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ing ceremony. So again the marriage was called off, with
health conditions in the home becoming increasingly serious.

Finally, the mother became convinced that the solution
lay in her embracing the faith of the father. I then went
to the Rt. Rev. Msgr. R. Marcellus Wagner, head of the
Catholic Charities, and told him the whole story. He was
wise and helpful and eventually we had a wedding. The
health commissioner as best man, the public health nurse
as bridesmaid, the father in a new suit and the bride carry-
ing two babies, one unborn, with a two-year-old tugging
at her skirts, constituted the wedding party. The father
went to the "San," the mother got her pension and, with
the aid of relatives, moved to a five-acre plot in the suburbs,
where with a cow and some chickens she started her family
on the road to rehabilitation and health. Whether I am a
social worker or not I think that fhis was social work by
any definition.

At the end of nine years as health commissioner, I found
myself on the governing boards of the Visiting Nurses As-
sociation, the Anti-Tuberculosis League, the Public Health
Federation and the Heart Council, as well as the recipient
of a medal for five years' continuous, meritorious service



to the Girl Scouts. I was also active on several committees
of the local chapter of the American Red Cross.

During 1929 and 1930 I served as director of health
for the state of Ohio, and again found that there is no
distinct differentiation between the activities of the health
and welfare departments.

Then came two years as associate executive secretary of
the Ohio Public Health Association, with my efforts di-
rected toward the organization of local anti-tuberculosis
societies. During this period 1 attended the first Great
Lakes Institute of Social and Health Workers at Geneva,
Wis., thus deepening my contacts with social workers.

Returning to Cincinnati at the beginning of 1932, I was
appointed superintendent of the Hamilton County Home
and Chronic Disease Hospital, an institution which cares
for some 1100 indigent and chronically ill persons. By
that time I knew social work when I saw or did it, and
although my position was nominally in the field of med-
ical care the major portion of the work was social work.

For six years now I have been engaged in work for the
indigent, infirm and chronically ill, cooperating hand in
hand with the officers and social workers in the private
social agencies of the city and in the welfare department,
the children's court, the adult probation department, the
mothers' pension department and all the other divisions of
the county government that are concerned with public wel-
fare work. Increasingly I have been drawn into the local
activities of social work agencies serving on more boards
and committees than I like to count. My constant associ-
ates are social workers: we speak the same language, have
the same approach to problems of social welfare, work for
the same objectives.

Well, Miss Bailey, there is the record thirty years of
constant activity in what, by no nicety of vocabulary can
be called anything but social work, even though the ap-
proach was from the angle of public health. Yet I am in-
eligible for membership in the American Association of
Social Workers because I never have had three hundred
hours of properly supervised field work with an "ac-
credited" organization. In spite of the experience I have
accumulated I find that all I can do is to sit on the vari-
ous boards that hire and fire members of the American
Association of Social Workers.

So again, Miss Bailey, I ask you am I a social worker?



Old Age Reserve

Hv BEULAH AMIDON



FOR months, the Old Age Reserve has been a storm
center. Anti-administration editorial writers and col-
umnists have warned workers who are paying old
security taxes out of the weekly pay envelope: "the
rnment is playing ducks and drakes with the social
rity money" ; "no use counting on that money for
our old age it won't be there." Because of the resulting
nfusion and anxiety it seems worthwhile to look briefly
lit the Old Age Reserve, in practice and in principle.
I John Jones is a punch press operator earning $30 a week,
nut in his pay envelope John Jones receives $29.70 and a
potation that the employer has deducted 30 cents for the
jj'ld age security tax. To this contribution of John's, his
Imployer adds a 30 cent payroll tax. Periodically the em-




ployer makes his report and forwards contributions from his
plant to the Bureau of Internal Revenue. What happens to
the money? The money goes into the General Fund as do
all other moneys received by the government the funds
deposited in Postal Savings and invested in "baby bonds,"
for example, as well as income tax receipts, postal receipts,
import duties, and so on. The General Fund can only be
used as authorized by congressional appropriation. Title II
of the social security act authorizes Congress to appropri-
ate annually to an Old Age Reserve Account in the U.S.
Treasury an amount sufficient to provide for old age benefit
payments, on a reserve basis. This means that the amount
of the appropriations shall take into account not only the
sums which must be paid out in claims during the fiscal



II' I I-MBKR 1938



283



year, but also the increasing future demands on the fund.

