Socialist Insecurity: How the Raw Deal Enslaved Americans

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By: Kyle Rearden

The Last Bastille blog

December 29th, 2015

Editor’s Note: In the following months, LUA will be mirroring a series of articles regarding security culture, a category on The Freedom Umbrella of Direct Action. This is the first of the articles. Due to the sheer length, I am unable to post the entire article, because of technical issues. Follow the link at the end of the post to continue reading.

The ideal of evolutionary biology is that parents would value the survival and betterment of their children above their own. In reality, however, parents vacillate between their own individual self-interests and those of their children, often resulting in either negotiated compromises or authoritarian dictates. Government central planners have legalized intergenerational parasitism through the mechanizations of taxation and welfare state subsidies in order to encourage senior citizens to directly feed off the productivity of the current workforce, thereby balkanizing the young and the elderly against each other.


to hell with social security


Two concepts are helpful for analyzing the political topic of Social Security. The Hegelian Dialectic shows how the pattern of “problem-reaction-solution” is used by Leviathan to further solidify its power, yet, Hanlon’s razor says that malice should never be attributed to that which can be satisfactorily explained by stupidity. These two ideas will be used during this examination of the history, legalities, economics, and the privacy implications of social insurance in order to measure its compatibility with human liberty.


An Overview of the Relationship Between Central Banking & Social Insurance

Central banking, through methods such as fractional reserve lending, directly causes all manner of financial crises, thus beginning the formulaic Hegelian Dialectic. The Second Bank of the United States precipitated the Panic of 1819 by about three years, yet this relationship was conveniently forgotten during the Panic of 1907, which itself was caused by then-Treasury Secretary Leslie Shaw stimulating inflation since 1905. This 1907 panic was used as the pretext for the establishment of the Federal Reserve Bank, which has since then proven itself to be incapable of accomplishing its stated objectives, to be a cartel operating against the public interest, as the supreme instrument of usury, the generator of inflation, a war-monger, a destabilizer of the economy, and most importantly, as an instrument of totalitarianism.

With the passage of the Federal Reserve Act in 1913, it would only be a matter of time until malinvestment by the Federal Reserve resulted in the Crash of 1929, given that business cycles are a completely artificial phenomenon caused by excessive credit creation by central bankers, which inevitably leads to a credit crunch. As former Federal Reserve chairman Ben Bernanke said back in 2002:


“Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton [Friedman] and Anna [Schwartz]: You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.” [emphasis added]


In other words, Bernanke admitted that the central bankers were responsible for the Great Depression. It does beg the question, though, as to how many deaths resulting from the Great Depression is the Federal Reserve responsible for? Whatever becomes revealed by statisticians, this much is certain – the Great Depression was used as the justification for social insurance.

Once the Social Security Act was signed into law by then-President Franklin Roosevelt in 1935, Social Security numbers (SSNs) were foisted upon Americans incrementally over time, originally as a tax accounting tool, to be used exclusively for accountability purposes; namely, for calculating each “contribution” into the Social Security Trust Funds through payroll taxes. Despite the fact that SSNs were never meant to be used for identity verification, they are now commonly required for various functions, especially in the application for licenses unrelated to taxation or anything else of a financial nature. In short, the Hegelian Dialectic formula has been repeated multiple times by authoritarians in order to establish a de facto national identification tracking number without Congress officially doing so through its statutory authority, as delegated by the 1787 Constitution; this was accomplished by disingenuous advocacy that said that the answer to the evils of central banking lay in empowering administrative agencies to determine welfare handouts by bureaucratic diktat.


Constitutional Avoidance, Statutory Legalities, & Federalist Posturing

Constitutionally, does the federal government retain the power to impose social insurance upon the American citizenry? Both the Preamble and the Taxing & Spending Clause (Art. I § 8 cl. 1) have similar general welfare provisions, which say, respectively, that:


“We the People of the United States, in Order to form a more perfect Union…provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity…”

“The Congress shall have Power…To pay the Debts and provide for the common Defence and general Welfare of the United States…”


As much can be assumed that “provide for the common defense” might be nothing more than a male citizen’s obligation to submit to the military draft by way of its statutory compulsory registration law, yet, promoting and/or providing for the “general welfare” is more of a challenge to determine its meaning, especially considering that the very word, “welfare,” itself has been verbicided. Needless to say, it is essential to understand what the Framers had to say as to their original intent in crafting that phrasing into the federal Constitution.

