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1936 › Franklin D. Roosevelt (Democratic) › How to finance old-age and unemployment insurance (contributory reserve vs. pay-as-you-go)
Defense of the payroll-tax financing: the employer pays an equal share and the reserves are safe
defense_of_recordspecific_pledgecandidate_directevidence A Relief, Welfare & Social InsuranceTaxation similar solutions · similar reasoning
Solution
Keep the contributory old-age insurance and the employer-financed unemployment insurance as enacted; reject the 'pay-envelope' claim that workers bear the whole cost or that reserves will be diverted.
Rationale
For every dollar the worker pays the employer pays another, and unemployment insurance premiums are paid entirely by the employer; suggesting a future Congress would steal the reserves 'attack[s] the integrity and honor of American Government itself.'
The 1939 amendments moved the system toward pay-as-you-go and the reserve was in fact held as Treasury obligations, as Landon had said; see followthrough.
Statements (3)
The fund necessary to provide that security is not collected solely from workers. The employer, too, pays an equal share. And both shares--yours and the employer's--are being held for the sole benefit of the worker himself.
They tell the worker his wage will be reduced by a contribution to some vague form of old-age insurance. They carefully conceal from him the fact that for every dollar of premium he pays for that insurance, the employer pays another dollar. That omission is deceit.
But they are guilty of more than deceit. When they imply that the reserves thus created against both these policies will be stolen by some future Congress, diverted to some wholly foreign purpose, they attack the integrity and honor of American Government itself.
Follow-through
partialcontested among sources
The payroll-tax structure survived (Helvering v. Davis upheld it in 1937), but the 1939 amendments conceded much of Landon's critique: the 1937 rate was frozen at 1 percent through 1942, the 'Old-Age Reserve Account' was replaced by a trust fund, and the system moved toward pay-as-you-go while early benefits were enlarged.
Mechanisms
| Date | Type | Name | Effect | Consistent? | Source |
|---|---|---|---|---|---|
| 1939-08-10 | statute | Social Security Act Amendments of 1939 (financing changes) | Reserve account replaced by a trust fund; scheduled tax increase postponed.The Old-Age Reserve Account previously established under §201 of the Act was replaced by the Federal Old-Age and Survivors Insurance Trust Fund, administered by a Board of Trustees. | partly | Social Security Act - Wikipedia |
Assessments
Roosevelt presented the 1939 changes as strengthening, not retreat.
we must expect a great program of social legislation, such as is represented in the Social Security Act, to be improved and strengthened in the light of additional experience and understanding.
The reserve the President had defended in 1936 was abolished in favor of a trust fund and a frozen tax rate -- the substance of the 'I.O.U.' criticism.
Reception (3)
Upstate New York workers, discovering the payroll tax, were shifting to Landon in an eleventh-hour protest; the administration's reply that employers also pay made matters worse once workers learned the employer rate would rise to 3 percent.
It is an eleventh hour shift to Lan don as a protest by laboring men who are discover ing what the New Deal means to them concretely In terms of the new pay roll tax.
Workers' pay will be docked to build 'a phantom reserve fund' any Congress can spend; the President will not say whether workers get back what they put in.
they will have their pay docked for the purpose of building up a phantom reserve fund--a fund that any future Congress can spend any time it sees lit and lor any purpose It sees fit.
Post-election judgment that the pay-envelope campaign, the campaign's 'sensation', failed to move the labor vote.
Ijast week Its local membership* through alliances with the New Deal and Federal political machines, did not divide the labor vote between the two parties, but marshaled from 80 to 90 per cent on the Roosevelt side.
Other positions on this issue
- Repeal the compulsory old-age insurance plan; pay every needy citizen over 65 a pension from a direct, widely distributed tax — Alf Landon, 1936 specific_pledge
- The Social Security Act is 'unworkable and unsound' -- 'lip service to security'; a Republican administration would offer its own legislation — Frank Knox, 1936 directional_stance
1936-fdr-defend-social-security-financing · created by claude-fable-5-1 · review: unreviewed