Why Social Security is welfare

[WallyWeaver]

This is an older article but there are several reasons why I posted it. First of all, if you haven't heard or read about the US Supreme Court case "Flemming vs. Nestor" in 1960 I encourage you to do some research about it (you can start here: http://www.intellect...g-v-nestor-1960). Of great importance to the ruling on this case is: "the Court ..... established the principle that entitlement to Social Security benefits is not contractual right." In case you missed it, there is a ruling on the books, by the Supreme Court, that says no individual American has any contractual guarantee to Social Security benefits, even if he/ she paid into S.S. for their entire working life!

Secondly, should large government benefit programs like Social Security and Medicare/ Medicaid be on the chopping block in the current fiscal cliff negotiations? After all, we are running a $1.3 trillion annual deficit, some hard decisions do need to be made.

So, we speed toward the fiscal cliff and on one side we have Republicans who state they will not tolerate ANY tax increases (though there is some wavering on this), and on the other we have the Democrats who won't dare make ANY meaningful cuts (other than to the military) on any of the so-called entitlement programs.

Anyway, just a few things to think about. I put this in the Wall Street section because the fiscal cliff has now taken center stage in the US markets and will remain there until a conclusion is reached sometime next year (my opinion).

WW.

Why Social Security is welfare

By Robert J. Samuelson

Monday, March 7, 2011

In a recent column on the senior citizen lobby, I noted that Social Security is often "middle-class welfare" that bleeds the country. This offended many readers. In an e-mail, one snarled: "Social Security is not adding one penny to our national debt, you idiot." Others were more dignified: "Let's refrain from insulting individuals who have worked all their lives and contributed to the system for 50-plus years by insinuating that [their] earned benefits are welfare." Some argued that Social Security, with a $2.6 trillion trust fund, doesn't affect our budgetary predicament.

Wrong. As a rule, I don't use one column to comment on another. But I'm making an exception here because the issue is so important. Recall that Social Security, Medicare and Medicaid, the main programs for the elderly, exceed 40 percent of federal spending. Exempting them from cuts - as polls indicate many Americans prefer - would ordain massive deficits, huge tax increases or draconian reductions in other programs. That's a disastrous formula for the future.

We don't call Social Security "welfare" because it's a pejorative term, and politicians don't want to offend. So their rhetoric classifies Social Security as something else when it isn't. Here is how I define a welfare program: First, it taxes one group to support another group, meaning it's pay-as-you-go and not a contributory scheme where people's own savings pay their later benefits. And second, Congress can constantly alter benefits, reflecting changing needs, economic conditions and politics. Social Security qualifies on both counts.

Let's start with its $2.6 trillion trust fund. Doesn't this prove that people's payroll taxes were saved to pay for future benefits, disconnecting them from our larger budget problems? Well, no. Since the 1940s, Social Security has been a pay-as-you-go program. Most benefits are paid by payroll taxes on today's workers; in 2010, those taxes covered 91 percent of benefits. The trust fund's $2.6 trillion would provide only 3.5 years of benefits, which totaled about $700 billion in 2010.

The trust fund serves mainly to funnel taxes to recipients, and today's big surplus is an accident, as Charles Blahous shows in his book "Social Security: The Unfinished Work." In 1983, when the trust fund was nearly exhausted, a presidential commission proposed fixes but underestimated their effects. The large surplus "just developed. It wasn't planned," the commission's executive director said later. Even so, the surplus will disappear as the number of retirees rises.

Similarly, Congress has repeatedly altered benefits. From 1950 to 1972, it increased them nine times, including a doubling in the early 1950s. In 1972, it indexed benefits to inflation. People didn't complain when benefits rose, but possible cuts now trigger howls that a "contract" is being broken. Not so. In a 1960 decision ( Flemming v. Nestor ), the Supreme Court expressly rejected the argument that people have a contractual right to Social Security. It cited the 1935 Social Security Act: "The right to alter, amend, or repeal any provision of this Act is hereby reserved to Congress." Congress can change the program whenever it wants.

All this makes Social Security "welfare." Benefits shift; they're not strictly proportionate to wages but are skewed to favor low-wage earners - a value judgment reflecting who most deserves help; and they aren't paid from workers' own "contributions." But we ignored these realities and encouraged people to think they "earned" benefits and that Social Security is distinct from the larger budget. Politicians, pundits, think-tank experts and journalists engaged in this charade to spare Social Security's 54 million recipients the discomfort of understanding they're on welfare.

A relatively small elderly population sustained these fictions. Now, this is no longer possible. Contrary to the Obama administration's posture, Social Security does affect our larger budget problem. Annual benefits already exceed payroll taxes. The gap will grow. The trust fund holds Treasury bonds; when these are redeemed, the needed cash can be raised only by borrowing, taxing or cutting other programs. The connection between Social Security and the rest of the budget is brutally direct. The arcane accounting of the trust fund obscures what's happening. Just as important, how we treat Social Security will affect how we treat Medicare and, to a lesser extent, Medicaid.

