Hey Janet and Jeh, How do you Square This?

May 2015, speech in part: DHS Secretary Jeh Johnson, “The FBI continues to identify, investigate, interdict and help the Department of Justice prosecute attempted terrorist plots to the homeland. With the help of DHS, the FBI has also made a number of arrests of those who attempt to become foreign fighters, before they can get on an airplane and leave the country.

In reaction to terrorist groups’ public calls for attacks on government installations in the West, and following the attack last fall in Ottawa, I directed that our Federal Protective Service enhance its security and presence at federal office buildings around the country. This enhanced security remains in place.

In reaction to terrorists’ public calls for attacks on U.S. military installations and personnel, the Department of Defense has enhanced its security at bases in the U.S.

Given the new reality of the global terrorist threat — which involves the potential for small-scale homegrown attacks by those who could strike with little or no notice, we are working in closer collaboration with state and local law enforcement. Given the nature of the evolving threat, the local cop on the beat may actually be the first to detect a terrorist attack on the homeland.

So, as often as several times a week, the Department of Homeland Security and the FBI share terrorist threat information and intelligence with Joint Terrorism Task Forces, state fusion centers, and local police chiefs and sheriffs.” Full speech here and note the some of the attendees.

Maybe we should be seeking a subpoena of Janet Napolitano and Jeh Johnson.

***

Enter Philip Haney, again:

DHS Official: I Was Ordered to Purge Records of Islamic Terror Ties
A veteran official with the Department of Homeland Security claims he and other staff were ordered to destroy records on a federal database that showed links between possible jihadists and Islamic terrorist groups.

“After leaving my 15-year career at DHS, I can no longer be silent about the dangerous state of America’s counter-terror strategy, our leaders’ willingness to compromise the security of citizens for the ideological rigidity of political correctness—and, consequently, our vulnerability to devastating, mass-casualty attack,” the former employee, Patrick Haney, wrote in an explosive column that was published late Friday on The Hill website.

Haney alleges that the Obama administration has been “engaged in a bureaucratic effort” to destroy the raw material and intelligence the Department of Homeland Security has been collecting for years, leaving the United States open to mass-casualty attacks.

His story starts in 2009, when during the holiday travel season, a 23-year-old Nigerian Muslim,  Umar Farouk Abdulmutallab, boarded Northwest Airlines Flight 253, with explosives packed in his underwear and the hopes of slaughtering 290 travelers flying on Christmas Day from the Netherlands to Detroit, Michigan. Passengers subdued the jihadist and he was arrested, thwarting the plot.

After the attempt, Haney writes, President Barack Obama “threw the intelligence community under the bus for its failure to ‘connect the dots,’ saying that it was not a failure to collect the intelligence that could have stopped the attack, but rather “‘a failure to integrate and understand the intelligence that we already had.'”

But most Americans were not aware that the Department of Homeland Security’s employees suffered enormous damage to their morale from Obama’s words, Haney said.

Further, many were infuriated “because we knew his administration had been engaged in a bureaucratic effort to destroy the raw material — the actual intelligence we had collected for years, and erase those dots. The dots constitute the intelligence needed to keep Americans safe, and the Obama administration was ordering they be wiped away.”

Just one month before the attempted attack, Haney said, his DHS supervisors ordered him to either delete or modify the records for several hundred people tied to Islamist terror organizations, including Hamas, from the Treasury Enforcement Communications System, the federal database.

Those records give DHS the ability to “connect dots,” explained Haney, and every day, the agency’s Custom and Border Protection officials use the database while watching people who are associated with known terrorist affiliations seeking patterns that could indicate a pending attack.

“Enforcing a political scrubbing of records of Muslims greatly affected our ability to do that,” said Haney.

“Even worse, going forward, my colleagues and I were prohibited from entering pertinent information into the database,” he wrote.

