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“Hawks Crying Wolf”: The Usual Republican Inflation Suspects Are Saying The Usual Things

According to a recent report in The Times, there is dissent at the Fed: “An increasingly vocal minority of Federal Reserve officials want the central bank to retreat more quickly” from its easy-money policies, which they warn run the risk of causing inflation. And this debate, we are told, is likely to dominate the big economic symposium currently underway in Jackson Hole, Wyo.

That may well be the case. But there’s something you should know: That “vocal minority” has been warning about soaring inflation more or less nonstop for six years. And the persistence of that obsession seems, to me, to be a more interesting and important story than the fact that the usual suspects are saying the usual things.

Before I try to explain the inflation obsession, let’s talk about how striking that obsession really is.

The Times article singles out for special mention Charles Plosser of the Philadelphia Fed, who is, indeed, warning about inflation risks. But you should know that he warned about the danger of rising inflation in 2008. He warned about it in 2009. He did the same in 2010, 2011, 2012 and 2013. He was wrong each time, but, undaunted, he’s now doing it again.

And this record isn’t unusual. With very few exceptions, officials and economists who issued dire warnings about inflation years ago are still issuing more or less identical warnings today. Narayana Kocherlakota, president of the Minneapolis Fed, is the only prominent counterexample I can think of.

Now, everyone who has been in the economics business any length of time, myself very much included, has made some incorrect predictions. If you haven’t, you’re playing it too safe. The inflation hawks, however, show no sign of learning from their mistakes. Where is the soul-searching, the attempt to understand how they could have been so wrong?

The point is that when you see people clinging to a view of the world in the teeth of the evidence, failing to reconsider their beliefs despite repeated prediction failures, you have to suspect that there are ulterior motives involved. So the interesting question is: What is it about crying “Inflation!” that makes it so appealing that people keep doing it despite having been wrong again and again?

Well, when economic myths persist, the explanation usually lies in politics — and, in particular, in class interests. There is not a shred of evidence that cutting tax rates on the wealthy boosts the economy, but there’s no mystery about why leading Republicans like Representative Paul Ryan keep claiming that lower taxes on the rich are the secret to growth. Claims that we face an imminent fiscal crisis, that America will turn into Greece any day now, similarly serve a useful purpose for those seeking to dismantle social programs.

At first sight, claims that easy money will cause disaster even in a depressed economy seem different, because the class interests are far less clear. Yes, low interest rates mean low long-term returns for bondholders (who are generally wealthy), but they also mean short-term capital gains for those same bondholders.

But while easy money may in principle have mixed effects on the fortunes (literally) of the wealthy, in practice demands for tighter money despite high unemployment always come from the right. Eight decades ago, Friedrich Hayek warned against any attempt to mitigate the Great Depression via “the creation of artificial demand”; three years ago, Mr. Ryan all but accused Ben Bernanke, the Fed chairman at the time, of seeking to “debase” the dollar. Inflation obsession is as closely associated with conservative politics as demands for lower taxes on capital gains.

It’s less clear why. But faith in the inability of government to do anything positive is a central tenet of the conservative creed. Carving out an exception for monetary policy — “Government is always the problem, not the solution, unless we’re talking about the Fed cutting interest rates to fight unemployment” — may just be too subtle a distinction to draw in an era when Republican politicians draw their economic ideas from Ayn Rand novels.

Which brings me back to the Fed, and the question of when to end easy-money policies.

Even monetary doves like Janet Yellen, the Fed chairwoman, generally acknowledge that there will come a time to take the pedal off the metal. And maybe that time isn’t far off — official unemployment has fallen sharply, although wages are still going nowhere and inflation is still subdued.

But the last people you want to ask about appropriate policy are people who have been warning about inflation year after year. Not only have they been consistently wrong, they’ve staked out a position that, whether they know it or not, is essentially political rather than based on analysis. They should be listened to politely — good manners are always a virtue — then ignored.


By: Paul Krugman, Op-Ed Columnist, The New York Times, August 21, 2014

August 23, 2014 Posted by | Federal Reserve, Inflation, Janet Yellen | , , , , , , , | Leave a comment

“Not A Single GOP Ripple”: So Much For Politics Stopping At The Water’s Edge

We talked earlier about Sen. Rand Paul (R-Ky.), who brought three television cameras, three photographers, six reporters, a political aide, two press secretaries, and far-right activist David Bossie to Guatemala for a “stage-managed political voyage.” But it appears that wasn’t the only reason for the trip.

