Of Course, Social Security is a Ponzi Scheme!!

By Dr. Harold Pease

Governor Rick Perry is accused of referring to Social Security as a Ponzi scheme. To consider the authenticity of this claim we must return to the deceptive strategy of its origin.

Since Social Security was not on the list of the qualifiers of general welfare—Article I, Section 8 of the Constitution—government had no power to forcibly extract a portion of a man’s wage and force his employer to match this fund—not even close. So they used the power to tax to justify this action. But Congress had no power to tax for powers that it did not have. Never the less the government took over the responsibility for everyone’s retirement and the people lost the right to their own money—the portion that was forcibly extracted as a condition of employment. Moreover, since the federal government would now do this for them, they had no incentive to do it for themselves.

At the time the Supreme Court had ruled much of the New Deal legislation unconstitutional and Social Security probably would have met the same end had Franklin D. Roosevelt’s new Court Packing bill not been threatening the independence of the Supreme Court. They let this one slide. To do so they had to agree to place the new tax monies in the “Treasury like internal-revenue taxes generally, and … not earmarked in any way” (301 U.S. 619, 1937). They should have gone to Article V, adding an amendment to the Constitution empowering the federal government to do so, but they were uncertain that it would pass so enacted an end run around the Constitution instead.

The money taken under the guise of taxes was not set aside for the giver’s future at all, as most believed, but just added to the general fund and spent. If private firms did the same thing, the federal government would call it a Ponzi scheme and perpetrators would serve time. When taxpayers do retire, they will have to depend upon the resources of future generations to cover what was promised. The system could never end without injustice to the “old” people. Each generation rightfully came to believe in their entitlement, having allowed FDR to spend their contributions on the previous generation.

Payroll taxes and benefits payments began in 1937. Ida May Fuller, a legal secretary, paid a total of $24.75 into the system between 1937-1939. Her first monthly check issued Jan. 1940, was $2.00 short of this. “After her second check, Fuller already had received more than she contributed over the three-year period. She lived to be 100 and collected a total of $22,888.92 (Research Note #3: Details of Ida May Fuller’s Payroll Tax Contributions, Social Security Administration).” How can this not be a Ponzi scheme?

Those receiving social security in 1935, never having paid a cent into the program, were grateful, of course, for the generosity of the nation and became beholding to the party in charge of the handouts. This insured the democrats’ continuance in office for the next 17 years. Prosperity returned in the fifties and sixties, and a challenge to the now established and popular program was unthinkable. People saw Roosevelt as having saved the country. Only now, younger historians, not favorably conditioned to a worshipful response to Roosevelt, recognize and document that it was not the New Deal but World War II that pulled us out of the 21-year long Great Depression.

Over time more groups that paid nothing or very little into the fund have received benefits: spouses, widows, children and the disabled—even illegals. I have a friend who brought his mother to America and she received benefits until her death. Government figures estimated in 2010 that 54 million were receiving Social Security benefits. Without significant changes the program will crash by 2036 say the Social Security Board of Trustees in their 2011 Annual Report.

We agree that somebody does owe our elders the total of what they paid into the program, but it is not the new generation. They did nothing wrong. Why should they pick up the tab for commitments made before their birth? How can government take their money, spend it on others, look them in the eye, and tell them that this isn’t a Ponzi scheme? They are its biggest victims.

Dr. Harold Pease is an expert on the United States Constitution. He has dedicated his career to studying the writings of the Founding Fathers and applying that knowledge to current events. He has taught history and political science from this perspective for over 25 years at Taft College. To read more of his weekly articles, please visit www.LibertyUnderFire.org.

President Usurps the Purse Powers of Congress

By Dr. Harold Pease

The power of the purse (both taxing and spending) is one of the most important powers in the Constitution. The Founders resolved that it should be left with the representatives of the people; “all bills for raising revenue shall originate in the House of Representatives (Article I, Section 7).” This made it impossible, without the people’s consent, for them to be over-taxed for more than two years as all members of this body come up for reelection on the same date—every two years.

