Big sounds, little economic fury

Impeachment of President Clinton and a Senate trial may rank as a historic political event, but from an economic standpoint, it's a dud.

Rather than doing any damage, the impeachment process has been positive in the financial world, economist Michael Cosgrove figures. "It has taken up the attention of both the administration and Congress, keeping them from attempting to do anything to the economy or the stock market," says the University of Dallas professor.

Mr. Cosgrove, a conservative, assumes Washington would do more harm than good for the economy should it be freer to intervene further in the process of creating and selling goods and services.

Another economist, Paul Kasriel, says the excitement over the trial "has not had much impact at all" on the economy.

"So far, so good," says David Hale, an economist with Scudder Kemper Investments, Chicago. "Investors have so much confidence in the secular growth forces associated with globalization and technological change that many believe that politicians have become irrelevant to the process."

Even removal of Mr. Clinton from office - seen as unlikely - doesn't raise much fear.

"We may have a few days of uncertainty in the market," says Cosgrove. But once the decision is clear that Vice President Al Gore will take over in the Oval Office, such concerns should rapidly fade. "I don't think there should be any problems for the stock market or the economy."

Some investors regard Mr. Gore as a policy clone of the president.

Mr. Kasriel, an economist with the Northern Trust Company, Chicago, sees Gore as more old Democrat than New Democrat. Gore's strong views on protecting the environment may lead to policies which "would be more harmful to commerce."

If such measures got through Congress, and that is doubtful, then stock investors and the economy might suffer, he adds.

Wall Street doesn't expect Clinton's scandal to prompt Alan Greenspan, chairman of the Federal Reserve, or Robert Rubin, secretary of the Treasury, to leave.

If either do go, it would upset the market somewhat, Wall Street lore has it.

Elliott Platt, with Donaldson, Lufkin & Jenrette, suspects the impeachment threat last summer compounded Wall Street's concern with the Asian crisis, Russia's troubles, and a major hedge-fund debacle.

And maybe, says the New York investment bank analyst, impeachment has had a "little impact" on the foreign exchange market. It may have prompted some Japanese to take money out of the United States on some days, weakening the dollar.

Kasriel cautions, however, that Japanese investors are not stupid. They know the US has established laws of succession.

"They see we are not going to have tanks around the White House."

Assuming Clinton stays in office, he and the Republican-led Congress will have incentives to work together.

The Republicans, says Kasriel, may feel "a little sheepish" about trying to remove the president and try to get back in the good graces of the voting public by concentrating on their legislative proposals.

Clinton will hope to bolster his record by pushing legislative accomplishments.

One result may be a compromise with the Republicans on a tax cut, Kasriel says.

To him, it is vital to the economy and the stock market that the president and Congress agree not to spend the budget surplus on new and expanded programs. Rather, they should use the surplus for tax cuts and federal debt reduction. The latter could be in the guise of rescuing Social Security.

A survey by the Pew Research Center for the People and the Press, released last week, found that Democrats hold a huge advantage over the Republicans on the public's top-priority issues. These include education and Social Security reforms.

That popularity gives Clinton some leverage in the bargaining process.

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