Sen. Rand Paul (R-Ky.) told the Guatemalan president the surge of child immigrants flooding the U.S. border this year is a result of President Obama’s policies, not problems in Central America.

“I told him, frankly, that I didn’t think the problem was in Guatemala City, but that the problem was in the White House in our country, and that the mess we’ve got at the border is frankly because of the White House’s policies,” Paul told Brietbart News in an article published Thursday.

According to the report in The Hill, the Kentucky Republican sat down with Guatemalan President Otto Perez Molina for 45 minutes, and the senator discussed politics with the foreign head of state.

“I think what’s happened at the border is all squarely at the president’s lap,” Paul said. “The problem and the solution aren’t in Guatemala. The problem and solution reside inside the White House.”

As a substantive matter, the senator’s position is tough to defend or even understand. President Obama didn’t sign the 2008 human-trafficking measure into law; he didn’t create awful conditions in Central American countries; and he didn’t encourage anyone to lie to desperate families about what would happen to their children. If there’s a coherent explanation for why the White House is to blame, it’s hiding well.

But even putting that aside, since when is it kosher for U.S. officials to travel abroad to condemn U.S. leaders like this?

In fairness, it’s hard to say with certainty exactly what Rand Paul told President Molina during their discussion. I haven’t seen a video of the meeting and all we have to go on is the senator’s own claims.

But if Paul is telling the truth, he traveled abroad, visited with a foreign leader, and spent time trashing the president of the United States.

I seem to remember a time when there were norms that deemed actions like this unacceptable.

Under traditional American standards, some considered it inappropriate to criticize the president when he was overseas. More importantly, when U.S. officials were outside the country, norms called on those officials to refrain from criticizing America’s elected leaders.

I guess that doesn’t apply anymore? These standards were certainly in place during the Bush/Cheney era.

Here’s what happened in 2006 when Al Gore gave a speech at a conference in Saudi Arabia in which he criticized Bush policies towards the Muslim world – as summarized by The New York Times’ Chris Sullentrop:

“As House Democrats David Bonior and Jim McDermott may recall from their trip to Baghdad on the eve of the Iraq war, nothing sets conservative opinionmongers on edge like a speech made by a Democrat on foreign soil. Al Gore traveled to Saudi Arabia last week, and in a speech there on Sunday he criticized ‘abuses’ committed by the U.S. government against Arabs after the attacks of Sept. 11, 2001. A burst of flabbergasted conservative blogging followed the Associated Press dispatch about the speech… The editorial page of Investor’s Business Daily accused Gore of ‘supreme disloyalty to his country’….”

The Wall St. Journal’s James Taranto accused Gore of “denouncing his own government on foreign soil” and quoted the above accusation of “disloyalty.” Commentary was abundant all but accusing Gore of treason for criticizing the U.S. in a foreign land.

I’ll concede that such niceties may be antiquated, and maybe no one cares about this anymore. But if presidential criticism abroad was outrageous in the Bush/Cheney era, why does it barely cause a ripple now?

Update: Just to flesh this out further, in 2010, then-House Minority Leader Eric Cantor (R-Va.) traveled to Israel in the hopes of undermining U.S. foreign policy towards Israel. At the time, this caused quite a stir in foreign-policy circles – it seemed extraordinary for an elected American official to travel abroad in order to work against his own country’s position.Perhaps now, with the Rand Paul example in mind, the practice is becoming more common.

For even more context, note that in 2007, then-House Speaker Nancy Pelosi (D-Calif.) met with Syrian officials in Syria. Republicans, including Cantor, suggested Pelosi may have violated the Logan Act, “which makes it a felony for any American ‘without authority of the United States’ to communicate with a foreign government to influence that government’s behavior on any disputes with the United States.”

One wonders who, if anyone, will raise similar allegations against Rand Paul.


By: Steve Benen, The Maddow Blog, August 22, 2014

August 23, 2014 Posted by | Border Crisis, GOP, Rand Paul | , , , , , , , | Leave a comment

“Taking Cover Behind What’s Left Unsaid”: The GOP’s Midterm Strategy Is As Hollow As Their Ideas Are

The most interesting thing about Senator Mark Pryor’s decision to tout his support for the Affordable Care Act in a well-financed, statewide television ad isn’t that he stands apart from other embattled Democrats this election cycle. It’s that Republicans scrambled to spin the story, insisting to reporters that Pryor couldn’t possibly be running on Obamacare if he won’t refer to the law by name.

