Social Security: How Security Became Social

More than half the American population has never known a time when the problem of economic security after retirement was not considered a responsibility of government. As a result, anyone who proposes, as Donald A.

Feder does in the article which accompanies this one, that we abandon the Social Security system altogether is greeted somewhat more than half the time by an astounded silence, followed by such questions as, “But how would older people live if there were no Social Security?” and “Do you think people should just go off and die when they’re no longer able to work?”

Yet we have not always had Social Security. In fact, we have had it for less than 50 years. Before August 14, 1935, when President Franklin Roosevelt signed the original Social Security Act into law, most elderly Americans either supported themselves by continuing to work or moved in with children or younger relatives. A few others lived on savings they had accumulated during their working years, or collected pensions they had earned by spending their careers in government service or in the service of one of the few private corporations then offering employee pension plans. In 1929, only 7 percent of our senior citizens were dependent upon public or private charity for their subsistence.

Then, in October of that year, the inflationary bubble the U.S. government had been pumping up for more than a decade burst. The reckless monetary policies which Uncle Sam had pursued throughout the 1920’s had plunged America into the ten-year slump we now know as the Great Depression. The sons and daughters and younger relatives who had been supporting nearly half of the elderly now saw their own jobs and savings disappear and found themselves no longer able to carry the extra burden of a permanent houseguest. And demand began to build for new government interventions to undo the damage done by previous government interventions.

The man who galvanized this demand, gave it a voice and a program, and more than any other single individual paved the way for the Social Security Act of 1935 was a Long Beach, California physician, himself out of work, out of money, and seriously ill, named Dr. Francis E. Townsend. As Bank of America research economist John Oliver Wilson tells the story in his new book After Affluence (Harper & Row, 244 pp., $9.95), Dr. Townsend first burst into public prominence on September 30, 1933, when the Long Beach Press-Telegram published an item by him under the headline “Cure for Depressions.” Dr. Townsend, Wilson writes, offered a radically new idea—the promise of a $200-a-month pension for each individual over sixty years of age. At a time when an estimated 87 percent of American families were receiving less than $2,500 annually, a $4,800 annual pension for a retired couple was radical indeed.

…It was simple [as well], offering an easily understood solution to economic problems that seemed complex and overwhelming. Dr. Townsend argues that the expenditure of billions of dollars by the elderly would immediately lead to an expansion of the economy, the creation of new jobs, and the end of the Depression.…The only conditions for receiving a pension under the plan were that the recipient retire at age sixty or over, have no criminal record, and agree to spend the money within the month received.

The Townsend Plan, Wilson writes, “immediately attracted great attention. Within a few weeks, the Press-Telegram was publishing full pages of letters debating Townsend’s proposals. New adherents invaded Townsend’s home in Long Beach wanting to know more about his proposals to achieve economic security for the elderly and to end the Depression. Petitions were circulated calling for enactment of the ideas into law.” And the following January, Dr. Townsend set himself up as a full-fledged organization, Old Age Revolving Pensions, Ltd. (OARP). By the end of 1934, OARP had established more than 1,000 Townsend Clubs in towns and cities all over the country, and had raised $84,000 in contributions. A month later, in January of 1935, Time magazine reported that the number ofclubs was up to 25,000, that membership was rumored to be as high as 4 million, and that, as Wilson puts, it, “[m]illions of dollars were thought to be flowing into the Townsend organization coffers.” Later that year, OARP held its first national convention, launched its own weekly newspaper, and spun off a Townsend Foundation which encouraged the elderly to give the organization not only their money, but also any property and stock they might have lying around. By mid-1935, as Wilson writes, “the movement could not be ignored.”

It could, however, be dismissed and publicly lampooned. Roosevelt administration officials, Wilson writes, “heaped scorn upon the ideas” at first, “calling the [Townsend] plan ‘a fantastic dole,’ a ‘cock-eyed’ proposal, and ‘not within the structure of our present economic or governmental system. Economists testified that the plan was utopian in its aspirations, that costs went far beyond the ability of the economy to sustain them, and that the economic basis of the plan was grossly in error.” Moreover, “No congressional leaders came forward to strongly support the plan. No leadership from labor or academics or business rallied to the cause.”

