Stop Me Before I Spend Again

Such spending once would have been considered unconstitutional. The Constitution authorizes federal spending for “common defense” and “general welfare”—first in the preamble and later in the clause setting out Congress’s power to tax. Before the New Deal, “general welfare” was limited to internal improvements, often linked to defense or territorial expansion. A later example is the interstate highway system, built during the Cold War and known as the

Dwight D. Eisenhower

National System of Interstate and Defense Highways. Mile-long stretches can double as emergency landing strips for military aircraft, and many military bases are located nearby.

The Founding Fathers opposed unlimited spending.

James Madison,

who wrote the first draft of the Constitution, interpreted “general welfare” in Federalist No. 41 and elsewhere as spending sufficient for defense and a limited government.

Alexander Hamilton,

the first Treasury secretary, believed that “general welfare” in the Constitution’s clause on Congress’s power to tax gave the government authority over almost anything that could be defined as such. Yet even Hamilton wrote, in his 1791 “Report on Manufactures,” that such spending must be “general and not local.”

In 1833, Justice

Joseph Story

published a three-volume treatise, “Commentaries on the Constitution of the United States,” in which he dismissed Madison’s strenuous objections. Story accepted Hamilton’s interpretation that “general welfare” was a separate power rather than a limitation on Congress’s taxing power. His opinion was largely ignored for 100 years.

Challenges to government spending are difficult, in part because potential plaintiffs must prove they have standing. In the early years of the republic, few tax-financed internal improvement projects passed Congress and avoided a presidential veto, largely because there was a consensus around Madison’s view of the limits on the spending power. Even when such projects did pass, there was no legal challenge. Only the few people directly concerned and benefiting had standing—meaning they were directly affected by the outcome and could file lawsuits—and they didn’t sue.

The Erie Canal, which opened in 1825, had to be built using state taxes because it was considered a New York project, despite benefiting several states. Land grants were used to promote railroad construction, given mid-19th century doubts that federal tax revenue could be used for this purpose.

In U.S. v. Butler (1936), the Supreme Court ruled that the New Deal’s Agricultural Adjustment Act, which aimed to subsidize hard-hit farmers through a tax on food processors, was unconstitutional. The court held that the act didn’t regulate transactions in interstate or foreign commerce, and Congress couldn’t regulate “local” commerce.

The decision endorsed Hamilton’s interpretation and Story’s commentary that “general welfare” was a separate power on par with taxation, not a limit on taxation. It was the first Supreme Court decision interpreting the General Welfare Clause. The following year, the high court cited Butler in Steward v. Davis and Helvering v. Davis. These upheld using payroll taxes to fund unemployment insurance and Social Security.

In the 1960s, President

Lyndon Johnson

and his Great Society campaign ushered in decades of government spending on state and local programs. Despite Supreme Court challenges, no social spending program thus far has been overturned. Permanent massive deficit spending has been embraced by both Democratic and Republican Congresses and administrations.

Congress has made many unsuccessful attempts to impose fiscal responsibility, beginning with the Budget and Accounting Act of 1921, which established the General Accounting Office (now the Government Accountability Office). Other efforts include President Nixon’s impoundment of congressionally appropriated funds; creating House and Senate Budget Committees and the Congressional Budget Office in 1974; numerous balanced budget acts including five-year and 10-year budget resolutions; the presidential line-item veto; and presidential signing statements.

Though concurring with the majority in ruling the line item veto unconstitutional, Justice Anthony Kennedy lamented, “A nation cannot plunder its own treasury without putting its Constitution and its survival in peril.”

The best hope for reining in overspending lies with the Supreme Court. Fortunately, it gave itself an opening to revisit the limits of “general welfare” when Justice

Benjamin Cardozo

wrote in the 1937 Social Security decision, “discretion belongs to Congress, unless the choice is clearly wrong.”

The court may have an opportunity to act by granting standing to a broader public—perhaps represented by one or more state attorneys general—when Mr. Biden’s student-debt forgiveness is litigated. The justices may be able to define “clearly wrong,” and save the nation by forcing restrictions on the scope of “general welfare” spending.

Mr. Starkman is a certified public accountant in Atlanta and author of “The Sex of a Hippopotamus: A Unique History of Taxes and Accounting.”