Since the truce was reached on the government shutdown, the hope has been that we’d get this resolved by the deadline. We did, but a state of emergency came with it.
If anyone still doubted President Donald Trump’s resolve to build his wall along the Mexican border, his actions today should serve to shed more light on just how serious he actually is about this.
The last-minute deal that members of Congress threw together to appease the President enough to have him abandon his effort to use government shutdowns as leverage to get more money for the wall has succeeded. Trump put his signature on the bill on Friday and put an end to this battle, for this year anyway.
If we thought this would be the end of the issue for the President though, that would be a clear mistake. President Trump had been threatening to use another tactic to get his way, his appropriating funds for the wall by way of declaring the issue a national emergency, and Trump generally means what he says and does not just make idle threats.
Sometimes he does use such things to gain a negotiating advantage, as a stepping stone to reach a compromise that is more in favor of his wishes. Perhaps the standoff we’ve seen with his refusing to sign a spending bill for 2019 is an example of this, but threats of declaring a national emergency was not in any sense a negotiating ploy, and at this point at least, this isn’t even something he is exposing to negotiation or willing to compromise on.
The signing of the spending bill and the emergency declaration was positioned as a package deal, of the nature of him taking this concession but still looking to get everything he’s out to get for the wall regardless.
Even though the markets didn’t seem to be too bothered about the shutdown when it was on, and didn’t respond in a particularly significant way to the temporary truce either, it’s simply better to not have to deal with this issue anymore this year. Score that as a win for the stock market even though it’s not as big of a win as some may suppose.
The threat of a national emergency is something that the markets care even less about, and if anything, more government spending is bullish, whether it be for roads or even a Mexican wall. The markets did rally very well on Friday in response to all this, but it was much more in response to the continuing positive developments with the trade negotiations with China, which is a very big deal indeed to companies and their stocks.
The Wall is Still More of a Sideshow as Far as the Markets are Concerned
Preventing an escalation of the current trade war is the biggest issue, although if and when both sides shake on this issue, whatever the resolution is, both sides will come bearing gifts to the market, and some pretty big ones.
Along with Trump speaking on his plans for the emergency we’re facing, he also shared that trade talks were progressing well. He is the man who has set the deadline and the one holding the big stick in case it’s not met, so his feeling that things are going well is particularly significant.
Trump framed the need for declaring this emergency based upon “an invasion of drugs and criminals coming into our country,” and he believes that the wall will have enough of a positive effect on this to justify such an extreme measure.
Democrats are of course up in arms about this announcement, evidenced by the joint statement issued by House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer, who are claiming that the President is acting unlawfully and have declared war on this ploy, telling us that they will “defend our constitutional authorities in the Congress, in the courts, and in the public, using every remedy available.”
The Battle Lines with the Emergency Wall are Now Drawn
Trump is prepared for a fight, and realizes that this won’t be an easy task, but “we’ll win.” He expects to lose some court battles and expects the issue to make it all the way to the Supreme Court of the United States, where he is hopeful that the issue will become decided in his favor.
If we look at precedence though, this is not very likely. The Supreme Court has taken a rather narrow view of the application of these declarations, holding that they can only be rightly used in genuine emergencies. Even if illegal immigration is seen as an important enough issue, it is difficult to see it having enough urgency to make the timeliness of building the wall such that consulting with Congress over it and getting their approval would put the country in such jeopardy that we cannot wait.
Back during the Korean War, a strike threatened to shut down the country’s steel mills. President Truman invoked his presidential powers and declared a national emergency, as this would jeopardize the war effort, and tried to keep the steel mills running, but the Supreme Court said no.
The bar is therefore high and it’s hard to imagine this issue rising anywhere close to this threshold. It is likely that today’s Court would see this as anything but a poorly disguised attempt to usurp the power of Congress, falling well short of the justification needed for this, but some of this at least depends on how Trump plays his hand.
Trump does have a few tricks up his sleeve to not make this too easy, and it all comes down to how he’s going to seek to appropriate the money he’s looking for. There are several sources he could tap into, with some being easier to challenge than others, and he probably isn’t going to make it too easy for his opponents to knock the air out of this plan.
As far as the progress with the talks with China on trade, he told us Friday that the negotiations over the past two days “are going extremely well – who knows what that means because it only matters if we get it done, but we’re very much working closely with China and President Xi, who I respect a lot.”
The stock market, which is quite happy to trade on appearances, does know what “extremely well” means, and the markets on Friday performed extremely well from this good sounding news. It will matter a lot if the deal doesn’t get done, and the markets will no doubt pull back and then some if this does happen, but for now, things are looking quite good on this front.