Art of Life/Donna Parker

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Guess What State Initiated Social Security?

Why was a Social Security program needed?

During 1890 to 1930, major shifts occurred in the ways Americans supported themselves, thereby increasing the numbers of people who began to live and work in cities and suburbs rather than in small towns and on farms. Many young people left rural areas, where multi-generational families had always produced much of their own food, shelter and clothing, and relocated in urban areas. Also, the cities new manufacturing techniques such as assembly lines reduced the number of jobs needed to provide basic commodities. Instead of creating objects, by 1930 many jobs provided services such as retail sales or cooking in restaurants.

The changes decreased the need to grow one's own food or make one's own clothing. Instead, large numbers of people earned money with which to buy those things. During the 1920s, these changes created great wealth as business expanded, and to fuel that growth many companies borrowed money from banks to expand production. At the same time, private investors borrowed large sums from banks to buy shares of stock and get a piece of the action. As the Roaring '20s progressed, demand for stocks and their prices both continued to rise.

However, in October 1929, more people tried to sell stock than to buy new shares. Stock prices therefore dropped far below what people had paid for them and within hours investors who had owned great wealth on paper found themselves unable to pay back their bank loans. Over the next 90 days, the stock market lost 40 percent of its value and $26 billion of wealth disappeared. Businesses could not raise capital to produce goods and services or pay workers, and employees began to be laid off. Consumers bought less because they had lost money in the stock market or even their jobs. Banks began to find themselves in the same position with individual investors owing more money than they possessed. As the news of this leaked out, individual depositors rushed to get their cash out of their local banks. Thus between 1932 and 1933 banks failed by the thousands.

By the mid-1930s, the combination of these forces had led to millions of unemployed workers, old people with little or no help from their families, parents unable to support their children, and businesses paralyzed. The human suffering caused by the failure of the economic system was on a scale never before seen in a depression.

When the Roosevelt administration took office in 1933, its major challenges were to alleviate that suffering and to restart the gridlocked economy. At the end of June 1934, the Roosevelt administration convened a committee to research the problems faced by millions of Americans and recommend a solution. The "Committee on Economic Security," (CES) was chaired by University of Wisconsin Economist Edwin E. Witte. Witte and his group developed the policies and procedures that became the Social Security Act of 1935 and has been referred to as the “Father Of Social Security.”

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The committee looked at a wide variety of measures proposed or adopted in many U.S. states and foreign countries. On January 17, 1935, the committee recommended: federal old-age insurance, joint federal-state public assistance and unemployment insurance programs, extension of services to people with disabilities, children and child welfare agencies, and job training services. Hearings quickly began before the House Ways and Means Committee and the Senate Finance Committee to turn the recommendations of Witte's committee into law. The original Social Security bill passed the House and Senate and was signed by President Roosevelt on August 14, 1935.

What's the Wisconsin connection?

The conceptual underpinnings of Social Security came directly from the "Wisconsin Idea,” the concept that government and academic experts should help solve social and economic problems, which dated from Wisconsin's Progressive-Era administrations. The two acknowledged designers of the original Social Security Act were Arthur Altmeyer and Edwin Witte; both were Wisconsin natives. Both were also on the University of Wisconsin-Madison faculty. Once President Roosevelt was elected in 1932, he chose Altmeyer to be assistant secretary of labor. Altmeyer drafted the presidential executive order which established the Committee on Economic Security (CES). He in turn selected Witte to chair that committee as he remained a key committee member.

When Witte came to Washington to head the CES in 1934, he also brought his prize student, Wilbur Cohen of Milwaukee, as a research assistant. Wilbur Cohen came with Witte to work on the CES in 1934, and stayed on to become the Social Security Board's first professional employee. Cohen was a key figure in the development of the Social Security program; and he went on to become a member of President Johnson's cabinet, as Secretary of Health, Education & Welfare. Cohen was also one of the two or three people most responsible for the creation of the Medicare program.

Because of Wisconsin's long connection to the Social Security program, the State Historical Society of Wisconsin, to this day, is one of the leading repositories for records relating to the history of Social Security.

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