When President Franklin D. Roosevelt signed the Social Security Act into law on August 14, 1935, he called it the "cornerstone" of a system of government-provided social protections that would take care of basic human needs while preventing the likelihood of crippling economic depression and mass poverty in the future. The several programs created by that historic legislation included Old Age Assistance (OAA) for the low-income elderly; Old Age Insurance (OAI) for retired workers; Unemployment Insurance (UI) for workers who lost their jobs; and Aid to Dependent Children (ADC) for single, principally widowed, women with children. Together, these programs would prove the mainstay of the social welfare system for decades to come. But only one of them, Old Age Insurance, would come to be associated with the favored term social security, a sign of its broader acceptance and growing popularity among the citizenry as the program that came closest to living up to President Roosevelt's ambitious aims. OAI was initially created to protect individual workers in the paid labor force from the later loss of income due to old age or retirement. Later expanded to include survivors and those with disabilities (becoming Old Age, Survivors', and Disability Insurance, or OASDI), the program popularly known as Social Security has become the single largest public income support program in the United States. Over 90 percent of all workers in the paid labor force are now covered by the program. As of 2003, the program paid monthly benefits to more than forty-five million Americans, including retirees and their surviving spouses, the long-term disabled, and the spouses and minor children of covered workers who die before retirement age. It is widely credited as the most important factor in reducing elderly poverty rates, from an estimated 50 percent at the height of the Great Depression, to less than 10 percent as officially measured at the beginning of the twenty-first century. There are several features that distinguish OASDI from most other social welfare or "safety net" programs, and that help to explain both its comparative popularity and its claim to the mantle of "social security." One is that it operates on the principle of social insurance: Individuals draw benefits from a common fund to which they have contributed during their working years as a form of protection against a life-course risk—in this case, the risk of devastating income loss due to retirement or disability. Although benefit formulae favor lower-income retirees, the system is otherwise "needs-blind" and pays benefits automatically upon retirement or disability. This reflects Social Security's preventive approach, and distinguishes it from "means-tested" social welfare programs, which provide benefits only after recipients become eligible by offering proof that they are sufficiently impoverished and continue to abide by various program rules. Social Security's reliance on worker contributions is a second feature that distinguishes it from more traditionally defined "welfare" or public assistance programs, and that has historically helped garner a broad base of political support. Its funding comes from automatic payroll taxes levied on employees and employers, which are put into a specially designated Social Security trust fund. As critics have pointed out, this is a relatively regressive form of financing since it imposes the same tax rate on all workers rather than taxing the affluent at a higher rate, and, since only income up to a certain level is subject to the tax, it actually takes a smaller percentage of the income of the most affluent than it does of low-income workers. And yet, much as the program's original architects predicted, this contributory element makes workers feel they have genuinely earned their benefits and have in interest in the program's success. Third, unlike most other income support programs, Social Security is wholly administered by the federal government through the Social Security Administration, bringing a far greater degree of uniformity and efficiency in comparison to those administered at the state and local level. Of all government supported programs, it comes closest to embodying the idea of a social contract between the citizenry and national government. Fourth, to a far greater degree than other programs, Social Security works as a family support system, offering protection against income loss to surviving spouses and children as well as to individual workers, while also relieving retirees from the prospect of financial dependence on their adult children in old age. Finally, Social Security's protection against post-retirement poverty is lasting, and not time-limited as most other income support programs are. Retired beneficiaries are guaranteed payments for the remainder of their lifetimes and, especially important, benefits are automatically adjusted each year to account for inflation. Many of the features that have made Social Security a popular and effective program were strongly contested at the time of its creation and came about only through a process of political negotiation and programmatic reform. Indeed, in comparison to the more relief-oriented programs created by the Social Security Act, old-age insurance was highly controversial and remained so for much of its early history. Moreover, some of the very political compromises that made the initial passage of Social Security possible also created serious inequities within it that were only later addressed through hard-fought legislative reform.
