Trump's Authority to Dismiss Jerome Powell Could be Clarified by the Supreme Court
Trump's Brawl: A Power Struggle Over Fed Control
USA's 45th president, Donald Trump, stirred the pot again when he slammed Federal Reserve Chair Jerome Powell for being "too late and wrong," urging for his termination on Thursday. Meanwhile, the Supreme Court is mulling a pressing appeal regarding two independent agencies responsible for overseeing workplace protections, which has become a heated proxy battle for national bank control.
This decision could either grant Trump the authority to seize control over independent agencies, pushing their power into the executive branch, or slow down this ambitious effort. The crux of the issue pivots around Trump's dismissal of senior officials at the two agencies, who are fighting tooth and nail to get reinstated. These officials claim that, if Trump triumphs, he'll set the stage for a radical overhaul of the Federal Reserve.
Trump posted a blunt message on social media, calling Powell's latest report "a mess" and stating, "Powell's termination cannot come fast enough!"
His administration made it crystal clear in a letter to Congress earlier this year that they planned to challenge a 1935 precedent which allowed Congress to require presidents to prove cause—like misconduct—before dismissing agency heads. Overturning this ruling could spur wide-ranging implications for numerous agencies established to stand apart from the White House's political mercies.
The administration argues that neither courts nor Congress should impede Trump's efforts to seize control of these agencies by firing their leaders. Solicitor General D. John Sauer, the top appellate lawyer, insisted to the Supreme Court earlier this month, "The president should not be forced to delegate his executive power to agency heads who are demonstrably at odds with the administration's policy objectives for a single day - much less for the months that it would likely take for the courts to resolve this litigation."
A Tussle Over Footnotes
The impending Supreme Court verdict on the two labor agencies might roll out a question about a significant 1935 Supreme Court ruling, Humphrey's Executor v. US, that keeps some distance between the White House and independent agencies. Overturning this precedent would equip presidents with immense power to discard officials who enforce anti-trust laws, labor rules, and disclosure requirements for publicly traded companies.
The conservative majority of the Supreme Court has shown skepticism towards for-cause protections that Congress incorporates into executive-branch positions in recent years. Four years ago, the court's conservatives declared that such protections for the Consumer Financial Protection Bureau violated the separation of powers principles. Trump has persistently targeted this bureau in his second term, as it oversees regulations intent on safeguarding consumers from credit card debt, mortgages, and financial products. Chief Justice John Roberts asserted in the majority, "The CFPB director has no boss, peers, or voters to report to. Yet the director wields vast rulemaking, enforcement, and adjudicatory authority over a significant portion of the US economy."
However, the court's decision left Humphrey's intact, with Roberts acknowledging that it applied only to independent agencies led by a single director rather than multi-member boards. Conservative Justice Clarence Thomas, joined by Justice Neil Gorsuch, would have pushed further. They framed the precedent as a "direct threat to our constitutional structure and, as a result, the liberty of the American people." Thomas declared, "In a future case, I would repudiate what is left of this erroneous precedent."
Trump's Subtle Strategy
The administration has strategically dodged concerns that a ruling in favor of Trump in the labor case could escalate to direct tampering with the Federal Reserve. Sauer told the Supreme Court in a brief this week, "While respondents focus heavily on other agencies such as the Federal Reserve Board, they ignore [the court's recent] observation that the Federal Reserve's tenure protection presents a distinct question with a unique historical pedigree."
Essentially, the administration is distancing itself from the notion that, if they triumph in the labor board case, they'd inevitably go after the Fed. Nonetheless, president Trump's hostility towards Powell stretches back to 2018, with most of his gripes revolving around the Fed failing to cut interest rates at his behest. Dubbing Powell as an arch-nemesis and accusing him of playing politics, Trump insisted, "Powell's termination cannot come fast enough!"
Although the Fed's decisions, under Powell's leadership, have always been rooted in economic data in pursuit of the central bank's dual mandate of optimal employment and price stability, these decisions sometimes don't align with politicians' preferences. However, the sacrosanct independence that enables the Fed to successfully combat inflation and unemployment when necessary is essential for the bank's credibility and effectiveness.
- The Supreme Court's ruling on two labor agencies could potentially question a 1935 Supreme Court ruling, Humphrey's Executor v. US, which separates the White House from independent agencies.
- Overturning this precedent would give presidents the power to dismiss officials enforcing anti-trust laws, labor rules, and disclosure requirements for publicly traded companies.
- Conservative justices have shown skepticism towards for-cause protections in executive-branch positions, having declared such protections for the Consumer Financial Protection Bureau as a violation of the separation of powers principles four years ago.
- According to the court's decision, the ruling left Humphrey's intact but only applies to independent agencies led by a single director rather than multi-member boards.
- Trump's administration has asserted that neither courts nor Congress should obstruct Trump's attempts to seize control of agencies by firing their leaders.
- The administration's strategy is to distance itself from the assumption that if they win in the labor board case, they will directly target the Federal Reserve.
- Trump's hostility towards Federal Reserve Chair Jerome Powell dates back to 2018, with most of his criticisms revolving around the Fed not lowering interest rates as desired.
- The independence of the Fed, allowing it to combat inflation and unemployment effectively when necessary, is crucial for the bank's credibility and success, despite decisions sometimes not aligning with politicians' preferences.
