Peter W. Martin

[I]t is my hope that soon the United States will have a national system under which no needy man or woman within our borders will provide adequate food, adequate clothing, and adequate lodging to the end of the road without having to go to the poorhouse to get it. I look forward to a system coupled with that, a system which, in addition to this bare minimum, will enable those who have faithfully toiled in any occupation to build up additional security for their old age which will allow them to live in comfort and in happiness.

President Franklin D. Roosevelt, Speech to the Teamsters Union, September 11, 1940.⁽¹⁾

Social insurance and public assistance are distinctly different mechanisms for the protection of people against untoward contingencies. Both have internal requirements for effective performance. Like the two wheels of a cart, they can effectively support a load if they are reasonably matched in size and strength. If they are not so matched the cart lunges to the weak side . . .

J.D. Brown, An American Philosophy of Social Security.⁽²⁾

I. The Original Blueprint: The Social Security Act of 1935

II. Social Security Adjusted to Take Account of Inflation: The Social Security Act Amendments of 1950

III. Why OAA Did Not Wither Away

A. OASI Benefits Counted as Income

B. The Addition of Federal Requirements Designed to Encourage or Ensurse Pass-Through of OASI Increases (1965-1974)

A. Importance of Benefits for Those with Limited Covered Employment

B. Improvement of Widows Benefits

C. Relaxation of the Age Sixty-Five Test of Old Age

D. Extension of Benefits to Retired Workers with Minimal Contribution and Eventually to Individuals with No

Contribution

E. The Resulting Stress on OASI

VI. Welfare Reform: The Replacement of OAA

VII. The Resulting Partnership: How OASI and SSI Fit Together ........................ 491

A. OASI

B. SSI

C. The OASI-SSI Relationship

1. Age

2. Marriage

3. Relationship to Other Income and Assets

a. Savings and Similar Provision for Eventual Self-Support Other Than by Earnings

b. Earnings

D. State Supplementation of SSI

A. The Basic Division of Labor

1. Inflated Benefit Levels for Those with Limited Covered Employment-OASI's Minimum Benefit

2. The Weighted Benefit Formula

3. Spouse Benefits

4. Old-Age Benefits Prior to Age Sixty-Five

5. Benefits for Those with Little or No Contribution

B. Desirable Adjustments to SSI

Introduction

For over forty years, public assurance of an adequate minimum income to older American has been a legislated national goal supported by extraordinarily broad popular acceptance.⁽³⁾ Throughout that period, the nation has had not one but a pair of programs committed to this purpose: a contributory "social insurance" program commonly called Social Security and a need-tested or public assistance program, until recently, Old age Assistance (OAA). Both were established by a single piece of legislation-the Social Security Act of 1935.⁽⁴⁾

Time has dramatically altered the respective shares of these two programs in the overall effort (see Figure 1).In part, the dynamics of the 1935 legislative scheme have been responsible. But subsequent congressional modifications reflecting changing notions about the proper relative

roles of social insurance and public assistance, as well as other political forces, have also played a major role. As these internal shifts have occurred, the composite system formed by the two programs has grown enormously and matured. Coinciding roughly with the arrival of maturity, as measured by reasonably comprehensive coverage and adequate benefits, came a revolutionary internal change. In 1972 Congress voted to replace federal grant-in-aid support of state administered OAA programs with a very different combination of federal and state aid, anchored by the federally funded and administered Supplemental Security Income (SSI) program.⁽⁵⁾.

The Original Blueprint: The Social Security act of 1935

The Social Security and SSI programs, now so important to the economic security of older Americans, trace directly back to the Social Security Act of 1935. The framers of that landmark legislation paid priority attention to the income needs of the elderly.⁽⁶⁾ To meet those needs, the act established a pair of programs-Old Age Insurance (OAI) and Old Age Assistance (OAA). The decision to employ a two-component rather than one-component system, though controversial at the time, set a pattern that has proven highly durable.⁽⁷⁾

Old Age Insurance was federally administered and shaped as a contributory plan; it paid benefits to those who, during their working years, had made mandatory contributions in the form of an earnings tax.⁽⁸⁾ This "insurance" scheme was expected ultimately to develop into the "first line of defense against destitution in old age."⁽⁹⁾ Being contributory, however, the program was not designed to commence paying out significant benefits for some time. The original legislation provided for contributions to begin January 1, 1937, and for monthly retirement payments to begin no earlier than January 1, 1942.⁽¹⁰⁾

Until the "insurance" program hit its stride and, it was thought, decreasingly thereafter, it would be essential to have a noncontributory program that paid benefits to all those of retirement age who lacked adequate resources. The program designed to fill that need was Old age Assistance, administered by the states with partial federal support and only modest federal control.⁽¹¹⁾ By June 30, 1936, less than a year after enactment of the Social Security Act, thirty-four states plus the District of Columbia had OAA plans that qualified for federal support. By the end of December 1937, all but one state (Virginia) had qualifying plans.⁽¹²⁾ In that month, OAA benefits reached over a million and a half elderly persons. During 1937, federal, state, and local expenditures for the program totaled $311 million.⁽¹³⁾

In short, for the initial post-enactment period, the allocation of responsibility between the two programs established by the 1935 Act was clearcut. Of the two, only OAA was capable of responding to the large, immediate income need of the elderly population. And OAA moved quite rapidly toward alleviating that need.

The initial plan for the subsequent interaction of the programs was also quite clear but perhaps a bit naive. As the number of those covered by OAI gradually increased, fewer would require assistance. Years later, Arthur Attmeyer recalled:

I well remember . . . the meeting [of the President's Committee on Economic Security in 1934[ when the staff exhibited a wall chart . . . . [showing] two lines: one declining year by year, which represented the declining number of old age assistance recipients; the other rising year by year, which represented the number of old age insurance beneficiaries.The two lines eventually crossed, demonstrating how the old age insurance system would gradually liquidate the old age assistance system.⁽¹⁴⁾

Implicit in this blueprint was an assumption that most, if not all, recipients of OAI would not need OAA, that once the insurance program attained maturity it would furnish a minimally adequate level of benefits to all recipients, at least measured against the payment standards of state OAA programs.

Forty-five years after [Old Age Insurance] becomes effective [1982!] persons whose wages from included employment have averaged 450 a month will be eligible at age 65 to a life income of 435 a month. In the absence of any radical increase in costs of living this amount may often be sufficient to provide for the person's needs without supplementary assistance from State old-age assistance plans. The Federal old-age benefit system will thus serve in the course of time to reduce materially the extent of old-age dependency among wage earners and the resulting burden on the state and Federal Governments for charitable assistance.⁽¹⁵⁾

The presumed adequacy of Old Age Insurance vis-á-vis Old age Assistance, upon which this prediction rested, was substantially enhanced by the Social Security Act Amendments of 1939. These amendments added dependents and survivors benefits to OAI (sweeping in large umbers of otherwise uncovered individuals) and changed the formula for retirement benefits to one based on average wages. At the same time, they increased the limit for federal reimbursement of OAA to benefits totaling forty dollars a month.⁽¹⁶⁾ Although the amendments reduced the benefit for the single retired worker whose wages averaged fifty dollars a month over a forth-five year period (seethe example quoted above), ⁽¹⁷⁾ if that worker had a qualifying dependent wife, her benefit increased the family's total to forty dollars a month.⁽¹⁸⁾ The amendments also improved the benefits of those with less covered work before retirement. The fifty-dollars-a-month wage earner retiring after ten years rather than forty-five, received only 417.50 a month under the original schedule.⁽¹⁹⁾ The 1939 amendments increased the amount to twenty-two dollars a moth for a single individual, thirty-three dollars a month for a husband and wife.⁽²⁰⁾

The original projections were soon upset, however, by a factor that the planners had left out of their calculations: a "radical increase in the cost of living." Between 1940 and 1949, the consumer price index rose roughly seventy percent.⁽²¹⁾ Wages rose even more dramatically; the average weekly wage for manufacturing workers more than doubled over the same period.⁽²²⁾ These economic changes had a drastic effect on the relationship between OAA and the 1939 successor to OAI-Old-Age and Survivors Insurance (OASI). For two reasons, OASI proved structurally incapable of dealing adequately with such levels of inflation without further amendment of the benefit formula (which did not occur until 1950). First, OASI's benefit formula rested primarily on average wages between January 1, 1937, and the date attaining age sixty-five.⁽²³⁾ Consequently, it responded very sluggishly to economic change as new waves of workers retired. Second, OASI provided no mechanism to preserve the purchasing power of benefits already awarded. In 1949, the average retirement benefit was twenty-six dollars a month, only 43.40 more than in 1940.⁽²⁴⁾

Consider again the worker who earned fifty dollars a month in 1935. If his monthly wages kept pace with those of other workers, they would have been sixty dollars in 1937 and $133.50 in 1948. If he retired at age sixty-five in 1949, his average monthly pay would have been $91.60, producing, after twelve years of covered employment, a monthly OASI benefit of $27.10-only $4.70 a month higher than if he wages had held at fifty dollars a month for the entire twelve year period.⁽²⁵⁾ These benefits amount to a meager twenty percent of the worker's immediate preretirement earnings (an index of adequacy now commonly termed replacement rate).

Old Age Assistance, the noncontributory program, proved far more responsive to the evident need for benefit increases through the war and immediately thereafter. Both Congress and state legislatures repeatedly raised the relevant benefit standards. In 1940, only 6.3% of OAA recipients had monthly benefits of more than forty dollars a month, the limit for federal reimbursement.⁽²⁶⁾ Nationwide, average OAA benefits were $20.14 a month.⁽²⁷⁾ In September of 1949, thirty-four jurisdictions were paying some of their OAA recipients more than the maximum for federal reimbursement,⁽²⁸⁾ which by then stood at fifty dollars.⁽²⁹⁾ In ten states, including several with large OAA rolls-California, Massachusetts, New York, and Washington-fifty percent or more of the recipients had monthly payments larger than the fifty dollar figure (and to that extent, completely financed by state and local funds). Nationwide, 29.4% of OAA recipients had monthly payments larger than the federal maximum; an additional 10.4% received precisely fifty dollars a month.⁽³⁰⁾ The average monthly OAA benefit was $44.76,⁽³¹⁾ almost identical to the maximum attainable retirement benefit under OASI for a high-wage worker retiring that year.⁽³²⁾

By 1949, the OAA programs of most states had standards of need that exceeded the average level of OASI benefits. Indeed, a majority had standards that exceeded the maximum attainable OASI benefit.⁽³³⁾ Thus, many Social Security recipients who had no significant other income and wre willing and able to meet other state eligibility requirements for OAA⁽³⁴⁾ could obtain both benefits. The patent inadequacy of OASI benefit levels placed extra weight on OAA.

