Are you an August baby? The Social Security Program was, too. August 14, 2006 was the 71st birthday of the program, making this bit of American history old enough to sign up for benefits.
And speaking of benefits, during those 71 years, payments of over $7 trillion have been distributed to more than 200 million people, according to the Social Security Administration records.
You might think it all started in 1935, when the Social Security Act was signed into law. But the original concept for Social Security was hardly a New World idea. It came from Europe.
In 1889, under the auspices of Chancellor Otto von Bismarck, Germany adopted a social insurance program. This early social welfare insurance plan formed the basis for America’s Social Security program.
In 1912, at a Progressive Party convention, Theodore Roosevelt was already talking about social insurance. But it took the Great Depression and a new president to get things moving.
In 1934 President Franklin D. Roosevelt announced his intention to provide a program for Social Security. The first step: Creating the Committee on Economic Reform. The five members heading the committee and their staff sent a report to Congress in less than seven months. Just over a year later, President Roosevelt signed the Social Security Act into law.
Under the Act, benefits for the primary worker were to start at age 65 when that person retired. Other highlights were unemployment insurance, aid to dependent children and grants to the states for various forms of medical care.
The first taxes were collected in 1937. From 1937 to 1940, lump sum benefits were paid to people who wouldn’t be vested long enough for monthly payments. On average, the lump sums were just over $58. That figure can be deceiving though, since records indicate payments were made for amounts as small as five cents. Monthly benefits began in 1940.
In 1939, payments to the spouse and minor children of a retired worker and survivor’s benefits were added. Later, the Act was modified to include disability and medical payments. The first cost of living adjustment took place in 1950, and automatic COLA increases began in 1975.
Today, Social Security exists largely in its original form. But America’s demographics are changing, with more retirees drawing from the system and less workers paying into it. Various methods of ensuring future solvency are being discussed—which means yet another chapter in the history of Social Security may soon be written.