THE NEW DEAL-- THE SOCIAL SECURITY ACT OF 1935 gggff

This essay covers the Social Security program after the enactment of the Social Security Act in August 1935.

A Brief History of Social Security by Larry DeWitt The Committee on Economic Security (CES) On June 8, 1934, President Franklin D. Roosevelt, in a message to the Congress, announced his intention to provide a program for Social Security. Subsequently, the President created by Executive Order the Committee on Economic Security, which was composed of five top cabinet-level officials. The committee was instructed to study the entire problem of economic insecurity and to make recommendations that would serve as the basis for legislative consideration by the Congress. The CES assembled a small staff of experts borrowed from other federal agencies and immediately set to work. In November 1934 the CES sponsored the first-ever national town-hall forum on Social Security. The CES did a comprehensive study of the whole issue of economic security in America, along with an analysis of the European experience with these perennial problems. Their full report was the first comprehensive attempt at this kind of analysis in many decades and it stood as a landmark study for many years. In slightly more than six months, the CES developed a Report to the Congress and drafted a detailed legislative proposal; and after passage of the law, the CES wrote a foundational text in the development of social insurance in America. "Security was attained in the earlier days through the interdependence of members of families upon each other and of the families within a small community upon each other. The complexities of great communities and of organized industry make less real these simple means of security. Therefore, we are compelled to employ the active interest of the Nation as a whole through government in order to encourage a greater security for each individual who composes it . . . This seeking for a greater measure of welfare and happiness does not indicate a change in values. It is rather a return to values lost in the course of our economic development and expansion . . ." Franklin D. Roosevelt: Message of the President to Congress, June 8, 1934. The Social Security Act In early January 1935, the CES made its report to the President, and on January 17 the President introduced the report to both Houses of Congress for simultaneous consideration. Hearings were held in the House Ways & Means Committee and the Senate Finance Committee during January and February. Some provisions made it through the Committees in close votes, but the bill passed both houses overwhelmingly in the floor votes. After a Conference which lasted throughout July, the bill was finally passed and sent to President Roosevelt for his signature. The Social Security Act was signed into law by President Roosevelt on August 14, 1935. In addition to several provisions for general welfare, the new Act created a social insurance program designed to pay retired workers age 65 or older a continuing income after retirement. President Roosevelt signing Social Security Act of 1935. Also shown, left to right: Rep. Robert Doughton (D-NC); Sen. Robert Wagner (D-NY); Rep. John Dingell, Sr. (D-MI); Unknown man in bowtie; Secretary of Labor, Frances Perkins; Senator Pat Harrison (D-MS); Congressman David L. Lewis (D-MD). Library of Congress photo, LC-US262-123278. "Today a hope of many years' standing is in large part fulfilled. The civilization of the past hundred years, with its startling industrial changes, has tended more and more to make life insecure. Young people have come to wonder what would be their lot when they came to old age. The man with a job has wondered how long the job would last. This social security measure gives at least some protection to thirty millions of our citizens who will reap direct benefits through unemployment compensation, through old-age pensions and through increased services for the protection of children and the prevention of ill health. 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. This law, too, represents a cornerstone in a structure which is being built but is by no means complete. It is a structure intended to lessen the force of possible future depressions. It will act as a protection to future Administrations against the necessity of going deeply into debt to furnish relief to the needy. The law will flatten out the peaks and valleys of deflation and of inflation. It is, in short, a law that will take care of human needs and at the same time provide the United States an economic structure of vastly greater soundness. I congratulate all of you ladies and gentlemen, all of you in the Congress, in the executive departments and all of you who come from private life, and I thank you for your splendid efforts in behalf of this sound, needed and patriotic legislation. If the Senate and the House of Representatives in this long and arduous session had done nothing more than pass this Bill, the session would be regarded as historic for all time." President Roosevelt upon signing Social Security Act Major Provisions Of The Act The Social Security Act did not quite achieve all the aspirations its supporters had hoped by way of providing a "comprehensive package of protection" against the "hazards and vicissitudes of life." Certain features of that package, notably disability coverage and medical benefits, would have to await future developments. But it did provide a wide range of programs to meet the nation's needs. In addition to the program we know think of as Social Security, it included unemployment insurance, old-age assistance, aid to dependent children and grants to the states to provide various forms of medical care. The two major provisions relating to the elderly were Title I- Grants to States for Old-Age Assistance, which supported state welfare programs for the aged, and Title II-Federal Old-Age Benefits. It was Title II that was the new social insurance program we now think of as Social Security. In the original Act benefits were to be paid only to the primary worker when he/she retired at age 65. Benefits were to be based on payroll tax contributions that the worker made during his/her working life. Taxes would first be collected