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The Revolution of 1935 / Interessanter Artikel
<font face="Verdana" size="1" color="#002864">http://www.mises.org/fullstory.asp?control=997</font>
<font face="Verdana" color="#002864" size="5"><strong>The Revolution of 1935</strong></font>
<font size="4">by Gregory Bresiger</font>
<font size="2">[Post July 10, 2002]</font>
<font size="2">This article is excerpted from Gregory Bresiger’s large
monograph, </font><font size="2">The
Revolution of 1935: The Secret History of Social Security</font><font size="2">,
published in the Mises Institute series Essays in Political Economy. You can download
the entire monograph now.</font>
<font size="3">[img][/img] A
second American revolution occurred almost 70 years ago. On August 14, 1935,
after very little public or congressional debate, President Franklin Delano
Roosevelt signed the Social Security Act into law on. Many of his allies were
disappointed because they wanted more than the act provided; FDR assured them
much more was coming.<a title href="http://www.mises.org/fullstory.asp?control=997#_ftn1" name="_ftnref1">[1]</a></font>
<font size="3">He 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."<a title href="http://www.mises.org/fullstory.asp?control=997#_ftn2" name="_ftnref2">[2]</a> In
the midst of the Great Depression, and with most of his New Deal initiatives
failing to restore the economy, FDR hoped that the federal government, through
programs such as Social Security, would temper and control the business cycle.
Social Security, FDR said, would"flatten out the peaks and valleys of
deflation and inflation."<a title href="http://www.mises.org/fullstory.asp?control=997#_ftn3" name="_ftnref3">[3]</a></font>
<font size="3">Social Security was representative of national planning
schemes, some of which had been tested during World War I and regained
popularity with intellectuals after the crash of 1929. Many intellectuals
believed the government could wage war on poverty and, by using the techniques
of wartime planning so popular with progressives during World War I, manage the
business cycle.<a title href="http://www.mises.org/fullstory.asp?control=997#_ftn4" name="_ftnref4">[4]</a></font>
<font size="3">Social Security was a Keynesian device meant to ensure that
buying power would remain strong in times of high unemployment. By Keynesian, I
mean a kind of thinking pre-dated John Maynard Keynes by centuries but that he
would popularize with his writings in the 1920s and 1930s. Keynes had
rediscovered it in his reading of the philosopher Bernard Mandeville,<a title href="http://www.mises.org/fullstory.asp?control=997#_ftn5" name="_ftnref5">[5]</a> whose
“Fable of the Bees” was considered an example of how deficit spending could
restart an economy.<a title href="http://www.mises.org/fullstory.asp?control=997#_ftn6" name="_ftnref6">[6]</a></font>
<font size="3">This philosophy held that, by using fiscal and monetary
policies, a government could inject inflation into a weak economy and thereby
work miracles. Keynes, for all his brilliance, was merely another member of this
inflationist school that dated back centuries.<a title href="http://www.mises.org/fullstory.asp?control=997#_ftn7" name="_ftnref7">[7]</a> And
although Keynes seemed to have little direct influence when he met with FDR, he
did influence many of the president’s key economic advisers.<a title href="http://www.mises.org/fullstory.asp?control=997#_ftn8" name="_ftnref8">[8]</a>
The latter, in turn, helped change FDR’s economic thinking, so Keynes’s
thought became influential in the 1930s. One of the founding fathers of Social
Security has said that the contribution of Keynes was not appreciated,<a title href="http://www.mises.org/fullstory.asp?control=997#_ftn9" name="_ftnref9">[9]</a>
but Keynes’s philosophy helped justify a massive welfare state.</font>
<font size="3">Myriad additional programs followed over the years because of
the initial triumph of the Social Security Act. One of FDR’s newspaper friends
called the act “a monumental achievement,”<a title href="http://www.mises.org/fullstory.asp?control=997#_ftn10" name="_ftnref10">[10]</a> even
as he complained that the benefit amounts were “miserably inadequate.”<a title href="http://www.mises.org/fullstory.asp?control=997#_ftn11" name="_ftnref11">[11]</a> </font>
<font size="3">This one new program helped bring about a fundamental change
in American culture and government: The federal government that pushed ahead
with Social Security took on many new powers and radically changed our economy.<a title href="http://www.mises.org/fullstory.asp?control=997#_ftn12" name="_ftnref12">[12]</a></font>
<font size="3">Most important of all, Social Security transformed American
culture in ways the authors of the original Social Security Act may not have
