Social Security Part Two – The Birth of Social Security
By Christina Mae Olson, CFP®
By the early 1930’s there were more than 30 countries which had adopted some sort of social insurance program. Among them were Canada, Spain, Denmark, Norway, Iceland, Switzerland, Estonia, Latvia, Japan, Brazil and Australia. Some of these programs were voluntary while others were mandatory. Some were contributory (like our Social Security Insurance). Some required an income means test for recipients to qualify. Some countries extended their social insurance program to people with disabilities but many did not. The Social Security website has a great link that describes the various provisions in all of these foreign plans. Go to: http://www.ssa.gov/history/pre1935table2.html if you are interested in learning more.
In 1934, President Franklin D. Roosevelt established the Committee on Economic Security (CES). This committee was charged with evaluating the various foreign social security programs and making proposals for America’s plan. Barbara Nachetrieb Armstrong, a law professor and economist UC Berkeley, became the CES director. She had been the Executive Secretary of the Social Insurance Commission of California. Ms. Armstrong was one of only two women in her first year of law school at UC Berkeley in 1913 and was the first female professor at an accredited law school. She was married but widely rumored to be a lesbian. Her “best friend” was journalist Ernestine Black. Barbara and Ernestine were vacationing in Lake Tahoe (with Barbara’s husband) when Barbara received a telegram from President Roosevelt imploring her to join the CES. It was Ernestine that talked her into taking the job.
The CES divided into two factions – and one group favored what was called The Wisconsin Idea (I am not making this up). The group advocating The Wisconsin Idea wanted individual states to administer the new social insurance program. The other group wanted a national plan. At the time, Wisconsin was the most progressive state in terms of its social programs (remember our motto: FORWARD). UW Madison professor John Commons had advocated for the early Workers Compensation provisions and state funded old age pensions. He actually advocated the prevention of illness and accident to help bring down the cost of these so-called social insurance plans. Loss prevention and risk management grew to be major factors in the profitability of insurance companies thanks to John Commons. Secretary of Labor, Frances Perkins, the first woman in our country to serve on a President’s cabinet, was also on the CES. Ms. Perkins supported The Wisconsin Idea. I’m sure you all know by now that the national plan ultimately won the most support.
In January, 1935, the CES presented their proposal to President Roosevelt. The Social Security Act was signed into law on August 14, 1935. The Act created a plan to provide ongoing income to retired workers. This is what President Roosevelt said while signing the Act into law: "We can never insure one hundred percent of the population against one hundred percent of the hazards and vicissitudes of life, but we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age."
Next month I’ll get into more detail about how Social Security became the program we know now.
One of my references for this article is a school paper by Courtney Towle entitled: Barbara Nachetrieb Armstrong: A Driving Force Behind Social Security: http://womenslegalhistory.stanford.edu/papers/courtneytowle.pdf.
Chris Olson is a Certified Financial Planner™ practitioner with a fee-only private practice. You can reach her at 608-525-9818 or CMOney@centurytel.net.