How did Americans learn the value of being paid in retirement?
If you’re an American, you’ve almost certainly heard of Social Security. But you probably haven’t heard of its predecessor, the Townsend Plan, advanced by a Long Beach, California doctor named Francis Townsend.
Social Security—and the ways we think about work, aging, and retirement—owe much to the Townsend Plan and its California roots. Its history is worth revisiting today, as a premonition of politics in an aging world.
The idea behind the Townsend Plan, drafted in 1933, was for the federal government to give $200 a month ($400 for couples) to every American over age 60. It spawned a variant in California, too: the “Ham and Eggs” movement, which would give adults over age 50 $30 every Thursday ($120 per month) from the state. Those sums were enough to support middle-class living in the Great Depression.
Both the federal and California plans were conditioned on recipients not working, thus leaving scarce Depression-era jobs available to the young. The Townsendites’ slogan was “Youth for Work; Age for Leisure.” And even though the Townsend Plan was never adopted and the Ham and Eggs initiative failed, their larger ideas would triumph.
That these ideas were born in California was no accident. In the early 20th century, California was a place where oldsters came to retire in the sunshine—so much so that that the state had a disproportionate share of the nation’s elderly population. Long Beach, where Dr. Townsend practiced medicine, was a beach town with a warm climate that attracted a substantial number of older people.
Older voters then, as today, were more likely to turn out for causes and candidates than young people, which is why California became a leader in catering to them. Even before the Great Depression, California had developed a system of “outdoor relief,” welfare-like payments to indigent elderly residents in their homes as an alternative to placement in poorhouses, which were common in the late 19th century.
Townsend’s movement soon outgrew its local origins. In the 1930s, Townsend Clubs sprouted up across the country, all funneling dues and other revenue to a headquarters in Washington, D.C. As the movement expanded, publicity around it did, too. This provided an opening for grifters to take advantage of elderly people, who thought they had money coming in.
The national plan also had a structural vulnerability. The $200-per-month was to be financed by a tax that would have funneled something like one third of the national income to those over 60. It was essentially a major intergenerational transfer payment, from younger taxpayers to older ones.
The radical nature of such a transfer drew opposition, but it also provided a political opening for President Franklin D. Roosevelt, who was trying to get his much more modest Social Security plan through Congress.
Social Security was not inspired by the Townsend Plan, but it was part of the New Deal’s larger idea of taking the raw edges off capitalism through government intervention. Social Security was designed to look like some of the relatively few private pension plans of the era, with its trust fund and mix of employee and employer contributions. It was also a rather decisive shift in American politics toward the creation of a federal safety net that would include not just an old-page pension, but also unemployment insurance and federal welfare payments.
Social Security passed in 1935, and the Townsend Plan failed. But the first Social Security checks would not go out until 1940. And in California, with its elderly demographic, there were calls for more generous old-age pensions, and sooner.
Robert Noble, a local radio personality in Los Angeles, came up with a state-level plan that seemingly did away with the nasty cost-and-tax element that had sunk Townsend. The state would create a kind of currency to fund a version of “Ham and Eggs” that became known as “Thirty-Thursday,” or $30 payments to those over 50 every Thursday.
With Thirty-Thursday, oldsters would appear to get their pensions at no cost! (As is the case with today’s cryptocurrencies, creating value out of nothing has had a strong appeal in California.) This, of course, was not true. But radio listeners in the 1930s were prone to believing what came out of their receiving sets. The fact that Ham and Eggs was being touted on the radio also gave the idea credibility. Colorful promoters and con men quickly realized that they could make money soliciting elderly supporters of Ham and Eggs for “donations” to the pensions cause.
A Ham and Eggs initiative was placed on the statewide ballot in 1938. Despite its questionable dependence on state currency creation, the Ham and Eggs initiative might well have passed had its sponsors not been involved in other shady affairs—Los Angeles police corruption, a car bombing, the recall of the mayor of Los Angeles, and a forgery connected to a scheme to build a radio station in Mexico. These sidelines of the initiative’s supporters got sufficiently bad PR to sink the measure; it got 45% of the vote. Another Ham and Eggs initiative in 1939 did even worse.
Still, the Ham and Eggers, the Townsendites, and other elderly groups remained a force in state politics for years. They played a role, for example, in 1942 in electing Earl Warren—later chief justice of the U.S. Supreme Court—to the governorship of California. But after World War II, the elderly lost their power, as California’s demographic profile shifted younger, as returning veterans and others settled in California and the baby boom got underway. The pension advocates’ last gasp was a successful ballot initiative in 1948 to raise California’s old age assistance payments to the highest level of any state in the U.S.
The battle of the Townsendites predicted the politics of aging and pensions today. France is already embroiled in strikes and protests over raising the official retirement age. Due to low birth rates, Japan and South Korea are facing shrinking populations. India recently passed China as the world’s most populous country because of aging China’s low-birth rates.
In these countries and our own, tensions are rising over how to divide the economic pie between the young and working population, and the retired elderly. In the U.S., some Congressional Republicans talk of using the debt ceiling negotiations to cut “entitlements.” When they use that word, they are talking about programs designed for older people who don’t work, such as Medicare—and that compromise version of the Townsend Plan that we call Social Security.