Making Social Welfare Policy in America

Three Case Studies since 1950

Edward D. Berkowitz

• Publisher: University of Chicago Press
• Year: 2020
• Print ISBN: 9780226692234, 9780226692067
• eBook ISBN: 9780226692371
• Topic: Politics & International Relations
• Subtopic: North American History
• Index: Politics & International Relations

American social welfare policy has produced a health system with skyrocketing costs, a disability insurance program that consigns many otherwise productive people to lives of inactivity, and a welfare program that attracts wide criticism. Making Social Welfare Policy in America explains how this happened by examining the historical development of three key programs—Social Security Disability Insurance, Medicare, and Temporary Aid to Needy Families. Edward D. Berkowitz traces the developments that led to each program's creation. Policy makers often find it difficult to dislodge a program's administrative structure, even as political, economic, and cultural circumstances change. Faced with this situation, they therefore solve contemporary problems with outdated programs and must improvise politically acceptable solutions. The results vary according to the political popularity of the program and the changes in the conventional wisdom. Some programs, such as Social Security Disability Insurance, remain in place over time. Policy makers have added new parts to Medicare to reflect modern developments. Congress has abolished Aid to Families of Dependent Children and replaced with a new program intended to encourage work among adult welfare recipients raising young children. 

Written in an accessible style and using a minimum of academic jargon, this book illuminates how three of our most important social welfare programs have come into existence and how they have fared over time. 
 

CHAPTER ONE

Congress Passes a Law, the Labor Movement Unites, and Walter George Retires

In 1956 the United States broadened the scope of its welfare state by removing the age limits on the receipt of retirement benefits. Instead of waiting until age sixty-five to claim benefits, a worker could take early retirement in the form of a disability pension. Once declared disabled—no longer able to work—by state authorities, a person would receive benefits similar to those he or she would have gotten had he or she waited until age sixty-five. To gain congressional passage, the legislation underwent an intense period of political bargaining, which left the outcome and the content of the final law in doubt until the very last minute. Casual decisions acquired permanent consequences. Understanding the rudiments of modern social policy in the important area of disability therefore becomes a matter of tracing the 1956 law through the political process. In other words one needs to tell its history, leaving lots of room for the role of contingency in shaping the final outcome.

At the same time, passage of disability insurance involved more than serendipitous political bargaining. All sorts of factors figured into the outcome. Institutions mattered, such as the fact that the House Ways and Means Committee and the Senate Finance Committee occupied a prominent place in the policy-making process. Interest-group politics also mattered, and here one needs to be aware that these interest groups themselves have histories that shaped their political outlook. In the case of disability insurance, the role of the labor movement was crucial, and developments within the labor movement figured prominently in the outcome. Ideas shaped the scripts of both proponents and opponents. Conservatives argued that a job for people of working age should be the ultimate objective of social policy, anticipating in some ways arguments that would later be made by liberals in favor of regarding disability as a matter of civil rights—as in the notion that people with disabilities should not be excluded from the labor market on that basis alone—and by conservatives in favor of workfare as the solution to welfare. Liberals believed that some people were simply too impaired to hold a job on a regular basis. Those people deserved the dignity of a disability pension, and an affluent country could afford to give it to them, particularly because they had “earned” those benefits through the taxes that they and their employers had paid during their working lifetimes.1

One way of uniting the serendipitous and structural explanations for the passage of disability insurance is to focus on 1956, the year of passage. In that year, the Social Security program, the legislative vehicle from which disability insurance was launched, had achieved a popular status among social welfare programs. Continuing expansion of Social Security benefits and Social Security coverage since 1950 testified to that.2 By 1956 rehabilitation had become at least an arguable alternative to cash benefits as a social policy strategy, as the development of rehabilitation medicine during and after the Second World War indicated.3 Finally, Democrats regained control of Congress in the 1954 elections, bringing the Congress that would pass disability insurance to Washington, and in 1956, a presidential and congressional election year, disability insurance served as a good wedge issue between the political parties.4

This chapter provides a narrative history of the passage of disability insurance in 1956. It sets up a discussion in the next chapter of how the 1956 law affected the nation’s approach to social policy in the area of disability. Together the two chapters provide the first of the book’s three case studies of the formation of social policy.

