The federal government invents Social Security

Posted on September 6, 2009. Filed under: American history, Economics, Politics | Tags: , , |

Our final post in the series on whether the federal government is capable of guarding the public health and well-being focuses on Social Security.

The reputation of the federal Social Security program is tarnished today because it is being strained by huge numbers of retirees and near-retirees, and there are justifiable fears that it will go bankrupt. But this cannot make us forget how important, how groundbreaking the program was. What, after all, is the fuss all about? Why care if Social Security goes bankrupt? The answer is that the Social Security program created and managed by the federal government was the first, and remains the only, safety net for elderly and other at-risk members of our U.S. citizenry.

The Social Security Act of 1935 was a response to the Great Depression. In the 1930s, the only form of financial support for the elderly was a government pension. You received a pension if you had served in the U.S. armed forces or worked for the U.S. government. This, of course, meant that only men could receive pensions. Widows and children of pensioned men could receive their male relative’s pension once he died, but only if they applied for it. And men who were not veterans or former federal employees had nothing unless their employers offered pensions, which was not usual.

These pensions were nothing to write home about. They were extremely small. Elderly people, widows and children with pensions lived very meagerly, and those without pensions had to have relatives willing to support them and even take them in. If you had no pension and no family to fall back on, you were forced to beg for public charity. End of story.

After the stock market crash in October 1929, many elderly, widows, and children lost their pensions and/or the support of their families. Their families had lost their income and were now penniless as well. It is estimated that by 1934 over half of all elderly Americans were unable to support themselves financially. That’s over half of Americans over 65 living on charity—charity that was drying up fast. Thirty states set up state pensions to try to relieve elderly poverty, but the states themselves were poor and the relief was slight, and only about 3% of elderly Americans were receiving any state money by 1935, when the Social Security Act was passed.

There was resistance to the idea of Social Security. Americans had convinced themselves that they weren’t a people who accepted charity, or even a helping hand, especially from the government. People were reluctant to admit that they had no family to depend on for help. One of the ingenious components of the Act was that it paid the elderly with money taxed on wages, taxes that would begin to be collected in 1937 so payments could begin in 1942. In other words, workers paid into the fund, so that when they retired, they would simply be taking back money they had set aside, rather than taking charity from others. This overcame the reluctance to lose face by taking a handout.

In a way, it wasn’t even the payments the elderly received that were so groundbreaking. It was the idea that the federal government, the government of any nation, would make it one of its responsibilities to provide for people in their old age. Government policies for the poor up to that date had consisted of various “poor laws,” which usually mandated prison for those poor who were deemed able to work but did not have jobs and those unable to work, or work farms/workhouses where the poor performed slave labor. If workers were to be taken care of once they grew too old to work, which was not a popular idea at all, then the companies they had worked for should provide a pension, but no one thought those companies should be forced to do so. Basically, no country thought the elderly poor needed or deserved special care, and in the U.S. there was an especially powerful idea that Americans could take care of themselves that foiled any attempt to help the vulnerable.

The Social Security Act included all workers, male and female. It was expanded in 1939 to include widows and children of working men. These people—the elderly, widows, and their children—quickly came to depend on Social Security, and the whole nation supported the idea that they should be reimbursed in their old age for the work they did in their youth. There was no shame attached to accepting Social Security by the 1950s, and the program came to be an accepted part of the American system.

Social Security was well-managed by the government that created it, although it is in serious danger now simply because of our massive population growth. It is perhaps the most important of the government programs put in place in the U.S. for the protection and care of its citizens. It is proof, along with federal highway safety programs and the FDA, of the ability and desire of the federal government to protect the public health and well-being. The fears expressed in 2009 about the federal government becoming involved in health care are just another example of Americans wishing to believe that we are different from all other nations and peoples, that we alone can always take care of ourselves without any help, and that we alone need to keep our federal government constantly at bay, as if it were a dangerous threat to our liberty.

But it is our federal government, our system of representative democracy, that truly makes us unique by creating our liberty. We should give it every opportunity to protect our equality of opportunity (that is, access to good and affordable health care) and justice for all (who seek health care). Our government is as good and as just as we demand it to be, and it is only by continually engaging with it, not fending it off, that we remain American.

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2 Responses to “The federal government invents Social Security”

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“Social security… is in …danger now …because of …population growth.” Would not the same thing happen with universal health care? An overwhelming of the system?

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Hello—good point. The situations are not quite the same, however, as SS was set up when we had about 125 million people in the U.S., and since then the population has topped 300 million. That kind of population growth during this century is not likely, though of course possible. It took until the 19th century to reach 1 billion humans; it took 100 years after that to reach 2 billion, and just 50 years after that (roughly 1950-2000) to reach our present 6 billion! The 20th century saw population growth that is just hard to take in. Since that is unlikely to be repeated, the same problems that face a program set up in 1935 may not face a program set up now.

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