The Constitution Changed Without a Vote – The Social Security Act of 1935

By David F.  Delorey, Jr.
In a mere four pages, ratified in 1788, the Constitution of the United Sates of America became a body of fundamental law which guarantees the natural God given rights of the people to establish justice, insure domestic tranquility, provide for a common defense, promote the general welfare and secure the blessings of liberty.

One hundred and forty one years later, the Great Depression began on Oct.  29, 1929 when the stock market crashed.  Suddenly, millions of people were out of work, bread lines formed to feed families, and the elderly could not support themselves.  A potential solution, like the one adopted in Germany in 1889, was a “social insurance” program run by the federal government which stressed the government’s responsibility to provide for citizens’ economic security.  In 1932, Franklin D.  Roosevelt was elected and he put forth such a plan where workers contributed to their future economic security through taxes paid while they worked and then paid out when they retired or became disabled.

From the outset, Roosevelt’s plan had a major stumbling block – – a plain reading of the Constitution finds absent the power of Congress to implement and run a federal social insurance program.  But, such legal limitation did not deter Congress, or the President, or the Supreme Court to assume powers not found in the United States Constitution.  The day that the Constitution was changed without a vote of the people came on August 14, 1935, when President Roosevelt signed the 33 page Social Security Act of 1935 into law.

This legislation indeed wove a new de facto constitutional thread into the United States constitutional fabric when the Congress and the President bypassed the Constitution Amendment process in Article V of the Constitution and ignored the limits of Congressional power stated in the “Enumerated Powers” in Article I of the Constitution.  Implicit with the avoidance of the required constitutional compliance process was that the several sovereign states were denied their right to deliberate, debate and ratify the law.  As a result, Congress and the President, on their own, raised everyone’s taxes and created a new federal government run insurance program bearing upon all the states.

Many have claimed over the years that the Social Security Act is unconstitutional which is the Constitutional right of the people to do so.  There is plenty of evidence to support the claim.  However, even if they are right and it is, the program is so deeply ingrained in the workings of Republic that such may be impossible to reasonably remove or replace it.  This constitutional precedent is now manifest as one of the largest financial burdens on the American taxpayer.  Along with the subsequently enacted federal social entitlement programs of Medicare and Medicaid in 1965, these programs now collectively pose a significant financial threat to the very existence of the Republic as the question of irresponsible levels of deficit spending by the Congress, potentially causing a bankruptcy of the government, becomes part of the political narrative today.

This evolving journey into the consequences of the Social Security Act began with its implementation in 1937 and its administration by the Congress.  The program started modestly with 60% of all wage earners, largely older Americans, being taxed about 2%.  According to the act, all tax revenue collected were to be deposited in a trust fund.  The fund, known as the Social Security Trust Fund, is technically comprised of two component funds in the original Social Security Act of 1935: Section 201, the Old-Age Survivors Insurance program; and Section 904, the Disability Insurance Trust Funds.

The Republic’s Social Security Act unsustainable financial dilemma came as a result of Congress converting what started as a self-funded program into an enormous de facto pay-as-you-go program by appropriating all “surplus” tax revenues [monies collected which exceed what was needed to pay benefits] to fund the annual federal budget.  With this process, Congress ignored its fundamental fiduciary responsibility to retain these assets in the Treasury to pay future benefits, and clearly ignored the word “trust” in the “Social Security Trust Fund.” Today, the Social Security Trust Fund contains only promises that the federal government will repay the fund.

This deficit spending process was facilitated by the specific wording in sections 201 and 904 of the original 33 page Social Security Act of 1935.  Both sections state that all monies collected may only be invested “in interest-bearing obligations of the United States or in obligations guaranteed as to both principal and interest by the United States.” Congress was left to determine the nature of these “obligations”, which presumably could have included such tangible assets as gold, silver and the like.  Instead, Congress elected the option of “borrowing” the “surplus” taxes collected from the Social Security Trust Fund and spending the proceeds on other things.  From an accounting perspective, Congress created nothing more than a “Ponzi Scheme” because there is no guarantee that future tax payers can sustain the level of payments to current beneficiaries forever.  Such a system will eventually collapse, and could result in putting the federal government in default of its “obligations.”

