McCulloch v. Maryland: The Birth of Big Government

Where does the government get its power? 

The answer, of course, is from the Constitution. But if you search the text, you won't find anything about the IRS, or the Commerce Department, or the Federal Reserve. 

So, on what basis do these government agencies exist? 

The answer is found in the 1819 Supreme Court case of McCulloch v. Maryland, the most important Supreme Court decision nobody knows anything about. 

To understand it, we need to review a little history. 

After the Revolutionary War, America’s finances were a mess. In 1790, the first Treasury Secretary, Alexander Hamilton, advocated for creating a national bank to help stabilize the economy and restore the nation’s shattered credit. 

Opponents of the bank — most notably Thomas Jefferson and James Madison — argued that the Constitution didn’t include any reference to such an institution; to create one was, therefore, unconstitutional. 

Over Jefferson and Madison’s objections and with President George Washington’s blessing, Congress passed the bill establishing the First Bank of the United States.

Nevertheless, to mollify the bank’s critics, Congress attached a sunset provision; after twenty years, the bank’s charter would be subject to renewal.

When that renewal date arrived in 1811, who should be president but James Madison. True to his long-held convictions, he lobbied Congress to let the bank’s charter expire. 

But by 1816, Madison reversed himself. The dire state of the nation’s finances during the War of 1812 turned him into a Hamiltonian. The Second Bank of the United States rose from the ashes of the first. 

Madison may have changed his mind, but many Americans still insisted the bank was unconstitutional. 

The Maryland legislature was one of those opponents. In 1818, it slapped the bank with a $15,000 annual tax. The bank refused to pay because as a federal entity, it was immune to state taxes. Maryland sued.

The case came to the Supreme Court, getting its name, McCulloch v. Maryland, from the cashier of the bank’s Baltimore branch, James McCulloh (yes, the Court clerk mistakenly added a “c” before the “h”). 

The time had come for the nation’s highest court to settle, once and for all, the bank’s constitutionality. 

As we shall see, Chief Justice John Marshall and the Court did much more than that. 

On March 6, 1819, by a 7-0 vote, the Court struck down the Maryland tax and ruled that the bank was constitutional.

Marshall argued that while the Constitution didn’t explicitly give Congress the power to create a bank, it did so implicitly. He invoked the Necessary and Proper Clause in Article I, Section 8, which endows Congress with the power to  “…make all Laws… necessary and proper for carrying…” out its responsibilities.

Marshall cited a specific example: the Constitution tasked Congress “to establish post-offices and post-roads.” But it did not say that Congress could “punish those who steal letters… or rob the mail.” Of course, there could be no mail if there was no way to protect the postal service. That was an implied power — “necessary and proper” to ensure mail delivery.

In the same vein, while the Constitution did not mention a national bank, it did give Congress the authority to regulate interstate commerce, raise taxes, and borrow money. A national bank was a “necessary and proper” means by which Congress could exercise those powers.

Why hadn’t the Framers been more specific on the bank question? Marshall had an answer. If the Framers had enumerated every possible action Congress could take in every hypothetical situation, the document, instead of being four pages long, would have been hundreds of pages long.

The Constitution was written, Marshall insisted, to be understood by every citizen, something that could be printed in a newspaper and voted on — which is exactly what happened. It was not meant to be a narrow legal code.

As Marshall put it, “We must never forget that it is a Constitution we are expounding…intended to endure for ages to come…to be adapted to the various crises of human affairs.”

The bank’s supporters praised Marshall’s decision. For them, the doctrine of “implied powers” was critical for the federal government to carry out its duties and meet the challenges of the day. 

The bank’s opponents, however, believed that the doctrine effectively removed all limits on the federal government’s power. After all, one could theoretically justify anything by claiming it was “necessary and proper.”

Marshall clearly never intended the idea of “implied powers” to be used in this manner. And for almost a century, Congress generally agreed, careful to act within the boundaries of the Constitution. Thus, the role of the federal government in American life remained small. 

That changed dramatically in the 20th century with the rise of the Progressive Movement and the presidencies of Woodrow Wilson and Franklin Roosevelt. Now, in the 21st century, the government creates rules on what kind of lightbulbs we can buy. 

Marshall and his fellow justices would not be pleased.

I’m John Yoo, professor of law at the University of California, Berkeley, for Prager University.