The Spending Clause

The New Deal and Great Society, and the mark they placed on the shape of American government, would not have been possible without the Spending Clause. The Social Security Act, and all of its component programs—old age, survivors’, and disability insurance; unemployment insurance; the old Aid to Families with Dependent Children program and its successor, Temporary Assistance for Needy Families; Medicare; Medicaid; the Children’s Health Insurance Program; and more—all find their source of constitutional authority in the Spending Clause.

So too with key federal education programs, such as the Elementary and Secondary Education Act (which offers aid to states to provide to their schools), the Higher Education Act (which, among other things, supports financial aid for college students), and the Individuals with Disabilities Education Act (which guarantees an education to children with disabilities). Federal housing and employment programs also rest on the Spending Clause, as do the vast federal investments in our transportation infrastructure that took off when President Eisenhower signed the Federal-Aid Highway Act in 1956. And some of the most far-reaching and important civil rights statutes—Title VI of the Civil Rights Act of 1964, which prohibits race discrimination; Title IX of the Education Amendments of 1972, which prohibits sex discrimination in education; and Section 504 of the Rehabilitation Act of 1973, which prohibits disability discrimination—were adopted under Congress’s spending power as well.

Despite the efforts of some influential academics—and lawyers for states who have brought litigation based on those academics’ theories—the Supreme Court has done very little to limit Congress’s exercise of its power to attach conditions to federal funds under the Spending Clause. Even the 2012 NFIB v. Sebelius decision—which represents the one time the Court has invalidated a federal spending condition as coercive—involved such an extreme statute that it is unlikely to impose much of a limitation on Congress’s power. 

One’s attitude about the failure of the courts to impose more meaningful limits might well depend on how one feels about the vast expansion of the American federal government since the 1930s. It is no surprise that those who, like me, are largely comfortable with the Court’s jurisprudence are also generally supportive of the changes that the New Deal and Great Society made to the shape of American government. Nor is it a surprise that those who seek more judicially-imposed limits on the spending power are skeptical of the New Deal and Great Society. 

I believe that the Court has acted sensibly in refusing to place more significant limits on Congress’s use of the spending power. There are two reasons for this conclusion. First, since the New Deal our constitutional system has settled on the position that it is for Congress—not the courts—to determine what is in the public interest. If the Supreme Court were to reject spending laws on the ground that those laws did not fit the Court’s understanding of the “general welfare,” it would subvert that important protection of democratic decisionmaking.

Second, conditional federal spending affirmatively advances the goals of dual federalism. There are many policies that people in most if not all states would prefer to implement, but that collective-action dynamics keep any individual state from implementing on its own. That is the point Justice Cardozo made in the Steward Machine Co. v. Davis (1937) case that upheld the federal unemployment insurance program under the Spending Clause: many states wanted to adopt unemployment insurance systems, but they feared that if they imposed the taxes necessary to pay for such systems they “would place themselves in a position of economic disadvantage as compared with neighbors or competitors.” A federal program that gave all states an incentive to participate overcame that collective-action dynamic and facilitated adoption of a policy that was welcomed in all corners of the Nation. The original Medicaid program, in which the federal government offered states money to provide health insurance for poor people, helped to overcome a similar dynamic.

It would be perfectly possible for the federal government simply to bypass the states and provide services like these itself. But providing these services through the mechanism of conditional grants serves important purposes. By giving states key responsibilities for implementing federal policies, conditional spending helps to ensure that programs will be administered by officials who are geographically closer and more politically responsive to local concerns than are officials in the Nation’s Capital. States can mold aspects of their implementation to adapt to unique local conditions or experiment with new administrative approaches—and state officials can seek, and in recent years have often obtained, waivers of federal program rules to do so.

