Four years ago, in 2011, Social Security reached a critical tipping point. It paid out more in benefits than it took in through payroll (FICA) taxes. So, for four years not, Social Security has been running a deficit.
In 1970, Social Security and Medicare made up 18.7% of the federal budget. In 2006, these two programs made up 33.3% of the federal budget. In 2010, the two programs made up 42.7% of federal budget spending. In that same year, defense spending comprised 19.7 % of the budget and welfare programs comprised 18%. Adding it all up, a full 60.7 % of the 2010 federal budget was designated to entitlement programs.
The recent economic downturn has led to a major decrease in payroll taxes and many people have opted to collect their benefits earlier. (People can retire at age 62, but payments are reduced until age 67). This has led to the Social Security system going into the red. At this point, Social Security is nothing more than a Ponzi scheme, robbing payrolls and future retirees to pay the benefits of current retirees. The enormity of the economic downturn has led to a giant decrease in revenues, and unless an immediate rebound occurs in the economy and revenues increase, benefits will have to be cut and the retirement age will be raised. Or Social Security will certainly go broke. Our very own president has even told us that economic recovery will take years. So you do the math.
The point I’m try to make is that the federal government continues to take payroll taxes out of everyone’s paycheck, including mine, every single pay period in order to cover Social Security benefits and Medicare. It also requires the employer to match those contributions at 6.8% (so if you are self-employed or are a small business owner, then the screwing is more intense). All the while, Social Security continues to run a deficit, continues to be in debt, and continues on the fast track to insolvency.
Social Security was signed into law by President Roosevelt in 1935, as the country was beginning to recover from the Great Depression and coming to the realization that there should be programs to provide for citizens when they can’t provide for themselves, such as the elderly, the disabled, those injured on the job, dependent mothers, etc.
Before the 1930s, support for the elderly was a matter of local, state and family rather than a Federal concern (except for veterans’ pensions). However, the widespread suffering caused by the Great Depression brought support for numerous proposals for a national old-age insurance system. On January 17, 1935, President Franklin D. Roosevelt sent a message to Congress asking for “social security” legislation. The same day, Senator Robert Wagner of New York and Representative David Lewis of Maryland introduced bills reflecting the administration’s views. The bills were met with strong opposition from those who considered the program a governmental invasion of the private sphere. Eventually the bill passed both houses, and on August 15, 1935, President Roosevelt signed the Social Security Act into law.
The act created a uniquely American solution to the problem of old-age pensions. Unlike many European nations, U.S. social security “insurance” was supported from “contributions” in the form of taxes (payroll taxes; FICA) on individuals’ wages and employers’ payrolls rather than from government funds. The act also provided funds to assist children, the blind, and the unemployed; to institute vocational training programs; and provide family health programs. As a result, enactment of Social Security brought into existence complex administrative challenges. The Social Security Act authorized the Social Security Board to register citizens for benefits, to administer the contributions received by the Federal Government, and to send payments to recipients. Prior to Social Security, the elderly routinely faced the prospect of poverty upon retirement.
Since its inception, workers have come to view their “targeted” payroll deductions (their “contributions”) to the Social Security program’s trust fund [the OASDI fund – “Old-Age, Survivors, and Disability Insurance”] as establishing a unique connection between those tax payments and future benefits, and thereby a true entitlement. They believe that because they have paid (been forced to pay) into the system, Social Security is an “earned right” and therefore they are entitled to retirement benefits, even if the government has a more pressing need for the funds and even if it claims financial insolvency. They believe the government has certainly encouraged that belief by referring to Social Security taxes as “contributions.” They have come to view the entitlement in terms of morality, ethics, and a contracts. The government, on the other hand, has come to view the “contributions” as anything other than that. Social Security is simply another form of taxation and revenue – plundering – for the government.
In the case Flemming v. Nestor (1960), the Supreme Court declined to honor Americans rightful expectations in the program, holding that there is no property or contractual right in the contributions taken from their paychecks specifically for their retirement. Justice Harlan wrote: “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.” The Court went on to say, “It is apparent that the non-contractual interest of an employee covered by the [Social Security] Act cannot be soundly analogized to that of the holder of an annuity, whose right to benefits is bottomed on his contractual premium payments.”
