Time Magazine on Social Security in 1939: "Pie From The Sky"

Monday, 13 February 1939

Time Magazine

It is an axiom in the insurance business that insurance is not bought but sold. In 1935 Franklin Roosevelt sold Congress and Congress sold the U. S. the Social Security Act, the biggest, most comprehensive, most expensive mass insurance policy ever written. Since then its purchasers, the nation's taxpayers, have had occasion to read their policy carefully and, if they have detected no outright jokers, their reaction has been such that practically every politician in the U. S. from Franklin Roosevelt down has put revision of Social Security at the top of his must list. Last week, as the House Ways & Means Committee began hearings on proposed ways & means to make the Act work better, the revisers officially got down to business. 

Ways & Means' old Chairman Doughton, his spectacles quizzically pushed up on his forehead, presided over as rowdy a show as he has seen in his 28 years in Congress. The hearing room was jammed with Townsendites and other pension peddlers, for on the committee's schedule was no less a witness than Physician Francis E. Townsend himself. Far more unruly, however, were Congressmen anxious to outdo one another in doing for the old folks. Massachusetts' broadbeamed Republican Allen Treadway, whose State party leaders made an election alliance with the Townsendites, showed what was likely to happen when Congress receives the committee's report. Trying to shout down a group of Democrats, Republican Treadway and his party members made so much noise that Chairman Doughton almost broke his gavel pleading:

"Order! Gentlemen, Gentlemen, we will have order!" 

Old Folks: The political failure of Social Security is that after more than three years of the Act designed to eliminate the insecurity of the aged, insecure oldsters are still making and breaking politicians, still rank as a prime U. S. political problem. By & large another provision of the Act, its program of unemployment insurance, has functioned to the satisfaction of participants who have drawn out $400,000,000 in unemployment benefits since the program started operation. But for old folks, Social Security, which will not begin paying monthly old-age insurance benefits for those over 65 until 1942, is still pie in the sky. The business of the witnesses before the Doughton committee was to show how the pie could be brought down within reach without wrecking the nation's economic structure. 

Altmeyer: First witness was the Social Security Board's scholarly Chairman Arthur J. Altmeyer. Chairman Altmeyer's job was to present to the committee the revisions proposed by President Roosevelt's official Advisory Council on Social Security and additional suggestions of the board, which were received and approved by the White House last month. With little elaboration, Mr. Altmeyer passed on a recommendation that the coverage of the Act be extended to seamen, domestic servants, employes of educational and charitable institutions and other groups that would add 6,000,000 to the board's present clientele of 42,500,000; that the board increase its subsidies to the States for dependent children and the blind. Then Chairman Altmeyer outlined his, and the White House's, three-fold plan to give more to the old:

1) Begin monthly old-age insurance payments in 1940 instead of 1942. This would help already insured oldsters who now get nothing but lump-sum settlements of their claims, totaling only $12,000,000 since 1937.

2) Extend old-age insurance benefits to wives over 65, aged widows and widows with dependent children.

3) Overhaul the present stopgap old-age assistance program, which was supposed to take care of uninsured oldsters by giving them pensions up to $30 a month, financed by matching State and Federal grants. In practice the 1,783,171 pensioners under this program are getting an average of $19, and in the South pensions have ranged down to $6. The Roosevelt-Altmeyer proposal: abandon the policy of matching grants, subsidize States according to their economic need. 

Crackpots. Plans like California's $30 Every Thursday, Indiana's $30 on Monday, and the Townsend Plan, which Franklin Roosevelt dismissed as "unsound," flourished more vigorously than ever in the soil of senile insecurity. Dr. Townsend, still promising up to $200 a month to be raised by a hazy "transactions tax," sat in Washington waiting to be called by the committee. Meantime, his organization's chief rival, the General Welfare Federation of America, got its crack at the committee last week.

Founded by a dissident Townsendite named Arthur L. Johnson, General Welfare Federation now maintains the only year-round old-age-pension lobby in Washington. The General Welfare Act it proposes, promising $60 at 60, is based on a gross income tax of persons and firms, exempting only sums paid out in wages, taxes and interest. The plan is modeled after taxes now levied in Indiana and Hawaii, and the federation calculates it could raise $7,000,000,000 a year for pensions in the U.S. The General Welfare Act has 100 pledged supporters in the present Congress. Two of them, California's Jerry Voorhis and Harry Sheppard, turned up to read the skeptical Chairman Doughton prepared statements on the wonders of the General Welfare Act. The federation's nominal president, the Rev. Mr. Thomas E. Boorde, a member of the Home Mission Board of the Southern Baptist Convention, "which speaks for 4,121,000 Southern Baptists," declared: "The Church must be up and about its Father's business." Read to the committee was a long testimonial to the General Welfare Act by Minnesota Packer George A. Hormel, whose firm has net sales of $56,900,000 a year. Excerpt: 

"It is estimated that more than 50% of those applying for pensions will be taken from the Federal relief list. . . . It will make possible the balancing of the Budget. . . . 

"We must consider that if we don't meet this issue we will have foisted upon us some type of pension legislation by States that will be very harmful. . . ."

Swindle? One headache which both Franklin Roosevelt and Chairman Altmeyer sought to save old Bob Doughton was that of worrying over where the money for a revamped, certainly more expensive, Social Security program is to come from. Without passing on the board's recommendation that the 1940 hike in employer-employe taxes from 2% to 3% should be the last, pending study of the Act's finances, Mr. Altmeyer told the committee that Secretary Morgenthau was studying the subject, would report in due time.