in 1937 and monthly benefits would begin in 1942. (Under amendments passed in 1939, payments were advanced to 1940.) The significance of the new social insurance program was that it sought to address the long-range problem of economic security for the aged through a contributory system in which the workers themselves contributed to their own future retirement benefit by making regular payments into a joint fund. It was thus distinct from the welfare benefits provided under Title I of the Act and from the various state "old-age pensions." As President Roosevelt conceived of the Act, Title I was to be a temporary "relief" program that would eventually disappear as more people were able to obtain retirement income through the contributory system. The new social insurance system was also a very moderate alternative to the radical calls to action that were so common in the America of the 1930s. FULL TEXT OF SOCIAL SECURITY ACT OF 1935 The Social Security Board Another provision of the Act established a Social Security Board (SSB) comprised of three members appointed by the President, with the chairman reporting directly to the President. The original members were John G. Winant, Chairman; Arthur J. Altmeyer; and Vincent M. Miles. During the first year, SSB was faced with the tasks of providing employers, employees and the public with information on how earnings were to be reported, what benefits were available and how they were to be provided. In addition, sites for field installations had to be chosen and personnel to staff these offices had to be selected and trained. First meeting of the Social Security Board, September 14, 1935. Left to right: Arthur J. Altmeyer, John G. Winant (Chairman), and Vincent M. Miles. Operation of the new program was hampered for several months when the budget bill for the Act was killed by a Senate filibuster (by Senator Huey Long) at the end of August 1935. The new Social Security Board had to borrow money from other federal agencies to operate until January 1936 when the Congress reconvened and passed an appropriation to fund the programs and operations under the Social Security Act. Early Work- Social Security Numbers The monumental first task was the need to register employers and workers by January 1, 1937, when workers would begin acquiring credits toward old-age insurance benefits. Since the new Social Security Board did not have the resources available to accomplish this, they contracted with the Post Office Department to distribute the applications. The first application forms were distributed in late November 1936. The numbers were assigned in the local post offices. There is no record of who received the first Social Security number (SSN). Postmen in New York City starting out in November 1936 to distribute more than 3,000,000 application forms for Social Security numbers. Library of Congress photo, LC-US262-123404. John David Sweeney, Jr. The post offices collected the completed forms and turned them over to Social Security field offices located near major post office centers. The applications then were forwarded to Baltimore, Maryland, where SSNs were registered and various employment records established. The first SSN account number record established in Baltimore was assigned to John David Sweeney, Jr. of New Rochelle, New York. Although, John Sweeney received the first SSN account, his was not the lowest number ever issued. That distinction fell to New Hampshire resident, Grace Dorothy Owen. Ms. Owen received number 001-01-0001. Over 30 million SSN cards were issued through this early procedure, with the help of the post offices. By June 30, 1937, the SSB had established 151 field offices, with the first office opening on October 14, 1936, in Austin, Texas. From that point on, the Board's local office took over the task of assigning SSNs. This is SSA's first local field office which opened on October 14, 1936 in Austin, Texas. Today there is a network of more than 1,300 such offices around the country. Trust Funds After Social Security numbers were assigned, the first Federal Insurance Contributions Act (FICA) taxes were collected, beginning in January 1937. Special Trust Funds were created for these dedicated revenues. Benefits were then paid from the money in the Social Security Trust Funds. Over the years, more than $4.5 trillion has been paid into the Trust Funds, and more than $4.1 trillion has been paid out in benefits. The remainder is currently on reserve in the Trust Funds and will be used to pay future benefits. Performance of Social Security Trust Funds 1937-2002 (Includes Old-Age, Survivors and Disability Trust Funds) [$ in millions] Calendar Year Net Interest Total Income Total Expenditures Balance 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 $2 15 27 43 56 72 88 107 134 152 164 281 146 257 417 365 414 447 454 526 563 577 572 569 614 594 587 633 651 702 896 1,045 1,342 1,791 2,027 2,208 2,386 2,660 2,866 2,722 2,531 2,264 2,155 2,330 2,231 1,391 8,276 3,440 2,741 3,871 5,338 8,168 12,692 17,245 21,892 25,365 27,862 31,103 34,977 38,718 43,800 49,300 55,500 64,500 72,900 80,400 $767 375 607 368 845 1,085 1,328 1,422 1,420 1,447 1,722 1,969 1,816 2,928 3,784 4,184 4,359 5,610 6,167 6,697 8,090 9,108 9,516 12,445 12,937 13,699 16,227 17,476 17,857 23,381 26,413 28,493 33,346 36,993 40,908 45,622 54,787 62,066 67,640 75,034 81,982 91,903 105,864 119,712 142,438 147,913 171,266 186,637 203,540 216,833 231,039 263,469 289,448 315,443 329,676 342,591 355,578 381,111 399,497 424,451 457,700 489,200 526,600 568,400 602,000 627,100 $1 10 14 62 114 159 195 238 304 418 512 607 721 1,022 1,966 2,282 3,094 3,741 5,079 5,841 7,567 8,907 10,793 11,798 13,388 15,156 16,217 17,020 19,187 20,913 22,471 26,015 27,892 33,108 38,542 43,281 53,148 60,593 69,184 78,242 87,254 96,018 107,320 123,550 144,352 160,111 171,177 180,429 190,628 201,522 209,093 222,514 236,242 253,135 274,205 291,865 308,766 323,011 339,815 353,569 369,100 382,300 392,900 415,100 438,900 461,700 $766 1,132 1,724 2,031 2,762 3,688 4,820 6,005 7,121 8,150 9,360 10,722 11,816 13,721 15,540 17,442 18,707 20,576 21,633 22,519 23,042 23,243 21,966 22,613 22,162 20,705 20,715 21,172 19,841 22,308 26,250 28,729 34,182 38,068 40,434 42,775 44,414 45,886 44,342 41,133 