There were several precursors to our Social Security program in Europe and elsewhere. Pensions for older people were promoted by Thomas Paine (1), the heralded political pamphleteer of the American Revolution, more than 200 years ago. In his 1795 treatise on Agrarian Justice, Paine advocated for a 10 percent inheritance tax on all bequeathed property (more if there were no direct heirs) that would be used to provide every person age 50 and older with a retirement income of 10 pounds, annually.
This proposal went nowhere. But, nearly a century later, in 1889, Germany’s Chancellor (and battleship namesake) Otto von Bismarck implemented a system making his country the first in the world (2) to adopt a national old-age insurance program, offering government-sponsored annual retirement income at age 70 (cut to age 65 in 1916). The policy was based on Bismarck’s principle that: “ Those who are disabled from work by age and invalidity have a well-grounded claim to care from the state.” England followed with its Old Age Pension Act of 1908, which also initiated yearly retirement incomes for those age 70 and older.
America’s Social Security program took its lead from these and other European predecessors ( 34 countries had some type of social security system by 1935) (3), but it also built upon smaller pension programs already set up in this country. Along with limited military pensions for disabled Civil War veterans (including their wives and dependents), most notable among these was the Pennsylvania Railroad Pension, begun in 1890, and widely considered the first modern pension system in the United States. The largest private employer in the nation at the time, the Pennsylvania Railroad created a benefit plan “equal to one percent of the average wage in the last ten years of employment times the number of years worked,” with a mandatory retirement age of 70. This pension system, like those that followed it, was launched not only for altruistic reasons, but also to cultivate worker loyalty, lessen the likelihood of strikes and to decrease turnover of experienced employees.
Still, well into the 20 th century – despite some noble efforts by former President Theodore Roosevelt and the Bull Moose Party in 1912 (“The hazards of sickness, accident, invalidism, involuntary unemployment, and old age should be provided for through insurance.") – the vast majority of Americans had no retirement or old-age pension system (4). The issue remained mostly on the back burner until the crash of the American stock market on Black Friday, Oct. 29, 1929. The subsequent economic downturn brought the need for a nationwide social safety net for the unemployed, elderly and disabled to the forefront of political discussion. After several years of debate – and after some 30 states had enacted varying forms of piecemeal, largely inadequate pension legislation covering only a small portion of older persons – Social Security was passed by Congress in 1935 (372-33 in the House; and 77-6 in the Senate, 12 “not voting”).(5)
But not until a few more radical ideas were entertained in the interim. One of the more memorable such plans was U.S. Senator Huey Long’s (D-Louisiana) “Every Man a King” proposition (6), guaranteeing each American family a minimum annual income of $5,000 and promising an old-age pension for every person past age 60 (and also limiting annual incomes to $1 million and personal fortunes to $50 million). Another (more warmly received) proposal, the Townsend Plan (sponsored by Dr. Francis Townsend) (7), asked for a 2 percent national sales tax to fund a $200 monthly pension for all American workers age 60 and older, provided each beneficiary would spend the $200 in the United States within 30 days of its receipt.
President Franklin D. Roosevelt (8) (Teddy’s 5th cousin) fought for Social Security early in his term, observing that the program represented not a change in American social philosophy, but “rather a return to values lost in the course of our economic development and expansion.” He signed the Social Security Act into law on August 14, 1935, stating: “We can never insure one hundred percent of the population against one hundred 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-ridden old age."
That measure of protection has been thorough enough to mark Social Security as the most successful social program in United States history, helping decrease the poverty rate among older Americans from close to 50 percent in the mid-1930s, and roughly 35 percent in 1959 (9), to just 9.8 percent in the year 2004, lower than the current U.S. poverty rate for all ages, 12.7 percent (10).
Social Security is best known for establishing (under Title II) a wage-deduction pension plan for workers, but this law (technically known as the Old Age Survivors and Disability Insurance Act) also provides (under Title I) small subsidies to those outside of the workforce, specifically destitute older persons (who received Old Age Assistance), the blind, and, through 1950 amendments, to those with a broader range of disabilities. In 1974, these initiatives (falling under Title I of the SS Act) were folded into the Supplemental Security Income program, with subsidies (and matching grants from the 50 states) that annually increased with inflation.
(1) Social Security Online, Historical Background and Development of Social Security (www.ssa.gov/history/paine4.html)
(2) Social Security Online, Historical Background and Development of Social Security (www.ssa.gov/history/ottob.html)
(3) Social Security Online, Historical Background and Development of Social Security (www.ssa.gov/history/pre1935.html )
(4) Social Security Online, Historical Background and Development of Social Security (www.ssa.gov/history/trspeech.html)
(5) Social Security Online, Historical Background and Development of Social Security
(www.ssa.gov/history/tally.html)
(6) Social Security Online, Historical Background and Development of Social Security (www.ssa.gov/history/hlong1.html)
(7) Social Security Online, Historical Background and Development of Social Security http://www.ssa.gov/history/towns5.html )
(8) Social Security Online, Historical Background and Development of Social Security (http://www.ssa.gov/history/briefhistory3.html
(9) U.S. Census Bureau: Historical Poverty Tables (www.census.govhhes.www/poverty/histpov/histpov16html)
(10) U.S. Census:Poverty – 2004 Highlights http://www.census.gov/hhes/www/poverty/poverty04/pov04hi.html