Perhaps the Court’s decision should not have been surprising. In an earlier case, Helvering v. Davis (1937), the Court had ruled that Social Security was not a contributory insurance program, saying, “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.”
As Michael Tanner put it: “Social Security is not an insurance program at all. It is simply a payroll tax on one side and a welfare program on the other. Your Social Security benefits are always subject to the whim of 535 politicians in Washington.” Just as Congress has cut Social Security benefits in the past, it is more than likely to do so in the future. In fact, given Social Security’s financial crisis, the high unemployment rate, and the historic numbers of Americans claiming disability, benefit cuts are almost inevitable. As we all know, there are various proposals to cut benefits, from increasing the retirement age to means testing. NJ Governor Chris Christie, realizing that workers have no right to the money religiously taken from their paychecks, has suggested that those who are well enough off in their elderly years should simply forfeit their benefits to others.
So, as a result of the Flemming case, workers have no legally binding contractual rights to their Social Security benefits. Those benefits can be cut or even eliminated at any time. You have worked hard all your life and have paid thousands of dollars in Social Security taxes. Now it’s finally time to retire. Your rightful expectation is that the government delivers on its promise. But what can you honestly expect? The Supreme Court, as it has always – ALWAYS – does, has given the government (Congress, in this case) the flexibility it needs to use use and direct the funds as it sees fit. Again, the individual is a mere pawn. He is, above all else, a mere source of tax revenue.
One of the myths of our political system is that the Supreme Court has the last word on the scope and meaning of federal law. Chief Justice John Marshall proclaimed that view in Marbury v. Madison (1803), despite commentary by our Founders to the contrary. But there is one remedy that can correct “mistakes” by the Supreme Court and it lies with the Peoples’ House – the US Congress. Under the original intent of our government, the branches were to be separate and were supposed to actively check each other in order that none of them should transgress the bounds of their authority. The federal judiciary, as assured to the state ratifying conventions in the Federalist Papers, would be the weakest branch, only being able to offer an opinion to the other branches. “The Executive not only dispenses the honors, but holds the sword of the community. The legislature not only commands the purse, but prescribes the rules by which the duties and rights of every citizen are to be regulated. The judiciary, on the contrary, has no influence over either the sword or the purse; no direction either of the strength or of the wealth of the society; and can take no active resolution whatever. It may truly be said to have neither FORCE nor WILL, but merely judgment; and must ultimately depend upon the aid of the executive arm even for the efficacy of its judgments.” (Federalist No. 78, written by Alexander Hamilton). The Supreme Court could offer its opinion as to the constitutionality of a law passed by Congress, but Congress (having the same capacity to read the words of the Constitution and its history), could act in accordance with that opinion or disregard it. Since Marbury, whenever the Supreme Court reaches an opinion, any legislation that is “repugnant” to the Constitution MUST fall. It’s their way or the highway. And so, time and time again, Congress has dealt with the dissatisfaction of having the Supreme Court frustrate its legislative schemes. Sometimes it is for the better but sometimes not. One way Congress has dealt with that dissatisfaction is by amending or re-enacting the legislation to clarify its original intent and overrule a contrary Court construction.
While it’s true that Congress cannot really “overrule” its decisions on what a law means, Congress certainly has the power to pass a new or revised law that “changes” or “reverses” the meaning or scope of the law as interpreted by the Court, and the legislative history of the new law usually states that it was intended to “overrule” a specific Court decision. The People, through their elected officials, and not at the mercy of unelected men and women in black robes, have the power to make the laws and set policy that they want to govern their country and their society.
With that in mind, I have come up with a proposal which, while not solving the debt crises that Social Security is in, will honor the reasonable and legitimate expectations of hard-working individuals who pay into the system, have paid into the system, and may not be able to enjoy its benefits when they retire. My solution addresses the frustration of individuals who know that the government has essentially stripped them of any legal right to their “contributions,” despite what the statute suggests, in order to use the funding scheme as an additional means of taxation to fund welfare programs.
