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Robert M. Ball - Interview #6
This is another session in the Bob Ball oral history interview. This session is taking place on October 25, 2001 at Mr. Ball's home in Alexandria, Virginia. Larry DeWitt interviewing for SSA, assisted by Ms. Lillian Liu of the SSA's Historian's Office.
Ball: You wanted me to tell you something about Arthur Altmeyer.
I do not think he has gotten anywhere near the place in history he deserves.
Altmeyer really dominated the development of the system from a little
bit after it started up to about 1953. Everybody else was subordinate
to his influence. His influence began in 1933-34. But I wouldn't say he
was dominate then. Doug Brown was just as influential. But Altmeyer is
certainly one of the most influential from the very beginning.
After he became the Chairman of the Board in 1936 in all aspects of Social Security he was the big policymaker. Wilbur Cohen was just a helpful assistant to Altmeyer then. And Wilbur has been written up a lot. But I don't think there's been anything significant written about Altmeyer.
I think it's really a good idea of yours to write an Altmeyer biography. I was going to say if you get tired of it and decide not to continue with it . . .
Interviewer: Oh no. No chance!
Ball: I think we ought to have somebody else, as a backup.
Interviewer: No. I'm going to do it.
Ball: If you're about to die or something . . .
Interviewer: I'm not planning to die anytime soon!
Ball: Maybe somebody like Ed Berkowitz. Berkowitz has done a biography of Wilbur, now he is doing one of me, but he's ignoring Altmeyer, who may have been the most important one of all.
Interviewer: Well, not the most important necessarily. But it is a gap-the fact that no one has done a biography of Altmeyer. And since no one has done it, I've decided I'm going to do it.
Ball: The other very important person was Doug Brown. But even he doesn't come up to Altmeyer's role in administering the program as well as setting policy.
Interviewer: While we're on the subject, I talked to Ed earlier in the week, he's finished his book and he has sent his manuscript to at least one publisher.
Ball: He has a completed draft?
Interviewer: Yes. He's finished his draft. I know he got your comments and I'm sure he's already included them.
Ball: He hasn't responded to me.
Interviewer: Well he's produced a revised draft. And I gave him comments on your comments. He corresponded with me about your comments and sent me a copy of them so I know he was working on them in to some degree.
Ball: Oh? Did you agree with my comments?
Interviewer: I did. I said, basically, that everything you said was right and he ought to do what you said. (Laughing) So, I think he did that. But I haven't seen the revised draft, so I can't say for sure.
I know he has prepared a prospectus and sent it around to four potential publishers: University of Wisconsin Press; Cambridge University Press; University of Kansas Press, who published his Wilbur Cohen book, and Brookings. So far, he's heard back from Wisconsin. They've asked to see the manuscript. Kansas said "no," they're not interested. He hasn't heard from Brookings or from Cambridge yet So, that's where he is.
Ball: You might raise the possibility of Columbia University Press with him, too, since they have a special interest in social science and they published my first book. So, that's another possibility.
Interviewer: All right. He's been asking me for advice on publishers, and I don't know how I could give him advice. I mean, he's an experienced author and I'm not. But, that's what he's done.
Ball: Does George Washington University have a press?
Interviewer: I guess not. He didn't say anything about that. Cambridge has done some of his other books and so I think he's hoping they will respond favorably.
Ball: There's Oxford University Press, too. Oxford has done a couple of Social Security books.
If it gets desperate--I wouldn't suggest this early--Wesleyan University, where I went to school, runs the publishing house for four or five relatively small college presses. They all go through Wesleyan University Press. But I would think these others are better.
Interviewer: Yes, I think so too.
Ball: Does he intend to send me the draft that he's showing to the publishers?
Interviewer: I don't know. He didn't send it to me. I haven't seen it either.
Ball: He had said a couple of times to other people that he was going to respond to my comments, but he never has.
Interviewer: I think he accepted your comments. That's the impression I got. I haven't seen the revised draft but, as I said, he sent them to me and asked me what I thought about them.
Ball: But, he didn't send you the revised draft?
Interviewer: No. I haven't seen the revised draft.
Ball: I would suggest that he interview quite a few people.
Interviewer: I know. And he decided not to do that and that's a shame.
Ball: He's not going to do it at all?
Interviewer: I don't think so.
Ball: Because the last correspondence we had on that I greatly reduced the number of people I was suggesting, but I said he ought to do some.
Interviewer: Yes. I think it would be good if he did, but I think he's decided that he's invested all the time he can on this project and he's ready now to get it published. That's the impression I have.
Ball: I think he doesn't like to interview. It's just a matter of taste.
Interviewer: That may be true too. I think he prefers to look at the paper trail. That's how he writes. That's how he did the Wilbur Cohen book and I know you think that caused some problems.
Ball: Yes. Because he looked only at Wilbur's stuff. If you are going to look at documents, you've got to look at a lot of other documents too. (Laughing)
Interviewer: Yes. He likes to do that kind of research.
Ball: Did I tell you that the Nancy Altman biography project is back on?
(Editor's note: Nancy Altman is writing a combined biography of Wilbur Cohen, Bob Myers and Mr. Ball.)
Interviewer: No. I wondered. I haven't heard from her in quite a while and I didn't know what was going on
Ball: She has started working on it again.
Interviewer: O.K., good.
Ball: And John Trout seems to think he's about through with his biography.
(Editor's note: John Trout is also writing a biography of Mr. Ball.)
Interviewer: He sent me a draft of his work to date. He is a very fine writer and what he has written is quite good. But as I read the draft and got to the end of it I thought, "well, where's the other chapters, where's the rest?" I felt like it ended too quickly somehow--like he wasn't quite finished.
Ball: It's an idea for an book . . .
Interviewer: Yes. But there is a lot going on here, with three authors working on biographies of you. Something's going to appear sooner or later.
Ball: On Altmeyer, when I say he dominated policy I'm not talking here just about OASI, the federally-administered program in which he was of course dominate. But, also, very important to him were programs like unemployment insurance, where he switched completely away from the Wisconsin school to support for federalizing unemployment insurance. The Wisconsin school had always emphasized the relationship of what employers paid to the amount of unemployment among their own employees-this was called "experience rating." The idea was that this would serve as an incentive that would make a difference in the amount of unemployment in the country. Altmeyer finally saw that view as not being very sensible. Experience rating was Rausenbush's idea and the unemployment insurance advocates in Wisconsin. Altmeyer turned his back on "experience rating" and he became a strong advocate of federalization. Those were his views and that became the view of the Social Security Board and the liberal community in general.
He was also very important in establishing the concept of state civil service to operate the Social Security Act programs that were administered by the states. He was very strong on avoiding patronage. Today it is hard to realize how revolutionary that was. Altmeyer insisted, against a lot of opposition in the states, that these were not patronage jobs. He made it a requirement of getting grants from the federal government for the states to have an objective, career, civil service in unemployment insurance and public welfare, and so on. That was a very important establishment of an institution. Henry Aronson worked with him on it but Altmeyer was a strong backer.
Altmeyer was also very strong in the means-tested and public assistance programs in supporting beneficiary rights. Also the principle of cash payments in welfare was really a very important change. Welfare recipients for the first time had the right to spend their money as they wanted--it was their decision. They got the money and they were treated like other human beings, not led around by the hand. It was a change in attitude where before everybody else in the country was free to spend on frivolous things now and then, but if a welfare recipient had a radio or a drink it was considered they were spending other people's money. They had no right to this kind of indulgence. So Altmeyer was very good about rights to assistance and the money principle in public assistance.
Interviewer: I think another part of what you were saying about the civil service and merit promotion on the state side, was true also on the federal side. Altmeyer helped establish a similar ethic within the Social Security Board. Right?
Ball: Yes. Absolutely.
He took a great interest in the detailed administration of the federal program, especially in the beginning, up until the time he finally found a Bureau Director whom he had confidence in. The first Bureau Directors of OASI were not very successful. I forget the number but, probably there were three or four more or less failed Directors before Altmeyer fixed on John Corson. Corson was a really young guy. He had been the Assistant to the Executive Director of the Board before being promoted to Bureau Director. The way the Social Security Board was set up, there was an Executive Director of the Board. The Board was supposed to be a policy group and the Executive Director supposedly had a lot to do with running these programs.
Interviewer: That was Frank Bane in the beginning, right?
Ball: Frank Bane for a long time but I think Oscar Powell may have been first. Powell was before Bane. John Corson was the young Assistant Executive Director and Altmeyer put him in charge of the Bureau of Old Age and Survivors Insurance, and he did a great job, and was just what the organization needed to get started on the right track.
And Altmeyer established a lot of traditions, if you can establish a tradition. He started the traditions that became a lot of what the Social Security organization come to be, in terms of service to the public and emphasis on that idea. Then at that point, Altmeyer stopped being as much involved in the detailed administration
Interviewer: When Corson came in?
Ball: After Corson came in and proved he could do it.
But, before, he was very involved. I remember a story of Altmeyer being in his office, sitting down on the floor with Governor Winant and taking slips of paper with names of District Office Managers and putting them around in different offices in the country. He was involved to that degree in detail.
It was a strange lopsided-type organization, which followed from the fact that the Social Security Act was a collection of different kinds of programs that really didn't have a lot to do with each other, except a broad concept of security. But when it came to day-by-day administrative tasks there was not really any cross current of staff interactions at the level of the Commissioner in those days. This happens not infrequently in government. A collection of people are sort of forced to sit together to consider each other's problems, with really nothing much in common. The President's cabinet is like that. And presidents usually get tired of having cabinet meetings. They meet with the guys who are going to do what is important that day, rather than wasting a lot of time having the State Department trying to learn Social Security policy.
So, Altmeyer had an unemployment insurance system, which was out in the states, but had a federal aspect too. It was a combination of an employment service and the payment of unemployment benefits.
And he had public assistance, which was headed by a professional social worker, Jane Hoey. Hoey emphasized a great deal the impossible dream of social work, of having people who could actually help individuals become independent by counseling and personal involvement. The early social work assumption was there was something wrong with these people and you could help them change. It came out of a tradition of "Lady Bountifuls," which social work started with but grew beyond. Hoey really pushed for stuff that was not possible. In public assistance they have never really had social workers. They've had some supervisors who were social workers and I think they always held out the goal for the employees that they were supposed to be doing these counseling things.
I've always been struck by the difference in job concept between the OASDI approach and that in public assistance. The OASDI job in the District Office is a narrow job, really. It's pretty narrow: to develop the proofs for paying a cash benefit. We insisted on a great deal training of our employees before they were turned loose on the unsuspecting public, so there is some expertise involved, to be sure. We also insisted on setting up goals that were feasible and possible. But in public assistance traditionally there were these huge, amorphous, goals of reform of the individuals and their families. And really no training, no significant training, to get them to where they could conceivably do even a good job of determining eligibility as OASDI does.
