Daniel Reed's Speech on the Social Security Act of 1935
Congressional Record - House (17 April 1935)
Mr. Chairman, the economic security bill now before us raises grave constitutional questions. More and more as the proposals of this administration are presented and the motives behind them are revealed, thoughtful citizens turn to the Supreme Court as the one dependable instrumentality of Government to hold the rudder of the Constitution true.
Recent decisions of this great bulwark of liberty and justice have inspired new hope in the hearts and minds of those who believe in the principles of constitutional government.
Two comparatively recent and notable decisions of the Supreme Court ought to exert a restraining influence on the Congress as well as the executive branch of the Government. The economic security bill now before us is evidence that another attempt is to be made to evade constitutional limitations and invade the rights reserved to the States. This Congress, under irresponsible executive leadership, has already attempted to delegate its legislative power in violation of the Federal Constitution, and under the same leadership it has attempted to repudiate the promises of the Government to its citizens. The same leadership that has brought the stigma of repudiation upon this Congress may be satisfied to dismiss this ugly word by issuing a statement from the White House that "the President is gratified," but the responsibility for this injustice to the citizens of the Nation rests upon Congress.
The executive branch of the Government for the past two years has made a spineless rubber stamp of this legislative body, and it has done so to the humiliation of the self-respecting Members of Congress and to the detriment of the Nation.
It may require a more blistering rebuke from the Supreme Court and the pressure of an aroused and enraged public opinion to restrain this Congress from continuing to be the tool of those who would destroy the Constitution; but the time is not far distant when those who believe in constitutional government will speak with force and with finality.
There are times when I enjoy to turn back the pages of our history and examine the philosophy of those who framed the Constitution, and to compare it with the philosophy of the ardent advocates of the new deal who have all but destroyed it.
One of the framers of the Federal Constitution, in commenting on the advantages to be derived from having two branches of our National Legislature, made these interesting observations:
Each House will be cautious and careful and circumspect in those proceedings, which they know must undergo the strict and severe criticism of judges, whose inclination will lead them, and whose duty will enjoin them, not to leave a single blemish unnoticed or uncorrected.
Every bill will, in some one or more steps in its progress, undergo the keenest scrutiny. Its relations, whether near or remote, to the principles of freedom, jurisprudence, and the Constitution will be accurately examined; and its effects upon laws already existing will be maturely traced. In this manner rash measures, violent innovations, crude projects, and partial contrivances will be stifled in the attempt to bring them forth.
When the distinguished statesman and jurist made this statement he did not have in contemplation the time when a Chief Executive would usurp the functions of Congress, bend it to his will, make the legislative committees subservient to him, formulate the legislative program, draft the bills both as to substance and form, and then demand enactment of them into laws without change. It did not occur to him, I venture to say, that legislators elected to the Congress of the United States would ever become so servile. Moreover, I dare say the thought never entered his mind that a Chief Executive would engage adroit counsel and assign to them the specific task of so formulating legislative measures as to evade the spirit and intent of the Federal Constitution. Few bills that have come before Congress, I am sure, have had more time spent upon them by legal talent in an attempt to evade and circumvent constitutional barriers than has the economic-security bill now before this House.
The provisions have been cut, carved, sawed, assembled, and reassembled in an effort to make it constitutionally presentable to the Supreme Court. A resort has finally been had to an ingenious mechanical arrangement of title II and title VIII as the most likely means of diverting the attention of the Supreme Court from the real issue, viz. that these two titles are the same in purpose, spirit, intent, and substance. This clever scheme may succeed, but I do not believe this mechanical subterfuge will deceive the Court. If the purpose sought to be accomplished does escape the scrutiny of the Court because of the mere juggling of titles, then other police powers reserved to the States may in the same manner be taken over and operated by the Federal Government without let or hindrance.
But, Mr. Chairman, the courts are not dumb when it comes to detecting legislative subterfuges, even when such attempted evasions are drawn by the "brain trust" counselors. We have evidence of this in a recent opinion written by Federal Judge Charles I. Dawson in support of a decision adverse to new-deal legislation. The language and the logic expressed in the opinion are appropriate and applicable to title II and title VIII in the bill before us. Judge Dawson writes, "It is impossible for anyone who has any respect for constitutional limitations to contemplate this law with complacency.... It is the plainest kind of an attempt to accomplish an unconstitutional purpose by the pretended exercise of constitutional powers."
