On This Day: Social Security Act Signed Into Law
One demographic in need of assistance was the elderly. According to Encyclopedia Britannica, “5,000,000 old people in the early 1930s joined nationwide Townsend clubs, promoted by Francis E. Townsend to support his program demanding a $200 monthly pension for everyone over the age of 60.”
In June 1934, Roosevelt announced to Congress his intentions to create what would become the Social Security program. He formed the Committee on Economic Security (CES), composed of a group of experts from various agencies, to analyze the issue of economic security in America.
The reports was completed in January 1935 and presented to Congress with the Economic Security Bill, later to be renamed the Social Security Act. The bill was debated in the spring and was passed in the House and Senate by overwhelming margins.
On Aug. 14, 1935, Roosevelt signed the Social Security Act into law. Upon signing the bill, he stated, “We can never insure 100 percent of the population against 100 percent of the hazards and vicissitudes of life, 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-stricken old age.”
The act provided “a wide range of programs to meet the nation’s needs,” according to the U.S. Social Security Administration. “In addition to the program we now think of as Social Security, it included unemployment insurance, old-age assistance, aid to dependent children and grants to the states to provide various forms of medical care.”
“When the Social Security program was created in 1935, a 65-year-old American had an average life expectancy of about 12 1/2 more years; today, it is 18 years and rising,” explains the U.S. Social Security Administration.
The system will also be burdened by the large number of baby boomers retiring between now and 2025. Because later generations are not as populous, the amount of taxable income will decrease.
The number of people whose wages are taxed to pay for Social Security benefits may decrease, but if history is any indication the rate at which those wages are taxed will continue rising. When the Social Security tax was instituted, the tax rate was 1 percent of each employee’s income. Today that tax rate stands at 15.3 percent.