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Tuesday, March 30, 2010

The Spending Power & Federalism Down Under

Everyone knows that judicially enforced limits on Congress' spending power are mostly moribund. But it is an open question whether the Court could ever practically fashion more robust and judicially manageable limits on the spending power The High Court of Australia's decision in Pape v. Commissioner of Revenue suggests that SCOTUS's position is not the inevitable result of the nature of the spending power: While narrowly upholding a Commonwealth tax bonus program, the Court stated that the Commonwealth could not spend money for purposes reserved to the states. The decision is being regarded as a big deal by Australian legal academics, although it remains to be seen whether the HCA will follow through by enforcing limits against the Commonwealth rather than just talking about them.

Thanks to my student, Joe Edwards, for calling my attention to this case. Does anyone know of any other constitutional courts that have limited their central government's spending power? In my own view, the peculiar text of the U.S. Constitution sheds very little light on decisions like South Dakota v. Dole: The American doctrine is driven, instead, by considerations of judicial competence to set manageable standards. The examples of how other federal regimes deal with central governments' spending, therefore, might be instructive the question of whether courts can practically constrain the central government's power of the purse.

Posted by Rick Hills on March 30, 2010 at 12:40 PM in Constitutional thoughts | Permalink


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The Australian Constitution has been derailed with amended legislation by Federal governments without referendums to the people. This will always aid government in acting without transparency or true accountability when it comes to expenditure or any facet of governance. Over the past 2 years we have seen the Federal government spend A$2 billion on consultants without any benefit to the Commonwealth. We have heard the Federal Treasurer boast about increased exports but these are false figures ie agricultural exports are down and manufacturing is almost non existent yet mining by multinationals is way up, giving the false perception of increased exports. Read how this can be changed simply at www.aussieswannakiss.com
Rachel Emmes

Posted by: Rachel Emmes | Mar 31, 2010 1:46:26 PM

Ooopps, make that page 57-58 for the Currie citation ...


Posted by: Positroll | Mar 31, 2010 5:34:38 AM

Germany. Cf.
- Currie, The Consitution of the Federla Republic of Germany, 1994, p. 38 and at 210
- Donald P. Kommers et al., American constitutional law: Governmental powers and democracy p. 316 (available via google booksearch),

See also:
- Daniel Halberstam , Of Power and Responsibility: The Political Morality of Federal Systems, Virginia Law Review, Vol. 90, p. 731, 2004
- Ronald Watts, The Spending Power in Federal Systems: A Comparative Study (1999)

Posted by: Positroll | Mar 31, 2010 5:28:40 AM

Well, it could make a difference if courts extended the same limitations to section 96 grants. But since South Australia v. Commonwealth held that foregoing state taxation is a valid section 96 "condition," it seems impossible to hold any other kind of section 96 condition violates state sovereignty--if you can take away the power to tax, what can't you take away? And since it is no exaggeration to say that the entire government structure in Australia is based on South Australia v. Commonwealth, there are obvious stare decisis concerns with overruling it.

Posted by: TJ | Mar 30, 2010 3:15:44 PM

Very helpful, TJ, thanks. So the moral is that a constitutional court will enforce limits on a central government for the sake of federalism when those limits won't make an iota of practical difference?

Posted by: Rick Hills | Mar 30, 2010 1:55:25 PM

Needs a bit of context here. Although I haven't followed Australian law for a long while, the Federal government there is much more powerful compared to the U.S. (if that is possible to imagine). The biggest reason is that, under South Australia v Commonwealth, 65 CLR 373 (1942), the Federal government acquired de facto the exclusive power to levy income and sales taxes. Moreover, unlike the U.S., there are two separate spending provisions in the Australian constitution. The first is section 81, which provides that the Federal government may spend money "for the purposes of the Commonwealth." The second is section 96, which provides that the Federal government may "grant financial assistance to any State on such terms and conditions as the Parliament thinks fit." What happens is that the Federal government makes annual "grants" to states that constitute an enormous chunk of their budget (again, because states lack significant power to tax). Pape concerns the constitutionality of a direct Federal program under section 81. It is not clear that it applies to a South Dakota v. Dole style situation, which in Australia would be implemented under section 96 (as a conditional grant to a state).

Posted by: TJ | Mar 30, 2010 1:30:42 PM

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