Sunday, May 8, 2011

President #1: Franklin D. Roosevelt (1933-1945)

What were the main reasons for pursuing a program of old-age insurance? What were some of the challenges associated with establishing a broad social welfare program?

I was concerned at the time about ensuring the security of the men, women, and children of the Nation against the many hazards and vicissitudes of modern life.[1] Old age was one of the most tragic of all hazards. There is of course, no tragedy in growing old, but there was tragedy in growing old without means of support.[2] As the Nation developed, the forces of industry meant that man’s individual strength and wits were no longer enough, not only for the worker at shop bench, but also for the merchant or manufacturer. Where men had once turned to their friends and their neighbors for help and advice, they now turned to Government.[3]

As Governor of New York, I had proposed the Old-Age Pension Act, one of the most generous pension programs in the country at the time. However, in approving the bill, I noted that the full solution to the problem would be possible only if based on insurance principles, as it would require too much money to provide even a moderate pension for all workers.[4] Accordingly, I proposed a comprehensive program of security for our old people that adopted three principles:

·         Providing non-contributory, old-age pensions for those who were too old or too poor to build up their own insurance
·         Compulsory annual contributions from workers to establish a self-supporting system for future generations
·         Voluntary contributory annuities ensuring that individual initiative could increase annual amounts received in old age.[5]

In furthering the security of older citizens through social insurance, I sought to create a program featuring a maximum of cooperation between States and the Federal Government. I proposed that States meet a portion of the cost management function, leaving to the Federal Government the responsibility of investing and maintaining the reserve funds.[6] I also sought to leave ample scope for the exercise of private initiative, hoping that private investment would relieve the Government of much of the burden it initially assumed.[7]

The Social Security Act proved its essential soundness within a few years of enactment, affording some degree of protection to millions of workers and their families. But as I had said to Congress, it was important not to attempt to apply it on too ambitious a scale before actual experience provided some guidance. Social Security was a development toward a goal rather than a finished product, a base upon which our citizens could build individual security through individual efforts.[8] And it was social legislation that I expected to be improved and strengthened over time.[9]

Accordingly, I proposed some amendments to the Act a few years after its creation. The size of benefits paid to retirees was increased, and a reasonable relationship between wage loss sustained and benefits received was retained. Insurance benefits were extended to cover workers in more occupations. We also provided assistance to the needy aged, blind, and dependent children of the Nation.[10]  It should be noted that Social Security was not intended to offer anyone an easy life. The money paid merely furnished a minimum necessity; the kind of protection Americans wanted from their Government.[11]

The increase in the average length of life and the improvement in the average levels of health and wellbeing that came about at the beginning of the century gave our country great reasons for satisfaction. Yet these improvements were cold comfort to the millions of people whose security was as limited as was that of the Nation as a whole fifty years ago.[12] Through the Social Security Act, we created a sound means to provide security against several of the great disturbing factors in life, especially those which related to old age.

Editor's Note

The Great Depression created and exacerbated a variety of social and economic challenges that required immediate and effective government action. The 1930s saw poverty among the elderly grow dramatically; one estimate suggested that over half of all old-age Americans lacked a sufficient income to be self-supporting.[13] Responding to this crisis, a variety of states had enacted old-age pension programs in the early 1930s. However, most of these programs were generally inadequate, providing only 3% of the elderly with benefits that averaged less than 70 cents a day.[14]

There were several reasons for the poor performance of these pension systems, including restrictive eligibility criteria, inadequate implementation of state programs, and a lack of funding. Interestingly, there was a perception among many senior citizens that these pension programs represented “going on welfare,” which might explain low participation rates.[15] Reflecting this poverty and the general lack of appropriate government solutions, several groups calling for radical overhauls of the American system rose to prominence.

In 1933, Francis Townsend, an unemployed doctor from California, devised the Townsend Plan, which stipulated that the government provide a monthly pension to all American citizens aged 60 and older, funded by a national sales tax. The plan, and the subsequent formation of “Townsend Clubs” with total membership of over 2 million people, remained popular several years after the passage of the Social Security Act. More radical alternatives such as the “Ham and Eggs” pension scheme and the “Technocracy” movement illustrated the huge public appetite for expansive government action.[16]

It was in this context that President Roosevelt launched the Social Security program. Demonstrating substantial capacity for policy innovation, Roosevelt introduced the idea of “economic security” to change the debate from a focus on welfare assistance through pensions to a discussion of “social insurance”. By framing the issue in terms of a security risk to society that needed to be mitigated, Roosevelt was able to portray Social Security as being necessitated by broader societal objectives rather than being a method to promote the interests and welfare of individual participants.