35,861 31,746 30,291 26,453 24,539 24,778 24,867 31,075 42,163 46,861 68,807 109,762 162,968 225,277 280,747 331,473 378,285 436,385 496,068 566,950 655,500 762,500 896,100 1,049,400 1,212,500 1,378,000 First Payments From 1937 until 1940, Social Security paid benefits in the form of a single, lump-sum payment. The purpose of these one-time payments was to provide some "payback" to those people who contributed to the program but would not participate long enough to be vested for monthly benefits. Under the 1935 law, monthly benefits were to begin in 1942, with the period 1937-1942 used both to build up the Trust Funds and to provide a minimum period for participation in order to qualify for monthly benefits. The earliest reported applicant for a lump-sum benefit was a retired Cleveland motorman named Ernest Ackerman, who retired one day after the Social Security program began. During his one day of participation in the program, a nickel was withheld from Mr. Ackerman's pay for Social Security, and, upon retiring, he received a lump-sum payment of 17 cents. The average lump-sum payment during this period was $58.06. The smallest payment ever made was for 5 cents! Ernest Ackerman "Long before the economic blight of the depression descended on the Nation, millions of our people were living in wastelands of want and fear. Men and women too old and infirm to work either depended on those who had but little to share, or spent their remaining years within the walls of a poorhouse . . .The Social Security Act offers to all our citizens a workable and working method of meeting urgent present needs and of forestalling future need . . . One word of warning, however. In our efforts to provide security for all of the American people, let us not allow ourselves to be misled by those who advocate short cuts to Utopia or fantastic financial schemes. We have come a long way. But we still have a long way to go. There is still today a frontier that remains unconquered--an America unclaimed. This is the great, the nationwide frontier of insecurity, of human want and fear. This is the frontier--the America--we have set ourselves to reclaim." -- President Franklin Roosevelt August 14, 1938, Radio address on the third anniversary of the Social Security Act 1939 Amendments "It is impossible under any social insurance system to provide ideal security for every individual. The practical objective is to pay benefits that provide a minimum degree of social security—as a basis upon which the worker, through his own efforts, will have a better chance to provide adequately for his individual security." -- From the Report of the Social Security Board recommending the changes which were embodied in the 1939 Amendments. The original Act provided only retirement benefits, and only to the worker. The 1939 Amendments made a fundamental change in the Social Security program. The Amendments added two new categories of benefits: payments to the spouse and minor children of a retired worker (so-called dependents benefits) and survivors benefits paid to the family in the event of the premature death of a covered worker. This change transformed Social Security from a retirement program for workers into a family-based economic security program. The 1939 Amendments also increased benefit amounts and accelerated the start of monthly benefit payments to 1940. Monthly Benefits In 1950 all Social Security beneficiaries received a general "cost-of-living" increase--for the first time since benefits began in 1940. Ida May Fuller is seen here receiving her first increased benefit check on October 3, 1950. Payment of monthly Social Security benefits began in January 1940, and were authorized not only for aged retired workers but for their aged wives or widows, children under age 18, and surviving aged parents. On January 31, 1940, the first monthly retirement check was issued to Ida May Fuller of Ludlow, Vermont, in the amount of $22.54. Miss Fuller, a Legal Secretary, retired in November 1939. She started collecting benefits in January 1940 at age 65 and lived to be 100 years old, dying in 1975. Ida May Fuller worked for three years under the Social Security program. The accumulated taxes on her salary during those three years was a total of $24.75. Her initial monthly check was $22.54. During her lifetime she collected a total of $22,888.92 in Social Security benefits. The Atlantic Charter In mid-August, 1941, Winston Churchill and Franklin Roosevelt met secretly aboard a warship off the coast of Newfoundland in the North Atlantic. On the sixth anniversary of the Social Security Act, they announced a joint-declaration known as the Atlantic Charter. The 383-word Charter was an expression of "certain common principles in the national policies of their respective countries on which they base their hopes for a better future for the world." This brief charter would be the founding document of the United Nations and among its eight principles was a call for social insurance. Former Social Security Board Chairman John Winant was then serving as the U.S. Ambassador to Great Britain. Although Winant did not attend the Conference, the social insurance provision was a suggestion he made from London which was instantly accepted by Churchill and FDR. Although social insurance began in Germany in the 19th century, in the years following World War II the United States was the leading model for nations around the world who were interested in designing Social Security systems. This movement toward the internationalization of Social Security can be symbolically fixed with the issuance of the Atlantic Charter in 1941. During August 9-12, 1941 President Roosevelt and Prime Minister Churchill rendezvoused in a secret meeting in the North Atlantic for the purpose of discussing the principles they saw as governing the post-War world. This Conference resulted in the eight-point Atlantic Charter, which was officially announced on August 14, 1941. Prime Minister Winston Churchill and President Franklin Roosevelt aboard the U.S. S. Augusta, off the coast of Newfoundland, August 1941. NARA Photo. This First Day Cover commemorates the 50th anniversary of the Atlantic Charter. SSA History Archives 1950 Amendments From 1940 until 1950 virtually no