With respect to the meaning of "the general welfare" the pages of The Federalist itself disclose a sharp divergence of views between its two principal authors. Hamilton adopted the literal, broad meaning of the clause;[276] Madison contended that the powers of taxation and appropriation of the proposed government should be regarded as merely instrumental to its remaining powers, in other words, as little more than a power of self-support.[277] From an early date Congress has acted upon the interpretation espoused by Hamilton. Appropriations for subsidies[278] and for an ever increasing variety of "internal improvements"[279] constructed by the Federal Government, had their beginnings in the administrations of Washington and Jefferson.[280] Since 1914, federal grants-in-aid,—sums of money apportioned among the States for particular uses, often conditioned upon the duplication of the sums by the recipient State, and upon observance of stipulated restrictions as to its use—have become commonplace.[281]
Triumph of the Hamiltonian Theory
The scope of the national spending power was brought before the Supreme Court at least five times prior to 1936, but the Court disposed of four of them without construing the "general welfare" clause. In the Pacific Railway Cases[282] and Smith v. Kansas City Title and Trust Company,[283] it affirmed the power of Congress to construct internal improvements, and to charter and purchase the capital stock of federal land banks, by reference to the powers of the National Government over commerce, the post roads and fiscal operations, and to its war powers. Decisions on the merits were withheld in two other cases—Massachusetts v. Mellon and Frothingham v. Mellon[284]—on the ground that neither a State nor an individual citizen is entitled to a remedy in the courts against an unconstitutional appropriation of national funds. In United States v. Gettysburg Electric Railway Co.,[285] however, the Court had invoked "the great power of taxation to be exercised for the common defence and the general welfare,"[286] to sustain the right of the Federal Government to acquire land within a State for use as a national park. Finally, in United States v. Butler,[287] the Court gave its unqualified endorsement to Hamilton's views on the taxing power. Wrote Justice Roberts for the Court: "Since the foundation of the Nation sharp differences of opinion have persisted as to the true interpretation of the phrase. Madison asserted it amounted to no more than a reference to the other powers enumerated in the subsequent clauses of the same section; that, as the United States is a government of limited and enumerated powers, the grant of power to tax and spend for the general national welfare must be confined to the enumerated legislative fields committed to the Congress. In this view the phrase is mere tautology, for taxation and appropriation are or may be necessary incidents of the exercise of any of the enumerated legislative powers. Hamilton, on the other hand, maintained the clause confers a power separate and distinct from those later enumerated, is not restricted in meaning by the grant of them, and Congress consequently has a substantive power to tax and to appropriate, limited only by the requirement that it shall be exercised to provide for the general welfare of the United States. Each contention has had the support of those whose views are entitled to weight. This court had noticed the question, but has never found it necessary to decide which is the true construction. Justice Story, in his Commentaries, espouses the Hamiltonian position. We shall not review the writings of public men and commentators or discuss the legislative practice. Study of all these leads us to conclude that the reading advocated by Justice Story is the correct one. While, therefore, the power to tax is not unlimited, its confines are set in the clause which confers it, and not in those of § 8 which bestow and define the legislative powers of the Congress. It results that the power of Congress to authorize expenditure of public moneys for public purposes is not limited by the direct grants of legislative power found in the Constitution."[288]
The Security Act Cases
Although holding that the spending power is not limited by the specific grants of power contained in article I, section 8, the Court found, nevertheless, that it was qualified by the Tenth Amendment, and on this ground ruled in the Butler case that Congress could not use moneys raised by taxation to "purchase compliance" with regulations "of matters of State concern with respect to which Congress has no authority to interfere."[289] Within little more than a year this decision was reduced to narrow proportions by Steward Machine Co. v. Davis,[290] which sustained the tax imposed on employers to provide unemployment benefits, and the credit allowed for similar taxes paid to a State. To the argument that the tax and credit in combination were "weapons of coercion, destroying or impairing the autonomy of the States," the Court replied that relief of unemployment was a legitimate object of federal expenditure under the "general welfare" clause; that the Social Security Act represented a legitimate attempt to solve the problem by the cooperation of State and Federal Governments; that the credit allowed for State taxes bore a reasonable relation "to the fiscal need subserved by the tax in its normal operation,"[291] since State unemployment compensation payments would relieve the burden for direct relief borne by the national treasury. The Court reserved judgment as to the validity of a tax "if it is laid upon the condition that a State may escape its operation through the adoption of a statute unrelated in subject matter to activities fairly within the scope of national policy and power."[292]
The appropriation of the proceeds of a tax to a specific use does not affect the validity of the exaction, if the general welfare is advanced and no other constitutional provision is violated. Thus a processing tax on coconut oil was sustained despite the fact that the tax collected upon oil of Philippine production was segregated and paid into the Philippine Treasury.[293] In Helvering v. Davis,[294] the excise tax on employers, the proceeds of which were not earmarked in any way, although intended to provide funds for payments to retired workers, was upheld under the "general welfare" clause, the Tenth Amendment being found to be inapplicable.
Conditional Grants-in-Aid
In the Steward Machine Company case, it was a taxpayer who complained of the invasion of the State sovereignty and the Court put great emphasis on the fact that the State was a willing partner in the plan of cooperation embodied in the Social Security Act.[295] A decade later the right of Congress to impose conditions upon grants-in-aid over the objection of a State was squarely presented in Oklahoma v. United States Civil Service Commission.[296] The State objected to the enforcement of a provision of the Hatch Act,[297] whereby its right to receive federal highway funds would be diminished in consequence of its failure to remove from office a member of the State Highway Commission found to have taken an active part in party politics while in office. Although it found that the State had created a legal right which entitled it to an adjudication of its objection, the Court denied the relief sought on the ground that, "While the United States is not concerned with, and has no power to regulate local political activities as such of State officials, it does have power to fix the terms upon which its money allotments to State shall be disbursed. * * * The end sought by Congress through the Hatch Act is better public service by requiring those who administer funds for national needs to abstain from active political partisanship. So even though the action taken by Congress does have effect upon certain activities within the State, it has never been thought that such effect made the federal act invalid."[298]
"Debts of the United States"