New Blueprints

When he proudly put his name to the Social Security Act (Aug. 14, 1935), Architect Franklin Roosevelt observed that the law was "the cornerstone in a structure which is being built, but is by no means complete." Last year the Senate Finance Committee, beset by the clamor of other architects to improve on the plans, commissioned an Advisory Council of 25--including employers, labormen, Government officials and consumers, chairmanned by Princeton Economist James Douglas Brown--to draw up plans for rebuilding the structure. Last week the Council handed back a much amended set of blueprints, designed to repair some of Social Security's major structural flaws.

A big flaw critics have pointed out in the Act is its scheme for a full reserve for old-age insurance to be built up during a long period while revenues from taxes on employers and employes exceed disbursements. By 1980 this vast coalbin is scheduled to hold a reserve of $47,000,000,000. The effect of locking up $47,000,000,000 of public purchasing power would be highly deflationary. Actually, the money is not being locked up but lent to the Government. This means that by 1980 the Government will owe the Social Security Reserve 21% more than the present big national debt (now $38,600,000,000).* It means also that by that year the whole idea of a reserve will be no more than a piece of fancy bookkeeping, for if the Fund wants to spend any of its vast reserve it will have to call on the Government, which in turn will have to raise the money by taxes.

The Advisory Council, without recommending that this cumbrous bin be thrown out altogether, proposed beginning at once to shovel less coal in, shovel more coal out. Instead of upping the present tax rates of 1% on employer and 1% on employe automatically to the maximum of 3% apiece by 1949 as the Act provides, the Council advised calling a halt for "further study" after they have been upped to 1 1/2% January 1.

It suggested for study: 1) a specific old-age-insurance trust fund with designated trustees for all receipts (now paid into the general Treasury fund); 2) reorganizing the fund from a full reserve into a "reasonable contingency fund," with the Government paying in direct subsidies to balance the increasing benefits paid out.

To shovel coal out now, the Council would liberalize benefits all along the line. Instead of waiting until 1942 to begin monthly benefit payments and making lump sum payments to workers who reach 65 before then, it suggested moving the monthly benefits back to 1940, making them bigger, adding annuities for wives over 65, benefits for widows and orphans. This would reduce the burden on Social Security's independent old-age-assistance program,* designed primarily for uninsured oldsters.

Further remodeling, the Council recommended: extending coverage immediately to some 2.800,000 ineligibles, including seamen, bank employes, and employes of non-profit religious and educational institutions, and by 1940 to 12,000,000 farm laborers and domestics; a study of the "administrative and financial problems" involved in Social Security for "self-employed" citizens, principally the nation's 32,000,000 farmers.

* Scheduled to pass 40 billions this fiscal year, the national debt is limited by law to 45 billions. Lame-Duck Representative Lamneck of Ohio last week declared that the Janizariat is planning to ask Congress to raise that limit.

*Under which the Government matches funds 50-50 with States for pensions up to $30 a month for impoverished oldsters.

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