Actually the President did have the power to declare a whole are in rebellion. In fact he had the sole authority as decided by the Supreme Court in this decision;
Martin v. Mott
25 U.S. 19 (1827), affirmed the president’s right as commander in chief to call out the state militia. Complying with an order from President James Madison during the War of 1812, the New York governor called out some militia companies. Mott, a private in one of those companies, refused to obey the order; he was court-martialed and fined for this refusal. Martin, a U.S. Marshal, seized Mott’s property to enforce the judgment when Mott did not pay the fine. Mott brought a civil suit to recover his property. The Court held that the president had validly used his Article I power to call out the militia, that he had sole authority to decide whether or not a situation permitting use of the statutory power existed, and that this decision was “conclusive upon all other parties” (as the states). The case set a major precedent in support of President Abraham Lincoln’s decision to assemble troops in the cause of defending the national union.
You cannot declare the innocent guilty because they live near the guilty, yet that's precisely the effect of such a decree.