As dear to Franklin Roosevelt as it is unpopular with most experts on social insurance is the principle of building up a "reserve" instead of financing on a pay-as-you-go basis. By 1980, ten years after the Social Security Board for the first time begins to disburse more in yearly old-age benefits than it collects in taxes, the reserve will have reached the unimaginable total of $47,000,000,000. In fact, the Treasury will have spent the $47,000,000,000 for other purposes as it is doing today and the reserve will consist of a hoard of Government bonds, the interest on which will meet Social Security's deficit. Because the bond interest will in turn have to be met by the Treasury, through other taxes, only net gains by this maneuver are: 1) Social Security taxes can now be used to finance Treasury deficits, and 2 ) the Government's tax-exempt bonds will eventually be shifted from private to public hands.

As the board hopefully pointed out, liberalizing Social Security's benefits will diminish the reserve in practice. But Franklin Roosevelt has so far shown no willingness to surrender it in principle. To the Congressional gunmen, led by Massachusetts' smart young Henry Cabot Lodge Jr., who are itching to attack the reserve when Social Security reaches the floor again, last week came a fresh round of ammunition from Liberal Economist John T. Flynn. Writing in Harper's on "The Social Security 'Reserve' Swindle," plain-talking Mr. Flynn declared:

 "Obviously the government cannot pay adequate pensions if it insists on 'borrowing' most of the old age taxes and spending them to support the government. The whole thing is a disguised tax levied upon the lowest income groups under the pretense of old age pension premiums. No government would dare support itself out of a payroll tax if it honestly proclaimed its purpose..."

Read more:

http://www.time.com/time/magazine/article/0,9171,771498,00.html#ixzz1XZ5Li7IL

When Were Democrats Ever The "Loyal Opposition"?

Clark Clifford, advisor to a string of Democratic Presidents and a major league elite, called Reagan "an amiable dunce."

The Chicago Tribune called Reagan ignorant and said his "air-headed rhetoric on the issues of foreign policy and arms control have reached the limits of tolerance and have become an embarrassment to the U.S. and a danger to world peace."

Washington Post columnist David Broder (still on the beat and front and center in the Obama cheering section) said the job of Reagan's staff is to water "the desert between Ronald Reagan's ears."

Henry Kissinger said that when you meet Reagan, you wonder: how did it ever occur to anyone that he should be governor, much less president?'

Jimmy Breslin, the columnist, said Reagan was senile and then insulted his supporters by saying they were proof that senility was a communicable disease.  For good measure, he called Reagan "shockingly dumb."

Newsweek columnist Eleanor Clift said that "greed in this country is associated with Ronald Reagan." 

Joining in this common slur was USA Today's White House reporter Sarah McClendon, who said that "it will take a hundred years to get the government back into place after Ronald Reagan. He hurt people: the disabled, women, nursing mothers, the homeless."

Lesley Stahl of CBS News (and now "60 Minutes") said, "I predict historians are going to be totally baffled by how the American people fell in love with this man."

Hollywood director John Huston (not a pundit as such, but illustrative of a mindset in Hollywood -- a major source of Democratic donors) said Reagan was a "bore," with a "low order of intelligence," who is "egotistical."

Tip O' Neill (the powerful Speaker of the House) said Reagan's mind was "an absolute and total disgrace" and that it was "sinful that this man is President of the United States."  Steven Hayward reminds us in his recent "Reagan Reclaimed" column that O'Neill said that "the evil is on the White House at the present time.  And that evil is a man who has no care and no concern for the working class of America and the future generations of America, and who likes to ride a horse. He's cold. He's mean. He's got ice water for blood."

John Osborne in the New Republic magazine wrote that "Ronald Reagan is an ignoramus."

After his election, columnist William Greider said, "[M]y God, they've elected this guy who nine months ago we thought was a hopeless clown."

The Nation warned "he is the most dangerous person ever to come this close to the presidency" and that "he is a menace to the human race."

When, in his first term, the country faced some economic weakness and Reagan's poll numbers turned down, pundits were celebrating as they wrote his political obituary.  Kevin Phillips, political pundit, wrote that "it didn't take a genius to predict on Inauguration Day that Reagan would unravel" and that it was foolish to think that Reagan could solve the nation's economic problems with policies based on "maxims out of McGuffey's Reader and Calvin Coolidge."

The New York Times joined in: "the stench of failure hangs over Ronald Reagan's White House."

When Reagan delivered his famous "evil empire" speech (that, by the way, also was critical of America's own historical failings), New York Times columnist Anthony Lewis was apoplectic, deriding it as "simplistic," "sectarian," "terribly dangerous," "outrageous," and in conclusion, "primitive...the only word for it" (then why did he use all the I could go on with more examples of the invective and personal insults hurled at Reagan by the chattering classes and opinion-makers over the years....

But, I'll let Lech Walesa speak for me...

When talking about Ronald Reagan, I have to be personal. We in Poland took him so personally. Why? Because we owe him our liberty.

This can’t be said often enough by people who lived under oppression for half a century, until communism fell in 1989. Poles fought for their freedom for so many years that they hold in special esteem those who backed them in their struggle. Support was the test of friendship.

President Reagan was such a friend. His policy of aiding democratic movements in Central and Eastern Europe in the dark days of the Cold War meant a lot to us. We knew he believed in a few simple principles such as human rights, democracy and civil society. He was someone who was convinced that the citizen is not for the state, but vice-versa, and that freedom is an innate right.I often wondered why Ronald Reagan did this, taking the risks he did, in supporting us at Solidarity, as well as dissident movements in other countries behind the Iron Curtain, while pushing a defense buildup that pushed the Soviet economy over the brink.

Let’s remember that it was a time of recession in the U.S. and a time when the American public was more interested in their own domestic affairs. It took a leader with a vision to convince them that there are greater things worth fighting for. Did he seek any profit in such a policy? Though our freedom movements were in line with the foreign policy of the United States, I doubt it.