I don't think Altmeyer resisted Hoey enough. He went along with Jane, who was a very well-motivated person who wanted to do good in the world. But I don't think Jane was much of an administrator. Of course, she didn't have to be. All you needed to do on those grant-in-aid programs was to set goals and to pay for what the states did.
The other thing I was going to say is that Altmeyer shifted from paying a lot of detailed attention to running the federal program, to working on the future of the program. He spent a great deal of his time after the first few years in trying to shape the future of Social Security. A major emphasis was the attempt to get a national health insurance plan passed. That consumed a great deal of time and effort of the staff at the Commissioner's level. The research staff did a lot of research in this area. I.S. Falk was the first director of research, and then Ida Merriam later. Falk was chosen because he was an expert in health insurance. So there was a great emphasis upon rounding out the program with disability insurance, health insurance, and extensions of coverage.
The reason I got to know Altmeyer well, from my relatively low level position in the organization, was that he had a great personal interest in covering additional occupations under Social Security, and that was my job. Within the Bureau of Old-Age and Survivors Insurance I was the expert in charge of extending the program to farmers and the self-employed, and farm workers and household employees, and non-profits, and everybody else that wasn't covered in the beginning. My job was to try to figure out how we can get them covered. So we came in contact early. Though I guess between me and Altmeyer there would have been three or four steps in the administrative hierarchy.
But I have been lucky throughout my career in finding myself thrown into contact with top people because I would belong to small organizations within the hierarchy that, although not big in themselves, were of interest to the top people. That happened within Old-Age and Survivors Insurance where I was really the Assistant Director of the training office for two or three years. But the training office reported directly to the Director of the Bureau. Now, most of the people on the Executive Staff had organizations of two or three thousand people under them. The Director of Training had four or five people under him. If he didn't go to an Executive Staff meeting for some reason, I went in his place. So I mingled all the time with the people who were really the big guys in the organization.
Interviewer: This is already in the early forties? mid-forties? What period of time are we talking about?
Ball: Yes, mid-forties. I was hired at Social Security in January 1939 and was out in the field for a couple of years, doing nothing significant for national policy. I took claims and called on employers to tell them they're supposed to get correct Social Security numbers. I gave information talks to meetings-things like that. Then I went to the Central Office, which was the big sea-change for me. Then I left all together at the end of seven years. That was 1946. So the period I'm talking about . . .
Interviewer: Is prior to that?
Ball: Yes.
Then I was at the Advisory Counsel after I was hired from a position at the American Council on Education.
But I got to know Altmeyer when I was in charge of the extension of coverage, from 1943-46. After I left, Karl de Schweinitz and I were operating what we called the University Government Center-which was a training and educational operation for top government administrators throughout the country in the fields of welfare and unemployment insurance and OASDI, and separately for the university professors who taught Social Security, usually as part of some larger course.
That's an introduction to saying that Altmeyer was quite active in that University Government Center that Karl and I ran. He was a member of the Board that we had set up; he spoke frequently at our invitation to the training classes. Frequently, he was the one who would be at a dinner that we would have and he would talk informally about what was going on and answer questions.
Interviewer: While you're on that subject let me ask you about Altmeyer as a speech maker and as a public speaker. I've seen one little clip of him made in 1936 for a trailer that would have been shown in the theaters explaining the new Social Security program. He seemed a little stiff and not very dynamic, and I'm wondering how he did as a public speaker.
Ball: You've got it right, he wasn't very good. He didn't think it was important. He had a view about an administrator which was quite the opposite of mine-- although I hadn't developed any at that time . . .
Interviewer: The opposite of what you became as an administrator?
Ball: Yes. He said that an administrator ought to be about as exciting as cold spinach. That's a real quote from him. He thought it was a diversion if administrators occupied a public spot in relation to the employees and the public. He was a behind-the-scenes person who wasn't very comfortable with people, except for a few people. So, your impression of him as a public speaker is just right. He did very little of it. And what he did was sort of stiff and awkward. In person he was not that way.
His relations with individual people is also kind of interesting. For instance, when he wrote his book, after he left the government, he deliberately avoided mentioning anybody by name.
Interviewer: Yes. It's striking. It's very striking.
Ball: Deliberately. I mean he made a decision not to mention anybody on the theory that he might say something that they would resent. That he would give too much credit to this person vs. that person, or not get it quite right. But even if he got it right, he was afraid he was stirring up animosities. It really upset Wilbur Cohen a lot to not have gotten any mention in the book
Interviewer: Yes, I feel it's an extraordinary book. It's very antiseptic in that way. Impersonal, I guess, is the way to say it. It's very impersonal
Ball: That's the way to think of him.
Now, on the other hand, if we're talking about his personality and character, which I started to do, for people who worked for him closely-- near him like secretaries and assistants, like Wilbur--he went beyond what I would have thought was the ordinary relationships among people like the head of an agency and secretaries. He was very paternal. For example, Leona McKinnon who at first was the second secretary in his office-she was like the second employee of the Social Security Administration, along with Wilbur, and through a series of promotions she ends up as the Secretary to the Board. Which was the job Maureen Mulliner had before. This is the person who kept the formal minutes of the Board's meetings, and saw that everybody got copies of the papers before the meeting, and that kind of thing. That was a substantial job, but the point I was starting to make was that Leona's relationship with Altmeyer was almost like an uncle or a father. He did not hesitate to object to her getting a divorce. He didn't think it was a good idea and he thought he had a responsibility to tell her so. He tried to keep her from getting a divorce.
So he had a paternal instinct for people very close to him, and a standoff attitude for most of the rest.
Interviewer: How did those people close to him feel about him?
Ball: Oh, they were devoted to him. Completely devoted to him, but subordinate.
I don't think Wilbur ever called him anything but Mr. Altmeyer in all the period of their relationship. It wasn't as if they were partners. It wasn't as if Wilbur thought that he had the authority to argue with Altmeyer. The way Wilbur operated with him was almost entirely finding out what it was that Altmeyer wanted and doing it. He was very imaginative about his doing it, and he would go off on his own, way beyond instructions. I don't mean that he waited for instructions. But he didn't try to decide whether the wage base should go up twelve hundred dollars, or six hundred dollars, but when he got the word, Wilbur was very good on the Hill with Congressmen and had very imaginative ways of accomplishing the goals. He worked very well with the Republican minority and had a couple of key people that he would get to offer bills. He had a long range view of how to accomplish these things. But what I meant was that Wilbur looked up to Altmeyer, not at all like a partnership, but like a leader. And that would certainly be true of the several women who worked in his office over the years. His personal secretaries--Maureen Mulliner and Leona McKinnon and so on. Once he decided you were part of the small team that he had, then he completely relied on you. I'm not going to repeat the story, because I've told you before, about how I got to be the Acting Director of the Bureau. But that was just because Altmeyer liked my views of the future of the program.
Interviewer: Do you know anything at all about Altmeyer's family history?. I've had a hard time trying to uncover the family history back in Wisconsin.
Ball: I don't think there's a lot to it. He had no children, as you know. His relationship with his wife, I think, was very close, as far as I know. I didn't know her well, but I had dinner with them and so on. She seemed to take almost no interest in the subject matter of his job and it was all a personal relationship. And as far as I can tell, he didn't seem to have close friends outside of work. Some of the people at work he had selected as real friends. John Corson was one of them. They played golf together. Frank Bane was another. Insofar as he ever had any recreation, it would be with those people, as far as I ever knew.
I don't want to give you the wrong impression about me as a source. I was not a personal friend, outside of work. I'm describing Altmeyer in a work situation.
He could joke around, and seemed to have a good time with a small group.
I can give you an illustration of how standoffish, in a way, he was. As I remember, one time he had to have some kind of relatively minor operation. He was going to be in the hospital, maybe overnight. He went to great trouble not to let anybody know that he was going to be in the hospital, he thought that was too personal a thing. When I was Commissioner, I had precisely the opposite view. One time I came back from a trip to Lisbon with a pretty uncomfortable illness, and I issued a statement about it, because otherwise the place was full of rumors.
I thought that part of the job of leading your organization was to attempt to inspire it, in terms of talks and addresses, and personal contact. Altmeyer didn't do that. Now, Corson did. Corson would have a lot of meetings and so on.
Interviewer: Let me ask you a couple of things, to fill in some gaps. This will be kind of out of order, but some things that are on my mind. I wondered about his final days and his last illnesses. I know that at some point he had a pacemaker inserted, so I assume he had some kind of heart problems.
Ball: He had the pacemaker for quite awhile.
Another illustration of his way of looking at things. He left in 1952 and some years later I wanted him to be on one of the standard Advisory Councils, which seemed logical. He turned it down. He told me that he cared so much about the way the program had developed when he was a part of it, that he didn't think that he could be a good member of a council that was re-evaluating it and might come up with some changes. He thought he just wasn't suited for that after being so much a part of creating what it was. Well, obviously, I feel just the opposite (Laughing)
Interviewer: Yes. Most people would have the opposite reaction. You want to be there in order to make sure it stays like you want it.
Ball: But that's not what he thought. I think it was not just a routine following of a principle that says one shouldn't get in the way of one's successors. It wouldn't be right for Clinton to start second-guessing everything that Bush does--you get out of the way and let the other guy run it. But, in his case, it was more than that.
Interviewer: It was an expression of his character and his personality, is that what you're saying?
Ball: Yes. He seemed remote and calm, but this is an illustration of his being emotionally so involved in the creation of an institution that he didn't think he would be very good at dealing with other people who hadn't been involved and might want to change things. I would guess he would have been pretty short with them. Instead of being a negotiator, I think he might just cut them off.
Interviewer: That's the other way that you're different, Bob. You're a master negotiator. And he was probably right about himself. That's a skill you've got to have in an Advisory Council, or anything like that.
So do you know anything about his illness and his death? I see some records in his papers of his being hospitalized a couple of different times. I presumed it was heart trouble that he died from.
Ball: I don't know what the death certificate says, you can find that out. That's a public record so you can find that out. But for several years, he had this pacemaker,
I know that when he left SSA, he went back to Madison, Wisconsin. It turned out that they missed Washington and so they came back and took an apartment in a big high-rise in Washington, from which they invited a few people to dinner now and then. But he was never a part of anything after that, so he turned around and went back to Madison again. He was having trouble figuring out how to live the rest of his life, I think. He stopped by and saw us once in awhile. I remember him stopping by Wilbur's office when I was there.
He would call me to talk, and he was still interested. He was very relaxed and full of laughter, and stuff like that, but that wasn't the general personality he presented to the world. He stayed out of things. There's no question, he just stayed out. He wrote this book, which is a very useful book. It's a good story on a lot of things that were done. If he hadn't written it, they wouldn't be known. But it does have this antiseptic quality to it. (Laughing)
Interviewer: Yes. It's very funny. It's very odd. I also noticed in his papers that while you were Commissioner you would from time to time send him copies of reports and studies and so on. I see a lot of that in his papers, so I know he was staying involved, at least intellectually, following the developments of the program.
