February 11, 2005

The phrase “guaranteed benefits” has been used a lot recently to describe the future benefits under the existing Social Security system. It shouldn’t be; benefits under Social Security are not guaranteed.

In 1960, the Supreme Court of the United States in Flemming v. Nestor ruled that you have no legal right to your Social Security benefits. The Court went on to say that your Social Security payroll taxes are just that: a tax, not a "contribution." And your benefits are part of a government spending program, no different in the eyes of the law than corporate welfare or farm subsidies.

Because of the Court’s decision in Flemming v. Nestor, Congress can cut your benefits at any time or even eliminate them altogether. Unfortunately, deep cuts in Social Security are not out of the question. "Saving" Social Security without individual accounts could require a 50% increase in Social Security taxes or a 27% cut in benefits.

The only way to guarantee benefits would be through personal retirement accounts. In fact, under the Cato Institute’s own plan, The 6.2 Percent Solution, you would be given a recognition bond for the contributions you made under the traditional Social Security system, which the government could never take away. In addition, you would be permitted to invest 6.2 % of your wages – your half of your overall Social Security contribution -- into a personal retirement account. The government could never take that away from you either.

Now that is a guarantee.

www.socialsecurity.org