A Brief ‘Inquiry’ in Looming Impeachment Proceedings

Written by Alejandro Sarmiento

In late September of this year, House Speaker Nancy Pelosi formally announced an impeachment inquiry into President Donald J. Trump. Impeachment means ‘formally accused,’ and following an initial investigation by Congress, a House majority must vote to proceed with impeachment before the President can be tried before the Senate. Calls for impeachment began in response to allegations that President Trump engaged in what many on the Left have referred to as a quid pro quo with Ukraine President Valodymyr Zelensky. President Trump is alleged to have withheld $400 million in military aid in order to induce an investigation of former Vice President and Democratic Presidential hopeful Joseph Biden and his son Hunter Biden, who sat on the board of Burisma Holding, a natural gas company in Ukraine. 

Though an inquiry has been announced, proceedings cannot begin unless a House majority is achieved. Historically, the House voted 258-176 to advance President Clinton’s impeachment probe and a distinct 410-4 in the case of President Nixon. In both cases, the facts were clear. The transcript of the phone call between Zelensky and President Trump, though, fails to illuminate an explicit quid quo pro, and in the absence of a smoking gun, Republicans have begun rallying behind the President as he prepares to face a Democratic House. If the House votes to proceed with impeachment, only a simple majority of 218 votes will be needed. According to the New York Times, the vote stands at 228-191 in favor of impeachment with 14 in abstention. It is likely that the House will proceed to formally try the President, but defensive measures from Lindsey Graham and other prominent Republicans might thwart Democrats in a Republican-controlled Senate. Burt Neuborne, the Norman Dorsen Professor of Civil Liberties and founding Legal Director of the Brennan Center for Justice at the NYU School of Law has alternatively suggested, in an article for Forward, a “Joint Resolution of Censure… [which] provides a practical alternative to impeachment that is supportive of the Democratic process.” Impeachment proceedings require a vote of two-thirds in the Senate whereas a Joint Resolution of Censure requires only a majority in each House, which is certainly a more attainable goal. 

Looking back to the Clinton impeachment proceedings, markets performed better during impeachment than they had previously. At the issuance of the impeachment inquiry on 9 October 1998, the S&P 500 opened at 959.44, rising 23% to 1178.99 at the time of impeachment, and rising further still to 1243.77 when President Clinton was acquitted by the Senate. However, impeachment did not cause markets to grow;rather, the two operated independent of one another. Market growth during the late 90’s came from Fed interest rate cuts and the expanding dotcom bubble. Looking even further back to the 1973 Nixon impeachment proceedings, markets tell a different story. The S&P 500 dropped 33% in 1974 from 111.15 in late October to 71.35 on 9 August, the day of President Nixon’s resignation. Once again, though, this shift was largely imposed by high inflation and a recession amidst a tempestuous oil crisis. The impeachment inquiry into President Trump, though still in its infancy, has already negatively impacted the markets, most notably undermining U.S. strength in trade-talks with China. As quoted by the Japan Times, Jude Blanchette, an expert in Chinese politics at the Center for Strategic and International Studies, notes that, “[China’s leadership] are interpreting the impeachment discussion as a weakening of Trump’s position, or certainly a distraction.” In order to lighten the load of growing domestic pressure, President Trump will be aiming to realize a successful trade deal with China, whose leadership might look to exploit President Trump’s desperation to achieve concessions. Strategists suggest that the Democrats lack the Senate seats necessary to defeat Trump, but acknowledge that uncertainty might cause markets to decline. In light of a looming recession, many strategists are preparing for the worst case scenario, envisioning what a Pence presidency might mean for the markets and taking cover as best they can.