Addressing this subject James Madison observed, “This power over the purse may, in fact, be regarded as the most complete and effectual weapon with which any constitution can arm the immediate representatives of the people, for obtaining a redress of every grievance, and for carrying into effect every just and salutary measure.” The U.S. Constitution mandates that “the House of Representatives cannot only refuse, but they alone can propose the supplies requisite for the support of government.” This power alone he added, “can overcome all the overgrown prerogatives of the other branches of the government. They, in a word, hold the purse… (The Federalist 58).”

The Constitution also requires that the U. S. Senate confirm the appointments of the Executive Branch (Art. II Sec II). The last two presidents have created a new level of bureaucratic government called Czars without any pretense of Constitutional authority, and none were presented for confirmation to the Senate as required by the Constitution. Moreover, most if not all, of Barack Obama’s 50 Czars make rules and regulations in dozens of areas where the President has no Constitutional authority to function, as identified in Article II, Sections II and III. Yes, the President has a list of powers, as do Congress and the Supreme Court. His doing so violates Art. I, Sec. I, which specifically leaves “all legislative powers herein granted” with a Senate and House of Representatives.

Finally, probably due to Tea Party influence in the last election giving the republicans some spine, Congress made a weak attempt to bring President Obama in line. Congress denied the funding of four of these so-called Czars. The law placed on the President’s desk for his signature or veto (the only two powers he has with respect to making law) April 15, 2011, could not have been clearer. “Sec. 2262. None of the funds made available by this division may be used to pay the salaries and expenses of the following positions: (1) Director, White House Office of Health Reform. (2) Assistant to the President for Energy and Climate Change. (3) Senior Advisor to the Secretary of the Treasury assigned to the Presidential Task Force on the Auto Industry and Senior Counselor for Manufacturing Policy. (4) White House Director of Urban Affairs.”

The President, in a procedure called a “Signing Statement,” also unconstitutional, boldly wrote that he would not obey this part of the proposed law, and then signed the law excluding the parts he disagreed with which meant that he wound continue to have these offices paid for. So in a dictatorial move he took spending power from Congress. The unconfirmed offices would be paid for anyway. The spending of money in essence requires it being first raised which again is a power left only to the House of Representatives. Congress defied by the President, dropped the issue.

Unfortunately “Signing Statements” was a practice used extensively by President George W. Bush to avoid the only two law-making powers a president has, allowing him a self-created third option. Prior to this time presidents simply vetoed the entire law if they disagreed with any portion thereof. They have no authority to pick and choose. Ironically, candidate Obama strongly and rightly condemned this practice as being unconstitutional when his predecessor did it. He then argued, “It is a clear abuse of power to use such statements as a license to evade laws that the president does not like or as an end-run around provisions designed to foster accountability (Boston Globe, Dec. 20, 2007).”

But Congress alone has all taxing and funding powers as all money needed by the government must first come from the people, and they through their representatives clearly said no!! Article I, Sec. 9 reads, “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law;” of course, all law must be passed by Congress as per Article I, Sec. I. The president is drawing money from the Treasury to fund positions not in the Constitution and against the clear will and directive of Congress. Congress must not concede its’ power over the purse to the executive branch. Their inaction now will do just that.

In this one issue the President has given new meaning to at least five parts of the Constitution. No one will destroy this document all at one time but by their ignorance or worshipful loyalty to party they will do so one piece at a time. In this case five. Please participate in preserving your own liberty and pass this column around.

Dr. Harold Pease is an expert on the United States Constitution. He has dedicated his career to studying the writings of the Founding Fathers and applying that knowledge to current events. He has taught history and political science from this perspective for over 25 years at Taft College. To read more of his weekly articles, please visit www.LibertyUnderFire.org.

Tea Party Patriots Win Debt Limit Deal

By Dr. Harold Pease

I do not usually write on themes getting extensive attention in the media but the establishment press has overlooked a big story in the debt limit debate. Every one has covered who lost: the President, Congress and both major political parties but almost no one identified the Tea Party Patriot movement as the clear victor.

Remember the over 2400 separate and spontaneous gatherings of Tea Party Patriots in 2009, geographically spread throughout the nation and proportionately held April 15, July 4, and Sept. 11, with about 800 such gatherings held each date. These gatherings, with no national leadership or direction, led mostly by moms with homemade signs, was perhaps the showing of greater anger against the federal government than in any single year in our history—certainly in my life time.

