Social Security Act
Social Security Act
SOCIAL SECURITY ACT
When President Franklin D. Roosevelt signed the Social Security Act into law on August 14, 1935, he called it the "cornerstone" of a system of government-provided social protections that would take care of basic human needs while preventing the likelihood of crippling economic depression and mass poverty in the future. The several programs created by that historic legislation included Old Age Assistance (OAA) for the low-income elderly; Old Age Insurance (OAI) for retired workers; Unemployment Insurance (UI) for workers who lost their jobs; and Aid to Dependent Children (ADC) for single, principally widowed, women with children. Together, these programs would prove the mainstay of the social welfare system for decades to come. But only one of them, Old Age Insurance, would come to be associated with the favored term social security, a sign of its broader acceptance and growing popularity among the citizenry as the program that came closest to living up to President Roosevelt's ambitious aims.
OAI was initially created to protect individual workers in the paid labor force from the later loss of income due to old age or retirement. Later expanded to include survivors and those with disabilities (becoming Old Age, Survivors', and Disability Insurance, or OASDI), the program popularly known as Social Security has become the single largest public income support program in the United States. Over 90 percent of all workers in the paid labor force are now covered by the program. As of 2003, the program paid monthly benefits to more than forty-five million Americans, including retirees and their surviving spouses, the long-term disabled, and the spouses and minor children of covered workers who die before retirement age. It is widely credited as the most important factor in reducing elderly poverty rates, from an estimated 50 percent at the height of the Great Depression, to less than 10 percent as officially measured at the beginning of the twenty-first century.
There are several features that distinguish OASDI from most other social welfare or "safety net" programs, and that help to explain both its comparative popularity and its claim to the mantle of "social security." One is that it operates on the principle of social insurance: Individuals draw benefits from a common fund to which they have contributed during their working years as a form of protection against a life-course risk—in this case, the risk of devastating income loss due to retirement or disability. Although benefit formulae favor lower-income retirees, the system is otherwise "needs-blind" and pays benefits automatically upon retirement or disability. This reflects Social Security's preventive approach, and distinguishes it from "means-tested" social welfare programs, which provide benefits only after recipients become eligible by offering proof that they are sufficiently impoverished and continue to abide by various program rules.
Social Security's reliance on worker contributions is a second feature that distinguishes it from more traditionally defined "welfare" or public assistance programs, and that has historically helped garner a broad base of political support. Its funding comes from automatic payroll taxes levied on employees and employers, which are put into a specially designated Social Security trust fund. As critics have pointed out, this is a relatively regressive form of financing since it imposes the same tax rate on all workers rather than taxing the affluent at a higher rate, and, since only income up to a certain level is subject to the tax, it actually takes a smaller percentage of the income of the most affluent than it does of low-income workers. And yet, much as the program's original architects predicted, this contributory element makes workers feel they have genuinely earned their benefits and have in interest in the program's success.
Third, unlike most other income support programs, Social Security is wholly administered by the federal government through the Social Security Administration, bringing a far greater degree of uniformity and efficiency in comparison to those administered at the state and local level. Of all government supported programs, it comes closest to embodying the idea of a social contract between the citizenry and national government.
Fourth, to a far greater degree than other programs, Social Security works as a family support system, offering protection against income loss to surviving spouses and children as well as to individual workers, while also relieving retirees from the prospect of financial dependence on their adult children in old age. Finally, Social Security's protection against post-retirement poverty is lasting, and not time-limited as most other income support programs are. Retired beneficiaries are guaranteed payments for the remainder of their lifetimes and, especially important, benefits are automatically adjusted each year to account for inflation.
Many of the features that have made Social Security a popular and effective program were strongly contested at the time of its creation and came about only through a process of political negotiation and programmatic reform. Indeed, in comparison to the more relief-oriented programs created by the Social Security Act, old-age insurance was highly controversial and remained so for much of its early history. Moreover, some of the very political compromises that made the initial passage of Social Security possible also created serious inequities within it that were only later addressed through hard-fought legislative reform.
PROGRESSIVE ERA ORIGINS
Although Social Security traces its legislative origins to 1935 and the Great Depression, the system was built on ideas and models for old-age provision that had been advocated within U.S. and European social reform circles throughout the late nineteenth- and early twentieth-century period known as the Progressive era. During a time marked by what one contemporary called a "reform spirit" and characterized by a great deal of crossnational "borrowing" in public policy, reformers sought new ways of coping with the growing inequities of an increasingly industrialized capitalist economy. Here, in the context of hotly contested debates over workers' rights and protections, unemployment, child labor, and access to health care, ideas such as compulsory social insurance, state-funded pensions, and subsidized private retirement funds began to get serious consideration as a way of dealing with the growing problem of economic need in old age.
These early reformers approached the issue that came to be referred to as old-age "insecurity" with an analysis and assumptions that later proved very influential in Social Security's design. Most significantly, they approached it as a problem of the growing industrial labor force, and with what they saw as the needs of the predominantly white, male breadwinner/wage earner in mind. As the economy became more industrialized, less agricultural, and less oriented to self-employment, they argued, workers relied more heavily on wages from outside employment as their chief source of income. This left older workers facing greater and greater insecurity as the prospect of retiring from, or being pushed out of, the paid labor force approached. At a time when union or employer-provided retirement benefits were virtually nonexistent, many of the elderly were being pushed to drain meager savings, to rely on their children, or to the humiliating recourse of poor relief or even institutionalization in an old-age home. In the eyes of reformers, this situation was inhumane and demeaning, especially at the end of a lifetime of productive work. In particular, the prospect of "dependency" in old age threatened to undermine an ideal of the wage-earning household in which men assumed the role of chief breadwinner and women remained economically subordinate, if not completely dependent.
Agree though they might on the outlines of the problem, reformers differed widely on the solution, and drew on different precedents for support. Early proponents of the social insurance approach looked abroad for inspiration, sending delegations to study and observe the comprehensive system of compulsory health, accident, and old-age insurance established in 1880s Germany, as well as the more limited approaches adopted by the British and other European countries in the early decades of the twentieth century. After World War I and throughout the 1920s, European social insurance continued to expand to cover new groups and new needs, starting from health and employment and eventually extending to old-age insurance. The momentum in the United States was far more halting and uncertain, however, reflecting controversy about the social insurance idea as well as ambivalence about how far it should extend. Thus, when an influential Progressive reform organization, the American Association for Labor Legislation, launched its campaigns for social insurance beginning in 1912, it focused on workmen's compensation, health, and unemployment but stopped short of endorsing old-age insurance. The American Association for Old Age Security (which later changed its name to the American Association for Social Security), established in 1927 by economist and leading social insurance advocate Abraham Epstein, also took the politically safer route of pushing for expanded old-age relief rather than insurance. By then operating in a more conservative political environment, old-age insurance advocates were mindful of the opposition they faced from private insurers, employers, and political leaders suspicious of its European roots, vaguely socialist undertones, and "un-American" collectivism.