changes were made in the Social Security program. Payment amounts were fixed, and no major legislation was enacted. There was a significant administrative change in 1946, however, when the three-person Social Security Board was abolished and replaced by the Social Security Administration, headed by a single Commissioner. Because the program was still in its infancy, and because it was financed by low levels of payroll taxation, the absolute value of Social Security's retirement benefits were very low. In fact, until 1951, the average value of the welfare benefits received under the old-age assistance provisions of the Act were higher than the retirement benefits received under Social Security. And there were more elderly Americans receiving old-age assistance than were receiving Social Security. Because of these shortcomings in the program, in 1950 major amendments were enacted. These amendments increased benefits for existing beneficiaries for the first time (see The Story of COLAs), and they dramatically increased the value of the program to future beneficiaries. By February 1951 there were more Social Security retirees than welfare pensioners, and by August of that year, the average Social Security retirement benefit exceeded the average old-age assistance grant for the first time. President Harry S. Truman signing the 1950 Amendments. 8/28/50 The Story of COLAs Most people are aware that there are annual increases in Social Security benefits to offset the corrosive effects of inflation on fixed incomes. These increases, now known as Cost of Living Allowances (COLAs), are such an accepted feature of the program that it is difficult to imagine a time when there were no COLAs. But in fact, when Ida May Fuller received her first $22.54 benefit payment in January of 1940, this would be the same amount she would receive each month for the next 10 years. For Ida May Fuller, and the millions of other Social Security beneficiaries like her, the amount of that first benefit check was the amount they could expect to receive for life. It was not until the 1950 Amendments that Congress first legislated an increase in benefits. Current beneficiaries had their payments recomputed and Ida May Fuller, for example, saw her monthly check increase from $22.54 to $41.30. These recomputations were effective for September 1950 and appeared for the first time in the October 1950 checks. A second increase was legislated for September 1952. Together these two increases almost doubled the value of Social Security benefits for existing beneficiaries. From that point on, benefits were increased only when Congress enacted special legislation for that purpose. In 1972 legislation the law was changed to provide, beginning in 1975, for automatic annual cost-of-living allowances (i.e., COLAs) based on the annual increase in consumer prices. No longer do beneficiaries have to await a special act of Congress to receive a benefit increase and no longer does inflation drain value from Social Security benefits. Social Security Benefit Increases 1950-2000 EFFECTIVE DATE PERCENT INCREASE 9/50 9/52 9/54 1/59 77.0 12.5 13.0 7.0 1/65 2/68 7.0 13.0 1/70 1/71 9/72 3/74* 6/74 6/75 6/76 6/77 6/78 6/79 15.0 10.0 20.0 7.0* 11.0 8.0 6.4 5.9 6.5 9.9 6/80 6/81 6/82 12/83 12/84 12/85 12/86 12/87 12/88 12/89 14.3 11.2 7.4 3.5 3.5 3.1 1.3 4.2 4.0 4.7 12/90 12/91 12/92 12/93 12/94 12/95 12/96 12/97 12/98 12/99 12/00 12/01 12/02 12/03 5.4 3.7 3.0 2.6 2.8 2.6 2.9 2.1 1.3 2.5** 3.5 2.6 1.4 2.1 * The increase in 3/74 was a special, limited-duration increase. It was effective for only 3/74-5/74. In June 1974 all payment levels reverted to their 2/74 level and the 11% increase was permanently applied on this base. ** The COLA for December 1999 was originally determined as 2.4 percent based on CPIs published by the Bureau of Labor Statistics. Pursuant to Public Law 106-554, however, this COLA is effectively now 2.5 percent. Disability The Social Security Amendments of 1954 initiated a disability insurance program which provided the public with additional coverage against economic insecurity. At first, there was a disability "freeze" of a worker's Social Security record during the years when they were unable to work. While this measure offered no cash benefits, it did prevent such periods of disability from reducing or wiping out retirement and survivor benefits. On August 1, 1956, the Social Security Act was amended to provide benefits to disabled workers aged 50-64 and disabled adult children. In September 1960 President Eisenhower signed a law amending the disability rules to permit payment of benefits to disabled workers of any age and to their dependents. By 1960, 559,000 people were receiving disability benefits, with the average benefit amount being around $80 per month. President Eisenhower signing the 1954 Amendments into law while on vacation at Byers Peak Ranch near Fraser, Colorado-- September 1, 1954. SSA History Archives.     Mr. William Calvin King (left) signs the first application for a disability freeze at 8:17 a.m. EST on January 2, 1955, in the Wheeling, West Virginia Social Security Office. The office Manager, Edgar Allen Poe (yes, that was his real name!) is shown assisting with the application. SSA History Archives. Medicare & Other Changes The decade of the 1960s brought major changes to the Social Security program. Under the Amendments of 1961, the age at which men are first eligible for old-age insurance was lowered to 62, with benefits actuarially reduced (women previously were given this option in 1956). This created an additional workload for the Agency as more beneficiaries entered the rolls. The number of people receiving disability benefits more than doubled from 1961 to 1969, increasing from 742,000 to 1.7 million. President Kennedy signing the 1961 Amendments into law, June 30, 1961. Shown with the President are (left to right) Rep. Carl Albert (D-OK); Rep. Wilbur Mills (D-AR); Sen. John J. Williams (R-DE); Rep. Thomas J. O'Brien (D-IL); Vice President Lyndon B. Johnson; Sen. Robert S. Kerr (D-OK); Rep. John W. Byrnes (R-WS); Abraham Ribicoff, Secretary of Health, Education, and Welfare; and Wilbur J. Cohen, Assistant Secretary of Health, Education, and Welfare. SSA History Archives. The most significant