Early Federal Pension Programs Created

One alternative to sending people to the poorhouses was to make cash payments to specific groups of disabled or indigent people to help them support themselves in their own homes. For many years, the only group eligible for federal cash benefits of any kind were veterans and their families. Although these payments were often called "pensions", many were dependent on the disability and/or indigence of the recipients, so some of them took on aspects of welfare payments. 

One of the first acts of the new government in 1776 was to authorize pensions for disabled Revolutionary War veterans. The initial military pension law offered half-pay for the rest of their lives to soldiers who were so disabled in the war that they were unable to work for a living. The federal government and the states disagreed about who should pay for and administer the program. The federal government didn't have the authority to raise funds by taxation at that time, so they said that the pensions were to be administered and paid for by the states. The states didn't want to bear the cost and they refused to do anything, so the federal government took back responsibility. However, the newly-formed government hadn't yet created any organized system for accepting and paying pension claims. For several years, a separate act of Congress had to be voted on to appropriate funds for each individual that requested a pension, until, finally, a general appropriation was made in 1790, and a pension law was enacted in 1792.

The rules for veterans pensions were changed numerous times in the next few years. Gradually, veterans benefits were expanded to include pension payments even for those who were not disabled, if they served during certain wars and time periods -- first for officers, then, several years later, for enlisted men. 

Benefits for veterans' surviving spouses came later, and most were limited to spouses who were indigent. In 1780, the first benefit for surviving spouses was created for widows of officers who died in the Revolutionary War. In subsequent years, the law was changed include officers who died in service after the War, and to their children under age 16, if their mother was deceased. Eventually, when the government needed incentives to get men to fight in the War of 1812, benefits for widows and children were made available to enlisted men as well as officers.