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Social security: the early years. William Bedford, Pilgrim leader, Plymouth, 1620.

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Social security: the early years


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william bedford pilgrim leader plymouth 1620
William Bedford, Pilgrim leader, Plymouth, 1620
  • …in ye times of most distress…spared no pains night nor day, but with abundance of toyle and hazard of their owne health, fetched them woode, made them fires, drest them meat, made their beads, washed their lothsome cloaths, cloathed them and uncloathed them; in a word, did all ye homly & necessary offices for them.
scots charitable society 1684
Scots’ Charitable Society, 1684
  • No prophane or diselut person, or openly scandalous shall have any pairt or portione herein.
early 1700s theistic view of chairty
Early 1700s: Theistic view of chairty
  • God established principles, but also is a personal intervener
  • The better-off should know the poor individually
  • The most important need for the poor was to learn of God
  • It is important, at times, to withhold charity
cotton mather 1698
Cotton Mather, 1698
  • “Instead of exhorting you to augment your charity, I will rather utter an exhortation…that you may not abuse your charity by misapplying it.
1753 charles chauncey re 2 thessalonians 3 10
1753, Charles Chaunceyre: 2 Thessalonians 3:10
  • The Command in my Text is plainly a Statute of Heaven, tying up your hands from Charitable Distributions to the slothful poor. And, so far as it appears to me, it would be an evident Breach of the Law of the Gospel, as well as of Nature, to bestow upon those the Bread of Charity, who might earn and eat their own bread, if they did not shamefully idle away their own Time.
1833 ohio law and poorhouses
1833 Ohio Law and Poorhouses
  • If any person shall refuse to be lodged, kept, maintained and employed in such house or houses, he or she shall not be entitled to receive relief from the overseers during such refusal.
the society for the prevention of pauperism 1824 10 causes of poverty
Ignorance

Idleness

Intemperance

Want of economy

Imprudent and hasty marriages

Lotteries

Pawnbrokers

Brothels

Gambling houses

Charities that gave away money too freely

The Society for the Prevention of Pauperism, 1824: 10 Causes of Poverty
opposition to ss
Opposition to SS
  • IT WAS WELFARE
the depression
The Depression
  • prior to 1930, you worked until savings carried you through retirement.
  • family was a major source of support.
  • almshouse (poorhouse) where there was no family
  • veterans benefits
  • private market old folks homes, insurance
  • private pension plans: 15% of workforce by 1930
dr francis e townsend
Dr. Francis E. Townsend:
  • Savior of the elderly?
    • $200 per month per over-60, must be spent
    • financed by “transactions tax”
birth of social security
Birth of Social Security
  • Je 8, 1934
    • FDR charged Congress to: “promote the general welfare”
  • greater focus on unemployment than old-age income
  • 1-17-35, FDR submits OA dependency as top priority
  • signed into law on 8-14-35
who pays
Who pays?
  • Half employee, half employer
  • tax incidence
  • Why?
    • FDR was afraid we would lose SS after the depression!
basic features
Basic Features
  • Title I was assistance (Welfare), administered on state level
  • Title II was insurance: funded by 1% wage by ee, matched by er.
  • American style (equity): contribute more, receive more, but progressive structure
  • Minimize redistribution
basic features cont
Basic Features (cont.)
  • Title III: unemployment compensation, administered by states
  • The deserving poor
    • Title IV: aid to dependent children
    • Title X: relief to the blind
    • Title V: crippled children, medical research
re vision
Re-Vision
  • Benefits not scheduled to begin until 1-1-1942
  • 1937: great public concern that the fund was too large!
1939 amendments
1939 amendments
  • emphasis on “social adequacy” rather than “equity”
  • benefits payable in 1-1-40
  • benefits =f(average (not total) earnings) = increased benefit level
  • benefits payable even if some earnings (<$15 per month)
  • Survivors benefits!
1939 amendments cont
1939 amendments (cont.)
  • intergenerational transfers and 3 legged stool.
  • wife receives either her benefit, or half of the husband’s benefit at age 65
current program
Current Program
  • OASDHI
    • Old Age
    • Survivor
    • Disability
    • Health
    • Insurance
  • No welfare
  • No unemployment
will benefits be there
Will benefits be there?
  • nature of the problem
    • what are the funds?
    • what are the demographics?
1983 reforms
1983 reforms
  • increased retirement age
    • 67 for you!
  • some benefits taxable
  • include federal employees
  • interfund borrowing
reform proposals
Reform proposals
  • Decrease benefits
    • raise age
    • tax benefits
  • Raise revenues
    • no cap on taxes
    • raise rates
    • invest at market rates
reform proposals continued
Reform Proposals (continued)
  • Privatization
    • Background
      • Funds currently invested in Treasury Securities
      • Return = +f(risk)
    • Proposed
      • Let SSA invest in corporate bonds
      • Let individuals invest their own retirement
        • Pay attention to general equilibrium models!