Ball: I never knew whether he read them. I sent them to him.
Interviewer: I'm sure he did. In fact, I can see some correspondence where he's talking about some issues, but not a whole lot.
Ball: He didn't do it publicly. A pretty good thing he did spend a little time on was when he was called back under subpoena right after he left to testify at some hearing chaired by Congressman Curtis.
Interviewer: Yes. That's a great story. Unbelievable story.
Ball: Curtis and his staff were complete incompetents in those hearings. We should have had a lot more trouble than we did in those hearings. If Congressman Curtis had been smart, and if his staff had been smart, we would have had more trouble than we did. As it was, after the first couple of days, it was a breeze for us. We worked hard to prepare, but they just weren't very good at their efforts to attack the program.
Interviewer: You were better-prepared than they were?
Ball: Yes, they just weren't very good at it. It wasn't too hard for us. We worked hard. That's the distinction I'm trying to make. It took up all of my time for a couple of weeks.
Interviewer: I bet.
Did Altmeyer ever talk to you about his growing up in Wisconsin?
Ball: No.
Interviewer: . and his parents or anything like that?
Ball: No.
Interviewer: Nothing personal? No personal history?
Ball: Absolutely none. None at all.
Interviewer: That's very odd too.
Ball: Another thing that might give you a touch of his character. Not his character so much, as his personality, and the face he turned to the world. Partly he was sarcastic about the Congress. When he went into a hearing they referred to him as "Dr. Altmeyer." They did it because he annoyed them. But he didn't know how to get out of that formal relationship with them. They weren't comfortable with him and he wasn't comfortable with them.
I mean, he was a complex guy. I don't want to give the wrong picture. I remember hearing about an incident in which Doughton, Chairman of the Ways and Means Committee, already an old guy when he was Chairman, came to see Altmeyer in Altmeyer's office. They were dealing with something and Doughton dropped his old-fashioned vest-pocket watch--one of these great big pocket watches. And it fell to pieces on the floor. Well, Altmeyer turned to Leona McKinnon, who was in the room, probably just the three of them, and said "get it fixed." So she scooped up all the parts of the watch and rushed off and got a jeweler to put it together again and came back within two to three hours to give it to Doughton before he left the meeting. Now, he would love that--Altmeyer would love it. And Leona would have killed herself to do it, and Doughton would be impressed.
Interviewer: That's a good story. So did you in those earlier days, when you were first getting to know Altmeyer, did you have a chance to attend the executive meetings in which he would be presiding and see him interacting with the Bureau Directors and can you tell me what that was like?
Ball: They did have executive staff meetings, but they weren't very significant. I have attended them. But the meetings that were important were after the Social Security Board was dissolved and replaced by a Commissioner.
After becoming Commissioner, Altmeyer continued the formality of meetings on important policy issues, which had been the case before with the Board. Bureau Directors would submit written proposals that would be circulated before the meeting and all interested Divisions would comment. Then you'd hold a meeting preparatory to a decision in which people would be arguing back and forth and making their points and so on. Which is not different than a lot of cabinet meetings, when a president frequently circulates a paper to get a reaction from several of the departments and then holds a meeting, maybe not with the whole cabinet, but with those most interested, to discuss it. In the Board's case the procedures of the past would be to make the decision and then formalize it in Minutes, so that the records of all the early decisions are there for all the world to see-the arguments pro and con and the final decision. It's a great resource. I don't know who's used it, but I had a set of them.
Interviewer: I have a set of them in the History Archives.
Ball: Did you send them to Wisconsin too?
Interviewer: No I haven't sent them to Wisconsin. I have a set in the SSA History Archives in Baltimore.
Ball: Did you get it from me?
Interviewer: No. It was something Abe Bortz had put together years ago.
Ball: Wisconsin must have my set because I had them here.
Anyway, those meetings were the ones that made a difference, and I was attending a lot of those, and Altmeyer was good and not so good. He intimidated people, which is not good. I mean, he didn't get out of them their best evaluation in an argument. They were too scared of him, except for a few people. For instance, as good an analyst and philosophical policy maker as Alvin David got tongue-tied with Altmeyer. He just couldn't stand up to Altmeyer in that setting. Altmeyer liked an argument. He would be glad to have people stand up and fuss at him back and forth, which I did all the time. But if people didn't know that, then he was not good at bringing them out and trying to get their views. He was very direct--intimidating you might as well say (laughing)-if you're subject to that kind of intimidation. But to do your best work you really have to have a feeling that you don't care, at some level, whether you're going to keep the job or whether you're going to get promoted, and he was responsive to that attitude.
Interviewer: Did he treat the Bureau Directors the same way? You mentioned Alvin David. I kind of think of Alvin as a special case. From my brief time with Alvin, he impressed me as being a gentle soul in some way and I would kind of think that . . .
Ball: Yes, but this was special. Alvin could always defend his viewpoint elsewhere. He got tongue-tied only with Altmeyer.
Interviewer: O.K.
Ball: Each Bureau Director was a separate person and I suppose most of what went on with Bureau directors went on one-to-one. I know enough about them and their personalities to know that it would have been very different with Corson, for example. Altmeyer and Corson saw things the same way and he would have delegated very strongly to Corson and there wouldn't have been this kind of argument. It was Jane Hoey, and the Children's Bureau people, where he would have thrown up his hands (laughing) thinking they were too temperamental.
Ewan Clague was the head of the employment service and unemployment benefits for a large part of the time. Ewan was absolutely impregnable. He had a tremendous ego and took everything anybody said to him as a compliment. (Laughing) I remember Altmeyer telling me that Clague came to see him and Clague was torturing himself about whether to leave SSA or not. Some other important job had come up. Altmeyer talked with him, and Altmeyer didn't gave a damn if he left or didn't leave. But Clague went through it all as if it was very important to the country which decision he'd make. Altmeyer just said to him, "Well, Ewan, make up your mind."(Laughing) He didn't say that he thought Clague was that important to the world.
Interviewer: What about Frank Bane and Altmeyer's relationship with him? You mentioned they were social friends and I have some indication of that from talking to Frank's daughter, Clarke. She told me a little bit about going over to socialize with the Altmeyers when she was a young girl.
Ball: Yes. That would be true. Frank Bane was a very hardy, joke-telling, politician-type guy. Almost the opposite personality from Altmeyer. As far as I know, they got along well. Opposites sometimes do attract.
Interviewer: There is one person who made some critical remarks about Altmeyer, and that was Thomas Eliot, in his book, which was published posthumously.
Ball: What was the criticism?
Interviewer: Well, his criticism was really consistent with everything that you've already been saying. He started off talking about Winant and how much he admired Winant and how he liked Winant because Winant was so warm and personable and likable as a personality, and he found Altmeyer to be hard to get along with, and hard to like, and not very attractive as a personality. That was essentially his criticism.
Ball: Winant had really no significant influence on Social Security. He was Chairman of the Board and left in 1936 because of the presidential campaign and the attack on Social Security by the Republicans. He of course was a Republican. So he left, and I don't know whether there is any trace of anything he accomplished while Chairman-- as opposed to Altmeyer.
Just to be sure that the personality things that I have been talking about don't way too heavily in your mind, you should be clear that Altmeyer was a great hero of Social Security. He's the one that got almost everything started right. It was the goals of good government that were in his mind all the time--on behalf of the people. He wasn't a bit of a politician. He came out of a Wisconsin reformist school that, of course, stems from John R Commons and that whole group. He headed the workers' compensation system in Wisconsin and brought to Washington the same completely impeccable approach to public service. We were very lucky to have a start up with him and I'm a great admirer of his. That never keeps me from seeing differences in personality. (Laughing)
Interviewer: All of that is part of the package, and none of that is incompatible. I agree.
Ball: Winant was basically a politician-had those characteristics. He was a very nervous fellow, personally. I was seated right next to him one time when he made a talk, a speech at an evening dinner. He was shaking as he got up to make that speech. I don't think the audience as a whole knew it, but he was very nervous about it. I don't know if he has ever had a biography or not, but he also had a real drinking problem-a serious drinking problem. He drank milk with scotch in it, to keep his stomach from going to pieces I guess. That was Winant.
New Hampshire had some influence on the selection of personnel because of Winant. Francis McDonald, the guy I worked for in the training office, came from New Hampshire. And Winant brought some other people with him, but that's all.
Interviewer: Now I've also heard you say about Altmeyer that he was very parsimonious . . .
Ball: Did I tell you about how he held off on getting Wilbur promoted?
Interviewer: That's what I want you to tell me.
Ball: That's terrible.
Interviewer: Go ahead. Tell me about that.
Ball: If Wilbur had been paid comparable to his work and influence, he would have had one of the top salaries of anybody in the organization. He was called the Technical Assistant to Altmeyer, and Altmeyer could have put him at any pay level he wanted. Wilbur was a young guy and Altmeyer in effect told him that he thought it would spoil him, getting too much, too young. So (laughing) he didn't think about the work Wilbur did, he thought about the effect on his character of getting high pay. It was part of this paternalism I talked about. He thought Wilbur was too young to get paid so much. So Wilbur got paid what in those days was a middle- range government salary. But if anybody ever deserved a promotion, continuing promotions, Wilbur did. And Altmeyer just held off.
Interviewer: Not because he didn't agree with you about Wilbur's importance . . .
Ball: Oh no, no.
Interviewer: But because he had this sort of parsimonious attitude about him . . .
Ball: And paternal instinct. He thought it wouldn't be good for Wilbur's character.
Altmeyer was parsimoniousness, but maybe that's best illustrated by something else. He felt strongly that a program like Social Security should be administered without luxury. He thought it would be a bad public image for Social Security offices to be too plush.
You mentioned about Eliot being critical of Altmeyer. Was this an autobiography?
Interviewer: Yes. He wrote this little book that was not quite finished when he died and the autobiography was published posthumously and it was edited by John Kenneth Galbraith, who brought it out and wrote a preface to it and apparently edited the fragments of the manuscript. It's called, "When People Mattered." It was published by Northwestern University Press and I think it was 1994. It was a little book, and it never really made an appearance anywhere. I happened to find it in one of those bookstores where they sell remainders.
Ball: Really? (Laughing)
Interviewer: I just came across it by accident. But it's a nice little book, he tells some nice stories of the early days of the Board and the development of the Act. It's a good little book, if you have a chance to find it somewhere. He's not that critical of Altmeyer, but he basically said that Altmeyer was hard on him, harsh and critical.
Ball: I can believe that. (laughing)
Interviewer: You were telling me that Altmeyer didn't like lavish offices.
Ball: His thought was that he didn't want the people who paid their money for Social Security benefits to think that it went for executives being comfortable. So he selected the kind of office furniture that you have in your exhibit. I'm not sure he would have approved of the furnishings that I had in what's now the Altmeyer Building. I always thought it was a good idea to have Social Security offices look at least as good as private insurance companies when people came in. In my view, that was the kind of connection we wanted, not a connection to what a welfare office looks like. So that was a difference in our attitudes. We didn't argue about it, I'm just reporting. That's just how he felt. It wasn't a question of arguing because I wasn't in a position to do anything about it in those days anyway (laughing).