But at least as important in the reluctance about old-age insurance was the comparative appeal of direct payments to the elderly in the form of government-funded pensions. Unlike social insurance, which was compulsory and based on the idea of shared risk, pensions involved outright grants to elderly recipients based on past service or established need. In addition to being more straightforward, this approach had the advantage of familiarity: Civil War pensions, originally intended for disabled Union army veterans, had grown into an enormous social welfare program for northern veterans, their families, and survivors—an expansion that drew disdain from some legislators but that nevertheless established an important precedent among the general public. Like other campaigns to establish public pensions for poor widowed mothers and their children, old-age pensions could be presented as aid to the "deserving" poor. Moreover, the pension movement had at least the appearance of being home-grown; old-age pension campaigns took place at the state level, sidestepping the charge of federal government expansionism and preserving local discretion over who among the elderly would receive aid. By the early 1930s old-age pensions had been proposed in a number of states but enacted in only six. That number quickly rose to thirty by mid-decade in response to the Great Depression.
Still another approach offered as an alternative to public old-age insurance envisioned relying on the private sector through expansion of company-sponsored retirement plans. For the most part, these "welfare capitalist" plans combined a percentage of withheld wages matched by employer contributions and invested in a retirement fund. Very few employer-sponsored programs existed by the late 1920s, however, and they offered workers no guarantee or protection against company default. Still, private retirement plans exerted a strong influence on public-sector planning, as influential business leaders organized to preserve a central role for employer benefits in any system of social provision.
THE GREAT DEPRESSION: GROWING DEMAND FOR REFORM
Despite considerable groundwork on many fronts, in reality the system of old-age provision was threadbare on the eve of the Great Depression, and utterly inadequate once mass unemployment and destitution set in. With an estimated half of all elderly Americans living in poverty (a rate nearing 90 percent among non-whites), only about 3 percent were receiving public benefits from the state pension programs, and then only under the stringent conditions imposed by local administrators. As their presence in bread lines, among the homeless, and in harrowing letters to President and Mrs. Roosevelt made evident, the plight of older Americans demanded action at the federal level. But what made federal action on old-age security a top priority was more than dire need. Equally important was the combination of political pressure and reform advocacy brought to bear on the Roosevelt administration by grassroots movements and social policy experts alike.
One important source of pressure was the growing segment of the population over age 65, which by the time the Roosevelt administration was facing the 1934 congressional elections had become an increasingly potent political force. Seeking to capitalize on that potential, Huey Long, the populist senator from Louisiana, made universal pensions for the elderly a prominent part of his "Share Our Wealth" campaign, promising generous monthly payments financed by taxes on millionaires. The Townsend movement was more singularly focused on the elderly, both as a constituency in need and a potential source of much-needed consumer spending. Named for Francis E. Townsend, a 66-year-old retired doctor from California, the Townsend Plan proposed to pay $200 monthly to people over 60, provided they were retired, American citizens, without criminal records, and prepared to spend the money within thirty days of receipt. Within months of its 1933 publication in a Long Beach, California, newspaper, the Townsend Plan had garnered millions of supporters across the country and thousands of local Townsend Clubs. The outcry for federal aid to the elderly, coming from a group the Democrats were eager to court, was a voice the Roosevelt administration could not afford to ignore.
Equally important in the momentum for change was the commitment to reform among a number of the social policy experts recruited for service by the Roosevelt administration, and ready to be mobilized as the New Deal shifted its focus from the immediate crisis of providing relief to the longer-range challenge of building a lasting system of protections against economic insecurity. While the demand for federal old-age pensions was mounting at the grass roots level, these policy experts were working behind the scenes on behalf of the more politically controversial social insurance approach. Dismissing the Townsend Plan and other popular pension schemes as far-fetched and prohibitively expensive, they used their expertise to present social insurance as the more fiscally responsible, long-term solution—one that they felt could be more easily insulated from the whims of politicians pandering to their constituencies.
Social insurance advocates also had two other important advantages in their efforts to influence the administration's approach to old-age security. One was Roosevelt's desire to avoid federal relief as a permanent policy, in line with his personal belief that "the dole" would undermine individual initiative and self-esteem. The other was that social insurance advocates found a strong institutional base within the administration. In the summer of 1934, President Roosevelt appointed the cabinet-level group known as the Committee on Economic Security (CES), and asked it to construct a comprehensive, stable, and permanent system of government social protections for consideration by the Congress. Secretary of Labor Frances Perkins, who chaired the committee, was a longtime advocate of social insurance for the unemployed. Edwin Witte, the University of Wisconsin professor brought in to head the CES staff, had played a central role in drafting the landmark unemployment insurance law in Wisconsin. And Roosevelt himself, while governor of New York and later as president, had expressed admiration for social insurance as a truly modern, forward-looking reform idea. While initially reluctant about extending the social insurance principle from unemployment to old age, the CES leadership eventually came to endorse the concept, thanks largely to the energies of the old-age security planners on its staff.
STRUCTURING SOCIAL SECURITY: THE CES PROPOSALS AND CONGRESSIONAL DEBATE
Chief responsibility for designing the old-age provisions was in the hands of a three-person committee headed by Berkeley law professor Barbara Nachtrieb Armstrong, a leading expert and fervent advocate of social insurance, along with Princeton economist J. Douglas Brown, and Murray Latimer, an economist with expertise in pension policy. It was their initial work, based on a combination of intensive study, careful actuarial calculation, and internal political negotiation, that gave Social Security some of its cardinal features. They were also animated by their own values and commitments to the New Deal, to a more socially responsible government, and to a principle of inclusion that did not always cross the boundaries of gender and race. Thus, in making federal retirement insurance rather than public pensions the centerpiece of their long-range proposal, they were not simply acting on research suggesting that this was the most fiscally sustainable approach. They were also embracing the New Deal spirit of revising and updating the social contract between government and the citizenry, with all the implications of a greater public responsibility for economic security it brought. Similarly, their decision to design a system that would be self-financing and based on worker contributions meshed with President Roosevelt's long-range political calculus, as well as their own concern for fiscal responsibility. Knowing that the payroll tax would initially prove unpopular, Roosevelt insisted that making the system contributory would eventually prove a political asset, avoiding the need to turn to general tax revenues while allowing workers to claim benefits as a right rather than on the basis of proven need.
