Herbert Hoover’s Planning for Unemployment and Old Age Insurance Coverage, 1921 to 1933

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The following essay was included in a collection of papers on the origins and future of the American Social Insurance System entitled, The Quest for Security, published by the Center for the Study of the Recent History of the United States, 1982

The Herbert Hoover presented in this essay is the humanitarian concerned with planning for the long-range welfare of the people of the United States. Little has been known about the desires, hopes, and plans of Secretary of Commerce and President Hoover in the area the public has come to call social welfare. This is true even though he and several close associates later asserted that those years did in fact witness thought and action by them on behalf of payments and pensions for the unemployed and the aged. The Hoover interest, when mentioned, has been given minimum space. Never, so far as I have learned, has been any effort to place the Hoover ideas in the context of at least some of the national social welfare experience.

My interest in social welfare goes back a quarter of a century and my research on Hoover longer than that. Invited to explore this area of concern, I have tried to piece together a story that ultimately surprised me and that should be new and useful to scholars, students, and the interested and receptive part of the public. For Hoover did in fact leave a record of dreams and efforts in this humanitarian area, just as he did in so many others.

This article will take up, in order, his plans and work in the field of insurance for the unemployed; his attitude towards state-funded old age payments and social insurance framed on the overseas model; and his attempts to stimulate interest in private annuities for the aged. His commissioning of a study of American society will be seen here to have been designed to further practical welfare goals. But his reaction in later years to the Social Security Act of 1935 and its amendments has been omitted because of lack of space and its remoteness from the events portrayed here.

It is possible to take a broad view of Hoover and society by observing at some length that Hoover once worked to insure the social well-being of Americans caught in Europe at the outbreak of World War I; that he placed American agriculture in a position to supply much of the food intake of European society; and that while the displaced and hungry after two world wars had no insurance arrangement with this nation, Hoover saw to it that we acted as though they did. He also performed the same role in 1940-41 as much as he could, despite official opposition, while the Nazis roamed over the continent. By no means finally, when working with the Boys Clubs, he certainly thought he was guaranteeing a better life for underprivileged boys. It was logical that he would become a member of the board of a giant life insurance company in the 1930s, and not for the honorarium, for he firmly believed in deterring personal and family catastrophe by planning ahead. Hoover cherished the conviction that some personal sacrifice might reasonably be expected of all who hope to insure themselves a comfortable life during their senior years in the social system.

Many questions come to mind. One of the most interesting, or course, is this: Would the United States have gotten some form of unemployment insurance and old age protection if Hoover had continued as president from 1933 to 1937? His plans for achieving such a goal were steadily maturing and depended on the pieces coming together at the right moment, so the answer appears to be: yes. But he really hoped to make substantial progress in his first term, as will be seen directly.

Beginning in 1921, Secretary of Commerce Hoover explored in some detail the possibility of providing World War I veterans with sickness and unemployment insurance, old age pensions, and support of dependents after the veteran’s death. Much of his exploration took the form of questioning top executives of the life insurance industry, an industry in which Hoover placed great faith then and later. 1 Before moving to further stages of Hoover’s activity, it may be well to consider that in dealing with the American life insurance industry in the 1920s, Hoover was interacting with an industry possibly second only to the United States government in assets. New York Life had long led the world in ordinary insurance, exclusive of industrial, but in 1922 it was just being passed by Metropolitan Life Insurance Company. The activities of the latter at that time are impressive even now: over 25 million policies in force ($7 billion in amount; company assets were $1 billion); 19.5 million lives covered, amounting to a sixth of the American and Canadian population; income was $350 million. (The national debt at the time was $22.8 billion and federal expenditures for the year just finished were but $5.5 billion.) Metropolitan was engaged in group insurance and welfare work (including some free nursing for industrial policy holders).2

Unemployment insurance was a concern of an industrial conference called by President Wilson in 1919, a meeting which included Hoover as vice-chairman. In their report of March 6, 1920, the conferees mildly suggested that “good industrial management on the part of a nation” would involve agencies providing against illness, old age, premature death, and industrial accident. The subject should be investigated, they concluded. Soon the new secretary of commerce would try to interest Wesley C. Mitchell, of the National Bureau of Economic Research, in studying various aspects of unemployment. This would be followed up a year later with still another request for research, which resulted in the study, Business Cycles and Unemployment. A study of unemployment insurance was also contemplated.3

Hoover went well beyond this in a long letter to Samuel Gompers, president of the American Federation of Labor, on October 23, 1920. This Hoover letter, deriving from personal conversation a few days before, said it was possible to increase production by 5 to 30 percent if workers had an attitude towards work which would maximize production and minimize strikes and lockouts. Unfortunately, increased production-though beneficial in the long run-could decrease employment “in the short view.” Thus there would have to be a “collective bargain” between employers and employee organizations. He thought there needed to be “monetary guarantees” on both sides; from this could come “the provision of unemployment and sickness insurance” on an adequate scale. Employers would surely be ready “to inaugurate a joint insurance against unemployment and sickness,” if by a collective bargain increased devotion to production would result. Like Gompers, Hoover believed in voluntary action rather than government interference.4

Now Hoover turned to Metropolitan Life Insurance Company with a public proposal that it institute unemployment insurance after appropriate study. Metropolitan was an inevitable choice, since the company had been trying in vain since 1919 to get the New York State Senate insurance committee to permit private life insurance companies to write such policies. In those years the superintendent of insurance thought it “socialism”-at least, “the entering wedge.” He had also charged that there was limited data, but this was precisely what the company sought to gather.5 Hoover met with Metropolitan’s president, Harley Fiske, in August, 1922. There was some interest in the subject of unemployment insurance at the time. Professor Leo Wolman had spoken to the subject, and books had been written about it. Said actuary James D. Craig in 1923: “It has been discussed at length in the press, reported upon by Chambers of Commerce, debated before the National Civic Federation and presented for legislation in certain states. Among the various influences there is probably none which should focus the attention of the Actuarial Society of America more than the interest taken it it by Mr. Herbert Hoover.” Craig’s article on the subject urged the private insurance industry to pay attention to what the secretary of commerce was suggesting. After all, payments to those out of work went back to ancient times. Still, “Compulsory Unemployment Insurance does not seem to be popular with the press, employers, employees, or taxpayers.”6 So there was real disagreement on what to do; here was fertile soil for Hoover leadership.

The secretary of commerce made his big push on unemployment insurance in an address to the Metropolitan Life Insurance Company managers’ conference on January 27, 1923. A premise was that keeping this kind of program in the private sector would be to avoid “the blighting hand of government.” After all, “Unemployment insurance in the hands of the Government would bring the disaster of incompetent and vicious encroachment of bureaucracy into the daily lives of our people.” Employers, however, could presumably band into large groups that would cooperate with the insurance companies. Here was one of the great fields “where insurance can be newly developed, where if scientifically employed, founded on a basis of actual savings, [and] contributed to by the employer, [the insurers] would provide one of those great safeguards against suffering and add to our social stability.” Repeatedly Hoover spoke of “service” and of “mutuality.” If his advice should be heeded, these would temper individualism “in such a way as to preserve its great qualities and at the same time safeguard it from destruction.” The insurance men in his audience were impressed. They recognized, as others did at the time, that “the task is one of almost inconceivable magnitude,” he would remember. “However, the companies did not wish even to experiment with it.”7 (This judgment of years later was too harsh, for the companies faced an insurmountable problem with the bureaucrats and politicians of New York State, as we shall see.)

Now Hoover wrote to Samuel Gompers along the line of his Metropolitan talk, pointing out that since mutual insurance companies had representatives everywhere, “It would not add greatly to their overhead” to write policies. These might be issued directly to the worker, and “in many cases employers would contribute to the premiums by way of payment directly to the Insurance Company upon presentation of evidence to them of some measure of payment by the employee.” The result would be increased saving, sustained income in time of depression-and accompanying buying power resulting in less acute depressions. He tried to reassure the aged Gompers that, after all, here were “none of the objectives of governmental insurance.” Each man could participate as much as he would. So there would be “no limitation of individual liberty, no obligation and no charity about it.” Thus there would be a “reservist employee,” one laid off, to be sure, in depression but destined to come back when business revived. Such a man deserved support for being part of such a reserve. Hoover was clearly wasting his time with Gompers, who had long been allergic to government programs, but he ended his letter hopefully: “The matter needs careful working out but I believe that with the good will and support of some of the great companies, there is the possibility of useful development.” A year later, according to Fiske, Gompers apparently labored “under a misunderstanding as to the purposes and effects of the Unemployment Insurance Bill which has been introduced in the new York Legislature” Fiske even had a member of the legislature all set to accompany the Metropolitan actuary on a visit to Gompers, but the legislate backed out.8

The fiscal year 1923-24 saw Metropolitan studying the Hoover unemployment insurance idea and struggling to get a new facilitating bill through the legislature. It failed to get clearance from insurance department officials at first but then won them over when there was a new committee chairman to work with. When the Joint Insurance Committee met on the subject, the only objection heard was from the trade unions. Gompers even wrote a letter of opposition. The chairman of the Assembly Insurance Committee had his own reasons for opposing it; wouldn’t Hoover write him, asked Fiske-who was terribly embarrassed when the secretary of commerce wrote that “by long established custom, Federal Cabinet Officers are inhibited from addressing themselves to state legislatures regarding matters within their province.”9 Under the circumstances obtaining in New York State (which housed the big insurance companies), with the companies insisting on what the chairman of the legislative committee thought to be a “vague” bill, no adjustment between the industry and the legislators could be reached.