Interviewer: The last thing I wanted to ask you about Altmeyer is whether you can think of anybody else that might have known Altmeyer that is still around, that I might talk to?
Ball: I don't think Alvin David is in good enough shape, is he?
Interviewer: Well, I haven't talked to him in a couple of years.
Ball: Try him on the phone. He sounds pretty good on the phone.
Interviewer: I never thought to talk to him about Altmeyer. It never occurred to me. You know, I went to interview him about three years ago.
Ball: Well, he's still around. He still talks on the phone. He's got to be 95.
Interviewer: And when I saw him three years ago, he was mentally quite sharp but, physically, he was very frail. He was getting around with a walker.
Ball: Oh, yes. He still hasn't improved any.
Interviewer: He was quite crippled up when I saw him.
Ball: Yes. He has a very bad shortening of the spine.
Interviewer: So, nobody else that you can think of that might be of some help?
Ball: Is Maureen Mulliner still around?
Interviewer: She is but she's not mentally acute anymore. She's in a nursing home in Washington and has Alzheimers.
Ball: She must be close to a hundred.
Interviewer: Yes. She's definitely in her nineties. So, unfortunately, Maureen couldn't help.
Ball: Well, everybody I can think of is dead.
Interviewer: Yes. That's why I wanted to talk to you about this. (Laughing)
Ball: (Laughing) Yes, well you had better hurry up! That's why I wanted to talk about Altmeyer first.
Interviewer: All right. Let's stipulate that neither one of us is going anywhere anytime soon!
All right, let's talk about the 1994-96 council. In our last session we talked about the 1983 Amendments and the Greenspan Commission. You also explained to me what happened to the financing afterwards, and you gave me the best, most clear, explanation of that I've ever come across
Ball: I did tell you that was summarized in a page-and-a-half in Appendix One.
Interviewer: In the Advisory Council report, yes.
So that sort of leads us to the '94-'96 Council.
But, first, I want to ask you about the period in between the 1983 amendments and your participation in the '94 Council. At some point along this way the financing picture changed and we begin to have these concerns, and you are already writing about that and thinking about that and talking to people about that, even before you came on to the Council. Can you tell where you were and what you were doing in that interim period?
Ball: We haven't talked about that at all?
Interviewer: Not much. I don't think we have.
Ball: That's a big story in there.
Interviewer: Well.
Ball: What happened was that when the Reagan Administration came in 1981, they were faced with what was a real critical time in Social Security. The automatic cost-of-living adjustment had made the program very sensitive to the relationship of prices and wages. As you know, wages ordinarily rise faster than prices. And since the income to the program depends on the wages, which keeps ahead of the automatic provisions for prices, all is well. Except in the late 1970's prices went way up beyond where wages were going and significant unemployment appeared as well. So that in the late 70's the system was very rapidly using up what had been accumulating in the Trust Funds. I'm talking about Consumer Price Indexes of 11 and 12 percent. And a drop-off on the income side because of wages.
So when the Reagan Administration came in, they had a real problem. There's no question about that. But what they did was to go beyond what they needed to do to fix that problem. They took advantage of a real difficulty to cut back on the program. They used it as an excuse to cut back on the program, beyond what those of us who tend to defend the program thought was necessary.
So this precipitated for a year or so a real fuss between groups organized in what was called SOS--Save Our Security--and the Administration. SOS had started earlier. Actually it had started because the Carter Administration, particularly Joe Califano and Stan Ross, had proposed some cuts in Social Security that in retrospect were relatively minor, compared to what the Reagan Administration wanted to do. But as a matter of principle we were just opposed to the idea of a Democratic administration proposing cuts in Social Security, just like it was any other program, without any regard to it being a contributory social insurance system. So Wilbur Cohen and I together more or less organized this coalition--principally of labor, disability, and senior citizens groups--into this SOS coalition. I wrote several pamphlets for them, I testified for them. Quite a lot of stuff in my papers are from that period, defending the system against, first of all the Carter cuts, and then later the Reagan cuts.
So when Reagan came in they made a series of 8 or 9 proposals, which would have resulted in very serious cutbacks in the long run in Social Security. And they made one very serious political mistake. They just stupidly included in the list a very near-term benefit cut for the age 62 benefit. People couldn't believe it. Those who had plans to retire in the next two to three years were just suddenly told that the benefits that they had been counting on would be significantly reduced. They went down from like 80% at age 62 to around 50 or 60 percent. The exact numbers are all there, but don't depend on my remembering the percentages exactly. But that was the general shape of it.
This was almost certainly an idea of David Stockman's. Stockman was the dominant figure in domestic policy in the Reagan administration in the early years. Bob Myers, who was appointed as the Deputy Commissioner of Social Security by the Reagan Administration, was quite clearly cut out of the loop on this. Stockman didn't pay much attention to what people who ostensibly worked for Social Security thought or wanted. They ran this from the White House and OMB. And it really got away from Jim Baker and Dick Darman in the White House. They had a quick meeting with the President, on what were really Stockman's proposals, and without the usual vetting of proposals to a President, he adopted it after just a couple of hours of presentation.
Baker and Darman were left to one side realizing that Reagan had worked himself into a very bad hole. So the first thing they did was to try to separate the President from the proposals by having them released not by the President, as a White House initiative, but by the Secretary of HHS, as if they were his proposals. Well, this one feature was so bad, so blatantly unpopular, they couldn't get anybody in Congress to even introduce the Administration bill, just as a courtesy. They wouldn't touch it. The Senate passed a resolution-they didn't need to do anything, there was no bill up there-they just passed a resolution, by a vote of something like 92 to zero, stating their opposition to the proposals.
But the Administration still had a problem. It really was true that the system was not going to have the money to pay benefits within a few months, if some action wasn't taken. Now, I had been arguing for SOS in the years just preceding this, to take it easy, it wasn't any big problem, that we should just borrow the money for the short-term, because the trick was just to get from the early eighties to the 1990s.
Interviewer: So this was a short-term problem?
Ball: Yes. People who knew about the program knew that beginning in 1990 there would be a period during which costs stopped increasing--because of the low birth rates of the 1930s. For quite a period of time, after the 1990s, the cost problem would abate. So if you could reach 1990, there wouldn't be any problem for quite awhile--15 years or so, anyway.
So it seemed, in these circumstances, perfectly reasonable to borrow the money from general revenue with the idea that it was to be paid back in the 1990s. That's the position I was taking and arguing for. But people who either were more or less opposed to Social Security anyhow on general principles opposed this idea too. And even some who generally favored Social Security were opposed to using any type of general revenue financing-even temporarily. Bob Myers, who generally is a supporter of Social Security, was very much opposed to that solution. Conservatives were generally opposed to it.
So, if the Administration was not going to use this temporary borrowing from general revenues, then they had to do something to keep benefits going. I always thought they would do something-that they would borrow the money, or they would use inter-fund borrowing among the three Trust Funds. There was authorization in the law for that, but that authorization was going to expire. So, they really needed to take action. They had tried their package of proposals, and that didn't work.
At that point, Baker and Darman again became influential in Social Security policy in the Reagan Administration and they developed a different approach. Remember, this is a time of a divided Congress, with the Republicans in control in the Senate and the Democrats in control in the House. Their new approach was to go see Tip O'Neill and propose an Advisory Council to take on the job of recommending what to do. Tip thought he had to participate; he didn't see how he could avoid it. It probably would have been to the Democrats' political advantage to keep the Social Security issue open, but Tip never reasoned that way. He really loved the program and he wanted to fix it. So he agreed to participate in setting up a commission that eventually became the Greenspan Commission-which we already discussed at length.
After the 1983 Amendments, the long-range deficit gradually came into being. I would say that between 1983 and the late 1980s Social Security wasn't at the top of anybody's agenda. The gradual development of the deficit is what put it back on the agenda. By 1993 or 1994 the concern had gotten serious, but before that it really wasn't. I was on the 1991 Advisory Council and that Council was to look primarily at health care. The Council took the position that since the Greenspan Commission had recently addressed cash benefits, and that seemed to be working, that the 1991 Council should spend its time on health care. We did issue a short report on the cash benefit part of Social Security. But all we really said, in effect, was: "It's okay, just take it easy, it's not a big problem." That was the Council that had Paul O'Neill (the current Secretary of the Treasury) on it, and a couple of doctors . . .
Interviewer: Was Debra Steelman the Chairperson?
Ball: Yes. She was entirely a health-care specialist, and still is
So as late as the 1991 Council the financing set-up in 1983 was still thought to be basically okay.
Of course, Social Security is a big program, and there is always some discussion of the financing of the OASDI program. But it wasn't a dominating issue. There was some discussion going on, but it was mostly inside baseball-experts talking to each other.
Senator Moynihan--beginning around 1984-85--started writing things saying, in effect, "Boy we did better in the 1983 amendments than we even realized. We not only fixed the short-term financing problem but we also greatly improved the long range position of the whole federal government." His point was that out of the 1983 Amendments came a build-up of the Trust Fund reserves. And by building-up the Trust Funds the government is buying back the federal debt held by the public and transferring it over to Social Security. Which means you only have to meet one debt obligation in the future instead of two. He was very enthusiastic about it. In fact, he wrote about it as if he had discovered it. (Laughing) He wrote as if nobody knew how well we did and that he was letting people in on that. There is a certain amount of truth to that idea because we really didn't pay much attention in the Greenspan Commission to the long range. We were focused on getting to 1990. And, as a by-product of what we did to get to 1990, we solved about two-thirds of the long range problem as well. Then the Congress--not the Commission--added the provision for increases in the Normal Retirement Age. According to the estimates for the 1983 amendments, that combination put the system back in actuarial balance for the next 75 years.
More recently, Moynihan has changed his view and now has come to the conclusion that the federal government won't save any surplus that might develop in the federal budget. And so the increased income from the payroll tax will not result in the government buying-back public debt, but will just become a basis for greater spending. The effect of this, in his new view, is that money is being diverted from Social Security to finance the rest of the federal government. So he started stirring things up, saying the opposite of what he had been saying before. There is a famous exchange between Senator Heinz and Senator Moynihan. Moynihan is accusing the government of "stealing" the money in the Social Security Trust Funds. Heinz responds by saying he thinks it's more like embezzlement. So Moynihan says to him, "Well, that's the class difference." (Laughing)
Interviewer: So, is that when he begins advocating cutting back on the payroll tax rate?
Ball: Yes. He called me up one night and he said: " I'm going to advocate something that you won't agree with." I said, "What's that?" He said, "to reduce the payroll tax; it's just building up a surplus that they're using for other purposes." I said, "Well, don't do that, we're going to need the money for Medicare. We can talk about pay-as-you-go and cash benefits if you want to, but don't cut the tax rate." He replied, "Well, we'll worry about Medicare later." Then he went off to Africa for a couple of weeks, after having issued this call for a reduction in Social Security tax rates. Well, it was very popular, as you would expect. Labor backed him . . .
