It has been argued that it is necessary to increase the taxable wage base in order to increase benefits. The report on H. R. 9366 correctly indicates that benefit amounts can be increased without increasing the taxable wage base by merely adjusting the benefit formula.

In total, the arugments seem to be overwhelmingly in favor of retaining the present $3,600 wage base and opposing any upward revision in it.

Closely connected and, in fact, interrelated with that provision is the proposed increase in all social-security benefit amounts.

The new formula, while increasing the benefits for low as well as higher wage earners, clearly discriminates against the lower wage earner by providing special benefits for the higher wage earners. The present formula provides a monthly benefit of 55 percent of the first $100 of average monthly earnings and 15 percent of the next $200 of average monthly earnings. The new formula would not increase the 55 percent, which is a weight in favor of the lower wage earner, although it would apply it to the first $110 of average monthly earnings instead of the first $100. However, the percentage applied against the higher segment of earnings formerly the next $200 of earnings and now proposed as $240– is increased 33 percent.

Chart No. 8 clearly illustrates that the proposed benefit increases are primarily for the benefit of the higher wage earner-the one who is in a better position to take care of his own retirement. The beneficiary whose average monthly wage is $150 would receive $62.50 under present law and $68.50 under the proposed bill-an increase of 10 percent. On the other hand, the person whose average monthly wage is $350 would receive $85 under present law and $108.50 under the bill-an increase of 28 percent (chart 8).

Certainly, if it is necessary to alter the formula to provide a larger benefit amount because of changes in the cost of living-which has risen only 1 percent since 1952-emphasis should be placed on increasing lower benefit levels rather than creating extra benefits for the higher wage earners especially if the system is to fulfill its objective of a minimum level of protection for all.

This blanket increase in benefits, which extends and enlarges benefits for the high-earnings group, indicates a dangerous shift in the philosophy of social security. It is time to reexamine closely the full implications of increasing the taxable wage base and providing higher and higher benefits to those who are in a better position to plan their own retirement. Few want social security to lead to the point where the vast majority of American citizens must look to the Federal Government for their sole source of retirement security. Yet, if benefits are continually increased and the wage base further extended, this will be the inevitable result.

The serious implications of continuously increasing benefit amounts and thus shifting social security further and further away from a basic floor of protec tion were recognized by Lord Beveridge, who said:

"To give by compulsory insurance more than is needed for subsistence is an unnecessary interference with individual responsibilities. More can be given only by taking more in contributions or taxation. That means departing from the principle of a national minimum above which citizens shall spend their money freely and adopting instead the principle of regulating the lives of individuals by law."

Here, it is necessary to note that OASI is but one phase of social-security protection. The Chamber of Commerce of the United States recently released a new survey of fringe benefits. These benefits totaled 20 percent of payrolls, including compulsory as well as voluntary programs. Furthermore, many of these programs are still growing. Thus, we face the issue of how much income we are prepared to divert to social-security programs. In other words, we must examine the cost of OASI in the light of all other claims on our resources.

The chamber opposes the blanket increases in social-security benefits proposed in H. R. 9366. Rather, the chamber proposes to increase the minimum benefit from $25 to $30 a month, while retaining the present benefit formula with its $85 maximum.

Another major weakness of H. R. 9366 is the incorporation of a disability freeze with free medical examinations. This would provide that in the computation of the average monthly wage for benefit purposes, periods of complete disability in excess of 6 months are excluded. An individual's complete dis ability would be determined by a medical examination procedure controlled by the Federal Government.

The serious implications of such an elaborate federally controlled system of medical examinations should be clear to all. It could be utilized as an opening wedge in the ever-present drive for socialized medicine.

Aside from the danger inherent in such a provision, its benefits are at best doubtful. The major problem of caring for an individual who becomes totally disabled when he is 30 or 40 years of age is not one of paying him greater or lesser old-age benefits 25 or 30 years later. Nor is the provision of assistance to this individual the function of the old-age and survivors' insurance program. Social security is a public purpose program to provide protection against destitution in old age for the retired worker. It should not be confused with a sickness or accident benefit program.

The cost of such a provision in the social-security system is speculative. Any one of 72 million covered by social security could conceivably apply for and obtain a free medical examination at the expense of other social-security taxpayers at the completion of a minimum period of coverage. For example, in a single month from August to September 1953, 4,500,000 persons left the labor

force. Any or all of them who had the required OASI coverage could, 6 months later, demand a free examination.

The chamber believes that this is an unwise and expensive provision. Moreover, it is unnecessary. The 4- or 5-year dropout, also approved in H. R. 9366, offers an adequate solution for dealing with low earnings resulting from temporary absence from coverage, and is much more in keeping with OASI prac tices and procedures (chart 9).

