The Ticker Quick Views on Politics, Economics and Finance
The IRS scandal offers plenty of reason to be upset. It also contains some nuggets of good news: The inspector general did his job. The administration fired the agency's acting commissioner. And IRS investigators may now think twice before applying partisan filters.
In the end, the system worked.READ MORE
Albert R. Hunt
U.S. Treasury Secretary Jacob J. Lew said there will be quick results on any reshaping of the Internal Revenue Service. Acting Commissioner Daniel Werfel will “get started full-bore next Wednesday and within 30 days he will report to me and we will report to the president on actions taken,” Lew told me on Bloomberg Television today.
Werfel is going to look into whether there is a “systemic” problem at the tax agency, Lew said, and whether additional people are going to be held accountable and any failures in management corrected.READ MORE
Like most Americans, one of the few things I know about Canada is that it’s supposed to be better than us. It’s an almost unbearably functional place, what with its non-collapsed banking system and strongly growing economy and harmonious, cosmopolitan society (Quebec excepted). If Canada had nuclear weapons, it would never flirt with giving Sarah Palin control over them.
But I have bad news for you, Canada: Americans have learned about Rob Ford, and we’ll have no more of your smug superiority.READ MORE
The targeting of conservative political groups by the Internal Revenue Service looks like a scandal of the first order. IRS workers charged with determining whether so-called social-welfare groups deserved tax-exempt status screened for organizations with words such as "Tea Party," "Patriots" or "9/12" in their names.
Depending on who's doing the talking, the motives of those responsible for the targeting, or ordered their underlings to do so, range from nefarious to benign. To some, IRS workers (no doubt, all registered Democrats) were aiding President Barack Obama, drawing up the equivalent of Richard Nixon's "enemies list" in an effort to intimidate or stymie groups that likely opposed the president's re-election. To others, the IRS inspector general's report released this week confirms that workers were confused by ambiguous rules over "political activity" and "social welfare" -- whatever that language means.READ MORE
Modern fiscal conservatism has wrapped itself in one whopper of a false choice: that the U.S. must decide between economic growth and the welfare state.
That’s wrong. Conservatives ought to recognize that where there is both robust growth and a sturdy safety net, the government tends to be highly efficient and market-friendly.READ MORE
Unless you're employed by a derivatives trading desk at a large bank, here's some good news: The derivatives cabal is slowly but surely headed for a break-up.
The Commodity Futures Trading Commission yesterday approved new derivatives rules required under the 2010 Dodd-Frank financial reform law. They dictate how buyers and sellers must enter contracts, including credit-default swaps and interest-rate swaps, in the $633 trillion market.READ MORE
Matthew C Klein
(Corrects description of Tim Geithner in second paragraph.)
Ben Bernanke has repeatedly said that he wants to leave his post as Federal Reserve chairman once his term ends early next year. The consensus among economists and journalists is that Janet Yellen, the Fed's current vice chairman, will get the nod. She has years of monetary policymaking experience from her time as a Fed governor in the 1990s and as president of the Federal Reserve Bank of San Francisco in the 2000s.
Last month, Sean West of the Eurasia Group wrote for the Ticker that the prospects for tax reform were dim. Democratic Senator Max Baucus and Republican Representative Dave Camp, who head the relevant tax committees in Congress, had just agreed to pursue tax reform through an open committee process, which West took as a sign that they planned to slow-walk it to death.
Baucus, it seemed, was going to face a tough re-election fight in 2014 and wouldn’t want to make the enemies that would come from enacting tax reform. He’d pay lip service to reform but not really try to pass it. It also wasn’t clear how committed the president was to reform.READ MORE
First Fergie, now Becks. A week after Sir Alex Ferguson announced his retirement from Manchester United, David Beckham announced that he will be hanging up his boots after his final two games with Paris Saint-Germain.
For a good chunk of his 20-year career, Beckham was the most famous soccer player in the world. Not coincidentally, he was also the game’s ambassador to the U.S. for a little while, a post that had effectively been vacant since Pele’s stint with the New York Cosmos in the 1970s.READ MORE
Michael Kinsley, my former Bloomberg View colleague, goes to bat in the New Republic for "'austerians," a term he says is "a clever Krugman coinage that makes adherents sound like aliens from another planet." That would be Paul Krugman, Nobel laureate in economics, Princeton professor and New York Times columnist.
Toward the end of his column, Kinsley gets to the crux of the argument and something Krugman ignores. It's not that austerians -- those who advocate cuts in government spending and increases in taxes during bad times -- want other people to suffer. "They, for the most part, honestly believe that theirs is the quickest way through the suffering," Kinsley writes.READ MORE
The conservative gospel holds that government is best when it is closest to the people, except when it's not. Advocates of limited government prefer state government to the federal government and local government to state government.
This week in North Carolina, however, that philosophy was abandoned after local government took an action that state conservatives didn't like.READ MORE
Arthur Brooks, president of the American Enterprise Institute, writes in today’s Wall Street Journal that Republicans aren’t as doomed with Hispanics as people think. Turnout among Hispanics is low, and Brooks says those who don’t vote tend to have more conservative attitudes than those who do. He thinks one reason conservative Hispanic voters are staying home is that they care about supporting the poor and they believe Republicans don’t -- so Republicans must fix that perception.
