THE SOCIAL SECURITY ACT
Social Security Card The United States government passed the Social Security Act in 1935, and issued the first Social Security card in 1936. Most U.S. citizens have a Social Security card, which displays a 9-digit Social Security number. The government uses this number to track contributions by employees and employers to the Social Security fund. People can draw on their portion of the fund in retirement, for the costs of health care in old age, or if they suffer a disability.
In 1934 President Franklin Roosevelt created a Committee on Economic Security to draft a program of guaranteed social support for all U.S. citizens. In early 1935 the committee submitted its Economic Security Bill to the Congress of the United States. Congress subsequently changed the name of the bill to Social Security, and approved it by the middle of 1935. President Roosevelt signed the Social Security Act into law in August of that year.
To most Americans Old-Age Benefits for retired adults became synonymous with the term social security.
The Social Security Act was a comprehensive law consisting of 11 titles, or subjects. Six of the titles detailed specific programs, while the others established methods of taxation to fund the programs, formed the organization of the controlling government body (the Social Security Board), and established guidelines for the creation of public health facilities. The six original programs were Old-Age Assistance, Old-Age Benefits (for retirement), Unemployment Compensation, Aid to Dependent Children (ADC), Maternal and Child Welfare, and Aid to the Blind. To most Americans Old-Age Benefits for retired adults became synonymous with the term social security. The federal government alone operated this program, whereas states ran the others with grants from the federal government.
Only Old-Age Benefits and Unemployment Compensation operated as social insurance programs. The federal government deducted taxes from workers’ pay to finance Social Security benefits, while states collected a tax from employers to finance unemployment benefits. Social Security and unemployment benefits came directly out of funds established to hold these taxes, rather than from general tax revenues. The other four program titles of the Social Security Act were forms of welfare, funded by general federal revenues. Old-Age Assistance and Aid to the Blind were meant primarily to supplement Old-Age Benefits, or to provide income to people ineligible for those benefits. Maternal and Child Welfare funded health-care programs for poor mothers and their children and for disabled children, as well as programs to protect and care for homeless, neglected, and otherwise endangered children. Aid to Dependent Children provided support for children living with only one parent or with relatives other than their parents.
In 1937 the government began issuing Social Security identification cards to all citizens. Each card had a unique number that the government used to keep track of a person’s earnings and the taxes collected from those earnings that went to finance Social Security benefits. Two titles of the Social Security Act specified the manner in which taxes would be deducted from workers’ earnings to finance both old-age benefits and unemployment compensation. These tax laws were later written into the code of the Internal Revenue Service. The Social Security tax became known by the name of one of these laws, the Federal Insurance Contributions Act (FICA).
The government began collecting Social Security taxes in 1937 and putting them in a trust fund—a fund that the government could use to pay benefits, cover administrative costs, and invest in securities to earn interest. To build up the trust fund, the government paid only single, lump-sum benefits to people who retired before 1940. Regular benefit payments, paid out monthly, began in that year. Workers could retire and become eligible for benefits at age 65.
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