And even weeks after the attempted Christmas Day attack, Haney said, he was still being ordered to delete and scrub terrorists’ records, making it more difficult to connect dots in the future.

The number of attempted and successful Islamic terrorist attacks kept increasing, notes Haney, including the 2013 Boston Marathon bombing, conducted by Dzhokhar and Tamerlan Tsarnaev; Muhammad Youssef Abdulazeez’ shooting of two military installations in Chattanooga, Tennessee last year; the attack conducted by Faisal Shahzad in May 2010; Detroit “honor” killer Rahim Alfatlawi in 2011; Amine El Khalifi, who plotted to blow up the U.S. Capitol in 2012; and Oklahoma beheading suspect Alton Nolen in 2014.

He believes it is “very plausible” that one or more of those homeland incidents could have been prevented, if DHS subject matter experts had been allowed to keep doing their jobs.

“It is demoralizing — and infuriating — that today, those elusive dots are even harder to find, and harder to connect, than they were during the winter of 2009,” Haney concluded.

 

 

 

 

 

 

The Unknown Soldier in St. Louis

Hey VA, how about you prove he wasn’t in the service…sheesh

1944, Philippines: Emil Limpert

He was patched up in a jungle tent and sent back to his unit. He received help from a veterans group and was able to provide plenty of documentation.  Limpert, a bit of a packrat, saved all his old paperwork.  He had his discharge papers, a roster of those injured in the attack, and the X-ray taken of his leg after he returned home.  On top of that he had the two bronze stars and the purple heart he earned in combat.

All that information was, with the help of a veterans service group called AMVETS, was sent to the Veteran’s Administration to apply for benefits.  After two months of waiting he received a letter from the VA saying he needed to provide more proof.

VA demands proof World War II combat vet with Purple Heart served in military

Fox2: The Veterans Affairs Department refuses to pay benefits to a World War II vet in his 90s who was wounded in combat and earned a Purple Heart.

Fox 2 Now in St. Louis reports that after Emil Limpert submitted an application for benefits to the Department of Veterans Affairs he was told he needed to provide more proof that he was in the military.

“I get this letter that says we can’t accept it because we’ve got no record of you being in the service,” he told the station. “I guess I’m the unknown soldier.”

He was wounded in a foxhole in the Philippines in 1944.

“There were four guys in there, and two guys got killed,” he told the station. “And then the other guy, he got his leg… Oh, hell. I guess he lost his leg. It was slit in four places where a grenade hit between us and I got one in my leg.”

Limpert said he waited until now to apply for benefits because he is down to nothing.

He and his wife live in an assisted-living facility outside St. Louis.

“We got rid of our car, we got rid of our house,” he said. “I got rid of money I had in bonds and stocks and now I need help.”

His application included plenty of documentation, including discharge papers, the names of his foxhole pals and the X-ray of his wounded leg. The proof also included his Purple Heart and two Bronze Stars he received in the Pacific.

Fox 2 reported the VA letter asks Limpert to submit affidavits from fellow service members, most of whom are dead, or the location of the hospital where he was originally treated.

“There ain’t no hospital,” he told the station. “We were in the jungles.”

The station reported that Limpert’s military records were apparently among the millions destroyed in a massive fire in Overland, Missouri, in 1973.

The station also reported that it sought comment from the VA in Washington without success.

Limpert has now turned to his local senator for help in the matter.

What do Banks Say About the Recession?

What do economists have in their forecasts?

It is important to watch other countries performance like China, Greece and Brazil:

Bank Of America Admits The U.S. May Already Be In A Recession

Zerohedge: Almost one year ago, in March 2015, we explained how “The Fed’s Artificial Steepening Of The Yield Curve” has resulted in many unexpected consequences, the most important of which has been the erroneous interpretation of the yield curve as a leading recessionary signal. As said back then, “the artificially steep yield curve is a reflection of policy intent not economic reality…. Where the yield curve in the all-important belly of the 5s10s might have deeply inverted in the past just prior to recession, there is no justification to expect the same attainment of absolute levels where artificial monetary intrusion has pushed the curve much, much steeper.”