By December 1949, OAA reached 24.1% of the population sixty-five and over, the broadest coverage in both percentage and absolute numbers since the program began.⁽³⁵⁾ Although the number of elderly individuals receiving retirement, dependents, or survivors benefits under OASI continued to grow, by December 1949, the total was significantly below that for OAA.⁽³⁶⁾ And at least one out of ten OASI recipients received OAA as well.⁽³⁷⁾

The late forties proved critical for Old Age and Survivors Insurance. A conservative Congress (1947-1948) not only resisted President Truman's repeated urgings for improvements in coverage, but cut back slightly on the program's scope.⁽³⁸⁾ In the Presidential campaign of 1948, Social Security was an important issue. The election of Truman and a Democratic Congress provided the necessary ingredients for the first major program overhaul in more than a decade-the Social Security Act Amendments of 1950.⁽³⁹⁾

II

Social Security Adjusted to Take account of Inflation:
The Social Security Act Amendments of 1950

The 1950 Social Security Act Amendments re-established the priority originally intended for OASI by both expanding the eligible population and nearly doubling benefit amounts.⁽⁴⁰⁾ The new benefit formula not only increased payments to those already receiving OSI, but also set six quarters as the basis of coverage for those at or near retirement age in 1950.⁽⁴¹⁾ This "new start" provision both made it easier to qualify for benefits and permitted benefits to be calculated using recent (and therefore, on average, higher) earnings. Our hypothetical steadily employed low-wage worker who retired in 1949 found his monthly check increased from $27.10 to $50 as of September 1950.⁽⁴²⁾ With a modest period of covered employment after the amendments at wage levels equal to or above the most recent assumed in our example, he could end up with an even higher amount.⁽⁴³⁾

As soon as the amendments took effect, OAA rolls began to decrease.⁽⁴⁴⁾ By the end of February 1951, the number of elderly OASI recipients surpassed the number of OAA recipients for the first time.⁽⁴⁵⁾ The gap has continued to grow ever since (see Figure 1). Later in the 1950's, significant additional segments of the population, including some important portions of the low-income working population, were brought under OASI.⁽⁴⁶⁾ And between 1950 and 1974, Congress liberalized the OASI benefit formula eleven times.⁽⁴⁷⁾ These formula amendments prevented a recurrence of the serious devaluation of benefits that occurred prior to 1950.⁽⁴⁸⁾ Social Security amendments in 1972 and 1977 put this process on an automatic, administratively determined basis so that benefit levels now increase to adjust for inflation without need for legislative action.⁽⁴⁹⁾

The continuing congressional attention to the scope and adequacy of OSI benefits since 1950, coupled with the program's maturation, has resulted in an enormous growth in the relative importance of Social Security. By September 1973, the even of the start-up of SSI, there were over nineteen million OASI recipients age sixty-five and over (nearly ninety percent of that population segment) compared with approximately 1.8 million OAA recipients.⁽⁵⁰⁾ Averageretirement benefits that were, even after the 1950 amendments, nearly identical to average OAA benefits, climbed eventually to more than double the levels in the need-based program (see Figure 4).

Despite the vigorous growth in OASI coverage and pay out, however, OAA did not and could not wither away. Moreover, its failure to develop nationwide with the same vigor as OASI had a profound effect on the evolution of OASI.

III

Why OAA Did Not Wither Away

The number of OAA recipients continued to drop from 1950 until 1973, but at nowhere near the pace at which OASI coverage was expanding. The resistance of the OAA ranks to further significant depletion stemmed not so much from the exclusion by OASI or district pockets of the older population (perceived in 1935 as the primary limitation on the withering away of OAA) but from the increasing overlap between the programs. For even while OSI benefits were increasing so dramatically on average, the program often did not pay enough at the bottom of the scale to take recipients off OAA. From 1950 through 1973, OASI entitlement among OAA recipients grew almost as rapidly as among the elderly as a whole (see Figures 2 & 5). By 1967, over half the OAA population also received OASI. The 1970 figure exceeded sixty percent.⁽⁵¹⁾

The growht in OASI clearly had a dampening effect on OAA, holding down both the number of recipients-many who would otherwise have been eligible for OAA had their full income needs, as defined by their state's program, met by OASI-and the amount paid those who were on OAA rolls. During 1970, for example, the roughly 1.2 million OAA recipients also on OASI received OASI benefits approaching 41 billion. Without those benefits, OAA expenditures (only 1.9 billion for 1970) would have been much larger.⁽⁵²⁾ Nevertheless, OASI had no realistic chance to supplant for noncontributory program and, throughout this period (1950-1973), the relationship between the two programs was haphazard at best.

The lack of coordination stemmed from a difference in program structure that seemed less important when OASI benefit levels and coverage were more modest and when OAA and OASI dealt with essentially distinct populations that overlapped only minimally. The difference was simply this; the federal government (Congress) set OASI benefit levels, but the states controlled OAA levels. As Congress repeatedly increased OASI benefits from 1950 through 1973, it occasionally adjusted the terms for federal contribution to state OAA programs to induce or permit similar increases. But having left to each state final authority over its OAA benefit levels

and related details, Congress lacked effective means to coordinate the two programs.⁽⁵³⁾ The states thus ultimately controlled the interplay between OASI and OAA. Because the states did not act in concert with Congress or with one another, the interplay was incoherent.

A critical factor in the relationship between programs was the enormous variation in OAA benefit levels among the states (see Figure 6 & Table 3). Some states initially set levels that equaled or exceeded the limits for federal support and tried subsequently to keep pace with cost-of-living increases by setting and resetting higher levels of support.⁽⁵⁴⁾ In California, for example, the average OAA payment surpassed the ceiling for federal financial support throughout the entire period from 1950 through 1965.⁽⁵⁵⁾ At the other extreme were states that set their OAA benefit levels at very low figures and left them there despite increases in living costs. In Mississippi, average OAA benefits peaked in 1971 at less than sixty dollars a month,⁽⁵⁶⁾ a figure

Sources:

^a Bureau of Family Services, Social Security Administration, HEW, Monthly Cost Standards for Basic Needs Used by States for specified Types of Old-Age Assistance Cases and Families Receiving Aid to Families with Dependent Children, January 1961 (Dec. 1962)and following reports in that series issued by successor agencies.

^b Current Operating Statistics, Soc. Sec. Bull., May 1961, Table 8, at 39 and the equivalent table for the appropriate period in later volumes.

^c Notes to 42 U.S.C. § 303 (1976).

^d History of the Provisions of Old-Age, Survivors, Disability, and Health Insurance, Soc. Sec. Bull.-Annual Statistical Supplement, 1975, at 24.

^e Soc. Sec. Bull.-Annual Statistical Supplement, 1975, Table 84, at 121 (averages for the end of the preceding year).

significantly below California's average payments for 1950.⁽⁵⁷⁾ In July 1970, OAA benefits for an age-qualified single person with no other income ranged from a low of sixty dollars a month in Mississippi to a high of $200 a month in Alaska.⁽⁵⁸⁾ Patently, OAA failed to establish a nationwide assured minimum income for the elderly.

During this long period, the only influence that Congress asserted over OAA payment levels was occasional fiscal encouragement. From the start, the OAA legislation had set an outside limit on payment levels toward which the federal government would contribute. Raising that limit, as Congress did from time to time, assisted high-benefit states in increasing payments.⁽⁵⁹⁾ In 1946, the statutory formula became a two-step one, featuring a lower range over which a more generous cost-sharing arrangement applied.⁽⁶⁰⁾ Each time Congress raised that lower-range share or the range to which it applied, both low- and high-benefit states were able, if they wished, to increase benefits by a certain amount at no additional cost. This "carrot" technique induced fairly wide-spread OAA increases in 1952 and 1956, even among low-benefit states/⁽⁶¹⁾ But it was not sure-fire. States could always accept the increase in federal reimbursement as an opportunity to cut back on their own welfare expenditures rather than as a chance to increase benefits at no cost.⁽⁶²⁾

IV

How OASI Benefits Affected OAA

A. OASI Benefits Counted as Income

For joint recipients, the relationship between OAA and OASI seemed, at first blush, straightforward. OAA carried a need-test that required states in calculating need to "take into consideration any other income . . . of an individual claiming old-age assistance."⁽⁶³⁾ The administering federal agency made it clear that Social Security benefits were income (unearned income, insofar as that distinction was important) and, as such reduced-dollar for dollar-the recipient's "need" under OAA.⁽⁶⁴⁾ Inmost states, entitlement to OASI benefits would consequently reduce one's OAA benefit dollar for dollar. This, in turn, meant that an increase in OASI unmatched by a rise in the state's OAA standard failed to produce a net increase in benefits for joint recipients.

The federal statute did not, however, require state to pay 100% of a recipient's "need," and some states chose not to. Although the terminology varied, those states that did not pay 100% of need employed one of two basic methods: (1) a maximum, paying 100% of need but only up to a certain figure; or (2) a percentage reduciton, paying all recipients a fixed fraction of their calculated need after counting other income, such as OASI. The former method was more common.⁽⁶⁵⁾

The precise relationship between OAA benefits and OASI varied from state to state. Each state controlled two important variables: the definition of "need" or minimum income level below which an elderly person was entitled to OAA and the formula by which income (and therefore OASI) affected the level of payments to a "needy" person. A state might have a definition of need below the minimum level of OASI, so that the latter constituted the income floor for qualifying elderly; more commonly, the OAA figure was higher. In either case, a state might reduce OAA to an individual by one dollar for every dollar of OASI received,; ignore the first twenty or thirty dollars of OASI (the consequence of a maximum); or reduce benefits in a constant ration of less than one to one (percentage reduction).

