President Roosevelt signed the Social Security Act into law on August 14, 1935. The law was wide-ranging. While most Americans know Social Security for its old-age pension system, the act also addressed unemployment benefits, aid to dependent children, maternal and child welfare, public health services, and aid to the blind . It launched what would be called ‘the welfare state’ or ‘the social safety net’ of the postwar era.
The social security idea had been gestating in Europe, starting with the pension system of Bismarck’s Germany and many countries had introduced old age benefits before the United States. Social security in America had some precedent in veterans’ benefits and state welfare payments, but there was no systematic provision for retirement, unemployment or disability . As a result, the poverty rate among senior citizens was extremely high and a huge burden on state welfare funds. So President Roosevelt created the Committee on Economic Security in 1934 to study the problem and make recommendations.
Frances Perkins and Harry Hopkins led the committee’s efforts and recommended a universal social insurance type program, with everyone paying in and everyone equally eligible for benefits. They even went so far as to suggest, “…the provision of public employment for those able-bodied workers whom industry cannot employ at a given time. Public work programs…may be needed in normal times…to help meet the problems of stranded communities and overmanned or declining industries” . In the end, the Social Security Act emerged from Congress with compromises on several fronts, including the absence of employment assurance, disability benefits and health insurance (disability and health provisions would be added decades later). A major restriction was that funding came from a (regressive) tax on employers and employees, rather than (progressive) income taxes.
Nevertheless, the Social Security Act was a watershed in American life. As FDR declared:
“The civilization of the past hundred years, with its startling industrial changes, has tended more and more to make life insecure. Young people have come to wonder what would be their lot when they came to old age. The man with a job has wondered how long the job would last…This social security measure gives at least some protection to thirty millions of our citizens….[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…It is, in short, a law that will take care of human needs and at the same time provide for the United States an economic structure of vastly greater soundness” .
The Social Security Act is the most effective poverty mitigation program in the United States. “Prior to Social Security, the elderly routinely faced the prospect of poverty upon retirement. For the most part, that fear has now dissipated” . As of 2009, over 52 million Americans were receiving some type of Social Security benefit . Unfortunately, despite its effectiveness and popularity, Social Security has repeatedly been questioned by conservative forces that seek to cut benefits on the false argument that the Social Security Trust Fund is going bankrupt (it is not). Wall Street financiers have long wished to privatize the system, promising higher returns if the funds were invested in capital markets . This argument, too, is bogus, as proven by the massive losses suffered by private retirement funds in the market crises of 2000 and 2008.
Sources: (1) “1935 Social Security Act,” Social Security Administration, http://www.ssa.gov/history/35actinx.html, accessed May 11, 2015. (2) Theda Skocpol, Protecting Soldiers and Mothers: The Political Origins of Social Policy in the United States, Cambridge: Harvard University Press, 1992. (3) “Report of the Committee on Economic Security,” Social Security Administration, http://www.ssa.gov/history/reports/ces/ces5.html, accessed May 11, 2015. On the roles of Perkins and Hopkins, see Kirstin Downey, The Woman Behind the New Deal: The Life of Frances Perkins, FDR’s Secretary of Labor and His Moral Conscience, New York: Nan Talese (Doubleday), 2009; June Hopkins, Harry Hopkins: Sudden Hero, Brash Reformer; A Biography of the Man Who Started the Welfare System, New York: St. Martin’s Press, 1999, pp. 183-186. (4) “Statement on Signing the Social Security Act,” The American Presidency Project, University of California, Santa Barbara, http://www.presidency.ucsb.edu/ws/index.php?pid=14916, accessed May 11, 2015. (5) “Social Security Act (1935),” Our Documents, http://www.ourdocuments.gov/doc.php?flash=false&doc=68, accessed May 11, 2015. (6) “Annual Statistical Supplement, 2010,” Table 5.A4, Social Security Administration, http://www.ssa.gov/policy/docs/statcomps/supplement/2010/5a.html#table5.a4, accessed May 11, 2015. (7) See, e.g., “Peter Peterson Spent Nearly Half A Billion In Washington Targeting Social Security, Medicare,” Huffington Post, May 15, 2012, http://www.huffingtonpost.com/2012/05/15/peter-peterson-foundation-half-billion-social-security-cuts_n_1517805.html.