In 1802, when the Military Peace Establishment act was passed, the pensions of soldiers who were disabled while in the line of duty was to be directed by the President of the United States. Section 14 of the act stipulated that the rate shall not exceed more than the half-pay of a lieutenant-colonel for commissioned officers, and the rate of compensation to non-commission officers was not to exceed $5 per month. Then, in 1806, the pensions laws were expanded to include state troops and militia units as well as disabled Continental Line veterans. The 1806 act repealed all former acts and replaced it with a more liberal act that became the law from which all eligibility claims of disability were to based on thereafter. Under the law, the disability must have been the result of known wounds received in the line of duty, and must have been such as to render the person wholy or partially unable to obtain a living through manual labor. The method of investigation did not change from the previous laws of 1793 and 1803, but Congress reserved for itself the power of final act of placing names on the pension list. This power was originally delegated to the Secretary of War under the 1803 act. The Act of 1806 expired in 1812 and was renewed for another 6 years.
When the war of 1812 ended, President James Madison pointed out a problem with this system to Congress. There were many new claims from those who fought in the War of 1812, but also many new claims continued to come in from the Revolutionary War of 30+ years earlier. Yet, the laws and methods for investigating the eligibility had not changed. The laws did not provide guidelines that allowed the military to distinguish the "age and infirm" from the "wounded and disabled". There were other problems as well. The rates of pensions had not increased since 1802 and the annual expenditures were expected to spike upwards. In his annual address of 1815, the president urged Congress to look into these matters.
"In the performance of the Executive duty upon this occasion there has not been wanting a just sensibility to the merits of the American Army during the late war; but the obvious policy and design in fixing an efficient military peace establishment did not afford an opportunity to distinguish the aged and infirm on account of their past services nor the wounded and disabled on account of their present sufferings."Om 1816, Congress increased the minimum pension from $5 per month to $8 per month and estimated that annual expenditures would be increased from $120,000 to $200,000, but no major restructuring of the pension laws would come until 1818. Fast forward to today, the proposed 2017 budget for Veterans Affairs is $182.3 billion, which includes disability compensation for 4.4 million Veterans and 405,000 survivors, and a pension benefits program for 297,000 Veterans and 210,000 survivors
http://www.presidency.ucsb.edu/ws/index.php?pid=29457
http://revwarapps.org/revwar-pension-acts.htm
https://en.wikipedia.org/wiki/Military_Peace_Establishment_Act#Text_of_the_Military_Peace_Establishment_Act
History of Military Pension Legislation in the United States by William Henry Glasson, 1900 pg. 32-34 (Book)
http://www.inquiriesjournal.com/article-images/uid-3298-1452453843/051247.jpg (image)
http://socialwelfare.library.vcu.edu/social-security/veterans-pensions-early-history/
https://www.va.gov/budget/docs/summary/Fy2017-BudgetInBrief.pdf
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