On Fake Scandals, Public Opinion Follows Long and Variable Leads?

     That's the-Market Monetarist!-argument of Jon Bernstein on the question of the effect of the IRS pseudoscandal on public opinion to the claim some in the Very Serious Media are making that we can't know if the Obama pseudoscandals have hurt the President yet but only after voters have time to "think it over."

    He argues that scandals normally hurt a President's popularity immediately. He makes the case that both Nixon and Reagan saw their popularity hurt immediately. If Obama hasn't been hurt, we already have the answer to the public's assessment.

    "The point of all this is that we shouldn't expect some sort of delayed reaction to the current scandalmania."

    "Assuming, that is, that the basic facts stay more or less the same. But don't expect continued publicity about the same facts to change public opinion in any dramatic way, and don't expect people to mull it over for a few weeks and then decide they no longer approve of the job Barack Obama is doing. That's not what happened in those other cases, and it's not likely to happen with this one."

     http://plainblogaboutpolitics.blogspot.com/2013/05/no-dont-wait-two-months-for-public.html

     I agree. We saw this same dynamic-Market Monetarist dynamic- during last year's election races. When Todd Akin talked about "legitimate rape" he saw his numbers get hammered immediately as did Richard Mourdock who also made a bizarre comment about rape victims and abortion 

     Bernstein gets it right off the bat; he's totally right that in this case it's right to go after a bad headline:

     "Is it worth a post over a headline? I suppose so...that's what people read, after all."

     He's right, there are lots of terrible headlines out there that totally get it wrong and create the wrong impression. It's impressive what lengths the media will go to deny that the President is not being hurt in the polls thinks to the media's feeding frenzy.   

     My guess is that this isn't hurting Obama for the same reason that so many were shocked by Obama's strong win over Romney: the public is not as dumb as the VSP want to believe they are. 

Market Less Impressed By Fed Hawks Than Sumner

     When Sumner read about what the Fed hawks were saying he declared victory-not at all for the first time, to be sure. Clearly the fiscal multiplier has been conclusively shown to be zero.

    From today’s news:

The marked improvement in the labor market since the U.S. central bank began its third round of quantitative easing, or QE3, has added an edge to calls by some policy hawks to dial down the stimulus. The roughly 50 percent jump in monthly job creation since the program began has even won renewed support from centrists, raising at least some chance the Fed could ratchet back its buying as early as next month.

I hope I don’t have to do any more of these.  The fiscal multiplier theory is as dead as John Cleese’s parrot.  The growth in jobs didn’t slow with fiscal austerity, it sped up!  And the Fed is saying that any job improvement due to fiscal stimulus will be offset with tighter money.  They talk like the multiplier is zero, and their actions produce a zero multiplier.  Has there ever been a more decisive refutation of a major economic theory?

     http://www.themoneyillusion.com/?p=21225&cpage=2#comment-249456

     There was some push back. Not just usual suspects like me but even from his friend David Glasner who agrees that Sumner is surely claiming too much at this point. 

     http://diaryofarepublicanhater.blogspot.com/2013/05/sumner-again-throwing-stones-at.html

     http://diaryofarepublicanhater.blogspot.com/2013/05/david-glasner-fiscal-multiplier-could.html   

     http://uneasymoney.com/2013/05/21/scott-sumner-meet-robert-lucas/

     The idea that the Fed 'talks as if the multiplier is zero' and that any fiscal stimulus will be offset is based on the idea that the hawks at the Fed are identified as the Fed itself. 

     In any case, the markets, unlike Sumner, saw nothing to celebrate when seeing the hawkish comments in the Fed minutes. The hawks are talking about ending QE3 sooner rather than later. Bernanke's testimony was seen as bullish-largely, but once the minutes came out the market reversed. However, even Bernanke's testimony leaves margin for error.

