History of Social Security in the United States facts for kids
The Social Security program started in the 1930s during a tough time called the Great Depression. Back then, more than half of older people faced poverty. Social Security was created to help them and others who needed support.
The Social Security Act became law on August 14, 1935. President Franklin D. Roosevelt's team, led by Frances Perkins, wrote the Act. It was part of the "New Deal" plan to fix the country's problems. The Act aimed to protect people from dangers like old age, poverty, job loss, and the struggles of widows and children without fathers. When President Roosevelt signed it, he became the first president to support federal help for older people.
The Act provided money to retirees and those who lost their jobs. It also gave a one-time payment when someone died. Today, payments to retirees come from a payroll tax on current workers' wages. Half of this tax comes directly from the worker's paycheck, and the other half is paid by their employer. The Act also gave money to states for other programs, like help for older people, unemployment insurance, and support for families with dependent children.
Contents
How Social Security Started
The idea for Social Security came from different places. In 1932, a politician named Dudley_J._LeBlanc suggested monthly payments for older people in Louisiana. Huey Long saw how popular this idea was and added it to his national plans.
Experts at the University of Wisconsin–Madison, including Edwin Witte, who is called the "Father of Social Security," helped create the plan for a government-funded pension in 1934.
Later, in 1933, Francis Townsend made the idea even more popular with his "Townsend Plan." Early talks about Social Security focused on how to pay for it. Some thought people should get benefits based on how much they paid in. Others argued this would be unfair to those who were already working, as they wouldn't have enough time to pay in much.
Early Challenges and Concerns
When Social Security was first suggested, some people didn't like it. One concern was that it might make fewer people want to work. But supporters said that if older workers retired, it would create jobs for younger people, which was very important during the Great Depression.
Some opponents even called the plan "socialism". Senator Thomas Gore asked Secretary of Labor Frances Perkins, "Isn't this socialism?" She said no, but he kept asking, "Isn't this a teeny-weeny bit of socialism?"
Many women and minorities were not covered by the first Social Security Act. Jobs like farm work, domestic service (like housekeepers), and government jobs were not included. These jobs were often done by women and minorities. For example, in 1940, 90% of domestic workers were women, and two-thirds of all employed Black women worked in domestic service. This meant almost half of all working people were not covered. The NAACP even said the Act was like "a sieve with holes just big enough for the majority of Negroes to fall through."
Some historians thought this was because powerful Southern politicians wanted to exclude Black workers. However, other experts have shown that the exclusions were mainly for practical reasons, like how hard it would be to collect taxes from farmers or housekeepers who employed maids. Many other countries also excluded farm and domestic workers when their programs started.
Social Security also supported traditional family ideas. Women usually got benefits through their husbands or children. Aid for mothers assumed they would not be working.
There was also unfairness in the "Aid to Dependent Children" program. States distributed this money, and some gave less to Black families than to white families. This made it impossible for many Black mothers to stay home, even though that was a program requirement. Some states also excluded children born outside of marriage, which affected Black women more.
Was the Act Constitutional?
In the 1930s, the Supreme Court often rejected parts of President Roosevelt's New Deal laws. Because of this, some people worried that the Social Security Act might also be struck down.
President Roosevelt tried to change the Supreme Court by adding more judges who supported his plans. This caused a big debate. But then, in 1937, the Supreme Court started to approve more New Deal laws, including the Social Security Act.
Two important Supreme Court decisions said the Social Security Act was constitutional:
- Steward Machine Company v. Davis (1937): The Court said that during a crisis like the Great Depression, using government money to help the unemployed and their families was for the "general welfare" of the country. Some argued that the government was forcing states to create unemployment programs, which they felt was beyond federal power. But the Court disagreed.
- Helvering v. Davis (1937): This ruling said that the Social Security tax was constitutional because it was just a regular tax that Congress had the power to collect. The money collected wasn't specifically set aside for Social Security, but went into the general Treasury.
How Social Security Was Put into Action
The very first Social Security payment was a small one. Ernest Ackerman, a motorman from Cleveland, retired just one day after Social Security began. He had paid only five cents into the system and received a one-time payment of seventeen cents.
