Franklin Roosevelt signed the Social Security Act into law on August 14, 1935, creating not only a federal system of old-age pensions but also providing a basis for federal unemployment insurance, as well as disability insurance and aid to mothers with dependent children. Limited in its scope by shrewd politics and racism, sketching a funding mechanism its framers believed inadequate, it is nevertheless certainly the single most important law establishing Congressional power to provide for the welfare of individual US citizens.
Before the Great Depression, state and local agencies, both public and private, sought to provide aid to the poor. But the economic catastrophe that began in 1929 put so many Americans out of work that these traditional sources of assistance dwindled and then vanished, while the numbers of jobless and indigent continued to grow.
The Depression was so great in scope that it touched almost everyone. With unemployment reaching nearly 25 percent by the end of Herbert Hoover’s presidency, everyone at least knew someone out of work. And although recovery from the downturn began with the start of Roosevelt’s policies in March of 1933, the conviction that the nation needed some better provision for the poor lingered.
The president appointed a Committee on Economic Security staffed with experts to design what became the first Social Security legislation, but Roosevelt’s political convictions overrode expert recommendations in key areas. Rather than a national program of social insurance funded by simple income taxes, he preferred decentralized programs funded by contributions from individuals and state governments. Roosevelt planned for unemployment insurance to be federally subsidized but under the control of state governments. He wanted Americans and their employers to contribute the funding for their old-age pensions, rather than have them simply paid for out of Treasury revenues.
In both cases Roosevelt sought to avoid the appearance of national programs based on simple transfers of wealth from those who had it to those who did not, even though throughout much of the modern world, unemployment and old-age pension programs were funded in precisely that way. Some of the president’s closest advisors tried to persuade him that national systems funded by transfer payments would work better. But he resisted, saying Social Security should be a “wholly contributory scheme with the government not participating” and that forty-eight separate state systems of unemployment insurance would provide “economic laboratories” for experimentation in programs for the jobless. Pundits puzzled over Roosevelt’s piecemeal approach. The New Republic ran an article complaining “the law is almost a model of what legislation ought not to be.” But as Roosevelt’s advisor Rexford Tugwell recognized, “There comes a time in such cases when it is time to stop arguing.”
The bill reflected political limits in another way: it omitted any mention of health insurance. The Committee on Economic Security had originally regarded health insurance as “equally important” to old-age pensions and unemployment relief. But the objections of doctors to public involvement in their business persuaded the administration it had better drop the provision for health insurance. The Roosevelt bill faced sufficient obstacles already.
The president’s suspicion he would face stiff opposition was borne out in Congress. On a vote to send the bill back to committee, perhaps to die and certainly to hibernate indefinitely, all but one Republican voted against Social Security. If significant number of Democrats – say, perhaps, a bloc of white southerners – had defected from the administration’s side, the bill would have vanished – which helps to explain why farm workers and domestic workers, overwhelmingly an African American population, were excluded from initial coverage under the law.
Even after passage, the Social Security Act had to overcome another obstacle: the Supreme Court, which had proven notably hostile to New Deal legislation. But in 1937, the Court held that the Great Depression proved the need of national relief for unemployment and poverty: “the ill is all one…whether men are thrown out of work because there is no longer work to do or because the disabilities of age make them incapable of doing it. Rescue becomes necessary irrespective of the cause. The hope behind this statute is to save men and women from the rigors of the poor house, as well as from the haunting fear that such a lot awaits them when journey’s end is near,” Justice Benjamin Cardozo wrote for a majority.
Congress’s power to provide for the welfare of American citizens was established.