Is Social Security Constitutional?

Email Print

24 marks the 66th 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.

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.

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.

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.

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.

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.

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

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.

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.

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.

April 12, the Court upheld the Wagner Act. On May 18, Van Devanter
announced his imminent retirement, enabling Roosevelt to nominate
a Justice.

case for his bill was weakening. But Roosevelt would not quit.

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.

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

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.

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.

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.

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 u2018insurance' is a doubtful question."

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.

Act, the government's summary statement declared flatly, "does
not constitute a plan for compulsory insurance within the accepted
meaning of the term u2018insurance'." 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.

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

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

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.

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.

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?

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.

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

and Butler dissented – but wrote no opinions. Did they have nothing
to say? Or were they afraid of Roosevelt?

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.

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.

all that, the issue of Social Security's constitutionality, far
from being settled, remains wide open. Somehow I doubt that the
Framers, who after all meant the Constitution as a fetter on expansive
government and not a blank check for it, intended the Constitution
to authorize a tax-devouring engine of dependence on the State like
Social Security. The purported constitutionality of Social Security
rests on sloppy argument, willful evasions of reality, and, ultimately,
frightened submission to one of the worst acts of tyrannical bullying
in the federal government's history. Here again the reality of Social
Security is radically at variance with the myths. The case for holding
this program inviolate collapses accordingly.

23, 2003

Attarian (send him mail)
is a writer in Ann Arbor, Michigan, with a Ph.D. in economics. His
book Social
Security: False Consciousness and Crisis
, which treats the
myths and realities of Social Security in detail, has just been
published by Transaction Publishers.


Email Print