Posted on 01/24/2005 1:55:38 PM PST by Conservative Coulter Fan
May 24 marks the 66th anniversary of Helvering v. Davis (1937), in which the Supreme Court found Social Security constitutional. With Social Securitys prospects shaky, and overhaul inevitable, this is an appropriate time to re-examine Helvering v. Davis and Social Securitys constitutionality.
Helvering v. Davis was heard when the Court faced the worst crisis of its history. Indeed, the most important thing about this case is its political context.
Franklin Roosevelts New Deal was immensely popular with the public and he dominated the lopsidedly Democratic Congress. Only one thing thwarted Roosevelt: the Supreme Court.
Four Justices, George Sutherland, Willis Van Devanter, Pierce Butler, and James McReynolds, believed that the Constitution should be interpreted conservatively, according to the intent of the Framers. In their view, the federal government could not intervene in economic or local matters, and the Tenth Amendment "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people" narrowly confined its legitimate activities. So the New Deal was invalid. Chief Justice Charles Evans Hughes and Owen Roberts often concurred. The liberal Justices, Harlan Fiske Stone, Louis Brandeis, and Benjamin Cardozo, believed that the Constitution had to be interpreted flexibly, to meet changing circumstances. A clause in Article I, Section 8, empowering Congress to impose and collect taxes "to pay the Debts and provide for the common Defence and general Welfare of the United States," they believed, authorized New Deal laws.
The Roosevelt Administration feared that the Court would rule that the Constitution did not permit federal tax-financed old-age insurance. While the Social Security bill was in Congress, the Court invalidated the Railroad Retirement Act, which resembled Social Security. So the Administrations allies on the House Ways and Means Committee weeded the insurance language out of the bill and physically separated the tax and benefits titles in the text so they wouldnt look like an insurance program.
Meanwhile, the Supreme Court hammered the New Deal. On May 27, 1935, in a crushing defeat for Roosevelt, it voided the National Industrial Recovery Act and the Frazier-Lemke Farm Bankruptcy Act. It struck down the Agricultural Adjustment Act on January 6, 1936, the Guffey Coal Act on May 18, and the Municipal Bankruptcy Act and a New York state law setting minimum wages for women on May 25.
Enraged, Roosevelt decided to subdue the Court. His megalomania inflated by his 1936 landslide, on February 5, 1937 he abruptly asked Congress to enact a bill empowering him to appoint one additional Justice for every one who turned 70 and did not retire, for a maximum of six, thus enlarging the Supreme Court from nine Justices to up to fifteen.
A firestorm ensued. Critics rightly called Roosevelts proposal a plan to pack the Court. Even liberals who deplored the Courts decisions, including many congressional Democrats, opposed it.
Its arm cruelly twisted by Roosevelts threat to its independence, the Supreme Court began surrendering in self-preservation. On March 29, the Court upheld a revised Frazier-Lemke Act; the National Firearms Act; the Railway Labor Act, which promoted collective bargaining; and a Washington state law providing for minimum wages for women.
Then cases arose involving the blatantly pro-labor Wagner Act and the Social Security Act. The Court was in a hideous bind. Most of the Justices opposed the expansion of government power which these laws entailed but if they voided them, Congress would probably enact Roosevelts Court pack.
On April 12, the Court upheld the Wagner Act. On May 18, Van Devanter announced his imminent retirement, enabling Roosevelt to nominate a Justice.
The case for his bill was weakening. But Roosevelt would not quit.
Such was the situation when the Supreme Court considered the Helvering v. Davis case. On November 12, 1936, George Davis, a stockholder of Edison Electric Illuminating Company of Boston, sued, alleging that the Social Security tax was unconstitutional, and asking that the company be kept from paying it. The U.S. District Court for the District of Massachusetts upheld the tax, but the Circuit Court of Appeals reversed it. IRS Commissioner Guy Helvering asked that the case go to the Supreme Court.
Social Security was immensely popular in Congress and in the country. If the Court killed Social Security, it could revive the Court pack. Surely the Justices knew that as the studied the Administrations brief.
Among the issues to be decided, it stated, were whether Social Securitys taxes were valid exercises of the taxing power in Article I, Section 8; whether providing the benefits was valid under the "general welfare" clause; and whether Titles VIII and II, the tax and benefit titles for old-age benefits, taken together, are an exercise of powers not granted by the Constitution.
Next, the brief described the Act. Title IIs old-age benefits "are gratuities (not based on contract, but based on a Congressional direction expressly subject to amendment or repeal)." Title VIIIs taxes "are not earmarked for any special purpose." They are "true taxes, their purpose being simply to raise revenue . . . available for the general support of Government." But in 1935 the Administration had told Congress and the public that the purpose of the taxes was to build up a fund to pay old-age annuities.
