It is recommended that a special study be made of Social Security systems in other countries where benefits are automatically related to changes in earnings in the economy. In other words, Senator, if the cost of living goes up, let us say, 3 percent a year, and wages and productivity go up 5 percent a year, and retired people only get benefit increases of 3 percent a year, in the course of 5 or 10 years they are going to be at a lower relative level than the other people in the economy.

Therefore, in the cost-of-living increases for retired people, an important and satisfactory step was taken in 1972 and 1973, which can only lead 10, 15 years from now to our aged being treated in a way that will put them at a relative disadvantage. (Part 4, p. 244.)

Mr. Cruikshank's testimony on this point reads as follows:

This Nation took a giant step forward in adopting the 1972 amendment to provide automatic adjustment of benefits to increases in the cost of living. An important future direction for Social Security, one also endorsed by the White House Conference on Aging, is acceptance of the concept of measuring income adequacy in terms of rising national standards of living, not just rising prices. In this respect, we have much to learn from the experience of other countries, notably West Germany and Sweden, in adjusting pension benefits to rising wage levels, thus allowing retirees to share in economic growth. (Part 2, p. 150.)

COVERAGE

Still unresolved at the time of the hearings was the issue of bringing under the nearly universal coverage of Social Security two groups of employees: (1) Railroad workers who then had what amounted almost to coverage for the lower part of their protection through an interchange arrangement with the Railroad Retirement System, and (2) Federal civilian employees whose system is uncoordinated with Social Security.

In the opening hearing, Commissioner Ball pointed out that the report of the Commission on Railroad Retirement called for covering railroad workers under Social Security "just like everybody else and move the upper part of railroad protection into an arrangement that is supplementary to Social Security similar to the protection that is so common in private industry in general." (Part 1, p. 16.)

In October 1974, the Railroad Retirement System was restructured into two components: the first tier reflecting a basic Social Security benefit calculated on the basis of Social Security covered employment and railroad services, and the second tier, a pension based on a formula applicable only to railroad service.

With respect to civil service employees, additional material submitted by Commissioner Ball in response to a question read:

The problems resulting from the lack of coordination between social security and the CSR system have been the subject of much study over many years but the various solutions which have been proposed have proved very controversial and many have involved high costs. Of the various plans which have been proposed, the coverage-coordination approach, more than any other, has the potential for assuring a reasonable relationship between benefits and lifetime contributions and service in the case of people who shift between Federal employment and other work. Under this approach, social security coverage would be extended to employment covered under the CSR system with some reduction in CSR benefits and contributions to take account of the contributions and benefits of the social security system. One of the most significant features of this approach is that it would provide prepaid hospital insurance protection under the Medicare program for all Federal employees. The coverage-coordination approach has in the past been unacceptable to the principal organizations of Federal employees; they are opposed to an approach which would reduce benefits now provided under the CSR

system on the basis that it would weaken the CSR system and would tend to limit future improvements in the protection of Federal employees to changes made in the social security program.

Another, more limited, approach would be to transfer earnings credits from the CSR system to social security where there is no benefit eligibility under the CSR system when the worker dies, becomes disabled, or retires. This approach would be less costly than coverage coordination and would fill the major gaps in protection of those who move between employment covered by the CSR system and jobs covered under social security.

The House Committee on Ways and Means has directed the Social Security Administration to give further study to ways in which limited coordination be'ween social security and the CSR system could be achieved and to consult with the Civil Service Commission and Federal employee unions on what would constitute a workable proposal. We are now engaged in this study. (Part 1, p. 63.) The Senate Committee on Aging will wish to pursue the question of Social Security coverage for civil service employees in future hearings.

ADMINISTRATION OF SOCIAL SECURITY

Several major witnesses wholeheartedly endorsed the proposal, initially made at the January 23d hearing by William L. Mitchell, for the establishment of a bipartisan board or commission to administer the Social Security program.

