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Level of protection. A social-security program should provided a minimum layer of basic protection against the major economic hazard with which it deals, and should be so designed and administered as to encourage additional savings and self-protection by the individual through his own efforts.

Role of State and local governments. Every effort should be made to encourage State and local governments to assume primary responsibility for social security in order to keep such activities close to the employers, to the employees, and to other taxpayers.

Coverage extension. The present system of old-age and survivors insurance should be extended to employees of nonprofit organizations, governmental em. ployees, railroad employees, agricultural employees, and other employees not now covered thereunder, including the self-employed, to the extent feasible.

Benefit level. Any adjustment of the old-age and survivors insurance benefit level should be conditioned upon a general extension of coverage (as above) and upon appropriate adjustment in the supporting tax schedule (as below). Conditioned upon these integrally related changes, the benefit level should be adjusted so as to contniue to be in line with the program's objective of providing a minimum layer of basic protection.

Financing. The tax schedule of existing law supporting old-age and survivors insurance should be increased appropriately to take account of any amendments increasing prospective benefit disbursements; otherwise, no increase in the schedule of tax rates should be adopted until necessary to prevent diminution in the funds of the program.

Governmental employees. When governmental employees are covered under old-age and survivors insurance, the civil service retirement system and the many other Federal, State, and local systems for such employees should be revised to provide supplementary protection (if such protection is desired), just as the staff retirement plans of other employers have been revised.

Total and permanent disability benefits. Voluntary agencies and the State public assistance systems, in conjunction with the State vocational rehabilitation agencies, offer the best means of providing for the totally disabled. No Federal system of total and permanent disability benefits should be established either in connection with old-age and survivors insurance or otherwise.

Temporary Federal participation. The present system of Federal grants to States for public assistance should be recognized as a temporary expedient. The States should assume an increasing proportion of the costs of public assistance as the beneficiary rolls of the Federal old-age and survivors insurance program expand. Eventually, the entire costs of such assistance as is needed to supplement old-age and survivors insurance should be borne by the States and their local subdivisions.

The CHAIRMAN. The next witness is Mr. Herschel C. Atkinson.
You may be seated if you wish, sir.



Mr. ATKINSON. Thank you, sir.

Mr. Chairman and members of the Senate Finance Committee, my name is Herschel C. Atkinson. I am executive vice president of the Ohio Chamber of Commerce whose principal offices are at Columbus, Ohio. The membership of our organization consists of over 4,000 industrial and commercial firms in Ohio, from the smallest to the largest. They engage in practically every line of business in our State. The views which I am presenting today are those of our Ohio Chamber of Commerce committee on social legislation, which consists of 25 representative business executives who are specifically charged with day-to-day handling of social-security problems for their own firms. After much careful study this committee submitted a series of recommendations on H. R. 6000 which were, in turn, reviewed and voted upon by our board of directors. The board is made up of top executives of

Ohio concerns; all of which are directly affected both by the taxation provisions of the Social Security Act, and also by the benefit features thereof as they apply to their own employees and the many retirement programs set up for the workers.

I also serve as the chairman of the social-security committee of the Council of State Chambers of Commerce, a federation of 32 State Chamber organizations, all vitally interested in the proposals now before your committee. I wish to point out, however, that I do not speak as the representative of all of these organizations today, although I do have authorizations with me from the following: Connecticut Chamber of Commerce, Inc., Indiana State Chamber of Commerce, Maine Chamber of Commerce, West Virginia Chamber of Commerce, New Jersey State Chamber of Commerce, South Carolina State Chamber of Commerce, and South Texas Chamber of Commerce. There are four or five other State chambers-I recall Illinois and some others—who also have had their own witnesses before this committee.

As to the general statement of our position, the Ohio Chamber of Commerce position, our approach to the problem of revising and extending the old-age and survivors provisions of the Social Security Act is predicated on the assumption that this basic program is directed toward the provision of a minimum subsistence income upon retirement for practically every person who works for a living in our Nation. In other words, our views parallel very closely those stated by Mr. Marshall, and as a matter of fact much of this statement is quite similar in character, although there are some variations.

