The Lincoln Plawg - the blog with footnotes
Sunday, April 10, 2005
Social security trust funds - there's case-law, of course
The Democrat lie is that these funds are stuffed full of assets; the fact, as stated in Clinton budget documents, is that they are bookkeeping entries.
The lie is so damned useful, the Dems aren't giving it up any time soon. But - unlike some other areas of controversy - there are some means available for throwing light on the question .
The 1960 SCOTUS case of Flemming v Nestor is distressingly widely quoted . However, it does seem to govern the status of Federal social security benefits.
The court decided that beneficiaries had no accrued property rights the defeasance of which would infringe the Fifth Amendment Due Process Clause. The only limitation on government action affecting social security was rational basis scrutiny.
This isn't dispositive, necessarily, of the question whether the trust fund exists, or is a mere bookkeeping entry, though. One might compare a charitable trust - one of the Heinz trusts, for instance: recipients might, failing contractual arrangements to the contrary , have no right to benefits from the trusts, but they none the less clearly have legal existence (and recognised as such by the IRS, amongst others).
And in some states, retirement arrangements for government employees have been found to give rise to trusts. According to this paper (DOC), plans in West Virginia and (I think) Wisconsin come into that category.
The mega-fund CalPERS became a trust as a result of a constitutional amendment by initiative in 1992 - according to a CA Third District decision (PDF) in Westly v CalPERS - which makes one wonder (though not right now research) what its legal status was before the amendment was made.
Whatever it was, it was entirely different in substance from the Federal social security trust funds, in that it held, and holds, securities in unrelated companies. Very far from being a mere bookkeeping entry.
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