How the Supreme Court can change the course of Trump’s presidency

0:00I'm Hugh MacArthur, chairman of Bain & Company's Global Private Equity Practice and host of Dry Powder, a podcast where I sit down with some of private equity's leading investors, such as TPG's Jim Coulter. Somehow the industry keeps growing. KKR's Pete Stavros. Driving operational change is really hard. And Vista's Robert Smith. As a market dampened, guess what? We were able to monetize 18 companies. And of course, I'll take you behind the scenes of Bain's latest research, including our newly released mid-year private equity report. Subscribe to Dry Powder today.

0:33We're just weeks away from the next Supreme Court term. The court will tackle some of the biggest issues of the second Trump administration. Just moments ago, actually, a federal appeals court ruled most of President Trump's tariffs are illegal. A legal blow for President Trump as a federal appeals court found that his efforts to end birthright citizenship are unconstitutional. But the most important cases the court has left to decide are still ahead, and they'll likely define what's to come of Donald Trump's presidency.

1:11This is Swamp Notes, the weekly podcast from the Financial Times, where we talk about all of the things happening in U.S. politics, finance and the economy. I'm Sonia Hudson, and this week we're asking, is this the Supreme Court that Trump has been hoping for? Here with me to discuss is Brooke Masters. She's the FT's U.S. managing editor. Hi, Brooke. Hello. And we've also got Stefania Palma, the FT's U.S. legal and enforcement correspondent. Hey, Stefania. Hi. Okay, so the Supreme Court term is approaching, but why have I been hearing about all of these rulings that keep coming out now? I mean, just in the last couple of weeks, the court permitted immigration raids in Los Angeles to continue and also allowed the president to claw back money for foreign aid?

2:00Yes. So I think it's a function of obviously the Trump administration really pushing just flurry of executive actions since Trump has returned to the White House in January, many of which have been quite controversial from a legal standpoint and have huge repercussions. People who are challenging these moves, they are also bringing these questions to the Supreme Court as quickly as possible in terms of trying to get a decision quickly. this means that the Supreme Court has handed down a very, very large number of emergency decisions. And oftentimes they have not actually issued full decisions, which has created a whole other sort of set of issues for some of the lower courts that have grown a bit frustrated with trying to parse these emergency decisions that have huge repercussions, but oftentimes lack actually the decision-making process and reasoning that the justices would have thought through before, handing down these decisions.

3:00So these emergency decisions are very real decisions that have real repercussions, but they're kind of a holdover until the cases come back to the Supreme Court for a full hearing, etc. Yes, oftentimes that is the case. But in the meantime, they have real life consequences and real world consequences. So for instance, one of these emergency decisions essentially allowed the government to continue deporting people to third countries. Obviously, that it's a massive, massive move. And until sort of the full case then makes its way back to the Supreme Court, the government obviously is still implementing this kind of policy.

3:36I would say they're deeply controversial as well because they make these decisions without formal written decisions. And so it's really hard to tell why or how they did it. And therefore, there is a lot of criticism of the court that it's not sort of maintaining the status quo while it's waiting to do a more fully thought out decision. Is maintaining the status quo what the court is supposed to do with these emergency decisions? Courts generally try to keep things in a position where they do the least harm while they're considering it. So one of the things is who's likely to win. So if they think one side is more likely to win, that side is going to be allowed to keep doing whatever it's doing, which is why a lot of people are scared by these decisions.

4:18The other thing would be there's two ways of looking at it. The government generally is allowed to do what the government does. And so the status quo would be allow them to keep on doing what they're doing. The other is the government is doing something entirely new. So letting them keep on doing it while the court thinks about it is not maintaining the status quo. It's a tough call. Based on what we've seen so far from this court during Trump's second term, what's your sense of how often they are siding with the president versus not? I would say critics would argue that even on sort of some of the more controversial questions, they have essentially allowed the government to continue implementing moves that critics argue are illegal while they sort of mull the broader question of merits or they consider whether to take on the case in full.

5:12One point that some legal experts have raised is that if you look at sort of the Joe Biden years, when that administration was trying to implement some policy moves, the court would tend to push back against the Biden administration. Whereas some of these experts argue now that we're seeing the Trump administration sort of appeal to the idea of an emergency to justify some of its moves, we're seeing the court be far more open to that kind of argument and handing them what Trump has often described as wins. Mm-hmm. Well, Brooke, I want to ask you to make the other side of that argument. What do people who agree with what the court has been doing, support what the court has been doing, say about that argument that Stefania was just telling us from critics?

