National Affairs: What Price Security?

One day this week, if he can draw up his specifications in time, Franklin Roosevelt will send a message to the Capitol asking Congress to make one of the wildest, brightest New Deal dreams come true. He will ask for a law to pour all Social Security payments in one big Federal pool, also to extend its benefits to some 27,000,000 household servants, farm laborers and migratory workers who are not now covered.

Immediate purpose of the President’s plan: to help check inflation, by draining off a few more billions from workers’ payrolls, cutting consumer purchasing power. A long-range object is to create a $5,000,000,000 Social Security fund to soften the effect of a possible post-war depression. But the ultimate aim is the object which lies near to the heart of the New Deal: to banish individual economic insecurity in the U.S.

Social Security, in its present form, is a coin with several faces. The only part of the program which is wholly administered by the Federal Government is the old-age insurance fund, which now covers about 40,000,000 workers in organized industry. Employe and employer each contribute 1% of the worker’s pay to this fund.

Unemployment insurance, administered jointly by the Federal Government and the States, now covers about 32,000,000 workers. For this fund the employer pays the Government a tax of 3% on the worker’s salary. A small part of this tax (1/10) is remitted in States which levy on the employer for their own insurance funds. (Some States tax the employe too.) There are several minor benefits in the Social Security Act.

Since the Act went into effect, old-age insurance has yielded the Government $2,740,602,058. Of this sum, $114,840,215 (about 5%) has been paid out in benefits. Of the $2,582,230,805 which remained in the fund at the end of August (after administrative costs were deducted), all but $221,630,805 was invested by the Treasury in its own securities, was used by the Government to pay expenses. Into the unemployment pool, employers have paid $4,245,246,801. Of this, $1,757,230,769 (about 42%) has been paid back to workers in compensation. Thus between them these two funds have already provided $5,000,000,000 of “deflation”—far more than offset by Government deficit spending.

Last year, collections for the two funds amounted to $1,500,000,000. This year they are expected to reach nearly $2,000,000,000. New Dealers would like to boost this levy to $5,000,000,000 a year, put it all at the disposal of the Treasury, use it to pay for defense and figure on pouring money out to labor during the post-war depression. Some of the ways in which they would broaden the Act:

> By adding 11,500,000 farmers and farm laborers, 4,000,000 Government workers (Federal, State and local), 3,000,000 day laborers, 2,500,000 servants, 6,000,000 miscellaneous workers to the rolls.

> By increasing old-age payments to 6% (3% each for employer and employe) now, instead of over a period of years, as provided in the Act.

> By taking over all unemployment payments, standardizing benefits in the 48 States. Under the present law the Government, out of the tax on payrolls, matches dollar for dollar (up to $20 a month) the unemployment benefit paid by the State. In California an unemployed worker gets a total of $37.82 a month. In South Carolina he gets only $7.49.

> By taking over home relief from the States.

> By providing disability benefits and medical treatment for people on relief. Social Security Chairman Arthur J. Altmeyer calls this “the most important gap in the present framework of Social Security.”

To make these increased benefits possible, Congress will have to raise substantially the tax on payrolls—now 5% for employer and employe together. Upping old-age payments another 4%, as suggested by Treasury Secretary Henry Morgenthau (see p. 77), would bring the total tax to 9%: 3% paid by the worker, 6% by the employer. Other proposals suggested by various White House advisers might raise the tax to as much as 15% or 20%, might increase the employe’s load more than the employer’s. With this burden added to all his other taxes (see p. 16), the worker would have precious little money left to fritter away.

But Congress, still groaning from the $13,000,000,000 tax egg it laid a few weeks ago, is not anxious to start brooding on Social Security taxes. Last week President Roosevelt sent for hot-tempered old Robert Lee (“Muley”) Doughton, mountaineer chairman of the House Ways & Means Committee. Still smarting from the slap in the face that Franklin Roosevelt gave him over the tax bill (TIME, Aug. 11), Muley Doughton jammed his battered black planter’s hat down on his bald dome, stumped around to the White House.

The President greeted him with the melting charm that only a Roosevelt can muster, touched his heart by inquiring about Mrs. Doughton’s health, asked how the Doughton beef steers were getting on at Laurel Springs, N.C. Then he mentioned the Social Security message he was preparing for Congress, topped it off with some breezy chitchat about world affairs. Mountaineer Doughton went away mollified but not wholly convinced. He thought the President would probably see part of his New Deal dream made flesh, but not his whole heart’s desire.