By 1995, 95% of the American workforce, not subject to Congressional exclusions, were covered by the Social Security Act.  While many exemptions have been eliminated through 1990, six million government workers in the ten states of: Alaska, California, Colorado, Illinois, Louisiana, Maine, Massachusetts, Nevada, Ohio and Texas are still exempt from the act and it’s taxation requirements.

By 2011, more than 56 million people were covered by the Social Security Act spending $731 billion or 20% of the federal budget.  The Social Security Trust Fund had about $2.6 trillion in assets on the books.  The Federal Insurance Contributions Act (FICA) payroll tax rate was 6.2%, paid each by the employee and employer, for a total of 12.4%, for the first $106,800.00 of income.  There were no “surplus” revenues because payouts to beneficiaries exceeded the tax payments deposited in the Social Security Trust Fund.  Federal spending that year was $3.46 trillion and the Treasury posted a $1.3 trillion federal deficit.

Today, the Social Security Act is now the largest government social insurance program in the world measured in dollars paid.

Predictions are that the Disability Insurance Trust Fund [Section 904 of the Social Security Act] will exhaust in 2016.  After 2020, the United States Treasury will need to fund the entire program by redeeming the unfunded “obligations” Congress created to pay program beneficiaries.  From an accounting perspective, the Treasury will continue to use this process until the projected absolute exhaustion of the entire Social Security Trust Fund balance sheet in 2033.

The problem is getting worse.  The current economic recession, world economic problems, and other matters are putting a formidable upward pressures on future projections.  Evidence is that the 2012 projection from the “Social Security and Medicare Boards of Trustees” exhaustion date of 2033 comes 3 years earlier than 2036 exhaustion date projected in 2011, only one year earlier.

Congress is well aware of the “ticking time bomb” aspect of the Social Security Trust Fund.  Printing money is not the solution – it causes inflation which every American suffers from.  Kicking the can down the road” only passes the problem on to our children and grandchildren.  A “Balanced Budget” amendment to the Constitution pursuant to Article V of the Constitution would help.  But, Congress has consistently opposed it simply because balancing the books takes away the politically popular option of deficit spending.  This whole matter is plainly a “third-rail” issue because the people who funded the program through payroll taxes are not to be trifled with for fear that these people will reflect their outrage at the ballot box.  Getting reelected is indeed at risk.  Predictably, sustained legislative paralysis has ensued.  The fact is that the problem is real and it is being ignored by Congress and the President.

The consequences of what started in 1935 are now overwhelming as a result of a mere 33 pages of unconstitutional legislation.  If Congress only had stuck with the framer’s concept of a limited federal government, that is, without a federal government run insurance program, we would not be in this mess now.

Let’s look at this issue at the personal level to understand the problem in simple terms.  Commonly understood is that if somebody took your money with the intent to deprive you of said monies, this act would called theft.  It is a crime.  Now comes Congress persistently collecting taxes for one thing, then “borrowing” the money to spend it on another thing, and putting forth no plan to repay the “borrowed” monies.  Did Congress steal the “surplus” money from the Social Security Trust Fund? It certainly looks like it.

How can we solve the problem?

The first problem to solve is that Congress needs to stop stealing the “surplus” money from the Social Security Trust Fund and start putting back what it “borrowed.” As Will Rogers once said: “If you find yourself in a hole, stop digging. ”

The second problem to solve is cash flow.  When the “baby boomers” reach retirement age, the Social Security Trust Fund is projected to remain insufficient indefinably to satisfy the level of benefit payments compared to a smaller number of projected wage earners paying into it.  The only available long-term remedy is for Congress to either vote to raise Social Security Act taxes, or diminish Social Security Act benefits, or both.