In comparable fashion, a family, considering the year's
budget, takes into account not only the necessary expendi-
tures over the next twelve months for food, clothing, shelter,
medical care, and so on, but also the fact that fifteen years
hence little Jim will be ready for college. The sum Jim will
need at Siwash in 1953 must be considered in drawing up
the family budget in 1938. Jim's parents may put aside a
fixed amount each year in the savings bank for the boy's
college course, or take out educational insurance, or invest
in stocks or bonds, or make any one of several other arrange-
ments. The social security act gives the Secretary of the
Treasury no leeway. He must invest such portion of the
amounts appropriated to the Old Age Reserve Account as is
not, in his judgment, required for current withdrawals, and
he is limited in his investment to interest-bearing obliga-
tions of the United States or obligations guaranteed as to
both principal and interest by the United States, yielding
not less than 3 percent per annum. This means that the
Treasury sells its obligations to the Old Age Reserve, and
the receipts from such sales are treated exactly as though
the obligations had been sold in the market. This flow of
funds into and out of the Old Age Reserve Account may
be followed in the weekly Treasury statements. Up to the
end of March, $636,100,000 had been invested to the credit
of the Old Age Reserve, and $577,447,532 had been col-
lected from the taxes for old age insurance purposes.

Suppose little Jim's parents decide to provide for Jim's
college course by making a weekly deposit in the savings
bank. Each week, Jim Sr. hands two dollars through the
wicket to the teller in the local savings bank. The teller
makes an entry in the depositor's bankbook, puts the deposit
slip on the spindle, counts the money into the till. What
becomes of the money? The bank does not hoard the cur-
rency it invests it. And at the top of the list of investments
which the bank or a mutual life insurance company may
make under the state banking laws, you will find listed
"government bonds."

A widely-quoted columnist recently stated that the Secre-
tary of the Treasury is taking the old age security funds "to
run the government" and putting in the account "pieces of
paper" or "I.O.U.'s." And in a sense, of course, this is
what the Secretary is doing. For what is a check, a stock
certificate, a note, a bond but a "piece of paper," an evidence
of indebtedness, its value in the end dependent wholly upon
the resources and the integrity of the signer of the "piece of
paper"? If the government goes bankrupt, neither its bonds
nor its currency has value. But the fact that the Treasury,
instead of the savings bank, holds the obligations which rep-
resent payments into the Old Age Reserve does not change
the character of the transaction or of the bond.

IN charging that the Old Age Reserve is mishandled,
critics of the scheme are playing on the fact that
few of us know anything about the workings of finance. To
say that the money contributed by wage earners and their
employers is being "spent," to call government bonds "pieces
of paper" and "I.O.U.'s" is to stir up a lot of fear and
misunderstanding. The Old Age Reserve is as "safe" as
the government of the United States. That is, invested in
government bonds, it is as safe as any money can be in an
uncertain world. The clamor, however, has obscured other
aspects of the Old Age Reserve which need the widest
possible understanding and discussion.

Two factors must be kept in mind in considering the



reasons for an Old Age Reserve. First is the increasing num-
ber of persons who will be eligible for benefits year by year,
with the addition to each year's load of those reaching the
age of eligibility in the following year a number which
mortality tables show will far exceed the number of annui-
tants who will die each year, though the scheme will
eventually reach a state of equilibrium. Second is the in-
creasing proportion of the aged in the population, due to
the increasing life span, the limitations on immigration, the
falling birthrate. Thus benefit payments in 1942, when the
plan begins to pay, will amount to about $52 million; in
1980, payments will be some $3500 million; the peak will
not be reached before the year 2000, and after that the
steep upward "curve" will flatten out to a fairly level line.
When the program is in full swing, contributions equivalent
approximately to 5 percent of wages and 5 percent of pay-
roll (10 percent in all) will be required to meet benefit
payments on the present scale, computed on the basis of
average annual earnings of $1100 a year over a forty-five
year period for the workers included in the plan. But under
the present scheme, contributions will not exceed 3 percent
from employers, 3 percent from employes. The balance is to
be made up by interest on the reserve which, it is estimated,
will eventually reach the staggering total of $47 billion.
This interest will have to come out of general taxation.

