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This Day in Labor History: August 14, 1935

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On August 14, 1935, President Franklin Delano Roosevelt signed the Social Security Act, bringing the modern welfare state to the American people and providing the nation’s poor long-desired old age insurance.

FDR signing the Social Security Act.

The nation’s elderly had long lived with the potential of late-life poverty. The nation’s lack of a welfare state doomed the poor to rely on their families for survival, an impossibility for many. During the nation’s frequent economic downturns, this problem was worse. The continued decline in quality of life for the elderly during the Great Depression helped spur a more organized movement for old-age insurance. Many advocates fell in behind Francis Townsend. A California doctor, Townsend believed that if you put more money in the hands of the elderly, they would reinvigorate the economy with their spending. The Townsend plan proposed a sizable pension of $200 a month to any American over the age of 60 and was based upon the federal investment in pensions for Civil War soldiers, the first welfare program in American history. Townsend favored a sales tax rather than an income tax (proposed by Huey Long in his own old-age pension program) to pay for it. People would have to spend every cent of the $200 each month and quit working in order to receive it, which Townsend said would open jobs for the young and spur the economy through spending. By 1935, 28 states had passed old-age pensions of their own, although many of these provided no more than a dollar day, required a state residency of ten years, and limited eligibility to those over the age of 70.



Francis Townsend.

Within Roosevelt’s Cabinet, no one advocated more for old-age insurance than Secretary of Labor Frances Perkins. Organized labor had opposed Perkins’ appointment as Secretary of Labor for three reasons: she was the first Secretary of Labor that did not come from the labor movement, she was a woman, and she was a reformer rather than a unionist. The American Federation of Labor did not trust the federal government to run any kind of social welfare program. Believing both that the government was always the tool of capital and that welfare would undermine the independence of the American worker, the AFL under William Green would oppose much of the New Deal, even if its rank and file loved FDR. Perkins had long advocated for old-age insurance. Roosevelt initially opposed any long-term program, seeking instead a quick fix for the elderly through emergency relief. But by 1934, he had come around to Perkins’ view on the necessity of a permanent program. FDR named Perkins the head of the Committee on Economic Security, combining politicians and academics, to create what would become Social Security.

At the same time the CES met, Townsend’s plan became famous. 25 million Americans signed petitions in support of the plan and 1200 clubs formed, mostly by the elderly, to promote it. Policymakers were not amused. Perkins called it “a very large gift….much larger than the income which they enjoyed during their younger and working years” while others said the high sales taxes to fund it would hurt businesses. In addition, policymakers feared a federal plan. Even FDR told Perkins that he preferred the states having a great deal of control because “Just think what it would be like to have the power in the federal government if Huey Long should become President.”

The final plan did preserve state old-age welfare programs but put the majority of power within the federal government. Roosevelt insisted that the program be entirely self-supporting, not wanting a huge initial outlay to create massive debts for future generations. This meant much higher payroll tax rates, up to 6% of taxable payroll by 1949.

Today, we think of Social Security as something that is almost untouchable; despite Republican attempts to privatize the program, people really like it the way it is. That doesn’t mean it wasn’t controversial in 1935. Roosevelt was so popular among the people that Democrats steamrolled the Republicans in the 1934 midterm elections. The giant congressional majorities that followed is how the bill passed. Much of Congress disliked the bill, particularly the increased federal presence. Most of it offered little short-term political value. Only FDR’s overwhelming popularity prevented more open opposition. Still, on March 20, 1935, the Times ran a story titled, “Hopes Are Fading for the Social Security Bill” that predicted the only piece of the bill that would get through would be some assistance for the indigent over 65 years old. No one really knew what would happen to the bill once it reached the House floor. Some thought the Townsendites would overwhelm it and make it politically infeasible. Others believed right-wingers would demand lower tax rates and thus not fund it.

FDR used every trick in his book to push the bill through, making voting for it a matter of personal political loyalty to the most popular president in 20th century America at the peak of his powers. And the bill did pass overwhelming, by a 372-33 margin. Still, that took a lot of compromising from Roosevelt, who accepted a scaled back bill that only covered about 60% of workers, excluding federal employees, professionals like doctors and attorneys, domestic workers, agricultural workers, and the self-employed. The CES had strongly fought for including domestics and farmworkers and giving these up was the last compromise FDR made. Even then, the Senate nearly made the bill voluntary instead of compulsory after passing an amendment by Champ Clark that would have allowed for plans with more liberal provisions to opt out. The Clark Amendment got dumped in reconciliation. Finally, Roosevelt signed the Social Security Act until 1935.

Social Security proved immediately popular, even if AFL leaders grumbled. Despite the fact that union members loved Social Security, it was only the emergence of the CIO and the success the rival federation had in wrapping itself in progressive New Deal policy that moved AFL leaders to accept that Social Security might not destroy voluntarism. By 1938, the AFL joined the CIO in promoting expanded benefits. Republicans tried to make repealing it an issue in the 1936 elections. That didn’t work out so well for them. The plan was not implemented until the Supreme Court decided its constitutionality in Helvering v. Davis in 1937. Social Security meant something very real for the nation’s elderly. For instance, Roy Acuff had a hit off of his song about Social Security, “Old Age Pension Check:”

I relied on Edward Berkowitz, America’s Welfare State: From Roosevelt to Reagan and Dewitt, Beland and Berkowitz, Social Security: A Documentary History to write this post. Check those books out.

This is the 72nd post in this series. Other posts are archived here.

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  • c u n d gulag

    “On August 14, 1935, President Franklin Delano Roosevelt signed the Social Security Act, bringing the modern welfare state to the American people and providing the nation’s poor long-desired old age insurance

    .”