President Reagan, in a radio address from his ranch on Oct. 9, 1982, announced trade sanctions against Poland in retaliation for the outlawing of Solidarity. I distinguish between two kinds of politicians. There are those who view politics as a tactical game, a game in which they do not reveal any individuality, in which they lose their own face. There are, however, leaders for whom politics is a means of defending and furthering values. For them, it is a moral pursuit. They do so because the values they cherish are endangered. They’re convinced that there are values worth living for, and even values worth dying for.

Otherwise they would consider their life and work pointless.  Only such politicians are great politicians and Ronald Reagan was one of them.  The 1980s were a curious time — a time of realization that a new age was upon us. Communism was coming to an end. It had used up its means and possibilities. The ground was set for change. But this change needed the cooperation, or unspoken understanding, of different political players. Now, from the perspective of our time, it is obvious that like the pieces of a global chain of events, Ronald Reagan, John Paul II, Margaret Thatcher and even Mikhail Gorbachev helped bring about this new age in Europe. We at Solidarity like to claim more than a little credit, too, for bringing about the end of the Cold War. 

In the Europe of the 1980s, Ronald Reagan presented a vision. For us in Central and Eastern Europe, that meant freedom from the Soviets. Mr. Reagan was no ostrich who hoped that problems might just go away. He thought that problems are there to be faced. This is exactly what he did.  Every time I met President Reagan, at his private estate in California or at the Lenin shipyard here in Gdansk, I was amazed by his modesty and even temper. He didn’t fit the stereotype of the world leader that he was. Privately, we were like opposite sides of a magnet: He was always composed; I was a raging tower of emotions eager to act. We were so different yet we never had a problem with understanding one another. I respected his honesty and good humor. It gave me confidence in his policies and his resolve. He supported my struggle, but what unified us, unmistakably, were our similar values and shared goals.

I have often been asked in the United States to sign the poster that many Americans consider very significant. Prepared for the first almost-free parliamentary elections in Poland in 1989, the poster shows Gary Cooper as the lonely sheriff in the American Western, “High Noon.”  Under the headline “At High Noon” runs the red Solidarity banner and the date — June 4, 1989 — of the poll.  It was a simple but effective gimmick that, at the time, was misunderstood by the Communists. They, in fact, tried to ridicule the freedom movement in Poland as an invention of the “Wild” West, especially the U.S.  But the poster had the opposite impact: Cowboys in Western clothes had become a powerful symbol for Poles. Cowboys fight for justice, fight against evil, and fight for freedom, both physical and spiritual. Solidarity trounced the Communists in that election, paving the way for a democratic government in Poland. It is always so touching when people bring this poster up to me to autograph it. They have cherished it for so many years and it has become the emblem of the battle that we all fought together.  As I say repeatedly, we owe so much to all those who supported us. Perhaps in the early years, we didn’t express enough gratitude. We were so busy introducing all the necessary economic and political reforms in our reborn country. 

Yet, President Ronald Reagan must have realized what remarkable changes he brought to Poland, and indeed the rest of the world.

And I hope he felt gratified. He should have.

Lech Walesa

Ernest "Putzi" Hanfstaengl, Harvard & Mock Trials

 By Ruth King

In this issue, historian Rita Kramer reviews Eric Larson’s Garden of the Beasts–a narrative of the experiences of the American ambassador to Germany during the years 1933-1938.

In the book, Ambassador Dodd records how the Nazis–from lower communications agency bureaucrats up to Goebbels and Hitler himself–were deeply unsettled by the American State Department’s  inability to thwart a mock trial of Hitler, sponsored by the American Jewish Congress and the American Federation of Labor on March 7th, 1934.

The twenty thousand people that packed Madison Square Garden on the evening of March 7 included many prominent early opponents of Hitler. Among them were New York’s Senator Robert Wagner and Mayor Fiorello La Guardia, Bainbridge Colby, Secretary of State under President Woodrow Wilson, former New York Governor Al Smith, Maryland Senator Millard Tydings, many American Federation of Labor leaders and members of the Protestant and Catholic clergy.

Officially the trial was named “The Case of Civilization Against Hitler” and the proceedings began with the words ”Hear ye, hear ye… All those who have business before this court of civilization, give your attention and ye shall be heard.”

And they were heard, in spite of the number of journalists and legislators and State Department officials who chose to remain silent in the face of all Ambassador Dodd’s early warnings.  The next day a column headline in The New York Times read: “Hitlerism Denounced as Crime Against Civilization” and the report stated  that the trial “rendered solemn judgment  that the Nazi Government stood convicted before the world of a crime against civilization.” Similarly, The New York Evening Post announced that Hitlerism was guilty of “high crimes against civilization.”

Apparently, they heard this at Harvard University as well.

Among the frequent guests to Ambassador Dodd’s home–and to his daughter’s bedroom–was a chap named Ernest “Putzi” Hanfstaengl  who flits in and out of the pages of Larson’s book.  Hanfstaengl, an alumnus of Harvard (1909), was a devoted Nazi and friend of Hitler who was godfather to Putzi’s son Egon. Putzi helped finance Mein Kampf and boasted that he developed the “Sieg Heil” salute. His official title was head of the Foreign Press Bureau in Berlin, a post to which he was well suited due to his many connections in America and England and his skills in duplicity and disinformation. Although William Shirer, the historian of the Third Reich, described him as “an immense, high-strung, incoherent clown,” Putzi retained friendships with many Americans, including Ambassador Dodd.

