With impeachment in the air, many are wondering how impeachment could impact the economy. Truthfully, no one knows. Very few presidents have ever been successfully impeached, though impeachment has been attempted.
Here’s what you need to know about this somewhat arcane political process.
Only Two US Presidents Have Been Successfully Impeached
Andrew Johnson and Bill Clinton were both successfully impeached, but neither were removed from office. Impeachment is only one step of the process. Removal from office is a separate issue, as are criminal charges. It’s too much to say that impeachment is ornamental: it does have some very real consequences. But ultimately impeachment doesn’t change much.
Impeachment opens the door to replacing a president. Usually that means they will be succeeded by the Vice President. Neither the Republicans nor the Democrats have any particular interest in having current Vice President Mike Pence in office, and consequently there’s limited reason to believe that President Trump would actually be removed from office.
But that still leaves a question. What does impeachment mean for the economy?
The Trade Deal With China May Supersede the Impeachment
Analysts are more concerned about the China deal than impeachment, because ultimately it’s very likely that Trump will still be making policies even after impeachment. As impeachment doesn’t directly impact the market in any particular way, the trade deals and current tariffs have more pressing importance to investors.
In fact, historically impeachment proceedings haven’t really had a resounding impact on the market. During Clinton’s impeachment, the market still continued to rise substantially. There aren’t many ways to look back historically, because impeachment is so rare. But impeachment doesn’t tend to unsettle the market because there aren’t any direct financial impacts.
Currently, it’s believed that an end to the US-China trade war is coming. If it ends, it will be a tremendous relief to many businesses and industries, and could spark a significant rally for both countries.
As a Recession Looms, There Is Still Some Uncertainty
For impeachment to impact the market, entrepreneurs and investors would need to feel as though financial policy was about to change. That means Federal rates going up, trade being slowed, and new regulations and laws entering into the market. If analysts don’t feel that Trump’s business-friendly policies are going to change, they have no reason to be hesitant about getting into the market.
In many ways, the upcoming election is more important than the actual impeachment action. A power switch from the Republican party to the Democratic party could shake the market and inspire a recession, given the fact that many business-friendly protections will be repealed. This is a more significant changeover than an impeachment, which could ultimately amount to nothing.
Investors Shouldn’t Worry, But They Should Plan
As you can see, an impeachment actually isn’t the incredibly disruptive act that it may seem. In fact, it’s very akin to an official sanction. While it opens the doors to removing a sitting president, it’s never been successfully used to do so. And while it may remove the president, it actually has no impact on their reelection.
At the same time, it’s obvious that a recession is still on the horizon, and the many confounding factors (such as the trade war, impeachment, and other global news) are making the market volatile. Investors are going to need to be cautious about the fact that a recession is looming ahead, and that others could start being skittish.
The market does trade on the emotions of investors, and when investors start to lose confidence, it has a cyclical effect. If it looks as though the trade deals are performing poorly and the impeachment process is going to be disruptive, investors are going to start to pull back. Once investors pull back, businesses are going to start to suffer.
Impeachment proceedings have started. But there’s a lot to this process, and there’s a lot that can go wrong. It’s not likely that impeachment is going to have any long-standing impact on the political office, for a variety of reasons, but it is still possible that it will go through. If impeachment occurs, Trump will still likely be in office, and Trump will still be making policy.