Mein Zupreme Kourt: Official Acts in the Eyes of the Beholder
Toxicity will get turbocharged on Supreme Court actions at a time when investment decisions could face more risk aversion in the private sector.
Thank you, Donald. I guess they are all official acts if I take your cabinet offer?!
I’ll call you back. Biden is on the other line.
The latest Supreme court decisions will only make the campaign rhetoric and behavior even uglier and private sector planning harder to handicap.
The immunity decision is rocking the sensibilities of legal experts trying to project risks into 2025-2026 ranging from decisions on Federal reserve governance to the ability to browbeat private sector decision makers from a seat in Washington.
It is unclear whether self-dealing (“Sir, oligarch bribe on line 3”) and influence peddling to shape “official” executive policy actions can be easily framed as official acts (notably if we see a handpicked hatchet man in the DOJ).
Today the market is seeing another UST steepener, and that reminds us of record supply and China as a major holder.
It is hard to be surprised on what direction the legal framework will take when Trump has 5 justices in the tank and one other who is hanging on to the 5 to pretend his meaningless title does not call for comedy. Among the questions coming out of the latest immunity blank checks given to Trump at the Federal level is what that free reign will mean for economic policy and rulemaking from the executive level.
With record deficits, record US debt service demands, record UST supply ahead, and the potential for unilateral action in handing out tariffs, there are plenty of reasons for some sectors to get risk averse with election uncertainty still a reality (the “my guy” vs. “your guy” X factor). Policy uncertainty can generate a stall in decision-making of the sort we saw in some sectors in 2019 that resulted in 3 FOMC cuts in the second half of the year (yes, during Trump’s “greatest economy ever”).
If supplier chains get treated like a political pinata, there is a lot of room to get crazy over what the “next guy” might do and what the current guy might do with the same blank check of immunity. Capex planning, M&A, and reshoring decisions require a lot of assumptions on taxes, tariffs, jobs, health care, and energy transition, among others.
On friendshoring and reshoring, there is even the uncertainty of relations with Mexico if Trump tries to drop millions of migrants or undocumented workers on the Mexico side of the border. That mass deportation X-factor is just one among a short list of outsized worries. Trump refused to answer that question the other night in the debate. When Trump moves to deport millions at a mobilization level in line with the peak of WWII, the new Mexican President (Claudia Sheinbaum) could tell him to “go pound orange face paste.” Of course, then comes the unilateral missile strike on cartel locations (a risk-free official act). Then comes massive supplier chain and trade dislocations.
Risk aversion is a highly amorphous variable that makes the consumer and capex handicapping more than a little difficult, but recent Supreme Court decisions have gutted the Federal agencies (the Chevron case) and would now unleash a generally unstable and dictator-adjacent power seeker to do whatever he feels like after pasting official acts on it with a bright orange Sharpie. The ability to ignore existing laws under the guise of official acts is leaving some of the legal talking heads struggling to put a fence around the limits.
We have some very bitter Supreme Court justices (some of them B team legal minds on their best day) wanting some payback against their ancestral liberal tormentors. Some also come with a dash of religious zealotry (fanaticism?) where the New Crusades have a home court advantage in the black robes, in the electoral college, and in the Senate counts. It is easy to pick 7 states in the West (and North) that have lower combined populations than NYC but have 13 GOP senators (soon to be 14?).
The whole “tyranny of the minority” theme has been picked over, but it is really as simple now as the “tyranny of the 6.” The fact that 2 of the Supreme seats come with asterisks adds to the ill will: Obama was denied the first seat by McConnell and the second was rushed through ahead of Biden by Trump in case he lost (which he did).