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CRS Annotated Constitution

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Earmarked Funds.—The appropriation of the proceeds of a tax to a specific use does not affect the validity of the exaction, if the general welfare is advanced and no other constitutional provision is violated. Thus a processing tax on coconut oil was sustained despite the fact that the tax collected upon oil of Philippine production was segregated and paid into the Philippine Treasury.568 In Helvering v. Davis,569 the excise tax on employers, the proceeds of which were not earmarked in any way, although intended to provide funds for payments to retired workers, was upheld under the “general welfare” clause, the Tenth Amendment being found to be inapplicable.

Debts of the United States.—The power to pay the debts of the United States is broad enough to include claims of citizens aris[p.159]ing on obligations of right and justice.570 The Court sustained an act of Congress which set apart for the use of the Philippine Islands, the revenue from a processing tax on coconut oil of Philippine production, as being in pursuance of a moral obligation to protect and promote the welfare of the people of the Islands.571 Curiously enough, this power was first invoked to assist the United States to collect a debt due to it. In United States v. Fisher,572 the Supreme Court sustained a statute which gave the Federal Government priority in the distribution of the estates of its insolvent debtors. The debtor in that case was the endorser of a foreign bill of exchange that apparently had been purchased by the United States. Invoking the “necessary and proper” clause, Chief Justice Marshall deduced the power to collect a debt from the power to pay its obligations by the following reasoning: “The government is to pay the debt of the Union, and must be authorized to use the means which appear to itself most eligible to effect that object. It has, consequently, a right to make remittances by bills or otherwise, and to take those precautions which will render the transaction safe.”573

Clause 2. The Congress shall have Power * * * To borrow Money on the credit of the United States.

BORROWING POWER

The original draft of the Constitution reported to the convention by its Committee of Detail empowered Congress “To borrow money and emit bills on the credit of the United States.”574 When this section was reached in the debates, Gouverneur Morris moved to strike out the clause “and emit bills on the credit of the United States.” Madison suggested that it might be sufficient “to prohibit the making them a tender.” After a spirited exchange of views on the subject of paper money, the convention voted, nine States to two, to delete the words “and emit bills.”575 Nevertheless, in 1870, the Court relied in part upon this clause in holding that Congress had authority to issue treasury notes and to make them legal tender in satisfaction of antecedent debts.576

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When it borrows money “on the credit of the United States,” Congress creates a binding obligation to pay the debt as stipulated and cannot thereafter vary the terms of its agreement. A law purporting to abrogate a clause in government bonds calling for payment in gold coin was held to contravene this clause, although the creditor was denied a remedy in the absence of a showing of actual damage.577

Clause 3. The Congress shall have Power * * * To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.

POWER TO REGULATE COMMERCE

Purposes Served by the Grant

This clause serves a two–fold purpose: it is the direct source of the most important powers that the Federal Government exercises in peacetime, and, except for the due process and equal protection clauses of the Fourteenth Amendment, it is the most important limitation imposed by the Constitution on the exercise of state power. The latter, restrictive operation of the clause was long the more important one from the point of view of the constitutional lawyer. Of the approximately 1400 cases which reached the Supreme Court under the clause prior to 1900, the overwhelming proportion stemmed from state legislation.578 The result was that, generally, the guiding lines in construction of the clause were initially laid down in the context of curbing state power rather than in that of its operation as a source of national power. The consequence of this historical progression was that the word “commerce” came to dominate the clause while the word “regulate” remained in the background. The so–called “constitutional revolution” of the 1930s, however, brought the latter word to its present prominence.


Footnotes

568 Cincinnati Soap Co. v. United States, 301 U.S. 308 (1937).
569 301 U.S. 619 (1937).
570 United States v. Realty Company, 163 U.S. 427 (1896); Pope v. United States, 323 U.S. 1, 9 (1944).
571 Cincinnati Soap Co. v. United States, 301 U.S. 308 (1937).
572 2 Cr. (6 U.S.) 358 (1805).
573 Id., 396.
574 2 M. Farrand, The Records of the Federal Convention of 1787 (New Haven: rev. ed. 1937), 144, 308–309.
575 Id., 310.
576 Knox v. Lee (Legal Tender Cases), 12 Wall. (79 U.S.) 457 (1871), overruling Hepburn v. Griswold, 8 Wall. (75 U.S.) 603 (1870).
577 Perry v. United States, 294 U.S. 330, 351 (1935). See also Lynch v. United States, 292 U.S. 571 (1934).
578 E. Prentice & J. Egan, The Commerce Clause of the Federal Constitution (Chicago: 1898), 14.
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