Speaker 1: To break it all down.
Speaker 2: I'm pleased to have two different guests on from two
Speaker 2: vantage points to dive in.
Speaker 1: Philip W.
Speaker 2: Magnus is a senior fellow at the Independent Institute and
Speaker 2: the David J. Throw Chair in Political Economy. He's been
Speaker 2: a research fellow elsewhere, has been a prolific author of
Speaker 2: several books as well. I'm also pleased to be joined
Speaker 2: by Thomas A. Barry, director of the Robert A. Levy
Speaker 2: Center for Constitutional Studies and the editor in chief of
Speaker 2: the Cato Supreme Court Review. Gentlemen, welcome to KOA. It's
Speaker 2: good to talk with you both.
Speaker 3: Absolutely thanks for having us, Yes, thanks for having me.
Speaker 1: Thank you both for coming on.
Speaker 2: So I will start with our legal expert for the beginning,
Speaker 2: and that would be you, Thomas A.
Speaker 1: Barry.
Speaker 2: Can you break down for us, just if you boiled
Speaker 2: it down, what the essence of this case is between
Speaker 2: the two sides with the Trump administration is arguing in
Speaker 2: the court and presented the other day, and what the
Speaker 2: point of suing the federal government have said?
Speaker 4: Absolutely, well, thanks for having me, and if you'll permit
Speaker 4: me one brief correction. That third voice we heard talking
Speaker 4: about the accretion of presidential power was Neil Gorstich.
Speaker 1: Now, excuse Melito, thank you. I'm embarrassed he's from Colorado.
Speaker 1: How could I?
Speaker 4: Gorstich was much more skeptical of the administration than Alito.
Speaker 1: Was true the argument, thank you for that clarification.
Speaker 4: In a nutshell, this is about, as you said, the
Speaker 4: text of AIPA, whether it allows President Trump to impose
Speaker 4: these tariffs that he started on so called Liberation Day
Speaker 4: as he put it, which have varied quite a bit.
Speaker 4: Not every tariff he's enacted is a part of this
Speaker 4: challenge because the lawsuits were filed months ago, so some
Speaker 4: of the newer ones might not be an issue, though
Speaker 4: their legal grounding might be undermined as well, depending on
Speaker 4: the reasoning the court issues. But i EPA, this nineteen
Speaker 4: seventy statute essentially has a long list of verbs and
Speaker 4: nouns that the president can do if he finds that
Speaker 4: there's an extraordinary and unusual threat and he declares a
Speaker 4: national emergency and he claims that he needs to take
Speaker 4: this action to deal with it. So among all of
Speaker 4: those very long list of verbs, some of them are
Speaker 4: quite broad. For example, nullify, void, prevent or prohibit importation.
Speaker 4: So the president can say, you know, no one can
Speaker 4: import platinum or gold or type tungsten or whatever from
Speaker 4: Vietnam or China or something like that. But the keyword
Speaker 4: is among those verbs is regulate, so it says the
Speaker 4: president can impose in order to regulate. And then among
Speaker 4: those objects of the verbs is importation. And what the
Speaker 4: administration is hanging its hat on completely is that if
Speaker 4: you combine those two regulate and then put in ellips's
Speaker 4: importation that includes tariffs. The tariffs are essentially a regulation
Speaker 4: on importation, and that they were necessary to deal with
Speaker 4: the extraordinary two threats through to national emergencies, one being
Speaker 4: the importation of fentanyl and the other being the so
Speaker 4: called trade imbalance with various countries. And the administration's main
Speaker 4: argument that they've made repeatedly in oral arguments is that
Speaker 4: they don't want these tariffs. The purpose of these isn't
Speaker 4: to raise revenue. This is what they're claiming now, though
Speaker 4: President Trump has said some things at odds with this,
Speaker 4: but their legal argument now is the purpose of this
Speaker 4: isn't to raise revenue. It's to provide leverage to change
Speaker 4: change people's behavior, and that the hope is that either
Speaker 4: other countries will stop the flow of fentanyl, and thus
Speaker 4: we won't need the tariffs anymore. So essentially the punishment ends,
Speaker 4: or that manufacturing will increase in the US, the trade
Speaker 4: imbalance will go away, and the things that we were
Speaker 4: importing just voluntarily won't be imported anymore, and once again
Speaker 4: tariffs won't be imposed. The administration's argument, in a nutshell,
Speaker 4: is that they're dealing with these two extraordinary threats by
Speaker 4: regulating importation and in this and tariff's count as among
Speaker 4: the things encompassed by the verb regulate.
