Two Casualties of the Impeachment Fight

by Greg Valliere, AGF Management Ltd.

RUNNING OUT OF TIME: Even with Saturday sessions, House Democrats are falling far behind their timetable of voting for impeachment by Thanksgiving. After hearing valid complaints about their lack of transparency, House Democrats will vote on Thursday to set new ground rules, making the process more open.

THIS WILL GIVE REPUBLICANS an opportunity to call their own witnesses and delay a trial well past the holidays. A House vote to impeach still could occur before Christmas, but Republicans are in no rush; the longer this drags out, the longer voters in swing districts will tire of it, they believe.

IN THE MEANTIME, impeachment has become such a pervasive issue that other crucial business will continue to languish. The first is finalizing a 2020 budget, which can’t possibly get finished by the Nov. 21 expiration of a continuing resolution. Still another CR will be required, extending well into December.

DURING THIS PERIOD, with the impeachment fight nearing a House conclusion, we expect President Trump to return to a favorite issue — building a wall on the Mexican border. If he doesn’t get substantially new funding, Trump may threaten a government shutdown. That won’t happen — GOP lawmakers will oppose it — but this could delay passage of a final budget until Christmas eve or early 2020.

ANOTHER POTENTIAL VICTIM of the impeachment fight could be the U.S.-Mexico-Canada treaty, which would replace NAFTA. There are enough votes to pass the measure in both houses, but Speaker Nancy Pelosi is in no rush to do Trump any favors. A key Senator, Charles Grassley, lamented yesterday that the NAFTA replacement bill has stalled.

OTHER LEGISLATION LOOKS DEAD: Gun reform, climate change, drug price legislation — you name it — has virtually no chance of passage. One of the few areas of activity will be the continued confirmation of federal judges by Mitch McConnell and the Senate.

A QUESTION we get constantly is why Congress is spending such an enormous amount of time on impeachment — neglecting other issues — when there’s virtually no chance that Trump will be convicted in the Senate. The answer is that House Democrats believe they have an overwhelming case of obstruction of justice and abuse of power.

THE DEMOCRATS WANT TO LAY THIS CASE out to the American public, hoping that it will deny Trump a second term. Republican complaints about the process will be defused somewhat by Thursday’s vote, many Democrats believe, leaving the GOP with only one issue — a weak case against impeachment. But the evidence will be largely irrelevant; this will come down to a strictly partisan vote on both sides, which has been obvious for months.

IN THIS INTENSELY PARTISAN CITY, there was no attention paid to the S&P’s record high yesterday. The bigger story this fall for investors is that a recession still isn’t imminent, as enormous fiscal and monetary stimulus pumps up an economy that continues to grow moderately, as it has done for over ten years.

The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.

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This post was first published at the AGF Perspectives Blog.