One week ago, it was as if a light bulb went off over Wall Street’s head, when first Deutsche Bank’s Dominic Konstam realized the significance of the above excerpt, and admitted that far from the 4% recession odds that the Fed’s hopeless FRB/US DSGE computer model spews out when looking at the “normal” yield curve, when normalizing for the Fed’s intervention odds of a recession in the next 12 months soar to 50%!

In a special report published earlier this week, we noted that today’s near-zero interest rate regime does not allow the yield curve to freely invert or even flatten too much because of certain structural limits. For example, liabilities-driven investors who in the past could receive long rates below the fed funds rate can no longer do so once rates are floored at zero. Investment fund managers are also restricted by mandates from buying negative yielding assets that lead to mark-to-market losses on their portfolios. Pension investors, who must target returns based on liability assumptions, have been driven into high yielding non-core rate assets as their discount rates are stubbornly and unrealistically high compared to Treasury yields. These factors keep the curve artificially steep even though both short and long rates have been clearly trending downward over the years.

An “artificially steep yield curve” – almost as if that’s exactly the phrase we used before. What DB did then is the logical next step: to adjust the artificial yield curve and exclude the Fed’s intervention. 

To address the artificial steepness of the curve we corrected the 3m10y spread for the level of the rates. Specifically we regressed the spread against the short rate, leaving the residual which by definition removes for the bias of the rate level and is centered at zero. Using this new curve as model input, we found the probability of a recession in the next 12 months is 46 percent, considerably higher than the original Fed model has predicted.

But wait, there’s more, because while the short-end remains anchored, with every 25 bps tightening in the 10Y yield, recession odds rise by another 6%.

As it may be useful for investors, we attempt to handicap the relationship between the yield curve and future recessions captured in our model. Holding the 3m rate constant, every 25 bps rally in 10s (implying an equal flattening in 3m10y) raises the recession probability by 6 percent. If 10yr yields rally to 1.50%, our model predicts a 59 percent chance of recession in the next 12 months; at 1.00% 10s, the probability is 71 percent.

 

At Friday’s close, recession odds are well over 50% according to DB’s model.

Or perhaps far higher, because shortly after DB admitted what we said in early 2015, namely that everyone who was looking at the yield curve as is was wrong, Bank of America’s Ruslan Bikbov did the exact same analysis and ended up with a far more disturbing conclusion:

The US Treasury curve is still steep by historical standards. Taken at face value, this may suggest recession odds are small. However, we argue this logic is flawed because the curve is structurally steep when the Fed Funds rate is close to zero. When adjusted for the proximity of rates to zero, the curve may already be inverted and therefore may already be priced for a recession.

And numerically: “Implied recession odds are as high as 64% if the adjusted OIS curve is used

Laughably, this comes from the same bank whose chief economist Ethan Harris recently “predicted” US GDP for the next decade and forecast there will be no recession until 2027… the same Ethan Harris as profiled in “Perma-bears” 1 – BofA Economist 0.

* * *

Below are the full wonkish details from BofA for all those Wall Street strategists who still hold on to the erroneous creed that recession odds are non-existent if simply looking at the unadjusted yield curve.

A leading recession indicator

We received numerous questions on the shape of the US yield curve and its relationship to recession odds. With the sharp weakening of US manufacturing data in recent months, recession risks are on everybody’s mind, while the curve has the reputation of one of the most powerful leading recession indicators. The basic fact is likely well known to our clients: each US recession since the mid 1950s (when Treasury bond data become available) was preceded by an inverted or extremely flat curve within one year before a recession start (Chart 8). This is, of course, intuitive because a flat curve reflects lower growth and/or inflation expectations. Some of our clients and market commentators pointed to this fact and the relative steepness of the curve to argue that current recession risks are rather low. Indeed, the 3m10s curve at 155bp is still far from being flat (Chart 8).

