Monetizing Executive Discretion

Bessent’s description revealed what the Trump administration saw as a model to be repeated across industries. Wherever the administration controls approvals or subsidies, it can use that delegated discretionary power to extract concessions. The conventional critique of the administration’s industrial policy and related deals is that federal officials are using government power to steer capital toward politically favored firms and industries. That critique is correct. State-directed businesses tend to underperform their privately directed counterparts because political incentives displace market discipline and turn competition into political patronage.

But the Trump administration has added a new facet to its state involvement in which executive discretion itself is a monetizable asset for the Treasury. And for all the energy and legal boundary pushing, it is remarkable how little revenue the deals actually raise.

The federal government has long collected fees under general statutory rules, and federal ownership of equity and equity-linked claims is not itself unprecedented. In 2008, Congress conditioned the financial crisis bailout (Troubled Asset Relief Program) on the Treasury receiving warrants for stock or senior debt instruments. The 2008 bailouts were not sound policy, and the executive stretched the law’s authority in directly taking stock. But Congress explicitly authorized warrants. What is unique in the case of the Trump administration is the executive branch’s use of existing discretion over licenses, subsidies, tariffs, transaction approvals, and visas to extract firm-specific payments and profit rights, often without clear congressional authorization.

Seemingly every week, the list of new “deals” grows longer—the chip-export-licenses-for-revenue-share deal was no one-off. The Trump administration has also converted subsidies into stock, attached profit rights to federal support, reportedly charged investors for its role in the TikTok sale, put price tags on immigration benefits, inserted itself as an investor in the tungsten supply chain, acquired equity in a Venezuelan oil deal, and tied tariff relief for Japan and South Korea to investment vehicles that promise the United States a share of future profits. In each of these cases, executive discretion was leveraged to extract additional value from the private sector.

When Congress ordered ByteDance to divest its US TikTok operations under a bipartisan national security law, it gave the president narrow authority to decide whether a sale complied. President Trump repeatedly (and illegally) pushed off the congressionally mandated divestiture date and reportedly demanded a $10 billion finder’s fee for the administration’s role in arranging and approving the transaction. Investors supposedly paid $2.5 billion at closing. If the reporting is correct, the government charged investors for approving a solution to a congressionally mandated business transaction.

The Nvidia and AMD revenue-share arrangement pushes the bounds of legality even further. The Constitution bars taxes or duties on exports, and the export control law says that “no fee may be charged” in connection with an export license. When the administration later authorized sales of more advanced Nvidia H200 and AMD MI325X chips, it implicitly acknowledged the thin legal footing. The administration improvised a workaround requiring that foreign-made, China-bound chips pass through the United States for testing. This triggers a 25 percent Section 232 import tax to collect revenue from licensed exports while calling it something else.

The Trump administration has also announced a growing portfolio of equity stakes, warrants, and other claims on the future value of more than 30 companies. The largest announced deal is with Intel. The Commerce Department converted $8.9 billion in previously awarded CHIPS and Science Act grants into an equity stake, making the government Intel’s largest shareholder. Nowhere in the act is the taking of stock expressly authorized. Indeed, during the 2022 Senate debate, Sens. Bernie Sanders (I‑VT) and Elizabeth Warren (D‑MA) proposed an amendment that would have expressly required warrants or equity. It was not adopted.

The Venezuela oil agreement was announced in August 2026. The Pentagon’s Office of Strategic Capital will reportedly receive a 35 percent stake in North American Blue Energy Partners, and the State Department has the right to buy 20 percent of the venture’s output at its cost of production. Most recently, the Department of Defense committed $450 million to the tungsten producer Elmet Group in return for redeemable preferred equity, warrants for up to 19.9 percent of its common stock, and a board seat. Other departments have taken or proposed similar deals with firms in the semiconductor, quantum computing, critical minerals, energy, and defense sectors.

Several arrangements seek more than the proceeds from a later stock sale or ordinary dividends. In exchange for a $500 million award, a final agreement with SandboxAQ includes both an equity stake and a royalty on new materials successfully developed and licensed. The Department of Commerce signed a term sheet with Westinghouse Electric’s owners, under which the government would help arrange financing and facilitate approvals for at least $80 billion in reactor projects. In return, the government could receive 20 percent of cash distributions above a certain threshold and an equity interest if Westinghouse reaches certain valuation milestones.