James Madison, the Father of the Constitution, had a rather limited view of the general welfare’s composition. As Madison wrote in Federalist Paper #41:


“Some, who have not denied the necessity of the power of taxation, have grounded a very fierce attack against the Constitution, on the language in which it is defined… No stronger proof could be given of the distress under which these writers labor for objections, than their stooping to such a misconstruction. Had no other enumeration or definition of the powers of the Congress been found in the Constitution…the authors of the objection might have had some color for it; though it would have been difficult to find a reason for so awkward a form of describing an authority to legislate in all possible cases. A power to destroy the freedom of the press, the trial by jury, or even to regulate the course of descents, or the forms of conveyances, must be very singularly expressed by the terms ‘to raise money for the general welfare.’ ”


In other words, the concept of the general welfare cannot be used to circumvent the enumerated powers delegated to the federal government by its own Constitution; otherwise, it wouldn’t be a very “limited” government, would it? From what can be construed, other references within The Federalist Papers strongly imply that the general welfare is tightly related to the common defense; specifically, that (according to Webster’s 1828 Dictionary) the “exemption from any unusual evil or calamity; the enjoyment of peace and prosperity, or the normal blessings of society and civil government” is only possible due to military defense of the national realm, especially its borders, as was the case during the War of 1812.

Perhaps a further examination of the relationship between taxation and the public (re: national) debt could illuminate the true nature of the general welfare itself. As Alexander Hamilton wrote in Federalist Paper #30:


“Money is with propriety considered as the vital principle of the body politic; as that which sustains its life and motion, and enables it to perform its most essential functions. A complete power, therefore, to procure a regular and adequate supply of revenue, as far as the resources of the community will permit, may be regarded as an indispensable ingredient in every constitution.”


Hamilton stressed the necessity for tax revenue as the lifeblood for the execution of other government powers. Interestingly enough, Cincinnatus wrote in Anti-Federalist Paper #12:


“If the new government raises this sum in species on the people, it will certainly support public credit, but it will overwhelm the people. It will give immense fortunes to the speculators; but it will grind the poor to dust. Besides, the present government is not redeeming the principal of the domestic debt by the sale of western lands…[p]erhaps it will be found, that the supposed want of power in Congress to levy taxes is, at present a veil happily thrown over the inability of the people; and that the large powers given to the new government will, to every one, expose the nakedness of our land. Certain it is, that if the expectations which are grafted on the gift of those plenary powers, are not answered, our credit will be irretrievably ruined.”


In other words, the power to tax is the power to destroy. Of course, this begs the question as to whether the “complete power” of taxation would inevitably ruin the credit of the United States, pursuant to the Borrowing Clause (Art. I § 8 cl. 2)? It would seem as if the modern history of repetitive increases in the debt ceiling have answered this question for us.

Statutorily, is it possible for the federal Congress to impose social insurance as an exercise of its enumerated powers? Although the Social Security Administration (SSA) was established by the Social Security Act of 1935, the payroll taxes that were intended to fund the Old-Age, Survivors, and Disability Insurance (OASDI) “trust funds” weren’t collected until the passage of the Federal Insurance Contributions Act (FICA) of 1937. Once this happened, the FICA payroll taxes were allocated towards funding the OASDI, from which the Social Security checks were issued to the qualified recipients; interestingly, § 210(c) of the original 1935 act said that the only “qualified individuals” were those who were 65 years old and had earned more than $2,000 beginning in 1937 (survivors and disabled benefits weren’t added until 1939 and 1954, respectively).

Judicially, are the FICA payroll taxes and the OASDI payouts a constitutional exercise of both the taxation and general welfare clauses? Such a pivotal question strikes at the very legitimacy of the social insurance mechanism that is Social Security itself. Judge Roberts wrote the United States Supreme Court’s opinion in United States v. Butler, 297 U.S. 1(1936):


Since the foundation of the nation, sharp differences of opinion have persisted as to the true interpretation of the [general welfare] phrase. Madison asserted it amounted to no more than a reference to the other powers enumerated in the subsequent clauses of the same section; that, as the United States is a government of limited and enumerated powers, the grant of power to tax and spend for the general national welfare must be confined to the enumerated legislative fields committed to the Congress. In this view, the phrase is mere tautology, for taxation and appropriation are or may be necessary incidents of the exercise of any of the enumerated legislative powers. Hamilton, on the other hand, maintained the clause confers a power separate and distinct from those later enumerated is not restricted in meaning by the grant of them, and Congress subsequently has a substantive power to tax and appropriate, limited only by the requirement that it shall be exercised to provide for the general welfare of the United States. Each contention has had the support of those who views are entitled to weight. This court has noticed the question, but has never found it necessary to decide which is the true construction. Mr. Justice Story, in his Commentaries, espouses the Hamiltonian position. We shall not review the writings of public men and commentators or discuss the legislative practice. Study of all these leads us to conclude that the reading advocated by Mr. Justice Story is the correct one. While, therefore, the power to tax is not unlimited, its confines are set in the clause which confers it, and not in those of section 8 which bestow and define the legislative powers of the Congress. It results that the power of Congress to authorize expenditure of public moneys for public purposes is not limited by the direct grants of legislative power found in the Constitution.” [emphasis added]


Obviously, Roberts is referring to Federalist Paper #41, but Hamilton did not argue in favor of a broader interpretation of the general welfare until after the federal Constitution had been ratified. This interpretation of the general welfare becomes significant in Judge Cardozo’s written opinion in Helvering v. Davis, 301 U.S. 619 (1937):


“There have been great statesmen in our history who have stood for other views. We will not resurrect the contest. It is now settled by decision [in the Butler case]. The conception of the spending power advocated by Hamilton and strongly reinforced by Story has prevailed over that of Madison, which has not been lacking in adherents.”