Interviewer: Everybody wanted it?
Ball: Just about. When he comes back, he's a hero. Everybody thinks, "What a great idea!" At that point, he couldn't have gotten out of it even if he wanted to.
Our relationship deteriorated from then on. We would follow each other around to various meetings, debating against each other. I talked to the legislative council of the AARP and told them what a bad idea this was, and, as I leave the platform, he's there waiting to go on, to tell them it's a good idea. I meet with a group of senators to say it's a bad idea and he follows me with the same group, saying it's a good idea. Well, he didn't like that. After all, he was elected, I'm an un-elected guy putting a spoke in his wheel all the time. (Laughing)
So things like that went on, but nothing very serious between 1983 and about 1993. Then this Advisory Council of 1994-96 comes into being. By that time a substantial deficit has developed. If I remember right, in 1995 the estimated deficit went up to about 2.18%, or something like that. So the 94-96 Council is very serious about the size of the Social Security deficit and what should be done about it.
Interviewer: Right before you went on the Council, you published an article in a book by Kingson and Schultz, where you outlined your proposal at that point. Can you tell us what you were advocating right before you went on the Council.
Ball: I had a proposal to put the system back in balance by a series of what I think were obvious ideas, and even now are still some of the obvious ideas. They vary at the edges, but they include such things as extension of coverage to the remaining state and local employees, taxing Social Security benefits like private pensions, and some others. I'm not sure now whether that article included extending the period of averaging for the computation of benefit amounts, which is something I also favored at various times. They were proposals like that, which I thought were desirable in their own right.
Interviewer: So this was kind of a menu of options which added together would restore long range balance?
Ball: Yes.
Interviewer: And all consistent with a traditional approach to the program?
Ball: If it included any cuts in benefits they would have been under the rubric of improving the accuracy of the cost-of-living adjustment, rather than any desire to reduce the level of protection.
Interviewer: The first thing we need to talk about is the membership of the Council. Because that's always a critical variable is it not?
Ball: It sure is.
This Council is only one example of the mistake the Clinton Administration made in not paying enough attention to the people they selected for various jobs, but particularly for advisory groups. They didn't seem to care very much what the people thought and whether they were likely to go along with the Administration's philosophy. The Clinton Administration was terrible in their selection of people--about their substantive positions. They were much more concerned about whether they could get representatives of various racial groups and ethnic groups, disability groups, etc. Diversity was the big thing for them. And they made all kinds of mistakes on the people that they selected, from the standpoint of their own views. I don't think they knew what they were doing about the people they picked.
Now Larry Thompson was the Deputy Commissioner of Social Security and a very powerful deputy because the Commissioner herself didn't know much about Social Security and Larry was a very old hand. And he had a lot to do with many of the selections.
Interviewer: Now the appointing official here is Donna Shalala, the Secretary of HHS.
Ball: Theoretically, yes. But I don't see that she had any real input on these selections. The input was fairly clear on some cases. I think Carolyn Weaver was on the Council because of Senator Dole's insistence. If they hadn't put her on, he would have raised a big stink. His relationship with her has always been something of a mystery to me. Because she's way to the right of him on Social Security issues. Dole was quite an agreeable negotiating partner in 1983 for example. She was on his staff then, and she has always had a consistent position of wanting to get rid of the Social Security system and substituting private accounts. That's her long term position, she's written on it, everybody knows it. Dole still thinks that she's the one he wants representing him on Social Security. So that's the explanation of her membership.
The Chairman, Ned Gramlich, I think is Larry's Thompson's responsibility. I think he made that selection himself. Gramlich seemed like a very likely chairman. He had been the deputy director of the CBO; he was a liberal economist; he was head of the graduate studies at the University of Michigan. Larry knew him fairly well because Larry got his Ph.D. there.
Larry's own view of the program at this time is different than his previous views or his current view today. At that time, Larry had the view that we had run out the line on Social Security dedicated contributions. That you could no longer get support for an increase in the contribution rate. That it was high enough that people just wouldn't support any increase. And so if you were going to maintain the level of benefits in Social Security--his reasoning was--you're going to have to get the money somewhere else. His own solution was a compulsory individual savings plan on top of Social Security. I argued with him a lot on that-we had lunch together several times and I argued with him about it. But his view was that the only way you are going to raise any extra money was to call it something else. It obviously has the same general effect if you take two percent of payroll and add it to what we already have going into Social Security, but that two percent was to be called an individual savings account.
So he had that view. And I think he got Gramlich appointed because that was Gramlich's view too at the time. Gramlich has kept on believing it, but Larry no longer does. So, the most important selection of all--the chairmanship--came about that way, because of that.
Edith Fierst, I think I'm responsible for her. They needed somebody they could call self-employed, and they needed another woman. She had done, with a group of other women, a long, detailed study on earnings sharing. They had come to the conclusion that it was a good idea but you couldn't get there from here without all kinds of impossible complications. So I knew her pretty well from that. She turned out to be a somewhat difficult member although mostly on our side. But she was just what they wanted. A self-employed lawyer. A woman, and so on.
Syl Schieber used to work at Social Security and was quite knowledgeable. Larry must have known him from then. I would think. Larry probably recommended him on the grounds that he was knowledgeable.
They followed the same approach to labor representatives that we had traditionally followed, and that is not to try to think them up ourselves but to ask the AFL-CIO to appoint the people they wanted.--three members to match the employers' three. And Labor did what was frequently done in the past. They appointed their top staff person from the central office of the AFL-CIO-the one who knew the most about it--Gerry Shea. And then the chairman of their internal Social Security committee--which is made up of presidents of international unions-that was George Kourpias. Then they wanted to appoint a woman, so they appointed one of the union vice presidents. So that's how those three came in.
The employer representatives are not quite so easy for me to say. I think that probably the former vice president at Ford in charge of their pension plans and employees benefits, came fairly naturally to the attention of the appointing authorities. He was recently retired and knew Gramlich. I think he may actually be related by marriage to Gramlich. And he stuck with Gramlich all the way on everything. Those were the two that ended up together for Gramlich's plan.
Joan Bok, was an employer representative. She kept showing up as an advisor--as a woman employer--in the Clinton Administration. I don't think she knew a thing in the world about Social Security. She was assumed to be a Democratic supporter of Social Security, which she turned out not to be, and she never paid very much attention to the whole thing. I blame myself for not having paid more attention to her and tried to get her to go with our group. I should have spent more time with her.
Ann Combs--I don't know why they appointed her. She was a Republican benefit expert.
I think Fidel Vargas was a plain mistake. Their focus on diversity required them to get a Hispanic and they had an Assistant Secretary of Aging, Fernando Torres-Gill, who came from California. And Vargas was from California. Torres-Gill probably thought it would be great to have a young Hispanic, an up-and-coming politician. He was the mayor of Baldwin Park--a part of Los Angeles. I think Torres-Gill recommended him and they appointed him without anyone realizing what his views were. He's on the new Bush Commission. But he doesn't hold still long enough for anybody to explain anything to him.
Tom Jones--that was a wonderful appointment. I think we were fortunate to get him. Their motivation probably, to a considerable extent, was that he is black. He is one of the top black businessmen in the country. At that time he was Chief Executive Officer of TIA-CREF. TIA-CREF, in people's minds, deals with a lot of the same issues as Social Security. It is a benefit organization, so it is like Social Security in that respect. He turned out to be wonderful. He was in many ways the most important ally I had on the Council. I'm very disappointed that I haven't been able to get him to continue his interest in Social Security. As soon as he left TIA-CREF and went to work for a big financial firm, he just gave up Social Security entirely. I think he felt that it might cross with his ambition to be a big success in the private world. He's the one that brought up and pushed the idea of investing Social Security directly in the stock market and he and I together pursued that throughout and wrote about it later in a joint piece in the New York Times, and so on. He is a very smart, very knowledgeable, very motivated, top-notch guy.
Interviewer: Ok. There are two more I want to ask you about. First is this guy Robert M. Ball. How did he get appointed? In the past you had told me that in your other Advisory Council service you hadn't sought the appointment. Was that true in this case?
Ball: I should never have said that. Because people get mixed up on what it is I said. I said somewhere that I had never actively sought any promotion, and that's true. Ed Berkowitz picked that up and made a big point about it in his book. What I meant was that before I got around to pursuing a promotion, somebody promoted me and I didn't have to. I'm not saying I'm above seeking a job, or that there is any great personal merit in this. It's just as a matter of fact, that I was just lucky, that every time I was ready to move up, things opened up and I was appointed to the next step. And that's true all the way up through my becoming Commissioner. But those were regular jobs. I didn't say that I didn't seek any Advisory Council appointment. And I didn't say that I never made the slightest effort to retain a job. Those are the distinctions. I wanted to be on this Council and they didn't know how to turn me down.
Interviewer: So, you wanted to be on this Council and you sought to be appointed?
Ball: I didn't have to seek very hard. I was really quite an obvious choice. But I let them know I was interested.
Interviewer: The other person I want to ask you about is the Staff Director, Dave Lindeman. I know you appreciate, having been one yourself, that the staff director can often have a big impact on the course of the work of a council.
Ball: The staff director is usually much more important than any single council member.
Interviewer: So what about Dave Lindeman?
Ball: I don't know how that happened.
Interviewer: Well, I don't either, but I'll conjecture. He is friends with Larry Thompson to some degree. I would be willing to bet that Larry was responsible for his appointment.
Ball: I didn't know that they were friends.
Interviewer: Well, I don't actually know that they're friends. They have some level of association, I don't know exactly what it is. During the time that Larry Thompson was the Principal Deputy Commissioner at SSA I had lunch with Lindeman in Washington one day and he made several comments during our lunch that clearly implied he was closely allied with Larry Thompson.
Ball: Well, Lindeman didn't turn out to be right for the job. He wasn't good at being a staff director.
And the Chairman, although he was a very nice guy, and good at many things. I don't think that the Chairman turned out to be good at being a Chairman either.
I think, as it developed, that anybody from the outside would have wondered why Ned and I couldn't have developed a plan we could have agreed on. You would think that given our general political orientation-- although he was no expert on Social Security--you would have thought that over time we would have created a majority in the Council for a good plan, and it didn't happen. Although there were points along the way when I thought maybe it would. You may want to talk with him about it and get his view on this, too. But I think that what happened over time was that instead of trying for a set of recommendations that could be given to the Congress with the expectation that they would be passed into law--which has been my view of the task of advisory councils in the past-- that Gramlich came to the view that the Council's more limited objective should be to develop the best possible plans of several types that could be presented to the country and the Congress for them to choose from. He wasn't really trying for a set of recommendations that would then just get adopted by the Congress. Now he may have come to that late because it wasn't working in terms of getting an agreed upon set and he was settling for this. But his entire conduct as Chairman was a little bit like he was conducting a graduate seminar rather than negotiating an agreement.
