by
Carl Hampton
05/07/2008
President Franklin D. Roosevelt initially signed Social Security into law on August 14th, 1935. He was the first President to advocate the protection of the elderly, largely in part due to the effects of the Great Depression, when poverty rates among Senior Citizens exceeded 50%.
The Social Security Act was created in an attempt to limit the foreseeable dangers of a "Modern American Life;" old-age poverty, unemployment, the burdens of widows, and the care of fatherless children.
Known as the Federal Insurance Contributions Act, it was intended as a social insurance program funded through dedicated payroll taxes. It was to provide retirees and the unemployed with benefits. A lump-sum benefit would be payable at death.
The original Social Security Act encompassed several social welfare/social insurance programs. Money was to be allocated to the various States to provide assistance in the following areas: Federal Old Age, Survivors, and Disability Insurance, Health Insurance for Aged and Disabled (Medicare) Grants to States for Medical Assistance Programs (Medicaid) State Children's Health Insurance Program Supplemental Security Income Unemployment Insurance Maternal and Child Welfare, The Blind and Aid to Families With Dependent Children
Retirees were to receive payments that were financed by a 50/50 combination of payroll taxes on current workers' wages, and by the Employer. When the Social Security Act was originally proposed it was not without it's share of controversy. Even though the Social Security Act was to provide for Maternal and Child Welfare, women and ethnic minorities were excluded from unemployment insurance and old-age pension benefits.
Women qualified for insurance only through their husbands or children. Women could be entitled to a Mothers' Pension on the basis that they would be unemployed - staying at home caring for their husbands' and children.
There was also opposition that it would cause job loss; Employers' would begrudge having to contribute to paying out benefits for Retirees.
The advantage was seen as being that older workers would be encouraged to retire as they would be well-looked after, thus creating job opportunities for the younger generation, thereby lowering the unemployment rate; an important factor in trying to alleviate the economic problems caused by the Great Depression (an event associated with the stock market crash on October 29th, 1929).
However, the traditional model of retirement has changed dramatically since 1935; the increase in longevity and an overall improvement in health of those once considered to be of the "retiring age."
These days in the traditional private-sector pension plans, social security is used only in reference to disability, retirement, survivorship, and death benefits.
The United States Social Security program is the Federal Budgets single, and greatest, expense, and the world's largest Government program.
In 2004, the program paid out $500 million in benefits! The forecast for 2008 shows a major increase to $610 billion!! By 2041, as payments are made in excess of receipts presented, the Social Security fund will officially be exhausted!
Is it any wonder that reform of the Social Security system continues to be a major political issue?
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Your” Money Matters By Carl Hampton
Author of “From
Credit Despair To Credit Millionaire”