Here is a Resolution proposing my solution:
RESOLUTION TO ENACT LEGISLATION TO DEFINE SOCIAL SECURITY FUNDS AS AN INDIVIDUAL’s PROPERTY/CONTRACTUAL RIGHT
Whereas, the actions of our Founding generation proved their greater desire for freedom than for the security provided by its political association with England;
And Whereas, for that reason, the original thirteen states, acting together, adopted the Lee Resolution (or Resolution for Independence) on July 2, 1776, formally dissolving the bonds of allegiance with said country;
And Whereas, two days later, on July 4, the Second Continental Congress adopted the Declaration of Independence, which was intended to proclaim “to a candid world” the reasons the American states sought to dissolve its political association with England
Whereas, the reason the American states felt compelled to seek their independence from the most powerful nation on earth at the time was because of the collective treatment – the “history of repeated injuries and usurpations” – they received at the hands of King George III and the English Parliament, “all having in direct object the establishment of an absolute Tyranny” over them;
Whereas, leaders from our founding generation petitioned and pleaded with the King and Parliament to respect the inherent rights of its “subjects” in America, as addressed and protected by the various English charters of liberty, including the Magna Carta, the Petition of Right of 1628, and the English Bill of Rights of 1689, only to be ridiculed, punished, and oppressed further;
Whereas, the Declaration of Independence proclaims the principles of liberty that the “united” States of America collectively stand for, including the following:
• Individuals are the inherent depositories of government power. Individuals “assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature’s God entitle them.” When government oversteps its delegated powers and becomes destructive of liberty (denies them their freedom), power returns to the People. [First paragraph]
• People have the inherent right to dissolve their government and to assume their full rights to govern themselves (or to compact and establish another government). [First paragraph]
• All men are created equal (stemming from their equality in a state of nature) and are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness… [Second paragraph]
• In order to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed… [Second paragraph]
• That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to affect their Safety and Happiness….. [Second paragraph]
• Governments are the product of social compact – among those agreeing to be governed (“deriving their just powers from the consent of the governed”) [Second paragraph]
Whereas, the author of the Declaration of Independence, Thomas Jefferson, as well as the other members of the committee selected to draft the document (John Adams of MA, Benjamin Franklin of PA, Roger Sherman of CT, and Robert Livingston of NY) made the conscious decision to ground American government theory on the philosophy and teachings of John Locke. To be sure, each statement written in the first and second paragraphs are taken from the writings of John Locke (see the Two Treatises of Government);
Whereas, by their votes, each of the individual states adopted the position espoused in the Declaration on the origins, purpose, and limitations of government, thereby grounding individual liberty on the natural law doctrine of Individual Sovereignty;
Whereas, John Locke wrote about the “inalienable rights” of “Life, Liberty, and Property and emphasized that the primary role of government is to secure the individual’s right of Property;
Whereas, Thomas Jefferson was not only as strong a proponent of the natural origin, and thus the inalienable character, of a personal right to property as John Locke, but believed the right to property should be enlarged to include the right to accumulate wealth (and hence changed the word “property” to “pursuit of happiness”). “I believe that a right to property is founded in our natural wants, in the means with which we are endowed to satisfy these wants, and the right to what we acquire by those means without violating the similar rights of other sensible beings.” http://www.indytruth.org/library/journals/libertarianstudies/18/18_1_2.pdf
Whereas, Thomas Jefferson understood “property” to include not only real property, but also intellectual property (the product of one’s mind), and the property that results from an individual’s use of his or her talents, energy, personality, etc etc. He believed a person has the right to the benefits (wealth, security, happiness) that result (“the Pursuit of Happiness”);
Whereas, the 16th Amendment established the federal income tax by which the government, according to a progressive system, can plunder the property of Americans for the purpose of funding the its programs and obligations;
Whereas, in 1935, President Franklin Delano Roosevelt signed the Social Security Act, as the country was finally beginning to recover from the Great Depression. Millions of people were still out of work, and there was alarming concern for the elderly and retired Americans who had lost everything. The Social Security program was intended to be – and is essentially still today – a social insurance program. It is a government-run program providing economic security to our elderly citizens. The 1935 Act, in great part, provided for “old age” or retirement benefits by having workers make contributions from their paychecks to a government-managed trust fund for the purpose of replacing lost earnings at retirement (in other words, to pay for their retirement and other benefits they might need in the further);