The third problem to solve is the lack of personal and fiduciary responsibility.  As Alexander Tyler said in 1787: “A democracy cannot exist as a permanent form of government.  It can only exist until the voters discover that they can vote themselves largesse from the public treasury.  From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury, with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. ”

During the eight years from January 20, 1993 to January 20, 2001, the total public debt outstanding went from $4.1 trillion to $5.7 trillion for an increase of $1.6 trillion.  In the next eight years, it increased by $4.9 trillion to $10.6 trillion.  Today, less than four years later, it has increased by $5.3 trillion to $15.9 trillion.  Congress has not enacted a federal budget each year, as required by law, for the last 1,200 days.  The Senate majority leader has not allowed the budget from the House come to the Senate floor for a vote for three years.  The President’s two budgets for fiscal 2011 and 2012 were both unanimously rejected, respectively, in the Senate by 0-97, and the next year in the house of representatives by 0-414 and by the Senate 0-99.  None of the President’s four budgets included a plan to save Social Security.  There is no budget approved for the next fiscal year.  Why do we have this problem? The answer is simple.  Congress and the President embrace relentless deficit spending and they see themselves as responsible fiduciary actors.  Conversely, the Republic cannot continue to exist by “borrowing” 40 cents of every dollar it spends.  The fact is that we cannot spend our way out of debt!

Let’s set aside the details and get down to basic logic.  Congress doesn’t want a balanced budget.  If Congress wanted a balanced budget, Congress could simply take a vote to make it so.  Since Congress doesn’t want a balanced budget, “We the People” need to force the federal budget to be balanced.  Such will then force Congress every year to vote on what to fund, what not to fund, or to fund what is left over by raising taxes.  By these votes, the people will have a better measure to determine who in Congress is fiscally responsible, or not.  How do we make this happen? Start work on “Change” with a Constitutional amendment, pursuant to Article V of the Constitution, which requires the federal budget to be balanced.  After reading the foregoing story, if you are convinced that we need to act now – call your Senator and Member of the House – make them do it.

On January 20, 1961, John F.  Kennedy said “And so, my fellow Americans: ask not what your country can do for you – ask what you can do for your country.” Accordingly, “We the People” need to put the country first and stop voting for people who vote for deficit spending.  Let’s vote for candidates who have read, understand, and will abide by the Constitution and the oath to defend it.  If not, we eventually will be left with Alexander Tyler proven right once again, as governments before us have fallen for the same reason.

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Debt Crisis Highlights Buck-Passing Culture of Washington

The Constitution is very specific as to which office, department or branch of government is responsible for each of the many functions of government. The decisions that have to be made in order to carry out the necessary tasks required for the good of the country is often politically unpopular. Over the years, Washington has become skilled at passing the buck and blaming others. For example, the first line in the body of the Constitution gives Congress the responsibility for “All legislative power”. (Article 1.1.1) In its eagerness to meddle in the affairs of citizens and states, Congress delegates many of its legislative powers to the various Secretaries of departments in the Executive Branch crating the giant bureaucracies that plague our lives today.

This allows Congress to further its agenda of expanding government and controlling the lives of citizens with impunity. If the “rules” (laws) prove unpopular with their constituents, they blame the Executive Branch and the Secretary or Department Head of that particular bureaucracy. Congress Members can even campaign for reelection — and often do — by opposing certain unpopular bureaucratic “rules” or Executive Departments, even though they personally may have voted for the bill that created the bureaucracy and gave it its power in the first place. When you think about it, this is an ingenious tactic for escaping blame, confusing constituents, and holding on to power.

This political ploy shows up “in spades” in the present budget and debt crisis. How often have we heard the complaint about the profligate spending by Obama; or the fact that Obama has not yet presented a budget; or, we are reminded that the Senate has not presented a budget since 2008? Here’s the shocker for many people; The Executive Branch can only spend money that has first been appropriated by Congress. (Article 1.9.7) Here is the second shocker; Neither the President nor the Senate is required by the Constitution to present a budget. Budget making is the Constitutional Responsibility of the House of Representatives. While I strongly disapprove of the actions of both the White House and the Senate, we are not going to solve our problems until we place the responsibility where it belongs.