Mind the zero bound

However, we believe that a simple mechanical extrapolation of the past link between the curve and recession odds is flawed. In particular, curve-based models calibrated to pre-2009 data are likely to underestimate recession odds today. This is because with the Fed Funds at only 38bp risks for plausible Fed Funds paths are asymmetric. Although tighter policy paths are unconstrained, the room for further cuts is likely limited resulting in a steepening bias for the curve. To see this, imagine an extreme situation where the policy rate is at zero and negative rates are not feasible. In such a scenario the curve simply cannot invert, and must be necessarily biased steeper relative to its historical distribution.

Granted, we cannot rule out the possibility of negative rates in the US, but it is safe to say the Fed’s reaction function must be highly asymmetric around zero. Because negative rates entail significant risks for the financial stability of money market funds and the banking sector, the negative growth/inflation shock required for a cut below zero should be larger than positive shocks required for a hike of a comparable size. In addition, negative rates should be floored by the storage cost of currency, another reason for asymmetric risks around zero. In any case, the market currently sees only a small chance of negative rates in the US (Chart 9). The end result is structural steepness of the curve at near-zero Fed Funds levels.

Don’t wait for the curve to invert

Even a casual look at other countries with near-zero policy rates confirms that the curve does not need to flatten significantly for a recession to occur. Consider Japan, a country with the longest zero-rate history. Japan had a recession in 1991-1993, which was preceded by an inverted curve, consistent with past US experience (Chart 10). But note the call rate was at 8% when the curve inverted. Since 1995, the call rate has not exceeded 50bp. Over that period, Japan had four official (announced by the Committee for Business Cycle Indicators) recessions, none of which was preceded by an inverted curve (Chart 10).

A number of other G10 countries adopted near-zero rate policy regimes since 2008 and experienced recessions since then. Some of these recession episodes are analyzed in Table 3. We use two methods to identify recessions: technical definition (at least two consecutive quarters of negative growth) and recession dates reported by Economic Cycle Research Institute (ECRI), which employs methodology similar to that of the NBER in the US. For each recession episode, we report the range of the 3m10s government curve and the policy rate observed for a year immediately before the beginning of a recession.

Again, an inverted curve did not emerge to signal an imminent recession. In fact, in some cases the curve ahead of recessions was steeper than in the US today. As an illustration, Chart 11 shows the historical German curve. Consistent with typical US experience, the curve flattened to extreme levels ahead of each of the pre-2009 recessions. However, Germany also had a technical recession in Q4 2012-Q1 2013 when the ECB rate depo rate was at zero. Not surprisingly, the curve remained steep before that recession. In fact, the curve did not flatten below 120bp in the one-year period ahead of the recession.

Adjusting the curve for zero-rate effects

Although the curve cannot be taken at face value in a near-zero rate regime, we believe it may still provide useful information about recession odds if adjusted for the zero bound effect. The idea is to estimate a model-implied curve that could be prevalent today if negative rates were just as feasible as positive. The curve adjusted in such a way may be directly compared to its historical distribution. As a result, it may be a better recession signal than the observed curve.

Turning to technical details, we model forward rates with a truncated (at zero) normal distribution, calibrated by matching its mean and standard deviation to forward rates and at-the-money option prices. We then compute adjusted forwards as the mean of the corresponding distribution without truncation (hence, using a symmetric distribution around the mean and allowing for negative rates). Although the choice of the truncated normal distribution is somewhat arbitrary, it provides a simple tool to model the core of our argument. Because very long-dated options are not liquid, we analyze 3m5s rather than 3m10s (normally used in academic literature) Treasury curve for this analysis. We found only a small deterioration in R2 statistics for recession forecasting probit models when the 3m5s curve is used instead of 3m10s. Consistent with intuition, the 3m5s curve adjusted in such a way has been significantly flatter than actually observed curve (Chart 12).

