As he barnstormed the nation last week aiming to sell Americans on the idea of private Social Security accounts, President Bush was rejoining a philosophical debate that was present at the system’s founding 70 years ago.
The United States was one of the last developed countries to establish a government-run retirement program, in part because of a strong national political bias against collective action and in favor of individual responsibility, historians say.
By most accounts, it took the massive losses of the 1929 stock market crash and the ravages of the subsequent Great Depression to overcome those biases and produce the Social Security Act of 1935. Even then, intense debates continued over the wisdom of operating a massive government support system for the aged.
“The Bush administration, by urging private accounts, draws upon a good deal of history,” said historian James Patterson, professor emeritus at Brown University.
Today Bush is asking the nation to revisit that Depression debate, suggesting that the government shift greater responsibility back to individuals in providing for their retirements.
It’s the kind of rugged individualist sentiment very much in evidence in the 1920s, when American financial prosperity reached a zenith and President Herbert Hoover declared the country was “in sight of the day when poverty will be banished in the nation.”
Germany had operated a social insurance system for 50 years, Great Britain for nearly 25. But in the United States, the idea that the federal government should be handing out assistance to people in need remained almost unimaginable. President Franklin D. Roosevelt himself came to office believing that welfare should be the province of local charities supplemented by states and local governments.
Then came 1929 and the stock market crash that, over the next three years, would wipe out nearly 90 percent of the market’s value.
With poverty spreading across the land – by some estimates touching half the population – calls for drastic federal action built quickly. Political movements like the Townsend Plan, which proposed a then-whopping $200-a-month subsidy for every non-working American age 60 and over, swept the country.
California was a hotbed of populist ideas for supporting the aged. Novelist Upton Sinclair organized a program called End Poverty in California, which proposed $50 monthly pensions for the aged in need.
Roosevelt got the message. In the summer of 1934 he appointed an advisory committee, headed by Labor Secretary Frances Perkins, to study proposals for strengthening Americans’ economic security.
Years later, Perkins would recall the harrowing conditions that confronted many Americans.
“The specter of unemployment, of starvation, of hunger, of the wandering boys, of the broken homes … stalked everywhere,” she said in a 1962 speech. “The unpaid rent, the eviction notices, the furniture and bedding on the sidewalk, the old lady weeping over it.
“The real roots of the Social Security Act were in the Great Depression of 1929,” said Perkins. “Nothing else would have bumped the American people into a Social Security system except something so shocking, so terrifying, as that depression.”
In January 1935, Perkins’ committee delivered its report, and Roosevelt offered its recommendations to Congress, calling for federal old-age insurance and a federal-state package of public assistance and unemployment programs.
On Aug. 14, 1935, the president signed the historic legislation, following its approval by overwhelming majorities in the House and the Senate. Quite quickly, it seemed, no one was happy with the results.
Townsend Plan supporters denounced it as far too insufficient to respond to the nation’s economic crisis. Many Republicans railed at it from the other side, with GOP presidential candidate Alf Landon calling Social Security a “cruel hoax.”
It would take most of five years’ worth of start-up problems and funding debates before the first monthly benefit check was written. The recipient was Vermont resident Ida M. Fuller, 65, and the initial check was for a mere $22.54.
That check symbolized Social Security’s modest beginnings – only about 20 percent of the nation was covered in the early years – but also its potential. Ida Fuller would live to be 100 and, despite the fact that she contributed only $24.75 to the system between 1937 and 1939, she ended up receiving more than $22,000 in benefits during her 35 years as a beneficiary.
With Congress adding survivor benefits (in 1939) and disability benefits (in 1956), Social Security was on its way toward becoming what former Social Security Commissioner Kenneth Apfel described as “the most successful, most popular domestic government program in the nation’s history.”