How Social Security Prolonged The Depression

Social Security began its life as a tax increase, not a spending program. In 1937, the federal government started collecting a 2 percent payroll tax, but benefits didn't start flowing until 1940. For more than three years, Social Security siphoned money from consumers' pockets into government coffers while offering almost nothing in return. This transfer helped tip the nation into a new recession. From 1934 to 1936, the economy had been growing smartly as the nation began to claw its way out of the Great Depression. But in August 1937, progress came to a halt, with industrial production, corporate profits and the stock market all sinking like stones.