SALT Speak - Joel Michael's Blog

A prime focus of the 2026 legislative session has been on the problem of fraud in social services programs. Absent the distraction (to put it mildly) of the ICE surge, the Republicans likely would have succeeded in making fraud the dominant session issue. This has an obvious political dimension: they hoped to ride it to electoral success in November. But it is clearly also a serious policy problem that needs to be addressed.¹

Trump and the national Republicans have accommodated those efforts by making fraud in Minnesota programs a national issue. The Right-Wing media have reinforced that effort with a constant drumbeat of stories. The large dollar numbers (about $250 million) from the Feeding Our Future, COVID food assistance fraud, along with fraud in newer MA-funded programs for autism and housing assistance made Minnesota an easy target. Add to that, the former acting US Attorney threw out ridiculously large and speculative, at best, estimates ($9 billion) of additional fraud.²

I have no expertise in the workings and structures of social service programs, potential fraud in them, or how to reduce or minimize it. But as I watch the debate from the sidelines, my tax centric perspective may provide useful context, as well as an idea for detection/mitigation based on what works in the world of tax compliance.

Context: $ amount

Putting aside Joe Thompson’s numbers, reliable numbers (i.e., from court proceedings, charges, and so forth – not speculation or guesses) are well under $1 billion for Minnesota social service fraud (Strib came up with $218 million from court records back in December). As has been occasionally reported, Arizona had a series of related Medicaid fraud cases that were many multiples (>$2 billion), but it has not garnered anywhere the national attention.³

A billion dollars in fraud is large (to say the least), but to provide useful context federal tax evasion cases involving owners of one closely held obscure company, Vista Equity Partners that provides software to auto dealers, likely also defrauded taxpayers of an equal or potentially larger amount:

• The IRS charged the principal owner, Robert T. Brockman, with fraudulently failing to report $2 billion in income.
• Brockman died before the criminal case could be tried, but his estate settled with the IRS, paying $750 million in taxes and interest in December 2025.
• The company’s CFO and another founder of the company, Robert Smith, settled with DOJ agreeing to pay $139 million in back taxes and penalties, as well as abandoning a refund claim for $182 million. His case led to the Brockman case.

It’s very easy to infer that taxpayer losses equaled or exceeded a billion or close to it from tax fraud by those two owners of Vista Equity. This attracted minimal public attention beyond the financial press and the tax world.

The cases were brought and settled during the Trump administrations. Beyond putting out the usual DOJ press releases, they did not make a big deal about it. Instead, they have been systematically dismantling and hobbling the IRS, the agency that fights tax fraud.

Moreover, Trump has pardoned a significant number of the perpetrators of tax fraud.⁴ An AI search turned up a list of notable pardons for tax crimes including these examples:⁵

• Todd and Julie Chrisley: The reality TV stars were pardoned for convictions including bank fraud and tax evasion related to a $30 million loan scheme and failure to file tax returns.
• Michael Grimm: A former Republican Congressman pardoned after pleading guilty to tax fraud for underreporting $900,000 in restaurant revenue.
• Paul Walczak: A Florida businessman pardoned after pleading guilty to willful failure to pay over $10 million in federal taxes.
• Jeremy Hutchinson: A former Arkansas state senator pardoned following convictions for bribery and tax fraud, specifically filing false tax returns.
• Joseph Schwartz: A nursing home executive pardoned after pleading guilty to a $38 million Medicaid and tax fraud scheme.
• Charles Kushner: Pardoned for convictions including assisting in the filing of false tax returns.
• Paul Pogue: Pardoned after pleading guilty to underpaying taxes by more than $400,000.
• Albert J. Pirro Jr.: Pardoned for conspiracy and four counts of tax evasion.

There is a basic asymmetry in the administration’s, and more broadly the public’s, perception of tax fraud as a lesser evil than bilking direct spending programs. (Note that some of these cases did not exclusively involve tax fraud.) This probably has something to do with the psychology of loss aversion – failing to pay taxes you owe simply is not as bad as defrauding direct spending programs. But money is money and committing tax fraud is not economically or financially different than fraudulently getting a government grant-in-aid – in terms of its effects on the federal fisc and taxpayers. That is why loss aversion is a fallacy.

It also demonstrates the administration’s hypocrisy and political opportunism. This isn’t about the integrity or the cost of government programs. It’s politics.