Speaker 2: Let's talk for a moment, Philip Magnus about that aspect
Speaker 2: of this idea of a regulatory terrorists versus revenue raising tariffs,
Speaker 2: because that is part of the distinction that the administration
Speaker 2: is addressing, per what Thomas Berry just told us, And
Speaker 2: it's interesting to me to hear this at the same time,
Speaker 2: phil that the administration, particularly President Trump, has been touting
Speaker 2: all kinds of revenue coming into the federal government. Look
Speaker 2: how much money we've made in America from these tariffs.
Speaker 1: But before the Supreme Court, now, no, this.
Speaker 2: Is about regulatory terrorists, not about making money.
Speaker 3: Right right, So Trump has actually contradicted in footplop several
Speaker 3: times on this particular point, including some of his own
Speaker 3: court filings, and certainly is Economic advisors public documents that
Speaker 3: they've released. Trump has been teuting that these tariffs, the
Speaker 3: i EPA tariffs that are being challenged right now, are
Speaker 3: projected to raise between about two point eight and four
Speaker 3: trillion dollars in new tax revenue over the next decade.
Speaker 3: And even as his lawyers are arguing this before the court,
Speaker 3: the White House is tweeting out media eclipse of President
Speaker 3: Trump bragging about all the revenue that's coming in even
Speaker 3: an internal contradiction and messaging here, although one of them
Speaker 3: they're arguing for illegal reason because they think if the
Speaker 3: court accepts these tariffs as regulatory powers, they'll be granted
Speaker 3: more deference in the leeway in the international arena. The
Speaker 3: reason being that the tax power is so explicitly tied
Speaker 3: to what Congress does in Article one, even though that's
Speaker 3: as where the commerce regulation power comes from. But the
Speaker 3: tax power itself is fundamentally seen as something that our
Speaker 3: representatives in an elected body are supposed to have direct
Speaker 3: and exclusive oversight on. So Trump wants to run away
Speaker 3: from the tax claims in court even while he's making
Speaker 3: them in public.
Speaker 1: And kind of dovetailing in with that.
Speaker 2: I want to ask you real quick of Phil Magnus,
Speaker 2: because you were tweeting about this on x as well,
Speaker 2: going back into the early mid well still pretty early
Speaker 2: eighteen hundreds, during the nullification crisis, and you had the
Speaker 2: debate that was going on there and some things you
Speaker 2: were pointing out about John C. Calhoun, who's a former
Speaker 2: Vice president of the United States, the seventh Vice president
Speaker 2: of the United States. Talk to us a little bit
Speaker 2: about what you're noticing from the Solicitor General that would
Speaker 2: be the Trump administration's lawyer, John Sower, and what he
Speaker 2: argued to the Supreme Court and John C.
Speaker 1: Calhoun from two hundred years ago.
Speaker 3: Well, that's the interesting thing. We've had all of these
Speaker 3: arguments play out before it goes back to the earliest
Speaker 3: days of the Republic. Because James Madison, basically the main
Speaker 3: figure in the design of the Constitution and the main
Speaker 3: record keeper at the Convention, introduces the first tariff bill
Speaker 3: in seventeen eighty nine, and in his opening speech he says,
Speaker 3: this tariff achieves two things. One is it raises revenue
Speaker 3: to it regulates commerce and Madison's point was that tariffs
Speaker 3: are actually a joint exercise of these two powers under Congress.
Speaker 3: They are both taxes and regulation. And for your economic
Speaker 3: followers out there, we also know that the economics of
Speaker 3: tariffs work in this exact way. You put a tax
Speaker 3: in place, it raises revenue, but it also discourages importation
Speaker 3: at the same time thereby regulating it. So it's a
Speaker 3: simultaneous exercise of these powers. Well, John C. Calhoun in
Speaker 3: eighteen twenty eight, the US Congress passed something referred to
Speaker 3: as the Tariff of Abominations. It was an extremely high
Speaker 3: protective tariff following the philosophy of Henry Clay to basically
Speaker 3: wall off America from foreign competition to protect our industries.