In June 1934 Putzi attended his 25th Harvard reunion. He was to have been class vice- marshal but protests and shouts of “Down with Hitler” hounded him until he resigned from that honor. However, Putzi had his fans: the Harvard Crimson suggested that “he has risen to distinguished station,” and it would have been appropriate to award him an honorary degree. Hanfstaengl was actually cheered by several admiring classmates when he gave the Nazi salute and he took tea at a reception at Harvard President Conant’s home.

That August Putzi penned an article in Colliers Magazine that was a full throated paean to Der Fuhrer.

The antagonism shown toward Putzi must have angered his anti-Semitic fans, including then Harvard President James Bryant Conant, who ignored every opportunity to take a stand against Hitler. (In fact, in a particularly egregious incident in March of 1935, the Conant administration permitted Nazi Germany’s consul  in Boston to place a wreath bearing the swastika in the Harvard chapel.)

Harvard decided to hold its own mock trail of Hitler on October 25th, 1934. The Harvard Crimson reported the results:

                "Mock Trial Hits Hitler On But Two Of Four Charges"

“Chancellor Adolph Hitler, present in spirit if not in body at the Lowell House Common Room last night, was found guilty of two crimes against humanity and acquitted of two others by a ‘bench’ of five educators on evidence and arguments presented by members of the Harvard Debating Council at their mock trial last night.

“On the charge of killing Kurt von Schleicher and his wife without giving opportunity for trial, he was found guilty 4-1.

“Charged with imprisoning men in concentration camps without definite charges against them, he was found guilty, 3-2.

“A 3-2 not guilty verdict was rendered on the charge of murdering or instructing his agents to murder 77 German citizens.

“On the charge of invading sanctity of homes without warrant, he was found not guilty 3-2.

“All testimony concerning the Nazi leader’s persecution of Jews was ruled out as irrelevant to the immediate questions.“

And then there was this pithy statement about the trial: “Before the start of the testimony and arguments, it was agreed that decision would be rendered solely on the basis of the arguments and not on the personal merits of Der Fuehrer.”

Putzi survived the war through guile and chicanery. He was imprisoned as an enemy alien in England, later moved to a prison in Canada and in 1942 he was turned over to the United States where he provided information on the Nazis to President Roosevelt. His information included many details of Hitler’s personal life. After the war he returned to Germany.

In 1959 Putzi attended his 50th reunion claiming (to the Crimson) with undiminished hubris “But this time it will be different. I expect to have a swell time, and get a warm welcome. Why not? I’m as anti-Nazi now as they come.”  And, by the way, he even made it to his 65th reunion at Harvard and a jolly time was had by all.

                

The ambassador’s daughter Martha, Putzi’s one time lover, married one of the dozen or so “great loves of her life”, became a spy for Russia and was exiled in Prague until her death in 1990.

                

The next great reunion could be in hell–with some of Putzi’s Harvard pals on hand.

THE MO DOCTRINE

(Mo is one of my nicknames)

1) The United States should only get involved in conflicts abroad where there is a direct and imminent threat to the nation and its security.

2) The United States should stay out of civil wars.

3) If war is declared upon us, CRUSH, and I mean C-R-U-S-H, the enemy.

4) Fight to win or stay home.

5) The United States has an abysmal record of siding with despots and propping up tinpot dictators. Know your enemy, your "ally," recognise self-determination, and MYOB.

(I suppose that we will ridiculously have to install the new Libyan government, for example, to find out who is in it.)

6) Unless the United States is under attack or imminent threat of attack, the President must get Congressional approval for all actions involving military operations abroad pursuant to Art. I, Sec. 8, Clause 11 and the War Powers Resolution Act.

7) When people want to kill each other, let them.

The Mo Doctrine

(For those of you, who are unaware, "Mo" is a nickname of mine)

1) The United States should only get involved in conflicts abroad where there is a direct and imminent threat to the nation and its security.

2) The United States should stay out of civil wars.

3) If war is declared upon us, CRUSH, and I mean C-R-U-S-H, the enemy. 

As the ever-helpful MarshFox reminded me:

“To crush your enemies, see them driven before you, and to hear the lamentations of their women!” 

- Conan the Barbarian

4) Fight to win or stay home.

5) The United States has an abysmal record of siding with despots, arming radical extremists and  terrorists, and propping up tinpot dictators. Know your enemy, your "ally," recognise self-determination, and MYOB.

(No installing new governments then "finding out who or what is in it")

6) Unless the United States is under attack or imminent threat of attack, the President must get Congressional approval for all actions involving military operations abroad pursuant to Art. I, Sec. 8, Clause 11 and the War Powers Resolution Act.

 7) When people want to kill each other, let them.

THE MO DOCTRINE

("Mo" is a nickname of mine)

1) The United States should only get involved in conflicts abroad where there is a direct and imminent threat to the nation and its security. 

2) The United States should stay out of civil wars.

3) If war is declared upon us, CRUSH, and I mean like Hiroshima-Nagasaki  C-R-U-S-H, the enemy. 

4) Fight to win or stay home.  

5) The United States has an abysmal record of siding with despots and propping up tinpot dictators. Know your enemy, your "ally," recognise self-determination, and MYOB.  

6) Unless the United States is under attack or imminent threat of attack, the President must get Congressional approval for all actions involving military operations abroad pursuant to Art. I, Sec. 8, Clause 11 and the War Powers Resolution Act.  

 7) When people want to kill each other, LET THEM.

QUESTION TIME WITH MO: WOULD A WEALTH TAX BE CONSTITUTIONAL?

Q: "I'm saying let's have a flat tax instead of one that allows the rich to pay less in proportion to their net worth than the middle class pay. Yes, you heard me - let's get rid of income tax - and have a FLAT TAX on NET WORTH. No tax increase, JUST A FLAT FAIR TAX on NET WORTH instead of the backward one we have. No deductions, no loopholes."

