September 4, 1935 ]

The Nation

261

Social Security Under the New Deal

By ABRAHAM EPSTEIN

,YE social-security bill was signed by the President on

August 14 with a succession of pens andunder
flood lights-as if to make up for the previous
lack

of publicityaccorded it, Never before in the history

of this
bill of suchgreat scope and
oranyothercountryhasa
import been passed with public opinion in such a daze about
the issues. Unfortunatelythepresentlaw
seems doomed
from the start by its complex, slovenly, and mangled character. T h e subject of social insurance, in which economics,
politics,
statistics, social policy, trade
unionism,
wages, and industrial production are intertwined, was barely
discussed inthe United States prior to the Presidents
message to Congress in June, 1934, when he promised to undertake the great task of furthering the security of the citizen
and his family through social insurance. For more than half
a century social-insurance programshave been keen political issues throughoutEurope,butheretherehasnot
been
evenacademic
interest;ournewspapersgavethesubject
no noticeuntilayear
ago andhavegivenitverylittle
since. Everywhere
abroad
social-insurance
measures
have
been
championed
chiefly by organized
labor.
O u r labor
movementhaseither
opposed themorgivenhalf-hearted
and uninformed support.
N o wonder,therefore,thatthePresidents
speech of
June 8, 1934, fell like a bombshell on the country. T h e most
ardent advocates of social insurance in America were bewildered by its boldness and political audacity. Even more
deluding was the almost universal approval which greeted the
speech. Everybody jumped on the social-security bandwagon.
Governors
made
their
it campaign
issues. Congressmen
it a
spoke for it. Candidatesforstatelegislaturesmade
plank in their platforms. Even candidates for city
councils
andsheriffs offices felt compelled todeclare themselves in
favor of social security. And when, o n November 6, 1931,
the American electorate gave the President the
most Democratic
Congress
in
two
generations,
hopes were raised
sky-high.
Likeallnine
days wonders,itwastoo
good to be
true. T h e President spoke of social security,andwho
could be against that?True,he
did mentionkocial int o discover themeaning
of so
surance,butwhybother
strange a term?
Of several hundred articles and newspaper
stories on social security zppearing during the past year, less
thana score attemptedan analysis of social insurance. S o cialsecuritywasidentifiedwithold-age
pensions, foran
ardent
twenty-year
campaign
for old-age
security
had
broughtaboutatremendouspopulardemandfor
old-age
protection. More than half the states had actually adopted
pension laws. T h i s movementhadgainedsuchpopularity
that it attracted a galaxy of nondescript promoters rangiog
of Eagles t o the messianic Dr.
fromtheFraternalOrder
Townsend.Thecountrywasthusclamoringforold-age
pensions. ButtheAdministration,
symbolized by Madame
SecretaryPerkins, seemed for awhilealmosttotallyunbeen principally
aware of this uproar. M i s s Perkinshad
concerned with theproblem
of unemploymentinsurance.

As late as November 14, 1934, there was an attempt to confine thefederalprogrzmtounemploymentinsurance.

At
thattimethePresident,ina
speech admittedlyprepared
underMissPerkinsssupervision,said,
I donotknow
whether this is the time for any federal legislation on oldage security.
T h i s conflict in basic objectivesmarkedonlythe
beginning of the confusion. Difficultieswereinherentinthe
very make-up of the Presidents Committee on Economic Security. For increating a committee to studythissubject
andpreparelegislation,thePresident,instead
of setting
up an expert commission, intrustedthesubjectto
five of
hisbusiest Cabinet-members,alreadydriventodistraction
by themanytasks
of theNewDealprogram.
T h e responsibilityforformulatingthe
concise andcomprehensive
legislation fell naturally upon the chairman
of the committee, Miss Perkins.Forone
reason oranotherMissPerlrins ignored
the
recognized
American
students
of the
circus
was
staged
in
Washington
problem. A one-day
on November 14 withover
300 expertsinattendance
and with theformal speeches so arrangedastofrustrate
one another. A staff composed largely of complete novices in
social insuranceor of persons connectedwith some fringes
of theproblemwasrecruitedto
advise theCabinet coma TechnicalAdvisoryCommittee
mittee.Therewerealso
of variousgovernment office-holders, some . fourteen other
committees,andan.AdvisoryCouncil
of prominentrepresentatives of the public, employers, and workers.
T h e direction of the committees staff came exclusively
fromthechairman
of theCabinetcommittee.SinceMiss
Perkinshadnoparticular
panacea for old-agedependency,
the staff was comparatively free to work out this
phase of
the program. Had their recommendations been followed, we
of meeting the probmight have had a constructive method
lem of old-age dependency. ButMissPerkinshadapalliative for unemployment. Early in
1934 shesponsoredthe
of unWagner-Lewis bill providing for the encouragement
employmentinsurancethroughthe
tax-offset method. T h i s
involved a federal tax on
employers payrolls throughout the
nation,to be remittedtoemployerswhopaidaduplicating
taxunderstateunemployment-insurance
systems.
When,afterthe
nations reactiontothePresidents
speech of November 14, it became clearthatactionon
old-agesecuritycouldnot
bepostponed,old-agepensions
were added to the security program. Since the old opponents
of laborlegidationwere
busy fightingthe NRA and other
Mew Dea! activities, theiroppositionto
the measure was
palsied. Theywere also convincedthatitwas
useless to
fighttheswellingtide
of enthusiasmfor old-agepensions,
and they were not much worried about the cumbersome taxoffset methodproposed,
since theyfeltthiswouldeither
be heldunconstitutional or prove so complicatedand irksomeas to nullify itself. There remained only the question
of healthinsurance.HerethereactionaryAmericanMedical Association got busy at once and succeeded in suppressing any suggestion for health insurance made by the Cabinet