Although Social Security traces its legislative origins to 1935 and the Great Depression, the system was built on ideas and models for old-age provision that had been advocated within U.S. and European social reform circles throughout the late nineteenth- and early twentieth-century period known as the Progressive era. During a time marked by what one contemporary called a "reform spirit" and characterized by a great deal of crossnational "borrowing" in public policy, reformers sought new ways of coping with the growing inequities of an increasingly industrialized capitalist economy. Here, in the context of hotly contested debates over workers' rights and protections, unemployment, child labor, and access to health care, ideas such as compulsory social insurance, state-funded pensions, and subsidized private retirement funds began to get serious consideration as a way of dealing with the growing problem of economic need in old age. These early reformers approached the issue that came to be referred to as old-age "insecurity" with an analysis and assumptions that later proved very influential in Social Security's design. Most significantly, they approached it as a problem of the growing industrial labor force, and with what they saw as the needs of the predominantly white, male breadwinner/wage earner in mind. As the economy became more industrialized, less agricultural, and less oriented to self-employment, they argued, workers relied more heavily on wages from outside employment as their chief source of income. This left older workers facing greater and greater insecurity as the prospect of retiring from, or being pushed out of, the paid labor force approached. At a time when union or employer-provided retirement benefits were virtually nonexistent, many of the elderly were being pushed to drain meager savings, to rely on their children, or to the humiliating recourse of poor relief or even institutionalization in an old-age home. In the eyes of reformers, this situation was inhumane and demeaning, especially at the end of a lifetime of productive work. In particular, the prospect of "dependency" in old age threatened to undermine an ideal of the wage-earning household in which men assumed the role of chief breadwinner and women remained economically subordinate, if not completely dependent. Agree though they might on the outlines of the problem, reformers differed widely on the solution, and drew on different precedents for support. Early proponents of the social insurance approach looked abroad for inspiration, sending delegations to study and observe the comprehensive system of compulsory health, accident, and old-age insurance established in 1880s Germany, as well as the more limited approaches adopted by the British and other European countries in the early decades of the twentieth century. After World War I and throughout the 1920s, European social insurance continued to expand to cover new groups and new needs, starting from health and employment and eventually extending to old-age insurance. The momentum in the United States was far more halting and uncertain, however, reflecting controversy about the social insurance idea as well as ambivalence about how far it should extend. Thus, when an influential Progressive reform organization, the American Association for Labor Legislation, launched its campaigns for social insurance beginning in 1912, it focused on workmen's compensation, health, and unemployment but stopped short of endorsing old-age insurance. The American Association for Old Age Security (which later changed its name to the American Association for Social Security), established in 1927 by economist and leading social insurance advocate Abraham Epstein, also took the politically safer route of pushing for expanded old-age relief rather than insurance. By then operating in a more conservative political environment, old-age insurance advocates were mindful of the opposition they faced from private insurers, employers, and political leaders suspicious of its European roots, vaguely socialist undertones, and "un-American" collectivism. But at least as important in the reluctance about old-age insurance was the comparative appeal of direct payments to the elderly in the form of government-funded pensions. Unlike social insurance, which was compulsory and based on the idea of shared risk, pensions involved outright grants to elderly recipients based on past service or established need. In addition to being more straightforward, this approach had the advantage of familiarity: Civil War pensions, originally intended for disabled Union army veterans, had grown into an enormous social welfare program for northern veterans, their families, and survivors—an expansion that drew disdain from some legislators but that nevertheless established an important precedent among the general public. Like other campaigns to establish public pensions for poor widowed mothers and their children, old-age pensions could be presented as aid to the "deserving" poor. Moreover, the pension movement had at least the appearance of being home-grown; old-age pension campaigns took place at the state level, sidestepping the charge of federal government expansionism and preserving local discretion over who among the elderly would receive aid. By the early 1930s old-age pensions had been proposed in a number of states but enacted in only six. That number quickly rose to thirty by mid-decade in response to the Great Depression. Still another approach offered as an alternative to public old-age insurance envisioned relying on the private sector through expansion of company-sponsored retirement plans. For the most part, these "welfare capitalist" plans combined a percentage of withheld wages matched by employer contributions and invested in a retirement fund. Very few employer-sponsored programs existed by the late 1920s, however, and they offered workers no guarantee or protection against company default. Still, private retirement plans exerted a strong influence on public-sector planning, as influential business leaders organized to preserve a central role for employer benefits in any system of social provision.
