EDITOR’S NOTE: On August 14, 1935, the Social Security Act was signed by FDR. The following article, originally published in 2005, examines the Act and the entire system of Social Security, from a Constitutional perspective.
After President Bush put forth his proposal to “partially privatize” Social Security, newspapers across the country inundated the American people with editorials and articles defending the present system. The Chicago Sun-Times called Social Security “the most successful government program ever to be invented.” Since most Americans, including the staff at the Sun-Times, blindly assume that the federal government was granted the constitutional authority to establish this so-called retirement/insurance program, the origin of Social Security is rarely discussed. In the author’s opinion, if the media was functioning as government watchdogs, as opposed to government lapdogs, it would be asking a question that goes beyond any proposal to partially privatize Social Security. Was the federal government granted the constitutional authority to establish Social Security or is it just another usurpation of power?
When Franklin Roosevelt and his New Dealers were contemplating Social Security in the early 1930’s, they were faced with a problem. Roosevelt, then governor of New York, identified this problem several years earlier in his “States Rights” address of March 2, 1930:
“As a matter of fact and law, the governing rights of the states are all of those which have not been surrendered to the national government by the Constitution or its amendments.”
After asserting that Congress had the power to legislate concerning Prohibition because that power had been given to them by the 18th Amendment, he continued by stating:
“[T]his is not the case in the matter of a great number of other vital problems of government, such as the conduct of public utilities, of banks, of insurance, of business, of agriculture, of education, of social welfare, and of a dozen other important features. In these Washington must not be encouraged to interfere.”
The reason the federal government “must not be encouraged to interfere” was because it lacked the constitutional authority to interfere. Not only had the States not surrendered these powers, but they did not vest the federal government with any general authority over them.
After becoming President, Roosevelt quickly changed his tune and pushed for an unparalleled expansion of federal power.
Following his election in 1932 and the implementation of his New Deal policies, much of Roosevelt’s legislation was challenged as unconstitutional and struck down by the Supreme Court. A majority on the Court, who had been appointed by Republicans, began declaring cornerstones of the New Deal unconstitutional in 5-4 decisions. The New Dealers were frantic. In 1934, Secretary of Labor Frances Perkins expressed concern to Supreme Court Justice Harlan Stone that the social security system they were devising would be declared unconstitutional. Stone replied — “[t]he taxing power of the Federal Government, my dear, the taxing power is sufficient for everything you want and need.”
Justice Stone was not referring to the Sixteenth Amendment, the so-called income tax Amendment. He was referring to the taxing provision found at Article I, Section 8, Clause 1. This provision grants Congress the power “[t]o 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.”
At this point, you are probably asking yourself a question. If Social Security is a legitimate retirement/insurance program as the politicians and the media claim, then what do taxes “to pay the debts and provide for the common Defense and general Welfare of the United States” have to do with the constitutionality of Social Security?
The answer can be found in the opening clause of the Social Security Act of 1935. It is entitled as “[a]n Act to Provide for the General Welfare.” Since the federal government lacked the constitutional authority to compel the people of the several States to participate in a federal retirement or insurance program, Roosevelt and his New Dealers had to structure Social Security as an excise tax under Article I, Section 8, Clause 1. They inserted the general welfare verbiage to make it appear as if the federal government was exercising a legitimate constitutional power. [Note: excise taxes fall in the class of indirect taxes and are synonymous with privilege taxes. As such, they can be avoided by not taking the privilege. This means that excise taxes are voluntary taxes]
Immediately after the Social Security Act was passed, various provisions of the Act were challenged as unconstitutional and reached the Supreme Court in 1937. In the case of Helvering v. Davis, the Court, in a 5-4 decision, sustained the constitutionality of the Act as an excise or income tax under the general welfare provision cited above.
Based on the Social Security plan devised by the New Dealers, employees would not making contributions into a retirement or insurance program. They would be paying a “special income tax” which would be deducted from their wages and paid to the federal government by the employer. This excise tax is imposed on the employee for the so-called “privilege” of being employed by an employer. Under Social Security, working as an employee for an employer became a federal privilege and subject to taxation.
