Coming full circle with social security

SOCIAL security, 50 years old today (Aug. 14), is one of the nation's most important welfare measures. But in terms of its old-age insurance aspect, it is likely to assume less importance in the next half century. That may sound like voodoo economics in today's political environment, but my reason is rooted in the economic evolution of elderly Americans since 1900. Contrary to popular belief, older Americans in the period from 1900 to 1930 appeared to be getting along all right, in spite of their increasing numbers. Studies at the time suggested that 9 of every 10 residents over the age of 65 were self-supporting or maintained adequately by families and friends. Of every 115 Americans in almshouses by the early 1920s, only one was a senior citizen.

What is more, during this same era investments such as savings accounts increased significantly, as did private pension plans. No business activity accelerated with more speed than insurance: From 1919 to 1929 the amount of life insurance tripled, and policyholders totaled over 120 million. Then there was the fact that states were beginning to provide an economic backstop for the needy aged. In 1914 the first state old age pension law for the destitute was enacted, and by 1929 the idea had spread to a d ozen other states.

Little wonder, then, that advocates of a federal insurance plan for the elderly had such a hard time mustering support. Moreover, they were badly divided over both objectives and ends. Of course, when the Great Depression deepened, the gains that had been made by the elderly were erased. A social security program emerged, embodying among several features a pension plan for the elderly.

Social security was basically a nonissue among politicians and the elderly until the 1960s and '70s, when double-digit inflation was either brewing or manifest. Then attention to the system's problems was largely raised by, or on behalf of, senior citizens who fell between the economic cracks. Possessed of no private pensions from their working years, these individuals found the federal government allotment inadequate to sustain their needs.

Recent trends suggest that the worst-case scenario is diminishing. Although the graying of America is the demographic hallmark today, individuals are likely to work longer, have the economic wherewithal to invest prudently, and possess private pensions as the mainstay of their retirement years -- characteristics reminiscent of the situation beginning to emerge in the decades before the Great Depression.

This is not to suggest that the old-age insurance system will be irrelevant to aging Americans in the future. Rather, it is to argue that it will be viewed increasingly as a supplement, which was the intention of its crafters a half century ago.

Thomas V. DiBacco is a historian at the American University.

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