Despite considerable groundwork on many fronts, in reality the system of old-age provision was threadbare on the eve of the Great Depression, and utterly inadequate once mass unemployment and destitution set in. With an estimated half of all elderly Americans living in poverty (a rate nearing 90 percent among non-whites), only about 3 percent were receiving public benefits from the state pension programs, and then only under the stringent conditions imposed by local administrators. As their presence in bread lines, among the homeless, and in harrowing letters to President and Mrs. Roosevelt made evident, the plight of older Americans demanded action at the federal level. But what made federal action on old-age security a top priority was more than dire need. Equally important was the combination of political pressure and reform advocacy brought to bear on the Roosevelt administration by grassroots movements and social policy experts alike. One important source of pressure was the growing segment of the population over age 65, which by the time the Roosevelt administration was facing the 1934 congressional elections had become an increasingly potent political force. Seeking to capitalize on that potential, Huey Long, the populist senator from Louisiana, made universal pensions for the elderly a prominent part of his "Share Our Wealth" campaign, promising generous monthly payments financed by taxes on millionaires. The Townsend movement was more singularly focused on the elderly, both as a constituency in need and a potential source of much-needed consumer spending. Named for Francis E. Townsend, a 66-year-old retired doctor from California, the Townsend Plan proposed to pay $200 monthly to people over 60, provided they were retired, American citizens, without criminal records, and prepared to spend the money within thirty days of receipt. Within months of its 1933 publication in a Long Beach, California, newspaper, the Townsend Plan had garnered millions of supporters across the country and thousands of local Townsend Clubs. The outcry for federal aid to the elderly, coming from a group the Democrats were eager to court, was a voice the Roosevelt administration could not afford to ignore. Equally important in the momentum for change was the commitment to reform among a number of the social policy experts recruited for service by the Roosevelt administration, and ready to be mobilized as the New Deal shifted its focus from the immediate crisis of providing relief to the longer-range challenge of building a lasting system of protections against economic insecurity. While the demand for federal old-age pensions was mounting at the grass roots level, these policy experts were working behind the scenes on behalf of the more politically controversial social insurance approach. Dismissing the Townsend Plan and other popular pension schemes as far-fetched and prohibitively expensive, they used their expertise to present social insurance as the more fiscally responsible, long-term solution—one that they felt could be more easily insulated from the whims of politicians pandering to their constituencies. Social insurance advocates also had two other important advantages in their efforts to influence the administration's approach to old-age security. One was Roosevelt's desire to avoid federal relief as a permanent policy, in line with his personal belief that "the dole" would undermine individual initiative and self-esteem. The other was that social insurance advocates found a strong institutional base within the administration. In the summer of 1934, President Roosevelt appointed the cabinet-level group known as the Committee on Economic Security (CES), and asked it to construct a comprehensive, stable, and permanent system of government social protections for consideration by the Congress. Secretary of Labor Frances Perkins, who chaired the committee, was a longtime advocate of social insurance for the unemployed. Edwin Witte, the University of Wisconsin professor brought in to head the CES staff, had played a central role in drafting the landmark unemployment insurance law in Wisconsin. And Roosevelt himself, while governor of New York and later as president, had expressed admiration for social insurance as a truly modern, forward-looking reform idea. While initially reluctant about extending the social insurance principle from unemployment to old age, the CES leadership eventually came to endorse the concept, thanks largely to the energies of the old-age security planners on its staff.
