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Remembering Social Security’s Best Friend


andrew yarrow, a former New York Times reporter, is the author of the new book, LOOK: How a Highly Influential Magazine Helped Define Mid-20th-Century America.

Published April 20, 2020


In January, the 70 million Americans drawing Social Security benefits received the biggest raise in 40 years— 5.9 percent — thanks, in large part, to one the country’s least-loved presidents. While FDR is rightly honored as the president who pushed the pension system through Congress in 1936, few are aware that Social Security’s most dramatic expansion came in 1972, when Pres. Richard Nixon signed legislation providing for automatic annual cost-of-living adjustments (COLAs).

Prior to the 1972 amendments, Congress episodically increased Social Security payouts, usually to offset inflation. Indeed, the hikes were an irregular ritual, leaving Congress in a position to pat itself on the back — and to remind the voters of their benevolence at upcoming elections.

But Nixon didn’t share in their Tammany Hall reflexes. “The best way to help people in need is not with a vast array of bureaucratic services, but by providing them money and insurance so that they can secure needed services themselves,” Nixon told a national television audience on the day he signed the legislation. “This landmark legislation will end many old inequities and will provide a new uniform system of well-earned benefits to older Americans, the blind and disabled.”

Down Memory Lane

When Ida May Fuller became the first recipient of a Social Security check in January 1940 (for $22.54, a not-trivial $400 in 2022 dollars) there were no cost-of-living adjustments and only 6 in 10 workers were covered by what was initially envisioned as a “universal” program. Recognizing these shortcomings, President Harry Truman and Congress embarked on the first of many expansions of the program in 1950. About 10 million workers, including farm and domestic workers, and many non-professional self-employed were added. Meanwhile, the first benefit increase in a decade — 77 percent — took effect.

New Dealers’ worries that FDR’s signature program would be rolled back after 1952, when Dwight Eisenhower took the White House and Republicans narrowly won the Senate, were allayed when the pragmatic Republican president pushed through his own Social Security enhancements. Legislation in 1954 and 1956 brought retirement benefits (and payroll taxes) to fully 90 percent of workers. As important, benefits were raised and disability insurance was added.

During his first year in office, Nixon called on Congress to “ make certain, once and for all, that the retired, the disabled and the dependent never again bear the brunt of inflation. The way to prevent future unfairness is to attach the benefit schedule to the cost of living.”

When Nixon was elected in 1968, defenders of Social Security once again feared the worst. In fact, though he tried his best to antagonize the left rhetorically, Nixon was a raving commie by the standards of today’s Republicans. He oversaw the creation of the Environmental Protection Agency and the Occupational Safety and Health Administration, the passage of the Clean Air and Endangered Species Acts — as well as the 1970 Voting Rights Act, which lowered the voting age in national elections to 18. And he would have managed to create a guaranteed minimum income to replace the bulk of federal welfare programs if Democrats hadn’t insisted on more. Most relevant here, during his first year in office, Nixon called on Congress to “make certain, once and for all, that the retired, the disabled and the dependent never again bear the brunt of inflation. The way to prevent future unfairness is to attach the benefit schedule to the cost of living.”

After raising benefits three times during the first three-and-a-half years of his presidency — by 15 percent, 10 percent and 20 percent — Nixon and Congress finally agreed to scrap the ritual song and dance for annual automatic adjustments to reflect the cost of living.

Actually, the new law went much further in addressing poverty and income insecurity. It not only indexed benefits to the price level beginning in January 1975, but created the Supplemental Security Income program for low-income elderly, blind and disabled Americans. And it extended Social Security benefits to widows and widowers, added a minimum monthly benefit to retirees who had been in low-wage jobs, increased benefits for those retiring later than age 65, increased the limit that a beneficiary could earn and still get full benefits, gave Medicare coverage to those with disabilities and added a long list of new Medicare benefits.

We’re not done yet. A year and a half later, even as the Watergate tsunami was engulfing his presidency, Nixon signed yet another short-term benefit hike, bragging: “With these increases, Social Security benefits will have risen by 68.5 percent since this administration took office nearly five years ago.”

Nothing Is Forever

As Social Security checks fattened, the total cost of the program grew from $30 billion in 1970 to $65 billion in 1975 — from 2.8 to 4.0 percent of GDP. And thanks to the high inflation of the late 1970s and early 1980s — the 1980 COLA hike was a record 14.3 percent — Social Security spending reached $171 billion in 1983.

Conservatives felt betrayed by their champion. Pete Peterson, Nixon’s commerce secretary, called indexing the administration’s “worst fiscal mistake.” By 1975, the program was paying more than it took in. And it was on target to clean out the Trust Fund by July 1983, which would have forced across-the-board cuts in checks thereafter. Bipartisan reforms in the nick of time bought several decades of breathing room by increasing the payroll tax rate, gradually raising the retirement age for full benefits, expanding the reach of coverage to government employees and taxing part of the benefits of higher-income beneficiaries.

La Plus Ça Change…

Today, as its annual outlays approach $1.3 trillion, Social Security again faces the prospect of being unable to pay full benefits in a decade or so. Since the political fallout from cutting the benefits of current recipients is almost unimaginable, it’s a safe bet that Congress is going to trim benefits for future beneficiaries, raise revenue or raise the retirement age. Probably all three. The best guess, though, is that inflation protection is here to stay.

Just say “thanks” to the president you love to hate. 

main topic: Social Safety Net
related topics: Pensions