George E. Bigge.
SSA History Archives
Bigge at work, 11/18/42.
SSA History Archives
|George Bigge was a top federal and state government official for many years. From 1937 until 1946 he was the Republican member of the three-person Social Security Board.|
HISTORICAL INTERVIEW WITH GEORGE E. BIGGE
February 25, 1966
Interviewed by Abe Bortz
George Bigge: It is difficult today, in 1964, when social security has become so much a part of our everyday life to think back almost 30 years to the time when the program was first being formulated and recapture the general outlook of the time and even one's own attitudes. We are so accustomed today to having the Government--and when we say Government now we mean the Federal Government--trying to solve our social and economic problems that it's difficult to realize how different things were some 30 or 40 years ago. The social security program is just one illustration, one aspect, of that difference and serves as a good example. Just one of the programs, for example, established under the Social Security Act, Old age and survivors insurance, is today paying out 50 percent more money regularly to its beneficiaries than the entire Federal budget was at the time the Act was adopted; that includes Army, Navy, Air Force, Post Office, and all of the New Deal spending programs during the 30's.
Interviewer: I had no idea of its immensity then that it would be something like this today.
George Bigge: That's right. Relief expenditures that we thought were tremendous were rarely over $300 million a year. Today OASI is currently paying out $15 thousand million a year, 50 times as much as the expenditures during the 1930's. And that's only one of the half dozen programs that were set up by the Social Security Act. And it isn't because the Federal Government has replaced the State and local governments in this field, either. State expenditures for the same purposes have increased enormously. For example, in 1934 there were only about a quarter of a million workers getting some kind of public assistance. By 1938, when the committee made its report, there were l,700,000 and these were all State programs merely aided by the Federal program. It's not that the Federal Government has taken over; it's just that we look at these problems differently than we did 35 or 40 years ago.
Take the matter of unemployment, for example, we are very much disturbed today because in spite of the continuing boom there is some 3 or 4 percent, 3 or 4 million I should say, of people unemployed--between 4 and 5 percent of the labor force--and yet throughout the period from 1900 to 1930 the average unemployment was 10 percent or more.
Interviewer: I don't think we realize that today, do we?
George Bigge: And there were not very many pressures. People didn't think too much about asking the Government to do anything about it. The pressure didn't really come until the depression of the 1930's when unemployment reached 30 and 35 percent. In my State, Rhode Island, at that time in 1933, 36 percent of the working force was unemployed and in Michigan it was 45 percent. It was that critical situation which brought about a rethinking of our whole attitude toward the Government's relationship to the individual's need, particularly the Federal Government. President Roosevelt's chief concern in setting up the Committee on Economic Security was to consider what to do about the problem of unemployment. The old-age problem was incidental at that time; it was a matter of unemployment. But once the committee was established, it became the sounding board, you might say, for many people and organizations who had been interested in the broader problem of individual economic insecurity. The terms of reference for the committee were extremely broad. They were "to study problems relating to economic security of individuals and report their recommendations concerning the proposals which, in its judgment, would promote greater economic security." It's as broad as that. It opened the whole field. And with that mandate the committee proceeded to explore the whole field of individual economic insecurity and focus public attention on the matter in a way that had never happened before.
Interviewer: Yes sir, that's quite true.
George Bigge: Of course, there had been considerable agitation of the matter for some years past and some experimental program, shall I say?
Interviewer: Yes, I think Hoover had that commission which-
George Bigge: Well that wasn't quite the same. You're referring to the recent economic changes.
George Bigge: That took a somewhat different approach. They were studying not from the point of view of the individual's welfare but more from the economic changes that had developed that caused technological unemployment, to be sure that was part of it.
George Bigge: But they were approaching it from industry's point of view rather than from the individual worker's security or insecurity point of view. Incidentally, that's a very interesting study or report, that 5-volume report. And there are many intimations there of things that came out in the study by the Committee on Economic Security. Employers and trade unions, for example, had been working on the problem for some years on pensions, industrial pensions. And the committee in its report said that there were about 160 thousand, I think it was, people receiving pensions under those programs--several million people covered but very few who had been retired. But the trouble with those was that almost inevitably a program like that, set up by the employer, the individual employer, was that it tied the individual worker to a given employer or at most to an industry like the clothing industry or the printing industry, and limited very much the mobility of labor that was absolutely essential if you are going to attack the larger problem of unemployment.
Interviewer: And also I suppose it would put industry or one company at a disadvantage if it set up a program, where as others--
George Bigge: Well, it depends upon the outlook of the company. In some cases it was competitive the other way.
Interviewer: It was to the advantage--
George Bigge: It was set up because the personnel people in the industry felt that it was an attraction for the better workers and they would hope to attract and keep the good workers by this pension plan. But you see that meant that the pension was often intended as a device to keep the worker tied to his employer. And it happened that when he was displaced for any reason whatsoever it was very difficult for him to get another job with another employer who had similar protection. And you got the "old at 40 idea," don't know whether you've come across that. If a man lost a job after age 40 or 45 it was extremely difficult for him to get another job.
Interviewer: Particularly if there was a pension system.
George Bigge: That had some such protection. That's right. So it was bad for the employer and bad for the worker. The employer if he had a deal with the union didn't dare fire a man at 55 or 60 because he'd be accused of trying to get rid of him before the pension started. And the worker didn't dare quit because he'd lose his pension; so it limited both the employer and the worker very much.
Interviewer: I think we were discussing the--
George Bigge: Yes.
Interviewer: The committee on that study.
George Bigge: Oh yes, of course. The States were doing something with old-age pensions, too, at the time trade unions and employers--a number of States had been exploring it. I think the first law was passed in 1923, as I remember it, the first old-age pension law. And in the next 5 years, 1928, I think there were six laws in effect.
Interviewer: But every one of those as I remember it were the optional type. The State simply said if a county would pass an old-age pension law, the state would participate and help to finance it; and that left it up to the county again, you see. Of course, they had different aid, they had one up to 70 and long residential requirements.
George Bigge: That was one of the major difficulties that they all had, very strict residence requirements, 15 years I think for the majority of them. And a good many of them even had county and city residence requirements before a person could be eligible for these pensions.
Interviewer: Plus means test.
George Bigge: Well, the means test, of course, is essential in any assistance program. We still have that for public assistance, so it wasn't the means test.
Interviewer: It was--
George Bigge: It was the residence requirement and the optional character of most laws so that if a given county didn't feel they wanted to take it on the State had no leverage to make them take it on. It wasn't until the depression came along that most of the State laws became mandatory Statewide, and the counties remained administrative units. But they were required to set it up and the State took over a good portion of the financing. I think when the Committee on Economic Security made its report there were 28 States and that was only 5 years later, you see--28 States that had laws. But very very few people were retired under the old-age pension system. They had the welfare, poor relief, and so on, but very few under the pension systems, and so on. I think that's all I have on that.
So when the Committee on Economic Security began to work on their problem they had considerable experience, experimentation, to work with, besides the experience of foreign countries. Of course, a good many foreign countries had had social security legislation for years, so we could benefit to some extent by their experience. But I think an interesting sidelight on that is that when we actually came to write our law and to rewrite it in 1939, I think we set up a more effective system by far than most of those that were in effect in the European countries that had been working with it for 30 or 40 years.
Interviewer: Well, we'll come to that. I'd like to see how you explain that because many of them still insist that their programs are far superior to ours.
George Bigge: Yes, I think one of the difficulties is that they had a different labor relationship, wage structure than we did. I had occasion to talk with the Germans a great deal about that when I was over there with the military government in reestablishing the German social security system. They were just accustomed to people being born or starting at a given wage level and staying there. So they had set up, I think, it was 10 wage classes and the contributions and benefits were related to those wage classes. And they never thought of the difficulty if a man shifted from the first class to the fifth class back to the second class and so on when he changed jobs. It was an altogether new idea to them when we suggested contributions based on the first $3,000, for example, they had a law that if a man earned a specified amount, such as $3,500 he was out; they didn't cover any wage for anybody that earned above a given amount. I think that was the most important one. And then rising out of that, of course, the contribution, the benefits relating also to the rate of earnings. There it would be flat benefits, so much a week, so much a month; the British system the same way. With us, with the mobility of labor, people moving from lower to higher classes and so on that just didn't suit, so I think we established a much more effective system from that point of view.
