PUBLIC ASSURANCE OF AN ADEQUATE MINIMUM INCOME IN OLD AGE: THE ERRATIC PARTNERSHIP BETWEEN SOCIAL INSURANCE AND PUBLIC ASSISTANCE*

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

IV. How OASI Benefits Affected OAA

A. OASI Benefits Counted as Income

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

V. OASI's Assumption of Public Assistance Functions

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

VIII. Prospects for Greater Coordination

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).

Figure 1

I

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.

Figure 4 (Insert Here)

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.

Figure 5 (Insert Here)

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

Figure 6 (Insert Here)

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

Table 3


Old Age Assistance and

Social Security Benefit Levels
Old Age

Assistance (OAA)

Jan.

1961

Jan.

1963

Jan.

1965

Jan.

1967

Apr.

1968

July

1969

OAA Payment Ala.

to Elderly Cal.

Woman Living Colo.

in Rented Ky.

Quarters With Mass.

No Other Miss.

Income-Selected N.Y.

Statesa Va.

$ 75.00

95.00

107.00

75.00

126.30

40.00

105.75

103.00

$ 75.00

106.00

110.00

84.00

124.45

50.00

110.65

103.00

$ 75.00

151.00

114.00

84.00

126.87

50.00

117.60

105.00

$ 82.00

151.00

120.00

84.00

136.00

50.00

131.45

115.00

$ 85.00

162.00

124.00

90.00

143.00

50.00

115.00

115.00

$ 88.00

165.00

128.00

90.00

152.00

55.00

145.00

138.00

Average OAA Ala.

Benefit Cal.

(Money Pay- Colo.

ments Only)-- Ky.

Selected Mass.

Statesb Miss.

N.Y.

Va.

$ 51.00

79.76

81.47

50.18

69.53

34.57

78.55

41.35

$ 60.80

94.63

80.58

53.43

68.41

33.34

68.86

41.76

$ 57.60

97.16

81.02

50.23

69.73

37.16

73.60

45.11

$ 60.70

102.15

82.10

56.10

80.10

38.95

83.15

53.05

$ 59.25

99.00

77.90

53.70

80.65

36.15

92.75

54.90

$ 61.85

105.65

77.85

53.70

88.95

39.80

93.90

61.00

Maximum Average Benefit After 1965 no limit for

for Which Federal $ 65.00 $ 70.00 $ 70.00 state electing medicaid

Participation Availablec 1318 (1976)

Social Security
Minimum Benefitd $ 33.00 $ 40.00 $ 44.00 $ 44.00 $ 55.00 $ 55.00
Average Retired-

Worker Benefite

$ 74.04 $ 76.19 $ 77.57 $ 84.35 $ 85.37 $ 98.86

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)

Table 4


OASI Benefits of Two Hypothetical

Low-Income Workers About to Retire
Worker A

Steadily Employed Forty

Hours a Week at the

Federal Minimum Wage

(1951-1977)a

Worker B

Employed at Annual

Earnings Equal to 1/2

the Median for Workers

of Same Age (1951-1979)b

Poverty

Line

Annual Earnings-- 1959 ($1952) $2080

Illustrative Years, 1963 (2052) 2388

Compared to Poverty 1969 (2458) 3328

Line for Non- 1972 (2808) 3328

Elderly Couplec 1976 (3830) 4784





$1876

2105

2906

3355

4203

Average Monthly

Earnings 244

Primary Insurance Amount

(PIA)--

June 1, 1978 Schedule 246

Monthly Benefit if Begun at

Age 62 (80% of PIA) 197

227





239



191

Average Indexed

Monthly Earnings 432

PIA-Jan. 1, 1979

Schedule* 243



387

228

* A person eligible for benefits before 1984 is entitled to use the PIA from the June 1, 1978 schedule if higher, which it would be in both cases. Social security Amendments of 1977, Pub. L. No 95-216, sec. 201, 215(a)(4)(B), 91 Stat. 1509.



Sources:

a H.R. Rep. No. 521, 95th Cong., 1st Sess, 17, reprinted in [1977] U.S. Code Cong. & Ad. News, 3201, 3218.

b Soc. Sec. Bull.-Annual Statistical Supplement, 1975, Table 42, at 75.

C Id. Table 9, at 46.


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.

Table 5

Cumulative Benefits-OASI and SSI
Average Monthly

No State Supplement OASI Earnings (AME) SSI Total

Individual













Couple with Only

One Covered Worker

$ 0.00

97.40

121.80



209.40





0.00

143.10



182.70



304.10



($76 or less, if benefits

claimed at 62)

($76 or less, if benefits

claimed at 65)

($178 if benefits claimed

at 65, $267, if at 62)a





($76 or less, if benefits

claimed at 62)

($76 or less, if benefits

claimed at 65)

($165 if benefits claimed

at 65, $263, if at 62)b

$189.40 $189.40

112.00 209.40



87.60 209.40



0.00 209.40





284.10 284.10

161.00 304.10



121.40 304.10



0.00 304.10

AME

(assuming bene- State

High State Supplement OASI fits claimed at 62) SSI Supp. Total

Individual $ 0.00 $189.49 $100.00 $289.40

209.40 ($267) 0.00 100.00 309.40

309.40 ($312)c 0.00 0.00 309.40

Couple with Only

One Covered Worker 0.00 284.10 150.00 434.10

304.10 ($263) 0.00 150.00 454.10

454.10 ($496)d 0.00 0.00 454.10

Sources: 42 U.S.C., 1382a(a)(2)(B), (b)(2)(A) (1976); 43 Fed. Reg. 20,867, 20,868-69 (1978).

a$178 AME = $2,136 average annual earnings; $267 AME = $3,204 average annual earnings.

b4165 AME = $1,980 average annual earnings; $263 AME = $3,156 average annual earnings.

c$312 AME = $3,744 average annual earnings.

d$496 AME = $5,952 average annual earnings.

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.

Figure 7 (Insert Here)

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.

Table 6

State Supplements for Individuals

and Couples Living Independently,

September, 1976
Supplement
Number of States
$100 or more per individual,

$150 or more per couple
3 states (Alas.,

Cal., Mass)
Less than $100/$150 but

enough to bring both

individuals and couples

to the poverty line ($60

or more per individual,

$33 or more per couple)





5 states (Conn., Idaho,

Neb., N.Y., Wis.)
Not enough to bring an individual

to the poverty line,

but meets that standard for a

couple ($33 or more per couple)
9 states (Colo.,

Mich., Minn., Nev.,

Okla., Pa., R.I.,

Vt., Wash.)
$10-$25 per individual and

per couple
4 states (Hawaii,

Me., N.J., Or.)
Less than $10 per individual,

$0 per couple



2 states (Ill., N.H.)
No supplement for

individual or couple



27 states and D.C.

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, 74th Cong., 1st 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" able to support them.

35. Compare Current Operating Statistics, Soc. Sec. Bull., Mar. 1950, Table 14, at 26, Table 19, at 28 with Perkins, Trends in Recipient Rates for Old-Age Assistance, Soc. Sec. Bull., Oct. 1948, at 10.

36. There were 2,736,000 OAA recipients in December 1949. Annual Statistical Supplement, 1949, supra note 92, Table 38, at 47. Retired wage-earners, dependent and surviving elderly spouses and surviving parents receiving OASI benefits totaled 1,951,250. Id., Table 10, at 20.

37. Concurrent receipt of Old-age and Survivors Insurance and Public Assistance, Soc. Sec. Bull., Aug. 1952, at 13; Public Assistance Supplementation of the Income of Old-age and Survivors Insurance Beneficiaries, Soc. Sec. Bull., Oct. 1949, at 10.

38. See A. A ltmeyer, supra note 1, at 152-68; E. Witte, Social Security Perspectives 46 (1962).

39. Ch. 809, Stat. 477. See A. Altmeyer, supra note 1, at 163, 169-87.

40. The amendments extended coverage to self-employed persons, agricultural workers and domestics, employees of nonprofit organizations, some federal, state, and local government employees and residents of Puerto Rico and the Virgin Islands. Social Security Act Amendments of 1950, Ch. 809, sec. 104(a), 210, 211, 64 Stat. 477. As a result, the fully insured worker population rose rapidly-from 40.1 million in 1950 to 59.8 millioon in 1951 and 71.0 million in 1954. 1975 Ann. Supp., supra note 7, Table 49, at 82. In 1950, 22 million workers aged 65 and over were eligible for OASI benefits. The figure was 3.1 million in 1951 and 4.8 million in 1954. Id., Table 51, at 84. See generally Cohen & Myers, Social Security Act Amendments of 1950: a Summary and Legislative History, Soc. Sec. Bull, Oct. 1950, at 3; Hawkins, Old-Age Assistance Recipients: Reasons for Non-entitlement to Old-age and Survivors Insurance benefits, Soc. Sec. Bull., July 1952, at 4.

