week 3 discussion rese 7. HIS 300

SOCIAL SECURITY ACT The Social Security Act, signed into law by President Franklin D. Roosevelt in 1935, created Social Security, a federal safety net for elderly, unemployed and disadvantaged Americans. The main sti ...

SOCIAL SECURITY ACT The Social Security Act, signed into law by President Franklin D. Roosevelt in 1935, created Social Security, a federal safety net for elderly, unemployed and disadvantaged Americans. The main stipulation of the original Social Security Act was to pay financial benefits to retirees over age 65 based on lifetime payroll tax contributions. The Act also established the Social Security Board, which later became the Social Security Administration, to structure the Social Security Act and figure out the logistics of implementing it. Tens of millions of people have received financial assistance through the Social Security Act since its inception. Still, the program was wrought with challenges from the start and has been a political hot topic for years, its existence threatened time and again. EARLY SOCIAL ASSISTANCE IN AMERICA Economic security has always been a major issue in an unstable, unequal world with an aging population. Societies throughout history have tackled the issue in various ways, but the disadvantaged relied mostly on charity from the wealthy or from family and friends. In the early 17th century, England established “poor laws,” acknowledging the government’s responsibility to care for its less­fortunate citizens. The Pilgrims brought these laws with them to the New World. Eventually, colonial governments created new laws to care for the poor and destitute, deeming which citizens were worthy or unworthy of different types of assistance. Poorhouses or outdoor relief (where people were given monetary or other assistance to keep them out of a poorhouse) were common means of public assistance. By the mid­19th century, conditions in poorhouses were often deplorable. Yet thanks to deteriorating economic conditions they were also packed to the rafters, and local governments struggled to keep up with the overwhelming need. EARLY FORMS OF SOCIAL SECURITY A large segment of American citizens received an early form of social security decades before President Franklin D. Roosevelt signed the Social Security Act. Starting in 1862, hundreds of thousands of veterans disabled in the Civil Warand their widows and orphans could apply for a government pension. In 1890, the law was amended to include any disabled Civil War veteran, regardless of how the disability occurred. In 1906, the law was amended again to include old age as a criterion. Company pension plans came on the scene in 1882 when the Alfred Dolge Company created a pension fund for its employees. A handful of companies followed suit, but few employees received even a nickel. Most of the companies went out of business before the pensions could be distributed, or the pensions were never dispersed. INDUSTRIAL REVOLUTION IN AMERICA According to the Social Security Administration, four changes beginning in the late 19th century helped abolish the economic security policies of the time: the Industrial Revolution, America’s urbanization, the vanishing extended family and a longer life expectancy. Prior to the Industrial Revolution, many people were farmers and managed to support themselves during hard times, and extended family often lived together on family farms and cared for one another as they aged or struggled. The Industrial Revolution, however, enticed people to flock to cities for jobs that were often threatened by layoffs and recession, leaving many without a way to support themselves if they lost their job. The urbanization of American also found many people leaving their extended family behind to fend for themselves. As sanitary and general conditions in America improved, the life expectancy of its citizens did, too. When more and more people grew older, many were unable to work or became sick yet still required care. IMPACT OF THE GREAT DEPRESSION The Great Depression left millions of people unemployed and struggling to put food on the table. It struck the elderly especially hard and many states passed legislation to protect their elder citizens. But most elder­assistance programs of the time were a dismal failure. They were underfunded, poorly run and, in some cases, flat out ignored by officials. Those seniors who received assistance only got about 65 cents a day. As the depression raged on, government officials and frustrated private citizens alike moved to find ways to help struggling Americans and introduced plans to increase economic security. Most ideas were basically federal or state financed pension plans. Some included all citizens while others included only the elderly. None of the plans became law; however, many had huge followings and initiated spirited dialogue about how to care for the disadvantaged and the elderly. ROOSEVELT’S RADICAL IDEA Until Franklin D. Roosevelt became president, most social assistance plans in America were dependent on the government, charities and private citizens doling out money to people in need. Roosevelt, however, borrowed a page from Europe’s economic security rulebook and took a different approach. He proposed a program in which people contributed to their own future economic security by contributing a portion of their work income through payroll tax deductions. Basically, the current working generation would pay into the program and finance the retired generation’s monthly allowance. SOCIAL SECURITY BENEFITS In June 1934, President Roosevelt created the Committee on Economic Security (CES) and tasked them with creating an economic security bill. Led by the first woman to hold a U.S. cabinet post, Secretary of Labor Frances Perkins, the CES drafted the Social Security Act aimed at giving people economic security throughout their lives. The bill included:  an old­age pension program  unemployment insurance funded by employers  health insurance for people in financial distress  financial assistance for widows with children  financial assistance for disabled individuals After much debate, Congress passed the Social Security Act to provide benefits to retirees based on their earnings history and on August 14, 1935, Roosevelt signed it into law. This firmly placed the burden of economic security for American citizens on the federal government’s shoulders. SOCIAL SECURITY CARDS After signing the Social Security Act, President Roosevelt established a three­person board to administer the program with the goal of starting payroll tax deductions for enrollees by January 1, 1937. It was a daunting task, but by November 1936 registration for the program began. Not everyone could participate, though. Self­employed professionals, field hands and domestic workers were excluded. To become eligible, workers completed an application at their local post office and received a national identity card with a unique, nine­digit identification number. Within eight days of rolling out the program, over one million workers had Social Security numbers. Four months later, almost 26 million had enrolled despite most projected payouts being below poverty level. The Social Security card was—and still is —used to track workers earnings and benefits. SOCIAL SECURITY ACT AMENDMENTS Many amendments have been passed to the original Social Security Act. For instance, originally, monthly payouts of old­age benefits were slated to start on January 1, 1942. Eligible people who turned 65 prior to that date received a lump sum payment. On August 10, 1939, an amendment passed to move up the start date to receive monthly benefits to January 1, 1940. Another amendment extended eligibility to dependents and survivors of retired workers. In the 1950s, amendments were made which extended Social Security eligibility to domestic and farm workers, non­farm self­employed professionals and some federal employees. It also offered voluntary coverage to some state and federal employees, hundreds of thousands of nonprofit employees and workers in the Virgin Islands and Puerto Rico. In addition, benefits were increased for millions of beneficiaries and a new contribution schedule established. MEDICARE In 1960, President Dwight D. Eisenhower approved legislation to allow Social Security benefits for disabled workers and their dependents. In 1965, the Social Security Act was amended to provide medical insurance to Social Security beneficiaries age 65 and older. This new “Medicare” program also offered people 65 and older the chance to purchase supplemental medical insurance. In 1972, President Richard M. Nixon signed legislation to provide an automatic cost of living allowance each year to offset the cost of inflation. Prior to the new law, annual increases required Congressional approval. EFFORTS TO KEEP SOCIAL SECURITY SOLVENT By 1977, it was clear Social Security was in financial peril. An amendment was passed changing the benefit qualification formula for people born after 1917. Other amendments were also passed including increasing the payroll tax and slightly decreasing benefits to help cut costs, leaving some beneficiaries with less money during difficult economic times. These efforts didn’t prevent the program from facing a serious financial crisis in the 1980s, however, and President Ronald Reagan created a commission to examine how to keep Social Security in the black. In 1983, he signed