FDR’s Alphabet Soup

Records from the Great Depression

Cath Madden Trindle

SSA-Social Security Agency

1934-present   NARA RG47

Drawn by climate and activity, thousands of elderly Americans flocked to southern California during the roaring twenties. Their comfortable living came to an abrupt halt as many lost their savings and retirement incomes when the Depression crashed down.

Controversial then and now, the Social Security Act passed in 1935, promised benefits ranging from $10 to $85 per month. Supporting this level of benefits required a tax rate of 2% (half paid by the worker and half by the employer) on the first $3,000 of wage income. The first checks arrived in households in 1940 with a maximum payout of $41.20 per month.

But the SSA was not the only suggested pension plan for citizens. Dozens of plans were proposed, over eighty in California alone. Some were suggested before the SSA passed, some were suggested as amendments and some were considered as supplements to what had already passed.

The most popular proposal was the Townsend Old Age Pension Plan. It was proposed in 1934 by Dr. Francis E. Townsend (1867-1960), a retired Long Beach physician.

The plan was simple. Each person over the age of sixty who was retired (there was a “fully” retired test) and had a past life free from habitual criminality would receive a monthly pension of $200. They were required to spend the money within thirty days thus restoring “the proper circulation of money.”

No contributions were to be collected from the beneficiaries. There was no obligation to work and pay taxes for a number of years. It was possible for a person who never worked a day in their life would be entitled to a full ʺretirementʺ pension under the Townsend Plan.

There was no means-test, poor and rich alike would collect the same $200 payment regardless of any current or past taxes they had paid to the government. And the beneficiary had to spend the entire pension payment each month as it was received–it would be illegal to save even a penny from the benefit.

The funds would be supplied by a 2% federal sales levied ʺon the gross value of each business, commercial, and/or financial transaction,ʺ to be paid by the seller.

Within two years of the publication of the plan, as stated in a letter to the editor in a Long Beach, California news-paper, there were over 7,000 ʺTownsend Clubsʺ with over 2.2 million members actively working to make the Townsend Plan the nationʹs old-age pension system. Regional and National Conventions were held, the walls reverberating with the clubs anthem “Onward Town-send Soldiers.”

Public opinion surveys in 1935 found that 56% of Americans favored adoption of the Townsend Plan and in 1936 Townsend delivered petitions to Congress containing 10 million signatures in support of the plan. However, fiscally unworkable, the plan was not adopted. The Social Security Administration website has a synopsis of the plan (The Townsend Plan’s Pension Scheme) that discusses the fiscal implications. You will also find a link to the full text of the Congressional hearings. You can find a guide to records held in the National Archives at Guide to the Townsend National Recovery Plan, Inc. Records 1934-1960.

To put that $2400 a year in perspective, my father-in-law at the age of 29 earned a salary of $1,545.70 as a teacher in a Long Beach. He did not reach the lofty income of $2,400 before he joined the army in 1942 and in fact his income in 1952 just topped $2,500 as a salesman of audio-visual equipment to schools.

Another proposal, specifically for California’s elderly, was Willis and Lawrence Allen’s “Ham ‘n’ Eggs”. It was based on Robert Noble’s California Revolving Pensions Plan which had promised to pay the elderly $25 every Monday morning. The Allen brothers, started out working with Noble, but soon suggested a different plan that omitted any involvement by Noble. Their plan offered to pay every unemployed person over fifty $30 every Thurs-day. Like the Townsend act this plan suggested a tax of 1¢ to 2¢ a week on unspent funds as an impetus to keep the money moving in the economy.

The plan was to be funded by a 3% gross income tax on Cal-ifornia Individuals and businesses. Although denounced by economists as irresponsible, it was placed on the 1938 ballot as an initiative. Although defeated, it received more than 1,430,000 votes. In fact it might have won if the corrupt practices of the Allen brothers had not come into the open shortly before the election.

Read more at The Battle for Ham and Eggs – San Diego History; California pension plan,Ham and Eggs, October 1938 – LA Times Blog. The Social Welfare History Project

You can read more about the History of Social Security on the SSA website.

Originally Published in the CSGA Newsletter May-June 2013