Connect with us

Economics

America’s Supreme Court is inclined to clamp down on regulators

Published

on

A PAIR OF spirited Supreme Court hearings on January 17th confronted a question at the heart of American democracy: what is the balance of power among the three branches of the federal government? The justices seemed inclined to shift that balance towards their own chambers.

The cases under review both involve fishermen objecting to a regulation requiring them to pay hefty fees for monitors who keep an eye on them as they troll for herring. The rule was issued in 2020 by the National Marine Fisheries Service, an agency of the executive branch. It was then blessed by two circuit courts of appeal as consonant with the Magnuson-Stevens Fishery Conservation and Management Act, a law passed by Congress in 1976.

Yet in siding with the agency, those courts relied on a 40-year-old Supreme Court precedent, Chevron USA v Natural Resources Defence Council, that some current justices have soured on. According to Chevron, when a law of Congress is ambiguous, agencies have free rein to regulate in line with their understanding of the statute, as long as their interpretations are reasonable. This has come to be known as “Chevron deference”. With this week’s cases, Loper Bright Enterprises v Raimondo and Relentless v Department of Commerce, the apex of America’s judiciary looks ready to rescind this elbow-room for its co-equal branch. It seems judges may soon have more control over regulators handling everything from aviation to consumer safety.

Chevron’s most vocal critic on the court, Justice Neil Gorsuch, stayed true to his cause in the three and a half hours of arguments. Judges “abdicate” their “responsibility” as the final interpreters of the law, he said, when they allow agencies to run amok by making onerous rules like the one for herring fishermen. He suggested that another case, Skidmore v Swift (decided 40 years before Chevron), strikes a more suitable compromise. “Skidmore deference”, Justice Gorsuch said, involves “listen[ing] carefully to both sides and provid[ing] special weight” to what the agencies have to say in favour of their view, but never outsourcing legal questions to bureaucrats.

Justice Brett Kavanaugh spoke sceptically of Chevron, too, but said “deference” mischaracterises Skidmore. The 1944 case is about “respect” for regulators, he said, rather than giving them a long leash. For Justice Elena Kagan, one of only three jurists who resisted Chevron’s demise, Skidmore says “nothing”. The purported Chevron alternative, she quipped, amounts to: “if we think you’re right, we’ll tell you you’re right.”

Justice Kagan posed a number of hypothetical questions to Roman Martinez, one of the fisheries’ lawyers, involving the relative expertise of judges and agencies. Should judges decide whether a new product to promote healthy cholesterol is a “dietary supplement” or a “drug” subject to more stringent regulation? “I would rather have people at HHS [the Department of Health and Human Services] telling me,” she offered. If Congress were to legislate on artificial intelligence, she mused, should America entrust courts or experts to resolve ambiguities?

Justice Ketanji Brown Jackson chimed in with big-picture questions during the Relentless hearing. (She was recused from Loper Bright due to her participation in the case as a circuit-court judge.) Chevron opponents may think judges can keep their own preferences at bay, but “it’s actually not as easy as it seems” to pry apart law and policy, she said. Empowering judges to encroach on the business of agencies, she warned, might turn courts into “über-legislators”.

Elizabeth Prelogar, the solicitor-general, argued doggedly in favour of agency leeway through both hearings. In a nod to Chief Justice John Roberts, she warned that ditching Chevron would cause a “shock to the legal system”—reminiscent of the words he used in 2022 in lamenting his five conservative colleagues’ decision to overrule Roe v Wade, the ruling that in 1973 declared abortion a constitutional right. And in her final few minutes, with prompting from Justice Kagan and in light of an apparent lack of a majority on her side, she proposed a few ways the conservative court might tighten judicial oversight without tossing Chevron overboard. It would be a surprise if the conservative justices take the bait. 

Stay on top of American politics with Checks and Balance, our weekly subscriber-only newsletter, which examines the state of American democracy and the issues that matter to voters.

Economics

Donald Trump sacks America’s top military brass

Published

on

THE FIRST shot against America’s senior military leaders was fired within hours of Donald Trump’s inauguration on January 20th: General Mark Milley’s portrait was removed from the wall on the E-ring, where it had hung with paintings of other former chairmen of the joint chiefs of staff. A day later the commandant of the coast guard, Admiral Linda Fagan, was thrown overboard. On February 21st it was the most senior serving officer, General Charles “CQ” Brown, a former F-16 pilot, who was ejected from the Pentagon. At least he was spared a Trumpian farewell insult. “He is a fine gentleman and an outstanding leader,” Mr Trump declared.