The trade agreements with Japan and South Korea scale this model to whole countries. Japan pledged $550 billion, and South Korea committed $200 billion to a strategic investment program and another $150 billion to shipbuilding, all for US-based projects, in exchange for lower tariff rates. Under the Japanese framework and South Korea’s $200 billion investment component, US officials help select projects, and the agreements stipulate that profits are divided evenly between the US and the financing country until financing costs and principal are recovered. Once fully repaid, the US could receive 90 percent of project profits. These commitments represent potential future revenue streams and face legal questions about their structure. Whatever the ultimate outcome, the administration is touting its use of delegated tariff authority to secure foreign investment commitments, influence project selection, and claim future profits.

The Trump administration has also attempted to monetize immigration. The administration’s Gold Card immigration program asks individuals to make a $1 million “gift” to the Department of Commerce or corporations to contribute $2 million on their behalf. Immigration officials are directed to treat the payment as evidence in support of an employment-based visa, although it can’t override other applicable laws, public safety, or national security concerns. The administration attempted to condition certain new H‑1B petitions on a $100,000 payment, claiming that its existing authority to restrict entry permitted the change, even though no statute authorized a new tax or fee. One federal judge upheld the policy. A second later vacated it as exceeding statutory authority, and the First Circuit declined to restore the policy pending the government’s appeal. The policy therefore remains an example of attempted monetization, but collections are not continuing as of August 2026. In the meantime, a proposed regulation from the Department of Homeland Security would require employers to pay a $103,265 fee just to file a petition requesting an H‑1B foreign worker.

In each of these cases, the Trump administration has imposed, or attempted to impose, new taxes on individuals and industries. The often firm-specific deals tie the economic burden to exposure to executive discretion over delegated policymaking. Targeted and unpredictable taxes violate every principle of sound fiscal policy. The revenue system should apply general rules evenly across industries to minimize distortions in economic decisionmaking.

The conventional case against industrial policy is a story about misallocated capital: businesses investing based on political priorities rather than consumer demand. The case against monetized executive discretion is even worse. It gives politicians a direct financial interest in maximizing the power and discretion they wield over otherwise consumer-driven markets.

In these deals, federal officials control the export license, subsidy award, tariff relief, transaction approval, or visa. Once they can collect revenue for granting approval or relief, they have an incentive to make the underlying restriction more burdensome and the relief more valuable.

The Trump administration’s actions show this ratchet at work, when the government can raise revenue by granting relief from its own rulemaking. An export license, or an improvised workaround, is valuable only because export controls block the sale. The Nvidia arrangement gives the government a financial interest in preserving the restrictions that make the revenue share possible. Likewise, tariff relief is valuable only if there is a tariff to remove, helping explain why Japan and South Korea were willing to pledge hundreds of billions of dollars for lower rates. In each case, the US government profits from the severity of its own restrictions.

Bessent asked, Why not expand this new model? If taxpayers are on the hook for subsidies, why shouldn’t they share in the upside? Because competing for government money distorts the initial investment decision. This initial distortion is extended by the equity stake, royalties, or profit rights. As the government has a direct and ongoing financial stake in a firm’s success, it will face pressures to protect partner firms from competition (foreign and domestic), tailor regulations to their advantage, and distribute additional subsidies if politically favored firms stumble under the weight of the political objectives that displaced sound management in the first place. Every subsequent decision about tariffs, procurement, and regulation becomes, in part, a decision about the value of the government’s own position.

Outside of government, investors no longer simply ask where capital will earn its best return. In pursuit of profits, they now have to assess the political landscape and navigate approvals through opaque political processes that have unknown costs. Managers also now weigh consumer demand against the preferences of President Trump and his regulators. The government wins either way; it can either extract rents in the form of political favors or share in the profits. Private capital is left chasing political favor instead of meeting the needs of American consumers.

The lobbying data offer exactly the warning signal one would expect. Total federal lobbying spending hit a record $5.3 billion in 2025. Lobbying registrations increased 42 percent for trade, 20 percent for taxation, 18 percent for manufacturing, and 14 percent for defense.

Tariff policy produced its own boom. The number of registered clients lobbying on trade and tariffs jumped 218 percent in 2025, the largest single-year increase since the first Trump trade war in 2018. Trade-related lobbying expenditures exceeded $900 million in the first half of 2025 alone, running 28 percent above the same period a year earlier. Those figures do not prove that every lobbying dollar bought a favor, but they do show how valuable access becomes when policy is negotiated firm by firm.

