The Supreme Court has just disclosed a particular concern it holds regarding Trump.
The Supreme Court has just disclosed a particular concern it holds regarding Trump.
On Thursday evening, the Supreme Court issued a brief order that temporarily allows President Donald Trump to dismiss two federal officials who are legally protected from being terminated without cause. This, in itself, isn't particularly noteworthy since, on April 9, Chief Justice John Roberts independently authorized Trump to fire the same two officials. Therefore, the practical outcome of Thursday’s order in Trump v. Wilcox is merely to uphold the existing situation.
However, the Thursday order does present some significant new insights from the Court’s Republican majority. The Republican justices have indicated for some time that they are keen to grant the president extensive power to dismiss officials that Congress intended to protect from presidential influence, yet the order includes a paragraph indicating that they will not permit Trump to remove members of the Federal Reserve.
From a legal standpoint, this paragraph is challenging to interpret. As Justice Elena Kagan notes in her dissenting opinion, it lacks the legal backing it references. Nevertheless, it is likely to provide reassurance to investors that, while the Supreme Court seems willing to broaden Trump’s authority over previously autonomous sectors of the federal government, it will not allow him to interfere with the Fed’s capacity to make technical decisions regarding interest rates.
The immediate implications in Wilcox concern a former member of the National Labor Relations Board (NLRB), which enforces labor laws and resolves union-related conflicts, as well as a former member of the Merit Systems Protection Board (MSPB), which addresses claims that a civil servant’s employment rights were infringed. Trump dismissed both individuals shortly after assuming office, despite the fact that federal law only allows for their termination under circumstances of neglect or misconduct.
The NLRB and the MSPB are just two examples of a range of "independent" agencies governed by multi-member boards, all of whose members benefit from similar employment protections. Other agencies include the Federal Trade Commission, the Federal Communications Commission, and the Federal Reserve.
For over 15 years, since the Court's decision in Free Enterprise Fund v. Public Company Accounting Board (2010), a majority of justices have indicated a desire to remove Congress's power to establish such independent agencies, granting the president the ability to dismiss the leaders of these agencies at will. Meanwhile, numerous economists and investors have cautioned that undermining the Federal Reserve — which is meant to determine interest rates based on intricate economic assessments rather than the interests of the current president — could lead to significant turmoil in the US economy.
The order issued on Thursday clearly indicates that the Court acknowledges these concerns and does not plan to revoke the Fed's independence. However, it is unlikely to appease many constitutional scholars, as the rationale provided for treating Federal Reserve leaders differently from those of other independent agencies is so perplexing that it seems forced.
Regardless of the rationale behind it, the order strongly implies that this Court will not grant Trump complete authority over the Fed.
Understanding the “unitary executive”
Trump v. Wilcox represents the peak of a long-standing resentment among many Republican legal experts towards Humphrey’s Executor v. United States (1935), the Supreme Court ruling that affirmed Congress's ability to create independent agencies whose members can only be dismissed for just cause.
Although the heads of these agencies are usually appointed by the president for a multi-year term and require Senate confirmation, Humphrey’s Executor clarified that the laws designed to protect them from dismissal during their tenure are intended to guarantee that they "act with complete impartiality" and "utilize the trained judgment of a group of experts."
Nevertheless, all six Republican members of the Court have expressed their belief in a concept referred to as the "unitary executive," which contradicts the principles established in Humphrey’s Executor.
The Constitution states that "the executive power shall be vested in a President of the United States of America." In a dissenting opinion from 1988, which many legal conservatives now regard as almost sacred, Justice Antonin Scalia contended that "this does not imply some of the executive power, but all of the executive power." Therefore, if a federal official is tasked with enforcing federal laws in any capacity, they must be entirely under presidential control.
If you take the unitary executive theory seriously, it follows that Federal Reserve governors can be dismissed at the president's discretion. The authority of the Fed over interest rates is rooted in federal laws that mandate it to aim for the dual objectives of 'maximum employment' and 'stable prices.' Thus, the Fed is tasked with enforcing federal legislation.
However, the ramifications of undermining the Fed's independence could be disastrous.
Back in 1971, President Richard Nixon exerted pressure on Fed chair Arthur Burns to reduce interest rates ahead of Nixon's reelection campaign — the strategy was to stimulate the economy just as voters were evaluating Nixon's performance — and Burns acquiesced. In the short run, this decision proved beneficial for Nixon. The economy thrived in 1972, leading Nixon to secure reelection by a remarkable margin. Yet, Burns's choice is frequently cited as a contributing factor to the prolonged period of 'stagflation,' characterized by sluggish economic growth coupled with soaring inflation, during the 1970s.
