“An Incredible Ignorance About The Economy”: Rand Paul Has The Most Dangerous Economic Views Of Any 2016 Candidate
Kentucky Senator Rand Paul has had better weeks. On Monday, he suggested there could be a link between vaccines and autism in a CNBC interview. Later on in that interview, he actually shushed—as in, pressed one finger to his lips—the female CNBC anchor. On Tuesday, a New York Times article linked him to a medical group that promotes anti-vaccine theories. But Paul’s dumbest comments came in Iowa on Friday night—and they show why Paul has the most dangerous economic views of any presidential candidate.
Speaking in front of more than 150 Iowa activists, Paul ripped into the Federal Reserve and promoted his “Audit the Fed” bill, which he introduced earlier this week. “I think there needs to be some sunshine,” he said, according to reports of the event. “I’m going to fight ’em, and we’re going to get a vote on audit the Fed.” I’m not sure if Paul will get that vote—ultimately, that’s up to Senate Majority Leader Mitch McConnell. But I do know that “Audit the Fed” is a terrible idea. First, the Fed already is extensively audited by the Government Accountability Office (GAO), the Office of the Inspector General (OIG) and even private sector auditors like Deloitte. Each week, the central bank also releases its balance sheet and even has an interactive guide of its balance sheet available for further explanation.
However, the GAO and OIG audits exclude a few parts of the Fed’s policymaking, including transactions by the Federal Open Market Committee. Paul’s bill removes those exclusions and requires “recommendations for legislative or administrative action” from the Comptroller General. Sounds innocuous, right? It’s not. That would significantly damage the Fed’s independence, which exists so that politicians cannot influence the central bank for their own political purposes. In other words, “Audit the Fed” would lead legislators to interfere with monetary policy matters and put the entire economy at risk. For further explanations why the legislation is so dangerous, see the Roosevelt Institute’s Mike Konczal and the Washington Post’s Catherine Rampell.
With President Barack Obama in office, Paul’s legislation stands no chance of becoming law. It’s hard to imagine it overcoming a filibuster in the Senate, and even if it did, the president would veto it. If Paul were to win the presidency, “Audit the Fed” would still face long odds in the Senate since, even in the best case scenario, Republicans likely won’t have a filibuster-proof majority in the next Congress. So while “Audit the Fed” is theoretically dangerous, it’s not much of an actual threat to Fed independence.
But a Paul presidency would still have disastrous effects on the U.S. economy, for other reasons that were on wide display in Iowa on Friday night.
“Once upon a time, your dollar was as good as gold,” he said. “Then for many decades, they said your dollar was backed by the full faith and credit of government. Do you know what it’s backed by now? Used car loans, bad home loans, distressed assets and derivatives.” Paul’s comments make very little sense. When Paul asks what backs the U.S. dollar now, he’s effectively asking what makes it valuable. When the U.S. used a gold standard, it meant that a dollar was worth a certain amount of gold. Economists overwhelmingly agree that that was a terrible idea, but the connection seemed to explain why dollars had value. The real reason dollars had value is the same today as it was back then: It’s the only currency the government accepts to pay taxes. Businesses and consumers thus have an incentive to carry out transactions using dollars. Paul’s quip about dollars being backed by “used car loans, bad home loans, distressed assets and derivatives” may sound good to Iowa conservatives but it betrays an incredible ignorance about the economy.
What Paul and his followers are concerned about is the purchasing power of the dollar. They want to return the U.S. to the gold standard to ensure that inflation doesn’t undermine the actual purchasing power of the dollar. Over the long run, a gold standard would guarantee that price stability. But over the short run, prices would still fluctuate violently, as happened when the U.S. used the gold standard.
In terms of current policy, goldbugs, as they are often called, think the Fed’s recent decisions—its zero interest rate policy and bond-buying program—will cause skyrocketing inflation and reduce what you can buy with dollars. Those warnings look more foolish by the day. Inflation over the past year was just 0.7 percent, 1.3 percent if you remove volatile food and energy prices. Inflation expectations for the next 10 years are also very low. You would think that these low inflation rates would convince Paul and his followers to rethink their economic theory.