Context: tax system social welfare benefits

Federal and state governments increasingly have turned to the tax system to deliver social welfare benefits. This is typically done through refundable tax credits, such as the earned income tax credit (EITC), child tax credit (CTC), working family credit, dependent care credit, and so forth. Many billions of dollars of benefits are delivered through the tax system. For example, the tax expenditure for the EITC is about 2X the outlays for TANF, the main direct spending federal welfare program (income support, rather than in-kind benefits like SNAP and Medicaid).

The policy/political thinking behind the refundable tax credit approach has several rationales. It takes advantage of the existing tax system infrastructure, is cheaper and less intrusive, delivers benefits with less social stigma, is better suited to encouraging or requiring work as a condition of benefits, and so forth. So, there are some definite advantages but also drawbacks; neither is the point I want to make.

This system relies on the recipients themselves to determine whether they are eligible and to claim benefits. That often means private advisors (tax preparers) effectively function as the social workers administering the programs because the recipients consider themselves unable (often correctly) to navigate applying the rules and filing the necessary returns. Tax preparers are only lightly overseen by the IRS and state tax administrators.⁶

The Center for Taxpayers Rights recently published an excellent study on non-credentialed tax preparers, specifically how accurately they claimed the EITC and CTC on behalf of their low-income clients. They did this by mystery shopping – i.e., having returns prepared and seeing how well a series of non-credentialed preparers complied with the law.⁷ The results were not pretty. They found:

Non-Credentialed Preparers … did not understand basic aspects of filing status, refundable and other credit requirements, cash income reporting, and deductible business and home office expense rules.

Of the 28 returns that they had successfully prepared claiming social welfare type benefits (EITC, CTC, etc.), only 2 were correctly filed. The wrongly claimed refunds varied widely, both too and high and too low, but more often too high. (No surprise – that’s what market economics would predict.) The amounts were, in some cases, large (e.g., $9k). Some of the reporting behavior pretty clearly was intentional or negligent overclaiming.

The scenarios presented were not easy (to say the least). Putting it in academic terms, they were difficult exam questions. But that is often the case in the real world, where unmarried couples live together and raise children who often also have other parents. The credit rules are complex and not easy to apply in those circumstances. It illustrates both the difficulty of using the tax system to deliver these types of benefits and how open that is to mis-claiming, if not outright fraud. On a systemwide basis, the erroneous and fraudulent amounts are undoubtedly large, and the IRS and state tax authorities are woefully understaffed to address the problem.

The whole piece is worth reading. Low-income sole proprietor returns were no better and probably were worse. Low-income recipients pay a material amount for these tax preparation services and over 60% used paid preparers or purchased software (about half of those used non-credentialled preparers).

The policy point is that federal and state money could be saved and fraud reduced by better education and regulation of preparers. It’s not obvious to me that the return on investment (ROI) on efforts along those lines would not be higher than attempts to reduce fraud in direct spending social welfare programs. It’s simply less eye-catching and glitzy.

Tax compliance insights

Again, I have no expertise in social services or health care programs. Nevertheless, I’ll venture to suggest a tactic for fraud detection or mitigation, based on tax compliance rubrics. (The more obvious approaches that should be pursued first have been widely discussed: replace the creaky old IT systems, improve management, invest in human capital, etc., all of which make sense but are outside my expertise.)

A core insight from the tax world is that compliance materially rises when critical data is reported to the government by trusted third parties. For example, 1099 reporting of interests and dividends by financial institutions result in >93% compliance, while the overall voluntary compliance rate is <85%. IRS Publication 5869 (Rev. 10-2024). It might be possible to apply that insight to develop a compliance-enhancing reporting features for some Medicaid funded programs.

I’m thinking of programs where nontraditional entities (i.e., other than classic, regulated health care providers like hospitals, nursing homes, and clinics) need to use employees to provide services, like home health care, personal care attendant, long-term care, or autism services, to individuals covered by MA, Minnesota Medicaid program. Many accounts suggest that these types of programs have high potential for fraud.

Based on media stories, one pattern of fraud by these types of entities goes like this:

• Fraudsters establish an entity (a nonprofit corporation or for-profit entity like an LLC) to provide the funded services. The entity applies for funding, representing it will provide services to eligible individuals and receives approval.
• Entity finds or recruits eligible individuals (family members, friends, individuals taking kickbacks, etc.) who it uses to claim reimbursement for services that it asserts to have provided but doesn’t actually provide.
• State reimbursements are diverted to the founders’ bank accounts and used for lavish lifestyle purchases, unrelated investments, gambling, foreign remittances, etc. rather than to provide services.