The bill-the Phelps bill, introduced February 22, 1924-need not further concern us here, but the fact that a full page of enabling legislation was needed before private insurers could write unemployment policies in the nation’s largest state in the mid-1920s is not generally recognized and must not go unnoticed.10 But the denial itself was touch and go. Few important matters in history, perhaps, have been settled so casually and obscurely. The Senate passed the bill handily, forty to seven. On the last day of the session the superintendent of insurance very belatedly supported it. After an all night session and much confusion, it turned out that the bill had died in the Assembly Committee. Metropolitan would continue its work on a policy, however, although far too many diluting safeguards were put into it. Said Fiske to his fellow life insurance company presidents late in 1925, “Patience, patience-as sure as God spares my life, we are going to issue unemployment insurance.” It would only be in 1928 that the approval of William Green and Matthew Woll of the American Federation of Labor would be given to the concept, but economic events clearly intervened.11

Meanwhile, companies or associations of employers had in a few cases conducted their own experiments at setting up unemployment plans in conjunction with their employees. This practice began in 1921 with the Cleveland Garment Manufacturers Association and the Ladies’ Garment Workers’ Union; surety bonds guaranteed performance. In April, 1923, the Chicago Industrial Federation and the Amalgamated Clothing Workers reached agreement, using an unemployment reserve fund managed by a board of trustees. The advantages of the Hoover approach over these can be weighed. By 1926 there were about four hundred formal pension plans in industry, according to Abraham Epstein; these covered over four million workers-but only 17.2 percent of the non-agricultural gainfully employed. The non-contributory plans paid about $400 a year and the others a third more. In 1931 in Rochester, New York, there was set up by fourteen companies, employing from forty-five workers to thirteen thousand, an unemployment benefit plan under which a substantial reserve would be built up voluntarily and independently, rather than by the use of government. The companies hoped that by 1933 the reserve would be sufficient to begin paying benefits. Another hope was that the allocation of 1 to 2 percent of payroll per year to such a fund would turn out to be enough.12 Meanwhile, the General Electric Company was working on its own unemployment plan, based on contributions by the company and employees. The experimental plan was described to President Hoover by Gerard Swope, president of GE, as early as June 20, 1930.13

Unemployment insurance was making only slow progress by the time of the Hoover presidency, it appears. In 1931, Frederick Ecker, Fiske’s successor as president of Metropolitan, wrote Hoover that the legal problem in his state continued to be a roadblock. If the law should ever be amended to permit it, the company would be willing “to experiment with groups in selected industries.”14 Experimenting meant coverage for only some workers. The politicians saw this as undemocratic or had other objections; the companies, entrusted with people’s insurance payments, naturally wanted to select good risks, at least until sure of their ground. Ecker wrote Hoover how far Metropolitan had traveled towards meeting pension needs by writing group policies with employers. “You said you would be interested,” he began, recalling that he had said Metropolitan was writing such policies all along. Standard Oil of New York had just covered forty-five thousand employees with retirement annuities, life insurance, accidental death and dismemberment insurance, and total and permanent disability benefits. “We are finding a growing desire on the part of employers to provide protection to employees against old age dependency,” he asserted. But the possibility of unemployment insurance cover-age was getting more attention.15

From this we see that early in the Hoover presidency the dream of unemployment insurance handled by giant life insurance companies was not dead in the minds of either Ecker or Hoover. As a matter of fact, the Metropolitan president (undoubtedly under the stimulus from the White House) was now prepared to send a vice-president and the company actuary abroad in summer, 1931, “to study the situation in England and on the continent of Europe. This is with a view of getting at first hand the view, opinions and conclusions of the governmental authorities, of employers, and of labor.” The resulting study would have great value, Ecker thought, and would provide more authoritative data and information than was then available. The only reason he had told the president all this, he said, was because of “your expressed interest.” Hoover, who knew that a book-writing project he had instituted with a professional writer to do just this had fallen through (see below), replied that he was indeed “deeply interested in the subject” and hoped to be kept informed.16

Research began within Metropolitan in fall, 1930, on the overall subject of social insurance as practiced abroad. Proof that Hoover was responsible for this activity is lacking, but the timing seems significant. The first short monograph appeared in January, 1931. On March 30, President Ecker was again invited to spend a night at the White House. There the subjects under discussion were the social insurance picture abroad, Hoover’s continuing interest in insurance for the elderly and unemployed, and the coming overseas research investigation. Showing the importance he attached to the trip, the president furnished each of the travelers with three letters of introduction to the American ambassadors in London, Berlin, and Rome. “In a view of the prominence which this issue [social insurance] has been given in the united States,” he wrote, “I am anxious that these gentlemen shall have every facility obtainable in examining the social results of such activities in the country to which you are accredited as their reports will have great value to the Administration.” The report of the three travelers, who were major figures at Metropolitan, would soon by published in the company’s social insurance series.17

Metropolitan series on social insurance was an impressive effort, probably the most extensive of its day. Monographs appeared on old age dependency, unemployment insurance, health benefit programs, and experience in England and Europe. As revised, the first volume would be used in fifty copies as a textbook by the Social Security Board in 1936. Distribution was widespread, reaching Calvin Coolidge, Governor Franklin D. Roosevelt, and such officials as the head of the Reconstruction Finance Corporation; that it reached and was noticed by President Hoover certainly can be presumed.18 Governor Roosevelt was told, “It is our hope that the resulting data may eventually be availed of by governors, legislators, industry, labor, and the public, to enable them to determine which, if any, insurance scheme is best adapted to meet local conditions.” A Metropolitan vice-president invited Senator Robert Wagner to lunch to discuss how the work could help him “in connection with the bills which you are planning to introduce in Congress.”19 Over two hundred interviews were conducted overseas and “hundreds” in America. The volumes, with accumulated material, were open to the public. May we not say that to whatever extent Herbert Hoover’s interest, expressed to President Hoover’s interest, expressed to President Ecker, stimulated Metropolitan to begin and carry through this project, it ma be at least mentioned as a partial accomplishment of the Hoover Administration? (The president’s help was acknowledged in each foreword.)

As Hoover was leaving office it would be possible for the research director of Metropolitan to tell a New York State Legislative committee that there were by then (December 1, 1932) “no insurance companies today which would advocate any change in the law which would make it permissible for them to experiment with unemployment insurance.” Metropolitan had definitely concluded on the basis of two years of study that it “certainly would not now be willing to undertake such an experiment.” He warned that a voluntary plan would work if, and only if, both employers and employees were fully committed to such a plan. The British were disillusioned with their solution and turning to charitable relief; they were even talking of moving workers back to the land. Germany was covering only 12 percent of its unemployed. Present American programs were not working.20 The Metropolitan abandoned a dozen years of effort on behalf of insurance company-based unemployment insurance.

Nearly a decade of Hoover interest in unemployment insurance located in the life insurance industry thus came to naught. The country had not been much interested during the 1920s; articles and books on the subject were rare and tinctured with the socialist convictions of more than a few of the writers. The organized labor bureaucracy was very little interested, when not hostile. The laws of New York State and attitudes of key legislators and bureaucrats (no doubt obsessed with placing all workers on an equal footing) were insurmountable obstacles. The insurance industry was solvent and growing in the decade and really did not have to add risky new policies or oblige the inclinations of a secretary of commerce. Later, the deepening depression made experiments with unemployment insurance possibly dangerous for companies fundamentally entrusted with the life insurance savings of Americans.

 

Our discussion of old age pensions will make more sense if it is understood that in the late 1920s, as now, the options for financing one’s security in old age were (a) savings; (b) continued earnings; (c) support by relatives or friends; (d) downright charity by local government or private associations, including institutionalization; (e) one’s own life insurance annuities, if any; (f) pension payments from an employer’s fund or union fund or, possibly, a fraternal fund (hopefully actuarially based); (g) regular old age payments paid under state or county law, or both, after establishment of need; or (h) in England and part of Europe, for some workers, social insurance payments funded from previous monthly contributions demanded of the individual and his employer by law.

