Title: PPA 419 Aging Services Administration
1PPA 419 Aging Services Administration
- Lecture 4a History of Social Security
2Pre-Social Security Period
- Traditional sources of income security.
- Assets
- Ancient Greeks Olive oil.
- Labor.
- Feudal system.
- Charity.
- Family.
- Land.
3Pre-Social Security Period
- The rise of formal systems of economic security.
- Medieval guilds mutual aid societies for
tradesman that regulated production and provided
a range of benefits. - Friendly societies common trades. Evolved into
fraternal organizations, then unions. Provided
life insurance. - Freemasons, Odd Fellows, Elks, Moose, Eagles.
4Pre-Social Security Period
- The English Poor Laws.
- English Poor Law of 1601 the first systematic
codification of the responsibility of the state
for the welfare of its citizens. - Taxation to fund relief activities.
- Distinguished between deserving and undeserving
poor. - Local and community control.
- Almhouses.
- Tradition that the colonists brought with them to
America.
5Pre-Social Security Period
- Economic security in America.
- Colonial poor laws.
- Increased complexity, diversity, and mobility put
strain on colonial poor laws. - Result more state financing, increasing use of
poorhouses and almshouses. - Relief made as unpleasant as possible.
- Outdoor relief increased, but mistrusted.
- Old age in colonial America.
- Struggle to develop adequate systems of
retirement. - First pension scheme Thomas Paine, Agrarian
Justice.
6Pre-Social Security Period
- Civil War pensions Americas first Social
Security program. - 1862 Benefits linked to disabilities as a
direct consequence of military duty. - Widows and orphans also eligible.
- Service disability link eliminated in 1890.
- Old age and service became sole qualification in
1906. - Often induced young women to marry Civil War
veterans for the benefit. Last civil war widow
to receive civil war pension was in 1999. - Military pensions a significant part of the
federal budget, but the federal budget at that
time not a significant part of the economy. Many
veterans not eligible (Confederate veterans, for
example).
7Pre-Social Security Period
- The company pension.
- The first formal company pension plan was
introduced by the Alfred Dolge company (maker of
pianos). Largely a failure because of worker
mobility. - Company provided pension plans only covered 2 of
workers in early part of 20th century.
8Pre-Social Security Period
- Coxeys Army.
- During the depression of the 1890s.
- Coxey, an unsuccessful Ohio politician and
industrial, called on unemployed from all over
the country to join in a march on Washington in
1894. - Tens of thousands marched on Washington, but only
500 made it. Coxey was arrested for walking on
the grass of the Capitol building. - Coxey a harbinger of demands for unemployment
insurance.
9Pre-Social Security Period
- State old-age pensions.
- Following the outbreak of the Great Depression,
poverty among the elderly grew dramatically. - Estimates over 50 percent did not have enough
income to be self-supporting. - State welfare pensions for the elderly were
virtually non-existent before 1930. - By 1935 30 states had pension plans.
- But, only 3 of the elderly were receiving
benefits of about an average of 0.65 per day. - Elderly reluctant to go on welfare.
- Many states failed to implement programs.
- Many states had county option.
- 87 of the money under elderly pension programs
were spent in California, New York, and
Massachusetts. - Pension laws subject to political vagaries (Huey
Long and black pensioners in June and July).
10Pre-Social Security Period
- America changes.
- The industrial revolution.
- The urbanization of America.
- The disappearance of the extended family.
- A marked increase in life expectancy.
- The changes made economic security fragile.
11Pre-Social Security Period
- Stock market crash and the Great Depression.
- October 24, 1929 stock market crash.
- In three months, market lost 40 of its value.
It took 25 years to return to its pre-crash
level. - Unemployment exceeded 25, 10,000 banks failed,
GNP declined from 105 billion to 55 billion.
Wages declined by 40.
12Pre-Social Security Period
- Radical calls to action.
- Every Man a King (Share Our Wealth) Huey Long.
- Confiscate wealth. Guaranteed income of 5,000.
Limits on private fortunes, legacies, and
incomes. Everyone over 60 would receive a
pension. - The Townsend Movement Francis E. Townsend
(unemployed doctor at 66). Townsend Old Age
Revolving pension plan. - Pension of 200 month for everyone 60 and older
funded by a 2 sales tax. - Person must be retired, non-criminal, money must
be spent within 30 days. - Hung around on the legislative agenda until 1949.
13Pre-Social Security Period
- Radical calls to action (contd.).
- Father Charles E. Coughlin.
- Radio show host with 35-40 million listeners.