Critics of conditional spending worry that Congress will use the Spending Clause to bypass the limitations on its power to regulate under the Commerce Clause, the Reconstruction Amendments, and other constitutional provisions. But the conditional-spending power contains its own built-in limit—Congress cannot enlist a state’s participation unless it is willing to pay what the state demands. Given the realities of modern federal budget politics, that built-in limit gives states key leverage in negotiating the terms of state-federal cooperative programs—and states have proved remarkably sophisticated in using that leverage. (Take a salient recent example: under the ACA’s Medicaid expansion, Congress agreed that the federal government would pay 100 percent of the states’ costs initially, dropping to 90 percent after a few years—an extraordinarily generous offer for a program that provides important services to state residents.) When a federal program relies on the conditional spending power, then, it is especially likely to take a form that is respectful of state interests.

The Spending Clause serves important purposes in our federal system, and Congress has used its power under that Clause to address significant public interests. The Supreme Court has been correct to give Congress a wide berth to do so.

Further Reading:

Lynn A. Baker & Mitchell N. Berman, Getting Off the Dole: Why the Court Should Abandon Its Spending Doctrine, and How a Too-Clever Congress Could Provoke It to Do So, 78 Ind. L.J. 459 (2003).

Samuel R. Bagenstos, The Anti-Leveraging Principle and the Spending Clause After NFIB, 101 Geo. L. J. 861 (2013).

Samuel R. Bagenstos, Spending Clause Litigation in the Roberts Court, 58 Duke L. J. 345 (2008).

Samuel R. Bagenstos, Federalism by Waiver After the Health Care Case, in The Health Care Case: The Supreme Court's Decision and its Implications (2013).

Lynn A. Baker, Conditional Federal Spending After Lopez, 95 Colum. L. Rev. 1911 (1995).

Erin Ryan, Negotiating Federalism, 52 B.C.L. Rev. 1 (2011).

The Spending Clause authorizes Congress to raise taxes and spend money “to pay the Debts and provide for the common Defence and the general Welfare of the United States.” These words cannot possibly justify the modern doctrine that the term “general welfare” authorizes Congress to spend money for virtually any purpose it wants.

If, as the Supreme Court has held since the 1930s, the General Welfare Clause gives Congress the power to spend for almost any purpose it considers beneficial, there would have been no need to give it the authority to spend for “the common Defence” or to pay federal debts. Both purposes are obviously beneficial to the Nation. And both are rendered superfluous by the modern interpretation of “general welfare.”

The modern approach runs counter to the original meaning of the Constitution, as well as the text. It makes a mockery of the Federalists’ repeated assurances that the Constitution sets strict limits on federal power, including the power to spend. In The Federalist No. 41, for example, James Madison emphasized that the phrase “general welfare” was limited by the enumeration of other powers of Congress, and did not give it “a power to legislate in all cases whatsoever.”

Even Alexander Hamilton’s broader construction of the Clause, which held that it authorized spending for all objects that are “general, and not local; . . . and not being confined to a particular spot,” falls well short of the modern approach. Grants to specific state and local governments are, almost by definition, confined to a “particular spot.” In any event, however, Hamilton’s theory is itself flawed, because it too tends to make the power to spend for defense and debt payments redundant, especially the latter. Such spending is almost always “general” in his sense of the term.

Defenders of the modern approach to the spending power usually focus on pragmatic “living constitution” considerations, rather than text and original meaning. They claim that a virtually unlimited spending power is necessary for effective policymaking in the modern world. Even if we assume that it is proper for courts to consider such policy considerations, they are dubious on their own terms.

Unconstrained federal spending since the 1930s has caused considerable harm. Federal subsidies for local pork barrel projects, such as the notorious “bridge to nowhere,” have wasted resources and skewed public works priorities. Federal grants to state governments and interest groups have often created and enforced cartels that harm consumers, especially the poor. For example, the Agricultural Adjustment Acts of 1935 and 1938— which led to Supreme Court decisions vastly expanding the scope of congressional power—paid farmers to artificially reduce production. This increased the price of food during the Great Depression, at a time when millions of Americans were already having great difficulty making ends meet, or even suffering from malnutrition. Federal farm subsidies and associated production restrictions continue to inflate the price of food to this day, disproportionately harming the poor in the process. The growth of massive entitlement programs poses a severe threat to our fiscal future, often subsidizing the relatively affluent at the expense of the relatively poor.

