- [Kim] Hey, this is Kim from Khan Academy.
And today we're learning about McCulloch V. Maryland.
A Supreme Court case 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?
- [Randy] Well, McCulloch V. 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,
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.
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.
- [Neil] This case arose in May of 1818
when Maryland sued McCulloch.
And he was the cashier at the Baltimore branch of the bank.
Maryland sued him in state court
to recover a tax assessed by Maryland on the bank.
And this was a time of intense hostility
toward 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 US Bank called in its loans and state banks
that had loans from the Federal Bank were crippled.
And in response, a number of states
passed nearly annihilative taxes on the Federal Bank
and that's the environment in which in 1819 McCulloch
against Maryland came before the Supreme Court.
- [Kim] And that's 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.
There's 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?
- [Neil] Yeah, there were 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 in commerce.
And the 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.
- [Randy] One of the leading opponents
in Congress was James Madison,
who at the time was a representative
from Orange County, Virginia.
What concerned him, and I think what's concerned many people
was that there was no expressed enumerative power
in the Constitution for Congress to make a bank.
There was an enumerative 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 applied
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 could 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?
- [Randy] The principal 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 in any Department of 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 a power, and therefore
it can pretty much do anything and that's a big problem.
- [Kim] So, Maryland sues McCulloch, and then what happens?
- [Neil] Right, Maryland sues McCulloch
because Maryland didn't pass an annihilative tax,
it was a tax of around 2% 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.
- [Kim] (laughs) Right.
- [Neil] They were, let's just say
solicitous of the views of the state
and after the state Supreme Court decided,
the case went to the US 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 of the Baltimore branch is now the petitioner.
He is requesting the US 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?
- [Randy] 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 Marshal 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.
He basically argued that states
couldn't have that kind of power.
- [Neil] 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 Marshal,
very well known as being kind of the Chief Justice
that brought the Supreme court to be a major player
in the US Governmental system.
How did he interpret what was going on?
What did he and the other justices decide?
- [Neil] He borrowed extensively from Hamilton's arguments.
And so Marshal adopted Hamilton's arguments
in defense of the constitutionality of the bank
that Hamilton originally articulated back in 1790, 1791.
And so the court held, entered 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.
- [Randy] And that is what Marshall concluded
was within Congresses power
under the Necessary and Proper Clause to enact.
And in fact, when it got to the court
in McCulloch V. 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 that 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 sometimes attributed
to John Marshal in McCulloch V. 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.
- [Neil] 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 its 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, Marshal 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 V. Maryland is frequently paired
with Marbury V. Madison as being two cases
that really decide the extent of Federal Power
in this early era.
Do you think that these two cases are related?
What do they tell us about the ideas
at this time period about federal power?
- [Randy] 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 progressive advocates
for a New Deal were going back
into the past and seeking justifications
for what they wanted to do,
they read McCulloch V. Maryland very broadly.
They also read Marbury V. Madison.
Actually they read Marbury V. Madison
in some respects very narrowly
because they didn't want courts invalidating
their New Deal legislations.
Marbury V. 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 V. 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 V. 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?
- [Neil] What ultimately happened
is both the first bank, 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 of 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.
- [Randy] 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 to Mark McCulloch V. Maryland?
If McCulloch V. 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 V. Maryland allows me, as a participant
in the legislative process, to make that call.
- [Neil] 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 V. Maryland
that still affects us today?
- [Randy] One reading of McCulloch is that it gives Congress
a power so broad that it allows Congress
to exercise any power that it deems convenient,
to the exercise of one of it's enumerative 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 V. Maryland that nowadays
is given no legal effect by the Supreme Court.
This is what John Marshal said, "Should Congress,
"under the pretext of executing its powers,
"pass laws for the accomplishment 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 it's enumerative 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 connects this case back up with Marbury V. 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 is unconstitutional.
That aspect of McCulloch V. Maryland is no longer followed
in part because during the New Deal,
the Supreme Court said that 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 is to say, hey, look,
it's really, it purports to be doing one thing,
but it's really doing something else
and that is pre textual.
- [Neil] Yeah, there has been irreconcilable
disagreement on basic constitutional questions
from the very beginning
of the constitution. (Kim Laughs)
Madison and Hamilton, who come together and write
the federalist papers, they disagree
about this fundamental question
of strict versus loose construction
of Congress's numerated powers.
They also disagree about Congress's spending powers.
They disagree about inherent executive powers.
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 agreements we've had about what the Constitution means.
- [Kim] So, we've learned that McCulloch V. 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 V. Maryland,
visit the National Constitution Center's
interactive constitution and Khan Academy's resources
on US Government and politics.