In essence, the Fed possesses the capability to effectively administer a short-term economic boost — akin to injecting cocaine into the US economy — which can be strategically timed to favor sitting presidents, albeit at the expense of significant economic instability in the future. It’s easy to envision how presidents might exploit their authority if they can terminate Federal Reserve members who resist providing such a fleeting and detrimental economic surge.
One might assume that these dangers would serve as a warning to the justices against overturning Humphrey’s Executor. Nevertheless, the Republican justices seem firmly dedicated to the unitary executive theory, and this commitment has persisted for quite a while.
If you take the unitary executive theory seriously, it follows that Federal Reserve governors can be dismissed at the president's discretion. The authority of the Fed over interest rates is rooted in federal laws that mandate it to aim for the dual objectives of 'maximum employment' and 'stable prices.' Thus, the Fed is tasked with enforcing federal legislation.
However, the ramifications of undermining the Fed's independence could be disastrous.
Back in 1971, President Richard Nixon exerted pressure on Fed chair Arthur Burns to reduce interest rates ahead of Nixon's reelection campaign — the strategy was to stimulate the economy just as voters were evaluating Nixon's performance — and Burns acquiesced. In the short run, this decision proved beneficial for Nixon. The economy thrived in 1972, leading Nixon to secure reelection by a remarkable margin. Yet, Burns's choice is frequently cited as a contributing factor to the prolonged period of 'stagflation,' characterized by sluggish economic growth coupled with soaring inflation, during the 1970s.
In essence, the Fed possesses the capability to effectively administer a short-term economic boost — akin to injecting cocaine into the US economy — which can be strategically timed to favor sitting presidents, albeit at the expense of significant economic instability in the future. It’s easy to envision how presidents might exploit their authority if they can terminate Federal Reserve members who resist providing such a fleeting and detrimental economic surge.
One might assume that these dangers would serve as a warning to the justices against overturning Humphrey’s Executor. Nevertheless, the Republican justices seem firmly dedicated to the unitary executive theory, and this commitment has persisted for quite a while.
The "First and Second Banks of the United States" served as 18th- and early 19th-century forerunners to the Federal Reserve. In the case of McCulloch v. Maryland (1819), the Supreme Court affirmed Congress's authority to establish national banks; however, national banking was ultimately abandoned during President Andrew Jackson's administration, leading to a period of economic instability, which included a depression shortly after Jackson's departure from office.
Yet, it remains uncertain how any of this relates to the powers of the president as defined in the Constitution. If the unitary executive theory holds true, then no organization — whether it is deemed "quasi-private" or part of a "distinct historical tradition" related to banking — can enforce federal laws unless it is overseen by individuals who are directly under presidential authority. Legally speaking, the Court's rationale for the Fed's uniqueness is merely a jumble of words.
The sole legal authority referenced by the Wilcox order to substantiate its assertion that the Fed is unique is a footnote from its pro-unitary executive ruling in Seila Law v. CFPB (2020). However, that footnote offers no backing for this assertion.
As Kagan highlights in her dissent regarding Wilcox, the only pertinent wording in that footnote is a dismissive remark addressing her partial dissent in Seila Law. Kagan contended that "federal regulators" have historically had some degree of protection from presidential influence. The footnote rebuffs this claim, indicating that even if "financial institutions like the Second Bank and the Federal Reserve can assert a special historical status," the agency involved in Seila Law does not meet that criterion.
In essence, the Court dismissed Kagan’s contention that entities such as the Fed ought to be insulated from presidential oversight in Seila Law. Yet, it seems that the justices in the majority are now hinting at a belief that Kagan’s argument holds some validity.
Should the Court officially overturn Humphrey’s Executor in the near future, the majority justices will probably provide further details on why a distinct rule should be applicable to the Fed. The most reasonable interpretation of the Wilcox order’s brief mention of the Fed is that a majority of the justices have already resolved to safeguard it, and they are now seeking astute legal minds to submit briefs that formulate an argument for that stance — one that incorporates phrases like "quasi-private" and references the early days of national banking.
Naturally, this is not the proper functioning of the law — judges should not begin with a desired outcome and then call upon legal professionals to devise a path to that conclusion. Nevertheless, this is certainly not the first instance where the Roberts Court has started with a predetermined outcome and reasoned backward to achieve it. This time, however, it is simply being more open about the process.