With all the recent consternation about social security reform there has been a great deal said about the subject. Some people seem to think they are entitled to their Social Security benefits. These people are in error, despite their signs saying, “Keep your hands off my Social Security.” In fact it isn’t theirs, and the Supreme Court has already said so.
In 1960 the Court ruled in Flemming v. Nestor that there is, in fact, no contractual right to Social Security. To quote the Court, “To engraft upon the Social Security system a concept of accrued property rights would deprive it of the flexibility and boldness in adjustment to ever changing conditions which it demands.” And this is in keeping with the wording by which Congress crafted the original law stating, “The right to alter, amend, or repeal any provision of this Act is hereby reserved to the Congress.”
There is not now, nor has there ever been a “right” to one’s Social Security benefits. The money taxed for that purpose is in no way obligated to be used for Social Security either, for the Supreme Court had already ruled in the 1937 Helverigh v. Davis case, “The proceeds of both the employee and employer taxes are to be paid into the Treasury like any other internal revenue generally, and are not earmarked in any way.” And in keeping with that ruling Social Security funds have never been, “earmarked” in any way but have gone into, and been spent by, the general fund.
Thus, Al Gore’s much ballyhooed, “lockbox” for Social Security was nothing more than a disingenuous pipe dream, (as were the budget “surpluses” of the late 1990s which were predicated upon Social Security tax revenues.) Without substantial revision of the law by Congress there could never be any such, “lockbox.” That Congress would never do such a thing is born out by the facts surrounding the coming crisis.
Social Security will begin running a deficit in 2018 and faces an unfunded liability of more than $26 trillion. The term, “unfunded liability” is just a fancy way of saying that at current rates, Social Security will pay out $26 trillion more than it will receive in taxes to fund it. To solve this inequity either benefits will have to be cut or taxes raised substantially.
That isn’t to say people aren’t being taxed already. Nearly 80 percent of Americans pay more in Social Security taxes than in federal income taxes. In other words, the Social Security tax is one of the most regressive taxes there is. And the idea that benefits be cut is also politically unpopular, which is what those, “hands off my Social Security” signs are meant to represent.
The problem is, if nothing is done by the year 2060 Social Security and Medicare combined will account for more that 71 percent of the federal budget. Either other programs will have to be cut dramatically or taxes raised just as dramatically. Or Social Security benefits cut.
And there is no guarantee that the latter will not be the case. Since the Supreme Court has already ruled that there is no “right” to such benefits, they will most likely be cut in some fashion. The only question then is how or in what way. And that depends upon the ever changing political landscape. Faced with huge increases in taxes or a cuts in benefits, what do you think tomorrow’s taxpayers will choose? Do the words, “flexibility and boldness in adjustment” provide a clue?
”’Don Newman, senior policy analyst for the Grassroot Institute of Hawaii, Hawaii’s first and only free market public policy institute focused on individual freedom and liberty, can be reached at:”’ mailto:firstname.lastname@example.org
”’This editorial is intended to provoke thought, discussion and an examination of issues. It does not reflect official policy of the Grassroot Institute of Hawaii. See the GRIH Web site at:”’ http://www.grassrootinstitute.org/
”’HawaiiReporter.com reports the real news, and prints all editorials submitted, even if they do not represent the viewpoint of the editors, as long as they are written clearly. Send editorials to”’ mailto:Malia@HawaiiReporter.com
PERSONAL PENSION ACCOUNTS IN CHILE
Daily Policy Digest
Friday, Feb. 11, 2005
In Chile, personal savings accounts (PSAs) have made young workers who pay into the system better off because their investment earns a tidy return, something not possible with a system that merely transfers income to seniors from working persons. What PSAs do not do is redistribute income or create dependency on the political system. Maybe that is what most bothers those who fear George Bush’s initiative, says Mary Anastasia O