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The Unconstitutionality of Social Security and Medicare

Government social insurance creates some of the most serious problems in western style democracies.  At best, these government insurance programs place tremendous strain on the economy and reduce work incentives.  At worst, they may result in the bankrupting of the society.  In the United States, Social Security pensions and Medicare are the worst culprits.

There are, moreover, alternative arrangements that would avoid these problems.  Some people may favor a fully voluntary system.  Others may favor more government involvement, such as a compulsory private system in which individuals are required to save certain amounts for their retirement or are required to purchase health insurance of some kind.  (For a discussion in the context of unemployment insurance, see here.  For a book comparing private and government insurance more generally, see here.)

While there are arguments for each of these systems, the important point is that they would not involve redistributions.  In particular, they would not require the massive redistributions that these existing systems make from one generation to another – redistributions that are unfair, inefficient, and cause serious political problems. 

While these private alternatives to government insurance are relatively well known, what is less clearly recognized is that the Constitution’s original meaning would have prevented the existing redistributive Social Security and Medicare systems from being established.  These programs are enacted under Congress’s so-called spending power.  Under this power, Congress is said to have the power to spend for the general welfare.

But I don’t believe there is a spending power.  The constitutional provision states that “Congress shall have power to 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.”  In my view, this Clause merely confers on Congress the power to tax.  The money is then to be used to further the other enumerated powers, which are briefly characterized as “for the common defense and general welfare.”  If this reading, which was held by James Madison is correct, Social Security and Medicare would be unconstitutional.  (I should note that some originalists disagree with this reading of the Constitution, but I think they are mistaken. For my defense of this reading, see here and here.)

Of course, government old-age pensions and medical insurance could have been enacted at the state level.  But these programs could not have been established in the form that they took at the federal level.  If young people were taxed 12.4 percent for old-age insurance (6.2 percent on the employee and the same amount on the employer) which conferred the poor returns that the federal program provides, they would have left the state that imposed the tax in droves.  Massive redistributions could not occur at the state level.  The states could impose less redistributive systems, but those systems would thereby avoid the significant problems caused by these government programs.

Now that we have had Social Security and Medicare for generations and people have relied upon them, I don’t think that the original meaning can be enforced to hold them unconstitutional.  Precedent should allow them to continue.  But it is worth remembering that these programs would have never taken their pernicious form if the Constitution’s original meaning had been followed in the first place.

Reader Discussion

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on July 23, 2015 at 12:24:48 pm

So, how did Cardozo dispose of your opinion?

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R Richard Schweitzer
on July 23, 2015 at 14:37:40 pm

If you are correct about the original meaning, isn't it a fair criticism of the framers that they failed to specify that Congress only has the power to spend in furtherance of the specifically enumerated powers? They could have written that into the constitution, but instead wrote, "provide for the common defense and general welfare of the United States." Notwithstanding the problems associated with Social Security and Medicare, I don't see how the aims of these programs do not fall under the rubric of "general welfare."

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djf
on July 23, 2015 at 15:38:06 pm

Chief Justice Hughes did. See United States v. Butler, a 1936 decision following Hamilton's opinion.

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Jimmy C
on July 23, 2015 at 15:43:21 pm

I assume the answer would be that "to provide for the general welfare" is not a power but simply precatory language following the power to tax. Any expenditure must therefore be authorized by the necessary and proper clause. It is a somewhat cramped reading of the text, and hard to enforce. Madison was opposed to internal improvements so he wanted to read it narrowly. Hamilton wasn't, so he read it broadly. Since Congress no longer cares about the constitution, there is no limit to unconditional spending. I think this is just right.

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Jimmy C
on July 23, 2015 at 16:01:38 pm

"I think this is just right."

Just for clarification, you are saying that this is right simply because our Legislative friends don't give a rip about the constitution and under this Legislative attitude, the Congress can do as it pleases (but see the Abood post below and we should also include the Admin Agencies in this.)