Finally, their insistence on inclusiveness had both practical and principled elements. As a practical matter, universal coverage would help to ensure a large pool of contributors while helping to ease the unemployment problem by allowing older workers to retire at age 65. But the planners also saw inclusiveness as a matter of equity, and on this basis included the substantially nonwhite population of agricultural along with industrial wage earners in their original old-age insurance proposal. And yet, the spirit of inclusiveness only went so far. Domestic workers, sharecroppers, and temporarily or irregularly employed workers were all excluded from the original insurance proposals, along with the self-employed. Although couched as a practical decision, these exclusions effectively denied coverage for much of the female, non-white, and lower-class workforce. It would remain for Congress, and its powerful southern bloc, to instill even deeper racial divisions in the system, using the mechanism of occupational exclusion. Rightly perceiving the threat to their control over African-American labor, southern members of Congress insisted on excluding agricultural as well as domestic workers from coverage. It was a price the administration was willing to pay for the sake of passing the Social Security Act.
Two other aspects of the legislation's old-age security provisions reflect its careful balance of principle with practical and political considerations. The first was ensconced in Title I of the Social Security Act, providing federal aid to states for needsbased Old Age Assistance programs. Viewed by the CES planners as a necessary stopgap for those too old or otherwise unable to benefit from insurance, it was also a response to the political threat posed by the Townsendites and other sources of popular activism. Second was the legislation's implicit promise to keep public insurance benefits adequate but low, sending important reassurances to private employers that Social Security would complement, not replace, their own employee retirement plans. This unspoken bargain proved essential in garnering political support from liberal-leaning business leaders, who in turn helped to fight off congressional efforts to allow employers to opt out of Social Security altogether.
Significantly, the dynamics shaping the creation of the Social Security Act's old age provisions also played out in its other major provisions. Thus, the CES experts responsible for the unemployment insurance program were committed to using the social insurance model, based on a payroll tax imposed on employers, and designed to provide laid-off workers with temporary benefits. But, in efforts to reassure advocates of state control as well as business leaders wary of higher federal taxes, they adopted a proposal based on the approach developed in Wisconsin, which allowed states to devise their own plans and benefit levels, and to lower tax rates for employers with stable employment records. In this, they rejected an alternative, known as the Ohio Plan, which would have required uniform tax rates within states and minimum federal standards, thus assuring a more adequate level of benefits for unemployed workers. Meanwhile, capitulating to prevailing racial and gender norms, they also excluded agricultural, domestic, and irregularly employed workers from UI coverage.
The other major provision of the Social Security Act, Aid to Dependent Children, was based on the patchwork but widely accepted system of mothers' pension programs introduced during the progressive era and adopted in nearly every state by 1930. Advocated by a widespread and predominantly female network of "maternalist" reformers, the idea of providing relief for single—mostly widowed—mothers and their children proved appealing to Depression era legislators eager to discourage women from entering the full-time labor force. Although materinalists considered ADC an important achievement, their proposals to assure more adequate benefits, uniform standards, and to prevent discrimination were fought back in Congress. With states largely in control and due to weak federal oversight, the program remained riddled with inadequacies and racial inequities that would contribute to the stigma associated with welfare in future decades.
FROM RETIREMENT TO FAMILY SUPPORT SYSTEM: THE 1939 AMENDMENTS
No sooner had the Social Security Act won passage than its old-age insurance provisions came under fierce attack. Republican candidate Alfred Landon called for repealing old-age insurance in the 1936 presidential elections. With payroll deductions set to begin in 1937, some prominent employers simply refused to cooperate, and backed a constitutional challenge that came before the Supreme Court. The Court's 1937 decision ultimately upheld Social Security's constitutionality, but by then oldage insurance had once again come under congressional scrutiny. The Senate controversy hinged on the issue of financing, an increasingly volatile issue as the country receded into further economic downturn during the recession of 1937 to 1938. Under the original financing plan, the system would build up a large accumulation of funds before any benefits were paid out. Workers would start paying into the system in 1937, but no retirees would receive benefits before 1942. Besides draining income from already hard-pressed workers, critics charged, this represented an irresponsible build-up of funds that might otherwise be circulating in the economy. Meanwhile, Old Age Assistance was growing to unprecedented proportions, providing millions with immediate benefits that Social Security could only promise in the distant future.
With the entire system under threat, Congress and the Social Security Board agreed to appoint an advisory council, chaired by former CES staff economist J. Douglas Brown, to recommend changes. Their deliberations, which resulted in the 1939 amendments to the Social Security Act, sought to strengthen the program by transforming it in fundamental ways. The first was to broaden it from an individual retirement plan to a system of family support, by adding survivors' and spousal benefits; the second was to make benefit calculations more generous and favorable to lower-income workers, while making provisions to start benefit payments by 1940; and the third was to shift to a "pay as you go" financing formula to accommodate these more expansive benefits. Under this formula, worker contributions are not held in reserve for their own future retirement, but are used to finance benefits for the current generation of retirees. As the advisory council acknowledged, this method would provide ample funding for the Social Security trust fund created by the 1939 amendments for several decades, but would eventually require supplementation as the population aged and reached retirement age. Their shift to a "family concept" of Social Security also served to reinforce traditional gender roles, albeit in unacknowledged ways. Thus, the 1939 amendments made spousal and survivors' benefits available to wives and not to husbands, on the assumption that a wife was rightfully dependent on her husband and that her earnings were not essential to the overall well-being of the household. Most immediately important to the survival of Social Security, however, the 1939 changes would enable the program to deliver on its initial promise of a more dignified, and ultimately more generous, form of support than means-tested old-age relief.
SOCIAL SECURITY AND THE NEW DEAL LEGACY
Through these and other provisions, the 1939 amendments instituted a new, more expansive idea of Social Security that in turn set the stage for significant program expansions in the decades to come. Beginning in 1950 with amendments extending coverage to previously excluded agricultural, domestic, and self-employed workers, the program gradually came to realize the inclusive vision articulated by its original architects, and eventually to redress the racial, gender, and class inequities perpetuated by the occupational exclusions. The addition of disability insurance in 1954, along with more progressive benefit formulae, has also proved especially important to non-white and lower-wage workers. Major court decisions in the 1970s overruled the gender biases in survivors' and spousal benefits. Especially important to Social Security's anti-poverty objectives, the 1972 adoption of automatic cost of living allowances (COLAs) has provided crucial protection against inflation. Few of these major changes would have come about without the combination of political activism and policy advocacy that helped to shape the original program.
And yet, while these changes made it a more popular and effective program, since the 1980s Social Security has faced an ongoing series of "crises," stemming in part from concern about the program's ability to meet future benefit obligations in the wake of the "baby boom" retirement, but more fundamentally from an ideological challenge to the very principles of social insurance. Nevertheless, Social Security remains the most lasting legacy of Depression-era activism, New Deal policymaking, and above all of the public commitment to a broadly inclusive system of shared social protection against the insecurities of a market economy. Future debate will hinge on these values as well.
