How the border wall battle could hurt the economy

Sixteen states that joined in the first of a string of expected lawsuits over President Donald Trump’s national emergency maneuver to fund a southern border wall could lock up nearly $7 billion in national spending if the funds come under the court’s jurisdiction.

The lawsuit filed in a federal district court for the Northern District of California seeks an injunction to stop the Trump administration from using $7 billion in federal funds already allocated to states to construct a wall along the U.S.-Mexico border.

“The diversion of funds is likely to be held up in the courts for most or all of the remainder of President Trump’s first term,” a report from Rabo Research, a Global economics and market research firm, said.

Drawn out court battles that withhold the funds from the economy, the firm said, could negatively impact GDP growth. Consumer confidence, business, and investment could be negatively impacted, as well.

‘Very hard to generate the legal case’

Whether courts will permit legal challenges at all is questionable. None of the parties that have sued the administration easily satisfy standing requirements typically required to maintain an action against the federal government over executive action.

“Unless the emergency order targets a class of people who have a right to be treated differently than they're treated under the universal declaration, it's actually very hard to generate the legal case that would challenge the emergency declaration,” Kim Lane Scheppele, professor of international affairs at Princeton University, told Yahoo Finance.

Plaintiffs must have an “injury in fact,” meaning an injury that has already occurred or is imminent, and that is not hypothetical. They also must be able to connect the alleged injury to the defendant and show that the court is capable of mitigating the injury.

The 16 states named in the California complaint allege varying injuries. Some say diverting funds away from the states causes injury to state citizens because the state can no longer use funds to stop the flow of illegal drugs and carry out separate law enforcement activities. Others say funds diverted from military projects will stymie general economic growth and, in turn, depress state tax revenues.

Whether those types of injuries are enough for the court to grant an injunctive order that and temporarily halt the use of $7 billion is anyone’s guess.

“If California says you’ve taken the funds that we’ll need for next year's fire season, it's a hypothetical injury and it's a long way off and Congress can re-top the funds,” Scheppele said. Though with courts in uncharted territory, Scheppele said they may find ways to substantiate the state’s lawsuit.

In all, the president announced $8 billion for border protection. $1.375 billion is not under immediate scrutiny because it was appropriated by Congress for border fencing. According to the administration, the remaining $7 billion could fund actual border wall construction, including $3.5 billion accessed through the emergency declaration, $2.5 billion tapped from a defense department account used to reduce the flow of illegal drugs into the U.S., and $600 million from a Treasury Department forfeiture fund used to fight crime.

The administration said it first plans to tap funds that do not rely on the emergency declaration. If courts find those funds are outside their purview it could lessen projected negative impacts on GDP.

Other potential lawsuits

In 2014, a federal district court paved the way for the U.S. House of Representatives to sue a sitting president. At the time, a district court granted House republicans standing to bring a claim against then President Barack Obama who sidestepped Congress’s power of the purse by reallocating unappropriated government funds to the Affordable Care Act.

Because The National Emergencies Act of 1976 gives the president authority to invoke national emergencies and provides a measure for Congress to remedy executive overreach, courts have been reluctant to grant Congress the right to sue under the Act.

“There’s a group called Protect Democracy that’s planning to file a lawsuit,” Scheppele said. The organization is comprised of former White House Counsel attorneys from Republican or Democratic administrations who rely on a body of informal executive branch laws handed down from previous administrations.

“Going back decades it has been a kind of secret law of the executive branch,” Scheppele said. The group, she explained, may have standing because they have a big stake in the continuity of executive office legal constraints.