In this same opinion, Judge Dawson said that if the act itself shows that "subterfuges were resorted to to circumvent constitutional limitations, no judge who respects his oath to support and defend the Constitution will hesitate to strike it down, it matters not how great may be the demand for such legislation."
Executive domination is responsible for including in this economic-security bill subject matter that should have been brought in under separate measures. Never under any circumstances, except under present dictatorial pressure, would the Ways and Means Committee have brought a bill in here loaded down with subject matter some of which ought to receive profound study before being launched in perilous times like these. There would be little if any opposition to Federal aid to the humanitarian subjects, such as adequate aid to the aged, grants to States for dependent children, grants in aid of maternal and child-health service, grants to aid crippled children, aid to child-welfare services, support to vocational rehabilitation, and to public-health work.
But there is included in this bill, by the direction and at the command of the President, the compulsory contributory old-age-annuity provision. As I have stated, it raises a grave constitutional question, and, beyond all this, it lays a heavy tax burden on employers and employees alike when they are least able to bear it, not to meet an emergency or to furnish immediate relief to those in need. Titles II and VIII, I repeat, were placed in this bill and kept in this bill because you were ordered and commanded to do it by the President.
This measure, like so many complex bills that have preceded it, was not brought here, and you did not dare bring it here, until it had run the gamut of administration approval. First it had to satisfy the "brain trust." Next it had to receive the benediction of the President. When the press announced that the majority members of the Ways and Means Committee had been to the White House to obtain the consent of the President to bring the economic-security bill before the House of Representatives for consideration, I was reminded of the truth that history repeats itself. Almost six centuries ago, when the King of England convened Parliament, the sole duty of the Commons was to consent to taxes. Later on, in 1354, Edward III, for some reason not revealed, asked the Commons their opinion of the French war which he was then carrying on, and this was their reply: "Most dreaded lord, as to this war and the equipment needed for it we are so ignorant and simple that we do not know how nor have we the power to decide. We, therefore, pray your grace to excuse us in the matter."
The parallel is in the procedure only — not a reflection upon the intellectual capacity of my colleagues. I want it distinctly understood that I have a profound admiration and respect for the character and intelligence of my associates on the Ways and Means Committee. What I deplore is the lack of legislative independence so much needed to prevent constant dictatorial Executive interference with the legislative branch of the Government. A great statesman has said, "The true danger is when liberty is nibbled away for expedients and by parts."
The centralization of power in the executive branch of the Government is a menace of major proportions. I know that the admonitions of George Washington on this point will fall on deaf ears, but I hope you will indulge me while I quote from his Farewell Address. He said:
It is important, likewise, that the habits of thinking in a free country should inspire caution in those intrusted with its administration to confine themselves within their respective constitutional spheres, avoiding in the exercise of the powers of one department to encroach upon another. The spirit of encroachment tends to consolidate the powers of all the departments in one, and thus to create, whatever the form of government, a real despotism.
A just estimate of that love of power and proneness to abuse it which predominate in the human heart is sufficient to satisfy us of the truth of this position.
The necessity of reciprocal checks in the exercise of political power by dividing and distributing it into different depositories, and constituting each the guardian of the public weal against invasions of the others, has been evinced by experiments, ancient and modern; some of them in our country and under our own eyes. To preserve them must be as necessary as to institute them.
If in the opinion of the people the distribution or modification of the constitutional powers be in any particular wrong, let it be corrected by an amendment in the way which the Constitution designates. But let there be no change by usurpation; for though this in one instance may be the instrument of good, it is the customary weapon by which free governments are destroyed. The precedent must always greatly overbalance in permanent evil any partial or transient benefit which the use can at any time yield.
Again let me remind the members of the majority that even though you enact title II and title VIII as commanded by President Roosevelt, the responsibility for an adverse decision by the Supreme Court as to the constitutionality of these two titles will rest upon you. It will not relieve you from it to say, We obeyed our master's voice. Will he come to your rescue? Not at all. What will his answer be? Is he not in a position to say this: "My fellow countrymen, I made my position clear on this subject when I was Governor of New York State. In a radio address broadcast on March 2, 1930, I then said —
"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. Wisely or unwisely, people know that under the eighteenth amendment Congress has been given the right to legislate on this particular subject [prohibition]; but this 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.
"Federal Government costs us now $3,5000,000,000 every year, and if we do not halt this steady process of building commissions and regulatory bodies and special legislation like huge inverted pyramids over every one of the simple constitutional provisions, we will soon be spending many billions of dollars more."
