1935  Labor and Social Security

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The National Industrial Recovery Act of 1933 had included provisions to legalize collective bargaining by organized labor. Once the NRA had been struck down Labor Secretary Frances Perkins and Senator Robert F. Wagner (D-NY) set about drafting a law to establish labor rights. The Wagner Act, the National Labor Relations Act of 1935 was a wide-ranging bill covering union organizing, labor-management relations, and legalizing the closed shop requiring union membership as a condition of employment.

The Social Security Act inaugurated a government pension system funded by a 2 percent tax on the first $3,000 of payroll income to begin in 1937. The act also included unemployment insurance, aid to the states for health and welfare programs, and the Aid to Dependent Children program.

The Wagner Act

The Wagner Act, sponsored by Senator Robert F. Wagner (D-NY) legislated a legal framework for the relations between employer and employee. The act legalized the right to strike, barred employers for firing worker for their union activities, and required them to negotiate in good faith with a union once it had been certified as a bargaining agent by the National Labor Relations Board.
Intention: The vast economic forces unleashed by the industrial revolution had fallen hardest upon those forced by their limited bargaining power to work for subsistence wages in dark and dangerous mills, mines, and factories. It was a matter of justice to provide beneficial legislation to allow workers to protect their interests by organizing in labor unions so that they could bargain with their employers as a unit rather than as helpless individuals.Liberal Line: The [[Wagner Act]] was one of the great landmarks of progressive legislation providing protection to working people from the unregulated capitalist economy. Without the protections of labor law workers would be powerless against their employers.
Outcome: The English common law had established centuries of precedent against “combinations in restraint of trade,” meaning both combinations of businesses and combinations of workers. But the entry of working men into politics in the 19th century meant that this ancient precedent began to encounter opposition. In the landmark [[Commonwealth v. Hunt]] the Massachusetts Supreme Judicial Court, following the election returns, ruled that unions were legal and workers had a right to strike. The [[Wagner Act]] established a national legal framework in which union and employer relations could be formalized.

But the granting of monopoly privileges has a simple effect. It allows certain workers the opportunity to charge monopoly prices for their labor. And in the aftermath of the [[Wagner Act]] wages rose substantially, especially in unionzed sectors like steel and autos. In the context of the Great Depression this meant creating more unemployment and extending the depression. The [[Wagner Act]] must be considered partly responsible for the sharp [[Recession of 1937]].

Conservative Line: Unions are a combination in restraint of trade, monopolies that almost always work in behalf of powerful special interests and against the interest of the consumers and the general interest. But clearly many workers regard labor unions as an essential bulwark against the power of the market. The question is: how much monopoly bargaining right can society tolerate? Seventy years after the [[Wagner Act]] we can see that all power corrupts, even union power. Union power helped destroy the basic steel industry, the automotive industry, and, through government employee unions, has helped develop bloated and ineffective state and local governments.

The Social Security Act

The Social Security Act was signed into law by President Roosevelt on August 14, 1935. It has become one of the most popular of government programs. The central program, Old Age, Survivors, and Disability Insurance, provides monthly payments to qualified beneficiaries from retirement until death. Social Security remains a crown jewel of the New Deal and the Democratic Party.

The bill was drafted in 1934 by an economic security committee headed by Edwin E. Witte and shepherded by him through Congress. The act was affirmed by the Supreme Court in a 5-4 vote in Steward Machine Company v. Davis in 1937. A tax of 2 percent on the first $3,000 in wages, shared between employee and employer was applied in 1937.

Intention: The notion of old age government pensions was pioneered by the Germans in the 1880s and by the 1930s had become a central idea of progressive politics in all western nations. Social Security provided a guarantee that older Americans “would have something to live on” after they were too old to work.Liberal Line: Social Security is one of the great social gains that liberals have given to the American people. It has rescued senior citizens from poverty and provided them with the dignity that a life of work demands for every citizen.
Outcome: The Social Security Act placed a tax of 2 percent on labor at a time when unemployment in the United States exceeded 15 percent. Raising the cost of labor at a time when millions of people were out of work was not a policy likely to get more people back to work. The new tax had to have contributed to the sharp and painful [[Recession of 1937]].Conservative Line: The great Winston Churchill said, in connection with his nurse, Mrs Everest, that he was proud “to have had a hand in all that structure of pensions and insurance” which is so much of a help to “poor old women.” Conservatives just wish that the program had been handed off to the investment industry where it could have become a genuine savings program rather than a simple transfer of income from the working people to the older generation.

1929-1939: “A Decade that will live — in stupidity.”

Why Stuck on Stupid?

Seventy years ago the leaders of both US political parties turned away from the policies that had created an economic powerhouse we call the Roaring Twenties. For ten long years Americans suffered through wrenching economic dislocations: deflation, inflation, a four-year economic contraction, endless unemployment, mindless political experiments, and ruthless attacks on businessmen for political gain as their leaders stayed Stuck on Stupid.

Today, after a twenty-five year economic boom, Americans are once more faced with a political elite that wants to monkey with success. It wants to raise tax rates. It wants to restrict trade. It wants to increase government power.

It’s time to look back and remind ourselves how it came to be, starting in 1929, that America got itself Stuck on Stupid. Otherwise it could happen again.

 — Christopher Chantrill



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presented by Christopher Chantrill