    "In a testimony to Congress on Wednesday, Bernanke sounded a dovish tone, remarking that the premature tightening of monetary policy carries a "substantial risk" of slowing the economic recovery. But in an answer to a question from a congressional committee, he also said the central bank could start paring back purchases in a couple of months and these comments helped send U.S. stocks lower."

     http://www.cnbc.com/id/100759944

     The market doesn't want to hear that. Now there's confusion for who to believe. 

    http://online.wsj.com/article/SB10001424127887324659404578498981449291750.html?mod=WSJ_article_MoreIn_Markets

     Alan Blinder urges us to believe Berannke not the hawks.      

      http://www.cnbc.com/id/100759944

      Ok, but he at least suggested that unwinding by the Summer is a possibility. The market would rather hear it's not a possibility. 

     

Overnight a Huge Selloff in the Dollar-Yen and the Nikkei Stock Market

     Wow. Sometimes you got to be and all hell breaks loose. It seems to have been precipitated by a sudden spike in Japanese government bonds (JGB) which led to a lot of profit taking in the Dollar-Yen trade which then brought the Nikkei down 8%.

     This by definition is a pretty big deal anyway, but it was even more so for your friendly blog writer in this case as I happened to have taken a strong position in USD-JPY. Let me hasten to emphasize that I only at this point have a practice account so have not lost any real money. FXC gives you a practice account of $50,000. Just yesterday I was thinking that it's too bad it wasn't real money as I was up 10%-the $50,000 they gave me was now $55,000.

    Now I'm pretty glad it isn't as the account is now $38,000. This is a good learning experience. The trouble with playing the Yen is the Japanese market is open just when we're asleep. Yes, I have bought a new position in the USD-JPY.

   My thought process is encapsulated here:

   "According to independent technical strategist Daryl Guppy, the sharp move lower in the Nikkei is a retreat from the historical resistance at around 14,580."

   "The move was not unexpected, he said, noting that the market will see support near 13,360."

    "Look for consolidation patterns. A fall to 13,400 remains consistent with the long term up trend line," he said.

    "Smith of CLSA says the market will likely stabilize soon as long as the Bank of Japan (BOJ) is able to successfully calm turbulence in the bond market."

   "Assuming the BOJ can get its act together and bring yields down in a stable manner, and the yen stays around 102-103, then all we need is for the market to take some heat out. Today's [Thursday's] move gives it a chance."

   "The BOJ conducted a market operation, offering to buy $1.1 billion worth of one-year Japanese bonds, in response to excessive volatility in the market on Thursday."

     http://www.cnbc.com/id/100760258

     There's a market saying: you can't fight the Fed. In this case I'd rather bet with the JCB than against it. I figure we're about to see how strong the central bank really is. Essentially the health of the Japanese market all comes down to whether or not the USD-Yen can get back up to 102-103. So I'll take that bet. 

     We're always hearing from the MMers that one of the most dangerous ideas out there is of central bank incompetence and weakness. This time I'm putting my money where there mouth is. Luckily, it's not real money. 

     P.S. No doubt all the conservative perma bears out there are going to claim vindication. I notice that every old conservative guy I talk to thinks the market is terribly overbought and is about to collapse becasue of the debt and all that "money printing" out of the Fed. They aren't impressed that the deficit has shrunk either-no doubt because Obama is President.

Stop it Harry Reid, You Had Me at 'Disagree'

     Reid is clearly drawing a line in the sand in the face of unprecedented GOP obstruction. Him and Mitch McConnell had a discussion today and-it didn't go well.

    "Harry Reid and Mitch McConnell have been slugging it out on the Senate floor today over Reid’s threat to revisit filibuster reform, and the escalating tone suggests this is now very real. Pay close attention to the statement Reid released today about their exchange:

Today, Senator McConnell defended the status quo of gridlock and obstruction in Washington, saying ‘there is no real problem here.’ I could not disagree more. Senator McConnell may choose to ignore it, but the problem of gridlock in Washington is real and it needs to be fixed.

Presidents — be they Republican or Democratic — deserve to have the people working for them that they choose. The Senate’s role is to advise and consent. But Republicans have corrupted the Founders’ intent, creating an unreasonable and unworkable standard whereby the weakest of rationales is often cited as sufficient basis for blocking major nominees. Due to Republican obstruction, the de facto threshold for too many nominees to be confirmed has risen from a simple majority to a supermajority of 60 votes. On judicial nominees, Republicans’ obstruction is equally unprecedented…There is no reason to delay qualified nominees for so long except delay itself, and it is little wonder we have a judicial vacancy crisis in this country.