Any Senate Budget is only a suggestion to the House of Representatives who must appropriate the funds and decide how to raise the revenue to pay for it. (Art. 1.7.1) The same is true with any presidential budget. (Art. 2.3.1) It is merely a suggestion to the House of Representatives. The Senate can offer amendments to the House’s budget but they must be approved by the House (Art. 1.7.1). The Senate can refuse to approve the House budget or the President can veto it, but neither can spend money that has not been appropriated by the House of Representatives. Some might argue that the House is only charged with the task of raising revenue, and that appropriations and the borrowing of money is not exclusively that of the House of Representatives.

Unless American businesses and foreign nations are willing to donate goods and services to the federal government, spending bills must also include appropriations to pay for the goods or services for which the money is to be spent. Hence, the raising of revenue to cover the purchase is always understood to be a part of the appropriation. That means the House of Representatives is the Constitutional originator of  the nation’s Budget.

There are only two ways of raising revenue, taxing and borrowing. Since we are told that the present necessity for raising the debt ceiling is to pay for expenditures already appropriated by Congress, that means that the deficit and the debt are both the result of the House of Representatives’ poor stewardship of the taxpayer’s money. It is just as disingenuous of the House to try and blame the Senate or the President for its lack of backbone as it is for President Obama to blame George W. Bush for his own poor leadership.

In his speech today on Congress’ raising of the debt limit, Obama also gave a litany of things on which he would like to spend more money. If any of them come to pass it will only be because the House of Representatives has abdicated its responsibility as “keeper of the purse”.  We need to watch carefully what our Representatives in the House vote for over the next sixteen months and make sure that the “business as usual” crowd is primaried and replaced.

Balanced Budget Amendment May Be Only Way Out

I have been opposed to the Balanced Budget Amendment proposed in the Republican Cut Cap and Balance Bill for a number of reasons. The two most important ones are the probability of unintended consequences and the ongoing lawlessness of the federal government.

1. Unintended Consequences: We do not have a very good track record with attempts to improve on the Constitution left us by the Founders. The seventeen Amendments added to the Constitution since the Bill of Rights was ratified in 1791 have consistently been used by progressive legislatures and courts to circumvent the intent of the Framers and assault the liberties of the people. The most onerous of these unintended consequences have been found in the Fourteenth Amendment.

Congress and the courts are peopled with lawyers whose stock in trade is their ability to find loopholes in legal documents. Even as I write this a number of Congressional Democrats are suggesting to the President that he “invoke” the Fourteenth Amendment and raise the debt ceiling without the approval of Congress. Even such concise language as that found in the First and Second Amendments have been twisted by progressives to infringe on the very liberties they were intended to protect.

Every unnecessary word in an amendment becomes fodder for progressives in their efforts to twist the Constitution to fit their socialist agenda. Based on our two hundred and twenty year history of Amendments, it is easy to predict that future Presidents and Congresses would claim the power of the purse for the Executive Branch rather than the people’s assembly where it has been throughout our history. They will also claim that the federal government is “entitled” and even “guaranteed” 18% of the money earned by citizens from their intellectual and physical labors for its use for any purpose it desires. These are only two of several possible unintended Consequences of the Proposed Amendment.

2. Wanton Lawlessness: The Constitution proclaims itself to be the “Supreme Law of the Land” governing the operations of the federal government. Every official in the federal, state, and local governments have taken an oath to preserve and defend it; many have done so multiple times as they move from office to office. However, until the rise of the patriot movements in the past few years and the constitution conservatives among its members, government officials have routinely ignored the constraints imposed by the Constitution whenever they were unable to find any previously undetected meanings to justify their progressive agenda. Constitutional lawlessness has been steadily growing for generations and has reached epidemic proportions in our own time. Our first and most important job in restoring the liberties we have lost is to return the federal government to its lawful place under the Constitution.

We now find ourselves on the abyss of extinction as a nation of peace, liberty, freedom and prosperity. Based on recent developments in the progressive’s attempts to bankrupt the treasury and impose a servitude of debt on future generations, a well-crafted Balanced Budget Amendment may be the only hope for saving “America as we know it.” It is likely that in the near term such an amendment would be adhered to until the ardor for constitutional government that is now strong among our citizens, cooled and lost its attraction.