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Social Security Act
Social Security Act
United States 1935
The creation of the Social Security Act represented a sea change in how Americans addressed issues relating to poverty, infirmity, and aging. Traditionally, the family or community volunteerism supported populations facing these issues. Before 1929 war veterans had been the only recipients of national public assistance.
Prior to the depression, resources such as accurate statistic studies were limited or nonexistent. As a result, the scope of the problems and conditions surrounding poverty were not well documented or understood. Activism and popular protest in reaction to the newly available information greatly influenced the Social Security Act legislation. Many of those who advocated for the passage of the Social Security Act were average citizens.
Although contemporary connotations of "social security" typically are synonymous with old age pensions, at its inception the Social Security Act was an umbrella for various programs including unemployment insurance, old age insurance, and mothers' aid.
- 1920: League of Nations, based in Geneva, holds its first meetings.
- 1925: European leaders attempt to secure the peace at the Locarno Conference, which guarantees the boundaries between France and Germany, and Belgium and Germany.
- 1930: Naval disarmament treaty signed by the United States, Great Britain, France, Italy, and Japan.
- 1933: Newly inaugurated U.S. President Franklin D. Roosevelt launches the first phase of his New Deal to put depression-era America back to work.
- 1935: Germany annexes the Saar region after a plebiscite. In defiance of Versailles, the Nazis reintroduce compulsory military service. The Allies do nothing, and many western intellectuals maintain that it is only proper for Germany to retake its own territory and begin building up its army again.
- 1935: Italians invade Ethiopia, and the response by the League of Nations—which imposes sanctions but otherwise fails to act—reveals the impotence of that organization.
- 1935: Second phase of New Deal begins with the introduction of social security, farm assistance, and housing and tax reform.
- 1938: The U.S. Fair Labor Standards Act establishes a minimum wage.
- 1940: Hitler's troops sweep through Western Europe, annexing Norway and Denmark in April, and in May the Low Countries and France. At the same time, Stalin—who in this year arranges the murder of Trotsky in Mexico—takes advantage of the situation to add the Baltic republics (Latvia, Lithuania, and Estonia) to the Soviet empire, where they will remain for more than half a century.
- 1945: April sees the death of three leaders: Roosevelt passes away on 12 April; the Italians execute Mussolini and his mistress on 28 April; and Hitler (along with Eva Braun, propaganda minister Josef Goebbels, and Goebbels's family) commits suicide on 30 April.
- 1950: North Korean troops pour into South Korea, starting the Korean War. Initially the communists make impressive gains, but in September the U.S. Marines land at Inchon and liberate Seoul. China responds by sending in its troops.
Event and Its Context
Need, Poverty Preceded Depression
The Great Depression was undoubtedly America's period of greatest need. Some estimates indicated that one-third of the nation lived in substandard housing and needed food, clothing, and regular medical care. To provide these necessities, the government instituted welfare programs during the New Deal. Often referred to as the Second New Deal, the Social Security Act was among the second round reform legislation that was passed during the Roosevelt administration.
Finding adequate solutions for poverty in the United States was compounded by widespread belief that anyone who needed assistance was either not working hard enough or suffered from a fatal character flaw, even moral turpitude. The reasons behind poverty are complex, and the picture is often complicated by the fact that the poor—including children, the disabled or mentally ill, and the very old—are sometimes unable to care for or speak for themselves.
Early American welfare programs were local. State governments provided extremely limited reimbursement for services, if at all. City and county agencies offered some public assistance, but custom dictated that family members were obligated to assist other family members in times of need. This remained the practice even with federal intervention. In 1937 an estimated two-thirds of all states legally required relatives to support their poorer relations. Private agencies, notably churches, filled the gap. The system was far from ideal.
So entrenched were beliefs about welfare and its stigma that the term "relief" was often used in the Great Depression. This distinguished this form of aid from charity or a gift of assistance for which no work was demanded in return for the assistance. Programs of public assistance vary and include means-tested relief (aid provided to people who demonstrate that they do not have the means to provide for themselves and who meet specific criteria to qualify for that aid) and social insurance (entitlement programs such as old age pensions and unemployment insurance).
The Herbert Hoover administration implemented small social programs, but it was not until Franklin D. Roosevelt was sworn into office in January 1933 that substantive changes commenced. Despite opposition to the creation of a welfare state, Roosevelt reiterated that government assistance was a temporary help. "Continued dependence upon relief induces a spiritual and moral disintegration fundamentally destructive to the national fiber," he said. "To dole out relief in this way is to administer a narcotic, a subtle destroyer of the human spirit."
As Roosevelt stated in his June 1934 message to Congress, "Security was attained in the earlier days through the interdependence of members of families upon each other and of the families within a small community upon each other. The complexities of great communities and of organized industry make less real these simple means of security. Therefore, we are compelled to employ the active interest of the Nation as a whole through government in order to encourage a greater security for each individual who composes it."
Social Security remains the most acceptable and controversial federal assistance program. Steve Forbes, magazine publisher and sometime presidential candidate in the 1990s, called the public foment for Social Security "one of the most remarkable grass-roots movements in American history . . . an epochal bill."
Old Age Insurance
The act's keystone was provisions for old age insurance. Americans wanted a means to insure themselves against poverty, particularly in their old age. They needed government assistance and a comprehensive program. The public saw this particular as relatively conservative because it was funded by taxing employers and employees and not publicly subsidized. Workers aged 65 and older would receive an individual pension based on their own financial contributions. Pensions were not to be paid before 1942.
Since 1929 various movements, including Upton Sinclair's End Poverty in California, had wrestled with these concepts. The federally conceived plan was for workers' contributions to fund their own pensions. Their contributions would be available after retirement or as unemployment insurance in the form of Social Security. Most view the program as very practical and cost-effective because Americans, rather than the government, would be paying for their own assistance.
Dr. Francis Townsend, an unemployed physician, propelled the debate on providing pensions for the elderly. His Old-Age Revolving Pension Plan, commonly called the Townsend Plan, was first made public in 1933. This plan proposed to resolve financial problems for the elderly by giving a $200 per month pension to those older than 60. He founded his nonprofit organization, Old Age Revolving Pensions, Ltd., in 1934 to promote the plan; soon after its founding, 500,000 Townsend Club members throughout the United States were espousing the plan.
Economists balked at the plan as "unworkable and impossibly expensive." By 1935, however, these clubs had millions of members and increasing political power. There is some lingering debate over the numbers of members and supporters, but club members deluged congressional leaders and other politicians with correspondence exhorting them to enact Townsend's program.
