The Social Security Act of 1935

V. Kumar By V. Kumar, 13th Mar 2011 | Follow this author | RSS Feed
Posted in Wikinut>Money>Pensions

The modern Social Security set-up that we witness today in the United States largely owes itself to the Social Security Act of 1935, which came as a response to the troubled times of great depression and was part of the ‘New Deal’ that was introduced by President Franklin D Roosevelt. An insight in to the original legislation is worth a moment.

The Act

The Social Security Act of 1935 was the most important and perhaps, the most successful legislation of the NEW DEAL – a list of acts and programs projected by President Franklin D. Roosevelt to protect the vulnerable American population from the vagaries of Great Depression of 1930s.

The historical background

One can say that to a large extent, the genesis of the Social Security Act of 1935 lay in Stock market crashes of October 1929 that formally began the Great Depression – one of the worst phases of economic recession and unemployment faced by the people of United States in modern times. It caused massive unemployment, fall in wages, and worst of all, it wiped out lifelong savings of many by severe devaluation of asset prices. Old people were one of the worst affected and their plight formed the background for interference by the Government.

During this period, President Frank D. Roosevelt initiated many steps, which he termed as the ‘New Deal.’ They included Emergency Banking Act, suspension of gold standard, 1933 Banking Act, Gold Reserve Act and the National Industrial Recovery Act. To protect the old people after they had retired, the Social Security Act was introduced on August 14, 1935. It introduced a system of universal retirement pensions for the first time. In addition it laid down a comprehensive welfare system that has continued till today with modifications from time to time.

The most characteristic feature of the social security package established by this Act was that it also laid down a system of financing it by payroll taxes. Thus even in the worst of economic times, a sustainable system of social security could be established that have since stood the test of time. While introducing it, Roosevelt said, “We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program.”

The benefits mandated by social security act of 1935

In addition to establishing universal retirement benefits, which constituted the most important feature of this Act, it also introduced several other benefits like unemployment insurance, welfare benefits for poor families and the handicapped, temporary assistance to needy families and health insurance for aged and disabled. In addition, it also laid down a system for grants to states for Medical assistance programs as well as states’ child health insurance programs.

The statute

The short title of the Act was the social security act (act of august 14, 1935). Its provisions were grouped under 11 different titles. Title I laid down grants to states for old-age assistance, while title II laid down the Federal old-age benefits. Titles III, IV and V dealt with benefits for the unemployed, dependent children and maternal and child welfare respectively. Titles VI pertained to public health works while Title VII established the Social Security Board. Title VIII and IX dealt with the payroll taxes from employees and employers respectively. Title X provided benefits to the blind, and the last sections dealt with general matters like definitions.

Role in modern social security

The Social Security Act has remained up to this date the mainstay of social security for American citizens. In spite of a number of amendments from time to time, rise in assured benefits as well as taxes imposed, the legal framework retains much of the substance prescribed by this Act. It may not have been the most effective measure to fight the great depression, but it has certainly provided substantial social security to people during the last seven decades.


1935, August 14, Financial Security, Great Depression, History Of Social Security, New Deal, Pension, Personal Finance, Social Security, Social Security Act Of 1935

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author avatar V. Kumar
I am a free lance author who writes for the sake of expressing myself. I like to share what I know and learn from the experiences of anyone willing to share it.

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author avatar jvaughan
26th Mar 2011 (#)

Social security taxes are an obvious step from the previous step of income tax. The first step was taken to prevent us from falling victim to the economic perils of defending ourselves from others in war. The second step was taken to defend us from falling victim to the economic perils of being unable to provide for ourselves. Yet each step leads us closer to a cliff of no control by taking away from us what we have rightfully earned.

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author avatar V. Kumar
29th Mar 2011 (#)

Fully agree with you.

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author avatar Vinman
3rd Apr 2011 (#)

The problem with the act over time, is that the Politicians raided the fund for their own selfish programs. Today they are arguing over whether to raise the retirement age. Although I have my retirement in hand, it makes sense to raise the age limit, in order to keep it a viable security net for those who will follow.

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author avatar Rathnashikamani
4th Apr 2011 (#)


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author avatar V. Kumar
4th Apr 2011 (#)

The gradually increasing life exepectancy and better health status of the elderly also supports the argument for increasing the retirement age. But as you say, the real issue is viability - it is a problem the whole world is struggling with, especially those where ageing populations are expanding, like Japan.

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