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Sources

LA Times Editorial (Full Text)

Head Note: On August 16, 1935, the Los Angeles Times published this editorial statement about the flaws in the Social Security Act.

"Social Security"

With the intents of the so-called Social Security Act, an omnibus or shotgun measure which the Present signed Wednesday, there can be no quarrel. Everybody wants to see the aged and infirm properly cared for, everybody sympathizes with the man out of work through no fault of his own. The theory of aid to dependent children, child healh, aid to the blind, vocational education, encounters little or no opposition.

That the social security bill as passed solves any of these problems satisfactorily, or even tolerably, is, however, extremely unlikely. That it imposes new large burdens on industry and the general taxpayer, at a time when to do so retards recovery, is certain.

The bill is so voluminous, so involved and complicated, and so all-containing, that discussion of it is difficult and conclusions reached must be tentative. Parts of it are of very dubious constitutionality. Both the old-age annuity features (not the old-age pension) and the unemployment-insurance features are financed on a Federal basis by a general pay-roll tax; but the individual States are to set up the plans for administering the systems, though not the money. This is seen to be a complicated set-up at the start, with room for all sorts of misunderstanding. It is not certain that the Federal government can tax for such purposes--the Supreme Court by 8 to 1 decided in 1922 that it can tax only to raise revenue. the old-age annuity is to be contributed to be the wage-earners, but unemployment insurance is not; an additional complicated factor.

What is to be done, precisely, with the funds collected, does not seem to have had sufficient study. The Secretary of the Treasury is to be the custodian and is to invest the money in government bonds. But just how is he to get it out again when needed? Various estimates of the total these funds will reach have been made: they vary from $35,000,000,000 to $75,000,000,000. There does not happen to be even $35,000,000,000 of United States government bonds in existence at present; though, since the New Deal has a year and a half run, the deficiency will no doubt be made good by that time. But $75,000,000,000! To sell such a quantity of bonds on the open market, if a depression required a sudden heavy drain on the unemployment-insurance funds, would constrict bank credit and produce a panic.

As to the cost of this program to industry and to the taxpayers, there are many estimates also. Towers, Perrin, Forster & Crosby, Inc., Philadelphia statisticians, put the gross figure at $2,615,000,000 for 1940, rising to $3,959,640,000 in 1950, a sum far greater than the annual cost of State government.

It is said industry will not feel this burden because it will be "passed on" to the consumer. But what will the consumer do when the cost of living is thus forced ahead of his income--an income reduced by heavy taxation? The result may be left to the imagination.

It is said the legislation will "increase purchasing power." It will, of course, do nothing of the sort. Purchasing power is not increased by robbing Peter to pay Paul.

The whole subject should have been put over at least to another Congress, for further study. There should have been at least three, probably five or six, separate bils, instead of lumping the whole subject into one so complicated that the public could not possibly comprehend it. Done as it has been this bill probably resembles a properand wise measure about as a statue by the village stonecutter resembles one by Michelangelo.

Source: August 16, 1935, excerpt from a Los Angeles Times editorial, Los Angeles, California.