The Federal Power to Spend
The Issues:  How far does the power of Congress to spend tax dollars extend?
The United States is a government of enumerated powers.  Congress, and the other two branches of the federal government, can only exercise those powers given in the Constitution.

The powers of Congress are enumerated in several places in the Constitution.  The most important listing of congressional powers appears in Article I, Section 8 (see left) which identifies in seventeen paragraphs many important powers of Congress.   In this section, we consider how the federal government's power to spend tax dollars has been interpreted by the Supreme Court..

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises,
to pay the Debts and provide for the common Defence and general Welfare of the United States...

The power to spend:

South Dakota vs Dole (1987)
National Federal of Independent Business v Sebelius (2012)

In the 1987 case of South Dakota vs Dole, the Supreme Court considered a federal law that required the Secretary of Transportation to withhold 5% of a state's federal highway dollars if the state allowed persons less than 21 years of age to purchase alcoholic beverages.  South Dakota, which allowed 18-year-olds to drink and stood to lose federal funds for highway construction, sued Secretary Dole, arguing that the law was not a constitutional exercise of the power of Congress to spend--but rather was an attempt to enact a national drinking age. In upholding the federal law, the Court announced a four-part test for evaluating the constitutionality of conditions attached to federal spending programs: (1) the spending power must be exercised in pursuit of the general welfare, (2) grant conditions must be clearly stated, (3) the conditions must be related to a federal interest in the national program or project, and (4) the spending power cannot be used to induce states to do things that would themselves be unconstitutional.  The Court considered--perhaps unrealistically--the grant condition to be a financial "inducement" for South Dakota to enact a higher drinking age rather than financial "compulsion" to do so--suggesting the possibility of a different result if a higher percentage of funds had been withheld.  In dissent, Justice O'Connor argued that spending conditions should be found constitutional only if they related to how the federal grant dollars were to be spent.

Opponents of the Affordable Care Act ("Obamacare") won a small victory when the Court held that states which refuse to expand Medicaid coverage
cannot be denied federal funds for their more limited, existing, programs.

In 2012, the Court considered whether provisions of the Affordable Care Act, which withheld federal funds from states that failed to expand  Medicaid coverage in specified ways, was within the power of Congress under the Spending Clause.  In National Federation of Independent Business v Sebelius, the Court held that it was unconstitutional to threaten states with the withholding of all federal Medicaid funding, including their existing funding, for failing to expand coverage in the ways Congress sought to encourage.  Chief Justice Roberts, in a part of his opinion joined by Justices Breyer and Kagan, concluded that federal funds withheld, representing perhaps 10% of a state's entire budget, was so substantial that states would have no real choice but to give into Congress's demands.  As a result, seven justices agreed that the Affordable Care Act's Medicaid expansion provisions violated the principle that the spending power can not be used to coerce states into enacting legislation or participating in a federal program.  The Court distinguished South Dakota v Dole, noting that the funds potentially lost by South Dakota in that case representing only one-half a percent of the state's budget.

Key Constitutional Grants 
of Powers to Congress

Article I, Section. 8. 

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States; 

To borrow Money on the credit of the United States; 

 To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes; 

 To establish an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States; 

 To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures; 

 To provide for the Punishment of counterfeiting the Securities and current Coin of the United States; 

 To establish Post Offices and post Roads; 

 To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;

 To constitute Tribunals inferior to the supreme Court; 

 To define and punish Piracies and Felonies committed on the high Seas, and Offences against the Law of Nations; 

 To declare War, grant Letters of Marque and Reprisal, and make Rules concerning Captures on Land and Water; 

 To raise and support Armies, but no Appropriation of Money to that Use shall be for a longer Term than two Years; 

 To provide and maintain a Navy; 

 To make Rules for the Government and Regulation of the land and naval Forces; 

 To provide for calling forth the Militia to execute the Laws of the Union, suppress Insurrections and repel Invasions; 

 To provide for organizing, arming, and disciplining, the Militia, and for governing such Part of them as may be employed in the Service of the United States, reserving to the States respectively, the Appointment of the Officers, and the Authority of training the Militia according to the discipline prescribed by Congress; 

 To exercise exclusive Legislation in all Cases whatsoever, over such District (not exceeding ten Miles square) as may, by Cession of particular States, and the Acceptance of Congress, become the Seat of the Government of the United States, and to exercise like Authority over all Places purchased by the Consent of the Legislature of the State in which the Same shall be, for  the Erection of Forts, Magazines, Arsenals, dock-Yards, and other needful Buildings;--And 

 To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof. 



1.  In South Dakota vs Dole, is it clear that South Dakota's lower drinking age jeopardized federal interests in the national highway program?  If so, how substantially?
2.  Could Congress condition the receiving of federal dollars to fight crime on a state's having enacted the death penalty?  How--if at all--would such a condition differ from the condition upheld in South Dakota vs Dole?
3.  What result in South Dakota vs Dole if South Dakota stood to lose all federal highway money if it didn't raise its drinking age?  What if it stood to lose 30%?
4.  Does the Court's ruling in the Affordable Care Act case suggest the Court will be closely scrutinizing large federal grant programs in the future?  Note that SEVEN justices agreed that withholding federal funds from states that failed to expand their Medicaid coverage was outside of Congress's Spending Clause power.

 Exploring Constitutional Law