Passage of Disability Insurance in the House, 1955: The Rise of Rehabilitation

Like most important social reforms, disability insurance did not arise spontaneously in the year of its passage. Instead, a long “prehistory” shaped the legislation. In 1938, only three years after the passage of the original Social Security Act, an advisory council gave serious consideration to recommending that disability benefits be added to the law. Conservatives, including an influential insurance executive, countered that the old-age insurance program, which dated from 1935 and had not even begun to pay regular retirement benefits, was simply not ready to initiate a disability insurance program. These benefits had proved tricky for private insurance companies to manage in the group policies they offered to employers in the 1920s. The problem was that a period of mass unemployment, such as the Depression, occasioned something like a run on the bank. People regarded disability benefits as an appropriate means of exit from an uncertain labor market, and neither the insurance companies nor the courts could control the stampede. That experience argued against the creation of disability benefits because they were too volatile. But advocates of an expanded Social Security system persisted, arguing that social needs mattered more than potential administrative problems, and a Social Security advisory council that met in 1947 and 1948 once again considered the matter and this time recommended that Congress create a disability insurance program. Although the House of Representatives acquiesced to this request in 1949, the Senate failed to concur. The matter extended into the 1950s and the end of twenty years of a Democrat in the White House.5

Congress changed hands after the 1952 election, and that tended to slow down but not derail the movement toward disability benefits. Here the technical arcana of Social Security took over in developments that were important in Social Security policy-making circles but relatively invisible to the general public. In 1954 the Republican Congress took a tentative step toward disability benefits by agreeing that a worker’s wage record could be closed or “frozen” should he become disabled. That meant, at least in theory, that once the disabled worker got to be sixty-five, he or she could claim his regular retirement benefits, despite having been out of the labor force for many years. Significantly, the administrative structure that congressional conference committee members negotiated to make disability determinations under the disability freeze first in 1952 (when they legislated a disability freeze that never went into effect) and then in 1954 prevailed in all subsequent discussions of disability insurance. The arrangement created in 1952 and 1954 allowed state authorities, acting under contract to the federal government, to make disability determinations. It represented a concession on the part of welfare state expansionists to conservatives who believed that the state would take a more cautious approach to disability benefits than would the federal government. The same arrangement governs disability policy today—a key example of how casual decisions made in the heat of political negotiations created permanent institutions of the American welfare state.6

The 1954 election restored a slim Democratic majority in both houses of Congress and reinvigorated the drive to pass disability insurance in 1955. At this point the issue reentered the realm of partisan politics, with many Democrats in favor of disability insurance and many Republicans opposed.

By the summer of 1955, the Eisenhower administration first passively and then actively opposed disability benefits that were under consideration in the House of Representatives. According to the popular press, the issue now involved “a clear challenge by the Democratic Congress to the President’s leadership.” Eisenhower’s Secretary of Health, Education, and Welfare advised the Ways and Means Committee—the key committee in Social Security legislation—to give the matter further study before recommending disability benefits, and Republicans urged Democrats to conduct hearings on the matter in public rather than in closed private sessions. These delaying tactics only increased the desire of Democratic leaders, such as Ways and Means Chairman Jere Cooper (D-TN) and House Speaker Sam Rayburn (D-TX), to pass the measure.7

No clear consensus existed in favor or against the measure. Speaking through their national trade associations, both the life insurance companies and the doctors raised objections. The life insurance industry saw disability benefits as a government encroachment on its turf, and other sectors of the business community tended to agree. If nothing else, disability benefits, financed by payroll deductions, would increase the tax load for many employers. The business community was hardly united on this matter, however. Large employers in the automobile and steel industries already paid for a broad range of fringe benefits, and having the government pay for disability benefits might decrease rather than increase their costs.8

The American Medical Association (AMA) had a more particular objection to disability benefits. The leaders of this umbrella organization for health care practitioners worried that disability benefits were actually a form of government regulation of the medical industry. Doctors would, for example, be recruited to make determinations of whether a particular worker was impaired enough to qualify as disabled. AMA leaders were not eager to have doctors take on this responsibility for fear it might lead to what some doctors regarded as the ultimate horror of national health insurance. If that happened, doctors might become government employees as they were in England. That might put a lid on doctors’ salaries and substitute bureaucratic for medical expertise in diagnosing and treating diseases.9

In the absence of an effective countervailing force to the doctors, disability benefits would never have passed in 1956. Organized labor became that countervailing force. In the mid-1950s, unions were nearly as ubiquitous as hospitals, which meant that local union leaders, just like local doctors, could lobby congressmen.

The resulting maneuvering led to the July 1955 passage of disability insurance in the House of Representatives. It would take more than a year for the Senate to consider and vote on the measure, and in that year arguments for and against disability insurance took hold. Proponents believed that disability insurance would close an important gap in social protection. Opponents, such as the American Medical Association, believed that the disability provision was “the stealthy hand which would socialize medicine.” They argued that it was a difficult matter to distinguish between people who were disabled and people who were unemployed. Rather than trying to parse that difference, policy makers should strengthen the public and private programs that restored impaired workers to employment. A related line of argument held that it was difficult to estimate the future costs of disability insurance with the likelihood that the addition of this feature would bankrupt the entire Social Security system, “perhaps causing today’s worker to wake up some bleak tomorrow to find his stake in the fund to vanish.”10