Technical factors contributed to Treasury curve steepness

Further, the Treasury curve may be currently skewed steeper by technical factors. Treasury bonds in the belly of the curve dramatically cheapened in the past few months, which is evident from extremely tight levels of swap and OIS/Treasury spreads. As a result, the Treasury curve now looks very steep to OIS. While the 3m5s Treasury curve is at 92bp, the corresponding OIS curve is only at 56bp (Chart 13). The likely reason for this is reserve selling of foreign central banks who need to support national currencies against the recent USD appreciation. International reserves of world central banks declined by about $1tn since September 2015. At the same time, the ability of dealers to absorb the supply has declined in recent years due to regulatory pressures on balance sheets.

Conventionally, academic literature on recession forecasting uses Treasury curve data. But the Treasury curve may not be the best measure of market expectations, presumably the key component of the curve predictive power. Because of the technical nature of the recent Treasury cheapening, the OIS curve should be a better measure of market expectations, and therefore may be more relevant for  assessing recession risks.

 

The curve may be priced for a recession

Applying our methodology to the OIS curve, we found that the adjusted 3m5s OIS curve at -30bp is already inverted. This suggests that the curve already could be priced for a recession (Chart 12). Granted, our methodology signaled a false alarm in 2012 when the curve was also inverted but a recession did not follow (Chart 12). However, at that time the curve flattened to extreme levels because of the forward guidance, an unprecedented event in the history of US monetary policy. In contrast, this time the curve flattened following the Fed hike, which looks more like a typical curve inversion episode. In fact, the Fed was hiking in all previous historical episodes where the curve inverted ahead of US recessions (Chart 8). From this point of view, the current curve flattening may be more worrisome.

Implied recession odds

Our economics team sees only about a 20% probability of a recession in the next year. They argue that the two most important causal factors in recession–aggressive Fed tightening in a battle against above-target inflation and very high oil prices–are not evident today. They also argue that both “real” and financial bubbles are small. The only sector that overexpanded in the recovery is the tiny oil and gas sector (about 2% of the economy at the peak) and the high yield sector overshot fundamentals, but it is much less important than the housing and equity market bubbles of the last two cycles.

Nonetheless, clearly markets are worried and an indicator we have developed confirms their concerns. To quantify implications from the inversion of the adjusted curve, we follow academic literature to compute model-implied recession probabilities from a standard probit regression based on the curve. We acknowledge this type of a model is highly simplistic and does not take into account all the complexities of today economic environment. Still, model probabilities may be interesting to know given the curve’s track record.

We estimated a standard probit model to pre-2009 sample when zero rates were not an issue. We then computed implied probability of a recession within next 12 months with different assumptions about the proper curve to be used in the current regime (Table 4). The model implies about 32% recession odds if the Treasury curve is taken at face value. Just using OIS instead of Treasury rates brings this probability to about 42%. Implied recession odds are as high as 64% if the adjusted OIS curve is used (Table 4).

Obama’s Paris Climate Agreement to Cost Trillions

Obama’s Paris Global Warming Treaty Will Cost At Least $12.1 Trillion

A.Follett/DailyCaller: The United Nations Paris agreement to stop dangerous global warming could cost $12.1 trillion over the next 25 years, according to calculations performed by environmental activists.

“The required expenditure averages about $484 billion a year over the period,” calculated Bloomberg New Energy Finance with the assistance of the environmentalist nonprofit Ceres.

 

That’s almost as much money the U.S. federal government spent on defense in 2015, according to 2015 spending numbers from the bipartisan Committee For Responsible Federal Budget. The required annual spending is almost 3.7 times more than the $131.57 billion China spent on its military in 2014.

