Conservatives should be apoplectic about the botched rollout of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Sure, lots of money went to undeserving large corporate recipients and universities with huge endowments—a few of which have pledged to give the booty back. With billions still in government coffers awaiting distribution, it remains to be seen whether the $2 trillion billed to future generations will have a net positive impact on the economy, which has suffered a terrible shock from the pandemic and public health response (36 million Americans are jobless, many businesses are going bankrupt, and the GDP is shrinking).
The bigger theoretical problem for conservatives with the CARES Act should be Congress’s massive handoff of largely unrestrained power over $500 billion in taxpayer dollars to the Department of the Treasury.
The Treasury Department was created to manage federal government revenues in 1789 by the first Congress. With Alexander Hamilton as its first secretary, Treasury is the only government agency mentioned in the Constitution itself. The Appropriations Clause provides that
No Money shall be drawn from the Treasury but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.
The Constitution thus contemplates that only Congress can decide how to spend taxpayer dollars. As students used to learn in high school civics, this is a vital part of the composition of our constitutional structure: It’s Congress—not the president—that holds the purse strings. This is one way that the powers of the presidency are kept in check.
This is also one reason why Donald Trump’s refusal to release $400 million in military aid absent Ukraine’s promise to announce an investigation into Joe Biden was legally fraught. Likewise, Trump’s diversion of billions of dollars in Pentagon funding to build his disastrous “border wall” clashed with the Constitution’s division of power, since Congress had planted that money in the Pentagon and the Pentagon alone, and the emergency declaration the president used to allow him to shift the money was transparently bogus.
But in addition to appropriations, there’s another problem with the CARES Act’s entrusting $500 billion to Treasury Secretary Steve Mnuchin.
In the wake of the Great Depression, President Franklin Delano Roosevelt famously spearheaded the creation of an “alphabet soup” of federal agencies that has since become what many people believe is a bloated, inefficient, and constitutionally suspect federal bureaucracy. Federal agencies are created by Congress, but largely answer to the president within the chain of command of Article II of the Constitution.
Ronald Reagan won the presidency in 1980 in part due to his promise to shrink the size of the federal government by slashing regulations and confining the authority of the myriad executive branch agencies that dot downtown Washington, D.C. (“In this present crisis,” he famously said in his first inaugural address, “government is not the solution to our problem; government is the problem.”) The deregulation refrain has been a dominant theme in Republican politics to this day. Just last week, Donald Trump signed an executive order directing agencies to “identify regulatory standards that may inhibit economic recovery” and to “address this economic emergency by rescinding, modifying, waiving, or providing exemptions from regulations and other requirements that may inhibit economic recovery” from the coronavirus crisis.
Setting aside animating economic theories, the constitutional justification for deregulation is to preserve Congress’s express and exclusive prerogative under the Constitution to make laws. When Congress passes off the legislative baton to agencies lodged in the executive branch, the so-called “nondelegation doctrine” argument goes, it enables the president, in effect, to exercise legislative power, impermissibly blurring the separation of powers. Since the New Deal, the Supreme Court has largely rejected this theory as a basis for striking down regulations on the rationale that Congress can empower agencies to make laws so long as the statute handing off such power gives “intelligible” instructions for implementing it.
What does this have to do with the CARES Act?
Well, section 4003 of the law provides that “the Secretary [of the Treasury] is authorized to make loans, loan guarantees, and other investments in support of eligible businesses, States, and municipalities that do not, in the aggregate, exceed $500,000,000,000 and provide the subsidy amounts necessary for such loans, loan guarantees, and other investments.”
Although the statute goes on to earmark $29 billion for airlines and cargo air carriers, $17 billion for “businesses critical to maintaining national security,” and—with the assistance of the Federal Reserve—$454 billion “for the purpose of providing liquidity to the financial system that supports lending to eligible businesses, States, or municipalities,” the law is pretty thin in terms of marching orders for Mnuchin and his army of unelected employees. (The law does bar support going to entities in which top Trump officials, members of Congress, or their families have a controlling interest. And it puts some constraints on Fed lending facilities that rely on CARES Act money.)
Instead, it states that “a loan, loan guarantee, or other investment by the Secretary shall be made under this section in such form and on such terms and conditions . . . (including requirements for audits) as the Secretary determines appropriate.” (Emphasis added).
