The Battle for Social Security E-Book

Nancy J. Altman

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 661

Veröffentlichungsjahr: 2012

Beschreibung

This book illuminates the politics and policy of the current struggle over Social Security in light of the program's compelling history and ingenious structure. After a brief introduction describing the dramatic response of the Social Security Administration to the 9/11 terrorist attack, the book recounts Social Securityâ??s lively history. Although President Bush has tried to convince Americans that Social Security is designed for the last century and unworkable for an aging population, readers will see that the President's assault is just another battle in a longstanding ideological war. Prescott Bush, the current Presidentâ??s grandfather, remarked of FDR, "The only man I truly hated lies buried in Hyde Park." The book traces the continuous thread leading from Prescott Bush and his contemporaries to George W. Bush and others who want to undo Social Security. The book concludes with policy recommendations which eliminate Social Security's deficit in a manner consistent with the program's philosophy and structure.

Leseprobe

Contents

Chapter 1: From the Poorhouse to Free Parking

Chapter 2: Social Security’s Grandfather

Chapter 3: Essential Insurance, Poor Welfare

Chapter 4: Bold Woman, Cautious Men

Chapter 5: A Teeny-Weeny Bit of Socialism

Chapter 6: Dirty Tricks

Chapter 7: Ready, Set, Start Again

Chapter 8: Dr. Win-the-War Replaces Old Dr. New Deal

Chapter 9: Third Time’s the Charm

Chapter 10: All American Program (Minus a Tiny Splinter Group)

Chapter 11: Visible Gains, Subterranean Tremors

Chapter 12: The Sky is Falling and Social Security is Bust

Chapter 13: Aging Gracefully

Chapter 14: A Leninist Strategy

Chapter 15: The Drumbeat Finds a Drummer

Chapter 16: The Ideal, Pain-Free (for Almost Everyone) Way to Strengthen Social Security

Chapter 17: From FDR’s Vision to Bush’s Gamble

Acknowledgments

Recommended Reading

Index

Copyright © 2005 by Nancy J. Altman. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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ISBN-13 978-0-471-77172-2

ISBN-10 0-471-77172-4

For Chip, my extraordinarily wonderful husband and partner for life

Chapter 1

From the Poorhouse to Free Parking

At 8:46 a.m. on Tuesday, September 11, 2001, American Airlines Flight 11 crashed into the North Tower of the World Trade Center. At that moment, Beatrice M. Disman, the New York Regional Commissioner of the Social Security Administration, was entering a conference room at the program’s headquarters in Baltimore, Maryland. A few minutes later, she was handed a note, which she quickly scanned. Bolting from the room and grabbing a phone, she hurriedly called her New York office, located a short walk from the World Trade Center—close enough that many of her colleagues had seen the plane hit the tower. She reached the assistant regional commissioner, who told her, “We’re evacuating.” Disman responded that she was returning to New York immediately.

By Thursday, September 13, two days after the attack, Social Security was in overdrive. The families of virtually every worker who perished that day were entitled to benefits under the program. The daunting task facing Social Security was to identify those families, contact them, and help them secure the financial protection their loved ones had earned for them.

The Social Security Administration was among the first insurers to meet with employers and victims’ families. Its employees worked with the New York Police Department, the Fire Department, and the Port Authority to find the families of every firefighter and police officer who had died. Social Security employees were at the Family Assistance Centers established at Pier 94 and Liberty State Park. They set up a special Web page, informing the families of the victims how to apply for benefits, as well as displaying the 800 number and a link to Social Security’s office locator.

By Sunday, September 16, public information spots about Social Security were running on every major network affiliate in New York City, on the local television stations, and on Spanish-language stations. In addition, Social Security distributed press releases and fact sheets to national media outlets and advocacy organizations. Lines of communication were established with local hospitals and the New York City Labor Council.

Program representatives called the families of every missing employee of those companies located in the World Trade Center. Social Security caseworkers spoke with the families of each missing firefighter and each missing police officer. The program contacted a number of the city’s largest financial service corporations, which might have had people in the World Trade Center on the day of the attack. The program’s employees phoned the union that represented the restaurant workers in the World Trade Center. To make sure Social Security reached foreigners who might be eligible for benefits, its representatives called over 60 consulates. All of these steps were taken on top of Social Security’s normal workload.

Social Security employees worked 15-hour days, seven days a week to get benefits to the families as quickly as possible. Long though the hours were, the program’s employees were eager to work. When Disman asked her managers to find people willing to help on the weekend, the response was overwhelming. The employees did not want to leave their long shifts to go home and rest. The people in the World Trade Center were their friends and neighbors, and the Social Security representatives knew that they were throwing an economic lifeline to the families when they needed help the most.

A stay-at-home dad lost his wife in the World Trade Center on September 11. In the midst of his grieving, he could see no way to remain at home with his child or support the child at the level they had been living. Unaware of the valuable Social Security benefits his wife had earned for her family through her work, he reluctantly put the family home on the market after that tragic day. The call from Social Security, from out of the blue, was a godsend. He hung up the phone and called his real estate agent. He could keep his home, after all.

Social Security recognized that it was vital to get benefits to the families quickly. In anticipation of natural disasters and other tragedies, the Social Security Administration had long-standing emergency procedures in place. In response to the attack, it invoked those existing procedures, which included, among other emergency measures, waiving the standard requirement of a death certificate, instead relying on airplane manifests and employer work records as proof of death.

