SOURCE:  The Great IRS Hoax book, Section 6.2.3.

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FDR’s Pep-Talk to Congress, January 17, 1935

Below is a speech given January 17, 1935 by President Franklin Delano Roosevelt to Congress on the issue of advocating a proposed new program he called “Social Security”.  This speech resulted in the eventual passage of the Social Security Act of 1935 on August 14, 1935:

In addressing you on June 8, 1934, I summarized the main objectives of our American program. Among these was, and is, the security of the men, women, and children of the Nation against certain hazards and vicissitudes of life. This purpose is an essential part of our task. In my annual message to you I promised to submit a definite program of action. This I do in the form of a report to me by a Committee on Economic Security, appointed by me for the purpose of surveying the field and of recommending the basis of legislation.

I am gratified with the work of this Committee and of those who have helped it: The Technical Board on Economic Security drawn from various departments of the Government, the Advisory Council on Economic Security, consisting of informed and public - spirited private citizens and a number of other advisory groups, including a committee on actuarial consultants, a medical advisory board, a dental advisory committee, a hospital advisory committee, a public - health advisory committee, a child - welfare committee and an advisory committee on employment relief. All of those who participated in this notable task of planning this major legislative proposal are ready and willing, at any time, to consult with and assist in any way the appropriate Congressional committees and members, with respect to detailed aspects.

It is my best judgment that this legislation should be brought forward with a minimum of delay. Federal action is necessary to, and conditioned upon, the action of States. Forty - four legislatures are meeting or will meet soon. In order that the necessary State action may be taken promptly it is important that the Federal Government proceed speedily.

The detailed report of the Committee sets forth a series of proposals that will appeal to the sound sense of the American people. It has not attempted the impossible, nor has it failed to exercise sound caution and consideration of all of the factors concerned: the national credit, the rights and responsibilities of States, the capacity of industry to assume financial responsibilities and the fundamental necessity of proceeding in a manner that will merit the enthusiastic support of citizens of all sorts.

It is overwhelmingly important to avoid any danger of permanently discrediting the sound and necessary policy of Federal legislation for economic security by attempting to apply it on too ambitious a scale before actual experience has provided guidance for the permanently safe direction of such efforts. The place of such a fundamental in our future civilization is too precious to be jeopardized now by extravagant action. It is a sound idea - a sound ideal. Most of the other advanced countries of the world have already adopted it and their experience affords the knowledge that social insurance can be made a sound and workable project.

Three principles should be observed in legislation on this subject. First, the system adopted, except for the money necessary to initiate it, should be self-sustaining in the sense that funds for the payment of insurance benefits should not come from the proceeds of general taxation. Second, excepting in old-age insurance, actual management should be left to the States subject to standards established by the Federal Government. Third, sound financial management of the funds and the reserves, and protection of the credit structure of the Nation should be assured by retaining Federal control over all funds through trustees in the Treasury of the United States.

At this time, I recommend the following types of legislation looking to economic security:

1. Unemployment compensation.

2. Old-age benefits, including compulsory and voluntary annuities.

3. Federal aid to dependent children through grants to States for the support of existing mothers' pension systems and for services for the protection and care of homeless, neglected, dependent, and crippled children.

4. Additional Federal aid to State and local public-health agencies and the strengthening of the Federal Public Health Service. I am not at this time recommending the adoption of so-called "health insurance," although groups representing the medical profession are cooperating with the Federal Government in the further study of the subject and definite progress is being made.

With respect to unemployment compensation, I have concluded that the most practical proposal is the levy of a uniform Federal payroll tax, 90 percent of which should be allowed as an offset to employers contributing under a compulsory State unemployment compensation act. The purpose of this is to afford a requirement of a reasonably uniform character for all States cooperating with the Federal Government and to promote and encourage the passage of unemployment compensation laws in the States. The 10 percent not thus offset should be used to cover the costs of Federal and State administration of this broad system. Thus, States will largely administer unemployment compensation, assisted and guided by the Federal Government. An unemployment compensation system should be constructed in such a way as to afford every practicable aid and incentive toward the larger purpose of employment stabilization. This can be helped by the intelligent planning of both public and private employment. It also can be helped by correlating the system with public employment so that a person who has exhausted his benefits may be eligible for some form of public work as is recommended in this report. Moreover, in order to encourage the stabilization of private employment, Federal legislation should not foreclose the States from establishing means for inducing industries to afford an even greater stabilization of employment.

