President Trump at the White House. (Alex Brandon/Associated Press)
There seems to be no end to tumult in Washington, of which President Trump’s vindictive and ethically clueless attacks on his attorney general are the latest manifestation.
High-level instability in the world’s most powerful government spells inevitable trouble for the country, and the world.
Or does it? Obviously, the paranoia and vulgarity emanating from the White House do harm, probably lasting, to the political culture of the United States, which was not healthy even before Trump’s election.
In one important sense, however, it’s amazing how little difference the absence of a functional figure at the top in Washington has made: The global economy, the United States very much included, continues to generate steady if unspectacular growth, price stability and job creation. Even recent laggards such as Europe and Japan seem poised for some of their best results in years.
Surveys of business leaders and hard data on employment, industrial production and the like, in both developed and emerging economies, reflect “a broadening global economic expansion,” according to the July 24 edition of “Eye on the Market,” a report to investors from J.P. Morgan’s analysts. Within the United States, consumer confidence and house prices are at post-2001 and post-2006 highs, respectively — not surprising given that unemployment is only 4.4 percent.
For Michael Cembalest, chairman of market and investment strategy at J.P. Morgan and principal author of “Eye on the Market,” the lesson is that geopolitical events — even highly disruptive ones such as Brexit and the rise of Trump — are less damaging economically than much conventional wisdom, on and off Wall Street, would have it.
As his report notes, the world’s perennial trouble spots (e.g., Syria and Ukraine) encompass 12 percent of global population but account for less than 1 percent of stock market capitalization, profits or investment flows.
“It’s the business cycle that matters,” Cembalest told me. Right now, the business cycle — abetted by central bank policies, and resilient with respect to Trump’s antics — is in a benign phase.
That could change, of course. Contrary to what he’s done so far, Trump could convert his protectionist rhetoric into actual policy, triggering a trade war. The Middle East’s various military conflicts, mishandled by Trump’s foreign policy team, could spiral out of control, triggering an oil price shock like the one that derailed the world economy in 1973 — and which Cembalest considers the only documented case of a postwar geopolitical event that wrought lasting economic damage.
But otherwise, it’s likely that things will chug along at their current pace through the 2018 congressional elections, even though the latest International Monetary Fund forecast marked down U.S. growth slightly due to Congress’s inability to enact Trump’s promised tax cuts.
That, in turn, casts further doubt on scenarios that Trump will be impeached or otherwise ousted before his term expires in 2021, even if a recent USA Today poll found 42 percent of the public favors Trump’s removal and 36 percent expect it.
Obviously, the key variables are Trump’s alleged wrongdoing and the quality of the proof against him — which would have to be substantial indeed to persuade Republicans on Capitol Hill to abandon him, as Republicans eventually turned against President Richard Nixon during Watergate.
Those breathlessly anticipating Trump’s ouster often forget that Nixon’s Watergate woes were compounded by what was then the worst economic crisis since the Great Depression — triggered in large part by the October 1973 cutoff of oil supplies by Arab states as reprisal for Nixon’s support of Israel during the Yom Kippur War.
Both unemployment and inflation rose rapidly during 1974, a key reason, along with the steadily mounting Watergate crisis, that Nixon’s approval rating plummeted from 67 percent, in the aftermath of his landslide reelection and the January 1973 Vietnam peace accord, to 24 percent at the time of his resignation in August 1974.
We’ll never know what might have happened if the economy had been in better shape and Nixon’s approval rating had been closer to the approximately 40 percent floor Trump has maintained for months, despite one Russia revelation after another.
Perhaps Republican senators would have stood by their man and Nixon would have tried to serve out his second term despite impeachment proceedings — just as President Bill Clinton did in 1998 and 1999, sustained by a 73 percentjob approval rating due in part to a booming economy at full employment.
Morals of the story: Even a bizarre president can’t necessarily bring down the global economy. And, awkwardly for Trump’s opponents, it might take a really bad global economy to bring down a bizarre president.