It is because these programs involve middle-class welfare that cuts could occur without inflicting widespread hardship. All the elderly aren't poor. In 2008, a quarter of families headed by someone 65 or older had incomes exceeding $75,000. No doubt people would be outraged. Having been misled, they'd feel cheated. They paid their taxes, why can't they get all their promised benefits? But the alternative is much worse: imposing all the burdens on younger taxpayers and cuts in other government programs. Shared sacrifice is meaningless if it excludes older Americans.

Link: http://www.washingto...1030602926.html

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[Chartman17]

Social Security is paid by employers and employees. To say that it is welfare is a ridiculous notion. When I retire, I expect to collect my Social Security and I will not live long enough to deplete my account. Now, if Congress allocates funds out of Social Security for other purposes, then that is theft and Congress should be held accountable. More later....

Chartman17

[WallyWeaver]

Social Security is paid by employers and employees. To say that it is welfare is a ridiculous notion. When I retire, I expect to collect my Social Security and I will not live long enough to deplete my account.

Chartman17

You did not read the article.

Please read the article and then I will discuss it with you.

Thanks for your comment.

WW.

[steveh12]

Hi Wally,

I remember sometime ago 60 minutes did this exact story on Social Security.

Don't remember who the person was from 60 minutes, but He explained first

that when You started to collect, it will be for 2 years 3 years tops.

Anything after the 3 years was Welfare.

He went to a Senior Center to ask how long people were collecting S.S.

Most were collecting for more than 5 years some 10 and so on.

When H e told them that they were on Welfare, the anger was iincredible.

He explained even though You had worked Your entire Life, You

should be only on S.S. for 3 years.

Then came the I am a VET, I have never taken a dime from the Gov. ect.

Needless to say, The Story was not a favorite one for anyone on S.S.

[WallyWeaver]

I remember sometime ago 60 minutes did this exact story on Social Security.

Don't remember who the person was from 60 minutes, but He explained first

that when You started to collect, it will be for 2 years 3 years tops.

Anything after the 3 years was Welfare.

He went to a Senior Center to ask how long people were collecting S.S.

Most were collecting for more than 5 years some 10 and so on.

When H e told them that they were on Welfare, the anger was iincredible.

Wow, sounds like a pretty bold interviewer!

As I was looking into this today I was a little shocked myself. The facts are there for anyone to read for themselves..... I encourage anyone interested in this to Google "Flemming vs. Nestor" and see it with their own eyes. I'm sure many will be as shocked as I was/ am.

I understand this is a very sensitive topic for many but people need to direct their anger in the appropriate direction. I guess the bottom line here is folks need to do what they can to secure their own retirement income, separate from anything the government might give them, as it might not be there when people may need it the most.

Thank you, steveh12, for your insightful comment.

WW.

[nstoolman1]

Lets start by going after the government that raids the SS funds, go after the people that fraudulent get on SS(yes the DRs and Lawers also) then go after the people on welfare that have never contributed to the system then we can discuss people on SS that HAVE paid into the system. There would be enough money. If "you" start demonizing the people that are on SS that is just another way of having class warfare and dividing the country further. If people are not going to get what they put in then stop taking it out of our paychecks and let us spend or invest it our way.

[WallyWeaver]

Here's the "Background to the Case" right off of the Social Security website:

Background to the Case:

The fact that workers contribute to the Social Security program's funding through a dedicated payroll tax establishes a unique connection between those tax payments and future benefits. More so than general federal income taxes can be said to establish "rights" to certain government services. This is often expressed in the idea that Social Security benefits are "an earned right." This is true enough in a moral and political sense. But like all federal entitlement programs, Congress can change the rules regarding eligibility--and it has done so many times over the years. The rules can be made more generous, or they can be made more restrictive. Benefits which are granted at one time can be withdrawn, as for example with student benefits, which were substantially scaled-back in the 1983 Amendments.

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. That is to say, if a person makes FICA contributions over a number of years, Congress cannot, according to this reasoning, change the rules in such a way that deprives a contributor of a promised future benefit. Under this reasoning, benefits under Social Security could probably only be increased, never decreased, if the Act could be amended at all. Congress clearly had no such limitation in mind when crafting the law. Section 1104 of the 1935 Act, entitled "RESERVATION OF POWER," specifically said: "The right to alter, amend, or repeal any provision of this Act is hereby reserved to the Congress." Even so, some have thought that this reservation was in some way unconstitutional. This is the issue finally settled by Flemming v. Nestor.

