President Franklin D. Roosevelt brought into being one of his most enduring domestic domestic-policy achievements when he signed the Social Security Act. With a stroke of the pen on August 14, 1935, he established a floor beneath an American labor force that had been in free fall since the start of the Great Depression.
The epochal legislation ensured old-age benefits for workers, benefits for victims of industrial accidents, as well as aid for dependent mothers and children, the blind, and the physically handicapped.
If you want to identify the rise of the so-called “welfare state” at the federal level, this is about as good a starting point as you can get.
Particularly over the last 30 years, it’s become more common to read about Social Security as a) giant ponzi scheme in which today’s young are taxed to subsidize the elderly, and b) an anachronistic scheme inexorably headed, because of major demographic changes, towards insolvency.
At the time of its creation, none of the latter was necessarily inevitable. It was only after 1950 that increasingly generous modifications of the program were voted into law, allowing for the size of the Social Security system to exceed welfare benefits.
Nevertheless, for all its problems, Social Security remains an almost politically untouchable program, and for a good reason: it’s impervious to the shocks that a private program, subject to the vagaries of a volatile stock market, would endure.
The drubbing that George W. Bush suffered when he decided to expend his political capital after the 2004 election was a necessary corrective to a profoundly foolhardy idea. As horrifying as the Great Recession has been, matters would have been infinitely worse if Congress had voted in favor of Bush’s scheme for private investment accounts. (Imagine bailing out all of that.)
It’s interesting to note a few other aspects of the passage of Social Security:
* Social Security was not a Socialist scheme, but instead an attempt to ward off Socialism and other forms of “thunder on the left.” In this sense, FDR’s motives resembled those of Chancellor Otto von Bismarck in Germany. Bismarck could hardly be called a radical, but his championing of old-age pensions, accident and health insurance took the steam out of much of the socialist movement in Germany in the 1880s. While not an authoritarian in the Bismarck mode, FDR needed to deal with similar leftist challenges at home by the middle of his first term. In particular, he wanted to co-opt a scheme then raging—the so-called Townsend Plan, calling for $200 per month to every citizen age 60 or older (at a time when the average monthly wage in 1935 was only about $100 per month)—with one he judged to be more economically and politically feasible.
* Social Security was not a carefully conceived plan from the beginning of the New Deal, but rather a reaction to events. In his first inaugural address, FDR had called for “bold, persistent experimentation,” a process of testing to see what worked and what did not. By the time of his fireside chat two years later calling for passage of the Social Security Act and the Works Progress Administration, however, he was defending these as part of a unified program. If this address contradicted a point he made in the most memorable fashion at the start of his term, however, it made another that couldn’t be more appealing to the younger unemployed: The program, he noted, would “help those who have reached the age of retirement to give up their jobs and thus give to the younger generation greater opportunities for work and to give to all a feeling of security as they look toward old age.”
* Social Security made a major dent in the often high poverty rate among the elderly. Before the Great Depression, poverty had been a steadily rising among those 60 and older. That concern has gradually ebbed with the passage of Social Security and its amendments over the years.
* Passage of the legislation featured a high percentage of bipartisan support. In contrast to Obamacare, which passed with skin-of-its-teeth margins, Social Security received affirmative “yea” votes from 81 House Republicans and 16 Senate Republicans.
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