Obviously, the reason for calling Social Securitys levies "true taxes" was to argue that they were valid exercises of the taxing power, which the brief did. It also argued that indigence in old age was a national problem too big for private charity and state governments, and that old-age benefits were therefore valid expenditures to promote the general welfare. Since the titles were valid separately, they were valid in combination, too.
As to the charge that Titles II and VIII, taken together, create "a scheme for compulsory insurance invalid under the Tenth Amendment," the brief denied this, flatly contradicting the Administrations testimony to Congress in 1935 and its promotion of Social Security after passage as "insurance" and "annuities": "Whether or not the Act does provide an insurance plan within the accepted meaning of the term insurance is a doubtful question."
The Administration contrasted World War Is War Risk Insurance for servicemen, which had policies which, "being contracts, are property and create vested rights," with pensions, which are "gratuities" involving neither contracts nor vested rights and which Congress could take away. Not possessing the legal properties of insurance, Social Security wasnt insurance, hence was constitutional.
The Act, the governments summary statement declared flatly, "does not constitute a plan for compulsory insurance within the accepted meaning of the term insurance." In oral arguments, Assistant Attorney General Robert Jackson reiterated that there was no contract entitling anybody "as a matter of right to sue the United States or to maintain a claim for any particular sum of money," and reminded the Court that it had held that a pension granted by the government is a "bounty" to which the pensioner "has no legal right." Yet for two years, Administration officials had told Americans that Social Security was insurance and that benefits would come "as a matter of right." The duplicity is obvious.
Whether or not Social Security "may properly be designated as old age insurance" was "completely immaterial." The law involved a valid use of the taxing power and valid spending of money for the general welfare, so it was valid "whether it was labelled as insurance or not." So why was that label purged from the bill?
Arguing before the Court on Daviss behalf of May 5, Edward McClennen demolished the claim that Social Securitys tax was simply for raising general revenue. Taxing the smallest wage earners and exempting income above $3,000 a year is, he observed, an odd way to raise general revenue. And if that was the goal, why not tax laborers exempted from the Social Security tax? Obviously, because the benefits would be "limited to the same classes of people." The Justices ignored McClennens points.
Voting 7-2, the Supreme Court found Social Security constitutional. Justice Cardozo wrote the majority opinion, joined by Justices Brandeis, Stone, Hughes, Roberts, Van Devanter, and Sutherland.
Cardozos first three pages describe Social Securitys tax and benefit titles, following the brief almost verbatim. About a page and a half describe Daviss suit and its treatment. Another page gives Cardozos view that the Court should dismiss the case and reports that most of the Justices disagreed. The opinions arguments are mostly in five pages maintaining that Title IIs benefit scheme does not conflict with the Tenth Amendment. There are about two pages of actual argument, that Congress may spend money to promote the general welfare; that what the general welfare is changes with the times, and that the Depression had made old-age poverty a national problem; that Congress didnt arbitrarily decide that old-age benefits would promote the general welfare, but drew on documents and hearings; that the wisdom of old-age benefits is for Congress to decide, not the Court; and that the concept of general welfare is for Congress to decide, not the states. The first two of these, occupying about three-quarters of a page, use language resembling the briefs. Altogether, of twelve pages, there are almost nine of description, six of them essentially lifted from the brief; about a page on miscellany; and roughly two pages of constitutional argument, of which about three-quarters of a page is largely from the brief.
Regarding whether Titles II and VIII together were an invalid old-age insurance scheme, Cardozo merely noted Daviss argument that they dovetail so as to justify concluding that Congress would not have passed one without the other, and the governments opposing position that Congress could spend the revenue as it willed. "We find it unnecessary to make a choice between the arguments, and so leave the question open." So the Court ducked the core issue of whether Social Security is an unconstitutional government insurance program. Why?
Moreover, Cardozo evaded McClennens exposure of Social Security as a program of taxes for old-age benefits, and rebutted only his final, ungermane argument: that Social Security regulated the internal affairs of Massachusetts.
The majority of the Helvering v. Davis majority, Hughes, Roberts, Van Devanter, and Sutherland, were conservatives. Most had bitterly criticized the New Deal. Can anybody really believe that they found Cardozos half-baked opinion, mostly lifted from the Administrations brief, an adequate expression of their views on Social Securitys constitutionality?
McReynolds and Butler dissented but wrote no opinions. Did they have nothing to say? Or were they afraid of Roosevelt?
In saving Social Security, the Court saved itself and people knew it. The decision, the Washington Post opined, drove "another nail in the coffin of the Presidents plan to enlarge the courts membership. Roosevelts Court pack failed, and Helvering v. Davis was a factor.
But its validity is shaky. Cardozos opinion is laughably weak: leaning on a brief full of duplicitous arguments, ignoring McClennens exposure of Social Securitys true purpose, and ducking the main issue. Clearly, the Court upheld Social Security for one reason only: Roosevelt was holding a gun to its head. Helvering v. Davis was a political act of self-preservation, made under duress. We know what things obtained under duress are worth.