I had been interested for a long time in the problem of individual security or insecurity before the Committee on Economic Security started its work. Of course, at the university in economics my work was largely in the field of labor and trade unions.
Interviewer: That was at Brown.
George Bigge: That was at Brown University. I had naturally thought a great deal about it and studied the private individual trade union pension systems. And it seemed clear to me that the limitations and the restrictions that necessarily applied to that kind of a system, and the rigidity that it introduced into the economic structure was such that they couldn't be depended upon to meet any very large part of the problem. And then as the depression went on and localities had to turn to the State and the States finally to the Federal Government to help with the problems of relief, it became clear that the Federal Government would have to assume a much larger responsibility than they ever had before in connection with the welfare of the individual citizen. The question remained how that should be done.
In general, there were two lines of approach to this problem. One was for the Government to step into the economic process and through work projects and relief payments to redistribute the national income on the basis of need to the extent necessary to meet the existing conditions. This, of course, was the--
Interviewer: These would come out, just out of general taxation?
George Bigge: Yes, well yes.
Interviewer: Income tax or other forms of Federal revenue?
George Bigge: Any kind of revenue, their programs would not have any specific means of support except taxes or from credit.
George Bigge: And a considerable portion from borrowing. As a matter of fact, the people who defended that approach, who urged that approach, were more in favor of borrowing than taxation. Because what they wanted was to increase consumers' purchases by the relief payments. You see, if you tax one consumer and gave it to another, it wouldn't increase the total. So actually the philosophy is two-sided. If you want to stimulate the economy by relief payments, they should be financed by credit and not by taxation unless you can think of the taxes coming from idle income that is waiting for investment or something of that sort.
Interviewer: I think you were saying there were two approaches.
George Bigge: Yes. This, I said was the substance of the emergency relief programs. But it was also the essence of many long-range programs that were proposed at the time. Probably the most ambitious of these programs was that put out by the Committee on Security, Work and Relief Policies of the National Resources Planning Board that was published in the late 1930's. While they did mention social insurance as one thing that should be developed, the emphasis was altogether on direct relief and work projects. As one student, Sumner Slichter, discussing that program at the time emphasized, it would have the Government provide work (this is quoted from Slichter), "would provide work on Federal relief projects for all adults who were able to work and willing to work and whom industry failed to employ." Just as the Beveridge program in England would make the social insurances the core of the social security program, the committee of the planning board would build their social security program around the work projects; the conditions of employment, the standards of work, payment proposed, the wage standards and such. To quote Slichter again, he says "the committee is proposing lifetime Government jobs at prevailing rates of wages to the 2 million people who will have low employability, who have trouble holding private jobs, and probably, several million more who would naturally prefer a steady Government job at the same rate of wages to the uncertainties of private employment." While the committee proposal in that extreme form was never really put forward as a policy to the Congress, that same view was held by a lot of other people, and it continued for some time. Incidentally, the early version of the so-called full Employment Act of 1946 when it was introduced in '45 by La Follette, I think it was, expressed exactly that point of view. If you read it, you'll find a statement that the Federal Government is responsible for providing employment at the going rate of wages in suitable work for anyone who can't find work in private employment and so on. So you have that same philosophy embodied in that proposal, in the postwar proposal, that you had during the '30's. Now to me that just seemed altogether unsound. It seemed the wrong approach to it; and the social security approach as I saw it was quite opposite to that.
Interviewer: Wouldn't that approach be more in the sense of merely a remedy rather than actually solving the sickness or illness which you had there, and that after a time you would have to resort to some permanent type of program.
George Bigge: Yes, as a matter of fact, it would be only a poultice to apply for the moment, no cure at all. But that was one of the weaknesses of the deficit spending philosophy that we have with us even now that you can stimulate permanently by this Government spending to the extent that private industry will then gradually pick up. But the point is, just as soon as you stop spending credit, borrowed money, you must get your money from private employment funds somewhere, so that the minute you begin to try to cut down on the credit financing of this Government employment you create a new problem which requires the Government to step in again, just as Slichter pointed out.
Interviewer: It's a trend, though, you can't get off.
George Bigge: As Slichter says here it means providing permanently through the Government for anyone who feels that it is to his advantage to be on Government employment. There wasn't too much said about that at the time but it always seemed to me that that was a serious defect in that whole idea of spending ourselves into prosperity, a deficit spending idea.
Interviewer: Now that was one approach. Now you were saying that. All right.
George Bigge: And there's another approach. It was often said at the time that we've solved the problem of production and now we need to solve the problem of distribution. But, many of the proposals for redistributing income overlook the fact that the motivation of production is intimately related to the process of distribution, and to interfere arbitrarily with distribution; fixing of wages and so on, may disrupt the process of production to the point where the result is less income for everybody, less income to distribute.
The real problem is for us to find some way to distribute the income over a working lifetime and among the fortunate and the unfortunate workers in such a way as to prevent destitution and dependency insofar as that's possible. And that's what social insurance is designed to do. That was the approach taken by the Committee on Economic Security. They did, in their report, make some reference to "employment assurance" in the particular cases where the social insurance program might be inadequate, but certainly they built their recommendations largely around the social insurance program as such. Incidentally, it was often said at the time that the Beveridge proposal in England was radical; actually it was much less radical than that of the National Resources Planning Board in this country, because it depended entirely on private initiative, private employment, individual enterprise, taxes, and social insurance, self-supporting, self financing. With the Planning Board it was the opposite approach. The Government will take care of whatever problem private enterprise can't take care of. It seemed to me at the time that the Beveridge proposal was much more conservative.
Interviewer: It never has received, this other, this other has never received the publicity and I guess, in the public mind it's--
George Bigge: Well, it's because the social security program came along.
Interviewer: Just overshadowed the whole thing.
George Bigge: Overshadowed it. Then the war employment came along, of course, to give us an interim breathing spell there. So this other more radical proposal never got too far. As an economist, of course, dealing particularly with the labor problems, I was very much interested in the work of the commission. Also I had been chairman of the Rhode Island Commission on Interstate Compacts affecting industry and labor. Here we were cooperating with similar commissions in other New England States, struggling with the basic problems of individual insecurity, the matter of wages, and hours, and working conditions, and unemployment, and so on. In the capacity of chairman there I was in close touch with the State government and when the Social Security Act was passed I was asked to serve on the commission which drew up the unemployment compensation law for the State.
Interviewer: Did they provide you with a model or was your pretty much something based on your own practical experience.
George Bigge: The Social Security Board provided a handbook that gave a number of suggestions on all essential points, on the rate of contributions that would carry certain benefits, on the organization, on the kind of contributions. For example, they had one section on pooled funds, one on employer's reserves, and one on the experience rating and so on.
Interviewer: What did Rhode Island--
George Bigge: We took straight-pooled funds and, I'm coming to that. May I come to that a little later?
George Bigge: When the Rhode Island law was passed, the Governor asked me to serve as the first chairman of the board during the period of organization and development. I retained my position at the university but I did serve the State for a few months. In political persuasion I was and still am a Republican but I was strongly in favor of the social security program and frequently had occasion to defend it in public addresses. In fact, the often-repeated statement that Republicans have always opposed the social security program from the beginning is quite without foundation. It's true that during the 1936 campaign there were a lot of remarks about regimentation of labor, and every worker wearing a dog tag and so on, but when the votes were counted in Congress, you probably have read this, there was overwhelming bipartisan support.
Interviewer: In both houses?
George Bigge: In both houses. I think in the House, for example, there were 18 Republicans and 13 Democrats who voted against it initially, and in the Senate even less opposition.
Interviewer: Seven I think it was.
George Bigge: Seven altogether, yes that failed to support it. I think five opposed and one, five Republicans and one Democrat opposed and one didn't vote or something like that. Anyway, it was overwhelming bipartisan support. One of the most gratifying things about this whole social security program to me when I came down here to take part in it has been the wholehearted bipartisan support that it's received from all sides throughout the period. One of the arguments urged against the social security program, of course, in the early years and we sometimes hear it even now, is that it's socialistic. It makes the government responsible for the individual's welfare. That seems to me to misconceive the nature of social insurance. As a matter of fact, you probably recall that it was started in Germany in the late 19th century as an antidote for socialism by Bismarck. Under socialism there would be no need for social insurance. It's in a system of free enterprise, competitive private enterprise, production for a market that social insurance becomes necessary for the protection of the individual. In many addresses at the time both before and after the passage of the Social Security Act, I emphasized that point.