administrative change involved the signing of the Medicare bill on July 30, 1965, by President Lyndon Johnson In the presence of former President Truman, who received the first Medicare card at the ceremony, Lady Bird Johnson, Vice-President Hubert Humphrey, and Mrs. Truman. With the signing of this bill, SSA became responsible for administering a new social insurance program that extended health coverage to almost all Americans aged 65 or older. Nearly 20 million beneficiaries enrolled in Medicare in the first 3 years of the program. President Johnson signing the Medicare program into law, July 30, 1965. Shown with the President (on the right in the photo) are (left to right) Mrs. Johnson; former President Harry Truman; Vice-President Hubert Humphrey; and Mrs. Truman. Photo courtesy of LBJ Presidential Library. President Johnson Regarding Medicare: "Thirty years ago, the American people made a basic decision that the later years of life should not be years of despondency and drift. The result was enactment of our Social Security program. . . . Since World War II, there has been increasing awareness of the fact that the full value of Social Security would not be realized unless provision were made to deal with the problem of costs of illnesses among our older citizens. . . . Compassion and reason dictate that this logical extension of our proven Social Security system will supply the prudent, feasible, and dignified way to free the aged from the fear of financial hardship in the event of illness." -January 7, 1965 SSI In the 1970s, SSA became responsible for a new program, Supplemental Security Income (SSI). In the original 1935 Social Security Act, programs were introduced for needy aged and blind individuals and, in 1950, needy disabled individuals were added. These three programs were known as the "adult categories" and were administered by State and local governments with partial Federal funding. Over the years, the State programs became more complex and inconsistent, with as many as 1,350 administrative agencies involved and payments varying more than 300% from State to State. In 1969, President Nixon identified a need to reform these and related welfare programs to "bring reason, order, and purpose into a tangle of overlapping programs." In 1971, Secretary of Health, Education and Welfare, Elliot Richardson, proposed that SSA assume responsibility for the "adult categories." In the Social Security Amendments of 1972, Congress federalized the "adult categories" by creating the SSI program and assigned responsibility for it to SSA. SSA was chosen to administer the new program because of its reputation for successful administration of the existing social insurance programs. SSA's nationwide network of field offices and large-scale data processing and record-keeping operations also made it the logical choice to perform the major task of converting over 3 million people from State welfare programs to SSI.   "This Nation must not break faith with those Americans who have a right to expect that Social Security payments will protect them and their families. . . . In the 34 years since the Social Security program was first established, it has become a central part of life for a growing number of Americans. . . . Almost all Americans have a stake in the soundness of the Social Security system." Richard Nixon-September 25, 1969 The 1972 & 1977 Amendments In 1972 two important sets of amendments were enacted. These amendments created the SSI program and introduced automatic Cost-of-Living-Adjustments (COLAs). The bill creating the SSI program also contained important provisions for increasing Social Security benefits for certain categories of beneficiaries (primarily aged widows and widowers). It also provided: a minimum retirement benefit; an adjustment to the benefit formula governing early retirement at age 62 for men, in order to make it consistent with that for women; extension of Medicare to those who have received disability benefits for at least two years and to those with Chronic Renal Disease; liberalized the Retirement Test; and provided for Delayed Retirement Credits to increase the benefits of those who delayed retirement past age 65. The separate bill creating automatic COLAs also provided for automatic increases in the earnings subject to Social Security taxes and an automatic adjustment in the wage-base used in calculating benefits. This second adjustment was put in the law as a sort of companion to the COLA. The COLA adjusts for increases in prices, whereas the wage-base adjustment corrects for increases in wages. The purpose of the COLA was to maintain the purchasing power of benefits already awarded. The purpose of the automatic adjustment in the wage base was to maintain the relative value of Social Security benefits for future applicants. Unfortunately, the procedure for adjusting for price and wage increases contained a flaw which resulted in future benefit levels soaring out of control. Indeed, it became apparent that if the trends of the mid-1970s continued, future Social Security beneficiaries could end up receiving more in their monthly retirement benefit than their gross salaries while working. This problem was corrected in the 1977 Amendments. However, the correction led to the appearance of what came to be known informally as "The Notch."   The Notch spawned a political protest movement of aggrieved "Notch Babies" who believe they have been the victims of unfair treatment.       