A state with a fair amount of overlap-i.e., having an OAA need standard above the OASI minimum-might, consistent with federal requirements, set up its OAA plan so that all joint recipients with no other significant income would receive the same cumulative benefits regardless of the relative proportions. Alternatively, a state could ensure that those receiving more OASI (but also OAA) would receive higher cumulative benefits. In such a case, the relationship could either be a constant one, increasing by some fraction of the person's OASI amount (the result of percentage reduction), or include a higher range over which cumulative benefits remained level and a lower range over which each dollar of OASI added a dollar to cumulative benefits (produced by a maximum).⁽⁶⁶⁾

Quite obviously, state control of OAA affected individual benefit patterns-who got how much OAA and OASI at a particular time. But more important, the state formula also affected the interplay between the programs over time. The effect on joint recipients of an increase in OASI benefits thus depended upon whether the state increased its OAA need figure (or maximum) by an equivalent amount or, if not, how, under its benefit formula, OASI increases affected OAA payments.

B. The Addition of Federal Requirements Designed to Encourage or Ensure Pass-through of OASI Increases (1965-1974)

This loss of control to the states is what brought the lack of coordination between OAA and OASI most forcefully to congressional attention: when it raised OASI benefits, Congress discovered it could not count on corresponding increases in OAA. (Fiscal encouragement proved to e an insufficient lever.) States with low OAA benefits and thus little overlap caused no concern. But in states where the OAA standard of need surpassed the OASI minimum benefit, an OASI increase could be nullified for joint recipients, assuming the state paid most recipientes 100% of their need.⁽⁶⁷⁾

Such a case created twin sources of embarrassment for Congress. First, the much-heralded increase had no impact for significant numbers of OASI beneficiaries. Second, it resulted in fiscal relief for precisely the wrong states-those that had failed to increase OAA standards. To the extent the additional OASI benefits reduced joint recipients' "need" for OAA, those states could reduce expenditures.⁽⁶⁸⁾

Beginning in 1965, Congress enacted a series of minor adjustments to the OAA grant-in-aid requirements to deal with this problem. In 1965, Congress accompanied a seven percent increase in OASI with an addition to the Social Security Act authorizing (but not compelling) state OAA programs to disregard five dollars of income of any sort.⁽⁶⁹⁾ Of course, a state could already disregard five dollars and more by abandoning the pretense of paying 100% of need and imposing a maximum.⁽⁷⁰⁾

As a companion measure, Congress increased the federal formula share so that a state could increase benefits $2.50 a month at no additional state expense.⁽⁷¹⁾ But for the first (an last) time Congress limited the increased share to states that used it to increase benefits. This was accomplished by a "maintenance of effort" clause that reduced federal payments, under the new formula, to the extent that the state public assistance expenditures had not gone up over the base period of fiscal year 1965.⁽⁷²⁾

In 1967, the Senate passed a bill that would have required states to increase OAA payments an average of $7.50 a month per recipient; in conference, an increase of the optional income-disregard to $7.50 wassubstituted.⁽⁷³⁾ The 1967 amendments also changed the "maintenance of effort" requirement, loosening up the test and trimming a year and a half off its life (terminating it at the end of fiscal year 1968).⁽⁷⁴⁾

The 1969 Tax Reform Act contained a mandatory provision that dealt specifically with OASI increases. The provision required each state OAA plan to achieve, in some fashion, a four dollar net increase in cumulative benefits for those OAA recipients also receiving OASI in 1970, thereby "passing through" a Social Security benefit increase.⁽⁷⁵⁾ Congress required a similar four dollar pass-through of Social Security increases in 1972..⁽⁷⁶⁾ But overall, these various measures constituted only minor limits on the broad state discretion to set the terms of the relationship between OAA and OASI.

V

OASI's Assumption of Public Assistance Functions

Although the existence of OASI had only a modest effect on the formal shape of OAA, the failure of OAA to assure a minimally adequate income to the elderly throughout the country had substantial impact on the structure of OASI. Early in its history, Social Security began to compete with OAA for federal money intended to meet the needs of the low-income elderly. OAA depended on the states to set payment levels, but any addition to OASI coverage or benefits became available nationwide. Particularly since 1939, OASI has therefore developed along lines that reflect two distinct and sometimes incompatible aims. It has retained a strong mandatory social insurance character, forcing workers to pay into a plan that, at the time of wage loss due to retirement or death, assures them benefits related to past wages. But it has also come to reflect a noncontributory "public assistance" purpose, the desire to improve the economic situation of those worst off among the elderly without regard to their past contribution to the program.

During the early years when OASI payments reached relatively few elderly,the inadequacies of OAA led some to propose converting OASI to a two-tier system with the bottom tier-a universally available flat pension-replacing OAA.⁽⁷⁷⁾ The growth in both coverage and payout that followed the 1950 amendments , however, eroded support for such a drastic measure. But the "competition" between OASI and OAA continued and even intensified.⁽⁷⁸⁾ Between 1950 and 1972, Congress enacted a large number ofmore limited adjustments to OASI to enhance its coverage and adequacy as a minimum retirement income program.

Despite initial doubts about President Eisenhower's views on Social Security, by the end of 1953 his administration had committed itself (as would those of Presidents Kennedy and Johnson) to the primacy of the social insurance program as the instrument of a national policy of preventing extreme need in old age.⁽⁷⁹⁾ His 1954 Social Security message included proposals for expanding the program's coverage and benefits; many of these proposals were subsequently enacted in the Social Security Amendments of 1954.⁽⁸⁰⁾ Eisenhower, though not his successors, combined this commitment with a conviction that federal financial participation in public assistance (including OAA) should, as a corollary, decline.⁽⁸¹⁾

The next Social Security amendments hearing significantly on the program's minimum income guarantee were part of a legislative package President Kennedy submitted to Congress in February 1961.⁽⁸²⁾ More than any prior or subsequent set of amendments, they represented a single-minded adjustment of OASI to enhance its effectiveness as an antipoverty weapon. The original proposals appeared in the President's Message on Economic Recovery and Growth, which recommended expansion of AFDC, unemployment insurance, and OASI but no change in the adult grant-in-aid programs.⁽⁸³⁾ The Message couched the OASI changes in these terms:

The current softness of the economy underscores the inadequacy of social security benefits in relation to the needs of many present beneficiaries. The average retired worker's benefit is only $74 a month. A majority of these beneficiaries have no other significant income. The basic principle of our social insurance system is undermined when a substantial number of retired individuals must seek public assistance or else subsist below minimum standards of health and comfort. We must not permit the benefits of retired workers and their families to lag behind rises in living costs; we cannot decently exclude our older population from the general advances in standards of living enjoyed by employed workers.⁽⁸⁴⁾

Significantly, President Kennedy did not recommend an across-the-board benefit increase, but instead submitted five proposals designed to improve OASI for those in greatest need: (1) an increase in the minimum benefit from $33 to $43 a month; (2) extension of actuarially reduced benefits to retired men beginning at age sixty-two ("The plight of the older unemployed man is particularly serious in areas of chronic unemployment."); (3) liberalization of the "insured" status test, to require only one quarter of coverage for each four quarters of time since 1950 rather than one per three;⁽⁸⁵⁾ (4) an increase in the aged widow's benefit from 755 to 85% of the deceased worker's primary insurance amount; and (5) some softening of the "disability" test for disability insurance.⁽⁸⁶⁾ Congress declined to pass the last proposal, but adopted the others with slight modification-the minimum benefit was increased only to forty dollars a month; the widow's percentage, to 82.5%.⁽⁸⁷⁾

After 1961, Congress continued to employ such measures to improve OASI's performance or the neediest elderly; numerous subsequent amendments hurried the expansion of Social Security coverage and payout. As OASI grew to reach 66%, then 75%, and finally 90% of the sixty-five and over population,⁽⁸⁸⁾ the pressure to embrace the remaining few who lacked the requisite slight contact with covered employment (or family connection with a covered worker) grew stronger and stronger. The 1961 amendments do, however, represent an unusually complete range of techniques, and thus furnish a particularly useful base from which to trace subsequent developments. The amendments contain four distinct methods for strengthening Social Security vis-á-vis OAA.