The Ways and Means Committee had already evaluated many of these arguments and come out on the side of the proponents. The absence of disability insurance in the Social Security system presented a gap that needed to be closed. To be sure, the committee wanted to move cautiously by initiating disability benefits only for those aged fifty or older, presumably the most serious cases. Younger people would have to fend for themselves, possibly by going to a state vocational rehabilitation agency and undertaking a course of training and medical treatment that would restore an impaired person to an employable condition.11 The problem was that these state rehabilitation programs, around since 1920, had an indifferent record of placing their handicapped clients in jobs, despite an uptick in the postwar years as the rehabilitation of veterans became a matter of national concern and as a dynamic administrator took over the program.12

Promotion of the state vocational rehabilitation program and of the closely related cause of rehabilitation medicine became important pieces of baggage in President Eisenhower’s social welfare program. The President wanted to extend Social Security coverage to previously excluded groups such as self-employed lawyers and regular, as opposed to itinerant, farm workers. But he did not favor broadening the scope of the program to include disability benefits. Instead, he sponsored a major expansion of the vocational rehabilitation program in 1954.13

Liberal Democrats went along with the initial phases of Eisenhower’s program but believed, as the Ways and Means Committee reported, that many “disabled persons cannot be rehabilitated and even those who can will need benefits during rehabilitation.” Besides, most of the suitable rehabilitation candidates were under the age of fifty and hence not covered in the disability insurance legislation. In short, “Important as rehabilitation is, it cannot be a substitute for disability benefits.”14

Republicans on the Ways and Means Committee believed that the committee’s measure did not go far enough in its encouragement of rehabilitation. This argument provided them with what they hoped was a positive response to the growth of dependency brought about by the expansion of America’s welfare state. The primary goal of a disability program should be “to encourage disabled persons to regain their position as useful, self-supporting members of society.” Every disabled worker had the potential for a rehabilitation process that emphasized “individual effort and incentive.”15 Representative Noah Mason (R-IA) put his objections to disability insurance in succinct form. He cited the bad experience of life insurance companies with disability benefits. He asserted that disability benefits would discourage rehabilitation. He emphasized that benefits for total disability would encourage malingering. He preferred a program that operated at the state rather than the federal level. He believed that the costs of cash disability benefits were unpredictable and would soon “get out of hand.”16

Such arguments failed to sway a majority of congressmen, and the measure, tied to the increasingly popular Social Security program, passed easily by a 372–31 vote.17 During the House debate, Herman Eberharter (D-PA) argued that the true alternative to a Social Security disability program was not rehabilitation but rather reliance on welfare in the form of means-tested, state-run public assistance programs. Enacted in 1950, these Aid to the Permanently and Totally Disabled programs turned handicapped individuals into paupers, in Eberharter’s stylized view of public policy, because they demanded that people prove they were poor—lacking in money or assets—in order to claim the benefits. With the enactment of disability insurance, “it will no longer be necessary for a disabled insured worker to sacrifice his self-respect and the well-being of his family in order to obtain some regular monthly income during the period of disability.”18

Secretary Folsom

Most observers believed that the real showdown over disability insurance would occur in the Senate, not the House. Because Congress adjourned at the end of July, the Senate could not take up the measure until the second congressional session, which began in January 1956. That meant that the Senate would consider disability insurance during an election year and, because of the apparent differences between Democrats and Republicans that had arisen in the House debate, it might become an issue in those elections.

As the action shifted from the House to the Senate, a key change occurred at the cabinet level that had the potential to influence the debate over disability insurance. Eisenhower appointed a new Secretary of Health, Education, and Welfare in the summer of 1955 to replace the woman who had been named as the first secretary of that department in 1953, Oveta Culp Hobby. Hobby knew little about Social Security and depended upon federal bureaucrats and outside consultants to bring her up to speed. The new secretary, Marion Folsom, a prominent Eastman Kodak executive, had a pedigree in the field of Social Security. He had served on important Social Security advisory councils in 1934, 1938, and 1947. He was perhaps the leading expert on Social Security in the business community, with many contacts among Social Security administrators and other experts. Unlike many of his business colleagues, Folsom defended the existing Social Security program and even argued for its expansion. He believed, based on his long experience in the field, that public social welfare benefits could coexist with and even strengthen Kodak’s private social welfare programs. Social Security was compatible with the type of welfare capitalism in which Folsom and his company had been so influential.19

The appointment of Folsom en...

Table of contents

• Cover
• Title Page
• Copyright Page
• Contents
• Preface
• Introduction
• chapter 1   Congress Passes a Law, the Labor Movement Unites, and Walter George Retires
• chapter 2   What Happened to the Disability Program and How Policy Makers Tried to Respond
• chapter 3   Wilbur Mills, Wilbur Cohen, and Nelson Cruikshank Curate Medicare
• chapter 4   The Consequences of Medicare from Accommodation to Regulation
• chapter 5   The Continuing Consequences of Medicare: Choice and Prescription Drugs
• chapter 6   The Welfare Reform Debate from JFK to Reagan
• chapter 7   Clinton, Gingrich, and Welfare Reform in 1996
• Conclusion
• Notes
• Index