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, nonprofessional 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 (OAS DHI), (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. (Bosk in p. 122) PAYING OUT BENEFITS Social Security benefits increased 142% in the period between 1950-1972. not only the elderly, but many of the survivors, the widows and children, of those who paid into the Social Security system, have received social security checks. These checks have paid for the food shelters, and in many instances the college education of the recipients. Unlike private insurance firms, the United States Government does not have to worry about financial failure.

Government bonds are considered the safest investment money can buy-so safe, they are considered 'risk free' by many financial scholars. (Stein p. 198) The ability of the United States Government to raise money to meet the requirements of the social security should be no more in doubt than the governments ability to finance the national defense, the housing programs, the State Department, or any of the other activities that the federal government gets involved in. By paying out benefits equally to all participate in Social Security- that is by not relying so heavily on total payments in making the decision to pay out benefits, the system is able to pay benefits to people who otherwise may not be able to afford an insurance program that would provide them with as much protection. One of the main reasons for the government's involvement in this program, is its ability and its desire to provide insurance benefits for the poor and widowed, who under the private market, might not be able to acquire the insurance to continue on a financially steady course.

The government, then, is in a totally unique position to pay out benefits that would be out of the reach of many American families. Another great advantage of this system, is the ability of the government to adjust the benefits for the effects of inflation (Robertson p. 134) INFLATION AND SOCIAL SECURITY Private insurance plans are totally unable to adjust for the effects of inflation with complete accuracy. In order for an insurance company to make this adjustment, they would have to be able to see forty-five years into the future, with twenty-twenty vision. When a private pension plan currently insures the twenty-year-old worker, it can only guarantee a fixed income when the worker reaches sixty-five and a fixed income is a prime victim of inflation (Robertson. 332) In order to adjust for that inflation, the private insurance firm would have to be able to predict what the inflation rate will be from the moment the worker is insured until the day he dies, and then make the complex adjustments necessary to reflect this in the pension plan.

An inflation estimate that is too small will result in the erosion of the workers retirement benefits. Because the govern m.