Marketplace - SCOTUS curbs regulatory agencies’ powers. Again.

Episode Date: June 27, 2024

The Supreme Court has decided a case involving internal tribunals the SEC uses to enforce fraud rules. In this episode, we’ll hear from a legal scholar about the ruling’s implications for all sorts of federal regulatory bodies. The short of it? It will be harder for agencies to enforce laws and easier for people and companies to get away with breaking them. Plus: what “final sales” means in the Federal Reserve’s analysis of GDP and why continuing jobless claims are climbing.

On the program today, how this economy really works. From American public media, this is Marketplace. In Los Angeles, I'm Colin Rizdal. It is Thursday today, the 27th of June. Good as always to have you along, everybody. Two words as a way to get going today. Administrative state. And now, just for the heck of it, a handful of more words. Securities and Exchange Commission versus Jarkuzzi.

The logjam of pending decisions from the United States Supreme Court broke up a little bit more today, the last couple of days of their term, with of interest to us in particular, a ruling in SEC versus Jarkuzzi about the power of federal agencies to make policy and then, most importantly, enforce it. Blake Emerson is a professor of law and political science at UCLA. He's our go-to on matters of administrative law.

Professor Emerson, good to have you back on the program. Great to be here. First blush, would you make this decision? So this opinion is of a piece with a number of cases that the Supreme Court has recently laid down that significantly limit the powers of Congress to regulate the economy, to promote public health and public safety. And this opinion on the Securities and Exchange

Commission's authority to impose penalties in its in-house courts furthers that overall project. Trevor Burrus This is not just about the Securities and Exchange Commission though. That's kind of the point. David Schoenberg Yes, very much so. So the powers that the court said the SEC unconstitutionally exercised are powers that other agencies also hold.

And if we look beyond the narrow ruling of the case about penalties to this broader question about regulatory agencies' powers to regulate private rights, like rights to property and contract, there's a much larger swath of agencies like the National Labor Relations Board and the Federal Trade Commission that could come under threat now that the court has made this significant change in law. Am I going too far if I say that these regulatory agencies and the powers they exercise are how this economy works? I think they're certainly central to the way in which the economy has operated at least since the New Deal.

The theory of the administrative state in the United States is that we want to have a free market economy, but there are many cases where the market doesn't function properly or where there are values other than maximizing profit that the people through Congress want to recognize. So the Securities and Exchange Commission, for instance, was created in response to the Great Depression in order to counter widespread fraud and abuse in the sale and marketing

of securities. And this opinion takes away one of the tools, one of the key tools in the arsenal that these kinds of agencies have to limit those kinds of abuses. Does it then follow that there may be more financial fraud and abuse if the Securities and Exchange Commission doesn't have these powers? Yes. Well, in a very straightforward way, you can think of this kind of ruling as increasing the costs to agencies like the SEC of enforcing the law, and at the same time, decreasing

the cost for people who want to break the law of doing so, because this will make it harder for the SEC to enforce the various securities laws that Congress has given it responsibility to administer. The phrase that comes to mind here, Professor, is chilling effect, right? Absolutely. And that's consistent with a number of other rulings the Supreme Court has laid down that send a very strong signal both to other courts, to lower courts in the federal judiciary, as well as to Congress and to administrative agencies that they are under very close scrutiny by the Supreme Court and the court will look

skeptically at their exercise of significant powers. Well, so let's play this forward a little bit because either tomorrow or Monday now, I understand, are going to be more decision days. And we've still got a case coming about the Chevron deference or deference, depending on how you want to pronounce it, about whether we ought to defer to regulatory agencies in interpretation of law. What does today's decision in the body of work that you've just cited lead you to believe about what might happen with the understanding that trying to spitball what the court's going

to do is a fool's errand? That's right. It's always hard to make predictions, but I think it is veryball what the court's gonna do is a fool's errand. That's right, it's always hard to make predictions, but I think it is very likely that the court will either overrule or significantly limit what's called Chevron deference. And Chevron deference is a principle going back to the 1980s that when a statute is unclear,

when it could mean more than one thing, the courts are supposed to accept the executive agency's interpretation of the statute if it's reasonable. Agencies both have scientific and technical expertise that the courts lack, and they're also more democratically accountable in the courts because the president exercises a lot of control over the people who are in charge of agencies. The court has given, I'd say, a lot of notice that Chevron is on the chopping block. And so I expect to see that doctrine either overruled or severely limited.

