Social Security at Seventy-Five

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Edward D. Berkowitz is Professor of History and Public Policy and Public Administration at George Washington University. He gave the keynote address at the Social Security Administration's seventy-fifth anniversary celebration at its headquarters in Baltimore.

Many people concede Social Security’s glorious past but worry about its future.  They see the Social Security program, which is celebrating its seventy-fifth anniversary, as a potential problem rather than prime example of what the government has done right.  They say it is a simple matter of numbers—too many benefits promised to too many people by too few workers.

Such a view willfully ignores the program’s history of overcoming challenges and overlooks the fact that, even under the direst scenarios, the program still would collect enough money to pay benefits that are higher in current dollars than today’s benefits and be able to do so indefinitely into the future.

Each month some 52.7 million people—about one in every six U.S. residents—receive Social Security benefits.  That figure understates the number of people who are affected by the program, such as children who worry less about their parents and grandparents because these elders get Social Security.  More than any social program that the federal government has ever undertaken, Social Security, directly or indirectly, involves all of us.

Benefits go out every month without a hint of political scandal.  They take the form of money, not prescriptive advice or limited vouchers. We have come a long way from the situation facing older people in many states in 1935.

In 1935, 450,000 people over the age of sixty-five lived in Ohio, and more than 100,000 of them applied to the state for aid.  Each application received intensive scrutiny from county boards who hired special investigators.  If the county board approved the application, it still had to go to state authorities who employed their own investigators to make sure that the applicant met the terms of the law.  The terms were strict.  One had to be at least sixty-five and have lived in the state of Ohio for at least fifteen years and for at least one year in the county that awarded the pension.  A person needed to prove that his income was less than $3,000 a year and that the net value of his real estate did not exceed $4,000.  The pensions paid $50 a month to a married couple, but the grant was considered a loan to the elderly that was secured by a lien against their estate.  There was no right of appeal.

Social Security ended that system.

The agency that ran the program overcame many administrative problems.  In the beginning, for example, people dismissed the Social Security Board (the precursor to today’s Social Security Administration) as “the biggest bookkeeping organization in the world.”  Experts who were brought in to advise how to establish wage records said that it simply couldn’t be done.  One European expert argued that an attempt to operate a wage record system on the scale required by the law would lead to disaster.  There was no way to keep records on the earnings of 80 million workers.  The expert recommended that the Board repeal the old age insurance program

Social Security proved the experts wrong.  In 1937, the first year of full-scale operations, Social Security numbers were assigned to 40 million Americans, and ledger accounts were established for each of these individuals.  A key moment came in 1938.  Albert Linton, an actuary and the president of an insurance company, demanded to see the Social Security records. He made a special trip to Baltimore and came away impressed.  “I think it is amazing,” he said, “the way they have solved the technical aspect of this.”  During 1937, the staff processed 75.1 million pieces of information concerning employees’ earnings, all by hand, without the aid of computers.

It became the norm for the Social Security Administration to undertake difficult tasks.  In 1956 Congress passed a program that, political reasons, required eligibility decisions for disability benefits to be made by the states.  Once again, experts told the agency that the plan was too cumbersome and would never work.  Instead, the Social Security Administration established a partnership with the states and proceeded to put disability insurance into operation.

Like all the parts of Social Security, disability insurance has grown.  As early as March 1962, about 1.25 million people were receiving monthly disability benefits amounting to nearly $1 billion a year.

At seventy-five, Social Security is the poster child for government that works.  Its history suggests that it has much to offer for the future.  This anniversary, then, deserves to be celebrated not only as a nostalgic exercise but also as an optimistic indicator of the program’s potential.

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Bob Harper - 8/18/2010

Social Security is a giant Ponzi scheme, and it's on the brink of implosion. Oh, it can be put off for a while by raising taxes and raising the retirement age, but until it is reformed to include individual accounts which are owned by the recipient and are inheritable it will simply lurch from crisis to crisis until it collapses--and that will be sooner rather than later. Every year that passes without addressing the problem simply makes it larger and more unwieldy.

Shirley Rob - 8/16/2010

IF the government would repay what is owed to SS Admin. I don't believe it would be in the mess it is in. The government borrowed from it for all kinds of things other that retirement benefits. GIVE IT BACK! I worked for 56 years in the system and don't think I should be penalized for mismanagement.