F. D. ROOSEVELT'S NEW DEAL, 'THE SOCIAL SECURITY ACT'

The Social Security Act of 1935

Today, The Grandma is still at home. She is reading some news about the future of some social benefits and she thinks that winter is coming for social rights. A new economical crisis is emerging and, as always, the weakest people are going to pay the party, in y¡that case unemployed and retired ones.

On a day like today in 1935, a law enacted by the 74th United States Congress and signed into law by US President Franklin D. Roosevelt was approved, the Social Security Act of 1935, a law that was part of Roosevelt's New Deal domestic program that tried to rose up American economy and employment.

The Grandma wants to talk about this law to remember that the most important thing for a government is the protection of its citizens and the creation of labour opportunities and the distribution of richness between all of them.

The Social Security Act of 1935 is a law enacted by the 74th United States Congress and signed into law by US President Franklin D. Roosevelt.

The law created the Social Security program as well as insurance against unemployment. The law was part of Roosevelt's New Deal domestic program.

By the 1930s, the United States was the only modern industrial country without any national system of social security. In the midst of the Great Depression, the physician Francis Townsend galvanized support behind a proposal to issue direct payments to the elderly.

More information: Social Security Administration

Responding to that movement, Roosevelt organized a committee led by Secretary of Labor Frances Perkins to develop a major social welfare program proposal. Roosevelt presented the plan in early 1935 and signed the Social Security Act into law on August 14, 1935. The act was upheld by the Supreme Court in two major cases decided in 1937.

The law established the Social Security program. The old-age program is funded by payroll taxes, and over the ensuing decades, it contributed to a dramatic decline in poverty among the elderly, and spending on Social Security became a major part of the federal budget.

The Social Security Act also established an unemployment insurance program administered by the states and the Aid to Dependent Children program, which provided aid to families headed by single mothers.

The Social Security Act, 1935

The law was later amended by acts such as the Social Security Amendments of 1965, which established two major healthcare programs: Medicare and Medicaid.

Industrialization and the urbanization in the 20th century created many new social problems and transformed ideas of how society and the government should function together because of them. As industry expanded, cities grew quickly to keep up with demand for labor. Tenement houses were built quickly and poorly, cramming new migrants from farms and Southern and Eastern European immigrants into tight and unhealthy spaces. Work spaces were even more unsafe.

By the 1930s, the United States was the only modern industrial country in which people faced the Depression without any national system of social security though a handful of states had poorly-funded old-age insurance programs.

The federal government had provided pensions to veterans in the aftermath of the Civil War and other wars, and some states had established voluntary old-age pension systems, but otherwise, the United States had little experience with social insurance programs. For most American workers, retirement during old age was not a realistic option.

In the 1930s, the physician Francis Townsend galvanized support for his pension proposal, which called for the federal government to issue direct $200-a-month payments to the elderly. Roosevelt was attracted to the general thinking behind Townsend's plan because it would provide for those no longer capable of working, stimulate demand in the economy, and decrease the supply of labor.

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In 1934, Roosevelt charged the Committee on Economic Security, chaired by Secretary of Labor Frances Perkins, with developing an old-age pension program, an unemployment insurance system, and a national health care program.

The proposal for a national health care system was dropped, but the committee developed an unemployment insurance program that would be largely administered by the states. The committee also developed an old-age plan; at Roosevelt's insistence, it would be funded by individual contributions from workers.

In January 1935, Roosevelt proposed the Social Security Act, which he presented as a more practical alternative to the Townsend Plan. After a series of congressional hearings, the Social Security Act became law in August 1935.

During the congressional debate over Social Security, the program was expanded to provide payments to widows and dependents of Social Security recipients. 

The Social Security Act, 1935

Job categories that were not covered by the act included workers in agricultural labor, domestic service, government employees, and many teachers, nurses, hospital employees, librarians, and social workers.

The program was funded through a newly-established payroll tax, which later became known as the Federal Insurance Contributions Act tax.

Social Security taxes would be collected from employers by the states, with employers and employees contributing equally to the tax. Because the Social Security tax was regressive, and Social Security benefits were based on how much each individual had paid into the system, the program would not contribute to income redistribution in the way that some reformers, including Perkins, had hoped.

In addition to creating the program, the Social Security Act also established a state-administered unemployment insurance system and the Aid to Dependent Children, which provided aid to families headed by single mothers.

Compared with the social security systems in Western Europe, the Social Security Act of 1935 was rather conservative. However, it was the first time that the federal government took responsibility for the economic security of the aged, the temporarily unemployed, dependent children, and the handicapped.

More information: Center on Budget and Policy Priorities

In 1940, Social Security benefits paid totaled $35 million and rose to $961 million in 1950, $11.2 billion in 1960, $31.9 billion in 1970, $120.5 billion in 1980, and $247.8 billion in 1990, all figures in nominal dollars, not adjusted for inflation. In 2004, $492 billion of benefits were paid to 47.5 million beneficiaries. In 2009, nearly 51 million Americans received $650 billion in Social Security benefits.

During the 1950s, those over 65 continued to have the highest poverty rate of any age group in the US with the largest percentage of the nation's wealth concentrated in the hands of Americans under 35.

By 2010, that figure had dramatically reversed itself with the largest percentage of wealth being in the hands of Americans 55-75 and those under 45 being among the poorest. Elder poverty, once a normal sight, had thus become rare by the 21st century.

Reflecting the continuing importance of the Social Security Act, biographer Kenneth S. Davis described the Social Security Act the most important single piece of social legislation in all American history.

More information: History

The program for social security that is now pending

before the Congress is a necessary part of the future

unemployment policy of the government.

Franklin D. Roosevelt