41. Social Security Act Amendments of 1950, ch. 809, sec. 104(a), 214, 215, 64 Stat. 477. For an explanation of the "quarters of coverage" concept, see text accompanying notes 101-10 infra.

42. See Social Security Act Amendments of 1950, ch. 809, sec. 104(a), 215, 64 Stat. 477.

43. See id.

44. See Annual statistical Supplement, 1950, Soc. Sec. Bull., Sept. 1951, Table 37, at 44.

45. At the end of February 1951, there were a total of 2,800,864 recipients fo retirement, dependent or surviving elderly spouse, or surviving parent benefits under OASI. Current Operating Statistics, Soc. Sec. Bull., June 191, Table 6, at 26. The same month there were 2,778,000 OAA recipients. Annual Statistical Supplement, 1951, Soc. Sec. Bull., Sept. 1952, Table 36, at 49.

46. Most important were the 1954 amendments which expanded coverage of farmers, farm workers, and domestic workers. See Social Security Amendments of 1954, ch. 1206, 101(a), 68 Stat. 1052. See generally, History of the Provisions of Old-age, Survivors, Disability, and HealthInsurance, 1975 Ann. Supp., supra note 24, at 15.

47. See History of the Provisions of Old-Age, Survivors, disability, and Health Insurance, 1975 Ann. Supp., supra note 24, at 18-19, 24-25.

48. OASDI Benefits, Prices, and Wages: A Comparison, Soc. Sec. Bull., Aug. 1966, at 19; Price, OASDHI Benefits, Price, and Wages: Effect of 1967 Benefit Increase, Soc. Sec. bull., Dec. 1968, at 288; Reports of the Quadrennial Advisory council on Social Security, H. Doc. No. 75,94th Cong., 1st Sec. 19-0 (1975).

49. See Act of July 1, 1972, Pub. L. No. 92-336, 202(a)(1), 86 Stat. 406 (codified at 42 U.S.C. 415(i) (1976)); Social Security Amendments of 1977, Pub. L. No. 95-216, 201.91 Stat. 1509 (Codified at 42 U.S.C.A. 415 (i) (West Supp. 1978)).

50. Current Operating Statistics, Soc. Sec. Bull., June 1974, Table M-14, at 37, Table M-25, at 46; 1975 Ann. Supp., supra note 24, Table 23, at 57.

51. National Center for Social Statistics, Social& Rehabilitation Service, HEW, Concurrent Receipt of Public Assistance Money Payments and Old-Age, Survivors, and Disability Insurance Cash benefits by Persons Aged 65 or Over, 1948-1970 and February 1970 (NCSS Report G2, 1970) (containing both the number of joint recipients and the average of their OASI payments); 1975 Ann Supp., supra 7, Table 23, at 57. Among new recipients, the percentages were higher still. In 1965, for example, 69% of the persons added to OAA rolls were OASI beneficiaries, while the comparable figure for all OAA recipients that year was 46%. See Characteristics of New, Old-Age Assistance Recipients, 1965, Soc. Sec. Bull. July 1968, at 16.

52. This estimate is based on February 1970 figures. See National Center for Social Statistics, Social & Rehabilitation Service, HEW, Concurrent Recipient of Public Assistance Money Payments an Old-Age, Survivors, and Disability Insurance Cash Benefits by Persons Aged 65 or over. 1948-1970 and February 1970 (NCSS Report G2, 1970).

53. The original administration bill in 1935 had included a requirement that state OAA plans furnish enough aid to an individual to assure "a reasonable subsistence compatible with decency and health." It met severehostility in both House and Senate and was removed. In its place was put language that, by contrast, emphasized state fiscal concerns, stating that the purpose of federal support was "to enable each State to furnish financial assistance as far as practicable under the conditions in such State." A. Altmeyer, supra note 1, at 35, 39, 59-60 (emphasis added). See M. Derthick, The Influence of Federal Grants: Public Assistance in Massachusetts 43-45 (1970); E. Witte, supra note 6, at 143-45.

54. Massachusetts started out with payment levels pegged at the ceiling for federal reimbursement. Thus, from 1936 to 1942, the statute specified payment at the rate of "not less than thirty dollars monthly for each recipient" ($50 for an eligible couple). In 1942, the figure was raised to $40 for "individual[s] living outside a family group." Those living with their family stayed at $30. Mass. Ann. Laws ch. 118A, 1 (Michie/Law. Co-op 1942). The standards were stated as minimum levels, creating some dispute about their conformity with federal insistence on a need based formula. Eventually, the 1942 legislation provided that income should be subtracted from such minimum payment levels. Id.

In 1943, the legislature authorized the state welfare department to review local budgetary standards. Five years later, it specified that whenever living costs rose five percent or more about the levels for 1947, those budgetary standards should be increased by the same amount. Id. (Supp. 1948).

Additional specificity about the content of minimum payment standards and increases in those standards followed in later years, but the basic scheme of administratively-set budget standards, adjusted for increases in the cost of living (in 1965 the five percent threshold was reduced to three percent) and subjected to no maximum, continued right up to the replacement of OAA by SSI. See id. (1965).

For an excellent account of the political context in which these OAA benefit provisions were enacted, see M. Derthick, supra note 53, at 53-70.

55. See Figure 6. In December 1964, California's average rate of OAA payment was $97.11, nearly $30 above the federal reimbursement limit of $70. Current Operating Statistics, Soc. Sec. Bull., Apr. 1965, Table 18, at 42.

California's OAA formula began as a simple and quite generous one by national standards. In 1937, the legislature specified that: "The amount of aid to which any applicant shall be entitled shall b, when added to the income of the applicant from all other sources, thirty-five dollars per month." 1937 Cal. Stats., ch. 369, at 1079. The standard was raised to $40 in 1941, to $50 in 1945 and so on. By 1949, it stood at $75. See Cal. Welf. & Inst. Code 2020, Legislative History (Deering 1952). In 1941the basic formula was modified slightly. For recipients with greater "actual need" the standard became a maximum. 1941 Cal. Stats., ch. 764, at 2299. Under the modified formula, in theory, an older person with "actual need" of $100 in 1949 and monthly income of $25 could receive a full $75 payment.

In 1945, the legislature added a provision authorizing an automatic adjustment of the state figures when the federal government changed its reimbursement formula (up or down). It was first triggered by the Social Security Act Amendments of 1946. See 8 Op. Cal. Att'y. Gen. 106 (1946).

As of 1957 (when the basic need standard was $89-up from the statutory figure of $85 because of a four dollar increase in the federal share), the formula was modified in its treatment of "actual need" above the basic figure. Additional amounts were to go only "to persons with special needs arising because of circumstances and situations not common to all recipients and not covered by the basic needs allowance." And a ceiling was placed on the total-basic needs and special grants-that a recipient could claim. For 1957, that ceiling was $105. "Actual need" in excess of that figure still counted, however, for recipients with more than $16 of income. See Cal. Welf. & Inst. Code 2020.002, Legislative History (Deering Supp. 1959); tenBroek, Welfare in the 1957Legislature, 46 Cal. L. Rev. 331, 345-49 (1958). See also 32 Op. Cal. Att'y Gen. 114(1958) (considering the relationship of the automatic adjustment section to the new special-grant ceiling).

Except for automatic and legislated increases of the basic need figure and grant ceiling, this formula remained intact until 1961. That year the legislature set those figures at $100 and $165 respectively and enacted a cost-of-living clause that removed the need for repeated amendments thereafter, committing the state to increases even though federal reimbursement remained the same. Cal. Welf. & Inst. Code 2020 (Deering Supp. 1961).

From then until SSI replaced OAA at the beginning of 1974, that framework set OAA levels in California. For a sense of the political context in which those developments occurred, see J. Putnam, Old Age Politics in California: From Richardson to Reagan 49-142 (1970).