This is a plausible diagnosis, though, of course, the perception of Republican hostility toward Hispanics also matters, as Brooks notes in discussing “self-deportation.” Unfortunately, the three prescriptions Dr. Brooks writes to align the Republican agenda with the interests of the poor won’t work.
Bloomberg Businessweek's Carol Matlack reports that several central and eastern European countries that adopted flat-rate income taxes over the last two decades are now abandoning them or considering doing so. The Czech Republic and Slovakia switched last year to progressive systems, where rates get higher as incomes rise. Now, Bulgaria is considering a similar move.
This makes sense, because flat taxes were never what they were cracked up to be. The flat tax is usually sold as a simplification tool, but multiple tax rates aren’t what make tax systems complex. Rather, it's rules about what goes in the tax base that complicate things. And most “flat-tax” systems aren’t really single rate anyway; they generally include personal exemptions that create a bracket of income taxed at a rate of zero.READ MORE
It's an irresistible story: Lloyd Blankfein, the once-embattled chairman and chief executive officer of Goldman Sachs Group Inc., has been giving quiet advice to Jamie Dimon, the chairman and CEO of JPMorgan Chase & Co., on how to handle "the challenges that Mr. Dimon is facing," as the New York Times put it in an article today.
Just what they have been discussing is left to the imagination, since the report is vague. It's one of those stories where the sources of information aren't named. Dimon and Blankfein have known each other for years. So it's no surprise that they talk. But the tidbits are interesting nonetheless.READ MORE
Suddenly, Washington is mired in scandal. President Barack Obama is on the defensive, trying to fend off criticism of his administration on three fronts: that it covered-up mistakes in handling the diplomatic compound attack in Benghazi, Libya; that the Internal Revenue Service harassed conservative groups seeking tax-exempt status; and that the Justice Department stepped on the First Amendment with its two-month sweep-up of Associated Press phone records.
There's a little something for everyone -- civil libertarians, foreign policy geeks, the tax-resistance movement, Big Brother conspiracy theorists -- in this triple threat.READ MORE
I was pleased to see this morning that Karl Rove tweeted my post on yesterday’s Congressional Budget Office fiscal projections. That’s the post where I said CBO’s analysis “shows that deficit panic is unwarranted, and that policymakers should focus on boosting the economy instead of cutting debt” -- much like CBO’s previous report did.
Just four months ago, Rove was urging Republicans to use the debt ceiling as a bargaining chip to force spending reductions, arguing that such a move was necessary to “prevent a fiscal catastrophe.” Obviously, that runs counter to what I wrote yesterday.READ MORE
Earlier today Bloomberg View columnists Ramesh Ponnuru and Margaret Carlson met online to chat about the IRS scandal. Below is a lightly edited transcript.
Ramesh: I see what you did in your column this week, Margaret, signaling your high esteem for the IRS. An esteem I share! It’s best to stay on that particular agency’s good side, because it has awesome powers. Which is why its abuses are, as President Barack Obama said last night, "intolerable." And those abuses look worse the more we learn. It turns out that Democratic Senator Carl Levin had urged the IRS to go after specific, mostly conservative groups: He had a list. It turns out that the misconduct was not limited to one Cincinnati office, as was initially claimed. And it turns out that the IRS released confidential information to the media organization ProPublica. Who will audit the auditors?READ MORE
This would be quite the week for the commissioner of the Internal Revenue Service. If the Internal Revenue Service had a commissioner.
The position has been vacant since Douglas Shulman finished his term in November, and President Barack Obama still has yet to nominate a replacement. So the IRS is responding to the scandal over its inappropriate review of conservative non-profit organizations without a permanent leader. Obama won’t be able to delay making a nomination much longer. But it’s not clear who would want the job, be good at it and be able to get confirmed.READ MORE
Eurostat has released preliminary first-quarter growth figures, and they aren’t pretty, underscoring the massive disconnect between the real economies and markets in Europe.
In the euro area, the country growing fastest was Slovakia, at 0.3 percent compared with the previous quarter, followed by Germany and Belgium at a whopping 0.1 percent. France, meanwhile, went into a triple-dip recession, with gross domestic product falling 0.2 percent.READ MORE
Matthew C. Klein
Japan is in the midst of a grand experiment to revivify its economy through a three-pronged campaign of monetary easing, fiscal stimulus and structural reforms. The markets have noticed: The Nikkei stock index has gained more than 70 percent while the yen has become more than 22 percent cheaper relative to the dollar and the euro since mid-November. At the same time, the difference in yields between 5-year Japanese government bonds and their inflation-indexed equivalents has widened by more than a percentage point.
All of this has led some observers to declare that Japanese expectations about inflation and growth have been transformed, thereby leading to a resurgence of domestic spending, hiring and investment. It's unclear, however, that this has actually happened.READ MORE