- Enemies included devil, FDR, international
bankers, communists, and labor unions. Described
them interchangeably. - Social reforms included inflation of currency and
nationalization of all banks. Anti-Semite and
isolationist. - Upton Sinclair (EPIC).
- EPIC a 12-point program.
- Issuance of scrip currency, creation of state-run
bartering enterprises, tax on idle land, and
state bond of 300 million. Point 10 provided a
pension of 50 a month to all needy persons over
60 who had lived in California for at least three
years. - EPIC movement captured Democratic party and
Sinclair became the Democratic candidate for
Governor in 1934. Received 37 of the vote,
another progressive candidate received 13 and
the Republican candidate received 48.
14Pre-Social Security Period
- Radical calls to action (contd.).
- Ham Eggs (Robert Noble).
- Call for state government to issue special script
each week to every unemployed Californian 50 and
older. - Almost adopted by initiative in 1938. Endorsed by
Democratic candidate for Governor, Cuthbert
Olson. - Bigelow plan (Reverend Herbert S. Bigelow).
- Guaranteed income of 50 per month to those over
60 who are unemployed in Ohio. 2 tax on land,
increase in income tax. Would have cost more
than the existing state budget for two years.
15Pre-Social Security Period
- Radical calls to action (contd.).
- General Welfare Federation of America (Arthur L.
Johnson). - Denounced Social Security, called for a pension
plan to those over 60. with the simple
stipulations that that they not engage in gainful
employment, spend their pension for American
goods and services, and that they not maintain
able-bodied dependents between 30 and 60. Not
less than 30 and not more than 60. Financed by
gross income tax.
16Pre-Social Security Period
- Radical calls for action (contd.).
- Technocracy.
- Technocracy held that all politics and all
economic arrangements based on traditional
economic theory were antiquated and that the only
way to run the country was to let engineers and
other technology experts run the country on
engineering principles. - Retirement by 45 due to increased productivity.
- Rejected political geography, referring to states
by their coordinates. - Rejected names.
- Guess which movement is the only one to still
exist today.
17Pre-Social Security Period
- Establishment response.
- Do nothing.
- Situation would right itself as it always had.
- Presidents Hoovers volunteerism.
- Advocated voluntary efforts based on his
experiences in the post-World War I period. - Problem Volunteerism difficult when total wealth
has been cut in half. - Expand welfare.
- Initial efforts focused on expanding traditional
old age pensions, but generally too restrictive
and limited. - The New Alternative.
- Social insurance work-related contributory
system in which workers would provide for their
own future economic security through taxes paid
while employed. - Alternative to radical plans and conservative
do-nothing approach.
18The Social Insurance Movement
- Original concept developed by Otto von Bismarck,
Chancellor of Germany in 1899. - Adopted by 34 European countries by 1934.
- Basic features.
- Insurance principle a group of persons is
insured against a defined risk. - Social element The program is shaped in part by
broad social objectives, rather than the
self-interest of the individuals in the group.
19The Social Insurance Movement
- Social insurance can cover a number of different
conditions including disability, death,
unemployment, and old-age. - Social insurance attempts to solve the problem of
economic security by pooling risk assets from a
large social group and providing income to those
members of the group whose economic security is
threatened. - One of the earliest advocates of social insurance
was Theodore Roosevelt who succeeded in getting a
social insurance plank in the Progressive Party
platform in 1912.
20The Threshold of Change
- In 1934
- U.S. in throes of Depression.
- Social changes from Industrial Revolution
irreversible. - Traditional sources of economic security (assets,
labor, family, and charity) had all failed. - Radical proposals for action were springing up
like weeds. - A new president and social insurance movement
would produce a social revolution.
21The Social Security Act Passage and Development
- The Committee on Economic Security appointed by
FDR in June 1934. Issued report in November
1934. - Result Social Security Act of 1935.
Controversial, but signed into law on August 14,
1935.
22The Social Security Act Passage and Development
- Major provisions of the Act.
- Old age insurance.
- Unemployment insurance.
- Aid to dependent children.
- Old age assistance.
- Grants to states to provide medical assistance.
- The provisions that affected the elderly included
Old Age Insurance and Old Age Assistance. - In the original act, benefits paid only to
primary worker. - Social insurance provision (Title II) based on
contributions. - Income assistance provision (Title I) based on
need and intended to be temporary.
23The Social Security Act Passage and Development
- Social Security Board 3 members.
- Provided employers, employees and the public with
info on how earnings were to be reported, what
benefits were available and how they were to be
provided. Replaced in 1946 by the Social
Security Administration. - Early work Social Security Numbers.