Paul’s economic ignorance doesn’t end there. “[The Fed’s] liabilities are $4.5 trillion; their assets are $57 billion. Do the math,” he said in Iowa. “They are leveraged 80-1. They are leveraged three times greater than Lehman Brothers was when Lehman Brothers went bankrupt. Why do we give ‘em a pass? Because they’ve got a printing press, and they can print up some more money.” Paul apparently can’t read the Fed’s balance sheets, because as of November, its assets were $4.487 trillion and its liabilities were $4.430 trillion. Where did the $57 billion figure come from? That’s its total capital. But as Cullen Roche, the founder of financial services firm Orcam Financial Group, points out, Paul also ignores the fact that the Fed remits most of its profits to the Treasury Department. In 2013, they gave Treasury nearly $80 billion. “The Federal Reserve isn’t just a profitable entity,” Roche writes. “It is perhaps the most profitable entity on the face of the planet.”
As all this shows, Paul’s views on monetary policy are profoundly misguided. As long as he’s in the Senate, that doesn’t really matter. He can spout his nonsense without having any effect on the Federal Reserve. But if he became president, he would be responsible for choosing the next Fed Chair when Janet Yellen’s term expires in 2018 and for nominating board members to the FOMC. That doesn’t give Paul unlimited power, since the Senate would still have to confirm his nominees. But as president, Paul would be the leader of the GOP, with an even greater ability to dictate its position on monetary policy and convince Republican senators to support his nominees.
Of course, the Republican Party itself has an incredibly misguided position on monetary policy. In 2012, its platform included returning to the gold standard. That’s a good reason why just about any Republican nominee would be a dangerous president. But Paul is far more open about his disdain for the Fed, and given his ideological bent, he’s far less likely to listen to conservative economists who reject his monetary policy views. At least on the economy, that makes Rand Paul by far the most dangerous candidate in the 2016 field.
By: Danny Vinik, The New Republic, February 8, 2015
“A Juvenile GOP”: If The Party’s Aim Is To Show Americans It Is Ready To Govern, We Are Witnessing An Epic Fail
Bang. Bang. Crash. That was the sound of the Republican majority in Congress shooting itself in both feet, then tripping over them.
At a moment of heightened concern that terrorists in the Middle East might stage or inspire attacks on U.S. soil, the GOP-controlled House and Senate are unable to agree on a bill to fund the Department of Homeland Security. If the party’s aim is to show Americans it is ready to govern, we are witnessing an epic fail.
Rather than ensure the smooth operation of the agency charged with keeping the nation safe, Republicans would rather argue about a separate issue — immigration — and struggle over tactics for tilting at windmills. Meanwhile, a Feb. 27 deadline for passing an appropriations bill draws near. “I don’t believe we should shut down the Department of Homeland Security, given the threats that are obviously out there and the attacks on America,” Sen. John McCain (R-Ariz.) said Wednesday. But too few in his party are listening.
The problem is that Republican conservatives want to use the Homeland Security funding bill to reverse President Obama’s executive actions allowing millions of undocumented immigrants to stay without fear of deportation. A measure stripping out money to fund Obama’s initiatives easily passed the House, with its massive GOP majority and streamlined procedural rules. But the Senate is a different story.
It was obvious from the beginning that Majority Leader Mitch McConnell (R-Ky.) did not have the 60 votes needed to get the bill through the Senate. Nevertheless, McConnell has dutifully brought the bill up three times — and seen it rejected each time by Democrats, who quite reasonably demand a clean funding bill with no extraneous bells or whistles.
“Isn’t that the definition of insanity? Voting for the same bill over and over again?” McCain asked.