Speaker 3: And Calhoun basically made the same argument. He says, this
Speaker 3: is a regulatory tier if this is not a revenue tariff,
Speaker 3: even though it was listed as the Revenue Act of
Speaker 3: eighteen twenty eight. But Calhoun's point was, you can only
Speaker 3: pick one of these two clauses at a time. It's
Speaker 3: either a revenue tariff or a regulatory tariff. And he
Speaker 3: had further arguments. He said that if this is a
Speaker 3: regulatory tariff, it's unconstitutional because it doesn't fulfill the tax power.
Speaker 3: Madison is still alive in this time, and he's still
Speaker 3: writing commentaries on these debates to his friends and close associates,
Speaker 3: and we have several letters from him. Madison rebukes essentially
Speaker 3: the Calhoun position. He says, no, these are joint powers
Speaker 3: exercise simultaneously, because every tariff does both things. It raises
Speaker 3: revenue and it regulates commerce.
Speaker 2: And quite honestly, I would choose the words of the
Speaker 2: father of the Constitution over John C. Calhoun, and particularly
Speaker 2: on that one. Again, we're joined by Philip Magnus, who
Speaker 2: was an economic historian, and by constitutional scholar Thomas Barry.
Speaker 2: And Thomas, I want to come back to you because
Speaker 2: one of the things that I've noticed, and I think
Speaker 2: you've observed this too, is that President Trump's administration has
Speaker 2: been searching around what's the legal justification we can find
Speaker 2: for the broadest tariffs possible. We saw a similar thing
Speaker 2: with Joe Biden and his presidency on things like in
Speaker 2: particular the student loans issue.
Speaker 1: Can you speak to that?
Speaker 2: And presidents looking for a legal justification for their chosen
Speaker 2: expansions of presidential authority.
Speaker 4: Yeah, that's exactly right. And this is the reason why
Speaker 4: the Supreme Court has, over the last decade or so,
Speaker 4: developed named doctrine. It's come to be called the Major
Speaker 4: Questions doctrine. And it gets that a common sense idea,
Speaker 4: which is that if the president starts with a policy
Speaker 4: goal in mind, and he President Trump very much had
Speaker 4: that goal in mind. He wanted tariffs, he made that
Speaker 4: clear before he was elected. If he starts with a
Speaker 4: policy goal in mind and then goes hunting for an
Speaker 4: old statute to enact it because he can't get Congress
Speaker 4: to give him what he wants, you should be more
Speaker 4: skeptical about whether that legal argument is correct, especially if
Speaker 4: that old statute has been around for a while but
Speaker 4: has never been used in the way that the president
Speaker 4: is now using it. So we saw this playout under
Speaker 4: President Biden with student loan forgiveness. This was a major
Speaker 4: issue in the twenty twenty election. He had a lot
Speaker 4: of pressure from his base to an act student loan forgiveness.
Speaker 4: Bills were introduced in Congress, but none of them could
Speaker 4: get passed. So he uses an uncontroversial old statute enacted
Speaker 4: during the two thousand and three Iraq War and claims
Speaker 4: that it allows him to takes a very general term
Speaker 4: waiver or modify provisions related to student loans, and claims
Speaker 4: that modify encompasses essentially a wholesale change in the structure
Speaker 4: of the student loan system, including for giving billions and
Speaker 4: billions of dollars in debt. And the Supreme Court right
Speaker 4: struck that down, and all of the reasoning of the
Speaker 4: six justices who voted to strike that down applies just
Speaker 4: as much, if not more here, And in fact, we
Speaker 4: heard John Roberts, Chief Justice, who's been the biggest proponent
Speaker 4: of the Major Questions doctrine, asking some pointed questions of
Speaker 4: the Solicitor General about whether the Major Questions doctrine should
Speaker 4: apply here as well. So I think all of that
Speaker 4: reasoning that of all six justices who joined that student
Speaker 4: Loan's opinion should lead them if they're being consistent to
Speaker 4: strike down these tariffs.