On October 3, 2001, three weeks after the terrorist attack, Social Security checks were mailed and electronically transferred, as they are every month, to program beneficiaries. Included among the 47 million people receiving Social Security benefits in October were the stay-at-home dad, his young child, and thousands of other members of families who lost loved ones on September 11.

In the chaotic aftermath of that tragic day, millions of Americans reached into their pockets to contribute to the Red Cross and other charitable organizations assisting the families of the 9/11 victims. But the most immediate, sustained, and generous support for those families came from Social Security. Today, virtually all working Americans continue to contribute to the 9/11 families every payday. The money withheld from every worker’s paycheck for Social Security goes into the program’s Old Age and Survivors Insurance Trust Fund, out of which those victims’ families receive benefits. Virtually every child who lost a parent in the terrorist attack will receive a Social Security check every month until his or her late teens. So will the children’s surviving parents who care for them.

Just as the actions of the brave police and firefighters in response to the terrible events of September 11 filled all of us with gratitude and pride, so Social Security’s response to the attack on America might have led us to celebrate this vital institution and recognize its value in our modern, insecure world. Instead, as Social Security was diligently finding and assisting the families of the victims, President George W. Bush had the program in his crosshairs.

Four months and 9 days before September 11, President Bush established a Social Security commission. The president instructed it to report back to him with changes that “must include individually controlled, voluntary personal retirement accounts.” Three months and 10 days after September 11, the commission filed its report with the President.

The commissioners offered three alternatives in response to the President’s directive to develop private account proposals. Just like the proposal President Bush unveiled once he was safely reelected, all three alternatives diverted a substantial percentage of the current Social Security payroll tax to fund individual accounts.

Only two of the three alternatives put forward by the commission addressed the long-range deficit that was projected in the Social Security program. Both recommended fundamentally altering Social Security through a technical adjustment to the benefit formula, just as the President himself proposed in a press conference on April 29, 2005. Although President Bush talks about strengthening Social Security, his proposals would profoundly weaken the system and radically transform it from a program of social insurance into a program of individual self-help.

Social Security provides a specified percentage of a worker’s earnings in the event of death, disability, or old age. In contrast, the President’s indexing proposal would cause Social Security benefits inexorably to erode into a very minimal, almost flat benefit, largely unrelated to earnings. Americans would be on their own to supplement the meager benefit with whatever they could accumulate in their own individual accounts. In his late night monologue, comedian Jay Leno succinctly and accurately summarized President Bush’s Social Security plan as “Good luck, Grandma. You’re on your own.”

For the first time in the 70-year life of Social Security, a President has proposed undoing this program that provides security to so many. The President seeks to focus public attention only on the part of Social Security dealing with retirement. But Social Security is not just a retirement program; it is, more accurately, a family protection program. Social Security is the nation’s largest children’s program. Over 5 million children live in homes where part or all of the family income comes from Social Security. Over 3 million children receive Social Security as dependents of deceased, disabled, or retired workers—including virtually all the children who lost parents on September 11, as well as the children of fallen and disabled U.S. soldiers in Iraq, Afghanistan, and elsewhere.

All parts of the program are interwoven. One single benefit formula generates payment amounts for all beneficiaries: retirees, disabled workers, spouses, widows, widowers, and children. The retirement strand of the program cannot be removed without unraveling the entire fabric.

In the current debate, President Bush has attempted to convince Americans that Social Security is outmoded and fundamentally flawed—created long ago, designed for the last century, and unworkable for an aging population. But knowledge of the program and its vivid history reveals that Bush’s assault is just another battle in a long-standing ideological war. A small minority, outside the mainstream, has always believed that all but the neediest individuals should be completely on their own and has long fought a campaign against Social Security.

Some of the most powerful and wealthy families in America considered President Franklin Delano Roosevelt a traitor to his class because he championed Social Security and other progressive programs and policies. President George W. Bush’s grandfather, Prescott Bush, once remarked of Roosevelt: “The only man I truly hated lies buried in Hyde Park.”

Opponents of Roosevelt fought against Social Security in 1935. The program was a major campaign issue in the waning days of the election of 1936. At the time of the election, Social Security had been enacted just the year before and no taxes had yet been collected or benefits paid. Nevertheless, Republican Presidential candidate Alf Landon and his supporters did everything they could in the closing weeks of the campaign to undermine support for the program. In words that sound astoundingly like those uttered by President Bush today, a Time magazine article of the day summarized the position that Landon and his supporters had espoused concerning Social Security in the just-completed election: “Said Republicans: ‘Wage earners, you will pay and pay in taxes...and when you are very old, you will have an I.O.U. which the U.S. Government may make good if it is still solvent.’”

Even Roosevelt’s landslide reelection victory did not stop the diehards. A small intransigent group continued to oppose Social Security in the decades following its enactment. When Social Security started projecting deficits in the mid-1970s, opponents of the program saw an opportunity to spread doubt and anxiety.

