The Great Depression Essay Research Paper Social

The Great Depression Essay, Research Paper

Social Security: Its History, the controversy, and my impressions Historical Background:The Social Security system that we know today was founded in 1935 with the adoption of the Social Security Act. Even as it was enacted, President Franklin Roosevelt described it as a cornerstone in a structure which is being built but is by no means complete. (Longman 26) This description proved accurate, as the system has undergone numerous overhauls over the past sixty years. In it s original state support for Frances Perkins, Roosevelt s secretary of labor, spearheaded the Social Security Act. When she took office, national employment was approaching thirty percent. (Mitchell 860) She viewed social security as a vehicle through which she could alleviate some of the crushing poverty that affected many retired senior citizens after the depression era. President Roosevelt adopted the plan, both as part of his emphasis on social reform and as a means to finance his other New Deal programs. The plan outlined in the Social Security Act called for the program to start taking in money through taxes on income in 1937, but not to begin paying out money until 1942. While the money was idle, it would be invested in U.S. Treasury bonds to finance other government projects. (Driver 12) This system was greeted with criticism for several reasons. Republicans cried foul and pointed out that the money taken in under the guise of social security insurance would likely be frittered away on other government projects. Some seniors were disgruntled that they were not allowed to benefit from the system because they had never paid any of their wages into it. Roosevelt was adamant about creating a system where only those who paid into the system through wage taxes would be allowed to collect benefits. Because of this, even thirty years later most people over sixty-five were unable to collect Social Security. (Longman 26) He felt that this established it as something more than a welfare system. Keynesian economists were concerned at the idea that the government that the act called for the government to take in large amounts of money through taxes and stockpile it, thereby reducing the money supply in an economy still recovering from a major depression. The $47 billion dollar reserve Roosevelt hoped the program would compile by 1980 would at the time have been enough money to buy every farm in America. (Driver 12) In 1938 a Senate Committee commissioned to look into financing options for Social Security released a report on its findings. They reported that the Social Security Act should be amended to extend more benefits to widows and children, and to reduce the size of the financial reserve that would be compiled. (Driver 12) They suggested that the massive financial reserve that Roosevelt had envisioned be cut back to a reasonable contingency reserve. These suggestions were incorporated into the Social Security Amendments passed in 1939. As a result of these changes Social Security shifted to a system where recipients do not receive the money that they had put into the system; rather they receive money contributed by people who are still paying money into the system. This came to be known as the pay as you go system, and it is still in force today. A problem which has cropped up from time to time over the years is that, technically speaking, an American who pays money into Social Security is not assured that he will be ever be able to collect Social Security. Many people, including the federal government, have fallen into the trap of looking at Social Security as an insurance policy, which it isn t. The Social Security Commissioner, Arthur Altmeyer, in 1953 admitted to Senate panel that a person paying into Social Security had no contractual right to benefits. (Longman 26) Since it s establishment in 1935, however, Social Security has been regarded as a permanent institution because Americans precisely because American s have come to view it as something the government owes them because of the wage taxes they paid. As Roosevelt said, With those taxes in there no damn politician can ever scrap my Social Security program. (Driver 12) Controversy Today: Today 44 million Americans receive payments from Social Security. But the controversy about Social Security today focuses on it s future. Although there is currently enough money in the Social Security reserve to fund a year or more of payouts, the amount of benefits paid out by the system is scheduled to increase dramatically as more and more baby boomers retire. ( Social Security ) Social Security payouts are scheduled to increase so dramatically, in fact, that in current projections the system will become insolvent by 2034. ( Bankruptcy ) To compound issues, the United States is projected to run a decade of substantial budget surpluses. Some congressmen see these surpluses as a way to pump new life directly into the Social Security system, while others have different plans. President Clinton is spearheading a plan that would direct large portions of the next fifteen years budget surpluses to shoring up Social Security. Under his plan, Congress would devote 62 percent of this year s surplus to the Social Security trust fund. This would add over $70 billion dollars to the fund this year, and even larger sums in coming years. ( Social Security ) These additions would help Social Securities expenditures though 2055 and possibly even