Social Security Act

In 1933 Francis Townsend proposed a scheme whereby the Federal government would provide every person over 60 a $200 monthly pension. Townsend claimed that his Old Age Revolving Pension Plan could be financed by a Federal tax on commercial transactions. The plan obtained a great deal of public support and by 1935 his Townsend Club had over 5 million members.

In 1935 Townsend handed in to President Franklin D. Roosevelt a petition supporting the Old Age Revolving Pension Plan that had been signed by over 20 million people. In response to the petition, Congress passed the Social Security Act.

Social Security Board Poster
Social Security Board Poster

The Social Security Act established Old Age and Survivors' Insurance that provided for compulsory savings for wage earners so that benefits may be paid to them on retirement at 65. To finance the scheme, both the employer and employee had to pay a 3% payroll tax. The provisions of the act also encouraged states to deal with social problems. It did this by offering substantial financial help the states provide unemployment benefits, old-age pensions, aid to the disabled, maternity care, public health work and vocational rehabilitation.

Francis Townsend claimed that Roosevelt's social security legislation was completely inadequate and in 1936 joined with Father Edward Coughlin and Gerald L. K. Smith to form the National Union of Social Justice. William Lepke was selected as the party's candidate in the 1936 presidential election but won only 882,479 votes compared to Franklin D. Roosevelt (27,751,597) and Alfred Landon (16,679,583).

Primary Sources

(1) Franklin D. Roosevelt, radio broadcast, Fireside Chat (28th April, 1935)

While our present and projected expenditures for work relief are wholly within the reasonable limits of our national credit resources, it is obvious that we cannot continue to create governmental deficits for that purpose year after year. We must begin now to make provision for the future. That is why our social security program is an important part of the complete picture. It proposes, by means of old age pensions, to help those who have reached the age of retirement to give up their jobs and thus give to the younger generation greater opportunities for work and to give to all a feeling of security as they look toward old age.

The unemployment insurance part of the legislation will not only help to guard the individual in future periods of lay-off against dependence upon relief, but it will, by sustaining purchasing power, cushion the shock of economic distress. Another helpful feature of unemployment insurance is the incentive it will give to employers to plan more carefully in order that unemployment may be prevented by the stabilizing of employment itself.

(2) John T. Flynn, The Roosevelt Myth (1944)

The most tragic illusion about this man is that built up by the ceaseless repetition of the false statement that he gave us a system of security.

Security for whom? For the aged? An old­age security bill was passed during his first administration which provides for workers who reach the age of 65 a pension of $8 a week at most. And even this meager and still very badly constructed plan had to be pushed through against a strange inertness on his part. Roosevelt's mind ran in curious circles. People have forgotten his procrastination about putting through the social security bill until in the 1934 congressional elections the Republicans denounced him for his tardiness. It is difficult to believe this now after all the propaganda that has washed over people's minds. And when he did finally consent to a bill, like so many good ideas that went into his mind, it came out badly twisted. It contained a plan for building a huge reserve fund that would have amounted to nothing more than a scheme to extract billions from the workers' payrolls without any adequate return. Over the protest of the President, the Congress finally took that incredible joker out of the law. But it is in every respect a pathetically inadequate law. Does anyone imagine that $8 a week is security for anyone, particularly since Roosevelt's inflation has cut the value of that in half?

But what of the millions of people who through long years of thrift and saving have been providing their own security? What of the millions who have been scratching for years to pay for their life insurance and annuities, putting money in savings banks, commercial banks, buying government and corporation bonds to protect themselves in their old age? What of the millions of teachers, police, firemen, civil employees of states and cities and the government, of the armed services and the army of men and women entitled to retirement funds from private corporations ­ railroads, industrial and commercial? These thrifty people have seen one­half of their retirement benefits wiped out by the Roosevelt inflation that has cut the purchasing power of the dollar in two. Roosevelt struck the most terrible blow at the security of the masses of the people while posing as the generous donor of "security for all." During the war boom and in the post­war boom created by spending 40 billion dollars a year the illusion of security is sustained. The full measure of Roosevelt's hopeless misunderstanding of this subject will come when security will be most needed ­ and most absent.