Uncertainty imposes its own costs when firms delay investment, which is exactly what happens when mergers, research, and international trade depend on political exemptions. Trade policy uncertainty is widely understood to depress business investment and is likely to stall investment in other politically sensitive industries.

The subsidies themselves are what make this uncertainty possible. Grants, loans, and discretionary tax credits don’t just misallocate capital; they create the leverage politicians can then use against the firms they subsidize. The discretion over who receives the funds is what makes the deals possible. Remove the uncertainty, and there is nothing to trade. Such arrangements have always bred rent-seeking and corruption. But monetizing this executive discretion is worse, as it corrupts the entire ongoing relationship between the government and partly government-owned firms.

The federal government does not lack ways to raise revenue. What the Trump administration is chasing is made-for-headlines revenue sources that can be presented as paid by someone other than American voters. But novelty does not change the fact that no plausible combination of new deals can fix the federal budget. The Congressional Budget Office projects a federal budget deficit of $1.9 trillion in 2026, rising to more than $3 trillion over the next decade.

Among the nontariff arrangements discussed, only the TikTok fee has been reported to produce a large Treasury payment—about $2.5 billion at closing, toward a reported $10 billion. Even the full $10 billion would amount to less than 1 percent of the 2026 federal budget deficit. The Nvidia and AMD filings provide no evidence that either chip export arrangement has generated revenue for the Treasury. Most of the remaining deals are equity assets or contingent claims whose value has yet to be realized. For an equity stake, potential net revenue is the amount the government could realize from a sale, minus what taxpayers paid to acquire it. Market value changes every day, and selling a large block could depress the price, especially when some of the value may reflect the government’s implicit interest in favoring the firm. The government can hold the position and realize no revenue or sell and undercut the rationale for buying in to prop up important industries.

The administration nonetheless earmarks these unrealized gains many times over. After Trump promised $5,000 payments to every American if Republicans hold Congress in November, Commerce Secretary Howard Lutnick asserted that the money would not come from taxpayers but instead pointed to the government’s Intel position. He said, “Everybody knows we got just about 500 million shares, and the stock was $20, and now it’s $100, so we’re up $50 billion.” At a roughly $50 billion value, if sold, the Intel shares could cover at most 4 percent of the $1.2 trillion it would cost to send every American a check.

Tariff revenue is larger in scale but no more decisive in fixing the federal budget. Before the Supreme Court ruled against the Trump administration’s so-called “reciprocal” tariffs under the International Emergency Economic Powers Act, the projected revenues of more than $2 trillion over a decade would have reduced cumulative deficits by only about 7 percent. The temporary Section 122 surcharge that replaced the reciprocal tariffs expired in July after its 150-day statutory limit. The administration immediately imposed new Section 301 tariffs on 60 trade partners, while Section 232 tariffs remain in place for particular products and industries. Tariff revenue has now been spent many times over. Federal net customs duties during fiscal year 2026 were $155 billion, about 9 percent of the $1.8 trillion deficit over the same timeframe. Tariffs may be the most aggressive form of discretionary revenue raising, but even they can’t come close to closing the structural deficit.

The lack of revenue undermines the argument that taxpayers are sharing in the upside. But bigger and more certain cash payments would not improve the deals either. Larger returns would incentivize officials to pursue further extractive interventions and protect favored firms from competitors through regulatory carveouts and new subsidies.

The executive branch is attempting to monetize trade agreements, merger approvals, subsidy awards, and immigration, turning delegated powers into potential streams of payments or equity. In each case, Congress has given the president some discretionary authority, but not to the degree exercised by this administration. For example, the authority to approve a license does not include the authority to sell it, and the authority to award a grant or loan does not by itself include the authority to demand an ownership stake. But the discretion creates leverage ripe for abuse.

The deeper objection is not that the government negotiated a bad deal in any individual case; it is that the government has no business negotiating these deals at all. The federal government has a tax code to raise revenue and a budget process to allocate spending. The president should not be freelancing with Congress’s tax and spending powers.

The remedy is fewer powers. Congress should narrow delegated tariff authorities, eliminate discretionary corporate subsidies, and bar agencies from demanding equity, royalties, or special fees in exchange for licenses, grants, approvals, or exemptions.

No portfolio of equity stakes, revenue shares, and finder’s fees can substitute for the spending reforms needed to stabilize the federal budget. Cutting spending is the only sustainable way out. Even if the budget were balanced, the executive branch would have no business turning its discretionary powers into a source of revenue.