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gabe
on July 23, 2015 at 16:03:39 pm

Another way that the general welfare language is not redundant is if it limits (rather then expands) the power to tax. Instead of granting an additional power to spend for the general welfare, it could limit the money raised through taxation to only “general” welfare (rather then personal, specific, or regional welfare). Now I don’t believe courts are likely to strike down many appropriations for not being “general enough” unless it is especially egregious. But that would not make the language redundant at all.

I disagree that we can’t return to the original meaning, it just as to be done in a careful way. A transition plan has to be put in place where the current programs are transitioned to the states to take care of current seniors. So two options, a court ruling that “this is what the constitution means” but having it go into effect delayed for a year or more to allow time to transition. Or something like happened in brown vs. board of education where the government is ordered to transition “with all deliberate speed.”

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Devin Watkins
on July 23, 2015 at 16:10:21 pm

How do you explain this part of the constitutional convention, which congress clearly would have the power to do (and has done) under the modern interpretation of allowing the power to spend on any subject (http://avalon.law.yale.edu/18th_century/debates_914.asp):

Docr. FRANKLIN moved to add after the words "post roads" Art I. Sect. 8. "a power to provide for cutting canals where deemed necessary"
...
Mr. SHERMAN objected. The expence in such cases will fall on the U. States, and the benefit accrue to the places where the canals may be cut.

This was voted down.

The power to "establish an University" was voted down (again something that our government would have the power to do if it could spend on anything). And yet the objection was not that it was not necessary because of the spending clause but because "The exclusive power at the Seat of Government, will reach the object." IE they can build a university in the district of Columbia so congress doesn't need this power.

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Devin Watkins
on July 23, 2015 at 19:08:07 pm

Just for Fun:

Are expenditures for the benefit of a **specific** class "general" in their welfare purpose?

Expenditures for civil war veterans were based on powers to spend for services.

But, is an age classification a "general welfare" classification.

Why of course it is because the legislators have so determined
(and not for any other reason we have read)

SS & M/C are age classes. M/A is an economic (income) classification.

So those expenditures really have not to do with the Madison Hamilton split do they?

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R Richard Schweitzer
on July 24, 2015 at 10:04:26 am

Actually, that wasn't Madison's view. It was Jefferson's. See Story's Commentaries, around sections 923 or 924...

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J.D.
on July 24, 2015 at 10:06:30 am

As used in the clause, "general" is the opposite of "local", not "specific."

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J.D.
on July 24, 2015 at 10:11:11 am

well, then Jefferson's view will certainly not find favor with our modern elites as evidenced by this piece in todays news wherein the Connecticut Democratic Party has seen fit to send Mr. Jefferson (and Jackson) to *Coventry.*

http://www.foxnews.com/politics/2015/07/23/connecticut-democrats-remove-jefferson-and-jackson-from-fundraising-dinner/?intcmp=latestnews

What next? Washington replaced on the one dollar bill by that genius politico from Greenwich Village, Bella Abzug?

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gabe
on July 24, 2015 at 12:37:31 pm

Social Security,Medicare/Medicaid,Obamacare etc.are all Constitutional because they are classified as a tax. (see the Helvering decision from 1936,among others). The Social Security Tax is collected and put into the General Fund. The funds are then doled out as benefits. The Tax can be ended tomorrow and the benefits stopped at any time by an Act of Congress. In fact Social Security,like the Income Tax, is completely voluntary otherwise it wouldn't be Constitutional. In essence,by obtaining and using a Social Security number one actually becomes a ward of the state. Of course trying to obtain a job or even surviving in today's modern world without a Social Security number is almost impossible,but that is besides the point. Like many good intentions Social Security has been turned on its head and is being used as a tracking number for ones entire life. Forget about the "right" to privacy. Through Social Security numbering Big Brother is always watching you.

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libertarian jerry
on July 24, 2015 at 13:48:36 pm

Putting aside the constitutional argument:

When providing a public finance policy argument, it is customary to compare alternatives under ceteris paribus assumptions – typically, comparing different ways that government might raise the same revenues.

So, what would have happened if Social Security had been pushed down to the states?