56. See Figure 6. Throughout the lifetime of OAA, Alabama and Mississippi consistently placed lowest among the states in average benefit levels. Both states achieved low averages by means of payment maxima substantially below their standard of need. See text accompanying notes 127-32 infra. From 1950 through 1958, Mississippi's individual maximum stayed at $30 a month. During most of the sixties, it rested at $50 a month. In 1971 it was $70. See Commissioner of Public Welfare, Mississippi, Annual Report to the Governor (1951-1958); Bureau of Family Services, SSA, 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, at 4 (1962) and following reports in that series issued by successor agencies up to an including National Center for Social Statistics, Social and Rehabilitation Service, HEW, OAA, and AFDC: Standards for Basic Needs for Specified Types of Assistance Groups, March 1972 (NCSS Report D-2, 1971).

57. California's average OAA payment in December 1950 was $67.13. Current Operating Statistics, Soc. Sec. Bull., Mar. 1951, Table 14, at 34.

58. National Center for Social Statistics, Social and Rehabilitation Service, HEW, OAA and AFDC: Standards for Basic Needs for Specified Types of Assistance Groups, July 1970 (NCSS Report D-2, 1970). Ten Years earlier the range was only slightly less extreme. See White, Meeting Financial Needs Under Old-Age Assistance, Welfare in Rev., Dec. 1963, at 1.

A July 1972 survey conducted by the Subcommittee on Fiscal Policy of the Joint Economic Committee of Congress reported a low of $75 a month in Mississippi and a high of 4239 a month in Nassau County, New York. Staff of Subcomm. On Fiscal Policy of the Joint Economic Comm., 93d Cong., 1st Sess. The New supplemental Security Income Program-Impact on Current Benefits and Unresolved Issues 6 (Studies in Public Welfare, Paper No. 10, 1973) [hereinafter cited as Impact of SSI]. The HEW reports understate the high point of the range by calling for states that vary their standard according to living costs (e.g., New York) to average.

59. The ceiling for federal participation rose form $50 a month per individual recipient, where it stood in 1950, to 455 a month in 1952, and $60 a month in 1956. Social Security Act Amendments of 1952, ch. 945, 8,66 Stat. 767; Social Security Amendments of 1956, ch. 836, 341, 70 Stat. 807.

In 1958, the ceiling was increased to 465 a month and converted to an average basis; the federal government began to participate in the support of some OAA recipients at say, $75 a month so long as there were off-setting lower payments holding the state's average below the ceiling. Social Security Amendments of 1958, Pub. L. No. 85-840, 501, 72 Stat. 1013.

Congress adjusted the ceiling again in 1960, 1961, 1962, and 1965. Those adjustments brought it to 475 a month beginning January 1, 1966. They also added complicated provisions for the treatment of medical vendor payments (eventually supplanted by Medicaid). See 42 U.S.C. 303 & note (1976).

No further adjustments have occurred, for another provision of the 1965 amendments ave states an option that effectively removed the ceiling. It permitted states with a federally approved an funded Medicaid program to elect reimbursement for public assistance expenditures(OAA, AFDC, etc.) In accordance with the "Federal medical assistance percentage" (see 42 U.S.C. 1396d (1976)) "without regard to any maximum on the dollar amounts per recipient." 42 U.S.C. 1318 (1976).

California and other high-benefit states were among the first to elect such limitless reimbursement (which required giving up the high rate of federal reimbursement of $31 on the first $37 average OAA per month for a flat percentage that in the wealthier states, like New York an California, amounted to 50%). By 1971, 33 states had made that election. See Assistance Payments Administration, Social and Rehabilitation Service, HEW, Characteristics of Sstate Public Assistance Plans Under the Social Security Act-General Provisions: Eligibility, Assistance, administration 134 (Public Assistance Report No. 50, 1971 ed., 1972).

60. Over the lower range, federal support was more generous in two ways. Fist, a greater percentage of total expenses was reimbursed (first 2/3, then 3/4, still later 4/5 and ultimately 31/37), compared to a maximum reimbursement of 65% for the upper range (see 42 U.S.C. 303 note (1976)). Second, over the lower range, states were always reimbursed for average expenditures, so that payments above the limit to certain recipients could still be reimbursed at the higher percentage if balanced by payments below the limit to others. Thus, in December 1952, when the average OAA payment in Mississippi stood at $26.24, nearly all of that state's OAA expenditures were federally reimbursed at the rate of 80%, since it applied to up to $25.00 a month average payments.

In New York, to draw the contrast, the average stood at $56.94, only slightly above the $55 limit on federal participation. That ceiling, however, applied not to New York's average but to payments to any particular individual receiving more than $55a month, so a far greater share was uncovered. See Social Security Act Amendments of 1952, ch.945, 8, 66 Stat. 767; Current Operating Statistics, Soc. Sec. Bull., Mar. 1953, Table 12, at 34. The limit for federal participation over the higher range was not computed on the basis of average payments until 1958. See note 57 supra.

61. See Initial Effects of the 1952 Amendments on Assistance Payments, Soc. Sec. Bull., Jan. 1953, at 17; Initial Effects of the 1956 Amendments on Public Assistance Money Payments, Soc. Sec. Bull., May 1957, at 16.

62. It is also true that Congress did not itself always coordinate OASI increases and adjustments in the OAA formula. Throughout the fifties and early sixties proposals for OASI benefit improvements tended to come from the executive branch, while amendments of the assistance reimbursement formula-being largely an expression of state fiscal interests-typically originated in the Senate. See Congressional Quarterly Service, Congress and the Nation: 1945-1964, at 1243-59 (1965); G. Steiner, supra note 78, at 50-59. In October 1954, for example, Congress increased Social Security benefits by 13% or a minimum of five dollars, but no change occurred in the federal OAA provisions. In Alabama (which had the lowest average OAA payment in December 1953), the OSI increase reduced OAA rolls by nearly one-quarter. Nationwide the drop was only two percent, but the total reduction on the rolls in September 1954 translated into more than $2 million. See Effect of Increased OASI Benefits on Public Assistance, September-December 1954, Soc. Sec. Bull., July 1955, at 11, Tables 1-3, at 11-13.

The 1954 increase in OASI benefits alone drew particular attention to the relationship between the two types of benefits; even by 1954, in quite a umber of states, between one in four and one in three OAA recipients also received Social Security. White, Concurrent receipt of Public Assistance and Old-Age and Survivors Insurance, Soc. Sec. Bull., Aug. 1954, at 12.

63. 42 U.S.C. 302(a)(10)(A) (1976). This explicit requirement was added in 1939 to remove any doubt. See A. Altmeyer, supra note 1, at 105. The Social Security Board had taken the view that the income requirement was implicit in the 1935 Act. See Social Security Board, Explanation of the Provisions of the Social Security Act Relative to Old-Age Assistance (1936). The Report of the House Ways an Means committee on the 1939 amendments made specific reference to OASI: "This will make it clear that, regardless of its nature or source, any income or resources will have to be considered, including . . . Federal benefit insurance payments under title II of the Social Security Act . . . ." H.R. Rep. No. 728, 76th Cong., 1st Sess. 32 (1939).

64. See 45 C.F.R. 232.20(a)(3), (6) (1973). Section 233.20(a)(4)(i) states in part: "All income must be included such as social security or other benefits. . . ."

65. Other methods existed, but in terms of OAA-OASI interaction they amounted to paying 100% of need. In one way or another, they took one need figure and reduced it to create a lower "payment standard." Other income (OASI) was then subtracted from the payment standard to determine OAA benefits. Like paying 100% of need, this approach meant OASI benefits would reduce OAA dollar-for-dollar. See Staff of Subcomm. On Fiscal Policy of Joint Economic Comm., 92d Cong., 2d Sess. Handbook of Public Income Transfer Programs 109 (Studies in Public Welfare, Page No. 2, 1972) [hereinafter cited as Public Income Transfer].

A 1958 survey found only 13 states paying "full need" in OAA. Most states paying less used a maximum. In some states, the maximum affected very few recipients; eight states reported paying 99% or more of need despite a maximum. Only 10 states, by maximum or otherwise, reduced average payments to 90% or less of need. See Perkins, Unmet Need in Public Assistance, Soc. Sec. Bull., April 1960, at 3, 5-6.

