The Social Security Conundrum

There is a common misconception among Americans that Social Security is a retirement program into which they have paid their ‘dues’, and thus are entitled to receive its benefits. And there is good reason for people to have this understanding of the system: they have consistently been lied to by politicians ever since the programs inception.

The entire system, however, was deliberately in a way so as to separate the taxes paid into the “system” from the benefits paid out. When arguing the constitutionality of Social Security before the Supreme Court, the government explicitly stated that there was no inherent connection between the program’s levied taxes and its benefits: “Taxes are not earmarked for any special purpose… They are true taxes, their purpose being simply to raise revenue . . . available for the general support of Government.” And thus, the retirement benefits “are gratuities” (not based on any contract with the recipient, but instead based on Congressional decisions that are subject to amendment or repeal). The reason behind the government’s decision to argue that the tax and the benefit were separate is simple: It was a necessity for the program to be seen as a valid exercising of its taxing power. Without the separation of tax and benefit the program was nothing more than a redistribution of wealth program along generational lines, and thus considered unconstitutional.

Regardless of how the government portrays the system, it was never set up with the idea that you were paying into your own private retirement account when S.S. taxes were taken out of your paycheck. The Social Security “system” was and always has been two distinct legal operations: 1.) a tax on workers income and 2.) a separate entitlement payment to retirees.

The rulings in two Supreme Court cases have solidified the government’s argument that there is, in fact, no direct entitlement to the benefits people have long “paid in to”:

  1. Helvering v. Davis (1937): In this case the Court made it very clear that Social Security was not a pre-paid retirement program.

    “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.”

  2. Fleming v. Nester (1960): In this case the Court said that since the taxing and spending portions of Social Security are, in fact, two separate things that the Congress has the right to either raise or lower the tax on workers or the entitlement payout to retirees.

“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 importance of this much ignored fact looms over the conservative Republican movement. At the time of its creation, old conservatives opposed the Social Security system because they saw it truly for what it was, a wealth transfer entitlement program whose constitutionality was accepted only because of a finagling of the language between tax and benefit. However, as time went on and the voting public began to rely on the welfare program and see it as an entitlement, such opposition to the program became politically impossible. This is the same course of events that happened with the passage, initial resistance, and eventual acceptance/reliance of conservatives in regard to Medicare. I fear and predict the same trend for conservative action will follow in the aftermath of Obamacare.

The conundrum is clear: If conservatives continue to wholeheartedly support the legitimacy of social welfare program like Social Security and Medicare it has no logically consistent grounds to oppose the recent changes in healthcare. In an electoral beauty contest between one side that professes governmental welfare at its core in theory and in practice, and another that denounces it in theory but supports it in practice, the former will prove to be victorious in the long term….until it all falls apart.

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