Trump 'Almost Definitely' to Declare a National Emergency

Plus, Ocasio-Cortez’s 70% tax rate bombshell

How Trump Could End the Shutdown: Swap One Crisis for Another

With talks to end the partial government shutdown showing no signs of progress, President Trump on Thursday said he has “an absolute right to declare a national emergency” in order to build a wall along the southern border without authorization from Congress.

"I may do it. If this doesn't work out, probably I will do it. I would almost say definitely," Trump said, adding that he hasn’t done it yet because he would like to reach a deal through Congress.

Late in the day, Sen. Lindsay Graham (R-SC) reportedly called for Trump to use emergency powers to fund the wall, after the president rejected a Graham-led effort by Senate Republicans to break the shutdown stalemate.

A Constitutional Battle as the Only Way Out?

Democrats have denounced the idea of a national emergency declaration and are sure to quickly challenge any such move in court. Some Republicans have warned against it, as well, concerned that it would set a problematic precedent regarding presidential power. “But it could be the only politically realistic way out of the shutdown crisis in the nation’s capital,” writes Charlie Savage in The New York Times.

Invoking emergency powers would unleash a firestorm of criticism and legitimate concerns about the health of the democratic process and rule of law in the U.S. “Of the 58 times presidents have declared emergencies since Congress reformed emergency-powers laws in 1976, none involved funding a policy goal after failing to win congressional approval,” Savage notes.

The Politics at Play

Those high-minded constitutional considerations might take a back seat to shorter-term political calculations, at least in the president’s mind. As we wrote here earlier this week, a declaration would allow the government to reopen without either side backing down in the fight over the border wall — and likely without resulting in much immediate progress on wall construction, given the legal battles that are sure to arise.

“If, in the end, the Supreme Court were to rule that emergency-power laws give Mr. Trump authority to proceed, he would probably face still more litigation with property owners over whether the government may use eminent domain to force them to sell their border lands,” Savage says. “There may be little time left in his term after all that to add more than a few miles, if any, of barriers to the 1,954-mile border.”

If, on the other hand, Trump’s declaration is ruled illegal by the courts, Trump “could honestly tell his supporters that he tried, and then vow to renew the push if he is re-elected.”

How Trump Could Get His Wall Money from the Pentagon

White House lawyers are reportedly preparing a legal justification for an emergency declaration. And officials at the Department of Defense are already searching for funds that could be redirected to wall construction, CNN’s Barbara Starr reports:

“Defense Department officials told CNN that the Pentagon is planning a figure of about $2.5 billion in funds they believe they can tap to support construction of a border wall if Trump declares an emergency and orders the military to build a wall. Those funds fall under the ‘unobligated’ pool of funds, which means the funds are earmarked but have no signed contracts signed for spending that money. Anything beyond that would require the cancellation of existing military construction projects, which might come with costly termination fees.”

The Economic Costs of the Shutdown

Moody’s Investor Service said Thursday that the government shutdown poses a risk to the U.S. credit worthiness “to the extent that it disrupts the US economy,” but there’s no threat to the country’s credit rating just yet. The U.S. government is still servicing its debt and the Treasury Department continues its borrowing-related work despite a lack of funding at the agency, Moody’s said.

If the shutdown continues, however, the economic costs will rise as a wide variety of activities are impinged upon, including “permitting and environmental reviews, import and export license processing, IPO application reviews and loans to small businesses and homeowners.” And liquidity strains could start showing up soon among entities that rely on federal funding, such as local transit agencies and small defense contractors.

Here’s the rating agency’s view of the potential effect on GDP:

“Moody's Analytics estimates that the shutdown could reduce US economic output by $8.7 billion if it persists until the end of January, shaving 0.2 percentage points off 2019 first-quarter annualized growth. Although this would have a minimal effect on our projection of 2.3% real GDP growth for 2019, the effect will be more pronounced if the shutdown continues into February and if it exacerbates recent softness in business and consumer confidence or triggers an adverse reaction by financial markets.”