    Or, as the Republicans know it, ‘The first date which will live in infamy!”

  • Social Security’s website has a page devoted to Bismarck’s “invention” of state pensions for the old. See if you can catch the polemical intent:

    Bismarck was motivated to introduce social insurance in Germany both in order to promote the well-being of workers in order to keep the German economy operating at maximum efficiency, and to stave-off calls for more radical socialist alternatives. Despite his impeccable right-wing credentials, Bismarck would be called a socialist for introducing these programs, as would President Roosevelt 70 years later. In his own speech to the Reichstag during the 1881 debates, Bismarck would reply: “Call it socialism or whatever you like. It is the same to me.”

    • PSP

      Just recently, I read a epic rant (masquerading as a comment somewhere)about Democrats, “Bismarkian Social Democracy”, and the disappearance of American values. Good Humor.

  • daveNYC

    Seriously? The AFL was against social security because something something people wouldn’t donate to the Lions Club?

    • Capt. James Tiberius Kirk

      The fear was that whatever old-age pension SS set would become a ceiling, not a floor, and that OAP other than SS’s would either become illegal altogether or crowd out those negotiated by the unions.

      Some of the same fears can be found today in union circles, especially the skilled and crafts unions, WRT the PPACA.

      • The thing to remember about unions is that they are an ally of liberals, a member of the coalition, and a needed check on corporate power, but that’s different from saying everything they advocate serves the greater good.

        They are still organizations with a fiduciary duty to advocate the interests of their members, which means they have to favor the interests of their members against the interests of non-members. Nor would we want it any other way.

        • Those points aren’t really relevant though to the SSA debates. The AFL certainly looked out for its own members over non-members of the working class. But the issue at play was not some fiduciary duty thing, but rather a deeply held belief in the principle of workers negotiating their own benefits with employers, a process they could never trust the government to do.

      • Bruce Vail

        Quite right. International Brotherhood of Electrical Workers is one of the few craft unions that has gone public with this fear about the impact of PPACA.

    • What Erik says below. Keep in mind, moreover, that union pension funds in a labor market in which employer pension programs were confined to a few pioneers (see Sanford Jacoby’s Modern Manors for more) were a huge draw to recruit skilled workers into the AFL – which in turn was why the pioneers adopted them in order to keep the unions out.

      This isn’t unusual – trade union federations were initially hostile/suspicious of state social insurance in Germany, in France, in the U.K, etc.

      • Foregone Conclusion

        In the UK, there were worries about how social insurance premiums would reduce the worker’s take-home pay. The Liberal government introduced compulsory National Insurance and voluntary labour exchanges; the Fabians wanted it the other way round.

  • Hogan

    Fine post in a fine series.

    The Clark Amendment got dumped in reconciliation.

    ITYM conference.

  • The Dark Avenger

    The Townsend plan proposed a sizable pension of $200 a month to any American over the age of 60 and was based upon the federal investment in pensions for Civil War soldiers, the first welfare program in American history.

    Nope.

    The first pension law based on service(in the Revolutionary War-ed) was passed in 1818, but it was later amended to make eligible only those soldiers unable to earn a living. The pension act of 1832 allowed pensions again based on service and made widows of veterans also eligible to receive pension benefits.

  • Scott Lemieux

    The American Federation of Labor did not trust the federal government to run any kind of social welfare program. Believing both that the government was always the tool of capital and that welfare would undermine the independence of the American worker, the AFL under William Green would oppose much of the New Deal, even if its rank and file loved FDR.

    See, that’s the kind of Real Leftist we needed more of during the Obama administration. Why take such pathetic half-measures when if FDR had wanted to he could have rammed an extensive, federally administered, racially egalitarian New Deal right down Theodore Bilbo’s throat?

    • A Bilbo quote from his Wikipedia article indicates, mutatis mutandis, the present GOP attitude towards black voters:

      I believe Negroes should have the right [to indiscriminate use of the ballot], and in Mississippi too — when their main purpose is not to put me out of office and when they won’t try to besmirch the reputation of my state.

      Blacks are welcome to vote, provided they vote correctly!

  • cpinva

    that the idea of putting extra cash, into the hands of the people most likely to spend all of it, thereby increasing demand, revenue, employment, etc., simply flies right over the heads of nearly every “conservative” on the planet, never fails to astonish me.

  • Vance Maverick

    Bespectacled, strangely-lit Gramps with the pipestem clenched in his gums is a bit creepy by present-day standards of avuncularity in advertising, but obviously he made the sale.

    • Hogan

      What a big chin you have, Grampa.

  • A few quibbles:

    1. I think the Townsend movement gets way too much credit for Social Security. While it’s true that it developed a substantial body of members, I’ve also seen public opinion data from the time showing very strong opposition to the proposal from those outside the movement who objected to a non-contributory pension of $200 a month ($3,400 a month in 2012 dollars, about 3x the current average Social Security benefit).

    2. “Perkins had long advocated for old-age insurance.” This is an understatement. Perkins made both old-age insurance and unemployment insurance a red-line requirement of taking the job of Secretary of Labor in the first place. I would argue that the New Deal’s embrace of Social Security has to be seen as an outgrowth of Progressive-era commitments to social insurance finally coming to fruition, as opposed to motivated by outward events.

    3. Historians also need to decrease our sole focus on social insurance vs. welfare within the CES (this is actually the chapter of my disst. I’m finishing revisions on as we speak). There was a lot more going on within the CES, from universal health insurance to direct job creation programs.

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