Alex Tabarrok at Marginal Revolution argues that there is no moral justification for not requiring current and soon-to-be retirees from sharing in the burden of fixing Social Security.
The political reasons for this are obvious but economically and morally the idea is as bankrupt as the program itself. It’s the current (and past) retirees who have gotten the best deal from social security – many of them did better than they could have done in any other investment.
He cites as an example the generally well-know case study of Ida May Fuller, the very first recipient of Social Security.
Now, few are as opposed to the current Social Security system as I, and few have blogged as much I have on the subject (see archive below). But in this instance, Alex is mistaken, and invoking the Ida May Fuller example is invalid.
In contract law there is a concept known as detrimental reliance, also known as promissory estoppel. Without reaching for a hornbook, it roughly means that even when a contract is found not to exist legally, one party can still be required to perform (or pay damages) as if a contract actually had been created.
A classic example is when a wealthy benefactor promises a university to make a major gift in the future, with no strings attached. Such a promise is not a legally enforcement contract. But if the university, relying on that promise, builds a new lecture hall that it would not have built but for the promise (i.e., if it reasonably relied on that legally unenforceable promise), and if the benefactor suddenly reneges, then the university may be able to legally enforce the promise.
Now, it is well-settled that there is no “right” to one’s Social Security benefits (in Wall Street terms, benefits never “vest”). Congress could legally cut benefits tomorrow, and current retirees would have no recourse.
But that’s not Tabarrok’s point: he’s making a moral claim. Well, the moral claim in my opinion lies more in detrimental reliance, and I would submit that, morally, retirees are absolutely entitled to every penny of their current benefits. They made decisions, in terms of saving, investment, consumption, tax planning, estate planning, perhaps even family planning, in reliance on the promise, by every politician of every stripe for three generations now, that their Social Security benefits would be forthcoming.
By the same token, the Ida May Fuller example is totally inapposite. Fuller was promised nothing. She in no way ever relied to her detriment on promises, legally binding or not, from the government or the politicians within it. She just started getting money out of the blue. That is in no way comparable to the situation of current retirees.
The moral high ground is very valuable real estate, especially when it comes to Social Security reform. Let’s not lose it via confused arguments. Retirees are morally entitled to their benefits, and it would be a critical philosophical (and strategic) error to suggest otherwise.
It’s not about the past; it’s not even about the present. It’s about the future.
POST SCRIPT: I didn’t say anything about cost-of-living adjustments for current retirees. Abolish them immediately!
For Discussion: Can opponents of gay marriage make any kind of “detrimental reliance” claim for maintaining the status quo of anti-gay discrimination?
Related Posts:
Social Security: “You Can’t Handle the Truth”
Social Security: Who’s Afraid of the Big Bad Trillion?
The Other Pension Crisis
The Social Security Meta-Crisis
Social Security: Read It and Weep
Social Security: What’s in the “Lockbox”?
