Collective action federalism: a general theory of article I, section 8.

Author:Cooter, Robert D.

INTRODUCTION I. PAST INTERPRETATIONS OF ARTICLE I, SECTION 8 A. Section 8 Outside the Courts 1. Preratification 2. Postratification B. Section 8 Inside the Courts 1. The General Welfare Clause 2. The Commerce Clause II. THEORY OF THE GENERAL WELFARE A. Externalities B. Internalization Principle C. Federal Coase Theorem D. Political Logic of U.S. Federalism III. ANALYTICAL CATEGORIES OF ARTICLE I, SECTION 8 A. Analysis of Section 8 B. Collective Action Federalism and Other Parts of the Constitution C. Collective Action Federalism and Constitutional Disagreement D. Collective Action Federalism and Theories of Interpretation IV. EXPLAINING (OR IMPROVING) CONTEMPORARY UNDERSTANDINGS A. The Commerce Clause B. Dormant Commerce Clause C. The General Welfare Clause 1. The purposes for which Congress may tax and spend 2. Regulation under Clause 1? 3. When to avoid avoidance V. EVALUATING CONGRESSIONAL JUDGMENTS ABOUT COLLECTIVE ACTION PROBLEMS CONCLUSION INTRODUCTION

The Federal system was created with the intention of combining the different advantages which result from the magnitude and the littleness of nations.... (1) Under the Articles of Confederation, Congress lacked the power to protect the states from military warfare waged by foreigners and from commercial warfare waged by one another. The states proved unable to solve these difficulties on their own. They acted individually when they needed to act collectively, and the Framers of the United States Constitution concluded that the states cannot reliably achieve an end when doing so requires two or more of them to cooperate. The solution lay with the establishment of a more comprehensive unit of government--a national government with the authority to tax, raise and support a military, regulate interstate and international commerce, and act directly on individuals. The Constitutional Convention thus instructed the midsummer Committee of Detail that Congress would possess the power "to legislate in all Cases for the general Interests of the Union, and also in those Cases to which the States are separately incompetent, or in which the Harmony of the United States may be interrupted by the Exercise of individual Legislation." (2) The Committee subsequently produced Article I, Section 8.

The Framers lacked the tools and language of modern social science, but they knew a collective action problem when they saw it. When activities spilled over from one state to another, the Framers recognized that the actions of individually rational states produced irrational results for the nation as a whole--the definition of a collective action problem. The federal government is the smallest unit that internalizes these spillovers. By internalizing the effects, the federal government is more likely than the states to solve the problem of interstate spillovers. So Article I, Section 8 of the new Constitution gave Congress additional powers to address collective action problems.

Interpretations of Article I, Section 8 since the Founding have not always focused on collective action problems involving multiple states. Regardless of collective action problems, many presidents and members of Congress throughout the nineteenth century doubted the constitutionality of internal improvements and disaster relief by the federal government. (3) Moreover, the Supreme Court of the United States, in trying to distinguish the "truly national" from the "truly local" in the context of the Commerce Clause, (4) historically has gone back and forth between imposing essentially no limits on the scope of the commerce power and imposing a series of dubious formal distinctions. The crisis of the Great Depression ultimately exploded the Lochner Court's categorical differentiations between "manufacturing" and "commerce," "direct" and "indirect" effects on commerce, goods in the "flow" of commerce and goods not in the flow, and "harmful" and "harmless" goods in commerce. (5) More recently, the Court has distinguished "economic" or "commercial" activity, which Congress may regulate using its commerce power, from "noneconomic" or "noncommercial" activity, which Congress may not regulate.

A federal constitution ideally gives the central and state governments the power to do what each does best. Economic activity, however, does not generally cause collective action problems among the states, and noneconomic activity is not generally free from collective action problems. Consequently, Congress is not generally better at regulating economic activity, and the states are not generally better at regulating noneconomic activity. Whatever its usefulness in defining the word "Commerce," (6) the distinction between economic and noneconomic activity is mostly irrelevant to the problems of federalism.