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President Trump visits border wall prototypes amid protests
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President Trump visits border wall prototypes amid protests
US President Donald Trump is shown border wall prototypes in San Diego, California on March 13, 2018. / AFP PHOTO / MANDEL NGAN (Photo credit should read MANDEL NGAN/AFP/Getty Images)
People hold signs during a protest while standing in front of the current border fence and near the prototypes of U.S. President Donald Trump's border wall, in Tijuana, Mexico March 13, 2018. The sign on the right reads "Trump, walls can be jumped over". REUTERS/Edgard Garrido
US President Donald Trump inspects border wall prototypes in San Diego, California on March 13, 2018. / AFP PHOTO / MANDEL NGAN (Photo credit should read MANDEL NGAN/AFP/Getty Images)
People attach a sign reading "Trump, stop the mass deportations" to the current border fence and near the prototypes of U.S. President Donald Trump's border wall, during a protest in Tijuana, Mexico March 13, 2018. REUTERS/Edgard Garrido
US President Donald Trump's motorcade arrives at the border fence in San Diego, California on March 13, 2018. / AFP PHOTO / MANDEL NGAN (Photo credit should read MANDEL NGAN/AFP/Getty Images)
People hold signs reading "No to the wall" and "Trump, put your wall, but in your territory, not in ours", during a protest near the prototypes of U.S. President Donald Trump's border wall, seen behind the current border fence, in Tijuana, Mexico March 13, 2018. REUTERS/Edgard Garrido
US President Donald Trump is shown border wall prototypes with White House Chief of Staff John Kelly (L) in San Diego, California on March 13, 2018. / AFP PHOTO / MANDEL NGAN (Photo credit should read MANDEL NGAN/AFP/Getty Images)
A man holds a sign reading "Trump, put your wall, but in your territory, not in ours", during a protest near the prototypes of U.S. President Donald Trump's border wall, seen behind the current border fence, in Tijuana, Mexico March 13, 2018. REUTERS/Edgard Garrido
US President Donald Trump arrives to inspect border wall prototypes in San Diego, California on March 13, 2018. / AFP PHOTO / MANDEL NGAN (Photo credit should read MANDEL NGAN/AFP/Getty Images)
People hold signs reading "No to the wall, Trump," and "Trump, we are not enemies of the USA" during a protest near the prototypes of U.S. President Donald Trump's border wall, seen behind the current border fence, in Tijuana, Mexico March 13, 2018. REUTERS/Edgard Garrido
US President Donald Trump speaks during an inspection of border wall prototypes in San Diego, California on March 13, 2018. Donald Trump -- making his first trip to California as president -- warned there would be 'bedlam' without the controversial wall he wants to build on the border with Mexico, as he inspected several prototype barriers. The trip to the 'Golden State' -- the most populous in the country and a Democratic stronghold -- was largely upstaged by his own announcement that he had sacked Secretary of State Rex Tillerson. / AFP PHOTO / MANDEL NGAN (Photo credit should read MANDEL NGAN/AFP/Getty Images)
Mexican Federal Police officers stand guard the Mexican side of the Mexico-US border in Tijuana, Baja California state, from where prototypes of the border wall, which US President Donald Trump will inspect on the outskirts of San Diego, in the US, are visible on March 13, 2018. Fresh off a cabinet reshuffle, President Donald Trump was headed for Democratic stronghold California on Tuesday to inspect prototypes of the controversial border wall with Mexico that was the centerpiece of his White House campaign. / AFP PHOTO / GUILLERMO ARIAS (Photo credit should read GUILLERMO ARIAS/AFP/Getty Images)
People hold signs reading "Trump, we will not pay for the wall" and "Trump, stop the mass deportations" near the border fence between Mexico and the U.S., in Tijuana, Mexico March 13, 2018. REUTERS/Edgard Garrido
Journalists gather at a rooftop near the US -Mexico border as President Trump is expected to inspect the border wall prototypes built outskirts San Diego, in Tijuana, Baja California State, Mexico, on March 13, 2018. Fresh off a cabinet reshuffle, President Donald Trump was headed for Democratic stronghold California on Tuesday to inspect prototypes of the controversial border wall with Mexico that was the centerpiece of his White House campaign. / AFP PHOTO / GUILLERMO ARIAS (Photo credit should read GUILLERMO ARIAS/AFP/Getty Images)