Mr. Mitchell, noting that the new provision for automatic adjustment might diminish "the thorough, periodic review of the system needed to insure its continued dynamism," stated:

With this new provision, and with the addition of Medicare and the adult categories of public assistance to OASDI, I suggest that this may be an appropriate time to consider the desirability of setting up a bipartisan board to help guide the future destiny of these programs. It will be recalled that the original Social Security Act of 1935 provided for such a board and the program was under its administrative supervision for the first several years of its existence. Surely the wisdom, objectivity, and intense work of that body contributed immeasurably to the design and development of an organization which today is known for its excellence and efficiency. The policies and principles which that board developed still guide an organization which has responsibly disbursed billions of dollars in benefits with never a breath of scandal and which continues to enjoy the confidence and respect of the American people.

Such a board could be expected to provide continuity to the policies and practices of the past and would be sensitive to the wishes of both the Congress and the President, as well as to political considerations. This is not the place, nor am I prepared to go into detail regarding formulation of this board, but I am convinced that it would serve the same worthwhile purpose as it did originally. (Part 3, pp. 205-6.)

Mr. Cohen too suggested reestablishment of something like the original Social Security board, saying:

If consideration is to be given to any administrative changes in the program, by either the executive branch or the legislative branch or any review, then I would like to suggest that one possibility would be to reestablish something like the original Social Security Board to administer the program.

This board would consist of three persons, that is illustrative of what the original board was, three persons nominated by the President with the advice and consent of the Senate for 6 years, staggered terms, with no more than two members from any one political party.

Social Security is getting so big and so involved and so complex and I have been so concerned with the possibility of political involvement of the executive branch that I have been thinking more and more that the Congress ought to reestablish an independent board to administer the whole program so as to be sure that no political involvement becomes a factor in the Social Security system.

Mr. Brickfield, testifying on behalf of NRTA-AARP, said:

I now come to the establishment of a bipartisan Social Security Board. Our associations believe that steps should be taken to assure the type of continuity with respect to supervision, direction, and development in Social Security that the country enjoyed in the past.

We think one important step in this direction would be a return to the former three-member bipartisan board form of administration which, in our judgment, contributed so importantly to the early success of the system and to the public's confidence in its administration.

Now that the Social Security Administration has the responsibility for supplemental security income as well as the old age, survivors, disability and health insurance programs, we believe that a three-member bipartisan board would best assure integrity, competence, and impartiality and provide protection against purely partisan political intervention.

We recommend that two of the three members be from the majority party and that all three be named by the President with the advice and consent of the Senate. The President could select the chairman and all members would serve for fixed terms. The board would be concerned primarily with policy formulation but would operate through an executive director who would have to qualify under Civil Service rules and serve at the pleasure of the board. (Part 5, p. 297.)

Mr. Cruikshank, in expressing wholehearted endorsement of administering the Social Security programs through an independent nonpolitical agency, pointed out a number of advantages:

Such an independent agency would underscore in the public mind the essential difference between these social insurance programs and other operations of the Government. It would also provide greater visibility and prestige as well as optimum responsiveness to the constituents-and again I point out that the constituency encompasses all our people, regardless of age. An important specific charge to this agency should be to develop and carry out an aggressive informational program. Our observation of social insurance programs in other countries indicates that this informational responsibility is an important part of the right to know on the part of beneficiaries, and of the effective administration of the program.

An independent, nonpolitical agency could assure continuity in both the review of the system's effectiveness and in its day-to-day administration-a continuity that cannot possibly be achieved under the present system when the administering officials are subject to change every few years and the program is reviewed only intermittently by an advisory council or by the Congress.

Another advantage is that it would be made clear that the agency has its own source of funding through the trust funds it administers. Indeed, our Social Security system now has, but this is a fact not commonly recognized by the general public who are surprised to learn that their Social Security system owns its own buildings and equipment and finances its own operations.

An important essential would, of course, be removal of the Social Security trust fund expenditures from the consolidated budget. Thus, Social Security expenditures could be assessed on their own merits and in relation to sound actuarial principles rather than primarily through their immediate impact on the annual Federal budget. Furthermore, the other programs now under DHEW would be relieved of the need to absorb more than their reasonable share of Department-wide budget cuts when they are imposed-cuts that are heavily weighted by the sheer size of the Social Security program and its irreducible obligations. (Part 4, p. 281.)