The Constitution would have to be amended in order for the federal government to do that which you propose. The Sixteenth Amendment only permits the taxation of income. The federal government is prevented from taxing land and, by extension, wealth. The Constitution's Article I, Section VIII, gave the federal government power to levy taxes, duties, imports and excises, as “indirect” taxes, requiring only that the duties, imposts and excises be “uniform throughout the United States.” The 16th Amendment authorized a “direct” tax on “incomes, from whatever source derived.” The intent of the Founding Fathers—almost all large landholders—was to prevent the new federal government from using land as a tax base. The Sixteenth Amendment exempted income taxes from the constitutional requirements regarding direct taxes, after income taxes on rents, dividends, and interest were ruled to be direct taxes in Pollock v. Farmers' Loan & Trust Co., 157 U.S. 429 (1895).

In the United States, Article I, Section 9 of the Constitution requires that direct taxes imposed by the national government be apportioned among the states on the basis of population.  The direct tax provisions appear in Article I of the Constitution.  Section 2, clause 3 provides that “direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers.” U.S. Const., art. I, § 2, cl. 3.  In section 9, clause 4, the Constitution elaborates on the direct tax requirements, explaining that “[n]o Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken.”  Id. art. I, § 9, cl. 4.  The Constitution treats excise taxes differently, stating that  “Duties, Imposts and Excises shall be uniform throughout the United States.”  Id. art. I, § 8, cl. 1.  Neither the record of the constitutional convention nor the state ratification debates defines with any clarity the meaning of the term “direct tax” in the context of personal property.  See Bruce Ackerman, Taxation & the Constitution, 99 Colum. L. Rev. 1, 9-11 (1999); see also 2 The Records of the Federal Convention of 1787, at 350 (Max Farrand ed., Yale Univ. Press, 1966) (Aug. 20, 1787) (“Mr. King [a delegate to the constitutional convention] asked what was the precise meaning of direct taxation? No one answ[ere]d.”).  Over the years, litigants have frequently challenged specific taxes as unapportioned direct taxes in violation of Article I, sections 2 and 9.

The Constitution’s contrast of direct taxes with excise taxes has generally provided the framework for constitutional analysis in this area.  The term direct tax generally means a tax paid directly to the government by the persons on whom it is imposed.  An excise tax is an indirect tax, meaning that the producer or seller who pays the tax to the government is expected to try to recover the tax by raising the price paid by the buyer (that is, to shift or pass on the tax). Excises are typically imposed in addition to another indirect tax such as a sales tax or VAT.

The federal Constitution prohibits a direct tax on individuals. Article I, Section 9 reads: "No Capitation, or other direct, Tax shall be laid, unless in proportion to the Census." It took the 16th Amendment to authorize a DIRECT INCOME TAX. Seemingly, therefore, Congress cannot directly tax individuals based on their wealth. (The estate tax was upheld by the courts on the grounds that the government was not taxing a person's wealth as such but focusing on a specific event, namely the death of the individual, as the basis for the tax. It is an indirect tax.)

Traditionally, a direct tax in the constitutional sense means a tax on property "by reason of its ownership" (such as an ordinary real estate property tax imposed on the person owning the property as of January 1st of each year) as well as a capitation (a "head tax").

The first direct tax case to come before the Supreme Court was Hylton v. United States, 3 U.S. 171 (1796), which upheld an unapportioned tax on carriages.  3 U.S. (3 Dall.) at 171.  The statute at issue in Hylton, Act of June 5, 1794, ch. 45, 1 Stat. 373 (repealed 1796), imposed a tax “upon all carriages for the conveyance of persons, which shall be kept by or for any person, for his or her own use, or to be let out to hire, or for the conveying of passengers.”  The Court rejected the plaintiff’s challenge to the carriage tax as an unapportioned direct tax, holding that the carriage tax was indirect.

The Court again made clear that its reasoning reached only general taxes on personal property.  In Union Electric Company v. EPA 427 U.S. 246 (1976), the Court approvingly quoted Alexander Hamilton’s definition of direct taxes, which he championed in his successful litigation of Hylton:

"The following are presumed to be the only direct taxes.  Capitation or poll taxes.  Taxes on lands and buildings.  GENERAL ASSESSMENTS, WHETHER ON THE WHOLE OF INDIVIDUALS, OR ON THEIR WHOLE REAL OR PERSONAL ESTATE; all else must of necessity be considered as indirect taxes."

The Court has never overruled Hylton.  In fact, in the years since Hylton, the Court has repeatedly cited Hylton with approval in rejecting direct tax challenges.  See, e.g., Fernandez v. Wiener, 326 U.S. 340, 353 (1945); Bromley v. McCaughn, 280 U.S. 124, 136 (1929); Thomas v. United States, 192 U.S. 363, 370 (1904); Springer v. United States, 102 U.S. 586, 599-601 (1881).

What does Hylton portend for a wealth tax?:

1)  Taxes on land and buildings are unconstitutional direct taxes.  (That would knock out real property in a wealth tax).

2)  General assessments on personal property are unconstitutional.  (That knocks out stock, bonds, jewelry, art, etc.).

In the late 1800s, the federal courts also began to treat an income tax on income from property, such as rental payments, as a direct tax. In constitutional law, an "indirect tax" or "excise" is an "event" tax, an overt act must occur such as the sale of a product subject to a VAT tax. In this sense, a transfer tax (such as gift tax and estate tax) is an indirect tax. Income taxes on income from personal services such as wages are also indirect taxes in this sense.

  After the 1895 Pollock ruling (essentially, that taxes on income from property should be treated as direct taxes), this provision made it difficult for Congress to impose a national income tax that applied to all forms of income until the 16th Amendment was ratified in 1913. After the Sixteenth Amendment, no Federal income taxes are required to be apportioned, regardless of whether they are direct taxes (taxes on income from property) or indirect taxes (all other income taxes).

