The first post in this pair established the backdrop for the current contest between the president and Congress over control of the federal state. This post assesses how that struggle is progressing.
The ongoing contest between the executive and legislative branches — a contest being mediated by the judicial branch — has mostly concerned encroachments on Congress’s “power of the purse.” (The other core question has been the power to declare war.) One theater of conflict has been federal revenues. The written US Constitution gave Congress the power to impose tariffs on imported goods, as did the unwritten constitution. One result was an incoherent series of vast tariff bills in the 19th and early 20th centuries, taking up a staggering amount of Congressional negotiating time. A major reason for the institution of an income tax (1913) was to escape this chronic legislative morass. Over a century later, President Trump revived tariffs as a revenue source, partly as a way to make possible the reduction of income tax. This of course put the executive in conflict with Congress. A sharply partisan Congress was unable to defend its own powers, but the Supreme Court partly did so in February of this year (see “Peak Trump? – 4 of 4,” 21 Feb. 2026).
A second theater of conflict between Congress and the executive over the power of the purse has been “impoundment” via “rescission.” This obscure strategy, based on a 1974 law, also aims at the “administrative state” discussed in the last post. Most administrative-state activities are financed by “discretionary spending” — federal spending that goes through Congress’s appropriations process. Discretionary spending is nearly 30% of federal spending. Half of it goes to defense. The other half goes to food safety, science research, homeland security, education, and so on, most of which the White House’s proposed 2027 budget would cut by a further 10%. “Mandatory” spending, like Social Security and Medicare, is separate and accounts for 60%. The balance goes to pay interest.
Since the Thomas Jefferson administration, “impoundment” — withholding some amount of appropriated, discretionary spending — has occasionally been used by a president to manage expenditures, for example when money had been appropriated for a purpose that later ceased to exist. This was an example of a feature of an unwritten constitution. It worked for almost two centuries until President Nixon tried to use impoundment much more expansively to advance his agenda; Congress retook its authority via the Impoundment Control Act (ICA) of 1974. This included a process by which a president could send a special message to Congress requesting “rescission” of appropriated monies.
President Trump, in his first administration, asked Congress for 34 rescissions totaling $14.8 billion. Congress did not allow any of them. He asked again, in the last days of that term, for 73 rescissions totaling $27.4 billion. Again the request was refused. In his second term, the president asked for $9.4 billion in rescissions. These were the initial cuts to USAID, public broadcasting, support for “color revolutions around the world” and the Green New Deal, and other administrative-state, discretionary expenditures. Congress passed $9 billion of the cuts and the Rescissions Act of 2025 became law on a narrow party-line vote. The Trump administration went on to make an additional $5 billion in cuts to foreign aid and international organizations in August through a “pocket rescission,” a maneuver that allowed it to eliminate Congressionally appropriated funds without any approval from Congress at all.
By such means the current administration has taken some budgetary authority away from Congress, effectively altering the constitutional balance of domestic governing power. It is all pretty murky and has occurred without much public debate. The same is true of the justification for it, the “unitary executive theory.” This theory has nothing to do with foreign aid, public broadcasting, color revolutions or Green New Deals. It only has to do with power. The narrow basis for it is the assertion that the executive branch has complete power to fire anybody the executive might care to fire — for example, anyone in the administrative state. The broader basis is the notion that it is up to the president to decide whether or not he has adequately carried out the will of Congress. It is agreed that Congress has the power to approve hires; but does it have the power to approve firings? The answer has been controversial since the beginning of the republic and has taken different forms for 250 years. They are all part of America’s unwritten constitution.
It is easy to underestimate this administration’s determination to assert the power of the unitary executive to dismantle what Congress has mandated by trimming Congress’s ability to control both the raising of revenue and the spending of it. An unwritten constitution seems at times to be overtaking the written one. The Supreme Court appears to be appreciating the magnitude of this, which is why the president made the extraordinary assertion that the courts really should not be independent at all.
The risk to investors is that the underlying rule of law, which has stabilized markets since the 18th century, will be weakened. While, as every prospectus says, past performance is no guide to future earnings, it should be remembered that one enduring result of England’s Glorious Revolution of 1688 was precisely — by making Parliament permanent and in a position to restrain the spending of the monarch as executive — to stabilize property relations so England could invest in long-term projects like infrastructure, be restrained from expensive wars, and enable the birth of modern industrialization. That example was very much in American minds when the US system was being designed 250 years ago. Limiting the power of the executive was part of the foundation of modern government and modern prosperity.