Supreme Court Slaps Down Challenge to Consumer Watchdog

Supreme Court Slaps Down Challenge to Consumer Watchdog

By Yuval Rosenberg and Michael Rainey
Thursday, May 16, 2024

Happy Thursday! Here’s what’s going on.

Supreme Court Upholds Consumer Watchdog's Funding Mechanism

The Supreme Court on Thursday rejected a constitutional challenge to the way the Consumer Financial Protection Bureau is funded, delivering a blow to the agency’s right-wing critics and handing a win to the Biden administration.

The CFPB was created under the 2010 Dodd-Frank Act and tasked with consolidating and supervising consumer protections, including those for financial products including mortgages and car loans, that had previously been the purview of various arms of the government. The legislation, passed in the wake of the 2008 financial crisis and signed into law by President Barack Obama, provided a different funding mechanism for the new agency: It gets money directly from the Federal Reserve rather than through the annual congressional budgeting and appropriations process.

The agency says that it has delivered more than $20 billion in relief to hundreds of millions of Americans and handled more than 4 million consumer complaints. But it has also made some tenacious enemies who have subjected it to a barrage of criticisms and attacks over the years, with many on the right slamming what they see as regulatory overreach and unnecessary red tape.

In a lawsuit, payday lenders challenged the agency’s funding structure, arguing that it violated the Constitution, which gives Congress the power of the purse. A federal appeals court in New Orleans had accepted that argument, ruling that the funding did violate the Constitution’s appropriations clause and allowed the agency to function without proper congressional oversight.

In a 7-to-2 decision handed down on Thursday, the Supreme Court reversed that ruling. “Under the Appropriations Clause, an appropriation is simply a law that authorizes expenditures from a specified source of public money for designated purposes. The statute that provides the Bureau’s funding meets these requirements,” Justice Clarence Thomas wrote in the majority opinion.

Two of the court’s conservatives justices, Samuel Alito and Neil Gorsuch, dissented. “The court upholds a novel statutory scheme under which the powerful Consumer Financial Protection Bureau (CFPB) may bankroll its own agenda without any congressional control or oversight,” Alito wrote.

President Joe Biden and consumer advocates celebrated the decision. “Today’s Supreme Court ruling is an unmistakable win for American consumers,” Biden said in a statement. “In the face of years of attacks from extreme Republicans and special interests, the Court made clear that the CFPB’s funding authority is constitutional and that its strong record of consumer protection will not be undone.”

Biden’s Plan to Extend Trump’s Tax Cuts Would Cost More Than $2 Trillion: Analysis

President Biden is calling for the individual tax cuts signed into law by former President Trump in 2017 to expire as scheduled after next year, but with one major exception: Anyone earning less than $400,000 per year will get to keep those cuts, with the burden of higher taxes falling only on businesses and the wealthy.

The White House has contrasted its position with that of Trump, who, along with many other Republicans, has called for extending the tax cuts for everyone. The Congressional Budget Office recently estimated the cost of doing so would be something like $4.6 trillion over a decade. Trump has also suggested that he wants to pass even more tax cuts, though details have been lacking.

Less has been said about the cost of Biden’s plan. But according to an analysis conducted for the news site Semafor by the Committee for a Responsible Federal Budget, Biden’s proposal would cost between $2 trillion and $3 trillion over 10 years, depending on how it is implemented.

Democrats say they plan to raise taxes on businesses and the rich to cover the cost of keeping the 2017 tax cuts in place for working- and middle-class households. Although they have not yet offered a comprehensive proposal, White House officials have indicated that they plan to raise the corporate income tax rate, crack down on wealthy tax avoiders and enforce a global minimum tax for major corporations.

It could be a challenge, though, to find enough funding to cover the cost of maintaining the Trump tax cuts, especially if a second Biden administration wants to boost its spending on domestic investments such as infrastructure and clean energy, in addition to fulfilling a pledge to expand the Child Tax Credit.

“The big question for Democrats, then, is whether they can find enough offsets to keep their deficit pledges and fund other goals — or if extending Trump’s cuts will simply eat up the rest of their agenda,” Semafor’s Joseph Zeballos-Roig and Jordan Weissmann write.

The big battle ahead: No matter who wins the election this fall, the expiration of large parts of the 2017 tax law will give policymakers a major opportunity to rewrite much of the U.S. tax code next year. U.S. Chamber of Commerce Executive Vice President Neil Bradley told Semafor that it could be “the Super Bowl of tax and economic policy.”

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