"But," John Jones objects, "I have made my contribution
to the reserve must I also help pay interest on the money
I have already paid in?"

THAT depends on how the Old Age Reserve is used. If
used to cut down the publicly held national debt, then it
represents a saving, not a further liability. Go back to little
Jim and his college fund. Perhaps instead of putting aside
savings to meet that future charge, Jim's parents decide to
pay off the mortgage on the house, and liquidate a note at
the bank. When the time comes, they will have to pay Jim's
college expenses. But they will not have to pay Jim's college
expenses plus the interest on the mortgage and the note.
They will have made their savings not by accumulating a
fund in the savings bank, but by releasing future income.
The analogy is not exact (analogies seldom are), but it may
help make clear the troublesome point that a reserve used to
reduce the national debt is, from the standpoint of the years
ahead, money "saved."

There is, however, the possibility that, with the Old Age
Reserve to include in its calculations, Congress will be
tempted to carelessness in appropriations, that the money
will not be used to reduce the national debt but rather to
make it possible to pile up the debt unnecessarily, because the
reserve is at hand. Most human beings, being human, are
less careful to make every dollar do full duty when some
little windfall has unexpectedly sweetened the bank balance,
or when there is a sum of money not immediately needed
lying in the savings account. Further, the presence of the
reserve is apt to prove a constant temptation to pressure
groups to campaign for increased benefits, without regard
to the effect on the solvency of the scheme.

Much more fundamental is the danger of so large a re-
serve to the total economy of the country. Speaking gen-
erally, the money put into the Old Age Reserve by wage
earners and their employers is not money which would other-
wise be "saved," that is, added to the invested portion of
the national income. Except for the fact of the old age
benefit scheme, these are funds which would be spent, in-
general, for consumers' goods. Take John Jones' 30 cents.



284



SURVEY MIDMONTHLY*



If it were not deducted by his employer and invested by
his government, that 30 cents would be absorbed in the
ucekly budget of the Jones family, to buy six pounds of
>u(jar, three quarts of milk, school supplies for little Jim,
or tobacco for the wage earner. Multiply John's 30 cents
consider that the old age security t.iv^ u>llected will eventu-
ally reach $2 billion a year, and it is clear why thoughtful
economists fear the effects of such a dislocation of our
spending-investment balance.

T)K< '< ) \KNTS of the reserve hold it is as necessary in
f a vast social insurance scheme as in a private life insur-
ance company. But Abraham Epstein, director of the Amer-
ican Association for Social Security, has recently objected:

A government does not need a reserve to pay benefits be-
cause unlike a private insurance company, it does not rely
solely on premiums but rather on its unlimited power of
taxation. Social insurance funds are derived not from voluntary
contributions but from enforced taxes. A participant in a
government plan cannot discontinue his payments as a private
policyholder can. Unlike a private insurance company also, a
nation cannot invest its funds in private industry and share in
the profits. It invests funds only in its own securities and pays
interest to itself. The building up of huge governmental social
insurance reserves is therefore not only an empty gesture in
terms of the future because of the rapid changes in the value
of money, but reserves of such astronomical sums as $47 bil-
lion are fraught with the gravest economic and social danger,
since they freeze sorely needed purchasing power.