Indeed, the whole episode does seem pretty insane. House Speaker John Boehner (R-Ohio) knew the bill he sent to the Senate would be dead on arrival. McConnell knew he didn’t have the votes to pass it. And both leaders knew that if the legislation somehow made it through — perhaps when Democrats weren’t looking, or through divine intervention — there was no way Obama would ever sign it into law.
Boehner and McConnell appear to be trying to teach House Republicans a lesson in basic arithmetic. The class, however, is busy throwing spitballs.
The GOP majority in the House continues to value symbolic posturing over pragmatic action. Is this too sweeping a statement? Not if you consider what House Republicans were doing this week instead of working on a Homeland Security bill that might actually pass: Voting for the 56th time to repeal the Affordable Care Act, knowing full well that this attempt, like the previous 55, had no earthly chance of success.
GOP freshmen wanted to have their votes recorded in obeisance to what has become a Republican article of faith: Obamacare is evil incarnate. If I stipulate that the whole universe gets the message, would you guys please stop pretending that Obama is ever going to sign legislation abolishing the landmark health-care program that bears his name ?
Let’s see, what else have Republicans achieved since taking control of both chambers? Well, the House tried to pass a bill banning abortion after 20 weeks of pregnancy but had to pull the legislation at the last minute over a requirement that rape victims report their assault to police before qualifying for an exemption. Republicans did manage to pass a bill authorizing the building of the Keystone XL pipeline, but Obama promises a veto and the GOP doesn’t have the votes to override him.
If this is the pattern, it’s going to be a long couple of years.
Let me suggest a different approach. First, Republicans must cross a big hurdle: acknowledging that with Democrats able to block legislation in the Senate and Obama still resident in the White House, passing legislation will require compromise. Once you get beyond that, the rest is easy.
No, you can’t repeal Obamacare, but you might be able to make it work better for your constituents. No, you can’t undo Obama’s immigration actions without passing legislation that the Senate and the president find acceptable. No, you can’t hijack funding for a crucial government agency without suffering political damage — and ultimately folding because you don’t have the cards.
The GOP apparently hopes the display of juvenile behavior we’re witnessing will inspire voters to give the party even more power in 2016 by electing a Republican president. Good luck with that.
By: Eugene Robinson, Opinion Writer, The Washington Post, February 5, 2015
“Hurting A Large Number Of Their Own”: Republican Refusal To Expand Medicaid Could Come Back To Haunt Them
Republican legislatures in state after state, from Tennessee to Wyoming, are rejecting the Medicaid expansion of the Affordable Care Act for no other reason than pure spite against poor people:
On Friday, the Wyoming Senate shot down Gov. Matt Mead’s expansion plan, and a House committee then pulled its bill. The double whammy effectively killed the state’s chances of enacting the Obamacare option this year.
Lawmakers there acted just days after the Tennessee Legislature shot down an expansion proposal by Gov. Bill Haslam. Together, the two rejections diminish the momentum that Medicaid expansion supporters were enjoying last month, when Indiana Gov. Mike Pence won federal approval of his particular plan and Arkansas Gov. Asa Hutchinson agreed to extend that state’s “private option” program for 18 months. Both Pence and Hutchinson are also Republicans.
There’s simply no good reason for any of it, even within the confines of conservative economic orthodoxy. The money for the Medicaid expansion comes from the federal government; the states themselves are at no risk of further expense for many years to come if at all. Republican governors are trying to get the funding for the healthcare of their citizens. Better access to healthcare means fewer illnesses, better productivity, and more money in the pockets of the sorts of consumers most likely to spend in the economy. More money for Medicaid creates a virtuous economic circle at no cost to the states.
No doubt there is a great deal of racism in the motivation of conservative state legislators to deny healthcare to their poorest residents. But in fact, the majority of those on Medicaid are not minorities–and poor whites are overwhelmingly Republicans. So even from the jaundiced view of a bigot these GOP legislators are hurting a huge number of their own.