A. Improvement of Benefits for Those with Limited Covered Employment

The 1961 increase in the minimum benefit to forty dollars a month significantly boosted the lowest benefits on the Social Security scale in relation both to average benefits and to the maximum available to a high-wage retired worker.⁽⁸⁹⁾ Throughout the sixties, subsequent amendments increased the minimum at a faster pace than benefits farther up the scale.⁽⁹⁰⁾ In addition to these improvements at the very bottom, Congress repeatedly made upward adjustments of the multipliers that converted average covered wags into benefit amounts, accentuating the "tilt" of the benefit schedule in favor of the neediest. This "tilt" grew increasingly more severe.⁽⁹¹⁾ Changes in the calculation of a worker's average wage also brought particular benefit to those with a spotty employment history.⁽⁹²⁾

B. Improvement of Widows Benefits

The 1961 increase of a widow's share of her husband's basic benefit amount to 82.5% was similarly not an isolated event. Various adjustments to the remarriage provisions increased the value of those benefits through the late sixties.⁽⁹³⁾ Then in 1972, Congress increased the widow's share to 100%.⁽⁹⁴⁾ This change had been pressed for several years on explicit "welfare" grounds. For example, the influential book by Pechman, Aaron and Taussig, Social Security: Perspectives for Reform, observed in 1968:

Abolition of the widow's "discount"-one of the major deficiencies in the benefit structure-deserves high priority. [There is no evidence] . . . that women [require] significantly less income than men to achieve a given living standard . . . . Widows receive lower incomes, possess fewer assets, and are even less capable of supplementing their benefits with earnings than are other retired persons. As a welfare measure, an increase in the widow's benefit to a full 100 percent of [her husband's basic benefit amount] would more effectively aid the poor, per dollar of added cost, than any other change in the system, including a higher minimum benefit. The nonpayment of taxes by the widow is clearly not a determining factor, since she already receives 82.5 percent of the standard benefit on the basis of her husband's earnings.⁽⁹⁵⁾

C. Relaxation of the Age Sixty-Five Test of Old Age

The original age threshold for both OAA and OASI was sixty-five.⁽⁹⁶⁾ The 1950 addition of federal support for need-tested benefits to the permanently and totally disabled permitted states to reach below sixty-five for those with severe medical problems.⁽⁹⁷⁾ Social Security benefits for the disabled, added six years later (initially limited to those fifty and over, but eventually without regard to age), represented a similar adjustment on the social insurance side.⁽⁹⁸⁾ For those unable to qualify as "disabled," however, sixty-five remained the age threshold for public assistance throughout the history of OAA. By contrast, a series of amendments, including the 1961 extension of retired-worker benefits to men, as early as age sixty-two, ended the age sixty-five definition of "old age" for Social Security.⁽⁹⁹⁾ In 1965, Congress, showing the special sensitivity to the problems of widows already notes, reduced their age of eligibility still further to sixty.⁽¹⁰⁰⁾ (Seven years later dependent widowers gained equivalent treatment.⁽¹⁰¹⁾] Those in greatest economic distress especially benefitted from the opportunity to draw benefits before sixty-five, albeit at an "actuarially" reduced monthly rate.⁽¹⁰²⁾

D. Extension of Benefits to Retired Workers with Minimal Contribution and Eventually to Individuals with No Contribution

The Social Security Act Amendments of 1939 tied OASI entitlement to "insured" status,⁽¹⁰³⁾ which required a certain number of "quarters of coverage."⁽¹⁰⁴⁾ Earning fifty dollars in covered wages during a three month period chalked up a quarter of coverage.⁽¹⁰⁵⁾ Despite drastic changes in nearly all other parameters of the system, the quarter of coverage remained the basis for entitlement from 1939 on. Since wage rates climbed dramatically after 1939, leaving the wage test for counting a quarter at fifty dollars⁽¹⁰⁶⁾ significantly enhanced Social Security's coverage of part-time and casual workers.

The 1950 amendments, reflecting a fresh start, provided retirement benefits to all workers who had one quarter of coverage for each two quarters that elapsed after 1950 and before the quarter in which the individual became old enough for benefits, subject, however, to a six-quarter minimum requirement.⁽¹⁰⁷⁾ In 1960, the required one quarter of coverage for two quarters of time became one for three.⁽¹⁰⁸⁾ The 1961 amendments, al already noted, set the ratio at one for four.⁽¹⁰⁹⁾ Thus, a male worker who turned sixty-five in 1962 needed only eleven quarters (two and three-quarter years) since 1936 in which he earned fifty dollars or more of covered wages.⁽¹¹⁰⁾ A person seventy years old or older in 1962 could claim benefits with as few as six quarters (a year and one-half).⁽¹¹¹⁾ Because the threshold carried such a low contribution requirement, excluding any elderly for failing to meet it seemed patently arbitrary. This led to renewed efforts to "blanket-in" all uncovered elderly.⁽¹¹²⁾

When the 1965 Social Security Amendments established Medicare, all persons attaining age sixty-five before 1968 became eligible for it even though they failed to meet the regular "insured" status requirements set for the program.⁽¹¹³⁾ An amendment was offered in the Senate that would, in like fashion, have granted the minimum Social Security cash benefit to all persons seventy and over, but it was tabled.⁽¹¹⁴⁾ The 1965 legislation did, however, establish a new class of benefits for certain people already in their seventies who met a new, reduced "transitional insured status" test. That test required as few as three quarters of coverage for men who were seventy-six or over and women who were seventy-three or over in 1965.⁽¹¹⁵⁾ The following year, a Senate amendment to the Tax Adjustment Act of 1966 "blanketed-in" all persons then seventy-two or over plus those who attained that age before 1968.⁽¹¹⁶⁾ Reflecting the clear"public assistance" character of these benefits, they, though not the "transitionally insured" benefits of 1965, were funded out of general revenues.⁽¹¹⁷⁾

The eligibility provisions for these blatantly noncontributory benefits demonstrated a novel degree of attention to the problems of interface with government retirement pensions and OAA. Receipt of or eligibility for any government pension caused a reduction of this special class of Social Security benefits by an equal amount (an early though limited recognition of the "double-dipping" problem).⁽¹¹⁸⁾ Receipt of any OAA rendered an individual ineligible, but a potential recipient could reject OAA in favor of the new benefits.⁽¹¹⁹⁾ The latter provision evidenced an intention that the new benefits not be paid where they would provide no advantage to the recipient-e.g., in a state where Social Security benefits produced a dollar-for-dollar reduction of OAA-but merely reduce state OAA expenditures.⁽¹²⁰⁾

E. The Resulting Stress on OASI

The "transitionally insured" and "blanketing-in" provisions of 1965 and 1966 were one-time gestures of gradually dwindling importance.⁽¹²¹⁾ But the other "welfare" modifications of Social Security traced in this section-including a comparatively generous minimum benefit paid to those making negligible contributions, a benefit formula that discriminated generally in favor of those with lower levels of average earnings, and a system of dependents and survivors benefits paid on behalf of those with qualifying family members without additional contribution-grew into major elements of the system.

Writing in 1968, Pechman, Aaron and Taussig observed:

The basic dilemma in considering reform of the social security system is that the United States has attempted to solve two problems with one instrument-how to prevent destitution among the aged poor and how to assure to people, having adequate incomes before retirement, benefits that are related to their previous standard of living. The earnings replacement function calls for benefit payments without an income test. Basic income support, on the other hand, can be carried out most efficiently if payments are confined to households with low income.

Two separate systems are needed to accomplish the two functions at the lowest cost. The earnings replacement function should continue to be performed by a social security system. Social security would become strictly wage-related, with the replacement rate roughly the same at all earnings levels between subsistence and the median earnings level. The income support function should be transferred to a negative income tax system or to a comprehensively reformed system of public assistance.⁽¹²²⁾

Few could have predicted then how soon such a "comprehensively reformed system of public assistance" (for the elderly at least) would in fact come about. Pechman et al. judged prospects for total reform "dim" over the "foreseeable future."⁽¹²³⁾

VI

Welfare Reform: The Replacement of OAA

Defying such predictions, in August of 1969, President Nixon publicly launched a major program of welfare reform. Its central feature was a proposed Family Assistance Plan (FAP) designed to replace federal grants-in-aid to state programs of Aid to Families with Dependent Children (AFDC) with a purely federal benefit program augmented by state supplements. Nixon's original address devoted but one sentence to OAA and the other "adult programs,"⁽¹²⁴⁾ and from 1969 through 1972 nearly all attention focused on FAP. Parallel reform of the other federally supported state assistance programs-Old Age Assistance, Aid to the Blind, and Aid to the Permanently and Totally Disabled-received continuing, though low-level, attention as the political battles surged over FAP.⁽¹²⁵⁾ Although Congress ultimately failed to enact FAP, in late 1972it did vote to replace OAA and the other adult programs with a FAP-like scheme.⁽¹²⁶⁾ The new program, Supplemental Security Income (SSI), began operating in 1974. For the first time, it established a national, minimum level of public assistance for the elderly.⁽¹²⁷⁾

The original SSI legislation left to the states the question of whether they would supplement the new federal benefits. Certain very limited types of state or local benefits were discouraged by the way benefits were calculated under the federal plan. No public body is likely to assist an SSI recipient if the aid is counted as income and produces an equivalent reduciton in the federal benefit.⁽¹²⁸⁾ But the SSI income definition excluded most local need-tested benefits, which thus did not reduce SSI benefits.⁽¹²⁹⁾

Six months before the new program was to take effect, however, the Senate Finance Committee became concerned that many recipients might be hurt by the change-over from SSI's grant-in-aid predecessors because of the states' unwillingness to supplement SSI.⁽¹³⁰⁾ This concern resulted in a new requirement that states supplement the federal benefit to a level that would assure each individual who was a recipient under one of the prior categorical grant-in-aid programs the same level of support under SSI. Congress imposed this requirement as a condition for the states to continue receiving federal support for Medicaid.⁽¹³¹⁾

During the brief history of the federal SSI program, Congress has increased benefit levels several times.⁽¹³²⁾ Indeed, an August 1974 amendment put SSI on the same automatic adjustment basis as OASI, thereby explicitly coordinating the two programs and regularizing increases in benefit levels.⁽¹³³⁾ But each time the federal SSI benefit went up, those states that by choice or mandate were supplementing SSI still retained the same option that all states had under OAA: they could supplement to a correspondingly higher benefit level, in tandem with the federal increase, or stay at the same level. The latter choice effectively denied recipients the federal increase.⁽¹³⁴⁾ In late 1976, Congress severely limited this remaining area of state discretion with a further Medicaid condition. To receive federal support for Medicaid after June 30, 1977, states must continue to supplement SSI, maintaining total SSI payments at their December 1976 level.⁽¹³⁵⁾ Thus to receive federal support for their Medicaid programs states must maintain a supplementary benefit program at a steady level of financing-a level which they may not reduce simply because the federal benefits have increased.

These revolutionary changes occurring between 1972 and 1976 removed virtually all the structural features that previously blocked effective coordination of social insurance and public assistance programs at the federal level.