The main purpose of the 1977 Amendments was to address the financing of the program. Shortly after passage of the 1972 legislation, it became apparent that Social Security faced a funding shortfall, both in the short-term and in the long-term. The short-term problem was caused by the bad economy, and the long-term problem by the demographics associated with the baby boom. By their 1975 report the Trustees said the Trust Funds would be exhausted by 1979. This financing shortfall was addressed by the 1977 Social Security Amendments. These amendments raised the payroll tax slightly (from 6.45% to the current 7.65%), increased the wage base; reduced benefits slightly; and "decoupled" the wage adjustment from the COLA adjustment. These fixes restored the long-term balance of the program for the next 50 years (but not the full 75 years used by the actuaries). It was hoped the amendments would prevent an expected short-term financing problem in the early 1980s. This hope would prove elusive as the major amendments in 1983 would be needed to avoid the short-term problem, and to address the remaining long-range program deficit. President Carter signing the 1977 Amendments into law, December 20, 1977. National Archives & Records Administration. Disability In The 1980s The Social Security Amendments of 1980 made many changes in the disability program. Most of these changes focused on various work incentive provisions for both Social Security and SSI disability benefits. The idea behind a key part of the 1980 Amendments was that the disability rolls had become clogged with individuals who were no longer disabled. A General Accounting Office study in 1980 suggested that perhaps as many as 20% of the beneficiaries on the rolls were no longer disabled. Thus, a key provision of the 1980 Amendments required the Social Security Administration (SSA) to conduct periodic reviews of current disability beneficiaries to certify their continuing eligibility. This was to become a massive workload for SSA and one that was highly controversial. By 1983, the reviews had been halted, and in 1984, Congress passed the Disability Benefits Reform Act modifying several aspects of the disability program. The 1983 Amendments In the early 1980s the Social Security program faced a serious short-term financing crisis. President Reagan appointed a blue-ribbon panel, known as the Greenspan Commission, to study the financing issues and make recommendations for legislative changes. The final bill, signed into law in 1983, made numerous changes in the Social Security and Medicare programs, including the taxation of Social Security benefits, the first coverage of Federal employees under Social Security and an increase in the retirement age in the next century. President Reagan signing the 1983 Amendments into law. Looking on are, left to right: Sen. Bob Dole (R-KS); Rep. J.J. "Jake" Pickle (D-TX); Rep. Claude Pepper (D-FL); Rep. Bob Michel (R-IL); Sen. Daniel Patrick Moynihan (D-NY); Rep. Tip O'Neill (D-MA); Rep. Barber Conable (R-NY); Sen. Howard Baker (R-TN). Pictured, seated, left to right: Bob Myers, Executive Staff Director; Rep. Claude Pepper (D-FL); Martha Keys;Chairman Alan Greenspan; Mary Falvey Fuller; Rep. Bill Archer (R-TX); Lane Kirkland. Standing, left to right: Robert Beck; Bob Ball; Alexander Trowbridge; Rep. Barber Conable (R-NY); Sen. John Heinz (R-PA); Sen. Pat Moynihan (D-NY); Sen. Bob Dole (R-KS); Joe Waggonner, Jr. SSA History Archives. Program Growth From its modest beginnings, Social Security has grown to become an essential facet of modern life. One in seven Americans receives a Social Security benefit, and more than 90 percent of all workers are in jobs covered by Social Security. From 1940, when slightly more than 222,000 people received monthly Social Security benefits, until today, when over 44 million people receive such benefits, Social Security has grown steadily. The SSI program has grown as well from its inception in 1974. Social Security   SSI  Year Beneficiaries Dollars (b) Year Beneficiaries (c) Dollars (d) 1937 53,236 (a) $1,278,000 1974 3,996,064 $5,096,813,000 1938 213,670 (a) $10,478,000 1975 4,314,275 $5,716,072,000 1939 174,839 (a) $13,896,000 1980 4,142,017 $7,714,640,000 1940 222,488 $35,000,000 1985 4,138,021 $10,749,938,000 1950 3,477,243 $961,000,000 1990 4,817,127 $16,132,959,000 1960 14,844,589 $11,245,000,000 1991 5,118,470 $17,95,639,000 1970 26,228,629 $31,863,000,000 1992 5,566,189 $21,682,410,000 1980 35,584,955 $120,511,000,000 1993 5,984,330 $23,991,153,000 1990 39,832,125 $247,796,000,000 1994 6,295,786 $25,291,087,000 1995 43,387,259 $332,553,000,000 1995 6,514,134 $27,037,280,000 1996 43,736,836 $347,088,000,000 1996 6,613,718 $28,252,474,000 1997 43,971,086 $361,970,000,000 1997 6,494,985 $28,370,568,000 1998 44,245,731 $374,990,000,000 1998 6,566,069 $29,408,208,000 1999 44,595,624 $385,768,000,000 1999 6,556,634 $30,106,132,000 2000 45,414,794 $407,644,000,000 2000 6,601,686 $30,671,699,000 2001 45,877,506 $431,949,000,000 2001 6,688,489 $32,165,856,000 2002 46,444,317 $453,746,000,000 2002 6,787,857 $33,718,999,000 a. Recipients of one-time lump-sum payments. b. Benefit payments only. c. Recipients of Federally-administered payments only. d. Includes both Federal payment and Federally-administered State supplementation payments. Legislative Changes in 1996 & 1997 Contract With America Advancement Act of 1996 (P.L. 104-121). This bill, signed by the President on March 29, 1996, made a change in the basic philosophy of the disability program. Beginning on that date, new applicants for Social Security or SSI disability benefits could no longer be eligible for benefits if drug addiction or alcoholism is a material factor to their disability. Unless they can qualify on some other medical basis, they cannot receive disability benefits. Individuals in this category already receiving benefits, are to have their benefits terminated as of January 1, 1997. Previous policy has been that if a person has a medical condition that prevents them from working, this qualifies them as disabled for Social Security and SSI purposes--regardless of the cause of the disability. Another significant provision of this law doubled the earnings limit exemption amount for retired Social Security beneficiaries, on a gradual schedule from 1996 to 2002. In 2002, the exempt amount will be $30,000 per year in earnings, compared to $14,760 under previous law. The Personal Responsibility and Work Opportunity Reconciliation Act of 1996. This "welfare reform" legislation, signed by the President on 8/22/96 ended the categorical entitlement to AFDC (Aid to Families with Dependent Children) that was part of the original 1935 Social Security Act by implementing time-limited benefits along with a work requirement. The law also terminated SSI eligibility for most non-citizens. Previously, lawfully admitted aliens could receive SSI if they met the other factors of entitlement. As of the date of enactment, no new non-citizens could be added to the benefit rolls and all existing