The Framers of the Constitution had little difficulty seeing that combinations among the states, or any foreign-affairs activities undertaken by the states, were so fraught with danger to the union that none should be allowed unless Congress consented. Comparable prohibitions had already been contained in the Articles of Confederation, but the Framers chose somewhat stronger language in the Constitution to assure national supremacy in foreign affairs and in relations among the states. The provisions caused no significant debate at the Constitutional Convention, and James Madison described them in The Federalist No. 44 as “fall[ing] within reasonings which are either so obvious, or have been so fully developed, that they may be passed over without remark.”

The constitutional logic of the provisions reflects a profound insight. Fearing that “factions,” or interest groups, operating at the state level would endanger the Union and the legitimate interests of sister-states, Madison urged the Convention to include a congressional “negative” of “state laws in all cases what-soever.” Under his plan, no state law could go into effect without prior congressional approval. The Convention rejected Madison’s proposal as unduly nationalistic and, moreover, unnecessarily broad, on the theory that most state laws would have little if any effect on the union or sister-states. The Convention instead subjected state laws to the operation of the Supremacy Clause: state laws become and remain in effect unless they are inconsistent with federal law or the Constitution.

Courts, however, cannot always be relied upon, and constitutional obstacles—in particular, the difficulty of mobilizing concurrent majorities in both houses of Congress and the executive’s assent—may prevent Congress from counteracting dangerous state enactments. Thus, for classes of state activities that could be presumed to threaten the union or sister-states, the Convention supplemented federal supremacy with either an absolute prohibition on state action (see Article I, Section 10, Clause 1) or the Madisonian “negative” (see Article I, Section 10, Clauses 2 and 3). The congressional approval requirement ensures that each state will be informed of, and heard on, potentially threatening sister-state activities, thus reducing the states’ costs in monitoring and countermanding such activities. Moreover, the requirement compels the proponents of presumptively problematic state activities to mobilize the requisite majorities at the federal level, thus affording an added measure of security.

Throughout the nineteenth century, the Compact Clause generated no more than a handful of cases, usually involving state border disputes. In the twentieth century, the Founders’ fear of state compacts gave away to a more benign view of compacts as a useful instrument of state cooperation. Accordingly, the Supreme Court interpreted the clause in an explicitly nontextual fashion. While the foreign Compact Clause still applies (as a constitutional matter, if not always in practice) to a broad range of formal and informal agreements between a state and foreign countries, the Supreme Court has held that the domestic Compact Clause applies only to a narrow class of state agreements (those that establish binding obligations and, typically, multistate administrative agencies). Moreover, in U.S. Steel Corp. v. Multistate Tax Commission (1978), the Supreme Court declared that state compacts require congressional approval only if they “encroach upon the supremacy of the United States.” Because states may not encroach upon federal supremacy in any event, a broad reading of the Court’s decision effectively deprives the Compact Clause of any independent constitutional force.

The Supreme Court has never found a state compact void for want of congressional approval. Partly due to that permissiveness, states have seized on compacts to establish national tax and regulatory regimes of unprecedented complexity and consequence. Prominently, a 1998 agreement among states and tobacco producers created a permanent, nationwide regime for the taxation and regulation of tobacco sales. So far, however, this trend has failed to prompt a judicial reexamination and rediscovery of the nearly-forgotten Compact Clause.