Do you ever sit back, here comes the free response question. Do you ever sit back as a guy whose job it is to figure out administrative law and teach it to new lawyers? Do you ever sit back and wonder how the administrative state and how this economy runs became so vilified? Yeah, it's a good question.

I think what has happened is that we have really profound, not only legal, but also political disagreements about the proper role of the federal government in regulating the economy, in trying to prevent unfair practices, in trying to avoid harmful pollution, things of that nature. And unfortunately, that has broken down along partisan lines. The Republican Party tends to be opposed to such measures, and the Democrats are broadly

in favor of it. Another side to it that I would note is that Congress has not shown a lot of willingness or alacrity to get in the game and to write new statutes, to refine the powers of agencies. And so in the absence of that kind of legislative action, what we see increasingly is more and more unilateral presidential action. And so today we're seeing the culmination of that process in what Justice Kagan has called in another opinion, an existential threat to the administrative state. Blake Emerson is professor of law and political science as well at UCLA. Professor Emerson, thanks for your time, sir.

I appreciate it. Thanks so much, Kai. Wall Street today, traders at last check. Still playing by the SEC's rules. Flat-ish were the major indices. Chevron shares, in case you're curious, they got some deference, up about a quarter percent. We'll have the details when we do the numbers. The The setup for this next item began this morning at the Bureau of Economic Analysis, which

gave us its third and final estimate of gross domestic product growth for the first quarter. That's January through March. It's of interest to all of us, but particularly to the Federal Reserve, which wants to know how GDP, economic growth is another way to say that, right? They want to know how GDP is changing. And it's changing pretty substantially, actually. GDP growth fell from 3.4% in the last quarter of last year to 1.4% at the beginning of this year. The data out today does contain more than just overall GDP, though. There are various unsundry components, one of which Fed Chair Jay Powell said at his last press conference he is watching in particular.

Private domestic final purchases, which Powell said, and this is a quote, usually sends a clearer signal on underlying demand. Demand, of course, can drive prices, which can drive inflation. You see where this is going, right? Marketplace's Mitchell Hartman has our primer. GDP is the broadest measure of goods and services produced in the U.S. economy. It includes pretty much everything. But the Fed needs to get a bead specifically on the level of demand from U.S. businesses and consumers for goods and services, says Kathy Busjancic

at Nationwide. They will prioritize the core readings and one of the core is final sales to private domestic purchasers. That's the one Fed Chair Powell is all set on right now. Essentially, GDP, less exports plus imports, less inventory investment. Dave Wasshausen is at the Bureau of Economic Analysis, which produces the GDP report. By removing that net export component, you're getting the purchases that are happening here in the United States, regardless of where they are produced. Final sales also strips out businesses buying up inventory and sticking it in warehouses to

sell later, says Mark Zandi at Moody's Analytics. Inventory changes, which go up, down, all around, but don't get to kind of the underlying growth rate in the economy. And note that this only counts sales in the private sector. Government spending is excluded too, because it tends to be more stable over time and can obscure cyclical changes in the economy. So right now, what is this J. Powell approved GDP measure telling us?

