Before the 1930s, there was no support for the elderly, retired, unemployed or poor at the national government level. Any support to people who fell under this category was either a state, local or private matter. However, in 1935, President Franklin D. Roosevelt communicated to Congress the need for a national old-age insurance system due to the general distress caused by the Great Depression. The result was an act called the Social Security Act Of 1935. This would be the first program of its kind anywhere in the world.
The act provided for the general welfare of older adults by forming a federal system of old age, disability, unemployment and poverty benefits. On the same day that President Franklin D. Roosevelt sent the message to Congress, two members of Congress, Senator Robert Wagner of New York and Representative David Lewis of Maryland, introduced bills that reflected what the president had requested. These bills would become what we know today to be the Social Security Act of 1935. However, the bill was not passed immediately. It was not until August 15, 1935, more than six months after the introduction of bills on January 17, 1935, that the bills were passed and signed by the president.
The main reason for the delay in passing these bills was the widespread disagreement with the idea that the government should intervene in what had always been handled at a state, local or private level. In addition, many sought a loophole that could enable employers to be exempt from payroll taxes if the employers adopted a government-approved pension plan. The Social Security Act of 1935 created several programs, including old-age insurance, unemployment insurance, and Aid to Families with Dependent Children (AFDC).
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These programs were created primarily because of the Great Depression. During the Great Depression, a large percentage of people were out of work, and due to this, they could not save money for any purpose, let alone to retire on. Many had difficulties just making enough money to feed their families. In addition, more than 50% of the elderly in our country were at or below the poverty line. The old-age insurance program was an entitlement program designed to give benefits to the elderly to help bring them out of poverty. The unemployment insurance program was also an entitlement program, but it paid benefits to individuals out of work and could not find new work.
This was important because a vast number of people were unable to find work, and the economy suffered because of it. Also, under The Social Security Act of 1935, the Aid to Families with Dependent Children (AFDC) programs were created to help the very poor. The AFDC programs are referred to as means-tested programs. These programs used statistics of the average income of certain size families to determine whether a family is above or below the poverty line. If the family’s income is below the poverty line, they are eligible to receive AFDC. AFDC was often referred to as welfare and was given to families with children but no breadwinner.
The significant issues with The Social Security Act of 1935 were funding and how it was to be run. Since there was no previous program elsewhere that even resembled this Act, there was no precedent to go by. Therefore, it was decided that for the program called old age For insurance, qualified employees would be obligated to pay a payroll tax. This payroll tax consisted of a 1% tax of the first $3,000 earned for both the employee and employer to pay. Therefore, in effect, 2% tax was being paid to fund the old-age insurance, now named, social security. Over the following years, the percentage that both employer and employee would pay gradually increased.
However, the old-age insurance or social security benefits were only paid to a specific qualifying group of people. The people who qualified for this were at least 65 years old and made at least $2,000 the year before he/she retired. Moreover, to qualify to receive benefits, you must have paid Federal Insurance Contributions Act (FICA) tax prior to turning 65 and retiring. Among the groups that did not qualify were farmworkers, self-employed workers and people who worked for a business employing less than ten people. These people did not qualify because it would be exceedingly difficult for the government to observe whether rules about taxes etc. were being heeded.
Because of these qualifications, roughly half of the population did not qualify to receive any social security benefits. Consequently, in 1939 the 1937 Federal Insurance Contributions Act (FICA) tax was amended. The amendment of the Federal Insurance Contributions Act gave non-working widow’s benefits from social security, gave benefits to survivors and gave benefits to retirees that did not pay any FICA taxes prior to retiring. In contrast, prior to the amendment, the widow of a person who would have qualified for social security benefits would not have received anything.
In addition, survivors (widows and orphans) in a family would not have received any benefits if one of the family members died while receiving social security payments, or if they had died and were eligible to receive social security payments when they reached 65. In addition, if you had turned 65 prior to the passing of The Social Security Act of 1935, you would have received no benefits from social security. This broadening of the qualifications needed to get social security benefits helped a great number of people, particularly some of the hardest hit by the depression.
Over the years, it has become increasingly evident how important this act has become to the American people. The various programs included in The Social Security Act of 1935 have helped fight against poverty. They have done this by giving benefits to retirees over the age of 65, which reduces the amount of poverty among the elderly. In addition, the unemployment insurance program gives benefits to people who are out of work but are unable to obtain a new job. Lastly, the AFDC programs help the poorest people who have children. These people all fall below the poverty line. Without this assistance, many of these families would be living in terrible conditions in extreme poverty.
In conclusion, The Social Security Act of 1935 created different programs to give aid to specific groups. These groups included the poor, the elderly, the disabled and the unemployed. The main programs that were created were the entitlement programs, the old-age insurance program, also called social security, the unemployment insurance program, and means-tested programs including the AFDC programs. These programs were all created in hopes of helping American society recover from the Great depression.