We have approved our system of individual enterprise and mass production because we felt that it tended to increase efficiency and increase our income, and it did that. It has brought us in good times the largest income that any people ever enjoyed. But this same system of private enterprise, mass production for a wide market has created conditions which periodically deprived millions of individuals of the income entirely. That isn't right. The benefits come to you and me and to all who enjoy the results of large output at low prices. And the burden falls on those who are out of jobs because of new machines, new products, or business depression, or who find themselves too old to get into the pace of modern industry. Social security is merely a proposal for spreading the burdens of our system to some extent, as the benefits are spread over the group as a whole instead of permitting them to fall largely on those who are often the least able to bear them. With industry changing as rapidly as it does, with labor as mobile as it must be, no trade union and no employer and no employer's association can deal with that problem effectively.
Interviewer: Do you think the members of the board at the time were aware that this was more than that or that it was possible that this system would help even out some of the business cycles so that--
George Bigge: Well, we did talk about it occasionally, not at this time, not at the beginning because it would get under way very slowly, you see?
Interviewer: Yes, of course.
George Bigge: Lifetime earnings were to be the basis of the benefits, no dependent's allowances nor survivors benefits, so it would take a long time before the outgo was very significant. And I think we saw perhaps more immediate influences from the unemployment compensation, employment service tied together because there we could hope to move an unemployed person to a job.
Interviewer: The effects would be felt much sooner.
George Bigge: The Government social security legislation establishes the framework through which all employers and all workers can cooperate in a nationwide group insurance program; which protects the individual and yet leaves the individual worker and the individual employer, the trade union and the employer's association, entirely free to make whatever adjustments may be called for, to meet changing conditions, and to produce the maximum income. Social insurance is a natural adjunct, I would say, on the system of private enterprise.
There were several programs established under the Social Security Act in 1935; each had its own weaknesses. The greatest weakness, as I see it of the system of old-age benefits as initially established was that it provided only annuities for retired individuals and refunds to estates in case of death. There was no pooling of the funds, of the risks, no benefits for dependents, no benefits for survivors. The individual or his estate would always get back all that he put in and a little more with some interest. Of course, all of this was changed by the amendments of 1939. Then the program was put on an insurance basis. There is no money-back provision in the later program, and benefits were provided for dependents and survivors.
Interviewer: It was changed from an individual to a family--
George Bigge: It was really a compulsory saving program at the beginning and was made an insurance program, a social insurance program, in 1939 by the amendments.
Interviewer: When did you first hear that you would come to the Social Security Board, or am I jumping ahead of you?
George Bigge: No, that's all right. I was at the university, of course. As it happened it was Saturday morning as I remember, and I was going out to the golf links. I was in the front hall and the telephone rang and somebody, he would not give his name, asked me to come down to an office, downtown in Providence, he had an important message for me.
Interviewer: This was all you had, a mysterious caller?
George Bigge: This was in May 1937 before college was out and I was still teaching. I finally went down and--
Interviewer: You didn't think it was a hoax or something?
George Bigge: Well, at first I didn't take it too seriously. But the person who called assured me that I would want to come so I did go down and I met Senator Green's secretary there. He told me what it was all about and asked me if I'd be available. And I told him that I'd have to talk to the university officials.
Interviewer: Did you know him before? You had never met the Senator before?
George Bigge: I knew the Senator, of course, but not the secretary. I shouldn't say that; I had met him a little because I'd had a lot of dealings with Senator Green when he was Governor, so I had met the secretary.
Interviewer: Well, I suppose some of this unravels later on. You didn't know how he came to select you.
George Bigge: I think probably it arose out of the contact we'd had for several years. First, through this commission on intergovernmental or interstate compacts dealing with industry and labor. I worked with him quite a bit there and with his staff and then he appointed me Chairman of the Unemployment Compensation Board. So I had quite a little contact with him on that. Incidentally in this interstate compact field I had quite a little dealing with John Winant, Governor of New Hampshire, who became the first chairman of the Board, of course.
Interviewer: He had already left at the time you--
George Bigge: He had left; he had resigned, that's right. As a matter of fact, that position had been vacant for some months before it was mentioned to me. I understand, although I never checked on it; that the Senator checked with Governor Winant and they agreed to put my name, to submit my name for the position.
Interviewer: Well, I would say this is quite an honor since there was only to be one Republican on it and they could certainly have chosen from all over the country, yet the choice was made here.
George Bigge: Well, I suppose it may have been rather difficult to find a Republican who was really in favor of the program and Senator Green knew that I was thoroughly in favor of it, and he was very much in favor of it. So he would naturally have been interested in getting someone who would support it.
Interviewer: What was your first inclination?
George Bigge: Well, the first inclination was, as I said, I told him I'd have to speak to the university authorities because it's sometimes difficult-- I was the chairman of the department and I'd have to find a replacement for myself.
Interviewer: Didn't have much time either?
George Bigge: Well, I didn't know how much time there would be. The position was vacant and it might have meant a few weeks, don't you see. As it happened, there was ample time because this was in about the middle of May and I heard not a word more during May, or June, or July.
Interviewer: So you were out on a limb now.
George Bigge: So I was out on a limb really. I checked with the university authorities and they said they'd be willing, they'd be glad to let me go and give me a year's leave of absence and another year promised in case I wanted it. So I said yes, I would accept it. And I didn't hear any more through the next 10 weeks; and I couldn't make any arrangements for a replacement until I knew that I was going. So when the end of July came along, I told Senator Green that it was essential that I know what was going on. If I was leaving, I'd have to find a replacement and time was short for that anyway so I'd have to withdraw my name if we couldn't get an answer shortly. Then he got busy on it and in a few days I did have an answer. My name was submitted to the Senate and was approved.
Interviewer: You didn't have to appear before the Committee, or did you?
George Bigge: Well, I did. I don't know that it's customary but as it happened there was one member of the committee asked the chairman to call me down, he wanted to talk to me. When I got before the committee, after they'd established the fact that I was really a Republican in favor of social security, he had just one question; no it wasn't a question. He said he wanted to make a statement. Then he told me that the Social Security Board was being pretty hard shelled in making its appointments. He said it had got to the point where if a Congressman or Senator recommended a man he was likely to be blackballed. He felt that there wasn't enough consideration given to members of Congress in making appointments. Well, to me that was rather promising. I thought it sounded as though the Board was looking for the best people and was building up a good staff.
Interviewer: And that's all there was to the hearing?
George Bigge: That's all there was to the hearing. It was about 5 or 10 minutes. But it did get me an opportunity to meet a number of the members of the committee and a number of members of Congress whom I hadn't met before. That was helpful.
Interviewer: Well, did you visualize that it would be much of a problem as a Republican having to work on a Board with two others of another party; or that didn't pose too many difficulties as you thought when taking on the job?
George Bigge: Well, naturally, I thought about it. Before I said yes, I thought about it a great deal.
Interviewer: You didn't meet the other two at the time?
George Bigge: No, no I didn't.
Interviewer: You hadn't met Mr. Altmeyer?
George Bigge: I had heard him speak. I think I had met him, as a matter of fact, at an economic association meeting in Chicago. But we didn't discuss the program. I was favorably impressed with the work the Board had done. I served as consultant to the State Unemployment Compensation Board after I retired as chairman during the year '36-'37. I served as consultant and met with the staff of the Board in discussing unemployment compensation problems. So I did come to know something of how they worked and I thought they were doing an excellent job, and I rather looked forward to taking part in the work.
Interviewer: Would you say that such a board, putting aside the question of you know, being two different parties, that is appointees from two different parties, the fact that you had three members on the board, did it serve as a benefit or would you say it was a defective system?