U.S. police officers use a ladder to climb up a truck parked in front of the prototypes of U.S. President Donald Trump's border wall, on the U.S. side of the current border fence, in Tijuana, Mexico March 13, 2018. REUTERS/Jorge Duenes
An agent faces Mexico while standing by the vehicle of U.S. President Donald Trump at the border near San Diego, California, where Trump reviewed wall prototypes designed to serve as a protective barrier against illegal immigrants, drugs and smuggled weapons, March 13, 2018. REUTERS/Kevin Lamarque
A U.S. Customs and Border Protection (CBP) Border Patrol Agent sits on horseback near U.S. President Donald Trump's motorcade during a tour of U.S.-Mexico border wall prototypes near the Otay Mesa Port of Entry in San Diego, California. U.S., March 13, 2018. REUTERS/Kevin Lamarque
TIJUANA, MEXICO - MARCH 13:Anti-Trump protestors demonstrate on the Mexico side of the border before the arrival of the U.S. President to inspect the prototypes of the proposed border wall on March 13, 2018 in Tijuana, Mexico. (Photo by Wally Skalij/Los Angeles Times via Getty Images)
The motorcade carrying US President Donald Trump drives past a US-Mexico border fence as Trump head for an inspection of border wall prototypes in San Diego, California on March 13, 2018. Donald Trump -- making his first trip to California as president -- warned there would be 'bedlam' without the controversial wall he wants to build on the border with Mexico, as he inspected several prototype barriers. The trip to the 'Golden State' -- the most populous in the country and a Democratic stronghold -- was largely upstaged by his own announcement that he had sacked Secretary of State Rex Tillerson. / AFP PHOTO / MANDEL NGAN (Photo credit should read MANDEL NGAN/AFP/Getty Images)
Mounted Border Patrol agents are seen as US President Donald Trump inspects border wall prototypes in San Diego, California on March 13, 2018. Donald Trump -- making his first trip to California as president -- warned there would be 'bedlam' without the controversial wall he wants to build on the border with Mexico, as he inspected several prototype barriers. The trip to the 'Golden State' -- the most populous in the country and a Democratic stronghold -- was largely upstaged by his own announcement that he had sacked Secretary of State Rex Tillerson. / AFP PHOTO / MANDEL NGAN (Photo credit should read MANDEL NGAN/AFP/Getty Images)
US President Donald Trump inspects border wall prototypes in San Diego, California on March 13, 2018. Donald Trump -- making his first trip to California as president -- warned there would be 'bedlam' without the controversial wall he wants to build on the border with Mexico, as he inspected several prototype barriers. The trip to the 'Golden State' -- the most populous in the country and a Democratic stronghold -- was largely upstaged by his own announcement that he had sacked Secretary of State Rex Tillerson. / AFP PHOTO / MANDEL NGAN (Photo credit should read MANDEL NGAN/AFP/Getty Images)
US President Donald Trump holds up a poster of before and after photos of a segment of the border wall prototypes with Chief Patrol Agent Rodney S. Scott (R) in San Diego, California on March 13, 2018. / AFP PHOTO / MANDEL NGAN (Photo credit should read MANDEL NGAN/AFP/Getty Images)
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Private property owners whose land the federal government would need to build border walls and fencing are another group of potential plaintiffs, though their claims would not be heard as a direct challenge to the Constitutionality of the emergency declaration itself.

‘I didn’t need to do this’

Trump may have undermined his position that drugs, human traffickers and gangs crossing into the U.S. supports a need for a national emergency declaration. While fielding a question about the declaration from an NBC, the president said, “I didn't need to do this, I wanted to get it done faster.”

Critics challenging the president’s interpretation of an emergency point to the speed with which he chose to declare it. If drugs, human trafficking and gangs were a true national emergency, they say, the action would have been invoked as soon as the president became aware of the purported crisis.

That argument, Scheppele says, might not be as potent as critics think.

“The National Emergency Act does not define an emergency in any way,” she said, explaining that under normal circumstances courts would defer from self-defining what constitutes an emergency.

Alexis Keenan is a New York-based reporter for Yahoo Finance. She previously produced live news for CNN and is a former litigation attorney. Follow her on Twitter at @alexiskweed

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