October 29, 2019
Charlotte Woodhams, Investment Strategy Analyst
John LaForge, Head of Real Asset Strategy
Impeachment Inquiry and Shifting Political Landscapes
Impeachment proceedings begin
As an impeachment inquiry moves forward in the House of Representatives, major legislative items may face delay in Congress.
- While it is yet to be seen if the House will bring any impeachment articles against President Trump, the inquiry may impact progress of high-profile legislative items awaiting congressional action.
- Although the impeachment inquiry should continue to attract attention, we believe that it is important for investors to remain focused on their financial goals and on fundamentals. Bouts of volatility are likely as more impeachment-related information emerges from Washington. Generally, we believe that political risks are more likely to increase and become periodic market headwinds as we enter a presidential election year.
The impeachment inquiry—impact on the legislative agenda
Impeachment-related headlines have been a constant in recent weeks. On September 24, House Speaker Nancy Pelosi announced that the House of Representatives would launch a presidential impeachment inquiry. This followed a whistleblower complaint regarding allegations that President Trump requested that Ukrainian President Zelensky investigate former Vice President Joe Biden’s son, Hunter Biden, and his business dealings in Ukraine.
President Trump is not the first president to face an impeachment inquiry — he is the fourth. The House of Representatives voted to impeach Presidents Andrew Johnson and Bill Clinton, and President Richard Nixon resigned before a House vote could take place. However, no sitting president has been removed from office due to impeachment, which sets a high bar for Democrats in the Republican-controlled Senate.1 In order for President Trump to be impeached, at least 20 Senate Republicans would have to move across party lines and vote to convict him of what the Constitution calls “treason, bribery, or other high crimes and misdemeanors.2
While impeachment is possible, if not likely, in the House, we believe that eventual conviction by the Senate has a relatively low likelihood. Yet, the House’s impeachment inquiry (and any House or Senate action) may disrupt the flow of legislation in Congress. With only 20 legislative days left for this session in the House of Representatives—and an election year ahead—the impeachment inquiry could quash completion of various legislative agenda items. With the House inquiry (and any follow-on congressional action) possibly taking months to complete, it is becoming less likely that Congress will pass any major bipartisan legislation before the 2020 presidential election.
Legislative items still on Congress’ docket
The U.S.-Mexico-Canada Agreement (USMCA) on trade and President Trump’s unfulfilled campaign plans for an infrastructure program are both legislative items that may find themselves unexpected victims of the impeachment inquiry. Impeachment-related delays reduce the chances that Congress will have the time to debate and ratify these comprehensive legislative items prior to the 2020 election. Likewise, there had been hope that Congress would pass a prescription drug pricing bill before the end of the session—as President Trump and Speaker Pelosi agree that it is an important policy issue (which garners bipartisan support). With impeachment proceedings causing delay and distraction, prescription drug prices should become an even more important issue, alongside health care, in the 2020 presidential election campaign.
Comparing today’s impeachment inquiry with President Clinton’s House impeachment in 1998
Although the political climate and economic backdrop during the impeachment of President Clinton differed from today’s political and economic landscape, there also was a lot on the congressional legislative agenda when the House of Representatives launched its impeachment inquiry in 1998. Before impeachment investigations began, President Clinton and the Republican-held Congress had successfully passed major bipartisan legislation. Together, they had created the Children’s Health Insurance Program,3 introduced Roth IRAs, and passed the comprehensive Balanced Budget Act & Taxpayer Relief Law, which included tax cuts and reforms to help balance the federal budget by 2002. From the start of the impeachment inquiry in October 1998 to the end of the Senate trial in February 1999, little else garnered more attention than impeachment in Washington, D.C. However, President Clinton continued to work with House Speaker Newt Gingrich to achieve a balanced federal budget (and later a surplus) and to eventually repeal the Glass-Steagall Act later in his second term. Comparatively, President Trump has suggested that he will not work with House Speaker Pelosi—nor with Congress—to pass major legislation until the impeachment inquiry has ended.
Today, Congress is also in a more partisan position than it was 20 years ago. Bipartisan agreements are harder to achieve as there are fewer moderate lawmakers on either side of the aisle than there were two decades ago. Additionally, President Trump is preparing to enter an election year, making it even more challenging for impactful legislation to pass through Congress, unless it is the subject of a crisis.