The building up of an Old Age Reserve rests on certain
assumptions in regard to the old age insurance plan in this
country: 1. It is to be a pay-as-you-go scheme. (Carelessly
used, this phrase means that in-payments equal out-payments
in any one year. But in a realistic sense, a pay-as-you-go
scheme must make provision, as does the Old Age Reserve,
not only for immediate charges but for specific future obliga-
tions) ; 2. Payments are to be on a sliding scale, based on
the amount and duration of contributions; 3. Total wage
and payroll taxes are never to increase above 6 percent;
that is, the plan is to pay for itself there is to be no subsidy
from general tax funds.

What are the alternatives to an Old Age Reserve on the
scale these assumptions require?

First, the scheme could be taken off the real pay-as-you-go
basis, which attempts to provide for accrued liability as well
as for immediate obligations. Contributions could be cut
down to the point where they would cover only the benefit
payments for each year, actuarial!}' computed, plus a small
contingent reserve, and a margin to provide the present
unearned benefits for low income groups and for those who
have come into the scheme within a few years of the benefit
age. This would leave to the oncoming generations the whole
problem of financing old age benefits as the total obligation
increases with the increasing numbers of annuitants reach-
ing the age of sixty-five, and the increasing proportion of
the aged in the population. This might mean a reduction in
wage and payroll taxes in the years immediately ahead, but
it would mean an increased future tax rate. Or it might
mean earlier payments, increased coverage or higher benefits
at once, with no change in the current tax rate, and with
future obligations proportionately heavier.

Second, we could abandon the present sliding scale bene-
fits, and adopt a flat rate in line with the rates set in other
countries. As it is framed today, the American scheme, when
it is in full operation, will pay benefits of $10 to $85 a
month, as compared with $10 a month in England to all

SEPTKMBER 1938



annuitants. Flat rates would greatly simplify the adminis-
tration of the plan, and effect a considerable saving in over-
head, in addition to the economy of a lower average rate.
How far such benefits would have to be supplemented out
of public relief funds is another problem.

Third, the scheme could be reorganized on the basis of
a contribution out of general taxation. The principle that
every stratum of society should share in the cost of old age
dependency through general taxation has been accepted in
all other countries which have established an old age benefit
system, and such a provision in the American measure was
recommended by the advisory council and the technical staff
of the President's Committee on Economic Security. As
finally adopted, however, the cost of the scheme in this
country is borne by the beneficiaries and their employers and
the benefits are limited to less than half the wage earning
population. The question has been raised whether it
would be just or politically expedient to attempt to draw on
general tax funds to supplement old age security taxes with-
out increasing the coverage of the plan the farmer and the
small shopkeeper might reasonably object to being taxed to
provide old age insurance in which they do not share. But
with or without wider coverage, a contribution from general
tax funds to the scheme would spread over the public gen-
erally the cost of the somewhat higher ratios of annuities
to earnings of the present aged and middle aged, instead of
throwing it entirely on the younger workers; that is, it
would penalize all the people, rather than one age group,
for the fact that the United States has lagged behind other
countries in establishing an old age insurance scheme. Fur-
ther, it might make unnecessary a large reserve fund with-
out reducing benefits or increasing old age security taxes.

In considering alternatives to the present method of
financing old age security, it must be borne in mind that a
large reserve is necessary if the benefits now provided are
to be financed solely from a 6 percent wage and payroll tax.
There is considerable agitation in favor of increased mini-
mum payments as well as broader coverage, since $10 a
month cannot be viewed as "security" for anyone.

It would seem advisable to make any desired changes in
minimum benefit payments and coverage before modifying
the reserve plan. Clearly the revenue needed to finance ex-
tensions of the present plan would materially affect calcula-
tions as to the reserve.

SOME years will elapse before the Old Age Reserve, un-
der the present scheme, reaches formidable proportions.
It would probably allay current fears and re-focus current
discussion if the Social Security Board would announce, as
a matter of policy, that the Old Age Reserve will not be
allowed to fall below $4 or $5 billion, once that point is
reached, nor rise above $15 billion without a public reexami-
nation of the financial provisions of the social security act.
A reserve of $5 billion would cover a decline of 50 percent
in payroll taxes for three years when benefits reach their
1980 level, and would provide for a longer period of de-
pression before that time. A maximum limit of $15 billion
is high enough to justify the continuation of the present tax
rates for the next ten or fifteen years. Such a floor-and-
ceiling policy would enable us to gain experience in handling
these reserve funds, and to make necessary changes and im-
provements in the whole system of old age security. It would
also provide a "breathing space" for widespread, informed
consideration of all aspects of the plan. And it is on such
public review and discu-M<m that any -ocial insurance scheme
must depend for its sound functioning and development.

