The Political Implications of Social Security Reform

The Political Implications of Social Security Reform

Andrea Louise Campbell

Associate Professor

Department of Political Science

Massachusetts Institute of Technology

Prepared for the Woodrow Wilson International Center

September 2005

Fifty years ago, more than a third of senior citizens lived in poverty. Very few had health insurance or were even allowed to purchase it if they did have the funds to do so. Senior citizens were the age group least likely to participate in politics – least likely to vote, make campaign contributions, or work on campaigns. Political party platforms barely mentioned senior citizens, and their issues rarely came up before Congress.

Fast forward to today. How much has changed. The senior poverty rate is 10 percent, just two-thirds that of children. Seniors, almost alone among American citizens, enjoy national health insurance, and indeed, just added a prescription drug benefit that comes on line in January 2006. Senior citizens are one of the clientele groups most likely to be mentioned in political party platforms, there are House and Senate committees for aging issues, and perhaps most prominently, seniors are the most participatory age group in society – the age group now most likely to vote, make campaign contributions, and (nearly the most) likely to work on campaigns.

What changed? What caused this profound transformation of the senior citizen population, and indeed this fundamental transformation of the American political system? I argue that the development of Social Security, and later Medicare, are key factors in this far-reaching and highly consequential evolution of senior citizens’ place in American society and politics. Social Security in particular gave seniors the resources to participate in politics, the interest in doing so, and the mobilization opportunities that made it possible. Here I trace the development of Social Security, its role in creating the senior citizen political constituency that we see today, and the likely political effects of proposed changes in Social Security’s design. My main argument is that policies create politics – the design of government policies feed back into the political system, influencing the political participation of client groups and in turn their ability to shape future policy outcomes. Moreover, changing the design of such policies will change the participatory patterns of the client group and the landscape of American politics more broadly. Reforming Social Security is hugely consequential, not only because of the fiscal and economic stakes involved but also because of Social Security’s crucial place in shaping the American polity as we know it.

How Social Security Created the Senior Political Constituency

While Social Security was enacted in 1935 and first implemented in 1940, it was still neither widespread nor very generous by the early 1950s, when we first have data on the financial and political standing of citizens by age.[1] The group that we now recognize as the most active in public affairs looked very different back then. The senior poverty rate, estimated to have been 50 percent during Depression, was still 35 percent in the 1950s (Achenbaum 1986, 53; Campbell 2003a, 91). Senior incomes were lower than those of most other age groups. Half of all men over 65 still worked; retirement was a relative luxury (U.S. House Committee on Ways and Means 1998, 1032). And seniors were the age group least likely to have health insurance (Anderson and Feldman 1956).

Seniors’ poor socioeconomic plight was reflected in their low rates of political participation. Seniors were the age group least likely to vote, to make campaign contributions, and to work on campaigns as of the 1950s. If we had data going back to the 1930s, before Social Security was enacted, the age differences in participation would likely be even greater.

The impetus for welfare state programs for seniors was not seniors’ political strength itself. Grassroots movements like the Townsend movement did highlight the dire plight of seniors in the 1930s, but Roosevelt had directed the Committee on Economic Security to devise a social security program even before the Townsend movement was widespread. Instead, the impetus for Social Security’s beginnings came from intellectuals who admired the European social welfare states, and from senior allies like labor unions. There were also the examples of state pensions, which provided a model for action at the federal level.

Thus Social Security’s enactment in 1935 was not a product of seniors’ political strength. However, seniors’ political strength is certainly an outcome of Social Security, and later, of Medicare. Indeed, as senior welfare state programs developed over time, they enhanced senior political participation. That seniors become an increasingly important electoral constituency then became an impetus to lawmakers to enhance their benefits yet further. Seniors over time benefited from what I call a “participation-policy cycle,” which in seniors’ case is a positive spiral, where policy enhances senior participation, which in turn increases the appeal of pleasing this now more important constituency with more generous policies, which in turn further enhances their political participation.

