Social Security Act
Based on Wikipedia: Social Security Act
In 1930, the United States was an outlier among wealthy nations—and not in a way Americans would have been proud of. While countries across Europe had built safety nets to catch their citizens when they fell, America offered nothing. If you grew old and couldn't work anymore, that was your problem. If you lost your job, you were on your own. The wealthiest industrial nation on Earth had decided, essentially, that misfortune was a personal failure rather than a collective responsibility.
Then came the Great Depression, and suddenly millions of hardworking Americans discovered just how thin the ice beneath them really was.
A Doctor's Radical Idea
Francis Townsend was a physician in Long Beach, California, and like doctors everywhere during the Depression, he saw suffering that medicine couldn't cure. The elderly were dying not from disease but from poverty. Banks had failed, taking their savings. Factories had closed, making their skills worthless. Families who might once have supported aging parents were themselves desperate.
Townsend proposed something that struck many as almost absurdly generous: the federal government should pay every American over sixty years old two hundred dollars a month, with one catch—they had to spend it all within thirty days. The idea was elegant in its simplicity. It would lift the elderly out of poverty immediately. It would stimulate the economy by pumping money into circulation. And it would open up jobs for younger workers, since older people would finally be able to afford to stop working.
Two hundred dollars in 1934 would be worth roughly forty-five hundred dollars today. Townsend was proposing, in effect, a universal basic income for seniors that would have made them solidly middle class overnight.
The Townsend Plan spread like wildfire. Clubs formed across the country. Petitions circulated. Politicians who had ignored the elderly suddenly found themselves facing an organized movement of millions of older voters who had nothing to lose and everything to gain.
Roosevelt's Careful Dance
President Franklin Delano Roosevelt watched the Townsend movement with a mixture of sympathy and concern. He genuinely wanted to help. His famous phrase about protecting Americans "from the cradle to the grave" wasn't mere rhetoric—he envisioned a comprehensive system that would insure every citizen against the major risks of life: old age, unemployment, illness, disability.
But Roosevelt was also a politician who understood the limits of what Congress would accept. He had an instinctive deference to state governments, a product of his years as governor of New York. And he harbored a deep aversion to what he called the "dole"—permanent welfare that might, he feared, sap people's initiative and create dependency.
There was another factor too. The Supreme Court had been striking down New Deal programs left and right, ruling them unconstitutional. Any program Roosevelt proposed would need to be carefully designed to survive legal challenge.
In 1934, Roosevelt assembled a committee to design America's first comprehensive social insurance system. He placed it under the leadership of Frances Perkins, his Secretary of Labor and the first woman ever to serve in a presidential cabinet. Perkins was a social reformer who had witnessed the Triangle Shirtwaist Factory fire of 1911, in which 146 garment workers, mostly young immigrant women, died because factory owners had locked the exit doors to prevent unauthorized breaks. That tragedy had shaped her understanding of why workers needed protection from the vagaries of industrial capitalism.
The Art of the Possible
The committee Perkins led faced a fundamental tension. Roosevelt wanted the program to be self-sustaining, funded by contributions from workers themselves rather than general tax revenue. He believed this would give workers a sense of ownership—they weren't receiving charity, they were collecting on an insurance policy they had paid into.
This decision had profound consequences. Because benefits would be tied to contributions, Social Security would not redistribute wealth from rich to poor in the way some reformers hoped. A factory owner's secretary who earned modest wages her whole life would receive modest benefits in retirement, while an executive would receive more. The system was progressive in the sense that it helped everyone, but it wasn't progressive in the sense of equalizing outcomes.
The committee also proposed national health insurance—what we would today call Medicare for All. This was dropped before the bill reached Congress. The American Medical Association, representing doctors who feared government control of medicine, mounted fierce opposition. Roosevelt decided the political capital required to fight that battle would doom the rest of his social security program. Health insurance would have to wait three decades.
Unemployment insurance, another piece of the original vision, was designed as a federal-state partnership. The federal government would set basic standards, but states would administer the programs and could set their own benefit levels. This compromise reflected Roosevelt's respect for federalism, but it also created a patchwork system that persists today, with workers in some states receiving far more generous unemployment benefits than workers in others doing identical jobs.
Who Was Left Out
When the Social Security Act became law on August 14, 1935, it represented something genuinely new in American history: the federal government was acknowledging responsibility for the economic security of its citizens. But that responsibility had significant limits.
Agricultural workers were excluded from coverage. So were domestic servants—the maids, cooks, and nannies who worked in private homes. Government employees were left out, as were many nurses, teachers, librarians, hospital workers, and social workers.