expected: The foundational social insurance<a title href="http://www.mises.org/fullstory.asp?control=997#_ftn13" name="_ftnref13">[13]</a> program,
among other things, discouraged savings, expanded the state’s reach into the
family, and redistributed income in ways no one imagined (quite often from the
working poor and the lower middle class to the upper middle class--the latter
tend to have more political clout as exercised through organizations such as the
AARP). It also created a huge unprecedented peacetime bureaucracy, a bureaucracy
that frequently--and quietly--pushed for more expansion of the program under the
guise of serving the people. Many of the leaders of the program became quietly
political, despite their ostensibly apolitical civil service status.<a title href="http://www.mises.org/fullstory.asp?control=997#_ftn14" name="_ftnref14">[14]</a></font>
<font size="3">The program had another profound effect on American culture:
It created the institution of mass retirement. Social Security, along with other
modern welfare state programs, encouraged the concept of golden years in which
individuals would stop working. Some of the best and wisest people in our
society would vegetate; they would do fewer things, write fewer letters, and,
most important, work less. Some physicians call this “the theory of
disengagement.”<a title href="http://www.mises.org/fullstory.asp?control=997#_ftn15" name="_ftnref15">[15]</a></font>
<font size="3">The program was designed to foster senior inactivity by a
clause that would allow recipients to earn only what one Social Security
advocate called “pin money.”<a title href="http://www.mises.org/fullstory.asp?control=997#_ftn16" name="_ftnref16">[16]</a> To
make more than pin money would mean a penalty to anyone receiving Social
Security. This idea was added to the original bill by the labor unions, which
until the 1930s had been highly suspicious of welfare state measures such as
social insurance.<a title href="http://www.mises.org/fullstory.asp?control=997#_ftn17" name="_ftnref17">[17]</a>
FDR and his allies readily agreed to the penalty notion, given that they had
little expectation that the economy would fully recover; they believed work had
to be rationed.</font>
<font size="3">Social Security advocates convinced tens of millions of
Americans that their golden years meant withdrawing from the most challenging
part of their lives. This would free up millions of jobs, an important
consideration in the midst of the Great Depression. That’s because FDR’s
recovery policies, which included Social Security as a counter-cyclical device,
did not restore a prosperous economy,<a title href="http://www.mises.org/fullstory.asp?control=997#_ftn18" name="_ftnref18">[18]</a> as
an FDR historian conceded: “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.”<a title href="http://www.mises.org/fullstory.asp?control=997#_ftn19" name="_ftnref19">[19]</a></font>
<font size="3">FDR, credited as the first major American politician to
support a social security system, actually campaigned in 1932 in favor of
limited government. He bitterly criticized Herbert Hoover’s huge deficits and
attempts to bolster failing businesses with federal help, some of which mirrored
the ideas of the New Deal.<a title href="http://www.mises.org/fullstory.asp?control=997#_ftn20" name="_ftnref20">[20]</a> Still,
on the campaign trail, FDR 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.”<a title href="http://www.mises.org/fullstory.asp?control=997#_ftn21" name="_ftnref21">[21]</a>
The Democratic Party platform of 1932 called for a balanced budget, sound money,
and a 25-percent reduction in federal spending.</font>
<font size="3">FDR gave no indication he was committed to a massive expansion
of the federal government. Later, FDR said that circumstances had changed. His
supporters would argue that the Great Depression, and the popularity of the more
radical social insurance proposals such as those advocated by Huey Long, Upton
Sinclair, and Frances Townsend,<a title href="http://www.mises.org/fullstory.asp?control=997#_ftn22" name="_ftnref22">[22]</a> had
led him to support this “moderate” program called Social Security.</font>
<font size="3">Yet even before he took office, FDR was quietly committed to a
social insurance program<a title href="http://www.mises.org/fullstory.asp?control=997#_ftn23" name="_ftnref23">[23]</a> as
part of a program of countercyclical measures he believed would cure the
problems of the business cycle. These initiatives were failures if one measures
by unemployment numbers and traditional economic indices.<a title href="http://www.mises.org/fullstory.asp?control=997#_ftn24" name="_ftnref24">[24]</a>
They did not restore prosperity, as advisers told FDR six years into the New
Deal.<a title href="http://www.mises.org/fullstory.asp?control=997#_ftn25" name="_ftnref25">[25]</a></font>
<font size="3">Social Security was a key part of FDR’s economic thinking.