1) First, given that the federal government finances its current operations with Social Security receipts, the ceteris paribus assumptions would require us to assume that the feds would have raised some other revenues to compensate. To engage in a policy discussion that assumes the feds stop collecting taxes without generating any other consequence is to engage is the purest sophistry.

2) States may well have engaged in a race-to-the-bottom in maintaining social insurance. People who deem themselves relatively healthy would pursue a John Galt strategy of fleeing states with relatively high social insurance costs, leaving the sick behind. And this would be socially beneficial – why?

3) The net effect would be less compulsory savings. And this would be desirable because we have so much evidence that in the absence of compulsory mechanism, people are really good at saving?

(Again, I’m comparing the actual savings and return on savings. Today’s Social Security is really just a general tax to finance government combined with savings. To make a fair comparison, you’d have to assume Social Security did not exist, calculate how much the feds would have raised other taxes to offset the loss of Social Security revenues, then re-introduce Social Security and calculate it’s return in the absence of the burden of financing the rest of the federal government.)

Neither liberals nor libertarians want to acknowledge the harsh reality, but here it is: The social safety net does not exist for the benefit of the poor and sick; those guys have too many other things to think about to bother voting. Rather, the safety net exists for the benefit of voters who feel compassion for the poor and sick, and are unwilling to see them suffer even if the poor and sick contributed to their own circumstances. And I humbly submit that most voters are in this category. In short, most voters are self-interested, but compassion -- even if misguided -- is a big part of their utility function. Thus, attacking the social safety net as “unfair” or “redistributionist” isn’t gonna sell, even among the affluent.

Attacking it as inefficient may sell – provided you have a more efficient alternative that achieves equal or better results.

I’m open to the idea that there may be more efficient ways to provide a social safety net; I’m intrigued by arguments for a guaranteed minimum income, and by Charles Murray’s work. But let’s have an honest argument.

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nobody.really
on July 24, 2015 at 14:23:14 pm

Not quite right:

Another way of viewing it is this:

Let us suppose that the Government HAD NOT been collecting Social Security taxes; would there then have been an a highly attractive slush fund for the likes of LBJ to pilfer as he sought to fund both "war and butter"? Perhaps, a bit more restraint would have been in order given the absence of this large pile of monies in the *trust* of Social Security.

The *trust* was simply low-hanging fruit subject to ready picking via Congressional / Executive budgetary legerdemain.

Hey, if I have a bundle in my checking account, I am somewhat more likely (than not) to go off and buy all sorts of wonderful wines?

Thus, there is an alternative to your scenario / narrative; one which takes into account both the deviousness of politicos and the continuing drive to aggrandizement (both personal and governmental). In R. Richard's terms, a mechanism was created (although unknowingly, perhaps) that was soon commandeered to provide rents to many thousands other than those for which the mechanism was created. Oh, those "clever" little buggers - they a'int done yet!

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gabe
on July 24, 2015 at 14:29:09 pm

I wish social security was voluntary but it's not.

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Devin Watkins
on July 24, 2015 at 16:11:34 pm

Ah ! L J:

"The funds are then doled out as benefits."

And under what provisions of the Constitution is that part of the "spending powers" of Congress?

I think you will find that Cardozo found the spending (not just the tax) not prohibited by the Constitution. He did nod to the Madisonian view, but not so as to loosen any dandruff.

So, let us assume that way back then (just before I turned 11) Congress had passed some weird revenue provision - say a sales tax on all bread commercial or homemade; then said the proceeds from that tax plus revenue from a tax on all millers would be paid to people who reach age 65?

Is that appropriation ok under the Big Parchment?

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R Richard Schweitzer
on July 24, 2015 at 16:32:14 pm

2 N B

The purpose of taxation is to provide revenues for the functions of governments.

Admittedly, those given the authority to levy have not hewed to that purpose, seeking instead tools for directing human motivations ( a noble legislative objective always).

But, returning to the purpose stated, was it, is it, a function of the **federal** government to care for the poor and indigent; to provide funds to the elderly (who have worked - not everybody) at a particular age in life; to tend the disabled (other than those disabled in service) -
where are these **federal** functions to be found?