The times were in flux; that is, the numbers of those surviving past sixty-five were increasing, the unity of the family was feeling stress, urbanization and increased cost of construction were reducing the numbers of bedrooms in new houses and apartments, modernizing medical care was having some effect already on need for institutionalization in county homes, and the diet of people was being modified towards somewhat more sensible nutrition (citrus fruits, fresh vegetable, safer milk). The humanitarian agitation of two generations of progressives, radicals, and then liberals was having an appreciable effect on understanding needs. Employers were feeling a greater sense of responsibility towards employees in the age of emerging “welfare capitalism.” Considering the report to the New York legislature by a state commission on old age security in 1930, the New York Times could say editorially that, in view of some of the differences between this nation and countries overseas, maybe old age pensions did need serious study here, but not because the current crop of aged persons was now in need!21

We must not get lost in semantics as we reflect on the hesitant growth of what people were calling “old age pensions” in 1929 and later. These would today be called “old age assistance” payments, that is, welfare payments to those qualifying because of need duly established. These were not social insurance payments, made from a fund amassed by sums paid in advance to a government body by employers and employees during working years, as a guarantee of payments later when eligible. The loose term “old age pensions” can thus be a tricky one. We will see in due course that Hoover’s principles will straddle this situation in an interesting way, being partly old age pension and partly social and/or industrial insurance payment.22

It was in this climate that Herbert Hoover served as a new president, anxious to strike a blow based on firm appraisal of the facts. What cries there were for doing something drastic about old age pensions were either muted in emotionalism, were part of packages to bring radical change to “the system,” or were in any case unable to command much of a hearing due to public disinterest born of lack of knowledge and parochialism. The path to change had not yet been paved in the colleges, the media, or the marketplace. There was already vigorous opposition, usually based on inadequate knowledge of facts and opportunities. The National Association of Manufacturers was particularly outspoken. The group was opposed to the adoption of “any general system of public old age pensions by any state, predicated upon a declaration that arrival at a certain age with a minimum amount of property or income constitutes evidence of destitution and thereby assures a definite monetary income to such individuals.”23

To concentrate on the Social Security Act of 1935 is to emerge with the illusion that the nation had no programs of aid in earlier years. In fact, in 1929 there were “mothers’ pensions” in all but four states; they paid about $30 million that year to some 200,000 children. Here was a building block for Aid to Families with Dependent Children. Ten states and Alaska had old age pensions at the time, and New York and Massachusetts would join them in 1930. Here were antecedents for Old Age Assistance. There were fifty-one workmen’s compensation programs, covering 17,000,000 workers. These paid out $150 million in 1929. About 16,000 crippled workers were undergoing rehabilitation at the time. While a quiet debate over unemployment insurance continued, the magnitude of unemployment and uncertainties in corporate finance after 1930 would crush suggested private sector solutions.

To mention these programs is by no means to claim that they were adequate. Nor was there insurance against illness. There was $5.6 billion in private group insurance in effect in American industry, however, and sixty-one trade unions paid $11 million in fiscal 1928 in benefits, chiefly for old age and death benefits.24 Neither moderns nor contemporaries would find it easy to be impressed by such figures. Said an industrial relations specialist then, “The remedies and relief for economic old age the United States are yet in an experimental stage. Experience with state old-age relief laws and voluntary industrial pensions is still too fragmentary and too inadequate to warrant judgment in favor of presently prevailing forms. Far more research and study are needed on the extent of old age dependency, on amounts required for relief, and on administrative techniques.” He thought “a coordinated system” would ultimately be developed.25

The number of persons over sixty-five in 1930 who were partially or wholly dependent was put at two million by a pressure group at the time. Children and relatives were their first resort for help. However, ‘There are no exact data as to the number of aged dependents in the United States,” said Abraham Epstein on behalf of his pressure group. He put the cost of keeping a person over sixty-five in an almshouse at $10.23 a month. There was something of a flurry in 1930 on the subject of old age pensions. A feature article on existing state laws hit the New York Times on January 26, for a bill was pending in Congress and bills awaited action in five states; Epstein’s American Association for Old Age Security issued some data on January 5, when New York was divided over the bill pending in that state. Governor Roosevelt said he would not sign a bill unless it included provision for contributions to a fund by the future beneficiaries; like others, he was feeling his way. The commission on old age security reported February 17, 1930, suggesting four bills. One debate would be over sixty-five versus seventy as an appropriate cut-off age. Some thought the need for unemployment insurance considerably greater. On April 12 the governor gave his considered views. Proponents were claiming that thirty-four nations had some kind of dependency legislation. Organizations issued bulletins on both sides of the controversy.26 That year New York would join the minority of states giving state-funded old age pensions, and so would Massachusetts. President Hoover had every right to believe that the states had already preempted the field or were in the process of doing so.

At the same time this activity was gradually moving forward, categories of employees were thinking of themselves as special cases, entitled to rewards from society. Hoover would soon have in his files an article about teachers’ pensions which might well have made him uncertain on equities. The truth was in 1930 that major issues concerning opinions were as yet decidedly not settled by society. The bulk of school teachers had the protection of retirement systems at the time. But there was debate over why the pensions were being paid, with opinion growing that they were designed to increase efficiency, possibly by getting older teachers out of the classroom!   A new idea being urged was that such pensions should be part of a general old age economic solution. They should be considered deferred pay. Opinions differed on whether early withdrawals should be allowed. What we now call vesting was under active discussion.27 Whether Hoover or his assistant, French Strother, did anything about all this is doubtful and letters requesting specific help in getting pensions for professors and for “old Federal officers” were only acknowledged.28 Ministers were a different matter. In early September, 1929, an inquiry gave Hoover the opportunity to think about the specific retirement problems of ministers. On the seventh he cam eup with a pithy statement of the entitlement of preachers to consideration in old age by their congregations. The inner man was revealed somewhat when he wrote:

The nature of the work of the ministers of our churches precludes the thought and usually the possibility that they should themselves provide for their old age. The provision of some form of retirement pension is a duty owed them by the congregations and public they have unselfishly served. Experience and actuarial knowledge are needed to avoid practical financial difficulties; but where these have been utilized, the pensioning of ministers should be generously supported.29 It would be a man harboring this hypothesis about persons who “serve” who would soon bring to his thinking compassion for the aging part of the general population.

In 1929 old age pension bills were passed by four states, bringing the total nationally to ten. Bills cleared one house of the legislature in seven more. While a Pennsylvania law was found unconstitutional, in New York, as has been seen, the subject would be studied. In California, the law provided an income of $30 a month, with costs divided equally between the state and the county of residence. Said the past president of the California Conference of Social Work, a minister, “The law is reasonably liberal, generous and helpful…. The outlook [elsewhere] is hopeful. Justice for the aged seems to be on the way (my italics). Since industry does not look after workers in their old age, the counties and states will do it and pay the bill out of public taxes.”30 Here was the view from spring, 1929, before the depression would erode the budgets of those jurisdictions. Many minds would then be changed as to helping state and local governments to finance their welfare programs. Nor was the picture in all ten states as good as that in California, New York, and Wyoming; in the others the old age pension system was optional with the counties, so that in Wisconsin only six counties, with a quarter of the people, participated.

All of this, in any case, was outside the constitutional concern of President Hoover. As a federal official, 1921-1933, he did not have to deal with the problem of state enactment of old age pension legislation. Feeling as he did about the proprieties of staying out of state internal affairs, he seems not to have had anything to say in public on the subject. Moreover, his official papers appear to be largely silent on the matter. Yet he revealed to a visiting confidant in July, 1930, the view that the state old age pensions were in their economic effects poverty-creating instead of – as they purported to be – poverty-alleviating. Contrast this with the firm statement of an intimate, Ray Lyman Wilbur, in 1936 that “Hoover believed in old age pensions. His original belief was that they should be established by the states. After later study, he felt that the subject must extend further than dependence upon the states.”31 In 1938 on various occasions, he pointed out that he and his party had favored the original old age pension programs of the states (he, in California), and he did not oppose federal financial support of them when it came.32 My educated guess is that earlier, during the period of growing state legislation in this area, the secretary of commerce favored this approach. When the pace slowed down during the presidency (and state solvency came into question) he moved toward the idea that action by the life insurance companies was in order. In any case, he had put together a package of principles he hoped to follow when instituting government old age pensions. His idea, apparently, was at some point to replace the state pension approach with a truly national program.

Certain concepts were basic to the package put together by the secretary of commerce and president. There would be no benefits or payments of any king en route to the established date settled upon for retirement. The cost of the whole program would be “lessened by forfeiture of all payments by those who died before sixty-five.” Business and industry would help provide these pensions for their employees by purchase of group insurance.33

The principles that Hoover felt should control a pension program in the area we now call old age assistance and old age and survivors insurance have great interest, even though they were never put into the form of legislation or revealed tot he public at the time. They were: (1) Private action in savings and insurance policies should be encouraged “by every device.” (2) Pensions should provide a “bare subsistence” in order not to weaken incentives to work and save. Anything more should come from the individual’s own effort. (3) The size of the pension should be readjusted from time to time “according to the purchasing value of money.” (In modern terms: indexing!) (4) On eligibility: those in old age still having enough income to pay income tax, that is, “who can look out for themselves,” would get no pension. Those getting pensions from other sources would also not be eligible. (Ergo: no double-dipping.) (5) The role of the national government would be to collect agreed percentages from employer, employee, and the self-employed; it would also supplement collections “from the tax in-come of the government.” (6) Money collected and allocated would be paid out in grants to the states; they would have to “assume part of the load.” (7) The states would have responsibility for administration. (8) The books on the system would be closed at the end of each year; thus the payout cos would be budgeted for each year and duly appropriated. “If the income is insufficient during one year, the rate of collections should be increased the next year.”34 There is little point to speculating on whether the Hoover plan would have been modified with time and experience. It was, after all, a pioneering think piece. We cannot know whether the Congress would have insisted on substantial changes. What we have is an alternative plan to what later developed: two competing yet complementary plans that have been amended and modified repeatedly over half a century.