And it’s starting to cause problems for them. Republicans in Kentucky are doing backflips to pretend to their constituents that there’s some big difference between Kynect, Kentucky’s state exchange, and Obamacare. And even now some Republicans are defecting over it:
Former Republican state Sen. Tim Johnson on Wednesday announced he’s switching parties and challenging incumbent Republican Lt. Gov. Tate Reeves this year.
But the noted Elvis impersonator said he won’t be appearing as the King on the campaign trail.
“Why join the Democratic Party and run for lieutenant governor?” Johnson said before a cheering throng of supporters at a Capitol press conference. “I’ll tell you: We are all Mississippians first. Elected officials should be in the business of helping all Mississippians, not picking out who to hurt.”
The Republican Party has relied for decades on cultural and racial resentment to keep them afloat. But there’s only so long a political party can only abuse the entirety its own people without even an eye toward sowing cultural division, without it coming back to haunt them.
By: David Atkins, Political Animal, The Washington Monthly, February 7, 2015
“Judicial Activism”: What It Will Take For SCOTUS To Buy Conservative Arguments On ACA Subsidies
A lot of the points that the New York Times‘ legal correspondent Linda Greenhouse covers today in an overview of the stakes involved in King v. Burwell have been made in various places. But pulled together as they are, you can see exactly how radical an exercise in judicial activism it would take for SCOTUS to agree with the petitioners in this case.
First of all, there’s never been a SCOTUS decision validating anything like the principles of statutory interpretation the anti-ACA camp is demanding:
Statutory interpretation is something the Supreme Court does all the time, week in and week out, term after term. And while the justices have irreconcilable differences over how to interpret the Constitution, they actually all agree on how to interpret statutory text. (They do disagree on such matters as the legitimacy of using legislative history, or on what weight to give a law’s ostensible purpose; I’m referring here to how they actually read a statute’s words.)
Every justice subscribes to the notion that statutory language has to be understood in context. Justice Scalia said it from the bench just last month, during an argument about the proper interpretation of the federal Fair Housing Act. “When we look at a provision of law, we look at the entire provision of law, including later amendments,” Justice Scalia said. “We try to make sense of the law as a whole.”
That militates against the sort of literalist meaning the petitioners are asking for. But worse yet from a conservative point of view, punishing the states for exercising an option ACA clearly provided for–allowing the federal government to create purchasing exchanges for them–would violate supposedly sacred principles of federalism.
A fascinating brief filed in support of the government by an unusual coalition of 23 red-state and blue-state attorneys general (some from states with their own exchanges and others from federal-exchange states) maintains that the challengers’ narrative would “violate basic principles of cooperative federalism by surprising the states with a dramatic hidden consequence of their exchange election.”
This brief, written in the Virginia attorney general’s office, continues: “Every state engaged in extensive deliberations to select the exchange best suited to its needs. None had reason to believe that choosing a federally facilitated exchange would alter so fundamental a feature of the A.C.A. as the availability of tax credits. Nothing in the A.C.A. provided clear notice of that risk, and retroactively imposing such a new condition now would upend the bargain the states thought they had struck.”
There are abundant Supreme Court precedents that require Congress to give states “clear notice” of the consequences of the choices a federal law invites them to make. Justice Samuel A. Alito Jr. invoked that principle in a 2006 case interpreting the Individuals With Disabilities Education Act, a case cited by the 23 attorneys general. The government’s own brief, filed by Solicitor General Donald B. Verrilli Jr., observes that “it would be astonishing if Congress had buried a critically important statewide bar to the subsidies under this landmark legislation” in technical sub-clauses.
Yes, “astonishing” is the right word to describe the implications of a SCOTUS action to blow up the Affordable Care Act. But not necessarily surprising.
