“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
“Shake The Complacency”: Twelve Percent Turnout Is An Insult To Your Children
The Rev. Al Sharpton, host of msnbc’s “Politics Nation,” spoke at the Greater Grace Church’s services yesterday, and addressed the crisis surrounding Michael Brown’s death from a variety of angles. Of particular interest, though, was one of Sharpton’s challenges to the community itself.
“Michael Brown is gonna change this town,” he said, before criticizing the paltry voting record on the area. “You all have got to start voting and showing up. 12% turnout is an insult to your children.”
That was not an exaggeration. The historical and institutional trends that created the current dynamic in Ferguson – a largely African-American population led by a largely white local government – are complex, but the fact that black voters haven’t been politically engaged has contributed to the challenges facing the community. In the most recent elections, turnout really was just 12%.
Patricia Bynes, a black woman who is the Democratic committeewoman for the Ferguson area, told the New York Times that last week’s developments may shake the complacency that too often shapes local politics. “I’m hoping that this is what it takes to get the pendulum to swing the other way,” Bynes said.
To that end, Ferguson residents have had an enormous amount of work to do over the last several days – mourn, grieve, protest, and recover, all while struggling through moments of violence – but haven’t forgotten about the importance of civic engagement in general, and voter registration in specific.
The St. Louis Post-Dispatch published a piece over the weekend that included a striking detail (thanks to my colleague Laura Conaway for the heads-up).
Rev. Rodney Francis of the St. Louis Clergy Coalition pointed to voter registration tent at the scene. “That’s where change is gonna happen,” Francis said.
Debra Reed of University City and her daughter, Shiron Hagens, were working at the registration tent. They said they set it up on their own.
“We’re trying to make young people understand that this is how to change things,” Reed said.
Note, some Republican-led states have made voter-registration drives far more difficult in recent years – Florida, for example, has imposed harsh restrictions without cause – but no such hindrances exist in Missouri.
State GOP policymakers have taken steps to restrict voting rights and curtail early voting, but none of this should be seen as an excuse to discourage Ferguson residents from registering and participating. The kind of systemic changes many in the community crave can be achieved through the ballot box.
To repeat Sharpton’s message: “You all have got to start voting and showing up. 12% turnout is an insult to your children.”
By: Steve Benen, The Maddow Blog, August 18, 2014
“Paying Back Campaign Donors”: Whose Presidential Campaign Will Your Pension Finance?
Wall Street is one of the biggest sources of funding for presidential campaigns, and many of the Republican Party’s potential 2016 contenders are governors, from Chris Christie of New Jersey and Rick Perry of Texas to Bobby Jindal of Louisiana and Scott Walker of Wisconsin. And so, last week, the GOP filed a federal lawsuit aimed at overturning the pay-to-play law that bars those governors from raising campaign money from Wall Street executives who manage their states’ pension funds.
In the case, New York and Tennessee’s Republican parties are represented by two former Bush administration officials, one of whose firms just won the Supreme Court case invalidating campaign contribution limits on large donors. In their complaint, the parties argue that people managing state pension money have a First Amendment right to make large donations to state officials who award those lucrative money management contracts.
With the $3 trillion public pension system controlled by elected officials now generating billions of dollars worth of annual management fees for Wall Street, Securities and Exchange Commission (SEC) regulators originally passed the rule to make sure retirees’ money wasn’t being handed out based on politicians’ desire to pay back their campaign donors.
“Elected officials who allow political contributions to play a role in the management of these assets and who use these assets to reward contributors violate the public trust,” says the preamble of the rule, which restricts not only campaign donations directly to state officials, but also contributions to political parties.
In the complaint aiming to overturn that rule, the GOP plaintiffs argue that the SEC does not have the campaign finance expertise to properly enforce the rule. The complaint further argues that the rule itself creates an “impermissible choice” between “exercising a First Amendment right and retaining the ability to engage in professional activities.” The existing rule could limit governors’ ability to raise money from Wall Street in any presidential race.
In an interview with Bloomberg Businessweek, a spokesman for one of the Republican plaintiffs suggested that in order to compete for campaign resources, his party’s elected officials need to be able to raise money from the Wall Street managers who receive contracts from those officials.
“We see (the current SEC rule) as something that has been a great detriment to our ability to help out candidates,” said Jason Weingarten of the Republican Party of New York—the state whose pay-to-play pension scandal in 2010 originally prompted the SEC rule.