George Bigge: Personally, I'd say it was very beneficial. In a program of that sort with the kind of legislation we had, it was blazing new trails all the way in this country. We never had anything like it, and the initial legislation was only a few pages. It provided the barest outline framework for the program that was to be established. All of the detail, program-wise and administrative, was left for Board determination, or determination by the Administration. And in circumstances of that sort, particularly where you had the kind of issues that would arise in connection with social security legislation, I think it's most important to have the interplay of individual attitudes and prejudices and outlooks and so on that you get from an administrative board rather than from an individual administrator. I'd like to add one thing. I think it does one other thing. I think it brings to the attention of the Board all of the accumulated thinking and experience of its staff in a way that you're not likely to get in a single administrator. If there are three members of the Board, each with his own outlook and point of view and comments and so on, the top staff gathered in their meeting are much more likely to speak up and speak their mind too and make their recommendations independently, than if you had one single administrator who makes a decision one way or the other.
Interviewer: Well, are you saying that all the issues would come before all three, it was never a case of one having responsibility for one area or--
George Bigge: No, we did sometimes tend to feel that one man might deal a little more with this and another man with another thing. There was a little inclination-- perhaps because I'd been on the State Unemployment Compensation Board.
Interviewer: There would be tendency to direct things of that nature.
George Bigge: A little more of that but we never did it. I might work up something but it would always come to the Board for action. We never worked individually on any part of the problem.
Interviewer: What would you say were the real responsibilities of the Board; that is, did they actually follow them or was there a tendency to slip into matters that could have or should have remained with the bureaus? In other words, what I'm getting at, did the Board try to confine itself to policy, or by the very nature of things because administration in many ways is policy, tend to move in that direction as well and in a sense then create problems?
George Bigge: No, I don't think there was that difficulty. There is so much to do, and I think a very competent staff in charge of each of the main programs, unemployment compensation and public assistance, and OASI, that the board had more than it could do just dealing with the major problems that the staff felt like bringing to them. They would develop a proposal, pro and con, discuss it thoroughly, discuss it with the people in the field--perhaps with the State if it was unemployment insurance or public assistance--and then bring to the Board the whole matter and ask for guidance. We might have a recommended policy statement, sometimes not even that. The first meeting would be just an open discussion. Then the board might indicate that we prefer this approach or that approach; then the Bureau would go back and prepare a recommendation.
Interviewer: When you say the Board would approve, was there a vote or was this--did it always require a general consensus before--
George Bigge: It would be a formal vote.
Interviewer: And a majority would?
George Bigge: As I recall it, it wasn't the first--
Interviewer: I mean does the chairman have any more--
George Bigge: No.
Interviewer: No. It was in other words, three individuals? It was three individuals. The chairman never exercised any special prerogative.
George Bigge: I see. I'm inclined to think that whenever there would have been a divided vote, the matter was passed back for further consideration.
Interviewer: Until you could sort of get a general consensus.
George Bigge: Until we got a general consensus, that's right. There were times when because of the division of opinion, we didn't act. It went back for further development, further consideration. But policy was always determined--I think always isn't too strong- by consensus.
Interviewer: You wouldn't say that was a defect. You felt--you would feel that that was an advantage.
George Bigge: I think it was a distinct advantage. Right. I know there's a lot of feeling that administrative boards are--I know they're anathema to a good many management experts, and in some fields that may be true. But I think in a field like this, at the beginning particularly, it was invaluable.
Interviewer: You think that this cross-current of different views from people with different experiences is much better than one individual who has complete authority?
George Bigge: That's right. There may not be the same reason for it now because a tremendous amount of policy has been determined and precedents established and so on. So I suppose it's much more largely determination of individual issues in the light of precedents now than at the beginning. But, as I say, then we were blazing new trails all the time and I think it was very important to have--
Interviewer: Well obviously, of course, mistakes would be made but that's to be expected in any new program so--
George Bigge: And again, I think there is much less likelihood of mistakes with three people thinking on it.
Interviewer: Were you criticized in the sense because you couldn't reach a decision. Therefore, you sent it back. That there--you would be open to the criticism that you were delaying--
George Bigge: Delaying?
George Bigge: Oh, I suppose sometimes the people in a given bureau felt that we would delay something where they wanted a decision. But I'm not sure the decision would have been right. I don't think the delay was very injurious.
Interviewer: As a separate entity in the beginning, as an independent agency, was there a direct line with the President in that way? How did the board get its views represented to the President; or did it go through say, Miss Perkins, being--
George Bigge: No. No, we were an independent agency.
Interviewer: And Mr. Altmeyer did have a--
George Bigge: Direct access when the occasion called for it. There were a few times when the whole Board went over to the White House and frequently two of us, sometimes three of us, went to the Bureau of the Budget or went up on the Hill to the Congress. Naturally, the chairman would carry the ball going to the White House most of the time.
Interviewer: Was there a periodic--did he go periodically or just when the occasion--
George Bigge: No. No, only when the occasion seemed to require it. No, it was an independent agency in every sense of the word. The law gave the Board authority to make these decisions.
Interviewer: Did the coming in of the FSA create new problems.
George Bigge: Well, a little bit, yes.
Interviewer: The Federal Security Agency.
George Bigge: A little bit. Naturally, the administrator being made responsible for the program would have to familiarize himself with it and the Board's decisions would have to be funneled through or channeled through the administrator.
Interviewer: Would you say then that this prevented direct access? Could Mr. Altmeyer still go to the President?
George Bigge: Not so well, not so well. I wouldn't be able to answer for him whether- -
Interviewer: I was wondering if this tended to inhibit or hinder the program?
George Bigge: I was just going to say I wouldn't want to say for him that it did inhibit him.
Interviewer: No. I'm looking at it just as a member of the Board. Did this tend to slow down the process of decision for you and for the programs that were under the administration of the Board?
George Bigge: I don't recall that I was ever very conscious of slowing it up particularly.
Interviewer: I see.
George Bigge: Mr. McNutt, the first administrator, was very accessible. We'd go in and talk with him on any issue that seemed important. I don't think it interfered with it very much. It did introduce one layer between the Board and the White House, of course.
Interviewer: What was--what were your relations with the other departments, particularly those that were under the Social Security Act, such as Labor, for example, with--
George Bigge: Initially, of course, the Employment Service was in Labor and then it was transferred for awhile, and then both were transferred back to Labor. So there were some problems there and I suppose there was more delay in making important decisions where we had to get in touch with the Employment Service and work out a policy than there was in dealing with the administrator or the White House, for that matter.
Interviewer: Well, you had a special interest here in, I think, as you have indicated, in unemployment compensation.
George Bigge: Yes.
Interviewer: And I know there was a rather difficult struggle there that went on between the Social Security Board's Unemployment Compensation and Mr. Persons in USES. And even though the agreement was worked out to resolve matters, it was never really resolved to the satisfaction of either one or both. Do you feel that that was because of the problem or was it due in some measure to the personalities involved? I mean is it inherent in the fact that it was divided between two agencies so that in a sense--
George Bigge: Well, of course, there is a certain necessary relationship between the placement function and the payment of benefits. That is nobody initially is supposed to apply for employment compensation. He's supposed to apply for a job.
Interviewer: Until he's exhausted that?
George Bigge: And only if the employment service can't furnish him a job then they certify that and he goes over. But, actually, the two are so closely tied together that it's difficult to have one agency administer the one and develop instructions and regulations and standards and so on for that, and the other agency develop the other. We did consult and meet together very frequently and tried to develop common policies. But I suppose it's just natural for separate units to be more or less independent. And, with a personality factor, too, added to it, there was a little difficulty sometimes in getting effective policies
Interviewer: What was the relationship of the Board to Congress, say with the committees, I mean, and--
George Bigge: On the whole, very favorable.
Interviewer: As you indicated, the Board members did testify individually or often even as a group?
George Bigge: On occasion, not very often. Usually, the chairman went up. We talked over the matters that were to be presented and the budget. We'd talk over the budget and he would go up to support the budget.
Interviewer: How about dealings with individual Representatives and Senators? I know you mentioned earlier in regard to the confirmation, that problem of jobs. Obviously that was--was that a difficult problem for the Board at the time you were serving?
George Bigge: No. As a matter of fact, I think we said very often in the early days that the members of Congress were most cooperative. If we could show to them that a given man that they had recommended was not really qualified for the job, they were satisfied.
