Sunday, May 24, 2026

The Trump Train Runs into a Wall

I am writing this while the U.S./Iran negotiations are in a state of flux, but make no mistake, the Trump train ran into a wall last week. His $1.8 billion “anti-weaponization” slush fund sparked outrage among Senate Republicans. So much so, that Trump’s all-important immigration funding reconciliation bill had to be pulled from the Senate calendar. Meantime Speaker Mike Johnson recessed the House because he lacked the votes to stop a war powers resolution on the Iran War.

 

Although Trump tactically succeeded in defeating Louisiana Senate incumbent Bill Cassidy, he strategically failed by making an enemy of him for the remainder of his term. He along with North Carolina Senator Tom Tillis will remain thorns in his side for the rest of the year. Those two along with Senators Susan Colllins and Lisa Murkowski means that Trump no longer has a working majority on a host of issues that will soon come before the Senate. Further exacerbating the situation is that Trump connived with his own Treasury Department to cease all tax audits on his and his family’s tax returns. The stench grows by the minute.

 

Adding impetus to the revolt was Trump’s endorsement of the ethically challenged Ken Paxton in the Texas primary over incumbent John Cornyn. Cornyn is one of the most well-liked senators in the Republican caucus. Should Cornyn go down this week, he too will likely join Tillis and Cassidy as a thorn in Trump’s side. Even if Cornyn surprises and wins, Trump will not be able to count on him as a supporter.

 

One last thing should the Iran deal go the way many are now speculating, Trump risks the support of Senators Cruz, Graham, and Wicker, among others. Any deal that looks like what the Obama appeasers Wendy Sherman, Bob Malley and Ben Rhodes would have produced will ignite a firestorm in the Republican caucus. Stay tuned.

 

 

Sunday, May 17, 2026

Reality Catches up to the Bond Market

Bond yields soared on Friday with the !0-Year U.S. Treasury yield rising 14 bps to 4.6%. Meantime the yield on the 30-Year Treasury hit 5.12%, its highest since 2007. Globally it was the same story, as Japanese yields are at their highest level since 1997 and government disarray in the U.K. is sending yields soaring there.


What’s going on? Three critical factors are coming together: rising inflation, government deficits, and an AI capital spending boom. Triggered by soaring oil prices caused by the Iran War, the U.S. consumer price index (CPI) is now 3.8% over year ago levels, and the producer price index (PPI) is now 6% over the same period a year ago. To be sure, core inflation at the CPI level is lower at 2.8%, but the core PPI is now running at a high 5.2% rate. More concerning is the likelihood that over the near-term, inflation will move higher, not lower. This clearly is not an environment for rate cuts.


Second, huge fiscal deficits are the order of the day. The U.S. continues to run a $2 trillion deficits around 7% of GDP, and with tariff refunds and higher defense spending it will go higher. Although the rest of the G-7 is doing much better, ex-U.S. the G-7 is running a deficit of 2.4% of GDP.


Last, the AI boom in the U.S. is sucking capital in from all over the world. Witness Alphabet’s recent $60 billion global offering. Here are the AI companies that used to supply capital to the rest of the world; they are now massive users of capital. Hence real rates have to increase and in the short run the massive expansion of data centers will put upward pressure on the price of inputs, ranging from memory chips to electrical equipment and construction labor.

 

This is the environment that incoming Fed Chair Kevin Walsh is facing. It is hardly an environment to cut rates. Indeed, with the two-year note now yielding 4.08%, well above the current midpoint of the Federal Funds rate of 3.63%, the market is now pricing in a rate hike. Those who say that Warsh will follow Trump’s orders to cut rates will soon be disabused of that notion. Kevin Warsh does not want to be remembered as the Fed chairman who looked inflation in the eye and blinked.

 

Finally, it is important to recognize that the recent rise rate is taking place in the context of a structural bond bear market. (See: https://shulmaven.blogspot.com/2025/01/we-are-in-early-stages-of-bond-bear.html ) Bond bear markets, just like bond bull markets last a long time. The last bond bear market lasted 35 years, from 1946 – 1981. We are now only in the sixth year of the bond bear market that began in 2020, when the 10-Year U.S. Treasury Bond bottomed at 0.56% in August of that year. So, buckle up, we are still early in a very long cycle.

Wednesday, May 13, 2026

My Review of G. Edward White's "Robert H. Jackson: A Life in Judgement"

 My Favorite Supreme Court Justice


Robert Jackson is my favorite Supreme Court justice. Here University of Virginia Law School professor G. Edward White brings to life one of the finest legal minds of the 20th Century in a detailed biography of his professional and personal life.  Unlike the current court which is dominated by snooty lawyers from Harvard and Yale, Jackson did not go to college, and he attended Albany Law School for only one year.  He read the law with a local lawyer which enabled him to pass the Bar Examination. We went on to become a leading public utility lawyer in New York.