Some empirical indicators give a sense of the magnitude of changes that took place for the senior population. First, Social Security coverage broadened over time, with new categories of workers included in the program. The first payments in 1940 went to less than one percent of all seniors. As of 1950, just 16 percent received benefits. The greatest extensions of coverage occurred during the 1950s, so that by 1960, 60 percent of all seniors received benefits, rising to 82 percent in 1970 and 93 percent by 1990. Second, the value of Social Security benefits increased dramatically. Average monthly benefits for a retired person increased from less than $300 in 1950 to almost $800 in 1996, an increase in real terms – after accounting for inflation – of 268%. Average Social Security benefits rose more in real terms than the wages and salaries of workers over the same period. The enactment of Medicare in 1965 meant that seniors went from being the age group least likely to have health insurance to the group most likely to be covered (Aday, Andersen, and Fleming 1980; Anderson and Feldman 1956).

The effects of the growth and development of these programs on the well-being of senior citizens is truly astonishing. Social Security made retirement a reality. Whereas half of senior men worked in 1950, by the 1990s, it was one in six, and then often a matter of choice rather than necessity as before. The program dramatically reduced senior poverty; its role is evidenced by the fact that if the value of Social Security benefits is subtracted from senior incomes, today’s poverty rate would still be 50 percent. Furthermore, Social Security contributed to the rise in senior incomes over time. During the 1950s and 1960s, the growth of senior incomes lagged that of younger groups. By the 1970s and 1980s, senior incomes grew at the fastest rate of any age group. And Social Security increased as a share of senior incomes, from 22 percent in 1958 to 42 percent by the 1990s (Cutler 1996, 127; Social Security Bulletin Annual Statistical Supplement 1997, 21).

These objective improvements in seniors’ well-being are reflected in their subjective evaluations of the financial status. Surveys show that seniors are less worried about their finances than any other age group, and less likely to have to change their lifestyle or make cutbacks in order to make ends meet. According to the 1990 Citizen Participation Survey, two-thirds of seniors said they made no changes in order to make ends meet financially, compared to only one-third of nonseniors. Not until incomes reached $125,000 and more were nonseniors as likely as seniors to have made no lifestyle changes.

How are these changes in seniors’ well-being reflected in their political participation? Over the last 40 years seniors have increased the absolute rate at which they vote and contribute to campaigns, overtaking younger people. They have caught up with younger people in the rate at which they work on campaigns.

From the modern peak of turnout in 1960, to 1996, the turnout rate of young people under 35 declined from 71% to 63%, according to the biennial National Election Studies.[2] The middle age group, 35 – 59, declined from 83% to 79%. Seniors by contrast first declined to a low in 1972, but have been rebounding ever since – and vote at higher rates than their 1960 level. Nonseniors are on the decline to an historic low in turnout while seniors are rising to an historic high. This gap is even larger in midterm elections.

Changes in campaign contribution rates are even more pronounced. Seniors have more than quadrupled the rate at which they make campaign contributions, from 3% in 1952 to nearly 14% in 2000, again overtaking nonseniors. Seniors used to be the age group least likely to make contributions, but they now outstrip even the middle group, which has much higher average incomes.

In campaign work seniors have made relative gains. During the 1950s and 1960s, seniors were much less likely to work on campaigns than younger age groups. Now they have reached parity. This change is particularly remarkable since campaign work is a more physically taxing activity than voting or putting a check in the mail.

Because senior participation is rising while that of nonseniors is falling, seniors are now disproportionately active in politics. In 1952, seniors constituted 13 percent of the National Election Study (NES) survey sample, 13 percent of all voters, and only 9 percent of all contributors. By 2000, seniors made up 17 percent of the NES sample, reflecting the aging of the population, but 20 percent of all voters and 28 percent of contributors. In recent midterm elections seniors were 30% of all contributors and voters.