After 1958, federal financial participation in OAA was limited on an average rather than individual basis. See note 123 supra. The $60 a month limitation in effect just prior to the change heavily influenced the maxima then in effect. Three states had maxima below $60. 15 between $60 and $65, and six between $66 an$70. National Center for Social Statistics, Social and Rehabilitation Service, HEW, State Maximums, Other Limitations, and Effect of Federal Matching Provisions on Public Assistance Money Payments, July 1972, at 5 (NCSS Report D-3, Feb. 14 (1973).

Once the limit on federal financial participation shifted to an average basis, the maximum lost some of its special attraction as a method for holding down OAA costs. After 1958, fewer and fewer states employed maxima with significant effect. By July 1972, only 18 states had maxima only 10 had maxima of $105 a month or less. Id. At 4 & Table 1.

The percentage reduction method of paying less than full need, although used by a number of states for Aid to Families with Dependent Children (AFDC), had very limited use with OAA. In the early seventies, only Iowa and Puerto Rico had an OAA percentage reduction formula. See id. Table 3; National Center for Social Statistics, Social and Rehabilitation Service, HEW, State Maximums and Other Methods of Limiting money Payments to Recipients of the Special Types of Public Assistance, October 1970, Table 3 (NCSS Report D-3, 1971).

66. An example of the latter is furnished by Louisiana which in 1973 had a standard of need of $150 (augmented for nearly one-third of the recipients by special needs amounts), but a maximum payment for a single elderly person of $107. See Growth of the Suplemental Security Income Program, Soc. Sec. bull., May 1975, at 32, 35. As a result a person receiving OAA and OASI, but no other income, had $43 of Social Security disregarded (or more if the person had special needs). By casting a broad "eligibility" net, such a a scheme brought OAA to a high percentage of the elderly in the state and produced a high degree of overlap with OASI. Thirty-one percent of those 65 and over in Louisiana were receiving OAA in December 1973 and 21% were receiving both OAA and Social Security. Quarterly Statistics, Soc. Sec. Bull., Dec. 1974, Table Q-4, at 81.

As of July 1972, 30% of the country's OAA recipients lived in states whose OAA programs were structured so that receipt of OASI made an individual better off by a least 420 a month. The remaining 70% lived where the increment was less; in the case of 27%, five dollars or less. Impact of SSI, supra note 56, at 12.

67. Ironically, states that achieved low benefits through a payment maximum substantially below their standard of need created little trouble of this sort. As long as the OASI increase did not drop an individual's net need below that maximum, the increase was, indeed, passed through to the recipient (even though the recipient's total of OAA and OASI typically fell far below that available in states where OAA nullified the OASI increase).

Thus, among the states, Mississippi-with a $30 maximum that remained unchanged through the 1954 OASI benefit increase-had the fewest joint recipients experiencing an offsetting OAA reduction because of that increase (53.8%). Effect of Increased OASI Benefits on Public Assistance, September-December 1954, Soc. Sec. Bull., July 1955, at 1, Table 2, at 12.

68. The 1954 OASI benefit increase reduced monthly OAA expenditures in California by $418,077, in Louisiana by $93,349, in Massachusetts by $127,322, and in Texas by $136,464. Id at 13. See G. Steiner, The State of Welfare 12-13 (1971). For a discussion of this problem, illustrated by the 1965 increases, see Reduction of Retirement Benefits Due to Social Security Increases: Hearings Before Subcomm. On Employment and retirement Incomes of the Senate Special Comm. On Aging, 90th Cong., 1st Sess. (1967).

69. Social Security Amendments of 1965, Pub. L. No. 89-97, sec. 403, 2(a)(10(A), 79 Stat. 286. The amendments also authorized, but did not require, disregard of lump-sum OASI payments attributable to the retroactivity of the 1965 increase. Id. sec. 406.

70. See text accompanying notes 61-64 supra.

71. Social Security Amendments of 1965, Pub. L. No. 89-97, sec. 401, 3(a)(1), 79 stat. 286.

72. Id. sec. 405. The clause lumped all federally supported public assistance together so that increased expenditures for AFDC could make up for a failure to increase OAA. See generally Welfare Provisions of the 1965 Social Security Amendments: Brief Guide for State Action, Swelfare in Rev., Sept. 1965, at 1, 4.

In 1962,President Kennedy had attempted such a result through "jawboning." While signing the Social Security amendments of that year, he said, "[it] would truly be a miscarriage of justice and a frustration of the legislative intent if these new Federal funds merely replaced existing state funds." Cong. Q. Weekly Rep., Aug. 3, 1962, at 1314.

73. Social Security amendments of 1967, Pub. L. No. 90-248, 213, 81 Stat. 821. See S. Rep. No. 744, 90th Cong., 1st Sess. 29 and Conf. Rep. No. 1030, 90th Cong., 1st Sess. 27, reprinted in [1967] U.S. Code Cong. & Ad. News 2834, 3006-07, 3179, 3208-09.

74. Social Security Amendments of 1967, Pub. L. No. 90-248, 221.81 Stat. 821. During this period, at least one state, California, nearly adopted an OAA provision guaranteeing pass-through of future OASI increases. In 1967 and 1968, the California legislature pased a bill with that effect only to see Governor Reagan veto it. J. Putnam, supra note 54, at 137-38.

75. Tax Reform Act of 1969,Pub. L. no. 91-172, 1007, 83 Stat. 487.

76. Social Security Amendments of 1972, Pub. L. No. 92-603, 304, 306, 86 Stat. 1329.

77. See A. Altmeyer, supra note 1, at 181-82, 204-08.

78. The first version of the 1950 amendments that the Senate passed contained a provision that would have reduced the federal OAA share for joint recipients who became eligible for OASI after 1950. It was dropped in conference. See H.R. Rep. No. 2771,81st Cong., 2d Sess. 117-18 (Conf. Rep.) reprinted in [1950] U.S. Code Cong. & Ad. News 3482, 3508; A. Altmeyer, supra note 1, at 183-84.

79. See A. Altmeyer, supra note 1, at 238: Congressional Quarrterly Service, Congress and the Nation, 1945-964, at 1246-47 (1965).

80. Congressional Quarterly Service, Congress and the Nation, 1945-1964, at 1248-50 (1965).

81. Eisenhower's 1958 Budget Message said, for example, that in light of the rapid expansion of the Social Security system and his "belief that the states should have greater responsibility" in assisting the poor, he would propose "modernizing the formulas for Public Assistance with a view to gradually reducing federal participation in its financing." Id. at 1252.

His successors did not share this view, but neither did they propose increases in federal participation. During most of the post-1950 period the initiative for more generous federal support for public assistance, including OAA, came from the Senate. See G. Steiner, supra note 14, at 50-59.

82. 107 Cong. Rec. 1677 (1961).

83. Id. at 1678-80.

84. Id. at 1679.

85. See text accompanying notes 101-09 infra.

86. 107 Cong. Rec. 1677, 1679-80 (196). See Cohen & Mitchell, Social Security Amendments of 1961: Summary and Legislative History, Soc. Sec. Bull., Sept. 1961, at 3.

87. 107 Cong. Rec.1677, 1679-80 (1961). See Cohen & Mitchell, Social Security Amendments of 1961: Summary and Legislative History, Soc. Sec. Bull., Sept. 1961, at 3.

88. Social Security Amendments of 1961, Pub. L. No. 8764, 101, 04, 75 Stat. 131 (current version at 42 U.S.C. 402, 415(1976)).

89. In 1961, the average and maximum were, respectively, $75.65 and $120.00. 1975 Ann. Supp., supra note 24, at 25, Table 84, at 121.

90. The minimum rose to 444 in 1956, $55 in 1968, $64 in 1970, and $70.40 in 1971. Id. at 25. The minimum represented 27.5% of the maximum in 1960, 32.8% in 1963 (a consequence of the 1961 amendments), 33.2%in 1966, and 34.3% in 1969 (all calculated in terms of the retirement formula for men). Compared to the average male retirement benefit, the minimum was 40.3% in 1960, 47.2% in 1963 (reflecting the 1961 amendments), 47.2% in 1966, and 49.6% in 1969. See id. at 25, Table 84, at 121.

