Dear Reader,
This is a historic day.
Today, the Supreme Court is going to hear arguments in a case that determines whether the tariffs President Trump imposed under the International Emergency Economic Powers Act are legal or not.
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Here’s what this decision will really mean to the future of our nation.
Two lower courts have already ruled that tariffs exceeded his powers, and the President himself has called it, “the most important case ever in the United States Supreme Court.”
A bit of an exaggeration - there have been a lot of big cases in the Supreme Court over the years.
The real question is, can the President invoke the emergency powers act to impose tariffs?
And look - tariff power lies with the people - with Congress.
And, was there really an emergency?
Is something that’s been happening over a span of decades, an “emergency?”
The U.S. imports a lot more goods than it exports.
But that’s not new. That’s old news.
So the question is really, does the President have the authority to impose tariffs unilaterally?
Does he have the authority, as spelled out in the Constitution, to take that power away from Congress and the people?
It’s funny - when you look at Polymarket - the betting market - the betting odds posted show 40% odds they’re illegal as written, but can be made legal, like John Roberts did to make Obamacare legal.
And 35% odds that it’s totally legal, and 25% that it’s totally illegal.
So it’s pretty split.
This is a big deal, and very interesting.
Trade and deficits are a very complicated and tricky subject.
It took me a while to understand this.
Yes, we have a deficit with goods, but not all trade is created equal.
So we buy more hats, t-shirts, sneakers from China, Vietnam, etc. than we export because they can manufacture them cheaper than us.
But we have a services surplus - we sell high value things like software.
Not all deficits are created equal.
Let me give you an example:
If we have a trillion-dollar deficit in goods like hats, but have a $500 billion surplus in services like software, what’s better?
I would argue that goods have a low return on capital. Say, 5%.
But services have a high return on capital; 30%, for instance.
If we export $500 billion worth of software and make $150 billion, and they export $1 trillion in goods and make $50 billion, we’ve got the better deal in my view.
I’ve been thinking a lot about history.
We have the President arguing for the unitary executive theory of government, and I actually believe if the founding fathers woke up today, they would have been shocked that President Trump could not have fired USAID, that people would debate any of these things.
They believed the executive had “king like powers” during his or her term in office.
And Vice President Cheney’s passing had me thinking about his role in all this…
He worked under Nixon, who was impeached basically for exercising the unitary executive theory.
And there’s always been this struggle between Congress, the Presidency and the Supreme Court.
If you look back, after the Civil War, Congress took power back from the executive.
But now, President Trump is reasserting the executive branch in government, and tariffs are one way he’s doing that.
It raises a lot of interesting questions about the nature of our constitution and which branches are competing.
That’s why I always say to my kids how great it is that we have three branches competing with each other for power…
That we really try to tease out the ambitions in each branch.
Today we sit at the door of major American history.
I thought it was important to talk about this with you this morning.
History is being made today…
The direction of the unitary executive, or not, whether Congress maintains its tariff power, it all hinges on what the Supreme Court decides.
It’s a very big deal.
Have a wonderful day. I’ll see you tomorrow.
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