What was the role of Social Security and Medicare in enhancing senior political participation over time? Political scientists have identified three participatory factors -- three ingredients that predict how much an individual or a group will participate in politics: politically relevant resources, engagement with public affairs, and mobilization. These affect whether someone can participate, whether they want to, and whether they are asked to do so. Social Security and Medicare affect each of these three factors. The programs provide the resources of income, free time, and health (or access to health care) that enhance participation rates. They foster seniors’ engagement with politics – their interest in public affairs – by tying their economic and physical well-being to government policy. And these programs define this otherwise disparate group of people as a political group. There’s nothing special about being 65+ in particular. Indeed, after a lifetime of accruing a variety of interests, loyalties and identities, seniors in many ways are the most diverse group. But Social Security and Medicare – conferred on the basis of age – create a political identity as a program clientele, providing the basis for mobilization by interest groups and political parties.

Thus the three participatory factors of resources, engagement and mobilization increased for senior citizens over time with the development of Social Security and Medicare, enhancing the ability, desire, and opportunities for seniors to engage in political activity. The result of growing senior participation over time is that elected lawmakers have an increasing incentive to address the needs and preferences of this constituency. Congress devoted a greater number of congressional hearings to senior concerns over time, and mentions of seniors and their programs in political party platforms grew as well (Campbell 2003a, ch. 4). And while seniors are a diverse group and certainly do not always vote as a bloc, they are of similar mind on Social Security – surveys show that 98 percent want federal spending on Social Security kept the same or increased (Campbell 2003a, 98). Furthermore, they are vigilant about their programs. When Social Security and Medicare were threatened during the 1980s, seniors responded with surges of letter writing to Congress (Campbell 2003a; 2003b). Frightened lawmakers withdrew the offending proposals. In fact, congressmen and senators are more likely to vote in a pro-senior direction the more seniors there are in their districts or states, regardless of their own ideological positions.[3] These program effects feed back into the political system – the programs enhance senior participation, which increases pressure to improve their programs, which further enhances their participation. Policy begets participation which begets policy, in an upward cycle that redounds to seniors’ benefit. Policy designs shape subsequent policy outcomes

But the focus here is on how policies make citizens – and how changes in policy design may change patterns of participatory democracy in the United States. To that end I focus on two characteristics of senior participation that arise from program design, and which may be undermined by changes in program design, like the introduction of individual accounts in Social Security.

Two key features of Social Security have protected it politically over the years. First is its universal nature, in particular the fact that the program is not means tested and includes the middle class and the affluent. Low-income seniors have a tremendous stake in the program, as it provides a majority of their income. But higher income seniors have a stake as well, because they feel entitled to the benefit for which they have made payroll contributions over the years, and because while the program constitutes a small share of their incomes, their benefits are larger absolutely than those of the poor. Because high-income seniors have such a large absolute stake, they have had an incentive to participate politically concerning the program, which strengthens its political standing. For example, in 1981 the Reagan administration proposed cuts in Social Security, the first cuts for current beneficiaries in program history. To address a shortfall in the trust fund, the administration proposed delaying the annual cost of living adjustment and cutting benefits for early retirees. This cut would have been immediate, and would have applied to the two-thirds of individuals who take their benefits “early,” between ages 62 and 65. High-income seniors, already the most vocal portion of the senior constituency, reacted the most vociferously to this threat. The rate at which seniors of all income levels write letters to Congress shot up in response to this threat. But the letter writing of high-income seniors surged the most (Campbell 2003a, 114). The participation of middle income seniors increased nearly as much, while that of low-income seniors, already lower in general than that of their more affluent counterparts, increased the least in response to the policy threat. Thus a key politically significant aspect of Social Security is that even though more affluent seniors are less dependent on Social Security than the poor, they still feel they have a stake in the program. Their high participation levels in general as well as their vehement reactions to policy threat have helped protect the program politically over the years.