Economics 103

Current Constitutional Issues


Throughout history Americans have argued about the appropriate division of power between the national government and the governments of the individual states. Under the Articles of Confederation that initially governed the U.S., the federal government had very little power. One of the major purposes of writing the Constitution was to shift this balance of power away from the individual states. But how to do this, and far to shift it, always has been controversial.

The U.S. Constitution delegates specific powers to Congress and the national government (primarily through Article I, section 8). It also states in Article VI (typically called the "Supremacy Clause") that in any area for which the Constitution grants federal power, that federal law overrides any state laws. In other words, since the Constitution gives Congress the power to "regulate commerce with foreign nations, " states cannot enact any laws that might conflict with federal policy in this area. In these areas, federal law always trumps state law.

However, according to the 10th Amendment, any powers not specifically delegated to the federal government by the Constitution, are delegated to the states. This Constitutional distinction seems clear on the surface: federal law is supreme in areas for which the Constitution specifically delegates it authority; but state law is supreme in all other areas.

Unfortunately, exactly what powers the Constitution has delegated to Congress is not always clear and the courts have wrestled with this for more than 200 years. Legal scholars often disagree about the "original intent" of our Founding Fathers, which is not surprising considering that the Founding Fathers themselves often disagreed and that many modern cases involve issues the Founding Fathers could not have envisioned. Two recent cases illustrate the conflict.

Health Care Reform

The Patient Protection and Affordable Care Act of 2010 contains a controversial "individual mandate" that requires all Americans (with some exceptions) to purchase health insurance.  Those who fail to obtain the required coverage must pay a penalty that eventually will be raised to the greater of $695 or 2.5% of income. While this provision is critical in pushing us toward the universal health coverage favored by Democrats, many Republicans immediately declared the provision unconstitutional. Indeed, the attorneys general in a number of states with Republican governors (including South Carolina) quickly filed suit against it claiming that it was unconstitutional.  The primary charge was that the federal government lacks the authority to require citizens to purchase insurance.

One issue involved what commonly is called the "Commerce Clause" of the Constitution.  Article 1, section 8, gives Congress the power to "regulate commerce…among the several states." Part of the original intent of this clause was to encourage free trade and give the federal government power to disputes among states. The authors understood that a system in which each state was free to impose its own unique set of rules and requirements for goods and services crossing state lines would significantly obstruct economic growth and development. However the interpretation of exactly when "commerce among the several states" is involved can be tricky. The physical transportation of products across state lines certainly qualifies but, over time, judicial precedents have declared that any activity that "exerts a substantial economic effect on interstate commerce" can qualify as well, even if the activity itself occurs only within a single state.1 For example, the federal government successfully forced a small, family-owned Alabama restaurant to follow federal civil rights laws because it served food that had come from other states.2

Healthcare accounts for about 17% of every dollar spent in the U.S. and most of the major players associated with healthcare are nationwide corporations whose goods and services routinely cross state lines. Therefore, the Obama Administration argued that health care has significant impacts on interstate commerce and, under the Commerce Clause, Congress has the right to regulate this sector.

Many constitutional scholars agreed with the Administration's position and doubted that the legal challenge would succeed. However, some scholars did think that the insurance mandate is unconstitutional. However Conservative law professor Randy Bartlett argued that the individual mandate "extends the commerce clause's power beyond economic activity, to economic inactivity.3 That, the plaintiffs insisted, was unprecedented. They argued that an individual who chooses not to buy health insurance is not engaging in commerce at all.

Others dispute this and point out that the decision to be uninsured imposes significant economic costs on others. Most hospitals are legally obligated to provide emergency care to everyone; however those without insurance often are unable to pay for the care provided.  As much as $50 billion of such uncompensated care ultimately is paid by other taxpayers through government grants to the hospitals and/or through higher premiums charged to those citizens who do have health insurance. As a result, some argue, the economic inactivity of some has important impacts on the commerce of others. 

