before Congress. It seems to me that few legislative proposals have had as careful study, as thorough and conscientious deliberation as went into the preparation of these measures. The program now under consideration represents, I believe, a most significant step in our National development, a milestone in our progress toward the better-ordered society.
As I look back on the tragic years since 1929, it seems to me that we as a Nation, not unlike some individuals, have been able to pass through a bitter experience to emerge with a newfound insight and maturity. We have had the courage to face our problems and find a way out. The heedless optimism of the boom years is past. We now stand ready to build the future with sanity and wisdom.
The process of recovery is not a simple one. We cannot be satisfied merely with makeshift arrangements which will tide us over the present emergencies. We must devise plans that will not merely alleviate the ills of today, but will prevent, as far as it is humanly possible to do so, their recurrence in the future. The task of recovery is inseparable from the fundamental task of social reconstruction.
Among the objectives of that reconstruction, President Roosevelt in his message of June 8, 1934, to the Congress placed “the security of the men, women and children of the Nation first.” He went on to suggest the social insurances with which European countries have had a long and favorable experience as one means of providing safeguards against “misfortunes which cannot be wholly eliminated in this man-made world of ours.”
Subsequent to this message he created the Committee on Economic Security, of which I have the honor to be the chairman, to make recommendations to him with regard to these problems. The recommendations of that committee are embodied in the economic security bill, now pending in Congress. The measures we propose do not by any means provide a complete and permanent solution of our difficulties. If put into effect, however, they will provide a greater degree of security for the American citizen and his family than he has heretofore known. The bill is, I believe, a sound beginning on which we can build by degrees to our ultimate goal.
We cannot hope to accomplish all in one bold stroke. To begin too ambitiously in the program of social security might very well result in errors which would entirely discredit this very necessary type of legislation. It is not amiss to note here that social legislation in European countries, begun some 25 years ago, is still in a developmental state and has been subjected to numerous changes as experience and changing conditions dictated.
It may come as a surprise to many of us that we in this country should be so far behind Europe in providing our citizens with those safeguards which assure a decent standard of living in both good times and bad, but the reasons are not far to seek. We are much younger than our European neighbors. Our abundant pioneer days are not very far behind us. With unlimited opportunities, in those days, for the individual who wished to take advantage of them, dependency seemed a reflection on the individual himself, rather than the result of social or economic conditions. There seemed little need for any systematic organized plan, such as has now become necessary.
It has taken the rapid industrialization of the last few decades, with its mass-production methods, to teach us that a man might become a victim of circumstances far beyond his control, and finally it “took a depression to dramatize for us the appalling insecurity of the great mass of the population, and to stimulate interest in social insurance in the United States.” We have come to learn that the large majority of our citizens must have protection against the loss of income due to unemployment, old age, death of the breadwinners and disabling accident and illness, not only on humanitarian grounds, but in the interest of our National welfare. If we are to maintain a healthy economy and thriving production, we need to maintain the standard of living of the lower income groups in our population who constitute 90 per cent of our purchasing power.
England, with its earlier industrialization, learned this lesson earlier, as well. The world depression caught up with Great Britain sooner than it did with us. She has known the haunting fear of insecurity as well as we. The foresight of nearly three decades has, however, found her somewhat better prepared with the basic framework of a social insurance system. Social insurance in Great Britain has proceeded progressively since the first decade of the century. Championed by the liberal Lloyd George and beginning with the old age pension act of 1908, it has known many revisions and extensions. Since its inception, however, it has gradually overcome the opposition of its critics, and there has never been any thought of abandoning the system. It is today in a healthy state of growth.
Practically all the other industrial countries of Europe have had similar experiences. In the trial and error procedure of Europe’s quarter century of social legislation — in that concrete experience — is contained sound truths as well as mistakes from which we can learn much.
But we cannot build solely on European experience. We, with our particular kind of State-Federal Government, our wide, expansive country, with its varying economic and social standards, have many needs different from those of the more closely knit, homogeneous European countries.
The American program for economic security now before our Congress follows no single pattern. It is broader than social insurance, and does not attempt merely to copy a European model. Where other measures seemed more appropriate to our background or present situation, we have not hesitated to deviate from strict social insurance principles. In doing so we feel that we have recommended the measures which at this time seemed best calculated under our American conditions to protect individuals in the years immediately ahead from the hazards which might otherwise plunge them into destitution and dependency.
Our program deals with safeguards against unemployment, with old-age security, with maternal aid and aid to crippled and dependent children and public health services. Another major subject — health insurance — is dealt with briefly in the report of the Committee on Economic Security, but without any definite recommendations. Fortunate in having secured the cooperation of the medical and other professions directly concerned, the committee is working on a plan for health insurance which will be reported later in the year. Our present program calls for the extension of existing public health services to meet conditions accentuated by the depression. Similarly, the provisions for maternal aid and aid to dependent and crippled children are not new departures, but rather the extension and amplification of safeguards which for a number of years have been a recognized part of public responsibility.
Let me briefly describe the other measures now under consideration which do represent something of a departure from our usual course.
Recognizing unemployment as the greatest of all hazards, the committee gave primary emphasis to provisions for unemployment–employment assurance. This measure is embodied in the $4,800,000,000 public works resolution, which is separate from, but complementary to, the economic security bill itself. Employment assurance, the stimulation of private employment and the provision of public employment for those able-bodied workers whom private industry cannot yet absorb is to be solely a responsibility of the Federal Government and its major contribution in providing safeguards against unemployment. It should be noted that this is the largest employment program ever considered in any country. As outlined by the President, it will furnish employment for able-bodied men now on relief, and enable them to earn their support in a decent and socially useful way. It will uphold morale, as well as purchasing power, and directly provide jobs for many in private industry who would otherwise have none.