Mr. Chairman, what is the situation? It is this: Five years ago in the broadcast from which I have quoted, Governor Roosevelt stressed his opposition to the type of Federal legislation which you now seek to enact. His reasons then given were, viz, that "the governing rights of the States are all those which have not been surrendered to the National Government by the Constitution or its amendments." That among the governing rights of the States not so surrendered are insurance, social welfare, business, and others.
You on the majority side say that you cannot understand our position with reference to title II and title VIII. I venture to suggest that the minority has a clearer conception of where the President stands with reference to the unconstitutional aspects of title II and VIII than do you on the majority side. The position taken by President Roosevelt, when he was Governor of New York State, as to the constitutional questions involved in legislation of the character of the bill now before us, was sound then, and it is sound now, and you know it and he knows it. We know it, and under our oath of office we shall support the Constitution.
You may manipulate, distort, and butcher this bill in an endeavor to evade the fundamental law of the land, but you cannot change the fundamental purpose, the facts, nor the law.
The tenth amendment to the Constitution provides that 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.
The fourteenth amendment does not take from the States police powers reserved to them at the time of the adoption of the Constitution. Furthermore, the Supreme Court of the United States has steadfastly adhered to the principle that the States possess, because they have never surrendered, the power to protect the public health, morals, and safety by any legislation appropriate to that end, which does not encroach upon the rights guaranteed by the National Constitution. What is more, as stated by Judge Cooley in his great work, Constitutional Limitations: "In the American constitutional system, the power to establish the ordinary regulations of police has been left with the individual States, and it cannot be taken away from them, either wholly or in part, and exercised under legislation of Congress. Neither can the National Government, through any of its departments or officers, assume any supervision of the police regulations of the States." Furthermore, the distinguished author makes this additional observation: "And neither the power [police power] itself, nor the discretion to exercise it as need may require, can be bargained away by the State."
Aside from insurmountable constitutional objections, there are practical reasons that ought to deter you from enacting titles II and VIII. Under these two titles the Congress proposes to compel the employers and employees to assume a financial burden that will ultimately amount to over $32,000,000,000. It is proposed to set up a bureaucratic scheme like this when 12,000,000 wage earners are without employment, when one-sixth of our population is on the relief rolls, when our national and State debts are appalling, and in face of the fact that it will be years before benefits will be paid.
Mr. Chairman, speaking of the present plight of the country brings me to a discussion of title III and title IX, which deal with unemployment insurance. This is another compulsory pay-roll tax. The system that is proposed to coerce the States to adopt by means of a 3-percent pay-roll tax, imposed on employers who employ ten or more persons, is a State function as distinguished from a Federal function. The States may or may not set up an unemployment system, but in a State that fails to do so the employers who fall within the purview of titles III and IX will receive no unemployment benefits for their employees from the 3-percent tax imposed. In such a case it is not a tax but a penalty, and, therefore, discriminatory as well.
The problem before the Nation today is to find work — not public work paid out of the taxpayers' money — but work in private industry. Private business and industry should be encouraged, not discouraged. What has been the philosophy under which our Government has operated for the past 150 years, until recently? It has been the nonintervention of government in competition with private business. When social or economic legislation has been presented the practice heretofore has been for Congress to ascertain whether the ideas proposed would produce useful or injurious results, without troubling about their theoretical value. Now all this is reversed by the apostles of Government intervention, who maintain that the brain trust, by reason of the intellectual superiority of its members, ought to control the whole complex of the Nation's industrial and commercial activities, even though it may deprive the citizen of initiative and therefore of liberty.
The gradual replacement of private initiative by that of Government domination is apparent to those whose intellectual and moral senses have not been dulled by Federal doles and assurance of "a more abundant life."
Steadily and gradually, under the powers granted by Congress to the executive branch of the Government, it is beginning to direct everything, manage everything, and monopolize everything. Day by day the Government will intervene more and more in the most trivial activities of its citizens.
The Congress has appropriated millions of dollars, in fact billions of dollars, of the taxpayers' money and made them available to Government functionaries to spend in developing Government plants and commercial activities to compete with private enterprise.
The United States of America, under constitutional government, has for 144 years, until the advent of the "new deal," surpassed every other nation in the creation of wealth and in the wide distribution of it among the masses. The American philosophy of government has permitted the activity of the individual to reach its maximum and that of the Government to be reduced to a minimum. It is proposed now to reverse the American policy of private initiative and, instead, to make the Federal Government preponderant in the daily affairs of every individual.
