Washington Merry-Go-Round

IMMEDIATE RELEASE 19 September 2025
WASHINGTON MERRY-GO-ROUND
Today’s Events in Historical Perspective
America’s Longest-Running Column, Founded 1932
Two momentous months
By Douglas Cohn and Eleanor Clift         
 
WASHINGTON – The next two months are going to be momentous.
Top of the list is the Supreme Court’s upcoming ruling – the most important in the nation’s history. The Court will hear arguments in the first week of November on the appellate court’s decision that the Trump tariffs – the largest in U.S. history – are unconstitutional. The president invoked emergency powers under the 1977 International Emergency Economic Powers Act (IEEPA), but the Supreme Court has never ruled on the critical question: Is the president the sole decider of what constitutes an emergency? If so, the president will have received an enormous power never envisioned by the Founding Fathers, which is why we believe the current Court, though dominated by conservatives who repeatedly ruled in Trump’s favor, will uphold the lower court’s ruling, there being no rational argument to do otherwise.
Should the Supreme Court do this, the tariffs will have to be refunded, and this may explain why the 10-year Treasury Bill interest rate went up instead of down when the Federal Reserve lowered its rate on September 17. To refund tariffs, the government will have no choice but to borrow much more money, which it does through the sale of Treasury Bills. Hence, the increased interest rate on the 10-year Bill.
Meanwhile, tariffs have contributed to the increase in inflation. At 2.9 percent, the Consumer Price Index (CPI) is at its highest level of the year, and this barely tells the tale. The August CPI is averaged with the prior 11-month readings to arrive at the figure, but the August CPI itself came in at .4 percent or an annualized rate of 4.8 percent, which explains why back-to-school purchases witnessed a price jump.
At the same time, massive deportations of undocumented workers have left farmers complaining about their inability to find sufficient workers to harvest the crops. This has contributed to the falling employment numbers reported since April, and it was this drop in employment that prompted the Fed to lower its interest rate.
The problem is that the Fed has a dual mandate to keep employment up and inflation down, and for the first time in years, it has now focused on falling employment instead of rising inflation. This is the definition of stagflation, which some forecasters are warning is leading to a recession.
On the political front in November, gubernatorial elections in Virginia and New Jersey are expected to go Democratic, giving beleaguered Democrats a needed boost. Virginia could be a sweep with Democrats taking offices from top to bottom on the strength of former undercover CIA officer Abigail Spanberger’s gubernatorial candidacy.
The Virginia election, the only one typically held in the off-year, has always been seen as a bellwether for what happens the following year in the midterms.
In New Jersey, Democrat Mikie Sherrill, a former Navy helicopter pilot, is running for governor, where she faces a tighter but still very winnable race than Spanberger, her former roommate when they served together in Congress. Taken together, these two women with blue-ribbon resumes notching wins change the narrative overnight for Democrats.
Taken together, November may bring a momentous Court ruling that reins in the president and reestablishes the constitutional balance of powers, a temporary spike in interest rates prompted by tariff refunds, followed by a fall off in inflation and interest rates as world markets are reopened, which, in turn, will allow farmers to recapture contracts for important commodities such as soy beans that have been cut off by China. To complete these remedies, it will be imperative for undocumented workers to quickly become temporarily documented for farm labor and other fields. Simultaneously, the political arena may deliver a message for the Trump administration to rethink some of its more unpopular policies.
On the other hand, if the events of November go a different direction, inflation will continue unabated, employment will continue its decline, the predicted recession will be upon us, and the unitary theory of government will have become reality as the president is given the power to govern at will through executive orders based upon imagined emergencies.
 
See Eleanor Clift’s book Selecting a President, and Douglas Cohn’s latest books The President’s First Year: The Only School for Presidents Is the Presidency and World War 4: Nine Scenarios (endorsed by seven flag officers).
Twitter:  @douglas_cohn
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END WASHINGTON MERRY-GO-ROUND