non-citizen beneficiaries would eventually be removed from the rolls (unless they met one of the exceptions in the law.) Also effective upon enactment were provisions eliminating the "comparable severity standard" and reference to "maladaptive behavior" in the determination of disability for children to receive SSI. Also, children currently receiving benefits under the old standards were to be reviewed and removed from the rolls if they could not qualify under the new standards. President Clinton signing the 1994 legislation. Looking on is Secretary of Health & Human Services, Donna Shalala. Omnibus Consolidated Rescissions and Appropriations Act of 1996. Requires that all federal payments (including Social Security and SSI) be made by electronic funds transfer (no more paper checks) effective January 1, 1999, unless a waiver is granted by the Secretary of the Treasury. The Department of Defense Appropriations Act, 1997 This massive omnibus spending bill contained SSA's budget as well as numerous legislative changes relating to the SSI program and to issues involved in fighting fraudulent documents in connection with obtaining Social Security numbers. The major SSI provision makes sponsorship agreements legally enforceable for the first time. In the area of identification-related documents, the law requires the establishment of federal standards for state-issued birth certificates and requires SSA to develop a prototype counterfeit-resistant Social Security card. The Balanced Budget Act of 1997 This bill passed the House on 7/30/97 by a vote of 346 to 85, and passed the Senate the next day on a vote of 85 to 15. This law restored SSI eligibility to certain cohorts of non- citizens whose eligibility otherwise would be terminated under the "welfare reform" of 1996. It also extended for up to one year the period for redetermining the eligibility of certain aliens who may ultimately not be eligible for continued benefits. SSI & Children The Welfare Reform legislation enacted in 1996 changed the rules for assessing disability in the cases of children seeking to qualify for SSI benefits, and the law required SSA to review the status of some children already on the rolls. These reviews proved to be difficult and somewhat controversial, leading SSA Commissioner Kenneth Apfel to call for a comprehensive review of the entire childhood disability determination process. On December 17, 1997 Commissioner Apfel announced the results of his "top to bottom" review. While expressing overall confidence in the quality of the determinations, some problems were found. The Commissioner directed a new review of approximately 45,000 of the 135,000 cases where benefits had been ceased, and offered a second opportunity to appeal for all ceased beneficiaries who did not choose to appeal initially. In addition, all 15,000 new claims filed since the August 1996 passage of the "welfare reform" changes in the law were to be reviewed again. Work Incentives On December 17, 1999 President Clinton signed the "Ticket to Work and Work Incentives Improvement Act of 1999"--one of the most significant changes in disability policy in the last 20 years. This law creates a Ticket to Work and Self-Sufficiency Program which will provide disability beneficiaries with a ticket they may use to obtain vocational rehabilitation services, employment services, and other support services from an employment network of their choice. In addition to allowing beneficiaries to purchase vocational services, the law provides incentive payments to providers for successful rehabilitation in which the beneficiary returns to work. The new provisions also provide a number of safeguards to the beneficiaries to protect their benefits and health Taken together, the Ticket to Work initiative seeks to shift the emphasis in the disability program away from mere maintenance of benefits more toward rehabilitating the disabled and assisting them in returning to productive work. President Clinton signs the "Ticket to Work" legislation at the FDR Memorial in Washington, D.C.--December 17, 1999. White House photo. Repeal of the Retirement Earnings Test (RET) On April 7, 2000 President Clinton signed into law H.R. 5, "The Senior Citizens' Freedom to Work Act of 2000," eliminating the Retirement Earnings Test (RET) for those beneficiaries at or above Normal Retirement Age (NRA). (The RET still applies to those beneficiaries below NRA.) The legislation began its swift march through Congress on March 1, 2000 when the full House of Representatives passed H.R. 5 by a vote of 422 to 0. The Senate, on March 22, 2000 then passed the bill by a vote of 100-0 (with a technical amendment). On March 28, 2000 The House agreed to the Senate amendment by a vote of 419-0 and cleared the measure for transmission to the President. This was a historic change in the Social Security retirement program. From the beginning of Social Security in 1935, retirement benefits have been conditional on the requirement that the beneficiary be substantially retired. This requirement was carried out by the provisions of the RET. The RET has changed considerably over the years. The requirement was first scaled-back in the 1950 Amendments, which exempted workers age 75 and older from the RET. The exempt age was reduced to 72 in 1954, and to age 70 and older in 1977. With the new legislation, starting at the NRA, Social Security retirement benefits will be paid to beneficiaries who are still working. Effectively, for those who have reached full retirement age, this repeals the requirement that the beneficiary be substantially retired in order to receive full Social Security retirement benefits. Social Security Reform in the Bush Administration In his Inaugural Address, President George W. Bush announced his intentions to reform Social Security and Medicare. Throughout the early months of his presidency the President made many speeches and addresses in which this was a major recurring theme. In his first speech to a joint-session of Congress in February 2001, the President announced his intention to appoint a Presidential Commission to recommend ways to address Social Security reform. The President stated the Commission would operate under three broad principles: It must preserve the benefits of all current retirees and those nearing retirement. It must return Social Security to sound financial footing. And it must offer personal savings accounts to younger workers who want them. On May 2, 2001 the President announced the appointment of his Social Security Commission, the "President's Commission to Strengthen Social Security." The Commission issued its final report in December 2001. President George W. Bush during his announcement of a Presidential Commission for Social Security in the Rose Garden May 2. As the commission's new co-chairman Sen. Daniel Patrick Moynihan of New York applauds the signing of the executive order, President Bush gives the pen he used to the other co-chairman Richard D. Parsons, Co-Chief Operating Officer of AOL Time Warner. White House photo by Eric Draper.