 

When President Hoover turned from a possible government plan to what might be done in the private sector, he found it far easier to make what for a time seemed to be real progress. His thinking gravitated naturally to the giant life insurance companies of America—with branches and agents nationwide—as he contemplated the possibilities. Often in years past he had paid tribute to this enormous industry. It was in 1932 that an aide told a college student that three quotation summarized his views. First, Hoover had said there was “no single device in our whole economic system which is greater in its importance in safeguarding the welfare of our women and children.” Second, he had called it “the first safeguard” for these persons, so that it was one of the foremost economic guardians of the home. The vast capital it represented was a great stabilizing influence on the nation. Third, he had said that private insurance had a “spiritual value.” It helped to meet the financial needs of expanding industry, commerce, and education. The fact was that the 54 percent of the people then owning life insurance had an effect on the stability of the entire social order.35

In 1929, as in 1921, Hoover turned first to New York Life and then to Metropolitan—with a general appeal to a group of insurance company presidents in between. His cagey approach that summer to an agent of New York Life came immediately to the attention of his old contact Kingsley, who seemed quite unaware that the president had anything in mind but purchase of a personal policy on his life.36 The next step would prove more meaningful. Coinciding with a meeting of insurance executives in Washington, D.C. (which he did not have time to address), President Hoover invited the eleven-member executive committee of the National Association of Life Underwrites to lunch at the White House on September 26, 1929.37 At the time, their companies sold conventional annuity policies in which payments made in advance were duly invested by the companies so that a larger sum could be returned in monthly increments at a given age. They were celebrating in 1929 the attainment of the $100 billion mark in their policy face value.

Talk at the luncheon centered on the president’s deep concern over the problem of old age pensions and his desire that the life insurance business move into that area. To do so would be to prevent government from further extending its activities into business and would demonstrate that life insurance was keeping up with the times. Hoover greatly impressed his guests with his actuarial and technical knowledge of the life insurance business. He was aware of the actuarial problems of many organizations that had already experimented with old age policies. He hinted that no company at the moment was prepared to write the kind of policy he had in mind.38

The response of the life insurance presidents to the Hoover luncheon meeting is hard to ascertain since only Ecker was to be a White House guest or correspondent in the next three and a half years. Hoover does seem to have telephoned some of them, and he may have talked with some of them when traveling. (On this form of interaction the Hoover scholar is helpless; yet the non-recorded Hoover interaction was voluminous and of the first importance.)

The major result was the beginning of a long exchange of views with Ecker. Wrote Hoover:

” I’m wondering whether it would be too much trouble for you to have your actuaries prepare a table for me indicating what the cost of an old age pension would be, assuming that there are no repayments of any kind except the pension itself—that is, take some basis, say $1200 a year payable in two cases, one at 60 years of age, and another at 70, and tabulate the annual payments the policy holders of different ages must make, say, from 21 onward.”

It would also be of great interest to know what sort of lump sum payment would need to be made at 21 and other ages in order to secure such pension (Hoover’s emphasis.)

If this is to cause any great trouble, please do not bother about it. It is passing through my mind that we might consider applying some such plan to Civil Service employees by which the Government would make half the contribution, the other half to be deducted from wages.39

(The reference to Civil Service personnel disappeared from ensuing correspondence at Hoover’s end. Nor was it used by Hoover when recalling this activity six years later.40) Ecker answered Hoover on October 8, sending comprehensive tables. We have had considerable experience in developing and administering retirement plans for different types of employment, he said. Wrote Hoover, “The tables you sent me are just what I need for further thought.”41

Any hopes the president might have had for undisturbed contemplation were dashed when Paul F. Clark, president of the Life Underwriters, quickly revealed Hoover’s concern “over the Old Age Pension problem” on the first page of the industry’s house organ.42 Now various inquiries began to come to the White House, with acknowledgment by presidential assistants.43

Contact with Metropolitan was by no means over. Hoover wrote Ecker on July 25, 1930, that he had heard “indirectly” that the company had worked out a pension policy which it intended to offer to the public. He would like some details! Wouldn’t Ecker like to visit the White House? He would and did on July 31, complete with a memorandum on the old age pension Hoover had in mind. The memorandum noted that the company would find it easier to keep track of policy holders if an annual premium were required, since single or irregular payments would mean the company could not tell whether a person was dead and would therefore have to carry larger reserves on the change that he was alive.44

The accompanying sample had been prepared “as an experiment,” it was said, and “the contract was made as simple as we could possibly make it.” Then came the bad news: “Frankly, we do not think that either… [of the policies] will sell to any great extent.” One reason was that the company would not feel like paying an agent anywhere near the standard rate of commission! If he could be getting $50, he would hardly be satisfied with $5. (He would get 30 percent if writing a regular policy.) The company had gone to the trouble just in case a law should be passed analogous to workmen’s compensation, except directed at old age; that is, employers would have to provide retirement coverage. “Were such a law in effect the employee could have one of these policies and the employer could pay the single premium at the required age. The employee would take the policy with him if he changed his employment and the new employer could do likewise.” While there was a provision permitting “anyone” to pay the premium, this was only “window dressing.”45 Such a response was hardly reassuring.

But back at Metropolitan its longtime specialist on social insurance, Dr. Frankel, was deep in plans for government liaison with private insurance companies to produce a voluntary old age pension system. During the week after Ecker’s visit with Hoover, he outlined his hopes to his superior. During their recent meeting Hoover had displayed his interest in “insurance provision for old age,” Frankel wrote. Metropolitan should therefore take the initiative, “suggesting legislation under federal or state auspices in favor of an adequate insurance plan, towards which employer and employee shall contribute on a voluntary basis and encouragement should be given to such plans by either the federal or state government by actual contribution of a part of the cost, relief from taxation, or in some way later to be decided upon.” He believed “we could secure the hearties cooperation for such a plan.” Frankel concluded, hopefully, “While the plan would be voluntary and permissive, in time it should become fairly universal and accomplish the results now obtained, under the compulsory plans of certain European countries.”46 The idea was interesting, for several of the European countries had neither voluntary nor compulsory plans. No overseas plan by any means covered a nation’s total population.

Meanwhile, those around the president knew of his interest in pensions and did not hesitate to reveal the fact to total strangers. When a citizen from Whittier, California, wrote intelligently in August about old age pensions, he was assured by Strother that the president had given “a great deal of study to the problem of provision for old age” and had asked the committee on Recent Social Trends “to make a special and searching investigation of facts and of methods by which this problem can be met.” Further, “The President regards this problem as one of the most pressing before the country and is doing everything he can to arrive at a solution which will really serve to meet it and at the same time be in accordance with the soundest economics.” To a citizen from Fort Worth, Texas, he disclosed much that was in his superior’s mind. He called it highly important that measures to take care of the aged “be properly formulated so that they will spread the cost of this relief in a way to cause the least possible disturbance to the economic structure of the country.” It might still be possible “for most of this provision to be done upon private initiative and by state and local authorities.” Various plans had been considered. “The President feels strongly that it is a duty of society by some means to solve this problem, so as to remove the fear of old age from the minds of every member of society.” He concluded, “It would be unwise for him to commit his mind to a final plan until the experts have finished their investigations, which are still in progress.”47

As an erroneous idea circulated in early September, 1930, that a commission to study old age insurance and/or pensions would be created, Strother was forced to write letters contradicting the “misapprehension.” In fact, Hoover had “asked the heads of responsible insurance companies to work on the problem of a feasible insurance policy for this purpose,” and he had talked with “numerous” people in an effort to arrive at sound conclusions. The president answered an inquiry from a top civil servant, saying hopefully that the companies were “about to offer a policy to the public covering the entire question.”48 Especially to be noticed is the total absence of the reference to pensions limited to the civil service.

Financial aspects of the several annuity plans created by Metropolitan have some interest even now. Bearing in mind the value of the mid-1981 dollar as 18.5 percent of that of 1930, a 1930 pension of $50 per month at sixty-five could come from any of the following lump sum payments (because invested profitably over the years by the companies): paid at twenty-one – $775, at thirty-one – $1,010, at forty-one – $1,500, at fifty-one – $2,450. Yearly payments beginning at twenty-one would come to $39 annually. There is a certain quaintness to a very early idea pursued by Hoover (camouflaged as an interest in purchasing a policy for each of his grandchildren) that parents or relatives might make a lump sum payment at one year of age to take care of the infant in old age. A mere $300 would suffice. His purpose, say Ray Lyman Wilbur and Arthur M. Hyde, was to develop such policies and “at some state” determine what steps the government would need to take to supplement these or to “assist the companies to care for certain groups, especially older citizens whose premiums would naturally be high.49 Hoover was counting on arousing public interest through publicity; for example, he planned to buy lump sum policies for his grandchildren as soon as the program was in operation. Initially, Christmas of 1929, and then or 1930, was to be the occasion. Said Hoover later, “The cost was so small that it was hoped it would attract many parents to provide an old-age pension for their children in this manner.”50 The official Metropolitan letter on pre-payment for infants )specifically his grandchildren), written December 18, 1930, would not be answered for a month and a half, however, for by then he could see that the country was not up to following his example in such a matter. He though it best to delay “until some time when you are initiating a campaign when it might be helpful in persuading people to take this sort of insurance.” Then he added “I imagine in the present dull times there is little being accomplished in this direction.”51

In considering all of this, the observer will bear in mind that annuities were common in American life insurance at the time (but not usually this kind, where there would be no estate value at death before sixty-five, and not the kind where costs would be shared by employer, employee, and perhaps government). Hoover the engineer certainly realized that the insurance industry would have to conduct studies, engage in experiments, and generally be reeducated before it would be ready to take advantage of national legislation–even if passed. In his Memoirs he finally judged that it was not something to push through in a deteriorating economic situation, only a year after the stock market collapse.52

