A Radical Idea Becomes a Savior of the Elderly

Born in the midst of America’s deepest economic darkness, Social Security has given two generations of retirees a decent standard of living.

The checks arrive every month for retired workers and their spouses, as well as for widows and widowers, the disabled and their families. Social Security is the biggest and most successful weapon ever wielded against poverty in America. Without the infusion of cash, 40% of all Americans over 65 would lead lives of deprivation. But the $350 billion flowing from the Treasury annually puts enough money into the pockets of the elderly to slash the poverty rate to a modest 12%.

The program has wide appeal. Warren Buffet, a billionaire investor, can collect a monthly benefit, just like the man who labored at a minimum-wage job for 40 years. Elected officials tinker with Social Security at their peril. It is called the third rail of American politics: Touch it and you might die at the polls.

But what is now vital to the lives of 44 million beneficiaries was once a controversial idea. It took the Great Depression to create Social Security, a radical departure from America’s frontier ethos of independence and self-reliance.

In those days, retirement was rare, a privilege enjoyed by the wealthy and a relative handful of elite workers employed by the railroads. Everyone else labored until old age, infirmity or death intervened. Old people without families or someone to take them in would go “over the hill� to the workhouse, a county-run home. It was meager charity, given with a grudging hand.

When the Depression hit, a staggering 25% of the work force lost their jobs. Workers could not provide for themselves, let alone their aged parents and grandparents. Relief systems were overwhelmed.

Millions flocked to the banner of Dr. Franklin Townsend, a Long Beach physician whose prescription for the Depression was a government grant of $200 a month for everyone older than 60. Recipients would have to quit the work force and agree to spend the money immediately to spur a revival of business and trade.

But this approach was feared by Democrats and Republicans as too drastic, a budget-buster. The experts picked by President Franklin D. Roosevelt to ponder the problem devised a plan for social insurance, with all taxpayers contributing toward building protection against the vicissitudes of old age.

They created a program to transfer wealth among the generations. Today’s workers would pay for today’s retirees. And when current workers reached retirement age, the taxes of their children would provide a fiscal bulwark against poverty.

Everyone would reap the benefits. The stigma of charity would be removed. “To cover all the poor, you cover the rich as well,� Wilbur Cohen, one of the system’s creators, once remarked.

Roosevelt signed the bill in 1935, and the first payroll taxes were collected in 1937. Benefits began flowing in January 1940, with the first monthly check going to Ida May Fuller of Vermont, who received $22.54. (Social Security was a bonanza for Fuller, who had paid in a total of $24.75 in payroll taxes. She lived to be 100 and ultimately collected $22,888 in benefits.)

Retired workers were the first covered in a program that grew steadily as Congress expanded the rolls of those who would be protected. Spouses of retired workers were added, and then the survivors of workers who died before reaching age 65. The range of the program reached its current form in 1956 when coverage for disabled workers began.

Today, 147 million workers and their employers pay taxes (6.2% from the worker and the same amount from his employer on the first $72,600 a year in salary) to provide benefits to 44 million Americans.

But its creators never foresaw the baby boom generation, a massive population wave that raises the question of whether the children will be able to pay for that many parents. The leading edge of baby boomers will be eligible for full retirement benefits in 12 years.

The oldest of the boomers include such diverse personalities as President Clinton, basketball star Kareem Abdul-Jabbar, real estate tycoon Donald Trump, actress Sally Field and Hollywood mogul Michael Ovitz. Born in the years 1946 through 1964, the 76 million boomers make up the biggest generation in American history. They married later than their parents and had fewer children, so there will be fewer taxpayers to pay into the trust fund that will give the boomers their retirement benefits.

A fiscal crisis is expected in 2034, when payroll taxes will be able to finance only 75% of the benefits promised under current law. Should taxes be raised or benefits cut? Or will the economy keep booming to generate enough money for Social Security without boosting taxes or slicing into benefits?

Meanwhile, the boomers grow grayer each year.