Whereas, the contribution by an American worker into the Social Security program’s trust fund through a dedicated payroll tax establishes a unique connection between those tax payments and future benefits;
Whereas, the design and intent of the Social Security program infers a reasonable and rightful expectation by that American worker to a “right” (an “earned right”) to the benefit at the age of retirement;
Whereas, the “earned right” to social security retirement benefits is a true entitlement in the moral and legal (contractual) sense;
Whereas, the government has encouraged that belief and expectation by referring to Social Security as a “contribution”;
Whereas, the forced contribution into the Social Security program denies individuals of using those funds – the funds they worked for and earned – to invest and save themselves, on their own terms, for their retirement;
Whereas, salary is a property right, derived from one’s employment contract which converts physical and mental skills that serve the employer into a monetary equivalent;
Whereas, salary can later be transformed into other types of property, including real and personal property, can be transformed into other types of investment, such as a college education, a business venture, or a retirement plan, and can be transformed or used for other objects all designed to enrich one’s life (“Pursuit of Happiness”);
Whereas, the social policy underlying employment is that every individual should be responsible for his or her life and his or her choices, particularly the costs involved. Everyone should be personally responsible to become educated or learn some sort of trade or skill. Everything costs money and if a person can’t pay for what he or she needs and the government is intent on providing services, that money necessarily come from the property rights of another;
Whereas, the Supreme Court, in the case Flemming v. Nestor [363 U.S. 603 (1960)], provided the federal government an additional avenue to plunder the finances of American citizens by denying them a rightful property interest in the amount deducted by the government for their retirement;
Whereas, in Flemming, the Court held that entitlement to Social Security benefits is not contractual right nor a property right. As Justice Harlan, who delivered the decision, wrote: “It is apparent that the non-contractual interest of an employee covered by the [Social Security] Act cannot be soundly analogized to that of the holder of an annuity, whose right to benefits is bottomed on his contractual premium payments.”
Whereas, indeed the Court in Flemming acknowledged the legislative intent when the law was passed. “The right to Social Security benefits is in one sense ‘earned,’ for the entire scheme rests on the legislative judgment that those who, in their productive years, were functioning members of the economy may justly call upon that economy, in their later years, for protection from ‘the rigors of the poor house as well as from the haunting fear that such a lot awaits them when journey’s end is near.” The decision then went on to state that “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.” The Court noted that as time has gone on and as the dynamics of the country has changed, the practicality of that “judgment” (the legislative judgment) has been questioned. As such the Court concluded that an individual who contributes to Social Security has no right (property or contractual) to his or her money or to benefit payments (as would be protected by the Due Process Clause of the 5th Amendment);
Whereas, despite the language used to sell the program to the American people, just like what happened with the Patient Protection and Affordable Care Act (PPACA, or “Obamacare”), the Supreme Court went on to characterize it in complete opposite terms;
Whereas, as a result of Flemming, Social Security is not an insurance program at all. It is simply a payroll tax on one side and a welfare program on the other. An individual’s Social Security benefits are always subject to the whim of 535 politicians in Washington;
Whereas, the American people believe that they have a rightful claim to the contributions they have made over the years into the Social Security trust fund, despite what the Supreme Court might say, and demand assurances that their money will be available to them when they retire;
Whereas, under the Separation of Powers doctrine, the wisdom of the scheme of retirement benefits set forth in the Social Security Act, as interpreted (ie, re-defined) by the Supreme Court in Fleming, must be addressed by Congress – the People’s House.
THEREFORE, the US Congress must – and should feel duty-bound – to supersede the Supreme Court’s characterization of Social Security (retirement) “contributions” and benefits in Flemming by defining said contributions legislatively as a “property” and a “contractual” right belonging to each American worker (that is, each employee who has a FICA payroll tax deducted from his or her paycheck). As such, each American worker cannot be deprived of his or her promised future benefit.
FURTHERMORE, characterization of Social Security retirement contributions and benefits in terms of a tangible property/contract right to the individual will force the federal government to control its spending. Of course, another option is to privatize Social Security. Under a privatized Social Security system, workers would have full property rights in their retirement accounts. They would own the money in them, the same way people own their IRAs or 401(k) plans. Congress would have no right to touch that money.
Michael D. Tanner, “Is There a Right to Social Security,” CATO Institute, November 25, 1998. Referenced at: http://www.cato.org/publications/commentary/is-there-right-social-security
Social Security Act (1935) – http://www.ourdocuments.gov/doc.php?flash=true&doc=68