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THE UNITED STATES CONSTITUTION AND THE DIVISION OF POWERS

The United States Constitution, adopted in 1789, provides for a division of powers among the three branches of the federal government.

Each branch of the federal government, Executive, Legislative and Judicial, is granted powers that will affect the economic system of the United States.

Please review the chart on the next page.

In Lessons 13 and 14, we studied many of the departments of the Executive Branch and the Independent Regulatory Commissions that have been created by the Legislative Branch.

In this lesson we will also discuss some Supreme Court decisions that have affected the operation of our economic system.

In this lesson and lesson 25 we will turn our attention to the relationship of the federal government and the state and local governments.

This chart provides an overview of the three branches of the federal government that are located in Washington, D. C.

However, this chart does not offer any exact detailed information as to the specific economic powers that are granted to these three branches.

In other words, exactly what is the federal government allowed to do? We must also consider what the federal government is not allowed to do under the terms of the Constitution.

We will be looking at the game of government, in which we have several teams (levels of government) participating.

Let's introduce the teams in the game of government:

Team 1 - Federal government; represented by the three branches (executive, legislative and judicial)

Team 2 - State governments (50); represented by the three branches (executive, legislative and judicial)

Team 3 - County governments, (parishes in Louisiana) which have many different forms.

Team 4 - City governments; may have different forms and includes large cities and small towns.

Team 5 - Other government levels, including school districts, water boards, library boards, etc. that are affected by what all of the other teams are doing.

We have determined the teams in the government game.

Let us now turn our attention to the rules of the government game.

Point to Ponder!

Most schools have a student handbook that provides an outline of expected student behavior.

The handbook tells you exactly what you can and cannot do, not only in the school but also at extracurricular activities.

What if something happens that is not specifically covered in the handbook?

Who will make the decision if an event is not covered in the handbook?

Someone must have the authority to make a judgement, and probably it will be the building principal.

What the student handbook does for your school the U. S. Constitution does for the government game.

The Constitution tells the teams what they can and cannot do in the game.

Some of the rules only apply to one team.

For example, only the federal government team can print money. Some of the powers are shared by most of the teams (example; all levels can lay and collect taxes).

The rules of the government game are actually called the division of powers between the federal government and the states (and other government levels.)

This division of powers is divided into three major categories; delegated, reserved and concurrent.

The delegated powers are those that are specifically granted to the federal government. There are three types of delegated powers; expressed, implied and inherent.

Reserved powers are those powers that are held by the states. These powers were granted by the 10th Amendment to the U. S. Constitution.

Concurrent powers are those powers that are held by both the federal government and the states in the federal system.

(For example the power to define and punish crimes and the power to tax.)

The concept of the reserved powers is an important part of our economic study of the Constitution.

The reserved powers are listed in the 10th Amendment which is part of the Bill of Rights.

The 10th Amendment states, "The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people."

In other words, the 10th Amendment and the principal of your school have the same role in the determination of what decision should be made.

Remember, this is what you can do and this is what you cannot do.

Anything that happens that is not covered in the student handbook is delegated to the principal for a decision.

Anything that is not covered by the Constitution is delegated (reserved) to the states.

The concept of the reserved powers is very important.

Make sure that you have a clear understanding of the reserved powers clause.

So what do all of these government powers have to do with economics?

The answer to this question can be found in Article I, Section 8, Clause 3 of the Constitution (Commerce Clause).

This is one of the delegated powers that specifically tells the federal government (team) what it can do in regard to the commerce (economy) of our country.

The Commerce Clause gives Congress the power "to regulate commerce with foreign nations and among the several states, and the Indian tribes."

Let us take a closer at the expressed powers, one of the three delegated powers of the United States Constitution.

The Expressed Powers

Most, but not all, of the powers of Congress are found in Article I, Section 8 of the Constitution.

There are 27 different powers that are explicitly given to Congress.

These grants of power are quite brief.

What these words say is not as important as the actions of government throughout our history.

Let's take another look at the Commerce Clause: "To regulate commerce with foreign nations, and among the several states, and with the Indian tribes."

Please remember the type of national economy that we had at the time of the writing of the U. S. Constitution. Over 90% of the people were actively engaged in farming.

It was impossible for the framers of the Constitution to anticipate all of the different types of business that would be developed in the United States.

All of the inventions and technological developments in our history have had to be regulated by the United States Congress, based on the few words in the Commerce Clause.

