Social Security: History of Social Security

In 2005, President Bush, one of the foremost advocates of reforming social security, presented a plan to Congress, which advocated privatizing social security partially. According to this plan, it would give the right to people of investing a small portion of their payroll tax in the stocks of private firms. Although Congress did not act on Bush’s proposal, this, along with the fact that by 2008 the earliest baby boomers would begin to retire, has made social security an issue in the forefront of many people’s minds. Hence, here is a brief history of Social Security.

Originally, the term "social security" referred to any program that was intended to help individuals who had little financial resources. Such people included the poor, the elderly, anybody who was physically disabled, and the mentally ill. The first such financial programs were begun by the European trade guilds, with the "poor laws" sponsored by the government being formed later.

Civil War veteran pensions were the first widespread program of social security in the United States. At the beginning Union veterans, who had sustained injuries in battle and were disabled, or the widows of the soldiers, were given the payments (The veterans and families of the Confederate side were not given the pensions). This pension program was later expanded to include all Union soldiers, regardless of whether they had sustained injuries or not. Once the program was expanded, it became so huge that, in 1894, for example, more than one third of the money spent by the federal government went toward military pensions.

It was in the 1930s, when America reeled under the debilitating effects of the Great Depression, that the requirement for a comprehensive system of providing adequate money to the elderly and poor, so that they could survive independently, was brought into sharp focus. Americans in their millions lost their jobs or had no avenue of earning enough money to support their families. It was in 1932, right in the middle of the Depression, that Franklin Roosevelt became the President of the United States. He was the one who advocated an idea which was referred to as social insurance. Eventually, this idea developed into the social security system that is in existence today.

Later, in 1934, the Committee on Economic Security, or the CES, was formed at the behest of Franklin Roosevelt. This committee, which was based on the social-insurance idea of Roosevelt, which was already prevalent in about 36 European countries, made a plan that allowed workers to put a small percentage of their wages into an aggregate account. Later, on retiring, they would be able to withdraw the money from that account to take care of their monthly expenses. Then, in 1935, the Social Security Act, or SSA, was made into a law.

Since then, over the years, the SSA system of retirement assistance has been modified by the government according to the changes in the economic situation of the country and the population. Some of these changes include: the workers’ families were made eligible to get the payments; COLAs, or cost of living adjustments, were included so that the benefits of social security would increase according to the inflation without the Congress having to pass a major act; and, disability provisions were also included in the program.