I mentioned Social Security as an entitlement payment in my post on the government shutdown, and it raised a fairly common objection in several who read it:
They don’t think of Social Security as an entitlement, or a welfare payment; they view it as their right, by virtue of having contributed to the system for their entire working life.
So, time to correct a very major, and unfortunately common, misconception.
Social Security, is NOT a pension, nor is it insurance.
Now, I realize that the majority of the American public believe this is so, because they have been deliberately defrauded by our government…
First read this to understand the scope and scale of the fraud, and the problem it (now only vestigially) masks:
Ok… so, by now, most people understand that Social Security, as it is, is essentially a legal Ponzi scheme (whether they accept that, or admit it… if they can do basic match, they at least understand it).
What I really didn’t fully appreciate until recently, is that often, even people who understand this is true, don’t understand why or how it got that way.
There is a very common misconception, even among otherwise economically, historically, and legally well informed and educated people, that the current state of Social Security is somehow a twisting of what it was intended to be, or taking advantage of loopholes etc…
Many people believe that Social Security was set up to be an annuity based insurance and pension plan. That paying FICA contributions was supposed to buy you into a long term annuity, or investment plan, and that your Social Security payments were intended to be the product of that investment.
They think that the “trust fund” exists, and was set up to collect and invest the contributions of the workers who paid into it, so that the investments would fund the workers retirements.
They believe that the problem with Social Security is that congress has been raiding the trust fund since 1958 (most don’t know it was since ’58, but they are sure that’s why Social Security is broke).
Unfortunately, every bit of this idea is entirely incorrect… and people who hold that idea generally do so, because they were deliberately misled.
I’s simply not true… though many… perhaps most… people believe it is; but in fact, Social Security was always nothing more than a pyramid scheme, and an entitlement.
They misunderstand entirely… Because they have been deliberately deceived; as has been the majority of the population.
Social Security was NEVER, EVER, an annuity, pension, or insurance.
Actual insurance, annuities, pensions etc… were not part of the legislation that created it, or anything thereafter.
Also, there never was an actual “trust fund” as such… simply an accounting of surplus contributions which were, in theory, to be placed into low yield “no risk” treasury bonds.
Note, I said “surplus contributions”… this means contributions in excess of payouts to existing recipients. Because benefit payments are not made from the proceeds of investment, they are made using the payroll taxes of those currently paying in today (this is why we call Social Security a ponzi scheme… When Bernie Madoff does it, it’s fraud and he goes to jail. When the government does it, it’s… well it’s still fraud, even worse fraud… but no-one goes to jail sadly).
The sham of it, particularly the sham of the accounting trick they called the “trust fund” was publicly proclaimed as early as 1936 (by Alf Landon in his presidential campaign).
Social Security is, and always has been, a tax and entitlement distribution scheme.
The government lied, and called it insurance, but in fact it has never been anything other than a payments and distributions pool, funded by taxes.
You can look it up, in 42usc (the section of U.S. code defining the various programs known as Social Security).
The programs collectively known as Social Security are referred to as insurance several times, but in fact they very clearly are not. The legal definitions and descriptions make this very clear. Social Security is a tax and entitlement disbursement scheme, by act of congress.
There is no individual ownership, no accrued value, no capital gain, it cannot be transferred, and it can be changed (or removed), at will, by congress; without being construed as a taking without due process.
It is NOT INSURANCE.
Perhaps I am not explaining this properly…
It’s not that congress went against the intent, or written provisions of the law, and changed Social Security from what it was supposed to be, to what it is…
It’s that in fact, the law was NEVER what they told the American people it was.
In fact, if the law HAD been what they sold it as, then that law would have been declared unconstitutional by the supreme court (as had the earlier railroad pensions act, which actually DID created a property based pension scheme). It was specifically because it WAS a tax and distribution, that congress had the power to do it; and was argued thus before the court in 1937.
Helvering v. Davis clearly defines Social Security “Contributions” as a tax, and social security “benefits” as welfare payments. This is the basis for it’s constitutionality.
Fleming v. Nestor in 1960, reaffirmed that FICA is a tax, and that the “contributions” are government property, to be done with as the government sees fit; and that “contribution” through FICA did not cause one to accrue a property right to any asset, pension, or insurance scheme, nor did it create a contract consideration, right, or obligation on the part of the government. Further, it affirmed that “benefits” were NOT insurance or pension disbursements, but entitlements by act of congress, and that congress could change them at any time in any way they chose, without being construed as a taking under the 5th amendment (though they did say that they must have cause and due process to do so… but any legitimate cause within their purview would do).
Justices Black and Reich, specifically dissented from the majority opinion, explicitly and expressly addressing the issue of property rights. They believed that such contributions, to such a program, SHOULD as a matter of moral and public good, be considered property, and have property rights attached. They acknowledged however that the law as written did not, and that by strict interpretation the majority was correct… They just thought it was better to make it property anyway.
Unfortunately, it’s not… It is neither a pension or insurance, and never has been, from the very beginning.
However, almost every explanation ever given the public, and in most documentation, it is referred to as insurance, or even a pension.