Author: Staff

Constitutional Context On September 14, 1787, in the closing hours of the Constitutional Convention in Philadelphia, Ben Franklin proposed Congress be granted "a power to provide for cutting canals where deemed necessary." Connecticut’s Roger Sherman objected, noting “The expense in such cases will fall on the United States, and the benefit accrue to the places where the canals may be cut.” Sherman’s objection reflected a concern with the potential abuse when responsibility is offloaded to a distant authority. The phenomenon whereby somebody else or some other entity absorbs the risk or cost of another’s behavior is referred to as “moral hazard.” Seeing Sherman’s logic, delegates from South Carolina voted with those from seven other states to reject Franklin’s proposal. By an 8-3 vote, the Framers made clear Congress would have no power to fund canals. Reflecting a similar concern over moral hazard, South Carolina’s Constitution wisely prohibits the use of general obligation bonds to fund infrastructure projects unless a special taxing district is created specifically for...