In my last post, I explained that Congress obtains authority to spend money from its enumerated powers. All of those powers inherently require some expenditures—at least to buy the pen and ink needed to write the laws. Some powers, such as the power to “maintain a Navy” (Art. I, Sec. 8, cl. 13) require expenditure of great deal of money.
In addition, the Necessary and Proper Clause (I-8-18) enables Congress to spend funds to carry out a power in ways customary at the Founding or reasonably necessary. For instance, Congress may hire revenue officers to collect the taxes authorized by I-8-1 because such was Founding Era custom, and it may maintain IRS websites because such has become reasonably necessary for efficient tax collection.
The Constitution imposed several limits on taxes, of which two are important here. First, Congress could tax only to raise funds to be spent “to pay the Debts and provide for the common Defence and general Welfare of the United States.” (I-8-1). During the Confederation era, there had been many cases of states discriminating against other states, even in conduct of the Revolutionary War. As explained during the ratification debates, the General Welfare Clause was designed to ensure that taxes could not be imposed purely to benefit particular sections of the country or particular special interests. The goal was to ensure that government spent money impartially—a goal inherent in the Founders’ belief that government was a public trust, subject to fiduciary standards.
The other limitation was inherent in the Necessary and Proper Clause: taxation incidental to carrying out a enumerated power had to be truly incidental—subordinate to the power, and customary or reasonably necessary.
After ratification was complete, Treasury Secretary Alexander Hamilton—who did not share most of the other Founders’ commitment to limited government—began a campaign to increase federal power beyond that authorized in the Constitution. (We have found notes he wrote to himself in 1787, making that intention clear.) In 1791, he floated the idea that the words “provide for ….the general Welfare” meant that Congress could spend any way it wanted to promote the general welfare. The problems with this interpretation were many—including the fact that it contradicted the then-prevailing meaning of “to provide for.” So at the time it went nowhere.
In 1936, however, the Supreme Court approved Hamilton’s theory in dicta (side comments) in the case of U.S. v. Butler. (The briefs in that case did a very poor job in explaining and documenting the real purpose of the General Welfare Clause.)
The following year, in Helvering v. Davis and Stewart Machine v. Davis, the Court cited those dicta in applying the doctrine that Congress could spend whatever it wanted for the “general Welfare,” even if the spending was irrelevant to Congress’s enumerated powers. Although the Court held open the possibility that it might invalidate a federal spending program that was not for the “general Welfare,” it never has done so.
A Congress with virtually unlimited spending authority is of course, a Congress that is an auction-house for special favors. The result has been what economists call a “tragedy of the commons”—in which everyone has to grab as much as he can before other people do, even though everyone knows the ultimate results are bad for all.
I have done extensive research into the history and meaning of the congressional spending power. In addition to the layperson’s discussion in my book, The Original Constitution, you can find heavily-documented academic treatments here and here.