A variant is a legitimate service providing organization and the owners or managers cross over to the dark side and claim sizable reimbursement for services never provided. The owners again divert the money to their own uses, rather than paying employees who take care of MA enrollees.

A key commonality is that MA reimbursements are going to the fraudsters personally, not being used to pay employees to take care of, provide therapy, or other services to elderly, disabled, or autistic MA recipients. The key question is: can trusted third-party reporting be used to reveal that failure? The failure is not actually paying employees at a level necessary to deliver the services purported to be provided.

A natural first response would be to have the MA recipients certify and regularly report on whether and/or how often they receive services. (Maybe this is already done or is being proposed – again, my ignorance is on display.) However, that type of reporting may be unreliable for a variety of reasons – in the worst case, the recipients are complicit in the fraud (b/c they’re friends or family, are receiving kickbacks, etc.) or more generally, their incentives are not properly aligned. They may feel compelled to stay on the good side of their providers if alternatives for them to get services are scare. In short, recipients may not be trusted third-party reporters for those reasons.

The solution that occurs to me: focus on whether wages are being paid to employees. It should be feasible to set a minimum percentage of MA reimbursement, based on the type of service (personal care attendant, autism therapy or whatever.), that is typically paid in wages.⁸ If trusted third-party reporting reveals that the minimum levels of wages are not being paid, an audit or other investigation would be triggered.

Federal tax law requires employers to pay FICA and Medicare taxes quarterly or more frequently for their employees. These taxes are a fixed percentage of wages. The money must be paid over to the federal government. That is, it cannot be easily faked – the employer must provide social security numbers for the employees and pay the tax. In short, paying the tax and pocketing the net as fraud proceeds won’t be easy to do and ultimately would be uncovered. So, trusted third-party reporting of the payment of varying threshold amounts of federal payroll taxes would seem to be a good fraud backstop.

The gold standard would be to have the IRS report regularly on the amount of payroll tax paid by the MA provider. Providers could be required to authorize disclosure of their tax information by the IRS (i.e., waiving their confidentiality rights). But even with that, a federal statutory change would be required to permit the IRS to disclose this information to the state. Obtaining a federal law change might be a bridge too far, even when the hyperfocus by Republicans nationally on fixing fraud in social service programs. The administration’s push to use IRS data for immigration enforcement would seem to be a good argument for a more targeted use in this context. But getting anything through a polarized and gridlocked Congress is a heavy lift.

Another alternative would be to require payroll providers (most businesses use big independent firms like ADP or Paychex) to regularly report this information for MA providers to the state. The requirement that this reporting is done would be written in the MA providers’ contracts to qualify for MA reimbursement.

There are likely good reasons why something like this is not feasible, but it is the type of approach I would look at based on my tax related experience.

Notes

1. What is unclear to me is whether the problem is worse in Minnesota than elsewhere in the country. I have seen no credible estimates – i.e., based on multistate analyses of reliable data – that Medicaid fraud is proportionately higher in Minnesota than nationally. What is clear is that the administration’s focus on Minnesota is political, not an evenhanded or neutral effort. Arizona, for example, has a larger documented Medicaid fraud case ($2.5 billion admitted by the state for one Medicaid funded program) that did not trigger a similar state-specific enforcement effort by the federal government. Arizona’s politics likely did not provide a sufficiently tempting political target, unlike Minnesota. The appropriate federal response is to treat this as a national problem that needs to be systematically and thoughtfully analyzed and addressed with forward-looking policy solutions, as well as backward-looking enforcement. Good luck with the folks in DC doing anything like that. ↩︎
2. Only time will tell obviously if I’m right about my instinct that his $9 billion number is simply a wild guess, a generalization from abuse levels in one program to many. So far, no support has come out from the administration. That to me is damning, given their propensity to make up bogus stuff to support their political positions. If they had real evidence, they surely would be putting it out and it would be showing up in the Right-Wing media ecosystem in a steady stream. I do wish Thompson could be held responsible for what may have been fabulizing to gain favor with the WH. In my mind, this is contrary to the spirit of DOJ’s ethical guidelines as to how US Attorneys are to deal with the media. His $9 billion number is now routinely cited by responsible MSM outlets like the NY Times (always with qualifying adjectives like “reported” or “suggested” as in this Times article). That repetition gives credibility to and a false reality to the number. Many assume it is true when it is likely little more than a bad guess. ↩︎
3. Acknowledged to be at least $2.5 billion by the Arizona authorities. ↩︎
4. Trump has pardoned many regular (i.e., non-tax) fraudsters, most of whom likely were tax chiselers as well. This NY Times article (3/19/2026) describes pardons of 70 individuals convicted of fraud, one of which involved $1.3 billion in Medicare and Medicaid funds. This ProPublica story describes one sorry example. The only logical conclusion is that his fixation on social service fraud in Minnesota is highly selective and fundamentally hypocritical. ↩︎
5. I also did a quick search of the DOJ’s Office of Pardon Attorney’s database and turned up more cases of pardons for tax crimes that AI must not have considered “notable” – including Darryl Strawberry, the former Mets and St. Paul Saints baseball player who pled guilty to tax evasion. Go figure why he’s not notable to AI. ↩︎
6. They are not licensed or explicitly regulated by the IRS, being only subject to civil and criminal penalties for violations. The IRS promulgated regulations that attempted to impose regulations, but its efforts were struck down in the Loving case by the DC Court of Appeals and not appealed to the Supreme Court. Minnesota has some additional legal rules that apply to preparers and provide enforcement authority to DOR. But they are not licensed or directly regulated in Minnesota. A few other states do that. ↩︎
7. Most preparers are non-credentialed – i.e., they are not CPAs, licensed attorneys, or enrolled agents, just someone who hung out a shingle and are providing tax preparation services. They have gotten a PTIN from the IRS, but that’s it. ↩︎
8. Adjustments would need to be made for firms that have revenues from material sources other than MA reimbursement or provide a variety of different types of MA services. There are likely a host of other technical details that would need to be worked out, which is surely an understatement. ↩︎

