History of Social Security in America: The Early Years

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The concept of Social Security did not begin in the United States. The history of Social Security in America began after other European countries had already adopted social insurance plans for the elderly several years before President Roosevelt signed Social Security Act of 1935 into law on Aug. 14, 1935.

According to Larry DeWitt in the Social Security Bulletin article “The Development of Social Security in America,” there were more than 20 other nations around the world with operating social insurance when the United States adapted its first national social insurance plan in 1935.

“The first Social Security retirement system,” according to DeWitt, “was put in place in Germany in 1889.” Great Britain had also instituted health insurance and disability benefits in 1925, and “these European systems, especially the German system, were to a considerable degree models for the American systems.” However, even though many European social systems received contributions from workers and their employers as well as the government, this precedent was not adopted by the United States (DeWitt).

Instead of following the same funding principles as the European countries, President Roosevelt insisted that Social Security be self-supporting. In other words, all of its funding, argued Roosevelt, must come from payroll taxes, not from government revenues (DeWitt).

History of Social Security in America

Before the implementation of Social Security in America, the “state old-age pension” movement was the most active form of social welfare states (DeWitt). Even though state welfare pensions for the elderly were practically nonexistent before 1930, by 1935 a surge of pension legislation was passed during the years preceding the passage of the Social Security Act of 1935. However, writes DeWitt, although old-age state pensions were widespread, they were ineffective. Only about three percent of the elderly were receiving benefits.

The elderly were especially hit hard when the 1929 Depression hit. Older workers tended to lose their jobs first and tended to be the last to be rehired during difficult economic times. Moreover, fewer than 10 percent of American workers had private pensions plans through their jobs. The difficulties of the economic climate in the 1930s and the financial challenges of the elderly initiated “pension movements,” writes DeWitt. One movement, the Townsend Plan,” promised every American 60 years or older $200 per month at a time when the average income was only $100 a month (DeWitt).

With pressure for old-age pensions rising, especially the pressure from the Townsend Plan, President Roosevelt decided that the government needed to proceed with some form of pension for the elderly. According to the Secretary of Labor Francis Perkins at that time, as stated by DeWitt, President Roosevelt told Perkins, “‘We have to have it. The Congress can’t stand the pressure of the Townsend Plan unless we have a real old-age insurance system.’”

Social Security Administration Opposition

Roosevelt faced pressure from Social Security opponents. According to Peter Dreier and Donald Cohen in the August 14, 2010 Los Angeles Times article “Insecure Times: Born 75 Years Ago, Social Security is Under Attack Again. Critics Were Wrong Then, and They’re Wrong Today,” Social Security was part of President Roosevelt’s “broader New Deal effort to humanize capitalism.” But Roosevelt’s ideas for social insurance for the elderly caused resistance from opponents who argued it was a threat to “American prosperity, freedom and democracy…Born to privilege, [Roosevelt] understood that many wealthy people considered him a traitor to his class.” Roosevelt thought his opponents were “greedy unenlightened and on the wrong side of history” (Dreier and Cohen).

In Roosevelt’s 1935 “fireside chat” on the radio, according to Dreier and Cohen, the President explained how his opponents were misguided: “‘A few timid people, who fear progress, will try to give you new and strange names for what we are doing.” Roosevelt also argued, “Sometimes they will call it fascism, sometimes communism, sometimes regimentation, sometimes socialism. But in so doing they are trying to make very complex and theoretical something that is really very simple and very practical.’” Roosevelt went on to say that he believed that beginning a Social Security system was “‘a necessary fulfillment of what Americans have always been doing — a fulfillment of old and tested American ideals.’”

Social Security Act of 1935

DeWitt argues, however, that the Great Depression was not the reason for implementing the Social Security Act. Rather it was the “problem of economic security in a modern industrialized society. The Depression was the triggering event that finally persuaded Americans to adopt a social insurance system.” Another reason for Social Security was life expectancy. Prior to preindustrial America a typical male who was born in 1850 had a life expectancy at only 38 years and a female could expect to live until 40. The shift to an industrialized society, a revolution in public sanitation, improved health care and higher quality living standards produced a growing American population living over the age of 65 (DeWitt).

DeWitt writes that Secretary of Labor Francis Perkins was “clearly the most important figure in this early pioneering effort.” Perkins chaired the Committee on Economic Security (CES) to craft the new social insurance system (DeWitt).

The Social Security Act of 1935 was the defining initiative and the starting point of President Roosevelt’s Second New Deal (1935-1937), which was the period of reform where the administration wanted to implement longer-lasting changes to America’s political economy (DeWitt). It was an important part of the history of Social Security in America and according to Frances Perkins, as stated by DeWitt, President Roosevelt’s “proudest domestic accomplishment as president.”

Sources:

DeWitt, Larry. “The Development of Social Security in America.” Social Security Bulletin. Vol. 7, No. 3, 2010.

Dreier, Peter and Cohen, Donald. “Insecure Times; Born 75 Years Ago, Social Security is Under Attack Again. Critics Were Wrong Then, and They’re Wrong Today. Los Angeles Times. August 14, 2010. A.25.

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