The Constitution lists powers it grants to the federal government, reserving the rest in the states and the people. Over the last few decades, some federal powers—particularly those embodied in the Commerce Clause, Taxation Clause, Necessary and Proper Clause, and Property and Enclave Clauses—have become stretched out of recognition. The power to regulate interstate commerce, for example, has become authority to regulate the entire economy. The power to tax has become authority to spend on anything Congress wishes. And the Property and Enclave Clauses have been expanded into federal authority to hold as much land as the government wishes, for any purpose and any length of time.
Some liberal constitutional commentators defend this development with this argument: One of the Founders’ goals was to deal with spillover effects—externalities—among the states. They designed the Constitution, therefore, to give the federal government almost all power necessary to do so. Over the years, those spillover effects have become greater and greater, as the country has become more and more interdependent. Therefore, construing the enumerated powers expansively serves the purpose for which the Constitution was written.
In support, they cite the wording of the Virginia Plan, an outline for a constitution submitted early in the 1787 convention. The Virginia Plan would have granted the Congress power “to legislate in all cases to which the separate States are incompetent, or in which the harmony of the United States may be interrupted by the exercise of individual Legislation.”
There are several problems in relying on this wording. First, the framers ultimately rejected it in favor of a specific enumeration of federal powers. Indeed, late in the convention they rejected several attempts to add powers to the list. Second, they excluded many activities from the federal enumeration even though they recognized that they were tightly tied up with activities within the enumeration. The Founders often spoke about how commerce, for example, affected manufacturing, agriculture, and even religion and demographics. But only the regulation of commerce was given to the federal government; regulating the other activities was left to the states.
Third, when the framers did want the federal government to regulate connected areas, they listed each separately. For example, they listed distinctly the tightly connected realms of commerce, patent, and copyright. Fourth, in Article I, Section 10, they recognized the power of states to deal with spillovers themselves by entering into interstate compacts.
Fifth, leading founders specifically represented that certain activities with interstate spillovers would remain outside central control.
And sixth, the argument that the central government ought to have power to control all activities with spillover effects proves too much. “Externality federalism” is inherently unstable. Because everything ultimately affects everything else, the central government can always make a case for central regulation.
But liberal commentators have an response: If the enumeration was a narrowing of federal power rather than just a clarification, then why did some pro-Constitution Founders claim that the document gave the federal government general authority to deal with spillovers? For example, speaking on November 26, 1787 at the Pennsylvania ratifying convention, James Wilson said:
Whatever object of government is confined in its operation and effects within the bounds of a particular state, should be considered as belonging to the government of that state; whatever object of government extends in its operation or effects beyond the bounds of a particular state, should be considered as belonging to the government of the United States.
Taken in isolation, however, this comment overstates the case. And it can’t be taken in isolation, because avoiding interstate spillovers wasn’t the framers’ only goal. In allocating power between the federal and state government, they considered but other factors as well. Wilson admits this immediately after the last quoted remark, in which he mentions the competing values of clarity and certainty:
But though this principle be sound and satisfactory, its application to particular cases would be accompanied with much difficulty; because, in its application, room must be allowed for great discretionary latitude of construction of the principle. In order to lessen or remove the difficulty arising from discretionary construction on this subject, an enumeration of particular instances, in which the application of the principle ought to take place, has been attempted with much industry and care. It is only in mathematical science, that a line can be described with mathematical precision. But I flatter myself that, upon the strictest investigation, the enumeration will be found to be safe and unexceptionable; and accurate too, in as great a degree as accuracy can be expected in a subject of this nature.
In other words, if we used words such as those in the Virginia Plan, there would be endless debates and uncertainties. So we listed specific federal powers instead. We did the best we could to give the national government power over national matters. But where the enumeration falls short of giving the national government power over all externalities, then we sacrificed that value for clarity and certainty.
That’s not all. The framers also sacrificed the “externality federalism” value to another at least as important. Wilson recognized this, too. But first some explanation:
Very often it is better to tolerate bad spillovers than to incur the cost of suppressing them. If your neighbor’s dog happens to wake you with its barking one night, you do not immediately run out to challenge your neighbor. You don’t call the police or kill the dog. The costs of such unkind and unneighborly behavior are too high. As long as nocturnal barking does not become a persistent nuisance, you tolerate it.
Similarly, state autonomy has benefits that outweigh the costs of most bad spillovers. Wilson recognized this later in his speech:
When a confederate republick is instituted, the communities of which it is composed surrender to it a part of their political independence, which they before enjoyed as states. . . . The states should resign to the national government that part, and that part only, of their political liberty, which, placed in that government, will produce more good to the whole, than if it had remained in the several states. While they resign this part of their political liberty, they retain the free and generous exercise of all their other faculties as states, so far as it is compatible with the welfare of the general and superintending confederacy.
Of course, the “good of the whole” consists of many more elements than merely suppressing spillovers: Allowing the people of individual states to govern themselves makes people happy. It improves the responsiveness of government. It gives people choices of different “policy packages” in different states. It greatly reduces the chances of centralized tyranny. Values like that generally far outweigh the inconvenience of, for example, differing traffic laws, tax schemes, and insurance regulations.
As the framers did so often, in allocating authority between states and federal government they balanced competing values. The need for central regulation of interstate spillovers was only one of those values. It should not trump the others.
I discuss this subject in the context of the Commerce Power in this academic article.