Leonardo Angiulo: Using Contract Law To Spur Congressional Action
Monday, October 14, 2013
Wait, you didn't know? Yeah. Social Security. Not going to be around forever. For a lot of people this is kind of like that day when some bully told you the Santa Claus at the mall was just a guy in a fake beard. As in, your mom lied to you, kid. There is no Santa, the Tooth Fairy doesn't leave money under your pillow and I ate the Easter bunny for dinner two nights ago. Game over. And, please, the state retirement systems won't save you. Reach out to the Detroit Police Officer's Association and let me know what they have to say about state pension plans.
Setting the record straight
Okay, now that I've gotten all that out, lets talk about some facts. Fact # 1: in 2009, the Social Security Administration sent out a mailing that included a column titled “Will Social Security still be around when I retire?” And they said “yes.” Except what they meant at that time was that in 2041 the trust fund would be depleted and those receiving at that time would get about 78% less. The mailing made no forecast farther into the future.
Fact #2 is that time marches on and in May of 2013 no mailing went out. An online “News Release” did however. In said release, the Social Security trust is now expected to deplete in 2033 resulting in benefits of 77% being payed out at that time. With operating costs expected to exceed income starting in 2021 that 77% figure will only go lower over time because basic math says if you spend more than you make you eventually run out of resources to distribute.
Here's the kicker: the only way these figures work is if the government continues to take Social Security deductions out of payrolls. So, to recap, if you are 30 right now you will be 50 when SSI distributions are at 77%. And if you work another 20 years we can only expect that benefits will be cut further. Say you lose another 25% in benefit during the next 20 years before you turn 70. That means if you got promised $1000, they take a portion of your income for the next 40 years based on that promise, and you get $577.50 back instead.
This leads me to an interesting point in basic contract law called “breach of contract.” Basically, if I make a promise to you, and fail to deliver on that promise I can be sued for that failure. Let's say I take an envelope of cash from you and promise to return with a case of beer. When I appear with a 12 pack I have failed to deliver on our agreement and I am in breach of our contract. If you sue me, you would be entitled to the lost benefit of our bargain: the monetary value of the difference between what you were promised and what I delivered.
Whose burden to bear?
Of course, in a traditional contract you have an offer made by one party, the acceptance of that offer by the other party and an exchange of consideration between them. Social Security is, in fact, the product of legislation, so in some ways it's a contract between the government and the people. In other ways, however, its really just another program that Congress needs to allocate federal resources for. Another truth of the world is that there are some things that lawsuits just won't fix.
To be clear, I really like the idea of retiring someday. In fact, I really like the idea of getting a Social Security check to help pay for groceries, gasoline and maybe gifts for grandkids in my old age. I don't, however, like being told Social Security payments are going to slow to a trickle unless Congress takes action.
Leonardo Angiulo is an Attorney with the firm of Glickman, Sugarman, Kneeland & Gribouski in Worcester handling legal matters across the Commonwealth. He can be reached by email at email@example.com.
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