Meanwhile, essential ingredients would be public desire and acquiescence by company executives and labor representatives. A first step would be to plant ideas in the mind of the general public. So it was that the president instituted a series of meetings with a master publicist, Samuel Crowther, a writer for magazines of large circulation and a book author. His first overnight visit to the White House came on the weekend of October 26-27, 1929; he had already met with French Strother. We do not know any more about the Hoover-Crowther meeting than clues that can be assembled here and there. Crowther says that he and the president “went fully into the thought of having some insurance company actively go forward in the writing of old-age insurance on a business basis, for we agreed that state old age pensions were in their effects poverty creating instead of, as they purported to be, poverty alleviating.”53

The first publicity payoff came with publication of an article in the Ladies’ Home Journal, “Insurance for Old Age,” with the subtitle, “It Should Be Possible for Every Man to Carry His Income on His Back.” The article was described as “an interview with Frederick H. Ecker, President, Metropolitan Life Insurance Company,” even though the prose did not mention his name or use any direct quotes–thus universalizing its findings and opening the door to using without attribution Hoover’s own reasoning. Its central ideas are similar to the ones in the hoover Memoirs. “Those who die and get nothing decrease the cost to those who live and receive pensions,” said the article. Thus the principle was the reverse of fire insurance: there, surviving buildings finance payments for those that burn; here, the pool of those dying before sixty-five finance years of payments to those who live on. “It may be said at once that if we consider an old-age pension as a right accruing to everyone who reaches a certain age, and to be paid by the state regardless of circumstance or consequences, we find ourselves in an impossible situation,” for a large liability and substantial increase in taxes would accompany universal pensions. Corporations might be a mechanism for setting aside sums required in the plan, half and half with employees. (Estate value could be had by paying extra.) There would be full vesting regardless of job changes. The amounts paid and received should be commensurate with previous earnings. The plan could be extended to industry in general; the idea was “perfectly feasible.”54 A series of articles in Forbes, a magazine read by executives, was a second Crowther effort, in which, as he put it, he said “the same thing in a different way.”

Crowther was also involved in an approach scheduled to be arranged with the United States Chamber of Commerce, for Hoover though its support might well be arranged. By early May, 1930, Crowther had talked with Secretary of Commerce Robert P. Lamont. Crowther’s contact with the Chamber was its president, William Butterworth. Overnight stays at the White House continued from May through August, 1930; for a time it looked as though Crowther would be commissioned to write a full-dress book financed by Metropolitan, based on a major investigation of social insurance overseas. Over dinner Crowther told Hoover and Henry Richard his reasoning:

“I said that I thought a book would have to be written…in which the actually experiences abroad would be given at first hand and from an economic and business angle instead of from the social worker’s angle and that all our people suffered from a lack of knowledge of the subject–that they were over-whelmed by the emotional appeal to help the aged and that they could only answer “high taxes” and that this was not an answer at all.”

Maybe the Chamber would help finance it, Hoover said; in due course he would bring all the parties together.55

Crowther then went to New York to meet with Ecker, who drew up some sample policies which struck him as being attractive. But Crowther came to believe that the book idea would not fly, even though “all the information is coming from the several active societies that are advocating pensions” (presumably of the social insurance kind). He did think that “everyone concerned is anxious to work and the only delay has been in making sure that they were working to the best advantage and in the direction that the President most desired.” Another meeting with the president ensued.56

During the nine months Crowther spent on this project in 1930, he reached the point where he could even telegraph George Akerson, presidential secretary, to please have a car meet him at Pennsylvania Station in Washington as he arrived by train from his Long Island home, “for it rather simplifies getting into the White House.”57 But he became increasingly impatient at the slow progress being made. Through the years other projects would be discussed with the busy and worried president. The White House stays of October 26-27, 1929, May 14-15 and August 11-12, 1930, and September 10-11, 1931, on the pension matter would be augmented by visits March 30-31 and August 11, 1932, and February 1-2, 1933, chiefly on the crime problem.58

We cannot detour to describe the efforts of the desperate president late in 1931 to get Ecker and his industry colleagues to purchase mortgages from banks as a way of helping the banks and preventing foreclosures. The idea came to naught as a major factor in ameliorating depression conditions, but there was some cooperation–limited by the crushing burden that policy loans and cash surrenders of policies were having on the cash flow of the companies. While on paper the assets of the companies now came to $16 billion, only $25 million could be pledged to the president’s purpose by Metropolitan. Hoover’s reply to this essentially negative response to his trial balloon was a bit formal. “I want to thank you for your letter of October 16th and the suggestions it contains. I am glad to have them,” he wrote.59

So, overall, the Crash, developing into an economic disaster, must be related to the failure of the American life insurance industry to push successfully Herbert Hoover’s idea of having the private sector provide old age pension opportunities for the nation’s aged and for those looking toward old age. Wrote Hoover in retrospect, “The slump, however, caused the companies to withdraw from this project and await a more favorable moment to launch it.” The death of his project was a cause for regret, since it “might have given us great experience and made it possible to reduce the extent of governmental action.” That he contemplated legislation that would provide government payments to underwrite the pensions is stated forthrightly: “I had suggested to the companies that if the idea was attractive to the public, we might consider some form of Federal grants to them, as an aid to lowering the cost to the beginners in the older groups whose premiums would necessarily be high.”60 The failure to get the companies started, and the accompanying failure to arouse major public interest, we have to conclude, meant that President Hoover never reached this stage.

Simultaneously with his liaison with the giant insurance companies in the interest of old age pensions, President Hoover was taking another approach designed to educate himself and to influence intellectuals, teachers, and opinion leaders. Reasonably well known even now is the major outgrowth of that effort, the mammoth book, Recent Social Trends in the United States, published with great pride by McGraw-Hill on January 2, 1933, with a foreword by the outgoing chief executive. It was the first of fourteen volumes to result from the coordinated research effort of the President’s Research Committee on Recent Social Trends (RST) and its investigators. Beginning officially in December, 1929, the effort was, as the scholars would say later, “unique in our history,” since “for the first time the head of the Nation has called upon a group of social scientists to sponsor and direct a broad scientific study of the factors of change in modern society.”61 The financing, arranged by Hoover, was by the Rockefeller Foundation; liaison with the White House was shared by presidential assistants French Srother and Edward Eyre Hunt, two intellectuals who displayed both competence and creativity, greatly contributing to the final result.62

The genesis of the RST work was a luncheon meeting in the White House attended by Hoover, Strother, and Professor Howard W. Odum, of the University of North Carolina, on April 26, 1929.63 The first meeting of the social scientists with Hoover was at dinner September 26, 1929, two days before the luncheon meeting with the insurance company presidents. There can be no doubt, now, that President Hoover anticipated that the work of the scholars on RST would lay the groundwork for some of the social programs he hoped would mark his administration (which at the moment he had every reason to believe would last two terms). It will be seen to be quite incorrect to say that from the outset of his presidency he thought of his second term as the time when he would use this study as an aid to striking a blow for his ideas.

Many clues, as will be seen, reinforce the plain evidence of intention to achieve in the first term. When sociologist William F. Ogburn emerged from a long conversation with Strother in early September, 1929, he declared to a colleague in confidence that while he guessed that neither Hoover nor Strother were yet prepared to tell exactly what it was they wanted, “I gather that [they] know in a general way that Hoover wants to do something in the field of human welfare, such as…the family, housing, recreation, or child welfare…And I think that he has in mind the restructuring of the Department of the Interior, or else the strengthening of it, or the rebuilding of it in such a way as to function largely in this field. I think Hoover has this very much at heart but hasn’t given much thought to the details or the means.”64 Ogburn–who would turn out to be the workhorse and the hub of the RST study, exceeding the efforts of Charles Merriam and the other–would meet often with Strother and Hunt, and sometimes with Hoover, during the next three and a half years.

Strother wrote Ogburn in early October, “I know how close to the President’s heart this field of inquiry is and how much value its results will have from him in his own efforts to be of practical use in the field of social service.” When Baltimore sun journalist Gerald W. Johnson inquired about the project in December, 1929, Strother replied at length. The country, he said, looks to the White House “for inspiration and leadership in social and economic movements for the well-being of people generally.” It had become clear to the president that social scientists and welfare workers were groping in the dark for lack of data on the national social structure and statistics. In eighteen to twenty-four months the work would be done (it was not), marking an epoch in such matters. “Such a research has never been undertaken here nor in any other country.”65

The official White House press release announcing the RST study, December 19,mentioned it its second sentence that subjects to be studied would include “the improvement of national health and vitality, its bearing upon increased number of persons of ‘old age’ and other results.” The goal would be systematic facts about social problems hitherto inaccessible. The New York Times carried RST story on December 20, featuring in its second sentence the idea that the field of study would comprise “the improvement of national health and vitality, its bearing on the number of persons of ‘old age,’” and mental and physical health in urban America. The study would be scientific research and would produce systematic facts.66

It seems to be relevant that on January 11, 1930, the New York Times ran an editorial containing a few comments on the lack of data on old age economic dependency. It quoted Abraham Epstein, of the Association for Old Age Security, as saying that it was a field without exact data and prolific in guesswork. Possibly the president read Epstein’s comments when they appeared, or he read the editorial. He certainly did not need a push from either, as we have seen, to be concerned about the aged citizen. But he might have been gratified indeed at the editorial’s final sentence: “It would be interesting and instructive to have President Hoover’s committee on ‘social trends’ bring back some fairly definite information on this subject.”67 A few days later Hoover and Hunt spent some time going over the plans for the RST study, especially the schedule for its completion in whole and in part. Told that the appearance of 1930 census data only in 1931 and 1932 would necessitate delay in the final report to as late as February, 1932 (it would be later than that), Hoover showed his great concern and hoped that re-warming census data would not become the focus. It was reassuring to be told that little more than a third of the topics were dependent on the census, and, as Hent put it, “later topics dealing with government policy” were independent of such data. According to Hunt, the president then made statements to the effect that “questions like old age pensions were coming up and that action would be necessary. Couldn’t this be explored without waiting for Census data?…To be of use to him he must have results in the summer or autumn of 1932 would be of no use for this purpose”; Hoover said he might be quoted.68