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 others who
believed European democratic socialism could be imported to the United States
step by step.<a title href="http://www.mises.org/fullstory.asp?control=997#_ftn26" name="_ftnref26">[26]</a> They
believed in a “new liberalism” that was at odds with America’s traditional
Jeffersonian philosophy. </font>
<font size="3">Almost everyone, FDR critics and admirers alike, agree that
Social Security was a watershed event in our history. It was indeed a
“monumental achievement,” even if it seemed modest at the time. But FDR said
of the legislation that, if it were the only bill passed in the 1935-36
congressional session, Congress would have accomplished much.<a title href="http://www.mises.org/fullstory.asp?control=997#_ftn27" name="_ftnref27">[27]</a> Social
Security was so important to those--such as FDR--who scorned the individualist
tradition because it was the centerpiece of a revolution that meant “big
government, modern government” was here to stay.<a title href="http://www.mises.org/fullstory.asp?control=997#_ftn28" name="_ftnref28">[28]</a> </font>
<font size="3">When Social Security survived--and, in its earlier years, it
was unknown whether it would, and it required all the political, judicial, and
legislative skills FDR and his allies could summon--Americans implicitly
accepted the most essential part of a new social policy. Washington, not
individuals, not state or local governments, would now have great power over
individual citizens’ 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.”<a title href="http://www.mises.org/fullstory.asp?control=997#_ftn29" name="_ftnref29">[29]</a></font>
<hr align="left" width="33%" SIZE="1">
<font size="2">Gregory Bresiger, a business journalist, is assistant managing
editor of <em>Traders Magazine</em>. He has also written for the <em>Free Market</em>
and the <em>New York Post</em>. See his Mises.org Articles
Archive, and send him MAIL. This
article is excerpted from his large monograph, </font><font size="2">The
Revolution of 1935: The Secret History of Social Security</font><font size="2">,
published in the Mises Institute series Essays in Political Economy.</font>
<hr align="left" width="33%" SIZE="1">
<div>
<div id="ftn1">
<a title href="http://www.mises.org/fullstory.asp?control=997#_ftnref1" name="_ftn1"><font size="2">[1]</font></a><font size="2">Although
the Social Security system initially covered a relatively small part of the
workforce, FDR assured his allies it would expand: “I see no reason why
everybody in the United States should not be covered,” FDR privately told
Francis Perkins. “Cradle to the grave--from the cradle to the grave they
ought to be in a social insurance system.” See Arthur Schlesinger, Jr.’s
The Coming of the New Deal, p. 308 (Houghton Mifflin Company, Boston,
1959). </font>
</div>
<div id="ftn2">
<a title href="http://www.mises.org/fullstory.asp?control=997#_ftnref2" name="_ftn2"><font size="2">[2]</font></a><font size="2">See
Policymaking for Social Security, by Martha Derthick, p. 5 (Villard
Books, New York, 1991). </font>
</div>
<div id="ftn3">
<a title href="http://www.mises.org/fullstory.asp?control=997#_ftnref3" name="_ftn3"><font size="2">[3]</font></a><font size="2">The
Public Papers and Addresses of Franklin D. Roosevelt, Samuel Rosenman,
ed., Vol. IV, pp. 324-325 (Random House, New York). </font>
</div>
<div id="ftn4">
<a title href="http://www.mises.org/fullstory.asp?control=997#_ftnref4" name="_ftn4"><font size="2">[4]</font></a><font size="2">Some
socialists said FDR was moving toward central planning and economic
nationalism. Said Stuart Chase: “National planning and economic
nationalism must go together or not all. President Roosevelt has accepted
the general philosophy of planning.” He added that the nation could
confidently move toward autarchy. Also see George Soule’s comments in
Walter Lippmann’s The Good Society, p. 91 (Grosset & Dunlap,
New York, 1936): “It is nonsense to say that there is any physical
impossibility of doing for peace purposes the sort of thing we did for war
purposes.”</font>
</div>
<div id="ftn5">
<a title href="http://www.mises.org/fullstory.asp?control=997#_ftnref5" name="_ftn5"><font size="2">[5]</font></a><font size="2">The
General Theory of Employment, Interest, and Money, Vol. VII, from The
Collected Writings of John Maynard Keynes, p. 378 (St. Martin’s Press,
Royal Economic Society, London).</font>
</div>
<div id="ftn6">
<a title href="http://www.mises.org/fullstory.asp?control=997#_ftnref6" name="_ftn6"><font size="2">[6]</font></a><font size="2">Ibid.</font>