Just like today, the overblown rhetoric of “crisis” and “bankruptcy” was swirling around Social Security in the late 1970s and early 1980s. In 1978, a candidate running hard for a congressional seat in west Texas spoke to a group of real estate agents about Social Security in a campaign stop at Midland Country Club. “[Social Security] will be bust in 10 years unless there are some changes,” the candidate claimed, adding: “The ideal solution would be for...people [to be] given the chance to invest the money the way they feel.” The candidate’s name: George W. Bush.

Throughout its storied history, Social Security has had its foes, but it has also had its champions. At every stage, people who have believed in the common good and the values of family and community have worked to give Social Security life and vigor. Some are famous names from history, but others are unsung heroes. One outstanding leader in the creation and development of Social Security is Arthur Altmeyer, a serious, bespectacled, scholarly man, called “Mr. Social Security” by President Roosevelt. Another is the gregarious, energetic Wilbur Cohen, about whom Senator Paul Douglas quipped, “...an expert on Social Security is a person who knows Wilbur Cohen’s telephone number.”

One more invaluable hero is the dignified and personable Robert M. Ball, who the late Senator Daniel Patrick Moynihan said was “as wise a counsellor as any Senator will know.” Still another is Robert J. Myers, a tall, shy, soft-spoken actuary, whom Moynihan labeled “a national treasure.” These people and many others have played crucial roles in Social Security’s dramatic history, a story that includes riveting accounts of dedication and conflict, of perseverance and close calls, of visionaries and determined opponents.

The work of all these supporters and defenders has always been backed by Social Security’s most important champion, the American people. Through its many challenges, Social Security has always emerged victorious, because Americans have remained committed to this essential program. The large majority of Americans have supported Social Security because it embodies the best of American values, including reward for work, compassion, fairness, foresight, and prudent, conservative management. This unflagging support has permitted Social Security to eradicate much of the economic insecurity of the past and to transform society.

Before the enactment of Social Security, people worked as long as they could hold jobs. But this was an insecure state of affairs. The fast pace of many jobs “wears out its workers with great rapidity,” a commentator noted in 1912. “The young, the vigorous, the adaptable, the supple of limb, the alert of mind, are in demand,” he explained. “Middle age is old age.”

Once a job was lost, an older worker could seldom find a new one. Older people almost never had sufficient savings to last until death. The dilemma of saving for one’s own retirement was described in 1934:

A man’s productive, wage-earning period is rarely more than 45 years. Under present conditions he must earn enough in this period to contribute toward the support of aged parents, rear and educate children, maintain his family at a standard of living more or less consistent with American ideals, and save enough in the form of insurance or absolutely safe investment to provide a modest income until death, if he survives his working period. This last item of his budget is the one least urgent, least stressed by advertising propaganda, and most easily disregarded among the many financial demands.

Other than the reference to supporting one’s parents—a job largely taken over by Social Security—the description of the difficulty of saving for retirement could have been written today.

Those unable to work almost always moved in with their children. Those who had no children or whose children were unable or unwilling to support them typically wound up in the poorhouse. The poorhouse was not some ancient Dickensian invention; it was a very real means of subsistence for elderly people in the world immediately preceding Social Security.

When Social Security became law, every state but New Mexico had poorhouses (sometimes called almshouses or poor farms). The vast majority of the residents were elderly. Most of the “inmates,” as they were often labeled, entered the poorhouse late in life, having been independent wage earners until that point. A Massachusetts Commission reporting in 1910 found, for example, that only 1 percent of the residents had entered the almshouse before the age of 40; 92 percent entered after age 60.

A higher percentage of men wound up in the poorhouse, even though women’s life expectancies were longer than men’s, just as they are today. The reason for this surprising result, according to a 1919 Pennsylvania commission, was that women’s traditional work around the house was useful even as they aged. Consequently, the commission discovered, “Children or relatives will make greater sacrifices in order to keep an old mother at home and prevent her going to a poorhouse, than they would for an aged father or other male relative.”

The poorhouse was a fate to be dreaded. Even in as progressive a state as New York, the conditions were abysmal. In 1930, the New York State Commission on Old Age Security found that “worthy people are thrown together with whatever dregs of society happen to need the institution’s shelter at the moment; sick people are thrown together with the well, the blind, the deaf, the crippled, the epileptics; the people of culture and refinement, with the crude and ignorant and feeble-minded.”

“Privacy, even in the most intimate affairs of life, is impossible; married couples are quite generally separated; and all the inmates are regimented as though in a prison or penal colony,” the commission reported. It noted that “private possessions, other than the clothes on the back, are almost out of the question, since individual bureaus, closets, tables or other articles of furniture, outside of a bed, are generally not provided.”

The poorhouse was always lurking in the background, haunting people as they aged. It was a powerful, ubiquitous image in the general culture. The early Monopoly boards, beginning with the game’s invention in 1903, contained a square labeled “Poorhouse.” Today, in a world with Social Security, that same exact square reads “Free Parking.”

Poorhouses and destitute senior citizens were a fact of life well before the Great Depression. Surveys by Wisconsin and New York, published in 1925 and 1929 respectively, found that almost half the population aged 65 and older had “insufficient subsistence income.” A writer in 1912 described the inevitable fate most Americans faced as they aged:

After the age of sixty has been reached, the transition from non-dependence to dependence is an easy stage—property gone, friends passed away or removed, relatives become few, ambition collapsed, only a few short years left to live, with death a final and welcome end to it all—such conclusions inevitably sweep the wage-earners from the class of hopeful independent citizens into that of the helpless poor.

