Article 1, Section 10, Clause 1: Limitations on State Powers
No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.
With this clause, the Constitution begins its enumeration of powers that are forbidden to the states. In some cases, the prohibition is absolute, and some prohibitions serve to restrict the power to the federal government, while others are a renunciation of the power at all levels of government. This clause enumerates several absolute prohibitions falling into both of the latter categories.
The first subclause effectively reserves control of diplomacy to the federal government. So far as foreign nations are concerned, the United States is one national government. Our constitutional divisions of sovereignty and our internal disputations were intended by the Founders to end “at the water’s edge”, and this has mostly been honored during most of our history.
The clause has had some less obvious applications. In Williams vs. Buffy (1878) the Court ruled that the Confederacy had no legal validity since it was a confederation in violation of this subclause. Another application is to regulations imposed on citizens of a state operating out of its ports (the particular case, Skiriotes v. Florida (1941), involved Florida sponge fishers); the court ruled that such regulation was permissible but was overridden by any conflicting federal law. In U.S. vs. California (1947) the Court ruled that resources within the three-mile limit (in this case, oil off the coast of California) is under the dominion of the federal government and not the state. Again, the philosophy of “beyond the water’s edge” was upheld.
The second clause prohibits individual states from issuing letters of marque and reprisal, reserving this power to Congress. Unlike foreign policy, not all aspects of national defense were to be controlled at the federal level. However, letters of marque and reprisal authorize action beyond the national borders, where the United States was to be seen as one nation.
The next three subclauses reserve the establishment and regulation of a system of currency to the federal government. The courts have identified bills of credit as what we would call paper currency. State bonds are not prohibited; nor are banks prohibited from issuing bank notes, even if the bank is a state bank.
The prohibition on any state making anything but gold or silver coin a legal tender had some teeth earlier in our history, but since the prohibition does not apply to Congress (which can, and has, made paper currency legal tender), it is of not much consequence today.
The final subclause prohibits states to pass bills of attainder or ex post facto laws or grant titles of nobility, which are powers denied Congress as well. These are absolutely ruled out as any part of our legal or political culture. However the subclause also prohibits any “Law impairing the Obligation of Contracts”, which is notable enough that it is identified separately as the Contracts Clause by constitutional scholars.
As presently understood, the Contracts Clause subjects any law to a two-pronged test. First, does the law substantially impair a contract? Second, is the law reasonable and necessary? The law is necessary if there is no less intrusive way to pursue a compelling state interest. The law is reasonable if the circumstances requiring it were not reasonably foreseeable at the time the contract was entered into. It is our view that this view of the clause renders it all but impotent.