Weekly Writing Challenge: Social Security – Entitlement or Ponzi Scheme?

Author’s Note: This week’s challenge is to step outside your comfort zone and write in a style that you normally don’t. Because this is a creative writing blog, I don’t normally post opinion or nonfiction pieces, so I think this fits the theme. Although I’m not an attorney, I love reading about the legal system and cases, especially those that have relevance to our current political and economic climate. The following is based on Chapter One of the book The Dirty Dozen: How Twelve Supreme Court Cases Radically Expanded Government and Eroded Freedom by Robert A. Levy and William Mellor. There are things I don’t agree with in this book, but overall it’s a scary look at how big government and the Supreme Court have insinuated themselves into our lives to the point where parts of the Constitution aren’t applicable to many of our laws.

      I wouldn’t give Paul Ryan credit for starting our current political discourse about the direction of Social Security in America – I’m sure other people have been willing to cry bullshit at the government  on this topic for a while now – but he certainly has brought it forward into our current economic consciousness. Once he started talking about serious and lasting Social Security reform, people began yelling about how the government can’t take away entitlements and disenfranchise the elderly. They would be right if Social Security was a true entitlement. Dr. Paul M. Johnson, a professor at Auburn University states at A Glossary Of Political Economy Terms  that an entitlement is the kind of government program that provides individuals with personal financial benefits (or sometimes special government-provided goods or services) to which an indefinite (but usually rather large) number of potential beneficiaries have a legal right (enforceable in court, if necessary) whenever they meet eligibility conditions that are specified by the standing law that authorizes the program. Social Security seems to fit this definition except for one small problem.

                We as citizens of the United States have no ability to sue the government if they choose to reduce our Social Security benefits or cut them altogether. In the case Flemming v. Nestor 363 U.S. 603 (1960), the Supreme Court ruled that we have no contractual or property rights to our Social Security benefits, even though a certain portion of our take-home every pay period is taken by the government for this purpose. I haven’t read the whole case in exhaustive detail, but from what I gather, Nestor was an immigrant from Bulgaria who came here in 1913. He came here and built a new life, and like every other American, had money taken out of his paychecks to provide a Social Security benefit after his retirement. In 1955, he retired, and had the misfortune of being caught up in the McCarthy era anti-communist witch hunts; in 1956 he was deported for having been a member of the American communist party from 1933 to 1939. He sued for- and lost – the right to the benefits he’d earned.

                An even older case, Helvering v. Davis  301 U.S. 619 (1937), approached the question of whether or not Titles II and VIII of the Social Security Act were in violation of the Tenth Amendment, which allows the states to have powers that aren’t already delegated to the federal government. The argument was that the federal government could issue taxes to protect the public under the General Welfare clause, but opponents felt that it gave Congress entirely too much leeway in imposing taxes. It really comes down to how you interpret the Constitution; I find myself siding with James Madison, who favored a small federal government, unlike Hamilton who believed in giving the federal government broad powers to create laws.

     Let me backtrack and try to explain how Social Security works, at least from the perspective of Levy and Mellor– when you start working, a percentageof each check is deducted in taxes for Social Security. If you assume that the money is put away into a fund that you will draw on once you reach the age of 65, then you’ve got it wrong. Basically what you pay in now goes to fund people who currently draw Social Security benefits. The government then issues IOU’s to the rest of us for all the money it has borrowed to fund current retirees, and that’s really where the trouble begins. Eventually, there will be more people retiring and taking money out then there will be younger people paying in – the deficit will begin as early as 2017 according to Levy and Mellor.  So what happens then? The government will have to make good on the IOU’s but how? The federal government will either have to raise taxes in order to cover them, or cut spending in other areas. The only other alternative is that the IOU’s could be cancelled by drastically reducing government benefits for future retirees. In any case, according to Levy and Mellor, the trust fund would be completely wiped out by 2040 and the only recourse would be to rely on the payroll taxes collected to continue to fund Social Security. As someone said on t.v., when the Social Security Act was passed, if you lived to 65, you were old. Most workers were men, and most of them died before they even had a chance to retire. Social Security was sustainable then. Now with medicines and preventive treatments, people are living longer than ever. My grandfather took early retirement in his 50’s and he’s 91 now. With fewer working Americans in the future and many more people relying on Social Security for possibly several decades, it’s obvious that we need to revamp the system.  

                The book also compares the Social Security Act to a Ponzi scheme, and while I think that wording might be a little harsh in that it implies criminal intent, I can see the authors’ point. Think about it, you spend your whole life giving money to the government, assuming you’ll get it back when you need it, and then you don’t? I picture it kind of as an inverted pyramid scheme really – in a typical pyramid scheme, a few people at the top get rich if people at the bottom keep paying in. In Social Security, the top of the pyramid is going to keep getting bigger as more people retire, and the people on the bottom will be fewer and fewer. A pyramid can’t balance on its point without collapsing and neither can our Social Security system.

                As much as Paul Ryan’s opinions about privatizing Social Security attract the ire and wrath of the American people, I think he’s got a point. My father is retiring this year, and I’m grateful he can do so before things get really bad. He put 42 years of his life into his work so that my sister and I could have a college education, a car, music lessons, and two beautiful weddings. He deserves to be able to retire and enjoy his life now without worrying about paying the electric bill versus buying medicines or food. Looking at myself, I’m 38 now and have at least another 30 years before I have to worry about retirement. As it is, there won’t be Social Security as we know it when I am ready to retire. I’d rather take the $47.65 and $16.45 the government takes from my paycheck in Social Security and Medicare taxes respectively and put it in a private account. At least then I’d know what I have and I could keep tabs on it and it would legally be mine. This should be something that all Americans at least consider when we vote in November. Future generations deserve it.


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