What follows is the story that changed that inevitable ending.

Notes

Page 1: “We’re evacuating.”

[Bea Disman, Essay from the magazine GOVEXEC.com, www.govexec.com/features/0904-15/0904-15s1.htm.]

Page 3: “must include individually controlled”

[Guiding Principles, Presideant’s Commission to Strengthen Social Security, http://csss.gov.]

Page 5: “The only man I truly”

[Kitty Kelley, The Family: The Real Story of the Bush Dynasty (New York: Doubleday, 2004), p. 57.]

Page 5: “Said Republicans: ‘Wage”

[“Grand Finale,” Time magazine, November 9, 1938.]

Page 5: “will be bust in 10 years unless”

[Richard W. Stevenson, “For Bush, a Long Embrace of Social Security Plan,” New York Times, February 27, 2005.]

Page 6: “an expert on Social Security”

[Edward D. Berkowitz, Mr. Social Security (Lawrence: University Press of Kansas, 1995), p. 144.]

Page 6: “as wise a counsellor”

[Senator Daniel Patrick Moynihan, Introduction to Robert J. Myers, Within the System (Winsted, CT: ACTEX Publications, 1992), p. iii.]

Page 6: “a national treasure”

[Ibid, p. vii.]

Page 6: “wears out its workers”

[E. T. Devine, Misery and Its Causes, p. 125, in Abraham Epstein, Facing Old Age (New York: Alfred A. Knopf, 1922), p. 4.]

Page 6: “A man’s productive, wage-earning”

[Report of the Committee on Economic Security, “The Economic Problems of Old Age,” Part II, Old-Age Security, U.S. Social Security in America (Washington: U.S. Government Printing Office, 1937) p. 138.]

Page 7: “Children or relatives”

[Report of the Pennsylvania Commission on Old Age Pensions, 1919, p. 20, quoted in Abraham Epstein, Insecurity: A Challenge to America (New York: Harrison Smith and Robert Haas, 1933), p. 501.]

Page 7: “Worthy people are”

[Report of the New York State Commission on Old Age Security, 1930, pp. 395–96, quoted in Ibid, p. 508.]

Page 8: “After the age of sixty”

[L. W. Squier, Old Age Dependency in the United States, pp. 28–29, in Epstein, Facing Old Age, p. 21.]

Chapter 2

Social Security’s Grandfather

John R. Commons was a brilliant, creative scholar with a self-deprecating sense of humor and a warmth of manner. Rumpled in appearance, serious in expression, and intellectual though he was, he was not the stereotypical absent-minded professor. He was a pragmatist, a man of action, who, underneath his soft-spoken exterior, cared deeply about others.

Commons’s name matched his values. He greatly respected common men and women. He believed in the concept of the “commons,” the idea—reflected in the name of one of America’s oldest parks, the Boston Common, referred to informally by many Bostonians as “the Commons”—that we are interdependent and united in our humanity.

Born in 1862 near the Ohio-Indiana border, he was the grandson of farmers and the son of an unsuccessful businessman, who, according to Commons, “could not fit himself to the Money and Credit economy.” Commons graduated from Oberlin College in 1888, “by the indulgence of my professors,” he wryly claimed.

By the time he graduated, he had witnessed a dramatic national transformation. The United States was in the process of becoming the world’s leading industrial nation, producing the most steel, iron, coal, timber, gold, and silver of any country in the world. Between 1870 and 1900, the automobile, telephone, electric light bulb, typewriter, Linotype, phonograph, cash register, air brake, and refrigerator car all were invented, and all led to new industries. Businesses became larger, factories became commonplace, and the need for labor exploded.

The number of people living in cities had grown at a frenetic pace. In a 20-year period, Chicago tripled in size. When Commons was born, only 9 cities had populations over 100,000; in another decade, he would live in a country where 38 cities were that large, including 3 with populations over a million.

Many of these new city dwellers came from rural areas. In 1920, for the first time in the nation’s history, more Americans would live in cities than in the country. As people moved from farms, they left a self-sufficient life of growing their own food and living with extended family to a world of groceries, rent, and streets full of strangers.

This was also a period of enormous immigration. From Commons’s eighteenth birthday to the start of the first World War, 34 years later, over 20 million immigrants arrived on American shores. They generally left most of their relatives thousands of miles behind. The newcomers typically came with nothing more than the clothes on their backs and the suitcases in their hands.

For the first time in the country’s history, millions of people were totally dependent on wages. Not surprisingly in an era before minimum wage and maximum hours laws, the United States witnessed frequent and sustained strikes—36,000 of them between 1881 and 1905—as workers organized into unions to improve their working conditions.

Employers retaliated by obtaining court orders against strikers on the grounds of criminal trespass, threats to property rights, and unlawful conspiracy. Those union leaders who defied the court orders were sent to prison for contempt. When those tactics failed to break the strikes, some employers hired Pinkerton Detective Agency guards and other private security forces who often resorted to back-alley violence.

Newspapers across the nation trumpeted the labor strife in sensational, front-page headlines. In 1886, during Commons’s sophomore year at Oberlin, newspapers were full of stories about the Haymarket Square riot, where what started as a peaceful picket line at the McCormick Reaper factory in Chicago ended with 11 people killed, more than 100 injured, and 8 people convicted of inciting to violence.