Despite the agreement we reached in January, Republican obstruction on nominees continues unabated. I want to make the Senate work again – that is my commitment.

     http://www.washingtonpost.com/blogs/plum-line/wp/2013/05/22/harry-reid-escalates-nuclear-threat/

     It's times like these I love Harry Reid. There have been a number of other times, like the time he said he had spoken to someone about Romney at Bain-Harry, my God, he didn't pay any taxes for 10 years. That was a moment of pure gold. 

    http://diaryofarepublicanhater.blogspot.com/2012_07_01_archive.html

     This is another one. What's at stake here is making a credible threat. It's getting to the point now, that the GOP is on notice-filibuster Condray for the Financial Protection Agency and the nuclear option is coming to the Senate where the filibuster as a requirement will be abolished for executive and judicial nominees. 

    "Lending some weight to this threat, the Huffington Post reports that Reid is delaying the push to confirm Richard Cordray as head of the Consumer Financial Protection Bureau until July, after immigration reform is done. A Reid aide tells HuffPo that this is about postponing a major war over all of Obama’s nominees until July — which is also Reid’s target to trigger the nuclear option if necessary."

    "This — along with Reid’s public statements today — amounts to the sharpest line yet drawn by Reid. The Senate Majority Leader has been striking a delicate balancing act. His challenge has been to slowly escalate the threat level by giving his threats ever more specificity, while simultaneously maintaining an aura of credibility about them. The current threat comes very close to saying that if Republicans obstruct Cordray — and others, such as Gina McCarthy to head the EPA, and Thomas Perez as Labor Secretary — then Reid will push the nuke button."

    C'mon GOPers. Make Harry's day. 

    "At any rate, given today’s public statements from Reid, if the current level of GOP obstructionism continues, it’s hard to see how he has room to not make good on his threat to hit that button."

    Essentially the GOP is going to have to backoff on the record level of obstruction at least on nominees or this is a reality. 

   By the way, from a constitutional, political philosophy standpoint I'm not sure the filibuster is the force for democratic good that It's defenders claim. It seems to me to be from a tradition of anti-democratic rules-like the time when Senators weren't even electted by Americans to even the 3/5 of a person compromise. The main impact has always been to thwart the will of the majority to the expense of the minority. We saw this just recently with gun control. 

    

      

At IRS Pseudoscandal Hearing Shulman Shines

     Who would guess that a Bushie would steal the show? Shulman was appointed by Bush though it looks like he donated $800 to the 2004 DNC. Whatever. He's about the only person that has impressed me at all in this witch hunt  disinterested search for the truth.

     Ok, Lois Lerner didn't do too bad. She got the better of Issa-at least according to Rush Limbaugh-in proclaiming her innocence and then taking the fifth. Issa was left sputtering that she can't take the fifth after claiming her innocence.

    http://www.politico.com/story/2013/05/rush-limbaugh-darrell-issa-lois-lernrer-irs-hearing-91758.html?hp=r3

   I like Shulman's style though. Of course, the very serious media who can't get over the fact that there has been no drop in the President's approval rating-in fact the GOP's numbers are dropping like a stone-is calling him a smirker. That's what they call someone who they're trying to torment but somehow manages to maintain his good humor. 

   I think the White House-including Jay Carney-could learn from Shulman how to conduct yourself in the face of a witch hunt disinterested search for the truth. 

   "He was a serial smirker, grinning or furrowing his brow when he thought the questions were going overboard. To Michael Turner (R-Ohio), who asked if he agreed that it “doesn’t represent American values” to target Americans for their political beliefs, Shulman suppressed a laugh: “I do not see those words in the report, Mr. Turner.”

    "When asked why he might visit the White House, his first response: “The Easter egg roll, with my kids.”

