Malcolm Rivera
The United States Constitution grants Congress the power to tax and print money, as outlined in Article I, Section 8, Clauses 1 and 18. The Constitution also prohibits states from issuing their own currency, coining money, or regulating its value. This power is exclusively granted to Congress, which has the authority to regulate every phase of currency, including chartering banks and authorising the issuance of circulating notes. The Supreme Court has upheld Congress's coinage power and its ability to regulate currency, including abrogation clauses in private contracts involving gold coin or foreign currencies. The establishment of a uniform national currency in the US was a gradual process, with the nation facing substantial debt and lacking a common currency after the Revolutionary War.
| Characteristics | Values |
|---|---|
| Currency before the Constitution | Many states printed their own money |
| Constitution's role in currency | Prohibited state governments from issuing their own currency |
| Power to tax and print money | Granted to Congress |
| Uniform currency | Established in 1865 with the national banking system |
| Supreme Court rulings | Congress's coinage power is exclusive; Congress can regulate every phase of currency |
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What You'll Learn
Congress's powers to tax and print money
Article I, Section 8, Clause 5 of the US Constitution, also known as the Coinage Clause, gives Congress the exclusive power to coin money and regulate the value thereof. The Supreme Court has interpreted this clause as giving Congress the authority to regulate every aspect of US currency, including the power to charter banks and issue circulating notes. This power is further reinforced by Article I, Section 10, Clause 1, which prohibits individual states from coining money.
Congress's power to tax and spend public money is known as the "power of the purse." This power is primarily vested in the House of Representatives, in line with the belief that the House, as the branch of Congress most immediately representative of the people, should control public funds. The Senate may propose amendments to bills for raising revenue, but these bills must originate in the House.
The "power of the purse" is a check on executive authority, ensuring that the executive branch cannot spend money without congressional authorization. This power has been used to fund government operations, pensions, infrastructure projects, and the military. Congress's taxation power is further bolstered by its ability to levy taxes on banknotes issued by state banks, as affirmed by the Supreme Court in McCulloch v. Maryland (1817).
In addition to its explicit powers to coin money and tax, Congress also has the implied power to prohibit the use of counterfeit money. This power has been derived from the Necessary and Proper Clause (Article I, Section 8, Clause 18) and the Counterfeiting Clause (Article I, Section 8, Clause 6). The Supreme Court has interpreted these clauses as granting Congress the authority to pass federal laws necessary for carrying out its powers, including the power to punish crimes related to counterfeiting.
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Supreme Court's recognition of Congress's coinage power
Article I, Section 10, Clause 1 of the US Constitution prohibits individual states from coining money. This has been interpreted by the Supreme Court as giving Congress exclusive power over coinage. This power was recognised in the cases of Houston v. Moore (1820) and Sturges v. Crowninshield (1819).
The Supreme Court has also interpreted Congress's power to coin money as giving it the authority to regulate every phase of currency. This includes the power to charter banks and give them the right to issue circulating notes, as recognised in McCulloch v. Maryland (1819). Congress can also restrain the circulation of notes not issued under its authority, as seen in Veazie Bank v. Fenno (1869).
In addition, the Supreme Court has held that Congress has the power to maintain coinage as a medium of exchange at home and to forbid its diversion to other uses by defacement, melting, or exportation. This was recognised in Ling Su Fan v. United States (1910).
The Supreme Court has also upheld Congress's authority to abrogate clauses in pre-existing private contracts calling for payment in gold coin or allowing bondholders to elect to be paid in foreign currencies. This was seen in Norman v. Baltimore & Ohio R.R. (1935) and Guaranty Trust Co. of N.Y. v. Henwood (1939), respectively.
However, the Supreme Court has held that such abrogations are unconstitutional when applied to obligations of the United States, as opposed to those of private parties. This was addressed in Perry v. United States (1935), where the Court reasoned that such abrogations would render the obligations of the United States "mere illusory pledges".
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The Constitution prohibiting state governments from issuing currency
The Constitution of the United States grants Congress explicit authority over the country's currency. This authority includes the power to mint money, determine its value, establish banks, and manage the circulation of money. Article I, Section 8, of the Constitution enumerates these powers, which are further reinforced by Supreme Court interpretations.
The Constitution explicitly prohibits state governments from issuing their own currency. Article I, Section 10, Clause 1 states that states are forbidden from "coining money" and issuing "bills of credit," such as promissory notes. This prohibition ensures that the power to regulate currency is solely vested in Congress and prevents states from creating their own competing currencies.