Speaker 2: Let me ask you a little more about that, Thomas Berry,
Speaker 2: particularly Justices A Leado who you corrected me on before,
Speaker 2: and yes, absolutely was much more a sort of friendly
Speaker 2: to the government's side, which I found interesting in Justice
Speaker 2: Thomas who you know, he's been speaking a lot more
Speaker 2: since COVID he didn't say a word for decades, then
Speaker 2: suddenly started to ask questions, and the few questions he
Speaker 2: asked were, we're not.
Speaker 1: So averse to this.
Speaker 2: Talk to me a little bit about how you view
Speaker 2: the conservative justices and their interpretation what could be here,
Speaker 2: especially from their questions, and whether they will or will not.
Speaker 2: I mean, obviously I'm not asking you for crystal ball.
Speaker 2: May or may not line up with what they concluded
Speaker 2: in the student loans case that you just mentioned.
Speaker 4: Right, Alito definitely seemed to be on the administration side,
Speaker 4: and it seems that to Aledo, the difference here is
Speaker 4: the foreign policy aspect of this. Alito asked a lot
Speaker 4: of pointed questions about what if we have, you know,
Speaker 4: we're on the verge of a hot war with China,
Speaker 4: or we have a hostage in a foreign hostile foreign
Speaker 4: country like China that we're trying to use leverage to
Speaker 4: get them out. Shouldn't the president have the maximum number
Speaker 4: of tools at his disposal to put leverage on these
Speaker 4: foreign countries to negotiate with them. So I'm guessing if Alito,
Speaker 4: I hope, writes a dissent, not a majority opinion supporting
Speaker 4: the government, he would argue that this is different from
Speaker 4: the student loans case because statutes giving presidents negotiating power
Speaker 4: with foreign countries should be interpreted more expansively given that
Speaker 4: the way the separation of powers is designed, it is
Speaker 4: understood that the president is the lead negotiator with foreign countries,
Speaker 4: is the person who often makes quick decisions when an
Speaker 4: emergency arises unexpectedly. Nonetheless, my response to that would be,
Speaker 4: we have had two hundred years of presidents having many
Speaker 4: tools at their disposal for leverage, but tariffs have never
Speaker 4: been one of them. In terms of unilateral presidential policy making,
Speaker 4: We've always relied on Congress to be the one to
Speaker 4: spell out explicitly in statutes what the teriff rates are
Speaker 4: going to be. So Congress really has always treated tariffs
Speaker 4: as a different kind of thing because they're not just
Speaker 4: foreign policy, they're also taxes on Americans.
Speaker 1: Now, that's a great point. Thomas Berry and I would
Speaker 1: tend to agree.
Speaker 2: Although there's an argument from President Trump and his supporters
Speaker 2: that the reason why Trump is using teriffs in this
Speaker 2: way is because he views it as a negotiation tool
Speaker 2: in a way that past presidents had not, and therefore
Speaker 2: is justified in going about it in this way.
Speaker 1: How do you respond to that, Well.
Speaker 3: He's been a very erratic and unreliable negotiator here because
Speaker 3: he keeps setting terms or claiming he comes to deals
Speaker 3: with other countries, and then a week later he gets
Speaker 3: mad at the prime minister of that other country or
Speaker 3: government official. He gets mad because Canada runs a TV
Speaker 3: ad quoting Ronald Reagan and decides that the deal is
Speaker 3: off and he's going to change the rate. And I
Speaker 3: think what this highlights is there's a deeper problem in
Speaker 3: Trump's approach to IEPA. He likes IIPA because he can
Speaker 3: change it on a whim with an executive order, but
Speaker 3: that also means any in all of these deals that
Speaker 3: he has claimed to have secured it with foreign countries
Speaker 3: have no enforcement mechanism. They're not worth the paper that
Speaker 3: they're written on, if they're even written on paper at all.
Speaker 3: They're outside of the balance of the traditional way of
Speaker 3: doing free trade agreements, which was there was a formal document,
Speaker 3: an agreement drafted, and it was put before Congress, and
Speaker 3: I think Congress would have to vote on it to
Speaker 3: accept the terms of that agreement. Trump's done absolutely none
Speaker 3: of that and is just relying on the perpetuity of
Speaker 3: his own executive orders to keep these supposed deals in place.
Speaker 1: Well, you just got a few minutes left.