In 1972, Congress established a new special minimum for those with many years of coverage at low wages. Social Security Amendments of 1972, Pub. L. No. 92-603, 10(b), 86 Stat. 1329 (codified at 42 U.S.C. 403(a)(5) (1976)).

91. From 1955 to 1975, the replacement rate (monthly benefits as a percentage of immediate pre-retirement earnings) rose from 45 to 56 for a low-wage worker, 31 to 43 for a worker with average earnings, while it held at roughly 30 throughout the period for a worker with maximum taxable earnings. Staff of Subcomm. On Social Security of House Comm. On Way and Means, 95th Cong., 1st Sess., Background Materials for Hearings on Social Security 16 (Comm. Print 1977).

92. See 1975 Ann. Supp., supra note 24, at 18.

93. See Martin, supra note 16, at 802-09.

94. Social Security Amendments of 1972, Pub. L. No. 92-603, 102, 86 Stat. 1329 (codified at 42U.S.C. 402(e)(2)(A) (1976)).

95. J. Pechman, H. Aaron & M. Taussig, Social Security: Perspectives for Reform 84 (1968) [hereinafter cited as Pechman et al.].

96. Social Security Act of 1935, ch. 531, 2, 3, 202, 49 Stat. 620. Prior to 1940, state OAA plans could impose a more stringent age test, starting benefits as late as age 70. Id. 2(b)(1).

97. See 42 U.S.C. 1351-1355 (1976). States could, of course, reach below 65 if they chose to do so without federal support. Colorado's OAA program paid (nonfederally funded) benefits starting at age 60 for long-term residents of the state. See Colo. Rev. Stat. 26-2-111(2)(11 (1973); F. Bond, R. Baker, J. Vieg, L. Perry, A. Scaff & L. Lee, Our Needy Aged 133-34 (1954).

General assistance benefits in a few states, available without age limit, approached OAA levels and thus reduced the importance of the latter's age threshold. Compare Public Income Transfer, supra note 129, at 332-33 with id. at 116.

States could also cover some persons under 65 in their OAA program by including their needs in the check of a person 65 or over. Federal guidelines allowed the inclusion of the needs of a younger spouse or other "essential person" in the benefit calculations for an OAA recipient. Most states made some use of that opportunity. See id. at 102.

98. Social Security Amendments of 1956, ch. 836, 103, 70 Stat. 807 (codified at 42 U.S.C. 143(1976)).

99. Social Security Amendments of 1961, Pub. L. No. 87-64, 102, 75 Stat. 131 (codified at 42 U.S.C. 402(a), (1976)). Congress in 1956 had already dropped the age threshold for women to 62. Social Security Amendments of 1956, ch. 836, 102(a), 70 Stat. 807 (codified at 42 U.S.C. 402(a), (b), (e) (1976)).

100. Social Security Amendments of 1965, Pub. L. No. 89-97, 307, 79 Stat. 286 (codified at 42U.S.C. 402(e)(1)(B) (1976)).

101. Social Security Amendments of 1972, Pub. L. No. 92-603, 107, 86 Stat. 1329 (codified at 42 U.S.C. 402(f)(1)(B) (1976)).

102. See Lauriat & Rabin, Men Who Claim Benefits Before Age 65: Findings from the Survey of New Beneficiaries, 1968, Soc. Sec. Bull., Nov. 1970.

103. Social Security Act Amendments of 1939, ch. 666, sec. 201, 209(g), (h), 53 Stat. 1360. The benefits central to this study (retired-worker, wife, and widow) required "fully insured" status. Id. sec. 201, 202(a), (b), (d).

104. Id. sec. 201, 209(g).

105. See 42 U.S.C. 413(a) (1976). The 1977 amendments finally changed the $50 figure. As of January 1, 1978, $250 is required for a quarter of coverage (with the calculation performed on an annual basis). After 1978, that figure is subject to an automatic yearly adjustment. Social Security Amendments of 1977, Pub. L. No. 95-216, 351, 352, 91 Stat. 1509 (codified at 42 U.S.C.A. 413(d) (West Supp. 1978)).

106. See note 103 supra.

107. Social Security Act Amendments of 1950, ch. 809, sec. 104(a), 214(a)(2)(A), 64 Stat. 477.

108. Social Security Amendments of 1960, Pub. L. No. 86-778, 204(a), 74 Stat. 924.

109. Social Security Amendments of 1961, Pub. L. No. 87-64, 103(a), 75 Stat. 131.

110. One for each year (four quarters) from 1951 through 1961.

111. One for each year from 1951 through 1956 or the minimum of six.

112. See Cohen, Ball & Myers, Social Security Payments to Noninsured Persons, Soc. Sec. Bull., Sept. 1966, at 3, 3-5.

113. 42 U.S.C. 426a(a) (1976).

114. Cohen, Ball & Myers, supra note 112, at 4.

115. Social Security amendments of 1965, Pub. L. No. 89-97, 103, 79 Stat. 286; Cohen & Ball, Social Security Amendments of 1965: Summary and Legislative History, Soc. Sec. Bull., Sept. 1965, at 3, 15; S. Rep. No. 404, 89th cong., 1st Sess. 14-15, reprinted in [1965] U.S. Code Cong. & Ad. News 1943, 1956. The new benefits wee $35 a month for a retired worker or widow, and $17.50 for the wife of a retired worker (80% of the minimum benefit for those meeting the regular "full insured" status test). Social Security Amendments of 1965, Pub. L. No. 89-97, 103, 79 Stat. 286. The minimum benefit was then 444 a month. 1975 Ann. Supp., supra note 24, at 25.

116. Tax Adjustment Act of 1966, Pub. L. No. 98-368, sec. 302(a), 228(a), 80 Stat. 38 (codified at 42 U.S.C. 428 (1976)). See Cohen, Ball & Myers, supra note 112, at 5-9. For such individuals, without regard to quarters of coverage, the Act established a special monthly benefit of $35, plus $17.50in the case of an eligible couple (the same amounts as the 1965 provision awarded the "transitionally insured"). Tax Adjustment Act of 1966, Pub. L. No. 98-368, sec. 302(a), 228(b), 80 Stat. 38 (codified at 42 U.S.C. 428 (1976)).

These amounts, like those for the "transitionally insured" were increased each time the regular benefit schedule was adjusted. See 1975 Ann. Supp., supra note 7, at 22. Those reaching 72 after 1967 had to have some quarters of coverage, the number increasing gradually, so that by 1970 for women (1972 for men), it equaled the number that would produce regular retired-worker benefits. Cohen, Ball & Myers, supra note 176, at 6.

117. See 42 U.S.C. 428(g) (1976). In 1972, several members of the House Ways and Means Committee expressed the view that at least a portion of the cost of the new special minimum benefit established that year should similarly be funded out of general revenues. H.R. Rep. No. 231, 92d Congress., 2d Sess, reprinted in [1972] U.S. Code Cong. & Ad. News 4989, 5363.

118. 42 U.S.C. 428(c) (1976).

119. Id. 428(d). See Cohen, Ball & Myers, supra note 112, at 5-6.

120. This provision had a strange effect on the distribution of the 1966 benefits. In low OAA benefit states the new "special" Social Security benefits were more attractive than OAA to many or perhaps most of those on the OAA rolls who met the more stringent age test of the special Social Security benefits. But in high OAA benefit states, where the basic payment exceeded the rates of $35 for an individual and $52.50 for a couple, the new special benefits were more attractive than OAA only to those with other income that reduced their OAA benefits. In other words, in such states the provision discriminated in favor of those OAA recipients in better financial shape. See Pechman et. al., supra note 95, at 108-09.

The enactment of SSI led many more of the dwindling population of potential special-benefit recipients to elect public assistance at the cost of losing their special benefits. Compare 1975 Ann. Supp., supra note 7, Table 55, at 88, Table 116, at 143 with Soc. Sec. Bull.-Annual Statistical Supplement, 1972, Table 104, at 119. Since SSI benefits are more than twice as large (for a person with no other income) as the special benefits, the remaining 162,000 recipients must, by SSI's criteria, be relatively non-needy. See Current Operating Statistics, Soc. Sec. Bull., Mar. 1978,Table M-14, at 8.

121. The blanketed-in beneficiaries totaled728,577 at the end of 1967. Since then the figure has declined every year-the consequence of few additions to the eligible group and significant attrition through death. See 1975 Ann. Supp., supra note 24, Table 55, at 88.