Troubled by the social upheaval that was engulfing the country, Commons decided to study economics in order to help improve working conditions and prevent the underlying causes of the violence. Upon graduation from Oberlin, he applied to Johns Hopkins University to do graduate work in economics. He was drawn to the school in part because he had read an editorial attacking one of Hopkins’s professors, Richard T. Ely, for his “socialist” views. An independent thinker himself (Commons voted for the Prohibitionist candidate for president in 1884 and the Communist party candidate for governor when he lived in New York a decade later), Commons was attracted to other similarly open-minded thinkers.

Professor Ely was the perfect teacher for Commons. Having graduated from Columbia University in 1876, at a time when the United States had no doctoral programs, Ely, like most of the intellectuals of his generation, studied in Germany, where he learned about the worker security reforms undertaken there. Urbanization, industrialization, and widespread worker unrest occurred earlier in Europe than in the United States. The bloody worker uprising in Paris in 1848—dramatized in the musical Les Misérables—was but one stark example of the worker protests, repression, and violence sweeping that continent. The lead Europe had with worker unrest also gave the continent a head start in developing solutions.

By the time Ely arrived in Germany, a number of European governments had already tried inducing private savings as a way of dealing with economic insecurity. These voluntary programs proved useless. Over time, it became clear that workers either could not or would not increase their savings enough, even with incentives, to protect themselves against the new economic risks. In 1850, for example, France established its National Old Age Insurance Institution, a voluntary program, where benefits were directly related to contributions. Not even workers making average wages took part. To the extent the program was used at all, it was almost exclusively the upper middle class who took advantage of it.

Germany was the first nation to take the bold step of enacting compulsory, universal social insurance. In 1883, Chancellor Otto von Bismarck instituted a landmark national health insurance program for wage earners. Over the next few years, Germany added programs of workers’ compensation and retirement, disability, and survivors’ benefits, and the rest of Europe followed Germany’s lead.

Professor Ely studied these programs in depth and passed along his firsthand knowledge to his students. Commons became Ely’s research assistant, and the two men grew close. Ely believed that, in addition to classroom work, students should gain experience in the real world, so on Ely’s suggestion, Commons became a case worker with the Charity Organization Society. The charity’s director, John M. Glenn, instructed Commons to help a Civil War veteran obtain a pension.

Military pensions for veterans dated back to the Revolutionary War. The Civil War was such a bloody, violent conflict that it produced the largest proportion of people disabled, widowed, or orphaned in all of American history. The destructiveness led Congress to authorize relatively generous benefits for soldiers who had been disabled in the war and for survivors of soldiers who had been killed.

As Civil War veterans aged, pressure mounted to expand the program. The Republican party platform in 1888 contained a plank stating that “any man who honorably wore the Federal uniform” should be protected with a pension, so that he would never be subjected to the terrible fate of becoming “the inmate of an almshouse, or dependent upon private charity.”

The idea proved popular. In 1890, Congress expanded Civil War pensions to cover any veteran who was disabled, regardless of cause. Sixteen years later, Congress expanded the program once more to provide benefits to veterans simply on the basis of old age.

The soldier whom Commons sought to help was disabled from tuberculosis. Although Congress had recently expanded the program to include disabilities not related to military service, the law on the books did not magically translate to cash in his pocket. When Commons was assigned the case, he found the soldier “in the third story of a rattle-shack tenement, his wife doing all she could to care for him.” The ailing veteran and his overworked wife had neither the energy nor the resources to take on a government bureaucracy.

Commons spent a year at the task. He visited the pension office, spoke with lawyers, and worked with the Democratic congressman from Baltimore, Representative Harry W. Rusk, who proved challenging because of his sympathies for the confederacy. Ultimately, after arduous effort and seemingly endless hours, Commons succeeded, and the veteran got the benefit he had earned with his war service. Commons, for his part, got the benefit of an education. For the rest of his life, he was to combine teaching and scholarship with efforts to make government work more compassionately for the people it served.

After two years of study, Commons left Johns Hopkins for a teaching position at Wesleyan University. He lasted one year. The next few years proved no more fruitful. Struggling to find himself, he went through a succession of jobs, teaching at various universities and colleges, as well as taking positions with government and private research organizations. Finally, in 1904, his mentor, Professor Ely, who had left Hopkins and joined the faculty of the University of Wisconsin in Madison, helped secure him a faculty appointment there.

Commons’s start in Madison was marked by two other commencements, one in the university, one in the state government. The brand-new university president, Charles R. Van Hise, told the faculty in his inaugural address that he expected them to spend equal time on teaching, scholarship, and assisting the state government, a close neighbor just down the road in the small town of Madison. Also commencing was a new era in Wisconsin’s political history. After two terms as governor, the progressive Robert M. La Follette gained control, for the first time, of both houses of the legislature.

Commons could not have written a better script for himself. The combination of teaching, writing, and working with a progressive government to put his ideas about worker security into action was exactly what he felt destined to do. Feeling “born again...after five years of incubation,” Commons knew instantly that he had found a permanent home.

He proved to be a popular professor. Early on, he began a tradition of regular Friday night dinners, first in restaurants and then in his home, where professors and students mingled and discussed the leading issues of the day. The tradition lasted until his retirement in June 1934, and generations of students became known to him and each other as “Friday Niters.”