Well, final sales growth fell from 3.3% at the end of last year to 2.6% early this year. Ask two economists what that means, you get at least two answers. Kathy Busjancic at Nationwide. That's still a really strong result for the core GDP. It shows that consumers continue to spend, and also businesses are still investing. And Mark Zandi at Moody's Analytics. I think the economy, no matter how you measure it, is slowing. And he says in the second quarter, which is about to end, it looks to be slowing even more. I'm Mitchell Hartman for Marketplace. The American labor market is give or take 168 million people, so tracking it should

be seen as more of a trend thing than a single data point thing. There is the monthly unemployment reports, of course. Again, trend. There's a weekly report as well called first time claims for unemployment benefits. Again, trend. Those weekly numbers bounce around quite a bit. They can be affected by one-off events

like the federal holiday last week for Juneteenth, one last business day, which helps explain why those new applications for unemployment fell just a little bit. Here's the trend part, though. Continuing jobless benefits claims are tracked as well, and they rose last week to the highest they've been since November of 2021. Marketplace's Megan McCarty-Corino explains what that might be telling us about this labor market. It's hard for one data point from one week to say too much, but in this case, it seems to be harmonizing with a number of other recent signals, says Daniel Jow, lead economist at

Glassdoor. Jobless claims are telling us a similar story to what we're seeing in the unemployment rate or the hiring rate, where the job market is slowing. Job openings have been on the decline and so have quits. Assigned workers are losing confidence, even though layoffs are still relatively low by historic standards. A weaker labor market doesn't just come from layoffs. It often does manifest as weaker hiring. So for those unlucky enough to lose a job, it's likely taking longer to find a new one,

says Gregory Dachau, chief economist at EY. We are seeing signs that employers are being more cautious with who they hire, how much they hire. That wasn't always the case in the decades before the pandemic, he says. You would often see business leaders, employers reacting very rapidly to the initial signs of an economic slowdown, and they would proceed with the initial signs of an economic slowdown. And they would proceed with rapid layoffs in an effort to cut costs. It's led to a labor market that can feel vastly different depending on your circumstances, says Julia Pollack, chief economist at ZipRecruiter.

If you have a job you love, this is a great economy. You have unprecedented job security. But if you don't have a job, and if you've never had a job, finding one is proving tricky. She notes the increase in unemployment last month was driven by young workers, aged 20 to 24. But comparing this moment to any time since March of 2020 doesn't really tell you much, says Robert Frick, corporate economist at Navy Federal Credit Union. I think people are still remembering how easy it was to get a job a year or two ago. Well, it's not so easy anymore, but that just means it's getting back to normal. Continuing claims are now just a tad above where they were in 2019.

I'm Megan McCarty-Corino for Marketplace. Coming up. Riding bikes, discovering the city through food and hopefully opening a restaurant soon. Not so bad, right? Not so bad. First though, let's do the numbers. Dow Industrial's up 36 points today at 10%, 39,164. The Nasdaq picked up 53 points, about 3 tenths percent, 17,858. The S&P 500 pocketed 4 points, 10 percent, 54 and 82.

Walgreens plans to close, quote, a significant portion of its U.S. stores over the next three years. The drugstore chain reported disappointing earnings today and told investors that the current pharmacy model is challenging for business. Walgreens plummeted to 22 percent today. Competitors CVS dipped three-and-seven tenths percent. The country's biggest banks have passed the Federal Reserve's most recent stress test. That's an annual thing. The Fed subjects major lenders to hypothetical disaster scenarios. The Fed found the banks were well resourced to withstand severe economic or market shakeups. JP Morgan Chase crept up 9 tenths percent today.

Citigroup added about a half percent. U.S. Bank slid about a tenth percent. Bond prices went up the yield on the 10-year treasury note, thus down 4.28 percent as the yield on the 10-year. You're listening to Marketplace. The wait is over. Dell Technologies Black Friday and July deals are live. You're listening to Marketplace. visuals, and immersive sound. Your talents now have a device to stream videos, edit photos, or create your next masterpiece. Plus, complete your dream setup with deals on select monitors, mice, and more must-have

electronics and accessories. When you shop online at dell.com slash deals, you'll have access to exceptional tech and electronics and free shipping on everything. Don't miss out on Black Friday and July savings at dell.com slash deals. That's dell.com slash deals. This is Marketplace. I'm Kai Rizdal. It's been a while since I've been

in a really crowded movie theater. Last summer, probably, in the one, two punch of Blockbusters that we all heard way too much about at the time. Now, though, theaters and a lot of the people who work in Hollywood are still recovering, that we all heard way too much about at the time. Now, though, theaters and a lot of the people who work in Hollywood are still recovering, kind of, from the pandemic and the strikes of last year.