SCOTUS invalidated Trump’s IEEPA tariffs and its decision has gotten the expected extensive coverage by the news media, opinion writers, and legal commentators. Much of the commentary, in my opinion, makes a much bigger deal out of the decision than it merits. The decision was pretty much what I expected, and its long-term effects (legally, politically, and economically) are likely not going to amount to much. By contrast, a decision upholding the tariffs would have been a big deal.

In a nutshell, the 6-3 decision held that the relevant statute did not authorize POTUS to impose tariffs (i.e., “regulate … foreign commerce” ≠ “impose tariff”). It took 170 pages of opinion writing to get there. Roberts wrote the main opinion and relied on the major question doctrine (MQD) to construe the statutory language with Barrett and Gorsuch joining; the three liberals relied on old-fashion statutory construction; Gorsuch wrote a long petulant concurrence emphasizing his version of MQD while attacking the hypocrisy of the three liberals, Barrett for not agreeing with him on his MQD views, and the dissenters for refusing to apply MQD (primarily because of the national security and foreign policy context). Thomas, Alito and Kavanaugh dissented and would have upheld the tariffs, concluding that if you can regulate and embargo commerce, you can tariff it.

Prediction accountability

The result – invalidation of the tariffs – was what the prediction markets had expected after the November oral arguments (about 70% probability), although many were surprised that it took the Court so long to issue the decision. I was not. I’m sure the internal sniping over the MQD and the number and length of opinions largely explain that.

Back in November, I predicted that there were four sure votes to invalidate (the three liberals and Gorsuch); three to uphold (Alito, Thomas and Kavanaugh), both of which were correct. I thought Roberts and Barrett would determine the result and expected invalidation based on the tenor of the argument. That proved correct. Those who hoped for a quick 9-0 or 8-1 decision invalidating the tariffs were IMO Pollyanna’s.

Economic effects

Will the case have big economic implications or effects? Before it came down, some had speculated that a decision might have important economic effects because it would cause most of the tariffs to go away and the resulting refunds would provide an economic stimulus of sorts. Neither appears likely to have much effect.¹

Reduced tariff rates

With regard to ongoing tariff rates, the main effect appears to be a modest cut in the effective tariff rate. The administration (i.e., stubborn, tariff-loving Trump himself) is determined to impose new tariffs under other statutory authority. As Kavanaugh pointed out in dissent, several statutes provide discretionary tariff authority to the president. That led him to observe that “the Court’s decision is not likely to greatly restrict Presidential tariff authority going forward.”² This CRS Report summarizes the various statutes, as well some of the caselaw under them. It has a nice table providing a thumbnail comparison of the different authorities.

