Social Security Act of 1935

   Despite its flaws, the Social Security Act of 1935, was a significant achievement in that for the first time the government had a responsibility for the individual welfare of all Americans.  It established a number of programs that provided for the material needs of individuals and families.  The Social Security Act reflected the humanitarianism of the 1930s as well as the inclination of Americans in those years to seek security and group acceptance.  Although the Act faced some problems along the way, it provided the economic security that the American people desperately needed during the post-Depression era. 

 

     The Great Depression of the 1930s left millions unemployed and penniless.  From 1930 to 1939, American unemployment averaged 18.2 percent.  The economy continued to decline as prices and world trade fell drastically.  The miserable effects of the Depression led the Roosevelt Administration in its attempt to jump-start the economy while shielding the indigent Americans from hardship.  President Franklin D. Roosevelt hoped to institute a program providing protection for the poor, unemployed, and elderly.  In January 1935, FDR called for social reform in his State of the Union Address.  He also placed an emphasis on social security and employment: “We have not weeded out the over privileged and we have not effectively lifted up the underprivileged” .The Social Security Act was passed by Congress in July 1935 and signed into law by Roosevelt on August 14, 1935 .

 

A major goal of the Social Security Act was to maintain maximum freedom in the economic lives of the American people.  The Act was established in order to provide security for the individual and his family.  It highly encouraged individual initiative and saving, in hopes of decreasing inefficiency, laziness, and dependency.  One of the basic objectives of the act was to protect the elderly and the disabled against expenses of illnesses that could otherwise drain their savings.  This essentially kept families together by giving children the opportunity to grow up in health and security .The original Social Security Act was a comprehensive law consisting of eleven titles, or subjects.  Six of the titles outlined specific programs.  These original programs included Old-Age Assistance, Old-Age Retirement Benefits, Unemployment Compensation, Aid to Dependent Children, Maternal and Child Welfare, and Aid to the Blind.  The rest organized the controlling government body, the Social Security board; established methods of taxation to fund the programs; and structured the creation of public health facilities .States could raise funds by utilizing the existing, and unchallenged, taxing powers of the federal government; this was eventually done through a payroll tax.  Although it might have seemed perfect to many Americans in need of aid, the formation of the Social Security Act had some complications.  It encountered difficulties because of the constitutional constraints imposed upon the federal government.  It had been generally assumed that social concerns lay within the domain of the states, rather than Washington.  As a result, a federal-state system for unemployment insurance was formed.  The federal government managed old-age insurance on a contributory basis, while old-age compensation and programs for the handicapped used a federal-state system .

 

          The various provisions of the Social Security Act helped to pull the economy out of the Depression.  A Social Security Board (SSB) was established in one such provision.  It comprised of three members appointed by the President.  The original members of the SSB were John G. Winant, Chairman; Arthur J. Altmeyer; and Vincent M. Miles.  During the first year, the task of the SSB was to provide employers, employees, and the public with information on obtaining available benefits.

 

In addition to establishing the SSB, the Social Security Act also insured 26 million American workers against income loss from unemployment, old age, and blindness.  The Act created a social welfare program designed to pay retired workers a continuing monthly income after retirement.  Unemployment insurance, retirement benefits, old-age assistance, and aid to dependent or crippled children were among the numerous provisions of the Act.  Monthly benefit initially ranged from $10 to $85, and remained frozen at those levels until 1950 .The amount of monthly benefits was determined by the total amount of wages on which taxes had been paid.  Lump sum payments would be given to persons who had not paid enough money into the program to qualify for benefits and also to the beneficiaries of workers who died before reading age 65.  Beginning in 1936, employers of eight or more persons were taxed 1 percent for unemployment benefits.  This tax increased to 2 percent in 1937 and 3 percent in 1938 .  The system of taxation for old-age and unemployment benefits imposed a total annual assessment of 6 percent on employers’ payrolls after 1949, in addition to 3 percent contributed by workers.  This imposition of payroll taxes on employers and employees established a reserve fund for old-age insurance.  Although the federal government provided money for the implementation of public assistance provisions in the Social Security legislation, it was only proportional to the state funds made available.  Therefore, the level of assistance received by the needy, old, blind, and mothers with dependent children varied greatly between states.  Some provisions of the piece of legislation led to opposing feelings about its components. 

 

     The Social Security Act stimulated differing reactions among the American society.  It was viewed by some people as a non-partisan, humanitarian measure.  The guarantee of a pension, or retirement income, relieved the Americans who feared financial hardship in their later years.  President Roosevelt also commended social security.  He remarked that the Act would never be perfect, but that the government has tried to give some measure of protection to the average citizen and to his family (“FDR Signs Social Security Act” 152).  Although social security had friends, it also had a fair share of enemies.  Some Americans regarded the Act as a “fraud on the working man” .According to organized business, with unemployment insurance no one would work, and with old-age and survivors’ insurance no one would save.  The result would be moral decay, financial bankruptcy, and the collapse of the economy.  Advocates of organized business argued that social security would facilitate “ultimate socialistic control of life and industry”

 

The Social Security Act was far from a perfect piece of legislation.  It denied coverage to numerous classes of workers, including those who needed security most.  Farm laborers, domestics, government, and casual workers were excluded from both unemployment and old-age taxes.  Sickness, the main cause of joblessness, was also disregarded.  Only employees in industrial and commercial occupations were eligible for protection under the original Social Security Act .Another defect of the Act was that it failed to set up a national system of unemployment.  It even failed to provide for effective national standards.  Just about every important decision was left to the states.  With a state-based network of unemployment compensation, the Social Security Act gave rise to the enactment of another type of levy, the sales tax.  This spread rather quickly in the nation’s poorest region, the South .In addition, the insurance system was based on payroll taxes.  The lower-income workers paid a much larger percentage of their wages in social security taxes than did those who had received higher incomes.  This was an unfair advantage to the wealthy class of workers.

President Franklin Roosevelt's remarks
at the signing of the Social Security Act

On August 14, 1935, President Franklin D. Roosevelt signed the Social Security Act into law. Below is the text of his remarks at the signing of the Social Security Act.

Today a hope of many years' standing is in large part fulfilled. The civilization of the past hundred years, with its startling industrial changes, has tended more and more to make life insecure. Young people have come to wonder what would be their lot when they came to old age. The man with a job has wondered how long the job would last.

This social security measure gives at least some protection to thirty millions of our citizens who will reap direct benefits through unemployment compensation, through old-age pensions and through increased services for the protection of children and the prevention of ill health.

We can never insure one hundred percent of the population against one hundred percent of the hazards and vicissitudes of life, but we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age.

This law, too, represents a cornerstone in a structure which is being built but is by no means complete. It is a structure intended to lessen the force of possible future depressions. It will act as a protection to future Administrations against the necessity of going deeply into debt to furnish relief to the needy. The law will flatten out the peaks and valleys of deflation and of inflation. It is, in short, a law that will take care of human needs and at the same time provide the United States an economic structure of vastly greater soundness.

I congratulate all of you ladies and gentlemen, all of you in the Congress, in the executive departments and all of you who come from private life, and I thank you for your splendid efforts in behalf of this sound, needed and patriotic legislation.

If the Senate and the House of Representatives in this long and arduous session had done nothing more than pass this Bill, the session would be regarded as historic for all time.

---Franklin Roosevelt   (August 14, 1935)