“All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with amendments as on other Bills.”
— U.S. Constitution, Article I, section 7, clause 1
“No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.”
— U.S. Constitution, Article I, section 9, clause 7
Origins
English history heavily influenced the Constitutional framers. The British House of Commons has the exclusive right to create taxes and spend that revenue, which is considered the ultimate check on royal authority. Indeed, the American colonists’ cry of “No taxation without representation!” referred to the injustice of London imposing taxes on them without the benefit of a voice in Parliament.
Constitutional Framing
Debate at the Constitutional Convention centered on two issues. The first was to ensure that the executive would not spend money without congressional authorization. The second concerned the roles the House and Senate would play in setting fiscal policy.
At the Convention, the framers considered the extent to which the Senate—like the House of Lords—should be limited in its consideration of budget bills. The provision was part of a compromise between the large and small states. Smaller states, which would be over-represented in the Senate, would concede the power to originate money bills to the House, where states with larger populations would have greater control. Speaking in favor of the provision, Benjamin Franklin of Pennsylvania said, “It was a maxim that those who feel, can best judge. This end would . . . be best attained, if money affairs were to be confined to the immediate representatives of the people.” The provision in the committee’s report to the Convention was adopted, five to three, with three states divided on the question. The Convention reconsidered the matter over the course of two months, but the provision was finally adopted, nine to two, in September 1787.
The constitutional provision making Congress the ultimate authority on government spending passed with far less debate. The framers were unanimous that Congress, as the representatives of the people, should be in control of public funds—not the President or executive branch agencies. This strongly-held belief was rooted in the framers’ experiences with England, where the king had wide latitude over spending once the money had been raised.
The Early Appropriations Process
The First Congress (1789–1791) passed the first appropriations act—a mere 13 lines long—a few months after it convened. The law funded the government, including important pensions for Revolutionary War veterans, with just $639,000—an amount in the tens of millions in real terms. This simple process was short-lived. Over time, nine regular appropriation bills emerged and funded such priorities as pensions, harbors, the post office, and the military. These were considered on an annual basis by the late 1850s. The House Committee on Ways and Means, which also had jurisdiction over tax policy, controlled the appropriations process. But legislation and funding were always kept separate. Priorities were spelled out in one law and money appropriated for those priorities in another. This has remained the practice, as substantive committees design authorization acts and the House and Senate Appropriation Committees fund authorized programs later. Indeed, there are laws and parliamentary rules against making new law in appropriation bills, although such rules are periodically waived.
Subsequent Reforms
In 1865, after the Civil War had created a nearly $3 billion national debt and spending exceeded a billion dollars a year, Congress reformed its funding process to handle the government’s new demands. The House separated the Ways and Means Committee’s taxing and spending functions. The Appropriations Committee was established to fund programs, while Ways and Means retained jurisdiction on tax policy. House leadership and other committees also tried to influence the appropriations process, and the lack of coordination over the years led to high deficits and the implementation of the federal income tax in 1913. Congress passed the Budget and Accounting Act in 1921 to address some of the coordination problems it faced funding government programs. This law centralized many of the budgeting functions with the President, who still has considerable agenda-setting power with the federal budget and submits a draft budget to Congress at the beginning of every year. The appropriations process has been reformed multiple times since 1921, including notable restructurings with the Congressional Budget and Impoundment Control Act of 1974 and the Gramm–Rudman–Hollings Acts of 1985 and 1987.
For Further Reading
Farrand, Max, ed. The Records of the Federal Convention of 1787. Rev. ed. 4 vols. (New Haven and London: Yale University Press, 1937).
Garfield, James. “National Appropriations and Misappropriations,” North American Review, 270: 572–586.
Kiewiet, D. Roderick and Mathew D. McCubbins. The Logic of Delegation: Congressional Parties and the Appropriations Process. (Chicago: The University of Chicago Press, 1991).
Kimmel, Lewis. Federal Budget and Fiscal Policy, 1789–1958. (Washington, D.C.: Brookings Institution, 1959).
Leloup, Lance. The Fiscal Congress. (Westport, CT: Greenwood, 1980).
Schick, Allen. Congress and Money: Budgeting, Spending and Taxing. (Washington, D.C.: The Urban Institute, 1980).
—. The Federal Budget: Politics, Policy, Process. (Washington, D.C.: Brookings Institution, 2000).
Selko, Daniel. The Federal Financial System. (Washington, D.C.: Brookings Institution, 1940).
Stewart, Charles H., III. Budget Reform Politics: The Design of the Appropriations Process in the House of Representatives, 1865–1921. (New York: Cambridge University Press, 1989).
Wildavsky, Aaron B. Budgeting and Governing. (Piscataway, NJ: Transaction Publishers, 2006).
—. The New Politics of the Budgetary Process. 5th ed. (New York: Longman, 2003).
The framers of the Constitution feared too much centralized power, adopting the philosophy of divide and conquer. At the national level, they created three different branches of government to administer three different types of power. The legislative branch made the laws through a Congress of two houses, the Senate and the House of Representatives. The executive branch enforced the laws through a president, vice president, and numerous executive departments such as Treasury and State. And the judicial branch interpreted the laws through a Supreme Court and other lower courts. In the words of James Madison: “The accumulation of all powers, legislative, executive, and judiciary, in the same hands, whether of one, a few, or many, and whether hereditary, self-appointed, or elective, may justly be pronounced the very definition of tyranny.”