However, any Balanced Budget Amendment passed and sent to the states, must be concise with no “wiggle-room” for politicians and lawyers to exploit. Section one of the proposed amendment seems to meet that criteria.

“Total outlays for any fiscal year shall not exceed total receipts for that fiscal year, unless two-thirds of the duly chosen and sworn Members of each House of Congress shall provide by law for a specific excess of outlays over receipts by a roll call vote.”

Everything else in the proposed amendment should be by statutory law — if necessary —  under Article I, Section 8 of the Constitution. Anything more is only inviting unintended consequences that will do more harm than good.

The value of such an Amendment will only be realized in the present crisis if it is used to force Congress and the President to curtail their unsustainable appetite for spending. Conservatives should hold fast to the demand that no increase in the government’s spending limit will be approved until a satisfactory Balanced Budget Amendment has been passed and submitted to the States for ratification. If the progressive Democrats maintain their “no compromise” position, they will be forced to downsize the federal government substantially when they run out of money to spend. That will cause major hardships for many, however, we are in a position much like the passengers on United Flight 93 over the hills of Pennsylvania, September 11, 2001. If we do nothing, we are going down as a nation. If we take a stand we may go down anyway, but if we succeed we can save the future for ourselves and our children and grandchildren.

Call or e-mail your Congressman today and urge them to hold out for a Balanced Budget Amendment as an uncompromising condition for raising the debt ceiling.

Conservative Knees Getting Wobbly?

If you are confused as to what is going on in Washington concerning the looming national debt deadline, you are not alone. Washington politicians, mostly lawyers, are masters of obfuscation. The MSM, propaganda arm of the Democratic Party, are ignoring the CCB proposal from the House that passed yesterday along a party line vote, 234-190 with eight or nine Republicans voting against it. At the same time, everyone seems to be leaning toward a compromise plan being hatched by the “Gang of Seven” in the Senate: This in spite of the fact that details of the plan have not yet been made public.

Advance information on the plan is that it will call for a raise in the debt ceiling while increasing revenue by some $1 trillion, with a reduction in spending of $3.5 trillion over the next ten years. The only certainty in all this is that the American people will eventually be the loser, taxpayers will have to cough up additional taxes and the meager influence of the U.S. Constitution will be diminished even further. It strains credulity to believe future Congresses will honor any budget cutting deals made by the current Congress.

A further test of our gullibility is the insistence by conservatives that they will not vote to raise taxes under any circumstances, but they are not necessarily opposed to increasing revenue through closing tax loopholes and other tax reform measures. To be fair, it should be pointed out that very few conservative politicians have promised not to raise taxes. They have only promised not to raise tax rates. Thanks to the success politicians and the media have had in corrupting the English language, such nuances of speech can easily be slipped by a trusting public.

The claim of increasing revenue without raising taxes is based on closing “loopholes” in the current tax code. A side effect of the class envy promoted by progressives over the past hundred years is that almost everyone is against tax loopholes — until they understand what a tax loophole is. Loophole is the word used by politicians to cast dispersions on certain types of “deductions”. By using the word loophole instead of deduction it is easy to convince the public that “fat cat” rich folks avoid paying their taxes by taking unfair or even illegal deductions. The type of deductions being considered in the Gang of Seven plan are things like deductions for mortgage interest, and deductions for minor children, etc. Very few taxpayers, homeowners and parents would consider these “loopholes”.

The truth is that the ONLY way to increase revenue to the federal government is through raising taxes. Government has no revenue other than taxes extracted from the producing members of society. Other schemes for raising revenue through fees, permitting, tolls, etc., are really taxes on taxes, in most cases. For example, National Parks are owned and supported by the public; when we pay a fee to enter a park we are simply paying an additional tax on top of the taxes we already pay to support the park in the first place. In other words, we are paying an additional tax in order to use a facility we already own. The same is true at the local level when the City Fire Department charges you $800 to transport you to a hospital, two blocks away, after a traffic accident. The Fire Department and the Ambulance have already been paid for by taxes. The idea that revenue can be increased $1 trillion without raising taxes has to be the ultimate oxymoron.

