Townsend Plan

The Townsend Plan, officially the Old-Age Revolving Pensions (OARP) plan, was a September 1933 proposal by California physician Francis Townsend for an old-age pension in response to the Great Depression, leading to a social and political movement. At its peak, the OARP advocacy group claimed more than 750,000 members. The movement demonstrated nationwide demand for old-age pensions, leading Congress and President Franklin D. Roosevelt to adopt a national Social Security policy, though Townsend's original plan called for greater benefits to a greater number of people than Social Security provided.

Origins
The Townsend movement began in September 1933 when Dr. Francis Townsend, a California physician, first published his plan for an Old-Age Revolving Pension (OARP) in a letter to the editor of his local newspaper, the Long Beach Press-Telegram. According to Townsend's 1943 memoir, his plan originated when he saw two old women, dressed in once-nice, tattered clothes, picking through his garbage cans looking for food.

Townsend's letter called for all Americans over the age of sixty to receive $200 at the start of each month, if they refrained from work and spent the $200 by month's end. According to Townsend, the pension was intended to decrease labor supply and competition by removing the aged from the workforce and would increase spending to stimulate economic recovery from the Depression.

Besides the age and spending requirements, the plan had few restrictions. Recipients did not have to be poor or build up a long work record. There were no gender or racial restrictions, though the recipients had to be "free from habitual criminality."

Organization
In January 1934, Townsend, his brother Walter, and his former employer, real estate agent Robert E. Clements, established Old Age Revolving Pensions, Ltd. The first local Townsend club was established in Huntington Beach, California in August 1934; local organizers, either volunteer or paid, would establish chapters once one hundred members had been secured. The organization expanded beyond California and the western United States in the summer of 1935.

Typically, a local club would meet weekly to hear speakers and advocate for the OARP plan. Membership dues were one quarter, of which ten cents went to the national organization and five cents to regional, state, and congressional district organizers. Almost all club members were of old age.

An exact membership size is difficult or impossible to identify because of lack of data, exaggeration by organization leaders, and unclear definition of membership. In February 1935, the OARP national organization claimed that 20 million persons nationwide had signed petitions to promote the plan, but by the time these petitions were presented to Congress in 1936, Townsend claimed only 10 million signatures, which were never counted. Evidence indicates that membership increased in late 1935, after the plan initially failed before Congress.

After the failure of the 1935 bill and Townsend's refusal to answer certain questions before Congress, the movement was subject to thorough investigation on charges of contempt of Congress. A bipartisan House select committee was established, chiefly for the purpose of investigating the Townsend organization. Though no additional charges were brought, the investigation revealed that the Townsend National Weekly was a for-profit publication and enormous commissions were given to some state organizers and Clements, who personally received upwards of $70,000. As a result of the investigation, membership and income stalled, and Clements was forced to resign. The organization was renamed Townsend National Recovery Plan, Inc.

Nevertheless, the organization quickly recovered and reached its peak recorded membership in 1939.

1935 proposal
In January 1935, Representative John S. McGroarty of California proposed the OARP plan as a bill before Congress. Under McGroarty's bill, the plan's costs, which estimated at $24 million annually, would be funded by a two-percent national tax on all transactions, a "multiple" sales tax. The bill was subject to criticism from academic economists, who thought the plan unworkable, and opposed by politicians of all persuasions: leftists who opposed the tax as regressive, conservatives who opposed all further taxation and spending, and moderates who found alternative insurance and assistance programs more palatable.

Dr. Townsend testified for the bill before Congress, but his testimony was ineffective. He admitted that the tax would likely not cover the cost of the program, that 75 years old was a more viable retirement age, and that the transactions tax was in effect a sales tax. At one point in his testimony, Townsend refused to testify by getting up from his seat and walking out while being questioned. By contrast to the competing Economic Security bill, for which the Roosevelt administration prepared witnesses for deposition, the expert testimony for the McGroarty bill was a resounding failure.

The McGroarty bill was subsequently amended to make payments only as the tax revenue allowed, but it was voted down 56 to 206, with many Western Democrats abstaining for fear of going on the record for or against the bill. The Social Security Act passed in August 1935, temporarily suspending calls for OARP.

Later years
The Townsend Plan continued for four decades, but did not really have much influence after 1950. In 1978, the national Townsend Plan was shut down, with only state chapters surviving, and that by then it had a "dwindling and aging membership."

Frances Perkins, President Roosevelt's Secretary of Labor, in her memoir, The Roosevelt I Knew (p. 294) says that Roosevelt told her, "We have to have it [Social Security]. Congress can't stand the pressure of the Townsend Plan unless we have a real old-age insurance system." As Roosevelt said, Social Security was passed by Congress substituting a pay-as-you-go "insurance" scheme for Townsend's far more generous pension plan, but as he told Perkins, it was the Townsend Clubs that forced Congress to act at all.