Economic Security 2010

Commentary by Bob Schaller, Dept. of Economic Development, St. Mary's County

The last couple columns I've written about public service. What it is, why it's needed, who does it, what makes it special, thus why it's like no other vocation. On the occasion of the 75th Anniversary of the signing of the Social Security Act (August 14, 1935), perhaps the most definable of public policies of modern America, it is fitting to continue this essay. Did you know that the initial title of the bill offered by President Franklin D. Roosevelt's Administration was Economic Security? According to it was changed in Congressional deliberations. Why economic security? Recall the Great Depression that followed the stock market crash of 1929. At its peak, national unemployment reached 25%. In the cities it was close to 50%. 10,000 banks failed. GNP and wages were halved in less than three years. Wealth evaporated daily. Lives were shaken to their core. Poverty rates among young and old especially were the highest as they were not able to seek what little work was available. Some estimate senior citizen poverty rates exceeded 50%. So the very means of economic stability of American life, a job, was in great question.

There is economic hardship resulting from the current recession. Witness persistent high unemployment, increased homelessness, higher rates of business closures and office vacancies. But recent comparisons of the current recession's impact to the 1930s, while plentiful, are not totally appropriate. The Great Depression was the national learning experience of pervasive hardship that touched most of America. It would take more than a decade to recover from, assisted greatly by our unwelcomed entry into war. As fragile as today's safety net may seem, there was none in the early 1930s. Here's one recent example. Congress just extended unemployment insurance benefits to 99 weeks a few short weeks ago. There was no such benefit 75 years ago. Unemployed meant then as it had always: completely on your own. In fact, the Social Security Act of 1935 included the first federal language for unemployment insurance. In addition, the landmark act provided for disability and dependent coverage. It was a broad attempt to limit what were seen as dangers in modern American life, including old age, poverty, unemployment, and the burdens of widows and fatherless children. The most fragile, without work, thus without economic security, was the focus of Social Security. Thirty years later, almost to the day, Medicare was passed to expressly address national health care needs. Forty-five years hence we are still grappling with the same economic security challenges that generations before us faced with little to no guidance to follow.

Today the U.S. Social Security program is the largest government program in the world and the single greatest expenditure in our federal budget. In Fiscal 2010 Social Security represents close to 20% of all federal spending. It is the only budget line item that exceeds the National Defense budget, a very close second at about 19%. Medicare is the 4th largest expenditure at almost 13% of the budget. Together, Social Security and Medicare make up just under 1 of 3 federal dollars spent annually on the public good. In hard numbers, that's about $1.15 trillion (million million). That's more than the GDP of India where the population exceeds one billion.

Returning to public service, there's little question that both Social Security and Medicare have had lasting effects on the economic security of modern America. I'm sure someone in your family has or will benefit from these policies. I'm equally sure that the same folks (and more) have helped make these benefits a reality through payroll contributions. Of course something this large and pervasive is in constant need for change and improvement. Thus, reform proposals have and will continue to be considered if these benefits are to be available some 45 or 75 years from now.

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