Academic journal article Social Security Bulletin

U.S. Social Security at 75 Years: An International Perspective

Academic journal article Social Security Bulletin

U.S. Social Security at 75 Years: An International Perspective

Article excerpt

Is the historical development of the Old-Age, Survivors, and Disability Insurance (OASDI) program unique or similar to the development of social security programs in other industrialized countries? The U.S. Social Security program was adopted some 40 to 50 years after those of most Western European nations. The United States thus had the opportunity to choose from a number of models and clearly chose to follow the classic social insurance path of such countries as Austria, France, and Germany, which in 1935 already had considerable experience administering earnings-related, employer/worker-financed old-age pension programs. Although based on the traditional social insurance model, OASDI evolved in certain unique ways, including the rejection over the course of succeeding decades of any reliance on general revenue financing, the importance attached to long-range (75-year) actuarial projections, and the relative generosity of benefits for survivors and dependents.

Introduction

The history of the United States is in many ways exceptional, giving rise to an important body of academic research propounding "the American exception." This notion of exceptionalism is however not so easily applied to its principal national social insurance program, Old-Age, Survivors and Disability Insurance (OASDI). Adopted by Congress in 1935, the Social Security Act was landmark legislation that established not only an old-age insurance program but also mandatory unemployment insurance and funding for state-administered old-age assistance. The United States was a relative latecomer in covering its employed workers with compulsory old-age insurance, and perhaps for this reason it is not surprising that the U.S. program was largely inspired by continental European models, particularly the German example, in the 20 or more years preceding its adoption. The OASDI program today exhibits in many respects the same classic social insurance principles that can be found in several other national old-age insurance systems. However, after 75 years, some features of the OASDI program appear to be particularly characteristic of the U.S. approach to old-age income security. The discussion that follows singles out three of the more striking characteristics of the U.S. program, compares them with relevant foreign experience, and in conclusion raises the question of whether these characteristics still have significant implications for the program's future. The discussion begins with a look at the historical context of U.S. Social Security.

Origins of U.S. Social Security in an International Context

Most historians of U.S. Social Security have expressed both wonder and puzzlement as to how a virtually full-blown social insurance program could have been incorporated in the 1935 Social Security Act. The task of the principal drafters working for the Committee on Economic Security, appointed by President Franklin D. Roosevelt in 1934, was indeed a daunting one, but the national debate about the need for a national old-age income security program had been under way for several years, picking up intensity as poverty among the elderly increased dramatically during the Great Depression. In a message to Congress in 1934, Roosevelt served notice that he intended to propose a comprehensive program of social insurance. Roosevelt emphasized that it was not "an untried experience" and that "this seeking for a greater measure of welfare and happiness does not indicate a change in values. It is rather a return to values lost in the course of our economic development and expansion" (Altman 2005, 29).

Thus, the United States embarked in 1935 on the road to providing its working population with old-age pensions, following in many respects the social insurance models adopted by Germany in 1889, Belgium in 1900, the Netherlands in 1901, Austria in 1906, France in 1910, Italy and Spain in 1919, and Hungary in 1928 (Social Security Administration 2008). …

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