Social Security: Ponzi Scheme, Unconstitutional?

By Dr. Harold Pease

Rick Perry views social security as a ponzi scheme, a state issue, and even unconstitutional. Mitt Romney argues for its’ constitutionality because it has been around for so long. Who is right? Two views prevail, original intent and past practice.

Original intent, what the Founders meant when they wrote the Constitution, largely based upon natural law, history, and their experience with governmental abuses of the past, was the only intended interpretation by the Founding Fathers.

This was the way the Constitution was interpreted until the Progressive Era in the 20th Century, primarily the Franklin D. Roosevelt administration. Thereafter past practice gained dominance. But when a Supreme Court ruling is rendered outside original intent (a rogue decision), other laws may stem from this departure and the departure in time becomes the new base for additional departures such that, again over time, what is constitutional is opposite of what was constitutional.

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For example, prior to this moment there is no constitutional authority to force a person to purchase anything as a condition of citizenship. But if the Supreme Court rules National Healthcare constitutional it would be a rogue decision making constitutional the government’s insistence that you purchase health insurance and upon this precedence other things as well.

In time, perhaps healthy foods will be required or only green-fueled automobiles. Who knows where the precedent could lead us. This is called past practice and potentially could destroy original intent and freedom.

Social Security started in 1935 under President Franklin D. Roosevelt as part of his New Deal program that basically extracted payroll taxes from those employed and matching donations from their employers. Theoretically these funds were to be held by the federal government and returned as old age insurance. The theory was based on the notion that the people would not secure their future without being forced to do so by government mandate.

Article I, Section 8, of the U. S. Constitution identifies the four areas where the legislative branch can make law as being: 1) to tax, 2) to pay the debts, 3) to provide for the general welfare and 4) to provide for the common defense. The rest of this long sentence with 18 paragraphs was qualifiers on these four areas. The power to tax had but one qualifier, the different types of taxes had to be uniform. There were no qualifiers on “to pay the debts.” General welfare and common defense each had eight qualifiers so as to prevent the federal government from using these broad phrases to justify anything it wished. So, if social security is not on the list, or even remotely related to any of the qualifiers that are, how can the government get away with mandating the extraction of someone’s pay and force the same from his employer? It did so by calling it a tax (a rogue decision).

Original intent says that the power to tax is limited to the legitimate purposes of government as listed. Simply put, government does not have the power to tax for powers that it does not have. This was the most extreme overreach of governmental power to that date in U.S. History. But this was ignored by the Supreme Court that was at the time threatened by President Roosevelt’s Court Packing Bill that would have brought the Court under the control of the Executive Branch because the Court had already ruled as unconstitutional much of his New Deal program. In Helvering v. Davis, social security was upheld as a tax because, “The proceeds of both [employee and employer] taxes are to be paid into the Treasury like internal-revenue taxes generally, and are not earmarked in any way (301 U.S. 619, 1937).” This presented a thorny problem not yet resolved 75 plus years later. The money taken under the guise of taxes was not set aside for the giver for a future date but just added to the general fund and spent. When these people do retire they will have to depend upon the resources of future generations to cover what was promised.

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A second case, Steward Machine Company v. Davis, resolved the same day by a one vote majority, argued that 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 narrower than the promotion of the general welfare (301 U.S., 548, 1937).” In other words, we will not limit ourselves to existing qualifiers on general welfare as intended by the Founders (a second rogue decision). The constitutional procedure for adding something to the list was by way of Article V but this too was ignored for perceived expediency.

So, who is right? Rick Perry uses the correct interpretation of the Constitution, original intent, and Mitt Romney uses past practice, which over time can destroy the Constitution as I have shown. The problem could be resolved by having social security added to the Constitution by way of an amendment, as it should have been in 1935, but this time have it earmarked for the recipient so that it would actually be there for him.

Dr. Harold Pease has dedicated his career to studying the writings of the Founding Fathers and applying that knowledge to current events. He has taught history and political science from this perspective for over 25 years at Taft College. To read more of his articles, please visit www.LibertyUnderFire.org.