It's been a good week or so for victimhood, especially if you are the Tea Party, any association using the label "Patriots" (except Tom Brady's bunch in New England, and assorted other "good government" types on the political Right). Having campaigned against the president on the theme that his policies were essentially Christmas-candy give-aways to a misfit group of self-proclaimed "victims" (47%) who do not pay taxes, these organizations are railing against the IRS for having dared to single them out to challenge their right not to pay taxes.
Of course, the IRS had no business targeting just such groups for special interrogatories that also seem to have gone beyond what would be required to discern their tax -exempt status under Section 501(c0(4) of the Internal Revenue Code, which grants such status to social welfare organization that don't mix too much direct politicking with their policy advocacy efforts. Indeed, why should the Tea Party be considered any differently for such tax purposes than the ACLU or the National Rifle Association? The substance of their political views should be irrelevant to such inquiries, so choosing to focus on them by means of "political profiling" is wrong at whatever level it occurred within the IRS. Not to mention stupid.
Now there is utterly no evidence that these actions were ordered, condoned or covered up by the President of the United States, as they were by Richard Nixon back in Watergate days. Yet a prominent Time Magazine columnist previously best known for writing "Primary Colors" about the Clintons under a false identity just got through writing that Obama is now "on the same page" as Nixon when it comes to the IRS.
Add to this the righteous (and the self-righteous) furor over the botched security arrangements, attenuated rescue efforts and misleading post-event TV talking points concerning the attack on the American facility in Benghazi and you have Senator Graham of South Carolina calling the situation reminiscent of Watergate; Senator Darryl Imhofe of Oklahoma opining that folks will soon start using the "I-word"; and Mike Huckabee predicting to his audience that the President will not serve out his term. Plus Dick Morris, who is even an impeachment era veteran, also has opined that the Obama Presidency is finished.
No commentary is intended here as to the legitimacy, the politics or the eventual likelihood of the impeachment or conviction of President Obama on charges of "high crimes" or "misdemeanors" relating to the IRS misconduct or the Benghazi mistakes (And Secretary Clinton is not around to impeach anymore - the political focus on her is more like an "advance impeachment" of a 2016 candidacy). The issue for us is, what does this all mean for the emerging US economy? Is the sudden prospect of genuine political upheaval in the US a good or bad thing for investors in the stock and bond markets?
If the Clinton impeachment period is any indication, it all might not so bad as one might think - maybe even pretty good. With both Nixon and Clinton, the whole matter of impeachment started after the president's re-election and as the coming mid-term Congressional campaigns were set to engage. In the Clinton years in particular, the equity markets had begun an inexorable ride to the dot-com boom, starting with the famous Netscape offering in 1995 and running right through all the impeachment proceedings. In terms of the economy, only Alan Greenspan was minding the store, and he wasn't "minding" much at all except for a couple well-chosen words warning about "irrational exuberance" (whereupon the equity market went up more).
It seems that the stock market at least this year has been again profiting from the benign indulgence of Federal reserve easy money, and a Chairman more worried that Congress will busy itself with more fiscal austerity in the form of quick-timed spending sequesters and additional tax increases than he is about inflation from easy money. Unspoken is the fear certainly in the Fed quarters and lurking in the markets' subconscious that Congress will go even further and again set up another credit-rating political cliffhanger over the debt ceiling extension now due sometime this fall. What better time, then, for Congress to have something else to do with itself once it finishes with immigration considerations this summer: something like an obsessive-compulsive trip down the impeachment road.
OK, it would be better if the House and Senate followed up a deal on immigration (which would probably itself good for the current economy and markets) by taking a real run at genuine tax reform. A deal on corporate taxes with repatriation of overseas profits, a modest lowering of rates balanced with loophole closing revenues and a serious program of entitlement reforms would be unequivocally positive for growth - but probably way too much to hope for in the wake of the new IRS controversy.
Thus we are left with the prospect of Congress becoming totally distracted from pursuing economic "remedies" by a probably pointless journey down the impeachment road for the bulk of the summer - pointless because there is zero chance to get the 2/3rds majority needed for conviction in the Senate given its current political make-up. (The House just needs a majority to bring impeachment charges.)
Although this sort of Washington summer may be just as unpleasant for the country as DC humidity, it could be a boon for the economy, at least under the Hippocratic principle of "First, do no harm." A Congress too busy trying to force the President out of office prematurely to meddle further with the economy - even for just a few months - might be just what the doctor ordered to give the business community a period of slow, steady and predictable growth. Especially in housing and consumer spending - to encourage both capital investment and an uptick in hiring. The CEO community would likely see through the politics of an impeachment push, and just be grateful that the Congress has chosen not to fiddle with default crises and tax tinkering and meat-ax spending cuts that would only spook consumers and homebuyers and hiring officers.
If so, then the economy can maybe "party like it's 1999."
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