262

[Vol. 141, No. 3661

T h e Nation

Committee, as well as the committees staff report on health

insurance, promised for March 15, 1935.
T h e Administration hadprobablyneverdreamedthat
itwouldhaveto
domorefor
old-agesecurity than establishasystem
of federal subsidies tostatesenactingstandardized pension laws. Such bills
had been before Congress
for many years, andcommittees
intwo
successive Congresses had reported them favorably. T h i s legislation would
have passed the Seventy-thirdCongresshad
not the President promisedamorecomprehensive
programfor
1935.
But when the Cabinet
committee learned of the future expense invoIved-considerably
exaggerated by the staff
because of unfamiliarity with the problern-it indorsed the
logicalplan of institutingsimultaneouslya
system of contributory compulsory old-age insurance. Althoughhandicapped by a total lack of information on a subject requiring
years of study, the staff did draft areasonableplan,which
was approved by the Cabinet committee and incorporated in
th e original bill.
This plan pro.vided for payroll contributions from
employersand employees t o reach 2% per cent each within
thenexttwenty
years. Pensions toallinsuredwereto
begin in 1942 out of money borrowed from the accumulated
fund.Afterthirtyor
thirty-fiveyears thefederal governmentwasto
reimburse theloan.ButwhenthePresident
learned thatthefederalgovernmentwouldowethe.fund
morethana
billiondollars
by 1970 he ordered his Secretary of the Treasury-amember
of the Cabinet committee, who apparently had approved this scheme before it was
introduced-to
insist thatunderno
circumstances would
thefederalgovernment
assume any financialresponsibility.
T h e plan must be made self-sustaining.
UnderWhiteHouse
pressuretheHousecommittee
stepped up the contributions to a total of 6 per cent within
twelve
years.
T h i s transfers
the
entire
burden
of oldage dependency after 1942 to the backs of the young workers andtheir employers, to the exclusion of thewell-to-do,
who have shared in the maintenance
of the aged poor since
the establishment of the Elizabethan poor-lawsystem three
centuries ago. Since industrywillmake
every effortto
pass on its levy to the
consumers, it means that the young
employees-in their dual role of workers and consumerswillbearthemajor
cost of theaccumulatedproblem
of
old-age dependency. No othernationhaseverput into
operationaplan
of thisnaturewithoutgovernmentcontributions derived from the higher-income groups.
T h e old-age contributory insurance plan is fraught with
many other dangers. Enormous reserves, estimated at more
than $10,000,000,000 by 1948 and at more than $40,000,000,000 in 1980, arecontemplated.
Thesewillcreate
a
stupendousproblem of investment.Experienceeverywhere
indicates that politicians willhardly be able to keep their
hands off such easy money. T h e cold-storaging of so much
sorely needed purchasing power no< only frustrates the expressed aims of theNewDealbut
maydefinitelyhamper
recovery. T h e constitutionality of theentire scheme is also
extremelydoubtful.
In thematter
of unemploymentinsurancethe
staffs
taskwas evenmoreonerous.
Despiteviolent criticism no
- ~-~ other--plan- except-thetax-offset method--was-countenanced,W h en the staffs expert on unemploymentinsurance opposed
thisplanas
ineffective, he waspromptly dismissed. H i s