Given all that, the issue of Social Securitys constitutionality, far from being settled, remains wide open. Somehow I doubt that the Framers, who after all meant the Constitution as a fetter on expansive government and not a blank check for it, intended the Constitution to authorize a tax-devouring engine of dependence on the State like Social Security. The purported constitutionality of Social Security rests on sloppy argument, willful evasions of reality, and, ultimately, frightened submission to one of the worst acts of tyrannical bullying in the federal governments history. Here again the reality of Social Security is radically at variance with the myths. The case for holding this program inviolate collapses accordingly.
John Attarian (send him mail) is a writer in Ann Arbor, Michigan, with a Ph.D. in economics. His book Social Security: False Consciousness and Crisis, which treats the myths and realities of Social Security in detail, has just been published by Transaction Publishers.
Copyright © 2003 LewRockwell.com
Is Social Security Constitutional? (My Thread)
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Precisely so.
There are a bunch of Freepers running around on this site supporting SS.
Well, Im not one of them and Ill be the first to challenge them to defend the largest federal program in exstence, a compulsory program that forcibly confiscates money from citizens against there will, a program that takes contol over our lives with respect to our retirement, a program that operates like a pyramid scheme, and a program that violates the law of land and a program that will collapse unless the government cuts benefits (SCOTUS ruled in 1960 that wehave no rights regarding payroll taxes) or economically ruinous tax inceases.
You're right. But the question is one of political will and political pragmatism. The defense of a program that is used today by hundreds of thousands of voters and is included in retirement plans today by even more voters should not be difficult. It is really for those who realize the program is not constitutional to devise a way to discard it that would pass inspite of these huge numbers supporting it.
Now, privitization is such a plan. First a little privitization, then more privitization, then finally hey, you should have control over how much of your money is invested from your paycheck, to the last step, people voluntary opting out. Now that you have forced me to divulge Bush's complete plan, you can see why democrats want to stop privitization at all costs.
Most of these people are trolls who use old sign-up dates. One person is running around saying Bush is using this as a campaign donation payback scam. Her screen name is LPM1888.
You are right in quoting Scalia, "If you want that right,
pass a law." That is exactly what people thru the congress
did. I find it ironic that we conservatives who hate to
see unelected, unaccountable judges in the Judiciary
arbitrarily overturn the Legislative (which reflects the
will of the people) are willing to overlook such a
decision when it suits personal ideology. Social Security
was (and is) so much a part of the fabric of American
society that there can't be any serious debate about its
existence. Even the most conservative Republicans only
want to REFORM it, not dismantle it. Rather than have
a pseudo-debate about a 1935 law, we should think about
the future and how to improve things for the next
generation. Or perhaps we should revisit Dred Scott and
waste time arguing about that decision.
Hell, there are Freepers who support no knock warrants, "civil forfeiture", abortion, and every facet of the WOD no matter who unconstitutional, intrusive, or just flat wrong.
Yep, and I spend a fair amount of time exposing them.
It is interesting to note that in Helvering v. Davis, the phrase "general Welfare of the United States" does not appear. The only term used is "general welfare".
Your tone was nothing short of condescending and you owe it to the falisty of your argument. See, I do complain about the unelected, unaccountable judges in the Judiciary. In fact, I'm arguing that the court deemed Social Security "constitutional" on what can be at best called a "misinterpretation." In order for us to overcome the problem I've raised, constitutionality, we would need an amendment to the Constitution effectively expanding the enumeration of powers under Article 1, Section 8. We've never had such an amendment. We've merely had the court, in a 1937 case, issue a judicial fiat to that effect. As you can read above, the author believes that the court was essentially doing so merely to preserve itself and stave any further action by FDR to alter the court or expand it. I would say that abolishing the program would be the greatest improvement for the future generations.
Of course not, the vast majority of pro-democrats believe SS is a redistribution of wealth and they are collectively for it. the problem is that even conservative republicans believe that "they should get back what they put in". and as such are not likely to listen to arguements starting out saying the program is unconstitutional. There is a reason that SS has been dubbed the "third rail" of politics, "touch it and you are dead". I have talked to these republicans and even when they know they stand to take out much more than they put in, they somehow believe that the money has an IOU with their name on it. Thats why wholesale fixing, (including termination ) won't fly.
As far as Rove having a republican take over in mind, he may. I have not studied this guy, but democrats certainly think he thinks like this. I would not like much having our work for conservatives simply gettin us a collectivist with a different letter after his name.
Of course some privatization is better than the current system, besides it will spur investment in the market and lead (unfortunately for the democrats) in people believing they have an account growing in wealth which is theirs. This "wealth effect" precedes a country prosperity. Not a bad deal eh?
The stock market historically has done even better than you stated, more like 8 % per year.
I wonder if it would at all be possible to solicit the opinion of Justice Scalia on this debate, the case, and see where he comes down.
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