Let me now turn to the serious omissions in H. R. 9366. One of them is the failure to extend benefit coverage to the 8 million presently unprotected aged. It is difficult to justify this discrimination. These individuals are excluded from OASI benefits mainly because of a capriciousness of fate-having been born too soon or having worked in uncovered employment.

The major argument that has been offered against blanketing in the retired unprotected aged is that they have not contributed to the system, and the pay ment of benefits to them would be a violation of a principle of sound insurance. It should be pointed out, however, that those who do collect benefits, in many

cases, have little more financial claim to benefits than those excluded. Their moral claim is the same. Many beneficiaries have derived their entitlement from the payment of only a token amount-as little as $6 in some cases-and for this nominal payment a man and wife-based on normal life expectancycan expect to receive benefits totaling more than $6,500 in addition to the survivorship benefits afforded. No current beneficiary has paid in taxes anything close to the amount that he can expect to receive in benefits. The largest amount of social-security taxes of any individual and his employer now eligible for the maximum of $85 per month benefit is about $1,100. Assuming normal life expectancy and one dependent (wife) the individual will receive monthly benefits which will total about $22,000. For a tax payment of $1,100 they will receive $22,000 in benefits. Moreover, OASI taxes paid by individuals barely cover the cost of the group life insurance provided by OASI-leaving nothing for retirement benefits. The real cost of their benefits is being paid by other OASI taxpayers.

The blanketing in of the present 8 million unprotected aged would be entirely consistent with past social-security practices and sound pension procedure. In 1950 the precedent in social security was set when the principle of past service credit was established in bringing new groups under OASI.

The Senate Finance Committee said in 1950:

"The older worker should not be penalized for the fact that he could not contribute throughout his life. We propose, in effect, that, as in many private pension plans, the older worker receives credit for his past service. * * *”

The chamber, therefore, urges that the extension of minimum OASI benefits to the present excluded aged be accomplished now, as a matter of equity.

Blanketing in the unprotected aged would, moreover, permit the termination of temporary Federal grants for old-age assistance. The Federal Government's participation in old-age assistance was to have been temporary during the maturing of the OASI system.

But in fact Federal participation has grown through the year. The extension of OASI protection to all of the presently unprotected aged will permit the Federal Government to terminate its participation in OAA, and at the same time provide to 8 million aged citizens the dignity of OASI benefit payments by right, in place of relief payments with their humiliating means test.

Certainly, almost 20 years after the temporary old-age assistance program began we should be able to have the Federal Government withdraw in favor of a single Federal program for the care of the aged. In any event, working toward the speedy withdrawal from the discriminatory, temporary OAA program, it seems improper for the Federal Government to pay an individual dual benefits under two programs. On the basis of sound governmental practices, in fairness to all citizens and OASI taxpayers, duplicate Federal payments from OASI and OAA to any individual should be eliminated. We, therefore, recommend that no Federal grant be made to a State on behalf on an individual who is receiving OASI benefits. The State can continue OAA grants then, as now, at any desired level.

The points which we have made in connection with the expansion of the taxable wage base, increase in the maximum benefits and the provision of a disability freeze with its free medical examination at social-security expense, all serve to highlight one other provision omitted from the bill. They indicate that it is timely to recognize the wisdom of placing social security on a pay-asyou-go basis with current taxes adjusted to meet current social-security costs. Only with social security on a pay-as-you-go basis can the true costs of benefit increases be appreciated. The cost of today's benefit increases are being assessed against tomorrow's taxpayers. We should be aware of our responsibility to the millions of young people who will have to bear this burden. We must provide a true picture of the costs involved-a brake against round after round of benefit increases which seemingly cost nothing (chart 10).

Our aim is to strengthen and improve social security so that it banishes fear of want in old age and at the same time becomes a bulwark of our competitive enterprise system, the system which makes it possible for us to look forward to something more than bare subsistence living.

UNITED STATES CHAMBER POLICY ON SOCIAL SECURITY

Experience now demonstrates that adherence to the basic purpose of a sound social security program for the aged requires:

(a) Adoption of a reasonable plan, in lieu of Federal grants for old-age assistance, to extend immediate protection under the old-age and survivor's insurance system to the present unprotected aged; and

(b) Periodic adjustment of the equal taxes on employer and employee and the tax on self-employed to support benefit disbursements on a current basis.' The system of old-age and survivors insurance, as extended in 1950, now covers about 75 percent of the workers of the country. As experience is gained with the administration of the system, further extension should be made to noncovered groups to the extent feasible. Governmental and railroad employees should promptly be brought under the old-age and survivors insurance system. 1 Adopted 1953.