A similar standard was applied to employers. Under Social Security, employers would not be making matching contributions into a retirement or insurance program for their employees. They would pay a separate excise tax for the privilege of having employees in their employ. Thus, under Social Security, the act of employing employees was made a federal privilege and subject to taxation.
Under the Helvering v. Davis decision, the Court basically declared that Congress has the subjective authority, unrestrained by the judiciary, to declare what constitutes the general welfare irrespective of whether that determination corresponds to the specific legislative grants of power contained in the Constitution. Not only was this contrary to the principles of limited government and enumerated powers, which are the foundation of the Constitution, but it was also contrary to the constitutional meaning of the general welfare phrase.
In the author’s opinion, the Supreme Court, in 1937, was simply looking for a way to expand federal power and escape FDR’s threat to restructure the Court. Since the Constitution does not grant the Supreme Court the constitutional authority to define the extent of the powers granted to the federal government or amend the Constitution from the bench by changing the meaning of words, this matter remains, in the author’s opinion, unresolved. Therefore, it is important to re-examine this issue and establish the true meaning of the general welfare phrase as it relates to Social Security.
In sustaining Social Security under the general welfare provision, the Court failed to perform a basic function. It neglected to establish the constitutional meaning of the words contained therein. A review of a standard dictionary shows that the words “general” and “welfare” are defined as follows:
“General. 1: involving or applicable to the whole. 2: involving, relating to, or applicable to every member of a class, kind or group.”
“Welfare. 1: the state of doing well, esp. in respect to good fortune, happiness, well-being or prosperity.”
The word welfare is derived from the words “well” and “fare” and means a “state of faring well” or “well being.” When the Framers used the word welfare in the Constitution, they were using it in this context. They were not referring to government social aid programs like Social Security. These programs were virtually unknown to the Framers and would have been classified, in the language of the day, as a form of “poor relief.” Thus, the common definition of the general welfare phrase, as it was used in the Constitution, was “the whole group’s well being.”
The other words that need to be put in constitutional context are the words “United States.” These words, as they appear in the founding documents, do not refer to a geographical territory or a single nation. The phrase “United States” was the name of the compact or union that was established between the several States when they adopted the Articles of Confederation. When the Framers drafted the present Constitution, they retained the term because the document was a continuation and expansion of the old constitution. Thus, the words “United States” specifically refer to the several States in their united or collective capacity. [i.e., the States united]
If the words “general welfare” and “United States” are put in their proper context, then the general welfare provision grants Congress the power “[t]o lay and collect Taxes… to provide for the… group well being of all the United States.” The “entire group” being referenced is not the people, as comprising a single nation, but the several States in their united capacity. Since the Constitution is a compact or contract between the several States, and the States are only united within the scope of the powers enumerated in the Constitution, this composition of the general welfare provision is in totally harmony with the intent and construction of that document.
Alexander Hamilton sustained this fact in his writings on the Constitution. In Federalist No. 83, he reduced this principle to a single sentence:
“The United States, in their united or collective capacity, are the OBJECT to which all general provisions in the Constitution must necessarily be construed to refer.” [Emphasis not added]
The general welfare clause, being but a part of a general provision of the Constitution, applies solely to the States “in their united or collective capacity.” If the Constitution had established a social compact or union between the American people, and they were the object of the general powers delegated to the federal government, then it would have been an absurdity to reference the States, in their united capacity, as the object of the general welfare phrase. In addition, if the Constitution had been established for the well being of the American people, then that same people would have been the “whole group” referenced in the general welfare phrase.
Based on the above definitions, Social Security should have been struck down because Congress used a provision of the Constitution that applied to the States, in their united capacity, and unconstitutionally applied it to the people. When Congress inserted the words “[a]n Act to Provide for the General Welfare” at the beginning of the Social Security Act, that body took a clause that granted Congress the power “[t]o lay and collect Taxes… to provide for the… group well being of all the United States” and twisted it into a power that granted Congress the power to tax and appropriate money for the general welfare generally. This was a gross usurpation of power.