Speaker 2: I want to ask each of you a different final question,
Speaker 2: a real quick film magnus. I'll throw it back to
Speaker 2: you on the argument about trade imbalances and how they're
Speaker 2: now viewed as a national emergency, and that is per
Speaker 2: the arguments presented in court as well before the Supreme
Speaker 2: Court this week, that this is part of the justification.
Speaker 2: Is the trade imbalance that we have with a given
Speaker 2: country a national security matter?
Speaker 3: It is absolutely not, and you would not be able
Speaker 3: to find any credible mainstream economist who would support that proposition.
Speaker 3: In fact, we've run trade desits for basically the last
Speaker 3: fifty years. We've run trade deficits for as long as
Speaker 3: i EPA has been in place, and never once until
Speaker 3: Donald Trump invented this new power, did anyone try to
Speaker 3: use IEPA to counter this supposed emergency and the economics
Speaker 3: behind it. It just comes down to basically the presidents
Speaker 3: in his team, they don't understand basic accounting in the
Speaker 3: international arena. They only see goods and services coming in
Speaker 3: or going out of the country. They don't look at
Speaker 3: all the other financial instruments. People are not giving us
Speaker 3: stuff for free, and they're not taking stuff away from us.
Speaker 3: There's always an exchange. And if you do a full
Speaker 3: accounting of what crosses borders by definition, it's like if
Speaker 3: I were to pay my bill at the grocery store,
Speaker 3: there's no trade deficit that occurs because I offer money
Speaker 3: in return for goods or vice versus. Someone comes into
Speaker 3: a store that I own and they give me money
Speaker 3: for something that I give them as a physical product.
Speaker 3: It actually comes out to a balance.
Speaker 2: Finally, appreciate that answer, Phil magnet So, Thomas A.
Speaker 1: Berry. Let me just ask you so briefly to talk
Speaker 1: a bit about.
Speaker 2: The implications of what the Supreme Court might decide. How
Speaker 2: do you think this may or may not go down,
Speaker 2: and what could it mean for the long term, particularly
Speaker 2: in so far as we consider presidential power.
Speaker 4: Sure well, I was in the audience during the Supreme
Speaker 4: Court argument trying to predict the votes counted justices see
Speaker 4: who's giving more skeptical questions. I counted at least five
Speaker 4: votes that I think are leaning against the administration. The
Speaker 4: three Democratic appointees plus Justices Gorsich and Barrett, and I
Speaker 4: could definitely see Chief Justice Roberts voting against the administration
Speaker 4: as well, given his interest in the major questions doctrine,
Speaker 4: and perhaps Justice Kavanaugh, who seemed to be a genuine
Speaker 4: swing vote. He seemed genuinely concerned and pained by both
Speaker 4: sides and really deep in the weeds of some of
Speaker 4: the precedents. So if I had to guess, I guess
Speaker 4: somewhere between five and seven votes against the administration. But
Speaker 4: a lot will depend on how they write the opinion.
Speaker 4: Do they try to work through all of the implications
Speaker 4: of how the refunds might work for every party in
Speaker 4: the country, or do they simply say the named parties
Speaker 4: in this case are entitled to a refund, will leave
Speaker 4: it to the lower courts to deal with claims for
Speaker 4: refunds by every other affected person. If I had to guess,
Speaker 4: I would guess that they would do the latter. The
Speaker 4: Supreme Court usually takes the approach of lessons more so
Speaker 4: there's certainly going to be much more litigation to follow
Speaker 4: no matter what. And of course, there are many other
Speaker 4: statutes that President Trump may use, and has said he
Speaker 4: probably sure to try to direct orff some more plausible
Speaker 4: than others. So we're likely to have litigation not just
Speaker 4: about IEPA, but about other statutes going forward.
Speaker 2: Ah years ahead of Supreme Court potentially or at least
Speaker 2: legal arguments over different justifications for tariffs.
Speaker 1: Oh what joy. Thomas A.
Speaker 2: Berry, Director of the Cato Institute's Robert A. Levy Center
Speaker 2: for Constitutional Studies, and Philip W. Magnus, Independent Institute Senior
Speaker 2: Fellow and economic historian, thank you both so much for
Speaker 2: your time, really interesting discussion and appreciate it today.
Speaker 3: Thanks for having us, Thanks for having us.
Speaker 1: Thank you both