I also think he leaned over backwards to make sure that the opponents of the existing system felt they were well treated. And far from being discriminated against, they were given every break. So much so that in situation after situation he was really aligning himself, in the way things were written-up and presented, with Schieber and Weaver, and that group of five, rather than with labor and me and Tom Jones and our group. I think his tendency would be to believe like us, but he felt his job was to be so neutral that it leaned over to supporting the other side of the debate.
Toward the end, after this has been going on a long time, I think he got very annoyed with me-that I was a big problem for him, which I suspect I was. He thought I was pushing points that were questionable from his standpoint. He got himself committed to kinds of analyses that I thought were really all wrong. He was committed to them before he really heard me out on them. But basically, I think he came to think of me as a big problem.
Now, substantively, the only place where I felt he came close to an agreement for awhile was when Tom Jones made a presentation and Barry Bosworth made a presentation about investment of Social Security in stocks and how that was a real way out. There was enough extra money from that proposal that it was possible to avoid any significant benefit cuts or tax rate increases. We would have had to increase the wage base, but not the tax rate.
So that would have done it. Labor, Tom Jones, myself, and Eve Fierst would all have backed that. Eve had all these other issues she had on the side. But as far as basic ideas, she would back that. And that would have done it, but although Gramlich for a short time said he thought it was a real possibility, he turned his back on it later. He came to accept the view that it could conceivably turn out to be a serious invasion of free markets, and accepted all the other Greenspan-type arguments against it. So he was left with nothing in his proposal except significant benefit cuts within Social Security, and the proposal--that I didn't think would fly--of a brand new increase in taxes to support a savings plan. I didn't see how it was possible to disguise the increases. They were just the same as if you increased the Social Security payroll tax directly. And I thought that was not going to happen.
Interviewer: Well, unless I got something wrong here, isn't that essentially the Larry Thompson idea that we just talked about a bit earlier?
Ball: Yes. Same thing.
Interviewer: So he's basically advocating what Larry Thompson was advocating.
Ball: Yes. They were together at first but Larry finally came to the conclusion that Congress wasn't going to pass an increase in the tax rate, even for the purpose of a new savings plan. Then he backed off because he didn't want to see Social Security cut. See Larry was willing to have Social Security benefit levels cut only because he thought it could be made up for by these mandatory savings plans, and when he saw that wasn't going to happen, he went back to saying we should defend what we have in the present program.
Interviewer: I think this is a core issue for this Council. Whether there was a possible compromise here and did we fail to grasp it.
Ball: Let me suggest a couple of other people to talk to. Henry Aaron was involved in this. Henry tried to be an intermediary between Gramlich and me. But he agreed with me and gave up pretty much on a lot of the analytical things that Gramlich was doing that he thought was just wrong. He thought that Gramlich's analysis was way off. Henry thought we should have been able to agree on something, and so did I. But it didn't work out.
Interviewer: Did Larry Thompson have any role in the Council? He had a role in helping recommend the members, but did he play any active role in the deliberations?
Ball: I don't think so. I don't really know to what extent he and Gramlich may have been talking. But he didn't play any particular role with me.
Interviewer: What eventually happened in the Council was a split between two major approaches-one headed by you-that supported the traditional program with a menu of potential changes, along with this idea of letting the Trust Fund invest in the stock market . . .
Ball: That was a key change.
Interviewer: Ok. So we had your group, which wanted to maintain the traditional program, and then we had the Weaver and Schieber group which wanted to partially privatize it, through the use of individual accounts.
Ball: In a major amount, five percent.
Interviewer: Yes. Now, is it the case that those two groups essentially started out in these two positions at the beginning of the deliberations or did this gradually unfold?
Ball: I think the differences were always there, but a specific plan for the group of five, their group, wasn't developed until late. And I guess I'm partly responsible for getting that developed. I felt, maybe mistakenly, that it would be good for clarification in the country to understand what the consequences were of this kind of privatization proposal. So I welcomed and supported working out such a plan, to show that it had a big transition cost. Which they were willing to show. I thought any good objective analysis of any such plan would help our position really. It would show the country, you don't really want this. So it wasn't an argument about getting it outlined. The argument came about how to evaluate it, and what you said about the costs, and what you said about the transition. There was a lot of argument about evaluation. And that's where Gramlich really helped their presentation much more than he helped us.
Interviewer: The argument about evaluation involving such things as what would the stock market return really be? Or do you mean something else?
Ball: We were able to get together on that immediately. We were able to agree on quite a lot. But there analytical issues and descriptions of results that they put in the report from their side that I felt were so far off that we were compelled to write a second report attacking what they did. So if you look at the supplementary report, that I more or less wrote, it shows what I thought was wrong with what they were doing. And Gramlich was really supporting their analysis.
Interviewer: Now, did the panel start work with your proposals on the table?
Ball: My proposals were always on the table.
The fact that Carolyn Weaver wanted a privatization plan, was always on the table.
Schieber's position seemed to have evolved. He was originally going along with traditional type thinking and then he gradually began to say, "well maybe this is a chance to say what I really think, instead of just what has been said traditionally." His take is not exactly original, it's popped up over the history of Social Security. What it is in effect is that the right thing to do is to have a dual program, the duality of which is made clear to people. He's very strong for transparency. He thought that part of the problem with Social Security is you can't really tell how much of it is really a wage-related contributory insurance plan and how much of it is governed by welfare principles. He had lots of angles to it, but in general, he was proposing to end up with a flat benefit plan for the government system. My own feeling is that neither he nor Carolyn would have cared if that flat benefit plan became means-tested. So you would have a universal, very low level, guaranteed benefit from the federal government, and then a relatively modest wage-related private contributory system on top of that. My impression was they didn't care very much whether a government non-means tested benefit was retained or whether individual private accounts became the dominate feature. I think that was his view going in and it developed more and more as it time went on. It had been Carolyn's position all along.
Interviewer: Who was the real leader of that group? Was it Schieber or Weaver?
Ball: You would have to say both. Schieber is a much better technician than Weaver is, so he probably had more to do with the actual development of the details of their plan. But she weighed in on all the principles. And she's quite pure in the sense that Carolyn really didn't want much regulation, she wanted people to be free to put their money in their own individual accounts wherever they wanted to. He would be more open to the idea that they should have a limited choice, like the federal employee plan is today. But Carolyn is a very consistent Cato-type thinker. Schieber takes off from that more in the direction of the need for some regulation, but they both agreed to the plan and they worked together on it with the staff.
The other three, they just signed on. I don't think Vargas had anything to do with the provisions. I don't think Bok had anything to do with the provisions. Ann Combs may have had something to do with it. Her real views are more moderate than Schieber or Weaver. She joined with them, but I thought she was always a possibility for a less drastic plan-more likely than anyone in that group. She just went along but, I don't think she was very influential on how they did it. But her basic views are a little more government regulatory orientated.
Interviewer: Now, the idea for your group--the Maintain Benefits group--the idea that we might let the trust fund invest in the stock market, where did that come from?
Ball: From Barry Bosworth and Tom Jones. I picked up on it and it seemed to me the way out of this.
Let me comment on the issue of general revenues. The history of general revenue, to me, is mixed. I was for it all during the early years. I had accepted the Doug Brown thesis that the problem would become later on as the program developed that the earmarked contributions for Social Security would be too high for a generation that starts out under the program and pays the top rate their entire career. The later generations would pay more than a fair actuarial rate because they've got hanging over their heads this deficit of contributions from the first few generations who don't pay their own way.
I had written an article in the Social Security Bulletin earlier in which I advocated that Social Security's basic rates be set at the rate that you needed for a new generation starting out. That that was the fair actuarial rate for that generation and that's all you should be asked to pay as a specific earmarked contribution for Social Security. And that we should meet the deficit of contributions from the first generations through general revenues because that was a more progressive revenue source and there's no reason to let capital and the wealthy out of the cost of getting the system started. I wanted to be able to tell people that what they were paying in earmarked contributions was a fair rate for their generation, not for each person, but for their generation. The article was called, "What Contribution Rate For Old Age and Survivors Insurance?" and it was an all-out support for general revenue under that rationale. I stayed with the idea at least through the time I wrote that 1968 book. Since everybody else was dropping away from supporting general revenues, and it seemed like almost no prospect of getting it, I began to wonder if it was a good idea. Also, as Commissioner of Social Security I couldn't see myself testifying before the Ways and Means Committee for the huge amounts of general revenue that you would need-about a third of the cost of the whole system. Social Security would then be in competition with all other needs in the federal government since it would be competing for the same general revenues. How can you make the case that this program is beyond everything for children and for armed services and everything else? So I just stopped talking about it and dropped it more or less. I was surprised, and I guess pleased, but surprised, when the Clinton Administration came back to general revenue. Since then, I've been for it again, with this specific function of paying off in part the old deficit of contribution problem from the early days. I've stopped saying you can do it all that way, it's just too big.
So that's the history of me and general revenues. At the time of the '94-96 Council I wasn't supporting it. The only way to get more money within the framework that was setup then was this investment in stocks, which seemed to me a great way out of a big problem. And the equity issue was addressed that way, as well as the practical issue of needed funds.
Interviewer: At the beginning of the process, when you first begin to table your Maintain Benefits plan, it didn't have that feature in it, it was developed somewhere into the process, is that right?
Ball: I think so, yes. Because it was really Bosworth who wrote an article on this that first brought it to my attention. He thought I was going to disagree with him. On the contrary, far from disagreeing, I thought it was great. And then Tom Jones brought in his perspective. And those two together made this seem to me the thing to do.
But we need to talk about the position of the labor people in my group. . .
Interviewer: That's where I'm going next. But before we talk about that, tell me about your early plan. Before you added the stock market investment proposal did your Maintain Benefits plan have a gap or implicit deficit that you hadn't fully closed?
Ball: I don't know whether we had a complete plan before that. I'm not positive- I would have to go back and check. But it may be just that I had advocated specific proposals that went in the direction of solving the problem and I didn't have a complete solution.
Interviewer: All right. Tell me what happened in about labor support in your group.
Ball: Well, I had the whole report written. They all left me the job of doing the writing. (Laughing) I had the whole report written.
Interviewer: Just for the Maintain Benefits plan? Or for some other parts of the report too?
Ball: A lot of the report. The common parts where we agreed. The section that reported our agreements, I did most of that. Gramlich made some contributions to that. They of course wrote up their five-person plan, I didn't have anything to do with that. But our side, which was later published separately, I did almost entirely at the outset. Edith Fierst made a couple of stabs at a few things. Labor left it all to me, which was fine with me. I'm not complaining, I'm just saying I had it all written up this way. Then the labor group had internal difficulties over the stock market investment provision. Stock market investment didn't seem like such a great idea right offhand to a lot of unions. The UAW wasn't crazy about the stock market. They thought that was some kind of employer-capitalist thing and workers shouldn't be thinking about that. In order not to get in a big mess, Gerry Shea pulled back and took the view that the whole thing ought to be put forward as a possibility, rather than as an outright recommendation. So I then rewrote the report in this new vein and actually I thought, well, that's probably better. It wasn't that I resisted that. All the work had been done the other way-all the estimates had been made the other way. And except for a few grunts and groans and ringing of hands by the opposition, it was allowed to go through that way.