</div>
<div id="ftn7">
<a title href="http://www.mises.org/fullstory.asp?control=997#_ftnref7" name="_ftn7"><font size="2">[7]</font></a><font size="2">For
more on this, see Ludwig von Mises, Human Action,, p. 466 (FEE,
Irvington-on Hudson, N.Y.,1966),.4th rev. ed., in which he discusses the
inflationist view of history: “A very popular doctrine maintains that
progressive lowering of the monetary unit’s purchasing power has played a
decisive role in historical evolution.” </font><a title href="http://www.mises.org/fullstory.asp?control=997#_ftnref8" name="_ftn8"><font size="2">[8]</font></a><font size="2">See
The Keynesian Episode: A Reassessment, by W.H. Hutt, pp. 269-70 (Liberty
Press, Indianapolis, 1979).</font>
</div>
<div id="ftn9">
<a title href="http://www.mises.org/fullstory.asp?control=997#_ftnref9" name="_ftn9"><font size="2">[9]</font></a><font size="2">Madam
Secretary: Frances Perkins, by George Martin, p. 346 (Houghton Mifflin,
Boston, 1976).</font>
</div>
<div id="ftn10">
<a title href="http://www.mises.org/fullstory.asp?control=997#_ftnref10" name="_ftn10"><font size="2">[10]</font></a><font size="2">Half
Way with Roosevelt, by Ernest K. Lindley, p. 218 (Viking Press, New
York, 1937).</font>
</div>
<div id="ftn11">
<a title href="http://www.mises.org/fullstory.asp?control=997#_ftnref11" name="_ftn11"><font size="2">[11]</font></a><font size="2">Ibid,
p. 219.</font>
</div>
<div id="ftn12">
<a title href="http://www.mises.org/fullstory.asp?control=997#_ftnref12" name="_ftn12"><font size="2">[12]</font></a><font size="2">Reviewing
the achievements of FDR, Doris Kearns Goodwin writes: “No longer would
government be viewed as merely a bystander and an occasional referee,
intervening only in times of crisis. Instead, the government would assume
responsibility for continued growth and fairness in the distribution of
wealth.” No Ordinary Time; Franklin and Eleanor Roosevelt: The Home
Front in World War II, p. 625 (Simon & Schuster, New York, 1994). </font>
</div>
<div id="ftn13">
<a title href="http://www.mises.org/fullstory.asp?control=997#_ftnref13" name="_ftn13"><font size="2">[13]</font></a><font size="2">I
will discuss this term in a later section.</font>
</div>
<div id="ftn14">
<a title href="http://www.mises.org/fullstory.asp?control=997#_ftnref14" name="_ftn14"><font size="2">[14]</font></a><font size="2">The
best example is one of the administrators of Social Security, Wilbur Cohen.
With the Republicans back in power in 1953, the supposedly nonpartisan Cohen
quietly “wrote speeches and supplied information” for the Democrats.
Says a friendly biographer: “It was not the first time that the
nonpartisan Social Security administration shaded into partisan politics.”
See Mr. Social Security: The Life of Wilbur Cohen, by Edward
Berkowitz, p. 41 (University Press of Kansas, Lawrence, 1995). </font>
</div>
<div id="ftn15">
<a title href="http://www.mises.org/fullstory.asp?control=997#_ftnref15" name="_ftn15"><font size="2">[15]</font></a><font size="2"> See
Dare to Be 100, by Walter M. Bortz, III, p. 52 (Random House, New
York, 1997).</font>
</div>
<div id="ftn16">
<a title href="http://www.mises.org/fullstory.asp?control=997#_ftnref16" name="_ftn16"><font size="2">[16]</font></a><font size="2">Barbara
Armstrong, executive director of the Committee on Economic Security (CES)
which wrote the Social Security plan, said retirement would mean “that
you’ve stopped working for pay.” See The History of Retirement: The
Meaning and Functioning of an American Institution, 1885-1978, by
William Graebner, p. 185 (Yale University Press, New Haven, Conn., 1980). </font>
</div>
<div id="ftn17">
<a title href="http://www.mises.org/fullstory.asp?control=997#_ftnref17" name="_ftn17"><font size="2">[17]</font></a><font size="2">“The
American antistatist tradition,” write a pair of historians, “produced a
union movement which in principle, though often not in action, refused to
look to the government to improve the position of the government.” See It
Didn’t Happen Here: Why Socialism Failed in the United States, by Gary
Marks and Seymour Martin Lipset, p. 31 (W.W. Norton & Company, New York,
2000). </font>
</div>
<div id="ftn18">
<a title href="http://www.mises.org/fullstory.asp?control=997#_ftnref18" name="_ftn18"><font size="2">[18]</font></a><font size="2">By
1938, in the midst of a recession, it was clear to many of FDR’s advisers
that the New Deal was failing. One of his political advisers, Vice President
John Nance Garner, said, “I don’t think the Boss has any definite
programs to meet the business. I don’t think much of the spending program.
