Paper money and the original understanding of the coinage clause.

• Author: Natelson, Robert G.

"The Congress shall have Power... To coin Money, regulate the Value thereof, and of foreign Coin...."

--Constitution of the United States (1)

"Poor? Look upon his face. What call you rich? Let them coin his nose, let them coin his cheeks."

--William Shakespeare (2)

Over a century ago, the Supreme Court decided the Legal Tender Cases, holding that Congress could authorize legal tender paper money in addition to metallic coin. In recent years, some commentators have argued that this holding was incorrect as a matter of original understanding or original meaning, but that any other holding would be absolutely inconsistent with modern needs. They further argue that the impracticality of functioning without paper money demonstrates that originalism is not a workable method of constitutional interpretation.

Those who rely on the Legal Tender Cases to discredit originalism are, however, in error. This Article shows that the holding, although not all the reasoning, of those cases was fully consistent with the original understanding of the Coinage Clause. This Article tells the intriguing story of Colonial America's extraordinary monetary innovations, examines contemporaneous law and language, and shows how the paper money question was addressed during the framing and ratification of the Constitution.

INTRODUCTION I. EARLIER ARGUMENTS OVER THE QUESTION A. Summarizing Earlier Arguments B. Assessing Earlier Arguments II. THE HISTORICAL CONTEXT OF THE COINAGE CLAUSE A. English Law and Practice B. Law and Practice in the Colonies 1. Before the Currency Act of 1764 2. The Currency Act of 1764 and Aftermath 3. Kinds of American Paper Money C. Revolutionary War Emissions D. The Confederation Era E. The Constitutional Convention 1. Why a Coinage Clause Was Necessary 2. What the Convention Records Have to Say About Paper Money III. THE ORIGINAL PUBLIC MEANING OF THE COINAGE CLAUSE A. Initial Considerations B. The Clear Original Meaning and Understanding of "Regulate the Value" C. The Ambiguous Original Public Meaning of "Coin" IV. THE RATIFIERS CHOOSE A MEANING FOR "COIN" CONCLUSION INTRODUCTION

In the latter half of the nineteenth century, the Supreme Court decided a series of cases that upheld the power of Congress to issue paper money and to make it legal tender for all debts. (3) Although the last of these cases was decided in 1884, (4) several constituencies have kept the issues decided in those cases alive. One of these constituencies is a small, but vocal, group that has never been reconciled to the idea of American paper currency. They maintain that the Constitution did not authorize paper money and that the United States, as a matter of constitutional fidelity and sound policy, should return to a monetary regime centered on the coinage of precious metal. (5) More influential, perhaps, have been legal commentators who agree that the Legal Tender Cases were wrongly decided from an originalist point of view, but who do not advocate a return to metal coinage. (6) Some, such as the late Professor James Willard Hurst, employ the Legal Tender Cases to argue that pure originalism is not a workable method of constitutional interpretation. (7) They contend that courts sometimes must decide constitutional cases according to current exigencies (8) or current values, (9) rather than according to original meaning or original understanding. Finally, a third group of commentators, such as Judge Robert H. Bork (10) and more recently Professors Michael J. Gerhardt (11) and Daniel A. Farber, (12) advance the related argument that the Legal Tender Cases are among those Supreme Court decisions that should be treated as "Super Precedents"--decisions that are now so central to the social order that the Supreme Court must follow them even if they were wrongly decided from an originalist standpoint.

Yet the conclusion that the Legal Tender Cases conflict with an originalist view of the Constitution rests on a fairly slender foundation. (13) Indeed, the same might be said for those who have argued for the contrary conclusion. (14) This Article is an effort to investigate the question more thoroughly.

The method of originalist analysis employed in this Article is the same that lawyers in the Founding generation would have used. (15) It might be called "original understanding originalism," as opposed to "original public meaning" or "original intent originalism." (16) Under the original understanding method, the interpreter seeks and applies the ratifiers' subjective understanding of the constitutional language, to the extent that subjective understanding is recoverable. If it is not recoverable, then one applies the original public meaning of the words. Note that the subjective understanding sought is that of the ratifiers rather than that of the drafters, for it was the ratifiers who transformed the Constitution from a proposal into basic law. (17)

Under the Founding-era method of originalism one may proceed either by first identifying the ratifiers' subjective understanding and then using public meaning as a gap-filler, or by first identifying the public meaning and then seeking evidence that the ratifiers had a different or specialized understanding. For purposes of structure and convenience, this Article generally takes the latter approach. Under either approach, however, one should reach the same result.

