The Roots of Social Security - dummies

By Jonathan Peterson

Copyright © 2018 by AARP. All rights reserved.

You may think of Social Security as part of life in the United States, but it wasn’t always this way. Social Security was a foreign idea — literally. Americans by and large never expected their national government to rescue them in hard times. This was a country shaped by pioneer culture, a society that expected people to pull themselves up by their own bootstraps. Back on the farm, extended families took care of their own and struggled together. But as more Americans migrated to cities for work, traditional supports of family and close-knit communities began to unravel.

The Great Depression of the 1930s transformed attitudes. Unemployment rocketed to 25 percent. People’s life savings vanished in a tsunami of bank failures. More than half of older Americans were poor. In desperation, people turned to Washington for help, and Washington looked overseas for ideas. President Franklin D. Roosevelt and his advisors, including Labor Secretary Frances Perkins, considered an idea known as social insurance, which had gained popularity in Europe. The idea was that governments could adapt insurance principles to protect their populations from economic risks. Unlike private insurance arrangements, which are supposed to protect individuals, social insurance programs are supposed to help all of society.

In 1889, German Chancellor Otto von Bismarck pioneered the idea with a system of old-age insurance that required contributions from workers and employers. By the time of the Great Depression, dozens of nations had launched some sort of social insurance effort. U.S. leaders, eager to ease the economic pain engulfing the nation, took a more serious look at social insurance from Europe. Others viewed social insurance as radical and un-American.

After a lengthy debate, Congress passed the Social Security Act, and President Roosevelt signed it into law on August 14, 1935. The law provided unemployment insurance as well as help for seniors and needy children. Title II of the act, “Federal Old-Age Benefits,” created the retirement benefits that many people now see as the essence of Social Security.

“We can never insure 100 percent of the population against 100 percent of the hazards and vicissitudes of life,” Roosevelt said at the bill signing, “but we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age.”