Sunday, May 8, 2011

President #6: Richard M. Nixon (1969-1974)


What were the major challenges facing Social Security? How were these challenges addressed in an equitable and efficient manner?

The reform of America’s welfare system was one of my highest priorities since the beginning of my presidency. Our welfare reform system was a hopeless failure that penalized those who worked, failed to control costs and coverage, and lacked incentives to encourage able-bodied individuals to go to work.[1] I therefore proposed a new, unified federal administrative structure for dealing more effectively with programs for the needy aged, blind, and disabled. These programs were largely administered inconsistently by states. I also established an Advisory Council on Social Security with the Secretary of Health, Education, and Welfare in 1969 to identify workable recommendations.[2]

I further proposed that Congress enact a single increase of Social Security benefits by 10% to counter the harmful effects of inflation, while making permanent an automatic future cost of living adjustment. This would ensure that once and for all, the retired, the disabled, and the dependent never again bear the brunt of inflation.[3] People receiving benefits from Social Security were among the hardest hit by the persistent inflation in prices and costs of living during this time. The reform enacted created certainty that the purchasing power of future benefit checks would not be eroded. I also increased benefits for widows and widowers, and liberalized the retirement work-income test.[4]

The landmark H.R. 1 legislation, containing a series of Social Security Amendments, was passed in 1972 and established a new, uniform system of well-earned benefits. The final bill increased benefits for 3.8 million retirees, while extending Medicare to cover over 1.5 million Social Security disability beneficiaries. Importantly, we established a new Professional Standards Review Organization, which was responsible for reviewing the medical necessity, appropriateness, and quality of services offered under Medicare.[5]

In 1974, I again increased Social Security benefits for nearly 30 million Americans, and brought increased benefits to nearly 4 million blind, aged, and disabled persons. Total Social Security benefits rose by 68.5% from when I entered the presidency to when I left. The newly created Supplemental Security Income program provided a minimum retirement benefit and increased benefits provided to those choosing to retire later than the age of 65.[6]

Editor’s Note

The 1970s were a tumultuous period for Social Security. The cost of living adjustments made in 1972 increased benefits substantially. Additionally, following a sharp downturn in the economic climate, marked by both high unemployment and high inflation, Congress passed a series of additional ad hoc benefit increases. Ironically, because inflation was now tied to Social Security, the growth in benefits occurred at rapid rates and began to reduce the value of the Social Security Trust Fund.[7] Additionally, changing labor force demographics and a decline in fertility rates meant that by 1977, the future solvency of Social Security was seriously jeopardized.

In light of the existing economic circumstances, the efforts of the Nixon Administration to reform Social Security appear to be short-sighted, but must be viewed in context. By the 1970s, public demand for increased benefits was very high, and the idea of raising taxes to finance this increase while so many workers were struggling was politically impossible. Further, both parties were largely supportive of increasing benefits. Still, the reforms of 1972 and 1974 created as many problems as they solved.

However, an area of some success involved the creation of Supplemental Security Income (SSI), which essentially combined many similar programs providing benefits to the needy into one, federally operated program, administered by the Social Security Administration. This move was not without controversy, as opponents accused the new SSI of imposing much stricter standards as a mechanism for reducing benefits.[8]     

Nixon’s reforms and President Ford’s subsequent fixes – an error known as the notch actually caused benefits to rise faster than the rate of inflation – contributed surprisingly little to a growing sense of disillusionment with the American welfare system. Indeed, despite massive increases in costs, the increases in benefits paid meant that Social Security remained incredibly popular. Again, Nixon, like many others, shied away from tangible efficiency improvements or benefit reductions, choosing instead to establish another committee.


[1] Statement About Approval of the Welfare Reform and Social Security Bill by the House Ways and Means Committee, May 18, 1971.
[2] Special Message to the Congress on Social Security, September 25, 1969.
[3] Ibid.
[4] Statement About Passage by the House of the Social Security Amendments of 1970, May 22, 1970
[5] Statement on Signing the Social Security Amendments of 1972, October 30, 1972.
[6] Ibid.
[7] Social Security History: 1970s, Social Security Administration, U.S. Government, 2011.
[8] Ibid.

2 comments:

  1. 1) Could Nixon have fared better on Social Security if he had not pursued permanent COLA adjustments?

    2) Does the Nixon era expansion of benefits indicate a divergence between the rhetoric of cost cutting and the reality of benefit expansion?

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  2. Not a lot to add here - this is very well handled. I think the emphasis on the COLA increases, and the tensions caused by the weakening economy are very important. One other thing to add might be Nixon's proposal for a Guaranteed Annual Income as a replacement for the AFDC system. This is a fascinating episode that, at least indirectly, leads to the creation of the Earned Income Tax Credit.

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