In the important field of security for our old people, it seems necessary to adopt three principles: First, noncontributory old-age pensions for those who are now too old to build up their own insurance. It is, of course, clear that for perhaps 30 years to come funds will have to be provided by the States and the Federal Government to meet these pensions. Second, compulsory contributory annuities which in time will establish a self-supporting system for those now young and for future generations. Third, voluntary contributory annuities by which individual initiative can increase the annual amounts received in old age. It is proposed that the Federal Government assume one-half of the cost of the old-age pension plan, which ought ultimately to be supplanted by self-supporting annuity plans.

The amount necessary at this time for the initiation of unemployment compensation, old-age security, children's aid, and the promotion of public health, as outlined in the report of the Committee on Economic Security, is approximately $100,000,000.

The establishment of sound means toward a greater future economic security of the American people is dictated by a prudent consideration of the hazards involved in our national life. No one can guarantee this country against the dangers of future depressions but we can reduce these dangers. We can eliminate many of the factors that cause economic depressions, and we can provide the means of mitigating their results. This plan for economic security is at once a measure of prevention and a method of alleviation.

We pay now for the dreadful consequence of economic insecurity - and dearly. This plan presents a more equitable and infinitely less expensive means of meeting these costs. We cannot afford to neglect the plain duty before us. I strongly recommend action to attain the objectives sought in this report.

You can read this speech for yourself at the New Deal Network:

A revolution was made when Social Security was enacted in 1935 and it radically changed our country. After remarkably little public and Congressional debate, Franklin Delano Roosevelt signed the Social Security Act into law on August 14, 1935. FDR knew that the welfare state wouldn't end with Social Security. Many of his disappointed allies had wanted much more. But FDR assured them this was just the beginning.[1]

FDR said, on signing the bill into law, that Social Security "represents a cornerstone in a structure which is being built but is by no means complete."[2]  The federal government through programs such as Social Security would create its own business cycle, it would "flatten out the peaks and valleys of deflation and inflation,"[3] Roosevelt promised. Social Security was representative of national planning schemes – some of which had been tried during World War I – and which became popular again with intellectuals. Many of them believed that the government could wage war on poverty; that, by using the techniques of wartime planning so popular with progressives during World War I, the government could generate and control the business cycle.[4]

Social Security was a Keynesian device to ensure that buying power would remain strong in times of high unemployment. By Keynesian, I mean a kind of thinking that pre-dated Keynes by centuries, which held that injecting inflation into a weak economy would work miracles. Keynes, in the 1920s, 30s and 40s, was merely one member of this inflationist school. But his thought was influential in America in the 1930s. One of the founding fathers of Social Security has said that the contribution of Keynes was not appreciated.[5] Keynes' philosophy helped justify a massive welfare state.

The original Social Security package, for instance, was a lot more than so-called old age insurance. The program initially contained 10 programs and included 11 titles. Besides, pensions, the federal government was initiating vocational rehabilitation, unemployment insurance, aid to dependent children and public health programs, among others. Myriad additional programs would follow over the years because of the initial triumph of Social Security. It would help bring about a signal change in American culture and government: The federal government would take on many new powers and radically change our economy.[6]

But, most important of all, Social Security changed our culture in ways the authors of the original Social Security Act may or may not have realized: It would, among other things, also discourage savings, expand the state's reach into the family, redistribute income in ways no one imagined (quite often from the working poor and the lower middle-class to the upper middle-class because the latter group tended to have more political clout as exercised through organizations such as the AARP) and create a huge unprecedented peacetime bureaucracy, a bureaucracy that frequently pushed for more expansion under the guise of serving the people.[7]

The program also had a much more profound effect on American life: It invented the concept of a passive retirement in which individuals would stop working, stop making more then a few dollars a year, or what a Social Security advocate called "pin money[8]. To make more than pin money would mean Social Security penalties, an idea added to the original bill by the labor unions.