The Sixteenth Amendment: "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration." 

Although the Eisner v. Macomber, 252 U.S. 189 (1920), Court acknowledged the power of the Federal Government to tax income under the Sixteenth Amendment, the Court essentially said this did not give Congress the power to tax — as income — anything other than income, i.e., that Congress did not have the power to re-define the term income as it appeared in the Constitution:

“Throughout the argument of the Government, in a variety of forms, runs the fundamental error already mentioned—a failure to appraise correctly the force of the term "income" as used in the Sixteenth Amendment, or at least to give practical effect to it. Thus, the Government contends that the tax "is levied on income derived from corporate earnings," when in truth the stockholder has "derived" nothing except paper certificates which, so far as they have any effect, deny him [or "her" — in this case, Mrs. Macomber] present participation in such earnings. It [the government] contends that the tax may be laid when earnings "are received by the stockholder," whereas [s]he has received none; that the profits are "distributed by means of a stock dividend," although a stock dividend distributes no profits; that under the Act of 1916 "the tax is on the stockholder's share in corporate earnings," when in truth a stockholder has no such share, and receives none in a stock dividend; that "the profits are segregated from his [her] former capital, and [s]he has a separate certificate representing his [her] invested profits or gains," whereas there has been no segregation of profits, nor has [s]he any separate certificate representing a personal gain, since the certificates, new and old, are alike in what they represent—a capital interest in the entire concerns of the corporation.”

Holding:

"A pro rata stock dividend where a shareholder received no actual cash or other property, and retained the same proportionate share of ownership of the corporation as was held prior to the dividend, was not taxable income to the shareholder within the meaning of the Sixteenth Amendment, and that an income tax imposed by the Revenue Act of 1916 on such dividend was unconstitutional, even where the dividend indirectly represented accrued earnings of the corporation."

Commissioner v. Glenshaw Glass Co., 348 U.S. 426 (1955), was an important income tax case before the United States Supreme Court. The Court held as follows:

"Congress, in enacting income taxation statutes that comprehend "gains or profits and income derived from any source whatever," intended to tax all gain except that which was specifically exempted.

Income is not limited to "the gain derived from capital, from labor, or from both combined."

Although the Court used this characterisation in Eisner v. Macomber, it "was not meant to provide a touchstone to all future gross income questions."

Instead, income is realised whenever there are "instances of

1) undeniable accessions to wealth

2) clearly realised, and

3) over which the taxpayers have complete dominion."

All of the precedent requires that there be a "taxable event" on income "derived from real property" before the federal government can tax. Gift and estate taxes are indirect taxes. Direct taxes are only permissible on taxable events that give rise to income whether through salary, bonus, dividend, capital gain, etc. There is no taxable event on wealth. The appreciation after a sale and income are taxable, but other than that, there is no taxable event. The wealth is stationary.

Free Speech In The Workplace

The First Amendment protects workplace speech from government abridgment, so long as the communications "do not contain a `threat of reprisal or force or promise of benefit.´" "[A]n employer's free speech right to communicate his views to his employees is firmly established and cannot be infringed"; and likewise, courts of appeals have held, for employees' free speech rights. See: NLRB v. Gissel Packing Co., 395 U.S. 575, 617, 618 (1969) (employer speech); NLRB v. Local Union No. 3, 828 F.2d 936 (2d Cir. 1987) (applying Gissel to union speech); Hospital & Serv. Employees Union, Local 399 v. NLRB, 743 F.2d 1417, 1428 n.8 (9th Cir. 1984) (subjecting regulation of union speech to strict First Amendment scrutiny). Though the National Labor Relations Act has a specific proviso that guarantees both employer and employee free speech, 29 U.S.C. § 158(c) (1988), the free speech rights established by Gissel are based not on this proviso, but on the First Amendment itself. "[Section] 8(c) . . . merely implements the First Amendment by requiring that the expression of `any views, argument, or opinion´ shall not be `evidence of an unfair labor practice,´ so long as such expression contains `no threat of reprisal or force or promise of benefit.´" Gissel, 395 U.S. at 617.

Unless an employee is working pursuant to an employment contract with a morals clause or similar restriction, employers, including governments, cannot infringe upon their employees First Amendment rights provided that the speech is not made during the course of employment or under colour of law. In fact, governments have to be very careful in this area because infringing on the constitutional rights of employees or ordinary citizens can trigger a 1983 suit (deprivation of constitutional rights by government or its agents acting under colour of law).

I agree with Justice Souter, who wrote in his Garcetti dissent, "[T]his ostensible domain beyond the pale of the First Amendment is spacious enough to include even the teaching of a public university professor, and I have to hope that today’s majority does not mean to imperil First Amendment protection of academic freedom in public colleges and universities, whose teachers necessarily speak and write ‘pursuant to official duties.’”

I think that Souter perfectly presents the potential problem. In Garcetti, a Deputy DA was contacted by defence counsel on the issue of a challenge to a search warrant because of alleged inconsistencies in the proffered affidavit of police. Ceballos conducted his own investigation during the course of his employment and concluded that the defence counsel was correct. He prepared a memo and sent it to Gil Garcetti (DA of OJ Simpson fame). His superiors dismissed his claims and continued to prosecute the criminal case. Ceballos later sued claiming that the DA's office had retaliated against him.

The Court held that statements made by public employees pursuant to their official duties are not protected by the First Amendment from employer discipline. Yet, this holding flies in the face of the holdings in whistleblower cases. We should want more speech, not less. We should want whistelblowers and professors that challenge the status quo.

