Federal Power McCulloch v. Maryland Sept. 27, 2004

1. Federal Power McCulloch v. Maryland Sept. 27, 2004

2. A little banking history • Pre-constitution • State banks issued coin & currency • Constitution (1787) • States prohibited to issue currency (Art I, § 10) • Pre-const’l war debts remain valid (Art. VI, § 1) • First Bank of the United States (1791) • Established by Congress to pay war debt and create standard form of currency • Charter lapses in 1811

3. First Bank of the United States, Phil.

5. A little banking history • Second Bank of the United States (1816) • Congress had difficulty financing war of 1812 • 2d Bank chartered in 1816 • Upheld in McCulloch v. Maryland (1819) and again in Osborne v. Bank of US (1824) • States claimed it was an instrument of federal control & eastern commercial interests • Andrew Jackson vetoes bank renewal in 1832; removes federal deposits • Fed charter lapses in 1836; chartered by Penn. • Bank fails in 1841

6. 2nd Bank of the United States Phil. PA tickets

8. Late 19th Century No central bank – “free banking era” National Bank Act (1863) attempted to create uniform national currency & banking system State banks issued state & federal currency (“greenbacks”) Federal Reserve System formed in 1913 A little banking history

9. Federal Reserve Board

12. Federal Power - Themes • Federalism • Federal government has limited power – enumerated in the constitution • All government power not delegated to the federal government remains with states Unionists (supporters of strong central government) argue for broad federal power States-rights advocates argue for narrow federal power

13. Quick Aside - Preemption • Under the Supremacy Clause – Art. 6, § 2 – federal law preempts (displaces) state law • Broad federal power gives congress more opportunity to displace state law • Narrow federal power means less federal displacement of state law • Sovereignty is a zero-sum equation • States' Rights (and its corollary – federal power) is the oldest and most litigated of all constitutional issues

14. Source of Federal Power • Article I, § 1 • All legislative Powers herein granted shall be vested in a Congress of the United States .... • contrast with Art. II, § 1: The executive Power shall be vested in a President of the United States ... • contrast with Art. III, § 1: The judicial power of the United States shall be vested ... • Article I, § 8 • The Congress shall have Power to ... [17 clauses]

15. Subjects of Federal Power • Examine the 17 clauses in Art. I, § 8 • Administrative items (relating to functioning of federal gov’t) • National sovereignty • foreign relations • military • Commerce & Finance • taxes, banking, bankruptcy, mail, intellect’l property • interstate/foreign/indian commerce clause • These are the “great powers”

16. McCulloch v. Maryland (1819) • Can Maryland impose a tax on the Bank of the United States? • May depend upon whether the act establishing the bank is constitutional v.

17. Nicholas Biddle, last president of 2nd Bank of US

18. McCulloch v. Maryland (1819) • Has congress power to incorporate a bank? (2nd Bank of the United States) • Not among the 17 grants of power in § 8 • Theories of interpretation • Textualism (strict construction) • Original Intent • Dynamic • Non-interpretivism

19. McCulloch v. Maryland (1819) • Defaults (aids to interpretation) • Source of constitutional power • International affairs • Domestic affairs • Individual Rights • Locus of sovereignty • States • Grant of domestic powers construed narrowly • People • Construction in favor of state power not necessary

20. How we got here • Articles of Confederation (1781) • Preserved state sovereignty, unanimous vote • Weak fed'l power was major failing of Articles • Annapolis convention (1786) • "to take into consideration the trade of US” • failed for lack of quorum, but reported: • "important defects in the System of the Federal Government . . . of a nature so serious as . . . to render the situation of the United States delicate and critical, calling for an exertion of the united Virtues and Wisdom of all the members of the Confederacy."

