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1935 U.S. law creating the Social Security program and unemployment insurance From Wikipedia, the free encyclopedia
The Social Security Act of 1935 is a law enacted by the 74th United States Congress and signed into law by U.S. President Franklin D. Roosevelt on August 14, 1935. The law created the Social Security program as well as insurance against unemployment. The law was part of Roosevelt's New Deal domestic program.
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| Other short titles | Social Security Act |
|---|---|
| Long title | An Act to provide for the general welfare by establishing a system of Federal old-age benefits, and by enabling the several States to make more adequate provision for aged persons, dependent and crippled children, maternal and child welfare, public health, and the administration of their unemployment laws; to establish a Social Security Board; to raise revenue; and for other purposes. |
| Nicknames | SSA |
| Enacted by | the 74th United States Congress |
| Citations | |
| Statutes at Large | Pub. L. 74–271, 49 Stat. 620, enacted August 14, 1935 |
| Codification | |
| Titles amended | 42 U.S.C.: Public Health and Social Welfare |
| U.S.C. sections created | 42 U.S.C. ch. 7 |
| Legislative history | |
| |
| Major amendments | |
| Social Security Amendments of 1965 Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 | |
| United States Supreme Court cases | |
By 1930, the United States was one of the few industrialized countries without any national social security system.[1] Amid the Great Depression, the physician Francis Townsend galvanized support behind a proposal to issue direct payments to older people. 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 Supreme Court upheld the act 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 older people, and spending on Social Security became a significant 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 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.[3]
By the 1930s, the United States was one of the few modern industrial countries 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.[4] 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.[5] For most American workers, retirement during old age was not a realistic option.[6] 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.[7] 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.[8] In 1934, the Dill-Connery bill for federal funding of state pensions programs, passed the House of Representatives and came near passage in the Senate that May. According to one study, ‘Roosevelt took ‘no open stand on the bill, but called supporters to the White House and persuaded them to delay passage until the administration prepared its own, "more comprehensive version.”’[9] That same year 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.[10]
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.[11] During the congressional debate over Social Security, the program was expanded to provide payments to widows and dependents of Social Security recipients.[12] 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.[13] As a result,
65 percent of the African American workforce was excluded from the initial Social Security program (as well as 27 percent of white workers). Many of these workers were covered only later on, when Social Security was expanded in 1950 and then in 1954.[14][15][16]
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.[17] 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.[18] 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.[19] Roosevelt believed that social security should cover everyone, stating that “I see no reason why every child, from the day he is born, shouldn’t be a member of the social security system. When he begins to grow up, he should know he will have old-age benefits direct from the insurance system to which he will belong all his life. If he is out of work, he gets a benefit. If he is sick or crippled, he gets a benefit….I don’t see why not. Cradle to the grave-from the cradle to the grave they ought to be in a social insurance system.”[20] 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.[21]
The Social Security Act has been amended significantly over time. The initial act had ten major titles, with Title XI outlining definitions and regulations. More titles were added as the Social Security Act was amended.
Title I is designed to give money to states to provide assistance to aged individuals.
Title II establishes the Treasury account used to pay for Social Security benefits and gives the Secretary of the Treasury the authority to invest excess reserves from the account.
Title III concerns unemployment insurance.
Title IV concerns Aid to Families with Dependent Children.
Title V concerns maternal and child welfare.
Title VI concerns public health services (investigation of disease and problems of sanitation). It grants the Surgeon General the power to distribute money to the States for that purpose with the approval of the Secretary of the Treasury.
Title VII establishes the Social Security Board and outlines that it is to be composed of three appointees chosen by the President and approved by the Senate and serving for six years.
Title VIII establishes a payroll tax used to fund Social Security. In the amendments of 1939, the tax was removed from the Social Security Act, placed in the Internal Revenue Code, and renamed the Federal Insurance Contributions Act. When Medicare was established in 1966, the FICA tax was increased to fund that program as well.
Title IX establishes an excise tax to be paid on the first day of every year by employers proportional to the total wages of their employees. It also establishes the first federal unemployment insurance program in the United States.
Title X concerns support for blind people.[22]
Title XVI establishes and concerns Supplemental Security Income (SSI).
Title XVIII establishes and concerns Medicare.
Title XIX establishes and concerns Medicaid.
Title XX establishes the rules for state-specific shares of the according to a formula.[23]
Title XXI establishes and concerns CHIP.
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H.R.6635 Approved, August 10, 1939, Public Law 76-379
The original Act provided for only one Federally-administered benefit: Old-Age Insurance, which was paid only to the insured worker. The 1939 Amendments transformed the very nature of the Social Security program. The Amendments created two new benefit categories under §202 of the Act:
Retirement-aged wives, children under 16 (under 18 if attending school), widowed mothers caring for eligible children, and aged widows were all made eligible for dependents and survivors benefits.