In order for a law or code restricting speech to be constitutional, it must survive strict scrutiny. Along with the lower standards of rational basis review and exacting or intermediate scrutiny, strict scrutiny is part of a hierarchy of standards employed by courts to weigh an asserted government interest against a constitutional right or principle that conflicts with the manner in which the interest is being pursued, United States v. Carolene Products Company, 304 U.S. 144 (1938). Strict scrutiny is applied based on the constitutional conflict at issue, regardless of whether a law or action of the Federal government, a state government, or a local municipality is at issue. For a law or code restricting speech to survive strict scrutiny and be upheld as constitutional it must be 1) narrowly-tailored, 2) the state must also have a compelling governmental interest, and 3) the law or policy must be the least restrictive means for achieving that interest.

In order for a university to succeed in limiting the speech of its employees in the classroom or elsewhere, it is going to have to satisfy all three prongs and I don't see how it can. What is the compelling governmental interest in preventing types of speech on campus?

The most common government interests cited are "harassment," "workplace environment," etc. We start from the position that free speech is the ideal. Then, we have to weigh the rights of others against those of the speaker. We might agree that an individual has the right to condemn soldiers, Christians, Jews, etc., but that doesn't mean that he has a protected right to speak thusly at his place of employment. These cases are usually fact-specific and require the least onerous infringement. 

The First Amendment & Snyder v. Phelps

"Congress shall make no law...abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances." -- The First Amendment

Restrictions on freedom of speech always authorise the government to decide how, and against whom, the restrictions should apply. The more authority the government has, the more it will use that authority to suppress unpopular minorities, criticism and dissent. Because freedom of expression is so basic to a free society, it should 'never' be abridged by the government.

Let’s start with some case law:

Free speech issues did not reach SCOTUS until 1919. That year, the Court dealt with free speech for the first time in the case of Schenck v. United States, 249 U.S. 47 (1919). Schenck, a member of the Socialist Party, had been convicted of violating the Espionage Act for mailing anti-war leaflets to draft-age men during WWI. SCOTUS unanimously upheld his conviction. The prevailing legal view at the time was that any speech that had a "tendency" to cause a violation of law could be punished.
 
The 'Schenck' case was quickly followed by others that ended in decisions equally contemptuous of First Amendment freedoms. Among them was the case of Jacob Abrams, Abrams v. United States, 250 U.S. 616, convicted under the Sedition Act of 1918 (which was repealed in 1920) for distributing leaflets that criticized the American military. However, even though SCOTUS upheld Abrams' conviction, the decision in his case was a watershed: Justices Oliver Wendell Holmes and Louis D. Brandeis dissented, stating that speech could not be punished unless it presented "a clear and present danger" of imminent harm. The Holmes-Brandeis dissent marked the beginning of modern First Amendment theory.

SCOTUS declared the inviolability of First Amendment rights for the first time in 1925 in Gitlow v. New York, 268 U.S. 652 (1925), a case that challenged the conviction of a communist revolutionary under New York's Criminal Anarchy law. Although the Court affirmed the conviction, it announced that freedom of speech and press were protected by the First Amendment from federal encroachment, and "are among the fundamental personal rights and 'liberties' protected by the states." This holding paved the way for the Court in Stromberg v. California, 283 U.S. 359 (1931), to rule that States cannot infringe on the First Amendment right to freedom of speech and expression.

Finally, the Court ruled, in Brandenburg v. Ohio, 395 U.S. 444 (1969), that “mere advocacy of the use of force, or of violation of law (in this case, by a Ku Klux Klan leader) is protected by the First Amendment free speech clause. Only inciting others to take direct and immediate unlawful action would be without constitutional protection.

The 'Brandenberg' test is the law today.

Can free speech be limited in any way? Yes.

The government may place "time, place and manner" restrictions on speech as long as they are "reasonable." For example, requiring people to obtain a permit to hold a meeting in a public building, or to conduct a demonstration that may interfere with traffic, constitutes a justifiable regulation. You can read the plethora of case law on TPM restrictions here: http://www.firstamendmentcenter.org/faclibrary/libraryexpression.aspx?topic=time_place_manner

But restrictions that are overly burdensome or are directed at specific groups or individuals (see: KKK, Nazi groups, or think Phelps) violate the First Amendment. For example, during the 1960s, officials in Southern cities frequently required civil rights activists to apply for permits in order to hold demonstrations, and then granted or denied the permits arbitrarily. Shuttlesworth v. Birmingham, 394 U.S. 147 (1969), is an excellent case to read to understand what fact pattern can cause licencing schemes to be ruled unconstitutional.

Are any forms of expression not protected by the First Amendment? Yes.

SCOTUS has established several limited exceptions to the First Amendment's protections. Here are a couple to consider:

FIGHTING WORDS:

In the 1942 case of Chaplinsky v. New Hampshire, 315 U.S. 568 (1942), SCOTUS held that so-called "fighting words...which by their very utterance inflict injury or tend to incite an immediate breach of the peace" are not protected by the First Amendment and can be punished. The Court based its decision on the concept that such utterances are of "slight social value as a step to truth."  While many may see Snyder v. Phelps as a case open to the Fighting Words Doctrine, such is not the case due to the fact pattern.  (Also, see discussion below)

SLANDER, LIBEL, INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS:

In New York Times Co. v. Sullivan, 376 U.S. 254 (1964), the Court held “the First Amendment, as applied through the Fourteenth, protected a newspaper from being sued for libel in state court for making false defamatory statements about the official conduct of a public official, because the statements were not made with knowing or reckless disregard for the truth.”