The Friday Niters represented early-twentieth-century networking at its best. Professors and students forged close friendships over these casual evenings. Graduates working in Madison remained regulars; others were sure to drop in on the weekly gatherings when they returned for visits. Friday Niters shared information about jobs and generally helped each other succeed.

Commons became a nationally recognized scholar. In his first year at Wisconsin, he began work on the History of labour in the United States, which, with the help of younger colleagues and students, developed into a four-volume classic still used today.

His instant success as a teacher and scholar were matched by his instant access to state government. Fortuitously, Commons had met Governor La Follette two years before coming to Madison. In Commons’s first few months at the university, La Follette contacted him to draft strong legislation reforming Wisconsin’s civil service. After that, Commons began to develop his own ideas for legislation.

In 1906, the Russell Sage Foundation financed a survey of Pittsburgh’s social conditions. Commons’s supervisor from Baltimore’s Charity Organization Society, John M. Glenn, was now head of the foundation, and he asked Commons to oversee the labor side of the survey.

The survey included the case of Adam Rogalas, a Russian immigrant who had worked for the Iron City Grain Elevator Company. On October 17, 1906, Rogalas was killed at work when the supports of the floor above gave way, dumping heavy bags of stored grain on him. He left behind his pregnant wife and four children aged ten, six, five, and two. After the accident, Mrs. Rogalas earned what she could by taking in laundry. Pittsburgh’s welfare laws provided her with groceries valued at $6.00 a month, a pittance for a family of six. She supplemented her earnings by begging outside the Catholic church on Sundays.

She found a lawyer who agreed to sue the employer for damages of $20,000. After a year’s wait and a short trial, the judge ruled that the evidence did not support a finding that the employer had been negligent. The Grain Elevator Company won the case and paid Mrs. Rogalas nothing.

The Rogalas family’s fate, and similar reports of other innocent workers killed or injured at work, caused Commons to turn his energy toward legislation providing compensation for workplace injuries and death. Maryland had enacted a workers’ compensation program in 1902, but two years later the courts had held it unconstitutional. Commons began drafting his own version for Wisconsin.

Around that same time, while attending a meeting in Atlantic City of the American Economic Association, Commons bumped into Henry W. Farnam, the renowned economics professor from Yale University. The two friends decided to take a walk on the unseasonably mild December day. As they strolled along the boardwalk, Farnam turned to Commons and remarked, “Curious isn’t it, that you, a radical, and I, a conservative, find ourselves working together.”

The two men were of strikingly different temperaments and political beliefs. Farnam was a conservative patrician from New England; Commons was a midwesterner with a more liberal philosophy. Notwithstanding these differences, both labor economists shared a deep concern about worker security.

Both understood that even the most skilled, hardworking, and frugal workers could not adequately protect themselves and their families from economic risk. They agreed that hardworking Americans who lost their wages through no fault of their own should not be forced into poverty and reliance on charity. Rather, government should assist workers in preventing that fate through the provision of social insurance. They believed that worker unrest was caused by a deep sense of insecurity. If workers had greater security, they would not be tempted to join radical political movements, both men agreed.

Their joint concern had led them, together with Professor Ely, to found the American Association for Labor Legislation. The AALL was modeled on the International Association for Labor Legislation, an organization based in Europe and dedicated to producing uniform labor laws across the European continent.

The three economists thought that the AALL would fill the important role of studying labor conditions and labor legislation in the United States and publicizing the findings. The AALL was concerned with all aspects of worker security—the freedom to unionize, the need for a legislated minimum wage and maximum hours, the importance of the health and safety of the workplace, and the necessity of social insurance covering industrial accidents, health, old age, disability, death, and unemployment. The organization studied these issues and assisted in the dissemination of legislative efforts to achieve them.

The membership at the first AALL meeting, on February 15, 1906, consisted of 23 people, including academics and representatives of business, labor, social work, and charitable organizations. Within seven years, the membership had expanded to 3,348, and included a broad cross-section of people concerned about worker security. The membership encompassed the political spectrum and included such notables as Louis Brandeis, Samuel Gompers, Woodrow Wilson, and Jane Addams.

In 1910, the AALL decided to become politically active and changed its stated objectives from “encourag[ing] the study of labor legislation” to “encourag[ing] the study of labor conditions in the United States with a view to promoting desirable labor legislation.” One of AALL’s first focuses of legislative action was its effort to convince state governments to establish programs providing workers with compensation when they were injured in the workplace.

In 1911, the workers’ compensation legislation, which Rogalas’s story inspired Commons to draft, was enacted by Wisconsin and subsequently upheld by the courts. Wisconsin became the first state to compensate workers who were injured on the job. The AALL publicized the Wisconsin bill and sought to convince other states to enact similar statutes.

Shortly after the bill’s enactment, Arthur Altmeyer, an office boy working in his uncle’s law firm, happened to see a pamphlet describing Wisconsin’s newly enacted Workmen’s Compensation Act. The moment he learned that the principal author of the legislation was the renowned professor John R. Commons, Altmeyer resolved, he later explained, “that I was going to go under Professor Commons and study labor legislation.” That fall, Altmeyer enrolled as a freshman at the University of Wisconsin.