For the 80 per cent of our industrial workers who are employed, we propose a system of unemployment compensation, or insurance, as it is usually called. In our concern for the unemployed, we must not overlook this much larger group who also need protection.
No one who is now employed can feel secure while so many of his fellows anxiously seek work. Unemployment compensation, while it has distinct limitations which are not always clearly understood, is particularly valuable for the ordinarily regularly employed industrial worker who is laid off for short periods because of seasonal demands or other minor industrial disturbances. He can, during this period when he has a reasonable expectation of returning to work within a short time, receive compensation for his loss of income for a limited period as a definite, contractual right. His standard of living need not be undermined, he is not forced on relief nor must he accept other work unsuited to his skill and training.
Unemployment insurance, wherever it has been tried, has demonstrated its value in maintaining purchasing power and stabilizing business conditions. It is very valuable at the onset of a depression, and even in the later stages will serve to carry a part of the burden of providing for the unemployed. For those who have exhausted their rights to unemployment benefits and for those who, in any case, must be excluded from its provisions, we suggest that they be given employment opportunities on public work projects. In these two measures, employment assurance and unemployment compensation, we have a first and second line of defense which together should form a better safeguard than either standing alone.
The unemployment compensation system has been designed to remove an obstacle which has long prevented progressive industrial States from enacting unemployment insurance laws — fear of interstate competition with States not having such laws. Having removed that obstacle, the law allows the States full latitude to develop trie kind of unemployment compensation systems best suited to their individual needs.
The bill provides for a Federal tax on pay rolls against which credit is allowed the employer for contributions to an approved State unemployment compensation fund. By this Federal tax every employer will be placed on the same competitive basis from a National standpoint, and at the same time, aside from compliance with a few minimum Federal standards, every State will be free to adopt the kind of law it wants.
One of the most important of the Federal requirements is that all unemployment compensation funds shall be deposited with the Federal Treasury in Washington, so as to assure their availability when needed and make it possible to utilize the reserves which will accumulate in conformity with the credit policy of the Nation.
We feel that this is a most fortunate time for the Government to take action on unemployment insurance. There has been a rapidly growing enthusiasm for it in the States for years. Many States have already prepared excellent legislation of this kind or are studying the subject, and they are but waiting word from Washington, so that they may proceed with the plans which have been so long under consideration.
I come now to the other major phase of our program. The plan for providing against need and dependency in old age is divided into three separate and distinct parts. We advocate, first, free Federally-aided pensions for those now old and in need; second, a system of compulsory contributory old-age insurance for workers in the lower income brackets, and third, a voluntary system of low-cost annuities purchasable by those who do not come under the compulsory system.
Enlightened opinion has long since discarded the old poor-house method of caring for the indigent aged, and 28 States already have old-age pension laws. Due to financial difficulties, many of these laws are now far less effective than they were intended to be. Public sentiment in this country is strongly in favor of providing these old people with a decent and dignified subsistence in their declining years. Exploiting that very creditable sentiment, impossible, hare-brained schemes for providing for the aged have sprung into existence and attracted misguided supporters. But the administration is confident that its plan for meeting the situation is both humane and practical and will receive the enthusiastic support of the people.
We propose that the Federal Government shall come to the aid of the State pension systems already in existence and stimulate the enactment of similar legislation elsewhere by grants-in-aid equal to one-half the State expenditures for such purposes but not exceeding $15 per month. This does not necessarily mean that State pensions would not anywhere exceed $30 per month. Progressive States may find it possible to grant more than $15 per month as their share. The size of the pension would, of course, be proportionate to the need of the applicant and would quite likely vary with conditions in different States. A larger pension would, for example, be necessary in certain industrial States than in communities where living conditions are easier.
For those now young or even middle-aged, a system of compulsory old-age insurance will enable them to build up, with matching contributions from their employers, an annuity from which they can draw as a right upon reaching old age. These workers will be able to care for themselves in their old age, not merely on a subsistensce basis, which is all that gratuitous pensions have anywhere provided, but with a modest comfort and security. Such a system will greatly lessen the hazards of old age to the many workers who could not, unaided, provide for themselves and would greatly lessen the enormous burden of caring for the aged of future generations from public funds. The voluntary system of old-age annuities is designed to cover the same income groups as does the compulsory system, but will afford those who for many reasons cannot be included in a compulsory system an opportunity to provide for themselves.
Many of you will be interested to know that the two proposed annuity systems in no way infringe on the commercial annuity markets. Officials of insurance companies have themselves remarked that these measures would touch a strata of our population for whom commercial annuities are prohibitively expensive. These officials feel that the measures we propose will prove advantageous to their companies rather than the reverse, in so far as they promote public interest in the insurance movement.
This, in broad outlines, is the program now before us. We feel that it is a sound and reasonable plan and framed with due regard for the present state of economic recovery. I can do no better than to pass on to you the words with which President Roosevelt closed his letter submitting these recommendations to the Congress now in session:
“The establishment of sound means toward a greater future economic security of the American people is dictated by a prudent consideration of the hazards involved in our national life. No one can guarantee this country against the dangers of future depressions, but we can reduce these dangers. We can eliminate many of the factors that cause economic depressions, and we can provide the means of mitigating their results. This plan for economic security is at once a measure of prevention and a method of alleviation.
“We pay now for the dreadful consequence of economic insecurity — and dearly. This plan presents a more equitable and infinitely less expensive means of meeting these costs. We cannot afford to neglect the plain duty before us. I strongly recommend action to attain the objectives sought in this report.”
Source: Social Security History Online: www.socialsecurity.gov