report was never published. Every effort was artfully made

to have the Advisory Council indorse the tax-offset method.
This body also was ignored and dismissed as of no further
use when, aftercareful deliberation, alltherepresentatives
of theemployers and of organizedlaborand
some of the
outstanding members of the public decided by majority vote
againstthisplan.
Onlythe clumsy, duplicating tax-offset
method permittingindividual
company reserves andmaking possible a miscellany of forty-eightcontradictorystate
lawswithgraveconstitutionaldi6cultieswaspermittedto
emerge.
The work of theCabinet committeewasshroudedin
mystery untilthe
day the bill wasintroduced.
It was
prepared in great haste by an inexperienced young Harvard
graduatewithoutconsultationeitherwithstudentsofthe
problem or
the
experienced Congressional
draftsmen.
It
is even doubtfulwhetherallthe
members of theCabinet
committee
examined
it.
So incompetently
and
loosely
dTawn was the bill that its introduction
caused a sensation.
Although it was completelyunintelligible,Administration
impatiencerushedCongressi6nalhearings
at which official
spokesmen attempted to explain away the meaninglessness of
, the drafted bill. Administration
spokesmen consumedmore
than 1,000 of thenearly 2,500 pages of testimony inboth
houses. Only after these spokesmen werethroughwere
others who persistedintheir
attempts allowed t o speak.
T h e HouseWaysandMeansCommitteeattempted
to
limit all outside witnesses to five minutes and on one
occasion forcibly ejected a Communist spokesman when he overstepped thetime limit-a
procedureunknowninCongress
in many years.
The House committeecould not proceed with the bill
as presented and ordered its draftsmen to make it intelligible.
Thelatter,unable
properly andconstitutionallytoretain
theunernployment-insurance provisions permittingall kinds
of individual schemes, limited all state plans to the
pooled
fund. Angered by the slipshod job presented to it, the committeetook the SocialSecurityAdministrationBoardout
of theDepartment
of Labor andmadeitindependent.
Outside of the contributory old-ageinsuranceplaninsisted
upon by theWhiteHouseandthe
questionabletax-offset
scheme theHouse bill wassound in itsfederalgrantsto
states for the aged,dependentmothers,andchildwelfare.
T h e proponents of social insurancewereencouraged
by theimprovementsmadein
theHouse.
They looked
forwardtothe
removal of otherfaultyfeaturesinthe
Senate. But thiswasnotto
be. T h e Administration was
insistent, and few members in either house had time to master thelengthyand complicated billcovering tendifferent
subjects. Convinced thattheAdministrations
choice was
all or nothing,
theymade up their mind to vote for
all.
Thus during five full days of Senate discussion n o t even
half acolumn of the Congressional Record wasdevoted to
the ptodigious andunprecedented scheme of unemployment
insurance,outside of explqnatoryremarks by the committee
chairman and Senator Wagner, the sponsor of the bill. T h e
economically unwise and socially menacing contributory oldape insuranceplanwas
given less thana column inthehundreds of pages of Congressional debate, and that only toward
che--ver-y- -end.-.-Qnlg-its ronstitutionality.-was .thoro.ughly- ._
discussed. SenatorafterSenator
declared that this part of
the bill is unconstitutional but no onemade
an effort to
I

September 4, 1935I

T h e Nation
~

- .-

amend itto avoid nullification. Duringthe debateonthe

Clark amendment to exempt private
pension schemes from
contributoryinsurance a number of Senatorspointedout
that thiswouldfurther
complicate theconstitutionaldi5culties. T o this Senator Clark replied in typical vein: The
constitutionality of the proposed act is already so doubtful
that it would seem to me to be a work of supererogation to
bringupthe question of constitutionalityinregard
t o the
pendingamendment.
T h e Senate bill not only differed much from
the original proposal but destroyedeveryimprovementmade
in
the House. T h e Clarkameudmentfurtherruinedtheoldage contributory plan.
T h e House improvements
on
unemployment insurance were wiped out
by restoring most
of theoriginal
questionable provisions. Even the
simple
subsidy panswereundermined
by theRussellamendment
granting federal pensions- instateswhichhave
no pensions
as yet, therebypitchingtheentiresubjectintothe
political
arenaandhalting
state action for old-agesecurity.
At the
insistence of theHouse
conferees theClarkamendment
waseliminatedandthe
Social SecurityBoard,whichthe
Senxtehadreinstatedin
theDepartment
of Labor,was
again made independent.
The United States thus possesses a new Social Security