In Hustler Magazine v. Falwell, 485 U.S. 46 (1988), a public figure shown in a parody must show actual malice to claim he is libeled to prove a case of intentional infliction of emotional distress.  Held:  Parodies of public figures, which could not reasonably be taken as true, are protected against civil liability by the First Amendment, even if intended to cause emotional distress.

In Gertz v. Robert Welch, Inc., 418 U.S. 323 (1974), the Court held that “the First Amendment permits states to formulate their own standards of libel for defamatory statements made about private figures, as long as liability is not imposed without fault.”

In Dun & Bradstreet, Inc. v. Greenmoss Builders, Inc., 472 U.S. 749 (1985), the Court held that “an individual or group can be held civilly liable for ordinary and punitive damages for publishing false assertions about another individual or group, which is not a public figure.” Dun & Bradstreet does stand for the proposition that “context” must be considered. But, “context” must also be within outrageous and personal conduct.


Let’s look at the actual facts in Snyder v. Phelps :

The hideous Phelps family did secure the requisite permits to protest the funeral. The police were well aware that they were there and had insured that the protesters stood outside of the barrier as proscribed in Maryland’s TPM restrictions. No signs were directed, specifically, at Matthew Snyder. In fact, the clan used the same signs that very day in 2 other protests: In Annapolis and at the State Capitol.

The most important facts to keep in mind:

1. The Snyder family did NOT personally see the Phelps family or their signs before, during, or after the funeral. They were told about the protesters’ presence afterward at a family gathering.

2. At the family gathering, the family was told that the Phelps protesters had posted an “Epic” on the internet depicting their protest at the funeral. The Snyder family ELECTED to view the “Epic” on the internet.

3. Petitioner ADMITTED that the Phelps family did not violate Maryland’s TPM restrictions nor did it violate any other criminal statutes, including the State’s funeral protest law that was passed subsequent to the Snyder funeral.

4. None of the signs were directed, specifically, to Matthew Snyder or the Snyder family. As Justice Alito recognised in argument, the “You” in the signs and in the Epic was generic in nature and not directed at any individual or group. It is crucial to bear in mind that not one sign named Snyder. All signs were to the effect: “God Hates F@gs!” (generic and plural), “Get Out Of Iraq!” (political), “God Hates You!” (non-specific), “You’re Going To Hell! (generic), etc.

5. Mr Summers, counsel for the Petitioner, Albert Snyder, argued that neither Sullivan nor Falwell applied because Matthew Snyder was not a public figure (true, but the estate of a decedent cannot sue for defamation).

ISSUES:

1. Can a person or group put anything on the internet?

Mo: Yes, but not without the possibility of liability. One cannot post copyrighted material. One can also not post defamatory statements directed specifically at private individuals. If I post an article that claims, for example, that my neighbour, John Adams, has been embezzling funds from the Co-op Building Fund and such are untrue, I can be sued for defamation. On the other hand, if I post an article that claims, for example, that Obama has sent stimulus funds to a personal offshore bank account and such are untrue, it is highly unlikely that I cannot be sued because he is a public official and he must prove that I posted information that I knew to be false and did so maliciously. An opinion is not defamation – for either private or public persons. If my opinion is that you are fat and I say so, I have not defamed you. You may be hurt, but you have no cause of action. This is even more the case for public figures.

2. Can a person put anything on television, even if it is obnoxious, about a private individual?

Mo: See #1.

3. Does it make a difference if the public comments about political issues are directed to public or private individuals?

Mo: I argue “No.” If I approach a returning soldier and accuse him of participating in an “illegal war” and say that soldiers are “baby killers”, while such behaviour would be despicable, it is permissible and because it is my opinion on a political issue and such matters not whether directed at Obama or G.I. Joe. (Mo: I am not applauding such. Just arguing the law.) On the other hand, the late John Murtha's claims that SPECIFIC soldiers were murderers WAS ALMOST CERTAINLY DEFAMATION, as the facts of the case did not support his statement.

4. To what extent, can a political opinion on a public issue (homosexuality, war, etc.) become the intentional infliction of emotional distress when it is directed at private individuals?

Mo: If my statement is “God Hates F@gs!” and is generic, even if directed at an individual, I do not believe that such can be proscribed by the government or give rise to a tort. Also, this would create a VERY SLIPPERY SLOPE. What if I say “Mohammed was a pervert and all of his followers are hated by the ‘real’ God”? Should the government be able to censor such? No. Should Muslims be able to sue me for intentional infliction of emotional distress? No.

5. Can there be intentional infliction of emotional distress when an individual makes an obnoxious, but generic statement, about another individual or group (soldiers) in an effort to raise public consciousness?

Mo: No.

6. And, most importantly, under what theory of the First Amendment stand for the proposition that public speech or speech on a public or political matter be treated differently depending upon the recipient of the speech?

Mo: There is no First Amendment theory to support such.  Where the public speech is on a public or political matter, there can be no intentional infliction of emotional distress. It is free speech and is protected. It cannot matter who receives or hears the speech. If I am standing in Central Park and speaking out against the war or homosexuality and the parent on a dead soldier or a homosexual hears me, there is no INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS. (There are cases in Britain that criminalise speech against gays, so be careful). On the other hand, TPM restrictions can be imposed that would proscribe my speech inside of a funeral service, for example. Those are legal.

The Phelps family is disgusting. It should be shunned. Its protests should be met with larger protests. That said, hate speech should never be recognised as a crime or tort. To do so, would eventually result in the government deciding what citizens may or may not say. Do not forget: The government once held this power and it was less than a century ago.

I encourage you all to either listen to the oral arguments here.


Update:  On 2 March 2011, the Supreme Court ruled 8-1 (Justice Alito dissented) in favour of Westboro Baptist Church although I would like to see it as they stood up for the First Amendment.  You can read the decision here.