The Introduction of Social Security - Term Paper Example

The introduction of social security Affiliation The introduction of social security Social security is a federal profit programthat was introduced in the United States in 1935. The program began as a way to implement social insurance in America during the Great Depression in the year 1930 where it had been established that the rate of poverty exceeded 50 percent among the senior citizens. This was because of the Stock Market Crash in 1929 that destroyed the Value of the Senior Americans retirement savings where the bank failures caused even further damages. Therefore, the social security was comprised of the Survivors, old age and disability insurance federal program. Social security was introduced in the United States through the enactment of the Social Security Act on August 14, 1935.1 The Act was conscripted during President Franklin Roosevelt term as the President’s Committees on Economic Security that was under Frances Perkins. The Act attempted to limit what were seen at the time as the dangers in modern America life that include poverty, unemployment, old age, fatherless children and the encumbrance of widows (Levitan & Levitan, 2003). When President Roosevelt signed the Act into law, he became the first President to support for federal backing for the aged in the society. The Social Security Act if there would be benefits to the retirees and the unemployed as well as a lump-sum benefit when a person had died. The Act also provided money to states to give assistance to the ages under Title 1, unemployment insurance, Title III, public health services Title VI, Maternal and Child Welfare Title V and Aid to families with Dependent Children under Title IV. Various arguments were introduced as to the manner in which the programs benefit would be funded.2 Some of the people believed that the individuals should be funded by using contributions that the individuals had made over the course of employment or careers. While other indicated that using this method would be disadvantage to the people who had begun their career at the time when the program was being implements. This is because they would not have adequate time to accumulate their benefits. Additionally, Social Security was controversial because many of the opponents believed that if the Act was implemented them many people would lose their jobs. The opponents also indicated that the proposal to implement social security would amount to socialism this is because most women and minority groups were excluded from the benefits of old age pensions and unemployment insurance.3 The proponents of the Act or Social Security believed that there was an advantage to the implementation of social security in the United States. This is because would encourage the older people in the workforce to retire; hence, creating job opportunities to the younger people. This would in turn lower the level of unemployment rate in America. The Act was biased in the sense that, it defined employment to reflect typical white male patterns and categories. Various job categories that were not included in the Act and they included domestic service, agricultural labor, government employees, hospital employees and social workers among others. It was established that this job categories were mostly dominated by women and minority groups; thus, establishing that the Act was biased. For example, in 1940, women made up 90% of domestic laborers where two thirds of all employed black women worked as domestic workers.4 This indicated that the emption created by the Act excluded nearly half of the working population in the United States. This resulted to a protest by the NAACP against the Social Security Act where they described it as “a sieve with holes just big enough for the majority of Negroes to fall through.”5 This form of discrimination was said to have resulted from the powerful position that the Southern Democrat held on the two committees that played a major role in the creation and implementation of the Social Security Act. The Southern congressional representatives advocated for Social Security as a way to bring the needed relief in various parts in the South, especially those places that were mostly hit by the Great Depression. However, they did not want a legislation that would interfere with the racial status quo in the Southern region. Therefore, the only solution to this issues would be to introduce and pass a bill that both had exclusions and granted authority to the states rather than the federal government. Such powers included the “States power in Aid to Dependent Children.”6 Today some of the job categories that were left out in the Social Security Act of 1935 are there where it has been established that the reason for them being left out is administrative difficulties in covering these workers. Additionally, the exclusion is not only in the United States, but also in various parts of the world. There were arguments as to whether the Act was constitutional where in 1930 the Supreme Court removed many pieces of the Roosevelt’s New Deal Legislation that included the Railroad Retirement Act. There were two rulings that acknowledged the constitutionality of the Act and they include the case of Steward Machine Company v. Davis 301 U. S, 548. The court in a decision of 5-4 indicated that given the necessities of the Great Depression” it is too late today for the dispute to be heard with tolerance that in a crisis so extreme. The use of the money’s of the nation to relieve the unemployed and their dependents is a use for any purpose narrower than the production of the general welfare.”7 This argument opposed the Social Security Act because it went outside the powers that were established to the federal administration under the Constitution. The Justices further claimed that by imposing a levy on companies that could be circumvented by paying to a state’s unemployment compensation fund the government was compelling each state to institute an employment-compensation fund that would acquire this criterion making the federal government to have no authority to enact such a platform. In the case of Helvering v. Davis 301U.S. 619 (1937) the court upheld the program reason being “ the proceeds of both employer and employee taxes are to paid into the treasury like internal-revenue taxes generally, and are not earmarked in any manner.”8 The Social Security Act was constitutional in the sense that it was a simple exercise of Congress’s overall power to tax people. The Act was implemented through payroll taxes that were first collected in 1937.9 This was the same year where the benefits were first paid in the lump-sum death benefits that were paid to 53,236 beneficiaries. The first benefit payment was made to Ernest Ackerman of Cleveland Motorman who had retired one day after the Social Security commenced. He received a lump-sum payout of seventeen cents and five cents were withdrawn from this payment. There have been various amendments to the Social Security Act of 1935 to ensure that it incorporates the social benefits of the working class in the United States. In the implementation of the Act the Federal Insurance Contributions Act Mandates that a 10.4% levy on the first $113,700 limit of each individual earned income for every year. The employer remits 6.2% and the members pays 4.2%. Independent individuals, on