The 25th Amendment

Understanding the 25th Amendment: Implications of a Presidential Disability Declaration And What It Could Mean For Investors

For those who do not know much about me, I stay actively involved in keeping informed on current events. I abhor politics and politicians in general. Following my writings, I mostly write on Financial and Business Topics. Our success as investors and business people is despite rather than because of anything that Washington or our local politicians do.

That said, I have been getting quite a few questions from clients and listeners to my podcast, “The Cents of Things,” regarding President Biden’s fitness for office and what would occur if Congress invoked the 25th Amendment to the Constitution.

My goal for this article is to provide an overview of the 25th Amendment, its process, implications for its use, and possible effects on Domestic and Global Policy, the Economy, and the Financial Markets.

Introduction

The 25th Amendment to the United States Constitution ratified in 1967, was crafted after President Kennedy’s assassination to address gaps in the constitutional process concerning presidential succession and incapacity. This Amendment ensures continuity and stability in the federal government’s executive leadership.

Sections of the 25th Amendment

Section 1 clarifies the succession to the presidency in the event of the President’s death, resignation, or removal from office, confirming that the Vice President assumes the presidency.

Section 2 addresses a vacancy in the vice presidency by allowing the President to nominate a Vice President, subject to confirmation by both houses of Congress.

Section 3 enables the President to declare their temporary incapacity, transferring authority to the Vice President as Acting President until the President declares they can resume their duties.

Section 4 is the most complex, providing a mechanism for the Vice President and a majority of the principal officers of the executive departments, or another body as Congress may designate, to declare the President unable to perform the duties of the office. This is the only part of the Amendment that has never been invoked, and it includes a detailed process for contesting and resolving such a declaration.

Hypothetical Scenario Involving President Biden

A scenario where Section 4 is invoked against President Biden could arise from a perceived inability to effectively lead due to health concerns or a dramatic shift in cognitive abilities. Such a move would likely stem from a significant, bipartisan concern among Cabinet members, requiring substantial evidence of incapacity.

Process for Invoking Sections 3 and 4

Section 3: The President must formally communicate, via a written declaration to the President pro tempore of the Senate and the Speaker of the House of Representatives, their inability to discharge the powers and duties of the office. The Vice President then assumes the role of Acting President until the President submits a written declaration stating that they are ready to resume their duties.

Section 4: This section can be initiated by the Vice President and a majority of the principal Cabinet officers or another body designated by Congress, sending a written declaration to the President pro tempore of the Senate and the Speaker of the House, stating the President is unable to discharge their duties. The President can contest this claim, leading to a Congressional decision. Congress must meet within 48 hours if not in session and has 21 days to decide the issue. A two-thirds vote in both Houses is required to determine the President incapable, allowing the Vice President to continue as Acting President. The President resumes their duties if Congress does not reach a two-thirds majority.

Timeframe Example Starting July 15:

• July 15: The Vice President and Cabinet send their declaration.
• July 17: Congress must convene (if not already in session) within 48 hours of the declaration.
• August 7: Congress has a maximum of 21 days to decide the issue. This is the deadline for Congress to reach a decision.
• Suppose Congress votes with a two-thirds majority in both houses to declare the President incapable. In that case, the Vice President continues as Acting President beyond August 7. If the required majority is not achieved, the President would resume the duties on August 8.

Financial Market Implications

In the event of political uncertainty due to a presidential incapacity or change, the financial markets could experience heightened volatility. This section explores various scenarios and their potential impacts on different market segments:

1. Immediate Market Reactions: Historical precedents suggest that markets react negatively to uncertainty. When the 25th Amendment is invoked, we might expect a sharp decline in stock prices, driven by investor anxiety over leadership stability and policy continuity.
2. Sector-Specific Impacts: Certain sectors might be more vulnerable to changes in the presidency due to their dependence on regulatory and fiscal policies. For example, financials could react to changes in banking regulations, while energy sectors might respond to shifts in environmental policies.
3. Long-Term Economic Outlook: Depending on the policies of the new leadership, long-term economic projections may shift. If fiscal policies become more conservative or expansionary, this could lead to adjustments in growth forecasts, inflation expectations, and Federal Reserve policies.
4. Global Market Repercussions: U.S. political stability is crucial for international markets. A perceived instability could lead to capital flight to safer assets like gold and U.S. Treasuries, affecting currencies and emerging market investments.
5. Investor Strategies: Investors might need to recalibrate their portfolios to hedge against increased risks. This could involve increasing liquidity, adjusting exposure to U.S. assets, or shifting towards more defensive stocks.
6. Expert Opinions and Historical Data: This section will draw on insights from financial analysts and historical data to explore how similar events have shaped market trajectories in the past and what lessons can be drawn for future investment strategies.

Conclusion

In all of the scenarios above, the Vice President would take over the office of President for the remaining 6 months of President Biden’s current term. This would include her having to take on the role of President, manage the Democratic Convention, barnstorm and campaign, and then win the office all in four months. I’m not saying all that couldn’t be done, but it is a Herculean task.

This would include her having to take on the role of President, manage the Democratic Convention, barnstorm and campaign, and then win the office all in four months. The potential disruption to the Democratic Convention, a key event in the party’s election strategy, could significantly affect the party’s chances in the upcoming election. I’m not saying all that couldn’t be done, but it is a Herculean task.

There is no easy answer to this situation. Regardless of the choices, it would take work. The 25th Amendment serves as a critical safeguard in our constitutional system, ensuring the presidency remains occupied by someone capable of fulfilling its demanding responsibilities. However, invoking it, especially under contentious circumstances like those hypothetically involving President Biden, could lead to significant turmoil. It is a measure of last resort, reflecting the grave circumstances under which it should only be considered. The potential for market instability is a stark reminder of the profound implications of such a constitutional action. It necessitates preparedness and cautious analysis by investors and policymakers alike, underlining the situation's urgency and the need for proactive measures.

My take on all of this? Be careful what you ask for, you may get it.

Jeff Kikel is the Presidentof Freedom Day Wealth Management, CEO/Founder of T-Werx Coworking, and President of CPTX Media. Jeff is a published author with his most recent book The Retirement Income Equation: Proven Strategies For A Secure, Flexible, and Prosperous Retirement is due out in July 2024. Jeff is also the co-host of The Cents of Things Podcast and the Freedom Nation Podcast.