The Ticker Quick Views on Politics, Economics and Finance

The FBI isn't the first intelligence agency to come under scrutiny for ignoring leads on young men who later proved to be terrorists. The U.K.'s MI5 faced similar questions after Islamist suicide bombers struck London's subway system on July 7, 2005.

The Federal Bureau of Investigation is under fire for not keeping Tamerlan Tsarnaev, who is accused bombing of Boston Marathon, under surveillance, despite a tip from Russia that he was interested in extremist Islamic groups.

The high tide for Keynesian fiscal stimulus came in 2008 and 2009. Panicked governments spent, spent and spent to stem the financial crisis and avoid a depression. But as economies stabilized in 2010 and 2011, governments began to worry about public debt. Enter the austerians. They pressed for fiscal consolidation -- and got their way. One has to look back to the 1940s and 1950s, as nations demobilized from World War II and the Korean War, to see a comparably rapid tightening.

Now, though, the intellectual case for austerity is on its way out -- at least in its vulgar form of immediate cuts to public spending and sharp increases in taxes. Part of the change comes from the implosion of a central claim in an academic paper by Harvard economists Carmen Reinhart and Kenneth Rogoff. They found that nations stop growing when their ratio of public debt to gross domestic product passes a threshold of 90 percent. Their findings were exhibit A for advocates of austerity.

The Boy Scouts of America has been all over the map on the issue of gay members and leaders. First, it said it would preserve its policy of excluding homosexuals, which enraged liberals. Then it said it was considering abolishing the policy, which infuriated conservatives.

Now, the organization wants to split the difference and admit gay boys while barring gay leaders. Predictably, that's angered just about everyone. More important, such a policy, if ratified at the Scouts' National Council meeting in mid-May, sends a disturbing message to the gay children now putatively welcome to become Scouts: Come on in, we accept you as you are, just as long as you don't grow up.

Did we overreact to the Boston bombings and underreact to the West, Texas, fertilizer plant explosion? That's what Richard Kim argues, characterizing the national reaction to terrorism as "total social warfare" and to industrial accidents as "callous indifference."

I agree with Kim on Boston. Terrorism remains a rare cause of death for Americans: a risk of just 1 in 20 million. Shutting down the whole city of Boston on Friday was a costly overreaction. It entailed large human costs, including lost wages and lost jobs, which probably totaled more than $100 million, and wouldn't have been worth it even if the shutdown produced a marginal increase in safety. And you only have to look at the invasion of Iraq to see our overreactions to terrorism can be far, far worse.

Senator Charles Grassley last week linked the Boston bombing suspects to the fate of immigration legislation -- and now immigration-reform supporters are lashing out.

We should slow down reform, the Iowa Republican said, to make sure we are properly screening for terrorists. “Given the events of this week, it’s important for us to understand the gaps and loopholes in our immigration system,” Grassley said. “While we don’t yet know the immigration status of people who have terrorized the communities in Massachusetts, when we find out, it will help shed light on the weaknesses of our system.”

Senator Marco Rubio last week sent out a long fundraising letter laying out the issues he was fighting for. There was one major omission: The big immigration bill that he and seven other senators of both parties have crafted and that may pass the Senate this year.

In the almost 2,000-word solicitation from the "Rubio Victory Committee," the freshman Florida Republican presents an ambitious agenda: "To stop the growth of government, encourage job creators to do what they do best, keep tax rates low, repeal government programs such as Obamacare, and protect the freedom and liberty of all Americans."

We don't know exactly what Tamerlan Tsarnaev did during his visit to Russia in 2012. We do know that the Federal Bureau of Investigation has told us very little about its inquiry at that time into the man now accused of bombing the Boston Marathon.

No, I'm not expecting the FBI to divulge specifics that would in any way compromise its investigation -- some things will have to wait until charges are filed and the national security threat has passed. But the FBI initially bungled its disclosure of the inquiry, first telling the news media on Friday that it had no record on either Tamerlan or his brother, Dzhokar, then quickly retracting and explaining that a foreign intelligence agency had asked it to investigate the older Tsarnaev. As we saw in the aftermath of the Sept. 11, 2012, attack on a U.S. diplomatic compound in Benghazi, Libya, botched communications from the government quickly become fodder for political grandstanding and conspiracy theories.

