The Supreme Court's Dilemma: Balancing Power and Independence
Is the Supreme Court prepared to challenge Trump's aggressive tactics? The former president, Donald Trump, has employed his characteristic strategy in his attempts to pressure the US Federal Reserve into lowering interest rates: when persuasion fails, resorting to bullying, and when bullying proves ineffective, firing.
In an extraordinary attack on the central bank, Trump has publicly insulted the Fed chair, Jerome Powell, calling him "stupid" and threatening to dismiss him for not reducing interest rates as swiftly as Trump desires. The Justice Department even initiated a criminal investigation into Powell's testimony regarding renovations at the Fed's headquarters. Despite this, the Fed has remained steadfast.
Trump's approach to the Fed mirrors his broader strategy of overhauling the federal government. He has discovered that persistent pressure can yield results, and he has largely succeeded in his endeavors.
However, with the Fed, Trump might have encountered a formidable opponent, particularly in the eyes of the Supreme Court. During oral arguments on Wednesday, the court's justices expressed resounding skepticism regarding Trump's firing of Fed governor Lisa Cook. This skepticism could be interpreted as a potential check on executive authority.
Yet, legal experts caution that a ruling against Trump may not significantly curtail his power. Instead, the court seems to be creating a unique exception for the Fed, even as the independence of other government agencies remains under threat.
Cornell University law professor Michael Dorf warns, "The consequences could be extremely damaging. The Supreme Court is waging war on independent agencies at the worst possible time, when there's a president eager to centralize power and appoint loyalists with no relevant expertise."
Trump dismissed Cook in August, accusing her of mortgage fraud by listing multiple properties as her primary residence to secure a better mortgage rate. These accusations originated on social media, and Trump swiftly removed Cook days later. The White House appealed to the Supreme Court after a lower federal court temporarily reinstated Cook.
Trump's hasty firing of Cook, without a proper investigation or hearing, has raised numerous questions for the court to address. Was Cook's right to due process violated by the lack of a hearing? Even if the mortgage fraud allegations are true (Cook's lawyers claim evidence of an "inadvertent mistake"), does pre-appointment mortgage fraud justify her removal? Should a lower court have decided on the case before it reached the Supreme Court?
The situation is further complicated by the Fed's unique nature. The US central bank is designed as a quasi-private, independent government agency, shielded from political influence. Fed officials can only be fired by the president "for cause", but the law does not define "cause".
Underlying this case is a critical question with global economic implications: How much authority will the Supreme Court grant a president over the Fed?
Constitutional experts typically examine past Supreme Court decisions in similar cases, and Cook's firing is not the first instance of Trump testing his executive powers.
Last year, Trump fired independent officials, including two Democratic-appointed members of the National Labor Relations Board (NLRB), which oversees unions, and Rebecca Slaughter, the commissioner of the Federal Trade Commission (FTC), which regulates telecommunications and media.
The Supreme Court upheld Trump's firing of these officials, and in Slaughter's case, experts anticipate a landmark ruling that will significantly bolster executive power for years to come.
Some members of the US conservative legal movement have been advocating for the "unitary executive" theory, which proposes that the president should have the authority to fire any executive branch officer at will. This theory asserts that the American people's votes should be the sole check on the president's power.
For conservative justices on the Supreme Court who embrace this theory, Trump's second term presents an ideal opportunity. Analysts predict that Slaughter's FTC firing, which is still pending, will enable the court to narrow or even overturn Humphrey's Executor v. United States, a landmark 1935 case that restricted the president's power to fire executive officials of independent agencies.
Interestingly, while conservative justices seem inclined to grant the president more power, they appear to make an exception for the Fed.
The Supreme Court explicitly mentioned the central bank when permitting Trump's NLRB firings, even though the Fed was not involved in the case.
The court's majority stated, "The Federal Reserve is a uniquely structured, quasi-private entity with a distinct historical lineage from the First and Second Banks of the United States."
Many interpreted this as a signal that the court would resist if Trump attempted to fire a Fed executive.
Legal experts emphasize that, legally, the Fed's structure within the federal government is no different from other quasi-private, independent agencies.
Columbia Law School professor Lev Menand questions, "Why, in the case of Lisa Cook, are the judges suddenly interested in enforcing the independence statute? Yet, with Rebecca Slaughter and others he unlawfully removed, they disregard the status and allow his constitutional authority to remove anyone for any reason. What's the rationale behind this discrepancy?"
The justices' reasoning appears to be both economic and legal. Amy Coney Barrett, part of the court's 6-3 conservative majority, referenced amicus briefs from economists who warned that firing Governor Cook could trigger a recession.
Barrett inquired, "How should we consider the public interest in this case?"
Brett Kavanaugh, another conservative justice, directly questioned the Justice Department about the real-world implications of Fed independence.
Kavanaugh stated, "Let's discuss the real-world consequences. If this sets a precedent, it could lead to a cycle of political retribution. All of the current president's appointees might be removed for cause when a Democratic president takes office in 2029. What's the purpose of this?"
The Fed's power stems from its ability to set interest rates. High interest rates make borrowing more costly and can curb inflation, albeit at the risk of higher unemployment. Trump's desire for lower interest rates is understandable, as they can provide a short-term economic boost, but they may also lead to future price increases.
Balancing these factors requires analyzing economic data and considering the long-term stability of the economy, rather than the political interests of those in power. Interfering with the Fed's independence could trigger economic shocks, such as a recession.
In the case of Trump vs. Cook, Menand observes, "An unstoppable force has met an immovable object. While the justices might be comfortable reducing the independence of agencies like the FTC, it's a different story when it comes to the Federal Reserve."
Menand adds, "Major business interests don't want to see the Federal Reserve weakened or politicized."
Many legal scholars argue that the Supreme Court has been overly permissive of Trump's executive power, beyond the issue of independent agencies. Over the past year, the court has allowed the administration to continue aggressive immigration enforcement tactics and has prevented lower courts from issuing nationwide injunctions that could have blocked some of Trump's executive actions, as seen in his first term.
Michael Dorf expresses concern, "If the court rules against Trump in the tariffs case and the Cook case, it might gain undeserved prestige for being unbiased and standing up to Trump. But it's only challenging him at the extreme edges, while allowing him to continue actions that, in other circumstances, the court should have opposed."
The timing of the court's decision on Cook's case is uncertain, but a ruling is expected by June.