In other words, the United States Congress, through its legislation and the United States Supreme Court through its decisions, are still defining the meaning of the Commerce Clause.

How has Congress use the Expressed powers?

The Power to Tax

Article I, Section 8, Clause 1 gives Congress the 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.

The 16th Amendment to the U. S. Constitution gives Congress the power to levy an income tax.

The basic purpose of the power to tax is both obvious and well-known: to raise the money needed to finance the operations of government.

Taxes are most often imposed in order to raise money - that is, "to meet the public needs." Taxes cannot be used to help a private individual or private group. Taxes are often imposed for other purposes.

The protective tariff is perhaps the oldest example of this point. It does bring in some revenue, but its real goal is to "protect" domestic industry against foreign competition.

Other taxes or fees are levied to protect the public health and the safety of the citizens

Most of this regulation is based on licensing. Only those who have proper federal license may legally manufacture and sell drugs.

The power to tax is not unlimited. As

with all of the other powers of the federal government, this power must be used in accordance with all of the other provisions in the Constitution.

Thus, Congress may not lay a tax on church services or publication of a newspaper. Such taxes would be a clear violation of the First Amendment.

Congress may tax only for public purposes, not for private benefit of any group or individual.

Remember that Article I, Section 8, Clause I says that taxes may be levied only "to pay the debts, and provide for the common defense and general welfare of the United States."

Congress may tax only for public purposes, not for the benefit of private groups or individuals.

Congress may not tax exports, including articles exported or imported from state to state.

Taxes must be divided equally among the states.

A direct tax is one which must be paid by the person upon whom it is imposed. An income tax is a direct tax.

An indirect tax must be levied at the same rate throughout the country. Usually, an indirect tax is actually paid by one person but is passed on to another. For example, the federal gasoline tax.

The Commerce Clause has been more responsible for building a strong Union of States out of a weak confederation than any other provision in the Constitution.

The Commerce Clause has enabled the United States to develop one of the greatest open markets in the world.

Together with the taxing power, the Commerce Clause has contributed to the vast growth in the power and

authority of the national government, especially since the Great Depression.

The very first case to reach the Supreme Court involving the Commerce Clause was Gibbons v. Ogden, decided in 1824.

This case marked the beginning of the broad interpretation of the Commerce Clause.

This case arose out of a clash over the regulation of steam vessels by the state of New York, on the one hand, and the federal government, on the other.

The Supreme Court defined Commerce as any type of economic activity that takes place between parties (parties meaning people, individuals, businesses, etc.).

An example of this type of broad interpretation of the Commerce Clause is the Civil Rights Act of 1964.

This act prohibits discrimination in access to or service in hotels, theaters, restaurants, and other public accommodations on grounds of race, color, religion, or national origin.

The Currency Power

The Constitution gives to Congress the power "to coin money [and] regulate the value thereof."

The states are not allowed to coin or print their own money for use as legal tender.

Legal tender is any kind of money a creditor must accept by law in payment of a monetary debt.

Almost all of the framers of the Constitution agreed on the need for a single, national system of "hard" money.

So the Constitution gave the currency power to Congress, all but removing the states from the field.

From 1789 on, among the most important of all of the many tasks performed by the government has been this very one: To provide the nation with a uniform, and stable, monetary system.

The Borrowing Power

In Article 1, Section 8, Clause 2 Congress has the power "to borrow money on the credit of the United States," to meet the financial obligations of the federal government.

Thus, the borrowing power was much used in World War II, as it had been during the economic crisis of the 1930s.

Congress has placed a legal ceiling on the public debt, but it changes the ceiling whenever more money is needed.

The fact that the Constitution gives Congress the power to borrow money makes borrowing a national function.

Thus, the interest the government pays cannot be taxed by the states - which makes its bonds quite attractive to investors.

The borrowing power also implies the power to create the Federal Reserve System and to regulate the nation's banking and other financial institutions.

Bankruptcy

Congress also has power "to establish uniform laws on the subject of bankruptcies, throughout the United States."

Bankruptcy is the legal proceedings in which the assets of the company or individual who has declared bankruptcy are then distributed among those to whom a debt is owed.

Both the states and the national government have the power to regulate bankruptcy. It is, then, a concurrent power.

Summary

This concludes our discussion of the economic role of the federal government in regard to the Commerce Clause of the Constitution.

In lesson 25 we will examine the taxing powers of state and local governments, two other teams in the government game.