EDITORS’ NOTE: This is the second in a three-part series on Social Security.
ALEXANDRIA, Va. (BP)–In the late 1800s German Chancellor Otto von Bismarck saw that expanding government power through the means of a government-funded pension system would make people “far more content and far easier to handle than one who has no such prospect.”
By 1889, one of the world’s first fully funded government pension systems was born — championed in terms of social justice. Sold to the people as government “insurance,” the German program resembled nothing of traditional insurance policies.
With true insurance, people voluntarily contract and contribute for benefits based on certain health conditions, anticipated life span and other risk factors assessed by an insurance company which ultimately is responsible for paying the policies of their customers.
But the new government insurance was a subsidy paid by one group for the direct benefit of another. As individual taxpayers, nothing was contributed to their own retirement. The funds required for their government retirement were to be paid by others in the future. What was important — and required — was that younger workers directly pay the benefits of older citizens in a pay-as-you-go system.
Denmark, unlike Germany, did not forge a pension program based on the pay-as-you go system, but instead on a national welfare model which was financed out of the government’s general revenues and available only for those who could prove they had no other means of support. At this time, the U.S. government already was financing the pensions of Civil War veterans, many railroads and public utilities, and steel companies began to offer pensions to their employees based on a system of voluntary contributions by the employee with matching funds from the employer.
By 1927, Abraham Epstein, a Russian-born economist, established the American Association for Old-Age Security. He published several books which greatly influenced many in the U.S. Congress, including “Facing Old Age” (1922) and “The Challenge of the Aged” (1928).
Well into the throes of the Great Depression, American citizens demanded action by their government in the face of their economic deprivations and the loss of retirement pensions, and these books helped cement their ideas. What followed was a battle between rival factions who saw the national economy in drastically different ways.
One side, championed largely by business leaders, thought that deficits were sure to come if the government embarked on a national pension plan patterned on the pay-as-you-go model. W.R. Williamson of the Travelers Insurance Company sparred with Kentucky Congressman Fred Vinson about the debt that future generations would be forced to pay because the funds paid by citizens would not be invested like a traditional insurance policy. “Federal securities,” Williamson said, “secure interest nonproductively, by taxation.” Some people might be unwilling to pay the tax, he asserted, and the number of people expecting coverage in their old age might be more than the number of workers available to pay the wages for their promised “social security.”
The other side of the argument was championed by Louisiana Sen. Huey Long. His bill, affectionately termed, “Share Our Wealth,” was defeated in the Senate on March 12, 1933. It was not until members of the medical community began to speak in favor of Long’s proposal that the movement actually began to gain ground in the Senate. Francis Townsend, a physician with the Long Beach, Calif., health department, proposed a national sales tax which would “abolish poverty and its attendant evils forever.” Stating that such a tax would end the Great Depression, he declared that “benevolence and kindly consideration for others will displace suspicion and avarice, brotherly love and tolerance will blossom into full flower, and the genial sun of human happiness will dissipate the dark clouds of distrust and gloom and despair.”
Such theological language in the midst of economic despair resonated with the electorate, and by 1935 both the U.S. Senate Pensions Committee and the U.S. House Labor Committee had approved a sweeping program of taxation. President Franklin Delano Roosevelt used his influence to keep the bill from becoming law until a later time when he could use executive authority to advance a national payroll tax garnered from workers and purported as national insurance.
From the start, what would come to be known as Social Security employed biblical concepts of brotherly love and kindness to further a scheme which, in the opinion of economists across the political spectrum, was a utopian dream.
For many who see the sides of the current Social Security debate in terms of morality, history should be consulted to reveal that not all those who participated in the formation of America’s government pension system were motivated by brotherly love. Nevertheless, the economic aspects and theological concepts embedded in the public debate over Social Security should not be passed off by the church as something that is not her concern.
The tension between the church and the state will always exist, and it remains the church’s duty to speak truth to power. The coming days will reveal if the church can still do just that.
Douglas Baker is associate pastor of First Baptist Church, Alexandria, Va.