|Court's Decision Based on Economic Misconceptions, Not Law
What reasoning did the Supreme Court employ to justify the tax? The Court basically accepted the government's sophomoric socio-economic theories. That the Court's decision was not based upon law but upon such socio-economic misconceptions is obvious from the following passage:
The purge of nation-wide calamity that began in 1929 has taught us many lessons. Not the least is the solidarity of interests that may once have seemed to be divided. Unemployment spreads from State to State, the hinterland now settled that in pioneer days gave an avenue of escape. Home Building & Loan Assn. v. Blaisdell, 290 U. S. 398, 442. 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. If this can have been doubtful until now, our ruling today in the case of the Steward Machine Co., supra, has set the doubt at rest. 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.
Congress did not improvise a judgment when it found that the award of old age benefits would be conducive to the general welfare.
The utter hypocracy of this reasoning became obvious when the government expanded Social Security to include the self-employed. Those capable of operating their own businesses are certainly capable enough to see to their own old age and disability needs. And, if they aren't, are the bureaucrats employed by the Federal government more capablel\
A Nation of Men, Not Laws
In addition, the Court argued that "the concept of the general welfare (is not) static. Needs that were narrow or parochial a century ago may be interwoven in our day with the well-being of the nation. What is critical or urgent changes with the times".
Here the court apparently argues that the Federal government can take whatever power it wants depending on the "times". Have we, therefore, become a nation not of laws but of men who can bend the law based upon their reading of "the times"? Of course the Court is wrong on this count, too. The Federal government was given specific and limited powers within the Constitution and it has no authority to increase that power because of "changing times" (except perhaps, during wartime emergency). As far as Cordoza and Justices of his philosophy are concerned, the government is apparently at liberty to twist the Constitution to fit whatever political expediency strikes its fancy.
Private Property can be Taken for Political Purposes
One of Cordoza's observations was that unemployment can be checked "by the resources of the nation". What resources does "the nation" possess that are available to check unemployment? Do private re-
sources automatically become public resources which the government is free to confiscate in an idiotic, politically inspired attempt to end "unemployment"? How about Cordoza's argument that unemployment can develop because "there is no longer work to do or because the disabilities of age make them incapable of doing it"? There is always work "to do" since human wants and desires are limitless. But the real and underlying causes of unemployment obviously escape Cordoza's limited economic understanding.
Economic Problems Always Aggravated By Government
It is the idiotic and destructive nature of government's economic and fiscal legislation that causes economic breakdowns and unemployment to occur.12 Otherwise society (barring natural disasters) would experience continuous improvement in its standard of living.13 So all of Cordoza's social and economic concerns were created by government, and he and the other Justices were further deluded by the belief that even more government could solve them! Why don't Supreme Court Justices stick to simply trying to figure out the applicable law without involving themselves in economic issues for which they have no particular training or expertise? Since when is constitutional law based on economics anyway?
Can the Government Support the People?
Note further Cordoza's pathetically naive statement that "the hope behind the statute is to save men
12 The high level of juvenile and minority unemployment is directly attributable to the Federal minimum wage law, see TheBig-est Con, pages 164-184.
13 See The Biggest Con, pages 264-289. (Schiff; Hamden, CT: Freedom Books, 1977.)
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".
Even overlooking the naivete of this statement, where in the Constitution is the Federal government empowered to attempt to "save men and women from the rigors of the poor house"?14 And what assets can the government lawfully draw on to do it? In reality it is government that is now driving men and women to the poor house because of all the wealth it takes from them in the guise of legitimate taxation! Obviously this passage demonstrates the Court's Pollyanna belief that government can support the people, when men of intelligence should understand that it is the other way around!
This statement also demonstrates how far this nation has travelled since 1897 when Grover Cleveland vetoed an act of Congress designed to aid some Texas counties affected by drought by stating, "I can find no warrant for such an appropriation in the Constitution. The lesson should be constantly enforced that though the people should support the government, the government should not support the people".
With this decision the Supreme Court (among other things) revealed that it was totally oblivious to a fundamental constitutional concept that Cleveland had expressed so well.
14 A socialist government is free to adopt such objectives (it adopts but never delivers them); but are such objectives compatible with the powers granted to the Federal government in the U.S. Constitution and the powers and rights reserved by it to the states and to the people themselves?
The Court's Duplicity Irrefutable
If you harbor any illusions that the Supreme Court is an honorable institution that seeks to uphold, protect, and defend the United States Constitution, prepare to shed them now. In this case the Supreme Court actually refused to face one of the only two legal issues brought before it (see page 78). Overlooking completely the Court's feeble and contrived effort to refute the lower court's finding that the tax on employers was not a valid excise, look at how the Court handled the other issue — namely that since the tax and benefit sections of the Act were intertwined, the taxes were unconstitutional since they were not "for the general welfare of the United States" as required by the Constitution. Since the "Court's" action on this issue is so outrageous, I've reproduced the entire page (Figure 25) so you can see the Court's actual words with your own eyes.