The American people should never lose sight of the fact that the individual States are not united generally. They are united specially. In other words, the States are only united within the scope of the limited powers delegated to the federal government. When the States are operating within these powers through their agent, the federal government, they are identified as the United States and the general welfare provision applies to them collectively. The opposite applies when the States are not operating within the delegated powers. Outside of the delegated powers, the States are known as the several States and are independent sovereign entities. Thus, Congress cannot have broad power to declare what constitutes the general welfare because the States are not united generally.
There are other facts that disprove a broad interpretation of the general welfare provision. In order for Congress to have extensive and indefinite power to tax and appropriate money for the general welfare, the federal government would first have to have been granted total power over both domestic and foreign affairs. In Federalist Essay No. 45, James Madison, who is recognized as the father of the Constitution, provided a blueprint of the Constitution when he distinguished the external powers granted to the federal government from the domestic powers reserved to the States:
“The powers delegated by the proposed Constitution to the federal government are few and defined. Those which are to remain in the State governments are numerous and indefinite. The former will be exercised principally on external objects, as war, peace, negotiation, and foreign commerce; with which last the power of taxation will, for the most part; be connected. The powers reserved to the several States will extend to all the objects which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people; and the internal order, improvement, and prosperity of the State.”
Since the constitutional powers of the federal government are few and do not extend to internal or domestic affairs, the federal government cannot have unspecified and indefinite power to tax and appropriate money for the general welfare. That government has no general legislative authority to do anything concerning the life, liberty or property of the people of the several States. Thus, domestic social aid programs like Social Security are nothing but a usurpation of power because they violate these constitutional principles.
In Federalist Essay No. 41, Madison, in discussing the limited powers delegated to the federal government, stated that they could be reduced to 6 categories of powers:
“That we may form a correct judgment on this subject, it will be proper to review the several powers conferred on the government of the Union; and that this may be more conveniently done they may be reduced into the different classes as they relate to the following different objects: 1. Security against foreign danger; 2. Regulation of intercourse with foreign nations; 3. Maintenance of harmony and proper intercourse among the States; 4. Certain miscellaneous objects of general utility; 5. Restraint of the States from certain injurious acts; 6. Provisions for giving due efficacy to all these powers.”
Since Social Security cannot be placed into any of these 6 categories of power, to sustain this domestic social aid program as a valid exercise of power under the general welfare provision was nothing short of an unconstitutional power grab by the federal government.
Even Supreme Court Justice Story, whose 1833 commentaries on the Constitution helped form the basis for the 1937 decision upholding Social Security referenced above, recognized that the federal government lacked the constitutional authority to establish these programs. In his analysis of the general welfare provision, Justice Story stated that the federal government had not been granted the authority to meddle with the “systems of education, the poor laws, or the road laws, of the states.”
If the federal government did not have the constitutional authority to institute domestic social aid programs like Social Security in 1833, as acknowledged by Justice Story, and did not have the authority in 1930, as acknowledged by President Roosevelt, then how could Congress have acquired this power in 1935? Since the Constitution had not been amended, there can only be one conclusion. The federal government, acting through its political appointees in the Supreme Court, simply opened the door for a new interpretation of the general welfare provision that deleted words, changed the meaning of the words, and was absent of the basic limitations incorporated into the Constitution by the Founders. In short, the Court re-wrote the Constitution from the bench and handed Congress almost unlimited power to tax and spend so long as it cites the general welfare provision as the constitutional authority for the legislation.
The present debate over President Bush’s plan to “partially privatize” Social Security is nothing but a debate over which usurpation of power is best for the federal government. The method will be different but the result will be the same. The American people will continue to be taxed for the so-called privilege of working as an employee or employer under the guise of contributing to a constitutionally authorized retirement/insurance program. Since the federal government’s power under the general welfare provision applies to the States collectively, not the people generally, taxing the American people to fund this unconstitutional social aid program is just another usurpation of power.
Originally published March 3, 2005 at www.thepriceofliberty.org