Replacing the tariffs under alternate statutory authority began immediately with the administration’s decision to impose an across-the-board 10% tariff (hey, that’s back to what Trump said he would do during the 2024 campaign).³ Yale Budget Lab estimates this will have the effect of reducing the overall effective tariff rate from about 17% to 9%. Penn Wharton Budget Model estimates the IEEPA rate of 10.3% would be replaced by 7.7%. (Each is estimating a slightly different rate.) A reasonable guess is that they will also impose additional, selective tariffs based on the country of origin, product, and so forth. Overall, the ongoing effects can be hypothesized to have a few effects – none of them of likely great economic moment (at least on a macro basis):

• A reduced overall effective tariff rate but still much higher than under Trump 1 or Biden.
• A modest reduction in the chaotic imposition and reduction of tariffs. Since the alternative statutory authorities are much less flexible administratively than the way the administration was using the IEEPA, they cannot be imposed based on Trumps’ whims.⁴
• Lower revenues than under the pre-decision regime but tariffs will still generate substantial revenues compared to Trump 1. CBO estimates the SCOTUS decision increased the deficit by $2 trillion (over the usual 10 years). CRFB estimates the 10% tariff if made permanent (statute has a 150-day limit) would restore over half of that revenue and, of course, that ignores selective tariffs likely to be imposed under other authority.

On balance, reduced and slightly more stable tariffs and larger budget deficits and debt are the likely outcomes, one positive and one negative. Overall, it is probably close to a wash economically.

Refunds as stimulus

Refunds of the invalidated tariffs will obviously have to be paid, but as Kavanaugh said “it is likely to be a ‘mess’[.]” (p. 63). Despite the decision, the administration did not immediately stop collecting the tariffs and signaled that it was not going to be prompt in paying refunds. Evidence of the likely administrative foot dragging is found in this NY Times article, including requesting a four-month delay out of the box.⁵

This Executive Functions podcast with a Stanford law prof who is a trade expert, provides a good taste of the legal complexities. Refunds are likely to be paid in more of a trickle than a torrent with only modest stimulative effects. However, this Court of International Trade order suggests that the administration may be compelled to issue refunds faster than it likes. This NYTimes story on the case contains useful background information. This 13-page affidavit explains why CBP has administrative difficulties complying with the court’s order to issue refunds, given the personnel and software limits. It also validates the “mess” Kavanaugh referred to.

This NPR story reports the administration is working on a fix and that the estimated amount of refunds is $166 billion (official estimate). The Penn Wharton Budget model estimates that the refunds will be in the same ballpark ($175 billion). That’s a lot of money, but the effect probably won’t be that big because the money will be gradually paid out mostly to businesses that are unlikely to quickly spend it (or reduce prices) because that’s not what businesses typically do (unlike low-income individuals getting rebates) and because of the uncertainty about future tariffs and the economy generally. Who knows how much will get to the consumers who bore most of the ultimate burden.

Political effects

A variety of politicos suggested that an adverse decision would provide Trump with the opportunity to walk away from the negative political consequences of his tariff madness. Put another way, SCOTUS was giving him and the GOP Congress, which must stand for election in November, a political gift of sorts. Events have shown that is not the case. Trump is doubling down and will impose replacement tariffs. In fact, his doing so may put more pressure on the GOP Congress, if he seeks congressional approval to extend his section 122 temporary tariffs. (I can’t believe he will try to do that because it will almost surely fail. But I have given up predicting what he will do.) Slightly lower rates and less chaos are better than nothing but aren’t a political balm.

Of course, the political, economic, and fiscal effects of the Iran War overshadow all of this. The inflationary effects and fiscal cost of the war dwarf those of tariffs – even if Trump declares victory and goes home quickly. The Pentagon is requesting $200 billion in funding for the war, more than the official estimate of the amount of illegally collected tariffs ($166 billion).⁶

The real political effect might be to shore up public views of SCOTUS’s independence and standing. I’m sure that is the effect that John Roberts is hoping for. (After I wrote the first draft of this, Adam Liptak made that point as well.) Some media coverage tends in that direction, and conservative commentators are banging that drum. I expect that narrative will be augmented by Trump losing the cases on birthright citizenship and his attempt to remove Fed governor Lisa Cook.

Constitutional significance

The tariff case was a big deal as a political and policy matter because it:

• Invalidated a signature policy of the Trump administration
• Trump himself made such a big deal of it before and after the decision
• It involved a lot of money ($166 billion in taxes invalidated)
• It got a lot of press and public attention
• It was one of the few losses the Trump administration has suffered in SCOTUS
• Etc.

