Graduation Year

2025

Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts

Department

History

Second Department

Economics

Reader 1

Corey Tazzara

Reader 2

Patrick Van Horn

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Terms of Use for work posted in Scholarship@Claremont.

Rights Information

© 2025 Elena N. Creason

Abstract

While the New Deal is often viewed as a legislative response to the economic conditions of the Great Depression, the Social Security program has its roots in pre-Depression calls for increased American welfare support. The program’s creation is found to have been driven primarily by President Franklin Roosevelt’s desire to accomplish that goal, capitalizing on an opportune political climate to pass old-age insurance legislation at the expense of alternative pension proposals. This thesis studies the creation and impact of the Old-Age and Survivors’ Insurance (OASI) provision of the 1939 Amendments to the Social Security Act on American saving behavior and the fiscal multiplier. The study specifically looks at county-level changes in saving rates in California, using state bank deposits as a proxy for total county savings, and the impact that the public’s perception of the program played in determining its effect. I hypothesized that the expansion of retirement benefits reduced private saving rates as people treated mandated Social Security saving as a perfect substitute, which in turn increased the size of the fiscal multiplier, making fiscal policy a more effective policy tool. However, my results show that while Social Security’s public reception was overwhelmingly positive, the 1939 Amendments led to a 1.48 percentage point reduction in the county-level saving rate, indicating that the program made people more aware of the need to save for retirement and reduced the size of the fiscal multiplier, thereby reducing the effectiveness of American fiscal policy.

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