Thursday, July 14, 2011

Social Tug of War

"The plan being drafted by Senate Minority Leader Mitch McConnell of Kentucky and Majority Leader Harry Reid of Nevada would lock in roughly $1.5 trillion in deficit reduction over the next ten years — a figure considerably smaller than Republican leaders or President Obama had been seeking."
- Lisa Mascaro, Chicago Tribune, today

The current wrangling over raising the debt ceiling, which has as its subtext the relative willingness to think about where the big social programs like Medicare and Social Security fit in the budget picture, made me wonder about the Social Security timeline in the context of its fiscal crisis:

  • January 29, 1932 The first State unemployment insurance law was enacted in Wisconsin
  • 1932 The American Federation of Labor endorsed social insurance.
  • May 18, 1933 The first significant use of the term "Social Security" came about when the American Association for Old-age Security became the American Association for Social Security.
  • June 29, 1934 The President created the Committee on Economic Security to study the problems relating to economic security and to make recommendations for a program of legislation. (This was Executive Order No. 6757.)
  • March 1, 1935 Congressman Frank Buck (Calif.) made the motion to change the name of the Economic Security Bill to the Social Security Bill. The motion was carried by a voice vote from the House Ways and Means Committee.
  • April 4, 1935 The Social Security Bill was introduced in the House of Representatives with a report. This bill (H.R. 7260) replaced the Economic Security Bill.
  • April 19, 1935 The Social Security Bill (H.R. 7260) was passed by the House of Representatives, 372 to 33 (25 not voting). Against were 13 Democrats, 18 Republicans and 2 Farm Labor.
  • May 13, 1935 The Social Security Bill (H.R. 7260) was reported out by the Senate Finance Committee with amendments, by a vote of 7 to 6. (Against, were 5 Republicans, 1 Democrat and there were 12 who did not vote.)
  • June 19, 1935 The Social Security Bill was passed in the Senate by a vote of 77 Yes, 6 No, and 12 Not Voting. 
  • August 17, 1936 An unemployed worker--Neils B. Ruud--in Madison, Wisconsin, received the first unemployment benefit check paid under a State law. The mount was $ chronology

So in four years we enacted a federal social welfare state, from the first local implementation to the first payout. The size of the act was not missed, despite the relative efficiency of its passage:

"One of FDR’s newspaper friends called the act 'a monumental achievement,' even as he 
complained that the benefit amounts were 'miserably inadequate.'”

And it appears there was a strategy in place to deal with a fractious Congress:

"In the end, we will see that FDR went around Congress, which was too unpredictable and 
whose review process might have foiled him." 

- (both quotes) The Revolution of 1935: The Secret History of Social Security 
By Gregory Bresiger

Contrast this timeline in the avoidance of what appears to be a profound economic risk, the defaulting on national debt:

  • 6/19 - "The closer America gets to Aug. 2 without resolving its debt deadlock, the more that bankers, investors, money managers, foreign governments and others will begin to think about the unthinkable." - The Kansas City Star
  • 7/6 - "Boehner said in a statement Wednesday afternoon. “His administration has been burying our kids and grandkids in new debt and offered no plan to rein in spending. " - Felicia Sonmez, Roz Helderman and Lori Montgomery,Washington Post, Published: July 6
  • Today - "In a marked shift, Republicans are now willing to close some tax loopholes as part of a final deal to raise the nation’s legal borrowing limit, House Majority Leader Eric Cantor (R-Va.) said Wednesday." -Lisa Mascaro, Chicago Tribune

As I consider all this, I wonder yet again about the business of social welfare structures. Republicans more than ever, in the classic American individualist tradition, ideologically oppose such things, though they recognize dealing with them is consistently political suicide; Democrats remain believers, but don't have a plan for how to deal with the imbalance in funding, simply refuse to consider adjustments like later coverage or lower rates.

Is there a point to imposing a survival structure on those who are most ill, or unwise, or unlucky? And I think in considering that question, it would make sense to leave aside for a moment the question of the morality of it, and focus solely on whether it is financially prudent, or even more efficient than the alternative. Considering, for instance, the "Hoovervilles" that dotted the Depression landscape of the America of the thirties - would things have worked better without these camps? It does seem like much of the point of what this debt default avoidance is involved with is social programs, or at least they gobble the majority of the money - on these terms, is it money well-spent?

This can seem like the the market proposition of any insurance writ large. People spend a certain amount of money on premiums to avoid having to spend all of the money to replace their house or their car, or get bankrupted by a health crisis. It appears that more people are willing to see to those insurance considerations than are willing to, effectively, arrange for insurance against running out of money in their dotage. There are wrinkles, to be sure:

"[Social Security] created the institution of mass retirement. Social Security, along with other 
modern welfare state programs, encouraged the concept of golden years in which individuals would stop working. "
(- Bresiger, above)

And of course the rapid migration of defined benefit pensions to 401K plans required that people figure out how the investment options worked - and most people were somewhat ill-equipped, it seems, given the profile of losses after 2000. And the result of that relative ineptitude was, among other things, to leave a lot of abandoned homes on the market, a lot of seriously ill people in hospitals and hospices, and a lot more people, well, in something like "Hoovervilles". That, however, is with Social Security and Medicare, which could not prevent these trends from occurring.

Some Republicans would angle for something like the block grants that led up to the formation of the SSA, ideologically in line with the States' Rights philosophy. And you would have to wonder how Mississippi and Oregon, for instance, might contrast a few years down that road. And you have to wonder how much the populace is likely to learn about foreseeing risks.

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