Continue Reading

Economics

Checks and Balance newsletter: The journalist’s dilemma of covering Trump

Published

on

Checks and Balance newsletter: The journalist’s dilemma of covering Trump

Continue Reading

Economics

Germany’s election will usher in new leadership — but might not change its economy

Published

on

Production at the VW plant in Emden.

Sina Schuldt | Picture Alliance | Getty Images

The struggling German economy has been a major talking point among critics of Chancellor Olaf Scholz’ government during the latest election campaign — but analysts warn a new leadership might not turn these tides.

As voters prepare to head to the polls, it is now all but certain that Germany will soon have a new chancellor. The Christian Democratic Union’s Friedrich Merz is the firm favorite.

Merz has not shied away from blasting Scholz’s economic policies and from linking them to the lackluster state of Europe’s largest economy. He argues that a government under his leadership would give the economy the boost it needs.

Experts speaking to CNBC were less sure.

“There is a high risk that Germany will get a refurbished economic model after the elections, but not a brand new model that makes the competition jealous,” Carsten Brzeski, global head of macro at ING, told CNBC.

The CDU/CSU economic agenda

The CDU, which on a federal level ties up with regional sister party the Christian Social Union, is running on a “typical economic conservative program,” Brzeski said.

It includes income and corporate tax cuts, fewer subsidies and less bureaucracy, changes to social benefits, deregulation, support for innovation, start-ups and artificial intelligence and boosting investment among other policies, according to CDU/CSU campaigners.

“The weak parts of the positions are that the CDU/CSU is not very precise on how it wants to increase investments in infrastructure, digitalization and education. The intention is there, but the details are not,” Brzeski said, noting that the union appears to be aiming to revive Germany’s economic model without fully overhauling it.

“It is still a reform program which pretends that change can happen without pain,” he said.

Geraldine Dany-Knedlik, head of forecasting at research institute DIW Berlin, noted that the CDU is also looking to reach gross domestic product growth of around 2% again through its fiscal and economic program called “Agenda 2030.”

But reaching such levels of economic expansion in Germany “seems unrealistic,” not just temporarily, but also in the long run, she told CNBC.

Germany’s GDP declined in both 2023 and 2024. Recent quarterly growth readings have also been teetering on the verge of a technical recession, which has so far been narrowly avoided. The German economy shrank by 0.2% in the fourth quarter, compared with the previous three-month stretch, according to the latest reading.

Europe’s largest economy faces pressure in key industries like the auto sector, issues with infrastructure like the country’s rail network and a housebuilding crisis.

Dany-Knedlik also flagged the so-called debt brake, a long-standing fiscal rule that is enshrined in Germany’s constitution, which limits the size of the structural budget deficit and how much debt the government can take on.

Whether or not the clause should be overhauled has been a big part of the fiscal debate ahead of the election. While the CDU ideally does not want to change the debt brake, Merz has said that he may be open to some reform.

“To increase growth prospects substantially without increasing debt also seems rather unlikely,” DIW’s Dany-Knedlik said, adding that, if public investments were to rise within the limits of the debt brake, significant tax increases would be unavoidable.

“Taking into account that a 2 Percent growth target is to be reached within a 4 year legislation period, the Agenda 2030 in combination with conservatives attitude towards the debt break to me reads more of a wish list than a straight forward economic growth program,” she said.

Change in German government will deliver economic success, says CEO of German employers association

Franziska Palmas, senior Europe economist at Capital Economics, sees some benefits to the plans of the CDU-CSU union, saying they would likely “be positive” for the economy, but warning that the resulting boost would be small.

“Tax cuts would support consumer spending and private investment, but weak sentiment means consumers may save a significant share of their additional after-tax income and firms may be reluctant to invest,” she told CNBC.  

Palmas nevertheless pointed out that not everyone would come away a winner from the new policies. Income tax cuts would benefit middle- and higher-income households more than those with a lower income, who would also be affected by potential reductions of social benefits.

Coalition talks ahead

Following the Sunday election, the CDU/CSU will almost certainly be left to find a coalition partner to form a majority government, with the Social Democratic Party or the Green party emerging as the likeliest candidates.

The parties will need to broker a coalition agreement outlining their joint goals, including on the economy — which could prove to be a difficult undertaking, Capital Economics’ Palmas said.

“The CDU and the SPD and Greens have significantly different economic policy positions,” she said, pointing to discrepancies over taxes and regulation. While the CDU/CSU want to reduce both items, the SPD and Greens seek to raise taxes and oppose deregulation in at least some areas, Palmas explained.

The group is nevertheless likely to hold the power in any potential negotiations as it will likely have their choice between partnering with the SPD or Greens.

“Accordingly, we suspect that the coalition agreement will include most of the CDU’s main economic proposals,” she said.

Germany is 'lacking ambition,' investor says

Continue Reading

Trending