Supreme Court: No Right to Social Security

Wednesday, 26 Feb 2014 07:31 AM

By Patrick Watson

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In a little-noticed decision, the U.S. Supreme Court ruled that Congress and the president could cut off your Social Security benefits any time they please.

The first victim was a man named Ephram Nestor.

Nestor paid Social Security taxes for 19 years and was already receiving benefits when the government stopped paying him. As you might imagine, Nestor was outraged and appealed all the way to the Supreme Court. He argued that, having paid all those taxes, the government owed him "his" Social Security benefits.

Nestor lost. So will you and me, if we live long enough.

Why was this not front-page news? It was — back in 1960 when the high court ruled in Flemming vs. Nestor. You can read the decision yourself online or at any law library.

The court's reasoning was quite simple: Social Security is not insurance. There is no contractual agreement between taxpayer and government, like there would be with an insurance policy. The fact that Nestor paid into the system was irrelevant. Congress can give, and Congress can take away.

This long-settled precedent is still in force today. As a strictly legal matter, Americans who spend a lifetime watching "FICA" reduce their paychecks are simply paying one more tax. The fact that you paid this tax creates no obligation on the government to give you anything in return.

Nestor's particular mistake was that he joined the U.S. Communist Party from 1933 to 1939. He then retired in the midst of Cold War anti-communist fever in 1955. He was deported from the United States in 1956.

The Social Security Act specifically says no benefits can go to anyone deported for being a communist, but Comrade Nestor may yet have the last laugh. He forced our highest court to rule that Social Security benefits are not "property." The Fifth Amendment's Takings clause does not apply.

The Constitution's Due Process clause does apply, but is little comfort. "Due process," in this context, simply means that Congress can change its mind anytime it wants.

The government can cancel the whole program tomorrow. They can stop paying benefits to retirees, but continue withholding taxes from workers. They can do whatever they want because we elected them. That's what due process means.

Now, realistically, no one needs to worry about Social Security disappearing. Congress knows better than to kick that hornet's nest. Nevertheless, the Flemming vs. Nestor decision ought to make us re-think the status of Social Security taxes and benefits.

Because FICA and Medicare liabilities start with your very first dollar earned, most Americans pay more on those taxes than on income tax. There are no deductions or exemptions. If you earn a living legally, you pay the tax.

The common belief that FICA and Medicare taxes "earn" you some kind of benefit is completely false. They are simply a regressive wage income tax. This mechanism lets politicians tax the poor much more heavily than they admit.

On the other end of the bargain, people currently receiving Social Security benefits are not reaping the reward of a long working life. The benefits are a gift that Washington officials dole out because they believe they are is politically expedient. In other contexts, we call such payments "welfare."

Am I saying retirees don't deserve their benefits? No. I am criticizing politicians who routinely portray Social Security as something that our "rule of law" long ago decided it is not. They are either lying or ignorant of the facts.

Like so many other aspects of our government, reality and perception are two different things. Congress likes it that way.

© 2014 Moneynews. All rights reserved.

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