After mixed rulings in lower courts, the U.S. Supreme Court upheld the law’s constitutionality in a controversial June 2012 5-4 decision. The four justices appointed by Democratic presidents (Breyer, Ginsburg, Kagan and Sotomayor) said Congress did have the power to mandate insurance purchases under the Commerce Clause, while the five Republican appointees (Alito, Kennedy, Roberts, Scalia and Thomas) disagreed. However, Chief Justice Roberts also noted that those who refuse to purchase insurance will be assessed a fee that essentially is a tax designed to discourage people from not buying insurance.  Even though Roberts disagreed with the Commerce Clause justification for the mandate, he maintained that, similar to tobacco taxes designed to discourage smoking, a tax to discourage people from not buying insurance fell well within Congress’s Constitutional authority to tax and was, therefore, constitutional. As a result, he joined the Democratic appointees and cast the deciding vote to uphold the law.

Interestingly, while many in the current Republican Party claim that forcing people to buy health insurance from private companies is an unconstitutional government infringement of personal freedom, many in the past (including Mitt Romney) championed the idea.  Conservatives formerly saw such a program as a free-market alternative to government provided healthcare via programs such as Medicare.  Ironically, if Congress had enacted a more intrusive law bringing all Americans under a single, government-run health care system paid for by taxes, its constitutionality would never have been in doubt.

Immigration Policy

Economists typically argue that immigration creates important benefits for the U.S. Nonetheless, the specifics of immigration policy remain controversial. For example, economists often are split on issues such as how many and which types of immigrants should be accepted.

Although almost everyone agrees that immigration policies need to be reformed, there is no clear consensus about what changes should be enacted. Concerns about illegal immigration recently prompted the state of Arizona to enact a new law (SB 1070) that raises important Constitutional issues. Among the more controversial provisions were ones that required law enforcement officials to detain suspected illegal immigrants when they are stopped for possible violations of other laws, made it a state misdemeanor if legal immigrants did not carry their papers at all times, and made it illegal for undocumented workers to solicit employment in public places (to stop them from working as day laborers).  Subsequently, several other states, including South Carolina, passed similar statues.

Soon after the Arizona law was passed, the U.S. Department of Justice filed a suit claiming that SB1070 violated the U. S. Constitution. The Justice Department noted that Article I, Section 8 of the Constitution gives Congress the "Power….To establish an uniform Rule of Naturalization…throughout the United States". Since Congress cannot dictate naturalization processes without impacting immigration, the courts typically have ruled that immigration comes under federal jurisdiction. The Justice Department claimed that a patchwork of fifty state laws involving immigration would be unworkable and any state laws that attempt to control immigration are unconstitutional under Article VI (the Supremacy Clause).

The state of Arizona countered that it merely was trying to enforce federal law and, therefore, was not violating Article VI. However, the Justice Department claimed that the Arizona law went beyond existing federal law and would "conflict with and undermine the federal government’s careful balance of immigration enforcement priorities and objectives." For example, being in the country without legal immigration status constitutes a civil violation under federal law, but is not a crime.  In addition, the Justice Department suit alleged that the Arizona law would "impose significant and counterproductive burdens on the federal agencies charged with enforcing the national immigration scheme, diverting resources and attention from the dangerous aliens who the federal government targets as its top enforcement priority. It will cause the detention and harassment of authorized visitors, immigrants, and citizens who do not have or carry identification documents specified by the statute…And it will interfere with vital foreign policy and national security interests by disrupting the United States’ relationship with Mexico and other countries."4

Lower courts did issue a temporary injunction to stop implementation of the law until its legality could be determined.  In June 2012 the Supreme Court ruled that the provisions making it a state crime for immigrants not to register with the federal government or to look for employment without proper documents were unconstitutional.  However, the Court allowed the requirement to check immigration status of those detained for other reasons to stand.  Opponents had argued that this would be discriminatory because it would encourage police to stop and question anyone who looks Hispanic and would amount to illegal racial profiling.  However, because no evidence of profiling now exists since the law has not been implemented, the Court did not consider this argument.  It is likely that future challenges to the law will be filed if racial profiling does occur.

