Last week I observed that the redrafted relationship between states and the national government under the then-proposed Constitution was not a constant-sum (or zero-sum) game in which states lost whatever the national government gained. By solving coordination and cooperation failures between the states, the creation of a more centralized, powerful national government in those areas of interstate failure, actually effectuated state-level policy goals.
So, too, anti-Federalists uniformly styled the creation of the national government under the Constitution as a threat to liberty (relative to the Articles of Confederation). While that was certainly possible, and the Anti-Federalists had a legitimate concern, their critique misses an important feature of the story.
As before, it will not do to think of “liberty” at one level of government only when comparing outcomes under the Articles of Confederation with those under the Constitution. The argument that a larger, more energetic and centralized national government actually increased liberty comes to the fore when we think of national power together with state power.
We need first to recall states were as cash-strapped after the Revolution as the national government under the Articles of Confederation. Taxing commerce was as attractive to states as it was to the national government. Indeed, imposing taxes on goods merely in transit through a state to another state would effectively make the citizens of other states supply revenue to the transit state. Retaliation threatened to spiral out of control, suppressing free commerce among the states. States struggled more generally with factions using legislative power against rival factions, and criminalizing political disputes. As a result, states acting largely on their own were not the best guaranty of liberty in the nascent country.
The most direct effect of the national government increasing liberty overall under the Constitution relative to the Articles comes in national-level restrictions on state powers in Article 1 Section 10 of the Constitution. Restrictions imposed on state bills of attainders, ex post facto laws, and laws abridging the obligation of contract. Only slightly less direct are the restrictions on state taxation of interstate commerce without the consent of Congress in the same Section.
By placing interstate taxation under national control, the U.S. Constitution effectively freed the channels of commerce between the states. States had engaged in tit-for-tat taxes on imports from other states. Experience suggested that state-level beggar-thy-neighbor policies would only increase in the future, hindering the development of free trade between the states.
So, too, the national guaranty to each state of a “republican form of government” suggested possibilities, if never really utilized in practice, for national government intervention in support of state-level republican liberties.
The most significant national guarantee of state-level liberty, however—at least outside of the later-added Fourteenth Amendment (and perhaps even then)—came not as a direct limitation on state power, but by reading a negative or dormant implication of one of the powers delegated to Congress in Article 1, Section 8.
While Article 1, Section 10 expressly limits state taxation of interstate trade, the Constitution nowhere expressly limits state regulation of interstate trade. (Article 1, Section 9 limits discriminatory commercial regulations at the national level preferring one port over another.) And states can use regulation of interstate trade for protectionistic purposes almost as easily as they can use taxation.
By delegating power to regulate interstate trade to Congress, the Constitution’s framers provided Congress the power to intervene against state regulations of interstate trade. Congress, however, would have to act to strike down state regulatory impositions on interstate trade.
More controversially, U.S. Courts effectively made this negative implication of congressional power over interstate commerce into a self-executing provision by interpreting the affirmative delegation to Congress as empowering courts to strike down state regulations of interstate commerce, even when Congress had not regulated.
Whatever the textual merits of the judicial decisions, the effective result of the “dormant commerce clause” was the creation of a judicially-enforced national free trade zone. This undoubtedly created a much more-effective restriction on state regulations of interstate commerce than would have occurred had enforcement required affirmative congressional actions.
Anthony Peacock underscores the freedom-enhancing aspect of the move from the Articles of Confederation to the Constitution in his recent book, Vindicating the Commercial Republic: The Federalist on Union, Enterprise, and War: “Stripping the states of a host of powers over economic and commercial development that they enjoyed under the Articles” resulted in increasing the scope available for entrepreneurial activity. Freedom from state-level over-regulation as a result of creating a more-powerful national government liberated enterprise and so facilitated the free-flow of commerce.
By limiting national power to areas in which state powers interacted pathologically with those of other states, or could be exercised pathologically within a state in such a way to affect “national honor,” the creation of a stronger, more centralized and energetic national government could widen the scope of liberty rather than reduce it.
Seeing this, however, required the summing together of state and national government power. Once summed, then a comparison of the whole under the Articles of Confederation with that under the Constitution.
Notable as this aspect of constitutional reform was, it would be inaccurate to herald the liberty-enhancing aspect of the Constitution as the only dimension of the shift. For example, the Constitution also aimed expressly to increase the effective extraction of tax revenues from the population. This was, after all, the point of empowering the national government to act directly on individuals rather than requiring it to work through the states.
Similarly, the point of centralizing tariff policy in the national government was to side-step the implications of state tariff competition. Creating, as it were, a national-level monopoly in tariff setting would allow greater extraction of tariff revenues under the Constitution than under the Articles of Confederation.
Interstate pathologies are a recurrent topic in The Federalist. This is natural given that these pathologies prompted much of the interest in, and demand for, a new Constitution. Commentators often mistake the distinctive or novel elements of the Constitution, however, for the most important features of the Constitution.
This is a subtle, but critical mistake.
On a host of policy dimensions, states did not interact detrimentally with each other; policies adopted in one state did not affect policies adopted in other states. Of these residual powers the Constitution did not differ from the Articles of Confederation. So these powers were little discussed at the Constitutional Convention, in The Federalist, or in state ratification debates.
As suggested by the well-known “Tiebout model,” policy diversity is efficiency maximizing where policies do not require cross-jurisdiction coordination or cooperation. But states already enjoyed this diversity under the Articles of Confederation. The framers did not need to justify the usefulness and necessity of local laws and administration for local purposes.
The trick the Constitution aimed to secure was to nationalize policies where inter-state interaction created interstate pathologies, and where intrastate pathologies that implicated national concerns. But it also aimed to allow states full reign in matters that do not create national or interstate externalities. In so doing, the ironic result is that the increase in national power could actually increase overall liberty for the country.