6:02It's worth remembering that historically, the last time there was a big fight about the extent of the power of the presidency and the executive branch, which was during Franklin Delano Roosevelt's administration after he passed a whole bunch of depression-related stuff, the court actually did hold off and not strike all down all the things they thought were unconstitutional until after they'd been in operation for quite a while. So it's not unprecedented to allow things to go through while you're thinking about it. The other thing they would say is that, in fact, there's a theory called unitary executive theory, which says that the president has the power to execute all laws and that that's fundamentally what Trump is doing.

6:42And we have gotten away from that and diluted the original constitutional idea from the – essentially from the 18th century, and they're trying to get back to it. That's a very controversial claim, but it's quite popular with people who support what Trump is doing. So, Stefania, you mentioned a few of the cases that have been getting a lot of attention lately. I want to narrow in on a couple of them. The court announced this week that they are going to hear the case about the legality of Trump's tariffs in November. This has obviously been a huge cornerstone policy of his second term. What does that tell you about where the court's head is at?

7:21I think it's such a critical pillar of Trump's agenda with such vast consequences, obviously for the U.S., but even beyond U.S. borders, obviously. Yes, the very nature of the policy. It's incredibly global and wide reaching. Correct. And now that we've seen a couple of lower courts actually rule against the administration saying essentially that the types of emergency economic powers legislation that they are trying to use to justify these tariffs, that use is illegal, according to these courts. It kind of is ripe for the top court of the country to come in and actually weigh in. I would have been honestly quite surprised had they completely sort of ignored or at least not taken on this case in a fully fledged manner, meaning they're going to have sort of the traditional process whereby we will have oral arguments and they will have to put out a full opinion, which honestly a lot of Supreme Court watchers are very excited and sort of anxious to see because it's kind of the first time where the court will have to really explain its thought process behind whatever decision it falls on.

8:40Brooke, what do you make of that? I think it's right. They have to take the tariff case because it has come squarely to them and there's no way to get around it. I think we'll also start to see them take other cases like the one where they're deporting people using the Illion Enemies Act, which is, again, 18th century law and is not very well fleshed out. So that's another one where I think the court will have to step in because the lower courts can't even guess what to do. And it's one where you also hear a lot of chatter that it might be one where the Supreme Court is willing to check Trump's power and say, actually, you can't do that.

9:15Kind of what I'm hearing from you guys, and correct me if I'm wrong, but what I've been hearing is the Trump administration has been losing in lower courts. The Supreme Court has issued a lot of decisions that allow the policies that are losing in lower court to continue while they wait to have a full hearing at the Supreme Court. And there's some debate about whether or not that signals that they're going to side with the Trump administration in the final hearing. But at the very least, it's some sort of, you know, bone that they're throwing to the Trump administration. It is a ruling in their favor.

9:49Is that right? Yes, I would say so. I would also stress, though, that we're kind of just at the beginning of a lot of these sort of legal fights. I think maybe what is helpful for people to think about when trying to parse what are very complex legal questions at this point, if we zoom out a little bit, I think broader picture what is happening is this. The administration is keen to come in and establish policy moves that are sort of very controversial, but also in a way having the freedom essentially to come in and implement these controversial policy moves at times. And what the legal strategy seems to have been is the Trump administration claiming there often is some form of emergency.

10:36We've seen it, say, in L.A., where they have claimed there was a, quote unquote, rebellion happening and therefore they could come in and take federal control of the National Guard. Or if we think about, say, the immigration policy, the whole immigration agenda is based on the argument that there is a quote unquote invasion happening. These are not words that are used lightly. It is a legal strategy because these are literally the prerequisites embedded in these very rarely used laws. And so the big question is, now that you have these discussions sort of making their way up to the Supreme Court, as Brooke pointed out, definitely the conservative wing, there are people there who very much subscribe to the idea that presidents in the U.S.

11:21should have very, very broad powers. Now, the real question is whether they believe that a president also has the freedom essentially to decide what constitutes an emergency, because this is the big argument that his team has made in lower courts. And that basically if a president said an emergency is happening or a rebellion is happening, that it cannot be challenged really in court. So will the conservative majority in the Supreme Court agree to this? It's very hard to predict because, again, because precisely these laws are rarely used, these questions haven't really been put to the Supreme Court very often.

11:59So it could not be a more important moment, I think, for the court, but also what really are the limits of presidential power here? Brooke, how are you thinking about this moment and how the court is considering presidential power? It's a real question of whether the court is going to stand up and be sort of a co-equal branch of government and say, actually, you know, we are going to defend especially Congress's power against the president, even if Congress itself is not challenging the president because they're of his party. I think things like whether he can rewrite at least intellectually what the Constitution says in the 14th Amendment, which is what the birthright citizenship case is about, is a really important thing.

