The Evolution of Federalism

The Struggle Between National and State Power

As George Washington’s secretary of the treasury from 1789 to 1795, Alexander Hamilton championed legislative efforts to create a publicly chartered bank. For Hamilton, the establishment of the Bank of the United States was fully within Congress’s authority, and he hoped the bank would foster economic development, print and circulate paper money, and provide loans to the government. Although Thomas Jefferson, Washington’s secretary of state, staunchly opposed Hamilton’s plan on the constitutional grounds that the national government had no authority to create such an instrument, Hamilton managed to convince the reluctant president to sign the legislation.[1]

When the bank’s charter expired in 1811, Jeffersonian Democratic-Republicans prevailed in blocking its renewal. However, the fiscal hardships that plagued the government during the War of 1812, coupled with the fragility of the country’s financial system, convinced Congress and then-president James Madison to create the Second Bank of the United States in 1816. Many states rejected the Second Bank, arguing that the national government was infringing upon the states’ constitutional jurisdiction.

A political showdown between Maryland and the national government emerged when James McCulloch, an agent for the Baltimore branch of the Second Bank, refused to pay a tax that Maryland had imposed on all out-of-state chartered banks. The standoff raised two constitutional questions: Did Congress have the authority to charter a national bank? Were states allowed to tax federal property? In McCulloch v. Maryland, Chief Justice John Marshall argued that Congress could create a national bank even though the Constitution did not expressly authorize it.[2]

Under the necessary and proper clause of Article I, Section 8, the Supreme Court asserted that Congress could establish “all means which are appropriate” to fulfill “the legitimate ends” of the Constitution. In other words, the bank was an appropriate instrument that enabled the national government to carry out several of its enumerated powers, such as regulating interstate commerce, collecting taxes, and borrowing money.

A portrait of Chief Justice John Marshall.
Figure 1. Chief Justice John Marshall, shown here in a portrait by Henry Inman, was best known for the principle of judicial review established in Marbury v. Madison (1803), which reinforced the influence and independence of the judiciary branch of the U.S. government.

This ruling established the doctrine of implied powers, granting Congress a vast source of discretionary power to achieve its constitutional responsibilities. The Supreme Court also sided with the federal government on the issue of whether states could tax federal property. Under the supremacy clause of Article VI, legitimate national laws trump conflicting state laws. As the court observed, “the government of the Union, though limited in its powers, is supreme within its sphere of action and its laws, when made in pursuance of the constitution, form the supreme law of the land.” Maryland’s action violated national supremacy because “the power to tax is the power to destroy.” This second ruling established the principle of national supremacy, which prohibits states from meddling in the lawful activities of the national government.

Defining the scope of national power was the subject of another landmark Supreme Court decision in 1824. In Gibbons v. Ogden, the court had to interpret the commerce clause of Article I, Section 8; specifically, it had to determine whether the federal government had the sole authority to regulate the licensing of steamboats operating between New York and New Jersey.[3]

Aaron Ogden, who had obtained an exclusive license from New York State to operate steamboat ferries between New York City and New Jersey, sued Thomas Gibbons, who was operating ferries along the same route under a coasting license issued by the federal government. Gibbons lost in New York state courts and appealed. Chief Justice Marshall delivered a two-part ruling in favor of Gibbons that strengthened the power of the national government. First, interstate commerce was interpreted broadly to mean “commercial intercourse” among states, thus allowing Congress to regulate navigation. Second, because the federal Licensing Act of 1793, which regulated coastal commerce, was a constitutional exercise of Congress’s authority under the commerce clause, federal law trumped the New York State license-monopoly law that had granted Ogden an exclusive steamboat operating license. As Marshall pointed out, “the acts of New York must yield to the law of Congress.”[4]

Various states railed against the nationalization of power that had been going on since the late 1700s. When President John Adamssigned the Sedition Act in 1798, which made it a crime to speak openly against the government, the Kentucky and Virginia legislatures passed resolutions declaring the act null on the grounds that they retained the discretion to follow national laws. In effect, these resolutions articulated the legal reasoning underpinning the doctrine of nullification—that states had the right to reject national laws they deemed unconstitutional.[5]

A nullification crisis emerged in the 1830s over President Andrew Jackson’s tariff acts of 1828 and 1832. Led by John Calhoun, President Jackson’s vice president, nullifiers argued that high tariffs on imported goods benefited northern manufacturing interests while disadvantaging economies in the South. South Carolina passed an Ordinance of Nullification declaring both tariff acts null and void and threatened to leave the Union. The federal government responded by enacting the Force Bill in 1833, authorizing President Jackson to use military force against states that challenged federal tariff laws. The prospect of military action coupled with the passage of the Compromise Tariff Act of 1833 (which lowered tariffs over time) led South Carolina to back off, ending the nullification crisis.

The ultimate showdown between national and state authority came during the Civil War. Prior to the conflict, in Dred Scott v. Sandford, the Supreme Court ruled that the national government lacked the authority to ban slavery in the territories.[6]

But the election of President Abraham Lincoln in 1860 led eleven southern states to secede from the United States because they believed the new president would challenge the institution of slavery. What was initially a conflict to preserve the Union became a conflict to end slavery when Lincoln issued the Emancipation Proclamation in 1863, freeing all slaves in the rebellious states. The defeat of the South had a huge impact on the balance of power between the states and the national government in two important ways. First, the Union victory put an end to the right of states to secede and to challenge legitimate national laws. Second, Congress imposed several conditions for readmitting former Confederate states into the Union; among them was ratification of the Fourteenth and Fifteenth Amendments. In sum, after the Civil War the power balance shifted toward the national government, a movement that had begun several decades before with McCulloch v. Maryland (1819) and Gibbons v. Odgen (1824).

The period between 1819 and the 1860s demonstrated that the national government sought to establish its role within the newly created federal design, which in turn often provoked the states to resist as they sought to protect their interests. With the exception of the Civil War, the Supreme Court settled the power struggles between the states and national government. From a historical perspective, the national supremacy principle introduced during this period did not so much narrow the states’ scope of constitutional authority as restrict their encroachment on national powers.[7]