The rest of the Hunt-Hoover talk shows convincingly that the president, a man of affairs and of action, hoped that the committee’s findings would come to him piece by piece and that he certainly intended to root policy formulation in what came in–not during a remote second term but at once. Immediately on leaving the president, activist Hunt told French Strother that chapters of the study should be placed on an “elastic schedule” so that when finished they would be submitted to Hoover; Hoover in turn would decide whether to release them to the public or hold them for the final report. Meanwhile, recorded Hunt, the president would have “immediate use of them for administrative guidance.” Where delayed census material should be involved, “no presidential action can be expected.”69

Now Hunt would turn to Ogburn with his intelligence. He told the scholar, “The President said that he hoped for some results within one year, and to influence on administration policy he would have to have results about on the schedule originally planned. I stated that it was our understanding that the report was a report to the President and must be of use to him.” Howard W. Odum was assured on February 5 by Strother, “At the moment the President has no subject other than the Old Age problem that he would suggest for earlier treatment.” Later on, he might.70 We do not know, as usual, what was said in the numerous face-to-face meetings of these parties or what was conveyed in their long distance calls, but what we do know is that on March 12 two investigators on contract with the RST committee began a special study of old age. The work of P. K. Whelpton and Warren S. Thompson, specialists with the Scripps Foundation for Research in Population Problems, was completed on June 3 and sent to the president on June 14. It contained “such material as could be quickly assembled bearing directly on this timely subject.” But the report had already reached White House insiders.71 There is no reason to doubt that the report as in fact read by the president, given all of this maneuvering and special action.

The hundred-page manuscript, plus appendix table, stamped “Strictly Confidential” and bearing the simple title “Old Age” would not be a part of the final Recent Social Trends book, nor would it be included as such in the volume the authors would publish later under committee sponsorship. Its first paragraph posed the questions, “To what extent are people able to support themselves when too old to work and how many of them are dependent on relatives, friends, or charity? Are old age pensions necessary, and if so, should they be worked out through private employers or the state?” The final twenty-two pages were devoted to old age pensions of two kinds–those set up by employers and those paid by the states. No consideration was given to annuity schemes of the kind that had occupied Hoover and his friends in the insurance industry (naturally, since the writers were not aware of them). Facts on industrial pensions had been hard to come by: “Because of the recent date at which most industrial pension plans have been established it is not yet generally realized what a given system will cost the company putting it into effect.” Most data was from unpublished sources. Fewer than 20 of 300 companies questioned had their plans on an actuarial basis, and only six states and nine large cities had set up pension plans for their employees. But plan for teachers existed in twenty-one states, and all larger cities provided for police and firemen.

Still other information unknown to either experts or the public was absorbed by Hoover. On old age pensions, a survey of industrialists in Pennsylvania found that of 126 replying, 83 favored some form of state pensions financed through public funds. There was a very wide difference of opinion as to what plan to follow and on what should be done. Some pointed out that to move forward at the state level in this field might put industries in the state at a severe disadvantage; federal action might be better, they thought. In any case, the study concluded that improved purchasing power among older people would be essential in the future. Its practical peroration was: “Charity may continue to be necessary to prevent some older people from starving, but greater opportunity for productive work and continued earnings later in life together with a more effective method of assuring an income when work is no longer possible, would make the elders better customers and would help to maintain a large market of high consuming power.”72

One other advance report, on crime, went to Hoover in September, 1930, but a request for a copy to send a commission on the subject was refused by the committee; there would be no other advance services! Feeding confidential data to a public official, even the president of their nation, offended the sense of academic propriety fo these typical (even though outstanding) academicians. The RST chairman even had the gall to say in his transmission letter for “Old Age” that the committee saw itself as “a group of research specialists making a scientific report to you for public use. (My emphasis.) The preparation and dissemination of publicity describing the report seem to us a proper function of the Committee, ad we have prepared summaries to be released later to the public, outlining the facts found.”73 This could hardly be called tactful, and behind the scenes there would ensue discussions among the professors on the propriety of serving a sitting political figure who would be running for reelection some day. (They were, of coure, privately financed and cherished the idea that they had themselves gotten the funds through intervention by the Social Science Research Council, but in fact it was the Hoover pipeline that worked with the Rockefeller Foundation in the 1920s and during the presidency that was responsible.74) Odum, godfather to the study and a pioneering researcher in every sense of the word, scarcely concealed his disgust over the ivory tower attitudes of the committee. On the eve of the project he blurted out to one of them, “Witness the senior members of even this committee of ours and their inability or unwillingness to dig in deep enough to see the magnitude of the President’s proposed research.”75

It was during these months that a euphoria swept over Hunt, Strother, and apparently even the president as they considered what might still be accomplished during the Hoover term despite the Crash. Hunt wrote the Survey magazine’s editor, Paul Kellogg, that is was “initially hoped” that the RST work would be “the basis for a report with special emphasis on problems which lend themselves to practical solution, their causes and relationships.” In reply: “Unless I read the signs all wrong, he (Hoover) has one of the greatest chances in his career. Do underscore it with him.”76

Surely it is significant in this regard that when Strother found it necessary to retire from office for a time, the president chose to replace him with (otherwise rather surprisingly) the assistant secretary of the New York State Charities Aid Association, George A. Hastings. And finally, in cinching our case that the RST effort was no mere exercise by academicians for academicians (the way it is normally treated), Hunt wrote in June, 1930, “not for printed publication,” that the RST Committee was doing research on the underlying facts of American life “that affect the welfare of the people.” On its data “all agencies of social welfare may base their projects for social amelioration.”77 Does not the case for their projects for practical, timely, and useful research seem quite overwhelming?

Recent Social Trends would turn out to be of first-class importance. It would get unexampled publicity for its vast storehouse of facts.78 Its influence would be unquestionably major. Yet the study itself ailed (except for our one “Old Age” example) to serve the busy and purposeful president of the United States who requested it, because its academic authors were uable or unwilling to put their time into underwriting with hard data any case or cause for immediate legislative enactment. (Times would certainly change in later years, as Rand, System Development Corporation, and other think tanks working at what may be called applied scholarship would do what the campus for so many years would not–and then finally did only with some guilt feelings and frequent recriminations.) The RST Committee would have been shocked had it known of Hoover’s private comment in January, 1930, that he did not expect to be reelected and that he counted on the results arriving long before summer, 1932.

Before finishing with old age pensions, we must turn to the Hoover Memoirs, with their several pages of clues to his feelings on the subject. These were filtered and possibly modified b two decades of events. He judged, “The organization of old[age assistance under some Federal scheme was an inevitability.” More people were living longer, thanks to medical science; the states were preparing their own legislation in the area; the county commissioners’ poor house solution was inadequate; and “some part of the people could not, even with thrift, provide for old age; and another part, through shiftlessness, would not.” As afar as he was concerned, “The height of the world’s greatest depression was no time to introduce such ideas [as those he suggested in the cabinet and presidential years], even had we possessed the leisure time to formulate the plans. Our first job was recovery of employment, and any such widespread action was bound to produce some shocks to the economic system.” But he did set up a Committee on Social Trends, he says, because he wanted to meet the problem of old age assistance.79

Writing two weeks before the end of the Hoover administration, Strother opined that “a President’s paramount influence upon the nation’s history is often by way of the ideas which he impresses upon the nation’s thought.” Good enough. But the impact of those ideas, one might think, should be visible in the immediately succeeding years–certainly within the next decade or so. Yet this may not prove to be the case, especially with ideas which get overwhelmed by dramatic events or which face mindsets so firm that the ideas have little or no chance for a fair hearing.

What are we to conclude as we consider the subject of Hoover and his pension ideas? Not, really, that he had a direct impact on the field of legislation devoted to this subject or on the minds of the experts who would emerge to dominate it. We may conclude, however, that Herbert Hoover did in fact devote thought and time to the thorny question of income maintenance in time of unemployment and old age, relying on private instrumentalities that would be supplemented by government. Further, that he started to set in motion a program to mold men’s minds in the direction of implementing those ideas. Then, that he laid the groundwork by commissioning a serious research study by the best scholars in order to create a basis for action in the welfare field.

If one must speculate on what happened to the Hoover plans for private company underwriting of unemployment insurance and old age benefits, 1921 to 1933, the answer is both obvious and obscure. Obvious is the total lack of knowledge of unemployment insurance feasibility in the American insurance industry in the 1920s. There was willingness but no burning desire to take on the New York State legislators, whose laws prohibited experimenting in order to gain experience with policies of a new king. Obvious also in the light of what has been revealed here is the failure, in general, of the academic social scientists of the Recent Social Trends project to accept the idea that they should leave their ivory towers to give rapid, direct, and perhaps public research help to a siting president so that he could plan and then, perhaps, design new welfare legislation for the national good.

