Trump: Just what is an "Executive Order"?
Since Trump took the helm, he has issued at least four Executive Orders. Based on his personality, he will continue ruling such decrees. So just what are these beasts? How does the evidence-based investor react?
What is an Executive Order (EO)?Strictly speaking, there is no official definition of an EO; nor is there any official provision authorizing its issuance. However, over 13,000 presidential EOs have slithered into law; thus, they are a reality that needs to be grasped. So what is an EO? De facto, an EO is a legally-binding order issued by the President to Federal Administrative Agencies (i.e. Executive branches and Agencies). The EO has the same legal weight as laws passed by Congress.
When is an EO legally-binding?Only if it is based on power vested in the President a) by the U.S. Constitution, or b) by Congress.
Why is an EO controversial?As stated in point one above, the legal basis for an EO is mushy, at best. Besides, the EO allows the President to make major decisions, even law, without the consent of Congress. This controversy glares when the EO runs contrary to Congressional or legal intent.
How can an EO be invalidated?Invalidation is a long and winding road, with an EO remaining in place until invalidation has taken its tortuous course. My guess is that Trump has factored this into the calculus when spewing EOs, knowing full well that their invalidation will get caught in the machinations of Congress and/or courts. Having written this sober preamble, just how can an EO be invalidated? First, a Congress that disagrees with an EO can rewrite or amend it, spelling-out how the Executive is to act. But remember that the President can veto this Congressional move; that Presidential veto, in turn, can be overridden only by a 2/3 majority in both chambers. Secondly, Congress can refuse to fund an EO. Finally, an EO can be challenged in court - usually because the EO deviates from Congressional intent, or because the EO exceeds the President's constitutional powers.
How can courts invalidate an EO?Again, no clear-cut rules apply; thus, many an EO has been tough to challenge, or indeed, overturn in court. In Youngstown Sheet & Tube Co vs Sawyer, the Supreme Court's Justice Robert Jackson provided a robust framework in order to determine the legality of an EO. Highly simplified, "The President's authority (to act or issue an Executive Order) is at its apex when his action is based on an express grant of power in the Constitution, in a statute, or both. His action is most questionable (i.e. at its nadir, the ed.) when there is no grant of constitutional authority to him (express or inherent) and his action is contrary to a statute or provision of the Constitution." (Gaziano, Todd F., The Use and Abuse of Executive Orders and Other Presidential Directives, in: The Heritage Foundation Legal Memorandum No. 2, 21st February 2001, p. 7)
Where is an EO published?Public ones appear in the Federal Register. However, secret ones remain out of the public's purview, by definition.
Implication for the Evidence-Based InvestorGiven Trump's imperious and impetuous personality, my guess is that he will rule by decree, by EO, instead of even trying to work with Congress. Trump's impetuousness will make markets skittish. That presents plenty of opportunities. For instance, buy the whole market when it is cheap. This applies particularly to small caps.
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