Economics: The American Government

Economics: The American Government


Most of the problems of the United states are related to the economy. One of the

major issues facing the country today is social security.


The United States was one of the last major industrialized nations to establish

a social security system. In 1911, Wisconsin passed the first state workers

compensation law to be held constitutional. At that time, most Americans

believed the government should not have to care for the aged, disabled or needy.

But such attitudes changed during the Great Depression in the 1930's.


In 1935, Congress passed the Social Security Act. This law became the basis of

the U.S. social insurance system. It provided cash benefits to only retired

workers in commerce or industry. In 1939, Congress amended the act to benefit

and dependent children of retired workers and widows and children of deceased

workers . In 1950, the act began to cover many farm and domestic workers, non

professional self employed workers, and many state and municipal employees.

Coverage became nearly universal in 1956, when lawyers and other professional

workers came under the system.


Social security is a government program that helps workers and retired workers

and their families achieve a degree of economic security. Social security also

called social insurance (Robertson p. 33), provides cash payments to help

replace income lost as a result of retirement, unemployment, disability, or

death. The program also helps pay the cost of medical care for people age 65 or

older and for some disabled workers. About one-sixth of the people in the United

States receive social security benefits.


People become eligible to receive benefits by working in a certain period in a

job covered by social security. Employers and workers finance the program

through payroll taxes. Participation in the social security system is required

for about 95 percent of all U.S. workers. Social security differs from public

assistance. Social security pays benefits to individuals, and their families,

largely on the basis of work histories. Public assistance, or welfare, aids the

needy, regardless of their work records. All industrialized countries as well as

many developing nations have a social security system. The social security

program in the United states has three main parts. They are (1) old-aged,

survivors, disability, and hospital insurance (OASDHI), (2) unemployment

insurance; and (3) workers' compensation.


THE SOCIAL SECURITY PAYROLL TAX


This tax was to be taken from the payrolls of the nation's employers and

employees. The government felt that, like unemployment benefits, the social

security should be financed by those who got the greatest benefit, those who

worked, and were liable to need those benefits in the future.


A plan that would affect those only who had paid such a tax for a number of

years would have done those who were currently suffering under the Depression no

good at all. As a result, the social security plan began paying out benefits

almost immediately to those who had been retired, or elderly and out of work,

and who were unable, primarily because of the depressed economic conditions, to

retire comfortably. In this way, the government was able to accomplish two

objectives: first, it helped the economy pull out of the depression, by

providing a means by which old people could support themselves and, by buying

goods and services, support others in the community ; and second, it showed the

younger workers of that time that they no longer had to fear living out their

retirement years in fear of poverty.


Therefore, the social security payroll tax has been used to provide benefits to

those who otherwise would have little means of support, and as of this writing,

there has never been a year when Social Security benefits were not paid due to

lack of Social Security income. (Boskin p.122)                PAYING

OUT BENEFITS                                        Social

Security benefits increased 142% in the period between 1950-1972. not only the

elderly, but many of the survivers, 
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