Interviewer: Well, that's what I was going to say next. A traditional argument on the part of advocates of private accounts is that the people who are for the traditional program have the obligation to explain how they're going to solve the long range financing deficit under their point of view. And advocates of the traditional program have always said of the advocates of private accounts, that they need to honestly account for the transition cost of their proposals. I think they're both right. Now, Schieber makes the same argument against you. He says, "It's incumbent upon the Maintain Benefits people to produce a completed plan that solves the problem just like it's incumbent upon us. And Ball and his group put trust fund investments in securities in at a certain point in the argument but, when it came time to really sign off on it, they pulled it back, so they didn't really meet their obligation."
Ball: I'd make the same argument if I were in his place.
Interviewer: How do you respond?
Ball: I've got a proposal, me, personally. My proposal has stock market investment of the Trust Funds in it, and has general revenues in it too. That's my Social Security Plus plan. But in the Advisory Council we're talking about a group of six people coming to an agreement such that they can get the support of their constituencies. The only people there with a constituency are the labor people. They're not free agents like me, who can sit in a corner and think up plans, a dozen a week if I want to, and put them out. They've got to satisfy memberships and get re-elected and in order to do that they found that they had to modify the position that those who were on the Council were willing to accept. Gerry as an individual, and these other two people as individuals, might well have agreed. But they were representing 12 million people. And they would have produced a split over the issue within the AFL-CIO. You know, the AFL-CIO is a collection of independent unions. For them to ever take any action, it has to be at the lowest common denominator. That's the nature of that kind of organization. There's nothing they can do about it. For instance in the Greenspan Commission Lane Kirkland, I believe, would have been glad to recommend the extension of coverage to state and local employees, but as the president of the AFL-CIO, he couldn't. He had to object. But he objected very quietly (laughing). So the labor representative were under a discipline that I'm not under. I don't have one single constituent. Nobody ever voted for me for anything.
Interviewer: I do want to ask you just briefly to talk about the role of the staff director, Dave Lindeman. Is there anything you can tell us about that?
Ball: There should be. I'm having trouble figuring out exactly what was wrong. I think partly he didn't realize that his was a facilitating role. He may have taken his own views too seriously. Now that isn't quite right, because a staff director should have views. I guess it's a degree of diplomacy and the extent to which he makes sure that the members are all happy with what he's doing and he doesn't seem to be pushing them, regardless of how much influence he really has. I think he lost everybody. I don't think there were any regrets when he left. He wasn't a partisan for any of the positions that anybody recognized and supported. But he was just not a helpful part of the process.
Interviewer: Was he replaced?
Ball: Part of the problem was that whole Council never had good staff support, except for Steve Goss who was, of course, fantastic. Steve is wonderful and he did just about all the staff work that was done. He was supposed to be the actuary but in the vacuum he ended up doing practically the only staff work that was done. Other help from Social Security was fairly routine. I don't know what they call it now, but the analysis division was what it used to be called, was a group of specialists who know a great deal about, say, the benefit formula and it's history and alternative developments. Others knew about remaining exclusions from coverage, and insured status, and so on. They did their detail responses to any question on topics like that. But there wasn't anybody charged with being a high-level Director of Staff. And so, by default it fell a lot to Gramlich in setting things up. And then the members of the Council did more than they should have done. Which resulted in biased presentations of their own positions-which is what happens without the correction of good staff work. The group of five put forward their stuff and then they turned around and gave the supporting material, without a rigorous screening by a top-notch staff as to what was right and what wasn't right. And then we had to perform that function, which then got us cross-wise with the Chairman, who thought he had already done it. So the lack of staff was one of the real failures. If you don't know a lot about this Council, sometime you ought to talk with Steve Goss. He knows a great deal about this Council.
Interviewer: Let's explore a little bit the Gramlich proposal and whether that was ever any basis for a compromise position or not. You said that the Maintain Benefits plan along with stock market investment of the Trust Fund was, you thought, a basis for a potential agreement. Was there ever a possibility that you could accept the Gramlich plan or some plan like the Gramlich plan as the basis for a compromise?
Ball: No. I don't really think that there was ever a plausible recommendation to in effect impose a new tax to provide the additional income through private plans, at the same time cutting Social Security. I didn't see why it was any easier to do that then to get an agreement to raise the contribution rates. And I never agreed, nor thought there was a chance of agreeing on, the size of benefit cuts that would be needed to support a Gramlich-type approach. On the other hand, I didn't say adamantly that out of a negotiation couldn't come some cuts. My advocating taxing benefits like private pensions, is like a cut. Improving the COLA's accuracy results in a cut, so you could get that out of a negotiation.
But the key idea of the Gramlich approach was you held the income to the Social Security program the same as that currently dedicated to Social Security. Now there is a big shortfall in supporting the current benefit levels at the current level of income. So keeping the income fixed means that in the future benefits will be cut so that they come down to the level of the income. Under Gramlich's plan you make up for that shortfall by creating a new program--compulsory deductions from workers' earnings-- to create a separate benefit stream to be added to the reduced Social Security benefits. I saw no advantage whatsoever of going that way. So I was never open to that.
Interviewer: Did Gramlich try to position his plan as a compromise between the two competing plans? Did he envision it to be that?
Ball: Yes. But I never found it to be a real compromise, involving elements of both, which is what a compromise usually does. He clearly hoped that when the plans were made public that the two he considered the extremes would kill each other off and his plan would emerge. That was what he thought.
Interviewer: Did he ever get any nibbles from the other group--from the private accounts group?
Ball: No. They knew what they wanted. They just got stronger and stronger. I tried to move Bok off of their position, but I was too late. I tried to get Bok to not necessarily come with me, but to refrain from going with them. I wrote up stuff for what I thought was a position that she could accept, but it was really too late. And as I said, the other two didn't hold still long enough to make an impression. The only hope was if Gramlich and I could agree.
Interviewer: How were the relations between the groups, and the working environment. Was it acrimonious or harmonious? Were you politely respectful in disagreeing?
Ball: I thought mostly it was harmonious in a decent atmosphere. People got their noses out of joint once in awhile. I know Carolyn objected vehemently to Tom Jones characterization of her plan as radical. I don't know why that upset her so. But that seemed to make her really mad, and I think he was just trying to characterize it. (Laughing) Compared to the existing program, that was a radical change. It wasn't small. I think, mostly, both sides respected the other. I think the labor people found Gramlich a little hard to take. They expected more of him and sometimes groups that are closer together feel more strongly about what separates them. No, I think the atmosphere was ok. It was better after Lindeman left. He didn't improve things much. He's a little condescending. When you're a staff director, no matter how you feel, you're not supposed to act that way.
Interviewer: Tell me what I'm supposed to ask you about the Advisory Council. What's the intelligent questions I'm forgetting to ask you? Is there anything else that sticks out in your mind that you think we need to talk about?
Ball: I thought it was a real failure and it's too bad that it was. But it was foreordained. The selections themselves made its failure almost inevitable. You don't see it all at first, but I don't see how that group could have come to a good resolution. Small changes in the make-up of the group might have done it. If Carolyn hadn't been there, Syl would have been quite isolated.
Interviewer: I'm looking at the notes that you dictated to Ed. One of the things that you mention in here was the role of the money's worth issue and the argument about money's worth and how that emerged. Do you want to touch on that?
Ball: Well, that became very important in that Council. It had never really bloomed before. It arose because we had reached the point that Doug Brown anticipated, where the rates to be paid in earmarked Social Security contributions were at the borderline whether under a strict actuarial basis you could say people were going to get their money's worth. That put a spotlight on the issue, and of course it was to the advantage of the people who wanted to change or get rid of the system--to emphasize that compared with a new program or a different program people were not getting as a good a return for their money as they had reason to expect and hope. So the money's worth issue really became a significant part of an argument about whether to retain the system. I don't see that you can duck it and I think it's a real point that needs to be dealt with.
Some people try to make the case that it's irrelevant. That's what Bob Myers says. He says money's worth should never be a part of it, that you supply what benefits you can with the money that's available, and if people want to pay that much then you can give these benefits on a pay-as-you-go basis. If they don't want to pay that much, then you have to give them something that's less. But he's committed to supporting only what you can pay for with dedicated taxes on a pay-as-you-go basis. Which inevitably means that down the road you will have pretty high dedicated taxes for Social Security, that are quite clearly vulnerable from the standpoint of whether people who pay those rates over their lifetime are going to do as well as if they put their money in a private savings plan. So, I don't think it can be ducked.
It can't be ducked in the sense that it has to be stated and dealt with. But you can handle it, I think, by distinguishing between earmarked contributions for Social Security that can be kept at what I call the actuarially fair rate and then provide a subsidy to the program from general revenues to make up for the first few generations where the system was shortchanged on the contributions. But I think you have to do something like that. You can't just insist that you do get your money's worth. And the other side says, "no you don't." And then you say, "yes, you do," and they say, "no, you don't." Now it's closer to money's worth then they ever admit--that's true, because the administrative costs are so low. And if the test is what can you buy in the private market--not the abstract test of what would you have to pay for a system like this, starting out with young workers and that generation, which is an abstract test--if your test is rather how does Social Security stack up against what's offered in the market and you take into account the savings in administrative costs that Social Security has compared to something that has to be sold on a voluntary basis, then you get quite close together, using that type of test. And that's worth pointing out. But I don't think it gets rid of the argument entirely. So that's the main reason I latched on to, and still argue for, direct investment in stocks. I think under controlled conditions in a limited amount direct investment in stocks will not produce all of the terrible things that Greenspan says it will and does make it possible to meet the money's worth argument even without general revenues.
Interviewer: Other than providing staff analysis work, did SSA play any larger role in the Council either during or after the issuance of the report and did HHS or the White House play any larger role?
Ball: I don't think so. I got quite annoyed at one point with the Commissioner of Social Security who came to a meeting and laid out a position that I didn't think was the right position. But it was, I thought, inappropriate to be openly trying to persuade the Council to support an administration policy, as against providing the pros and cons.
Interviewer: You're talking about Shirley Chater?
Ball: Yes. Though I must say that I had done it, in, I think, a more subtle and diplomatic way, in earlier years.
Interviewer: (Laughing) What was she representing as the administration's position?
Ball: I'm not even sure she quite knew what she was trying to do, and I've really forgotten the specifics. It's in the Minutes, I'm sure. But I don't know who has Minutes.
Interviewer: I don't either. That's a good question.