122. Pechman et al., supra note 95, at 215. At an earlier point, the authors note:

The need for any minimum benefit would be greatly reduced, or would be eliminated, if there were some method outside the social security system by which the aged poor . . . could be assured adequate income without the imposition of degrading application procedures. The old-age assistance program is today the only major alternative for providing aid to the aged poor, but payments under it are far from adequate.

Id. at 93.

123. Id. at 217.

124. V. Burke & V. Burke, Nixon's Good Deed: Welfare Reform 112-13 (1974).

125. The Nixon administration's initial reform bill, H.R. 14173, 91st Cong., 1st Sess., introduced in October 1969, and the version passed by the House in 1970, H.R. 16311, 91st Cong., 2d Sess., both left the adult categories in state hands, supported, as before, by federal grants-in-aid. Both bills would have imposed a nationwide minimum payment level and uniform national eligibility standards. H.R. 1, 92d Cong., 1st Sess., reported out by the House Ways and Means Committee in May 1971 and passed by the House on June 22, 1971, recast the adult programs in the same form as FAP-a federal benefit, federally administered, with state supplements.

In June 1972, following its hearings on H.R. 1, the Senate Finance Committee announced several tentative points of agreement including dropping the new federal program for the aged, blind, and disabled contained in Title II of the bill. Instead, the committee favored minimum benefit standards for state assistance programs for the adult categories (essentially the approach contained in President Nixon's original plan). But, by the time the committee reported out a bill on September 26, 1972, the federal program for the adult categories, now named Supplemental Security Income, was back in. See generally M. Bowler, The Nixon Guaranteed Income Proposal 123-58 (1974); SSI Study Group, Report to the Commissioner of Social Security and the Secretary of Health, Education, and Welfare on the Supplement Security Income Program 1-13 (Jan. 1976).

126. Social Security Amendments of 1972, Pub. L. No. 92-603, 301, 86 Stat. 1329 (codified at 42 U.S.C. 1381-1383c (1976)). FAP stalled in the Senate twice after the program passed the House.

SSI, however, was approved by the Senate because needy blind, aged, and disabled adults were seen as more deserving of help than poor families, because it did not cost as much or add as any new recipients to welfare rolls, and, most important, because the attention of the Senate was focused almost completely on the proposed programs for families. Describing action on the Senate floor, [Senator] Ribicoff's legislative assistant said,

people were so concerned about Title IV (the family provisions) that no one paid any attention to Title III (provisions pertaining to aged, blind, and disabled adults). If SSI had been on its own it never would have made it. Also, it passed because it looked like peanuts next to the family programs.

A Senate Finance Committee staff member told a reporter that "During conference, the SSI barely captured the conferees' attention."

M. Bowler, supra note 125, at 147. Reviewing the same record, the Burkes conclude that the controversy surrounding FAP "probably helped passage" of SSI:

The welfare revolution embodied in SSI escaped detection because few read the plan, because few understood the welfare status quo well enough to appreciate the plan; because man [sic] interpreted the triple endorsement of Richard Nixon, Wilbur Mills, and Russell Long as a guarantee that the plan was modest.

Except for the few persons who engineered it and for governors, who anticipated savings from its federally paid floor for the aged, blind, and disabled, few knew what was in Title III of H.R. 1.

V. Burke & V. Burke, supra note 124, at 197. All in all, a strange chain of events led to SSI; as the Burkes observe:

Had Republican Nixon not won the presidency in 1968, America almost surely would not have adopted a federal income guarantee for the aged in 1972. Not only was this revolutionary concept missing from the Democratic agenda; the party's leaders and professionals were embarrassed by welfare and loath even o discuss the matter.

Id., at 4.

127. The 1972 legislation set payment standards of $130 a month for an individual, $195 for a couple, Social Security Amendments of 1972, Pub. L. No. 92-603, sec. 301, 1611(b), 86Stat. 1329. Subsequent amendments brought the respective figures to $140 and $210 for the first half of 1974. See 42 U.S.C. 1382(b) note (1976). Such standards far surpassed what the "low benefit" states were paying under OAA, but fell substantially below the levels in "high benefit" states.

128. In-kind benefits furnished by state or local agencies were discouraged by SSI in this fashion. Although supplementary "cash payments" furnished by local public bodies were not counted as income in SSI benefit calculations, there was originally no comparable exemption for in-kind benefits. A 1976 amendment removed the distinction. See Unemployment Compensation Amendments of 1976, 505(b), 90 Stat. 2667 (codified at 42 U.S.C. 1382a(b)(6) (1976)).

129. See note 126 supra.

130. A reading of the one-day Senate Finance Committee hearing on the subject (June 19, 1973) raises doubts about the grounds for that concern. See supplemental Security Income Program: Hearing on the Need for Protecting Aged, Blind, and Disabled Welfare Recipients from Suffering a Reduction in Benefits When the New Federal Supplemental Security Income Program Becomes Effective in January 1974 Before the Senate Comm. On Finance, 93d Cong., 1st Sess. (1973).

131. Act of July 9, 1973, Pub. L. No. 93-66, 212(a), 87 Stat. 152. The requirement was originally attached by the Senate Finance Committee as one of several Social Security amendments o a bill (H.R. 8410, 93d Cong., 1stSess. (1973)) that had already passed the House, extending the federal debt limit. When the House resisted use of that vehicle, the requirement was promptly (one day later) appended to H.r. 7445, 93d Cong., 1st Sess. (1973), "An Act to Amend the Renegotiation Act for Two Years and For other Purposes." This time the House acquiesced.

132. See 42 U.S.C. 1382 note (1976).

133. Id. 1382f.

134. The OASI/SSI cost-of-living increase of June 1975 took at least 14,000 elderly off state supplementation rolls. The following year's increase removed 35,000. Social Security in Review, Soc. Sec. Bull., Nov. 1975, at 1, 1/2; Social Security in Review, Soc. Sec. Bull., Nov. 1976, at 1, 1-2.

135. Act of Oct. 21, 1976, Pub. L. No. 94-585, sec. 2, 1618(a), 90 Stat. 2901 (codified at 42 U.S.C. 1382g(a) (1976)).

136. That minimum period is one quarter of coverage for each year after 1950 and before the year in which the worker turns 62 [Workers who turn 21 after 1950 need count only years after that.) A worker turning 62 in 1978 needed 27 quarters. In 1991, the statutory maximum of 40 quarters (10 years) will be reached. See 42 U.S.C. 414 (a) (1976). Prior to 1978, $50 of covered wages in a quarters produced a quarter of coverage. See text accompanying note 169 supra. The 1977 Social Security Amendments shifted the test to an annual one. For 1978, $250 of covered wages produced one quarter of coverage; $500, two; $750, three; $1,000, four. Thereafter, the figures are subject to automatic adjustment to reflect increases in wage levels. Pub. L. No. 95-216, secs. 351(c), 352(b), 213(a)(2), 213(d), 91 Stat. 1509 (to be codified in 42 U.S.C. 4139a), (d)).

137. See 42 U.S.C. 402(b), (c), (e), (f) (1976).

138. See 42 U.S.C. 402(h) (1976).

139. Compare id. 402(e, (f) with id. 402(a), (b), (c), (h). Spouses who care for eligible children of retired or deceased workers are eligible for benefits without regard to age. See Weinberger v. Wiesenfeld, 420 U.S. 636, 645 (1975) (extending such benefits to husbands of deceased workers); 42 U.S.C. 402(b)(1)(B), (g) (1976).

140. Only wages up to a certain figure are taxed and counted. The limit was $3,600 for the years 1951-1954, $4,200 for 1955-1958, $4,800 for 1959-1965, and so on. In 1972, the adjustments were put on an automatic formula basis, which, for example, produced a limit of $16,500 for 1977. See 42 U.S.C. 409, 430 (1976); History of the Provisions of Old-Age, Survivors, Disability, and Health Insurance, 1975 Ann. Supp., supra note 24, at 15, 32. The 1977 amendments further increased the amounts. Social Security Amendments of 1977, Pub. L. No. 95-216, sec. 103, 230(c), 91 Stat. 1509 (codified at 42 U.S.C.A. 430(c) (West Supp. 1978)).

The worker's base period covers the years after 1950 and before age 62 (death in the case of survivors benefits), with the lowest five years dropped. A person working beyond his or her 62nd birthday can substitute later years for lower ones before 62. See 42 U.S.C. 415(b) (1976).