But is it a big deal legally and as a constitutional precedent? A variety of legal commentators with a conservative bent think so. A few examples: Jack Goldsmith (“blockbuster”); David French (“most important case of the century” albeit with a question mark), Sarah Isgur; and Jeffrey Rosen.⁷

As I suggested in the intro to the post, I don’t think so. It’s a statutory construction case. Thus, it establishes no constitutional doctrine or precedent per se. (To be fair, most of the commentators are reading it mainly as a harbinger of the Court’s sentiments and it avoided an outcome – upholding the tariffs – that would have been a truly big deal. So, there’s that.) A majority did not even agree that the newish MQD applied. That’s why Gorsuch was so exercised in his concurrence. The Court split 3-3-3 with the liberals rejecting it, Roberts, Gorsuch, and Barrett applying it, and the other three conservatives saying it didn’t apply. MQD is a constitutional doctrine that the Roberts Court created to invalidate congressional grants of power to the executive that standard statutory construction rules would allow. It clearly was unnecessary to decide the case, given the vote. As Roberts put it (p. 11):

The President’s assertion here of broad “statutory power over the national economy” is “extravagant” by any measure. And as the Government admits—indeed, boasts—the economic and political consequences of
the IEEPA tariffs are astonishing. The Government points to projections that the tariffs will reduce the national deficit by $4 trillion, and that international agreements reached in reliance on the tariffs could be worth $15 trillion. In the President’s view, whether “we are a rich nation” or a “poor” one hangs in the balance. These stakes dwarf those of other major questions cases. [Citations omitted and emphasis added.]

In short, standard statutory construction was sufficient. But likely in Roberts’ view, it was an opportunity to solidify the MQD’s standing.

Those claiming the case is a big deal are conservative oriented commentators who defending the Court from the charge that it’s “in the bag” for Trump and/or conjuring up how its actions are consistent with conservative principles (i.e., not Trumpian or partisan). I’m skeptical of those claims, although to be fair I haven’t done any serious analysis of it.

As a general matter, the charge that the conservative justices are “in the bag” for Trump or that they are simply partisans has never made sense to me. Most of them are standard-issue, conservative Federalist Society types. I assume that privately they are as appalled by Trump as are most elite, elected Republicans apparently are (based on the Romney book and various journalists reporting). Okay, Alioto and Thomas may be special cases because of their wives, more extreme partisanship, loathing of the left or other unknown factors.

Because Trump has been the effective head of the Republican Party and national conservative movement for the last decade, the conservative justices are stuck paddling in the legal wake he has created when it comes to defining presidential powers. That means that they often must rule in his favor to advance their conservative agenda. That agenda happens largely to overlap with being pro-GOP and, of course, they all were to greater or lesser extents affiliated with and active in the Republican Party. So, all else equal, they will act as Republican partisans, especially in election law cases (remember Bush v. Gore, Voting Rights Act cases, and the pending mail-in voting case), where they line up like true Republican partisans.

That the conservative justices are in the tank for Trump does not seem plausible more generally. However, I understand how Trump’s very high batting average at the Court leads people to that assumption and why Court’s ideological supporters seize on counter examples (i.e., the tariff case) to counter that. However, I do think the conservative justices are strongly inclined to put their thumbs on the scale for a more traditional Federalist Society, limited government, quasi-libertarian point-of-view.

The Goldsmith and Isgur, of course, have a more sophisticated or nuanced view of what is going as a matter of constitutional doctrine in the context of other decisions over the last decade or so to justify their claims that the tariff case is a big deal. Specifically, the theory (more or less) is that the decisions (1) uphold vertical executive power and (2) limit horizontal executive power.

• Vertical power could be loosely defined as the president’s control over the executive branch – essentially how to execute the law, such as authority to hire and fire staff, how to spend appropriations, and internal organization and similar matters.
• Horizontal power, by contrast, is power that verges on or is legislative in nature – powers that a high school civics teacher would say should be exercised by Congress. For example, broad discretion to impose tariffs and to forgive student loans fall into the horizontal category, explaining a couple recent decisions. MQD is a way to implement that by limiting Congress’s ability to hand over legislative-like power with broad grants of executive authority to carry out legislation unless it says so clearly and explicitly.

This dichotomy is a clever way to explain some of the decisions that expand executive powers, including some of the shadow docket rulings, while refusing to uphold (arguable) statutory grants of power. That is, they affirm vertical executive powers – e.g., invalidating limits on the president’s authority to fire heads or members of commissioners of independent agencies, how and whether to spend appropriations (USAID nixing), and limits on internal executive branch organizations (e.g., dismantling the Education Department). But they limit horizontal executive powers through narrow construction of statutory grants, including contrary to a natural reading of statutory language by MQD putting a thumb on the statutory construction scales.

