The provision was part of a deal struck between major and small states. Smaller states, which would be over-represented in the Senate, would surrender the authority to initiate money legislation to the House, where bigger states would wield more power. The Constitution does not explicitly grant either body the power of the purse, but rather provides that "Congress may provide for the common Defence and general Welfare of the United States."
In practice, however, neither body has used its power of the purse effectively. The president can veto bills, but without support from both chambers he can never muster enough votes to override the veto. In addition, no congressional bill has ever been rejected by the public through a referendum or election campaign promise. Finally, neither house has ever denied funding for the government and agencies, including those not directly related to war efforts, such as the Environmental Protection Agency and the Department of Education. Thus, each branch of government has granted itself power over spending decisions.
Congress has the power of the purse because it can refuse to approve funds for government programs. Without an appropriation from Congress, the executive branch cannot spend any money. This means that if voters do not want their elected representatives to spend their money on certain items, they can vote them out of office at the next election.
Large states believed that they should have more representation in Congress, whilst small states said that they should have equal representation with larger states. This resulted in a bicameral legislative body, with each state receiving equal representation in the Senate and representation based on population in the House of Representatives. The Constitution does not specify how the two chambers are to be constituted; instead, it leaves this issue up to the states. As a result, there are several different configurations of congressional districts and senators today.
The current system was established with the Apportionment Act of 1801. Before then, both houses of Congress were elected by voters living in the individual states. By adopting national elections, the Confederation Congress ensured that all states would have an equal voice in selecting representatives. The Equal Representation Clause of the Federal Constitution requires that "Representatives shall be selected... by direct vote of the people."
In addition to equalizing state power, another reason for establishing a federal system of government was to provide "external checks" on executive power. Since neither the President nor the Senate is directly accountable to the voters, these other branches are needed to serve as constitutional barriers preventing officials from abusing their power.
Last, a bicameral legislature provides more diversity of opinion and ideas, which is necessary for robust governance. Multiple voices can help prevent majorities in either house from imposing their will on the country.
This meant that Congress could issue debt money or currency that could be repaid with gold or silver. After much deliberation, the Founders felt that giving Congress the authority to create money, even if it was redeemable in gold and silver, was too hazardous, so they repealed the right to "emit bills of credit." Instead, they gave Congress the power to make all laws necessary and proper for carrying into execution the powers vested in it by the Constitution. This includes the power to raise armies and conduct wars.
In other words, the power to print money is just another way of saying that Congress can declare war. And without a clear declaration of war from Congress, the President cannot initiate hostilities.
Here are the two clauses from Article I, Section 8, of the Constitution that give Congress this power:
"The Congress shall have the power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States; but no tax shall be laid on articles exported from any state."
The Constitution and Money The framers plainly envisaged a national monetary system based on currency, with the federal government having sole authority to control it. A provision that would have granted Congress the right to print paper money was rejected by the delegates at the Constitutional Convention.
Clauses 5 and 6: The Congress shall have the jurisdiction to create money, regulate its value and that of foreign currencies, and establish a weights and measures standard.
List six limitations on the ability to tax. Why did the Framers of the Constitution grant Congress the control over the currency? In the United States, there was no stable currency system. Each state produced its own currency, persuading Congress that a single national money system was required. How did Congress put a stop to the printing of private bank notes? By granting the Federal Reserve System (FRB) the authority to print dollars and loan them to banks at interest.
Private banks issued bills of exchange as payment for goods and services. The problem with this method was that it was not a reliable way to store value. If someone wanted to avoid paying their debts, they could create more bills than they had money to pay. This would result in a credit crisis for the bill issuer! To make matters worse, if the debtor were wealthy or important, they might be able to refuse any amount of money offered as payment. The only way out of this situation was for the creditor to take possession of the debt instrument (i.e., bill of exchange). With this form of payment unavailable, the only other option was for the debtor to go into debt further to cover the original debt.
By setting up a central bank (the FRB), they can stabilize the currency by preventing inflation and speculation.