June 1, 2004
ByJoseph J. DioGuardi
Ossining, New York

When Social Security—more precisely the Old Age and Survivors Insurance Program (OASI)—was originally enacted by Congress in 1935, the payroll tax and the benefit program were separated because of doubt as to whether the Constitution allowed Congress to tax some people to benefit others. When this was tested in 1937 in the Supreme Court (Helvering v. Davis), the government lawyer understood and successfully argued that OASI was not an insurance program requiring a trust fund and separate accounting, but was in reality a welfare program. Yet, in spite of the legal outcome, an early Social Security information booklet advised workers that their payroll deductions were strictly accounted for and kept separate from the general funds of the U.S. Treasury,” which was clearly a gross misrepresentation of the legal and economic reality then and now. Read More