VII

The New Partnership: How OASI and SSI Fit Together

A. OASI

OASIs present broad coverage stems from eligibility rules that qualify: (1) those who have worked a minimum period in covered (and taxed) employment,⁽¹³⁶⁾ (2) the spouses of such workers,⁽¹³⁷⁾ and (3) dependent parents of deceased covered workers.⁽¹³⁸⁾ Surviving spouses of deceased workers are entitled to payments at age sixty; all other claimants must be sixty-two to receive benefits.⁽¹³⁹⁾

For any recipient, the monthly benefit depends upon at least the following: the average covered earnings of the worker during a base period;⁽¹⁴⁰⁾ the age at which the recipient first claims benefits;⁽¹⁴¹⁾ and, prior to age seventy-two, the recipient's current earnings if they are above a modest amount deemed consistent with retirement (e.g., $3,000 in 1977).⁽¹⁴²⁾ Earnings above that figure reduce benefits fifty cents per dollar.⁽¹⁴³⁾

Benefits are calculated in terms of a "primary insurance amount" (PIA)-the monthly benefit a retired worker would receive if he had no excess earnings and first claimed benefits at age sixty-five.⁽¹⁴⁴⁾ Thus, a worker who claims benefits upon turning sixty-two receives eighty percent of his (or her) PIA.⁽¹⁴⁵⁾ The spouse of a retired worker claims a dependent's benefit at age sixty-five receives fifty percent of the worker's PIA.⁽¹⁴⁶⁾ A surviving spouse who first receives benefits at sixty-five receives 100% of the deceased worker's PIA.⁽¹⁴⁷⁾ A single surviving parent receives 82.5%.⁽¹⁴⁸⁾ And so on.

For those receiving benefits prior to January 1979, PIAs are determined from an annually-amended schedule according to the worker's average covered earnings over a post-1950, preretirement (or predeath) base period.⁽¹⁴⁹⁾ The Social Security Amendments of 1977 established a new and more complicated method for calculating a worker's PIA. The new formula necessitates converting covered (and taxed) earnings for an indexed average derived by comparing wage levels during the years of the worker's base period to wage levels shortly before his retirement.⁽¹⁵⁰⁾

Both formulae include an initial bracket in which the return of benefits to earnings is extremely high. The pre-1979 formula (as adjusted for the latter half of 1978) provides a PIA of approximately 1565 of the first $110 of average monthly earnings (with a minimum of $121.80).⁽¹⁵¹⁾ The new formula yields 90% on the first $180 of average indexed monthly earnings(with essentially the same minimum).⁽¹⁵²⁾ Beyond the first bracket, the return drops off sharply-under the old formula to roughly 56% for the next $290 of average monthly earnings;⁽¹⁵³⁾ under the new, to 32% for average indexed monthly earnings in excess of $180 but not more than $1,085.⁽¹⁵⁴⁾ Additional brackets exist for high-income workers, but the first two brackets are the ones pertinent to beneficiaries for whom a minimally adequate income during old age, and often before, is a serious problem.⁽¹⁵⁵⁾

The boundary between the first and second brackets is set low enough to assure that any person with reasonably steady employment during the program's base period will have substantial earnings falling in the second bracket. As a result, the cumulative return on earnings for a steadily employed low-wage worker falls somewhere between the first and second bracket percentages. Only those with spotty, low-wage employment in covered work fall completely in the first bracket. The minimum benefit goes to individuals with only the barest employment experience; a person claiming benefits at age sixty-two in January 1979 would receive the minimum PIA only if his monthly earnings over the best twenty-three years between 1951 and 1978 averaged seventy-six dollars or less.⁽¹⁵⁶⁾

A steadily employed low-income worker is currently able to retire with a PIA (under both the new and old formula) in the neighborhood of $240, approximately twice the minimum (see Table 4). A spouse without equivalent retired-worker entitlement is eligible for an additional benefit of approximately $120.⁽¹⁵⁷⁾

While Social Security's "retirement test" may reasonable measure retirement for higher-income workers, it allows low-wage workers to receive benefits without retiring. The workers used as examples in Table 4 both made less than $400 a month in 1977 and qualified, at age sixty-two, for beginning benefits of roughly $190. During 1977, a "retired" worker could earn up to $250 a month while receiving full OASI benefits.⁽¹⁵⁸⁾ Earnings for $400 a month reduced benefits only $75.⁽¹⁵⁹⁾ As a consequence, the low-income worker can supplement continuing earnings with OASI. Indeed, as long as such an individual is able to work, OASI permits a higher standard of living than was possible before "retirement."⁽¹⁶⁰⁾

B. SSI

SSI is available to all persons sixty-five and over who have income and assets falling below the program's standard of need. As of July 1, 1978, the standard for an individual was $189.40 of monthly income and $1,500 in assets;⁽¹⁶¹⁾ the comparable figures or an eligible maried couple were$284.10 and $2,250.⁽¹⁶²⁾ Certain amounts of both earned and unearned income may be disregarded, and "assets" do not include such significant assets as the applicant's home, automobile, and household furnishings.⁽¹⁶³⁾ Although undoubtedly more could qualify, approximately ten percent of the elderly receive some SSI.⁽¹⁶⁴⁾

In one sense, SSI has supplanted the minimum income assurance function that OASI had been previously stretched to fill. Those receiving Social Security benefits based on a low earnings record-their own or that of a spouse or child-are now entitled to a greater level of support under SSI. The SSI payment for an individual is fifty-six percent higher than the minimum Social Security PIA⁽¹⁶⁵⁾ and only slightly below the retired-worker benefit a steadily employed minimum-wage worker receives upon electing benefits at age sixty-two (see Tables 4 & 5).

In another sense, however, SSI has only supplemental Social Security for recipients at lower benefit levels. To remain eligible for SSI, persons also eligible for OASI benefits must apply or them.⁽¹⁶⁶⁾ Approximately seventy percent of the elderly who receive SSI also receive Social Security.⁽¹⁶⁷⁾ Joint recipients get undiminished OASI benefits, with only enough SSI to bring them up to that program's standard of need, plus a small bonus created by its disregarding a small amount of OASI. SSI thus forces primary reliance on OASI. Currently, Social Security payments to elderly SSI recipients slightly exceed their total SSI payments.⁽¹⁶⁸⁾

C. The OASI-SSI Relationship

When received, OASI benefits are treated as unearned income that produces a dollar-for-dollar reduction in SSI payments after the first twenty dollars per month.⁽¹⁶⁹⁾ (The relationship between the two benefits is shown in Table 5 and Figure 7.) For the income range in which SSI eligibility exists, therefore, eligibility for OASI merely adds twenty dollars to the total income of an individual or couple.⁽¹⁷⁰⁾ This increment is the same whether the wage-earner's prior average earnings were the absolute minimum consistent with insured status (fifty dollars a quarter for twenty-seven quarters-six and three-quarter years-for an individual turning sixty-two in 1973)⁽¹⁷¹⁾ or were as high as $267 a month. Between those amounts, past employment and the related payment of Social Security tax (FICA) affect only the mix of OASI and SSI in the recipient's total income during a period when both are available. The steadily employed low-wage worker and the person with minimal covered employment receive identical total benefits.

The OASI-SSI relationship sketched so far represents the situation for individuals to whom both programs are potentially available. But both may not be available. While the programs focus on much the same population, a number of significant discrepancies exist in their coverage.

Except in the case of disability, for which Social Security and SSI provide specially, strict age thresholds define access to the two programs. At present, there is a three to five year discrepancy as to when that threshold is reached. A widow or widower who claims OASI on the account of a deceased wage-earner can obtain benefits as early as age sixty; in all other OASI cases, the age threshold is sixty-two.⁽¹⁷²⁾ Reflecting the contributory or "insurance" character of the program, a benefit reduction formula adjusts the monthly payment according to the age at which the recipient begins benefits.⁽¹⁷³⁾

In contrast, SSI has an absolute age sixty-five threshold.⁽¹⁷⁴⁾ As a consequence, the low-income (low-OASI benefit) individual or couple draws three to five years of unsupplemented OASI (at a reduced monthly amount, because drawn ahead of the "normal" retirement age of sixty-five). But once SSI is available, it cancels out the OASI "early retirement" benefit reduction.

2. Marriage

When a married couple with disparate ages⁽¹⁷⁵⁾ moves across these thresholds, the results seem even more discrepant because of another difference in the programs: their treatment of marriage at benefit time.

SSI has an expansive definition of marriage and a benefit scheme that treats a married couple household as an economic unit. This affects both eligibility (because of income imputation) and the definition of "need."⁽¹⁷⁶⁾ Eligibility for each partner nevertheless still depends on age.⁽¹⁷⁷⁾ Under OASI, marital status can provide additional benefits without regard to whether the spouses still live together.⁽¹⁷⁸⁾ Thus, OASI provides a bonus for marriage under some circumstances while SSI penalizes married couples in the sense that it treats them less favorable than, say, a brother and sister living together.⁽¹⁷⁹⁾ The following example illustrates the impact of the different treatment accorded married couples under the two programs.

Year 1: Mr. And Mrs. Doe are age sixty and fifty-seven respectively. Both have Social Security wage records, but Mr. Doe's reflects higher average wages and more consistent employment. Consequently, Mrs. Doe, as a spouse, will receive additional benefits beyond her retired-worker amount, especially after Mr. Doe dies. Neither are "disabled," but a combination of deteriorating health and limited education is causing a year-by-year reduction in their earnings. OASI and SSI are not yet available to the pair.

Year 3: Mr. Doe is now Sixty-two. He files for and receives OASI retired-worker benefits which are actuarially reduced to reflect his "early retirement." Mr. Doe can continue to earn at his "preretirement" level ($4,000 a year) and still receive significant benefits. His wife's earnings and age have no effect on his benefits.