Remember as well the two Tea Party assemblages of over a million in Washington D. C. during that same year crying out “President Obama!! Can you hear us now?” “CAN YOU HEAR US NOW?? Yes, the establishment media had trouble covering these stories then too, but they still happened.

The Tea Party movement resulted in the election of a few candidates committed to Constitutional limited government, the free market and fiscal responsibility—the Tea Party’s core values and actually those of the U.S. Constitution as well. Values perceived by them as having been largely abandoned by the leadership of both major political parties.

All this is conceded but how does this translate to a win for the Tea Party Patriots on the Debt Limit Deal? True to the Constitution and their election promises these patriots bucked the weak-kneed Republican Party in the House of Representatives and the spend-happy Democrats in the Senate and forced both to talk about the following previously ignored concepts. What is the proper role of government? How do we get a Balanced Budget Amendment to curb our addiction to debt? Are raising taxes always the only answer? And given government’s addiction to growth, will they ever have enough?

The promise to vote on a Balanced Budget Amendment, to not raise taxes, and to actually cut future spending, are each a part of the finished agreement because of the insistence of the Tea Party members of Congress. As a group only the Tea Party saw the looming financial problems ahead if we did not seriously live within our means and scale back our debt. NOW!! With our debt credit down grade and near stock market crash of this week can anyone seriously question Tea Party philosophy now? Still, there are voices in the land aimed to discredit them.

Republicans have shown themselves to have no fire in their bellies and have thus caved-in to the run-away spending plans of their adversaries every time. Sometimes, as under the Bush Stimulus, they have shown themselves as leading the charge for debt enslavement. In short, modern Tea Party Patriots gave the Republican Party enough fire so that they did not cut and run so easily.

Did the Tea Party get what they wanted? No! Definitely not!! Were that the case they would have had an actual Balanced Budget Amendment, actual spending cuts, and our credit rating would not have been down graded. Reducing the rate of increase is not the same as reducing spending. The deal did nothing to stop the growth of our debt and resulting bondage of our children. In fact, it did just the opposite. Still, opponents were forced to listen and give some attention to the Tea Party Patriots—a huge victory especially given their small size in Congress and governments nature to spend without restraint. We just need more of them in Congress. Returning to the Constitution is the only answer and they are the only ones saying it.

Hopefully, more Americans will see the Tea Party Patriot movement and our defense of the Constitution as the same thing. Until now they have been a somewhat lone voice in the wilderness as far as Congress was concerned but with this victory should merit our greater confidence lending to greater support resulting in even bigger victories to come.

Dr. Harold Pease is an expert on the United States Constitution. He has dedicated his career to studying the writings of the Founding Fathers and applying that knowledge to current events. He has taught history and political science from this perspective for over 25 years at Taft College. To read more of his weekly articles, please visit www.LibertyUnderFire.org.

Should the “Poor” Pay Federal Income Taxes?

By Dr. Harold Pease

Lets see if I have this right. The President wanted to spend $3.7 trillion this year. Our total income for the year is about $2 trillion so that would leave a deficit of $1.7 trillion which will be added to the $14 trillion that is already placed upon the backs of my children and grand children, some not born yet.

Democrats wanted to cut $6 billion from this deficit, and thought that a hefty amount, leaving only $1.64 trillion for my children and grand children to make up latter, raising the national debt to over $15 trillion by years end. Not to be outdone, Republicans in the House and Senate wanted to reduce the budget by $61 billion leaving only $1.09 trillion to borrow from Communist China or elsewhere to be added to the $14 trillion national debt, making it in excess of $15 trillion by the end of this year. Democrats pat themselves on the back for taking a cup of water out of the Pacific Ocean and Republicans gloat when taking a mere bucketful of water from the same ocean.

So the parties went to war over the issue and compromised at $38.5 billion, which still leaves us in excess of $15 trillion in debt by years end. Well-done guys! Your final agreement was about the equivalent of a one-day deficit reduction. I am having difficulty understanding why this wasn’t a sell-out to my children. In fiscal responsibility both parties proved themselves inept.

