The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
15, 1939. Honorable Horary Morgentliau, J r . , Secretary of the Treasury, D. C. Doar Mr. Secretary: To complete your set of memoranda I an enclosing e copy of the statement on old age security I left with the President. I should very such appreciate i t if you could gtre thia statessent some study as X am tliorougmy aonvinced that a national old I passion program i s issiritabla ancl tliat w& fears regarding t&e i f l i i n i affects of the ftmilm benefit am©2^B.0nts vSIX tie amply borne out by the middle of next year. elso appreciate f W tfil Ht « Q a * complete copy of tlie material prssented yestorday to the President ~oy the Fiscal Board. Sincerely, Cliainaan. June 13, 1939.. OLD lU-K SECURITY 1, Tim ecc-i,o .ie baais of tlaa old a;® iis.iA^ zc^ pro.^axi i s ua- sound. I t is operating as a gigantic saving defies at a tiae when there is a surfeit of saving; I t is decreusisg eonsxamption -whan w bare in© adequate consumer buying pcrarar. I t vionld 'm appropriate to a capital*- poor country where a curtailment of consumption was necessary in order to divert aor© resources into the leaking of plant aM equipment. It no possible ecozumic Justification, however, in our capitel-ricn, snm.ptios-poor 2. The old a:;e i.iiauracce pro^ra^i is nullifyiiis the recovery efforts of the •• . -':.:* .•tratior^ By the end of this ysar nearly' | 2 billion aeo«SEale.t©d in S5Tf5i5 will havo b&a© witMrawn froa miIMHHIJJIIlulli Hence., tha effect of nearly | 2 blHion of deficit spending will heTe been M»» plately offset. Wan under psiidiug assadmsnts si»th.er on@«iialf billion dollars will be added to the F-nd in 1940. 3« Our ciiroiLic difficulty ginco 1929 bus DSQE g TJie stimulation of conci^ption threi,;1. Wk is tranins in popularity. 555 field of old Agi pensions offers the BOfft feasible ilfuBBM for increasing elatiT© to income. W fc.&¥©closoci tiiis iifUHiiiii and our old © progrsm is intensifying ratlier tiiaii ©esias ^^r 'b&sie probleai. Bayroll taxes In I n l a n d ^as^unt onlj ,to.60, percent of old the resaaainder beir. „ -1 • - -:-c . c ; o;* _ ,•;- r-wl . the stisnilation of consiiptiori, En;;.lcrd lias boan'able to''sustain a Mgii level of ?;.cti¥itj with less capital expenditurai tlian formerly. 5* riaa ©xistinj old S^Q insuroioa yrojr^ is, golitically ^ Tlte Federal Govarr^isnt is collecting lietTy tsxos for old age security and i t s only I . .• .ents k i s been tlaroujL the separate state assistance systems. Tfea real dessand in this country is for old ajje pensions for the exist ing aged population, rather tlia.n for old ace JBlHili'liiCiii for the gainfully employed in certain occupations* A contributorf .systaiii vtill sever be aliow&a to deT-slop unless the ajed. sm tiie people ifi uncoYered occupations, includii^s agricultura, are cared for. 6. Ti.e proposed postpoE^nent of the tax increase will merely greyent tlie situation froa; ;;ettin^ 0:-, j . The ^ropooc-1 benefit aaendsiants islll, add a^pe^li^ibls aaount to buying power next JOLT &nd v/ill prove to ba a political l i a b i l i t y of major proportions* The pending benefit sEiaiTJuvBirtj are unbelievably conplij^iaJ, adjsinistrativslj impossible, and in operation will maika the old a.;e isanras,ee program t e r r i f i c a l l y -2- unpopul&r* They Mill merely result in pmjwmtM to a relatively few people who dan qualify 0 1 store or less arbitrary and accidental grounds. 