Chief responsibility for designing the old-age provisions was in the hands of a three-person committee headed by Berkeley law professor Barbara Nachtrieb Armstrong, a leading expert and fervent advocate of social insurance, along with Princeton economist J. Douglas Brown, and Murray Latimer, an economist with expertise in pension policy. It was their initial work, based on a combination of intensive study, careful actuarial calculation, and internal political negotiation, that gave Social Security some of its cardinal features. They were also animated by their own values and commitments to the New Deal, to a more socially responsible government, and to a principle of inclusion that did not always cross the boundaries of gender and race. Thus, in making federal retirement insurance rather than public pensions the centerpiece of their long-range proposal, they were not simply acting on research suggesting that this was the most fiscally sustainable approach. They were also embracing the New Deal spirit of revising and updating the social contract between government and the citizenry, with all the implications of a greater public responsibility for economic security it brought. Similarly, their decision to design a system that would be self-financing and based on worker contributions meshed with President Roosevelt's long-range political calculus, as well as their own concern for fiscal responsibility. Knowing that the payroll tax would initially prove unpopular, Roosevelt insisted that making the system contributory would eventually prove a political asset, avoiding the need to turn to general tax revenues while allowing workers to claim benefits as a right rather than on the basis of proven need. Finally, their insistence on inclusiveness had both practical and principled elements. As a practical matter, universal coverage would help to ensure a large pool of contributors while helping to ease the unemployment problem by allowing older workers to retire at age 65. But the planners also saw inclusiveness as a matter of equity, and on this basis included the substantially nonwhite population of agricultural along with industrial wage earners in their original old-age insurance proposal. And yet, the spirit of inclusiveness only went so far. Domestic workers, sharecroppers, and temporarily or irregularly employed workers were all excluded from the original insurance proposals, along with the self-employed. Although couched as a practical decision, these exclusions effectively denied coverage for much of the female, non-white, and lower-class workforce. It would remain for Congress, and its powerful southern bloc, to instill even deeper racial divisions in the system, using the mechanism of occupational exclusion. Rightly perceiving the threat to their control over African-American labor, southern members of Congress insisted on excluding agricultural as well as domestic workers from coverage. It was a price the administration was willing to pay for the sake of passing the Social Security Act. Two other aspects of the legislation's old-age security provisions reflect its careful balance of principle with practical and political considerations. The first was ensconced in Title I of the Social Security Act, providing federal aid to states for needsbased Old Age Assistance programs. Viewed by the CES planners as a necessary stopgap for those too old or otherwise unable to benefit from insurance, it was also a response to the political threat posed by the Townsendites and other sources of popular activism. Second was the legislation's implicit promise to keep public insurance benefits adequate but low, sending important reassurances to private employers that Social Security would complement, not replace, their own employee retirement plans. This unspoken bargain proved essential in garnering political support from liberal-leaning business leaders, who in turn helped to fight off congressional efforts to allow employers to opt out of Social Security altogether. Significantly, the dynamics shaping the creation of the Social Security Act's old age provisions also played out in its other major provisions. Thus, the CES experts responsible for the unemployment insurance program were committed to using the social insurance model, based on a payroll tax imposed on employers, and designed to provide laid-off workers with temporary benefits. But, in efforts to reassure advocates of state control as well as business leaders wary of higher federal taxes, they adopted a proposal based on the approach developed in Wisconsin, which allowed states to devise their own plans and benefit levels, and to lower tax rates for employers with stable employment records. In this, they rejected an alternative, known as the Ohio Plan, which would have required uniform tax rates within states and minimum federal standards, thus assuring a more adequate level of benefits for unemployed workers. Meanwhile, capitulating to prevailing racial and gender norms, they also excluded agricultural, domestic, and irregularly employed workers from UI coverage. The other major provision of the Social Security Act, Aid to Dependent Children, was based on the patchwork but widely accepted system of mothers' pension programs introduced during the progressive era and adopted in nearly every state by 1930. Advocated by a widespread and predominantly female network of "maternalist" reformers, the idea of providing relief for single—mostly widowed—mothers and their children proved appealing to Depression era legislators eager to discourage women from entering the full-time labor force. Although materinalists considered ADC an important achievement, their proposals to assure more adequate benefits, uniform standards, and to prevent discrimination were fought back in Congress. With states largely in control and due to weak federal oversight, the program remained riddled with inadequacies and racial inequities that would contribute to the stigma associated with welfare in future decades.