This was poorly disguised Calvinball, a standard that Republicans invented for the special case of the ACA. Literally no other members of Congress are expected to refer to the laws they’ve helped pass by name or nickname. Republicans in the aughts weren’t expected to refer to the “Economic Growth and Tax Relief Reconciliation Act,” or “EGTRRA,” or “the Bush tax cuts,” or “the Bush tax cuts for the rich,” no matter how unpopular the moniker became. They ran on having cut taxes, and wanting to renew those tax cuts. And sure enough when President Obama set about trying to let “the Bush tax cuts” expire, he conveniently omitted the popular ones. Which is to say, the vast majority of them. He made those permanent.

Nevertheless, several reporters fell into line. And good for the ref workers. Score one for them.

But if Obamacare is a huge liability for Democrats, why are conservatives and GOP operatives desperate to control the narrative surrounding Pryor’s decision to run on the law? If your opponent’s stepping on rakes, why not just stand back and let him?

The answer is that with respect to both Obamacare and other issues Republicans must rely on diversions from policy and outcomes when expressing their substantive and strategic views. We’ve reached a point in the fight over Obamacare where the best thing Republicans have on their side is the law’s unpopular brand. Particularly in states like Arkansas, where President Obama is widely loathed but his signature law has cut the uninsurance rate nearly in half. It’s deeply silly to argue that Pryor isn’t running on Obamacare unless he refers to it using one of two unpopular slogans. But that’s the argument.

Instead, Pryor says, “I helped pass a law that prevents insurance companies from canceling your policy if you get sick or deny [sic] coverage based on pre-existing conditions.” Maybe he shouldn’t have said anything about “a law” at all, but that’s a niggling, semantic critique. That Republicans working to defeat Pryor are asking reporters to squeeze the word “Obamacare” into this sentence is an admission that they’ve lost the policy fight. They criticize Pryor for eschewing the label, because the label’s just about the only thing they’re comfortable assailing. In this way, they resemble Democrats six and eight years ago, running against the Bush tax cuts (for the rich), knowing that they had no intention of letting anything but the most regressive of those tax cuts expire.

In that sense, the GOP’s obsession with the moniker, and only the moniker, is excellent news for Obamacare’s political durability. But only if the people who cover politics are clear about the implications of the GOP’s rhetoric. Unlike Democrats, who were generally clear about the fact that they planned to make most of the Bush tax cuts permanent, Pryor’s opponent, Representative Tom Cotton, acknowledges that the pre-Obamacare status quo, in which insurers denied coverage to people with pre-existing health conditions, was “broken,” but nevertheless maintains that his goal is to repeal the law that makes that practice illegal.

Cotton repeated that mantra just this week, on the trail with Mitt Romney, who, in an amusing twist, tried to save Cotton from himself. “Tom Cotton is going to make sure that we change Obamacare, making sure that people can keep insurance and those that have pre-existing conditions can have coverage,” Romney said, “but he doesn’t want to see the federal government telling people in Arkansas what kind of insurance they have to have or making it more expensive.” Those are remarkably accommodating priorities. They’re just not ones Cotton is prepared to espouse just yet.

In this way, the politics of Obamacare in Arkansas mirror the politics of legislative brinksmanship in Kentucky. Just two days ago, Mitch McConnell, the embattled Senate minority leader who hopes to become majority leader next year, vowed to lard up appropriations bills with partisan policy riders and allow the president to choose between a veto, precipitating a government shutdown, and a bitter pill. A classic take it or leave it proposition.

McConnell said it would be up to the president to decide whether to veto spending bills that would keep the government open.

Obama “needs to be challenged, and the best way to do that is through the funding process,” McConnell said. “He would have to make a decision on a given bill, whether there’s more in it that he likes than dislikes.”

It wouldn’t be much of a challenge to Obama if McConnell plans to cave the moment the president whips out his veto pen. So the threat is pretty clear. Nevertheless, McConnell’s campaign wasn’t pleased by the ensuing deluge of stories about how a GOP majority would embrace high-stakes confrontations and potentially shut down the government again. And in a very narrow sense they have a pointMcConnell never said he’d shut down the government. Political scientist Jonathan Bernstein, no McConnell partisan, was among those who defended McConnell on this score.

But much like Cotton can’t credibly claim to support protections for people with pre-existing medical conditions when his plan is to repeal Obamacare, McConnell can’t sidestep the implications of his publicly declared strategy. He can’t say “when we’re in power, we’re going to put two and two together,” and then get angry when the headlines say, “McConnell promises four.”

That won’t stop him from trying to, though. And to an unappreciated extent, the broader Republican strategy heading into November is to speak in abstractions, and take cover behind what’s left unsaid.