We have the normal three solutions: tax more, inflate more, and cut more. We could double our taxes but that will destroy our incentive and resources to create jobs. We could inflate the dollar making every dollar already earned worth less. But that will rob those on fixed incomes and seriously damage the lower classes who don’t have the money to purchase gold or silver to ensure the value of what they have saved. Yet the Federal Reserve did just that last December when they, with President Barack Obama’s authorization, began printing and distributing $600 billion, all by June 1, 2011. Or finally, we could cut half the free or subsidized “non-essential” programs and live within our means. That is the most realistic as long as it isn’t “your” program that is cut.

Dare I suggest a fourth solution? The Internal Revenue Service just revealed that 45% of U. S. households paid no federal income tax last year and the year before it was 47% who had not. Are we becoming a two-class society—those who pay taxes and those who do not, with the non-tax payers still receiving generous subsidies from the pockets of those who do? Worse, those who are taxpayers are denied these same benefits their less productive neighbors receive. We all have able-bodied friends who chose not to work. How often do we hear of friends who won’t work because they get enough on unemployment or that they might, in fact, make less by working?

Why should anyone be exempt? Don’t we all use federal services in some way? In fairness shouldn’t we require everyone to pay federal income taxes even if less for the poor? Why do we assume that they should be exempt? Even the widow paid her mite in the New Testament and was subsequently praised (not excused) for having done so by Christ himself.

All “freebie” benefits that the poor received during the preceding year should be added to their salary in this calculation. When they know this up front they may elect to opt-out of the benefit so that it doesn’t put them in a higher tax bracket. When the “poor” pay federal income taxes they are vested in the system and hypothetically more responsible. When they do not then the issue of taxation becomes meaningless to them. “So what if taxes are raised, it does not affect me!”

When the non-taxpayer class (presumably the poor) reach 51% of the population they become the majority class and will never reduce the taxes on the “rich,” which will always be defined as anyone making more than they do. The working tax payer class becomes the new slave class. Eventually when the “rich” are destroyed as a class, as happened in the U.S.S.R. under socialism, all become slaves and poor. With everyone participating in the tax burden, it is harder to gain support for tax raising issues, thus saving billions and the payment of taxes by non-taxpayers, the “poor,” helps reduce the national debt.

Dr. Harold Pease is an expert on the United States Constitution. He has dedicated his career to studying the writings of the Founding Fathers and applying that knowledge to current events. He has taught history and political science from this perspective for over 25 years at Taft College.

A Socialized Christmas

By Dr. Harold Pease

I do not usually write satire but here is a scary proposition that could come true as witnessed by other extreme laws recently passed.  The country is now 13½  trillion dollars in debt and it is incorrectly believed, by the less informed—mostly socialists—that the only way to solve this problem is to increase taxes.

Congress recently discovered how unfair Christmas really is as some get more presents than others.  To correct this injustice a 1,500 page law called the Christmas Equalization Act is working it’s way through judiciary committees in both the House and Senate and will be on the floor of both houses very soon.  Members are not likely to read it, as on other long-winded laws, but they are likely to pass a conceptual document instead from which lawyers spin the actual words—now an all too common practice.

Under the new law, to begin next year, shoppers buying for loved-ones are required to identify receivers at check out for each gift and it’s amount. Retail stores are to then fill out form13,208, The Affidavit of Christmas Gifts, passing that information to the IRS for national list tabulation.

The total allotment per Christmas per person is 20 gifts.  Totals exceeding this number in intervals of 10 will be assessed a gradual value added tax up to 70% of the value of the gifts in excess.  This amount will be given to those suffering from Christmas Depravation Syndrome, recently discovered by psychologists to inhibit the development of ambition and drive.  Overall value is also taxed if exceeding a total of $200 beginning at 25% and at $50.00 increments ending at 100% for any total exceeding $400.00 dollars.  This information is submitted on The Affidavit of Excess Christmas Value (Form 13,209).  If you have problems following these formulas so do the lawyers who made them up but it does help ensure full employment for them for decades to come sorting it out.

Those applying for benefits could do so in the same place and same way they get food stamps or any other benefits. One idea receiving strong support is to turn it over instead to ACORN or some other reputable organization already in existence.