Stephanie Silverman, with whom we chat from time to time, runs a nonprofit movie house in Nashville, Tennessee. It's called The Bell Court. And we've caught up with her in Chicago, Illinois, where she's at a conference of independent exhibitors. Stephanie Silverman, great to talk to you again. Kai Ristahl, it's great to be in conversation with you right now.

In conversation. That's why I like these interviews to go. So what is the vibe amongst independent exhibitors, of which obviously you are one at the bell court? You know, first of all, every time you say, how's it going, there's always a little sigh first. And then it is like, you know, it's okay. We're definitely commiserating a little bit, but I'd say on the whole the vibe is positive.

Well, tell me about the optimism because, you know, there have been Hollywood strikes. There's a pipeline challenge, you know, people are getting laid off. I mean, and you're kind of on the receiving end. Yeah, we are definitely on the receiving end. I think honestly the optimism is because it feels like we're coming to the end of what is a profound impact from the strikes. We are still seeing some really wonderful first run like new release movies, but you know it's just not Barbenheimer level awareness right now, but the world of good movie making is still alive and well. Did you show either of those options, the Barman or the Heimer?

We showed the Heimer. Did you? We did. Yeah, well, we showed it on 35 millimeter film, but yeah, Barbie didn't need the help of the Bell Court. She was doing fine on her own. What had done some business for you though? Of course, but it's doing business for other people. And so we try and center filmmakers who maybe aren't Barbie, right?

They're smaller filmmakers, they're foreign films, they're repertory films. That's where we feel like our place in the world lies. So I was obviously being flipped because I knew you weren't going to show Barbie, but it does get to the whole, your challenge is programming, right? You have to program things really carefully.

Yeah, every day. We exist sort of showing two sectors of movies. First runs, the new released kind of content and repertory. And usually, the first runs are the bigger revenue titles for us. So we make more money on the new shiny releases. And repertory is just part of our curatorial work and is core to who we are, but has traditionally been secondary. And frankly, this year, that has been fully flipped on its head.

So right now, it's the Repertory programming that is really our bread and butter in terms of how we are paying our people. So the work requirements from our curators and from our programming staff are huge. All the marketing assets we put together, you know, it's just, it's exponentially increasing our work to do that, but it's also got great returns. So it's just a functional part of our reality right now.

All right, a couple other things on my list here I need to take through. Inflation. Obviously the headline numbers are down, but price levels are still elevated. What are your input costs like? What's going on with you? You know, they're still up. They're, of course, you know, for things especially like cost of goods, concessions, items, things

like that, we don't expect them to go down. We've had to increase pricing a little bit. I think we've done it in a way that hasn't been too stressful on our patrons. If I want to come on a Saturday date night with me and my wife, how much is it going to cost me at the bell court for two seats? Well, if you're a member of the bell court. Of course I would be, yes. Okay, good.

Well, then it's only going to cost you $950. Oh, that's nothing. For you and your wife. Yeah, exactly. That's like 1980s racing, frankly. Right, right, right, right. Okay, business model question. I'm sure you saw the thing where Sony, big producer of movies, is going to buy Alamo

Drafthouse. Yeah. That's a very big deal in the whole movie producers owning theaters thing. There's history involved. What does that mean for you? Does it mean anything for you? How do you feel about it? Well, right now, the positive for me is that it is just like

the rubber stamp of approval on theatrical matters, and it matters so much that we, this giant movie studio, are buying some of our own movie theaters. Now, of course, we don't want to get into the, you know, back, return to the years of the Paramount Consent Degree, right, where the studios owned every theater, and there was the years of the Paramount Consent Degree, right? Right, right, right. Where the studios owned every theater and there was a lot of confusion about who got to show what.

