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McCulloch v. Maryland

The McCulloch vs. Maryland Supreme Court case in 1819 defined the relationship between the federal government and the states. It confirmed that Congress had the power to create a Bank of the United States and that states couldn't tax federal entities. This case strengthened federal power and is still relevant today.

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Video transcript

- Hey, this is Kim from Khan Academy and today we're learning about McCulloch versus Maryland, a Supreme Court cases decided in 1819 that helped to define the relationship between the federal government and the states. The question at issue in this case was whether the state of Maryland could tax the Baltimore branch of the Bank of the United States. And whether Congress even had the power to create a Bank of the United States in the first place. To learn more, I sought out the help of two experts. Randy Barnett is the Carmack Waterhouse Professor of Legal Theory at the Georgetown University Law Center and Director of the Georgetown Center for the Constitution. Neil Siegel is the David W. Ichel Professor of Law and Professor of Political Science at Duke Law School. So, Professor Barnett, could you kind of set the stage for us, what was happening in this case? What was the overall context? - Well, McCulloch versus Maryland was a culmination of a 30-year old constitutional controversy. In fact, it was the culmination of one of the earliest controversies that we had in the country, and that is over whether Congress had the power to establish a national bank, a bank that would be a corporation formed by Congress and which would have certain privileges that Congress granted it. This was a proposal that had been made by Alexander Hamilton when he was Secretary of the Treasury in the Washington administration in the very first year of the Washington administration, and it went to Congress, and there was a very, very robust debate in Congress as to whether this measure was within the powers of Congress to enact. Eventually, Congress voted that it was, and then before he signed the bill, President Washington asked some of his cabinet members to give him their opinion on whether it was constitutional, and he heard from several of his cabinet members. He heard from his Attorney General, Edmund Randolph, he said it was unconstitutional. He heard from his Secretary of State, Thomas Jefferson, Jefferson said it was unconstitutional. And finally, he heard from his Secretary of Treasury, who had proposed it, Alexander Hamilton, who said it was constitutional. And Washington signed the bill and it became law. And it established the First National Bank of the United States. - [Siegel] This case arose in May of 1818 when Maryland sued McCulloch, and he was the cashier at the Baltimore branch of the bank. And Maryland sued him in state court to recover a tax assessed by Maryland on the bank. And this was a time of intense hostility towards the national bank in a number of states. The state banks competed with the national bank, and there had been an economic panic in 1818, when the U.S. bank halted its loans and state banks that had loans from the federal bank were crippled. And in response, a number of states passed nearly annhilative taxes on the federal bank, and that's the environment in which, in 1819, McCulloch against Maryland came before the Supreme Court. - [Kim] I find this very interesting, because this is something that we talk a lot about in the early 19th century, the Bank of the United States. And what was good about it and what was bad about it. And there are certain people who were certainly enemies of the bank, like Thomas Jefferson, and then later, Andrew Jackson. Why did people object to the Bank of the United States so much? - [Siegel] Yeah, there were a variety of objections. There was a real political policy disagreement about whether it was a good idea. Hamilton had a nation-building, economy-building objective as the first Secretary of the Treasury. He wanted to pay off both the national debt and the state debts from the Revolutionary War, which remained unpaid. He was emphasizing manufacturing and commerce and a national bank was a key part of his plan. The bank would make it easier for the national government to raise taxes, to pay off debts, to make payments, to obtain short-term loans. The notes issued by the bank could function as a national currency, it could also provide a source of capital for financing businesses. But the opponents had different ideas. - [Barnett] One of the leading opponents in Congress was James Madison, who at the time was a representative from Orange County, Virginia. And what concerned him, and I think it's what concerned many people, was no expressed enumerated power in the Constitution for Congress to make a bank. There was an enumerated power to create a post office, but there was no enumerated power to create a bank. So the question is whether the failure or the silence of the Constitution on whether there was this power should be construed in favor of having such a power, or not having such a power. And Madison's concern was that to imply such a power, especially when the way in which it was being implied was very remotely connected to one of the enumerated powers that were in the Constitution, was very dangerous because by that form of reasoning, Congress can essentially do whatever it wished, and that would violate the basic pledge that this was going to be a national government of limited and enumerated powers. - [Kim] So in Congress, what was the power that proponents of the bank used to justify passing it? - [Barnett] The principle power that they used is called the Necessary and Proper Clause. The Necessary and Proper Clause says Congress shall have power to make all laws which shall be necessary and proper for carrying into execution its foregoing powers, those powers on the list, and all other powers vested by the Constitution in the government of the United States or any department or officer thereof. This is called the Necessary and Proper Clause. It allows for Congress to make laws incidental to the enumerated powers to effectuate, or carry into execution, those powers. And supporters