Note that the Court states "the argument for the respondent (Davis) is that the provisions of the two titles dovetail in such a way as to justify the conclusion that Congress would have been unwilling to pass one without the other." (OBVIOUSLY!) "The argument for the petitioners (the government) is that the tax moneys are not earmarked and that Congress is at liberty to spend them as it will. The usual separality clause is embodied in the act..." Well, this is what this case was about, all right. Let's see how the Court decided the issue. Incredulously, look what the Court said: "We find it unnecessary to make a choice between the arguments and so leave the question open." CAN YOU BELIEVE IT!? Leave the question open? Why? This was the most important of the two issues that Davis raised, so why didn't the Court rule on the matter? It was because they obviously could not address this without declaring the Social Security Act unconstitutional! So those black-
HELVERING v. DAVIS. 645
619 Opinion of the Court.
may sap those sturdy virtues and breed a race of weaklings. If Massachusetts so believes and shapes her laws in that conviction, must her breed of sons be changed, he asks, because some other philosophy of government finds favor in the halls of Congress? But the answer is not doubtful. One might ask with equal reason whether the system of protective tariffs is to be set aside at will in one state or another whenever local policy prefers the rule of laissez faire. The issue, is a closed one. It was fought out long ago.10 When money is spent to promote the general welfare, the concept of welfare or the opposite is shaped by Congress, not the states. So the concept be not arbitrary, the locality must yield. Constitution, Art. VI, Par. 2.
Third. Title II being valid, there is no occasion tp inquire whether Title VIII would have to fall if Title II were set at naught.
The argument for the respondent is that the provisions of the two titles dovetail in such a way as to justify the conclusion that Congress would have been unwilling to pass one without the other. The argument for petitioners is that the tax moneys are not earmarked, and that Congress is at liberty to spend them as it will. The usual separability clause is embodied in the act. § 1103.
We find it unnecessary to make a choice between the arguments, and so leave the question open.
Fourth. The tax upon employers is a valid excise or duty upon the relation of employment.
As to this we need not add to our opinion in Steward Machine Co. v. Davis, supra, where we considered a like question in respect of Title IX.
19IV Channing, History of the United States, p. 404 (South Carolina Nullification); 8 Adams, History of the United States (New Eneland Nullification and the Hartford Convention).
robed scoundrels ducked the issue entirely by saying that they would "leave the question open". Why should the question of the constitutionality of a law which would drastically change the entire social, economic and political landscape of the nation be left "open"? "Open" for what? "Open" for when? So someone else could make the long, legal trek back to the Supreme Court to have a question decided that had already been before it?
But if a cowardly and deceitful Supreme Court refused to address this question, an honest Court of Appeals did and found Social Security unconstitutional dti this very issue! Even though the Supreme Court refused to rule on this important issue, why shouldn't it have been settled on the basis of the Appellate Court's finding that this issue rendered the Act unconstitutional? And, more importantly, if the Supreme Court did leave this question "open" in its 1937 decision, the issue has since been conclusively settled by the government itself.
The government now openly admits (pages 169-170) that Social Security taxes are needed to pay Social Security benefits. Indeed, Social Security taxes are now routinely increased (admittedly) for no other purpose than to pay mounting Social Security costs. So does the government now dare contend that such tax increases "are not earmarked" and that their purpose is "just to raise revenue" for the government?
It is clear that the Supreme Court upheld Social Security's constitutionality not on the basis of law (which it refused to face) but, rather, on the basis of its own economic and social (never mind legal) misconceptions. What is equally depressing is the realization that today's Supreme Court is no better than the pathetic
panel that found this piece of socialistic tripe (repugnant in every way to the U.S. Constitution) to be constitutional.
SUMMARIZING THE POINTS COVERED IN CHAPTER 5
1. An honest Appellate Court found Social Security unconstitutional on a variety of grounds.
2. A dishonest Supreme Court didn't!!
Was Sold To The
Public - Would They
Buy It Today?
The Federal government sold Social Security to the nation on a basis that is entirely different from how it operates that program today. Further, there is no question that if the politicians in 1935 proposed Social Security in its current form, they would have been laughed right out of office. In addition, it is equally clear that even a biased Supreme Court could never have held today's Social Security program constitutional.
An "Insurance" Program
Social Security was sold to the American public as an "insurance" program. The politicians simply took advantage of the public's faith and trust in America's respected life insurance industry (which, unlike the banks, had just come through the depression without causing any losses to the public) to sell their socialist scam to them. The government claimed Social Security was going to have gigantic "insurance reserves." These
"reserves" would be created from the "contributions" of employees and employers from which future benefits would be paid. The nation was told that these huge reserves would reach their "full fruition" by 1980 when they would, with only modest tax supplements, be capable of carrying the program along into the indefinite future. And the public swallowed it!