Social Security advocates implicitly convinced tens of millions of Americans that their golden years meant "taking it easy," withdrawing from the most challenging parts of their lives. That would free up millions of jobs, an important consideration in the midst of the Great Depression, an economic calamity in which FDR's policies failed even after six years of huge spending.[9]  By 1940, an FDR historian would implicitly concede that the New Deal had failed to restore a strong economy. "The America over which Roosevelt presided in 1940 was in its eleventh year of depression. No decline in American history had been so deep, so lasting, so far reaching."[10] Clearly, America's recovery from the Great Depression did not begin until the buildup for World War II and the war itself. That's when FDR discovered his affinity for a military Keynesianism.[11]

Many changes triggered by Social Security. The changes triggered debates over basic social and economic issues such as personal responsibility vs. the general welfare, and who defines the nature of retirement, the individual or the government, as well as who should control the retirement assets of millions of people.

"Why, then was America so far behind? The first reason was out of the cherished ideal of rugged individualism.”[12]

FDR and the Birth of Social Security: Destroying Rugged Individuality

Social Security has become the crown jewel of a welfare state, which is why its defenders are today so ardent in fighting any move to privatize any part of it. The welfare state will always be safe as long as Social Security survives. Social Security has continued to expand in good times and bad, under Democrats and Republicans, even though a few of the latter actually claimed that they would bring Social Security under control. Those who thought they would tame this huge program lost time and again. These politicians who once criticized Social Security, usually ended up praising it[13] or kept their criticisms to themselves.[14] And this was FDR's goal in designing the program: Insuring that no succeeding group of politicians could ever undo his work.[15]

Today those who would privatize or even reform Social Security[16] face a formidable task, a task as difficult as dismantling the military-industrial complex or selling off Amtrak. That's because decrepit government bureaucracies – as opposed to rotten private bureaucracies – have the power to tax and to preserve their existence. And the first rule of any bureaucracy is survival at any cost. The second rule is always try to expand.

The welfare state took much longer to take hold in the United States than in Europe, where socialism had a better name and a longer tradition.

By the early 1930s, Germany had a Social Security program for nearly a half century. Britain had a government pension scheme since before the World War I, when the Liberal/Labour government of Herbert Henry Asquith in 1911[17] laid the foundations of a welfare state that would be later carried out by the Labor and Conservative parties over the next two generations. Germany under Bismarck had passed a Social Security plan as part of an alliance with Social Democrats. Bismarck was ready for socialism[18]. Dozens of European countries had put Social Security schemes by the outbreak of World War I.

But in America, there was a tradition of "rugged individualism" that resisted most forms of collectivism. Even labor leaders like Samuel Gompers,[19] who had called for many other government initiatives, opposed a mandatory social insurance program, a concept that stressed an insurance that was not for profit, but was run for the benefit of society. But Gompers was wary of that idea. To him, it smacked of German socialism. "Compulsory social insurance," he complained, "is in essence undemocratic."[20] Foreshadowing the objections of those who would later complain that the government would mismanage the assets of a program, Gompers wanted workers to depend on themselves, private institutions, their unions – anything but the government.

The opposition to social insurance was owing to an American individualist tradition whose adherents held that individuals, families and community groups should take care of people in old age, not the government. And, most importantly, it was a voluntaryist tradition that resisted compulsory government programs.[21]

FDR, who was credited as the first major American politician to support a social security system, nevertheless had campaigned in 1932 in favor of limited government. He bitterly criticized Herbert Hoover's huge deficits. On the campaign trial he promised to roll back, not expand, the size of the federal government. "For three long years I have been going up and down this country preaching that government – federal government, state and local – costs too much. I shall not stop that preaching."[22]

FDR gave not the slightest indication that was he committed to a massive expansion of the power of the federal government. Later, as we will see, FDR would say that circumstances had changed. His supporters would argue that the Great Depression, and the more radical social insurance proposals of men like Huey Long, Upton Sinclair and Frances Townsend,[23] had led him to back this "moderate" program called Social Security.