This Article concludes that the holdings of the Legal Tender Cases were consistent with original understanding. Therefore, although it is true that some of the Supreme Court's reasoning in the Legal Tender Cases was superfluous, and some was wrong, the end results were dearly correct.

1. EARLIER ARGUMENTS OVER THE QUESTION

   1. Summarizing Earlier Arguments

      The originalist arguments previously made on both sides of the paper money issue are fairly straightforward. Those who contend that the text of the Constitution does not authorize paper currency read the term "coin" in the Coinage Clause (18) as denoting only tokens made of metal. (19) Hence, any power to issue paper money must be deduced from the Necessary and Proper Clause. (20) However, the argument goes, the Necessary and Proper Clause's authority is limited to incidental powers--to means subordinate to the main powers--that would be included even in absence of that Clause. (21) The capacity to issue legal tender paper is not incidental to any enumerated power, (22) but is an independent, unconnected power. (23)

      Those who contend that there was no federal power to emit paper money further observe that in McCulloch v. Maryland, (24) Chief Justice Marshall said that to be incidental a power must be consistent with the "spirit" of the Constitution. (25) But the spirit of the Constitution, the opponents of paper currency say, is hostile to paper currency. Their evidence includes (1) the instrument's ban on state emission of bills of credit and on certain related actions, (26) (2) the Fifth Amendment Due Process (27) and Takings Clauses (28) (both designed to prevent expropriation of the kind historically associated with paper money), (29) (3) the Founders' general dislike of paper money, (30) and (4) proceedings at the federal Convention where delegates deleted from an earlier draft of the Constitution an enumerated congressional power to emit bills of credit. (31) Commentators of the anti-paper money school also cite Ratification-era statements by Luther Martin of Maryland, an Antifederalist who argued that the Constitution gave Congress no power to issue paper money. (32)

      On the other hand, those who argue that the original Constitution authorized paper currency observe that the Constitution's specific bans on bills of credit and tender laws apply only to the states, and therefore (expressio unius est exclusio alterius) those prohibitions do not apply to the federal government. (33) Additionally, some of the federal Convention delegates who voted to remove the express bill of credit power did so only because they believed that the government would still be able to issue paper money without it. (34) Defenders of paper currency add, further, that the Fifth Amendment is a bar only to direct takings, not to the exercise of regulatory authority that incidentally reduces property values. (35)

      Perhaps surprisingly, paper money advocates generally concede that the Coinage Clause authorizes only metallic tokens. (36) They maintain, however, that the authority incidental to various express federal powers (37) was sufficient to permit emission of paper. (38) To support this argument, they adopt definitions of "incidental" that embrace all actions facilitating express powers (39) or linked to express powers in the aggregate. (40) Some paper money advocates have argued that the federal government has authority to issue legal tender paper money even in the absence of constitutional enumeration, simply because the authority to emit paper money is inherent in national sovereignty. (41)

   2. Assessing Prior Arguments

      Most of the foregoing arguments are unsatisfying. One might have expected an inquiry into whether the phrase "to coin Money" encompassed paper, for an affirmative answer would render the implied-powers arguments of both sides unnecessary. But neither side has made such an inquiry, and both have assumed that the phrase "to coin Money" was limited to metallic tokens. They have so assumed even though the Constitution's wording and structure should have encouraged investigation. As explained below, (42) ascribing a purely metallic meaning to "coin" creates serious textual difficulties. Similarly uninvestigated has been whether the phrase "to regulate the Value" (43) was intended to grant Congress authority to confer legal tender status.

      Two doctrinal arguments raised by the advocates of paper money are seriously flawed. First, the concept of inherent sovereignty, although referenced in a few Supreme Court decisions, (44) is flatly precluded by the text of the Tenth Amendment, (45) as...