$550 Billion Trump-Lutnick-Japan Slush Fund May Violate Constitution

Plus, AOC fundraises for a Gaza charity

President Trump before the U.S. and Japanese flags at a February 7, 2025 press conference with Prime Minister Shigeru Ishiba.

The trade deal with Japan that President Trump announced days ago raises potentially problematic constitutional issues on two fronts.

A July 23 White House “Fact Sheet” about the deal refers to “a new Japanese/USA investment vehicle” and says, “Japan will invest $550 billion directed by the United States to rebuild and expand core American industries…At President Trump’s direction, these funds will be targeted toward the revitalization of America’s strategic industrial base,” including “Energy infrastructure and production, including LNG, advanced fuels, and grid modernization; Semiconductor manufacturing and research, rebuilding U.S. capacity from design to fabrication; Critical minerals mining, processing, and refining, ensuring access to essential inputs; Pharmaceutical and medical production, ending U.S. dependence on foreign-made medicines and supplies; Commercial and defense shipbuilding, including new yards and modernization of existing facilities.”

In a July 24 appearance on CNBC, the secretary of commerce, Howard Lutnick, expanded on the plan. “They gave Donald Trump and the American people $550 billion, $550 billion to invest at our and Donald Trump’s discretion, the American people’s discretion to build in America. The things that Donald Trump wants to build — power, generic drugs, shipbuilding, whatever Donald Trump wants to build, the Japanese will finance it for him,” Lutnick said. He went on, “the key is this is not regular foreign investment. This is not Toyota building a plant in America. That's what normally people think about. This is literally the Japanese government itself saying to Donald Trump, we will provide Donald Trump and the American people $550 billion of projects you choose. And we will give you 90% of the profits America. So basically Donald Trump can pick the projects…”

What’s the constitutional problem? The Constitution gives the taxing and spending powers to Congress. “All Bills for raising Revenue shall originate in the House of Representatives,” is known as the “Origination Clause” in Article I of the Constitution. Likewise, “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” Lutnick may describe this money as “gave,” as if it were the Japanese voluntarily parting with the money, but Trump more accurately the other day described it as the Japanese buying down their tariff rate, like paying points up front to reduce a mortgage rate. Maybe Congress won’t challenge it, and maybe if they do some judge or justices will okay it, but on my read, at least, here Trump is raising the revenue and spending the money while bypassing Congress.

Perhaps Trump will claim that the spending is from “an investment vehicle” rather than the Treasury and so the Appropriations Clause does not apply. Perhaps he will claim it isn’t “raising revenue” but is an investment or a gift of some sort and so the Origination Clause does not apply. If so, give Trump some credit for creativity, but Congress might not be so happy about yielding control to the executive branch over more than half a trillion in spending. Imagine if it were President Biden or President Buttigieg trying this with a half-trillion on spending on their priorities—green energy, racial justice, Amtrak, bike lanes, gender-affirming health care, whatever—to bypass a Republican Congress. And imagine if the government involved wasn’t Japan but, say, China, or Ukraine, or Saudi Arabia, or Qatar, or Turkey, or France.

Regular readers here know I’m about the last thing from an alarmist when it comes to President Trump’s supposed authoritarianism. I think most of those concerns are overwrought, partisan hype cooked up by Democrats or deranged former Republicans. But this one is a bit much even for me.

Which brings us to the second big constitutional issue. That has to do with the Treaty Clause. That gives the president the power “by and with the Advice and Consent of the Senate, to make Treaties, provided two thirds of the Senators present concur.” If a half-trillion dollar deal with Japan doesn’t meet the threshold for being treated as a genuine treaty rather than as some secret or less-than-treaty “international agreement to which the U.S. is a party,” then the Treaty Clause isn’t worth the parchment it’s written on. Where’s the text of the agreement? When was the two-thirds approval vote of the Senate? Under the Constitution, Trump doesn’t have the power, without the Senate’s advice and consent, to bind America into a half trillion dollar deal with Japan. Secretary Lutnick doesn’t, either.

From a markets perspective, even a sketchy verbal deal with Japan, which is one of the world’s largest economies, is better than a trade war or extended uncertainty. But from a rule-of-law perspective, any deal that includes a $550 billion Trump-Japan slush fund without treaty approval is pushing the limits in a risky way. And that doesn’t make for great economics, either. Experience shows that decentralized decisionmaking—the wisdom of crowds—works better than central planning. Rather than letting Trump direct the $550 billion in “investment,” why not let Congress appropriate it the way the Constitution intended? Or why not cut taxes on Americans by $550 billion and return the money to businesses and individuals to invest and build in their own projects, at their own discretion?

The point here is not to get bogged down in pedantic legal technicalities or to demonize Trump as a would-be tyrant.

The point is that having a half-trillion investment pool funded by a foreign country for the president to run around spending as a discretionary fund is just a terrible idea.

What happens if the projects flop or take longer than expected? After all, Trump has plenty else on his plate beside running a public private-equity fund. Do President Buttigieg or President Vance then shake down the Japanese to reinvest in a “continuation fund”? How does the private U.S. economy—business owners with companies in the relevant industries, or that compete with them—relate to the Trump–Lutnick-Japan slush fund? One reason Congressional approval is required is that it offers an opportunity to ask these sorts of questions and head off bad ideas before America is stuck with them.