NWo Government and President Barrack Hussein Obama on Social Security for Americans

PRESIDENTIAL QUOTE BY BARRACK h. OBAMA

"I can not guarantee those checks go out on August 3rd if we haven't resolved this issue because there may simply not be the money in the coffers to do it."

May 24 marks the 66^th anniversary of Helvering v. Davis (1937), in which the Supreme Court found Social Security constitutional. With Social Security’s prospects shaky, and overhaul inevitable, this is an appropriate time to re-examine Helvering v. Davis and Social Security’s 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 Roosevelt’s 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 Administration’s 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 wouldn’t 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 Roosevelt’s proposal a plan to pack the Court. Even liberals who deplored the Court’s decisions, including many congressional Democrats, opposed it.

Its arm cruelly twisted by Roosevelt’s 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 Roosevelt’s 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 Administration’s brief.

Among the issues to be decided, it stated, were whether Social Security’s 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 II’s old-age benefits "are gratuities (not based on contract, but based on a Congressional direction expressly subject to amendment or repeal)." Title VIII’s 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 Security’s 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 Administration’s 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 I’s 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 wasn’t insurance, hence was constitutional.

The Act, the government’s 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 Davis’s behalf of May 5, Edward McClennen demolished the claim that Social Security’s 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 McClennen’s 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.

Cardozo’s first three pages describe Social Security’s tax and benefit titles, following the brief almost verbatim. About a page and a half describe Davis’s suit and its treatment. Another page gives Cardozo’s view that the Court should dismiss the case and reports that most of the Justices disagreed. The opinion’s arguments are mostly in five pages maintaining that Title II’s 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 didn’t 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 brief’s. 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 Davis’s argument that they dovetail so as to justify concluding that Congress would not have passed one without the other, and the government’s 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 McClennen’s 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 Cardozo’s half-baked opinion, mostly lifted from the Administration’s brief, an adequate expression of their views on Social Security’s 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 President’s plan to enlarge the court’s membership. Roosevelt’s Court pack failed, and Helvering v. Davis was a factor.

But its validity is shaky. Cardozo’s opinion is laughably weak: leaning on a brief full of duplicitous arguments, ignoring McClennen’s exposure of Social Security’s 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 Security’s constitutionality, far from being settled, remains wide open.