Most Americans have probably never heard of the 1960 U.S. Supreme Court ruling, Flemming v. Nestor. It is one of several important facts about Social Security that are unknown to the public. The essence of the ruling is that nobody has an “earned right” to Social Security benefits, no matter how much money they have paid into the program.
The court upheld the denial of benefits to Nestor even though he had contributed to the program for 19 years and was receiving benefits. In it’s ruling, the Court established the principle that entitlement to Social Security benefits is not a “contractual right.” This Court ruling was specific and without conditions. It made it legal for the government to deny benefits to people, no matter how much money they had contributed to the program.
The government has a moral obligation to repay the Social Security money, but it does not have a legal obligation to repay any of the $2.8 trillion that it owes to the trust fund. If the government chooses to cut Social Security benefits, or even to terminate the entire program, the American people have no legal recourse. Section 1104 of the Social Security Act specifically states, “The right to alter, amend, or repeal any provision of this Act is hereby reserved to the Congress.” This means that the future of Social Security is totally in the hands of Congress and the President. If the President and Congress should choose to cut benefits, or eliminate the whole Social Security program, they could do so, and there is nothing the public could do about it, except to vote to remove the politicians from office at the next election.
A frequently made false statement is that the Social Security trust fund has enough money to pay full benefit payments for another twenty to thirty years. That statement is false. The only thing that Social Security has is government IOUs, which cannot be used to pay benefits or converted into cash. The amount of Social Security revenue that comes in annually, fell below the cost of paying full benefits in 2010, and each year the gap between revenue and the cost of paying full benefits becomes larger and larger.
The 1983 payroll tax increase was designed to generate large surpluses for 30 years, and the surplus revenue was supposed to be saved and invested in marketable U.S. Treasury bonds, which would be held by the trust fund until the baby boomers began to retire. But politicians from both parties transferred the surplus revenue into the general fund where it could be spent for anything. Most of the Social Security surplus revenue was used to pay for such things as wars, tax cuts and other general government programs.
The government “stole” or “borrowed” every dollar of the $2.8 trillion in surplus revenue generated by the 1983 payroll tax increase. The word, “borrowed”, usually implies repayment, but the government has made no provisions for repayment of the money. Given the fact that higher taxes and/or cuts in other government programs would be required to pay back the Social Security money, conservative politicians will almost certainly oppose efforts to raise taxes in order to repay a debt that the government is not legally required to pay.
Source