On the one hand, we wish to see basic retirement payments which are reasonably commensurate with the present cost of living. On the other hand, we think it would be unwise for the Nation to contract for an insurance program which would, in effect, make it “insurance poor. just as the term is applied to an individual who over-extends his pri. vate insurance obligations to the point where he is unable to meet his needs for day in and day out living. Also, we believe that there is a need to encourage private provisions for old-age retirement. The danger, as we see it, in this situation is that with the Federal OASI program, the commitments which are made in the early years of the program are deceptively low, whereas in the long run the obligations for the years ahead may be ruinous unless we temper our present desires with our known future obligations. And, of course, all you gentlemen are thoroughly familiar with the actuarial estimates, which you have had discussed many times before this committee.

One of our basic premises in developing our recommendations on the legislation now before you is our very deep realization of the demands which are being made upon our Federal budget for national defense needs, for veteran services, and for servicing the enormous public debt of our Government. A prudent and careful look at the present costs of social security must be tempered by the fact that we, as a Nation, should not assume obligations today which are only the forerunner of the fully matured cost of this program in the decades ahead. It is our view, therefore, that the present framework of the socialsecurity system should be retained and that modifications that are made should be within that established framework, and reflect our ability to absorb and adjust to the costs.

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Dealing in trends in old-age pensions as compared with OASI benefits: As a fundamental consideration in the study of social security by this committee, we are hopeful that steps will be taken which will restore the old-age and suvivors insurance program as the dominant part of the Social Security Act. The plain fact is, and you have had much testimony on this, that old-age assistance payments in the latter part of 1949 were averaging $44.50 per person per month, while the old-age and survivors insurance program was paying $22.93 per month. Moreover, the number of persons being supported on State and Federal old-age assistance numbered 2,700,000 while the old-age and survivors insurance program had absorbed only 1,683,000.

By several acts of Congress since 1939, the Federal portion of the matching program of old-age assistance has been increased. This trend has resulted in a marked increase in the so-called "free" pensions.

At our annual meeting in Columbus, last fall, Mr. R. A. Hohaus, actuary of the Metropolitan Life Insurance Co., commented upon this trend as follows:

Because the old-age assistance developments and the proposed revision in H. R. 6000, recently passed by the House, are receiving so little attention in current discussions of that bill, and because I am convinced the great challenge now facing our citizens in social security is to deflate old-age assistance and strengthen and extend the insurance plan-a challenge which I think is as grave a domestic issue as any now before Congress-I propose to stress the weaknesses of the . present and proposed old-age assistance arrangements.

Federal matching of State assistance funds as practiced to date has two major defects. First, though the Federal law requires that a State, in determining need, shall take into consideration a claimant's other income and resources, it lays down no standards, not even minimum ones, of what constitutes need. This allows the State very broad discretion in determining how much Ferderal money is to be spent and what proportion of those in a particular category it will take on the rolls as needy.

Thus the proportion now varies by States from less than 10 percent to more than 80 percent of those 65 and over. Secondly, as a result of this latitude and the nature of the matching formula, it is possible for a State to increase the amount of Federal grants it receives, with no additional expenditure on its part, or even with reduced expenditure, by simultaneously increasing the number of recipients and reducing the average payment.

Ohio made payments to some 190 of every 1,000 of its population aged 65 and over-less than the Federal average of 232 per 1,000. Louisiana, however, took in as many as 819 of each 1,000 of its old folk-a record for the United States if not for the world; while the figure for New Jersey was, in the light of Louisiana's record, a paltry 65 per 1,000. Of the average monthly pay. ments in each of these States the Federal and States shares were approximately as follows:

Monthly old-age assistance per recipient





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1 In making these approximations account was taken of the fact that each of the three States made nay. ments in excess of $50 a month. For Ohio and New Jersey the proportion of such payments was considet. able. For Louisiana it was relatively small.