There is no long-term way to get us out of our financial crisis other than “gritting our teeth” and abiding by the Constitution; only spending taxpayer money on programs authorized under the enumerated powers section. In the short term, we need to hold the line on the debt by refusing to raise the limit under any circumstances. That is the only way to force Washington to get their financial affairs in order before the next elections. I do not believe a Balanced Budget Amendment would provide much help with a government that violates the Constitution with impunity on a daily basis. However, a concise, well-written Amendment probably would do little harm.

The proposed BBA is a good start, provided it is limited to the wording of Section 1.

“Total outlays for any fiscal year shall not exceed total receipts for that fiscal year, unless two-thirds of the duly chosen and sworn Members of each House of Congress shall provide by law for a specific excess of outlays over receipts by a roll call vote.”

Any additional words only gives politicians the tools to nullify it through imaginary meanings their legal wizards read into the text. However, I find a bit of irony in the term “sworn members” used in the Amendment, when if the member’s oath to defend the Constitution had been taken seriously in the past we would not be having the present debate. By the way, any plan the Gang of Seven comes up with is unconstitutional on its face because it purports to raise revenue. The Constitution requires that all revenue bills originate in the House.

Cut, Cap, and Unbalance

The more I see of the “Cut, Cap, and Balance” plan being ballyhooed by the Conservative Republicans the more it seems like little more than “smoke and mirrors” designed to hide from the American people the responsibilities of the Republican House of Representatives. It may succeed in making it appear that the Democrat Senate and the White House are responsible for our current mess, and since it has such a strong populist appeal, it may even become law. It cannot solve our problems however, and it plays on the lack of awareness by the American people as to how we got to where we are and who alone has the power to get us out.

We have a $14.5 trillion dollar debt only because of the unconstitutional spending of prior Congresses; mostly Democrats, often aided and abetted by “moderate” Republicans and RINO’s. Presidents are the titular heads of their respective party and Congresses of the same party try to follow his leadership and pass the legislation he asks for. There is no sound reason for doing so however, if his proposed legislation is unconstitutional. The willingness of Congress members to follow the wishes of their Party Bosses rather than the dictates of the Constitution is the only reason our country is in the fiscal shape it is.

Cut, Cap and Balance will not solve that problem, especially if the Cut and Balance is scheduled for future “out-years” and not NOW. Every new Congress starts with a new slate. They can pass any legislation or appropriate any funds they wish. The only constraints on them are those found in the Constitution which they ignore anyway. There is no reason to think future Congresses would honor the requirements of a CCB Amendment any more than they have honored Article I or Amendment 10 in the past. The only thing a Congress critter fears is losing his or her cushy position and the power that goes with it. There is only one way to turn the country around and it is questionable if enough members of Congress have the stomach for it.

The first step is to rein in spending, and the method for doing it is not complicated. Do not appropriate the funds for any NEW unconstitutional expenditure. The Executive Branch can only spend funds appropriated by Congress and for the purposes designated in the appropriations bill. (Constitution 101) The second step is to gradually de-fund the existing unconstitutional programs created by prior Congresses. While we are at it we also need to de-fund much of the bloated Executive Branch budget, particularly the unconstitutional bureaucracies created by Congresses determined to avoid voter censorship while implementing the socialist agenda through bureaucratic “rulemaking” in violation of the first clause in the Constitution. (Article I, Section 1, clause 1)

These reforms can only be undertaken by the House of Representatives which the Constitution gives sole responsibility over the national treasury. (Articles I, Sections 1, 7, 8 and 9). Voters also have an important role to play in any reforms we make. Watch your elected representatives carefully, those who support any appropriation bills authorizing unconstitutional expenditures or programs should be voted against in the next election, whether they wear the label of conservative, Republican, moderate, fiscal conservative, or are just plain RINOs. Allowing them to continue in office only makes our task more difficult.