I don't think we're going to get there, but I am just thrilled that a major studio says, this matters so much to us that we are putting our money in it and we're going to experiment around how we build audiences over time. So frankly, I'm glad to have Sony as a colleague in the theater exhibition business. KUHN-LAMBORG That's pretty funny, you and Sony. SONIA I know, right? KUHN-LAMBORG Stephanie Silverman,

Belcourt Theatre, Nashville, Tennessee. You should check it out. It's great. Talk to you soon. SONIA Thanks, Kai. It's always great to talk to you. I think we mentioned this the other day that consumer confidence was down a bit in June. Not a lot, but down, another sign that consumers are growing more hesitant about this economy. A more hesitant consumer often, although not always, indicates a slowdown in spending. So the data shows us. What though have small business owners been seeing? We call Jelon

Hall Johnson. She's the owner of the Sassy Biscuit Company in Billings, Montana to find out. So summer for us is typically a busier season for in Billings. There's lots of tourism, there's lots of different events. People are out, it's not as cold. You know, the last snow is in April, sometimes May. Once that's over, people like to get out and eat good food. Beginning in April, we start to ramp up our staffing wages range from about $10.50 to $14 an hour, and we typically see about $7 to $9 additional in tips per hour for each employee. Wages have definitely increased since we've opened. Minimum wage has absolutely increased. And so the tip sharing and the team effort is so huge within our work environment because it's the only way we can really sustain paying

our decent wage to our employees while also maintaining our costs. So our first location is in Billings, Montana, but I am currently in Richmond, Virginia, working on a new location. We have always struggled with finding financing and our last major project we had to walk away because of financing. So our scaling up is looking a little different these days. Instead of leasing, we're looking to hoping to buy. One of the thoughts was, well, if we are able to purchase a building, then we have

equity, then you know, banks look at it differently, lenders look at it differently. The way I work is we're gonna go for it and see if we can make it happen. And so that's what I've been working on. Part of how I decide on a new location is by exploring the city. And so I've been in Richmond for a little over a year now. And I have recently just bought a new bike. I tell you with a a bike, it's just, you can explore, but on a bike, it's just so magnificent. And so it just allows me to get out there and see what's going on in the city,

understand more about the people and the places and the history. That's what I'm focusing on, riding bikes, discovering the city through food, and hopefully opening a restaurant soon. Jelana Hall Johnson, owner of the Sassy Biscuit Company in Billings, Montana and maybe soon, Richmond, Virginia. This final note on the way out today, I direct your attention to the concurrence by Justice Gorsuch in today's decision in Securities and Exchange Commission versus Jarkozy that

I was talking to Professor Emerson about up at the top of the program. Everybody is entitled to a typo I know, but this is the Supreme Court we're talking about. Here is Gorsuch's opening line in his concurrence. The court decides a single issue, whether the Security and Exchange Commission's use of in-house hearings to seek civil penalties violates the Seventh Amendment right to a jury trial. Securities and Exchange Commission, Mr. Justice. Securities. John Buckley, I know I'm a jury trial. Securities, an Exchange Commission, Mr. Justice. Securities. John Buckley, I know I'm a stickler. John Buckley, John Gordon, Noya Kardai at the Parker Amid.

Petra and Stephanie Sieck are the Marketplace editing staff. Amir Bibawe is the managing editor. I'm Kyle Rizdal. We will see you tomorrow, everybody. This is APM. Hey, I'm Ryan Knudsen, co-host of The Journal, a daily news podcast about money, business, and power. Every day on our show, we bring you the most fascinating stories from the business world, from covert corporate moves. What Amazon was doing is they set up a very secretive show company that people at Amazon didn't even know existed.

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