Exactly what is the purpose of Social Security and how did it start?
Let me address that question with a general answer, then give a background. Social Security is a form of social insurance that is meant to provide basic protection against financial hardship due to significant events, such as, death, disability and aging.
To provide an understanding on why we get Social Security benefits, we should start in England.
The early colonist brought the concept of “Poor Laws” with them from England. This idea included taxation to help the destitute. It was done on a local basis, that is, the village or small town would help its own. As colonies grew, it became more difficult to handle locally. A public arrangement on a wider scale to assist those in need really did not develop. According to the IRS, even as late as 1915, public funds only provided up to 25% of the money spent on relief for citizens.
Later during the Revolutionary War period, Thomas Payne proposed the establishment of a public system of economic security. It called for a way to give a person a start in life by providing a one time payment of 15 pounds sterling when that person reached age 21. It also provided a way to protect against poverty in old age by annual payments of 10 pounds sterling to be paid to every person age 50 or older. Although proposed, these elements were never enacted.
After the Civil War, we began seeing the development of a pension program to help the many widows, orphans and disabled veterans. Later service-connected disability was not required for the veteran to receive a pension. Any disabled veteran of the Civil War could qualify. Subsequently, a veteran qualified if he reached old age, even without a disability. By 1910, veterans and surviving widows were receiving benefits.
Due to the Great Depression poverty grew dramatically, especially among the elderly. A number of states developed some form of old age pension to help, but were not significantly effective.
The Great Depression caused our political leaders to focus on ways to improve security as our nation grew. On June 8, 1934, Franklin Roosevelt announced his intention to provide a program for the social security of the citizens. It was later signed into law on August 14, 1935. The main provisions were:
Provide for general welfare Provide social insurance program to pay workers age 65 or older after retirement Unemployment insurance Old age assistance Aid to dependent children Grants to states to provide various forms of medical care.
In 1939 amendments provided for 1) payments to spouses and minor children of a worker and 2) survivors benefits paid to a family in the event of premature death of a covered worker. This changed the program to a family based economic security program from a program for retired workers.
The Cost of Living Adjustment (“COLA”) started in 1950 and was adjusted periodically by special acts of Congress until 1972 when legislation called for automatic annual adjustments.
The Disability Insurance program was added in 1954 to eventually allow payments to disabled workers of any age and to their dependents.
In 1964 a new social insurance program was added that extended health coverage to all Americans age 65 or older, i.e. Medicare.
Supplement Security Income became the responsibility of the Social Security Administration in 1972. It was designed to 1) help aged, blind or disabled people who have little or no income, and 2) provide cash to meet basic needs for food, clothes, and shelter.
The end result today is a program that provides some benefit due to old age – for the worker’s retirement, spouse’s benefits, and child’s benefits. It also provides survivor benefits after the death of a worker. Disability Insurance provides benefits to the worker and perhaps to the spouse or child of the disable worker.
The concept has evolved from that of assisting the destitute and old aged to a retired worker program to a security program for families on a national level. Undoubtedly, it will continue to change.