By: Ed Kilgore, Contributing Writer, Political Animal, The Washington Monthly, February 6, 2015
“More Worried About Their Reputation”: Republicans Don’t Really Care About Inequality
The Republican Party appears to accept that poverty and the inequities of wealth and political power that have prevailed over the last 15 years are issues it can no longer ignore. Not without paying a price. After all, Mitt Romney’s cool indifference to the everyday struggles of working Americans went a long way toward sinking his 2012 campaign.
But expressing concern about inequality is one thing. Doing something about it is another. The GOP so far appears more worried about its reputation as being the party of the very, very rich, than the empirical reality of its being the party of the very, very rich.
At a recent Republican gathering, Senator Ted Cruz of Texas gave voice to the party’s incongruity of perception and reality. “I think Republicans are and should be the party of the 47 percent,” he said. Later at that same event, billionaire brothers Charles and David Koch announced plans to spend nearly $1 billion through their political network in the next race for the White House, with virtually all of it going to the Republican Party’s nominee.
If the GOP were truly troubled by historic rates of income and wealth inequality, it would rubber-stamp President Barack Obama’s plan to raise taxes on the wealthy and use the proceeds to fund infrastructure projects like roads, bridges, waterways, and sewer systems. Public investments like these have historically garnered broad support, because they are neutral vehicles for achieving the goals of statecraft. Such expenditures would not only create hundreds of thousands of seasonal jobs, as well as many thousands of permanent jobs, but also stimulate economic activity on a national scale. And they’d pay for themselves over time.
The president’s $4 trillion fiscal budget would tap into offshore accounts and Wall Street transactions that only the very, very rich possess and thus care about. In addition to public works, which Obama has been calling for since his took office, increased revenues would be used for free community college and universal child care.
This, or something like it, is what serious people talk about if they are serious about combating inequality. Progressive redistribution, however bitter-tasting the phrase may be, must be on the table. But all we are likely to hear, especially from Republicans aiming high, are platitudes steeped in conservative morality, homilies to the power of private enterprise freed from the bonds of bureaucratic red tape, or the benefits of cutting taxes. Really. Anything. Anything at all to avoid tax hikes even on the treasonous few who hide their money offshore.
All one needs to do to see the difference between what Republicans are saying and Republicans are doing is look at the current session of Congress. The very first item on Senate Majority Leader Mitch McConnell’s to-do list was passing a bill authorizing the construction of the Keystone XL Pipeline. That project would indeed create thousands of seasonal jobs, but only about 40 permanent ones. It would have virtually no impact on the U.S. economy. Moreover, the public would get nothing in return, unless you count greater levels of global warming.
That’s not to mention other items being pushed which have nothing to do with serving the greater good. A short list: House Republicans have introduced legislation to restrict abortion (the melodramatically titled “fetal-pain bill”), to dismantle part of the Dodd-Frank financial reform law, and to starve to death the president’s modest executive action on illegal immigration.
Even if the Republicans really did believe, as Jeb Bush is trying to convince us, that addressing inequality is the right thing to do, don’t bet on any action. Doing the right thing had rarely been an incentive, because this is a party now committed to total warfare against Obama and the Democratic agenda. The only way the Republicans will take action on inequality is if they are forced to, but even then, they’ll likely do everything short of raising taxes on the very, very rich.
That’s why we should keep our eyes on the minimum wage and paid sick leave. House Speaker John Boehner has said he’d rather kill himself than raise the minimum wage. Conservatives are poised to attack Republicans entertaining mandated sick days. But in terms of inequality, these are the easiest ways to say you’ve done something without raising taxes on the very, very rich.
So yes, inequality is emerging as a major issue in the 2016 presidential race, and Jeb Bush, Ted Cruz and others are going to try hard to convince us that the Republican Party cares, really cares, about the plight of the poor and an ever-shrinking middle class. But remember the last time a major candidate talked about such “compassionate conservatism.” By the end of his second term, the greatest beneficiaries of that compassion were the very, very wealthy.
By: John Stoehr, Managing Editor of The Washington Spectator; The National Memo, February 6, 2015
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