In this 1960 Supreme Court decision Nestor's denial of benefits was upheld even though he had contributed to the program for 19 years and was already receiving benefits. Under a 1954 law, Social Security benefits were denied to persons deported for, among other things, having been a member of the Communist party. Accordingly, Mr. Nestor's benefits were terminated. He appealed the termination arguing, among other claims, that promised Social Security benefits were a contract and that Congress could not renege on that contract. In its ruling, the Court rejected this argument and established the principle that entitlement to Social Security benefits is not contractual right.

Link: http://www.ssa.gov/history/nestor.html

[WallyWeaver]

Lets start by going after the government that raids the SS funds, go after the people that fraudulent get on SS(yes the DRs and Lawers also) then go after the people on welfare that have never contributed to the system then we can discuss people on SS that HAVE paid into the system. There would be enough money. If "you" start demonizing the people that are on SS that is just another way of having class warfare and dividing the country further. If people are not going to get what they put in then stop taking it out of our paychecks and let us spend or invest it our way.

I certainly don't disagree with you here. This is exactly what needs to happen in all of the big 3 "entitlements" (Social Security, Medicare, Medicaid). There needs to be a very thorough investigation into where every penny contributed to these programs goes. I have always been a proponent of that.

I don't believe "I'm" demonizing anyone, however. Please investigate the above mentioned US Supreme Court case for yourself. As far as your last sentence goes I think you need to read the article more carefully.

Thanks for your comment.

WW.

[Nelg]

I have been receiving a SS Check since for the past 7 years. The amount for both my wife and myself amounts to about $1,700. From what has been posted we have been on "welfare" for 4 years. It is not right or honorable to consider it an obligation of the government to take from others to pay for our measly check.

Honor and obligation have no meaning to the government when it comes to dollars. All money belongs to the government and they can do with it whatever they deem more important and advantageous. This fact is demonstrated by their constant drawing from the SS to pay for everything and anything they want. There has been a constant drain of trillions of dollars from the SS Trust (?) Fund. These dollars are over and above what the beneficiary taxpayer has paid budgeted to receive. In other words, these are the reserve that the taxpayer has paid into the system. The fund should currently have $2.5 trillion working to increase by prudent investment. Instead, the greed of government will gladly raid these funds to fund their pet projects or their failed economic plans. The “fiscal cliff” is the results of government failure.

President Obama recently commented that he couldn’t guarantee that SS checks will go out if the debt ceiling doesn’t get raised. But how can that be; If there is a trust fund with surplus capital of 2.5 trillion dollars that is dedicated to pay the recipients if the budget “runs out of money?” How is it that the checks would stop being issued? Because the government has “borrowed” so much from the SS Trust Fund that it is impossible for them to pay it back!

Why did the government borrow the money? To bail out Wall St., to supply funds for the banks and auto industry, to pay for housing and schooling for the illegal alien, to pay for Obama Care, and a number of other good but ill advised projects.

The point I am making is that there WAS plenty of regular and surplus funds to take care of those who paid into the system, but now its gone and the taxpayers that have paid into SS for 50 years are now seeing the folly of their trust in the governmental policies that raped and pillaged a weak system.

I agree that we should be the ones responsible for investing into our own “retirement” plan. Then we could be paid the retirement fund that we individually put into investment that could make us a great deal of money each month or just a little money; all based on our own efforts.

BUT there are people who do not see this as fair. What we receive by diligent investment and saving should also be “redistributed” to those who didn’t put out the effort to save or risk the dangers of investment.

As I said in the beginning, the government has their name of these papers we horde; the United States of America. Therefore, it really isn’t ours, but theirs. And “we the people” are just “welfare” recipients and wards of the state. And isn’t this the place they want us? Otherwise, they can’t control us.

[WallyWeaver]

I have been receiving a SS Check since for the past 7 years. The amount for both my wife and myself amounts to about $1,700. From what has been posted we have been on "welfare" for 4 years. It is not right or honorable to consider it an obligation of the government to take from others to pay for our measly check.

Honor and obligation have no meaning to the government when it comes to dollars.

I agree that we should be the ones responsible for investing into our own “retirement” plan. Then we could be paid the retirement fund that we individually put into investment that could make us a great deal of money each month or just a little money; all based on our own efforts.

BUT there are people who do not see this as fair. What we receive by diligent investment and saving should also be “redistributed” to those who didn’t put out the effort to save or risk the dangers of investment.

Very thoughtful post, Nelg. Thanks for taking the time.

You are right-on with many of your points. It is amazing that so many are so happy to just let the government deduct money from their individual paychecks under the pretense that the government will manage that money responsibly. This idea of the government being responsible is such a farce. I am confident that no one can point to anywhere where our government responsibly and efficiently handles money. But somehow many are under the delusion that "entitlements" are different.

Thanks again.

WW.

[nstoolman1]

It is amazing that so many are so happy to just let the government deduct money from their individual paychecks.