Altmeyer began to attend Commons’s Friday night get-togethers. He overlapped one year with another Friday Niter, Edwin Witte, a graduate student also studying with Commons. The two students, who shared a similar passion for improving the lives of workers, became friends. Sharing the same passion but living 1000 miles away was an outspoken, confident, and compassionate woman who was pushing for better working conditions in New York. Frances Perkins, a tireless advocate for worker rights, was secretary of New York’s chapter of the National Consumers League.

The National Consumers League had been founded in 1899 by Jane Addams, Florence Kelley, and other women associated with Hull House, perhaps the most famous residence of the settlement movement, where middle class volunteers lived in poor neighborhoods and sought to assist their low-income neighbors. The league’s main goal was to expose scandalous working conditions and push for a minimum wage and maximum hours for women and children. It had the word “consumers” in its name because the founders believed that acceptable working conditions should be a prerequisite for consumer purchases.

On a sun-drenched Saturday, on March 25, 1911, Perkins was having tea in Washington Square in New York City, near her Consumers League office. Suddenly, she heard screams of “Fire! Fire!” She leaped up and joined a throng of others rushing toward the shouts. To her horror, she saw deadly, swelling flames engulfing the Asch Building, whose top three floors housed the Triangle Shirtwaist Factory. For 15 terror-filled minutes, she watched 146 workers—mainly women between the ages of 13 and 23—perish as they desperately tried to escape the fire. The workers had been, as usual, locked in to ensure that they would not leave their sewing machines and, as a result, were trapped inside. Perkins witnessed young women praying on the window ledges of the factory before they leaped to their deaths.

The widespread publicity about the fire revealed that the factory had complied fully with all city regulations. Public outcry caused the state legislature, which included freshman senator Franklin Roosevelt, to create the New York State Factory Investigation Commission to study the safety of working conditions inside factories. Headed by state senator Robert Wagner and Assemblyman Al Smith, and staffed by Frances Perkins, who left the Consumers League to take the job, the commission expanded its investigation to include wage rates and other conditions of employment. Originally authorized for only one year, the commission remained in existence until 1915.

During those years, the AALL was achieving great success in its efforts to encourage the enactment of workers’ compensation legislation around the country. By 1915, 30 states had enacted workers’ compensation statutes. With its efforts to obtain legislation going so well, the AALL added health insurance to its agenda. In 1913, the AALL set up a committee to study the issue, and in 1915, it published a model bill.

At first, the AALL appeared to be as effective in the area of health insurance as it had been in the field of workers’ compensation. In 1915, the Republican governor of California, Hiram Johnson, established the California Social Insurance Commission and instructed it to study the issue of health insurance. The governor appointed Barbara Nachtrieb Armstrong, one of the first female law graduates in the country, to be the executive secretary of the commission. The commission proposed that California enact health insurance for its citizens. Governor Johnson endorsed government health insurance, as did the governors of Massachusetts and Nevada.

In 1916, Congress held hearings on the issue. That same year, the Social Insurance Committee of the American Medical Association (AMA) recommended compulsory government-run health insurance, and the American Hospital Association and the National Association of Manufacturers established internal committees to study the subject. In 1917, the House of Delegates of the AMA passed a resolution supportive of government health insurance plans. By that time, AALL’s model bill had been introduced in the legislatures of 12 states, the New York Senate had passed the proposed legislation, and 8 states had appointed study commissions.

California, because of limitations in its state constitution, required a two-thirds vote of each house of the legislature plus a majority vote of the population on a state ballot referendum in order to enact health insurance. A health insurance bill received the necessary vote of the California legislature in 1917 and was placed on the November 1918 ballot. Former president Theodore Roosevelt, Senator William Borah (R-Idaho), and a number of leading newspapers all came out in favor of government-sponsored health insurance.

As part of the effort, the state commissions in Illinois and Ohio asked Commons to survey the attitudes of the various groups regarding government health insurance and to prepare a report summarizing his findings. He coauthored the paper with Altmeyer, who was now a graduate student in economics and Commons’s research assistant. Their paper, “The Health Insurance Movement in the United States,” was appended to the reports of both the Illinois and Ohio commissions.

When Commons and Altmeyer began the paper, government health insurance looked like it would be enacted quickly without enormous struggle, just as workers’ compensation legislation had been. But the reformers were to learn that the entrenched interests would not stay quiet for long. By the time the paper was published, the movement was in free fall.

The more physicians learned about the proposal, the more they opposed it, fearing it would lead to government control of medical practice. Breaking with the position taken by the AMA, a number of state medical associations came out in opposition. Similarly, the National Association of Manufacturers’ Committee on Industrial Betterment, which had supported the legislation in 1916, repudiated that support in mid-1917. Insurance companies opposed it, as did the Pharmaceutical Manufacturers’ Association.

Perhaps most damaging, the American Federation of Labor (AFL), a group that might have been considered a natural ally, was against government-provided health insurance. The AFL’s leader, Samuel Gompers wanted gains for workers to come through collective bargaining and feared that government-provided benefits would weaken the incentive of workers to join unions. Gompers felt so strongly about the issue that he resigned his membership in the AALL.

A coalition consisting of many of these groups unleashed a massive advertising campaign against government-provided health insurance. Playing on anti-German and anti-Russian sentiment generated by World War I, they released ads claiming that the proposals were, at one and the same time, symbols of Prussian autocracy and Soviet communism.

