NEW YORK, March 31 (Reuters Breakingviews) - Donald Trump’s indictment is a distraction rather than a disruption for the U.S. economy, but on balance it’s still unhelpful. Money markets and currencies were unmoved on Friday morning after a grand jury’s decision to press criminal charges was announced on Thursday night. The trouble is that U.S. financial stability depends on politicians finding common ground, and this event is likely to make that harder.
The ex-president and front-runner for the Republican presidential nominee in 2024 will appear in court next week over money a prosecutor claims he paid to Stormy Daniels, an adult-movie actress. Other countries such as Brazil and South Korea have jailed former leaders, but this is a first for the U.S. While pressing charges against a former leader can amount to a dangerous political tool if used frivolously, it also shows that future American leaders are not immune to criminal charges, creating an extra incentive for them to behave.
Markets weren’t phased on Friday morning. The U.S. 10-year Treasury yield, which can move when investors sense heightened risk, was unchanged. The dollar strengthened very slightly against a basket of currencies including the UK pound and Japanese yen. The S&P 500 Index (.SPX) was up by an unremarkable 0.5%. Those indicators moved much more dramatically following the failure of Silicon Valley Bank and Signature Bank. In other words, while Trump may still be popular among Republican voters, investors, including those who view the U.S. as a safe haven, aren’t predicting much instability as a result of his indictment.
The trouble is that Trump’s legal tangles could leave bigger fish unfried. The U.S. is expected to run out of money sometime this summer because of the legal cap on the government’s ability to run up debts, and only Congress – meaning politicians from both parties acting with a common cause – can raise that limit to avoid an American default. Democrats will also have to reach across the aisle to tighten up safeguards against future banking crises. Toughening up rules for large banks or extending deposit insurance both require Congressional backing.
Neither side – hopefully – wants to crash the economy by allowing a U.S. debt default, or watching more banks fail savers panic. But moments of high political drama make politicians run to their corners of the boxing ring. Whatever the jury decides, putting Trump on trial gives Washington’s divided lawmakers a new reason to bicker to their heart’s content, and everyone else’s discontent.
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CONTEXT NEWS
Former U.S. President Donald Trump was indicted by a Manhattan grand jury on March 30 and is expected to face criminal charges next week. Trump is the first sitting or former president to face such charges in the U.S. Grand juries decide whether there is enough evidence to merit proceeding with a formal charge.
Trump is the front-runner to be the Republican nominee in 2024, according to a poll published by Quinnipiac University on March 15. The poll found 46% of Republican and Republican-leaning voters support Trump, while 32% support Florida Governor Ron DeSantis. A majority of respondents would favor Trump in a head-to-head contest between the two Republicans.
