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The Great Social Security Scam


A common myth of Social Security is that it is an entitlement. People pay "into the system" through contributions and expect a legally guaranteed payout when they retire. This could not be further from the truth and it is one of the biggest scams perpetrated on the American people by the federal government. It began with good intentions (as all government programs do) and became a vehicle for elderly and middle-class dependency on government. It has helped to destroy the foundations of the family structure and remove the responsibility of people to provide for their own retirement.

In two cases, Helvering v. Davis 301 U.S. 619 (1937) and Flemming v. Nestor 363 U.S. 603 (1960), the Supreme Court ruled that Social Security taxes convey no property or contractual rights to any said benefit. Benefits could be reduced, increased, or eliminated entirely at the political whim of Congress and the President.

The Helvering case involved an action by a shareholder of the Edison Electric Illuminating Company of Boston, MA. The shareholder wanted the corporation to stop any payments and deductions under the Social Security Act pending adjudication of the constitutionality of the Act. The Supreme Court heard the case after the federal government appealed a lower court ruling stating the Act was unconstitutional.

The Supreme Court had to determine if the Social Security Act was an insurance program or a welfare program.

The court sided with the federal government deciding that it [Social Security benefits] was a welfare program, not an insurance program, and therefore constitutional.

[Therefore, it must go without saying that Medicaid / Medi-Cal is also a welfare program.]

The court noted in the Helvering case, "The proceeds of both employee and employer taxes are to be paid into the treasury like any other internal revenue generally, and are not earmarked in any way." The court left it to Congress to decide how the welfare programs would fall under the Constitution's General Welfare Clause. It is simply another income tax. Social Security benefits are merely promises made by politicians.

The Flemming v. Nestor decision determined the legal relationship the worker had with the U.S. government concerning his payroll taxes. Were the taxes paid into Social Security by the worker and employer considered property owned by the worker? If Congress legislatively reduced or eliminated benefits, could a citizen sue under the 5th amendment for the unlawful seizure of property?

Ephram Nestor was deported to his native Bulgaria in 1956 after being classified as a Communist Party member. From 1936 to 1955 Nestor and his employers paid the required Social Security taxes under the Social Security Act. In 1954 Congress passed a law that all Social Security benefits would be eliminated for anyone with Communist Party affiliation. Nestor sued claiming the government unlawfully confiscated his property; his property being his Social Security benefits.

The Supreme Court disagreed and sided once again with the government.

The court ruled that Congress expressly reserved the right to "alter, amend, or repeal any provision " of the Social Security Act. The Court noted: "That provision makes express what is implicit in the institutional needs of the programů" The court concluded that persons covered under the Act have no such right to benefit payments and could not claim it as property protected under the Fifth Amendment.

What about the Social Security Trust Fund?

It is the sacred [cow] fund that all Social Security receipts are supposedly kept. Politicians talk endlessly about protecting or "lock-boxing" the Social Security Trust Fund.

Question:  If the people have no property right in Social Security as ruled by the Supreme Court, how can there possibly be a trust fund?

Answer:  There isn't a trust fund in the legal sense.

Charles E. Rounds Jr., author of Loring: A Trustee's Handbook defines a trust as follows: "A 'trust' is a fiduciary relationship with respect to 'property.' The trustee takes title to the property for the benefit of the beneficiary." The trustee's duty is to act solely in the best interest of the beneficiary. The trust fund is a political gimmick. All Social Security taxes are paid into the treasury and disbursed to politically protected groups as determined by Congress and the President.

The language used to describe Social Security is quite Orwellian. Social Security taxes deducted from your paycheck under the name FICA (Federal Insurance Contribution Act) are called "insurance contributions." These "contributions" are held in the "Social Security Trust Fund" to pay "Old-Age and Survivors Insurance" benefits. Even the name Social Security conveys a sense of insurance and trust.

Since Social Security is a welfare program, we must "end welfare as we know it" and eliminate Social Security. Current retirees who are receiving benefits will continue to get their checks as well as those people just beginning to retire. Former Libertarian presidential candidate Harry Browne suggested that the federal government purchase a one-time annuity to pay for current retirees and disabled recipients at their current levels. This would be funded by selling off federal assets that are no longer needed or are unconstitutional. The FICA tax would be repealed and every taxpayer would receive a 12.4% raise.

If Social Security was abolished, savings and investments would soar. By not having a safety net when a person hits 65 or older, people will take it upon themselves to properly save for their retirement. Fiscal responsibility would fall back into the hands of individuals and families rather than government. That might be a scary prospect for some who lack the responsibility to save or are just too lazy. For many others, it will be a welcome chance to build substantial wealth and the freedom it affords.

[Emphasis & Pictures Added.]


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C. Francis Baldwin
Updated Wednesday, May 26, 2004