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August 14 - 20, 1935
Social Security Act

August 2011

Franklin Delano Roosevelt.

On August 14, we mark the anniversary of one of the landmark pieces of New Deal legislation enacted by President Franklin Delano Roosevelt, the Social Security Act of 1935. This Act marked a decisive commitment to the Federal government's playing a role in securing the general welfare of the unemployed, the elderly, the disabled and the poor—against the Social Darwinian ideology of the "free market" which had characterized the 1920s, and other periods of American history.

The Social Security Act was enacted in the face of an enormous assault by the "free marketeers," and reflected a compromise in many respects. The Act was immediately challenged in court, and the case ended up in the U.S. Supreme Court in 1937. In May of that year, however, the Court's majority ruled that the provisions for unemployment insurance and old-age insurance were Constitutional on the basis of the General Welfare clause of the U.S. Constitution. Associate Justice Benjamin Cardozo cited the magnitude of unemployment, noting that the states had been unable to give the requisite relief, and that the unemployment problem "had become national in area and dimension."

Benjamin Cardozo, 1870-1938, served in the U.S. Supreme Court from March 2, 1932 until his death, July 9, 1938.

"There was need of help from the nation if the people were not to starve," Cardozo wrote. "It is too late today for the argument to be heard with tolerance that, in a crisis so extreme, the use of the moneys of the nation to relieve the unemployment and their dependents is a use for any purpose narrower than the promotion of the general welfare."

At the same time, again citing the General Welfare clause, Justice Cardozo expressly adopted the Hamiltonian view of the general welfare power, as opposed to that of Madison. "The conception of the spending power advocated by Hamilton and strongly reinforced by Story has prevailed over that of Madison," Cardozo wrote. He said that in response to the nationwide calamity that began in 1929, Congress had enacted various measures conducive to the general welfare, including old-age benefits and unemployment compensation. Only a national, not a state, power can serve the interests of all, Cardozo declared.

The Provisions

Let us review the provisions of the Social Security Act now, before making a few more analytical remarks.

In a June 8, 1934 message to Congress, Roosevelt spoke of a "national social insurance system," to protect against "misfortunes which cannot be wholly eliminated in this man-made world of ours." After commissioning and receiving the recommendations of a Committee on Economic Security, Roosevelt issued a message to Congress on Social Security on Jan. 17, 1935, presaging legislation which would achieve "the security of the men, women, and children of the nation against certain hazards and vicissitudes of life."

Despite the hysterics of Newt Gingrich's political forebears, in August of 1935, the House of Representatives passed the Social Security Act by a vote of 372-33; the Senate by 77-6. On Aug. 14, 1935, President Roosevelt signed the Act into law. The Social Security Act not only provided for social insurance for retirement, but also provided for assistance to the indigent elderly, the blind, and families with dependent children; and established the first comprehensive national unemployment insurance system. Taking this Act's major provisions:

* Old-Age Insurance—a giant national retirement system based on social insurance principles, and intended to be the chief method of assuring income to an individual after retirement. The basis of the system is a Federal payroll tax, assessed on most employees and their employers. Today, the tax is 6.2% each for employers and employees. An individual becomes eligible for a monthly cash payment at 65, if he has worked a specified amount of time in employment subject to the payroll tax and has thus, along with his employer, contributed toward the costs of his own pension. Eligibility is a matter of right and does not depend on need.

* Old-Age Assistance to the Indigent—authorized Federal matching grants to the states to help them make monthly cash payments to indigent elderly people.

* Aid to the Blind—authorized Federal matching grants to the states to help them make monthly cash payments to those who are blind.

* Aid to Dependent Children—Federal grants to the states to help them support needy children and a parent, if the children have been deprived of normal parental support because of the death, incapacity, or absence from the home of a parent. Now called Aid to Families with Dependent Children, the program incorporates the premise that society should leave no one destitute.

* Unemployment Insurance—a system established by the Act, whereby the states set up their own unemployment insurance programs, but by means of a tax offset device, are compensated by the Federal government. For the first time in American history, laid-off workers could collect unemployment insurance.

Revolutionary Implications

The Social Security Act was a revolution in social policy. Different nations in Europe had differing elements of this package, but America had had none. Now, it had all of them in one package, and it was recognized that those unable to help themselves had a right to receive help from the government.

As you will have noticed, the Neo-Conservatives of today are determined to reverse this revolution. Already, the Aid to Dependent Children program enabled by the Social Security Act—what has been derogatorily been called "welfare"—has been gutted. The next target is the Old-Age Insurance section, which the privatizers have had in their sights for years, but have been unable to eliminate so far. Unemployment insurance too, which is administered by the states, has been made more onerous in many states.

Yet, as we enter ever deeper depths of the depression, there is good reason to believe that the Social Security concept, and Act, will be strengthened, not gutted. The principle of the general welfare must be revived, or the future will be grim indeed.



The original article was published in the EIR Online’s Electronic Intelligence Weekly, as part of an ongoing series on history, with a special emphasis on American history. We are reprinting and updating these articles now to assist our readers in understanding of the American System of Economy.