Bloomberg’s estimates are likely low, as they exclude costly energy efficiency measures. The amount spent to meet global carbon dioxide emissions reduction goals could be as high as $16.5 trillion between now and 2030, when energy efficiency measures are included, according to projections from the  International Energy Agency. To put these numbers in perspective, the U.S. government is just under $19 trillion in debt and only produced $17.4 trillion in gross domestic product in 2014.

American taxpayers spend an average of $39 billion a year financially supporting solar energy, according to a report by the Taxpayer Protection Alliance. The same report shows President Barack Obama’s 2009 stimulus package contained $51 billion in spending for green energy projects, including funding for failed solar energy companies such as Solyndra and Abound Solar.

Solyndra was given a $535 million loan guarantee by the Obama administration before filing for bankruptcy in 2011. Abound Solar got a $400 million federal loan guarantee, but filed for bankruptcy in 2012 after making faulty panels that routinely caught fire.

Despite relatively high levels of taxpayer support, in 2014 solar and wind power accounted for only 0.4 and 4.4 percent of electricity generated in the U.S., respectively, according to the Energy Information Administration.

Ironically, solar and wind power have not done much to reduce America’s carbon dioxide emissions. Studies show solar power is responsible for one percent of the decline in U.S. carbon-dioxide emissions, while natural gas is responsible for almost 20 percent. For every ton of carbon dioxide cut by solar power, hydraulic fracturing for natural gas cut 13 tons.

*** Really dude?

Protect the health of American families. In 2030, it will:

  • Prevent up to 3,600 premature deaths

  • Prevent 1,700 non-fatal heart attacks

  • Prevent 90,000 asthma attacks in children

  • Prevent 300,000 missed workdays and schooldays

Boost our economy by:

  • Leading to 30 percent more renewable energy generation
    in 2030

  • Creating tens of thousands of jobs

  • Continuing to lower the costs of renewable energy

Save the average American family:

  • Nearly $85 a year on their energy bills in 2030

  • Save enough energy to power 30 million homes
    in 2030

  • Save consumers $155 billion from 2020-2030

*** Climate Action Plan

Explore the infographic to learn about the progress we’re making to combat climate change, and read President Obama’s full Climate Action Plan here.

 

SCOTUS to Rule on Obama’s Executive Order

Primer: This is the White House official Fact sheet and Executive Order being challenged.

The Supreme Court has often dealt a big blow to presidents in their second term.

LATimes: Harry Truman was rebuked for claiming the power to seize strike-bound steel mills during the Korean War. Richard Nixon resigned shortly after the court ruled unanimously he must turn over the Watergate tapes.

Bill Clinton’s impeachment was triggered by the court’s decision that he must answer questions under oath in the Paula Jones sexual harassment case. And George W. Bush lost before the court when he claimed his power as commander in chief gave him almost unfettered authority over prisoners held at the Guantanamo Bay prison.

Now, as President Obama begins his last year in office, the court is set to render a verdict on his use of his executive authority. The justices will decide whether he violated the law by authorizing more than 4 million immigrants living in the U.S. illegally to come out of the shadows without fear of deportation and obtain work permits.

There are signs that at least some of the justices are ready to rein in the president’s ability to take such bold action without the approval of Congress.

Never before has the high court ruled that a president violated his constitutional duty to “take care” that laws are “faithfully executed.” Yet when justices agreed to hear the immigration case, they surprised many by asking both sides to present arguments on whether Obama’s actions violated the rarely invoked “take care” provision. That question had not even been at issue when lower courts blocked Obama’s plan from taking effect.

In a separate pending case this term, the court also will rule on whether the president and his healthcare advisors went too far by requiring Catholic charities and other faith-based employers to formally opt out of providing a full range of contraceptives to their female employees by citing their religious objections.

The faith-based entities argued that by notifying the government of their decision to opt out — which triggers a process under which employees would get contraceptive coverage by other means — they would be “complicit” in supplying “abortion-inducing drugs.”