When John Mica (R-Fla.) asked Shulman whether he had ever given political donations, he looked puzzled, as if it was the dumbest question in the world. (He was appointed by President George W. Bush, but The Washington Post has reported that he gave $500 to the Democratic National Committee in 2004.)

    “Have I in the past? To the best of my recollection, I have,” Shulman said — but not in a long time, and not while he was IRS commissioner.

    "And when Jim Jordan (R-Ohio) asked if “the American people are supposed to believe that” when Shulman said he never discussed the situation with the White House, Shulman just gave him an icy stare."

    Read more: http://www.politico.com/story/2013/05/irs-scandal-hearing-best-moments-91765_Page2.html#ixzz2U4Eg4RoR

    Shulman's performance is a welcome breath of fresh air after debacles like these. 

    http://diaryofarepublicanhater.blogspot.com/2013/05/et-tu-greg-sargent-he-piles-on-lois.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+DiaryOfARepublicanHater+%28Diary+of+a+Republican+Hater%29

    Maybe he reads Diary of a Republican Hater-not that we want to impose political views on him, that's the last thing Darrell Issa needs to hear. In tough times like these I have recommended that you read me twice as often.

    http://diaryofarepublicanhater.blogspot.com/2013/05/i-go-there-democrats-should-try-diary.html

    Also bone up on Media Matters.

    http://diaryofarepublicanhater.blogspot.com/2013/05/i-go-there-democrats-should-try-diary.html 

    I'm glad to see that at least someone is giving this witch hunt I mean search for the truth the dignity it deserves. 

    P.S. You tell me how much respect to treat people who ask questions like this:

    "If Shulman couldn’t keep his attitude in check, though, some committee members couldn’t restrain themselves from some over-the-top comparisons — like the time Trey Gowdy (R-S.C.) compared the IRS Cincinnati employees to a dangerous, armed intruder."

   “If there’s someone wielding a knife in the parking lot, are you going to wait for the inspector general?” Gowdy asked.

Read more: http://www.politico.com/story/2013/05/irs-scandal-hearing-best-moments-91765_Page2.html#ixzz2U4IMRovl
   

     

    

David Glasner: the Fiscal Multiplier Could be More Than Zero

     Wow. This is pretty earth shattering in the econ blogosphere. While Sumner always brushes off the questions of Keynesians like me, it will be interesting how he answers his fellow Market Monetarist, David Glasner.

     For the original Sumner piece see here

     http://diaryofarepublicanhater.blogspot.com/2013/05/sumner-again-throwing-stones-at.html

     Now and again Sumner's shrillness gets to Glasner clearly.

     "But now Scott seems to be turning the Lucas Critique on its head by saying that the expectations that result from a particular policy regime — a policy regime that has been subjected to withering criticism by none other than Scott himself – refutes a structural theory (that government spending can increase aggregate spending and income) of how the economy works. I don’t think so. The fact that the Fed has adopted and tenaciously sticks to a perverse reaction function cannot refute a theory in which the Fed’s reaction function is a matter of choice not necessity."

     "I agree with Scott that monetary policy is usually the best tool for macroeconomic stabilization. But that doesn’t mean that fiscal policy can never ever promote recovery. Even Ralph Hawtrey, originator of the “Treasury view”that fiscal policy is powerless to affect aggregate spending, acknowledged that, in a credit deadlock, when expectations are so pessimistic that the monetary authority is powerless to increase private spending, deficit spending by the government financed by money creation might be the only way to increase aggregate spending. That, to be sure, is a pathological situation. But, with at least some real interest rates, currently below zero, it is not impossible to suppose that we are, or have been, in something like a Hawtreyan credit deadlock. I don’t say that we are in one, just that it’s possible that we are close enough to being there that we can’t confidently exclude the possibility, if only the Fed would listen to Scott and stop targeting 2% inflation, of a positive fiscal multiplier."

     By saying monetary policy is usually the best tool-but that there may be times when fiscal policy would have a rule, Glasner is on the same page as Krugman. 

    http://uneasymoney.com/2013/05/21/scott-sumner-meet-robert-lucas/#comment-19001

    A Hawtreyan credit deadlock sounds kind of like a liquidity trap... 