Gigantic Reserves Contemplated
Look, for example, at this excerpt from a New York Times editorial of December 15, 1935 in which the proposed Social Security program was discussed:
"The plan contemplates the building up of the most gigantic reserve, estimated to reach over $50,000,000,000 by 1980. The freezing of so much sorely needed purchasing power cannot but hamper recovery.1 The problem of investing such huge sums will prove insuperable. No one can guarantee that such fantastic governmental credits will ever be made good.2 Large reserves are always in danger of being usurped by politicians for other purposes,3 as experiences with other funds amply testifies. Should even a partial inflation wipe out some of these funds;4 no one can calculate the menace it will create, (emphasis added).
The New York Times was (correctly) skeptical of these "reserves". "The problem of investing such funds", the Times observed, "will prove insuperable." Well, it really proved to be no problem at all since the government never invested one dime of it! (see page 217).
1, Y>4 The writer of this editorial clearly foresaw the numerous inherent dangers in the Social Security concept. And the government, as feared, delivered every one of them!
Note, however, the size of the "reserve" that the government was projecting (and the nation was seriously contemplating) — $50 BILLION by 1980! Actually by 1980 the fictitious Social Security reserve (for the programs) was reported at $22.8 billion—but $50 billion in 1935 was a whole lot different than $50 billion in 1980. So let us put that $50 billion "reserve" into its proper 1935 perspective.
The total Federal revenue in 1935 was $3.3 billion (the government now spends that in a day-and-a-half) so this projected "reserve" amounted to 15 years of Federal receipts! By contrast, the actual reported 1980 "reserve" amounted to federal expenditures for 12 days!5
This will give you some idea of the magnitude of the "reserve" that the nation foresaw. The public also believed that these "reserves" would be real and not imaginary! Can you see how financially formidable Social Security was made to appear? But the above "reserve" picture tells only half the story. Remember, these projected "reserves" were only expected to finance modest Social Security benefits (as compared to what Social Security promises today).
The projected $50 billion "reserve" was not expected to "insure" 1) substantial survivors' benefits (a feature that was not added until 1939 and then greatly expanded over the years); 2) disability benefits (not added until 1956); 3) Medicare (added in 1965); nor 4)
8 By October, 1982, the OASI (Old Age and Survivors Insurance) "reserve" was totally exhausted and OASI checks were sent out on the basis of the government "borrowing" from the other two "funds" — the Disability and Hospital "funds". These accounts reportedly had "reserves" of $27.7 billion at year's end, while the OASI account was now minus $2.6 billion.
the millions of people subsequently brought into the plan who were initially excluded. In addition, the maximum projected retirement benefit in 1980 was $572.00 as opposed to the $85.00 maximum projected retirement benefit in 1935. It is safe to say that the total Social Security package by 1980 was at least 20 times greater than what was contemplated by the Times editorial writer.6 To him the "gigantic reserve" must have appeared to be the equivalent of at least $20 trillion when viewed in today's terms. No wonder he was skeptical!
Not Like The Toivnsend Plan
As I mentioned previously, while Social Security was being debated, Dr. Francis E. Townsend was beating a loud drum for his own proposed retirement program; and millions of Americans (uninformed ones to be sure) were taking his plan seriously. His program called for paying everyone over sixty $200 per month (if they agreed to spend it in 30 days!) to be financed by a national sales tax. To be sure, Townsend's activities did generate a certain amount of political and social pressure.
The New York Times of December 15, 1935 even devoted an entire editorial to Townsend captioned, TOWNSEND'S SOLDIEES", and commented that«...
' The maximum combined tax on employees had increased from $60 in 1937 to $3,175 in 1980, or better than 50 times. Combined payments in 1984 will be $5,178 or 86 times greater and are projected to reach $8,722 by 1990. In the past, though, all such government projections have proved to be optimistically low! Also, the cost per family can even be greater than these figures if both husband and wife work since there are no income limitations on employer payments.
last week Dr. Townsend decided that his followers should name candidates for President and Vice President in every state...". As you can see, Townsend was getting considerable national attention. As a matter of fact, the December 20th issue carried a front page story of a debate which took place between news columnist George E. Sikolsky (God bless his memory!) who was vainly trying to alert the nation to the folly of Social Security and Frances Perkins (the then Secretary of Labor) who was defending the swindle. The Times reported that Perkins "... sounded a warning last night against the Townsend plan, although she did not specify it by name ..." The Times quoted Perkins as stating that "... contributory old age insurance, as provided in the Social Security Act, is not nearly as costly as an alternative of free pensions for old people in the country without regard to need .. .".7
The point is, the nation (in order to buy the scheme) was clearly being told by the Washington political establishment that Social Security was comparable to "old age insurance" and not at all like the "free pensions" then being urged upon the nation by the financial crack-pot Townsend. However, by comparison, today's Social Security program now makes Townsend look like a fiscal conservative!
7 That debate (under the auspices of the League for Political Education) was broadcast nationally over the ABC Radio Network and emanated from Town Hall in New York City. Interest in the subject was so high that The Times reported, "... The crowd filled the auditorium and there were rows of standees at the rear, while a few late comers were turned away even though they had tickets... "