So, Cardozo was simply reminding everyone, via stare decisis, what Roberts had written a year earlier regarding which interpretation the Court was going to use from here on out. Cardozo then gives some uniquely revealing details:


“The purge of nation-wide calamity that began in 1929 has taught us many lessons. Not the least is the solidarity of interests that may once have seemed to be divided…Congress did not improvise a judgment when it found that the award of old age benefits would be conducive to the general welfare. The President’s Committee on Economic Security made an investigation and report, aided by a research staff of Government officers and employees, and by an Advisory Council and seven other advisory groups. Extensive hearings followed before the House Committee on Ways and Means, and the Senate Committee on Finance. A great mass of evidence was brought together supporting the policy which finds expression in the act…The problem is plainly national in area and dimensions. Moreover, laws of the separate states cannot deal with it effectively…States and local governments are often lacking in the resources that are necessary to finance an adequate program of security for the aged.” [emphasis added]


Ah-ha! So, here is the justification for Social Security as the “solution” to the Great Depression – because the Federal Reserve caused the Crash of 1929, therefore the U.S. Congress must impose social insurance, as a bulwark against financial crises, in order to provide for the retirement of the elderly? Further elaborating on the structure of Social Security is Judge Harlan writing in Flaming v. Nestor, 363 U.S. 603 (1960):


“The Social Security system may be accurately described as a form of a social insurance, enacted to Congress’ power to ‘spend money in aid of the general welfare,’ whereby persons gainfully employed, and those who employ them, are taxed to permit the payment of benefits to the retired and disabled, and their dependents. Plainly the expectation is that many members of the present productive work force will in turn become beneficiaries rather than supporters of the program. But each worker’s benefits, though flowing from the contributions he made to the national economy when actively employed, are not dependent on the degree to which he was called upon to support the system by taxation. It is apparent that the noncontractual interest of an employee covered by the Act cannot be soundly analogized to that of the holder of an annuity, whose right to benefits is bottomed on his contractual premium payments.” [emphasis added]


Simply put, there is no contract between taxpayers and the SSA in terms of receiving those coveted Social Security “benefits” once full retirement age has been met. Harlan elaborated on this revealing situation:


“Particularly when we deal with a withholding of a noncontractual benefit under a social welfare program such as this, we must recognize that the Due Process Clause can be thought to interpose a bar only if the statute manifests a patently arbitrary classification, utterly lacking in rational justification. Such is not the case here.” [emphasis added]


Given that the due process clause (would that be from the Fifth or Fourteenth Amendment?) is not arbitrarily classifying Social Security recipients, then the general rule of there being no contract between the SSA and taxpayers is what’s happening here. In other words, baby boomers and others who insist that they are “owed” Social Security checks because they “paid into the system” are woefully ignorant of the government’s interpretation of its own laws. Needless to say, because there is no contract, Social Security recipients are not “owed” a damn thing; Harlan goes onto describe in Flaming how Congress can change the schedule of “benefits” entirely at its own discretion.

In a rather uniquely illuminating piece of government literature, the SSA’s Office of Legislative and Regulatory Policy issued a Social Security Bulletin in January of 1987 about the very constitutionality of Social Security itself. According to the bulletin’s author, Eduard Lopez:


“Of course, the Court’s decisions in the social security cases, represented a significant constitutional development in establishing the breadth of Congress’ powers to tax and spend for the general welfare. The decisions not only cleared the way for other general welfare programs, but more fundamentally provided the Federal Government with the substantive power and institutional flexibility to respond to the changing needs of the Nation.”


Lopez, much like Judge Roberts in the Butler case, compared and contrasted the two Madisonian and Hamiltonian views of federalism, but this time regarding the Supremacy Clause (Art. IV cl. 2) and the Tenth Amendment. Briefly put, Lopez said that the Hamiltonian view is that of “subordinate States” and the Madisonian view of the several state governments being “coequal sovereigns” with the national government; Lopez goes onto mention that “coequal sovereigns” was the original view of the U.S. Supreme Court from the mid-19th century to 1937, and that the “subordinate States” view took over since the late 1930s. Court-packing, much?

Considering all the legalities at play, what is the constitutionality of Social Security? You must keep in mind that in Helvering, Cardozo mentioned that only the FICA payroll taxes are constitutional, pursuant to the Taxing & Spending Clause, yet the Court, by their adherence to the Ashwander rules, totally dodged the question of the OASDI payouts; the closest answer to the latter issue was the lack of a contract mentioned by Harlan in Flaming. What this demonstrates, if anything, is that the Court’s use of both judicial review (that is, ruling on the constitutionality of the matter brought before them for adjudication) and constitutional avoidance are often practiced whenever they want to either preserve or increase the power of the federal government, but seldom to limit or reduce it.

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