The first monthly payment went to Ida May Fuller of Vermont on January 31, 1940. She had paid a total of $24.75 into the system over three years. Her first check was for $22.54. After her second check, she had already received more than she contributed! She lived to be 100 years old and collected over $22,000 in benefits.
Growing and Changing Over Time
Social Security has changed a lot since the 1930s. It has grown to cover more people and has adapted to economic changes and new ideas about gender roles and minorities. The program has slowly moved towards covering almost everyone. By 1950, discussions were more about how to provide better benefits rather than who should be included.
The amount of money paid out by Social Security has grown a lot over the years:
- 1940: $35 million
- 1950: $961 million
- 1960: $11.2 billion
- 1970: $31.9 billion
- 1980: $120.5 billion
- 1990: $247.8 billion
- 2009: $650 billion to nearly 51 million Americans
Social Security also changed how older people lived. In 1950, about 40% of Americans over 65 still worked. By 1990, this dropped to less than 11%. Before Social Security, poverty among older people was common. By the 21st century, it became rare.
1939 Changes
Economic Reasons for Change
One reason for changes in 1939 was concern about how the money saved by the 1935 Act was affecting the economy. A recession in 1937 was partly blamed on the government collecting too much in Social Security taxes. So, benefits started in 1940 instead of 1942, and the way benefits were calculated was changed to give more money to early recipients. This reduced the amount of money saved up. The original plan was to pay benefits from a large savings fund, but the changes made it more of a "pay-as-you-go" system, where current workers' taxes pay for current retirees' benefits.
Creating the Social Security Trust Fund
The 1939 changes created a special savings account called the Social Security Trust Fund. The Secretary of the Treasury manages this fund. The money in it can be invested in government bonds.
Helping Families
People wanted Social Security to do more to protect families. They worried that without enough help, women might have to go back to work. So, the 1939 changes focused on family protection. This included more federal money for "Aid to Dependent Children" and raising the age limit for children to receive money to 18.
The changes also added wives, elderly widows, and dependent survivors of male workers to those who could get old age pensions. Before, these individuals only received a one-time payment when the worker died. If a married woman who worked earned less than half of her husband's benefit, she was treated as a wife, not a worker. However, if a working woman died, her dependents could not get her benefits. Also, since support for widows depended on the husband being a covered worker, many African American widows did not receive help.
To keep costs down, benefits for single workers were lowered, and the one-time death payments were stopped.
FICA Taxes
The taxes that fund Social Security were originally in a separate part of the 1935 Act. In 1939, these tax rules were moved into the Internal Revenue Code and named the Federal Insurance Contributions Act (FICA). That's why Social Security payroll taxes are often called "FICA taxes."
Changes in the 1950s and 1960s
Over time, more types of workers were added to Social Security:
- 1950: Domestic workers (like housekeepers) and self-employed people (except certain professionals) were included.
- 1954: More farm workers, hotel workers, and state/local government employees were added.
- 1956: The tax rate went up, and benefits for people with disabilities were added. Women were allowed to retire at age 62 with reduced benefits. Widows could retire at 62 without reduced benefits.
- 1961: Men could also retire at age 62, and the tax rate increased again.
- 1962: The changing role of women was recognized. Dependent husbands, widowers, and children of covered women could now receive benefits, but they had to prove they depended on the woman's income.
In 1965, Medicare (health insurance for older people) and Medicaid (health insurance for low-income people) were added to the Social Security Act. These were part of President Lyndon B. Johnson's "Great Society" programs.
Also in 1965, the age for widows to start collecting benefits was lowered to 60. Later, when divorce became a common reason for marriages to end, divorced people were added to the list of recipients if they met certain conditions.
Changes in the 1970s
1972 Amendments
In 1972, Congress approved a 20% increase in benefits for millions of Americans. The average monthly payment went up. The bill also created a cost-of-living adjustment (COLA) to start in 1975. This meant that benefits would automatically increase each year if the Consumer Price Index (which measures inflation) went up by 3% or more. The goal was to make sure benefits kept up with rising prices. However, a mistake in the formula caused benefits to increase too much, sometimes twice as fast as inflation.