Federal Debt Limits

A third recent constitutional controversy involves Congressional limits on the national debt.  Because Congress regularly spends more than it receives in tax revenue, the Department of the Treasury must borrow to cover the shortfall.  It does this by issuing or selling government bonds that it promises to repay in the future with interest.  These bonds constitute what is commonly called the “national debt.”  Every year in which Congress runs a budget deficit the Treasury Department must sell more bonds, thereby increasing the national debt. 

Although Congress has created a ceiling or cap on the allowable amount of this debt, it routinely has increased that ceiling every time we have approached the limit -- until recently.  In 2011 the Republican-dominated House of Representatives refused to raise the debt ceiling unless the President would agree to trillions of dollars of future spending cuts.  President Obama agreed to many of these cuts on the condition that taxes on the wealthiest Americans also would be raised.  When the Republicans balked at any tax increases, a political impasse ensued that threatened to drag the U.S. economy into chaos. The 2011 crisis was “solved” when House Republicans agreed to raise the ceiling with the provision that a bipartisan committee be formed to come up with $1.2 trillion in debt reduction over the next ten years.  If the Committee could not reach agreement, then automatic, across-the-board cuts on all discretionary federal spending would kick in on January 1, 2013 (part of the now-famous “fiscal cliff”).

Republican critics argue that the Constitution specifically gives Congress the power to “borrow money on the credit of the United States” and, therefore, Congress can legitimately limit the debt at will. However, some legal scholars contend that any debt ceiling is unconstitutional.

Note that the debt ceiling threatens existing programs, not just future ones.  Current federal revenues are too small to finance programs that have been approved by Congress in past years. Without additional borrowing the Treasury Department cannot meet its obligations to fund these already-approved programs.  As a result, it either must default on the debt (that is, not repay the maturing government bonds) or else renege on other spending obligations for national defense, social security, Medicare, courts, and a wide variety of other programs.  Both options might be considered unconstitutional.

According to Section Four of the 14thAmendment, “the validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.” This provision was added after the end of the Civil War to reassure creditors that the U.S. would not default on the massive debt that had been built up to finance the war effort.  At that time, representatives from the former confederate states were complaining that they should not be taxed to repay debt incurred to bring about their defeat and wanted to be “able to tear up the nation’s IOU’s”.5  Consequently, allowing the government to default on its debt probably would violate this amendment.

However, if default is not possible, then the Department of Treasury will not have enough funds to cover other obligations such as national defense spending or Social Security payments.  In  effect, by enforcing a debt ceiling, Congress is refusing to pay bills it has run up in the past. But this too might be unconstitutional. After all, the Department of the Treasury is borrowing only to support spending bills already approved by Congress. Once these spending bills have been approved by the legislative branch, it is the Constitutional duty of the executive branch to implement the legislation. Holding the executive branch to a debt ceiling denies the Treasury Department the revenue needed to pay for these approved programs and, therefore, could be interpreted as a legislative attempt to stop the executive branch from fulfilling its Constitutional duty to carry out the enacted laws.6

1.      See Accessed August 2, 2010).
2.      op.cit.
3.      Barnett, Randy, "Is health-care reform constitutional?" Washington Post, August 2, 2010).
4.      A copy of the official Justice complaint is available at: August 2, 2010).
5.       Epps, Garrett, “Our National Debt ‘Shall Not Be Questioned,’ The Constitution Says”, the Atlantic, (Accessed on July 18, 2011).
6.       Zeitlin, Martin, “The Debt Ceiling: Why Obama Should Just Ignore it”, The New Republic, (Accessed July 18, 2011).

Last modified 06/24/13