Tens of millions of Americans tuned in this week to hear the president's (belated) State of the Union address. President Trump made no mention of declaring a state of emergency, and instead focused more on appeals for national unity.
This should not be interpreted as a sign that emergency measures are off the table, however. Lest we forget, presidents in the modern era have invoked emergency powers during economic crises or wartime. (Think: virtually all 12 years of Franklin D. Roosevelt's presidency.)
Given our current geopolitical conditions and macroeconomic outlook, Trump could have ample opportunity to declare an emergency.
President Trump Could Use Emergency Powers
The first question we should be asking is this: What are the president's emergency powers?
Congress specifically enumerated these powers in legislation beforehand. They were adjusted following Watergate and the Nixon resignation, but the presidential emergency powers are nonetheless wide-ranging and far-reaching.
What could happen if President Trump does decide to declare an official state of emergency?
Sidestepping the constitutional issue regarding a chief executive diverting funds from the congressional budget and allocating them to another purpose (the border wall), the president has broad authority over other economic matters in an emergency. Trump could freeze banks and generally impose greater government control of the economy.
Pundits often ignore this side of the emergency powers question. Yet it's a far more plausible scenario. There's actual precedent for such actions in (relatively recent) American history.
Moreover, Congress would likely allow a "grace period" of six months to a year where it would not challenge the use of emergency measures, provided their use was justified by some crisis.
Growing Economic Risk
So there's little doubt that the president is willing to invoke emergency powers. That begs the question: What might prompt him to do so?
An economic crisis, of course.
With that in mind, what are the odds of that scenario arising?
They are admittedly low—thankfully!—but the downside risk of a global economic shock is higher than any time since the 2008 financial crisis.
The signs of this weakness in the economy abound. Consumer sentiment in the U.S. is at a seven-year low; credit card delinquencies and auto loan defaults are up; worldwide debt is triple the size of GDP, and many businesses are over-levered; global manufacturing is contracting; forward earnings per share (EPS) have diverged from stock prices; the U.S. yield curve is partially inverted and bond yields elsewhere are still negative; and markets face the tripartite risk of the trade war, Brexit, and perhaps another government shutdown in Washington.
These are not signs of a robust economy. We appear to be moving closer and closer to a painful recession.
If the economy does go south, emergency measures could go as far as the wealth confiscation that followed the Great Depression. Gold was demonetized by executive order in 1933; today, we could see something akin to a bank "bail-in" with depositor money.
On top of it all, these risks are unlikely to abate any time soon. The trade war negotiations, and the gridlock over fiscal policy on Capitol Hill, are playing political football with the American economy. Those dilemmas are all but certain to follow the pattern of this year's Super Bowl, with lots of punting back and forth.
: Super Bowl LIII (53) was the lowest-scoring championship game in pro football in 70 years. Going back to the first NFL title game in 1933, the only two years with lower scoring totals were 1948 and 1949, long before the Super Bowl Era began (1966).
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