Sunday, October 31, 2004

Social Security Is Unconstitutional

I'm breaking away from election-related posting to touch briefly on a subject close to my heart: the unconstitutionality of Social Security. The Social Security Administration tells us this:
Three Social Security cases made their way to the Supreme Court during its October 1936 term. One challenged the old-age insurance program (Helvering vs. Davis) and two challenged the unemployment compensation program of the Social Security Act. The Court would issue rulings on all three on the same day.

Helvering vs. Davis:

George P. Davis was a minor stockholder in the Edison Electric Illuminating Company. Edison, like every industrial employer in the nation, was readying itself to start paying the employers' share of the payroll tax in January 1937. Mr. Davis objected to this arguing that by making this expenditure Edison was robbing him of part of his equity, so he sued Edison to prevent their compliance with the Social Security Act. The government intervened on Edison's behalf and the Commissioner of the IRS (Mr. Helvering) took on the lawsuit.

The attorneys for Davis argued that the payroll tax was a new type of tax not listed in the Constitution's tally of taxes, and so it was unconstitutional. At one point they even introduced into their argument the definitions of "taxes" from dictionaries in 1788 (the year before the Constitution was ratified) to prove how earnest they were in the belief that powers not explicitly granted in 1789 could not be created in 1935. Davis was also of the view that providing for the general welfare of the aged was a power reserved to the states. The government argued that this was too inflexible an interpretation of the powers granted to Congress, and (loosely) that if the country could not expand the interpretation of the Constitution as it stood in 1789 progress would be impossible and it would still be 1789.

Steward Machine Company:

In the Steward Machine Company case the unemployment compensation provisions of the Act were disputed. The Company dutifully paid its first unemployment tax installment ($46.14) and then sued the government to recover the payment, claiming the Social Security Act was unconstitutional. Steward made the same as points as Davis about the meaning of the word "tax," and argued in addition that the unemployment compensation program could not qualify as "providing for the general welfare."

Carmichael vs. Southern Coal & Coke Co. and Gulf States Paper:

This was also a case disputing the validity of the unemployment compensation program. In this variation the companies were challenging the state portion of the federal/state arrangement. Unwilling to pay their share of state unemployment compensation taxes the two companies sued the state of Alabama declaring that it was the Social Security Act, which they deemed unconstitutional, that gave Alabama its authority to tax them in this way and since they believed the Act to be invalid, they did not have to pay the tax. Alabama differed. It was again the same issues as in the two prior cases.

Mr. Justice Cardozo for the Court-

On May 24, 1937 the Supreme Court handed down its decision in the three cases. Justice Cardozo wrote the majority opinion in the first two cases....

Mirroring the situation in Congress when the legislation was considered, the old-age insurance program met relatively little disagreement. The Court ruled 7 to 2 in support of the old-age insurance program. And even though two Justices disagreed with the decision, no separate dissents were authored. The unemployment compensation provisions, by contrast, were hotly disputed within the Court, just as they had been the focus of most of the debate in Congress. The Court ruled 5 to 4 in support of the unemployment compensation provisions, and three of the Justices felt compelled to author separate dissents in the Steward Machine case and one Justice did so in the Southern Coal & Coke case.

Justice Cardozo wrote the opinions in Helvering vs. Davis and Steward Machine. After giving the 1788 dictionary the consideration he thought it deserved, he made clear the Court's view on the scope of the government's spending authority: "There have been statesman in our history who have stood for other views. . .We will not resurrect the contest. It is now settled by decision. The conception of the spending power advocated by Hamilton . . .has prevailed over that of Madison. . ." Arguing that the unemployment compensation program provided for the general welfare, Cardozo observed: ". . .there is need to remind ourselves of facts as to the problem of unemployment that are now matters of common knowledge. . .the roll of the unemployed, itself formidable enough, was only a partial roll of the destitute or needy. The fact developed quickly that the states were unable to give the requisite relief. The problem had become national in area and dimensions. There was need of help from the nation if the people were not to starve. It is too late today for the argument to be heard with tolerance that in a crisis so extreme the use of the moneys of the nation to relieve the unemployed and their dependents is a use for any purpose [other] than the promotion of the general welfare."

And finally, he extended the reasoning to the old-age insurance program: "The purge of nation-wide calamity that began in 1929 has taught us many lessons. . . Spreading from state to state, unemployment is an ill not particular but general, which may be checked, if Congress so determines, by the resources of the nation. . . But the ill is all one or at least not greatly different whether men are thrown out of work because there is no longer work to do or because the disabilities of age make them incapable of doing it. Rescue becomes necessary irrespective of the cause. The hope behind this statute is to save men and women from the rigors of the poor house as well as from the haunting fear that such a lot awaits them when journey's end is near."

