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On social media, people regularly argue that Americans earn their Social Security benefits by paying into the system and that Social Security is not a handout or government gift. They imply that receiving Social Security is a right and that any reduction in the amount or growth of Social Security benefits is morally wrong.
Of course, the posts usually garner quite a few “likes,” especially from older folks who are on Social Security. Indeed, as Bohanon soon plans to file for his benefits, he is becoming increasingly sympathetic to this view.
Nevertheless, it seems to us the Supreme Court settled the issue in 1960, in Fleming v. Nestor. Ephram Nestor, a legal U.S. resident who had migrated from Bulgaria in 1913, had paid into the Social Security systems for 19 years. He was deported from the United States in 1956 because of his affiliation with the Communist Party in the 1930s.
In 1954, Congress had amended the original Social Security legislation to terminate benefits for recipients deported on such grounds. Nestor’s lawyers appealed, claiming his Social Security benefits were an “accrued property right” protected by the “taking clauses” of the Fifth Amendment. A lower court agreed, but the government appealed to the U.S. Supreme Court.
In a 5-4 decision, the Supreme Court said no, ruling that Congress defines Social Security and can change the benefits. Speaking for the majority, Justice John M. Harlan II argued, “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. … It was doubtless out of an awareness of the need for such flexibility that Congress included in the original Act, and has since retained, a clause expressly reserving to it ‘[t]he right to alter, amend, or repeal any provision of the Act.’”
The most recent estimate by the Social Security Trustees is that, in 2033, the Old Age and Survivors portion of the Trust Fund will be depleted, and the revenue from Social Security taxes will be sufficient to cover just 79% of the promised benefits if Congress takes no action. Of course, there are numerous ways to mitigate a 21% benefit cut. However, Congress must either raise taxes, reduce benefits or both.
We conclude that reducing benefits is more of a matter of arithmetic than of righteous indignation. But who knows? The Supreme Court has previously overturned its own rulings and might do so again.•
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Bohanon and Horowitz are professors of economics at Ball State University. Send comments to ibjedit@ibj.com.
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