Today in 1935: Social Security is created

August 14, 2015

Today in Legal HistoryToday marks the 80th anniversary of the enactment of one of the most momentous laws every passed in U.S. history: the Social Security Act.

At about 3:30 p.m. on August 14, 1935, President Franklin D. Roosevelt signed the act into law.  The act, one of the crowning achievements of Roosevelt’s New Deal, sought to provide relief to some of those hardest hit by the Great Depression: the elderly, the poor, and the unemployed by providing benefits to such groups.  In addition, the act provides for a lump-sum benefit at death to help dependent widows and fatherless children, also hard hit by the Great Depression.

Despite the widespread popularity of Social Security today, it was created in the shadow of a long series of defeats of earlier New Deal legislation at the hands of the Supreme Court.  Thus, at the time of its passage, the Social Security Act had a very real chance of meeting an ignominious legal end like so many of its predecessors.

And the act faced not one, but two legal challenges, one against its unemployment compensation provisions and another challenging the Social Security program itself.  The former challenge was resolved by the Supreme Court in 1937’s Steward Machine Company v. Davis, which upheld the unemployment compensation program established by the act.  The program imposed a tax on employers of which the taxpayer was allowed to credit up to 90% to the state unemployment fund, assuming it were an approved unemployment compensation plan under the act.  The challenger argued that these provisions were essentially forcing states to adopt such compensation funds under the act, in violation of the Tenth Amendment.  The Court disagreed, however, finding the plan to be a valid exercise of Congress’s taxing power under the Constitution.

The latter of these challenges was settled by the Court’s Helvering v. Davis decision, handed down on the same day as Steward.  In Helvering, the Court ruled that the taxing and spending powers exercised under the act’s Social Security regime were valid uses of Congress’s powers of spending to aid in the “general welfare” under the Constitution, and did not violate the Tenth Amendment’s separation of powers.

With the Court’s Steward and Helvering rulings, Social Security’s future was secured.  But that isn’t all: the rulings also marked a new era of the Court allowing Congress to use the Spending Clause to influence state laws through incentives.

Since its enactment 80 years ago, the Social Security Act has undergone several changes, with the first only being four years later in 1939 when it was amended to include surviving spouses and minor children as Social Security beneficiaries.  In addition, the 1939 amendments also included the “FICA” (Federal Insurance Contributions Act) tax provisions.

In the 1950s, changes included the addition of several occupations, such as nonprofit workers, the self-employed, hotel workers, all agricultural workers, and state and local government employees.

As part of the Social Security Act of 1965, Medicare and Medicaid were added.

In the 1970s, Supplemental Security Income (SSI) was established.  In addition, because of a series of financial missteps and economic factors, Social Security’s outlook deteriorated significantly.  Amendments were passed to address these issues, once in 1977 and again 1983.

Even today, the program continues to garner attention because of questions of its future financial viability – but discussions about the future and necessity of Social Security as a policy matter are somewhat limited, since proposals to fundamentally alter or terminate the program itself are quite unpopular.

Thus, 80 years later, Social Security is still going strong, notwithstanding any issues regarding its financial outlook.  Nevertheless, considering its widespread popularity, policymakers would be wise to continue to keep the program solvent for the foreseeable future.