The Townsend camp often found allies in other national movements, including the Share Our Wealth program instituted by Louisiana senator Huey P. Long, who, it was said, typically received as much mail from the public as the president. Many of Long's ideas about income redistribution were in his book, Every Man a King. Another conservative reactionary of the era was Father Charles Coughlin, whose radio shows attacked capitalists as often as he railed against Jews and communists. Several alternate plans gathered support, including the General Welfare Federation Plan, San Diego Income Idea, and Ham and Egges.
The Roosevelt administration was demonstrably threatened by the Townsend movement. Labor Secretary Frances Perkins said that the debate "both drove us and confused the issue." Edwin E. Witte, director of the Committee of Economic Security, is said to have called the Townsend Plan "a terrific menace which is likely to engulf our entire economic system" and might result in demands for "extravagant, gratuitous pensions." Witte also reputedly fueled the campaign designed to discredit Townsend. "All told," wrote author Linda Gordon, "many hours went into studying and damning his proposal."
Among those working with the cabinet to draft the old age pensions section were Barbara Armstrong, J. Douglas Brown, and Murray Latimer. Perkins referred to them as "wild horses." Regardless of their colorful reputations, they did assist in the development of the framework for old age insurance. The plan provided secure old age for many Americans but excluded agricultural workers and domestics, which left two-thirds of all African Americans without any safety net in times of unemployment or in their old age.
Creating Aid for Children
Aid to Dependent Children (ADC) was a noncontroversial part of the Social Security package. Building on decades of work by the U.S. Children's Bureau, which had been founded in 1912, social reformers pressed the Roosevelt administration to provide meaningful assistance for poor mothers and their dependent children. This portion of the bill was designed to support motherhood; however, crafting this support network was not a simple task.
In this era, men worked outside the home, and their wives typically were the family caregivers. Beginning at the turn of the century, aid had been available to widows with children. Single mothers had some relief, starting in the 1920s, with the creation of mothers' aid pensions, which were enacted in 42 states.
Single women, even those widowed with young children, faced the stigma that was attached to taking a hand-out. Plus, once that pride had been swallowed, there were strings attached. Moral fitness was often a prerequisite for aid. Relatively few women were judged morally sufficient to be granted this sorely needed help.
Representatives of the U.S. Children's Bureau, including Grace Abbott, Katharine Lenroot, and Martha Eliot, were instrumental in helping to craft the language of ADC legislation. They were cautious about minimizing their aid requests. The agency had been the target of Red-baiting and funding cuts. This bill needed to pass and was therefore initially weaker than advocates may have desired. Witte and Perkins ultimately sacrificed the bill during the tangles in Congress. To ensure the passage of the entire Social Security bill, Congress cut key portions of the Aid to Dependent Children Act.
The intent of this program was to assist dependent children in single-parent families, and was thus approached differently from the other Social Security Act programs. Most notably, state and local governments, rather than the federal government, were responsible for administering it. The bill was weak and did not put an end to means and moral testing as some advocated. In 1950 the program became what is now known as Aid to Families of Dependent Children (AFDC).
Because the direction given to the framers of Social Security was that a program of social insurance was to be a first defense against poverty with public assistance a secondary defense, the creation of unemployment insurance and the policies surrounding it received the greatest attention, according to Arthur Altmeyer, assistant secretary of the Department of Labor in the Roosevelt Administration. Roosevelt was unwavering in his mandate that work be found for those able to work and relief stopped.
The technical board of the Committee on Economic Security issued a report that conveyed three possibilities: a solely federal system, a cooperative system with federal subsidies, and a cooperative plan based on the Wagner-Lewis unemployment insurance bill. The board did not clearly support one over the other. There was no consensus and members' opinions shifted even while the bill was still being created. Harry Hopkins, director of the Federal Emergency Relief Administration (FERA), proposed that there be no more discussion of a federal plan. The committee decided to support the Wagner-Lewis framework, which advocated a federal-state tax offset plan. The president later announced his support for a federal-state plan.
The creation of unemployment insurance legislation was fraught with obstacles. As it passed through body after body, it was frequently amended. Senator Robert M. La Follette's suggestion became a permanent amendment that granted discretion to each state to institute the type of unemployment program it deemed appropriate. The president's suggestions that employers should pay into a pooled fund were ignored.
There was concern that the Supreme Court would declare all or some portions of these programs unconstitutional, so the framers took great care in crafting the legislation. The fear was not unwarranted. From January 1935 through May 1936, the Supreme Court declared eight laws within the New Deal as unconstitutional. The timidity of those shaping the legislation may have hindered some programs, particularly ADC, from being more potently effective. In retrospect, the bill was regarded as far too conservative.
The initial legislative package also included public works programs and national medical insurance. Vehement opposition from big business and the medical community quickly eliminated these programs. The administration received suggestions and comments from all quarters including business, social workers, medical professionals, politicians in various parties both left and right, and the public. AFL support vacillated. William Green, the union's president, reportedly "made so many suggestions for improving the bill that he seemed to be against it."
Social workers who protested the end of FERA, which was scheduled to be replaced in 1935 by the Works Progress Administration, also caught the administration's attention. The protesters' timing, coming as the Social Security Act was under consideration, was said to have helped greatly in its eventual passage.
The varying demands and lobbying by Townsend and Long supporters served to propel the bill forward. The bill represented a national shift in how entitlement was defined for the purpose of public assistance. Ultimately, the administration seemed willing to compromise—or sacrifice—pieces of the concept just to get the act passed. It took six months to write the bill and another seven before it passed through Congress.
The president signed the Social Security Act on 14 August 1935. Since that time, Social Security has expanded with the addition of new programs, beginning with federal minimum wage and child labor laws (1938) and disability insurance (1956). Witte's diaries, which detailed the minutia of the creation of the Social Security Act of 1935, became the book, The Development-ofthe Social Security Act. Another lasting impact of the events surrounding the passage of the Social Security Act is the acknowledgement of the power of the ongoing pensioners' lobby by politicians. It is worth noting that these programs bear little resemblance to the contemporary Social Security programs.
Altmeyer, Arthur J. (1891-1972): Born in Wisconsin, Alt-meyer first came to Washington, D.C., as the director of the Labor Compliance Division of the National Recovery Administration in 1933. He became assistant secretary of the Department of Labor in the Roosevelt administration and technical board chair, President's Cabinet Committee on Economic Security. He was a pivotal member of team that researched and developed legislation that would become the United States Social Security program. He was appointed to head the Social Security Board and served in that position from 1937 to July 1946.
Coughlin, Father Charles Edward (1891-1979): Born in Ontario, Canada, Coughlin was a Roman Catholic priest based in Michigan and was well known for his criticism of Roosevelt's New Deal policies. His ideas were popularized through radio broadcasts that he began in 1930.
Cummings, Homer Stillé (1870-1956): United States' attorney general between 1933 and 1939, he served as a member of the Committee on Economic Security, which developed legislation that would become the United States Social Security program.