It's not every day that a central banker admits that his medicine for curing the last crisis may be laying the groundwork for the next. But that's exactly what Narayana Kocherlakota, President of the Federal Reserve Bank of Minneapolis, said last week at the annual Hyman P. Minsky Conference at the Levy Economics Institute of Bard College.

Kocherlakota said low real interest rates are necessary to achieve the Fed's dual mandate of maximum employment and stable prices. He also said that low real rates lead to inflated asset prices, volatile returns and increased merger activity, all of which are signs of financial market instability. Listen to what he calls his "key conclusion" -- and what I'd call a true conundrum:

(Corrects date of Chechen president's election to 1997 in eighth paragraph.)
The identification of Tamerlan and Dzhokar Tsarnaev as suspects in the Boston Marathon bombings focuses attention on the troubled history of Chechnya and the legacy of its recent wars with Russia. As the investigation continues and we learn more about the circumstances and motivations of the bombers it is important that we also hear the voices of ordinary Chechens who struggle to overcome the trauma of violence and exile and lead normal lives in the U.S.

The Tsarnaev brothers were born in Kyrgyzstan, a country in Central Asia that, like Chechnya, had been part of the Soviet Union. In 1944, Joseph Stalin ordered the deportation of the entire Chechen nation -- almost 1 million people -- from the North Caucasus to Kyrgyzstan and Kazakhstan. The Chechens had been falsely accused of collaborating with the Nazis, and were branded an enemy nation. About one third of the deportees died of cold, hunger and disease in Central Asia, where they lived in detainment camps similar to those of the Soviet gulag.

We don't yet know why the Boston bombers set off explosives killing three and injuring more than 170 at the Boston Marathon. That hasn't prevented social-media speculation, rampant misinformation, and some pundits and politicians from drawing a straight line from the attack to their issues du jour. Here are some of the most predetermined conclusions of the week:

Political Appointments

Yesterday, Nayarana Kocherlakota, the president of the Minneapolis Federal Reserve Bank, gave a speech in which he said that the Fed "will only be able to achieve its congressionally mandated objectives by following policies that result in signs of financial market instability." I noted that this was also the Fed's approach in the 2000s -- and we all know how that worked out. Central bankers should spend more time coming up with new ideas instead of retreading ones that have already been discredited by experience.

One intriguing idea was buried in the middle of Kocherlakota's speech. He implied that a credible promise to make entitlement programs like Social Security and Medicare more generous in the future could lead to a faster economic recovery today. If you take Kocherlakota's reasoning seriously, this would obviate the need for a prolonged period of low real interest rates and the associated bubble-bust cycles.

If anything is to be learned at this point, just days after the bombings at the Boston Marathon, it is that every terrorist attack should be approached as a discrete event, disaggregated from assumptions about groups, "hallmarks" and ethnicity. Just ask the young Saudi man injured by the explosion, whom some in the news media wrongly tagged as a suspect. We should take a careful, measured look at the inevitable talk of the suspected bombers' links to Chechnya.

The Tsarnaev brothers, Tamerlan, 26, and Dzhokar, 19, would have been babies in 1994 when their ethnic homeland, a Russian republic in North Caucasus region, was ripped apart by a war of independence. I was editing a newspaper in Russia at the time and visited Chechnya just before the war to talk to the republic's new president, a former Soviet air force general by the name of Dzhokar Dudayev. Dudayev was a strange character but not remotely Islamist. He liked to drink and fought with the Soviet military against the mujahedeen in Afghanistan. Chechens are Muslims, but of the moderate Sufi rite. Islamic jihad played no role in their bid for independence.

Fitch Ratings announced today that it is cutting the U.K.’s credit rating from AAA to AA+, the second-highest level, because of its weak economic performance and high public debt. This follows a similar move by Moody’s in February, and it doesn’t matter.

