Tuesday, February 01, 2011

Social Security: not welfare, but a poverty reduction program

Nancy J. Altman's The Battle for Social Security is not a gripping book; I doubt if anyone would find it a page-turner. Written in 2005 in response to President George W. Bush's (unsuccessful) attempt to privatize the federal program, it is both a history of the policy and a set of arguments for its efficacy. Dull stuff you may be thinking and I wouldn't pretend I thought differently as I waded through it.

But nonetheless, Altman's volume has moved my thinking as much as any discussion of policy that I've ever read. I will be sharing some of that in a series of bite-sized posts.

Because Social Security is simply a fact of U.S. life, we tend to think we know what it is. But do we? I didn't really. Here's the central expression of what I didn't really know as Altman lays it out:

Welfare programs are designed for people who are already poor. Social insurance prevents workers from becoming poor in the first place.

Unpacked, that's the subject of the book. Social Security is an insurance program administered by the federal government that we pay for out of our earnings. It is designed to reduce poverty among old people. It's not welfare, not a charitable hand-out, because what we receive is related to the amount we've paid in over the years under FICA, alongside our taxes.

Do you know what "FICA" stands for? I didn't.

Although most Americans tend to refer to the payments by the act's acronym, FICA, it is good to pause and reflect on the name of the statute chosen in that era before spin doctors: the Federal Insurance Contributions Act.

Social Security is old age insurance we buy through the federal government.

Because at the time of its enactment far more citizens understood that idea (it's less necessary today to understand something we take for granted), it is enlightening to realize that when the program was introduced in Congress in 1935, politicians competed to be sponsors. As is still often the case with our legislators, their antics were a little silly.

The Ways and Means Committee was scheduled to hold its first hearing on January 22, five days after the bill had been introduced. When the committee learned that the Senate Finance Committee had also scheduled its first hearing on that day, it hastily moved up its start by one day, so that it could be on record first.

Not that there was no opposition. Many Republicans (though not all) were rabid enough in rejecting the act to satisfy today's Tea Party know-nothings. Choice tidbits from their "arguments" (via Altman) are reproduced here.

Medicare was added in the 1960s when President Johnson had momentary huge Democratic majorities. I had not realized how central to his predecessor's agenda the medical program was. Kennedy was not hesitant to come out swinging when a Medicare bill failed in 1962.

An hour after the vote, President Kennedy staged a televised press conference, where he decried that "this is a most serious defeat for every American family." He pointed out, "Nearly all the Republicans and a handful of Democrats joined with them to give us today's setback." He closed by forcefully urging "I hope that we will return in November a Congress that will support a program like Medical Care for the Aged....With your support in November, this bill will pass in 1963."

We could use a little more of such Presidential advocacy for his policies from the preset incumbent. Medical coverage for old people was a political issue politicians were eager to run on in 1962. Medicare as later passed was also insurance, not welfare.

...the bill that emerged from committee contained Medicare Part A, a mandatory federal program financed by employer and employee payroll contributions and covering hospital costs; Medicare Part B, a voluntary federal program financed by premiums and general revenue and covering physician services...

Medical coverage for the non-elderly indigent (Medicaid) was passed at the same time and was to be funded out of general revenue, but federal Medicare was conceived as insurance that beneficiaries largely funded themselves, like Social Security. Inflation of medical costs (profits?) has undermined this principle, but people on Medicare Part B still pay about $100 a month for coverage, usually deducted from Social Security payments.

Among the matters I learned from Altman's book was one that seems almost incomprehensible in the current overheated political environment. Until the 1980s, the sort of policy experts who oversaw the creation of Social Security and Medicare thought it was healthy that Congress frequently revisited the design of these programs. Hearings and briefings from experts were a chance to inform Congresspeople about the issues and they usually enacted improvements. ... Nowadays it seems rare to encounter politicians, even Democratic supporters of Social Security, who we can trust to understand the program. I'll go into more on that in my next Social Security post.

To be continued ...

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