The Supreme Court has played a significant role in interpreting and upholding this prohibition. In the McCulloch v. Maryland case of 1819, the Court affirmed Congress's exclusive power to coin money and regulate its value. Additionally, in cases like Veazie Bank v. Fenno (1869), the Court ruled that Congress could restrain the circulation of notes not issued under its authority and impose taxes on state bank notes.
The Constitution's counterfeiting clause, while not directly prohibiting states from issuing currency, grants Congress the power to punish the use of counterfeit money. The necessary and proper clause further bolsters Congress's authority by enabling it to pass federal laws necessary for executing its powers, including the regulation of currency.
In summary, the Constitution's prohibition on state governments issuing currency is a crucial aspect of the country's monetary system. This prohibition ensures a uniform currency across the nation, with Congress and the federal government holding ultimate authority over its regulation and management. The Supreme Court has consistently interpreted and upheld this prohibition, providing clarity and consistency in monetary policy.
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Congress's abrogation of clauses in pre-existing private contracts
The Contract Clause, outlined in Article I, Section 10, Clause 1 of the US Constitution, imposes prohibitions on the states to protect individuals from state government intrusion. The Contract Clause states that "No State shall... pass any... Law impairing the Obligation of Contracts".
The Framers of the Constitution added the Contract Clause to prevent state legislatures from retroactively impairing private rights and abrogating or modifying the terms of existing contracts. This was in response to the practice of states passing bills that relieved influential persons of their obligation to pay debts, which Federalists believed would jeopardise the inflow of foreign capital into the US.
The Contract Clause does not apply to acts of the federal government, and the federal government is not prohibited from modifying or abrogating contracts. However, the Contract Clause does prohibit states from enacting legislation that breaches or modifies its own contracts, or regulates contracts between private parties.
The Supreme Court has interpreted the Contract Clause to mean that states cannot pass laws that interfere with or affect bona fide private contracts or engagements. This includes the prohibition of state laws that abrogate private contract rights, as this could serve as a source of hostility among the states.
In the context of private contracts, the Supreme Court has upheld the validity of state laws that do not interfere with the obligation of contracts. For example, during World War I, the State of New York enacted a statute that forbade the enforcement of covenants for the surrender of the possession of premises on the expiration of leases. The Court upheld this legislation, stating that "contracts are made subject to this exercise of the power of the State when otherwise justified".
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The establishment of a uniform national currency
The Constitution itself played a significant role in addressing this issue by prohibiting state governments from issuing their own currency. Article I, Section 10, Clause 1 of the Constitution explicitly prevents states from coining money, granting Congress exclusive coinage power. This interpretation was affirmed by the Supreme Court, which recognised Congress's authority to regulate every phase of currency, including chartering banks and regulating the circulation of notes.
The establishment of the Bank of the United States in 1790 was another important step towards a uniform national currency. The bank was conceived to address the substantial debt accumulated by the nation, particularly the war debts issued by individual states. By taking over these debts, the federal government aimed to establish its authority over the states and lay the foundation for a uniform currency.
However, the early years of the 19th century saw a shift away from the idea of a national bank. With the war debts largely settled, Congress refused to renew the bank's charter in 1811, leading to its cessation. This decision, however, proved challenging as federal debt began to mount once again with the War of 1812. The suspension of specie payments by most state-chartered banks during this period further highlighted the need for a uniform currency.
The establishment of a national banking system and the creation of District Banks contributed significantly to the establishment of a uniform national currency. The national charter allowed banks to issue government-printed bills, backed by federal bonds. By 1865, state bank notes were effectively eliminated, marking the first time a truly uniform national currency was established in the United States.
While the system faced challenges, including bank panics and concerns about the concentration of power, the establishment of a uniform national currency was a significant achievement in the United States' economic history, addressing the financial problems of the early nation and strengthening the federal government's authority.
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Frequently asked questions
Article I, Section 10, Clause 1 of the US Constitution prohibits the states from coining money, and grants Congress exclusive coinage power.
The Constitution grants Congress the power to tax and print money, and to regulate the value of money.
The Supreme Court has interpreted Congress's power to coin money and regulate its value as authorizing Congress to regulate every phase of currency. This includes the power to charter banks and authorize them to issue circulating notes, as well as to restrain the circulation of notes not issued under its authority.
Yes, the Supreme Court has considered several cases related to Congress's power to regulate currency. For example, in *Norman v. Baltimore & Ohio R.R.*, the Court upheld Congress's authority to abrogate clauses in pre-existing private contracts calling for payment in gold coin or foreign currencies.