We have to accept the plausible Hoover evaluation that, due to economic depression, the times by 1931 were no longer ripe for leaders like himself to stimulate the public to insure the old age of children and youth by lump sum payments made decades in advance. But he had also been told that insurance salesmen could not make much money selling old age pension policies of the kind he suggested and thus would be unwilling to sell them. One speculates that the concept of using public funds to underwrite the old age benefits of those unable to pay for them was an original idea so foreign to contemporaries that the president was reluctant even to talk candidly about it with highly placed professionals. (They leaked some of what he did tell them.)

As for extending to America the social insurance of the kind then practiced overseas, Hoover in the fall of 1930 was seeking reliable facts on welfare programs in England and Europe. The extent of planning in the United States–except in the minds of a handful of specialists, planners, and radicals–was totally inadequate in his presidential years as a basis for new public policy. (It would be two and a half years into the Roosevelt administration before a social security act would be passed; the resulting act would be flawed, requiring amendment routinely for decades thereafter simply to achieve rudimentary equity.)

The state old age pension (welfare) activity was spreading in those years, but slowly. Its constitutionality had been successfully challenged in one state. County and state solvency soon became inadequate to the talk at hand, especially as the base of aged persons expanded and the financial standing of the work force eroded. At the same time, unfortunately, the ability of individuals to provide for their own well-bring–as against unemployment and old age–deteriorated rapidly. Reliable facts on this were hard to come by.

It appears unfair to fault a president under such circumstances for continuing to study and ponder, while waiting impatiently yet hopefully for the facts on which to base policy that would be acceptable to public opinion. Most of his waking hours were in any case devoted to stimulating employment and averting collapse of the economy and with it the American capitalist system.

The nature and dimensions of the Hoover old age pension plans are reasonably clear. There was the idea of new insurance policies that would provide annuity payments in old age. These would normally be paid for by parents in a lump sum or by the individual over the years. Costs might be supplemented by employers. For some, government might help in the financing. Then there was the idea of government old age pensions, with the federal government deducting amounts from paychecks and getting payments from employers (the self-employed aso participating); funds would be transferred to the states, who would administer the program in other respects and would probably help finance it.

Compare the above to the old age portion of today’s social insurance and public assistance, where there emerged two quite different programs: “social security” and old age assistance. The former is funded from a special tax on employer and employee; the latter is apid from general tax revenues. Funds received from the social security tax go temporarily to trust funds, from which the Treasury may borrow at very low interest, greatly supplementing general revenues from other taxes. Everybody over sixty-five would become eligible for payments from one program or the other, or both at once. There is no estate value other than, at the moment, a death benefit. Because the revenues are not to be invested and do not compound (and for other reasons), the tax has had to be increased regularly. Amounts paid to a person are only partially commensurate with those paid in. The sovereignty of government, its integrity, and national humanitarianism guarantee the system. And the elected and appointed officials of government at three levels usually administer the programs–for better or worse.

It Has Seemed unnecessary to load down this exposition with analysis and conjecture on what these facts have revealed about Herbert Hoover’s political economics, that is, his view of the role of the state in society. Various terms are being used in an effort to characterize Hoover’s purposes, methods, and goals. My perception is that he believed first and foremost in what we may call “the cooperative state,” for “cooperation” was one of his favorite words. He made his devotion to this trait clear on a variety of occasions. Industry, labor, government, and the public should cooperate for the common good without massive legislation or vast restriction by laws or unnecessary administrative controls. The individual was always the key; but some persons, he realized, will always need a helping hand. Voluntary organizations should be given the first chance to help. Then government at some level–and ultimately at the national level–has an obligation of leadership: “a leadership state,” one might say. Leaders have inescapable responsibilities–especially leaders with long experience and specialized education. Good will, sacrifice of self-interest, taking the long view, and never straying from fundamentals should serve well the country and the people living it it. Here, in summary, appears to be the philosophy that guided Secretary of Commerce and President Hoover in the years 1921 to 1933, as he engaged in planning and work for the economic security of Americans.

One aspect of Hoover’s planning for economic security for the nation’s aged must be stressed. He believed, spoke about, and had further plans to encourage preparation by individuals for their own old age through savings and investment in private annuity insurance policies. Social insurance, he thought, even pensions with private companies that might come to be underwritten by government, could not do the whole job. It is noteworthy that in the past decade, despite the existence of social security and public assistance programs for half a century, a major thrust in the United States has been to use tax laws to help create and expand retirement funds in the private sector by individuals themselves. (The tax amendments of 1981 especially furthered this goal.) Hoover would have applauded this long overdue emphasis on self-help during working years to ensure financial happiness during retirement years.

Has all this been worth remembering in the 1980s? Many obscure details, old meetings, speeches long forgotten, and memoranda and letters revealing high hopes, details of conferences in rooms long since refurbished–it all seems so long ago. The book Recent Social Trends and its companions had their fundamental impact, no doubt. The insurance leaders were stimulated and encouraged to make their pioneering studies of social insurance; they also had to focus on writing group policies for the nation’s industries. A few new annuity policies were developed, but little came of that. The way was paved somewhat for those who later would want to create unemployment insurance, for the secretary of commerce helped to highlight the need, even if his solution was not chosen. A major series of monographs on social insurance at home and abroad, prepared by the largest of the private life insurance companies, was carried through with the distinct encouragement of the president. These would prove useful at the time to authorities in New York State and soon to a federal government pondering social security legislation.

We can now see that America once had before it alternative ways of meeting major human needs. People would come to believe that government programs–not just their own planning, saving, investing, and insuring–are absolutely central to economic sufficiency in old age. Hoover would have deplored this result. Indeed, he did so in later years in speeches and books. He accepted some parts of the Social Security Act as passed while criticizing some provisions. Overall, that piece of legislation was not in philosophy, content or outcome what he seems to have preferred, but he did not oppose it.

We have seen that the secretary of commerce and president gave thought to the problem of economic dependency among both of unemployed and the aged. It should not have been a surprise to learn that he cared deeply about the social welfare of people at home, just as he did those overseas. The programs he favored for a time cannot be fully judged, for they were never put into effect. Nevertheless, it is quite clear that they were tailored to help preserve the kind of economic and social system he is well known to have favored. That system, in his view, was a partially regulated capitalist system in a country possessing a cooperative government, blessed with intelligent and dedicated leadership, and peopled by families who would want to participate fully in preparing to rise above adversity.

NOTES

[1]      Herbert Hoover to Darwin P. Kingsley, Nov. 17, 1921, Commerce: Kingsley; Hoover, “Address to Metropolitan Life Insurance Co. Managers Banquet,” ms. (Jan. 27, 1932); Hoover to Joseph S. Frelinghuysen, Aug. 15, 1921, Commerce: Senate; all in Herbert Hoover presidential Library (hereafter cited as HHPL), West Branch, Ia. An unusual amount of archival assistance was given to the author during the period in which this paper was researched. Thanks are due to Tom Thalken, Robert Wood, Dale Mayer, Dwight Miller, Betty Gallagher, Mildred Mather, and Cora Pedersen, archivists at the HHPL; and Charles Palm, archivist at the Hoover Institution.

[2]      Harley Fiske to Hoover, Aug. 12, 1922, Commerce: Fiske. HHPL. (Hereafter, the reader may assume that cited correspondence and files are in the HHPL, except where otherwise noted.)

[3]      Hoover to Mitchell, July 29; Mitchell to Hoover, Aug. 3, 1921, in Lucey Mitchell, Two Lives (New York, 1953), 364-67; William Starr Myers and Walter H. Newton, The Hoover Administration: A Documented Narrative (New York, 1936), 475. Daniel Nelson, Unemployment Insurance: The American Experience, 1915-1935 (Madison, 1969) covers the general subject.

[4]      Hoover to Gompers, Oct. 23, 1920, Commerce: Industrial Waste Committee.

[5]      Marquis James, The Metropolitan Life (New York, 1947), 227-28.

[6]      “Unemployment Insurance,” Transactions of the Actuarial Society of America, vol. 24, part 1, no. 69 (1923), 1. Lee K. Frankel’s and Miles Dawson’s Workingmen’s Insurance in Europe (New York) had been published in 1910.

[7]      Hoover, “Address to Metropolitan”; Herbert Hoover, The Memoirs of Herbert Hoover (3 vols.; New York, 1951-52), II, 102.

[8]      Hoover to Gompers, Feb. 19, 1923; Fiske to Hoover, April 2, 1924, Commerce: Unemployment.

[9]      Fiske to Hoover, March 13; Hoover to Fiske, March 29, 1924, Commerce: Unemployment.

[10]      Copy attached to Fiske to Hoover, March 13, 1924.

[11]      James, Metropolitan Life, 230-31, 432.

[12]      Edward Eyre Hunt, “Nation Planning,” ms. (May, 1931), Hoover Papers, Hoover Institution.

[13]      Swope to Hoover, June 20, 1930, Presidential: Unemployment.

[14]      Ecker to Hoover, Feb. 24, 1931, President’s Personal File (hereafter cited as PPF).

[15]      Ibid.

[16]      Ibid.; Hoover to Ecker, Feb. 27, 1931, PPF.

[17]      Exchange of telegrams, March 30, 1931; White House Diary; letters of introduction forwarded to Ecker by letter of April 2, 1931, HHPL. The travelers were Lee K. Frankel, vice-president; James D. Craig, chief actuary; and Rodney Olzendan, research director. The series reached thirteen volumes and appeared during 1931-33, with revisions to 1935.