    Glasner asks asks a question I often ask Sumner. We'll see if he gives him a better answer than he gives me-it couldn't be a worse one. 

     "With US NGDP not even increasing at a 4% annual rate, and the US economy far below its pre-2008 trendline of 5% annual NGDP growth, I don’t understand why one wouldn’t welcome the aid of fiscal policy in getting NDGP to increase at a faster rate than it has for the last 5 years. Sure the economy has been expanding despite a sharp turn toward contractionary fiscal policy two years ago. If fiscal stimulus had not been withdrawn so rapidly, can we be sure that the economy would not have grown faster? Under conditions such as these, as Hawtrey himself well understood, the prudent course of action is to err on the side of recklessness."

     I've never gotten Sumner's dogmatism on this point, assuming, the real point is that his agenda is to make sure there is never a fiscal intervention into the economy regardless of how bad the economy gets; ie, his dogmatism about the multiplier is ideological rather than scientific. 

     It will be interesting to see if he answers Glasner-it may be tough not to as they are friends and fellow MMers. 

     HT: Tom Brown
      

Et Tu Greg Sargent? He Piles on Lois Lerner

     Now he's joining the chorus of  "Lois must go." I don't really get this. Supposedly it's because she pleaded the Fifth in front of Darrell Issa's IRS witch hunt  hearings. I'm becoming more and more convinced that the media people just have to join a good chorus. They can't be the one person not throwing stones. They too want to be Serious.

     "The big piece of IRS news today is that Lois Lerner, the head of the exempt organizations division — the IRS unit at the center of the scandal involving the targeting of conservative groups — has pleaded the Fifth at today’s hearing:

Lois G. Lerner told the House Committee on Oversight and Government Reform in an opening statement that members of the panel have already accused her of providing false information to Congress.

“I have not done anything wrong,” she said. “I have not broken any laws. I have not violated any IRS regulations. And I have not provided false information to this or any other committee.” But on the advice of counsel, she said, she would not answer questions or testify before the committee.

     "In a letter to committee chairman Darrell Issa, Lerner’s lawyer claimed she “has no choice” but to plead the Fifth, given that the Justice Department has launched a criminal investigation. But I agree with Josh Marshall: while this may be the right path for Lerner herself, given the circumstances, it also means she must be removed from her position, even if this is bureaucratically difficult."

     http://www.washingtonpost.com/blogs/plum-line/wp/2013/05/22/lois-lerner-has-to-go/

    It's not clear why pleading her Constitutional rights means this. Incidentally she's not the first to do this when testifying in front of Congress: Ollie North himself did this. 

    "The Treasury Department inspector general’s report found that the IRS used “inappropriate criteria” in targeting Tea Party groups, but found no evidence of partisan motivation in the application of those criteria. Top IRS officials, such as acting IRS commissioner Steven Miller, who has resigned, have reiterated that there was no partisanship at play.  Meanwhile, a New York Times investigation suggested that what happened was partly the result of incompetence and confusion in the face of a tide of applications for tax exemptions."

    "But there are still key gaps in the story that must be filled concerning how, exactly, these groups were targeted. There is absolutely no evidence that what happened was tied to the Obama administration or 2012 reelection campaign, or any outside Democratic political group. Nor is there any evidence that those who did target the Tea Party groups were doing so out of a desire to influence the election. But as Ezra Klein notes:

But then there’s the offense that everyone agrees did occur: A number of IRS employees developed criteria that was politically biased both in appearance and in effect…Their actions called the fairness of the agency into question and kicked off a national scandal. Even if their intent was pure, they showed bad judgment, more than a bit of incompetence, and perhaps even a touch of insubordination. That is reason enough to fire people, even if the process is difficult.

     I don't get where 'insubordination' comes in either-was there someone who told them not to use such criteria beforehand? I have to say I'm tired of all the hue and cry about this. At the end of the day this is even sillier than Benghazi as far as I'm concerned. Nobody was killed. No wealthy Tea Partier lost their tax exemption. While it's true that some had to wait as much as two years, in the mean time guess what they were doing? Not paying any taxes. 

