Franklin D. Roosevelt signs the Social Security Act. Labor Secretary
Frances Perkins, behind the President was the administration point
person for the Act.
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Note--Your scribe, the Old Man, in the interest of transparency admits that he is a recipient of Social Security and Medicare and damn glad of it!
On August 14, 1935 President Franklin Delano Roosevelt signed the Social Security Act into law. It was the crowning achievement of the New Deal. It has rightly been acclaimed “the most successful American anti-poverty program in history.” Once considered so popular that proposals to alter or abolish it were widely considered the third rail of American politics—too dangerous to seriously advance. But that was before years of a carefully managed drum beat of hysteria that the system was somehow running out of money which has convinced many folks, despite all of the evidence to the contrary, that they will never live to collect what they have been paying in for their entire working lives.
On August 14, 1935 President Franklin Delano Roosevelt signed the Social Security Act into law. It was the crowning achievement of the New Deal. It has rightly been acclaimed “the most successful American anti-poverty program in history.” Once considered so popular that proposals to alter or abolish it were widely considered the third rail of American politics—too dangerous to seriously advance. But that was before years of a carefully managed drum beat of hysteria that the system was somehow running out of money which has convinced many folks, despite all of the evidence to the contrary, that they will never live to collect what they have been paying in for their entire working lives.
That
kind of talk was the camel’s nose under
the tent that allowed retirement
ages to creep upward and for talk
of limiting or reducing future benefits become fashionable in some quarters. Proposals to privatize all or part of the system in whole or in part seemed to
be gain steam for a while. These would allow younger workers to take all or part of their Social Security contributions and invest them in private IRA-like
accounts.
The fears of some Republicans in this 2005 cartoon were justified--George W. Bush's support of Social Security privatization helped cost him re-election and punished Congressional Republicans.
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The
wind was kicked out of that fantasy in the stock
market collapse of 2008, which understandably raised doubts for the safety of
investment in the volatile Stock
Market.
But
some bad ideas just won’t stay dead. Republican Vice Presidential Candidate in
2012 Paul Ryan refloated various
alleged reforms, including the privatization scheme. That was good politics in the short run as Tea Party activists were threatening to
sit out the election because Mitt Romney
was allegedly too moderate or
perhaps even a hated RINO (Republican in Name Only.) But
it surely it contributed to the GOP’s rather
decisive drubbing at the hands of Barack Obama and Social Security loving
Democrats.
In
the 2016 clown car posse of
Republican presidential wannabes mostly
kept their yaps shut about Social Security even if their plans did not change. Libertarian darling Rand Paul, however, was actually
for abolition of the system, but you
have to dig deep into his position papers and old speeches to safely conservative audiences to discover it. Hapless Louisiana
Governor Bobby Jindal, dragging bottom in the polls tried to attract
attention and support from deep pocket
oligarchs by making noises about hitting the program. Jeb
Bush, the White Hope of party regulars and insiders as a supposed moderate
who could win a general election, showed himself to be a clone of his brother who pushed so-called reform and
privatization by suggesting that lazy
Americans need to work until they are 70
or beyond. Donald Trump avoided the
topic except to claim that he would “save”
Social Security.
Of
course the demographics of a lot of Baby Boomers retiring together over the
next few years in a kind of slow motion
avalanche and the reduction of
collection of FICA taxes after the
economic collapse due to heavy unemployment and actually falling wages for those still
employed did put a strain on the
system, which could theoretically go
bankrupt in a few years unless “something
is done.”
But
that something does not have to be further raises in the retirement age,
reduction of benefits, privatization, or changing the system from social insurance to a means tested welfare program—the later
program sometimes surprisingly advanced
on the right knowing that it would erode
support for the system among higher
income voters.
Even before his first run for the Presidency, Vermont Senator Bernie Sanders was sponsoring legislation to save Social Security without reducing benefits or raising retirement age.
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Bernie Sanders, the Independent Vermont Senator and proudly self-proclaimed socialist who surged from being a snubbed dark horse challenger to a
serious rival to Hillary Clinton as
a populist powerhouse, long
supported and proposed simple Social Security reforms that would keep the
program safe and solvent well into the next century. He pointed out that simply raising the cap on wage income subject to FICA taxes and/or levying FICA taxes on non-wage
income above a certain level would do
the trick.
Now,
three years into the Trump era and
the all-fronts attack on all popular
Democratic programs from Obama’s Affordable Care Act (ACA), to Environmental
Protection Agency regulations, to
voting rights and election security, Social Security cuts
are once again on the table. Senate Majority Leader Mitch McConnell blamed the burgeoning deficit on social insurance programs
and so-called entitlement programs when
he publicly pledged to pursue massive cuts in October of last year. Despite the fact that the ballooning deficit
was clearly the direct result of
Republican tax cuts for the wealthy which slashed Federal tax revenues and that the Social Security Trust Fund is entirely separate from the operational
budget, McConnell has recently re-affirmed his intention to make cuts a
priority in the next Congress.