In November 1918, California voters marched to the polls with images of Lenin and the German kaiser intertwined with thoughts of government-provided health insurance floating through their heads. Californians defeated the ballot referendum, which would have established a statewide health insurance plan. Six months later, the New York Assembly defeated the bill that had been passed by the State Senate. In 1920, the AMA formally reversed its position, putting itself on record as opposing government health insurance. That sounded the death knell. Every health insurance proposal in the country was dead.

That same year, the nation ratified the Eighteenth Amendment, granting women the right to vote. Witte, who had stayed in Madison to work in government while lecturing part-time at the university, was now the top administrator of Wisconsin’s Industrial Commission. The commission, which was created as part of Commons’s 1911 legislation establishing workers’ compensation, consisted of a board of experts appointed by the governor. The board’s job was to advocate and implement labor legislation.

In 1920, Witte approached Altmeyer to be the commission’s chief statistician. Altmeyer accepted the offer. Meanwhile, the AALL and the National Consumers League continued to lobby for worker legislation.

The AALL shifted its focus from health insurance to the concerns of unemployment and old age, while the Consumers League continued to work for minimum wage and maximum hour legislation. In this area, too, Commons and Wisconsin were leaders. Commons drafted a minimum wage bill that was introduced in the Wisconsin legislature in 1911—the first of its kind in the nation.

By 1923, 11 states, the District of Columbia, and Puerto Rico had enacted minimum wage laws protecting women and children. But in that year, progress came to a screeching halt. By a 5 to 3 decision, the Supreme Court, in Adkins v. Children’s Hospital, struck down the District of Columbia’s minimum wage law. The Court found that the law, which required a minimum wage for women and children employed in Washington, D.C., had interfered with the right of employers and employees to enter into contracts freely. The Court held that the due process clauses of the Fifth and Fourteenth Amendments, which prohibit the federal government and the states, respectively, from depriving people “of life, liberty, or property, without due process of law,” guaranteed this freedom of contract. Because the Fifth Amendment applies to the federal government and the Fourteenth Amendment applies to states, the Court’s decision effectively struck down minimum wage laws everywhere.

The year before the Supreme Court issued its opinion in the Adkins case, Witte accepted the position of chief of the Wisconsin Legislative Reference Library, which required him to research and draft legislation, and Altmeyer took over Witte’s position as secretary of the State Industrial Commission. The new job caused Altmeyer to travel frequently to Washington, D.C., as well as to conferences where he met colleagues from other state governments. His counterpart in New York was Frances Perkins. When Al Smith had become governor of New York in 1918, he had appointed Perkins to be the first woman to serve on the New York State Industrial Board.

In 1926, Smith appointed Perkins to the position of chairman of the board. Two years after that, on November 8, 1928, as Smith met defeat in his run to be president, Franklin Roosevelt became governor of New York. He appointed Perkins to be his industrial commissioner, the top position in the state’s Labor Department, where she remained for four years.

Then, in late February 1933, Roosevelt’s secretary called Perkins and asked her to come to Roosevelt’s New York City home at 8:00 p.m. That evening, the newly elected President of the United States invited Perkins to become his secretary of labor. In accepting, she became the first woman cabinet officer in the history of the United States.

Perkins moved to Washington and contacted her colleague from Wisconsin, Arthur Altmeyer, who agreed to join her at the Department of Labor. The legacy of John Commons, in the person of Arthur Altmeyer, traveled from the shores of Lake Mendota in Madison to the banks of the Potomac and the New Deal.

Notes

Page 9: “could not fit himself”

[John R. Commons, Myself (New York: Macmillan, 1934), pp. 11, 38.]

Page 12: “any man who honorably wore the federal”

[Donald Bruce Johnson and Kirk H. Porter, National Party Platforms 1840–1972 (Urbana: University of Illinois Press, 1973), p. 82.]

Page 12: “in the third story of a rattle-shack”

[Commons, Myself, p. 43.]

Page 13: “born again...after five”

[Ibid, p. 95.]

Page 14: “Curious isn’t it”

[Ibid, p. 139.]

Page 15: “encourag[ing] the study of labor”

[David A. Moss, Socializing Security (Cambridge, MA: Harvard University Press, 1996), p. 12.]

Page 16: “that I was going to go under Professor”

[Larry DeWitt, Never a Finished Thing: A Brief Biography of Arthur Joseph Altmeyer—The Man FDR Called “Mr. Social Security,” Chapter 1, The “Wisconsin World View,” Social Security Administration website, http://www.ssa.gov/history/bioaja.html.]

Chapter 3

Essential Insurance, Poor Welfare

Not quite spring but not still winter, Washington was cold and blustery on that eventful Saturday, March 4, 1933, when the thirty-second President of the United States was to be inaugurated. Dark clouds sporadically released icy cold rain on the spectators wrapped in blankets and overcoats for protection against the raw, gusty day. A half million citizens, hoping to get a glimpse of their new president, lined Pennsylvania Avenue, crammed onto the temporary bleachers, or pressed against the ropes that were retrieved from storage and set up every four years. Thousands of other onlookers, packed in on all sides, were gathered in front of the steps of the east portico of the domed Capitol building, where a columned platform had been erected. American flags and red, white, and blue bunting were everywhere.