141. See 42 U.S.C. 402(q)(1) (1976).

142. See id. 403(b), (f); History of the Provisions of Old-Age, Survivors, Disability, and Health Insurance, 1975 Ann. Supp., supra note 7, at 15, 29. The 1977 amendments dropped the age at which the "excess earnings" reduction for OASI beneficiaries ceases from 72 to 70 (as of 1982) and increased the "exempt amount" for those 65 and over. As a result, there are now two reduction formulae-one which applies to those under 65, another, more generous, to those from 65to 72 (65 to 70 beginning in 1982). See Social Security Amendments of 1977, Pub. L. No. 95-216, 301, 302, 91 Stat. 1509 (to be codified in 42 U.S.C. 403).

143. See 42 U.S.C. 403(f) (1976).

144. Id. 402(a) ("Except as provided in [the reduction subsection[, such individual's old-age insurance benefit for any month shall be equal to his primary insurance amount . . . . ")

145. The reduction formula is 5/9 of one percent for each month prior to age 65, which, for three years, totals 20%. Id. 402(q)(1)(A).

146. Id. 402(b)(2), (c)(3). Drawing benefits at age 62 reduces the amount to 37.5%. The reduction formula is 25/36 of one percent per month prior to age 65, which, for a three-year period, totals 25% (of 50% of the PIA). Id. 402(q)(1)(A).

147. Id. 402(e)(2)(A), (f)(3)(A).

148. Id. 402(h)(2)(A). If more than one parent is eligible, each receives 75% of the PIA. Id. 402(h)(2)(B).

149. See id. 415(a), (i); 43 Fed. Reg. 20,867, 20,869-72 (1978).

150. See Social Security Amendments of 1977, Pub. L. No. 95-216, sec. 201, 215(a),(b), 91 Stat. 1509 (to be codified in 42 U.S.C. 415).

151. See 43 Fed. Reg. 20,867, 20,869 (1978).

Between 1954 and 1979, the system responded to price and wage increases through increases in the multipliers applied to a steadily increasing number of brackets, but the initial brackets themselves remained constant. Thus, the PIA formula was 55% of the first $110 in 1954, 71% in 1967, and 90% in 1971. History of the Provisions of Old-Age, Survivors, Disability, and Health Insurance, 1975 Ann. Supp., supra note 24, at 15, 18-19.

152. See Social Security Amendments of 1977, Pub. L. No. 95-216, sec. 201(a), 215(a), 91 Stat. 1509 (to be codified in 42 U.S.C. 415).

153. See 43 Fed. Reg. 20,867, 20,870 (1978).

154. Social Security Amendments of 1977, Pub. L. No. 95-216, sec. 201(a), 215(a), 91 Sta. 1509 (59 be codified in 42 U.S.C. 415).

155. See Table 4.

156. See 42 U.S.C. 415(b) (1976); 43 Fed. Reg. 20,867, 20,869 (1978).

157. 42 U.S.C. 402(b), (c) (1976). Benefits are, respectively, 20% and 255 lower than these amounts if begun at 62 instead of65. Id. 402(q)(1)(A).

In late 1977, the average benefit to workers who had first claimed benefits at age 65 or later (and had therefore received at least 100% of their PIA) was $274; the average for the 59.3% who started benefits between 62 and 65 (at a reduced rate) was $221. Quarterly Statistics, Soc. Sec. Bull., June 1978, Table Q-4 at 74. Taken together, they represented average monthly earnings in the neighborhood of $290. Compare the average earnings of the low-income workers in Table 4. See id.; 42 Fed. Reg. 24,210, 24,211 (1977). Because these averages pre-date the 6.5% increase of mid-1978, they understate the benefits available under the schedule shown in note 213 (supra by at least that amount. The benefits paid new retired-worker claimants, based on more recent and therefore, on average, higher earnings, exceeded the average benefits for all retired-worker beneficiaries. Th difference amounted to 5%. The average payments during late 1977 for dependent wives and husbands and surviving widows and widowers (including those electing benefits before age 65) were $123 and $222 respectively.

158. See 42 U.S.C. 403(f) (1976).

159. The reduction amounted to 50 cents for each dollar over $250 a month. See id. 403(b), (f).

160. Using the above figures, the individual would receive $400 in earnings and $115 in OASI a month.

161. 43 Fed. Reg. 20,867, 20,868 (1978). See 42 U.S.C. 1382(a), 1382a, 1382b (1976).

162. 43 Fed. Reg. 20,867, 20,868 (1978).

163. See 42 U.S.C. 1382(a), 1382a, 1382b (1976).

164. Quarterly Statistics, Soc. Sec. Bull., Mar. 1978, Table q-3, at 77. On the gap between the number of eligible and the number receiving benefits, see Note. Outreach: Bringing the Eligible Into Federal Assistance Programs, 62 Cornell L. Rev. 1093, 1108-10 (1977).

165. See 43 Fed. Reg. 20,867, 20,869 (1978). If one assumes OASI benefits are begun at age 62, SSI is 94% higher than the minimum OASI retired-worker benefit.

166. Those eligible for OASI benefits or similar payments must apply for them within 30 days after receiving a notice to that effect, or they become ineligible for SSI. 42 U.S.C. 1382(e)(2) (1976).

167. 1975 Ann. Supp., supra note 24, Table 23, at 57.

168. For December 1977, the 70% of aged SSI recipients with Social Security benefits received a total of approximately $210,508,000 of OASI. SSI payments (including state supplements) to all aged recipients that month were only approximately $199.340.00. See Office of Research and Statistics, Social Security Beneficiaries, December 1977, Table B, at 5, Table F, at 9 (1978).

169. The SSI benefit formula ignores $20 of income of any type. 42 U.S.C. 1382a(a)(2)(B), (b)(2)(A) (1976).

170. It adds nothing if there are other sources of income.

171. See note 134 supra.

172. See note 137 and accompanying text supra.

173. See 42 U.S.C. 402(q)(1)(A) (1976).

174. Id. 1382c(a)(1)(A).

175. Most married couples approaching retirement are three or more years apart in age. Typically the husband is older. Bureau of the Census, U.S. Dep't of Commerce, Perspectives on American Husbands and Wives, Table 4, at 5 (Current Population Reports, Series P-23, No. 77, 1978).

176. SSI treats the married couple household differently from, for example, a brother-sister household in at least two ways. First, whether or not the husband and wife are both 65 or over, their combined income is compared with a single need standard for the household. See 42 U.S.C. 1382(a)(2), 1382c(f)(1) (1976). Second, for an eligible couple, that standard is only 3/4 the total need figure for two unmarried individuals with a joint household. Compare id. 1382(a)(1)(A) with id. 1382(a)(2(A). Ssi includes within its definition or married couple "a man and woman . . . found to be holding themselves out to the community in which they reside as husband and wife." Id. 1382c(d)(2). The program also continues to treat eligible couples as a household for the first six months after they have begun living apart. Id. 1382c(b).

177. See id.

178. See id. 402(b), (c), 416(b), (f), (h).

179. See note 174 supra.

180. 42 U.S.C. 1382c(f)(1) (1976); 20 C.F.R. 416.11859a) (1978).

181. Even if Mrs. Doe is receiving widows benefits on the account of her deceased husband, remarriage ha no impact by virtue of a 1977 amendment. Social Security Amendments of 1977, Pub. L. No. 95-216, soc 356(a)(3), 202(e)(4), 91 Stat. 1509 (to be codified in 42 U.S.C. 402).

182. See note 174 supra.

183. The eligibility rules of some state Old Age Assistance programs attempted to prevent the most blatant forms of asset dissipation by would-be recipients.

184. See 42 U.S.C. 1382a(b)(4)(C) (1976).

185. See text accompany notes 130-33 supra.

186. See Quarterly Statistics, supra note 228, Table 1-2, at 91, Table Q-29, at 94.

187. In 1976, 26 states and the District of Columbia used federal administration for at least some supplementary payments to the elderly. Quarterly Statistics, Soc. Sec. Bull., June 1977, Table Q-24, at 99. Twenty-four states administered their own supplements. Id., Table Q-30, at 102.

