The new Department of Government Efficiency informs us that the federal government, through its Agency for International Development (AID), has been distributing taxpayer money for condoms in Gaza, DEI in Serbia and Ireland, and transgender stage productions in Columbia and Peru. (A longer list is here.)

　　These revelations should renew questions about what constitutional limits there are on federal expenditures. At what point does the use of taxpayer money cease to be legitimate and become merely theft?

　　For a constitutional originalist, the answer is easy: The Constitution permits the federal government to spend funds only when exercising its enumerated powers, and not otherwise. Each enumerated power carries with it some spending authority, either through its clear wording or with the assistance of the Necessary and Proper Clause.

　　Of course, the federal government no longer pays attention to the spending limits in the original Constitution, and has not done so for some time. The story of how this occurred begins with Alexander Hamilton.

　　The History

　　Hamilton was the most extreme “high Federalist” among the leading Founders. He favored a central government with unrestricted powers, a lifetime chief executive, and a lifetime senate. But he supported the Constitution as a necessary first step toward realizing his goal. And he could be disingenuous. So while campaigning for the Constitution, Hamilton, like other proponents, emphasized how the document constrained the federal sphere.

　　By December 1791, the Constitution was safely ratified and Hamilton was Secretary of the Treasury. It was then that he issued his Report on Manufactures. This publication propounded an ingenious new theory: While the federal government’s power to regulate was restricted, its power to spend was untethered to any enumeration.

　　Hamilton built his thesis on Article I, Section 8, Clause 1. It provides in part as follows: “The Congress shall have Power To lay and collect Taxes … to pay the Debts and provide for the Common Defence and general Welfare of the United States.”

　　The purpose of this clause was to grant Congress the power to tax. Hamilton claimed it also granted the power to spend money (“provide for”). He claimed the only restriction on spending was that it be directed toward paying debts or providing for the common defense or general welfare.

　　The most prominent rebuttal to Hamilton’s new thesis came from James Madison. But few, if any, of Hamilton’s other contemporaries accepted it either. The obstacles to Hamilton’s interpretation were just too great.

　　To begin with, in eighteenth-century English, the verb “provide for” did not mean “spend.” Rather, it retained its Latinate sense of looking toward to future (providere = to see ahead). In other words, the purpose of the taxation power was to store up assets that later could be used for the common defense and general welfare. The “common Defence and general Welfare” phrase was a statement of purpose, not an authorization for spending. The Taxation Clause implicitly authorized spending for tax collection, but authorization for other kinds of spending came in subsequent clauses.

　　In fact, the vast spending authorized by Hamilton’s interpretation would render several of Congress’s other enumerated powers nugatory. If, for example, the Taxation Clause authorized spending on the “common Defence,” the subsequent clauses for “to raise and support Armies” and “maintain a Navy” would serve no purpose. If the Taxation Clause authorized spending for the “general Welfare,” then clauses empowering Congress to “establish Post Offices and post Roads” and to constitute lower federal courts would have been unnecessary.

　　Hamilton’s reading also would render nugatory several restrictions inserted in other enumerated powers—particularly the two-year maximum on army appropriations.

　　Finally, Hamilton’s interpretation clashed with repeated representations made during the ratification debates by the Constitution’s advocates, including some by Hamilton himself.

　　During the nineteenth century, Hamilton’s interpretation did win a few converts, including Joseph Story, the constitutional commentator, Supreme Court Justice, and Harvard law professor.

　　There matters rested until 1936—the depths of the Depression and the height of the New Deal. That year, in United States v. Butler, the Supreme Court struck down a New Deal federal farm program. But it bowed to public pressure along the way by announcing that it would henceforth apply the Hamilton-Story “Spending Clause” theory. The following year, the court issued Helvering v. Davis, which relied on Butler to uphold the Social Security program.

　　Among the American Founders, the prevalent view was that government was a fiduciary enterprise and should be held to fiduciary standards.

　　The legal effect of the Butler and Helvering decisions was to render the federal spending power almost unlimited. The practical effects were to license the federal welfare state, convert Congress into an auction house for special interest spending, and enable the government to run up more than $36 trillion in national debt.

　　The Limits

　　Although under current Supreme Court doctrine the federal spending power is almost unlimited, it is not entirely unlimited. Hamilton, Story, and the Butler court all acknowledged that federal spending that does not serve the common defense or general welfare is unconstitutional. Justice Story explained it this way:

　　A power to lay taxes for the common defence and general welfare of the United States is not in common sense a general [i.e., unlimited] power. It is limited to those objects. It cannot constitutionally transcend them. If the defence proposed by a tax be not the common defence of the United States, if the welfare be not general, but special, or local, as contradistinguished from national, it is not within the scope of the Constitution. If the tax be not proposed for the common defence, or general welfare, but for other objects, wholly extraneous, (as for instance, for propagating Mahometanism among the Turks, or giving aids and subsidies to a foreign nation, to build palaces for its kings, or erect monuments to its heroes), it would be wholly indefensible upon constitutional principles.

　　Similarly, the Butler court acknowledged that the “general Welfare” phrase was “intended to limit and define the granted power to raise and to expend money” and that “the qualifying phrase must be given effect all advocates of broad construction admit.”

　　This induces us to recall the list of AID projects: Promoting DEI in Serbia and transgenderism in Peru both look a lot like “propagating Mahometanism among the Turks.”

　　Judicial Review of Non-General Welfare Spending

　　Among the American Founders, the prevalent view was that government was a fiduciary enterprise and should be held to fiduciary standards. In 2007, I undertook a research project to better understand what the Founders meant by fiduciary standards. The goal of the project was to reconstruct in broad outline fiduciary law as it stood in the late eighteenth century.

　　I submitted the resulting article for publication to student-edited journals. (It is an outrageous fact that law professors delegate the editing of almost all law journals to students.) One student editor was intrigued, but clearly thought the piece was insufficiently trendy. To induce acceptance, therefore, I had to add a slighting reference to a Republican congressional majority and propose a judicial test for distinguishing between legitimate federal expenditures and mere frivolity and graft.

　　The test finally seems useful, and I offer it here. It is similar to what legal scholars call “rational basis with bite.” That means, it is deferential to Congress without wholly dispensing with constitutional requirements. Further, it has the advantage of being similar to a standard applied in Founding-era fiduciary law.

　　First, if an appropriation or program is challenged, the court should examine it to see if, on its face, it appears not to serve the common defense or general welfare. It is presumptively invalid if it favors some localities or special interests over others. For example, federal funding of a baseball museum in Stonycreek, Pennsylvania probably does not qualify as “general welfare” spending as Hamilton, Story, or the Butler court understood it.

　　Similarly, the program would be presumptively invalid if, as in the case of the cited AID expenditures, the program appears to be, in Story’s words, “extraneous” to American interests.

　　Next, if the program fails this “facial” test, then the government can save it by proving that the expenditure has a genuine and substantial (not merely conceivable or tenuous) rational relationship to the common defense or general welfare. Thus, the general welfare would be served if the museum in Stonycreek, Pennsylvania memorialized the national heroes who died there on 9/11.

　　I am not enamored of this test. It arguably involves the judges too much in policymaking, and it suffers from some of the same uncertainties and subjectivities that afflict many of the judicial tests imported into constitutional law during the twentieth century. Moreover, it won’t get America’s fiscal house in order, or return us to the original constitutional limits on spending.

　　But it might catch a few of the worst programs in the judicial net. It also might encourage Congress and agencies to exercise more discipline than AID has exercised over the past few years.