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The Social Security Act represented a sharp departure from previous American practice. The United States had traditionally celebrated individualism and voluntarism, and except for war veterans the national government prior to 1929 did not provide old age pensions, unemployment compensation, health insurance, or public assistance. The Great Depression of the early 1930s, however, created widespread suffering and provoked an organized popular movement for old age pensions led by Francis Townsend, an elderly California physician. The administration of President Franklin D. Roosevelt responded to such pressures by securing the Social Security Act in 1935.
The old age insurance provisions of the law were conservative. Funding for the pensions (for workers who reached the age of sixty-five) was to be raised entirely through taxes on employers and employees - and not, as in other countries, subsidized by general public revenues. The size of individual pensions was to reflect the amount of worker contributions - the higher one's earnings, the higher one's pension. The original program did not cover survivors of pensioners or nonworkers who could not make regular contributions. It exempted from coverage agricultural laborers and domestics, many of whom were poor people of color. Pensions were not to be paid before 1942. These provisions reflected Roosevelt's fiscal conservatism and the historic American suspicion of governmental social programs. Contemporary activists were highly critical of the result.
As early as 1939, Congress amended the act to provide survivors' insurance and to authorize the paying of pensions in 1940. Later amendments between 1950 and 1972 greatly broadened coverage, sizably increased the real value of benefits, and indexed them against future inflation. Medicare (health care for eligible retirees) was added to the system in 1965; like the pensions, it is financed through contributions. By 1989 Social Security covered 38 million people (virtually all the elderly) and accounted for nearly a quarter of the federal budget of more than $1 trillion.
The Social Security system
contributes to the well being of Americans by providing a foundation of
retirement income which permits seniors to live in dignity and relieves
younger family members of the obligation for their support. In addition to
retirement and spousal benefits, workers receive insurance protection that
provides benefits to workers and their dependents if the wage earner
becomes disabled or dies. In fact, 38 percent of Social Security benefits
go not to retired workers, but to disabled workers, families of retired or
disabled workers and survivors of deceased workers. Ninety-eight percent
of children under the age of 18 in the United States can count on monthly
cash benefits if a working parent dies. No other wage replacement program,
public or private offers the protection of the Social Security Old Age,
Survivors, and Disability Insurance program.
Although income inequality among the aged remains higher in the United States than in most other industrialized nations, the average income security of the elderly (many of whom receive company pensions as well as Social Security benefits) is considerably greater than it was in the 1930s and 1940s. The poverty rate among the aged in the late 1980s was slightly below that of the population as a whole.
Between 1960 and the mid-1970s a period of considerable expansion of programs the percentage of Americans officially defined as poor declined from around 21 percent to less than 12 percent. Although general economic growth was vitally important in producing this improvement, government programs contributed substantially.
The reduction in elderly poverty is one of the largest accomplishments of Lyndon Johnson's Great Society. In 1966 , almost 30 percent of our senior citizens lived in poverty. Thanks to LBJ's expansion of Social Security, its down to 12 percent today.
The Social Security trustees have said that in the long term the system will go bankrupt.