of the bill said that the bank carried into execution a number of powers, it carried into execution the taxing power, it carried into execution the commerce power. The opponents of the bank said, well, it may do that, but it only does that in a very attenuated way. And therefore, if it can do this in order to effectuate that power, then it pretty much can do anything to effectuate power, and therefore it can pretty much do anything. And that's a big problem. - [Kim] So Maryland sues McCulloch, and then what happens? - [Siegel] Maryland sues McCulloch, because Maryland didn't pass the annihilative tax, it was a tax of around two percent of the banknotes issued by the National Bank. And Maryland won in the state trial court, and Maryland won in the state supreme court, and this was really not a surprise at the time, - (laughter) state courts were, let's just say, solicitous of the views of the state and after the state supreme court decided, the case went to the U.S. Supreme Court on appeal. So even though Maryland sues McCulloch, by the time it gets to the Supreme Court, it's called McCulloch against Maryland because McCulloch, the cashier at the Baltimore branch, is now the petitioner, he's requesting the U.S. Supreme Court review of the decision of the Maryland high court. And McCulloch is asking the Supreme Court to intervene and, in essence, side with the federal government over the state. - [Kim] Interesting. So what are the constitutional issues at stake once the McCulloch case gets to the Supreme Court? - [Barnett] Well, the Supreme Court in a very lengthy opinion has to consider a couple of different matters. First it has to consider whether the states have the power to tax a federal entity like a bank. And that's where you have the famous statement by John Marshall that says, "the power to tax can be the power to destroy." What he's talking about is the power of states to tax a federal entity like a bank, might be the power of states to destroy a federal entity, and he ruled against that claim. And he basically argued that states couldn't have that kind of power. - [Siegel] And a threshold question before the Supreme Court decides that question of state authority to tax the national government, is whether the national bank can exist to begin with. Is there federal power to create a national bank? Part of what Maryland is arguing is that there's no federal power to create the bank, and so in fact, this taxation that it's engaging in is unproblematic. The first question is whether the federal government can create the bank, and if the answer is no, then the case is over. If the answer is yes, then you get to the second question of whether the states can tax this part of the federal government, the national bank. - [Kim] So at this time, the Chief Justice of the Supreme Court is John Marshall, very well-known as being kind of the Chief Justice that brought the Supreme Court to be a major player in the U.S. governmental system. How did he interpret what was going on, what did he and the other justices decide? - [Siegel] He borrowed extensively from Hamilton's arguments. And so Marshall adopted Hamilton's arguments in defense of the constitutionality of the bank, that Hamilton originally articulated back in 1790, 1791. So the court held an opinion by the great Chief Justice, first, that Congress does possess the authority to create the bank and secondly, that states have no authority to tax the bank. - [Barnett] And that is what Marshall concluded was within Congress' power under the Necessary and Proper Clause to enact. And in fact, when it got to the court in McCulloch versus Maryland, it was the state of Maryland who basically adopted the Jeffersonian approach and said that a measure must be, in its words, indispensably requisite, or what you might call absolutely necessary in order for it to be constitutional. And whereas the defenders of the bank bill said that it could be a lot less than that. So, I think there's basically three positions that you can have. It has to be indispensably requisite, or logically necessary, that's the Jefferson and Maryland view. It could be merely a matter of convenience or expediency, meaning basically Congress can do whatever it wants. That's the liberal view that's sometimes attributed to John Marshall in McCulloch versus Maryland, but he denied it. And there's the in-between position that I think both Madison and Hamilton were favoring, and that is the requirement of some degree of means-ends fit, so that a measure really is aimed at a particular end, and it's not really trying to accomplish something that Congress isn't given the power over. - [Siegel] What I think is less well-known about this case is that this part of the case was over and the court had already decided, that this federal power to create the bank, before it even got to the Necessary and Proper Clause. This case is a great example of what's called Structural Constitutional Interpretation. Hamilton articulated two structural principles. First, that the federal government is supreme within it's sphere of action. And second, if some kind of end is within federal power, is listed in the Constitution, then any convenient or useful means to accomplishing that end is also within the scope. And so Marshall decides that drawing inferences from his understanding of the theory and structure of government created by the Constitution, and only after he does that, does he then turn to the Necessary and Proper Clause to confirm what he has already deduced through what he calls general reasoning. - [Kim] So, McCulloch versus Maryland is frequently paired with Marbury versus Madison as being two cases that really decide the extent of federal power in this early era. Do you think these two cases are related? What do they tell us about the ideas at this time period about federal power? - [Barnett] Well, they're very important. I don't think they are quite as extreme as they've come to be read after the New Deal. When the New Deal Court and the rest of advocates for a New Deal were going back into the past and seeking justifications for what they wanted to do, they read McCulloch versus Maryland very broadly. They also read Marbury versus Madison, actually they read Marbury versus Madison, in some