Interviewer: I've seen it somewhere that either a Senator or Representative said that often the people on these Boards were a little confused, that unless the Congressman actually came over personally or asked you to come over, he was merely going through the normal polite process of transferring a request from a constituent to the agency; and it did not indicate necessarily that this was pressure or that he really was putting out a real strong argument for the individual unless he came over personally and said that now here's somebody I feel qualified.
George Bigge: Or called up.
Interviewer: Yes. But if he merely sent the individual over with a letter, he, in many cases, was merely going through the formality, which is often called for on the part of a Congressman.
George Bigge: Well, my own feeling is that that very frequently happens. But if a Congressman has a real interest he will call up and say I'm sending this man over and I think he's a very good man, I know this or that about him and it's fine.
Interviewer: Well in the--
George Bigge: I remember one secretary telling me that all of these letters-- "we have to issue those letters, but if we're really interested, we'll give you a ring." I never had much of that to do here as a matter of fact, because I didn't maintain too close contacts with the party organization. I felt that the other members of the Board were acting impartially and nonpartisan and I did the same thing. And if a member of Congress wanted to call us, well and good, but I didn't see any occasion for making special contacts with them.
Interviewer: Well, in that connection, what would you say was the policy of the Board in elections? Did it attempt to remain completely out of the--
George Bigge: Well, I can't speak for the other members, individually, personally, but I should say as a Board it certainly did, 100 percent.
Interviewer: Try to stay out of the--
George Bigge: Stay out of it.
Interviewer: Remain a nonpartisan administrative agency which would go on regardless of who is elected.
George Bigge: That's right. I think if you would care to check it up, you would find that when the administration changed, for example, when Eisenhower came in, there was a very, very small turnover, infinitesimal almost, considering the size of the staff. Even very important highly placed officials remained in their positions. They were under civil service and it was just assumed that it was a career service.
Interviewer: What was the relationship to the '37-'38 Advisory Council, that is, to the Board?
George Bigge: '38-'39, you mean?
Interviewer: Yes, which resulted, of course, in the--
George Bigge: The '39 amendments. How do you mean?
Interviewer: Well, I mean were you in full accord with the views, did you influence them?
George Bigge: Oh, I suppose we influenced them to some extent. The Advisory Board was in the process of being established when I came down.
Interviewer: I see.
George Bigge: The members had been named, as I remember it. We furnished information--Douglas Brown, professor at Princeton, was the program chief you might say for the committee, and we furnished the technical staff, the research people, statisticians, and so on. Working with Brown we got the information, he would review it and revise it to get it ready for the meeting of the committee. And then we all three sat, all three board members sat with the committee.
Interviewer: I see, and they could ask you questions and you-
George Bigge: And across the table completely open frank discussion of every issue. So we worked together. It was really a joint effort.
George Bigge: Right. I think we had recommended everything that the committee recommended, possibly a little more. They didn't go along with everything that we wanted but I think it was an outstanding illustration of constructive committee work. Working with a Government agency.
Interviewer: And this was in line, of course, with the '34 and what would follow later on. This whole policy of using Advisory Councils.
George Bigge: That's right.
Interviewer: One role I think the Board members did play a great deal, I think you were even quoting, was speech-making. Was that--did that just develop out of or was that assumed to be a responsibility from the beginning, that the board members would go around and make speeches? And for what purpose were the speeches, was it to provide information?
George Bigge: For information. Even now there's much misinformation or lack of information about the program. I think you'll find if you'll ask OASI there are millions of dollars of benefits that should be paid right now that are not being paid.
Interviewer: People aren't aware of it.
George Bigge: Because people don't know about it. We felt that it was part of our function as members of the Board to answer any significant request for speech information of that sort.
Interviewer: And so as--and these speeches were made to all sorts of groups and--
George Bigge: All sorts of groups, to some extent I think I tended to go to the business groups more, and Mr. Altmeyer more to the labor groups. His background was a little more of that sort. I enjoyed going to the Chambers of Commerce and the NAM, Lion's Group, Association of Commerce in Chicago, the New England Federation of Industries, and so on.
Interviewer: What was the attitude when you first went out to these groups? Was it a rather skeptical one or were they sold on it?
George Bigge: It was a nuisance, of course, the beginning. We were only collecting taxes and not paying out any benefits, you see, the first few years. Benefits didn't start until under the '39 amendments. We were to have 5 years of collections before benefits were paid, so in the early years it was just a contribution problem--all going out, nothing coming back--and all the problems of keeping the records, and making reports; and it was difficult for some of the employers.
Interviewer: We were discussing the relationship with business groups and you were saying that on the whole you found them cooperative and open and willing to--
We were discussing the relationships with various groups and Congress and I was wondering how things worked out with the State agencies or the State officials in regard to unemployment compensation or public assistance. Did you have problems in regard to setting up standards which would be in accord in both service and personnel with the Social Security Board standards?
George Bigge: Of course there would be problems in unemployment compensation; but it was an entirely new program in all States except Wisconsin--they had an Act so they had to adapt to it--but the others were all new. And the first problem we had was to develop a handbook, I suppose you might call it, that would help the States in setting up the programs. One of the difficulties there was that the Federal law permitted several kinds of State programs. One was the Wisconsin type, employers' reserves, and that, I might say here, I think is one of the weaknesses of the unemployment compensation program as it is in the Federal Act. It permits an individual employer to set up reserves from which benefits will be paid to his workers when they are unemployed. There is no pooling of funds at all as between employers or between industries.
Interviewer: The logic being, of course, that that way there would be an incentive to stabilize. Of course, there are other factors that come into play.
George Bigge: As a matter of fact, stability is so valuable for an employer that he will do it without any such stimulus as a 3-percent tax on employment. If he can do it, he's done it. The industries or the employers who have stable employment are those who find a stable market--finance, service, utilities, and things of that sort. And I could never understand why industry, the employer, who is fortunate in having a stable market and, therefore, stable employment, shouldn't contribute to a fund from which other industries where the workers are unfortunate, where they have very unstable employment, from which they can be helped a little bit when they are in difficulty.
Interviewer: So in a sense really it wasn't an insurance.
George Bigge: It's not really an insurance program. It's merely an individual employer's guarantee of a job or a limited amount of benefits--that's all, no pooling. That was one system.
Interviewer: That was one system. Of course, the fact that Wisconsin had led in it and you did have many people who were-
George Bigge: So it had to be incorporated in the Federal law and there were standards for it if they did so and so, if they treated the funds so and so then they could do that. There was another one that didn't set up individual employers' reserves but they had what they called employers merit rating or experience rating. So an employer didn't have his own fund (there was a pooled fund), but if the employer could have stable employment, the agency would keep a record of benefits paid to his employees, his former employees; and if little was paid out, the tax went down for the individual employer, experience rating. In some States there was a pooled fund--Ohio, Rhode Island, for example, had a pooled fund. And because those options were there, we did have a little more trouble with the States working out what their people wanted. There was pressure for this or pressure for that. And it took a bigger staff of ours to work out the standards.
Interviewer: Now with all the various types that were permitted to be encouraged, and I think in the beginning there was a hope that there would be an experimental stage, but was there anything else in mind? Was there a goal that ultimately there would be one type or ultimately there would be a national?
George Bigge: I think there were always some who hoped that their particular type would become national. I had always hoped that experience would indicate that employer reserve wasn't the proper approach, that ultimately we would recognize unemployment as a nationwide problem, and that the contribution should be pooled to help the employed where they happened to be. In this connection you may want to look at a speech I made at Hershey, PA on February 14, 1941.
Incidentally, there was another issue at the beginning, although it didn't cause much trouble, and that was should the worker contribute. The Federal law put all the burden on the employer, 3 percent on the employer with a 2.7 percent offset if the State elected that much to support their program. But in our State, Rhode Island, for example, the Social Security Board experts told us that with our employment history and the anticipated amount of unemployment we could only pay about 8 weeks' benefits, with the collections we would get. That didn't seem enough. Besides I, as a member of The Commission writing the bill, thought we should have a pooled fund and that workers should contribute. I still think workers should contribute to unemployment compensation.
Interviewer: I think in relation to that even the labor officials who at the time opposed the idea--feeling that ultimately the workers would pay it anyway; I think today they recognize that as having been an error because if nothing else it did remove them, too, in a sense from the policy-making of unemployment compensation.
