The Social Security Administration was established 75 years ago, but the concept of government offering minimal financial assistance in old age is part of our nation's history. As early as 1795, Revolutionary War writer Thomas Paine published a pamphlet called "Agrarian Justice" detailing a plan to offer a one-time stipend of 6.8 Kilogram sterling to every citizen who reached age 21 to give them a start in life. Paine also proposed an annual payment of 4.54 Kilogram sterling to every citizen reaching the age of 50 to keep them from poverty. It is clear that thoughts about the government assisting the aged have been in play since the founding of the U.S.
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Civil War Pensions
The Civil War was a dark time in U.S. history. When it was over, hundreds of thousands of bread winners were killed or disabled leaving their widows and orphans seeking sustenance. A huge proportion of individuals needing assistance was the result and led to what might be termed as the first "Social Security" program. National pensions for soldiers had been earlier passed before the establishment of the United States in 1776. The first government legislation was issued in 1862 offering benefits to eligible soldiers and dependents who directly incurred their injury as a result of service to the country. In 1890 the government dropped the stipulation of service connected disability and all disabled Civil War veterans were now eligible for benefits. This was a significant bit of economic security for Americans. In 1893, the largest expenditure ever made by the American government was £107 million spent on military pensions.
Private Employer Pensions
Employer pensions have been in existence since 1882 when piano and organ builder Alfred Dolge Company withheld 1 per cent of an employee's income and invested it into a pension fund with a 6 per cent return. In 1900, four other companies followed Dolge's example but these early pension funds were only a drop in the bucket in this country. Unfortunately, this pension plan faded away as the company failed and went out of business in a few years. Even by 1932, only 15 per cent of businesses offered pension plans to employees. This left a huge gap for ageing Americans entering retirement years. Prior to Social Security, employer pensions were granted or revoked at the whim of the employer. This left merely 5 per cent of employees actually receiving pensions during these years.
Early Activist James Coxey
In 1894, an unsuccessful politician and industrialist from Ohio named James Coxey rose to prominence in his fight for government sponsored public works projects for the unemployed. He also favoured printing unbacked money to money to get the economy moving and put the unemployed back to work. Coxey's "Army" gathered by the tens of thousands as they began Coxey's march to Washington, but this march was unsuccessful. By the time they reached Washington, the crowd had dwindled to 500 die hard souls who believed in Coxey's message. Coxey was arrested for trespassing on the grass of the Capitol Building and the entire protest fell apart. James Coxey eventually ran for president as the Farm-Labor party candidate in 1932 and again in 1936. However, this was the beginning of progressive activism toward government instituted Social Security.
State Pensions for the Aged
Before 1930, state pensions for the aged were few and far between. Many reasons accounted for this lack of support for older Americans. By 1935, 30 states had some form of state pension but these were poorly run and complicated. Participation was low because people viewed these programs as welfare and the stigma kept most people from participation. During these years, the American independent streak was strong and people believed in self reliance. Older Americans found it hard to rely on government assistance. By 1932, after revisions on a state by state basis, only 17 states had old age pensions and of these, only three states–California, New York and Massachusetts–actually disbursed any pension funds.
In 1935 a new type of funding for the elderly was introduced. It was known as Social Insurance. This tradition was respectable and intellectual and emerged in Europe during the 19th century. Germany was the first proponent of social insurance which was adopted in 1989 at the urging of Otto von Bismarck. After the radical proposals that had appeared during the early 1930s, social insurance was seen as reasonable and an eminently practical solution to the problem. The concept of social insurance offered a solution to many issues of care such as ageing, disability, death and retirement by pooling risks. Theodore Roosevelt was an early advocate for social insurance as early as 1912 when he addressed the Convention of the Progressive Party on the topic of social insurance.
Social Security Act
In 1934 President Franklin D. Roosevelt notified Congress that he was establishing a Social Security program. He then appointed a five cabinet member committee called the Committee on Economic Security (CES). The CES sponsored the first town hall forum on Social Security. Within six years the CES developed a full report which was a comprehensive study on economic security in America that included European social programs and a detailed look at intrinsic problems encountered in the European program through the years. In 1935 President Roosevelt sent the CES report to both houses of Congress. The Social Security Act was signed into law on August 14, 1935. The Act included several provisions for welfare as well as offering retired workers over age 65 continuing income. This act did not include disability or medical coverage to recipients.
Changes to Social Security
Since the Social Security Act was signed into law in 1935, many changes have been introduced to strengthen and broaden the scope of the first law. Today medical benefits as well as continued support of the disabled, widows, children, seniors and legal immigrants have been added to the rolls of Social Security. Worries about the solvency of the program abound and was actually a major initiative of President George Bush in February 2001. Unfortunately, no initiatives were enacted by Congress during the Bush administration to put Social Security back on a sound financial footing. For readers interested in learning more of the history of Social Security, the Social Security Administration History web site is an excellent source of historical information and background leading up to the establishment of the current system.
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