No sooner had the Social Security Act won passage than its old-age insurance provisions came under fierce attack. Republican candidate Alfred Landon called for repealing old-age insurance in the 1936 presidential elections. With payroll deductions set to begin in 1937, some prominent employers simply refused to cooperate, and backed a constitutional challenge that came before the Supreme Court. The Court's 1937 decision ultimately upheld Social Security's constitutionality, but by then oldage insurance had once again come under congressional scrutiny. The Senate controversy hinged on the issue of financing, an increasingly volatile issue as the country receded into further economic downturn during the recession of 1937 to 1938. Under the original financing plan, the system would build up a large accumulation of funds before any benefits were paid out. Workers would start paying into the system in 1937, but no retirees would receive benefits before 1942. Besides draining income from already hard-pressed workers, critics charged, this represented an irresponsible build-up of funds that might otherwise be circulating in the economy. Meanwhile, Old Age Assistance was growing to unprecedented proportions, providing millions with immediate benefits that Social Security could only promise in the distant future. With the entire system under threat, Congress and the Social Security Board agreed to appoint an advisory council, chaired by former CES staff economist J. Douglas Brown, to recommend changes. Their deliberations, which resulted in the 1939 amendments to the Social Security Act, sought to strengthen the program by transforming it in fundamental ways. The first was to broaden it from an individual retirement plan to a system of family support, by adding survivors' and spousal benefits; the second was to make benefit calculations more generous and favorable to lower-income workers, while making provisions to start benefit payments by 1940; and the third was to shift to a "pay as you go" financing formula to accommodate these more expansive benefits. Under this formula, worker contributions are not held in reserve for their own future retirement, but are used to finance benefits for the current generation of retirees. As the advisory council acknowledged, this method would provide ample funding for the Social Security trust fund created by the 1939 amendments for several decades, but would eventually require supplementation as the population aged and reached retirement age. Their shift to a "family concept" of Social Security also served to reinforce traditional gender roles, albeit in unacknowledged ways. Thus, the 1939 amendments made spousal and survivors' benefits available to wives and not to husbands, on the assumption that a wife was rightfully dependent on her husband and that her earnings were not essential to the overall well-being of the household. Most immediately important to the survival of Social Security, however, the 1939 changes would enable the program to deliver on its initial promise of a more dignified, and ultimately more generous, form of support than means-tested old-age relief.
Through these and other provisions, the 1939 amendments instituted a new, more expansive idea of Social Security that in turn set the stage for significant program expansions in the decades to come. Beginning in 1950 with amendments extending coverage to previously excluded agricultural, domestic, and self-employed workers, the program gradually came to realize the inclusive vision articulated by its original architects, and eventually to redress the racial, gender, and class inequities perpetuated by the occupational exclusions. The addition of disability insurance in 1954, along with more progressive benefit formulae, has also proved especially important to non-white and lower-wage workers. Major court decisions in the 1970s overruled the gender biases in survivors' and spousal benefits. Especially important to Social Security's anti-poverty objectives, the 1972 adoption of automatic cost of living allowances (COLAs) has provided crucial protection against inflation. Few of these major changes would have come about without the combination of political activism and policy advocacy that helped to shape the original program. And yet, while these changes made it a more popular and effective program, since the 1980s Social Security has faced an ongoing series of "crises," stemming in part from concern about the program's ability to meet future benefit obligations in the wake of the "baby boom" retirement, but more fundamentally from an ideological challenge to the very principles of social insurance. Nevertheless, Social Security remains the most lasting legacy of Depression-era activism, New Deal policymaking, and above all of the public commitment to a broadly inclusive system of shared social protection against the insecurities of a market economy. Future debate will hinge on these values as well. See Also:AID TO DEPENDENT CHILDREN (ADC); OLD-AGE INSURANCE; PERKINS, FRANCES; TOWNSEND PLAN; UNEMPLOYMENT INSURANCE.
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