These changes also created Supplemental Security Income (SSI). SSI is a separate program that helps older, blind, or disabled people with low incomes, regardless of their work history. It's not a Social Security benefit.
For many years, Congress could easily increase Social Security benefits because the system had extra money. But by the late 1970s, this changed. The number of older people compared to working people was growing. Also, the mistake in the 1972 COLA formula, combined with high inflation (prices rising quickly), caused big financial problems for Social Security.
1977 Amendments
To fix the financial issues, Congress passed new laws in 1977. These laws corrected the COLA mistake and changed tax rules to bring in more money. President Jimmy Carter signed the legislation, saying it would make Social Security financially sound until 2030. However, the financial situation worsened again quickly, leading to another crisis in the early 1980s.
1983 Amendments
By 1982, it looked like the Social Security Trust Fund would run out of money by 1983. A special group, the National Commission on Social Security Reform, was formed to find solutions.
The 1983 changes to Social Security were based on this group's recommendations. They included:
- A six-month delay in the COLA.
- Changes to tax rates to collect more money.
- Making some Social Security benefits taxable for people with higher incomes.
These changes were important for getting more money in the short term. The commission also looked at the long-term future, especially how to pay for the retirement of the "baby boomers" (people born after World War II). To address this, the 1983 amendments:
- Increased the payroll tax rate sooner than planned.
- Added more types of employees to the system.
- Slowly increased the age at which people could receive full retirement benefits.
Social Security's Savings Account
The 1983 amendments also included a rule to treat the Social Security Trust Fund separately from the government's main budget. This meant its money wouldn't be mixed with other government funds.
Because of these changes, especially the tax increases, Social Security started to collect a lot of extra money. This money was meant to cover the future retirement costs of the baby boomers. Congress invested these extra funds in special U.S. government bonds held by the Social Security Trust Fund. These bonds are guaranteed by the U.S. government.
The Supreme Court and Social Security's Development
The Supreme Court has played a big role in shaping Social Security. It has ruled that people do not have a "contractual right" to Social Security benefits. In the case of Flemming v. Nestor (1960), the Court said that the government can change or end benefits.
The Supreme Court also made important decisions that changed how Social Security dealt with differences between men and women's earnings.
- Goldberg v. Kelly (1970): The Court ruled that people must have a hearing before their government benefits can be taken away.
- Weinberger v. Wiesenfeld (1975): Stephen Wiesenfeld, a widower, argued that he should receive his deceased wife's Social Security benefits, just as a widow would receive her husband's. Before this case, only children, not widowers, could receive benefits if a wife died. The Court agreed with Wiesenfeld, saying that denying benefits to widowers was unfair and violated the Equal Protection Clause of the Fourteenth Amendment.
When Different Workers Were Covered
Social Security has gradually expanded to cover more and more types of workers:
- 1935: Most workers in business and industry.
- 1939: Age limits removed; bank employees and sailors added.
- 1950: Regularly employed farm and domestic workers, most self-employed people, and some federal employees.
- 1954: More farm and domestic workers, and most professional self-employed people.
- 1956: Members of the military.
- 1965: Interns, self-employed doctors, and tips.
- 1983: All federal civilian employees hired after 1983, members of Congress, the President and Vice-President, federal judges, and all employees of nonprofit organizations. State and local government employees could no longer opt out of Social Security.
- 1990: Employees of state and local governments not covered by another retirement plan.
Images for kids
-
President Franklin D. Roosevelt signs Social Security Act, August 14, 1935. Standing are Rep. Robert Doughton (D-NC); unknown person in shadow; Sen. Robert Wagner (D-NY); Rep. John Dingell (D-MI); Rep. Joshua Twing Brooks (D-PA); the Secretary of Labor, Frances Perkins; Sen. Pat Harrison (D-MS); and Rep. David Lewis (D-MD).
-
A poster for the expansion of the Social Security Act
-
Brochure from 1961 with basic advice about Social Security cards (pages 1 and 4)
-
Same brochure (pages 2 and 3)
-
President Ronald Reagan signing the Social Security Amendments Act of 1983