The suit comes only a few weeks after the SEC issued its first fines under the rule—against a firm whose executives made campaign donations to Pennsylvania Gov. Tom Corbett, a Republican, and Philadelphia Mayor Michael Nutter, a Democrat. The company in question was managing Pennsylvania and Philadelphia pension money. In a statement on that case, the SEC promised more enforcement of the pay-to-play rule in the future.
“We will use all available enforcement tools to ensure that public pension funds are protected from any potential corrupting influences,” said Andrew Ceresney, director of the SEC Enforcement Division. “As we have done with broker-dealers, we will hold investment advisers strictly liable for pay-to-play violations.”
The GOP lawsuit aims to stop that promise from becoming a reality. In predicating that suit on a First Amendment argument, those Republicans are forwarding a disturbing legal theory: Essentially, they are arguing that Wall Street has a constitutional right to influence politicians and the investment decisions those politicians make on behalf of pensioners.
If that theory is upheld by the courts, it will no doubt help Republican presidential candidates raise lots of financial-industry cash—but it could also mean that public pension contracts will now be for sale to the highest bidder.
By: David Sirota, Senior Editor, In These Times, August 15, 2014
“McConnell’s Genius Pitch”: Vote GOP, Get Another Shutdown
Senate Minority Leader Mitch McConnell (R-KY) is often hailed as one of Washington’s most tactically cunning politicians, and for the most part it’s true. But McConnell does have a serious political flaw: His tendency to actually tell the truth about those tactics.
Senator McConnell did it again in an interview with Politico, published on Wednesday. Previewing a Republican-controlled Senate, McConnell made it clear that he plans to escalate congressional confrontation with the president, potentially leading to another government shutdown:
In an extensive interview here, the typically reserved McConnell laid out his clearest thinking yet of how he would lead the Senate if Republicans gain control of the chamber. The emerging strategy: Attach riders to spending bills that would limit Obama policies on everything from the environment to health care, consider using an arcane budget tactic to circumvent Democratic filibusters and force the president to “move to the center” if he wants to get any new legislation through Congress.
In short, it’s a recipe for a confrontational end to the Obama presidency.
“We’re going to pass spending bills, and they’re going to have a lot of restrictions on the activities of the bureaucracy,” McConnell said in an interview aboard his campaign bus traveling through Western Kentucky coal country. “That’s something he won’t like, but that will be done. I guarantee it.”
When asked if this strategy could force a government shutdown, McConnell “said it would be up to the president to decide whether to veto spending bills that would keep the government open.”
“He could,” McConnell later said of the probability that President Obama would veto must-pass appropriation bills that are loaded with riders to undo policies that the White House supports. “Yeah, he could.”
It’s difficult to overstate what a horrible idea this is. Although some Republicans may not have noticed it, the last government shutdown was a debacle. The GOP’s hopeless effort to blackmail President Obama into defunding the Affordable Care Act failed miserably, wasting $24 billion and dragging Republicans’ poll numbers into the sewer along the way.
The poll numbers haven’t really recovered, but the combination of President Obama’s own political struggles and a very favorable electoral map still have them set up to make gains in 2014. In fact, Republicans have a good chance of winning the Senate. But promising to ramp up the brinksmanship that caused the last shutdown gives Democrats their best argument for why voters should deny Republicans full control of Congress.
Democrats recognize this, of course; numerous party leaders have already turned McConnell’s remarks against him, and they are certain to resurface in Democratic campaign pitches from now until November. Alison Lundergan Grimes, the Democrat giving McConnell the fight of his career in Kentucky’s Senate race, surely appreciates the minority leader’s Kinsley gaffe most of all.
If Republicans do manage to win the majority and follow through on McConnell’s threat, it would virtually guarantee that they don’t hold control for long. The 2016 Senate map is as favorable to Democrats as this year’s is to the GOP. It will be difficult enough for Republicans to hold on to seats in blue states like Florida, Illinois, New Hampshire, Pennsylvania, and Wisconsin; if they spend the next two years threatening vital services for the sole purpose of making a hopeless ideological stand, it will be nearly impossible.
By: Henry Decker, The National Memo, August 21, 2014
“Wounded Innocence?”: Why Rick Perry May Be Out Of Luck
Governor Rick Perry of Texas and President Barack Obama, strangest of bedfellows, are making similar discoveries about the scope of prosecutorial discretion. In short, it’s very broad.
