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By: Anonymous

Date: 1935

Source: The Library of Congress.

About the Author: This advertisement is part of the collection at the Library of Congress.

INTRODUCTION

The single most important feature of the New Deal's emerging welfare state was Social Security. An ambitious, far-reaching, and permanent reform, Social Security was signed into law by President Franklin D. Roosevelt on August 14, 1935 to provide a modest income to relieve the poverty of elderly Americans. By promoting the law, Roosevelt became the first president to advocate protection for the elderly.

Roosevelt acted in response to a critic, Dr. Francis Townsend, who argued that the New Deal should include more far-reaching programs to end the Great Depression. After watching three elderly women rummaging through garbage cans for scraps of food, Townsend called for the government to offer old-age assistance. The Townsend Plan proposed that the federal government pay every American sixty years and older a monthly stipend of $200 on the condition that they leave the work force and spend the money within thirty days. A married couple, both sixty years old, would receive $4,800 annually at a time when eighty-seven percent of American families earned $2,500 or less. However, younger workers would benefit because they would no longer compete with the elderly for jobs and the elderly would rejuvenate the economy through spending.

Roosevelt had an interest in social security legislation. As governor of New York in 1928, he had proposed unemployment insurance for the elderly. Facing a tough reelection battle in 1936, Roosevelt decided to adopt a modified version of Townsend's plan. With the Social Security Act, Americans aged sixty-five or older would receive a monthly payment, starting on January 1, 1942, that initially ranged from $10 to $85. A payroll tax would provide the funding and determine the amount received by each recipient. In 1937, the new tax, the Federal Insurance Contribution Act (FICA), first appeared on workers' paychecks. Funding Social Security through payroll deductions removed the stigma of accepting government funds because the workers themselves had contributed to their payment. To claim social security, workers needed a Social Security number. To persuade Americans to sign up, the government advertised the benefits of Social Security.

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SIGNIFICANCE

With Social Security, millions of ordinary American citizens were numbered, registered, and identified by a government bureaucracy for the first time in U.S. history. The Social Security program created a personal, individualized connection between people and the federal government. It provided the bedrock for the emerging welfare state. The legislation ensured Americans that the government would provide a safety net, a measure of financial aid and support in time of economic and personal crisis.

Since its inception, Social Security has paid approximately $8.4 trillion in benefits to nearly two hundred million people. However, in 1935, no one expected vast numbers of Americans to live well past age sixty-five. In 1935, only 7.5 million people were sixty-five or older. In 2006, thirty-six million Americans (or one in eight) are sixty-five or older. By the mid-twenty-first century, this number is expected to rise to one in five. The ability of Social Security to continue payments to so many people is greatly in doubt. The Social Security program is largely a payas-you-go system with current workers paying for current beneficiaries. This system has worked well over the years because a relatively large number of workers supported each individual receiving benefits. It is not apparent whether a comparatively small number of workers will be able to support a comparatively much larger number of retirees.

FURTHER RESOURCES

Books

Social Security at the Dawn of the Twenty-First Century, edited by Dalmer Hoskins, Donate Dubbernack, and Christiane Kuptsch. New Brunswick, N.J.: Transaction, 2001.

Lubove, Roy. The Struggle for Social Security, 1900–1935.

Cambridge, Mass.: Harvard University Press, 1968. Myles, John. Old Age in the Welfare State: The Political Economy of Public Pensions. Boston: Little Brown, 1984.

Web sites

Social Security Administration. "Social Security History." May 1, 2006. <http://www.ssa.gov/history> (accessed June 5, 2006).

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