285



The Common Welfare



Politics and Relief

A) the campaign progresses, the issue of politics and
relief appears as a double question, both forks of
which are in the headlines: Is there political coercion of
relief clients with forced contributions to campaign funds?
Are relief clients justified in making voluntary contribu-
tions to campaign funds? In a recent statement, Harry L.
Hopkins, WPA administrator, answers both questions with
a forthright "No." Mr. Hopkins stated that the charge
that responsible WPA officials had told workers on relief
how to vote had never been substantiated, in spite of re-
peated attempts to do so. He declared that the three mil-
lion WPA workers need have no fear of their jobs be-
cause they vote as they please, or because they refuse to
respond to solicitation for campaign contributions.

On the question of voluntary contributions, Mr. Hop-
kins said, "I suppose it's legal enough, but I just don't
like the idea of getting money from these people for polit-
ical purposes. What they need to do is to spend their
money for food and clothing."

David Lasser, president of the Workers' Alliance, left-
wing organization of the unemployed and of workers on
relief, announced that the alliance will raise a $50,000
campaign fund. The plan, as Mr. Lasser explained it in
a statement to the press, is to use the fund nationally,
keeping an accounting which, if requested, he will submit
to the Senate campaign investigating committee. Mr. Las-
ser said the purpose of the fund is "to make clear to the
unemployed and WPA workers what the political issues
are in the campaign and where the interests of the unem-
ployed and WPA workers lie. On the basis of our plans
we believe we are justified, legally and morally."

The Second World Youth Congress

DELEGATES and observers, representing youth or-
ganizations of fifty-five countries not including
Italy, Germany or Russia, and including only observers
from Japan concluded their second parliament of the
world's young people on August 23. The meeting, held at
Vassar College, Poughkeepsie, N. Y., lasted a week. The
keynote was peace and social justice. Despite differences of
opinion on methods of attaining peace, the final resolution
pledged support of "necessary concerted action to prevent
aggression and to bring it to an end." To this implication of
force, if necessary, embodied in part of the six resolutions,
which were adopted, there was objection on the part of the
minority of the American delegation, largely representing
rural, religious, pacifist and socialist groups.

Although the proceedings were conducted with all the
decorum of a League of Nations session, with translation
devices in English, Spanish and French, the net result of
the congress cannot be counted in the final resolutions, the
reports of the four commissions on youth's problems in the
modern world, or the formulations of the special interest
groups concerned with students, labor, agriculture and
religion. Rather, the significant thing was the fact that
more than five hundred delegates augmented by more
than that number of observers and visitors, from all parts



of the world got to know one another, and one another's
problems and pleasures, in a hospitable setting made possi-
ble by President Henry Noble MacCracken of Vassar. Dr.
MacCracken, Mrs. Franklin D. Roosevelt, and other dis-
tinguished Americans addressed the congress. However, it
was the statements and deliberations of the youths them-
selves that really counted.

Charges that communist influences dominated the or-
ganization of the congress or misled its sponsors were eas-
ily dispelled by the meeting itself. Whatever the ultimate
outcome of youth's assumption of new responsibilities for
the future, the paradox that they face was vividly dem-
onstrated by the number of representatives of subject peo-
ples, colonial or mandated, who now are deprived of de-
mocracy by the imperialism of some of the great democratic
nations with whom the majority of the youths present per-
force were compelled by events to cast their lot.

Civil Liberties' Balance Sheet

THE day after Independence Day the American Civil
Liberties Union issued its annual report. On the whole
it is a heartening document, recording progress in the sub-
stitution of law for force, and comparatively few repressive
new laws or injunctions in labor disputes. But the title of



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