Stability by Design: Keeping Economic Tools Within Constitutional Bounds

Guardrails for the Economy: Congress, the Courts, and the Limits of Executive Power

In the coming weeks, the Supreme Court will decide whether a president can 

1. use the International Emergency Economic Powers Act to impose sweeping import tariffs without new legislation, in the consolidated Trump v. V.O.S. Selections / Learning Resources v. Trump cases; 

   
   

2. refuse to obligate congressionally approved funds via a late‑season “pocket rescission” in Department of State v. AIDS Vaccine Advocacy Coalition; and 

   
   

3. remove a sitting Federal Reserve governor in the Lisa Cook dispute. 

Together, these cases test the three levers of economic power—taxing, spending, and monetary policy—and whether they remain anchored in statute and congressional design or shift toward the White House.  The policy stakes are large. 

• Upholding the tariff gambit would convert an emergency tool into de facto taxing authority in the Oval Office, with spillovers for sanctions and outbound‑investment controls. 

• Endorsing “pocket rescission” would erode the Impoundment Control Act and Congress’s Appropriations Clause power, which GAO has read to prohibit letting impoundments run through the date funds expire. 

• Allowing removal of a Fed governor on disputed, pre‑appointment grounds would weaken central‑bank independence and rattle markets 

  
  

How the Court rules—and how Congress responds—will shape both separation‑of‑powers doctrine and the immediate fiscal outlook. In sum, many view Trump’s legal positions as a direct challenge to Congress’s constitutional authority over budgeting and appointments. How the Supreme Court responds will either curb this overreach or effectively bless it. If the latter, it would fall to Congress to assert itself, though that may prove difficult if the President’s party holds a majority or if partisan divisions persist.

Overview of Key Cases and Concerns 

Tariffs / “taxing by emergency” (Trump v. V.O.S. Selections; Learning Resources v. Trump).

On Nov. 5, the Court will hear whether the International Emergency Economic Powers Act (IEEPA) lets a president impose sweeping tariffs without new law. Lower courts have said most of these tariffs exceed presidential authority; the ruling will shape US economic statecraft far beyond tariffs (sanctions, outbound investment, etc.). 

If the Court upholds Trump’s tariffs. It would hand presidents a playbook to tax imports by declaring an “emergency,” shifting leverage from Congress to the White House. Expect structurally higher import costs and more policy uncertainty for businesses and consumers; analysts link these tariffs to higher prices, slower growth, and market volatility.  Despite Trump and administration claims of multi‑trillion‑dollar revenue effects, data shows costs being passed on to American consumers and businesses.

Spending / impoundment (Dept. of State v. AIDS Vaccine Advocacy Coalition).

This case asks if a president can refuse to spend congressionally appropriated funds—using a late‑season “pocket rescission” to run out the clock so money expires. A D.C. judge ordered the government to make funds available for obligation by Sept. 30.

On Sept. 9, the Chief Justice issued a partial stay letting the administration keep on hold the slice of aid “subject to the President’s Aug. 28 rescission proposal” while the Court considers the dispute—raising the risk that unobligated one‑year funds hit the Sept. 30 deadline and expire.  Watchdogs and even some Republicans say the pocket‑rescission tactic violates the Impoundment Control Act.  

Once expired, agencies cannot create new obligations with that money—even if challengers later win—unless Congress passes a new law to re‑appropriate or extend the funds. By contrast, multi‑year or no‑year accounts don’t expire on Sept. 30 and could still be used later (subject to shutdown rules). During a shutdown, the Anti‑Deficiency Act generally bars agencies from making new obligations unless the work is legally “excepted” or otherwise authorized—so even available funds are harder to move until Congress restores funding. 

Federal Reserve independence (Trump v. Cook). 

Trump is asking the Court for emergency permission to fire Fed Governor Lisa Cook, despite statutory “for‑cause” protections. A district judge kept Cook in place, and SCOTUSblog notes the showdown’s implications for central‑bank independence and markets. If removal is allowed on disputed, pre‑appointment grounds, presidents could pressure monetary policy in real time.

Removing a sitting Fed governor would be unprecedented since the Fed’s creation in 1913, which is why the case is so significant. The Fed was designed to be independent so interest‑rate decisions aren’t steered by short‑term politics. If the Court lets a president remove a governor over disputed, pre‑appointment claims, future presidents could pressure or replace Fed officials for political or other purposes —raising risks to market stability and inflation control. 

Impact on the Looming Government Shutdown

Timing raises the stakes: without a continuing resolution by Sept. 30, a shutdown begins Oct. 1.  The House has advanced a stopgap to avert a lapse, but as of now it has not passed in the Senate.

A shutdown layered on top of these cases would add real economic risk. 

• Tariffs raise import costs and uncertainty for businesses; interference with the Fed undermines confidence that interest‑rate decisions are insulated from politics; and freezing appropriated dollars pulls government spending out of the economy. 

• Late rescissions and stays can cause funds to lapse—as reflected in the Court’s Sept. 9 order partially staying a district‑court directive and allowing foreign‑aid dollars to be held past the fiscal‑year deadline.

• Many agencies must pause non‑essential work: hundreds of thousands of federal employees are furloughed without pay, some services (like national parks operations, loan processing, permits) slow or stop, and essential workers (TSA, border, certain health/safety roles) keep working but without pay until the government reopens. 

Historically, the longer the shutdown, the larger the economic impact both directly (missed paychecks and halted services) and indirectly (lost confidence and investment delays).   

• 2018–19 (35 days, partial shutdown): The Congressional Budget Office said the shutdown cut GDP by $11 billion, with $3 billion permanently lost. Most losses came from delayed federal spending, lost productivity, and private activity that couldn’t happen without federal permits and services.

• 2013 (16 days): The White House’s OMB estimated a $2 - $6 billion hit to Q4 real GDP growth, while S&P put the broader drag at $24 billion. The shutdown also meant $500 million in lost national-park visitor spending, 120,000 fewer private‑sector jobs created between Oct. 1–12, delayed $4 billion in tax refunds, and slowed lending and exports because agencies couldn’t process applications.

• 1995–96 (two shutdowns totaling 26 days): OMB estimated “over $1.4 billion” in direct federal costs, not counting wider private‑sector spillovers.