Now, amongst communities (and associations) those functions have existed and been incorporated in their broader organizations. Note the provisions for duties to educate in state constitutions that do not appear in the Big Parchment.

The choices (of giving up community conditions and benefits) for opportunities elsewhere (urbanization, e.g.) did not create an "undeniable" need for a **federal** function. It was a political manipulation of economic interests. That trend has not ceased.

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R Richard Schweitzer
on July 24, 2015 at 19:02:10 pm

And if I may add to that: something that also served the interests of some far sighted government factotum envisioning legions of public servants (unionized, of course) to provide for the "needs" of poor ole' buggers such as I, whether we desired such as assistance or not, or even whether we agreed with the definition / exposition of said "needs."
My goodness, how big is the Social Security Workers Union - probably smaller only than the Postal Workers Union - well, at least the SS types have not gone "postal", although it could be argued that the IRS union has!

Nobody really wants to look at "who benefits" (we don't need to say it in Latin).

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gabe
on July 26, 2015 at 02:37:48 am

I suspect that part of the original meaning of the Constitution is the method of interpretation called "the doubtful case rule". Under that rule, judges must let stand any enacted spending bill unless it clearly contradicts the Constitution. It's not enough to say that Madison was right and Hamilton was wrong, or Madison was probably right and Hamilton was probably wrong; one must be able to say that Madison was right and Hamilton wrong WITHOUT ANY DOUBT. And I just don't see the matter as free from doubt, given the constitutional text.

As a matter of policy, though, it might be quite wise to restructure the entitlement programs.

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Andrew Hyman
on July 26, 2015 at 17:14:36 pm

You do know that Federal employee unions do not have the right to negotiate for wages and benefits, right?

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Robert Levine
on July 27, 2015 at 09:29:45 am

Yes: however, they do have their own means of *demanding* or *speaking out for* more such as slowdowns, strict adherence to workplace rule books, etc.
Is it negotiation or extortion?

More importantly, it is a unique work environment wherein one, vested with the power to create, issue and impose "binding" regulations may enact said regulations with the knowledge that it will swell the ranks of the "cubicle competents" inhabiting the various Fed Agencies.

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gabe
on July 27, 2015 at 18:00:05 pm

It is not usually called the “doubtful case rule” usually it’s referred to as the presumption of constitutionality. But to employ that canon you must first employ the evidence of original meaning and cannons of construction to determine what was meant by the words and only after that is accomplished can you presume constitutionality if it does not violate that original meaning. That is why it is only a presumption, it can be rebutted.

Secondly, it is not, if there is “any doubt” as to the constitutionality. It was referred to at the time as that “judiciary may and ought to adjudge a law unconstitutional and void, if be plainly repugnant to the letter of the Constitution, or the fundamental principles.” But before you can know if it is “plainly repugnant” or at “irreconcilable variance” (as Federalist 78 says), you need to know what you are comparing it to. Look at how marshal tries to determine what commerce means in the commerce clause in gibbons v. ogden, it isn’t just a blind deference there are a variety of other tools to examine first.

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Devin Watkins
on July 27, 2015 at 19:56:44 pm

[…] form if the Constitution’s original meaning had been followed in the first place. [“The Unconstitutionality of Social Security and Medicare,” Library of Law and Liberty, July 23, […]

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Not-So-Random Thoughts (XVI) | POLITICS & PROSPERITY
on July 28, 2015 at 01:48:14 am

SCOTUS has correctly said: "The question whether a law be void for its repugnancy to the constitution, is, at all times, a question of much delicacy, which ought seldom, if ever, to be decided in the affirmative, in a doubtful case." If a proposed law spends money for the general welfare, outside the enumerated powers, then Congress may well have a constitutional duty to reject such a law, even though the courts cannot strike it down. The matter must be beyond doubt for the courts to strike the law down, but a mere probability of unconstitutionality is enough to obligate members of Congress to reject the proposed law.