However, weighting those figures by the proportions of the agerl receiving assistance in the respective States we arrive at the following vutlass jær agd inhabitant of the State:

Monthly old-age assistance per inhabitant 65 and over

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To illustrate the second defect in the type of matching formula now current, whereby the Federal Government allows more than half of the average State payment up to a stated limit, and one-half thereafter up to a higher limit, consider the following hypothetical situations :

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It is clear that for the same State outlay of $100 twice as much Federal money can be brought into the State by paying $20 a month to 20 recipients, as by paying $50 a month to 5 recipients, or half as much again as by paying $30 a month to 10 recipients. Accordingly, the current type of unequal matching offers strong financial inducement to a State to increase the number of recipients rather than the average payment. Indeed the average payment can be reduced with financial advantage to the State.

The possibilities here indicated are not mere theory. Mississippi reduced her average monthly old-age assistance payment from $17.50 in September of 1947 to $15.65 in September of 1948 while increasing the number of recipients from 38,431 to 52,159.

After the 1948 liberalization in Federal grants-in-aid, the number of recipients advanced further to 58,051 last June. Yet even though the average payment was increased to $18.80 (from $15.65) during that period, the State dollar total outlay actually fell, while the dollar receipts from Federal funds increased by over 50 percent. The actual figures are instructive.

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With the proposed very substantial liberalizations in the old-age insurance benefits in H. R. 6000, as passed by the House, one might have expected that there would have been coupled amendments to the old-age-assistance provisions which would reverse the trend of more and more Federal grants. But just the opposite has occurred. H. R. 6000 further liberalizes the formula by providing Federal funds equal to 80 percent of the first $25 of the average payment per recipient plus one-half of the next $10, plus one-third of the next $15.

This means that the provisions promulgated in H. R. 6000 for enlarging the Federal matching contributions is a move which, in our judgment, is in the wrong direction. We believe that it will produce even greater distortions in the comparative position between old-age and survivors insurance and the State public-assistance programs, that it will encourage the States to place a greater burden upon the Federal Treasury at a time when we are hopeful that Federal budgetary demands can be reduced and should be reduced. If the basic OASI pension amount is increased, there is every reason to believe that the States should be able to take care of the residual oldage pensioners, who are not eligible for OASI,

from their own resources and funds rather than to rely upon the Federal Government for ever-increasing amounts of Federal dollars; and very similar views were reflected in the testimony of Mr. Marshall.

In view of the fact that public assistance for the aged and the de. pendency groups was originally intended to be a residual portion of the program, we sincerely recommend to the committee that the Federal Government take steps to strengthen the insurance program and at the same time gradually retire from public assistance. With this as a basic concept, we recommend the following major changes in the program:

As to extension of coverage: We recommend the extension of coverage of the OASI program, not only to the groups that were included in H. R. 6000 as it passed the House of Representatives but also to bring into the system other wage-earning groups. We believe that if the old-age and survivors insurance program is to provide a basic floor of protection for all gainfully employed, then a closer approach to universal coverage seems to be in order. This very broad extension of coverage is, in our opinion, a fundamental prerequisite to any change in the primary benefit formula.

Senator MILLIKIN. You are departing from the original concept that this should be a system for the benefit of the employee in the correct sense of the term "employee”? I assume that you are also for coverage of the self-employed, the business executive, professional men, and so forth?

Mr. ATKINSON. That is correct.
Senator MILLIKIN. Thank you.

Mr. ATKINSON. We recognize that a new start in OASI is extremely costly, for all of these groups, Senator Millikin, and therefore extended coverage and benefit revision should be considered simultaneously. Careful study should be given to the proposal that business, agricul. tural, and professional groups, employees covered by the Railroad Retirement System, and those covered by Federal and State civilservice retirement systems should come under the OASI system also. And, of course, where it is desired, and where it is possible, those systems could become supplementary, in addition to the basic Federal system-where they want to add something to that established by the employer and the employee Government contributory plan and also preserve those other systems.

We recognize that objection may come from certain of these groups on the ground that it will require revision and change in their established retirement programs. We point out, however, that if revisions are made in the OASI system, many private industrial pension programs now integrated with social-security benefits under the present law will also have to be revised. And, of course, to me the industrial and business system is the basic economic system of this country, and if they can revise those, I think the systems that depend upon the tax money produced in a private-enterprise economy certainly can also be revised.

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