The contentious history of Social Security
Part one of a three part series
November 1, 2017
In 1935 the National Association of Manufacturers testified before Congress that Social Security would represent “ultimate socialist control of life and industry.” Other opponents argued that the initial Social Security registration process was like social engineering used in Nazi Germany. These critics predicted that American workers would be forced to wear metal Social Security tags on chains around their necks.
Earlier in the decade industrial production had fallen 46 percent, foreign trade had plummeted by 70 percent, and unemployment had soared to 25 percent. More than 5,000 banks failed. Hundreds of thousands of Americans were forced into destitution and homelessness. They lived in slums called “Hoovervilles” (in honor of then unpopular President Hoover) that sprang up across the country.
President Franklin Delano Roosevelt was inaugurated in 1933. He implemented a number of federal programs in the following years designed to stabilize and improve the deteriorating economic and social conditions. In the middle of the Great Depression, Roosevelt signed legislation into law on Aug. 14, 1935, creating one of his major programs, the Social Security Act. During the signing, he said:
“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.”
The President had a clear understanding that Social Security went far beyond the assistance of individuals and families in need:
“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.”
While the new legislation was anathema to corporate titans, it was wildly popular among millions of low-income working and unemployed people across the nation. A working person filled out a short application at the post office to receive a paper card indicating enrollment in the program. (It turns out the card was not a metal tag and did not have to be worn around the neck on a chain.)
So many people applied during the first weeks of the program in November 1936 that clerks and typists had to be recruited by the thousands in big cities. Within four months Social Security files would hold the names of nearly 26 million Americans. In January of 1937 Ernest Ackerman, a Cleveland motorman who retired only one day after Social Security began, received the first ever Social Security payout. He got 17 cents.
In the following decades Social Security was repeatedly modified to expand coverage to new categories of people, to expand benefits, and to maintain financial solvency. However, the 1970s were not kind to Social Security financial stability due to high inflation, an error in the Cost of Living Adjustment (COLA) computations, and lower than expected wage growth. Late in the decade the COLA errors were corrected and Social Security taxes were raised in an attempt to give long-term stability to the program. Nevertheless, financial problems persisted because of a combination of declining real wages and high unemployment in the 1970s into the 1980s.
In response, the 1983 Amendments to the Social Security Act accelerated a previously enacted increase in the payroll tax rate, added new employees to the system, slowly increased the full-benefit retirement age, and made a portion of the Social Security benefit potentially taxable income. As a result of these changes the Social Security system began to generate a surplus of funds.
Next month, part two of this three-part series on Social Security will discuss the current benefits and status of Social Security. Part three will discuss the future of Social Security with special attention to facts and myths.
Lawrence Weiss is a UAA Professor of Public Health, Emeritus, creator of the UAA Master of Public Health program, and author of several books and numerous articles.