The exclusions were not random. Agricultural labor and domestic service were the two occupational categories that employed the largest numbers of African Americans. In the South, these jobs were overwhelmingly held by Black workers. By excluding these categories, Congress ensured that sixty-five percent of Black workers would receive no Social Security protection, compared to twenty-seven percent of white workers.
Historians debate whether this was explicitly racial in intent or whether Southern Democrats, who held enormous power in Congress and whose support Roosevelt needed, simply wanted to preserve cheap labor for their region's agricultural economy. The practical effect was the same either way: Social Security at its birth was a program primarily for white industrial workers.
These excluded workers would not gain coverage until amendments in 1950 and 1954 finally brought agricultural and domestic workers into the system. By then, an entire generation had retired without protection.
How the Money Works
Social Security is funded through what's called a payroll tax, though today most people know it by its technical name: the Federal Insurance Contributions Act tax, or FICA. If you've ever looked at your pay stub and wondered what that line item was, now you know.
The original design split the tax equally between employers and employees. Your employer pays half, you pay half. Self-employed people pay both halves, which is one reason freelancing comes with a significantly higher tax burden than people often realize when they first strike out on their own.
The tax is what economists call regressive, meaning it takes a larger percentage of income from workers who earn less. This is because Social Security taxes only apply up to a certain income level—in 2024, about one hundred sixty-eight thousand dollars. A worker earning fifty thousand dollars pays Social Security tax on every dollar. A corporate executive earning five million dollars pays the tax on only the first one hundred sixty-eight thousand, meaning the remaining four million eight hundred thousand is completely untaxed for Social Security purposes.
The money collected goes into trust funds—one for retirement and survivor benefits, one for disability benefits. These aren't savings accounts in the traditional sense. The money coming in today pays the benefits going out today. When more money comes in than goes out, the surplus buys special Treasury bonds. When more goes out than comes in, those bonds get cashed.
The Court Fight
Roosevelt had every reason to worry about the Supreme Court. The justices had already struck down the National Industrial Recovery Act, the Agricultural Adjustment Act, the Railroad Retirement Act, and even New York State's minimum wage law. The court seemed determined to rule the entire New Deal unconstitutional.
In early 1937, Roosevelt proposed what became known as the "court-packing" plan. Whenever a federal judge reached age seventy and refused to retire, Roosevelt wanted the power to appoint an additional judge. The effect would be to let him immediately add six new justices to the Supreme Court, transforming its ideological balance overnight.
The plan was widely criticized as an attack on judicial independence, even by many who supported the New Deal. But something interesting happened while Congress debated the proposal. Justice Owen Roberts, who had previously voted to strike down New Deal programs, suddenly began voting to uphold them. The court validated Social Security in two major decisions in 1937.
Whether Roberts changed his mind because of genuine legal reasoning or because he saw the political writing on the wall remains debated. Wags at the time called it "the switch in time that saved nine"—the nine being the number of justices Roosevelt would have been able to expand to fifteen.
Evolution Over Decades
The Social Security of 1935 bore only a partial resemblance to the program Americans know today. It covered only retired workers—if you died before retirement, your contributions died with you, benefiting no one. There were no benefits for spouses or children.
The amendments of 1939 transformed the program's very nature. Now, when a worker retired, their spouse and minor children could receive benefits too. And crucially, if a worker died prematurely, their surviving family members—widowed spouses, orphaned children, even dependent parents—would receive survivor benefits. Social Security had evolved from a retirement program into a family protection system.
The 1950 amendments brought the first increase in benefit levels and, critically, extended coverage to previously excluded workers in agriculture and domestic service. For the first time, Social Security was approaching its goal of universal coverage.
Perhaps the most significant change came in 1950 with the introduction of the cost-of-living adjustment, commonly known as COLA. Before this, benefits were fixed at the dollar amount established when you retired. A worker who retired in 1940 and lived until 1970 would have seen their purchasing power devastated by three decades of inflation. The cost-of-living adjustment ties benefit increases to the Consumer Price Index, ensuring that retirees don't slowly sink into poverty as prices rise around them.
Medicare and Medicaid: The Unfinished Business
Remember that national health insurance proposal that Frances Perkins's committee had to abandon in 1935? It took thirty years, but it finally happened—sort of.
The Social Security Amendments of 1965 created two major healthcare programs. Medicare provides health insurance to Americans over sixty-five, regardless of income. It's the universal healthcare program that Roosevelt envisioned, but only for seniors. Medicaid provides health coverage to low-income Americans of all ages, but it's administered by the states, creating the same patchwork of varying coverage that characterizes unemployment insurance.
