Social Security in the United States has become an institution enshrined in tradition and sacrosanct to politicians. Former Speaker of the House Tip O'Neil once said that Social Security was a political "third rail," meaning if any politician dared touch it, he would soon be voted out of office. The federal legislation was aimed at ensuring senior citizens did not die of starvation or became homeless. Knowing how this came about is key to understanding the importance and cultural significance of Social Security today.
Precursor to Social Security
In 1601, colonists in New England followed the lead of their British homeland and instituted "Poor Laws" aimed at providing "deserving poor" with a means to survive harsh winters and lean times. Poor Laws in New England, much like their counterparts in England, were paid for with taxes on the affluent. Money and services were then doled out to communities and administered like a charity. Social workers would visit the homes of the poor to ensure they were not wasting or squandering the funds given to them. Often, because of their inability to work, the elderly were deemed the most "deserving" of charity.
Civil War Pensions
During the Civil War, Americans experienced loss on a scale previously unimaginable. Fathers, husbands and sons who were killed in battle often left families--particularly elderly parents--without a means for survival. Additionally, the number of wounded veterans, with missing limbs, paralysis or other handicaps, was staggering to mid-19th century society.
In response to public pressure, the U.S. Congress passed the Civil War Pension Act in 1862 to provide a means of support for wounded veterans, and for the widows and orphans of slain soldiers. By 1910, some 90 percent of Civil War veterans were old enough to be considered "disabled" and thus began collecting benefits.
The Great Depression
As the country reeled from the effects of the Great Depression, an alarming number of elderly Americans were left without savings--most of which had disappeared in the Stock Market crash of 1929 or the subsequent bank failures. This left some 70 percent of Americans over 65 dependent upon charity or without any income at all. In response to public outcry, President Franklin D. Roosevelt signed the Social Security Act (HR 7260) on August 14th, 1935, with a minimum of protest from fiscal conservatives.
In addition to ensuring elderly Americans at least some income after retirement, the Social Security Act also instituted federal support for health care, unemployment insurance and aid to dependent children programs
Private Social Security
At the time of the Depression, and for decades afterward, some companies had instituted pensions, which were intended to reward a workers for their lifetimes of loyalty and productivity. A form of old-age insurance, pensions were intended to afford workers a portion of their working-age wages for the rest of their lives.
Unfortunately, few workers remained at a single job long enough to qualify for old-age pensions through company programs. Additionally, not all companies provided pensions, and those that did had variable programs that were difficult to capitalize upon. For example, in 1932, only 15 percent of workers were participating in pension programs or were employed in companies that had such programs.
Other Considerations
Aside from the social contract theory of providing for the elderly or helpless in American society, the Social Security Act helped with another problem in American society--radicalism. Some radicals, angered at the widespread poverty, unemployment and financial inequality of American society, advocated forced redistribution of wealth. For example, the populist governor of Louisiana, Huey Long, agitated for government guarantees of $5,000 a year per family. The money would be acquired through taxation and regulation of wealthy Americans' incomes, holdings and estates. His ideas resonated with many Americans, and by the mid-1930s some 7.7 million Americans were involved in "Share the Wealth" campaigns throughout the country.
Cost of Living Adjustments
Between 1935 and 1951, no adjustments were made to the Social Security Act to provide for an increase in the cost of living. In 1951, monthly benefits were inadequate to meet the needs of retired Americans, so new legislation was proposed to fix this problem. Unfortunately, provisions in the legislation prevented automatic adjustments in the Cost of Living Adjustment (COLA) payments, meaning Congress had to propose, vote on and approve each cost increase.
In 1972, legislation was passed so that, beginning in 1975, all Social Security payments would include a fixed COLA increase every year. The automatic COLA, in combination with the vastly increasing number of retirees eligible for benefits, put a serious strain on the Social Security trust fund, leading to some momentous changes in later years.
Financing Shortfall
In 1977, accountants in the government realized that at the current tax rate, Social Security would be bankrupt by 1979. In order to meet the budget shortfall, the Social Security tax was increased from 6.45 percent to 7.65 percent, a measure that proponents hoped would ensure the fund's solvency for the next 50 years.
In 1983, however, facing another budget shortfall, President Ronald Reagan--at the recommendation of Alan Greenspan--found it necessary to begin taxing Social Security benefits.
In 1996 and again in 1997, President Bill Clinton passed acts that limited or curtailed provisions in Social Security not directly tied to old-age benefits. In 1996, recipients who were on Social Security disability due to drug or alcohol addiction were cut from the program. In 1997, Aid to Families with Dependent Children programs had a time limit and new, stringent qualifications imposed upon them, and eliminated aid to non-citizens completely. These moves were implemented because of the looming financial problems with Social Security that were not foreseen in previous years.
Tags: Social Security, American society, Americans were, benefits 1996, budget shortfall, Cost Living, elderly Americans