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Andrew Hyman
on July 28, 2015 at 15:26:02 pm

That's good evidence in favor of the restrictive reading of the spending clause, Devin, but my objection remains: why didn't the Framers spell out the limitation in the text, in an unambiguous, nonvague language, instead of using the language they did? It seems to me that you can make the same kind of textual argument in favor of the nonrestrictive reading of the spending clause, regardless of the subjective intent of the Framers or ratifiers, that conservatives made in favor of reading "exchange established by a state" as written in the ACA (assuming, for these purposes, that Leftists are correct in arguing that Congress did not intend to deprive participants in federal exchanges of subsidies).

It seems to me that either the Framers' drafting skills left something to be desire or that the language was an intentionally ambiguous compromise.

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djf
on July 31, 2015 at 14:44:14 pm

No doubt that the framers could have written it more explicitly. But they can hardly be expected to know in advance what misconstructions people would later apply to the text. No one before Alexander Hamilton came out in 1791, 4 years after the constitution had been drafted, claimed that the federal government could spend on any subject it wanted (and the congress and every popularly elected president from 1800 through the civil war rejected this interpretation). Even the Federalist Papers (written in part by Alexander Hamilton prior to ratification) rejected this interpretation: "No stronger proof could be given of the distress under which these writers labor for objections, than their stooping to such a misconstruction" http://avalon.law.yale.edu/18th_century/fed41.asp

Considering the "best" reading of the text, the evidence is clear that the more limited interpretation of the clause was the one the founders believed.

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Devin Watkins
on July 31, 2015 at 14:45:55 pm

You are right as to what story believed Jefferson vs Madison's interpretation was. I disagree with Story, I think Madison's interpretation was the same as Jefferson's (both rejecting Alexander Hamilton).

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Devin Watkins
on July 31, 2015 at 14:58:02 pm

That phrase originally comes from John Marshal in Fletcher v. Peck
10 U.S. 87 (1810). (1) Notice that he said "seldom, if ever" not never, in other words sometimes it might be. (2) Both congress and the courts have a duty to enforce the constitution, not one or the other. (3) If you read the rest of the paragraph that sentence occurs in, you will see this: "The opposition between the Constitution and the law should be such that the judge feels a clear and strong conviction of their incompatibility with each other." After applying all the laws of construction to determine the meaning, then you examine if the law is such that the judge has a "clear and strong conviction" that it is incomputable. That is not beyond all doubt, but more of a "clear and convincing" standard in law, which is a lower burden of proof.

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Devin Watkins
on July 31, 2015 at 15:14:30 pm

In any event, it is a higher burden of proof than Congress has. If a preponderance of evidence indicates unconstitutionality, then I think a member of Congress should vote "no" even if he likes the policy or disagrees with the constitutional provision.

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Andrew Hyman
on August 02, 2015 at 13:15:55 pm

Devin, that the issue was actually raised at the framing convention, and the framers still failed to address it explicitly in the text, indicates that, in this aspect at least, the Constitution is not a particularly well drafted legal document. This assumes, of course, that most of the framers and ratifiers intended the spending power to be limited, which I agree the historical evidence you cite tends to show was the case. The failure to anticipate that someone like Hamilton would exploit the ambiguity to argue for an unlimited spending power as early as 1791 shows that those who wanted to limit the power really dropped the ball (although I guess they would not have used that idiom). Perhaps the framers can be excused on the ground that they had little history of written constitutionalism to draw on, particularly in the area of written limits on the scope of government activity.

Of course, those like Hamilton who wanted a broad spending power for the federal government (probably a minority at the time) were wise to keep their mouths shut when their opponents shot themselves in the foot with this myopic drafting mistake. At any rate, at this late date, we certainly are not returning to the "original meaning" of the constitution, no matter how obvious it is in light of the historical evidence.

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djf
on November 16, 2018 at 12:09:26 pm

[…] the fringes of the conservative movement today, rightwing law professors and pundits are reviving long-dormant attacks on both programs, contending that Congress never had the constitutional authority to implement […]

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Unequal Justice: Ginsburg’s Ribs and the Future of SCOTUS - LA Progressive

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