12:45Like if the president can change the meanings in direct contradiction of a previous Supreme Court decision, that says something about the balance of power in the U.S. And whether the Supreme Court, because the majority intellectually agree with him and want more power, whether they're willing to give up their role as the arbiter of the Constitution is a really interesting one. It's quite a moment. So I want to ask the question that I posed at the top. Does Trump have the court that he wants that he has been hoping for? That's a huge question. Do we not know yet? I mean, I would say the sixth justice conservative majority is a reality.

13:29So it's a huge point in his favor. Not to say that they always have to vote in bloc, of course. I mean, one of these conservatives, Justice Amy Coney Barrett, there have been some instances where she actually confounded quite a few Republicans when she voted against the government, even though a lot of Supreme Court watchers sort of really stopped short of calling her a swing vote, which I tend to agree with. I don't think she's necessarily there yet. So, again, that's a big advantage, I think, probably in Trump's mind. But it's also true that there isn't a lot of legal interpretation for some of these cases that are going to make their way, most likely, to the Supreme Court.

14:10And so it's very hard to have. It's always hard to predict what the court is going to do. But I think it's in these instances, perhaps less obvious. Brooke? I think there is a middle group of justices, including John Roberts, who the reason Coney Barrett can be a swing vote is that he votes with the liberals on some of the crucial issues. So it's worth remembering that it isn't a pure ideological split. The thing about that middle group of justices is we don't know what they think about preserving balance of power in the government. They haven't – many of them have wanted and have tended to give Trump a lot of leeway in that crucial immunity decision last year where they said the president can't be prosecuted for things he did while in office.

14:55That was exactly what Trump wanted. But whether that will also apply when it comes to sort of cutting the legs off Congress by not spending what they've appropriated or by imposing tariffs without their input, we just don't know how many of the justices think he can do that. All right. I want to thank our guests, Brooke Masters, the FT's U.S. Managing Editor. Thanks, Brooke. Thank you. And Stefania Palma, the FT's U.S. Legal and Enforcement Correspondent. Thanks, Stefania. Thank you. All right. We'll be right back after this.

15:41I'm Huma Arthur, chairman of Bain & Company's Global Private Equity Practice and host of Dry Powder, a podcast where I sit down with some of private equity's leading investors, such as TPG's Jim Coulter. Somehow the industry keeps growing. KKR's Pete Stavros. Driving operational change is really hard. And Vista's Robert Smith. As a market dampened, guess what? We were able to monetize 18 companies. And of course, I'll take you behind the scenes of Bain's latest research, including our newly released mid-year private equity report. Subscribe to Dry Powder today.

16:13And we're back. I wanted to end this week's show with a slightly different closing segment. Conservative activist Charlie Kirk was shot and killed at a Utah university on Wednesday. It's the latest in a growing list of acts of political violence in the United States. The FT's Washington Bureau Chief James Politi is here to talk through what we know about the killing. Hi, James. Hi, Sonia. So law enforcement officials said this morning that they had apprehended a 22-year-old from Utah that they think is responsible for killing Kirk. What do we know about a potential motive for the attack? Well, I think it's pretty clear that this was a politically motivated assassination, given the nature of Charlie Kirk and his status in the conservative movement, and just how the shooting unfolded with a single shot directly targeting him and nobody else.

17:07We now have some additional information. The investigators apprehended the suspect. In the case, they have found some casings, which are unused casings, which included some anti-fascist writings. But we don't have a firm motive. Tyler Robinson, who is the suspect in the case, was not registered with any party. He was unaffiliated and he had not voted in recent elections. So he seemed detached from the traditional political process. Now, James, we've seen some calls for retribution from some people on the right, notably from President Donald Trump. What would that look like? And are there any concerns about that?

17:53I think the concern is that we are already in a period of escalating political violence in the country. And I think the worry is that there could be a new cycle of retribution, further violence as, you know, in reaction to the assassination of Charlie Kirk. What President Trump has warned is that not only he wants to apprehend the suspect and bring him to justice, including the death penalty, which is what he suggested in an interview with Fox on Friday morning, but also a broader sort of assault on left-wing political organizations because he believes that left-wing attacks on the right are responsible for the murder.

18:40James Politi is the FT's Washington Bureau Chief. Thanks, James. Thanks, Sonia.

19:09I'm your host, Sonia Hudson. Our acting co-head of audio is Topher Forges, original music by Hannes Brown. Check back next week for more U.S. political analysis from the Financial Times.

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