Wednesday, May 25, 2016
Larry DeWitt serves at the U.S. Social Security Administration as the public historian, a post he has held since 1995. He is also the principal editor of Social Security: A Documentary History.
Social Security is the largest single function in the federal governments budget, counting
for about 21 percent of everything the federal government does. Created in 1935 under
President Franklin Roosevelt, it was also the driving force behind modern retirement as
we know it, according to Larry DeWitt, a historian for the
Social Security Administration. He gives us an idea of why and how Social Security
came to be.
What did seniors do before Social Security?
As late as 1932, only about 5 percent of elderly people in America had any kind of retirement pension at all. Most Americans working before Social Security had three options: work until they dropped, which many did; stop work on their own initiative or because their employer retired them, and suffer the economic consequences; or become a superannuated worker, someone kept on the payroll with reduced responsibilities and reduced pay in lieu of pension. Another option was institutionalization. Right up until Social Security was passed, there were more than 2,000 poor houses across America. The poor house was the place where old folks were sent for the crime of being old and poor and unable to support themselves.
Why did Social Security come about?
The Great Depression was undoubtedly the triggering event that caused America to adopt this kind of social insurance approach to the problem of economic security. Other factors included longer life expectancy people really started living longer due to better public health and sanitation during the first three decades of the 20th century. Also because of industrialization, we became urban dwellers and wage earners dependent on a job for our economic security. Traditionally people had lived in extended families on farms where they could support themselves. After the Industrial Revolution, we began to see the appearance of the nuclear family, parents and kids, as opposed to these large extended families, which were more common in the period before industrialization. It was really that, I think, that set the ground for something like Social Security becoming necessary in the modern industrial world.
What was the importance of Social Security?
In the era before Social Security, retirement tended more often to be a period of fear and dread because there wasnt a way to provide for your own economic security. And so Social Security was the empowerment of this social transformation that produced modern retirement as we know it today. Franklin Roosevelt said, we can never insure 100 percent of the population against 100 percent of the hazards and vicissitudes of life, but we have tried to frame a law which will give the average citizen and his family protection against loss of a job and against poverty-stricken old age. That was the concept of the program more than 70 years ago, and that remains the concept today.
Will we have Social Security in the future?
We are witnessing a large buildup in trust fund reserves, currently in excess of $2 trillion. Actuaries project that the buildup will continue until about 2017. At that point, because we will have more being paid out in benefits than we have coming in, we will have to start spending down the assets of the trust fund, and that process will be completed in 2041.
Commenting on the approaching demise of the trust fund, Peter Peterson, chair of The Blackstone Group said, Social Security Trust Fund I say it's an oxymoron because the fund shouldn't be trusted, and it's not funded.