A criminal investigation of a powerful official doesn’t seem like democratic erosion. Equal application of the law is a central democratic principle. The real questions are why, why now, and by whom; criminal investigation of an official in open opposition to the executive is a more complicated matter.

The conflict between the Trump administration and former Fed Chair Jerome Powell creates a puzzle. How does a President who wants lower rates act when he can’t legally fire the chair? A seemingly neutral investigation offers a solution. It could supply the “cause” necessary for removal while preserving the appearance of ordinary law enforcement. This is what Ozan Varol calls stealth authoritarianism: using legitimate-looking legal tools for anti-democratic ends.

I argue that the Powell investigation was not ordinary law enforcement, but an attempt to turn legal accountability into a tool of political coercion. Powell’s cost overrun provided a seemingly legitimate justification for targeting a Fed Chair who was opposing the President. If the investigation was genuinely about fiscal responsibility, we’d expect comparable overruns involving officials without conflicts to attract similar scrutiny. The case illustrates how democratic institutions can be threatened through the legal mechanisms designed to protect them, and how their survival depends on officials willing to enforce those protections. 

Overt authoritarianism has become costly in an era of international cooperation and democracy promotion. Under stealth authoritarianism, governments maintain democratic institutions, but apply them in undemocratic ways. Selective enforcement is a key mechanism: rules are applied unevenly, punishing some violators while ignoring others.

This works because investigations are costly to endure and hard for outsiders to judge. The target faces legal expense and reputational damage, while the government can claim it is just enforcing the law. Prosecution is not the danger. The danger is an executive using it to punish or deter those who constrain him. Intent is elusive, so the best test is context: the timing, motive, strength of the legal basis, and how comparable cases are treated.

Trump pressed Powell to cut interest rates throughout 2025, arguing that lower rates would stimulate the economy and reduce national debt costs. Powell refused, arguing that cuts were premature given inflation risks tied to tariffs, steady unemployment levels, and the Fed’s forward-looking policy (Hyatt, 2025). On April 17 the President posted that “Powell’s termination cannot come fast enough” (Trump, 2025). In July, he made an unprecedented visit to the Fed to observe the renovation project, where the two clashed on live television (Sherman, 2025). In August 2025, Trump called for the Fed’s Board of Governors to strip Powell of his control (Boak, 2025). Because the Fed has independence, the President only has the legal authority to fire Powell for cause, meaning inefficiency, neglect, or misconduct. In January 2026, the Department of Justice opened a criminal investigation into Powell regarding the renovation’s cost overruns and whether Powell misled Congress about the project. 

The sequence matters. The president wanted Powell gone, lacked the legal means, and then a criminal probe appeared that could supply them.

Two months after the investigation was opened a federal judge blocked the subpoenas, finding “no evidence whatsoever that Powell committed any crime other than displeasing the President” (Goudsward, 2026). A month later, the DOJ dropped the investigation, and an independent watchdog found mismanagement but no criminal misconduct (Schneider, 2026).  

Mismanagement is also ordinary. The U.S. Government Accountability Office reports that the vast majority of major federal projects run over budget and track risk poorly (GAO, 2022). As Senator Thom Tillis put it: “if we put everybody in prison in federal government that had had a budget go over, we’d have to reserve an area roughly the size of Texas for a penal colony.”

The relevant feature of stealth authoritarianism is not that the renovation was managed perfectly; it was not. The question is why managerial failures prompted a criminal investigation, instead of an audit. We must also ask if comparable conduct by an aligned official would draw the same level of scrutiny.

The administration’s case against Powell was not pulled out of nowhere. The renovation project was initially budgeted $1.9 billion and has grown to over $2.5 billion (Aspen, 2026). The Fed’s Inspector General reported “extensive management shortfalls” on the project (Schneider, 2026). Powell told Congress in June 2025 that the project had no luxury features, yet documents filed with the National Capital Planning Commission allegedly contradict his testimony (Luna, 2025). If an unelected official overseeing a multibillion-dollar public project faces allegations of misleading Congress, why shouldn’t the DOJ investigate? Political independence does not mean immunity from accountability. 

This establishes only that some inquiry was defensible, not that this one was neutral. 

The existence of legitimate oversight concerns does not explain why those concerns escalated into a criminal investigation, particularly against an official the president repeatedly sought to remove. The relevant question is not whether Powell deserved scrutiny, but whether an official aligned with Trump would have faced the same treatment. That counterfactual cannot be observed directly. Yet, the president’s public hostility toward Powell, the investigation’s timing, and the lack of substantial evidence of criminal wrongdoing make selective enforcement a more convincing explanation than neutral accountability. The danger is not that the administration investigated a flawed project. It is that legitimate oversight may have become a vehicle for punishing political independence.

One failed investigation does not prove democratic erosion. However, Nancy Bermeo argues that backsliding is often incremental: executives weaken constraints with acts that appear legal or relatively insignificant. While this case alone may not prove democratic backsliding, it can be useful for corroborating a broader systemic trend. Democracy doesn’t necessarily end with a coup; it’s important to recognize the signs of backsliding before it becomes too late.

It also shows what resistance requires. Independence matters only if officials use it, whether courts, inspectors general, Congress, or individuals within those institutions. The court that intervened did not have to prove the government’s subjective intentions to limit its use of prosecutorial power. It simply had to demand a legally sufficient basis for the subpoenas. 

The Powell investigation demonstrates both the danger and the limits of stealth authoritarianism. Democratic institutions can be weakened without being formally dismantled. Presidents can use conventionally democratic means to pursue anti-democratic ends. Yet this attempt failed because a court held the line and a watchdog supported it. That is one case, not proof of systemic resilience, but it suggests that stealth tactics depend on institutions willing to go along.

Somodevilla, C. (2025, July 24). President Donald Trump and Federal Reserve Chair Jerome Powell look at a piece of paper as they tour the Federal Reserve’s $2.5 billion headquarters renovation project [Photograph]. Getty Images. https://www.gettyimages.com/detail/news-photo/president-donald-trump-and-federal-reserve-chair-jerome-news-photo/2226862937