Year 6: Mr. Doe is sixty-five at last. SSI benefits, as well ad Medicaid and Medicare, are now available to him. (His OASI monthly benefit is slightly below the SSI need standard.) The reduction of his OASI because of early retirement is cancelled out by SSI. But, if he continues to earn more than $780 per year, his SSI will be reduced (fifty cents for each dollar above sixty-five dollars per month). Furthermore, his wife, who is too young for SSI, may adversely affect his benefits. She is now sixty-two and can claim OASI retired-worker benefits, plus an additional amount as the wife of a retired worker. Those benefits, plus the earnings that she may continue to bring in without effect on either spouse's OASI amount (so long as they fall below the amount permitted by the "retirement test") are "deemed" to be income to Mr. Doe for purposes of SSI.⁽¹⁸⁰⁾ Of course, assuming SSI benefits of only thirty to forty dollars are at stake, the Does may be better off despite their loss due to such "deemed" income.

Year 9: Mr. Doe is sixty-eight, Mrs. Doe is sixty-five. They are finally an SSI "eligible couple." That means simply that the SSI standard of need for the household increases; the increase is less than would occur if the two were not married. As before, the OASI benefits and the earnings of both diminish their SSI benefits.

Year 10: Mr. Doe dies. Mrs. Doe becomes an SSI individual and a Social Security widow. So long as her widows benefits do not put Mrs. Doe above the SSI standard of need plus twenty dollars a month, the Social Security has no effect on Mrs. Doe's total income unless reasonable earnings are still available to her.

Year 11: Mrs. Doe meets a widower, Mr. Roe, and the two contemplate marriage. Mr. Roe is living on his OASI retired-worker benefits, which is slightly above the point at which SSI would be available. (His assets would disqualify him in ay event.) Marriage will not reduce OASI benefits for the two.⁽¹⁸¹⁾ But Mrs. Doe's SSI will be lost, for a marriage (or even 'living together as husband and wife") will create a new couple for SSI purposes with full attribution of income and assets between the "spouses."⁽¹⁸²⁾

3. Relationship to other Income and Assets

Consistent with OASI's basic contributory character, the program pays full benefits without regard to possession of other assets and other "retirement"income. It also has a fairly generous disregard of earned income which Congress has repeatedly increased. In contrast, SSI has income and asset policies-forcing consumption of most other resources before turning to SSI-designed to assure that only the most needy receive its benefits. For those potentially subject to the benefit policies of both programs, the difference in signals must be startling. The politics of SSI prevail for individuals whose OASI falls significantly below the SSI need standard.

a. Savings and Similar Provision for Eventual Self-Supporter Other Than by Earnings. Future self-support is "encouraged" by OASI. It is often said that the program furnishes a basic lawyer of support upon which individuals, through savings, will add. Yet significant pre-sixty-five savings merely create a disqualifying asset that must be consumed by potential SSI recipients. Consequently, the SSI incentives encourage full consumption of past savings during the pre-SSI period, when OASI alone is available.⁽¹⁸³⁾

b. Earnings. SSI is also much more sensitive to earnings than is OASI. As already noted, OASI so only slightly affected by earnings at levels likely to be available to potential joint recipients and then only until age seventy-two. The "supplementing" SSI, however, quickly disappears if the individual is earning more than sixty-five dollars per month. The rate of reduction for earnings, fifty cents per dollar, is the same for both programs, but OASI totally disregards a monthly amount close to four times larger than SSI's sixty-five dollars.⁽¹⁸⁴⁾

D. State Supplementation of SSI

Due in part to federal "mandates,"⁽¹⁸⁵⁾ most states supplement SSI benefits for at least some needy elderly.⁽¹⁸⁶⁾ Strong fiscal incentives have also lead the majority of them to elect federal administration of their supplementary benefits.⁽¹⁸⁷⁾ The federal agency merely adds the state's money to the federal benefit check. Recipients deal with one agency, the Social Security Administration, and receive SSI and state supplements in a single payment. Because large-supplement states have particularly strong incentive to choose federal administration, nearly ninety percent of all state supplementary dollars are federally administered.⁽¹⁸⁸⁾

Some state supplements are simply indirect subsidies of certain special living arrangements for the elderly, such as adult foster homes. Several states limit supplements to such cases.⁽¹⁸⁹⁾ As a consequence, in a slim majority of the states the federal SSI benefit is the only public assistance available to an elderly individual or couple living independently.⁽¹⁹⁰⁾ At the other extreme lie a few states that add 4100 or more a month to the federal standard for an individual and$150 or more for a couple.⁽¹⁹¹⁾ Table 6 shows the range of state supplements, in relation to the poverty line, for elderly persons living independently, as of September 1976.

Source: Bureau of Supplemental Security Income, Social Security Administration, HEW, Summary of State Payment Levels, State Supplementation, and Medicaid Decisions (Revised aug. 9,1976 with addendum dated Sept. 2, 1976).

States electing federal administration must have income disregards at least as generous as those contained in the basic federal SSI benefit formula. States may disregard additional amounts or types of income, but such disregards cannot affect benefits in the income range in which federal SSI benefits are still being paid. These disregards can come into play only for those with incomes above the federal SSI limit.⁽¹⁹²⁾ Assuming that a state disregards only the required twenty dollars a month of all types of income, supplementary benefits have no effect on the relationship between SSI (as supplemented) and OASI, other than to increase the amount of total benefits and therefore the range over which Social Security does not affect the total income of the recipient beyond the first twenty dollars a month. This effect should not be belittled. The increase of the range is quite large in some states; in a few, it extends up to the average retired-worker benefit.⁽¹⁹³⁾

When the state administers supplementary benefits, there are no federal constraints on the treatment of OASI or other income. Thus, a state can nullify the twenty dollars per month disregard in SSI, placing recipients of OASI and other types of income on a par.⁽¹⁹⁴⁾ There is little reason, however, to expect state-administered supplementary benefits to have less respect for the SSI disregards than federally-administered programs do. Consequently, Figure 7 can be assumed to depict the relationship between OASI and SSI and state supplementary benefits generally, not just for states that choose federal administration.

Since 1975, SSI has contained an automatic cost-of-living adjustment to accompany that in the basic Social Security program; since 1976, "mandatory pass-through" has assured comparable adjustment of state supplementary benefits.⁽¹⁹⁵⁾ Prior to enactment of the latter, the dynamic interaction between SSI and OASI-over time-was as much subject to state control as OAA had been,⁽¹⁹⁶⁾ at least in states with a sizable supplement. Currently, the SSI-OASI benefit"system" assures upward adjustments for inflation to virtually all elderly covered by the "system."

Despite this coordination of OASI, SSI and state supplements, several areas remain in which the existence of significant state benefits can have an important impact on the OASI-SSI system. First, by raising the income range over which OASI benefits do not affect the total income of an individual or couple, state supplements can accentuate all the features of the basic fedeal program, including its offset of the "early retirement" reduction of OASI, its override of Social Security incentives for savings and earnings, and its identification of old age with age sixty-five. A state can, by providing public assistance at or near SSI levels prior to age sixty-five, reduce or eliminate the effects of SSI's age sixty-five threshold; however, such assistance is rare.⁽¹⁹⁷⁾ Far more common is an additional state SSI supplement for eligible individuals living with a younger spouse not old enough for SSI. In late 1976, the SSI supplement programs of eight states contained such a benefit.⁽¹⁹⁸⁾ This form of indirect support for the younger spouse (without a specific age limit) eases some of the transition problems for the married couple that the differing age thresholds of OASI and SSI create.

The structure of state supplements can also affect the marriage penalty that SSI contains. Treatment of a married couple household as an economic unit-with the income of one spouse assumed to be available for both-is required of federally-administered state supplements and is no doubt included in state-administered programs as well. But state benefits that supplement couples more generously than individuals offset the sacrifice in payment standard upon marriage that the federal benefit scheme contains. The supplements of two states (California and Colorado) result in combined federal and supplementary benefits for a couple precisely twice those paid an individual.⁽¹⁹⁹⁾

Overall, however, such reshaping of the SSI benefit scheme through supplements is rare. From a national perspective, state supplements appear to have limited effect on the OASI-SSI relationship beyond expanding the range of SSI in a number of states, quite significantly in a few.

VIII

Prospects for Greater Coordination

In 1974, Congress enacted SSI, a public assistance program, to go alongside the social insurance program, OASI. The latter itself had by then taken on many "welfare" features largely because of the prior lack of an adequate public assistance program for the elderly. Initially, Congress left those features undisturbed; it made no coordinating changes in OSI and shaped SSI without evident attention to that program's interaction with Social Security.

Since 1974, Congress has acknowledged this interaction, but has yet to address most major issues of coordination. The most fundamental question is: Should Congress shift more of the task of providing minimally adequate old-age benefits from OASI to SSI? Congress must also consider how to treat those who could potentially qualify for benefits under either or both programs. Three groups deserve particular attention: (1) elderly who had been steadily employed low-wage workers dependent on their income from OASI-covered work; (2) elderly whose marginal covered employment results from marginal employment overall; and (3) elderly whose marginal covered employment masks significant uncovered work-most notably, longtime federal civil servants with comparatively generous public pensions ("double-dippers").

A. The Basic Division of Labor

As a device for assuring a minimally adequate income to the elderly, OASI has several major drawbacks. Because the program lacks a "need" test, Social Security benefits justified on grounds of minimum adequacy will reach some who have a more than adequate income from other sources, including a significant umber of the now-notorious "double-dippers." Moreover, the wage taxes that finance OASI, whatever their merit as a base for the "insurance' strand in the program, compare unfavorably with the federal income tax as a method of paying for public assistance.

The existence of SSI makes it possible to shift public assistance functions assumed by OASI to a program that will perform them more efficiently and more equitably. Yet an examination of the major "minimum adequacy" features of Social Security reveals that realignment of the program with SSI requires complicated surgery. Few of those features so completely express welfare aims that straightforward excision can be viewed as an attractive reform. Most call for new and complex adjustments to OASI or SSI, or both.

1. Inflated Benefit Levels for Those with Limited Covered Employment-OASI's Minimum Benefit

One bit of simple surgery does seem desirable and possible. With SSI available, there is no reason for OASI to pay a substantial minimum benefit to those who have had only marginal covered employment. That minimum should be removed.

