Social Security: An Intergenerational Compact

The year 1985 brings the fiftieth anniversary of the enactment of the Social Security Act, which President Franklin Roosevelt signed into law on August 14, 1935. This omnibus legislation has resulted in major changes in the economic, social, and political life of the nation. If any piece of social legislation can be called historic or revolutionary, the Social Security Act is entitled to that mantle. 

Under President Roosevelt’s leadership the Act broke with the past in vastly expanding public responsibility for dealing with the problems of old age, unemployment, disability, and childhood dependency. Yet it carried this policy out in a way that built upon well-accepted institutional practices: it utilized the widely understood pooling-of-the-risk concept prevalent in private insurance (in connection with old age and unemployment compensation) and federal-state cooperation (in connection with unemployment insurance, welfare, rehabilitation, public health, child health, and social services). 

As a social compact between generations of Americans and the U.S. government, the Social Security Act established the nationwide foundation of the “safety net” and was the basis for expanded protection against poverty. When he signed the Social Security Act, President Roosevelt explained his basic incremental approach; he said that the Act “represents a cornerstone in a structure which is being built but is by no means complete.” The building of the program has been a continuing process which Roosevelt expected to go on until the program provided protection against all the major hazards of life “from the cradle to the grave.” 

Despite criticisms, costs, and controversy, the Social Security system remains basically intact today in almost every major aspect and has been significantly broadened from its 1935 beginning. Old Age, Survivors and Disability Insurance (OASDI) is what most people think of as “Social Security,” and it is the largest program in the act. But also included in the act’s various “titles” are Medicare, the federal-state system of unemployment insurance, and several other benefits and service programs that together comprise the safety net — the Supplemental Security Income program, Medicaid, maternal and child health, programs for crippled children, child welfare, aid to families with dependent children, and the block grant social services program (Title XX). 

OASDI has helped millions of Americans to enjoy a better life. It was a major issue in the 1984 presidential campaign, with both candidates pledging not to reduce benefits provided by present law for both current beneficiaries and those earning protection for the future. But there is still a great deal of public confusion, concern, and even anxiety over Social Security’s future. The system faced a fiscal crisis beginning in the mid-1970s not resolved until a bipartisan compromise was enacted in 1983. 

Over a period of some 40 years before this compromise, a number of proposals had been advocated to completely revamp the system’s basic structure and financing. These proposals had come from the left and the right. They had come from economists of all shades of opinion and from politicians, primarily conservatives, of both political parties. They had come from some senior citizen groups, from newspaper and magazine columnists, and from others who had simplistic solutions for “reforming” or “restructuring” the system and who did not value the contributory, earnings-related elements in the program. 

The 1983 bipartisan compromise contained something nearly everyone could complain about, and something nearly everyone could endorse. It was the achievement of a national commission drawn from the ranks of labor, management, the insurance industry, and the private sector, as well as members of Congress. The commission was deadlocked for most of its 12 months’ existence, and came to agreement only after acrimonious debate. Significantly, though, its members agreed unanimously that no “fundamental” change should be made in the structure of the Social Security system. 

The commission rejected proposals — made by Barry Goldwater and later by Ronald Reagan when they were candidates for the presidency — to make the system “voluntary”; it rejected proposals to allow individuals to invest their Social Security contributions in Individual Retirement Accounts or other investments. The commission stated that it opposed transforming Social Security into a “program under which benefits are a product exclusively of contributions paid, or to convert it into a fully funded program, or to change it to a program under which benefits are conditioned on the showing of financial need.” 

Social Security is a controversial and dynamic institution, and the 1983 amendments are not the final word on it. In my opinion: 

• The provision in the 1983 law that calls for gradually increasing the retirement age from 65 to 67 beginning in the year 2003 will probably be the subject of further debate. It was adopted by a very close vote in the House. Organizations representing senior citizen groups, unions, welfare agencies, and similar groups are discussing plans for a vigorous campaign during the next 15 years to amend or repeal this provision. 

• The Social Security system still discriminates against women. The 1983 law did eliminate four “gender disqualifications” in the system — largely because two women on the commission (Martha Keys and Mary Falvey Fuller) were able to persuade the men of the validity of these eliminations, even though they increased expenditures. But these four changes affect very few people. Women continue to get the lowest Social Security benefits because of lifetimes of low wages, benefit calculations which average zeros into earnings records for years spent in homemaking, provisions which treat divorced and widowed women inadequately, and benefit reductions for early retirement. One remedy that was widely discussed but not adopted is “income-sharing” for couples. To illustrate: if one member of a couple earns $20,000 a year and the other, $10,000 a year, each person would be deemed for Social Security benefit purposes to have $15,000 credited for that year. 

• Some amendments adopted by Congress in 1981 should be repealed. Congress eliminated the minimum benefit of $122 a month, the payment to college students previously entitled to survivors’ benefits, and the burial benefit in cases where there is no surviving spouse or eligible children. These cuts hurt primarily low-income people and those not eligible for other benefits. 

The enactment of Social Security in 1935 — and the important expansions in 1939, 1950, 1956, and 1965 — were all based upon a widespread acceptance and endorsement of government responsibility for a safety net underpinning a democratic political system and a free-market-enterprise economy. The opposition to the Vietnam War, the disillusionment due to Watergate, and other unexpected political and economic developments have led to a decline of confidence in both government and Social Security. 

The general decline of confidence in government occurred simultaneously with the rising cost of Social Security, increased inflation and unemployment, and dissatisfaction with the general tax system. While it would be too much to hope that the 1983 Social Security legislation will restore confidence in all of government, it is possible to hope that it might restore a wider degree of confidence in Social Security. A vigorous education program will be required, however, enlisting both the public and private sectors to explain the program as a constructive and fair institution. 

Social Security should be viewed in a broad context — not merely as a mechanism to give individuals greater freedom when they experience one of the “major vicissitudes of life,” but as a way of assuring the dignity and independence of the individual, the integrity of the family, and the stability and purchasing power of the community. 

We can make this fiftieth anniversary a celebration of the enduring nature of Social Security and the hundreds of millions of Americans who have benefited from it. Let 1985 be not only a reaffirmation of our belief in the program but also a year when we will fight to put back benefits that politicians have taken from us in the last four years.