Within the separation of powers, each of the three branches of government has “checks and balances” over the other two. For instance, Congress makes the laws, but the President can veto them and the Supreme Court can declare them unconstitutional. The President enforces the law, but Congress must approve executive appointments and the Supreme Court rules whether executive action is constitutional. The Supreme Court can strike down actions by both the legislative and executive branches, but the President nominates Supreme Court justices and the Senate confirms or denies their nominations. “Ambition must be made to counteract ambition,” wrote James Madison in Federalist 51, so that each branch will seek to limit the power of the other two branches to protect its own power. Such a system makes concerted action more difficult, but it also makes tyranny less likely.
We the People content written by Linda R. Monk, Constitutional scholarThe Commerce Clause refers to Article 1, Section 8, Clause 3 of the U.S. Constitution, which gives Congress the power “to regulate commerce with foreign nations, and among the several states, and with the Indian tribes.”
Congress has often used the Commerce Clause to justify exercising legislative power over the activities of states and their citizens, leading to significant and ongoing controversy regarding the balance of power between the federal government and the states. The Commerce Clause has historically been viewed as both a grant of congressional authority and as a restriction on the regulatory authority of the States.
The Constitution does not explicitly define the word “commerce” leading to wide debate as to what powers section 8, Clause 3 grants congress. Some argue that it refers simply to trade or exchange, while others claim that the framers of the Constitution intended to describe more broadly commercial and social intercourse between citizens of different states.
Courts have generally taken a broad interpretation of the commerce clause for much of United States history. In 1824’s Gibbons v. Ogden, the Supreme Court held that intrastate activity could be regulated under the Commerce Clause, provided that the activity is part of a larger interstate commercial scheme. In 1905’s Swift and Company v. United States, the Supreme Court held that Congress had the authority to regulate local commerce, as long as that activity could become part of a continuous “current” of commerce that involved the interstate movement of goods and services.
For a brief period between 1905 and 1937, the Supreme Court narrowed their interpretation of the Commerce Clause in what has now become known as the Lochner era. Courts during this era experimented with the idea that the Commerce Clause does not empower congress to pass laws which impede an individual’s right to enter a business contract.
However, beginning with NLRB v. Jones & Laughlin Steel Corp in 1937, the Court began to recognize broader grounds upon which the Commerce Clause could be used to regulate state activity. Most importantly, the Supreme Court held that activity was commerce if it had a “substantial economic effect” on interstate commerce or if the “cumulative effect” of one act could have an effect on such commerce. Decisions such as NLRB v. Jones, United States v. Darby, and Wickard v. Filburn demonstrated the Court's newfound willingness to give an unequivocally broad interpretation of the Commerce Clause. From the NLRB decision in 1937 until 1995, the Supreme Court did not invalidate a single law on the basis of overstepping the Commerce Clause’s grant of power.
In United States v. Lopez (1995) the Supreme Court attempted to curtail Congress's broad legislative mandate under the Commerce Clause by returning to a more conservative interpretation of the clause. In Lopez, the defendant was charged with carrying a handgun to school in violation of the federal Gun Free School Zones Act of 1990. The defendant argued that the federal government had no authority to regulate firearms in local schools, while the government claimed that this fell under the Commerce Clause on grounds that possession of a firearm in a school zone would lead to violent crime, thereby affecting general economic conditions. The Supreme Court rejected the government's argument, holding that Congress only has the power to regulate the channels of commerce, the instrumentalities of commerce, and action that substantially affects interstate commerce. The Court declined to further expand the Commerce Clause, writing that “[t]o do so would require us to conclude that the Constitution's enumeration of powers does not presuppose something not enumerated, and that there never will be a distinction between what is truly national and what is truly local. This we are unwilling to do.”
Nonetheless, Lopez did not indicate a full return to the Lochner era conception of the Commerce Clause. For example, in Gonzales v. Raich, the Court returned to its more liberal construction of the Commerce Clause in relation to intrastate production when it upheld federal regulation of intrastate marijuana production.
In 2012, the Supreme Court again addressed the Commerce Clause in NFIB v. Sebelius. In Sebelius, the Court addressed the individual mandate in the Affordable Care Act (ACA), which required uninsured individuals to secure health insurance or pay a monetary penalty in an attempt to stabilize the health insurance market. Focusing on Lopez's requirement that Congress regulate only commercial activity, the Court held that the individual mandate could not be enacted under the Commerce Clause. The Court stated that requiring the purchase of health insurance under the ACA was not the regulation of commercial activity so much as inactivity and was, accordingly, impermissible under the Commerce Clause. Nonetheless, the individual mandate was allowed to stand because it could reasonably be characterized as a tax.
While most discussion surrounding the Commerce Clause revolves around the federal government, it indirectly also affects state governments through what’s known as the Dormant Commerce Clause. The Dormant Commerce Clause refers to the prohibition, implicit in the Commerce Clause, against states passing legislation that discriminates against or excessively burdens interstate commerce. Of particular importance is the prevention of protectionist state policies that favor state citizens or businesses at the expense of non-citizens conducting business within that state. For example, in West Lynn Creamery Inc. v. Healy the Supreme Court struck down a Massachusetts state tax on milk products because the tax impeded interstate commercial activity by discriminating against non-Massachusetts citizens and businesses.
[Last updated in July of 2022 by the Wex Definitions Team]