Advocates of unconstrained spending power contend that it is necessary to prevent collective action problems among the states, enabling them to cooperate in situations where they would otherwise find it impossible. But such power also routinely creates dangerous collective action problems, benefiting powerful special interests at the expense of the less well-organized general public. Individual states acting on their own could never have established nationwide agricultural cartels that fleece consumers. Where genuine interstate collective action problems exist, they can usually be addressed without giving Congress a blank check to spend for whatever purposes it wants.

The widespread use of federal grants to state governments undermines beneficial diversity and competition between state and local governments, which also often helps the poor and oppressed. States and localities that can rely on the federal government for funds have less incentive to innovate and to adopt policies attractive to people “voting with their feet.”

In a nation as large, diverse, and complex as the modern United States, federally imposed standardization of policy—facilitated by conditional spending grants—is often harmful. Indeed, this is more true today than at the time of the Founding, when the nation was smaller and less diverse, and government policy much simpler. In this respect, a pragmatic “living Constitution” approach to constitutional interpretation argues for tightening constitutional limits on federal power, rather than loosening them.

In some instances, states have refused to accept ill-conceived conditional spending grants. But the vast majority of the time, state governments find it hard to resist the temptation of federal funds, especially if they are being taxed to provide similar grants to other states that compete with them. In many cases, widespread voter ignorance makes it hard for the electorate to monitor these complex programs.

Even most originalists recognize that the Supreme Court cannot and should not strike down all federal programs that go beyond the text and original meaning of the Spending Clause. Some, most notably Social Security and Medicare, are too well-entrenched to be reversed by judicial action alone. Moreover, it would be unjust to suddenly pull the rug out from under the many people who rely on them. But the Court can still take incremental steps in the direction of enforcing constitutional limits on federal power. For example, it can hold new unconstitutional programs to a higher level of scrutiny than existing well-established ones, on which many people rely. Such a distinction is already implicit in the Court’s ruling in NFIB v. Sebelius (2012), where the Justices invalidated a key part of the Affordable Care Act in part because it was a massive step beyond the existing Medicaid program. It can also strike down at least some of the many blatant cases of special-interest spending that go beyond even the Hamiltonian position.

Enforcement of a tighter conception of “general welfare” is not only practical; it is easier for judges to do than administration of the Court’s current approach to federal grants to state governments, which requires extraordinarily difficult determinations about whether a particular grant condition is “coercive” or insufficiently clear. Unlike “coercion,” the phrase “general welfare” is actually in the Constitution, and can be analyzed using conventional methods of legal interpretation.

From the standpoint of both originalism and pragmatic living constitutionalism, the Court’s Spending Clause jurisprudence is badly flawed. Fortunately, perpetuation of the status quo and complete judicial reversal of the modern approach are not the only two options available. We can and must get beyond this false choice.

Further Reading:

Ilya Somin, Federalism and Collective Action, JOTWELL (June 20, 2011).

Ilya Somin, Foot Voting, Federalism, and Political Freedom, Nomos: Federalism and Subsidiarity (2014).

Ilya Somin, Voting With Your Feet Works for the Poor, Too, The Volokh Conspiracy (Oct. 26, 2013).

Ilya Somin, Democracy and Political Ignorance: Why Smaller Government Is Smarter (Stanford University Press, 2nd. ed. 2016).

Ilya Somin, Closing the Pandora’s Box of Federalism: The Case for Judicial Restriction of Federal Subsidies to State Governments, 90 Georgetown Law Journal 461 (2002).

John Eastman, Restoring the “General” to the General Welfare Clause, 4 Chapman Law Review 63 (2001).