And on top of the disbelief and indifference the Townsendites encountered at the hands of officialdom, there was the derision and ridicule they had to endure at the hands of various popular writers. One of the best examples of this latter phenomenon is the portrait of OARP which the Tucson, Arizona newspaperman and novelist Charles G. Finney included in The Unholy City, a satiric fantasy published by the Vanguard Press in 1937. The main character in Finney’s tale is one Butch Malahide, a resident of Abalone, Arizona who is on a flight around the world when his plane develops engine trouble and crashes, leaving him unharmed but stranded on the outskirts of the gigantic, ultra-modern city of Heilar-wey. Almost immediately he meets and begins travelling toward the city with a strange, loquacious man named Vicq Ruiz, who persuades Malahide after their arrival in the central business district to join him for an evening of entertainment in the company of a couple of female friends. The two men hail a cab and set out to pick up the women, but after travelling some distance through the congested streets, their taxi comes to a sudden screeching halt.

We cranked down the draftless, visionless, nonfrangible window and peered out in an endeavor to ascertain the cause of our halt. Up ahead...jamming the street from curb to curb...was a huge procession, the members of which carried banners and chanted songs and howled defiance. And, looking at the procession, a profound and nameless desolation came over me, for I perceived that the procession was composed of very old people, some of them barely able to hobble, and in their eyes I could detect a burning bitter spark of madness.

I asked Vicq Ruiz who in the world were all those countless thousands of demented ancients.

“Sir,” says Ruiz, “what you behold and wonder at is the Union of Old Folks. Now, I will give you one guess as to why they formed their organization.”

“Money,” I hazarded wildly.

“Sir,” says Ruiz, “you are entirely too acute this evening...Yes, you guessed right. Those old people have bended together to get money. They want pensions,...they have banded together to get them through the gross weight of their numbers; they hold meetings constantly; they write to newspapers; they threaten politicians; they contribute their hoarded mites in hope of reaping mountains; they sign millions of petitions; they never rest any more. See them there, sir, tottering on the threshold of death as they wander the streets in a mob; hear them forlornly chanting their last pathetic cry: ‘Give us money! Oh, give us money!’ Gott! They have even evolved a philosophy.”

“A philosophy, Mister Ruiz?”

“Yes, sir, a philosophy. They claim that by spending the pensions as fast as they get them, all we younger people will have to work our necks off to supply their demands. Such an orgy of work on our part will produce untold wealth for the city and keep us from the evils of unemployment. We give them money to buy the fruit of our labor; they spend recklessly and joyously to keep our noses to the wheel.”

“That’s bad,” I said. “What’s being done about these Old Folks?”

“Well, sir, this same young politician I told you about a while back has evolved a plan for taking care of them. He calls it the Rausmitemall Plan; it contemplates arresting every one of them and deporting them. A lot of people have spoken very favorably of the Rausmitemall Plan, sir. They will tell you it is the only solution for the problem of the Old Folks and that the young politician who thought it up should be rewarded with the Premiership.

“Well, but do the people of Heilar-wey favor the Rausmitemall Plan?” I asked.

“Oh, they do, indeed,” says Ruiz. “One of the big weekly magazines conducted a poll several months ago to seek an answer to that very question, and, when the ballots were counted, it was discovered that whereas only seven million people were against the Plan, there were twenty-three million for it. And the magazine, in breaking down the vote, showed conclusively that the seven million opposed was made up entirely of the Union of Old Folks plus their very near relatives.”

Similarly, in 1935, the year the Social Security Act became law, only 35 percent of the American people were said to favor such legislation. But OARP was louder and more determined that its opposition, and it was indefatigable in its efforts. And unlike the Union of Old Folks, it didn’t have an up-and-coming young politician with a popular Rausmitemall Plan to contend with. Instead, OARP had an important political ally ready to help it buck popular opinion. That ally was none other than the President, Franklin D. Roosevelt.

FDR believed strongly in the concept of government old age pensions for everyone who retires. “I see no reason,” he once said, “why every child, from the day he is born, shouldn’t be a member of the social security system...from the cradle to the grave they ought to be in a social insurance system.” More important, he believed that the Townsend movement would soon build a popular majority and emerge victorious unless government moved quickly to short-circuit its appeal by offering an alternative pension program. “We have to have it,” John Oliver Wilson quotes the President as saying early in 1934, “...[t]he Congress can’t stand the pressure of the Townsend Plan unless we have a real old-age insurance system, nor can I face the country without having devised at this time a solid plan which will give some assurance to old people of systematic assistance upon retirement.” What he came up with didn’t entirely defuse the Townsend movement, which lingered on for several more years before fading away. More important, Roosevelt’s Social Security program didn’t really give any “assurance to old people of systematic assistance upon retirement.” Or, rather, it gave such assurance only as long as the average chain letter or pyramid scheme—that is, as long as the supply of inpaying younger hosts greatly exceeded the demands of the older parasites. And now, with the day when the parasites will outnumber the hosts only a decade or so away, the only assurance Social Security offers anyone is an assurance of bankruptcy and default.

Jeff Riggenbach is executive editor of LR.