    Lerner herself is just a scapegoat. She actually was the one who saw a problem with the criteria being used in the Cincinnati office and had them employ new criteria. Honestly it was not such an easy question just what kind of criteria should be used. While supposedly their supposed to use "nonpolitical" criteria that's the whole issue. What exactly constitutes nonpolitical vs. political groups. Now we have the spectre of all kinds of unsavory Tea Party groups coming out and beating their breast-like homophobic groups, etc. 

    The idea that you shouldn't look at politics seems reasonable but how about the KKK-could they conceivably qualify for 401(c)(4)? If not, then clearly there are limits on considering only "nonpolitical criteria."
   
    In more pile-on news, Darrell Issa claims that Lerner has no constitutional rights. 

    http://www.politico.com/story/2013/05/darrell-issa-irs-lois-lerner-91755.html?hp=t3_3

    I'm sure he believes this but probably doesn't think anyone but his Right wing reactionary friends have any rights. I love how the fact that a Fox news reporter may have been questioned about leaks is a big scandal. The GOP has always demanded that the Obama Administration go after leakers. It turns out that their is an implied Fox News Exception. 

    Meanwhile I see that Sargent does get it right that this whole When did Obama know about the scandal is absurd. Still, Jay Carney is coming out and saying that the White House deserves criticism on how it has released information on the IRS pseudoscandal. 

   "The White House could have done a better job at providing an accurate timeline of when and to what extent it became aware of an investigation into improper Internal Revenue Service conduct that targeted conservative groups during the run-up to the 2012 election, press secretary Jay Carney conceded Wednesday."

    "There's been some legitimatize criticisms of how we're handling this," Carney told reporters at his daily briefing.

    "Faced with mounting criticism over its shifting timeline and incomplete answers about which senior administration officials were aware of an impending inspector general report in April, Carney admitted that information he previously provided required a "correction" on Monday.

    "You're good at your jobs and you're smart," Carney told reporters, "but we can't anticipate every question."

   "Sometimes we don't have the answers and sometimes we need to go back and get them," he added.

     http://livewire.talkingpointsmemo.com/entry/white-house-concedes-legitimate-criticisms-exist-with-its?ref=fpb

     If the Administration doesn't intend to get roiled by the GOP and their media henchmen I think Carney conceded too much. As Sargent and others have pointed out, this whole game of what did he know and when did he know it? is foolish. Yet by agreeing with the criticism, Carney is implicitly saying that this game is legitimate. 

    For that matter, as Elizabeth Drew says, it was probably a mistake for the White House to have opened a criminal probe in the first place: we don't know that anything criminal was done.

 If the facts we later learn suggests this ten do so. But doing so before we even investigate suggests a rush to judgment. 

     "Obama, anxious not to be seen defending everybody’s punching bag, the IRS, quickly ceded ground on what could be perfectly defensible actions. He may come to regret taking what seemed a trigger-happy decision to order a criminal investigation of the Internal Revenue Service, a sure way to drag people who may have—may have—simply made errors of judgment through a long and expensivelegal process that is likely also to keep the agency from examining the validity of the application for tax-free status of any group with powerful allies. If, following the Citizens United decision, there is a sudden doubling of the number of new organizations with similar names and missions, and these organizations apply for tax exempt status—and also the right to hide the names of their donors—might it not make sense to use a search engine to find them? This what the just-fired sacrificial acting IRS commissioner, testifying before a congressional committee on Friday, termed a “grouping” of the cases that had already been almost universally condemned as “targeting,” which he insisted it wasn’t. But this simple explanation wouldn’t do, didn’t warrant the term “outrage” routinely conferred on the IRS case. Could it just possibly be that the Tea Party and their allies see a great benefit in making a stink over this? How better to freeze the IRS examinations of these groups??

     http://www.nybooks.com/blogs/nyrblog/2013/may/18/why-obama-is-not-nixon/

     Lerner seems to be one of the few here who seems to get what it means to defend yourself.