Obama’s Inadvertant Admission

wheres-my-moneyPresident Obama has said that he cannot guarantee Social Security checks will go out on August 3 if the debt ceiling is not raised by August 2. In doing so, he presented the GOP with a golden opportunity to change the terms of the entitlement reform debate.

Democrats opposed President Bush’s timid and appeasing plan to privatize a mere tiny sliver of Social Security by allowing workers to deposit a portion of their FICA taxes into a private account in their own name. In this link, then candidate Barack Obama attacked John McCain for having supported Bush’s partial privatization plan, because it would ” would threaten [the receipt of] government retirement benefits.” Similarly, liberal think tanks like this one argued that privatizing any portion of Social Security was “too risky” and a form of “gambling.”

But for all the talk of the benefits of government guarantees, President Obama has now made clear what should have been clear long ago. There is no Social Security Trust Fund. There are no hard assets the federal government is holding that could pay Social Security benefits. There is no guarantee of anything from the government. SCOTUS made this clear in several decisions, including Fleming v. Nestor, but President Obama has now concretized that principle by threatening to withhold Social Security payments.  In fact, the Social Security website itself has a page devoted to that case, on which it incredibly admits that

“The fact that workers contribute to the Social Security program’s funding through a dedicated payroll tax establishes a unique connection between those tax payments and future benefits. More so than general federal income taxes can be said to establish “rights” to certain government services. This is often expressed in the idea that Social Security benefits are “an earned right.” This is true enough in a moral and political sense. But like all federal entitlement programs, Congress can change the rules regarding eligibility–and it has done so many times over the years….There has been a temptation throughout the program’s history for some people to suppose that their FICA payroll taxes entitle them to a benefit in a legal, contractual sense…. In its ruling [in Fleming v. Nestor], the Court rejected this argument and established the principle that entitlement to Social Security benefits is not contractual right.”

If there is any “gamble” associated with Social Security, it is whether the government will choose to pay you anything.

Making the implications of this admission clear to the American people could permanently alter the debate on entitlement reform. The GOP should start running commercials with Obama’s own words, and explain again to Americans why the only way they can guarantee money for their own retirement is through their own savings, not government handouts. Privatizing all of Social Security into an account with your own name on it is the only way to control the monies that will fund Americans’ retirement.

To paraphrase some of the quotes from then candidate Obama in the above linked article, deposits of FICA taxes into the government’s general fund rather than to a segregated fund in each worker’s name was a bad idea then and a worse idea now. It is time to give each American who pays FICA taxes his own account into which all FICA taxes may be deposited, so that each worker retains full ownership rights in the property that will be used to fund his retirement.

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