The history of Social Security goes all the way back before the Great Depression. Social Security was implemented as a method of social insurance after the Great Depression in the 1930s left more than a half of the U.S population unable to provide for themselves. The depression brought about the crumbling of the stock market and the disappearance of retirement savings for many senior American citizens.
The History of Social Security in the United States
By 1930, a Social Security program had begun as a method of ensuring “self insurance.” By 1935, the Social Security act draft was enacted after Franklin D. Roosevelt became the first President of the United States to advocate federal assistance to the senior citizens.
This act provided financial benefits to unemployed, elderly or retired citizens and offered a huge sum benefit upon one’s death. The act also issued money to the American states to provide those in need with assistance, for insurance on unemployment, to offer support to the blind, families with dependent children, for maternal and child welfare, and for public health services.
With Social Security, the payment received by retired individuals is done via a tax on the wages of current workers. Half of this amount is paid by the tax and the other half is paid by the employer.
Origin and Design
In the 1930s, there were debates as to how the benefits of Social Security would be sponsored. Many people suggested that the individuals expecting the benefits should be funded by payments that they had made in the span of their careers. This idea was ideal, but it would be a disadvantage to those who had already worked for some time before the implementation of the act. They would not have adequate time to raise the money needed to secure their benefits.
Social Security was initially very controversial. Many believed it would intentionally encourage the loss of jobs. Many found this idea to be flawed, however. In fact, because Social Security encourages the elderly to retire, the number of job opportunities for young people is enhanced. This results in diminished overall unemployment levels and the rise of employment for the next generation of employees. Many citizens viewed Social Security as having an agenda that supports socialism as well.
Discrimination arose with the implementation of the act. Many women and minorities who worked intermittently and who worked for companies in specific industries – such as nursing, agriculture, education and domestic services – could not receive coverage. In addition, the vast majority of America’s black population was not covered. This led to the protests by the NAACP.
Some literary works insinuated that the discrimination resulted from the powerful position held by southern Democrats within the Senate Finance Committee and the House Committee on Ways and Means. However, Larry DeWitt refuted the comments, citing a lack of evidence that supports the allegations.
Debates on The Legality of The Act
In the 1930s, the court system struck down many pieces of the act. Removed were the centerpieces of the New Deal era, including the Agricultural Adjustment Act, the National Industrial Recovery Act, and New York State’s minimum-wage law.
President Roosevelt responded with the Judicial Procedures Reform Bill of 1937. This bill gave him power to appoint six new Justices into the Supreme Court and 44 judges into lower federal courts. This would instantly and dramatically tip the political balance of the Supreme Court in his favor.
On February 5, 1937, Roosevelt sent a message to Congress, proposing new legislation. This legislation would grant him power to add additional judges to all federal courts whenever sitting judges who were above 70 years old refused to retire. This debate lasted six months. The Supreme Court then made a set of decisions in March, April, and May of 1937 (including the Social Security Act cases) in which the Court sustained a series of New Deal legislation.
The Supreme Court eventually found the Social Security Act to be constitutional.
Expansion and Evolution
Social Security officials still consistently ignored minority groups, but put a stronger focus on women. Social Security gradually entailed universal coverage and eventually, more focus was put on minorities and improving equality.
In 1940, the total benefits paid equaled $35 million. This number rose to $961 million in 1950, $11.2 billion in 1960, $31.9 billion in 1970, and continued rising. By 2009, 650 billion in Social Security benefits was provided to nearly 51 million Americans.
Amendments of the 1950s and 1960s
After years of debate, casual laborers who worked at least twice a week for the same employer were included. Local government employees were added in 1954.
In 1956, taxes were raised by 4 percent (2 percent for the employer and 2 percent for the employee). There was also an increase in disability benefits. Women were allowed to retire at the age of 62. Men were given a retirement age of 62 years in 1961.
In 1962, the changing role of workers was acknowledged when the law permitted dependent husbands, widowers, or children to collect benefits from women. These people needed to prove their relations and dependency.
In 1965, the age in which women could collect their benefits was reduced to 60 years.
In June of 1972, Congress approved by an overwhelming majority a 20 percent increase in benefits for more than 27 million Americans.
In October of 1972, the Social Security plan was significantly expanded, giving rise to the Supplemental Security Income (SSI) program that offered compensations to those living with low-income who are 65 or older, blind or disabled.
To fight the declining financial outlook, Congress passed legislation that was signed by President Jimmy Carter. This amendment raised holdings from 2 percent to 6.15 percent by altering tax formulas to raise more money.
Assumptions surrounding Social Security continued to be overly optimistic as the program moved towards a crisis. The National Commission on Social Security Reform (NCSSR) investigated the long-run creditworthiness of Social Security.
The amendments made in 1983 were based on a report by the NCSSR’s report. It recommended enacting a six-month long delay in the Cost-of-Living Adjustment (COLA) and changing tax-rate schedules. It also suggested an income tax on Social Security benefits for higher-income individuals. This meant that an benefits of $25,000 for single citizens and $32,000 for couples became taxable. For more about the history of Social Security in the United States, click here.