My amateur view is that this is just a clever construct, a sophisticated law professorish way to cloak what the Court is doing in fancy-pants constitutional doctrine. It seems to me that it has some limits. For example, it doesn’t explain important decisions both expanding and restricting the executive – such as the grant of presidential immunity (that’s not preserving or enhancing a vertical power) or the likely carve out for the Federal Reserve for the power over personnel. That’s a vertical power that I expect the Court to invalidated, while holding the president can fire at will heads of independent agencies like the FTC.⁸

My instinct is that something much simpler is going with the Roberts Court decisions on presidential power – a sort of Occam’s Razor explanation – the conservative justices are guided by their policy priors. The conservative justices (Thomas excepted) are products of and were handpicked by the Federalist Society. In an oversimplified view, the Fed. Soc. agenda is a limited government, quasi-libertarian view of the world. In many ways, it is not that different than the Lochner era Court, but more nuanced and sophisticated than reading laissez faire economics into the due process and contract clauses. Basically, anything that limits or hamstrings expanded government intervention into market and private decisions is good. Secondarily, that may mean (often) ruling for Trump in the cases they hand-pick, but it’s not fundamentally pro-Trump. It’s also not partisan, although it often means the decisions are favored by Republicans. The real agenda is Federalist Society version of conservatism, limiting the scope and operations of government, especially the federal government.

The tariff case, in that context, was easy. Ruling in favor of Trump’s reading of the statute would have gone in the opposite direction by enhancing the ability to raise revenues with a strained and expansive reading of the statutory language. That is the opposite of constraining government. It also a power that might have been useful to big government liberals (i.e., Dems).⁹

Some random observations:

• Defining what constitutes a horizontal power is highly subjective. It will always or almost always involve statutory construction (exceptions are when the constitution explicitly gives a legislative type power to the president, like signing and vetoing legislation). If Isgur and Goldsmith are correct, this would mean the Court will consistently construe grants of power narrowly (as in the tariff and student loan forgiveness case) when it involves extending the reach of governmental power, such as more expansive social welfare programs or regulation of private activity. However, the counter example that I would need to see is a strict or narrow construction of a negative power, limiting the president’s ability to narrow the ambit of a public program or a private law rule. That would both go against their policy priors and expand a horizontal power. I doubt the Court’s conservatives will put their thumbs on the statutory construction scales in that type of case. Instead, they will play it straight or read the grant liberally. Of course, standing rules make it difficult for cases like that to come up.
• Isgur likes to characterize invalidating horizontal executive power as reclaiming article I powers for Congress. As she puts it, forcing Congress to do its job, rather than allowing it to make general directives or mandates in legislative enactments and relying on the executive branch to write regulations to fill in the details. Strict construction of statutory grants is sort of a de facto reenergizing of the anti-declaration doctrine through other means.
• My view is that while she can characterize it as compelling Congress to do its job, more fundamentally it restricts its ability to do so, by rigidly limiting how it can legislate. In her formulation, it must do so specifically, which is all but impossible practically and politically. The world is so extraordinarily complex that legislating with Isgur’s desired specificity is not practical. Congress does not have the time or expertise. Moreover, political polarization and our creaky constitutional structure (goofy Senate representing more land than people leavened with the filibuster) make it politically impossible. Isgur’s edict is really a constraint on Article I powers. Rather than compelling Congress to do its job, it makes it harder to do so. In the current polarized environment, that approach may be a practical neutering of much of Congress’s power. Isgur wants a debating society or ivory tower legislature that does not match practical, political reality. Her scheme would work (maybe) in a parliamentary system but not a bicameral, gerrymandered Congress with a filibuster and rural dominated Senate. It’s an edict that guarantees little gets done (satisfying what I assume are Isgur policy priors, as well as the Federalist Society’s).
• The throughline that I see in SCOTUS’s upholding of expansive presidential power is that in almost every case the exercise of power limits government operations that the quasi-libertarians abhor, such as not spending appropriated money, firing agency heads, laying off employees, reshuffling agency organizations, turning away asylum seekers, and so forth. Crucially, they’re not all that useful in advancing a big government agenda if/when progressive types get elected.
• I fear the litmus test will be whether (assuming the administration requests it) the conservative justices stay lower courts’ invalidating of the SNAP and Medicaid holds put on Minnesota, Illinois, Colorado, and California or the one that singles out Minnesota. If they do, Goldsmith and Isgur need to come to terms with the character of the Court they’re defending IMO.

