With the possible exception of one Nonaganerian Kossack I'm aware of, there probably aren't any notch babies reading this, and there may be plenty who've never heard the term, but for seniors of a certain age, that is, those born beween 1917 and 1921, (a cohort which included both of my parents) the term has real significance - and for Americans of a certain age, that is, those born between about 1956 and 1992, if Congressman Ryan's budget were to prevail, the term might have real significance again.
"We can never insure one hundred percent of the population against one hundred percent of the hazards and vicissitudes of life, but we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age."-- President Roosevelt upon signing Social Security Act
The Federal Old Age, Survivors and Disability Insurance program, more commonly known as Social Security, was enacted in 1935, and payroll taxes (FICA) were first collected in 1937. The first social security numbers were issued at post offices. The first social security monthly retirement benefit check was paid on January 31, 1940 to Ida May Fuller of Ludlow, Vermont, who had paid into the system for the previous three years. (As fate would have it, Ida May lived a long life in retirement, eventually collecting a huge multiplier of her original contributions to the trust fund.) Benefits, however, were quite modest. Ms. Fuller's first monthy check was for a whopping $22.54.
Notwithstanding continued opposition at every turn from the right, the program took hold. Oh boy did it take hold - so much so that it has been described as the "third rail" in American politics. (Some of you may also not have experienced a third rail. In cities with electrified light rail systems, it is the "third rail" - the one which does not bear the weight of the train, which provides the electricity to run the system. Touch it and you're dead.) So the program chugged along, subject to periodic amendments and adjustments, such as those providing for widows, orphans and even some divorcees, and those increasing the amount of wages which would be subject to the imposition of FICA (Federal Insurance Contribution Act) taxes - a tax burden which is borne equally by the employer and the employee.
In 1965, Lyndon Johnson signed amendments to the Act which created Medicare to ensure a modicum of health care for retirees, and in a great symbolic gesture, Harry Truman and his wife Bess were enrolled.
In the early years of the program, of course, there were far, far more wage earners paying in to the system than there were retirees drawing out. But with the huge demographic of "Greatest Generation" (born roughly between 1910 and 1921) coming into retirement age in the 1970s, the program would face a large number of first-time retirees.
In 1972, Richard Nixon signed H.R.1, which made significant amendments to the program:
-Higher benefits for most people eligible for benefits as aged widows and widowers
-For men reaching age 62 in the future, repeal of the provisions under which a man the same age and with the same earnings as a woman generally got a lower benefit than the woman worker and under which men needed more social security credits to qualify for retirement benefits than women did (the change will be accomplished over a 3-year period beginning with 1973)
-Changes in the retirement test to assure that the more a beneficiary works and earns, the more spendable income (social security benefits plus earnings after taxes) he will have, and to raise from $1,680 to $2,100 the annual exempt amount of earnings with future automatic adjustment to keep pace with increases in earnings levels
-A special minimum benefit for those who have worked in covered employment for many years, but at low earnings
-Higher benefits for workers who do not get social security retirement benefits before age 65 but continue to work past that age
-Improvements in disability insurance protection (including a reduction in the waiting period for benefits and extension of childhood disability benefits to persons disabled between ages 18 and 22) as well as improved protection for a worker's dependents and survivors
From the March 1973 issue of the "Social Security Bulletin."
Social Security Amendments of 1972: Summary and Legislative History by Robert M. Ball
Also included that year were improved medicare benefits and the creation of SSI, a program for the needy aged, blind and disabled. A second bill that year made other amendments to the program. Those amendments
(1) provided a 20-percent across-the-board increase in social security benefits effective for September 1972; (2) included provisions for keeping social security benefit amounts up to date automatically in the future as the cost of living rises; and (3) increased from $9,000 in 1972 to $10,800 in 1973 and to $12,000 in 1974 the maximum amount of a worker's annual earnings that may be counted in figuring his and his family's social security benefits (and on which he pays social security contributions) and provided in addition for keeping the amount up to date automatically in the future as average wages rise, and a revised contribution rate schedule, which included increases in the hospital insurance rates to restore the financial soundness of that part of the program.
ibid
By 1977, a number of demographic factors, including a decline in fertility rates in the wake of more available birth control, led to a conclusion that the fund was headed for depletion in the near future.
The 1977 Social Security amendments attempted to restore the program's financial soundness. A major element of those amendments was a change in the formula (i.e. benefit computation method) for Social Security benefits. Individuals born prior to 1917 were left under the old formula. Individuals born after 1916 were required to have their benefits computed under the new rules. Many of those born in 1917 and the years immediately following 1917 believe that the change unfairly discriminates against them as compared with persons born in earlier years and also as compared with those who come well after them.* This alleged discriminatory impact is referred to as the notch issue.
A Paper Prepared for The Commission on the Social Security 'Notch' Issue
by James W. Kelley Former Staff Director, Subcommittee on Social Security, House Ways and Means Committee and Joseph R. Humphreys Former Professional Staff Member, Senate Finance Committee
While there remains to this day a great debate about whether the 1977 amendments produced an inequitable result, their net effect was this: workers who had made FICA contributions for their working lifetimes, on the cusp of retirement, and at a time in their lives that their ability to otherwise add to their retirement income was significantly time-limited, faced a significant drop in their monthly benefit payments compared to those who were just a few years older, or just a few years younger. Those individuals were known as "notch babies." Although there have been multiple efforts to provide better for this cohort, those efforts have not been successful, and the notch babies ended up faring far poorer than others.
This is a controversy that has gone on now for nearly thirty five years, and will not end until the last notch baby drawing Social Security benefits is deceased. (Indeed, there are those who charge that the issue has been forestalled for precisely that purpose.)
The cohort grows smaller every day, but the importance of the issue has not waned. Why? Well, among other things, because the notch babies have had to rely more on other resources for their survival than other seniors. (Fortunately, many of them also had actual pensions, something else which may soon be a thing of the past.) Ask the child of a notch baby, (likely someone in the 45-70 year age cohort) and odds are they will know exactly what the term refers to, and will tell you that their parents got a raw deal as a result of the notch. (My own mother's social security benefit in the penultimate year of her life was a paltry $175.00/mo - less than the daily rate for her nursing home care.) Indeed, I would argue that the issue is more important todaythan ever before.
Why ? Because the Paul Ryan budget plan would create a whole new cohort of notch babies: Individuals who earned wages, made FICA contributions, but will not turn 55 before Ryan's target implementation date. In other words, individuals for whom the whole social security program will have become nothing but a bait-and-switch scam, for many of them (especially those 50-55) at the last minute, when it is too late for them to make other provisions, if that were even possible.
So as for me, every chance I get, I'm going to point out that Paul Ryan intends to make my siblings, my co-workers, my friends and my children just another group of notch babies.