Perry’s education on the subject is an unhappy one. Late Friday, the Texas Governor, who has about five months left in his term, was indicted on two counts: abuse of official capacity and coercion of a public servant. What those charges mean, though, is hard to say. The indictment itself is just two pages and, to put it charitably, unelaborated.
The case has its origins in Perry’s long-running feud with Rosemary Lehmberg, a district attorney in Travis County, which includes Austin and represents an island of blue in the deep-red sea of Texas. Last year, Lehmberg was charged with drunken driving. She promptly pleaded guilty, which, in light of the YouTube videos of her sobriety test and her booking at the police station, was no surprise.
Lehmberg served several days in jail but declined to resign, so Perry decided to make the most of her difficulties. He said that, unless she resigned, he would use his power as Governor to veto $7.5 million in state money for her Public Integrity Unit, which had been hard at work prosecuting Texas pols, many of them Republicans. He could not, he said, support “continued state funding for an office with statewide jurisdiction at a time when the person charged with ultimate responsibility of that unit has lost the public’s confidence.”
What Perry did was obvious. The Governor was using his leverage to jam a political adversary—not exactly novel behavior in Texas, or most other states. But Democrats succeeded in winning the appointment of a special prosecutor, Michael McCrum, to investigate Perry’s behavior, and on Friday McCrum brought the hammer down. The threat to veto the money for the D.A. amounted to, according to the prosecutor, two different kinds of felonies: a “misuse” of government property, and a corrupt attempt to influence a public official in “a specific exercise of his official power or a specific performance of his official duty” or “to violate the public servants known legal duty.” (In the charmingly archaic view of Texas statutes, every public official is a “him.”)
Perry’s indictment has been widely panned, including by many liberals, as an attempt to criminalize hardball politics. (Vetoing things is, generally, part of a governor’s job.) Perry himself is all wounded innocence. “I intend to fight against those who would erode our state’s constitution and laws purely for political purposes, and I intend to win,” he said at a news conference. (It would be easier to feel sorry for Perry if he expressed similar concern about, say, the constitutional rights of those who were executed on his watch and with his support.)
So Perry may have a point, but he also has a problem. Prosecutors have wide, almost unlimited, latitude to decide which cases to bring. The reason is obvious: there is simply no way that the government could prosecute every violation of law it sees. Think about tax evasion, marijuana use, speeding, jay-walking—we’d live in a police state if the government went after every one of these cases. (Indeed, virtually all plea bargaining, which is an ubiquitous practice, amounts to an exercise of prosecutorial discretion.) As a result, courts give prosecutors virtual carte blanche to bring some cases and ignore others. But, once they do bring them, courts respond to the argument that “everyone does it” more or less the same way that your mother did. It’s no excuse. So if Perry’s behavior fits within the technical definition of the two statutes under which he’s charged, which it well might, he’s probably out of luck.
The President is relying on the same concept of discretion to push immigration reform, even though Congress has refused to pass a law to do so. The legislative branch writes the laws, which define the classes of people who are subject to deportation. But it is the executive branch that decides which actual individuals it will pursue and deport. Over the past several years, the Obama Administration has used its discretion to allow more immigrants to stay. During the 2012 campaign, the President announced his Deferred Action for Childhood Arrivals (DACA), which amounted to a kind of administrative DREAM Act. It limited the number of deportations of people who had been children when they were brought illegally to this country, provided they meet certain other conditions. The legality of DACA has not been successfully challenged.
Prosecutorial discretion is not unlimited. The executive branch can refrain from prosecuting certain individuals, but it cannot, in theory, offer immunity to entire classes of law-breakers. Nor can a prosecutor only charge people of a certain race, or, for that matter, political party. But it’s hard to know who would have standing to challenge a failure to bring a criminal case or a deportation. The rules of standing are usually limited to individuals who have suffered a specific harm, and there’s no harm in not being prosecuted. (The New Republic has a useful primer on the subject. )
That sort of limitation on prosecutorial discretion is unlikely to help Rick Perry. His complaint is that the prosecutor is bringing one case too many, not too few. That claim, almost invariably, is a loser. So, it turns out, may be the soon-to-be-former governor.
By: Jeffrey Toobin, The New Yorker, August 19, 2014
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