188. Compare Current Operating Statistics, Soc. Sec. Bull., Apr. 1977, Table M-22, at 78 with Current Operating Statistics, Soc. Sec. Bull., June 1977, Table M-29, at 70.

189. During 1976, for example, Alabama provided no supplements to elderly individuals or couples living independently, but added $56.20 a month to the federal benefit for a couple living in a "personal or foster care home." Arizona limited supplements to individuals or couples in licensed nursing homes, adding $145.20 a month to the federal benefit for a couple in a private nursing home. Bureau of Supplemental Security Income, Social Security Administration, HEW, Summary of State Payment Levels, State Supplementation, and Medicaid Decisions 1, 3 (Revised Aug. 9, 1976 with addendum dated Sept. 2, 1976) [hereinafter cited as Summary of State Supplementation].

190. The total is 27 states and the District of Columbia. In all but 12, elderly persons living in nursing homes or adult foster homes or other special care living situations received some supplement. See id. at 1-35.

191. Id. at 2, 4, 13.

192. 20 C.F.R. 416.2025 (1978).

193. In the latter half of 1976, that extension required a monthly state supplement of between $35 to $40 for an individual living individually. Eight states were supplementing at or above that level. See Summary of State Supplementation, supra note 253, at 1-35; Quarterly Statistics, Soc. Sec. Bull., Dec. 1977, Table Q-4, at 75.

194. This would be true, for example, if a state chose to supplement SSI $25 a month but reduce the supplement one dollar for each dollar disregarded by SSI.

195. See text accompanying notes 130-33 supra.

196. See text accompanying notes 41-50 supra.

197. State and local programs of general assistance to needy individuals not within the coverage of federally supported welfare programs (SSI ad AFDC) typically have much lower payment standards. Often, they furnish only temporary or emergency assistance. See Staff of subcomm. On Fiscal Policy of Joint Economic Comm., 93d Cong., 2d Sess., Handbook of Public Income Transfer Programs: 1975, at 349-56 (Studies in Public Welfare, Paper No. 20, 1974).

198. See Summary of State Supplementation, supra note 253, at 1-35.

State Old Age Assistance plans had been permitted to include the needs of a person living in the same household and "essential" to the well-being of the recipientin calculating the recipient's needs. Most OAA plans made some provisions for such "essential persons." The rubric allowed indirect coverage of the younger spouse.

SSI contains no generally available "essential person" increment. However, a grandfathering provision applies to that dwindling number of recipients who had an "essential person" recognized under one of the predecessor programs (OAA, Aid to the Blind, Aid to the Permanently and Totally Disabled) when they were transferred to SSI in 1974. See Act of July 9, 1973, Pub. L. No. 93-, 211, 87 Stat. 152. In December 1975, there were 65,690such "essential persons," 88.5% of them spouses; in December 1976, 47,051, 89.2% of them spouses. Office of Research and Statistics, Social Security Administration, HEW, Program and Demographic Characteristics of Supplemental Security Beneficiaries, December 1975, Table 31, at 55 (1977).

In the latter half of 1978, a grandfathered "essential person"added $94.80 a month to the federal standard for an individual eligible for SSI. 43 Fed. Reg. 20,867, 20,868 (1978).

199. See Summary of State Supplementation, supra note 191, at 4.

200. Social Security Amendments of 1977, Pub. L. No. 95-216, sec. 201, 215(a)(1)(C)(i)(I), 91 Stat. 1509 (to be codified in 42U.S.C. 415).

201. H.R. Rep. No. 702, 95th Cong., 1st Sess., pt. 1, at 32, reprinted in (1977) U.S. Code Cong. & Ad. News 4155, 4189.

202. Id. at 31-32, reprinted in (1977) U.S. Code Cong. & Ad. News at 4188-89.

203. See 123 Cong. Rec. H11,612 to H11,615 (daily ed. Oct. 26, 1977).

204. Id. at H11,615.

205. Representative Corman introduced his elimination amendment only after the House had rejected extension of OASI coverage to public employees. Id. at H11,613. The final 1977 legislation directs HEW to study "the feasibility and desirability" of such an extension or, as the act puts it, "universal coverage." Social Security Amendments of 1977, Pub. L. No. 95-216, 311, 91 Stat. 1509 (codified at 42U.S.C.A. 902 note (West Supp. 1978)).

206. For 1979 the amendments intentionally adjusted the new formula to provide slightly lower PIAs, on average, than the old formula would have, but preserved the relative advantage of the low-wage worker. See H.R. Rep. No. 702, 95th Cong., 1st Sess., pt. 1, 23-24, reprinted in (1977) U.S. Cong. Code & Ad. News 4155, 4180-81. In addition, those eligible for benefits before 1984 may use the old formula if it produces a higher PIA. Social Security Amendments of 1977, Pub. L. No 95-216, sec. 20, 215(a)(4)(B), 91 Stat. 1509 (to be codified in 42 U.S.C. 415).

207. Impact of SSI, supra note 58, at 5 (emphasis added).

208. J. Brown, An American Philosophy of Social Security 58 (1972). Brown sets this as the"upper side" of the desirable "boundary" between "protection by assistance" and "by social insurance." Id. His companion proposition is that social insurance should not be stretched to cover those with marginal contact with employment:

A simple first approximation in establishing the model area of coverage for public assistance is that it should protect those persons whose earnings under contributory insurance coverage would be inadequate to form a sufficient base for insured protection. Social insurance is insurance in the sense of relating benefits to a loss of income normally received. If the income lost is already inadequate . . . reliance on the insurance mechanism would be inappropriate.

Id. at57 (emphasis in original). See also Ball, Some Reflections on Selected Issues in Social Security, in Subcomm. On Fiscal Policy of Joint Economic Comm., 90th Cong.,1st Sess., Old Age Income assurance pt. 1, at 48, 52-53 (Comm.Print 1967).

The preference for Social Security as the vehicle of income assurance for the low-income worker derives from its identification with earnings. The 1965 Advisory Council expresses the point in this fashion:

[T]he Council believes that where it can be properly applied [social insurance] is much to be preferred to the method of public assistance, with its test of individual need, and the Council therefore strongly favors the improvement of social insurance as a way of reducing the need for assistance. The Council recognizes the need for an adequate public assistance program, but it believes that assistance should play the role of a secondary and supplemental program designed to meet special needs and circumstances which cannot be dealt with satisfactorily by other means.

No matter how well designed and administered, assistance has serious inherent disadvantages in terms of human dignity . . . . People view receipt of assistance as meaning a loss of self-support. In contrast, they view social insurance as an extension of self-support. People who have led productive lives and have supported themselves through their own efforts do not want to see their self-reliance end with their ability to work.

Advisory Council on Social Security, The Status of the Social Security Program and Recommendations for Its Improvement (1965), reprinted in Soc. Sec. Bull., Mar. 1965, at 3, 5.

209. Social Security Amendments of 1977, Pub. L. No. 95-216, sec. 201, 215(a)(1)(c)(i)(II), 92 Stat. 1509 (to be codified in 42 U.S.C. 415). The $1.50 figure will subsequently be adjusted to reflect average-wage increases. Id. sec. 201(g)(1), 215(i)(2)(A)(ii). Thus, the 1977 amendments fail to follow the path suggested by some-elimination of both the minimum benefit and weighted benefit formula-to turn OASI into a fairly pure contributory system. See Impact of SSI, supra note 58, at83-84.

210. The inefficiency lies in its also producing increased benefits for those without a history of steady employment in covered work.

211. See text accompanying notes 91-98 supra.

212. See HEW, Report of the Task Force on the Treatment of Women Under Social Security (1978) (comparing a wide range of "reform" proposals); HEW, Social Security and the Changing Roles of Men and Women (1979). Some proposals add to the value of spouse benefits rather than eliminating them. See id. at 826.

213. See text accompanying notes 94-99 supra.

214. Impact of SSI, supra note 58, at 84.

215. In 1976, $60 a month separated the SSI payment standard from the poverty level for an elderly individual. For couples, the gap was $33. In December 1976, the average monthly OASI benefit received by SSI-OASI joint recipients was $137.50. Office of research and Statistics, Social Security Administration, HEW, Program and Demographic Characteristics of Supplemental Security Beneficiaries, December 1976, Table 19, at 42 (1977). With a 30% disregard, the average benefit would have added $41.50 to the combined income of a recipient rather than the flat $20 provided by the actual SSI disregard.