 

Jackson grew up in a Democratic family in Jamestown, New York. Democrats were few and far between in western New York; Franklin Roosevelt, a rising politician took notice of him. When Roosevelt was governor, he asked Jackson to join the Public Service Commission, but he declined. Although Jackson represented most of the utility interests in western New York, he was so respected that consumer advocates supported him.

 

Roosevelt convinced him to come to Washington, first to the Internal Revenue Service and then to the Justice Department. He managed the high-profile Mellon tax case and helped write the Public Utility Holding Company Act of 1936. Later as Attorney General he helped draft the destroyers for bases deal and the Lend Lease Act. In late 1941 Roosevelt appointed him to the Supreme Court.

 

Most observers thought that Jackson would be a rubber stamp for New Deal laws and generally hew to an activist liberal position. That was not to be the case. However, in Wickard v. Filburn (1942) Jackson writing for a unanimous court declared that the Agricultural Adjustment Act of 1938 applied to a small farmer planting corn for his own use and hence was in violation of the Act. To me this stretched the power of Congress to regulate interstate commerce beyond a reasonable limit.

 

Jackson supported the court’s decision in West Virginia Board of Education v. Barnette (1943) which ruled that the state couldn’t compel a Jehovah’s Witness student to say the Pledge of Allegiance on free speech grounds. Simply put, the government can’t compel speech. In Korematsu v. U.S. (1944) Jackson dissented in a case that supported the government’s right to intern Japanese citizens on the west coast as a wartime measure.

 

Professor White brings out the long running feud Jackson had with Justice Hugo Black. They didn’t like each other from the beginning, and it exploded when Black refused to recuse himself in Jewel Ridge Coal v. United Mine Workers (1945). Black’s former law partner was the attorney for the mine workers and Black was one of the authors of the Fair Labor Standard Act of 1938 which was what the case was about. On a broader level he philosophically disagreed with Black’s and also Douglas’ result-oriented view of decision making. Jackson started at the bottom and worked his way up, while Black and Douglas started at the top and worked their way down to support their conclusions.

 

In 1945 Jackson took leave of the court, to become the Chief Prosecutor at the Nuremberg War Crimes Trials. Indeed, practically on his own, he created the full panoply of procedures that the tribunal would adopt. His goal was to bring justice to the Nazi war criminals with a modicum of procedural safeguards. Thus, it was far from a show trial.  Indeed, Nazi leader Hermann Goering actually tripped up Jackson during his examination. No matter, Goering committed suicide in his cell. To Jackson, his time at Nuremberg was the highlight of his career. He witnessed the obstinacy of the Soviet justices making him deeply suspicious of their motivations and the Nazi rise to power taught him to be very suspicious of authoritarians of all stripes.

 

Jackson return to the court in 1946. In perhaps one of his most important dissents in Terminiello v. Chicago (1949) he noted that the constitution is not a suicide pact. More specifically he wrote “…it will convert the constitutional Bill of Rights into a suicide pact.” Thus, he was not free speech absolutist in the tradition of Justice Black. He noted that “there was no unlimited freedom for dangerous speech.” That opinion, yet again, demonstrated what a fine legal writer he was.

 

In the late 1940’s and early 1950’s the Supreme Court got caught up in the growing Cold War tensions with the Soviets and the fear of communism domestically. Jackson supported the Smith Act and sustained the conviction of the leading members of the Communist Party in Dennis v. U.S. (1951). Later in 1953 he supported the conviction and the execution of the Rosenberg’s in the atomic spying case. (Rosenberg v. U.S. (1953)) White brings out the perfidy of Justice Douglas in his supporting the execution, but wanting to dissent to show off is civil liberties bona fides.

 

My favorite Jackson opinion is his in Youngstown Sheet and Tube v. Sawyer (1952), the steel seizure case. Here Jackson enunciated the rule concerning presidential power versus Congress that stands to this day. He divided the question into three parts. The first is where the president is strongest when he “acts pursuant of expressed or implied authorization of Congress.” Second where “Congress has not given or denied authority” is sort of a “twilight zone.” Third, the president is weakest when “he takes action incompatible with the expressed of implied will of Congress.” In case of the last, the courts should strictly scrutinize the presidential act. Jackson’s rule today is directly applicable to the current controversy over the War Powers Act.  Just to note Youngstown was about the domestic powers of the presidency, while the War Powers Act is concerned with foreign policy which gives the president more leeway.