21. Doctrine of Enumerated Powers • Fed'l gov't can exercise "only the powers granted to it" • "But the question respecting the extent of the powers actually granted, is perpetually arising, and will probably continue to arise, so long as our system shall exist." • "the government of the Union, though limited in its powers, is supreme within its sphere of action" Read non-delegated powers narrowly Read delegated powers broadly

22. Doctrine of Implied Powers • In addition to powers expressly granted, fed gov’t may exercise "incidental power" • Theoretical support for doctrine • Fed'l gov't is supreme within sphere of power • No exclusion of implied powers • Compare 10th Amd w/ Articles of Confederation • Express limitation of power (§ 9; Bill of Rights) • Great powers need ample means for execution • Source of power • "It is a constitution we are expounding"

23. Doctrine of Implied Powers • Textual support for doctrine • Necessary and Proper Clause • Art. I, § 8, ¶ 18: "To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers …" Must be? Could be? Who decides? Is this a term of limitation or expansion?

24. Doctrine of Implied Powers • Textual support for doctrine • Necessary and Proper Clause • Art. I, § 8, ¶ 18: "To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers …" Congress shall have power .. This clause is placed in § 8, not § 9

25. McCulloch v. Maryland (1819) • Bank of the United States • Incidental to which great powers? • Lay & collect taxes • Borrow money • Regulate commerce • Support armies and navies • A "necessary and proper" means to any power? • If there is one and only one necessary mean, who decides what it is? • If congress, haven't we given wide berth to the N&P clause?

26. Theories of interpretation Textualism Original Intent Dynamic Non-interpretivism Marshall's Opinion N&P clause has flexible meaning structure supports broad scope Failure of Articles, avoid embarassment Early practice (1st bank) and Const "intended to endure for ages to come [and] be adapted to the various crises of human affairs" Theoretical justification for broad federal power McCulloch v. Maryland (1819)

27. Marshall’s Test • “Let the end be legitimate, let it be within the scope of the constitution, and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consist with the letter and spirit of the constitution, are constitutional” • ENDS must be enumerated • MEANS must be “plainly adapted” (reasonable) • Cannot transgress prohibition in text Rational Basis test

28. Jackson’s Veto Message (1832) “A bank of the United States is in many respects convenient for the Government and for the people. [Yet] some of the powers and privileges possessed by the existing bank are unauthorized by the Constitution, subversive of the rights of the States, and dangerous to the liberties of the people. I sincerely regret that in the act before me I can perceive none of those modifications of the bank charter which are necessary, in my opinion, to make it compatible with justice, with sound policy, or with the Constitution of our country.”

29. Federal Power - Themes • Separation of Powers • The powers of the federal government are subdivided into three distinct branches • Each uniquely constituted, as to respond to different interests & constituencies Active use of judicial review transfers power from the political branches to the courts Restrained judicial review keeps federal courts from meddling into political affairs

30. Separation of Powers • How does Court’s interpretation of Necessary and Proper clause affect the separation of powers in the federal gov’t? • “the degree of [the law’s] necessity is to be discussed in another place.” • Where the law is not prohibited, and is really calculated to effect any of the objects entrusted to the gov’t, to undertake here to inquire into the degree of its necessity, would be to pass the line which circumscribes the judicial dep’t, and to tread on legislative ground.”

31. Original Supreme Court – basement of the Capitol

32. Maryland’s Tax on Bank of US • Where do states get the power to tax? • Does the const. explicitly withdraw this? • See Art. I Sec. 10, par. 2 & 3. "No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing its inspection laws …" • Does the Tax conflict with federal law? • Express conflicts • Implied conflicts

33. Supremacy & Implied Preemption • Does the tax negate the federal act? • “The power to tax is the power to destroy” • Can’t the states be trusted to tax reasonably? • Even if reasonable, does a state tax deny federal supremacy? • States never possessed the right to tax the superior gov’t • The const. need not negate such a right

34. On Just Theory ... • Taxation of foreign objects • Taxation without representation • Non-discriminatory taxes • virtual voice theory of representation • Modern rule • No state taxes on federal instrumentalities • Taxes permitted on employees/contractors

35. Practice Questions • Congress enacts a law banning the cloning of human beings? Is the law constitutional? • What enumerated power could congress use? • Who decides if the law is necessary or proper? • Does the law infringe upon state power? • Which theory of interpretation would most likely uphold the law? • Same questions re. a federal law (not const’l amendment) defining marriage as a solemn union between persons of the opposite sex.