Wednesday Morning Rant

There can be a spectacular degree of risk in a single act, and the recent ruling on Trump's tariffs represents perhaps the single greatest risk that the administration - and the country - faces. There are many things that could could be done about this, but my greatest fear at the moment is that nobody does anything. The ruling declares that Trump overstepped his authority with his tariff regime, and exceeded the powers that are delegated to the executive by Congress. There are many opinions on the merits of the ruling and it doesn't look reasonable to me, but the ruling has been made.

SCOTUS will probably take this up and so we will, of course, find out later what the decision is - but the stakes are incredibly high. This is an important ruling with tremendous implications for government fiscal conditions, for the wider economy, for the business environment and for the MAGA movement more broadly. If SCOTUS upholds the lower court decision and Congress does nothing, the game could be over regardless of merit.

This is for three reasons. First is inflation. Inflation is not really tamed and is gearing up to make a comeback even in a rosy scenario where Trump wins or Congress acts to obviate the problem. The Producer Price Index (PPI) is a leading indicator, and CPI usually follows it a quarter or two later. CPI has come down nicely, but the PPI is red hot. PPI came in at +0.9% in July, and the annualized rate is 3.3% so far for this year. That is going to cause movement in the CPI and it is baked in at this point. That is probably manageable on its own, but it won't remain manageable if this decision goes the wrong way.

The government is still wildly overspending, but that overspending has been mitigated to some degree by the tariffs. They have raised hundreds of billions of dollars so far and are on track to bring in at least half a trillion dollars during the first full fiscal year of the tariff regime (that is, the year that is about to start). If the tariffs are deemed illegal, that's a mighty big hole in the budget - and a great reservoir of inflation. Congress is not going to cut that much spending out if the tariffs go away, and the difference will go right into inflation. A rising problem gets worse, and gets worse immediately. If found to be illegal, the government will likely have to pay some or all of those revenues back - representing a huge, immediate hit.

But that's just the fiscal condition and inflation. The wider business environment will also tailspin because of this. What Trump did with the tariff regime was - and remains, though less so - hugely disruptive. Trump introduced a whole heap of brand new policy risks when he went down this road. They were worth it, but a sudden reversal introduces far more policy risks. The ground that just started to solidify turns back into quicksand. Do businesses need to sue to get money back? Do they need to reserve for future changes? Will there be a new tariff regime that comes out of it? When, if so? How will it work? Business projections will have to go in the trash and everyone gets to start over in the face of countless unknowns. That will not help inflation, employment or investment.

Economics aside, Trump's tariffs have only partly been an economic or fiscal exercise. They are the means through which Trump has pursued his comprehensive revamp of American foreign policy. Trump's spectacular foreign policy achievements are courtesy, in large part, of the tariff cudgel. This administration has been bringing rivals to heel and adversaries to the bargaining table, and tariffs are at the dead center of much of it. They are key to a lot of Trump's winning, winning, winning. There is no tool in his toolbox more powerful. The fortunes of his movement ride on tariffs to the same degree. The consequences of tearing down Trump's tariff regime is the removal of his most powerful foreign policy weapon and incentive. Progress stops dead in its tracks and many prior wins reverse. I don't know that it would kill the movement, but it would bea brutal blow.

Congress can act to mitigate these risks, and do it now - before the case gets to SCOTUS. There are a couple of options. Congress could immediately codify Trump's tariff agreements into legislation. Even if they were found to be improper, they are law now and the worst case is a refund and a big hit to this year's budget balance. Better would be revisions, if necessary and workable, to the Tariff Act to more explicitly delegate authority to Trump. Either could have a sunset built-in - say, for 2027 - to enable the con men on the Hill to get stupendously rich during the political theater that will surely be involved in its renewal or not. There is a gigantic opportunity for Congressional corruption and enrichment in this, and they can come out looking like heroes to the base in the short term.

One shouldn't have to consider the question of how major and important decisions with tremendous consequences on all aspects of the country's fiscal health, economic health and political environment directly enrich Congressmen, but we have the Congress we have and so the question needs to be considered. Fixing this before it blows up will provide ample potential for great wealth, power and skulduggery for the Critters, with the bonus of a huge improvement in short-term popularity going into a midterm. Anyone who worries about the risks of a non-Trump getting this same power - a real risk if SCOTUS rules that Trump overstepped - can point (and point legitimately) to the same sunset provisions that will so greatly enrich them in a couple of years.

There is plenty of upside for Congress. The tariffs - either themselves, or via an enabling act they hand to Trump - will provide much more opportunity for enrichment and power than a CR or tax law and they can do it to thunderous applause and surging popularity. And they should. Congress can remove these risks and personally gain in what is essentially a no-lose scenario. If Trump wins at SCOTUS, none of it mattered and it was all just so much wasted and irrelevant effort, but they can still crow about having done the right thing all way into the midterms.

The only reason not to codify a winning strategy, set the playing field for many exciting future corruption opportunities and win much new support is an abject hatred of Donald Trump, his supporters and everything they desire. Which is why the ball is going stay firmly in SCOTUS' court.

posted by Joe Mannix at 11:00 AM

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