>>Hmmm, Clinton bombs Iraq on the day before the impeachment vote....how conveeeeeeeenient!
Someone told him he should bomb the Republican guard and he agreed. No doubt he was shocked and very disappointed that Iraq was bombed instead.
As scholar James Glassman makes clear, the market has reacted very positively throughout the entire scandal and towards Clinton's certain impeachment:
The Market Will Do Fine
By James K. Glassman
Tuesday, December 15, 1998; Page A27
There are legitimate reasons to oppose the impeachment of President
Clinton, but concern that it will cause the stock market to crash and disrupt
the economy is not one of them.
While presidents get the credit when the Dow and the GDP go up, and the
blame when they go down, politicians rarely have much effect on either. In
fact, a thriving economy depends mainly on interest rates, technological
progress and corporate profits -- all largely beyond the control of
Washington.
If Bill Clinton is driven from the White House and replaced by Al Gore, the
effect on stocks and the real economy will likely be small and brief, even
providing a fine buying opportunity for long-term investors.
What about an impeachment trial in the Senate, during which little
legislative business would be done? Not a big deal.
First, both sides have a stake in making the trial short -- perhaps only a
few weeks. And, second, over the next two years, in a divided
government, there's not much that Congress and the president were going
to do anyway, other than reform Social Security -- which may be more
likely after impeachment, as the parties try to prove to voters that they can
accomplish something despite all the turmoil.
In fact, if there is any correlation, it seems to be that the closer Clinton gets
to impeachment, the more the U.S. economy and the markets prosper --
no matter what's happening in other parts of the world.
Look at the big picture. On Jan. 17, Clinton gave his deposition in the
Paula Jones case, and four days later newspapers reported that he was
asked about an affair with Monica Lewinsky. The scandal had broken.
At the time, the Dow Jones Industrial Average was languishing nearly 400
points below its August 1997 high. While stocks did drop in the week
following the first Lewinsky revelations, they quickly rallied. The scandal
seemed to revive the market.
On Jan. 20, the Dow Jones Industrial Average closed at 7873; last Friday,
it closed at 8822. That's a return, including dividends, of 14 percent, or
three percentage points better than a normal year in the stock market.
Other market indicators of crisis are also absent. The interest rate on a
30-year Treasury bond has dropped from 6 percent to 5 percent, and gold
has barely budged all year, trading around $300 an ounce. Meanwhile,
gross domestic product has surged 3.5 percent this year, inflation is a
minimal 1.5 percent and unemployment just 4.6 percent.
During the first critical period for Clinton -- between the first news reports
and April 1, the date the Paula Jones suit was dismissed, the Dow gained
more than 1,000 points. During the second critical period -- from Aug. 17,
when he gave his deposition to the grand jury, admitting "inappropriate
intimate contact" through the Judiciary Committee's approval of four
articles of impeachment -- the Dow rose 400 points.
Still, in August, as the market fell, experts discovered a connection
between the decline and the scandal. "I think it's definitely cracked the
market," said Charles Henderson, chief investment officer at Chicago Trust
Co. "If there's one thing the market hates, it's uncertainty."
Yes, but uncertainty over what? Impeachment? Or corporate earnings, the
dicey economies of Southeast Asia, recession in Japan, default in Russia?
On Sept. 9, the Starr report went to Congress. Talk about uncertainty!
Instead of dropping further, the market continued to rally through much of
September, setting the stage for a record October. The Dow is now about
1,000 points higher than it was when those trucks full of evidence pulled up
to Capitol Hill.
"What's most noteworthy about Wall Street's reaction to impeachment is
that . . . there has been so little of it," writes Alan Abelson in Barron's this
week.
True, but, then again, why should there be much reaction? Clinton's
presidency has coincided with a bull market, but if you believe that politics
affects stocks at all, then you have to acknowledge that his responsibility
for a soaring Dow may be less than that of Republicans, whose victory in
1994 prevented higher taxes and new spending programs that threatened
to roil both the market and the economy. Unless stocks collapse in the next
two weeks, then the period since the GOP sweep will be the best four
years ever for the modern market.
I do have one worry about stocks and impeachment. What if Clinton
decides that, to keep the White House by appearing indispensable, he
needs to take risks, similar to the missile attacks on Afghanistan and Sudan
earlier this year? World War III would put a damper on the stock market.
One could also argue that, until the House actually does decide to impeach
President Clinton, in a vote that should come by week's end, the markets
don't really believe he's on the way out -- so they haven't responded with
full force.
Possibly, but markets act at the margin; prices rise and fall based on
probabilities, not certainties. And, while Clinton's chances of filling out his
term have been reduced by, say, 20 percent since the start of the year,
stocks are still up smartly.
In the end, of course, justice should trump money. House members should
follow their consciences in deciding whether to impeach Clinton, rather
than worrying about a decline in the market. Still, it's nice to know that the
evidence indicates strongly that impeaching the president won't damage
either stocks or the real economy.
The writer is a fellow at the American Enterprise Institute.
washingtonpost.com
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