Constitution Economic Powers Constitution, Article

Constitution Economic Powers

Constitution, Article I, Section 8: The Economic Powers of Congress

The economic powers granted to Congress by the United States Constitution are numerous and varied, with far-reaching and often complex implications and effects. The basic underlying principles of these economic powers, as well as some of the more essential specific enumerated powers and their purpose and effect, will be examined and explicated here. Any examination of the law, especially the highest body of law in the land (from which all other laws derive their authority, directly or indirectly), must begin with a careful reading of the words making up that law. As language is, in a very real way, determinative of thought, this will be the starting point of our examination. The Constitutional language that enumerates Congress' economic powers is fairly straightforward, but still bears careful consideration.

Somewhat less straightforward are the arguments behind the development of the specific economic powers granted to Congress, which will be discussed following the examination of the wording of Section 8. Though essential to security and prosperity, the centralization of monetary policy was a matter of much debate during the time of the Constitutional Convention. The social, political, and judicial developments in the interpretation of the Section 8 powers is also fairly complex, especially with the addition of the Sixteenth Amendment and federal government's ability to collect income taxes. Money is always a contentious subject, and is even more so when involved in the growth and development of a nation; these contentions will be traced herein. Finally, the application of the Section 8 powers in administrative practice will be examined, giving a clear understanding of the law at work today.

Section II: Actual Wording

As a part of the original seven Articles of the United States' Constitution, the economic powers granted to Congress in Section 8 of Article 1 were composed during the Constitutional Convention of 1787 after a great deal of debate and deliberation. As Christopher Collier notes in Decision in Philadelphia: The Constitutional Convention of 1787, the very establishment of Congress was itself a matter of great debate, let alone the determination of the actual powers it was granted (Collier 1987, pp. 132-4). The necessity of creating a central government much stronger than that which had existed under the Articles of Confederacy, as argued by James Madison, Alexander Hamilton, and John Jay in the Federalist Papers, contained many of the economic arguments raised at the Constitutional Convention, as will be seen in greater detail in the following section (Avalon Project 2008; Collier 1987).

The first paragraph of Article I, Section 8 of the U.S. Constitution reads: "The Congress shall have power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States; but all duties, imposts and excises shall be uniform throughout the United States" (Legal Information Institute). Of the many provisions that follow this general provision, some of the most essential are found in paragraphs two, five, and six: "To borrow money on the credit of the United States," "To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures," and "To provide for the punishment of counterfeiting the securities and current coin of the United States" (LII). Each of these will be explored in greater detail.

Section III: Founding Contexts

As one of the basic underlying structures of any power system, especially in the modern age following the Enlightenment, a discussion and agreement of issues concerning money and monetary policy was a necessary part of the United States Constitution. This did not mean, however, that the economic powers as enumerated were put into the Constitution without any debate -- far from it. Due to its extreme importance, the issue of money and the central government's control of it was a highly contentious aspect of the Constitution. This can clearly be seen in several of the federalist Papers, which laid out the argument for the provisions as written.

Though it seemed outrageous to many readers of the time, and even know can be viewed with at least a hint of irony, one of the arguments put forth for allowing the federal government, through Congress, to control money and taxes was an appeal to the fiercely independent spirit of the colonies. In Federalist Paper #11, Hamilton tried to focus this spirit solely on external European powers: "Under a vigorous national government, the natural strength and resources of the country, directed to a common interest, would baffle all the combinations of European jealousy to restrain our growth" (Avalon Project 2008). Section 8 attempts, in some measure, to regulate commerce by establishing uniform taxes, thus directing resources towards a "common interest" rather than the individual -- and weaker -- interests of the states themselves. Halting or diminishing internal squabbling was also a major goal of these provisions.

The necessity of taxation for the achievement of strength and unity is more explicitly enumerated in Federalist Paper #30, where Hamilton outlines the basic problems of funding a government and society. He also shows the inherent problem to differentiating between internal and external taxes, claiming that if internal commerce were to be regulated only by the individual states, the federal government would still be highly subservient to the smaller powers and its external taxations (i.e. imposts) would be rendered largely ineffective (Avalon Project 2008). In Federalist Paper #42, Madison handily addresses the issue of coining money. He asserts that this provision of the Constitution is necessary and logical on its face, and that the determination of value by a single body (i.e. Congress) is the only way to ensure harmonious commerce between the individual states (Avalon Project 2008). The regulation of weights and measures is a provision lifted directly out of the Articles of Confederation, and is needed for precisely the same reasons, and the punishment of counterfeiters follows directly, according to Madison, from the power to coin money and establish value (Avalon Project 2008).