Hopkins, Harry Lloyd (1890-1946): As Federal Emergency Relief administrator, he became a member of the Committee on Economic Security. He was active in various roles throughout the Roosevelt administration.
Long, Huey (1893-1935): The controversial populist governor of Louisiana and United States senator, Long was critical of Roosevelt. He advocated a radical income redistribution known as the Share-Our-Wealth Plan. He had discussed running for president in 1936. He was assassinated in September 1935.
Morgenthau, Henry, Jr. (1891-1967): As secretary of the U.S. Treasury, he served as a member of the Committee on Economic Security, which had been created to develop legislation that would become the Social Security program. Morgenthau, born in New York, was a longtime Roosevelt advisor and confidant.
Perkins, Frances (1882-1965): The first female Cabinet officer in the United States government, Perkins served as secretary of labor during the Roosevelt administration. She was first a social worker, which informed her government career. She was instrumental in developing policies that would become the United States Social Security program.
Sinclair, Upton Beall, Jr. (1878-1968): Best known as the author of works such as The Jungle, Sinclair created End Poverty in California (EPIC), a reform program that also enabled him to run, although unsuccessfully, for governor.
Van Kleeck, Mary Abby (1883-1972): Born in New York, Van Kleeck criticized New Deal programs, saying they weakened both workers and unions. She was best known in her capacity as director of the Russell Sage Foundation department of industrial studies. She advocated socialism and also wrote on industrial socialization.
Wallace, Henry Agard (1888-1965): Secretary of agriculture during the first two of the four Roosevelt administrations, he was also a member of the Committee on Economic Security, which was created to develop legislation that would become the United States Social Security program. He later became vice president under Roosevelt during the third term.
Winant, John Gilbert (1889-1947): Member of the Committee on Economic Security, he was the first chairman of the Social Security Board. He was tireless in his support for Social Security. Winant resigned from the Social Security Board so that he could defend the act.
Witte, Edwin Emil (1887-1960): A labor economist, Witte was appointed executive director of the Committee on Economic Security. He was at the crux of debates regarding the constitutionality of federal Social Security programs and funding issues. He continued as an advisor in the Social Security Administration.
See also: Stock Market Crash.
Altmeyer, Arthur J. The Formative Years of Social Security:A Chronicle of Social Security Legislation and Administration, 1934-1954. Madison: The University of Wisconsin Press, 1966.
Gordon, Linda. Pitied but Not Entitled: Single Mothers and the History of Welfare. New York: Free Press, 1994.
Graham, Jr., Otis L., and Meghan Wander, eds. Franklin D.Roosevelt, His Life and Times: An Encyclopedic View.Boston: G. K. Hall & Co., 1985.
Handlin, Oscar and Lilian Handlin. Liberty and Equality:1920-1994. New York: Harper Collins Publishers, 1994.
Katz, Michael B. In the Shadow of the Poorhouse: A Social History of Welfare in America. New York: Basic Books, Inc., 1986.
Lubove, Roy. The Struggle for Social Security, 1900-1935.Cambridge, MA: Harvard University Press, 1968.
Olasky, Marvin. The Tragedy of American Compassion.Washington, DC: Regnery Publishing, 1992.
Patterson, James T. America's Struggle Against Poverty:1900-1980. Cambridge, MA: Harvard University Press, 1981.
Watkins, T. H. The Hungry Years: A Narrative History of the Great Depression in America. New York: Henry Holt and Company, 1999.
Witte, Edwin E. The Development of the Social Security Act.Madison: The University of Wisconsin Press, 1962.
Davies, Gareth, and Martha Derthick. "Race and Social Welfare Policy: The Social Security Act of 1935." Political Science Quarterly 112, no. 2 (summer 1997): 217-235.
"FDR and the New Deal." The Economist 353, no. 8151 (25December 1999): 49.
Forbes, Steve. "Backhanded Godfather." Forbes 159, no. 1(13 January 1997): 259.
Hutchison, Elizabeth D., and Leanne W. Charlesworth."Securing the Welfare of Children: Policies Past, Present, and Future." Families in Society: The Journal of Contemporary Human Services 81, no. 6 (November 2000): 576.
Jacoby, Sanford. "Downsizing in the Past." Challenge 41, no.3 (May-June 1998): 100-112.
Lopez, Eduard A. "Constitutional Background to the Social Security Act of 1935." Social Security Bulletin 50, no. 1 (January 1987): 5-11.
Manza, Jeff. "Political Sociological Models of the U.S. New Deal." Annual Review of Sociology, Annual 2000: 297.
—Linda Dailey Paulson
Social Security Act of 1935
Social Security Act of 1935
Jerry W. Markham
Congress adopted the Social Security Act (P.L. 74-271, 49 Stat. 620) in 1935 for the purpose of providing retirement security for American workers. This legislation was a product of the New Deal legislation that spun out of the Great Depression of the 1930s.
POPULIST PROPOSALS IN THE DEPRESSION ERA
Before Congress adopted the Social Security Act a number of individuals and leaders called for government payments to assist the poor and the elderly during this economically difficult period. Their programs promised wealth to everyone. The novelist Upton Sinclair, for example, ran for governor of California in 1934 on a platform that he called the End Poverty in California Plan (EPIC). One feature of the plan was a proposal for the state of California to tax corporations for purposes of getting the necessary revenue to feed the poor and to convert bankrupt factories and farms into cooperatives. Sinclair did not win the gubernatorial race, but his EPIC plan received much attention across the country. Dr. Francis Townsend, another populist with a large following, announced a plan that would entail monthly payments of $200 to nonworking elderly people to help relieve their hardships and difficulties. Over 7,000 "Townsend clubs" with 2.2 million members supported this program. Even Hollywood advertising executives formulated plans to assist the poor; two executives promoted a "Ham and Eggs" plan that would have given thirty dollars each Thursday to elderly people.
"Kingfish" Huey Long, the demagogue , former governor and senator from Louisiana was promoting a "Share the Wealth" program, which would have made "every man a king" by providing pensions of thirty dollars per month to individuals over the age of sixty with annual incomes of less than $1,000 and no more than $10,000 in assets. Under Long's Share the Wealth program, every family in America was guaranteed a minimum annual income of $2,000, and each family was to be given $5,000 to buy a home, an automobile, and a radio. Long proposed to fund the plan by confiscating the assets of the wealthy.
While none of these plans succeeded, they were popular and placed considerable political pressure on President Franklin Roosevelt to propose a plan of his own. A public opinion poll suggested that if Huey Long challenged Franklin Roosevelt, for example, the challenge would split the Democratic voters and could result in the election of the Republican presidential challenger, Alf Landon. Accordingly, Marion Folsom, an executive with the Eastman Kodak Company, created an alternative program for the Roosevelt administration and this program eventually became the Social Security Act.