Along the same lines, economists at Bank of America said that if the partial government shutdown continues, they may reduce their estimate of 2.2 percent GDP growth for the first quarter, CNBC reported.

Federal Reserve Chair Jerome Powell echoed those views Thursday during a discussion at the Economic Club of Washington, D.C., saying that a long shutdown could hurt the economy: “If we have an extended shutdown, I do think that would show up in the data very clearly.”

Previous shutdowns have been relatively short and haven’t had a big impact on overall economic growth, Powell said, but the current closure will become the longest in history if it continues until Saturday, leading the country into uncharted territory.

Quote of the Day

“I’m very worried about it. From the Fed’s standpoint, we’re really looking at a business-cycle kind of length. That’s our frame of reference. The long-run fiscal, non-sustainability of the U.S. federal government isn’t really something that plays into the sort of medium-term that is relevant for our policy decisions. It’s a long-run issue that we definitely need to face, and ultimately, will have no choice but to face.”

­­­– Fed Chair Jerome Powell, during an interview Thursday at The Economic Club of Washington, D.C., when asked whether the Fed is worried about the amount of federal debt level

Lawmakers Push Bills to Cut Prescription Costs

With the new Congress now in session, lawmakers have been rushing to unveil legislation to rein in rising drug prices, and the Trump administration’s top health official has been talking tough about the issue.

* Sen. Chuck Grassley (R-IA), the new chair of the Senate Finance Committee, laid out three bills this week as top priorities. They include a proposal put forth with Sen. Amy Klobuchar (D-MN) to allow Americans to import drugs from Canada for personal use and a bill to ban “pay for delay” agreements in which manufacturers of brand-name drugs pay the makers of generics to delay production of competitors. (Grassley remains opposed to legislation allowing Medicare to negotiate directly with drug companies, and he doesn’t favor the Trump administration’s proposal to tie certain Medicare drug payments to prices that European countries pay.)

* Sen. Bernie Sanders (I-VT) and some Democrats on Thursday unveiled three bills aimed at lowering drug prices. The bills, according to the Associated Press, would allow consumers to import medications from Canada; let Medicare to directly negotiate with drugmakers; and strip exclusive licenses from pharmaceutical companies and open up generic competition for drugs whose prices are higher than the median price in Canada, the United Kingdom, Germany, France and Japan. The international pricing proposal would apply to any patent-protected brand-name drug — far more than under the Trump administration’s similar proposal.

“The Democratic bills stand little chance of becoming law in a divided government. But the effort could put Republicans on the defensive by echoing Trump’s pledge to force drugmakers to cut prices,” the AP’s Ricardo Alonso-Zaldivar writes.

The Trump administration has ramped up the political rhetoric against drugmakers as well. Health and Human Services Secretary Alex Azar sent a stern-sounding warning this week to drugmakers who raised prices to start the new year (see the Bloomberg chart below for some examples).

“Maintaining the status quo, where higher priced drugs are more competitive and patients pay more, is unacceptable. Companies that announced price increases in January admitted they were doing so to funnel payments back to PBMs in order to keep the preferred status of their drugs,” Azar tweeted Wednesday. “For those listening in the pharmaceutical industry: The list price increases must stop. Prices must start coming down.”

He offered a similar message in a Fox Business interview: “I want to be really clear to the pharma companies out there and to the pharmacy benefit managers: The president and I will not stop until list prices of drugs come down. This behavior has to stop. Drug prices must come down. And we will roll out more regulatory and legislative proposals, and we will work with Democrats and Republicans to get drug prices down.”

Trump himself tweeted Saturday that “Drug makers and companies are not living up to their commitments on pricing. Not being fair to the consumer, or to our Country!” And he called Azar and other top officials to the White House for a meeting on drug prices Tuesday.

Shutdown News

Other News

Views and Analysis