Section IV: Social, Political, and Economic Developments

Though the actual language of these provisions has not been altered by way of Constitutional amendment(s), there have been many changes to the implications and applications of Congress' economic policies over the two-and-a-quarter centuries since the Constitution was written. The Sixteenth Amendment, which established the federal right to collect an income tax, was one of the most important and obvious of these developments, but there have also been many others, brought on by a variety of often related causes. The basic need to provide the federal government with funds to carry out its various duties is a major aspect of changes to monetary policy, as is establishing and maintaining the nation's financial security.

The text of the Sixteenth Amendment is as straightforward as a typical tax return is complex: "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" (LII). The specific language of the amendment was the result of decades of income taxation and debates surrounding its legality under the Constitution and its basic appropriateness in a democratic system. The Revenue Acts of 1861 and 1862 were used to fund the Union's effort in the Civil War, and were maintained for decades afterwards. Debates began to emerge about the nature of such taxes, specifically whether they were direct or indirect, which would affect how Congress was legally able to collect the tax and what they were able to do with the money. Specifically, direct taxes on persons and property had to be apportioned to the states based on various proportional factors, whereas indirect taxes did not (Terrell 2004).

Several court cases, but most importantly Pollock v. Farmers' Loan & Trust Co. In 1895, challenged the authority of the federal government in collecting the income tax in the manner that had developed by the time. In its ruling on Pollock, the Supreme Court found the income tax unconstitutional, and the Sixteenth Amendment was ratified nineteen years later as a way of rendering the Supreme Court's decision moot (Terrell 2004). Even during the intervening years, the federal government was forced to collect income taxes in order to fund its ever growing projects and duties, though it was far more constrained in the methods of taxation employed (Terrell 2004).

Although income tax is one of the most prevalent and obvious of the changes made to the policies of taxation and money in general in the United States, it is far from the only one. Another significant development is the establishment of the Federal Reserve bank and the elimination of competing currencies. The language of the provision concerning taxes ensured uniformity, making an amendment necessary for the non-uniform income tax. A reverse situation existed in regards to money; the language of the Constitution granted Congress the ability to mint money and determine its value, but it did not exclude other entities from the same activities. Each state and many banks eventually developed their own currencies, greatly complicating trade and issues of security, both through increased potential for fraud and a lack of reliable knowledge about the strength of a particular currency at any given time. These issues were seen as largely responsible for a series of financial crises in the nineteenth century, and even in part for the Great Depression. The establishment of a uniform national currency was not established via a Constitutional amendment, but it is hard to imagine accepting anything else today.

Section V: Judicial Developments

Other than the judicial interpretation of the taxation powers granted to Congress which led to the ratification of the Sixteenth Amendment as detailed above, judicial development concerning Congress' powers to tax and to mint money has been significantly eclipsed by legislative changes. In fact, there are some significant legal questions concerning the Federal Reserve System and its mixture of public and private control that have yet to be addressed by the courts, effectively rubber stamping the legislation that led to the creation of this institution and the perpetuation of its growing influence on the United Sates' and the world's economy. While many cases involving interstate commerce have been decided, the actual Constitution has been left largely untouched.

Section VI: Meaning for Administrative Practice

Despite the silence of the judiciary in regards to the broad elements of taxation and money making, the implications for individuals and public agencies regarding these provisions of Section 8 have been enormous. The effects that taxes have on all aspects of commerce, which in turn affects the daily life of every person living in this country and arguably in most of the world, are enormous, especially given that the United States is far and away the world's largest economy. There are, of course, the already mentioned examples of the income tax and the Federal Reserve System, both of which have come to influence the lives of citizens and the operations of public agencies in innumerable and complex ways. These are only two of the largest influences of these provisions, however; many others also exist.