The Necessary and Proper Clause of the U.S. Constitution & the Doctrine of Implied Powers
The doctrine of implied powers was first articled by Alexander Hamilton in defense of his idea for Congress to charter a national bank. Image: 1797-1811 Headquarters of the Bank of the United States in Philadelphia.
In 1819 the Supreme Court affirmed Hamilton’s articulation of the doctrine of implied powers. Image: The Supreme Court in Washington D.C.
The Bank of the United States
By the end of the American Revolutionary War (1775-1783) America’s individual states were deeply indebted, having borrowed heavily to finance the war effort.
Moreover, inflation had rendered Continentals - the fiat money issued by the Continental Congress to finance the war - worthless.
So Alexander Hamilton, America’s first Treasury Secretary (1789-1795), sought to get the newly formed country’s finances in order.
Part of his plan for doing so was to create a national bank which would perform many of the functions of a modern central bank and collect taxes on behalf of the federal government.
But his proposal met fierce opposition from a pair of Virginia policy-makers: Secretary of State Thomas Jefferson and Congressman James Madison.
In 1791 Congress accepted Hamilton’s proposal for a national bank and passed a bill which, if signed by President George Washington, would grant a 20-year charter for the creation of such a bank.
But Jefferson and Madison urged Washington to veto the bill.
And Washington was unsure about the constitutionality of Hamilton’s proposal for a national bank because the Constitution does not explicitly grant Congress the authority to create such a bank.
Enter the Necessary and Proper Clause and the possibility that it implied that Congress had the authority to create such a bank.
Arguing that it implied no such power, Thomas Jefferson provided Washington with his case that creating a national bank would be unconstitutional.
He argued that the Necessary and Proper Clause of the US constitution could only be applied when the legislation in question was necessary - not merely if Congress deemed it convenient - to the execution of Congress' explicitly enumerated powers, and therefore, could not be used to suggest that Congress has the implied power to create a national bank.
So Washington sent Hamilton a letter with comments by Secretary of State Thomas Jefferson on why he should veto the bill and gave Hamilton one week to provide his rebuttal.
Hamilton spent the next week preparing his thoughts and worked through the night of February 22 drafting his rebuttal, which amounted to almost 15,000 words.
His rebuttal argued for a looser reading of the Necessary and Proper clause than Jefferson's.
He suggested that reading the clause as only being applicable when the legislation in question was absolutely necessary would be debilitating, restraining the government from fulfilling its duties: in a world of uncertainties, how can we know for sure what is absolutely necessary?
And if we accept a looser reading of the Necessary and Proper Clause as being applicable to anything Congress deems useful in the discharge of its duties, then it is implied that Congress can do things – such as creating a national bank – which it deems to be useful to discharge its explicitly stated powers and obligations under the constitution – such as collecting taxes – even if the constitution doesn’t explicitly state that Congress has the authority to create a national bank.
In other words, Hamilton had articulated the so-called doctrine of implied powers: the idea that Congress, under the Necessary and Proper Clause, has the authority not only to use the powers explicitly conferred upon it by the Constitution, but also the implied authority to take actions which it deems proper in the discharge of its explicitly enumerated powers.
Hamilton’s rebuttal managed to convince Washington of the bank’s constitutionality and Washington signed the bill into law, creating the Bank of the United States (1791-1811).
Carpenters Hall: 1791- 1797 Headquarters of the Bank of the United States.
The Supreme Court Weighs In
In 1791 the federal government created a national bank based on Hamilton’s idea that the Necessary and Proper Clause implied that it had the authority to do so.
But a formal judgement on the implications of the Necessary and Proper Clause by the one institution that could provide a binding legal opinion, the Supreme Court, would not come until the 19th century.
In 1811, with Alexander Hamilton dead - killed in an 1804 duel with then Vice President Aaron Burr - and his Federalist party out of power, the charter for the Bank of the United States was allowed to expire un-renewed.
But by 1816, the financial difficulties America experienced during the War of 1812 (1812-1815) had persuaded some Congressmen that it was easier to wage war with a central bank.
Moreover, several prominent self-interested businessmen had waged an aggressive lobbying campaign to convince Congress to charter a new national bank in the hopes that such an institution could get a grip on inflation and thereby ensure the profitability of their enterprises.
So in 1816, the federal government would charter the Second Bank of the United States.
And in the 1819 Supreme Court case McCulloch v. Maryland, the court - presided over by Chief Justice John Marshall - unanimously ruled that the Second Bank’s charter was constitutional under the doctrine of implied powers, affirming Alexander Hamilton’s argument almost three decades earlier that the Necessary and Proper Clause of the U.S. Constitution allowed Congress to establish the First Bank of the United States.
(The charter for the Second Bank of the United States was nevertheless allowed to expire un-renewed in 1836 and the United States would continue without a central bank until the creation of the Federal Reserve in 1913).
The Doctrine of Implied Powers
Considering these early battles over the constitutionality of a federally-chartered national bank reveals the significance of the Necessary and Proper Clause.
The doctrine of implied powers, articulated by Hamilton in defense of a Bank of the United States and affirmed by the Supreme Court in its 1819 consideration of the constitutionality of the Second Bank of the United States, states that the Necessary and Proper Clause gives Congress wide-ranging implied powers not explicitly enumerated in the Constitution.
The acceptance of the doctrine by the high court means that Congress, under the Necessary and Proper Clause, has the authority not only to use the powers explicitly conferred upon it by the Constitution, but also the implied authority to take actions which it deems proper in the discharge of its explicitly enumerated powers.
So, for example, it can establish a national bank, despite not having the authority to do so explicitly conferred upon it by the Constitution, to collect federal taxes, something the Constitution does explicitly state Congress has the authority to do.
Or, put another way, the Constitution explicitly grants Congress the authority to levy federal taxes and therefore implicitly grants it the authority to establish a national bank to collect these taxes.
Written By: Aiden Singh Published: July 28, 2020