By: Franklin D. Roosevelt
Date: January 17, 1935
Source: Roosevelt, Franklin D. "On Social Security." Message to Congress, January 17, 1935. Printed in Vital Speeches of the Day 1, no. 9, January 28, 1935, 258–259.
About the Author: Franklin D. Roosevelt (1882–1945) was elected president in 1932, the worst year of the Great Depression. While Roosevelt did not have a consistent strategy for dealing with the Depression, he was willing to experiment with various programs. This willingness to "try something" combined with his infectious enthusiasm and optimism, performed wonders in restoring the faith of the American people in themselves and their government. Roosevelt died while still in office.
The first modern social security legislation was passed in Germany in 1883. Over the next several years the German government created a social security system that included health coverage, workers injury compensation, and an old age pension. Within twenty years these types of programs were implemented and expanded across Europe and in Australia, New Zealand, and Canada. In the 1920s various forms of social security began to appear in South America and Africa.
Restricted in part by constitutional issues but more significantly by philosophical opposition to government involvement in personal financial matters, the United States lagged far behind these countries in providing a social security system for its citizens. By 1930, the United States was the only important industrialized country without a government-mandated social security system.
The Depression was an important catalyst for change. Massive unemployment prompted a reassessment of government's responsibility in assuring some level of financial security for its citizens, particularly the elderly who were especially hard hit. While the first phase of the New Deal program focused on emergency relief and stimulating the economy, by 1934, the Roosevelt administration had begun to consider more fundamental reforms, including various social security measures.
Federal action was prompted by an old age pension plan suggested by a retired California doctor, Frances Townsend. The Townsend Plan called for a $200 payment to all Americans over the age of 65. This grant carried the stipulation that the recipient had ceased gainful employment and would spend the money immediately. Although wholly unworkable—the $25 billion cost would have been nearly half the gross domestic product of the entire United States in 1933—Townsend's proposal was very popular. It put considerable political pressure on Roosevelt to develop a federal old age pension program.
In June 1934 Roosevelt appointed Secretary of Labor Frances Perkins to chair the Committee on Economic Security (CES), which was charged with recommending appropriate legislation to address the broad question of social security. Specific issues to be considered were retirement pensions, unemployment insurance, national health insurance, disability protection, and aid to dependent children. The Committee's report was submitted to Congress in January 1935.
Conservatives opposed the social security proposals as being contrary to the American principle of self-determination. Liberals, in contrast, thought the proposals were too limited. Despite coming under attack from both sides, the essential CES proposal was finally passed in June 1935.
The main components of the Social Security Act were:
- A compulsory federally administered old age pension
- A joint federal/state unemployment insurance program
- Federal grants to states for old-age assistance, aid to the blind, and support for dependent children
In truth, the 1935 Act was not a particularly enlightened piece of social security legislation. It did not cover all workers and it was paid for through payroll deductions rather than a wealth redistribution program. Nonetheless the Social Security Act was a major New Deal achievement and represented a fundamental change in the U.S. philosophy of government. For the first time the federal government assumed some level of direct responsibility for the economic security of Americans.
Roosevelt recognized that the act did not go as far as it could have, and that employee payroll taxes may not have been the best funding approach. With regard to the funding mechanism, his explanation reflects both philosophical and practical considerations: "We put those payroll contributions there so as to give the contributors a legal, moral and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program." After nearly seventy years, the program remains unchanged in its basic structure.
Primary Source: "On Social Security"
SYNOPSIS: On June 8, 1934, Roosevelt sent a message to Congress citing the need for a broader economic security system for all Americans. The Committee on Economic Security was formed at that time and charged with recommending appropriate social security legislation. The Committee delivered its report to President Roosevelt in early January 1935. On January 17, 1935 Roosevelt forwarded the report to Congress along with this message.
To the Congress of the United States:
In addressing you on June 8, 1934, I summarized the main objectives of our American program. Among these was, and is, the security of the men, women and children of the nation against certain hazards and vicissitudes of life. This purpose is an essential part of our task.
In my annual message to you I promised to submit a definite program of action. This I do in the form of a report to me by a Committee on Economic Security, appointed by me for the purpose of surveying the field and of recommending the basis of legislation.
I am gratified with the work of this committee and of these who have helped it: the Technical Board on Economic Security drawn from various departments of the government, the Advisory Council on Economic Security, consisting of informed and public-spirited private citizens and a number of other advisorygroups, including a Committee on Actuarial Consultants, a Medical Advisory Board, a Dental Advisory Committee, a Hospital Advisory Committee, a Public Health Advisory Committee, a Child Welfare Committee and an Advisory Committee on Employment Relief.
All of those who participated in this notable task of planning this major legislative proposal are ready and willing, at any time, to consult with and assist in any way the appropriate Congressional committees and members with respect to detailed aspects.