We propose a more promising constitutional foundation for American federalism in Article I, Section 8. Our theory of collective action federalism flows directly from the relative advantages of the federal government and the states: much of what the federal government does best is to solve collective action problems that the states cannot solve on their own. (7) We will argue that the eighteen clauses of Section 8 are a coherent set, not a heterogeneous aggregation of unrelated powers. Coherence comes from the connection the specific powers have to collective action problems affecting the general welfare.

Section 8 begins in Clause 1 by granting Congress the power to "lay and collect Taxes ... to pay the Debts and provide for the ... general Welfare of the United States." Welfare is "general" (or "among the several States," in the language of Clause 3) when the federal government can obtain it and the separate states cannot--that is, when spillovers pose a collective action problem for the states. The theory of collective action federalism interprets the clauses of Section 8 as authorizing Congress to tax, spend, and regulate when two or more states face collective action problems. Conversely, governmental activities that do not pose collective action problems for the states are "internal to a state" or "local."

Some concepts from economics help to develop the theory of collective action federalism. We will show that the eighteen clauses of Article I, Section 8 mostly address two kinds of spillovers: interstate externalities and national markets.

Conscientious members of Congress and presidents should use the theory of collective action federalism in assessing the scope of their own legislative or veto powers. Courts also should use the theory to the extent that they engage in judicial review of federalism questions. The theory of collective action federalism addresses the constitutional meaning of Section 8, not the extent to which courts should declare its meaning in constitutional adjudication.

Part I, on history, surveys past interpretations of Article I, Section 8, both outside and inside the courts. Part II, on theory, shows how interstate externalities and markets cause collective action problems that affect the general welfare. Part III, on taxonomy, sorts the powers in Article I, Section 8 into analytical categories from economics, notably interstate externalities and national markets. Taken together, Parts I through III demonstrate that the specific powers form a coherent group, one that defines a substantive constitutional conception of the "general Welfare."

Part IV identifies substantial support for the theory of collective action federalism in the U.S. Supreme Court's interpretation of Article I, Section 8 during the tenure of Chief Justice John Marshall and since 1937. We also identify two ways in which existing constitutional understandings of Congress and the Court would improve by taking greater account of the existence or nonexistence of collective problems involving multiple states. First, collective action federalism differentiates interstate commerce from intrastate commerce by using the distinction between individual and collective action by the states, not the Supreme Court's distinction between "economic" and "noneconomic" activity. The distinction between individual and collective action by the states best explains why Congress may not ordinarily use the Commerce Clause to regulate such crimes as assault or gun possession in schools. Indeed, our distinction explains what the Court has actually done in recent Commerce Clause cases better than the Court's own proffered distinction. (8)

Second, collective action federalism suggests that Congress possesses some power under Clause 1 to regulate noncommercial harms that spill over state boundaries, such as certain environmental problems and contagious diseases. We thus favor reconsideration of the Court's conclusion in United States v. Butler that the General Welfare Clause does not confer any regulatory authority. (9) Not only can the text of Clause 1 bear such an interpretation, but we also avoid longstanding concerns about a general federal police power and about rendering the rest of Section 8 superfluous. We avoid these concerns by defining the "general Welfare" substantively based on the nature of the problems addressed by the balance of Section 8.

Part V identifies one way of evaluating congressional judgments about the existence and seriousness of collective action problems, and about the adequacy of Congress's response. The Conclusion summarizes the argument.


    We begin with previous interpretations of Article I, Section 8, both extra-judicial and judicial, over the course of American history. Although we will not rest our interpretation of Section 8 primarily on history, much of this history supports our structural and consequentialist approach. (10) Moreover, the parts of the history that do not support our approach illustrate the problems that result when constitutional interpretation of Section 8 disregards collective action problems and attempts instead to resolve federalism...

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