Under select circumstances, parents of deceased insured workers were also made eligible for Survivors Insurance. To be eligible parents must be at least age 65, not entitled to Old-Age Insurance, wholly dependent upon the insured worker for income, and mustn't have married since the death of the insured worker. Furthermore, the parent(s) are not eligible if the deceased insured worker leaves a widow or unmarried surviving child under the age of 18.
The 1939 Amendments also increased benefit amounts and accelerated the start of monthly benefit payments from 1940 to 1942.
The Old-Age Reserve Account previously established under §201 of the Act was replaced by the Federal Old-Age and Survivors Insurance Trust Fund, administered by a Board of Trustees. The Secretary of the Treasury, Secretary of Labor, and the Chairman of the Social Security Board were all ex-officio members. The composition of the Board of Trustees has been significantly altered since.
S.2051 Approved, October 3, 1944
Public Law 78-458
Title XII
H.R.7037 Approved, August 10, 1946 Public Law 79-719
Title XIII
H.R.6000 Approved August 28, 1950 Public Law 81-734
These amendments raised benefits for the very first time and placed the program on the road to the virtually universal coverage it has today. Specifically it is the introduction of the cost-of-living adjustment (COLA).
Approved June 28, 1952 Public Law 82-420
H.R.7800 Approved, July 18, 1952 Public Law 82-590
H.R.9366 Approved September 1, 1954 Public Law 83-761
Approved September 1, 1954 Public Law 83-767
Title XV
H.R.7544 Approved, October 24, 1963 Public Law 88-156
Title XVII
H.R.6675 Approved, July 30, 1965 Public Law 89-97
Title XVIII Title XIX
In the 1930s, the Supreme Court struck down many pieces of Roosevelt's New Deal legislation, including the Railroad Retirement Act. The Court threw out a centerpiece of the New Deal, the National Industrial Recovery Act, the Agricultural Adjustment Act, and New York State's minimum-wage law. President Roosevelt responded with an attempt to pack the court via the Judicial Procedures Reform Bill of 1937. On February 5, 1937, he sent a special message to Congress proposing legislation granting the President new powers to add additional judges to all federal courts whenever there were sitting judges age 70 or older who refused to retire.[24] The practical effect of this proposal was that the President would get to appoint six new Justices to the Supreme Court (and 44 judges to lower federal courts), thus instantly tipping the political balance on the Court dramatically in his favor. The debate on this proposal lasted over six months. Beginning with a set of decisions in March, April, and May 1937 (including the Social Security Act cases), the Court would sustain a series of New Deal legislation.[25]
Chief Justice Charles Evans Hughes played a leading role in defeating the court-packing by rushing these pieces of New Deal legislation through and ensuring that the court's majority would uphold it.[26] In March 1937, Associate Justice Owen Roberts, who had previously sided with the court's four conservative justices, shocked the American public by siding with Hughes and the court's three liberal justices in striking down the court's previous decision in the 1923 case Adkins v. Children's Hospital, which held that minimum wage laws were a violation of the Fifth Amendment's due process clause and were thus unconstitutional, and upheld the constitutionality of Washington state's minimum wage law in West Coast Hotel Co. v. Parrish. In 1936, Roberts joined the four conservative justices in using the Adkins decision to strike down a similar minimum wage law New York state enforced in Morehead v. New York ex rel. Tipaldo[27] and his decision to reverse his previous vote in the Morehead decision would be known as the switch in time that saved nine. In spite of widespread speculation that Roberts only agreed to join the court's majority in upholding New Deal legislation, such as the Social Security Act, during the spring of 1937 because of the court packing plan, Hughes wrote in his autobiographical notes that Roosevelt's court reform proposal "had not the slightest effect on our [the court's] decision" in the Parrish case[28]: 419 and that the delayed announcement of the decision created the false impression that the Court had retreated under fire.[28]: 419 Following the vast support that was demonstrated for the New Deal through Roosevelt's re-election in 1936,[28]: 422–23 Hughes persuaded Roberts to no longer base his decisions on political maneuvering and side with him in future cases that involved New Deal legislation[28]: 422–23
Records show Roberts had indicated his desire to overturn the Adkins decision two days after oral arguments concluded for the Parrish case on December 19, 1936.[28]: 413 During this time, however, the court was divided 4-4 following the initial conference call because Associate Justice Harlan Fiske Stone, one of the three liberal justices who continuously voted to uphold New Deal legislation, was absent due to an illness;[28]: 414 with this even division on the Court, the holding of the Washington Supreme Court, finding the minimum wage statute constitutional, would stand. As Hughes desired a clear and strong 5–4 affirmation of the Washington Supreme Court judgment, rather than a 4–4 default affirmation, he convinced the other justices to wait until Stone's return before both deciding and announcing the case.[28]: 414
Two Supreme Court rulings affirmed the constitutionality of the Social Security Act.
| This section needs expansion. You can help by adding to it. (April 2019) |
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.[30] 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 U.S. 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.[31]
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."[32]
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