It is my judgment that this legislation should be brought forward with a minimum of delay. Federal action is necessary to and conditioned upon the actions of States. Forty-four Legislatures are meeting or will meet soon. In order that the necessary State action may be taken promptly it is important that the Federal Government proceed speedily.
The detailed report of the committee sets forth a series of proposals that will appeal to the sound sense of the American people. It has not attempted the impossible, nor has it failed to exercise sound caution and consideration of all of the factors concerned; the national credit the rights and responsibilities of States, the capacity of industry to assume financial responsibilities and the fundamental necessity of proceeding in a manner that will merit the enthusiastic support of citizens of all sorts.
It is overwhelmingly important to avoid any danger of permanently discrediting the sound and necessary policy of Federal legislation for economic security by attempting to apply it on too ambitious a scale before actual experience has provided guidance for the permanently safe direction of such efforts.
The place of such a fundamental in our future civilization is too precious to be jeopardized now by extravagant action. It is a sound idea—a sound ideal. Most of the other advanced countries of the world have already adopted it and their experience affords the knowledge that social insurance can be made a sound and workable project.
Three principles should be observed in legislation on this subject. In the first place, the system adopted, except for the money necessary to initiate it, should be self-sustaining in the sense that funds for the payment of insurance benefits should not come from the proceeds of general taxation. Second, excepting in old-age insurance, actual management should be left to the States, subject to standards established by the Federal Government. Third, sound financial management of the funds and the reserves, and protection of the credit structure of the nation should be assured by retaining Federal control over all funds through trustees in the Treasury of the United States.
At this time I recommend the following types of legislation looking to economic security:
- Unemployment compensation.
- Old-age benefits, including compulsory and voluntary annuities.
- Federal aid to dependent children through grants to States for the support of existing mother's pension systems and for services for the protection and care of homeless, neglected dependent and crippled children.
- Additional Federal aid to State and local public health agencies and the strengthening of the Federal public health service. I am not at this time recommending the adoption of so-called health insurance, although groups representing the medical profession are cooperating with the Federal Government in the further study of the subject and definite progress is being made.
With respect to unemployment compensation, I have concluded that the most practical proposal is the levy of a uniform Federal payroll tax, 90 per cent of which should be allowed as an offset to employers contributing under a compulsory State unemployment compensation act. The purpose of this is to afford a requirement of a reasonably uniform character for all States cooperating with the Federal Government and to promote and encourage the passage of unemployment compensation laws in the States.
The 10 per cent not thus offset should be used to cover the costs of Federal and State administration of this broad system. Thus States will largely administer unemployment compensation, assisted and guided by the Federal Government.
An unemployment compensation system should be constructed in such a way as to afford every practicable aid and incentive toward the larger purpose of employment stabilization. This can be helped by the intelligent planning of both public and private employment. It also can be helped by correlating the system with public employment so that a person who has exhausted his benefits may be eligible for some form of public work as is recommended in this report.
Moreover, in order to encourage the stabilization of private employment, Federal legislation should not foreclose the States from establishing means for inducing industries to afford an even greater stabilization of employment.
In the important field of security for our old people, it seems necessary to adopt three principles—first, non-contributory old-age pensions for those who are now too old to build up their own insurance; it is, of course, clear that for perhaps thirty years to come funds will have to be provided by the States and the Federal Government to meet these pensions.
Second, compulsory contributory annuities which in time will establish a self-supporting system for those now young and for future generations. Third, voluntary contributory annuities by which individual initiative can increase the annual amounts received in old age.
It is proposed that the Federal Government assume one-half of the cost of the old-age pension plan, which ought ultimately to be supplanted by self-supporting annuity plans.
The amount necessary at this time for the initiation of unemployment compensation, old-age security, children's aid and the promotion of public health, as outlined in the report of the committee on economic security, is approximately one hundred million dollars.
The establishment of sound means toward a greater future economic security of the American people is dictated by a prudent consideration of the hazards involved in our national life. No one can guarantee this country against the dangers of future depressions but we can reduce these dangers.
We can eliminate many of the factors that cause economic depressions and we can provide the means of mitigating their results. This plan for economic security is at once a measure of prevention and a method of alleviation.
We pay now for the dreadful consequence of economic insecurity—and dearly. This plan presents a more equitable and infinitely less expensive means of meeting these costs.
We cannot afford to neglect the plain duty before us I strongly recommend action to attain the objectives sought in this report.
Franklin D. Roosevelt.
The White House, Jan. 17, 1935.
Leuchtenburg, William E. Franklin D. Roosevelt and the New Deal (1932–1940). New York, Harper & Row, 1963.
Lubove, Roy. The Struggle For Social Security, 1900–1935. Pittsburgh, Pa.: University of Pittsburgh Press, 1986.
U.S. Social Security Administration. Pocket History of Social Security. Baltimore: U.S. Department of Health, Education, and Welfare, Social Security Administration, 1976.
History Page. Social Security Online. Social Security Administration. Available online at http://www.ssa.gov/history/ (accessed August 29, 2002).