The decisions, both due by summer, will help answer a question that looms over Obama’s presidency. Has he properly used his power as chief executive to circumvent congressional gridlock on issues such as immigration, climate change and healthcare, or has he gone too far and violated his duty to enforce the laws as set by Congress?

The cases come before the court with a backdrop of Republican claims that the president has overreached and abused his power. Former House Speaker John A. Boehner said Obama was “acting like a king” and “damaging the presidency” when he announced the deportation-relief plan now before the high court.

On the campaign trail, Sen. Ted Cruz of Texas promises GOP voters that, if he is elected president, his first task on his first day in the White House will be to “rescind every illegal and unconstitutional executive action of Barack Obama.”

White House officials and supporters of the president counter that Obama’s actions are not only legal and well within his discretionary authority, but that Congress has left him no choice by refusing to take action on pressing national problems.

Conservative scholars think Obama has left himself vulnerable by announcing broad executive actions on policies that had been considered and rejected by Congress, and which even he once said were beyond his authority.

In his first term, Obama told Latino activists who were pushing him to take unilateral action that he could not “waive away the laws Congress put in place” regarding the removal of immigrants who entered the country illegally. But later the president decided he did have the power to suspend deportation and offer “lawful presence” and work permits to as many as 5 million of those immigrants.

So far conservatives have mostly failed to derail Obama in the Supreme Court. Twice, the justices upheld the president’s healthcare law against conservative attacks, with Chief Justice John G. Roberts Jr. casting his vote with the court’s four liberals.

Four years ago, in a key test of state-versus-federal power, the court ruled for Obama after his administration sued to block Arizona from enforcing a law to crack down on immigrants in the country illegally.

In 2011, Obama and then-Atty. Gen. Eric H. Holder Jr. raised ruffles on the right when they announced the administration would not defend in court the Defense of Marriage Act, which recognized only marriages between a man and a woman. House Republicans took up the cause, but two years later the high court agreed with the administration and struck down key parts of the law as unconstitutional.

But the new immigration and contraceptive cases pose a tough test for Obama’s lawyers. In last year’s healthcare case, they were defending a law that had won approval in Congress, when both chambers were controlled by Democrats. “We must respect the role of the legislature and take care not to undo what it has done,” Roberts said in upholding its system of insurance subsidies.

This year, by contrast, Obama is defending an executive action on immigration that was taken without the approval of Congress and in the face of fierce Republican criticism.

Similarly, the “contraceptive mandate” was not spelled out in the Affordable Care Act, as lawyers for Catholic bishops often point out. It was adopted later in a regulation issued by Obama’s healthcare advisors.

But Obama’s defenders, including immigration law experts, say the critics are missing the crucial point that the deportation laws give the chief executive a free hand to decide how or whether to deport those living here illegally. Contrary to what many assume, the law does not say federal officials must arrest and deport such people. Rather, it says they are “subject” to removal, based on policies and priorities set by the executive branch.

Obama’s administration says it wants to focus on deporting criminals, security threats, gang members and drug traffickers, not parents and grandparents who have children in the United States legally.

The administration can quote a powerful voice to back up its view of the matter. “Aliens may be removed” if they entered the country illegally and committed crimes, said Justice Anthony M. Kennedy, but “a principal feature of the removal system is the broad discretion exercised by immigration officials…. Federal officials, as an initial matter, must decide whether it makes sense to pursue removal at all. As a general rule, it is not a crime for a removable alien to remain present in the United States.”

Kennedy spoke for the court four years ago in rejecting Arizona’s claim that immigrants who could not prove their citizenship should be arrested, and Roberts agreed. Kennedy’s explanation of the deportation system may also defeat any claims that Obama is violating his duty to “faithfully execute” the law.

“The president is not claiming a constitutional authority to not enforce the law. He’s claiming authority based on the immigration statute,” said Walter Dellinger, a White House lawyer under President Clinton. “And if the court says he is wrong, then he will comply with that.”