 

The last major case Jackson dealt with was Brown vs. Board of Education (1954), the famous school desegregation case. Initially Jackson was ready to rule against Brown, and White goes through several detailed drafts where Jackson ultimately changed his mind. While the case was being deliberated Jackson suffered a heart attack. He was thinking about writing a separate concurring opinion questioning, in part, the decision, but was talked out of it by Justice Frankfurter.

 

Jackson died soon thereafter at the relatively early age of 61. Had he lived another decade, he along with Justice Frankfurter (See: Shulmaven: My Amazon Review of Brad Snyder's "Democratic Justice: Felix Frankfurter..........." ) could very well have functioned as a braking influence on the Warren Court. Jackson wanted to avoid political questions (i.e., redistricting), and he believed that the court was moving in the same direction as the Lochner and anti-New Deal courts of the 1930’s by substituting their personal values above the constitution. My guess is that had the court taken that path it would be far less controversial than it is today.

 

Robert Jackson was a legal giant. It is a shame our society seems incapable of producing someone like him today. Perhaps the current Justice Amy Coney Barrett, a Notre Dame graduate, comes closest to him.

Sunday, May 10, 2026

The Redistricting Melee

Donald Trump started the redistricting melee by calling on Texas to undertake an unprecedented mid-census congressional redistricting to create five additional Republican seats. California Democratic Governor Gavin Newsom responded in kind by calling a successful referendum to redistrict California to create an additional five Democratic seats and the partisan war was on. It came crashing down for the Democrats in Virginia this week when their Supreme Court ruled their redistricting referendum unconstitutional. That plan would have created four more Democratic seats. Along the way Trump unseated candidates in Indiana's Republican primary that opposed his redistricting plan for the state.

Then of a sudden the U.S. Supreme Court declared parts of the Voting Rights Act of 1965 unconstitutional paving the way to redistrict a host of Black (Democratic) seats across the South. Tennessee and Louisiana have already acted. Further, by 2028 elections there will be a raft of redistricting across Democratic and Republican states. I don't know who the ultimate winner will be, but I do know the American voter will be the loser. Simply put voters should choose their politicians, not the other way around.

Meantime after being down in the dumps all year, the Republican Party now has some spring in its steps. To me their optimism and the Democrats pessimism is premature. Why? In a wave election, and if there is to be a wave, it will be the Democrats that sweep and instead of helping, redistricting will hurt because it dilutes a party's strength where it was presumably strong.(See: https://shulmaven.blogspot.com/2018/07/gerrymandering-wont-save-republicans-in.html ) Second, I would hope that the electorate gives a big F-You to both parties by voting Republican in California and Democratic in Texas. It maybe too much to hope for, but I fear that both parties are now circling the drain. We need something new.

Sunday, May 3, 2026

The Purim War - Part 6, Cracks in the Home Front*

Although America’s blockade of the Persian Gulf is working causing oil storage problems in Iran, an implosion of its economy and a collapse of its currency, severe cracks in the home front have emerged. The 60-day clock of the War Powers Act has run out, and President Trump’s approval rating, with gas prices up nearly 50%, has declined to 37%, according to the latest poll. Indeed, beyond the wackos on the Right and the Left who are rooting for Iran, it seems that voices of the liberal establishment are implicitly supporting an Iranian victory. Why? Their hatred of Trump overwhelms all considerations of America’s security interests in the middle east region.

 

So, where do we go from here? Trump’s novel interpretation of the War Powers Act arguing that direct fighting between the U.S. and Iran ceased in early April, means that should hostilities resume a new 60-day clock would start. The ball is now in Congress’ court, but I would note Congress did nothing in 2011 when President Obama engaged in hostilities in Libya for six months. Further, every president since Nixon have has stated that the act is unconstitutional; it looks like we will once again be headed to the Supreme Court on the issue of executive power.

 

Meantime, Trump, and Chinese leader Xi are scheduled to meet in less than two weeks. This meeting has been postponed before, and it may yet be postponed again. Nevertheless, my guess is that meeting or no meeting, Trump will execute the new military plan to attack Iran’s infrastructure as a means to coerce Iran to yield on its nuclear program.

 

Beneath the surface the dynamics of the middle east are changing before us. The UAE is leaving OPEC and there seems to be a budding alliance between the UAE and Israel. Israeli troops are on the ground in the UAE to assist in its first ever deployment of its iron dome air defense system outside of the country.  Thus, it would be a foreign policy blunder of the first order for the U.S. to fail to achieve its fundamental war aims.

* See: Shulmaven: The Purim War- Part 5, Deadlock in the Strait of Hormuz*