Concluding thoughts

On reflection, the Court’s decision was entirely predictable, holding the statute’s words mean what they say. It would have been a big deal – economically, politically, and (to a lesser extend) legally – if the Court had upheld the tariffs. Thus, the decision’s main significance is negative.

As a constitutional matter, I don’t think the case is a counterexample to the Court’s path of rewriting the constitution to give presidents more negative power to constraint government. At least that is the path I perceive the conservative justices are on in their quest to expand executive power through the unitary executive doctrine. Contrary to Isgur, expanding executive power in this fashion is a limit on Congress’s power. Sure, it’s a dictate to Congress to do its job, at one level, but it also materially moves the bar for doing so much higher. And that is really what is going on and why she promotes it.

Its Congress’s power that the Federalist Society types are really concerned about – expansion of private market regulatory interventions and increasing the social safety net – because that is what contradicts their policy priors. Making Congress act as the expert by writing (and, let’s be honest, regularly rewriting as future events inevitably will require) specific legislation (rather than relying on experts in the executive branch writing regulations that flesh out general directives) and preventing it from insulating executive expertise from rapid-fire changes both advance that agenda. Put another way, giving the executive more power to fire personnel, not spend appropriated money, rearrange administrative boxes, etc. typically will limit the scope of government. Those expanded powers under a Big Government president are not a huge risk. The tariff case is simply not a counterexample to those tendencies.

Notes

1. For an overall assessment of the economic effects of the tariffs (before the IEEPA tariffs were invalidated) see this Brookings paper and, better yet, listen to its presentation and the discussants’ and audience’s comments, both of which were insightful, available here. What’s clear are two effects: (1) a big tax increase almost equal to 1% of GDP before the invalidation (but nowhere big enough even before invalidation of the IEEPA tariffs to offset OBBBA) and (2) a reduction of trade with China. Other effects are unclear, pending more time and data. Other interesting tidbits: 57% of imports are exempt; 90% of the tariffs were passed through to domestic consumers and producers; the potential welfare effects ranged from -0.13 to +0.1 of GDP (a discussant using a different model computed a much wider range).
   Real economic effects take longer-run data and more policy stability and certainty than Trump is likely capable of providing. ↩︎
2. Page 63 of his opinion. Kavanaugh is overstating the case. All those statutes have limitations and restrictions, such as rate and time limits and condition precedents that must be investigated and found me, etc., which is why Trump was using IEEPA. The case will reduce tariffs, just not as much as popular perceptions think. Reading the CRS report referenced in the text provides a good guide to restrictions and details of these authorities, as well as why the administration used the IEEPA. ↩︎
3. These section 122 tariffs are temporary, but the administration, based on reports in WaPo and the NYTimes, is undertaking steps to impose permanent tariffs under other authority. Because of the process restrictions, that will take time, as various findings etc. are required. The section 122 tariffs are already subject to a legal challenge, but it is likely weaker than the IEEPA case. ↩︎
4. I’m making no assertions about Trump’s propensity to threaten increased tariffs, though. ↩︎
5. Quote from article: “Terence Lau, the dean of the College of Law at Syracuse University and a former lawyer for Ford Motor, said the actions [administration’s request for 4-month delay] reflected an effort by Mr. Trump to introduce ‘administrative friction’ around the $166 billion in tariff collections. While Mr. Lau acknowledged that the refund process was so complex that it necessarily would take some time, he said the government’s court filings also showed ‘they are trying to narrow who gets refunds, and they’re stretching the timeline.’” ↩︎
6. Of course, it is unclear how much Congress will authorize and appropriate. In any case, the fiscal cost was estimated to be $16.5 billion on day 12. ↩︎
7. My general reaction to them is their hyperbolic. Big Yikes on the Rosen piece. He compares Gorsuch petulant concurrence defending MQD to Justice Robert Jackson’s famous Youngstown concurrence, which is considered a landmark separation of powers statement. IMO this is ridiculous, but events could prove me wrong if MQD is the cudgel the Court uses to reign in exercises of executive power whose policy results conservatives favor (unlike tariffs – most of them are free traders). ↩︎
8. It’s because the conservative justices think Fed independence is important as a policy matter, even though it is clearly an executive branch entity and is executing monetary power and bank regulation, executive functions. ↩︎
9. Conservatives often think that Dems are keen to impose tariffs because of the industrial labor movement (the old CIO) often favored them and were a key Democratic constituency. IMO that was truer for the old Democratic Party than now. The big constituency for tariffs and protectionism has largely moved into the Republican Party. But that’s a longer and complicated conversation that’s contestable. ↩︎