By: Brian Beutler, The New Republic, August 22, 2014

August 23, 2014 Posted by | Affordable Care Act, GOP | , , , , , , , | Leave a comment

“Making A Just Outcome More Likely”: The Prosecutor In The Michael Brown Case Must Go

Lots of people in and around Ferguson, Missouri, don’t trust Robert McCulloch, the prosecutor who is presenting the facts about Michael Brown’s killing to a local Grand Jury. In fact, more than 70,000 of them have reportedly signed an online petition calling for the appointment of a new, special prosecutor to replace him.

These critics have their reasons. They think McCulloch’s record suggests that he is unlikely to construct an aggressive case against Darren Wilson, the white police officer who shot and killed Brown, who is black. And without a serious effort at prosecution, these people say, a Grand Jury is more likely to conclude the case is too weak to pursue.

I don’t know if that assessment of McCulloch and his motives is correct. I also don’t think it matters. McCulloch should step aside.

I don’t say this because I’m sure that Wilson is guilty or deserves indictment. On the contrary, the precise circumstances of Brown’s death still seem murky. Pretty much everybody seems to agree on how the incident began twelve days agowith Wilson stopping Brown in the street, an altercation ensuing, and then Wilson firing at Brown as he gave chase to him. But the witness accounts that have become public so far diverge on a few key points, including what Brown was doing when he eventually stopped and turned. At that moment, when one of Wilson’s bullets delivered a fatal blow to Brown’s head, was the 18-year-old trying to surrender? Or was he charging at Wilson? The angle of the shot has gotten a lot of attention, because it suggests that Brown, who was six-foot-four, had lowered his head before getting hit. But that could actually be consistent with either of the theories.

The twelve-member Grand Jury will eventually get to see more evidence. It will get the results of ballistic tests, for example, and it will hear a much fuller range of witness testimony than anybody in the public has heard so far. But more evidence won’t necessarily clarify what happenedor whether Wilson should face criminal charges. Not everybody will remember the event the same way. Tests can be inconclusive or contradict one another. The Grand Jury will ultimately have to decide whether there is “probable cause,” but that’s a pretty fuzzy standard and open to interpretation. Inevitably, a lot will depend on what kind of case the prosecutor decides to present.

The issue with McCulloch isn’t whether he’s capable of mastering and presenting the material. It’s whether he’ll do so in an impartial way. Prosecutors are always close to police, because they work closely on investigations. But McCulloch seems to have particularly strong feelingsstrong enough that, when Governor Jay Nixon called in the state highway patrol to take over security in Ferguson a week ago, McCulloch criticized Nixon strongly and publicly. “It’s shameful what he did today, he had no legal authority to do that,” McCulloch said. “To denigrate the men and women of the county police department is shameful.”

One reason McCulloch may feel so strongly about cops is that several relatives have served on the force. (One of them, McCulloch’s father, died in the line of duty when he was shot by an African-American.) Critics have also taken note of a 2001 statement McCulloch made, in a controversial case of police shooting two unarmed men. McCulloch called the victims “bums.” McCulloch presented that case to a Grand Jury. It declined to indict.

“Nobody thinks Michael Brown can get a fair shake from this guy,” Antonio French, a St. Louis alderman, told the New York Times“There is very little faith, especially in the black community, that there would ever be a fair trial.” McCulloch has bristled at such criticism and pledged to see the case through. “I have absolutely no intention of walking away from the duties and responsibilities entrusted to me by the people in this community,” McCulloch said in a radio interview. “I have done it for 24 years, and I’ve done, if I do say so myself, a very good job.”

It’s entirely possible that a fair-minded Grand Jury will conclude the evidence doesn’t justify an indictment, let alone a conviction, at least according to the legal standards of Missouri. As my colleague Yishai Schwartz has written, the state’s laws make it unusually difficult to convict a police officer who claims that he fired in self-defense. But the difficulty of the case is precisely why McCulloch shouldn’t be the one presenting it. It needs a prosecutor whose intentions and motives are not in doubt. Otherwise, people will assume a decision not to indict reflects lack of prosecutorial effort, rather than the facts of the case.

McCulloch has said that he will step aside if Nixon asks him to do so. Nixon (whose own motives are open to question) has declined to take that step, arguing that it would exceed his authority. It’s not clear exactly how far the governor’s power extends in cases like these. I’ve read and heard different accounts about what Missouri law allows. But nobody questions that McCulloch can decide to recuse himself, clearing the way for Nixon to name a special prosecutor.