Meanwhile
even more draconian plans to actually abolish the Social Security System have
been proposed by some Republican in the House
of Representatives. Although these
bills have zero chance in the
Democratic controlled House, they make propaganda
points with the libertarian far
right and the deep-pocket billionaires
that finance them.
Before
Social Security was enacted those who lived
beyond their income producing years
were the poorest sector of society,
particularly those who could not rely on the support and/or charity of family. And the necessity of supporting an elderly relative drove many young families into poverty because of
the extra expenses and the foregone income of those who had to
become caretakers.
Today,
those over 65 are the least likely of all age cohorts to live in poverty.
The
battle for Federal retirement insurance
was a long one. The first such scheme was
advocated as early as the 1820’s by trade
unionists and socialists in Europe.
German Chancellor Otto Von
Bismarck implemented the first old
age insurance plan in 1889 in the hope of achieving social stability in the new German
Empire and uniting the loyalties of
citizens of the various principalities
he had brought together. The German
system provided contributory retirement
benefits and disability benefits
as well. Participation was mandatory and contributions were taken from the employee, the employer,
and the government. It would become essentially the model for F.D.R.’s initiative.
Social
security plans had spread over Europe but were resisted as unwanted government interference in business in this country. Social security, along with unemployment insurance, a government medical plan, the eight hour day, and limits to child labor were key planks of Eugene V. Debs’ Socialist Party platform of 1912. It was widely supported by most of the labor movement, although some craft unions which had wrung private pension plans from employers were opposed.
Roosevelt’s
Secretary of Labor Frances Perkins spearheaded
the drive for Social Security for the administration. Republicans in Congress bitterly opposed the
program, decrying it as socialist, un-American,
unconstitutional, and a business destroying tax burden. Sound familiar?
A poster promoting the 1939 Amended Social Security Act
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But
the program was still wildly popular with voters, who elected large majorities of Democrats committed to the program in
both houses of Congress. Some compromises, however, had to be made
and the original system was far from
perfect. Nearly 50% of all workers
were excluded from coverage
including workers in agriculture, domestic service, government employees, and most teachers,
nurses, hospital employees, librarians,
and social workers. The act also did
not cover those who worked
intermittently including most seasonal
workers.
These
provisions fell especially heavy on women and minorities who were disproportionately engaged in these
occupations. 90% of all domestic workers
were women and 2/3 of all employed Black
women worked in domestic service.
And Southern Black men were
predominately engaged as agricultural workers.
For these reasons the NAACP actually
opposed the legislation that reached Roosevelt’s desk calling it, “a sieve with holes just big enough for the majority
of Negroes to fall through.”
Most women qualified for old age
insurance only through their husbands. Women’s payments under the system were based
on the presumption that mothers
would not be in the work force.
The
Social Security Act also established the Aid
to Dependent Children, a welfare
program designed to support children
in unemployed families who had
exhausted unemployment insurance. Management of these programs was left
to the States, at the insistence of Southern Democrats who did not want to
disturb the racial status quo. As a result Southern states routinely adopted rules making it difficult or nearly impossible for Black families to qualify.
This
became one of the major reasons,
along with increased employment
opportunities as the country geared
up for war later in the decade, for the Great Migration of rural Southern Blacks to Northern cities.
In
1937 the Social Security withholding tax
went into effect and the system began building
reserves to make the first payments
to retirees, originally scheduled for 1942.
Some economists charged that the income
taken out of circulation by the tax was responsible for the 1937 Roosevelt Recession. Others have pointed to drastic reductions in Federal spending because of budget concerns and because key
elements of the New Deal had been declared
unconstitutional as being the real
culprit in the downturn. Some felt
that building a huge reserve before beginning to make pay-outs was a drag on the economy.
So
in 1939 Social Security was amended
to begin making payout two years earlier than planned. This caused the plan to become de facto a pay as you go system with current workers supporting the immediate benefits to retirees instead
of relying of a large accumulated fund. The amendments did establish a trust fund for any surplus funds managed by the Secretary
of the Treasury. The money could be invested in both non-marketable and marketable
securities.
But
because this trust fund became a Treasury Department asset, Congress later
began to borrow against it to fund current general spending.
Amendments
to the act also tied women’s benefits more closely than ever to their husband’s
income. The amendment added wives, elderly widows, and dependent survivors of covered male
workers to those who could receive old age pensions. These individuals had
previously been granted lump sum
payments upon only death or coverage through the Aid to Dependent Children
program.
Ida Mae Fuller receives first Social Security check.in 1940.
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While
this rescued many widows from poverty,
the amendments also devalued the
value of benefits a woman could receive from her own labor. If a married
wage-earning woman’s own benefit was worth less than 50% of her husband’s
benefit, she was treated as a wife,
not a worker and the dependents of women who were covered by Social Security
benefits were ineligible for her benefits.
Changes were also made to the Aid to Dependent Children program,
including raising the age of eligible
children to 18.
Despite
being far from perfect, the first monthly
payment was issued on January 31, 1940 to Ida May Fuller of Ludlow,
Vermont.
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