Supreme Court Rules: Social Security is NOT a Binding Contract, by
Jonathan Bean, 1/23/16
This post was prompted by
all-too-common opinions expressed in Randall Holcombe’s recent “Federal Government Debt Undermines the Programs It
Finances” blog. The respondents passionately
insist that Social Security is a contract, whatever you do to the budget, do
not touch Social Security. “I paid in and it is a contract. They owe me.”
The Supreme Court settled this issue
in 1960! Even more to the
point, the Social Security Administration mocks those who think it is a binding
contract. On the SSA’s own web site, it states:
“There has been a temptation
throughout the program’s history for some people to suppose that their FICA
payroll taxes entitle them to a benefit in a legal, contractual sense.”
The SSA cites the Flemming
v. Nestor (1960) decision and
even posts it in its entirety. The Social Security
Administration defends the
inevitable default on payments (for some Americans, not all) by summing up that
case:
“In its ruling, the Court rejected
this argument and established the principle that entitlement to Social Security
benefits is not contractual right.”
I don’t agree with R. Holcombe that
the program is “doomed.” The program will be means-tested (prediction) for
“those who do not need it,” including those who saved, had long work histories,
and generally did all the old-school things that our destroy-the-wealth State
frowns upon. In fact, if Social Security were a binding contract, what is the
stated rate of return? There is none! But anyone who has studied the history of
Social Security knows that past and present formulas give a much higher payout
to those with lower incomes and spotty work records. If you pay in the maximum
amount your entire career, then you will get the lowest rate of return. This is
all done behind the curtain of Oz.
One last Reality Check: You aren’t
entitled to Social Security at age 65. Starting October 1, 2027 (the day before
I turn 65), the retirement age rises to 67. It will go even higher for “those
who do not need (much) of it.”
Mark my words. The slicing of Social
Security will retain the benefits for the less productive wage earners and
simply skew the formula ever more against those who work and pay the maximum
amount.
Postscript: The person who appealed
to the Supreme Court for his right to benefits was a Communist. Further proof
that if those you dislike lose their rights, we all lose. There is a certain
irony, though, with a Communist claiming a contractual property right to Social
Security. History is funny that way.
And remember: we aren’t talking
about the Super Rich or even the 1%. If you are working upper middle class, you
pay on wages (not investment
income) up to $110,000. But don’t expect much if anything in return. You are
not entitled. The Court has spoken.
We invite your civil and thoughtful
comments. The use of profanity or derogatory language may result in a ban on
your ability to comment again in the future.
Comments
US
citizens who are under age 16 should have the right to opt out of Social
Security and instead open their own self-directed IRA. The federal government would take
responsibility for paying out Social Security Retirement Benefits to those who
have not opted out, without the benefit of the dollars saved by the “opted out”
group. The death tax should be repealed
so that those who opted out own their accounts and could bequeath the funds to
their heirs.
Preventing
citizens from starving to death would revert to their families, churches and
local charities.
Norb
Leahy, Dunwoody GA Tea Party Leader
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