_
.-_

263

Act,just as a shortwhile ago it also possessed a National

IndustrialRecoveryAct
and aRailroadRetirementAct.
Its fatenow lies withthe courts. T h e federalgrants for
pensions in old age, to dependent mothers, to the blind, and
to varied child-welfare and public-health activities
are sound
andconstitutional.
Theymarktruly
advancedsteps
and
genuine progress. T h e unemployment-insurance
and
oldage contributoryinsuranceplans,
however, areadrninistratively and socially unwise.
T h e effect this billmayhave
on the American socialinsurance
movement
is of vital importance.
Social
insurance is recognizedtodayasoffering
theonlypracticable
instrumentformeetingthe
problem of insecurityarising
from modern industrial development. It is used in communist as well as capitalistand
fascistcountries.
Its chief
asset liesin its powerto distribute the costover all groups
in society-the rich as well as the poor. , But in placing the
entile burden of insecurity upon theworkersandindustry,
tothe exclusion of the well-to-do in thenation, e the presentsocid-securitybillviolatesthe
most essential modern
principles of socialinsurance,
There is also gravedanger
thattheadministrative
perplexities inherent in the bill, to
say nothing of possible court nullification, may deal a death
blow to the entire movement in the United States.

By EMIL LENGYEL
Berlin, August 15
ERMAN criminal law has been one of the pet ob-

official commentators of theamendmenthavepointedout,

thelawandits
accessory stipulatipnsmake
it incumbent
upon theGermanjudge
to accept fullythepartyline
sf
jects of Nazi vociferations. TheNazijournals
havepointed
outtheanomaly
of livingunder
a National Socialism. If he should fail to see thelight according to Nazi wishes, he may be promptly called to order
heroic Teutonic regime while at the same time having to
is given theright to appeal
apply a system of laws conceived by such French sob-sisters by theStateAttorney,who
as the Encyclopedists and Rousseau. Evenimpartial
ob- against judicial decisions that do not stretch the law in such
servers saw the inconsistency of protecting the defendants in, a way as to convict a defendant.
criminal trials with constitutional safeguards while exposing
It was a red-letter dqy in the history of mankind when
the rest of Germany to unmitigated tyranny. This anomaly the legal axiom, NOpunishment without law (nulla goena
is now at an end, and if it should occur to some Nazi leaders sine Zege), became the keystone of thejudicialstructure.
to stage another Reichstag fire, they could be sure that the
Under systems based on it the citizen knows what actions the
defendants would be condemned whatever the evidence.
state considers offenses againstthe community. T h e principle which the Nazi law announces is expressed in theaxiom,
T h e change
was
effected throughthePenalCode
law (nullurn crimen sine p o e n a ) .
Amendment Law, whichwaspromulgated
onJuly 5 and NO crimewithout
will go into effect on September 1. It has been described by Under the oId system the defendant was supposed to be innocent until found guilty; under the new
he may be found
Dr. HansFrank,President
of the Academy forGerman
Law and Reichsminister WithoutPortfolio, as revolution- guilty even if he hasbroken no law fitting the case. T h e
legal means to
ary. T h el a w codifies Nazi lynchjustice,divorces
juris- newlaw, in short, gives the Nazi state the
prudence from impartiality, and makes the National Socialist crush political opposition of every imaginable kind.
Already the law hascast its shadow over the criminal
TYeltanschauung theguidingstar
of criminaltrials.
This
revolution in German law is accomplished, first, by making courts of the Reich, and judges anxious to please the regime
io apply its principles. T o whattyrannyit
thejudgesentirelysubservienttoNazi
ideology and, sec- havebegun
ond, by freeingthemfromthetrammels
of ,objective ap- mayleadcan be illustrated by a few recent cases. One of
them, reported in the
ultra-Nazi Frankfurter Yolksblatt, is
plication of the law. Article I of the amendment provides:
Punishment will be meted out to anyone who commits a particularly noteworthy because of the judges comments.
deed madepunishable by lawor deservingpunishment in
An Aryan of Wetzlar wanted to marry a Jewess who
accordance with the basic principles of the criminal code or
had been his sweetheartfor five years. H e applied tothe
soundpublicsentiment.
If no definite criminal law applies town registrar, who refused to marry them on the ground
to the deed, it must be punished in accordance with the law that as a National Socialist he considered suchmixed marthe basic ideas of which best fit it. As official and semi- riages harmful to the community. T h e -Aryan took his case
1