You can’t keep spending forever. Some day you have to meet the bills.”
See Jim Farley’s Story: The Roosevelt Years, p. 138 (McGraw Hill,
New York, 1948). Roosevelt also complained when Secretary of Commerce Dan
Roper told him that the economy was slipping into recession. “Dan,
you’ve got to stop issuing these Hooverish statements all the time.”
Ibid., p. 101. </font>
</div>
<div id="ftn19">
<a title href="http://www.mises.org/fullstory.asp?control=997#_ftnref19" name="_ftn19"><font size="2">[19]</font></a><font size="2">The
historian is Doris Kearns Goodwin, and her implication was that FDR had
failed to reverse the depression just as Hoover had. See No Ordinary Time,
p. 42 (Simon & Schuster, New York, 1994).</font>
</div>
<div id="ftn20">
<a title href="http://www.mises.org/fullstory.asp?control=997#_ftnref20" name="_ftn20"><font size="2">[20]</font></a><font size="2">See
FDR, Architect of an Era, by Rexford Tugwell, p. 71 (Macmillan, New
York, 1967).</font>
</div>
<div id="ftn21">
<a title href="http://www.mises.org/fullstory.asp?control=997#_ftnref21" name="_ftn21"><font size="2">[21]</font></a><font size="2">The
Roosevelt Myth, by John T. Flynn, p. 37 (Devon-Adair Company, New York,
1961). </font>
</div>
<div id="ftn22">
<a title href="http://www.mises.org/fullstory.asp?control=997#_ftnref22" name="_ftn22"><font size="2">[22]</font></a><font size="2">Social
Security: The First Half Century, Gerald Nash, ed., pp. 35-36
(University of New Mexico Press, Albuquerque, 1988). </font>
</div>
<div id="ftn23">
<a title href="http://www.mises.org/fullstory.asp?control=997#_ftnref23" name="_ftn23"><font size="2">[23]</font></a><font size="2">Social
Security in the United States, by Paul Douglas, p. 15 (McGraw Hill, New
York, 1936). </font>
</div>
<div id="ftn24">
<a title href="http://www.mises.org/fullstory.asp?control=997#_ftnref24" name="_ftn24"><font size="2">[24]</font></a><font size="2">In
1937, after five years of the New Deal, another recession began. Two
historians have written, “The resulting downturn began in August 1937 and
continued through the winter and spring of 1938. It was nothing short of
catastrophic.” See FDR’s Fireside Chats, Russell D. Buhite and
David W. Levy, eds., p. 111 (Penguin Books, New York, 1992). </font>
</div>
<div id="ftn25">
<a title href="http://www.mises.org/fullstory.asp?control=997#_ftnref25" name="_ftn25"><font size="2">[25]</font></a><font size="2">FDR
conceded to Farley that there were problems, but he blamed a conspiracy
against him: “I know that the present situation is the result of a
concerted effort by big business and concentrated wealth to drive the market
down and just to create a situation unfavorable to me.” See Jim
Farley’s Story, p. 101. </font>
</div>
<div id="ftn26">
<a title href="http://www.mises.org/fullstory.asp?control=997#_ftnref26" name="_ftn26"><font size="2">[26]</font></a><font size="2">“The
vast expansion of public assistance functions and expenditures beginning in
the 1930s was superimposed upon a long tradition of disdain totally
incongruous with the political and economic power assumed by the public
welfare sector.” See The Professional Altruist: The Emergence of Social
Work as a Career, 1880-1930, by Roy Lubove, p. 54 (Atheneum, New York,
1969).</font>
</div>
<div id="ftn27">
<a title href="http://www.mises.org/fullstory.asp?control=997#_ftnref27" name="_ftn27"><font size="2">[27]</font></a><font size="2">See
The New Deal: A Documentary History, William E. Leuchtenburg, p.
80 (Harper & Row, New York, 1968).</font>
</div>
<div id="ftn28">
<a title href="http://www.mises.org/fullstory.asp?control=997#_ftnref28" name="_ftn28"><font size="2">[28]</font></a><font size="2">Frances
Perkins said “modern government” was here to stay when she saw the 1944
GOP platform, which accepted many of FDR’s welfare-state initiatives. The
Republicans were in the process of becoming “a me-too party.” See Frances
Perkins: a Member of the Cabinet, by Bill Severin, p. 223 (Hawthorn
Books, New York, 1976).</font>
</div>
<div id="ftn29">
<a title href="http://www.mises.org/fullstory.asp?control=997#_ftnref29" name="_ftn29"><font size="2">[29]</font></a><font size="2">Goodwin,
p. 625.
</font>
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