NCPA - National Center for Policy Analysis

The Clark Amendment: What Social Security Might Have Been

August 22, 2001

The President's Commission to Strengthen Social Security is meeting again today (August 22). Its efforts would not be necessary if President Franklin Roosevelt had not torpedoed an amendment by Sen. Bennett Champ Clark (D-Mo.) to the first Social Security bill in 1935.

Social Security was set up to look like a private pension plan; proponents characterized it as "insurance" rather than welfare; and it was to be financed by "contributions" from both workers and employers, rather than general revenues.

  • Sen. Clark said if the goal was to see that everyone was covered and received an adequate retirement income, it didn't matter whether it was provided by government or the private sector.
  • Thus he proposed that if an employer provided his employees with a pension at least as good as they would get from Social Security, they would not have to pay Social Security taxes.
  • The Clark amendment passed the Senate overwhelmingly on June 19, 1935, by a vote of 51 to 35, but the Roosevelt Administration killed it in conference committee.

Economist Carolyn Weaver, writing in her book, "The Crisis in Social Security: Economic and Political Origins" (Duke University Press), notes that if the goal was to have a retirement annuity system based on sound insurance principles, as Social Security's advocates said they favored, there was no rational argument against the Clark Amendment.

Says Dr. Weaver, "By subjecting the federal plan to competition, the government would have been forced, if only by default, to maintain a sound old-age insurance program. The voluntary flow of participants between competing suppliers would have dramatically reduced the potential monopolization of the old-age insurance industry. At the least, the (Clark) amendment, like the private alternative, made the redistributive nature of the federal 'insurance' program very clear."

Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, August 22, 2001.  


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