Democrats are pushing for a USD3 trillion package while the White House only wants USD1 trillion, and focused on a payroll tax cut rather than an extension to the USD600 weekly extension to unemployment benefits. The clock is ticking given we are days away from income supplements drying up at a time when millions are jobless and one in three Americans is not making a full rent or mortgage payment. Political speed is of the essence.
The US Treasury is of course sitting on a cash balance of USD1.8 trillion at this point. I don’t recall any taxes being paid to raise that sum – almost as if MMT were already a thing. (On which note, please see this report.) One wonders when this massive fiscal firepower is going to be unleashed; because surely no president wants to leave USD1.8 trillion to a successor?
Surely not indeed, and sure enough with some $1.7 trillion in cash still held by the Treasury at the Fed…
… Trump did just as we expected and with Congress squabbling over the details and unable to bridge a $2 trillion gap between the HEALs and HEROs act…
… gave himself permission to trigger the next fiscal stimulus in what now appears to be a never-ending series of helicopter money.
But now comes the hard part because with Trump having effectively trampled over any leverage the Democrats had to collapse the economy ahead of the elections by withholding money from tens of millions of unemployed workers, the president now faces a barrage of lawsuits from furious Democrats and liberal advocacy groups challenging the executive actions he issued on Saturday providing economic relief measures that many of his fiercest critics actually support, including weekly federal unemployment payments, student loan relief and efforts to protect tenants from eviction during the pandemic.
As we reported last night, late on Saturday Trump unveiled an executive order and series of proposals which plan an extension of the weekly federal unemployment payments that lapsed in July; Trump has proposed financing $400 weekly payments, down from $600 under the original legislation, by redirecting funds from the Federal Emergency Management Agency and calling on the states to cover some of the costs with money left over from the first relief package.
As a result, with the stroke of a pen – literally – Trump wrested core powers away from Congress, after weeks of discussions over a second pandemic rescue package stalled on Friday, putting democrats in the highly unpopular position of being the party that withheld funding from the people. Democratic in turn, claim they were pushing for a much more expansive relief plan – even if they refused to release a small package of much needed fund, and have called the orders an insufficient stopgap that will be difficult to implement.
As a result, unwilling to give up the fight and more than willing to put American financial stability in jeopardy, the president’s directives are likely to get tied up in litigation over whether they violate core constitutional principles like the separation of powers.
“If he could actually help people, that would be great,” said Laurence Tribe, a constitutional law professor at Harvard University. “But the Constitution isn’t a magic wand for the president. Anything as sweeping as what he’s promising is just pie in the sky.”
To critics, Trump’s success in nullifying the influence of the two bickering parties looks illegal end run around Congress, which has spending power under the Constitution. House Democrats sued to prevent a similar effort by the White House to finance the construction of a wall on the Mexican border using funds redirected from the Defense Department, although the Supreme Court last week declined to halt the construction of the wall.
“He’s basically saying he doesn’t need to rely on Congress’s power of the purse — he can simply spend money, and he can spend it on whatever he wants,” Tribe said. “And that’s simply not the law” even though millions of Americans – and countless Democrats – will surely side with the man who just greenlighted $400/weekly into their bank accounts.
But, as Bloomberg puts it, a key question is, who will sue?
While they have criticized the orders as insufficient and impractical, congressional Democrats may view it as politically risky to block payments to Americans in distress.
“It puts the administration in a different position than what they’ve been used to,” said Keith Whittington, an expert on politics and law at Princeton. “It’s smart politics.”
But states that planned to use pandemic relief funds for purposes other than unemployment payments might refuse to comply with Trump’s directive, potentially setting up a legal battle. The president seemed to acknowledge that possibility when he announced the orders on Saturday.
“I guess maybe they’ll bring legal actions. But they won’t win,” he told reporters. “I think this will go very rapidly through the courts.”
One group that will surely sue the administration are landlords as one of the orders Trump issued appears to give federal housing officials broad discretion to prevent evictions.
“Every legal aid lawyer in the country faced with a destitute client being evicted will slap this executive order on the judge’s table and say there should not be any eviction,” said Charles Tiefer, a law professor at the University of Baltimore. “And their landlords who have federally insured mortgages will argue back that it would be illegal for evictions to be halted.”
In a third order, the president said he would defer payroll tax payments from September through December for people making less than $100,000 a year, a proposal that has met bipartisan opposition in Congress because it could endanger funding for Social Security and Medicare. The order also said the Treasury Department would “explore avenues” to eliminate the obligation to pay the tax altogether.
That directive may well draw legal challenges.
“The argument behind the payroll tax seems very aggressive,” said Whittington. “The breadth of the order clearly exceeds what Congress anticipated in giving the Treasury some discretion to delay tax deadlines in disaster areas.”
Trump may have better luck defending the fourth of his executive actions, namely student loan relief. Existing federal statutes allow the secretary of education to temporarily delay loan repayments during periods of economic hardship. It’s unlikely that perennial opponents of Trump like liberal advocacy groups, congressional Democrats and Democratic state attorneys general would want to block that measure, and they might not even have legal standing to sue.
“It is not clear who would be well situated to challenge the administration’s action,” Whittington said.
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