George Bigge: I hadn't heard any demand, any request, from the labor leaders that we have employees' contributions. They have been opposed to it.
Interviewer: Yes, they were from the beginning.
George Bigge: Except that in Rhode Island we got the cooperation of the trade unions; they saw the benefit of it. So we had from the beginning 1.5 percent employee contribution as well as the employer contribution. And then the war came along, of course, or at least lower unemployment when the war started in Europe, so that by the time we began to pay benefits the burden of unemployment wasn't as heavy as it had been.
Interviewer: What about the system in a sense that it is set up the wrong way; that is, in good times when you should be building up a reserve, the tax goes down in a sense of the merit or experience and in times when the money is needed, the tax goes up when the employer is least able to--
George Bigge: To put it strongly, as I often did talking to the State officials, I think it's nonsense; I don't think it's the right approach. If you want to reduce contributions, do it in bad times when the employer is struggling with meeting his payroll anyway; but when times are good, build up your funds so that you have something to work with. The approach never made much sense to me.
Interviewer: What about the idea that why should this money be kept in this fund at the very time when it could be out in economy and, therefore, you have idle funds there which could be used?
George Bigge: If you think of the funds as idle. Of course they come into Washington, they are deposited with the Treasury, and the Treasury pays the State approximately 3-percent interest on the funds.
Interviewer: So they aren't really idle.
George Bigge: They are not idle funds any more than an insurance company has a lot of idle funds lying around. They're used somewhere. On that question of dealing with the States on unemployment insurance, we did have rather difficult problems to begin with, technical problems; because States took somewhat different views, it made ordinary administrative problems a little more difficult too.
Interviewer: What about that problem too of the administrative costs, in a sense, that the Board really could not control the amount that was spent for administration even though the funds were coming in that sense back from the Social Security Board?
George Bigge: That's very true. We didn't have effective control. I remember in the early days one State that would have a very small operating program, that could have done it by hand bookkeeping very nicely, wanted a complete mechanical system of bookkeeping to its system. And another State that had a huge operating program wanted to do it all by hand because they wanted to hire a lot of people, and who were we to tell them that you must do it this way or you must do it this way? All we could do was to see that it was an effective system of whatever kind they adopted and try to keep them within the 10 percent that the Federal Government had to operate with.
Interviewer: Would you say that through the years the Board was able to exert enough of its influence so that there were better administrative standards on this procedure?
George Bigge: On the whole I think, yes. You may be interested in looking into the report of the Commission on Intergovernmental Relations dealing with this situation in general, the Social Security Board relationship to States. I think they felt that the operations were very effective in establishing good standards, rather high standards of administration.
Interviewer: Would the same thing apply--this is both to unemployment compensation and to the public assistance program?
George Bigge The public assistance is a little different because there the Federal Government only shares in a system that the States already had. For one thing, they had a Welfare Department. They may not have had old-age benefits, they may not have had benefits for dependent children that they call mother's pensions; but they had the system. They had the administrative organization; and they had some history; they had some knowledge; they had some experience; they had social workers on their staff. So there you started with a State organization and sometimes it was rather difficult to get them to change their mind.
Interviewer: But there were occasions when you either suspended or held off funds from States when their programs were not in accord?
George Bigge: There were very very few occasions, yes.
Interviewer: Did the officials come to Washington themselves--a Governor?
George Bigge: Oh, yes, from the States. I don't recall that a Governor ever came; it was the Director of Welfare who would come. The Governor would make his representation probably to the Chairman. There were one or two occasions where the State's action was so flagrant that the Board felt it had no choice but to apply the sanction that was included in the law. One of them, I remember one of the earliest ones was political.
Interviewer: What was that? That wasn't stuffing the envelopes, was it?
George Bigge: Yes.
Interviewer: Was that Barrow? Was it Maine or was it a Middle Western State? It was Kansas, I think? No?
George Bigge: It was where there was a stuffer put in the envelope with the monthly payment saying, "I hope you appreciate this, and will you get you and your family and your friends to vote for me at the next election." That was obviously attempting political blackmail, and the Board called a hearing and actually suspended payments for several months.
Interviewer: Of course, that would hurt the people who needed it most but there was no other device that the Board--
George Bigge: Well it wouldn't necessarily hurt the people you see. We held up money from the State and the State could continue to pay the benefits, the State and the county.
Interviewer: Of course, that's just its share. Yes, I see.
George Bigge: The State lost its money. The State lost the Federal money, but it could go on.
Interviewer: So, in other words, this could boomerang against this particular individual?
George Bigge: That's right. They would either have to cut individual benefits or find the money elsewhere to carry it on, but that was very very rare.
Interviewer: What about other? It didn't necessarily resort to suspension but try to bring up the standards either as to the--
George Bigge: Well that would always be a long, drawn-out process.
Interviewer: So that you really never suspended, you merely warned them and suggested ways of--
George Bigge: That this is not in accord with our program, with the standards in the Social Security Act, and the plan. You see, the point is the State would submit a plan, and we would approve the plan as being in accord with the Federal Act; and if their operation was in accord with the plan, then we couldn't raise any question. So if we objected, it was always on the ground that their operation was not in accord with the plan that they had promised to use; otherwise, it was a step removed from actual operation. The state would want to change. They are operating; they submit a plan that they want to make this change or that change and we disapprove it, so they continue operating as they were before. It doesn't actually suspend the program, it's rather that we wouldn't always approve the thing that they wanted to do because it was not in accord with the Federal Act. But suspension would usually be on the ground that they're not operating in accord with their own plan, and that rarely happened.
Interviewer: I see. I think one of the early issues that probably came before the Board and certainly became a political issue was that reserve.
George Bigge: The OASI reserve, yes.
Interviewer: Of course, I think there was even some thought that one way perhaps of using some of it would be for public works or public housing, but it never got very far on that.
George Bigge: Never got very far. The basic difficulty there was, of course, that in the original act there was no direct connection between the contribution and the benefit program; they were under separate titles of the law. That may have been to make them more constitutional, to avoid the danger of unconstitutionality. There was no connection. The contributions went directly into the Treasury, and then the Congress was instructed each year to make an appropriation which as an annual premium would be sufficient to support the program that was provided for. Congress would have to appropriate the money each year. But at the beginning there were no benefits paid; the only expenses were small administrative expenses. So the reserve would begin to accumulate. And if the step-up in the rate had continued, it would have made a very large accumulation in a relatively short time.
Another difficulty of that provision, as I see it, was that there was real danger that Congress would not appropriate a sum sufficient as an annual premium to support the program. We've had that experience in civil service, the retirement fund. Congress had not made the appropriations called for by the structure. So I think one of the difficulties was that the funds as collected didn't go into the reserve. I think that was the basic difficulty.
And then the accumulation of the reserve, of course, was due to the fact that benefits in the early years would be very small based on a lifetime of earnings; no survivors benefits, no dependent's benefits. I think that was the basic difficulty with the reserve, that it was wrongly conceived in the social security program.
I remember writing to Senator Green about that. I think I have a note here about that reserve problem. This was in December 1936, after I had been on the Unemployment Insurance Board and before I came down here. "Just a word more lest I be misunderstood," I said. "I'm thoroughly in sympathy with the system of old-age pensions on a national basis, and I'm heartily in favor of the payroll tax as a source of income from which to pay the pensions. My suggestion is that the funds collected instead of going into general revenues and then through the reserve back into the Treasury should go directly into the pension fund and should be fixed in general at such a level as to support the pension charges. I believe it's important to have the payroll tax as a source of funds, particularly the tax on worker's income, to avoid undue political pressure, to increase the benefits paid. If it can be established as a principle that the tax rate increases whenever the benefit is increased, there'll be a healthy restraint on the level of benefits that are promised."
Interviewer: Had it become a political issue?
George Bigge: A little bit, I think, in that first campaign, yes. Somebody issued an estimate that the reserve would amount to $47 billion in the course of time, not a very long period, and the debt at that time was about half that. So it would have meant that the Federal Treasury would have had to find ways to use this money. So during those first couple of years before the amendments of 1939, it was a political issue.
Interviewer: Was your thinking--I say you, the Board as a whole--that perhaps a Government contribution ultimately was a wise one particularly with those people who would get into the program would contribute very little and yet receive a much larger amount ultimately as benefits and also perhaps even to blanket in the people through this?