Lillian: Yes.
Interviewer: Lillian, ask Tim Kelley when we get back.
Lillian: Ok
Ball: You ought to have the Minutes.
Interviewer: Yes, I agree.
Ball: Better than the Minutes are the Transcripts--that's what I mean. Minutes don't necessarily show everything.
Interviewer: Right. We could see if we can find out where they went.
The other thing that strikes me about it is that I never noticed any evidence of the Clinton Administration supporting the Council's report. I don't know that I can say they disowned it but, they certainly never embraced it.
Ball: There wasn't anything to embrace--there were three different reports. Every other advisory council made recommendations--although the 1991 Council wasn't very good on recommendations either. The 1991 Council said, "in the next ten years we ought to try different things out in the states and sees what works on healthcare." So they really didn't have any recommendations either.
Up to then the function of advisory councils had been a forum in which labor and business could negotiate an agreement with the support of outstanding experts on the subject and then they could take that to the Congress and say to the Congress, in effect, "here's what we agreed to." The big political forces of labor and business have this agreement. You can pass this and feel safe because you are not going to get attacked on a Social Security issue, and you're going to make progress. The last time that happened was 1983 and the Greenspan Commission.
So that was the big function of the councils and the commissions that worked. Almost every recommendation made by an official Advisory Council has become law. Not necessarily right away. The '47-48 Council recommended disability insurance. Well, we have it but, it took until 1956 from a recommendation in 1948 to get it. Good recommendations were well worked out and they fit the basic pattern of the program. The pattern of the program was well set in the '39 amendments. One way to consider the whole history of the program from then on is as filling in the structure that had been created in '39. You had to extend coverage, you had to create programs for the two risks that were not included, disability and health--health insurance for the elderly, at least. But everything was an elaboration of the basic structure and ideas. Nothing radical or brand-new has been added, except pieces here and there. The councils served the function of saying how much and how little will business support and labor support and how much are they willing to pay for it and here's the next step.
Interviewer: But that depends on the council itself coming to an agreement?
Ball: Yes. And with this last Council there wasn't enough of an agreement to expect any administration or Congress to pick it up. So that's what I hope this new Bush Commissioner will do. They will come out with something nobody wants to touch. (Laughing)
Interviewer: The Clinton Administration did eventually come out, as you alluded to earlier, for a resolution that invoked general revenues as the way to close the financing gap. Did you have anything to do with that?
Ball: I had a lot to do with what the Clinton Administration came out with. Gene Sperling chaired the continuing group in the White House that was looking at Social Security for a couple of years. It was a group made up of top people--it wasn't some technical group. The members that were important on it were Sperling and Larry Summers, originally the Deputy Secretary of the Treasury, later the Secretary. The Chairman of the Council of Economic Advisors, the Social Security Commissioner and the Director of OMB, and that was the group that was continually looking at this, trying to find a solution. I must say they started with some willingness to consider individual accounts--Summers and Sperling both. At Sperling's request, I wrote a series of memos that were circulated to the group and I met with them a couple of times. I wrote a group of five memos, that the Century Foundation came across and asked if they could publish. I had just put them out as a group of memos. So they published this small book, "Straight Talk About Social Security," that is almost the same as the memos, just edited here and there. That's really the measure of my involvement with the Administration.
I had not really pushed on general revenues so much. This goes back to when I pretty much had given up on general revenues, and their willingness to do that surprised me. I, of course, supported it when they came out with it. I'm not trying to take credit for that, they did it and I supported it. Not the other way around.
I guess I made that clear in a paper for the National Academy of Social Insurance in an annual meeting, where I had been asked to comment on a Berkowitz paper and my comments on the Berkowitz paper included this business about general revenues. Then I got sick and I couldn't go and Alicia Munnell read the paper for me.
Interviewer: You mentioned earlier you have your own plan, the Social Security Plus plan.
Ball: The Social Security Plus plan--I've put out at least three or four versions-- and I've been sympathetic to people who wanted to criticize my plan because I have been sort of a moving target. I didn't have just one plan. But this current plan has been out since June of 2001. It's more than my plan. When I circulate it I accompany it with a memo which says that Bob Reischauer and Henry Aaron in their book come out with a plan that is very much the same, and that they have told me that what I'm for they like just as well as their own. In fact they say mine is "probably a little more acceptable than their plan." So I have incorporated their support in what I'm saying. And it's bigger than that, it's a group that's worked together pretty much along these same lines and includes Peter Diamond at M.I.T.; Reischauer and Aaron; Bob Greenstein at his think tank; and Alicia Munnell. Sometimes we put things out together and sometimes we just support what the others have said. I would say all those people would support what I have in mind in the Social Security Plus plan.
The Democrats in Congress, with a few exceptions, are very much on our side too. I think they're quite dependable against the seduction of individual accounts. But they have hesitated about being for a specific plan, on the ground that anything you put out becomes the subject of political attack. And there's no solution that doesn't have some things in it that a lot of people aren't going to like. So they have never said as a Democratic Party in the Congress "we support the idea of taxing benefits more." That drives a lot of retirees nuts. They haven't said they would extend the coverage to remaining state and local employees--that drives the workers in those states crazy. Each one of these points, although there are relatively small, are fiercely opposed, and the Republicans seem to be saying we can do all of this without any sacrifices, just do what we say, we're not going to cut benefits--we're going to come out with putting in less money and getting more out of it. So from a political standpoint, the Democrats have been unwilling to endorse any specific proposal, and I think that's probably right. One function this Bush Commission might perform is to develop a concrete plan. This might happen because Hans Reimer maneuvered them into it at one of the public hearings. They got into that because they asked Reimer to do it, and he said, "I'll do it, if you do it." So they all said, "yes, we'll do it." I'm not sure they knew what they were doing, but they agreed to develop a plan and have Steve Goss price it out. If they do that and there's a concrete plan, perhaps the Democrats can hang it around the necks of their Congressional opponents in the next election. But everybody is waiting until somebody else puts a plan out so they can attack it. There isn't any plan that's made up of all good things. The good result is achieved by a combination of things to each of which there is some objection.
That's the situation now. That's not hopeless by far. Once you engage and you're actually talking, like say the '83 council, so that there is a negotiation, then both sides can get committed to things that aren't too good and could be attacked. But if they want to solve it, and finally get to that point, then the kind of things I've got in Social Security Plus will work, and it will fly. But it has to be in a political situation where you can't have one side saying we'll fix it without any pain, and the other side sponsoring a realistic plan. So it's out there for the long run, not for the next Congressional election.
Interviewer: Ok, and what do you think is going to happen with the Bush Commission?.
Ball: I think it's as clear as anything could be that neither this year nor next is Congress going to do anything. First of all, everybody's attention is going to be on September 11th and its consequences. Secondly, the stock market dive undercuts a lot of the initial enthusiasm for individual accounts. And thirdly, I don't think the Republicans on the Hill want to take this argument into the next Congressional election. So the earliest I think anybody would seriously consider anything is 2003. And there isn't really any strong push out there to do anything then. In the '83 amendments, the difference is that we were within a few months of not being able to make payments, without some big change, or at the very least borrowing money from the federal government. Now they're trying to create a sense of crisis out of how in 2016 the system will actually take in less than it will pay out. But everybody knows that the Treasury owes interest on this and that'll carry into the 2020s, and then you've got commitments in long-term bonds from the federal government that nobody really thinks they'll renege on. So the pressure is only we've got to do something before 2041.
I mean it's been remarkable in the history of Social Security that the Congress has been willing to act, not in a two year cycle, but on a 75-year scale--they really have. At the end of every big change they've asked the actuaries to say the system is adequately financed for 75 years.
In 1983 the only serious argument in the whole bunch of Social Security amendments was an argument about something that wasn't even going to start until the year 2000-17 years later--and that is the change in the normal retirement age. That was the only argument. The Congress accepted the Greenspan Commission's proposals and they added that change, and 17 years later it was going to start gradually to kick in. It isn't true that Congress can only think two years ahead. Sometimes they think so far ahead, they get confused!
That's a long way off. So, I don't see anything to push this. I'd be glad to have the right kind of early action. I mean, I really would like to have them adopt something like this Social Security Plus plan because I do think there has been an erosion of confidence in the program. People have been saying now year after year after year "Social Security is going bust." And everything that people read or see on television says this. I'd like to get it off the front pages, or out of the paper entirely. You're going to have to make some changes, but that's really the only reason, to help restore confidence in the program, which is a very important thing to do. But I'm not sure it's sufficient to drive action. So maybe nothing will happen for twenty years or so. I hope it's sooner, but I'd rather have nothing happen than something bad. We don't need to act, just to act.
I really do believe that the individual account idea is really bad. It's not a good idea at all, if it substitutes an individual account for a Social Security retirement benefit. As an add on, sure. Who can be against people having an opportunity to save more in addition to Social Security. But not at the expense of the security of the basic program. That's what the whole argument is going to be. And I think our side has been making progress. I think when the individual account proposals first came out, they were greeted with a lot of support. There was a lot of feeling, at least, of "why not?" Isn't there a good chance that you will get more investing in stocks yourself? It's only been over a long period of time, I think, we've made some progress. So that newspapers at least report one thing that they didn't used to. They now report that if nothing is done, say by 2041, not that the system would run out of money. They don't say that anymore. At least they now say we would have to reduce benefits by a significant amount, 25% or something. Whatever it is they say. But they've caught that point at least. That the financing in Social Security in the future depends largely on contributions made in the future, rather than from Trust Fund accumulation. That's a big step forward in understanding. And there are a handful of reporters who now follow the system who know enough about it that they're contributing to public understanding rather than misunderstanding--which they contributed to for a long time.
There's still basic confusion, which may not be worthwhile trying to straighten out, as to what really caused the current deficit. They keep repeating that it's the increase and the number retirees relative to the number of workers-that ratio. Which is the explanation, of course, of why the system will cost more in the future than it does today, but is not the explanation of what happened after '83 to produce a new deficit. It is not a question of demography at all. All the demographic changes put together have improved the position of the program by 0.83 percent of payroll. No paper reports what has happened as a different view of how much disability benefits will cost. Or the changes in actuarial methods, which is half the whole story. More pessimistic economic assumptions and a persistent substitution of a more expensive out-year for a cheaper recent year as the 75 year period changes each year. Those factors are a major part of the explanation of what happened after '83, not that suddenly somebody discovered that the population is aging. We knew that in '83 and they're using almost exactly the same assumptions today about the ratio of retirees to Social Security contributors that we had before us in '83--almost exactly the same. Going the other way, the estimates are more optimistic from Social Security's standpoint about short-term fertility rates, so the net effect of the demographic changes are all positive. So newspapers are completely off on the wrong track in the explanation, but I'm not sure that it matters very much. When they get around to making changes it'll all become clear. Though I keep repeating the truth--just because I believe in teaching the truth.
Interviewer: (Laughing) Ok. Well, that's probably a good place to stop for today.