McCulloch should seize the opportunity. It would demonstrate that he has the integrity some think he lacks. It would also make a just outcome more likely.


By: Jonathan Cohn, The New Republic, August 21, 2014

August 23, 2014 Posted by | Ferguson Missouri, Michael Brown | , , , , , , | Leave a comment

“Innocent Before Proven Guilty?”: The Bizarre Bipartisan Rush To Clear Rick Perry

If you’re planning a second presidential bid — especially if your last one didn’t go so well — getting indicted would seem to be, at the very least, a major roadblock.

But the news that Texas Gov. Rick Perry (R) is facing felony charges has so far brought the man nothing but support and sympathy. As the Texas Observer’s Forrest Wilder put it, “Judging from the reaction of national pundits and journalists, the verdict in the case of State of Texas vs. James Richard ‘Rick’ Perry is already in: Rick Perry is not just innocent; he’s being railroaded by liberal Democrats in a vindictive, politically motivated prosecution.”

On both the right and the left, politicos have sympathized with the governor, arguing the case is nothing but a political witch hunt. “Sketchy” is how David Axelrod described the whole affair.

Rather than taking a hit, Perry has managed to turn his ordeal into an indictment of the apparently oh-so-powerful liberal establishment in Texas. He’s largely played offense. On Tuesday, he got booked, smiled through his mug shot, then went out for ice cream at Austin-favorite Sandy’s. His statement on the charges explained that “this indictment amounts to nothing more than an abuse of power and I cannot, and will not, allow that to happen.”

The greatest irony with Perry being cast as victim is that the many charges of cronyism and legalized corruption that have long dogged his tenure are now at risk of fading to the background — just part of those ostensibly trumped-up integrity charges.

But the highlights alone show a theme. Perry’s biggest backer, the late home-building magnate Bob Perry (no relation), once got his own commission, the Texas Residential Construction Commission, which largely shielded builders from consumer complaints. In another case, Perry mandated an HPV vaccine for all Texas girls after his former chief of staff, Mike Toomey, became a lobbyist for the vaccine maker, Merck. Then there was the time construction firm HNTB hired former Perry spokesman and friend Ray Sullivan less than a year after he left the governor’s office; from 2004 to 2009, when Sullivan returned to Perry’s staff, the company got $300 million worth of state contracts. (One $45 million contract, for disaster recovery, had to be canceled after the company disastrously mismanaged rebuilding from Hurricane Ike.)

For now, the indictment gives Perry more allies than he has any right to expect, which allows him to gain distance from charges of corruption on every front.

Of course, that might not last.

The charges aren’t nearly as straightforwardly bunk as many reports make them sound. In 2013, Travis County District Attorney Rosemary Lehmberg was arrested for drunk driving and displayed appalling behavior — screaming and crying and spitting — as she was pulled over and cuffed, all of it caught on camera. Many thought she should resign, but Perry uniquely stood to gain from her departure. Housed within the Travis County DA’s office is the Public Integrity Unit, which investigates and prosecutes corruption in the state. It’s one of the most significant checks on the power Perry has amassed in his 14 years in office. Had Lehmberg resigned, Perry would have appointed her successor.

Perry threatened to veto all funding for the Public Integrity Unit if Lehmberg didn’t resign. And when Lehmberg didn’t step down, the state funding got cut. But Perry, through intermediaries, continued to make offers in exchange for her resignation, including a promise to return funding to the office and another position for Lehmberg within the DA’s office. Though no one disputes that the governor has the power to veto funds or to call for a DA’s resignation, Perry’s guilt or innocence rests on whether these threats and promises amount to an illegal coercion of public officials.

Though some national pundits have claimed a liberal witch hunt because a left-leaning group, Texans for Public Justice, filed the complaint against Perry, it was actually a Republican judge, Bert Richardson, who gave the case to special prosecutor Michael McCrum, a man who’s received support from Democrats and Republicans. We still don’t know what evidence McCrum has gathered in his investigation.

It’s certainly possible that as the case drags out and more information comes to light, Perry will lose his glow of invincibility. Even if the evidence is not enough for a guilty verdict, it may still hang Perry in the courtroom of public opinion. But these aren’t easy cases to prove, and Perry has assembled an impressive team to combat the charges.

For now, Perry should be pretty pleased with turning what should have been a black eye into some sort of beauty mark. He might even go out and get more ice cream to celebrate.


By: Abby Rapoport, Freelance Reporter in Austin, Texas; The Week, August 22, 2014

August 23, 2014 Posted by | Abuse of Power, Rick Perry, Texas | , , , , , , | Leave a comment

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