- The first task was to register employers and
workers by January 1, 1937, when workers began
acquiring credits toward benefits. Contracted
with Post Office Department to do this. First
established account record was to John David
Sweeney, Jr., of New Rochelle, New York. - Established 151 field offices by June 30, 1937.
- Trust funds.
- The first Federal Insurance Contributions Act
(FICA) taxes were collected, beginning in January
1937 and put in special trust funds. Over the
years, 4.5 trillion has been paid in and 4.1
trillion has been paid out. The balance is the
surplus.
24The Social Security Act Passage and Development
- First payments.
- First payments between 1937 and 1940 were lump
sum. Ernest Ackerman retired one day after the
Act went into effect, paid a nickel in, and
received 17 cents in retirement benefits. - 1939 Amendments.
- Added dependents benefits and survivors benefits.
Turned the program into a family-based program. - Also increased benefits amounts and accelerated
start of benefits from 1942 to 1940.
25The Social Security Act Passage and Development
- Monthly benefits.
- Payments began in January 1940 and authorized for
retired workers, aged wives, and widows, children
under 18, and surviving aged parents. - First retirement check issued to Ida May Fuller
for 22.54. Started collecting at 65 and lived
to 100. Paid in 24.75 and received 22,888.92.
26The Social Security Act Passage and Development
- 1950 Amendments.
- Benefits increased making the program more
valuable than old age assistance for the first
time. - The story of COLAs.
- 1940 to 1950 no increases. 1952 another
increase. Doubled benefits. - Legislated increases until 1975 when automatic
cost of living increases keyed to the CPI kicked
in.
27The Social Security Act Passage and Development
28The Social Security Act Passage and Development
29The Social Security Act Passage and Development
- Disability.
- Social Security Amendments of 1954.
- Disability insurance program Disability freeze
1954-1956. - Full disability insurance program 1956 ages 50-64
and disabled adult children. All disabled 1960. - Medicare other changes.
- 1962, Mens eligibility reduced to 1962 (women in
1956). - 1965, Medicare. Extended health coverage to
nearly all Americans 65 and older.
30The Social Security Act Passage and Development
- SSI.
- Supplemental Security Income.
- Originally, partially federally funded program of
aid to the needy aged, blind, and disabled.
Mostly state and local funding and
administration. Considerable variation. - SSI nationalized program
31The Social Security Act Passage and Development
- 1972 1977 Amendments.
- 1972.
- SSI and COLA changes, minimum retirement benefit,
adjustment in male benefit formula to equalize it
with women, extension of Medicare to disability
recipients, extension to sufferers of chronic
renal disease, liberalization of retirement test,
and delayed retirement credits. - 1977.
- Addressed financing raised payroll tax,
increased wage base, reduced benefits slightly,
decoupled wage adjustment from price adjustment.
32The Social Security Act Passage and Development
- 1983 Amendments.
- Taxation of benefits, first coverage of federal
employees, increase in retirement age.
33The Social Security Act Passage and Development
34The Social Security Act Passage and Development
- Independence for SSA.
- 1994 SSA moved from DHHS to independent status
by President Clinton. - Legislative changes in 1996 1997.
- Contract with America Advancement Act.
- Elimination of drug addiction and
alcoholism-based disabilities from Social
Security Disability. - Personal Responsibility and Work Opportunity
Reconciliation Act of 1996. - Terminated SSI eligibility for most non-citizens.
Limited eligibility for children. - Omnibus Consolidated Rescissions and
Appropriations Act of 1996. - Electronic funds transfers mandatory.
- Department of Defense Appropriations Act, 1997.
- Identification-related documents.
- Balanced Budget Act of 1997.
- Restored SSI eligibility for most non-citizens.
35The Social Security Act Passage and Development
- Work incentives.
- Ticket to Work and Work Incentives Improvement
Act of 1999. - Ticket to work for SS disability recipients and
incentives to employers to hire them. - Repeal of Retirement Earnings Test.
- First exempted in 1950, 75 and older, then 72
(1954), 70 in 1977. - Repealed altogether in 2000.
36The Social Security Act Passage and Development
- Bush Administration.
- Appointment of Commission to Strengthen Social
Security. - Principles.
- The President directed the Commission to propose
Social Security reform plans that will strengthen
Social Security and improve its fiscal
sustainability, while meeting several principles - Modernization must not change Social Security
benefits for retirees or near-retirees. - The entire Social Security surplus must be
dedicated to Social Security only. - Social Security payroll taxes must not be
increased. - Government must not invest Social Security funds
in the stock market. - Modernization must preserve Social Securitys
disability and survivors components. - Modernization must include individually
controlled, voluntary personal retirement
accounts, which will augment the Social Security
safety net.