We have urged Congress repeatedly to revise our social-security system so as to remedy admitted inadequacies and deficiencies. H. R. 6000 which has passed the House and now awaits action by the Senate does not meet the social needs of the American people; its fiscal provisions are based on fallacious_reasoning and unsound principles; its benefit provisions are still grievously deficient; its coverage provisions, though expanded, are still excluding some 15 to 20 million gainfully employed persons who are entitled to the minimum protection against the hazards covered by the law; while it provides new additional protection against total permanent disability, it fails to recognize the needs of dependents and completely disregards the problems of temporary disability. We urge the Senate thoroughly to revise H. R. 6000 and amend it in the manner indicated in this analysis: we urge the House to reconsider the bill and jointly with the Senate to remedy the indicated shortcomings. Congress has now the opportunity to enact the reforms in our social-security system so long overdue. The time to make it applicable to the entire gainfully employed population, fiscally sound, and to provide benefits that would assure a minimum decent standard of living, is now. We strongly urge that the bill H. R. 6000, amended, as proposed herein, be enacted during the present session of Congress. Mr. SILBERSTEIN. I want to confine my remarks to brief arguments supporting our general policy with regard to the main and most essential requirements of a sound social-security system. 1. Coverage should extend to all of the gainfully employed population: The original exclusion of a large segment of the gainfully employed from coverage at the time of the enactment of the Social Security Act was sought to be justified because of lack of experience in this country with compulsory old-age insurance and because of fear that such a program could not at the outset be administered on such a large scale. We have now had 14 years of experience, which has shown us that these exclusions are unwarranted, are harmful to the welfare of the people and result in a system which fails to protect those who most need it. Millions of wage earners are discriminated against. A heavier burden for the support of the indigent aged is cast upon localities and communities which can least afford it. Incomplete coverage results in lower benefits. In many instances, wage earners are taxed without security any benefits in return. This weakens the entire system. Partial coverage also affects the administration of the law. Universal coverage under a single administration would be financially sounder, more efficient, and could provide adequate benefits. All of the most recent studies made by the Federal Security Administration attest to the desirability of a unified all-inclusive old-age and survivors insurance system. The Ways and Means Committee in its report accompanying H. R. 6000 makes the following statement: Without an adequate and universally applicable basic social-insurance system, the demands for security by segments of the population threatens to result in unbalanced, overlapping, and competing programs. The financing of such plans may become chaotic, their economic effects dangerous. Why for instance should 600,000 lawyers, physicians, and other professionals, be excluded? The exclusion cannot be justified upon the basis of their vocation, because those pursuing these professions in the employ of others are covered. This exclusion is arbitrary, capricious, and without any merit or justification. The conception which may prevail in some quarters that self-employed lawyers are in general so well off as to be able to provide for their own needs in old age and disability is without foundation. Surveys made by the Department of Commerce of the net incomes of lawyers in the United States show that 50 percent of the lawyers received annual net incomes of less than $2,760 in any year from 1933 to 1939. In 1941 which is, I believe, a normal year, if there is such a thing for the profession, the median annual net income was only $2,960. While in 1947 the figures in the Commerce Department indicate a rise in annual median net income to nearly $5,200, a large part of this rise was attributable to the inflation of costs and prices. Most of the lawyers even in that abnormal year could not have managed to set aside the funds required to provide for their old age, especially as they had to "keep up appearances" with all that implies. And the ability of a group to provide for itself must be judged on the basis of earnings over a long period of time-not for this or that peak year. Viewed from that perspective it seems clear to us that the need of the legal profession for coverage is genuine and urgent. We are convinced that there is no less need for coverage for the professional self-employed than for other self-employed groups who are to be covered if H. R. 6000 is enacted in its present form. Senator MILLIKIN. Do you have any statistics on the number of aged lawyers who are receiving public assistance? Mr. SILBERSTEIN. We do not have that. The exclusion of farm laborers and of farmers is even less excusable. The Treasury Department and the numerous congressional and other committees which have studied the problem had time and again found that there would be no administrative difficulties in bringing the farm group into the social security system. The earnings of the average farmers are below those of the average self-employed businessman or manufacturer, and the wages of agricultural laborers are among the lowest in the country. The need of these people for social security is as great as that of those groups already covered. The exclusion of these groups is unpardonable. The failure to cover the entire gainfully employed population constitutes not only unfair discrimination, but it is economically unsound in our opinion. Sooner or later these groups will have to be brought within the system. But by that time a number of years will have elapsed during which these groups will have made no contributions to the system. Moreover, allowances will have to be made to the older people within these groups, to enable them to qualify for basic minimum benefits. Why then not include them now and thus have them share the burden imposed upon the rest of the working population? Senator MILLIKIN. Do you believe in the pay-as-you-go system? Mr. SILBERSTEIN. We do. The bill should be amended to extend coverage to the millions now excluded. 