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Before 1935, America did not have social security programs. The great depression of the 1930’s and stock market crash played a major role towards development of social security program (Diane 1993). The two events frightened people and they realized that even the employed could lose their economic security. As a result, various individuals lobbied and social groups lobbied for the commencement of social security program. This paper will discuss how social security programs developed in U.S and the current structure.
Development and Administration of Social Security Program in the U.S
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In 1934, President Roosevelt declared his intention of starting a social security program and formed a Committee of Economic Security (CES) to investigate on the matter. CES compiled a report and came up with a legislative proposal. The report was presented to the president who passed it on to Houses of Congress for consideration. The bill was passed by the congress and the president assented to it on August 14, 1935 and this was the first legal Social Security Act. Major provisions of the act were: unemployment insurance, help to the aged, grants to the state that were meant for medical care and donation to dependent children. A Social Security Board was established and it consisted of three members appointed by the president. The main role of the board was to educate the public on how to report their incomes and enlighten them on available benefits (Historical Background and Development of Social Security .n.d.).
The board started off by registering all the employers and employees and assigning numbers to them. This was done with the help of the post office department which helped with disbursement of the applications. By June 1937, about 30 million Social Security numbers (cards) had been assigned. After numbers were assigned, the board moved on to collect Federal Insurance Contribution Act taxes and this commenced in January 1937. Taxes collected led to the creation of trust funds from which benefits were paid. Between 1937-1940, benefits were paid as a one-off lump sum and this was paid to those who had participation in the program creation and would die before enjoying monthly benefits which were to commence in 1942 (Historical Background and Development of Social Security .n.d.). Originally, the program offered retirement benefits to the employee but in 1939, amendments were made to incorporate dependants and survivor’s benefit incase of premature death of the employee. Payment of monthly benefits kicked off in 1940 and they were paid to retired workers and their dependants. A constant amount of money was paid to the beneficiaries every month until 1950 when amendments were done to incorporate cost of living allowances (Diane 1993). In 1954, further amendments were made to incorporate payment of benefits to disabled workers. However, this was further amended in 1960 to include disabled employees, their dependants and adult disabled children. In 1972, there was an amendment which required automatic adjustment to the Cost of Living Allowances (COLA) and initiated SSI (supplemental Security Income). However, the methods employed in adjustments were faulty and this created a shortfall in the programs fund. This was corrected by a further amendment in 1977 which raised taxes to 7.65%, and reduced the benefits awarded to the beneficiaries (Diane 1993).
Between 1996 &1997, several laws were passed to amend the social security act. Contact with America Advancement Act was passed with the primary aim of excluding disabled beneficiaries whose disability was as a result of drug abuse. Amount of money paid to retirees was doubled from $14,760 to $30,000 per annum. The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 abolished Aid to Families with dependent Children and discontinued SSI to a majority of non-citizens. Omnibus Consolidated Rescissions and Appropriations Act of 1996 called for electronic fund transfer of all federal payments. In 1997, Balanced Budget Act was passed and it restored SSI eligibility of some non-citizens (Historical Background and Development of Social Security .n.d.)
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Being a member of the social security program is voluntary and this applies even to children. Having a social security number is not a must for anybody to work in U.S though the internal revenue requires individuals to have it for tax purposes. SSN is important when filing tax returns regardless of whether it is the taxpayer filing the returns or the spouse. Federal insurance contribution act charges tax to both employees and the self employed (Historical Background and Development of Social Security .n.d.)
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