The more likely option, however, is to create a whole new department, as the necessary monitoring would require at least 15,000 new federal agents to oversee.  It certainly would create much needed employment, which would stimulate the economy.  Recipients, however, would have to fill out another simple10 page form called the Underprivileged Christmas Affidavit (Form 13,210) which also allows participants to identify favorite gifts. Recipients would not be limited to 20 gifts as it is certain that they have been “gift deprived” for some time, nor would they have a total value limit placed upon them for the same reason.

The excess taxes are thought to be sufficient for funding the under-gifted, but critics are skeptical about it’s ability to fund the 15,000 federal agents as well.  Some say that gift givers will lower the number to the 20 gifts thus avoiding the excess tax altogether, leaving the taxpayer to fund both the “under gifted” and the agents thus, increasing the national debt.  Proponents say that such is just uncompassionate right-wing extremist talk.

Other legislation on the table is to tax excessive tree length, Christmas decorations, and turkey size.  There are so many injustices to alleviate.   Some few have even suggested making the holiday illegal.  Lawmakers hope to expand the legislation to Hanukkah next year for the same reasons.

Merry Christmas, my liberty loving friends.

Dr. Harold Pease is an expert on the United States Constitution. He has dedicated his career to studying the writings of the Founding Fathers and applying that knowledge to current events. He has taught history and political science from this perspective for over 25 years at Taft College.

How To Cut the State or Federal Bureaucracy Before It is Too Late

By Dr. Harold Pease

The bureaucracy is out of control, enlarging itself at every turn.  “The Blob” comes to mind; an enemy absorbing and devouring people, ever enlarging itself as it does.

Congress either creates the bureaucracy or allows the President to do so because it does most of their law-making work for them (all of this is done without proper constitutional authority, of course).  A recent example is the 2700 page National Healthcare Bill that created 159 separate organizations to manage it, each capable of hundreds of additional rules and regulations.  Conveniently, the bureaucracy also leaves them with an “enemy” of their own making to “combat.” Constituents love “bureaucracy bashing.”

Seemingly there is no way to stop the bureaucracy’s growth. Soon the growth, like cancer, must be fed.  In this case, it is fed by taxes.  While this is obvious to everyone else, it is seldom so to the enlarging bureaucracy whose new adherents become ever more vocal with a vested interest in its defense, sustainment, and again enlargement.

Obviously any plan to succeed in reducing their size and consumption must have their full support.  In other words, Goliath must agree to undertake one serious diet, or it will never happen.

Some thirty years ago such a plan by F. F. McClatchie came across my desk that I have modified slightly. What follows is that plan, and I invite public comment.  It is simple.

One, immediately freeze all state or federal hiring of new employees.  There will be resistance, but not enough to stop this step because “their” job is secure.

Two, lay off 10% of all existing employees each year, selecting those to be laid off by lottery.  This ensures that the layoffs will be “fair,” that is, the bureaucrats can’t play with the deck.  That way, those who are part of the fat are not in charge of cutting the fat. This step will meet serious resistance, so it must be accompanied by the next step.

Three, continue to pay the laid-off bureaucrats at their wages as of the layoff date.  This would ensure their full cooperation.  In fact, their full-time vacations would no doubt thrill them.  This would save billions of dollars, since they would no longer occupy office space or waste paper, to say nothing of working mischief.  They could no longer interfere with business, saving countless billions for productive uses.  Almost no one would reject this offer. However, it can’t go on forever, as it is immoral to pay someone for doing nothing.

Four, reduce each laid-off employee’s paycheck by 10% per year. This would ensure that sooner or later they would seek productive employment.  They may choose to bank the new salary or vacation a year or two before returning to full employment in the private sector.  In the meantime, they will spend the money on hobbies, travel, etc., and keep the economy roaring along with no additional tax burden and no requirement for a big bureaucracy to administer welfare.

Fifth, continue this process until the government is operating efficiently at approximately 1/10th the current payroll or less.  The few who might reject the program could continue as part of the 1/10th that remain.

The nation is close to bankruptcy. California leads a pack of states following closely behind, all with the same problem.  We desperately need a solution that works.  Do you think this would work?  Again, I invite public comment.

Dr. Harold Pease is an expert on the United States Constitution. He has dedicated his career to studying the writings of the Founding Fathers and applying that knowledge to current events. He has taught history and political science from this perspective for over 25 years at Taft College.