the other hand, recompense the full 10.4%, which is contrary to what most people belief where this cash is not put in trust for the individual workers who remit payments into the system. However, the payments are used to pat the existing retirees where any excess money is invested in the United States Treasury bonds.10 The earnings for Social Security Credits and eligibility are accrued over time. However, prior to 1978, employees were obligated to earn $ 50 in a three-month quarter in the effort of getting one Social security Credit. In that, the accomplishment of 40 credits were accrued after a period of 10 years of working which further provided eligibility.11 Recently, employees report earnings of once a year instead what was previously given that is quarterly. Individuals earn credit depending on their earnings, which means that they do not earn them on quarterly basis meaning that, it is probable to earn all four credits for the earn even when person has worked only for a short time each year. By 2013, workers will be required to have earned $1,160 per credit.12 The current operation of the Social Security in relation to quitting and joining is that for children attaining a social security number is voluntary. Additionally, there is no provision or legal requirement that individuals should join the social security program except if the individuals want to or they are employed. Where in normal circumstances the SECA and FICA taxes are collected on all wages.13 The only way that an individual can avoid remitting taxes to the SECA and FICA is by joining a religion that does not trust in insurance such as the Christian science, the Amish or a religion whose associates have taken a vow to remain poor.14 Employees who were employed before 1987, were given the opportunity to join the social security systems by they opted to stay away from it because of the limited costs and benefits. To help in the implementation of the provisions of the Social Security Act the Social Security Administration was created where it become a sub agency in 1939. However, it was not entirely independent not until 1995. The independence that was given to the SSA allowed it to implement the necessary provisions of the law ensuring that all the employers and employees remitted their taxes adequately. Today the Social Security Act has undergone some changes although the basic principles are still the same. The Social Security Act holds that the SSA is the agency that still manages the program where workers still contribute from the monthly payments and paychecks.15 This makes them eligible for Retirement benefits where at the age of 67 workers who underwrote to the fund may make an application for payments to assist them in their everyday expenses and living, as well as, offsetting the loss of income from their careers. Although a person may retire at 62 payments are reduced until a person turns the age of 67. Secondly, there are survivor’s and death benefits, which are paid to the surviving family in lump sum for members who paid to the fund. In many cases, the workers spouse or the dependents may continue receiving the worker’s monthly payment for a stipulated period. Lastly the people who remit payments are eligible for disability benefits, these benefits are for those workers who ate paid into the fund and for definite family members who have a physical or mental problem and they do not have the capacity to work as their disability interferes with their ability to do any form of job. Apart from social security benefits, the Act today provides for Medicare, which provides for health care benefits people such as the elderly with very low incomes, those people who are disabled. The future of social security in the United States is bleak. According to most research that has been carried out recently the SSA officials have indicated that the cost of running the program will be more that what has been paid into the funding beginning in 2016.16 This will in turn reduce the benefits that will be paid to individuals, as it will be reduced by 74% unless a change occurs that will lower the cost and increase the money that is remitted to the fund. Additionally, the money being paid to the fund should decrease or all the three things will happen otherwise the cost of funding will decrease affecting many people that give money to the social security fund. In 2010, there were suggestions that the retirement age should be raised to the age of 70 years or raise the payroll tax to meet the increased demand of paying people who have retired.17 However, unless something is done urgently the future of the retirees as envisioned by President Roosevelt on benefiting from the fund, as well as, financial security will be lost. President Obama saw this happening and he suggested a fix by reducing the annual cost of living adjustment for social security benefits the cut was favored by the Republicans, but was scorned by the Democrats.18 The reason for the Republicans refusals was that President Obama wanted taxes to be increased in exchange, which was held to be harmful to the United States economy. The idea to cut COLA has been held to be a bad idea, which has been greatly opposed. Being that the social security is vital and seeing that without any reforms is, will diminish it is essential that consensus and direction is form among all the people in the United States because the benefits provided by social security are too immense for the people to lose. In conclusion, the introduction of social security in the United States was very crucial and essential because it catered for the needs of the people who did not have the strength to work anymore. Additionally, giving benefits to the old ensured that they opened opportunities for the younger generation to get employment. Therefore, it is important to safeguard the dreams of President Roosevelt of ensuring that people do not live in poverty and the old people are taken care of in their old age by providing new measures to ensure that there is going forward for the Social Security Act and Agency. References Attarian, J. Social security: False consciousness and crisis. (New Brunswick, N.J: Transaction Publishers, 2002) Campeau, G. From UI to EI: Waging war on the welfare state. (Vancouver: UBC Press, 2005). Feldstein, M. Privatizing Social Security. (Chicago: University of Chicago Press, 1998). Gruber, J., & Wise, D. Social Security and Retirement around the World. (Chicago: University of Chicago Press, 1999). Levitan, S. A., & Levitan, S. A. Programs in aid of the poor. (Baltimore: Johns Hopkins University Press, 2003) National Association for the Advancement of Colored People, “NAACP Legal History” accessed November 26, 2014, http://www.naacp.org/pages/naacp-legal-history Organization for Economic Cooperation and Development Paris France. “Education at a Glance 2011 – OECD Indicators”. Accessed November 25, 2014, http://www.oecd.org/dataoecd/61/2/48631582.pdf Riley, S. Systems of Social Security: United States. Social Service Review, 4(5), 1956: 45-49. Doi: 10.1086/639999 Samwick, A. A. Social Security Reform: The United States in 2002. Social Security Administration, 60(4), 2002: 34-45. Social Security Act 1935 Perna, W. L., Understanding the Working College Student: New Research and its Implications for Policy and Practice, (Sterling VA: Stylus Publishing, LLC, 2010) 77 Read More