In 1977, Congress took a hesitant step in that direction. As part of a major overhaul of the system,it froze the "minimum benefit." The 1977 amendments permanently fix the minimum PIA at the December 1978 figure, rounded off to the next highest dollar-$122.⁽²⁰⁰⁾ The Report of the House Ways and Means Committee tied the change to the existence of SSI:

Freezing the minimum emphasizes that the supplemental security income (SSI) program is an appropriate source of income for needy aged, blind, or disabled people. . . . The committee believes that this is a more efficient and appropriate method of dealing with the problem of poverty for those who have only a marginal attachment to work covered by social security.⁽²⁰¹⁾

The report noted that "[i]ncreasingly, the minimum benefit is being paid to people who did not, during their working years, rely ontheir covered earnings as a primary source of support." To some of them-notably federal civil servants with lengthy employment in uncovered work producing a public pension-the minimum is a "windfall." Finally, the report pointed out that freezing the minimum would have little or no effect on "low-paid workers who worked regularly under the social security program."⁽²⁰²⁾

On the House floor, Representative James C. Corman (Chairman of the Public Assistance Subcommittee of the Committee on Ways and Means) offered an amendment that would have eliminated the minimum.⁽²⁰³⁾ He argued that "freezing" the minimum responded inadequacy to the considerations the committee recited. The amendment failed by a vote of 131 to 271.⁽²⁰⁴⁾

The arguments for eliminating the minium are compelling, and quite possibly Congress will return to the proposal. The likelihood that elimination will replace the gradual "real" reduction, achieved by the 1977 freeze, rests in part on whether Congress extends Social Security coverage to presently uncovered federal and state employees. So long as they remain uncovered, the minimum generates a particularly troublesome "windfall" to the significant fraction of those workers who by retirement have enough work in the private sector to qualify for Social Security.⁽²⁰⁵⁾

2. The Weighted Benefit Formula

Although the 1977 amendments reduced the importance of the minimum, they reaffirmed-for some, even increased-the weighting of the benefit schedule in favor of those with low average earnings over a lifetime of employment. By most measurements, the steadily employed low-wage worker will, under the revised benefit formula, do as well in comparison with the average- or high-income earner as before.⁽²⁰⁶⁾

Do the arguments for eliminating the minimum apply equally to the benefit formula's severe "tilt" in favor of those with a history of steady by low average earnings? Some seem persuaded that they do. At the time of SSI's passage, one commentator observed that

[t]he existence of a large, uniform Federal benefit program for the low-income aged will force congressional attention on the question of structural changes in social security. That is, the need for a special minimum social security benefit and the need for a heavy weighting of the benefit schedule in favor of the low-wage worker will diminish, and the benefits paid out under these provisions will become less efficient in reducing poverty.⁽²⁰⁷⁾

Linking the minimum and the weighted formula in this way ignores a face to which Congress was quite sensitive in 1977. The minimum provides advantage only to those who have had very slight contact with covered employment. The weighted formula, in contrast, benefits many who have had a long period of earnings-based self-sufficiency. Moreover, because it falls significantly below the SSI payment standard, the minimum keeps no one off public assistance. The weighted formula, on the other hand, provides large enough benefits to those above the very bottom of the scale to keep them off SSI. Providing a constant ratio of OASI benefits to covered average indexed earnings would, like removing the minimum, deny "windfall" benefits to former public employees whose low average covered wages resulted from few covered years out of many years of work. But leveling the formula would also allocate to SSI a major share of the old-age income support of steadily employed low-wage workers. Indeed, a flat Social Security formula with a benefit-earnings ratio pegged at the current rate for middle-income workers would bring many more retired workers, including some middle-wage workers without private pensions, into SSI. In the process, these workers would necessarily shift from OASI's to SSI's policies concerning earnings, savings and marriage. To qualify for SSI, they would have to exhaust any individual savings for old age, losing, as a consequence, any incentive to save in anticipation of retirement.

The prospect is not an attractive one. Strong reasons point toward fixing the boundary between OASI and SSI at a line that assures that "persons regularly employed at even minimum wage levels . . . receive reasonable insurance protection without resorting to assistance (SSI) except under exceptional conditions of need."⁽²⁰⁸⁾

This allocation principle does no, however, support retention of the present OASI formula. The formula fails on two counts. First, it inflates benefits for some who have marginal covered work, most conspicuously, the "double-dippers." Second, it falls short of guaranteeing the steadily employed low-wage worker enough Social Security to avoid reliance on SSI. Although at first glance the formula appears adequate for such a worker when judged against the SSI standard, that holds only f he first collects OASI at age sixty-five. With benefits begun at age sixty-two (ro sixty in the case of a widow or widower)-the assumption that corresponds more closely to when beneficiaries in fact file-OASI monthly amounts for the low-income worker fall within the SSI range (see Tables 4 & 5). The fundamental problem with the present weighted formula is that it blurs together quite different groups of people. Those it favors-individuals with low average wages over the base period-include those with steady low wages and others having sporadic covered wages for a variety of reasons. On grounds of efficiency and equity, some (but not all) of them should be denied special treatment under Social Security, now that SSI provides more than adequate replacement protection.

A feature of OASI materially strengthened in 1977 shows one way to separate these groups. Congress increased the "special minimum" (added in 1972 for low-wage workers with many years of coverage) to the point where it now assures a PIA of $11.50 for each year of coverage in excess of ten bu not more than thirty.⁽²⁰⁹⁾ For the worker with a full thirty years, that produces a minimum PIA of $230 for 1979. This minimum, in sharp contrast to the regular minium frozen by Congress in 1977, is paid to those with a history of steady low-wage employment, rather than those who have marginal covered work.

Only a modest additional increase in the "special minimum" would assure that a thirty-year worker employed at the minimum wage would receive a large enough OASI benefit, even if begun at age sixty-two, to meet SSI's standard of adequacy. Increasing the multiplier for those with low average indexed earnings would achieve the same effect, bu less efficiently.⁽²¹⁰⁾ As with the regular minimum, this inefficiency is particularly troublesome so long as public employees remain uncovered by Social Security. If Congress increased the special minimum sufficiently to assure an adequate retirement income to the steadily employed low-wage worker, the heavy weighting of low average indexed earnings could be cut back.

3. Spouse Benefits

The 1939 addition of OASI benefits for surviving and dependent spouses, and subsequent improvement in benefits for spouse-particularly widows benefits-were strongly motivated by a concern with minimum adequacy.⁽²¹¹⁾ What implications does SSI have for these feature of the Social Security system?

With SSI available to the widow of a marginally employed male, there is less reason to retain such spouse benefits-or their present fraction of the worker's PIA-as a welfare measure in such a case. Yet without major changes in the OASI structure to assure greater benefit equality between men and women and more equitable treatment of the many women who divide their time between home and work, spouse benefits simply cannot be eliminated.⁽²¹²⁾ SSI alone is an inadequate replacement. If major reforms occur, however, the existence of SSI should ease the removal of these "welfare" features from OASI.

4. Old-Age Benefits Prior to Age Sixty-Five

Income needs associated with old age often begin before age sixty-five-particularly for those with lower Social Security benefits or none. Congress has lowered the age threshold for OASI in response to this phenomenon.⁽²¹³⁾ SSI ought to extend at least to the same ages. The existence of a significant age band for which OASI is available but SSI is not (currently five years in the case of a widow or widower) puts pressure on OASI to perform essentially "public assistance" functions. A coordinating step less drastic but also less compete than lowering the general age threshold for SSI would be to add an SSI benefit increment to cover the younger(need6) spouse of a person meeting the age sixty-five eligibility test. The younger spouse of an SSI recipient can claim OASI at age sixty-two. SSI currently treats the couple as an economic unit for purposes of charging those OASI benefits against the older spouse's SSI amount but not, for setting that amount. The couple should be treated as a unit for both purposes.

5. Benefits for Those with Little or No Contribution

The existence of SSI should curb any congressional desire to repeat the mid-sixties experiments with special Social Security benefits for those with slight or no contribution. Its existence also points toward eliminating those enduring features of the regular benefit scheme that permit benefits to go to such individuals. The distinction between steadily employed low-wage workers and individuals "who have only a marginal attachment to work covered by social security" applies here. Workers qualify for Social Security on the basis of "quarters of coverage." Congress should consider tightening that basic eligibility unit.

With SSI in place, there seems far less reason than before to count years of income below the SSI need standard (e.g. $2,000) toward OASI eligibility. In 1978, the test for coverage rose from the historic fifty dollars of covered earnings per quarter to $1,000 in a year (for four quarters of coverage-five times the previous test). Years with earnings below $250 are taxed and figured into the benefit formula but do not count toward the initial eligibility test of"insuredstatus." Congress should increase the test figure.

B. Desirable Adjustments to SSI

A more rational and equitable fit between SSI and OASI requires some changes on the SSI side as well. The need for a coordinated age threshold has already been addressed. Another obvious target for reform is SSI's treatment of OASI income.

Reducing SSI payments on dollar for each dollar of OASI, beyond the first twenty dollars, neutralizes at least two features of Social Security. It cancels out the benefit reduction for pre-sixty-five retirement-which is particularly troublesome so long as the programs' age thresholds remain different-and denies the low-wage worker whose OASI falls below the SSI "break-even point" the sense of return on contribution. As one study put it:

Setting the SSI level at an amount that is only a few dollars below the average social security benefit lowers the value of social security to individuals who receive both types of benefits. The feeling that a large part of their retirement income is earned through a lifetime of payroll tax payments may be of psychological value to individuals who receive small SSI supplements. But the psychological value may succumb to reality when a retired worker realizes that the payroll tax he has paid gives him no more income than if he had worked less or not at all. . . . Twenty dollars a month may seem to be a small return to an individual who has worked and paid increasingly higher social security taxes for many years.⁽²¹⁴⁾

A disregard of twenty or thirty percent of OSI (an similar retirement benefits) would solve this problem. It would also increase the adequacy of the system for joint recipients. Currently, neither SSI alone nor SSI coupled with OASI assures a poverty-line income to eligible individuals or couples. State supplements take recipients across that line in only a few states(see Table 6). Adding a thirty percent OASI disregard to SSI would assure a poverty-line income to many joint recipients.⁽²¹⁵⁾

The importance of such a change in SSI depends heavily upon whether Congress adjusts the OASI benefit to assure an income significantly higher than the SSI standard to all steadily employed low-income workers, including those starting benefits at age sixty-two.

