NCPA - National Center for Policy Analysis

Social Security's Bankruptcy Will Force Benefit Cuts

April 27, 2000

Despite widespread popular belief, Social Security benefits are not "guaranteed." Social Security's impending bankruptcy will lead to benefit cuts, warns the Concord Coalition.

  • The landmark Supreme Court case Flemming v. Nestor (1960) determined that workers have no property right to Social Security benefits -- therefore Congress can change benefit formulas at will.
  • When the Social Security Trust Fund runs out of money in 2037, Congress will be free to make up the budget shortfall by cutting benefits.
  • A typical worker born in 1960 stands to lose 8 percent of his or her lifetime benefits, a worker born in 1980 will lose 29 percent and a worker born this year will lose 33 percent.

Supporters of the status quo suggest the budget shortfall can be made up by committing general revenue funds. However, Congress recognizes that breaking the link between Social Security's revenues and expenditures would change the program from a self-funded elderly entitlement to an expansive welfare system and undermine the program's popularity.

Source: "What Happens to Benefits When Social Security Goes Bankrupt?" Facing Facts Alert, April 19, 2000, Concord Coalition.

 

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