Of course, this congressional handoff of power to the executive branch is nothing new. Congress appropriates loads of money to dozens of executive branch agencies every year without identifying where every last penny must go. Agencies get loads of discretion. But when it comes to policymaking, agencies are generally bound by the Administrative Procedure Act, which mandates a laborious rulemaking process that incorporates commentary from the public before agencies can step into Congress’s shoes and make laws that bind conduct—such as, for example, penalties for non-compliance with standards for accepting COVID-related money from the government. In implementing the $500 billion CARES Act fund, Treasury has issued what’s loosely known as “guidance,” which does not go through the painstaking rulemaking process.
The CARES Act set up a bunch of oversight mechanisms, including establishment of a Congressional Oversight Commission to oversee the $500 billion loan fund. It’s the statute’s only oversight mechanism that’s actually tied to Congress which—again—is the place the Constitution put appropriations and legislative powers in the first place. (In April, House Majority Leader Nancy Pelosi also named a House Select Committee on the Coronavirus Crisis to oversee the CARES Act.)
The five-member commission has the power to hold hearings and request (but not subpoena) documents from Treasury, but only if it has a chairperson, who is to be picked jointly by Senate Majority Leader Mitch McConnell and Speaker Pelosi. So far, they haven’t agreed on anybody. Until that person is in place, the commission cannot even hire staff. The headless four-member commission nonetheless managed last week to comply with its statutory obligation to issue a 30-day report on Treasury’s progress to date. It’s pretty telling.
The May 18 “report” is actually entitled “Questions About the CARES Act’s $500 Billion Emergency Economic Stabilization Funds.” The commission is statutorily charged with answering two questions: What are the Treasury and the Fed doing with $500 billion in taxpayer money? And who is that money helping?
So far, the $46 billion in airline loans haven’t been disbursed, although Treasury published “procedures and minimum requirements” for doing so. Of the $454 billion balance, only $37.5 billion was handed out as of the date of the report.
The rules of the game are already shifting. In an April 9 announcement, for example, the Treasury and the Fed issued a term sheet requiring certain would-be borrowers to attest that they “require financing due to the exigent circumstances presented” by COVID-19. But on April 30, the agencies announced that they had eliminated that requirement. And although the administration initially issued a requirement that companies make “reasonable efforts” to retain employees during the term of the loan, on April 30 it changed the rule to “commercially reasonable efforts.” And so on.
These are the kinds of policy decisions that conservatives would traditionally prefer be made by Congress, not the executive branch. And for good reason. Congress is electorally accountable. Mnuchin is not; he serves at the pleasure of Donald J. Trump, who has no compunction firing people for perceived personal disloyalty or for simply doing their jobs for the American people. And while Fed chairman Jerome Powell cannot be fired by the president, he, like Mnuchin, is not answerable to voters.
Most revealing is the May 18 report’s laundry list of “preliminary questions” that the commission “intend[s] to consider in our future work.” So far, there are a whopping 52 of them (not even counting sub-questions). These are questions that, so far, nobody but people inside the Trump administration knows the answers to—and maybe not even people inside the administration. They include such critical matters as:
- How will the Treasury and the Fed . . . assess the success or failure of this program?
- How will the agencies attempt to stabilize the economy while protecting taxpayer dollars?
- Will the agencies “faithfully follow the statutory requirements” of the CARES Act?
- How will outside sources be hired to assist in this effort and “how are conflicts of interest mitigated?”
- What will the effect be on overall employment?
And so on.
The Trump years have made crystal clear a fact of life that the Framers of the Constitution knew full well: It’s human nature for people in power to abuse power. And without meaningful oversight, corruption thrives.
Ideally, Congress would have addressed the commission’s questions before the money flowed to Steve Mnuchin for lending as he “determines appropriate.” The central question of whether the $500 billion should be used to serve the millions of unemployed Americans over big banks and corporations is also a pivotal one that should have been decided before Mnuchin was handed the giant checkbook. And certainly, Congress should have ensured that the congressional watchdog had an actual head before the money was sent over to Team Trump.
At this point, all we can do is hope that the people in power will do the right thing. Needless to say, Trump continues to prove that hope is pointless.