THE GROWTH OF THE SOCIAL SECURITY ACT
The Social Security Act created a federal pension system funded by taxes on employers and employees. Social Security was not "needs based"; rather, the theory was that workers would contribute to those already retired. These workers would in turn receive benefits upon their own retirement funded by the taxes paid by those still working and from new workers entering the marketplace. The amount of benefits was not limited by the retiree's assets or income from investment sources.
The Social Security program as Congress originally enacted it did not provide universal coverage for retirement benefits but provided benefits principally for industrial employees. The legislation initially excluded most workers, including farm laborers, the self-employed, educators, household servants, casual laborers, and the unemployed.
The government mailed the first Social Security check in 1940 to Ida May Fuller in Ludlow, Vermont, just as the Depression was ending. Ida May Fuller lived for thirty-five more years, until 1975, and by that date, Congress had expanded the Social Security system to cover nearly all workers. Coverage was also broadened to include dependents of workers and disabled employees. By the end of the twentieth century, almost 150 million Americans contributed to the system and more than forty million received benefits. The government paid about 7.5 million individuals survivor benefits, and six million received disability benefits.
SOCIAL SECURITY BENEFITS AND CONTRIBUTIONS
Social Security benefits are similar to an annuity concept in that the government pays them from the time of retirement until the beneficiary and certain dependents are no longer living. The government ties the level of benefits to the workers' annual contributions and number of years the workers made the contributions. Importantly, the law does not entitle all workers to benefits, but only those who satisfy the minimum qualification requirements associated with a certain number of years of contributions. The law caps maximum benefits at a level not far above a poverty level, but many people nonetheless believe the benefits are an important entitlement the government cannot reduce or eliminate. The Supreme Court, however, has held that Social Security contributions do not entitle individuals to some contractual amount on retirement. The Court held that contributions to Social Security are not accrued property rights and that benefits may be removed or changed by Congress. In the Court's words:
The "right" to Social Security benefits is in one sense "earned," for the entire scheme rests on the legislative judgment that those who in their productive years were functioning members of the economy may justly call upon that economy, in their later years, for protection from "the rigors of the poor house as well as from the haunting fear that such a lot awaits them when journey's end is near." ... But ... [t]o engraft upon the Social Security system a concept of "accrued property rights" would deprive it of the flexibility and boldness in adjustment to ever-changing conditions which it demands.
Congress increased Social Security benefits for the first time in 1950, but benefit levels were undercut by inflation in the 1960s. Congress increased benefits again in 1972, and then provided for automatic cost of living adjustments in subsequent years to ensure that the benefits payments kept up with inflationary pressures. This resulted in a mandate that workers pay more into the system before retirement and at the same time restricted access through increased eligibility ages for benefits. Originally, Social Security contributions were equal to a tax of three percent on salaries up to $3,000; both the employee and employer paid the tax into the Social Security fund. By 2000, the law required workers and their employers to contribute 6.2 percent (a total of 12.4 percent) on employees' salaries up to $76,200.
Congress originally intended Social Security benefits to be funded on a "pay-as-you-go" basis. This meant that the benefits paid out each year were to be funded from the annual contributions of workers and their employers. That plan later changed to reflect the fact that the aging "baby boomer" population placed demands on the system that workers could not meet. Congress changed the Social Security system from a pay-as-you-go to a partially funded system in 1977. This meant the law imposed taxes on existing workers that exceeded the amount needed for current payouts, but the government nevertheless collected the revenue and placed it in "trust" for future beneficiaries. This surplus was not actually placed in trust. Instead, the government used the money to pay down federal debt. When needed for Social Security, the funds will have to be reborrowed or taken from the surplus funds. In short, there is no "lockbox" where Social Security funds are being held secure for current and future recipients.
PROBLEMS AND REFORM PROPOSALS
As noted above, Congress adopted a scheme of Social Security taxes largely to pay for benefits in retirement. Eighty percent of American households now pay more in Social Security taxes than they do in income taxes—and the taxes have become burdensome. At the same time, the Social Security benefits are largely insufficient for enabling a comfortable retirement without outside sources of income. Notwithstanding the high taxes and minimal benefits, the Social Security system faces bankruptcy down the road. The Social Security Administration, the agency Congress charged with administering the system, announced it will pay out more in benefits than it will collect in taxes by the year 2015. Sometime before the year 2040, Social Security contributions will enable the government to pay only 71 percent of the benefits it owes under the law to Social Security participants. This means Congress must also dramatically cut benefits or increase contributions or both to maintain the present system in some form. Of particular concern is the fact that the number of workers paying into the Social Security system is shrinking. At the time Social Security was adopted there were twenty-five workers for each retiree. In 2002 there were about 3.25 workers for each retiree. By the year 2030, this ratio will drop to two workers for each Social Security recipient.
The Social Security system has several flaws beyond its bankruptcy. Minority and low-income individuals have shorter life spans and receive less in Social Security benefits than longer-lived, more affluent individuals. In short, criticisms of the current law abound.
Various groups have begun to examine the problems facing the Social Security system and have generated a range of proposals, including privatization, a process through which the program would change from public to private control. In January 1997, a federal advisory council was divided over the issue of whether to allow private social security accounts, but seven of its thirteen members wanted to require compulsory saving through individual accounts. Another federal advisory committee unanimously recommended the use of private accounts to supplement Social Security. The 2000 presidential election focused further attention on the issue. Following his election, President George W. Bush appointed a bipartisan panel to make recommendations on how to privatize Social Security. That committee urged partial privatization.
Advocates of Social Security reform contend that private accounts would provide far more social security and retirement benefits than Social Security, and that private accounts would make more funds available for investment, strengthening the economy for the benefit of everyone. Reformists argue that private contributions compounding tax-free in a private account will not only enhance the retirement years of the workers but will create an estate for their descendants that will enhance their status in life. Opponents of reform claim privatization will result in a loss of the contributions already made into the system and that private accounts may incur investment losses that could devastate a pensioner. Although still controversial in many circles, the law has already effectuated privatization for the pension accounts of federal government employees. These employees may invest contributions in stocks and other securities, and the benefits received during retirement will depend on the success of those investments. State pension funds also allow employees to invest contributions in common stocks and other securities. Countries in Europe, South America, and in Australia are also privatizing some or all of their social security pensions.
Campana, Kristen V. "Paying Our Own Way: The Privatization of the Chilean Social Security System and Its Lessons for American Reform." University of Pennsylvania Journal of International Economic Law 20 (1999): 385–421.