I don't know of anyone who is happy about that except the people that don't pay into it and receive bennies and the US government. You don't have a choice. When people don't have a choice they usually are not happy.

[WallyWeaver]

I don't know of anyone who is happy about that except the people that don't pay into it and receive bennies and the US government. You don't have a choice. When people don't have a choice they usually are not happy.

Please read the statement you commented on in its full context:

"It is amazing that so many are so happy to just let the government deduct money from their individual paychecks under the pretense that the government will manage that money responsibly. This idea of the government being responsible is such a farce. I am confident that no one can point to anywhere where our government responsibly and efficiently handles money. But somehow many are under the delusion that "entitlements" are different."

My overall point is there seems to be a willingness amongst Americans to rely on the government rather than practicing a little rugged individualism and preparing for themselves. I look to the record low amounts that the average American has in savings today coupled with record high amounts of personal debt that individual Americans have acccumulated in recent years.

WW.

[Luigi1]

Disagree. You don't have to do nothing to get on Welfare.

SS is paid into all your life by you & matched by your employer.

You only recieve a small portion back than if you would had invested that on your own.

[desimo]

I collect social security disability. This is not a freebie and is not a government hand-out. It is not an entitlement. I paid into it. I am getting what I have paid and what I feel the government has taken from me without my permission or knowledge in many ways. This is my money.

[carlablum]

My husband has paid 130,000.00 into S.S. being self employed all his life and he also contributed 25,000 into Medicare. If he becomes disabled before age 62, he can draw SSDI because he has enough credits and has paid for it. If he was disabled he would get a monthly check and would be able to get Medicare after being disabled for 24 months.

If someone has never paid into the S.S. or Medicare and has less then 3000.00 in resources and broke they can get S.S.I benefits as well as Medicaid the day they receive S.S.I benefits.

My question is why take from my husband who has paid? Why not take from S.S.I recipients who have not?

Nothing for something????

Something for nothing????

I just don't get it.

I collect social security disability. This is not a freebie and is not a government hand-out. It is not an entitlement. I paid into it. I am getting what I have paid and what I feel the government has taken from me without my permission or knowledge in many ways. This is my money.

Yes it is!

If they want to mess with S.S. then I want my and my husbands money back so I can put it in a safer place..

[willy1der]

It's an older article but this may be of some interest to those with 401's.

http://www.ronpaulforums.com/showthread.php?382585-Warning-Obama-Confiscates-IRA-s-401k-s-New-Senate-Bill-Nationalizes-IRA-s

Appreciate these post WW!

[WallyWeaver]

My only comment to this point is how many people actually read the article in its entirety and looked at the US Supreme Court listed before they posted a comment? I would say almost every comment on here, with the exception of a few, seems to be replying only to the title of the article rather than its content.

Please, I'm encouraging you, if nothing else research the US Supreme Court case. The precedent is there.... I didn't make it up. Even if you paid into Social Security your entire life the government can find grounds to stop paying you.

Also, to those who say they paid into it and deserve those benefits again I say (in the nicest way possible):"Please read the article!"

Money is taken out of the paychecks of those currently working and paid directly to beneficiaries. This is true in 91% of the total benefits paid out and, again, this would be understood if the article had been read in its entirety.

The bottom line, and the main reason I posted this, is Social Security has major ISSUES! It's scheduled for insolvency because it is so poorly managed. But why would we expect anything less from our government? THIS IS MY POINT!

WW.

It's an older article but this may be of some interest to those with 401's.

http://www.ronpaulfo...ionalizes-IRA-s

Appreciate these post WW!

Thank you Willy. Nice to see an old friend with a positive comment....

WW.

[Captjohn]

Hi Wally,

I remember sometime ago 60 minutes did this exact story on Social Security.

Don't remember who the person was from 60 minutes, but He explained first

that when You started to collect, it will be for 2 years 3 years tops.

Anything after the 3 years was Welfare.

He went to a Senior Center to ask how long people were collecting S.S.

Most were collecting for more than 5 years some 10 and so on.

When H e told them that they were on Welfare, the anger was iincredible.

He explained even though You had worked Your entire Life, You

should be only on S.S. for 3 years.

Then came the I am a VET, I have never taken a dime from the Gov. ect.

Needless to say, The Story was not a favorite one for anyone on S.S.

Actually, if you think about it, Obama has just introduced a "fix" for the whole SSI issue...Obamacare

I worked for 40 years and will begin taking SS next March at 66. Now, I have already had by-pass surgery

four years ago. Should I have another bout of coronary issues say, 3 to 5 years from now (hopefully before I

become a ward of the welfare state) and the new Death Panel says, "you're too old for another operation"

problem solved. I die, don't go on welfare, and everyone wins........hmmm. The new progress.