[18]      Based on copies of correspondence received from Metropolitan.

[19]      Frankel to Roosevelt, Dec. 4; to Wagner, Dec. 29, 1930, Metropolitan Life Insurance Co. Archives, New York.

[20]      Roderic Olzendan, “An alternative to Unemployment Insurance” (Memorandum to the Joint Legislative Committee on Unemployment of the State of New York, Dec. 1, 1932. (This includes Olzendan’s own complex plan.) Bornet Collection, HHPL. Photocopies of may of the materials cited here are in the Bornet Collection.

[21]      New York Times, Feb. 21, 1930, p. 18.

[22]      For a contemporary appraisal, see Glenn A. Bowers, “Economic Old Age; The Public Looks at the Problem,” in Proceedings of the National Conference of Social Work (1930), 258-65 (hereafter cited as Proceedings, 1930).

[23]      Quoted in Bowers, “Economic Old Age,” 287.

[24]      See John B. Andrews, “Progress of Social Insurance in America,” in Proceedings, 1930, 258-65.

[25]      Bowers, “Economic Old Age,” 279-82.

[26]      New York Times, Jan. 6, April 13, p. 20 June 29, II, 2, 1930.

[27]      Rainard B. Robbins, “Teachers’ Pensions and Our More General Old Age Problem,” Transactions of the Actuarial Society of America, vol. 31, part 2, no. 84 (1930), 230-44.

[28]      Chamber of Commerce, Idabel, Okla. to Hoover, Dec. 17, 1929, PPF: Pensions. Such correspondence was common.

[29]      Hoover to (name withheld), Sept. 7, 1929, PPF: Pensions.

[30]      Robert E. Lucey, “Industrial Life: Gains and Losses,” in Proceeding of the National Conference of Social Work (1929), 329-32.

[31]      Samuel Crowther to Strother, July 24, 1930, Strother Papers. Cf. Ray Lyman Wilbur and Arthur M. Hyde, The Hoover Policies (New York, 1937) p. 91.

[32]      Herbert Hoover, Further addresses on the American Road, 1938-1940 (New York, 1940), 13, 33, 35, 40, 55, 56, 62, 68, 73, 202.

[33]      Hoover, Memoirs, II, 313-15; Myers and Newton, Hoover Administration, 405. Additional details appear in the Memoirs (II, 314), where there is given the text of a memorandum the former president says he circulated to colleagues which spelled out his principles on old age pensions in general. The original memorandum has defied efforts of archivists to locate it, probably because Hoover often loaned important documents in later years and did not always get them back. Discovery of the Crowther files might solve this mystery.

[34]      Hoover Memoirs, II, 313-15.

 

[35]      The quotations are from Hoover to Paul F. Clark, Sept. 28, 1932, all quoted in Strother to Frank O. H. Williams, Nov. 29, 1932, PPF: Insurance.

 

[36]      Kingsley to Hoover, July 22, 1929, Presidential: Insurance.

 

[37]      White House Diary, Sept. 26, 1929. (The date in the Memoirs is incorrect)

 

[38]      Paul F. Clark’s account in National Underwriter, Oct. 11, 1929. Courtesy Bonnie Chernin, Archives Librarian, Metropolitan Life Insurance Co., who also performed other useful services.

 

[39]      Hoover to Ecker, Sept. 28, 1929, Presidential: Pensions.

 

[40]      Hoover to Lawrence Richey, Jan. 19, 1935, Post-Presidential: Richey.

 

[41]      Ecker to Hoover, Oct. 4; Hoover to Ecker, Oct. 5, 1929, Presidential: Pensions.

 

[42]      National Underwriter, Oct. 11, 1929.

 

[43]      For example, Sun Life Assurance of Canada to Hoover, Oct. 14, 1939, and reply, Presidential: Pensions.

 

[44]      Internal memorandum to “Mr. Ecker, President,” no signatory. Copy in Strother Papers, 1930.

 

[45]      Ecker to Hoover, July 31, 1930, PPF.

 

[46]      Frankel to Ecker, Aug. 6, 1930, Metropolitan Archives.

 

[47]      Strother to Walter Key, Aug. 21; Strother to W. P. Groves, Sept. 6, 1930 Presidential: Pensions.

 

[48]      Strother to Congressman Vincent Carter, Sept. 12, 1930; Hoover to John W. Philp, Sept. 10, 1930, Presidential: Pensions.

 

[49]      Wilbur and Hyde, The Hoover Policies, 92. Nineteen eighty-one v. 1930 dollar calculation made by researcher for the Federal Reserve Bank of Cleveland, June, 1981. Oregonian, June 27, 1981.

 

[50]      Hoover, Memoirs, II, 315; Myers and Newton, Hoover Administration, 406.

 

[51]      Ecker to Hoover, Dec. 18, 1930; Hoover to Ecker, Jan. 27, 1931, PPF.

 

[52]      Hoover, Memoirs, II, 315.

 

[53]      Crowther to Strother, July 24, 1930.

 

[54]      Samuel Crowther, “Insurance for Old Age,” Ladies’ Home Journal, March, 1930.

 

[55]      Crowther to Strother, July 24, 1930.

 

[56]      Ibid.; White House Diary, Aug. 13, 1930.

 

[57]      Crowther to Akerson, Aug. 9, 1930, Secretary’s File.

 

[58]      White House Diary, these dates.

 

[59]      Ecker to Hoover, Oct. 16; Hoover to Ecker, Oct. 21, 1931, PPF.

 

[60]      Hoover, Memoirs, II, 315.

 

[61]      From the committee’s foreword to one of the subsequent books, Warren S. Thompson and P. K. Whelpton, Population Trends in the United States (New York, 1933), v.

 

[62]      All facts and generalizations in this section rest on the writer’s own extensive research on RST, not on two thoughtful accounts with which my narrative differs in at least three important respects. See Barry Karl, Charles E. Merriam and the Study of Politics (Chicago, 1974), Ch. 11, and his “Presidential Planning and Social Subject to modification, I believe, are these judgments in the latter: (1) that the committee “was given a three-year mandate”; (2) that “Hoover had planned the whole program as part of a campaign for a second successful administration” (both p. 364); and (3) after a quotation from the committee saying it hoped its work “may prove of value to the American public,” the statement that it then “entered into oblivion” (p. 405).

 

[63]      White House Diary, April 26, 1929; Odum to Strother, April 19 1929, Strother Papers.

 

[64]      Ogburn to Wesley C. Mitchell, Sept. 6, 1929, Box 13, Ogburn Papers, University of Chicago.

 

[65]      Strother to Ogburn, Oct. 4, to Johnson, Dec. 9, 1929, Strother Papers.

 

[66]      Press release. Mimeographed. Ogburn Papers; New York Times, Dec. 20, 1929, p. 1.

 

[67]      New York Times, Jan. 11, 1930, p. 16.

 

[68]      “Social Trends,” Hunt’s “Memorandum of a Conversation with President Hoover, January 14, 1930,” Hoover papers, Hoover Institution.

 

[69]      Ibid

[70]      Hunt to Ogburn, Jan. 15, 1930, Box 12, Ogburn Papers; Strother to Odum, Feb. 5, 1930, Strother Papers.

 

[71]      Mitchell to Hoover, June 14, 1930, Presidential: RST Old Age; Hunt to Strother, May 26, June 6, 1930, Strother Papers.

 

[72]      P. K. Whepton and Warren S. Thompson, “Old Age, A Report Sponsored by the President’s Committee on Social Trends,” ms. (n.d.), Strother Papers, file “Old Age,” 1930.

 

[73]      Mitchell to Hoover, June 14, 1930.

 

[74]      A typical demonstration of the illusion is in Odum to Hoover, Feb. 9, 1954, Post-Presidential. See also Strother to George E. Vincent (president of the Rockefeller Foundation), Oct. 22, 1929, Ogburn Papers, Box 12; and Vincent to Strother, Oct. 23, 1929, where Vincent says, “The President has talked with Mr. Mason and with me about his plan, so that we have a preliminary familiarity with the purposes of the proposed study. It is needless to say that anything in which the President asks for the cooperation of the Foundation will receive the most careful and sympathetic examination.” Also Strother to Ogburn, Oct. 23, 1929. Both in Strother Papers, file “Old Age.”

 

[75]      Odum to Ogburn, Sept. 30, 1929, Box 13, Ogburn Papers.

 

[76]      Hunt to Kellogg, March 1, 1930; Kellogg to Hunt, April 18, 1930, file 627, Survey Papers, Social Welfare History Archives Center, University of Minnesota.

 

[77]      “Accomplishments of the Administration in the First Sixteen Months,” type-script, Hunt Papers, Hoover Institution.

 

[78]      A thoroughly researched and documented conclusion I have not yet published; it differs 180 degrees from what is commonly accepted. See how the careful scholar Frank Freidel summarized in 1981 the existing viewpoint of the secondary literature, writing that RST attracted little attention outside of the scholarly community.” “Hoover and Roosevelt in Historical Continuity,” in U.S. Congress, House, 96th Cong., 2nd sess., Herbert Hoover Reassessed (Washington, D.C., 1981) Senate Document 96-63, p. 281; this may be compared with my contrary judgment there in “An Uncommon President,” p. 85, based on my archival investigation.

 

[79]      Hoover, Memoirs, II, 314-15.

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