The following is a lightly edited transcript of the May 19 episode of The Daily Blast podcast. Listen to it here.
Greg Sargent: This is The Daily Blast from The New Republic, produced and presented by the DSR Network. I’m your host, Greg Sargent.
As you may have heard by now, the Justice Department just announced that it has reached an agreement with Donald Trump to settle his $10 billion lawsuit against the IRS. Guess who controls the Justice Department? Donald Trump. The settlement will transfer nearly $1.8 billion to a new fund that reportedly will be controlled by Donald Trump.
So in short, Trump effectively ordered his own DOJ to reach an agreement with him to transfer over a billion dollars in taxpayer funds into a new fund that he apparently controls and can use to reward allies. How is this possible? Is there any recourse? And also, isn’t this going to backfire? A new poll shows Trump is getting absolutely crushed on the economy. So good luck, Republicans, defending this new arrangement.
We’re working through all this with legal expert Harry Litman, who writes for The New Republic and presides over the Talking Feds podcast. Harry, good to have you on.
Harry Litman: Hey, good to be here, Greg. Thanks.
Sargent: So let’s quickly set the stage. Back in January, Trump sued the IRS for $10 billion due to his tax returns getting leaked during his first term. Trump was in control of the IRS when that happened. So the lawsuit is baloney.
But let’s put that aside for now. DOJ, which theoretically is supposed to be defending the IRS against Trump’s lawsuit, now reached an agreement with Trump to settle the suit. A judge was probably set to throw the suit out, but this new arrangement circumvents that. Harry, can you explain in really simple terms what just happened here with the settlement?
Litman: Yes. Greg, the judge said, I want to hear from you why there is actually a lawsuit here, because the Constitution says you have to have two parties opposed to each other. Trump here looks like he’s controlling both sides.
So by doing this so-called voluntary settlement, the DOJ hopes that it doesn’t have to face the music on saying whether it’s a real lawsuit or not. And they can just go around and create this fund without any use of the court.
Sargent: This is all designed to circumvent the judge, right? The judge was about to rule potentially and say this lawsuit is bullshit—we’re throwing it out. By doing this settlement, now DOJ has circumvented the judge.
Just to back up for context, there’s something that already exists called the Treasury Department Judgment Fund. Now this entity pays out money to victims of the U.S. government who successfully bring claims against the government. That fund is subject to various statutory restrictions and oversight since Congress created it.
But now by reaching this settlement, DOJ has created a situation under which that particular fund pays nearly $1.8 billion to this separate new fund. And this new thing will supposedly be used to pay whoever Trump and his allies decide has been victimized by supposed weaponization of the government.
But the key thing here, Harry, if I understand this correctly, is this new entity won’t be in the control of the U.S. government in any sense. Per further reporting, Trump will have total control over the fund’s members. It operates outside the U.S. government.
It’s just a fund that’s been filled with taxpayer money that Trump controls. So this fund—Donald Trump hopes—will not be subject to any kind of congressional or constitutional constraints of any kind. Correct, Harry?
Litman: Correct. Or maybe you could say, Greg, constraints that anybody will enforce, because there are constraints here. Even with what the DOJ is saying, Congress has permitted DOJ to settle, but only real lawsuits.
So under the very statutory authority, Congress has appropriated a bunch of money and normally DOJ has a lot of discretion in how to use it. But the proper reading, I think, is it’s got to be for a real lawsuit, which this isn’t. The big question, though, will be who can oppose it?
Sargent: Okay, Harry. So what you’re saying here is that this fund can only exist theoretically under the law—this new fund that Trump’s creating—if the lawsuit that Donald Trump and DOJ are settling with each other is a real lawsuit. But the rub becomes who decides whether the lawsuit is real or not. Does the judge have the authority to step in and say, this is not a real lawsuit, therefore the settlement is void, or not?
Litman: And now we come to the question, who can make the claim? Who can say it’s not a real lawsuit? You can’t cheat the taxpayers out of $1.8 billion, especially to pay off January 6th offenders. And a quick aside here, Greg—we don’t even know the names of who will get money under this. They don’t have to say.
It is illegal because Congress has said you can use this money only to actually settle real cases. And it’s a fake case. But who can come in now and say this fund is phony baloney? They’re going to say nobody has standing. Members of Congress—93 of them filed a brief this morning saying you can’t do that, but they don’t, I think, have standing. They’ll say that you can’t go to the court now because the case has been voluntarily dismissed. It is violating the law. It’s going to be—can they get away with it?
Sargent: Okay. But to be clear, the judge cannot step in and say this lawsuit is not real, precisely because Donald Trump has settled it and has now removed it from the agenda?
Litman: Very close: Because he’s voluntarily dismissed it. So that goes over there. She can say, you really were abusing me and there’s a rule that says you can’t—I’m thinking of sanctions here. She can say other things, but I think this separate creation of the fund, she now—and this is the design—no longer can really do anything with. And they will take her right away up to the higher court if she tries.
Sargent: So DOJ can enter into a settlement with a private individual who happens to be the president with no judicial oversight whatsoever?
Litman: It all depends—if I can be Clintonesque here—on the meaning of what “can” means. It’s not legal. The question is, can they be stopped?
This is many levels of outrage. They’re screwing Congress’s instruction. They’re really abusing and exploiting the court. And of course, they’re lying to us and [it’s] all about trying to whitewash the January 6th episode. The “can” here means can they get away with it, as it so often means in the Trump administration—not, is it illegal. It is illegal.