The President also repeatedly indicated his firm belief in the need to expand coverage to more citizens and to increase the level of benefits being distributed, responding directly to the problem of persistent poverty and economic hardship among America’s seniors. However, suggestions that Roosevelt was unable or unwilling to consider the potential for significant cost escalation are somewhat unfounded, as the President called for a modest program that made incremental adjustments over time. Further, the scheme for Social Security payments, where taxes on present day workers were used to pay benefits to present day retirees, was broadly accepted as being economically sound given the labor force demographics of the time.[17] The creation of Social Security can thus be said to have occurred against a backdrop of widespread public and political support and with a focus primarily on the expansion of coverage to impoverished elders.

[1] Message to Congress on Social Security, January 17, 1935.
[2] Fireside Chat, June 28, 1934.
[3] A Social Security Program Must Include All Those Who Need Its Protection, Radio Address on the Third Anniversary of the Social Security Act, 1938.
[4] Address to Advisory Council of the Committee on Economic Security on the Problems of Economic and Social Security, November 14, 1934.
[5] Message to Congress on Social Security, January 17, 1935.
[6] Message to Congress Reviewing the Broad Objectives and Accomplishments of the Administration, June 8, 1934
[7] Note: The notion of voluntary private investment originated from President Hoover’s commitment to “Volunteerism.” President Hoover’s famed international relief efforts helped feed millions of starving people and relied on voluntary partnerships between government and business. This success shaped much of his response to the Great Depression, which advocated voluntary efforts and limited federal engagement. President Roosevelt likely sought to retain a rhetorical commitment to private efforts while recognizing the limitations of a solely volunteerism-based approach.  
[8] A Message Transmitting to the Congress A Report of the Social Security Board Recommending Certain Improvements in the Law, January 16, 1939.
[9] Presidential Statement on Signing Some Amendments to the Social Security Act, August 11, 1939.
[10] Ibid.
[11] A Social Security Program Must Include All Those Who Need Its Protection, Radio Address on the Third Anniversary of the Social Security Act, 1938.
[12] Message to Congress on the National Health Program - January 23, 1939.
[13] Historical Background and Development of Social Security. Social Security Administration, U.S. Government, 2011.
[14] Ibid. pg. 7.
[15] See, for example, Berkowitz, Edward. Social Security After Fifty. Greenwood Press, 1986.
[16] Historical Background and Development of Social Security. Social Security Administration, U.S. Government, 2011.
[17] See, for example, Committee on Economic Security Report to Congress, 1934. 


  1. Questions for Readers:

    1) The concept of "social insurance" is an unmistakable part of American political discussions today, but was largely missing prior to the Roosevelt presidency. How has this focus on providing a basic safety net altered the dynamics of the American political landscape?

    2) Could President Roosevelt have incorporated a stronger private or voluntary component to Social Security? Were there opportunities for public-private partnerships that were not taken advantage of?

    3) Should President Roosevelt be held responsible for the shortcomings of social welfare programs today? Why or why not?

  2. A very solid assessment of this, and a generally accurate presentation of FDR's views. It might be interesting to have FDR himself comment on the Townsend plan (or Huey Long's Share the Wealth proposal - FDR viewed Long as a potentially serious political rival for the '36 nomination). Also useful would be a discussion of FDR's general willingness to let Americans' believe that their eventual SS benefits were their own contributions being returned to them. This leads into a more detailed discussion of the critical 1939 amendments which change a number of key features of the program: in addition to earlier payout of benefits, it makes the system entirely pay-as-you-go...the survivors' benefits that are added also placed the male head of household at the core of the program. Finally, a significant omission here is the lack of discussion of the act's exclusion of domestic and agricultural workers from coverage, which left a high percentage of African Americans outside the system.

  3. One other thing to note on the possible inclusion of a private component in the original bill: the stock market and the wider financial industry were so discredited at the time that this would have attracted little support and quite possibly generated opposition.