It's not terribly surprising that Kennedy would consider retirement — indeed, there was some thought he could even have announced it last week, when the court's term ended — but this looks like a pretty good indicator that it will come at some point in President Trump's first term. If Kennedy is considering retiring in 2018, is he really going to stick it out until 2021, when he will be 84 years old? That seems even more unlikely now than it did before.
The upshot? It would mean that Democrats wouldn't have a chance to unseat Trump before the next big Supreme Court vacancy comes along. And not only that, but it would seem they may not even have a chance to stop it the other way: with a Senate majority. If Kennedy announces his retirement in advance of the term beginning in October 2018, logic suggests that the GOP would be able to fill it before that election.
Even if the vacancy is filled after the midterms, though, Democrats face a very difficult map in November 2018. To win three seats and the Senate majority, they effectively need to win the two competitive states on the map — Arizona and Nevada — along with a very red state like Texas. Oh, and they also have to successfully defend a bunch of Trump states where Democratic incumbents are up for reelection.
Basically: If this vacancy happens before 2018, that's great for the GOP. But if it happens basically at any point in the next three years, that's likely to be gravy, too. The key is for it to happen before late 2020.
And it's difficult to overstate the significance of all this. Indeed, if nothing else of real substance gets accomplished on Trump's watch, it all might have been worth it for the GOP merely for his potential appointment to replace Kennedy. Kennedy is the swing vote on a pretty evenly divided nine-vote Supreme Court, and replacing him with a more conservative justice would tilt the court further to the right for years or potentially decades to come.
Replacing Kennedy with a Gorsuch-esque justice would give us five justices that were to Kennedy's right. And that, according to Andrew D. Martin's and Kevin M. Quinn's scores of the ideology of Supreme Court justices, would be basically unprecedented.
Here's how the Supreme Court looked between 1935 and 2015 — before Antonin Scalia died and was replaced by the ideologically similar Gorsuch. Keep an eye on that yellow line for the median justice, and imagine it being John G. Roberts Jr. instead of Kennedy.
At that point, Democrats would basically have to hope that the George W. Bush-appointed chief justice would be more liberal than Bush intended. And then they'd have to hope that future vacancies come at much more opportune times.
(h/t Rick Hasen)