Sargent: Okay. Now this entirely circumvents Congress. Congress didn’t create this fund—the Trump fund—though it did create the bigger thing that the money is coming out of. As you pointed out, a number of Democrats just entered a filing in the court where the lawsuit was being litigated, arguing that Trump and DOJ colluded to agree on this corrupt settlement payout to Trump’s fund.
These Democrats say this empowers the judge to step in and invalidate the settlement. Where are you on this? Do these Democrats have standing or not? How does that get decided?
Litman: It gets decided in the first instance by the court. And I wish they did, but the law out there—and the law that they’ll bang right into if it goes higher—says that they don’t, that it’s really for Congress to push back. I do think, Greg, now that people are aware of what happened, you’re going to see oversight, you’re going to see a spotlight.
But I think a motion to invalidate the settlement itself—DOJ will come in and say no standing. And I think, if not at the district court level, higher up the courts will agree there’s not standing from the congressmen. Go and do your political pushback.
Sargent: Could a majority in Congress have the standing to do this?
Litman: Very possibly. If Congress was doing it as an entity, which they’re not. But it doesn’t really—if there were a majority in Congress against it, they would pass a law, namely: we’re the ones who appropriate money. You can’t use our money just to do your slush fund here. Here is the law.
Of course he would veto it, but yes, if everyone were in on it—and, the political oversight, is going to cause Republicans to be in an uncomfortable spot of supporting this totally rank violation, including the possibility that if all of Congress were to come in, possibly there’d be standing.
Sargent: Right. Just to be clear for people, if Republicans in Congress wanted to put a stop to this today, they could pass a law saying that what Trump is doing is not permitted. Trump would probably veto it. And then Republicans could join with Democrats to override the veto. So if Republicans wanted to stop this, they could, right?
Litman: Your scenario, Greg, 100 percent solid. Were they to do that and pass a law? Can’t do it. Congress appropriates money, after all. That’s one of like six problems with what he’s trying to do here.
Sargent: Right. So just to be clear, Republicans won’t do this. They will fully allow Trump to go forward with really one of the most corrupt schemes I think we’ve seen in modern memory, right?
Litman: I think so. I think this is the worst thing that’s happened in the government since the actual pardons on January 6th. I do think the Democrats will try hard to force some kind of vote that makes Republicans have to take some ownership here, because this stinks to high heaven and no Republican will want to put their imprimatur on it. So that’ll be the political maneuvering—to try to make that happen.
Sargent: I want to point out for people that it’s very easy to get cynical about Republicans going along with everything that Trump does. And I do expect them to mostly go along with this one, but they don’t always.
They are stopping the ballroom money—the billion dollars that Trump and the White House are demanding for security for his ballroom. Republicans are genuinely split over that and the fate of that is hanging in the balance. So here’s a case where I think this could be just as hard for Republicans to support.
Litman: Look, I really agree. He is now at record levels of 22 percent more disapprove of him than approve. If Democrats can maneuver to put them on the hot seat—I think a lot of who would actually be for, here’s what’s going on here, Greg.
If he had just come out and said, I’m going to give out $1.7 billion of your money—sorry about how expensive gas is—to the people who stormed the barricades, people would really have a political meltdown. He’s doing that, but worse, because he’s trying to, in a convoluted and secretive way, make it look like it’s just a settlement of a case, which it is not. So yes, if Republicans have to own it in some way, I think that could really pose the possibility of more space and daylight between them and Trump now.
Sargent: And let’s clarify—Trump is going to control this fund. All the members are appointed by acting attorney general Todd Blanche, and Trump can fire them at will for any reason.
Now to your point about how this is going to be bad for Republicans, we just had a New York Times poll with absolutely brutal news for them. Trump’s approval is only 37 percent and on the economy, it’s 33 percent with 64 percent disapproving—31 points underwater on the economy.
Meanwhile, Democrats are leading Republicans in the generic House ballot matchup by 11 points among registered voters, 50 percent to 39 percent. Among independents, Democrats lead by 51 to 33—that’s an 18-point lead. That’s staggering. And Harry, independents hate corruption.
So if I’m a House Republican, I’m absolutely dreading having to defend an arrangement where Trump is getting handed a $1.8 billion slush fund while ordinary Americans are suffering economically, right?
Litman: So we just on our podcast—two Republicans, David French and Mike Murphy, former Republicans—said, if that 11 percent generic advantage for Democrats holds, then all of this Sturm und Drang about the Supreme Court gerrymandering will just go away and be an asterisk. But that’s the question.
But I surely agree. This news on polls is, I think, unprecedentedly bad. We are getting very late in the day for them to have to defend such a stinking-to-hell arrangement as this phony baloney settlement is.
Sargent: Okay, Harry, just to make this simple—what’s going to happen? Is he going to get away with this or not? How do you see it playing out?
Litman: So I think it’s going to be a political question. So I might punt that back to you. I do think that the judge is going to come in and say, the nerve, how can you do this, and make trouble. But it won’t be trouble that goes to the lawsuit. So I think it will come to Congress.
And I’m on this very issue—I think I have been seeing around corners for a while—but this one, if you put a gun to my head, and I’m so sorry, readers of The New Republic and fans of The Daily Blast, as you should be—I think if they really push it, they’ll get away with it. But it may come back to bite them in an impeachment if the House changes sides.
Sargent: So the judge is basically going to say, I’m sorry, Democrats who have brought this action, you don’t have standing to do it.
Litman: Right. I’m going to want to hear from the lawyers, I want to assign sanctions, but I cannot step in and make this slush fund go away.
Sargent: At the end of the day, Republicans are going to regret this victory for Trump. Harry Littman, thanks for walking us through all that complexity, man. It’s pretty dispiriting stuff.
Litman: Hey, thanks a lot, Greg. Always good being with you.