With these cases decided, Justice Stone could then dispose of the third case in short order. "Together the two statutes now before us embody a cooperative legislative effort by state and national governments, for carrying out a public purpose common to both, which neither could fully achieve without the cooperation of the other. The Constitution does not prohibit such cooperation."....
It is no coincidence that the Supreme Court reversed its record of opposition to the New Deal when faced with the certainty that Congress would approve Roosevelt's court-packing plan and dilute the authority of the sitting justices. As SSA tells it:
Despite the intense controversy the court-packing plan provoked, and the divided loyalties it produced even among the President's supporters, the legislation appeared headed for passage, when the Court itself made a sudden shift that took the wind out of the President's sails. In March 1937, in a pivotal case, Justice Roberts unexpectedly changed his allegiance from the conservatives to the liberals, shifting the balance on the Court from 5-4 against to 5-4 in favor of most New Deal legislation. In the March case Justice Roberts voted to uphold a minimum wage law in Washington state just like the one he had earlier found to be unconstitutional in New York state. Two weeks later he voted to uphold the National Labor Relations Act, and in May he voted to uphold the Social Security Act. This sudden change in the Court's center of gravity meant that the pressure on the New Deal's supporters lessened and they felt free to oppose the President's plan. This sudden switch by Justice Roberts was forever after referred to as "the switch in time that saved nine."
In the end, the Court decided wrongly to legalize Social Security by invoking Hamilton's supposedly looser view of the powers vested in Congress, and by improperly interpreting the "general welfare" clause.

Madison -- the "Father of the Constitution" -- had this to say about the general welfare in Federalist No. 41:
Some who have denied the necessity of the power of taxation [to the Federal government] have grounded a very fierce attack against the Constitution, on the language on which it is defined. It has been urged and echoed that the power to "lay and collect taxes, duties, imposts, and excises, to pay the debts, and provide for the common defense and general welfare of the United States" amounts to an unlimited commission to exercise every power which may be alleged to be necessary for the common defense or general welfare. No stronger proof could be given of the distress under which these writers labor for objections, than their stooping to such a misconstruction....

For what purpose could the enumeration of particular powers be inserted, if these and all others were meant to be included in the preceding general power? Nothing is more natural or more common than first to use a general phrase, and then to explain and qualify by an enumeration of the particulars. But the idea of an enumeration of particulars which neither explain nor qualify the general meaning, and can have no other effect than to confound and mislead, is an absurdity ... what would have been thought of that assembly, if, attaching themselves to these general expressions and disregarding the specifications which limit their import, they had exercised an unlimited power of providing for the general welfare?...[quoted in testimony before Congress]
Was Hamilton of a different mind? Apparently not:
The Federalist Papers are one of our soundest guides to what the Constitution actually means. And in No. 84, Alexander Hamilton indirectly confirmed Madison’s point.
Hamilton argued that a bill of rights, which many were clamoring for, would be not only “unnecessary,” but “dangerous.” Since the federal government was given only a few specific powers, there was no need to add prohibitions: it was implicitly prohibited by the listed powers. If a proposed law — a relief act, for instance — wasn’t covered by any of these powers, it was ipso facto unconstitutional.

Adding a bill of rights, said Hamilton, would only confuse matters. It would imply, in many people’s minds, that the federal government was entitled to do anything it wasn’t positively forbidden to do, whereas the principle of the Constitution was that the federal government is forbidden to do anything it isn’t positively authorized to do.

Hamilton too posed some rhetorical questions: “For why declare that things shall not be done which there is no power to do? Why, for instance, should it be said, that the liberty of the press shall not be restrained when no power is given by which restrictions may be imposed?” Such a provision “would furnish, to men disposed to usurp, a plausible pretence for claiming that power” — that is, a power to regulate the press, short of actually shutting it down.

We now suffer from the sort of confusion Hamilton foresaw. But what interests me about his argument, for today’s purpose, is that he implicitly agreed with Madison about the narrow meaning of “general welfare.”

After all, if the phrase covered every power the federal government might choose to claim under it, the “general welfare” might be invoked to justify government control of the press for the sake of national security in time of war. For that matter, press control might be justified under “common defense.” Come to think of it, the broad reading of “general welfare” would logically include “common defense,” and to speak of “the common defense and general welfare of the United States” would be superfluous, since defense is presumably essential to the general welfare.

So Madison, Hamilton, and — more important — the people they were trying to persuade agreed: the Constitution conferred only a few specific powers on the federal government, all others being denied to it (as the Tenth Amendment would make plain).
Now we are embarked on a great mission to undo what Congress did so wrongly almost 70 years ago. The first step is to privatize Social Security. The next step is to abolish it. The ultimate step is to abolish Medicare and Medicaid. But one step at a my father always said.