On August 14, 1935, President Franklin D. Roosevelt signed the Social Security Act into law. Amongst other benefits, the primary aim of the Act was to offer a pension scheme that would provide aged Americans with a means of living even after their retirement Rose, 1989; Quadagno, 1984; “Transcript of Social Security Act,” n.d). According to the Act, the pension scheme was to be jointly funded by both the employees and employers. There is a consensus amongst various scholars that the period before and after the enactment of the act was played an instrumental role in the process of formulating and implementing the Act. This essay is therefore aimed at exploring the historical trends that were evident during the period of enactment of the Social Security Act.
The enactment of the Social Security Act took place in the midst of the Great Depression (Quadagno, 1984). Thus, one of the period’s defining factors was the harsh economic environment. This was not solely experienced in the United States (U.S) but rather was a global phenomenon. Thus, the fact that America was still navigating and finding its way out of the Great Depression implies that the two cannot be decoupled. President Franklin D. Roosevelt took over power in 1932 when America was experiencing the severe effects of the Great Depression that was characterized by the worst ever economic crisis. In response to the sinking economy, the president promised “New Deals” which were programs aimed at helping the nation come out of the Great Depression. The enactment of the Social Security Act was thus perceived as one of the programs under President Franklin D. Roosevelt’s administration that were aimed at creating a government-driven safety net. Although critics argued that the act would further deepen the crisis by taking money from the market. They argued that the country required an increase in consumer spending so as to revive the economy. Conversely, Roosevelt argued that the Social Act would offer protection to over thirty million Americans who were bound to reap direct benefits through unemployment compensation (Hoskins et al., 2001).
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Another critical factor that surrounded the implementation of the Act was the fact that Roosevelt was a conservative. Typically, conservative economists believe in a self-sustaining economy as opposed to the need for government spending to initiate economic growth. Likewise, the fact that the country was going through a hard economic time meant that the available reserve funds were inadequate to support the pension scheme. Therefore, the president was keen on identifying self-sustaining mechanisms that could spur economic recovery. The social security scheme seemed to fit into his economic ideologies perfectly. The social security system was self-funding and hence did not require funds from the tax revenues (“Transcript of Social Security Act,” n.d). Rather, the scheme was paid for by both the workers and their employers. Owing to this, the president felt that the social security system not only helped to protect the country’s economy from inflation but also ensured that money taken out of the depressed economy did not return until after five years.
Historically, employment has always been a major challenge in most economies, including the U.S. Thus, the fact that there was a global financial crisis meant that consumer spending in the country had reduced significantly. As a result, most employers had resorted to lean production and minimal expenditure programs that saw them employ a reduced number of people (Rose, 1989). Subsequently, the rate of unemployment was increasing rapidly. On the other hand, re-employment was practically impossible. Hence, the Social Security Act was seen as a response to the steadily rising number of unemployed citizens. During the signing of the Act, President Roosevelt insisted that his administration could not afford to insure everyone against the unlimited hazards and vicissitudes of life. Thus the Act had been developed as a framework that would offer significant protection to the average Americans and their families against the loss of employment and also against poverty-ridden old age (Rose, 1989). In other words, the need to respond to the menace of joblessness necessitated the implementation of the Social Security Act.
The end of the Great Depression was not anticipated by most nations. Similarly, it was feared that the scenario would recur in the future. Thus, there was a need to develop preventive measures that would reduce the severity of depression and its impacts on the American economy. These initial fears were confirmed during the recent global economic crisis in 2008. During this period, most economies were significantly affected. The Social Security Act was therefore implemented with the goal of protecting future administrations against accumulating debt in a bid to help the needy. The law was therefore meant to respond to both inflation and deflation. It was also aimed at providing the economy with a sound economic recovery framework and taking care of the needs of the needy in the society (Myles, 1984). Initially, the social insurance under the social security law excluded workers in the agricultural sector, industrial employment and domestic services sector. However, it was later discovered that the excluded categories consisted the largest percentage of needy citizens. As a result, the law was reviewed to cover them too.
President Franklin D. Roosevelt understood that the economy did not have enough money to support most of the programs that his administration intended to implement. As a result, he chose to find alternative approaches for stabilizing the economy and improving the living standards of all Americans. Overall, the Social Security Act was mainly implemented as a response to the hard economic conditions that were evident during the reign of President Franklin D. Roosevelt.
References
Hoskins, D., Donate, D., and Christiane, K. (2001) Social Security at the Dawn of the Twenty-First Century . New Brunswick, N.J.: Transaction.
Myles, J. (1984) Old Age in the Welfare State: The Political Economy of Public Pensions . Boston: Little Brown.
Quadagno, J. S. (1984). Welfare capitalism and the Social Security Act of 1935. American Sociological Review , 632-647.
Rose, N. E. (1989). Work relief in the 1930s and the origins of the Social Security Act. Social Service Review , 63 (1), 63-91.
“Transcript of Social Security Act” (n.d). Ourdocuments.gov. Retrieved from https://www.ourdocuments.gov/doc.php?flash=true&doc=68&page=transcript