respects, very narrowly because they didn't want courts invalidating their New Deal legislations. Marbury versus Madison was not a huge deal at the time it was decided. The idea that judges had a duty to follow the higher law when it was in conflict with the mere statute was widely accepted at the time of the founding. And so Marbury was not announcing a new policy. McCulloch versus Maryland, on the other hand, was extremely controversial when it was decided, and in fact quite oddly, James Madison, who had signed the bill authorizing the second bank into law, greatly, strenuously objected to John Marshall's opinion in McCulloch versus Maryland upholding the bill that Madison had signed into law. So, Madison still maintained that Marshall had a latitudinarian or overly-broad interpretation of federal power even in upholding the bill that Madison, by this time, had come to believe was constitutional. - [Kim] So what ultimately happened with the Bank of the United States? - [Siegel] What ultimately happened is both the bill creating the First Bank and the Second Bank had what's called a sunset provision, which means after a certain amount of time, and it was 20 years, it expires. And so to reauthorize it, it puts the burden on inertia on those who want the thing to continue. And so Congress had to pass another bill reauthorizing the bank, and President Andrew Jackson opposed reauthorization. - [Barnett] President Andrew Jackson vetoed the reauthorization of the bank, and it was very interesting because he vetoed it on constitutional grounds, he said it was unconstitutional. And yet, what happened in McCulloch versus Maryland, if McCulloch versus Maryland said the bank was constitutional, how could President Jackson say that it was unconstitutional? Well, it was interesting. Because what McCulloch said was that the bank was constitutional as an exercise of Congress' power to make laws that are necessary and proper, that Congress believed was necessary and proper, and because Congress believed it was necessary, and because the measure was plainly adapted to a legitimate end in the Constitution, then it was constitutional. What Jackson said was, hey look, the court said that it's up to Congress to decide whether something is necessary and therefore constitutional, and I as president exercise a veto power as part of the legislative process, therefore, it is up to me to decide whether the measure is necessary and therefore is constitutional, so I as president have decided that a bank is not necessary and therefore, because the bank is not necessary, it is unconstitutional, and McCulloch versus Maryland allows me as a participant in the legislative process to make that call. - [Siegel] Congress did not override Jackson's veto and the bank expired and the story ended in 1836. And I think this speaks to one of many morals of the story of the Bank of the United States. The Supreme Court doesn't have the last word on Constitutional questions when it upholds exercises of federal power. It's then left to the political process to decide whether or not it wants to continue whatever controversial action or legislation was at issue. - [Kim] So is there any aspect of McCulloch versus Maryland that still affects us today? - [Barnett] One reading of McCulloch is that it gives Congress a power so broad, that allows Congress to exercise any power that it deems convenient to the exercise of one of its enumerated powers, that is how McCulloch has come to be interpreted. I think that is an over-reading of McCulloch. And it also overlooks one of the key passages of McCulloch versus Maryland that nowadays is given no legal effect by the Supreme Court. This is what John Marshall said: should Congress, under the pretext of executing its powers, pass laws for the accomplishments of objects not entrusted to the government, it would become the painful duty of this tribunal, should a case requiring such a decision come before it, to say that such an act was not the law of the land. So what Marshall is saying there is that just because Congress says a law is necessary to one of its enumerated powers, doesn't make it so. And if there is a lack of fit between means and ends suggesting that in fact Congress is trying to pursue one of the powers that was not given to it under the Constitution, it really would be the painful duty of the tribunal to say it was not the law of the land, and that's what connects this case back up with Marbury versus Madison, in which it is the painful duty of the Supreme Court to say that a statute is not the law of the land if it's unconstitutional. That aspect of McCulloch versus Maryland is no longer followed in part because during the New Deal, the Supreme Court said it would not inquire into the motives of Congress in enacting laws. And in fact, what McCulloch is saying here is to inquire into the motives, it's to say, hey look, it purports to be doing one thing but it's really doing something else and that is pre-textual. - [Siegel] There has been irreconcilable disagreement on basic Constitutional questions from the very beginning of the Constitution. Madison and Hamilton, who come together and write the Federalist Papers, they disagree about this fundamental question of strict versus loose construction of Congress' enumerated powers. They also disagree about Congress' spending powers, they disagree about inherent executive power. So sometimes, originalist constitutional arguments presuppose a greater degree of consensus about what the Constitution means at the start of the country that I don't see when I study the history. We have always disagreed. We've always managed to find some kind of community in disagreement. It's the conflicts and disagreements that have binded us together as much, if not more, than the agreements we've had about what the Constitution means. - [Kim] So we've learned that McCulloch versus Maryland was about far more than just a tax on a bank. It bolstered the power of the federal government by broadly defining the Necessary and Proper Clause and by confirming that federal law is supreme to state law. To learn more about McCulloch versus Maryland, visit the National Constitution Center's interactive Constitution, and Khan Academy's resources on U.S. government and politics.