George Bigge: It was debated. We debated it quite at length from time to time, and we even debated the possibility of bringing the public assistance people under by having the State make a certain contribution. And when we had a rather comprehensive program recommended including other benefits, we did suggest that it would be appropriate for the Government to contribute at a certain point in the development rather than put it all on a contributory basis--but never that this program be changed, OASI. It would have included disability benefits and so on.
Interviewer: I notice today that if any form of hospital insurance would be included, that there's recognition there that the Government would have to make a contribution.
George Bigge: Not necessarily. There's a suggestion I believe before Congress that the rate be increased to absorb it, not that the Government take from general revenues to support it. Up to this time Congress has always increased the contribution for added benefits. When they increased the basic amount, the minimum amount, they added a little bit; when they put in disability benefits, they added another-set up a separate trust fund.
Interviewer: Yes, on disability.
George Bigge: So if you have hospitalization or whatever, I think the prospect is that it will be financed through an additional contribution.
Interviewer: Were there any other crises that you could think of in the period in the nature of--well one that wasn't really a crisis but certainly was this question of decentralization of the whole program from the administrative point of view, that is, of trying to get more of the work done out in the field and setting up the regions as much more autonomous units and yet it was delayed and delayed until finally recognition that this couldn't be accomplished.
George Bigge: I think that's a good statement. It was kicked around a great deal. Of course, we did have the regional organization from the beginning. And more and more as the--
Interviewer: Well, for example, you had Mr. Hopf coming in with his whole scheme of trying to decentralize this; and at first they were going to adopt it and then delay and delay until finally--was that delay with the recognition that ultimately the issue would just be allowed to die?
George Bigge: I don't think so. I think it was just that there were so many problems that weren't cleared up. It was just a matter of how were you going to do it, and we never got the answer. I think the regional organization has been very effective, and authority has been decentralized just about to the extent that it could be carefully spelled out so that the regional office could administer it. For example, in public assistance, the regional representative for the public assistance division here has very large authority to approve State plans; and if he or she feels that the State's action is in accord with the plan, to approve any State action. The regional director is the chairman of the board really with all those people dealing with the States. I think it's a very effective organization, and I don't see that it could be decentralized much more without getting conflicting decisions.
Interviewer: I notice that the rate was kept even all through the thirties and in the forties the 1 percent; the Board was not in accord with that.
George Bigge: No. For two reasons we felt the law shouldn't be changed to reduce the contribution. We felt that the law as written to cover a given system of promised benefits should be allowed to stand. And the other was that that was the very time when contributions should have been made from the economic point of view. It would have been better to take a little money out of circulation. That's the only time when Congress has interfered with the operation of the law as written. They didn't allow the increase in the rate to take place.
Interviewer: What was the work of the Board during the war years? Was it a question of pretty much standing still in terms of looking ahead and trying to expand or improve the program? Was it the fact that the war just completely overshadowed everything and the Board was merely called upon to administer whatever existing program--
George Bigge: No, I wouldn't say so.
Interviewer: Often its said that those years were pretty much static or even in the sense when they compare, for example, the public assistance say to the benefits paid under OASI that the public assistance payments outdistanced them by end of the war or in the late forties--whereas the benefits paid under OASI lagged far behind so that the program was either dead center or just almost in a sense moving back. Is that due to the--
George Bigge: I don't see how that could be because the law was not changed.
Interviewer: Well, in that sense it was standing still even though the economy was moving forward.
George Bigge: No, the law shouldn't have been changed. There wasn't any occasion for changing the law. It was growing up. The amendments of 1939 began to pay benefits in 1940 instead of '42 and we had all the problems that were connected with the payment of benefits--setting up the referee system, the appeals system, and so on, getting all that worked out. And our regional people almost without exception were up to their ears in State programs connected with war activity, employment activity, and so on. I think we worked harder during those years than any other period.
Interviewer: Did you have much hope even from the beginning or through those years that public assistance actually would ultimately go out?
George Bigge: Not out of existence, no.
Interviewer: Or that most of the burden would be handled under the OASI?
George Bigge: You say "most of the burden," What have we today? Sixteen billion a year being paid out in OASI, and how much from public assistance?
Interviewer: Well nothing like that, although we do have a large number of people.
George Bigge: A large number, right. But it is taking up the increasing load, don't you see? I don't think any of us felt that it would ever take all the load. In the first place, there are a large number of people who are in and out of the labor market just enough to get minimum benefits-now $42 I believe--obviously not enough to live on, $45, $50 not enough to get along on. So they would have to have some supplement from some source. Their own savings--but most of those people don't have any savings, so they have to get welfare from some source. And the public assistance is the logical place rather than local welfare, or poorhouse, or poor relief, or what have you. I do think that we hoped it might not increase quite as rapidly as it did, the public assistance, but there again you have to remember how low it started. At the beginning of this program $30 was a big payment, $30 a month. Some of them were down to $7 a month. Some of the State pension programs averaged less than that. That's where you started. And with this developing outlook toward individual welfare, the States had been compelled to raise the ante, raise their sights, and take care of people better. It's partly taking care of those people that are never in the social security program, they never were employed enough to get under, and partly those that are in and out and can't earn enough benefit where you'll always need some public assistance program.
Interviewer: Looking at all those years, '37 to '46 when you were on the Board, I wonder if you could summarize just briefly what would you say were the major contributions of the Board in regard to the whole idea of social insurance? Did it sell the idea to the American people or was it already sold? Did it change attitudes towards the public assistance or towards benefits? I mean it's one thing to have the Government adopt a law. Would you say that the Board in this sense contributed to an acceptance of the idea?
George Bigge: Well let's put it this way. The Board was fortunate in the staff it was able to get together. In the thirties we could have the cream of the crop; if we could find a place for any man, he was glad to come. So they started very fortunately with the cream of the crop, and they've always had an exceptionally high-caliber staff. Then we had a little time to develop it. It started slowly. The fact that we had the report of the Committee on Economic Security, for example, to help us out in public support and then the Council in 1937 and '38 I think was extremely important in helping to sell the idea to the business community. Look at the names of the people on that council. I think that was a major source of support. So that by the time the program really got under way, the way it now is, 1939-40, benefits beginning in 1940, I think the idea of social insurance is pretty well sold to the public.
Interviewer: Also looking backward would you say that there are any things that the Board might have done differently.
George Bigge: Oh, no.
Interviewer: No, I mean without probing too deeply, without going into personalities--I mean either issues or procedures that might have been done differently, looking back on the basis of experience now.
George Bigge: Well, I'd have to think about that. In OASI, I don't see anything at the moment.
Interviewer: How about the other programs?
George Bigge: I don't see much prospect of it. In unemployment compensation I think possibly. It's possible that if we had gone about that in a little different fashion, we might have had a more effective nationwide program; although you must admit the thing has worked pretty well on the whole. Public assistance, I really don't know. There was so much to be done to shore up the State programs in that field. They started from so low a level that--(tape stopped at this point).
Interviewer: --under different agencies such as it was then and probably even more so now has hindered the program in any way--there's overlapping or that there are gaps, for example; that you have part of the program in HEW and you have the Labor Department?
George Bigge: Well, unemployment insurance and employment service are over there, of course. And there's much to be said for having those together. If the employment service should be in Labor because of its interest in wages and hours and what not, then probably it's all right for unemployment insurance to be there. There was an argument, I think, at the beginning to keep the insurances altogether, but this other argument may be just as good for having employment service and unemployment compensation together in the Labor Department. I wouldn't say one way or the other on that.
Interviewer: So you don't think it has hindered the program in any way:
George Bigge: Who am I to say that it's hindered.
Interviewer: Well, I mean in the sense of your experience that it either delayed programs or decisions, whether looking at it from only one viewpoint alone rather than looking at all of these as basically one problem, even taking--say you took in workmen's compensation, unemployment insurance, old-age disability as being one, really one ball and you're looking at it from different sides so that when the program was administered by various agencies--
George Bigge: But there you see workmen's compensation.
Interviewer: Of course, I know it's a State, so you do have another problem there.
