On this day in 1935, President Franklin D. Roosevelt signs the Social Security Act into law. Flanked by ranking members of Congress, the 32nd President ratified an historic act guaranteeing an income for the unemployed and retirees. FDR commended Congress for what he considered to be a “patriotic” act.
Largely a measure to implement “social insurance” during the Great Depression of the 1930’s, when poverty rates among senior citizens exceeded 50 percent, the act was an attempt to limit unforeseen and unprepared for dangers in the modern life, including old age, disability, poverty, unemployment, and the burdens of widow(er)s with and without children.
The idea of a federally funded pension plan was popularized by Francis Townsend in 1933, and the influence of the “Townsend Plan” movement on debate over social security persisted into the 1950s. Early debates on Social Security’s design centered on how the program’s benefits should be funded. Some believed that benefits to individuals should be funded by contributions that they themselves had made over the course of their careers. Others argued that this design would disadvantage those who had already begun their careers at the time of the program’s implementation because they would not have enough time to accumulate adequate benefits.
Social Security is funded primarily through payroll taxes called Federal Insurance Contributions Act tax (FICA) or Self Employed Contributions Act Tax (SECA). Tax deposits are collected by the Internal Revenue Service (IRS) and are formally entrusted to the Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund, the two Social Security Trust Funds.
In 2015, Social Security expenditures totaled $750.5 billion for OASDI and $146.6 billion for DI. Income derived from Social Security is currently estimated to have reduced the poverty rate for Americans age 65 or older from about 40% to below 10%. In 2018, the trustees of the Social Security Trust Fund reported that the program will become financially insolvent in the year 2034.