As Svenja O’Donnell and Scott Hamilton note in reporting on the downgrade for Bloomberg, “Investors often ignore such moves,” and U.K. sovereign bond yields fell after the Moody’s downgrade. Investors are similarly blase today: Credit-default swap prices for the U.K. have barely moved. As of 2:05 p.m. in New York, U.K. five-year CDS are trading at $47.01, up all of 11 cents today. (That’s a price to insure $10,000 in bonds against five years of losses.)

According to its own reasoning, the European Central Bank has set its inflation target too low.

Since 2003, the ECB has promised that inflation, as measured by the euro area's Harmonized Index of Consumer Prices, would average 2 percent or below over the medium term. But 2 percent is no longer enough.

“I used to think it was possible for an artist to alter the inner life of the culture," wrote Don DeLillo in his 1991 novel "Mao II." "Now bomb-makers & gunmen have taken that territory."

As this morning's police standoff unfolded in Watertown, Massachusetts, that line popped into the head of the author Tom Vanderbilt, who tweeted (to much "favoriting" from his 6,000 followers): "Not sure whether to follow Twitter or just drag the DeLillo down from the shelf."

As police continue their search for Boston Marathon bombing suspect Dzhokar Tsarnaev, the Boston area remains frozen. Businesses and schools have closed their doors. Public transportation has screeched to a halt. Residents have been told to stay inside, away from windows, as the manhunt unfolds around them.

Massachusetts Avenue Bridge, Cambridge

Americans have been whipsawed by devastating cycles of boom and bust over the past three decades. Now some at the Fed want us to go through it again.

The excesses of the 1980s -- leveraged buyouts, the junk bond bubble and wild property speculation -- led directly to the original "jobless recovery" of the early 1990s. This occurred despite a prolonged period of very low interest rates. (The 1990 tax increases and post-Cold War defense cuts were probably counterproductive.) In many ways, that episode was a dress rehearsal for the recent crisis, so it makes sense that some of the most interesting writings about the dangers of excessive private borrowing come from that earlier time.

Revenue volatility is a real problem for states and cities. Recessions cause tax revenue to decline and demand for services to rise. Because states and cities must (roughly) balance their budgets each year, this leads them to cut spending and raise taxes at the least opportune time in the economic cycle. Stable sources of tax revenue that reduce these pressures are desirable.

Elizabeth McNichol of the Center on Budget and Policy Priorities, a liberal economic think tank in Washington D.C., has a new paper urging states not to shift from income taxes to sales taxes as a strategy for addressing revenue volatility. She makes four main points: Sales taxes, while less volatile than income taxes, still can experience significant declines in recessions (see the chart); sales taxes face a long-run revenue insufficiency problem, as an eroding tax base means that receipts do not keep up with economic growth; sales taxes are regressive; and there are better strategies available to manage volatility.

George Orwell illuminated something important about how bad policy can be both the cause and the effect of sloppy writing. Language, he wrote, "becomes ugly and inaccurate because our thoughts are foolish, but the slovenliness of our language makes it easier for us to have foolish thoughts."

I bring this up apropos of the gun-control plan the Senate has been considering. You might think, reading this morning's news, that the Senate had voted on this plan and then "defeated" or "rejected" it. The Hill, for instance, wrote: "It failed by a vote of 54 to 46, with five Democrats voting against it. Only four Republicans supported it." Reading that, you wouldn’t suspect that 54 senators actually supported passing the measure in question, which they did. Or that the proposal was actually blocked by a filibuster.

Beijing’s taxi drivers are most notable for two characteristics. First, they know and love their politics. Rightly or wrongly, they tend to consider themselves among the city’s most astute analysts of what’s happening behind the Communist Party’s many closed doors. Second, they have an almost supernatural capacity to recognize gullible passengers whom they can plunder with longer-than-necessary rides (while telling tales of the city’s powerful).

Thus it comes to pass that Guo Lixin, formerly an anonymous Beijing cabbie, set off a Chinese media firestorm on Thursday in China by fooling two of the Communist Party’s most prominent media outlets into believing that Chinese president Xi Jinping waved down his taxi for a ride to a hotel.