economy politics

The US Consumer Doesn’t Care About Impeachment – For Now, Anyway

"References to the impact of impeachment on economic prospects were virtually non-existent".

The preliminary University of Michigan sentiment survey was largely a non-event on Friday.

Sentiment collapsed to a Trump-era low in August, but has rebounded since and was largely unchanged at 95.7 in the first read for November (versus 95.5 on the final read last month).

The range of forecasts was from 92 to 98.5.

Current conditions slipped, while expectations rose. Expected inflation over the next year was unchanged, while the outlook for prices over 5-10 years ticked up to 2.4% from 2.3% in October.

Despite being generally a snoozer, the color that accompanied the report was some semblance of interesting.

First off, spontaneous negative references to tariffs were still mentioned by one-in-four consumers this month. That underscores the notion that even as we inch closer and closer to an interim trade deal that is widely expected to bring tariff relief (Trump’s Friday morning comments notwithstanding), the spat with China continues to serve as a psychological drag.

More interesting, though, was the commentary from Richard Curtin (the survey’s chief economist) on the impeachment inquiry.

“References to the impact of impeachment on economic prospects were virtually non-existent, mentioned by less than 2% in October and November”, he writes, adding that “the lack of impact on economic prospects is broadly similar to Clinton’s but not Nixon’s impeachment inquiry”.

He goes on to explain the “critical difference” as follows:

During Clinton’s impeachment, economic conditions remained very favorable; indeed consumer sentiment was at its most favorable levels ever recorded. In contrast, Nixon’s impeachment inquiry started at the same time as the oil embargo in October 1973, with oil prices quadrupling over the next six months. While consumers voiced a rapid collapse in optimism, many believed Nixon was too distracted to attend to their concerns about escalating inflation and unemployment, or that the economy would fall into recession in late 1973.

The read-through for Trump is obvious – if the economy were to take a turn for the worse in the near-term, consumers may start to fret that Trump will be too preoccupied with defending himself against allegations of impropriety and illegality to focus on steering the economy.

Poll data in August clearly indicated that voters were beginning to doubt his economic stewardship, but mercifully, the data has broadly improved (with the exception of ISM manufacturing). Given the drama in D.C., another swoon wouldn’t be digested well by consumers, who have shouldered the burden of sustaining the expansion.

Read more: Economy Now More Important Than Ever For Trump As Impeachment Probe Goes Public

Commenting further, Curtin notes the following:

The current performance of the economy, in contrast, is neither as bleak as Nixon’s nor as good as Clinton’s. The strongest aspect of the current economy has been job and wage gains. Although consumers have become somewhat more cautious spenders, they see no reason to engage in the type of retrenchment that causes recessions. While most consumers do not anticipate year-to-year increases in the unemployment rate, the majority of consumers expect the unemployment rate to remain largely unchanged at its lowest level in 50 years.

Here’s the chart on that:

That’s the good news for Trump. The bad news is that if those expectations turn out to be too optimistic and the economy does falter, there isn’t much he can do. Larry Kudlow can do all the ruminating he wants, but another supply-side stimulus package will be DOA in the Democratic House.

And besides, with the deficit having ballooned to $984 billion (on the way to $1 trillion+ next year), the optics around additional stimulus will not be great for the GOP, assuming there are any Republicans left who care about the party’s traditional commitment to budget discipline and fiscal rectitude.

Read more: Say Congrats To Donald Trump, The US Budget Deficit Exploded 26% To Nearly $1 Trillion In 2019

5 comments on “The US Consumer Doesn’t Care About Impeachment – For Now, Anyway

  1. vicissitude

    2020 election will come down to the difference between being lied to and those who don’t care. trump apparently won the last election because he was an outsider who promised change, made a long list of promises and then a contract with voters — so, in 2020, will his base forgive him for lies and double down on the policy of failure, or will they hold their candidate accountable, even up to the point of being opened minded about impeachment investigations that point to criminal conduct? The GOP is fickle and highly forgiving, generally following in lockstep and staying the course, until the smell of stupidity becomes too vile. On the other side, the Democrats are offering more of the same, if-not taking up the cause of socialism — and essentially running a group of losers, when combined, amount to nothing; they offer no choice against the liar/crook. The pending impeachment trial is really America on trial — in what seemingly will be a hung jury, i.e., those that dismiss crimes and those that seek justice. The perfect dichotomy where polarization and weaponization of politics will reach an entirely new level, where a constitutional crisis will intersect with total malaise and passion. Will Americans succumb to paralysis or be propelled into revolutionary actions?

    Also see: Pat Caddell: Trump Will Lose 2020 if He Doesn’t Change His WH Team

    Caddell continued, “This is not what they promised. The point is they can be held responsible for what they said. Basically this is a cynical belief that the voters are too stupid to care about what they were promised and voted for, and the Republicans share in that cynicism. It’s a Washington phenomenon.

    • Good points. No clue. But imagine the outrage if it was Obama, not Trump, on trial. They’d have already built a scaffold on the White House lawn!

  2. I think you hit the nail on the head. A hell of a lot of the voters are just too stupid … period. When the education system fails the vast majority (or the vast majority don’t take advantage of the opportunity) this is the result.

  3. “consumers may start to fret that Trump will be too preoccupied … to focus on steering the economy.”

    Good one!

  4. Trump’s impeachment is moral, not economic. As for Trump steering the economy……..LOL

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