2. The benefits should be increased to provide a minimum living standard. Existing benefits are woefully inadequate. In many instances many beneficiaries are compelled to apply for and accept supplementary public assistance. Studies made by the Social Security Board in 1946, 1947, and 1948 in 13 cities show that an elderly couple needs not less than $1,400 per annum in Houston, Tex.; $1,780 in New York City, N. Y.; and, $1,830 in Washington, D. C., for a decent minimum standard of living. The present highest possible benefit for a couple is thus less than 60 percent for Houston and about 45 percent for New York and Washington. The benefit formula in the proposed bill, H. R. 6000, would still provide much less than these minimum requirements for elderly couples. Thus, an individual with an average wage of $200 a month would be entitled to receive under the law, as revised by H. R. 6000, $63 per month if covered for 10 years continuously when single, and $94 with a wife 65 years old (H. Rept. No. 1300, p. 17). But most workers are not likely to have 10 years of continuous covered employment, and in most cases it will be years after the wage earner reaches 65 that his wife will reach the same age. To be adequate the benefits under the law should be revised to provide allowances approximating the findings of the cost of living. surveys made by the Social Security Board. The question will be no doubt raised in connection with this point and with my later remarks on coverage for temporary disability that the proposed pay-roll taxes might have to be prohibitively high to bear the cost. In anticipation of that question, I would say, in the first place, that the House Ways and Means Committee estimated that contributions to the fund under H. R. 6000 would exceed the benefits to be paid for the next 30 years, and that the reserve should reach 90 billions within 40 years (Rept. No. 1300, pp. 17-24, 31-38). Such a reserve creates grave problems affecting the national economy, by reducing purchasing power and hence the domestic market within our country. It is also in our view a basically unsound and improper method of financing the program. The viewpoint recently expressed by the Brookings Institution in Washington is in our opinion deserving of serious consideration. They said: Since the The OASI trust fund is invested in Federal Government securities. money is used by the Government in meeting its regular expenditure requirements, no real reserve is created. The obligations of the Government (liabilities) deposited in a trust account do not represent assets; they merely record future obligations which can be fulfilled only through the levy of future taxes on the economy in general. The way to avoid the dilemma of the current pattern of old-age and survivors insurance with its pseudo resemblance to private insurance is to abandon it entirely. * * * But if the present system is to be adhered to in its general plan we suggest the appropriateness of contributions from the general funds of the National Treasury raised on the basis of ability to pay at such time as the contributions from pay-roll taxes prove to be inadequate. Senator MILLIKIN. That is from income taxes? Mr. SILBERSTEIN. General revenues, Senator. Specifically, in the printed full statement of our position, we recommend that the pay-roll taxes be not permitted to rise above 4 percent for employed persons; that is, 2 percent to the employee and employer, or above 24 percent for self-employed. At such time as the contributions by pay-roll taxes are inadequate, there should be a contribution from general revenues. We agree with the view expressed by the Advisory Council to the Senate Finance Committee in 1948 that "there are compelling reasons for an eventual Government contribution to the system." 3. Disability coverage and benefits: The disability benefits under H. R. 6000 would begin only with the seventh month of disability, 60805-50-pt. 3- -61 and no provision whatever is made for the payments of benefits to a wife, child, or other dependent-section 104 (a) 107. The benefits are grossly inadequate in our opinion. A totally disabled person necessarily requires constant care. His expenses increase. The benefits would clearly be insufficient for the family needs. The wife, if not gainfully employed, should receive a supplemental benefit equal to one-half of the primary benefits, and additional benefits for dependents. H. R. 2893 provided such additional benefits, and the provisions of that bill should be adopted. In a single year wages amounting to 5 or 6 billion dollars are lost due to illness lasting up to 6 months. The economic hardship caused by disability is usually more serious than a wage loss from unemployment due to the added expense of medical care (Unemployment Insurance, S. Doc. No. 206, 80th Cong., p. 45.) We believe that coverage of temporary disability up to 6 months is essential to alleviate grave hardship, and for the well-being of our economy: That there should be no exclusion from coverage for purposes of temporay disability of any gainfuly employed persons; that the waiting period should be reduced to an absolute minimum. Congress has now the opportunity to enact the reforms in our socialsecurity system which are so long overdue. The time to make the system applicable to the entire gainfully employed population and to provide benefits that would assure a minimum decent standard of living is now. We strongly urge that H. R. 6000 be enacted at this session of Congress with the amendment we have urged. I thank you for your kind consideration, gentlemen. That completes the hearing for today, and the committee will recess until Monday morning at 10 o'clock. (Whereupon, at 12: 20 p. m. the committee was recessed to reconvene at 10 a. m. Monday, March 20, 1950.) SOCIAL SECURITY REVISION MONDAY, MARCH 20, 1950 UNITED STATES SENATE, The committee met at 10 a. m., pursuant to recess, in room 312, Senate Office Building, Hon. Walter F. George, chairman, presiding. Present: Senators George, Byrd, Hoey, Millikin, Taft, and Brew ster. Also present: Mrs. Elizabeth B. Springer, chief clerk, and F. F. Fauri, Legislative Reference Service, Library of Congress. The CHAIRMAN. The committee will come to order. Dr. Slichter, we are very glad to have you on H. R. 6000, the socialsecurity bill, which we are studying, and we shall be very glad to hear from you. Do you wish to submit a general statement before we question you, if any questions arise, or would it interfere with you to be interrupted at any time? STATEMENT OF DR. SUMNER H. SLICHTER, LAMONT PROFESSOR, HARVARD UNIVERSITY, CAMBRIDGE, MASS., ASSOCIATE CHAIRMAN OF THE ADVISORY COUNCIL ON SOCIAL SECURITY TO THE SENATE COMMITTEE ON FINANCE Dr. SLICHTER. Mr. Chairman, I have a prepared statement which I can read in part if you care to have me do so. I also welcome questions at any time. The CHAIRMAN. We are very glad to have you because you have your work on the Advisory Council, of course. We are familiar with the studies made by the council, and we recognize your peculiar fitness for this particular assignment that you have been good enough to assume this morning to come down here and talk to us about this bill. We have as the basis, of course, H. R. 6000 on which the hearings are proceeding. Dr. SLICHTER. Mr. Chairman, I have assumed that the members of the committee were familiar with the recommendations of the Advisory Council. Consequently, the statement which I have prepared does not go into detail but undertakes to underline some of the main features of the conclusions which the council reached. Suppose I read this rapidly and perhaps with a little skipping here and there, and then as I go along the members may see fit to interrupt with questions or if they prefer to defer the questions until the end, all well and good. I am particularly interested of course in the questions. |