Unemployment insurance is dependent on the pay rolls of private industry, not on Government pay rolls. Private pay rolls are a condition precedent to the success of the plan embodied in titles III and IX of the bill before us.
It has been truly said that "the man who is trying to make a living for his family and pay taxes to city, State, and Nation, always loses if he has a government for a competitor." Mr. Chairman, the small-business man, the one who falls within the purview of titles III and IX is sorely pressed at the present time to maintain his solvency. These small concerns can meet this new burden of taxation only by either going out of business or by cutting expenses. How will the man employing twelve or fifteen men reduce his expenses? He will, if possible, reduce the number of his employees to nine to escape the tax burden.
Much has been said about the unemployment systems of foreign governments; that the United States is a backward nation in this field of social legislation. The experience of some of the other nations with unemployment insurance demonstrates clearly that if such a system is launched on a large scale during a period of depression, all that can save it from financial disaster is the Treasury of the Federal Government. The burden of keeping the system solvent will first fall on the wage earner.
Gustav Hertz, German labor economist, in a recent work on social insurance, states this:
In Germany no one any longer doubts the fact that the employer's share of the premium is taken from the workman's wages. What the employer pays as his contribution to social insurance he cannot pay the workmen in the form of wages.
Some years ago a well-known unionist even had to admit that countries without social insurance have higher real wages than Germany [United States, Holland, Scandinavia], while another said, "High wages are the best social policy."
In other words, social insurances handicap wage development. But not only this, they also intensify wage struggles.
Mr. Hertz states that under the German system, "premiums started on a modest basis. The first were 1½ percent for employee and three-fourths of 1 percent for employer. Today the entire premium averages almost one-fifth of the amount of the wages, and for miners it is nearly 30 percent."
Mr. Chairman, I am not hostile to unemployment insurance, but I do maintain that such a system, to succeed, must be put in operation when the unemployment fund can be built up without retarding recovery.
British experience with unemployment insurance demonstrates the advantage of starting such a plan under auspicious circumstances. The British National Insurance Act went into effect December 16, 1911. It covered only 2,000,000 manual workers in "seven of the more unstable industries." After the outbreak of the World War, 1,500,000 were added to the insurance list. The scheme operated successfully from 1911 up to 1920. It could not do otherwise, because during that time there was practically no unemployment. Because of the war activities, it was almost impossible to find men to fill available jobs.
In November 1920 the unemployment scheme was expanded to cover a total of 12,000,000 workers. Then came the depression of 1920, followed by unemployment. What happened?
The fund of £22,000,000, accumulated prior to the depression, was exhausted by the middle of 1921. Then the unemployment system had to borrow from the Treasury, and by 1922 a debt of £14,3000,000 had be incurred.
The employment-fund debt in March 1927 had increased to £24,710,000, more than twice what it had been previous year.
Then contributions were increased and benefits reduced.
It became necessary in 1929 to borrow £10,000,000 more from the Treasury.
The annual cost in 1930 increased £13,000,000 more. The debt doubled in the next twelve months, and in March 1931 stood a £73,600,000 — all this drawn from the Treasury and as an added burden to the taxpayers.
The indebtedness of the unemployment fund increased steadily at the rate of £1,000,000 a month.
In September 1931 the debt had reach £101,910,000.
Mr. Chairman, is this the record and this experience of Great Britain to be ignored by the Members of this House? Theorists may do so, but ought we, as responsible representatives of the people, to do so?
It cannot be successfully disputed that the national budgetary crisis of Great Britain in 1931 was largely due from financing the unemployment system.
I want to impress on the Members of the House that during the calender year 1931 the British Treasury paid out £16,000,000 in contributions, £28,000,000 in transitional benefits, and also loaned in addition to these fifty million to the unemployment fund.
Mr. Chairman, only last year, 1934, one of the great problems of the British Parliament was to find some way to establish the unemployment system on a solvent and self-supporting basis. It still remains an unsolved problem in Great Britain.
I urge you not to disregard the facts. The greatest boon that can come to the wage earners of this Nation is industrial and business recovery. The unemployed want jobs and not doles. Recovery cannot come by plunging the Nation further and further into debt by increasing Government bureaus and commissions and by imposing taxes. The way to confidence and recovery is not by squandering money on experiments that have been tried and have failed.
Let us replace experiments with experience. "Experience," says Wendell Phillips, "is a safe light to work by, and he is not a rash man who expects success in the future by the same means which secured it in the past."
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