George Bigge: It's another problem but public assistance is State too, so there's an open question again. But workmen's compensation is so directly related to the wage relationships and standards of employment and whatnot which is for the Department of Labor; and if workmen's compensation is naturally there, then possibly this other should be there too. I think you can make a pretty good argument for it. I argued the other way at the time.
Interviewer: After you left the Board when it was abolished and you became the Director of the Office of Federal-State Relations, what were your relationships then with the Social Security Administration?
George Bigge: Well that was in the Administrator's Office, of course, and my responsibility was to see that these State plans for public assistance, for public health, for Children's Bureau and vocational rehabilitation, for education, all of those plans that came from the States to the agency, that they adopted standards that were in so far as possible uniform.
Interviewer: When you refer to standards now, you are referring not merely to benefits but also to service--
George Bigge: Any kind of standard that is required in the Federal law. There is one standard, for example, on personnel. They must have the system of personnel administration on a merit basis. That's in the public health law, it's in the public assistance, the Children's Bureau, and now in vocational rehabilitation.
Interviewer: You would consider that a pretty significant contribution was made then having raised the standards in the States?
George Bigge: Well I think so, yes. Those programs were in effect. My function was --let me back up a little bit- -the programs were in effect and each unit dealt separately with the State in approving the State plan. Public health might take a little different approach than the Children's Bureau for example, and the Children's Bureau would take a different approach than Public Assistance, and so on. So you would get variety. And yet in the State, the State Health Department, for example, was dealing with the Children's Bureau, as well as with the P.H.S. So you'd have several Federal programs impinging on the given State, and the State submitting several plans, and the Federal agencies taking a little different approach. So my responsibility was to see to what extent we could get all of those standards uniform to the extent that the Federal laws permitted it. It was a matter of keeping in touch with the people here in the bureaus to see the instructions that they were sending out to the States for the development of State plans, the standards that they were applying, calling them together if there was a conflict and trying to iron out the conflicts to get uniformity.
Interviewer: Were there any major crises in the period--
George Bigge: No.
Interviewer: --or had the program pretty well been accepted and adopted?
George Bigge: As a matter of fact, there were differences; and that's one reason the Office was set up. They called it the Office of Federal-State Relations because there had been a number of those problems, and we proceeded to work with the separate Federal agencies to try to iron it out as far as possible.
Interviewer: I know you've written a lot and said a great deal about the grant program as being in a sense shall we say, to use the word barrier of preventing further centralization in the--
George Bigge: Do you have a copy of that?
Interviewer: I have a number of articles and speeches that you've made in connection with that. I wonder if though that barrier is beginning to collapse, particularly as the Federal Government makes larger and larger grants? Will the control--I'm speaking not only in money amounts but also in percentages--are we tending in the direction that ultimately there'll be greater Federal control?
George Bigge: I think that depends in part on the attitude toward grants, both in the Federal Congress and in the States. If the State insists that the grant-in-aid is just a device by which the Federal Government is trying to take away their responsibility, then I think sooner or later the Federal Government will have to step in and operate the program.
Interviewer: Well particularly as you pointed out, though, in a sense there's almost an inevitability since many of the problems although handled on a State level administratively, the problems are actually national when you have some States that are poor and yet they are the ones that get the least amount and the States that have the most get the most amount.
George Bigge: That is less true than it used to be. One thing we did was to press this idea of the equalization grant. In the early days of public assistance, for example, at one time California was getting as much Federal money to support public assistance as 20-odd low-income States in the Southeastern part of the country.
Interviewer: Where the need was greater.
George Bigge: But that's been changed so the Federal Government is now making grants more related to the need of the State.
Interviewer: So it's a progressive tax in a sense, isn't it--in the sense of--well, let's say a redistribution?
George Bigge: It's a redistribution of resources, that's right. So that in the wealthiest State out of every $100 the Federal Government puts in perhaps $33 and the State $66. In the poorest State the Federal Government puts in $66 and the State $33. That's 1 to 2. In some cases it's higher than that.
Interviewer: I was thinking of progressive in the sense of in its income the funds that go from the States to the Federal Government, the richer States in a sense get back less--
George Bigge: That's right.
Interviewer: --than they contribute, so that that becomes merely a redistribution.
George Bigge: What the States don't contribute, the individuals contribute. And there is no reason why, because a multimillionaire lives in New York all of his tax should be used in New York. He gets his money out of operating in Louisiana and California and Wisconsin, and so on. It's a national problem; and I think to the extent the national Government is in it, it should use this grant-in-aid device to distribute the resources a little bit to meet the needs the way they are distributed.
Interviewer: Well, I've pretty well exhausted you. Do you have any other areas you'd like to--
George Bigge: Well, let me look and see if I have anything more. It's sometimes suggested that the responsibility for providing employment is upon industry, upon the employer but that's true only in a very general sense and there is no way either of fixing or assuming that responsibility. Employment is created in the process of making goods and not by any given industry as a whole; nor by a given industry, but by particular employers, industrial enterprises.
The modern industrial community has entrusted to business enterprise the task of making goods, primarily I suppose because as Adam Smith said, "By that method the wealth of a nation might be increased." Jobs are created in the process of making goods, but the businessman's immediate responsibility is not to make jobs but to make goods, and to do this as efficiently as possible. If he can make the shoes that we are willing to buy from him with 700 men instead of 1,000 and if he will share the gains with the rest of the community by reduced prices, presumably he's done his part to promote material welfare. He should not be expected to find new work for the other 300 men. They may be needed to build houses or roads or operate filling stations, but as a producer of shoes he should not be expected to operate in these fields, and yet these men cannot under modern conditions employ themselves. And that's the difficulty.
Interviewer: I think we have some of that same problem with automation today.
George Bigge: Oh sure, it's exactly the same, a little more widespread because it affects the white-collar worker to some extent too and the blue-collar--not only the shirt-sleeve worker. We've always assumed that either capital or labor freed from one industry would be needed in some other new and expanding industry. No one was directly responsible for seeing that such opportunities for employment existed. Circumstances created the opportunities. Today we face the situation where for some reason new opportunities are not appearing as rapidly as men are being displaced and we have prolonged unemployment. None of our existing programs are designed to deal with that problem, for that we need a new technique.
In reflecting on this problem some years ago an eminent American jurist said in substance, "For every man who is steady in his work there must be steady work. No industry is socially sound that doesn't pay regular wages as well as regular interest, rent, and taxes." As an expression of social ideal, that's excellent; but as a program of action, it's extremely difficult to put into operation. It conflicts with another basic ideal-- the ideal of individual liberty. We can make the employer responsible for a stipulated return to capital or land over any period of time because we can turn over to him complete control of those factors for that period of time. You can't do that with labor. Labor is a human being and a citizen. He has certain inalienable rights. He can't be bound to a given employer by any time contract; and since he can't be made responsible for delivering his service over a period, the employer cannot reasonably be held responsible for paying an income over that period. And even if the employer should undertake to pay wages just as he pays interest and rent, that wouldn't solve the problem. If business is bad and income is not earned, it can't be paid for any great length of time. Billions of dollars of anticipated earnings and tens of billions of dollars of capital have been wiped out as the result of the very same conditions, which cause widespread unemployment, and loss of wages. The unemployment of capital and land is not so striking as the unemployment of labor; but in the long run, it may be just as injurious to the whole community. The real problem is not to require an employer to pay a given income, but to find a way to use our productive equipment to produce that income.
And here's another that I was reminded of a little while ago, another assumption that's very common, which is that if an employer would raise wages as the output of his workers increases, he could sell his product and keep his people employed. Let's look at that a moment. Assume that a given plant employs 1,000 people. It modernizes its process and doubles the output per man. If wages are doubled, costs per unit will remain about the same and prices can't be reduced very much. But twice as much will be produced, and they're not a twice as much at that price. The workers in that plant do not buy their own product--you and I do that--and the wages of the rest of us have not risen. So we can probably sell only about the same amount and half of the workers will have to be laid off. Any way we approach this problem, there's no easy automatic answer.
I said I was reminded of that recently when President Kennedy made his proposal, "Guidelines for Determining Wages in Relation to Productivity." Remember, he said that wages in a given industry should be increased only as the rate of productivity for industry as a whole rises. In any given industry if the productivity increases more rapidly than the benefits, it should go to consumers through reduced prices. That's a perfect economic argument, but not many people will accept it.