Endnotes

* First appeared in 64 Cornell Law Review 437 (1979). Copyright © 1979, 2000 Peter W. Martin.

1. Quoted in A. Altmeyer, The Formative Years of Social Security 126 (1966).

2. At 61 (1972).

3. The commitment of the federal government to income support for the elderly dates back to 1935, the year the Social Security Act was passed. See, e.g., A. Schlesinger, Jr., The Coming of the New Deal 315 (1958) ("For all the defects of the Act, it still meant a tremendous break with the inhibitions of the past. The federal government was at last charged with the obligation to provide its citizens a measure of protection from the hazards and vicissitudes of life.").

Judicial acceptance of that goal as well as the Act's means came less than two years later in Helvering v. Davis, 301 U.S. 619 (1937). The Supreme Court's opinion, written by Justice Cardozo, observed:

Congress did not improvise a judgment when it found that the award of old age benefits would be conducive to the general welfare. . . . A great mass of evidence was brought together supporting the policy which finds expression in the act. Among the relevant facts are these: the number of persons in the United States 65 years of age or over is increasing proportionately as well as absolutely. What is even more important the number of such persons unable to take care of themselves is growing at a threatening pace.

Id. At 641-42.

Popular support for this form of governmental activity was high in 1935 and subsequently grew to near unanimity. See M. Schlitz, Public Attitudes Toward Social Security 1935-1965, at 35-36 (1970). During the first decade or so, this remarkable level of public acceptance existed side by side with considerable confusion about the relevant programs and widespread dissatisfaction with their payment levels. See id. At 40-49, 79-88.

4. Social Security act of 1935, ch. 531, §§ 1-6, 201-210, 49 Stat. 620 (current version at 42 U.S.C. §§ 301-306, 401-432 (1976)). A variety of state and local old-age pension plans did exist prior to the Social Security Act. See F. Bond, R. Baber, J. Vieg, L. Perry, A. Scaff & L. Lee, Our Needy Aged 39-68 (1954); Social Security Board, Social Security in America 155-66 (1937) [hereinafter cited as Soc. Sec. In America].

5. See 42 U.S.C. §§ 1381-1383c (1976).

6. See Soc. Sec. In America, supra note 4, at 137-226; E. Witte, The Development of the Social Security Act 27 (1962). That attention derived in part from political pressure generated by the Townsend movement. The Townsend plan, which remained a force to be reckoned with into the early forties, offered the elderly immediate university coverage and payments of $200 a month. See M. Schiltz, supra note 3, at 40-44; Twentieth Century Fund, Inc., The Townsend Crusade (1936).

7. The controversy centered on Old Age Insurance; Old Age Assistance was the most popular feature of the Act. See E. Witte, supra Note 6, at 78-79, 93-95, 103.

8. See Social Security Act of 1935, ch. 531, §§ 201-210, 49 Stat. 620. To anyone familiar with the present statute, the simplicity of the 1935 legislation is overwhelming. The OAI provisions take up less than four pages. They are usefully summarized in Soc. Sec. In America, supra note 4, at 222-26.

9. A. Altmeyer, supra note 1, at 16.

10. Soc. Sec. In America, supra note 4, at 224-25. The 1939 amendments moved the later date up to January 1, 1940. A. Altmeyer, supra note 1, at 91, 119, 278. See L. Meriam, Relief and Social Security 74-125 (1946).

11. See Social Security Act of 1935, ch. 532, §§ 1-6, 49 Stat. 620; Soc. Sec. In America, supra note 4, at 189-97, 217-21.

12. Social Security Board Security Yearbook: 1939, at 12 (1940).

13. Bureau of Research and Statistics, Social Security Board, Tabular Summary of Statistics of Public Assistance, table 1, at 2 (1937).

14. A. Altmeyer, supra note 1, at 26. While some apparently did refer to the "liquidation of Old Age Assistance," the claims made by most supporters of the bill that became the Social Security Act were less extreme. The Report of the Committee on Economic Security stressed the need for the contributory OAI plan to hold down, not eliminate, expenditure under noncontributory OAA:

Contributory annuities [Old Age Insurance] can be expected in time to carry the major, but under the plan we suggest, never the entire load.

. . . .

. . . The estimates of the actuaries indicate that if a compulsory system of contributory annuities is started by January 1, 1937, the Federal grants-in-aid to the noncontributory pensions will by 1980 total less than 40 percent of the amount they will reach by that date if a contributory system is not started.

Economic Security Act: Hearings on H.R. 4120 Before the House Comm. On Ways and Means, 74^th Cong., 1^st Sess. 39, 42 (1935).

The executive director of the Committee, Edwin E. Witte, made it clear in testimony before the House Ways and Means Committee that the reduced 1980 figure will remain because the contributory system [embodied in the bill] will not reach large groups in our population. If we can devise a method by which we can bring into the contributory system the groups in the population who are not now covered, the self-employed groups, then that cost can be further reduced.

Id. At 100-01.

When one compares such presentations with the recollections of congressmen unhappy with rising welfare costs during the 1960's, one is led to conclude that the "withering away" notion grew more simplistic with time. See g. Steiner, Social Insecurity: The Politics of Welfare 26 (1966) (in a chapter entitled, "The Withering Away Fallacy").

15. Soc. Sec. In America, supra note 4, at 224. The $35 a month figure is significant because it exceeded by five dollars the maximum OAA benefit for which federal grants-in-aid funds were available under the 1935 Act. Id. At 221. For most states, although not all, that limit on federal reimbursement set the ceiling on OAA payment levels during the early years of the program. In 1939, for example, 40 of 51 jurisdictions with approved OAA plans had an explicit limit on monthly payments of $30 or less per month. Social Security Board, Social Security Yearbook: 1939, at 158. See id. At 201, 204.

The $50 a month wage figure was well below the average for a manufacturing worker in 935. 1975 Labor Statistics, supra note 10, Table 102, at 254. It approximated monthly earnings at the minimum wage established by the Fair Labor Standards Act of 1938 (a 44 hour week at 25 cents an hour). See Fair Labor Standards Act of 1938, ch. 676, §§ 6(a)(1), 7(a)(1), 52 Stat. 1060.

16. Social Security Act Amendments of 1939, ch. 666, sec102, § 3(a), 53 Stat. 1360. See A. Altmeyer, supra note 1, at 278; L. Meriam, supra note 10, at 77-79; Martin, Social Security Benefits for Spouses, 63 Cornell L. rev. 789, 795-801 (1978). Significantly, the $40 a month figure corresponded closely to the contemporary public's view of "the smallest income that a single person over sixty [required] for a decent living." M. Schliltz, supra note 3, at 45.

17. The formula provided 405 of the average monthly wage up to the first 450 (plus 10% of the amount the average exceeded450, up to 4250), the resulting dollar amount to be increased by one percent for each year of coverage. Social Security Act Amendments of 1939, ch. 666, sec. 201, § 209(e), 53 Stat. 1360. For the $50-a-month worker with 45 years, this yielded a benefit of $29.00.

18. The basic wife benefit was 1/2 the husband's retired-worker payment, but in the example, a maximum (in this case 805 of the husband's monthly wage) would limit the two to 440 a month. See Social Security Act Amendments of 1939, ch. 666, sec. 201, §§ 202(b), 203(a), 53 Stat. 1360. See generally L. Meriam, supra note 10, at 93-107.

19. See Social Security act of 1935, ch. 531, § 202(a)(2), 49 Stat. 620; Soc. Sec. in America, supra note 4, at 224.

20. See notes 15-16 supra.

21. See Bureau of Labor Statistics, U.S. Dep't of Labor, Handbook of Labor Statistics 1975 - Reference Edition, Table 122, at 313 [hereinafter cited as 1975 Labor Statistics]..

22. See id., Table 102, at 254.

23. See note 15 supra.

24. Soc. Sec. Bull. - Annual Statistical Supplement, 1975, Table 84, at 121 [hereinafter cited as 1975 Ann. Supp.]. The average benefit awarded newly retired persons during that year was slightly higher, approximately $28.40 a month. Id., Table 62, at 93.

25. The wage figures are calculated by indexing the $50-a-month figure against the average weekly earnings for a manufacturing worker. See 1975 Labor Statistics, supra note 21, Table 102, at 254. Benefits responded somewhat more favorably to wage increases below $50 a month. See note 15 supra.

26. Only eight states paid any OAA above the $40 level up to which the federal government would share costs. However, 20jurisdictions paid some benefits above the $30-a-month maximum that had been in effect only the year before; 18 paid benefits at least up to $40. Social Security Board, Social Security Yearbook: 1940, at 297 (1941).

27. Id. at 294.

28. Annual Statistical Supplement, 1949, Soc. Sec. Bull., Sept. 1950, Table 43, at 58.

29. Congress raised the level of federal reimbursement to $45 a month as of October 1946 and to $50 a month as of October 1948. Social Security Act Amendments for 1946, ch. 951, sec. 501, § 3(a), 60 Stat. 978; Act of June 14, 1948, ch. 468, sec. 3, § 3(a), 62 Stat. 438.

30. Annual Statistical Supplement, 1949, supranote 92, Table 43; at 58.

31. Soc. Sec. Bull.-Annual Statistical Supplement, 1960, Table 126, at 91.

32. 1975 Ann. Sup., supra note 24, at 25.

33. See Public Assistance Supplementation of the Income of Old-Age and Survivors Insurance Beneficiaries, Soc. Sec. Bull., Oct. 1949, at 10, 15.

34. Other state eligibility requirements for OAA included limited assets, willingness to suffer a lien, and no children or other "responsible relatives" ab