To fund Medicare, Congress increased the FICA tax. That's why your pay stub actually shows two separate withholdings: Social Security tax and Medicare tax. They're collected together but fund different programs with different rules.
The 1965 amendments also added Title XIX, which concerns Medicaid, and later amendments added Title XXI, establishing the Children's Health Insurance Program, commonly known as CHIP, which covers children in families that earn too much to qualify for Medicaid but not enough to afford private insurance.
What the Titles Mean
When lawyers and policymakers talk about Social Security, they often reference specific "titles" of the act—Title II, Title XVIII, and so on. These aren't separate laws but chapters of the same legislation, each addressing a different aspect of social insurance.
Title I, the original first chapter, provided money to states for aid to aged individuals who didn't qualify for regular Social Security benefits. Title II established the trust fund from which retirement benefits are paid and gives the Treasury Secretary authority to invest reserves in government bonds.
Title III concerns unemployment insurance. Title IV established Aid to Families with Dependent Children, which for decades was what most Americans meant when they said "welfare"—the program that provided cash assistance to single mothers. It was later replaced by Temporary Assistance for Needy Families in 1996.
Title V deals with maternal and child welfare, while Title VI concerns public health services, giving the Surgeon General authority to distribute money to states for investigating disease and sanitation problems. Title VII established the Social Security Board itself—three presidential appointees, confirmed by the Senate, serving six-year terms to administer this vast new system.
Title X provides support for blind people. Title XVI, added later, established Supplemental Security Income, which provides cash assistance to elderly, blind, and disabled people with limited income and resources—a safety net beneath the safety net. Title XVIII is Medicare. Title XIX is Medicaid. Title XXI is CHIP.
Understanding these titles matters because political debates about "reforming Social Security" often actually concern specific titles. Proposals to "save Medicare" are about Title XVIII. Discussions of disability benefits usually involve Title II (disability insurance) or Title XVI (supplemental income). The Social Security Act is not one program but an entire architecture of social insurance that has grown more complex over ninety years.
The Transformation of Old Age
Before Social Security, growing old in America meant, for most people, working until you physically couldn't anymore and then depending on family, charity, or luck. Retirement as we understand it—a distinct phase of life characterized by leisure, perhaps travel, certainly dignity—was a luxury available only to the wealthy.
Today, poverty among Americans over sixty-five has fallen from roughly forty percent before Social Security to under ten percent. This is one of the most dramatic reductions in poverty in human history, and it happened because the federal government decided that Americans who had worked their whole lives deserved not to die in destitution.
Social Security has also become one of the largest items in the federal budget. Because Americans are living longer and birth rates have declined, the ratio of workers paying into the system to retirees drawing benefits has fallen over time. In 1940, there were about forty workers for every retiree. Today, there are fewer than three. This demographic shift drives much of the political anxiety about Social Security's future solvency.
But the program's scale is also its political strength. Nearly every American either receives Social Security benefits, will receive them in the future, or loves someone who depends on them. Politicians sometimes speak about reforming entitlements, but they rarely propose specific cuts to Social Security, because doing so has historically been an excellent way to lose elections.
From Cradle to Grave
Roosevelt's vision was that every American, from birth, should be part of a social insurance system that would protect them through every stage of life. If you lost your job, you would receive unemployment benefits. If you became disabled, you would receive disability benefits. If you grew old, you would receive retirement benefits. If you died, your family would receive survivor benefits. If you got sick, you would receive healthcare.
"I don't see why not. Cradle to the grave—from the cradle to the grave they ought to be in a social insurance system."
Compared to the social security systems in Western European countries—Germany, which pioneered social insurance under Bismarck in the 1880s, or the United Kingdom, which built a comprehensive welfare state after World War II—the American system remains more fragmented, more tied to employment, and less generous. Americans receive healthcare through their employers, if they're lucky, or through a patchwork of programs if they're not. Unemployment benefits vary wildly by state. Paid family leave, standard in most wealthy countries, is available to only a fraction of American workers.
Yet the Social Security Act of 1935 represented a fundamental break with what came before. For the first time, the federal government acknowledged that economic security was not purely an individual responsibility. Society had an obligation to protect its members from risks that no individual could adequately prepare for: the risk of unemployment in a Depression, the risk of outliving your savings, the risk of disability striking in your prime.
That principle—that we are, in some fundamental sense, responsible for each other—continues to shape American politics ninety years later. Every debate about expanding or contracting the welfare state is, at root, a debate about how far that responsibility extends. The Social Security Act didn't answer that question definitively. No law could. But it established the terms in which the question would be asked for generations to come.