Karmel, Roberta S. "Regulatory Implication of Individual Management of Pension Funds: The Challenge to Financial Regulators Posed by Social Security Privatization." Brooklyn Law Review 64 (1998): 1043–81.
Markham, Jerry W. "Privatizing Social Security." San Diego Law Review 38 (2001): 747–816.
Social Security Online. <http://www.ssa.gov/>.
Three-Legged Stool Model for Retirement
Jerry W. Markham
The combination of the growth of private pension plans and the low level of Social Security benefits has resulted in a three-legged stool model for retirement in America. This means that a combination of Social Security benefits, company pension plans, and savings in personal retirement accounts are needed to have a comfortable retirement.
Social Security Act
SOCIAL SECURITY ACT
As the Great Depression (1929–39) in the United States continued in the early 1930s, growing unemployment created widespread fear and insecurity. Between 1929 and 1933 the unemployment rate rose from 3.2 percent to 25.1 percent. Funds from charities and local government were almost completely drained. Many demands were placed on the federal government to design and implement economic and social reforms to help abate social tensions.
One of the groups that arose during this crisis was composed of senior citizens. Led by an elderly California physician by the name of Francis E. Townsend, the "Townsend Plan" involved a government program of monthly checks of $200 to citizens over the age of 60. The only way to stay on the program was to spend all of the money each month. According to Townsend, this requirement would put money in circulation and stimulate the economy. Beginning in 1933, the group formed a network of "Townsend Clubs" with a combined membership of over 5 million, mostly older, Americans who agitated for the reform.
President Franklin D. Roosevelt (1933–45) responded to these and other concerns by appointing the Special Committee on Social Security, chaired by Secretary of Labor Frances Perkins. The committee's recommendations became the foundation for one of the most significant federal social policies in U.S. history, the Social Security Act of 1935. The Social Security Administration provided unemployment insurance, aid to the poor, and pensions for the elderly.
The Social Security System acted as a non-profit insurance company, raising funds through taxes on employers and employees for old age insurance. The size of each pension was based on how much the worker contributed to the fund. Increased earnings resulted in increased pensions. In order to build up the fund, these social security pensions were not to be dispersed before 1942. Originally, this protection did not apply to non-workers who could not contribute to a pension fund. It also did not apply to family members of a deceased pensioner and to farmers and domestic laborers (who were usually poor).
Congress amended the Social Security Act in 1939 to authorize pension payments to survivors of deceased Social Security recipients. In 1965 Medicare was added to provide health care for eligible retirees. In 1989 Social Security covered 38 million people (nearly all the elderly), and it accounted for nearly a quarter of the one trillion-dollar federal budget. In the late 1980s the poverty rate among the elderly was just below that of the general population. In 1998 discussions began about shoring up the social security program. As the 76 million baby boomers reached retirement age, there would be fewer workers paying taxes compared to the number of people drawing benefits. Without revisions, experts predicted, funds would begin to run out early in the twenty-first century.
The Social Security Act included other programs as well. Unemployment insurance was developed to provide some security against joblessness; it was funded by employee and employer taxes. In 1938 minimum wage and child labor laws were implemented, while federal disability insurance was added in 1956. In the 1960s and 1970s government assistance programs grew significantly in response to demands of liberal activists. In 1965 Medicaid was added to help support health care for the poor. In the 1960s and 1970s the food stamp program was developed, which helped the poor buy food. In 1972 the Supplemental Security Income system was enacted to provide assistance for the elderly and disabled poor.
Another arm of the Social Security Act that significantly impacted the country's social structure and created much controversy was Aid to Dependent Children (ADC). Originally, ADC was designed to help widowed mothers who could not adequately support their families. In 1950 Congress amended ADC to provide grants not only to single parents but also to their children. The program was renamed Aid to Families of Dependent Children (AFDC). Additional amendments broadened coverage to include poor, two-parent families. By the late 1980s more than three million families were receiving AFDC benefits. The growth of this program over the years sparked debate about its role in creating an underclass. While most agreed that the program provided many families with temporary assistance, as was its original intent, critics charged that it stigmatized recipients and conveyed in them a sense of hopelessness, and that it in the same time caused resentment among taxpayers. In the 1980s the focus of anti-poverty programs turned to single mothers receiving AFDC. Initially, these programs provided work training and job placement and, as incentives, they also offered childcare assistance and Medicaid for a year after the recipient began to work. In 1988 the Family Support Act required mothers without children under three to work. In the early 1990s President Bill Clinton (1993–) allowed 42 states to change their AFDC programs in any way they saw fit. These states were not required to provide job training; they could impose time limits on adults receiving assistance and they could also withdraw assistance from those who did not comply with certain conditions. Because of these changes critics predicted a potential rise in single, working poor women who were not equipped to adequately support their children.
Over the years the Social Security Act was successful at protecting a large number of individuals from various forms of suffering. However, even though social security programs have grown and expanded to provide for the poor and disadvantaged, still in 1989 about 15 percent of Americans were poor and 37 million Americans had no medical insurance. In the late 1990s conservatives and liberals, as well as special interest groups on both sides, continued to debate the advantages of restricting or expanding social programs into the twenty-first century.
See also: Great Depression, Medicare, Medicaid, Franklin D. Roosevelt, Townsend Clubs, Welfare Policy
Albelda, Randy and Chris Tilly. "Once upon a Time: A Brief History of Welfare," Dollars and Sense. Boston: n.p., 1996.
Patterson, James T. "Social Security." The Reader's Companion to American History.
Perkins, Frances. "A Dream Translated to Reality." Public Welfare, n.p., 1993.
Stevenson, Richard W. "Squaring Off, at Last, on Social Security." The New York Times, November 29, 1998.
the social security system acted as a non-profit insurance company, raising funds through taxes on employers and employees for old age insurance. the size of each pension was based on how much the worker contributed to the fund.
Social Security Act of 1935
SOCIAL SECURITY ACT OF 1935
The Social Security Act (42 U.S.C.A. § 301 et seq.), designed to assist in the maintenance of the financial well-being of eligible persons, was enacted in 1935 as part of President franklin d. roosevelt's new deal.
In the United States, social security did not exist on the federal level until the passage of the Social Security Act of 1935. This statute provided for a federal program of old-age retirement benefits and a joint federal-state venture of unemployment compensation. In addition, it dispensed federal funds to aid the development at the state level of such programs as vocational rehabilitation, public health services, and child welfare services, along with assistance to the elderly and the handicapped. The act instituted a system of mandatory old-age insurance, issuing benefits in proportion to the previous earnings of persons over sixty-five and establishing a reserve fund financed through the imposition of payroll taxes on employers and employees. The original levy was 1 percent, but the rate has increased over the years. Only employees in industrial and commercial occupations were eligible for protection under the Social Security Act of 1935, but numerous important amendments have expanded the categories of coverage.