2 To those who can qualify, the payments will in M ff cases be hundreds of Ul tines in excess of taxes paid. Others will fettfl peid taxes but, for various reasons, which will appear completely arbitrary to the individuals concerned, they will not ymllfy. I t is « conservative es - 3 1 that during the nart f w y^ars not less than. 50 to 100 thousand persons who pay taxes will be dis® qualified each year from raceiTiEg benefits by certain arbitrary provisions. These exclusions will be concentrat3d on the groups least able to bear PMfe ES employees in tlie lot/ *•$• arses of the South, in regions of unemployment, and in areas where the character of the industries i s such that rates of sickness and disability are above normal. Thirty-one per cent of the women in covered occupations will pay taxes and yet will not 'be able to qualify for benefits. Every QoagPteflaajD .HI hsv* in his d i s t r i c t substant i a l numbers of parsons or JMBtivuru, orflipjuflltTitilof persona vho hsire r©c©iTed Mt ligM and psid 2^>re taxes than aoms persons or survirdra who fm have recsiTed benefits but find themselves turtfjlliloii disqualified. In other words, penaing benefit smendKiOKts, instead of aakillg the old t£t insurancQ program less politically Yulno^blo, r i l l , by the r.;iIdle of 1940, make i t iaore Tulnerable to attsck. 7» ^hO| OYorwholain^ aou^iid of th^s country, particularly a ^ | who ars on o'Suor mQi-sr-ros ^:--, r ^ l y in support of tha K w Deal, @ i s for a rslaoiTely simple national old-a,:s pension pro.^reg:. I t is boliairsd that a scheme along this line can a worked out wiiicii would © grsatly broaden the ftffymfigi of tho existing old e.^e assistance progrsm, would prssanre regional differentials in payments, would permit the contributory systet.. to erolTe naturally, wwijd contributa enorisously to the growth in consioiuption, and yet isould not sntail a.ny sore federal and state appropriations t&a acm bei, .3. 8* A national old a.;;.e pension pro^raxw is politically In the G-allup poll reported on Febmayy 25, 1939* 94 percent stated that th&y flbeliev^d in OoTsrimsirt *Xd panoions*1. For pensions of 440 a rionth for a sin^l© person and #60 for a couple, 8? percent signified their wiliiiign©ss wto pay a sales tax or an ineosiG t&z in order to proiride siich pansiona*. In the Gallup poll reported on April 21, 1939» in answer to the auostion, uDo you think Fodsral spending ahoul iduesd bf 10 percent or. old ty;;e pens ionsw? 86 psrcant replied, BHo,n In the Fortune poll, reported in April 1939* a substantial MLJ«rltj of the people WBBB balievad tliLt the President *is aasential^ approved of larger pensions, orsaa a substantial majority of the people who completely disapproved of the President v;ere opposed to XtrgftT portions. 3y ecoiK),;dc groups, 63 percent of th© poor faTorad larger pensions. The fortune coimr^rrt; on tMl poll was to the effsct tlitt tti:x>rG liberal pension legislfttloa apparently be not only popular btrt politically expedient for the Aumlnistration.• 9* A : i i o i J '1 ', ' ^ gens JOB nyate^ is i&3yifcftSla« I t Is car~ tain that, ir, ft®* of tEe political nit^etlon ?:~ri the ix>, CLJIII, riaibor of old people, i t is but a question of time befium such e grogrwc will bo initiated. In that ease i t say happen tliat tliis AcMinis tret ion TIMCL I M MB the interests of He lowest third of the population ftt iioart and which, lias blazsd. tlis way for the EdoptioE of security in oldftggtas a iMtioiml policy will be blamed for colloctiug billioBS ta taxes for old ftge Insurenco wiiile a subssqusnt adminlstratiOB tAlX TQQQIYB credit for sdoptiag an effective old-a^Q program ?iith l i t t l e , if any, additional cost to the THE SECRETARY QF THE TREASURY WAS HI NGTON June 23, Dear 7^arriner: Thank you for a copy of the statement on old age security which you left -with the President. I have read it with interest but confess my position on the matter remains substantially the same. However, the subject of social security is in no sense a closed issue with me and I shall be glad to discuss the matter further with you in the hope that our differences in opinion may be resolved. There is enclosed a complete copy of the material presented to the President by the fiscal and Monetary Advisory Board on June L4, 1939. incerely, Hon. Marriner S. Secies, Chairman, Board of Governors of the Federal Reserve System, Washington, D. G. Enclosure o