So persuasive was the testimony of the above witnesses that, in the spring of 1974, Senator Church, chairman of the Senate Special Committee on Aging, introduced S. 3143 to establish an independent commission. Ways and Means Committee Chairman Wilbur Mills introduced a companion bill in the House. S. 3143 had 50 cosponsors by the time the session ended.9

On January 27. 1975, Senator Church introduced S. 388, the Social Security Adminis

SUBJECTS FOR FUTURE HEARINGS

Women and minorities. The committee plans to hold additional hearings that focus on treatment of women and of blacks and other minority groups under Social Security.

The hearing on women will provide an opportunity to explore the following proposal made by Mr. Cohen at the July 25 hearing:

Women who perform household and family duties should be able to contribute to the insurance program on an amount equivalent to the self-employment rate on the average earnings of all women working four quarters in the latest prior year. Women would then receive benefits in their own right with the provision that a married woman would always receive at least one-half as much as her husband did. Special consideration should be given to assuring equal treatment for women and men in the program.

Therefore, my proposal which is designed in part to overcome some of these difficulties is that a wife or mother or woman who stays at home and does not receive regularly earned income in the economy would have her work counted for Social Security at the presumptive rate of average earnings of all women who work four quarters during the year and pay, rather than the double contribution, the self-employment rates. I urgently speak to that as a possibility. (Part 4, p. 249.)

Another problem in relation to women was touched upon at the Twin Falls hearing when the statement submitted by the representative of the NRTA-AARP included these comments on the treatment of working wives under Social Security:

Today, many working wives feel that their Social Security contributions have been wasted in situations where they are entitled to receive benefits upon their spouses' earnings that are as high if not higher than those to which they are entitled on the basis of their own earnings. This criticism has become more pronounced in recent years as proportionately more women have been entering the labor force.

The dissatisfaction of working wives who, despite their Social Security contributions, receive no higher benefits than they would have received had they not worked in Social Security covered employment is the result of their nonacceptance of the rationale for paying the wife's benefit only to those who may be presumed to be dependent—that is, not paying those who have earnings records which defeat the presumption of dependency. This rejection of the "dependency" rationale is coupled with a lack of awareness of the advantages that working women have as a result of their eligibility for benefits based on their own earnings records. For example, married women who work usually have disability insurance protection, which is not available to nonworking wives. Should they retire at or after age 62, benefits will be payable to them on the basis of their own earnings records even though their husbands continue to work. Finally, in the event that they become disabled or die, monthly benefits on their earnings records are payable to their children.

Our organizations recognize, however, that neither the dependency rationale nor the expanded insurance protection available to working wives is likely to assuage the growing dissatisfaction with what they perceive to be inequitable treatment in terms of social security benefit amounts. We believe that the Congress will find it necessary to acknowledge the reality of the working wife by modifying the Social Security system so as to eliminate, to the extent possible, those situations in which a working couple receives less in total old age insurance benefits than another couple with the same total earnings where only the husband worked.

While it may not be possible to achieve precise benefit equity with respect to everyone, our organizations recommend that the Congress consider seriously the proposal advanced by the 1971 Advisory Council on Social Security to reduce existing inequities with respect to working wives. That proposal would provide

benefits for a married working couple equal to those provided now for a couple where only one spouse works and has all the earnings.

Under the council's proposal the earnings of a man and wife in each year would be combined and credited up to the maximum annual earnings creditable for the year. The benefits of the couple would be based on these earnings. In order to qualify for the combination, each would have to be fully insured, would have to be at least age 62, and would have to have applied for benefits. Both the husband and wife would be entitled to a benefit, before any reduction on account of early retirement, equal to 75 percent of the age 65 benefit based on the combined earnings. A widow would get a benefit based on the combined earnings of the couple. The earnings record would be separated on divorce, with each member of the couple receiving benefits as if the earnings records had never been combined. (Part 6, pp. 504-505.)

Other subjects. Throughout the forthcoming hearings of the Senate Committee on Aging in its study of "Future Directions in Social Security" will be the all-pervasive question of long-range financing, especially in view of the 1974 Trustees Report. Another area of special and timely emphasis will be suggestions for dealing with an inflationary situation: is there need for a special cost of living index for the elderly? Should the Government issue a constant purchasing power bond, for use both by individuals with small savings and as an investment device for private pension funds? Also underlying these hearings will be the basic problem of persons with low earnings and other low-income individuals and the role of the Social Security program in meeting their needs.