Bibliography of the Social Security Act and its Development Classic Sources: Cohen, Wilbur, and Haber, William, (eds.) "Readings in Social Security," Prentice-Hall, 1948. A collection of essays by a wide variety of authors on the history, philosophy and major policy issues in the development of Social Security. Cohen, Wilbur, and Haber, William, (eds.) "Social Security: Programs, Problems, and Policies," Richard D. Irwin, 1960. Similar to their earlier book, with a bit more emphasis on policy issues, and bringing the discussion current through the passage of the 1960 amendments. Frase, Robert and McKinley, Charles, "Launching Social Security: A Capture and Record Account 1935-1937," University of Wisconsin Press, 1970. A detailed academic exercise in which two political scientists recount the implementation of the new Social Security program in its first years. Primarily an administrative history. Perkins, Frances, "The Roosevelt I Knew," Viking Press, 1946. Memoir of Miss Perkins' role in the Roosevelt Administration, with a chapter on the development of the Social Security Act. Social Security Board, "Social Security in America," Social Security Board, 1937. Summary of the research developed by the Committee on Economic Security that underlay the Social Security Act. Academic Treatments: Achenbaum, Andrew, "Social Security: Visions and Revisions," Cambridge University Press, 1986. Review of the political and policy development of the Social Security Act, up through the 1983 amendments. Berkowitz, Edward D., "Disabled Policy: America's Programs for the Handicapped" Cambridge University Press, 1987. A review of workmen's compensation and the disability benefits program of the Social Security Act. Berkowitz, Edward D., (ed.) "Social Security After Fifty," Greenwood Press, 1987. Proceedings of an academic conference held at George Washington University in 1986. Berkowitz, Edward D., "America's Welfare State: From Roosevelt to Reagan," Johns Hopkins University Press, 1991. A review of developments in Social Security, welfare reform and health insurance since the passage of the Social Security Act. Berkowitz, Edward D., "Mr. Social Security: The Life of Wilbur Cohen," University Press of Kansas, 1995. A biography of one of the important pioneers of Social Security and an account of the historical developments in which he participated, with a special emphasis on the development of the Medicare program. Derthick, Martha, "Policymaking for Social Security," Brookings Press, 1979. A political scientist surveys the political and administrative development of the Social Security program up through the early 1970s. Derthick, Martha, "Agency Under Stress: The Social Security Administration in American Government," Brookings Press, 1990. A political scientist reviews the administration of the disability and SSI programs. Nash, Gerald; Pugach, Noel; and Tomasson, Richard (eds.), "Social Security: The First Half Century," University of New Mexico Press, 1988. Proceedings of an academic conference held at the University of New Mexico in 1985. Tynes, Sheryl, "Turning Points in Social Security: From 'Cruel Hoax' to 'Sacred Entitlement'," Stanford University Press, 1996. A critical history of the development of Social Security up through the early 1980s. Weaver, Carolyn, "The Crisis in Social Security: Economic and Political Origins," Duke Press Policy Studies, 1982. Contains an account of historical developments from prior to 1900 through the Social Security amendments of the early 1970s. Popular Accounts: Altmeyer, Arthur, "The Formative Years of Social Security," University of Wisconsin Press, 1968. Chronicle of the development of Social Security from 1934-1954 from a major figure in this history. Ball, Robert, "Insuring the Essentials: Bob Ball on Social Security," Century Foundation Press, 2000. A collection of historical and policy essays by a former Commissioner of Social Security. Bellush, Bernard, "He Walked Alone: A Biography of John Gilbert Winant," Mouton, 1968. Biography of the first Chairman of the Social Security Board. Coll, Blanche, "Safety Net: Welfare and Social Security 1929-1979,"  Rutgers University Press, 1995. A readable history of the welfare provisions of the Social Security Act. Davis, Kenneth, "FDR: The New Deal Years," Random House, 1986. Contains an extended chapter on the development of the Social Security Act. Eliot, Thomas, "Recollections of the New Deal," Northeastern University Press., 1992. Memoir of the lawyer who helped draft the legislative language for the Social Security Act in 1935. Light, Paul, "Artful Work: The Politics of Social Security Reform," Random House, 1985. And "Still Artful Work: The Continuing Politics of Social Security Reform," McGraw-Hill, 1995. A history of the Greenspan Commission and the development of the 1983 amendments. Myers, Robert J., "Within the System: My Half Century in Social Security," Actex Publications, 1992. An autobiography of the Social Security actuary who started with the Committee on Economic Security in 1934 and eventually became SSA's Chief Actuary. Schlabach, Theron, "Edwin Witte: Cautious Reformer," State Historical Society of Wisconsin, 1969. Interesting biography of a key figure in the creation of the Social Security program. Witte, Edwin, "The Development of the Social Security Act," University of Wisconsin Press, 1963. A contemporary memorandum on the behind-the-scenes development of the Social Security Act.