Yet even before he took office, FDR was quietly committed to a social insurance program[24] as part of a program of counter-cyclical measures he believed would cure the problems of the business cycle. These initiatives were failures if one is to measure by unemployment numbers and traditional economic indices[25]. They did not restore prosperity, FDR was told by advisers six years into the New Deal.[26]

Social Security was a key part of his revolutionary corporativist economic policies. It was a revolution that shifted the responsibility for income maintenance from the private to the public sector, from the family to the state and from voluntary organizations to public bureaucracies. And it was a revolution carried out by elite groups of welfare workers, Social Democrats and other who believed European socialism could be imported to the United States on a step-by-step basis.[27]  They believed in a "new liberalism." Classical liberalism would die in the United States in the 1930s through programs such as Social Security just as it had died in Britain some four decades before. A new liberalism celebrated the expanded powers of the federal government. The old American individualist tradition was distrustful of distant central governments and the bureaucracies they spawned.

"Americans assumed that their country was unique in assigning to private voluntary institutions a wide range of responsibilities which in other nations were relegated to governments or elite groups," writes one historian of Social Security.[28]

Almost everyone, FDR critics as well as admirers, agree that Social Security was a watershed event in our history. FDR said of the legislation that, if it was the only bill passed in the 1935-36 congressional session, Congress would have accomplished a lot.[29] Why was it so important to those such as FDR who scorned the individualist tradition? Social Security was the centerpiece of a revolution that one historian has said meant that "big government, modern government" was here to stay.[30]

When Social Security survived – and, in its earlier years, it was a dicey question if it would or not, requiring the most effective political skills that FDR and his allies could summon – Americans implicitly accepted the most essential part of a new social policy. Washington, not individuals, would now have huge powers over the individual citizen's retirement planning, unemployment insurance and welfare payments. When FDR signed the Social Security Act, the United States, for the first time in her history, would have "a significant, permanent social welfare bureaucracy."[31]

FDR assured his social democratic allies that the Social Security was just the beginning of an expanded role for the federal government. But it wasn't until toward the end of his life, in the Economic Bill of Rights speech that so "thrilled" his social democratic supporters[32], that he was ready to publicly walk away from the campaign promises of 1932 and the American individualist tradition.

Some four years after its creation, the structure of this landmark program was expanding. Some 12,000 employees would be working in the Social Security administration, which would become bigger and bigger . Once in place, there were calls for sister bureaucracies. American Socialists were disappointed that more people were not included in the 1935 act (such as servants and farm workers); that disability insurance wasn't initially covered, that health insurance had not been included. But many of those leftist critics, who had at the time claimed that it was too little, later would concede that Social Security's establishment, no matter how modest, opened the door for the government to do many other things.[33] All the measures left out of the original bill would be included within 30 years.

That is why even many of those socialists who scorned FDR, who said that he was a bumbling savior of capitalism, could still summon up some grudging praise for FDR. Socialism would be quietly achieved over generations as part of a mixed economy that seemed, on the surface, to be a traditional laissez-faire American economy.

Social Security, whether it was called social insurance or government pensions, was the first vital step on the road to the welfare state. How it finally happened in the United States, after decades of frustrating unsuccessful efforts by social democrats and professional bureaucrats, is a fascinating story. FDR went around Congress, which was too unpredictable and whose review process might not have given him what he wanted. FDR found his own experts that he knew would give him what he wanted, then would unveil a Social Security proposal that he expected to be adopted whole. Congress, generally intimidated by the experts, went along with few objections.

This process, this masterful strategy of building a welfare state in a nation with a historic commitment to individualism, will be discussed in the next report.