Poverty-ridden old age.  It's hard to imagine our not-so-distant past when many Americans faced old age without any income, assets or even the basic necessities of life.  In 1935 over half of the nation's elderly were poverty stricken.  Poorhouses didn't just exist in fiction; they were a reality for many elderly Americans without families to take them in.  Today, this sad part of our history is gone. Far fewer American seniors, ten percent, live in poverty or are denied access to medical care thanks to social insurance programs like Social Security and Medicare.  Sadly, many conservatives and private market advocates ridicule social insurance as an archaic system of government handouts. Yet, like other risk pools designed to insure individuals against physical and material losses, social insurance continues to provide income protection for workers and their families, retirees and the disabled. 

Social Insurance

Social insurance generally defines a system of public insurance under which a national community, through their government, may guarantee a collective base of economic security for each other against some of the unique uncertainties of modern life.  Such systems are most often structured in a way that requires most, if not all of a nation's workers to participate and contribute.  Mandatory participation ensures broadly shared risk.  Adequate and equitable distribution of program resources and costs is essential if such programs are to achieve their expansive social goals while maintaining widespread public support. In turn, benefits are disbursed by these programs only as the requirements of the policy are met. 

Social insurance programs in the United States today include: Social Security, which, though Old Age, Survivor and Disability Insurance (OASDI), provides families with protection against the loss of income due to death of a family wage earner, disability, and old age; Medicare, which provides affordable health coverage to both disabled Americans and those who have reached the age of 65; Workers' Compensation, which covers wage replacement and medical care for workers and their families who may be injured or killed on the job; and  Unemployment Insurance, which provides partial and temporary wage replacement to certain individuals who have lost their jobs.  All of these programs in the United States emanated from the Social Security Act of 1935 and its many subsequent amendments.

Enacted in 1935, the Social Security Act reflects the core values that extend from the fabric of our nation's infancy;  work hard, obey the laws, and come to the aid of those in need In this sense, Social Security is the modern day equivalent of the early American barn-raising – a community approach to address an individual need.

The Social Security system contributes to the well being of Americans by providing a foundation of retirement income that permits seniors to live in dignity, while also providing support to younger family members who may have caregiver responsibilities. In addition to retirement and spousal benefits, workers receive insurance protection that benefits workers and their dependents if the wage earner becomes disabled or dies. In fact, 38 percent of Social Security benefits go to disabled workers, families of retired or disabled workers, and survivors of deceased workers. No other wage-replacement program – public or private – offers the protection Americans receive from the Social Security program.

Social Security benefits are based on the amounts earned during the worker's employment, adjusted to make sure that the benefit keeps up with the overall growth in wages in the economy during the employee's working years. Adjustments are also made to give a higher proportionate benefit to low-income workers. This feature is particularly important to women, who typically earn less than men over their lifetimes. Initial benefits are increased each year through cost of living adjustments (COLAs) to keep up with inflation after retirement.

The movement of national governments toward modern universal social insurance programs had its genesis in Europe in the late 19 th century.  The trend was an outgrowth of industrial economies' devastating effect on the traditional family supports that were found in agriculturally based economies.   Indeed, by 1935, when working families were devastated and destitute from the impact of the third major economic depression of our industrial era, thirty-four nations had already adopted some form of a social insurance program.  Twenty nations had, by then, adopted contributory programs such as those found in the United States today.

Though critics of social insurance have often described specific programs as outdated or outmoded in their attacks, the concept of social insurance is perhaps more relevant than ever in the 21 st century.  Despite the successes of social insurance in America , today's global economy is more complex, and economic security more uncertain.  Americans born in the generation following 1945 in particular, face tremendous financial challenges as they get closer to their own retirement.  These “baby boomers” are the heart of the so-called sandwich generation – trying to help their aging parents while at the same time saving for both their childrens'college expenses and their own retirement.  And because wages have been stagnant for so many years, and job insecurity has increased dramatically, we are seeing higher average debt and fewer average assets for millions of America 's working families.

Today, traditional pension plans are disappearing in the United States . For millions of our citizens, health care benefits are non-existent or are being cut back. American families are generally saving less.  Job loss impacts all socio-economic classes. The need for programs like Social Security and Medicare is as critical today as ever. The National Committee believes that Congress and the Administration must work toward improving and strengthening the role of social insurance in our nation to protect the independence and dignity of all citizens.

Few, if any, other federal programs have served so many so well. Through economic crises, natural disasters and war time, America 's social insurance programs have remained reliable constants in a changing world. These are not the antiquated and archaic programs portrayed by those opposed to any government social insurance role. In fact, quite the contrary is true. Social insurance programs showcase the best of what government can do for its citizens. These are programs we should be emulating not tearing down.

Department of Government Relations and Policy, May 2007