Kevin Drum - September 2012

Romney Hits Obama for Following Romney Trade Policy

| Mon Sep. 17, 2012 10:31 AM PDT

The Washington Post reports today on dueling trade complaints between China and the U.S. Here's the American side:

U.S. officials accuse China of giving subsidies to its auto parts industry, and the Obama administration has steadily amped up enforcement actions against China at the WTO through tariffs and other duties....“Export subsidies are prohibited under WTO rules because they are unfair and severely distort international trade,” U.S. Trade Representative Ron Kirk said in a statement on Monday.

....On Monday [Mitt] Romney quickly pounced on the WTO filing, accusing the administration of waging a “campaign-season trade case” that “may sound good on the stump but is too little too late for American businesses and middle-class families.”

Don't you just love campaigns? I mean, Romney is probably right: the timing of this action does seem a mite convenient, doesn't it? On the other hand, no one has used China bashing as a cynical campaign tool more than Romney himself. It's a little hard to take his feigned outrage seriously.

But I'm sure we'll clear this all up during the debates. Those are usually calm, clear-headed discussions of policy differences that help the American public cut through all the election-year hot air. Right?

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The Stink of Defeat Has Descended on Romney HQ

| Mon Sep. 17, 2012 8:55 AM PDT

Politico has a long piece today about the Romney campaign being in disarray and how it's all the fault of chief strategist Stuart Stevens. Ed Kilgore comments:

So long as there is Politico this kind of piece will continue to be published. What's odd about it, however, is the timing: this sort of fragging from within a presidential campaign typically occurs early on, when the pecking order is still taking shape, or at some other obvious transition point like the beginning of the general election phase of the cycle. Actually, this piece is savage enough that you'd guess it would have appeared after election day. So it's not a good sign for Team Mitt.

Hold on. Is this true? Ed knows about a thousand times more than me about this kind of stuff, so I really shouldn't be arguing with him about this, but it seems to me that stories like this frequently appear at exactly this time during presidential campaigns. That is, they appear right at the point where a candidate appears to be in serious trouble, and senior staffers start desperately trying to point fingers away from themselves for the coming debacle. Sure enough, that's where we are. Romney has had a rough summer, capped by a listless convention and polls showing Obama starting to open a substantial lead in swing states. The stink of defeat around Romney HQ these days is probably strong enough to make hardened sewer maintenance workers turn tail and run away.

Roughly speaking, then, my advice is to ignore this story. Oh, you can go ahead and read it. It's good, clean fun. But it's basically just rats deserting a sinking ship and trying to make sure that other rats get the blame. It's a classic Beltway genre, and only the details change from campaign to campaign.

Mitt Romney Will Not Be Providing a Detailed Economic Plan Anytime Soon, Thankyouverymuch

| Mon Sep. 17, 2012 8:03 AM PDT

The Washington Post reports that Mitt Romney is tired of being derailed and is determined to refocus his campaign on the economy. He's going to create 12 million jobs during his first term, and here's his detailed 5-point plan to do it:

  • Drill, baby, drill
  • Bash China
  • Fix our schools
  • Cut spending
  • Cut taxes and regulations

Am I being unfair? Not really. If you click the link above you'll see that his plan is about half a page long. There's no real detail there and there never has been.

There are at least two reasons for this lack of detail. First, there's the usual one: he knows that if he starts to get specific about taking away tax loopholes and cutting spending, people will realize that they don't like some of the specifics. Cut ag subsidies and farmers get mad. Take away the home mortgage deduction and homeowners get mad. No politician ever wants to get specific about the price that voters might have to pay to balance the budget or let kids go to any school they want.

But there's a second reason for fuzziness that's very specific to Romney: his numbers don't add up. They don't even come close. Romney can't offer details even if he wants to because any detail he provides would immediately demonstrate just how laughable his plan his.

So all those tea partiers who want details can forget it. They may be convinced that the American public will swoon if someone presents them with a full-throated, blow-by-blow defense of their principles, but Romney knows better. If he did what they want, his election chances would go from bad to zero overnight.

But there is one thing Romney is being oddly accurate about: his jobs claim. If he's elected, he probably will be able to create 12 million new jobs over the next four years. That's because this is a very modest goal. The economy will probably create 12 million new jobs no matter who's president. This is a case where Romney is taking advantage of the public's general innumeracy. Most people have no idea how many jobs a good economy produces, so there's no point in making an outrageous claim. Sure, he could say he'll produce 20 million jobs, but to the average voter that's just as meaningless as 12 million or 100 million. So he might as well stick to reality.

It's Time for Obama to Explain His Middle East Policy

| Sun Sep. 16, 2012 2:44 PM PDT

Dan Drezner doesn't think Mitt Romney needs to give a speech about the Middle East. He thinks Barack Obama probably ought to do that:

Right now, it's the president who needs to deliver a major address. Americans are rightly confused by what the United States is doing in the Middle East, and President Obama had a pretty uneven week. On the one hand, there appears to have been some adroit behind-the-scenes diplomacy on Egypt. On the other hand, there are crisis moments when patience begins to look too much like passivity, and that's beginning to happen to this administration. Sure, there have been times in the past when U.S. embassies and consulates around the world faced even greater threats — but things still seem pretty uncertain, U.S. lives have been lost, and the only thing that can be said for Barack Obama's leadership this week is that he's not Mitt Romney. Oh, and that the administration's argument that this has been caused by a single stupid YouTube clip is utter horses**t.

Sign me up for putting a lid on the nonsense from Obama's various mouthpieces about how these riots and protests were all caused by a single poorly produced YouTube trailer. We deserve better than that from this administration.

So what should Obama say about all the turmoil in the Middle East? Dan has a few ideas about that too. Click the link for more.

The Anti-Semitic Slur Surfaces Once Again

| Sun Sep. 16, 2012 2:28 PM PDT

Over at Commentary, they're partying like it's 2003. Here is Jonathan Tobin on Maureen Dowd's column today:

Dowd sees [Mitt Romney] and running mate Paul Ryan as the cat’s-paws of a shadowy group of “powerful” Jewish “neocons” who are out to seize the country in his name and enforce, “a duty to invade and bomb Israel’s neighbors,” on Americans....Those who write about “neocons slithering” are clearly intending to stoke prejudice.

....The bottom line here is the same despicable “Israel Lobby” smear that seeks to silence friends of Israel through the use of traditional anti-Semitic stereotypes. Dowd’s column marks yet another step down into the pit of hate-mongering that has become all too common at the Times.

I know, I know: it's Commentary. What do you expect? But can't we ever put a stop to this? Neocons exist. They're neither shadowy nor conspiratorial. They're part of an actual political movement with a very visible public profile. They tend to be hawkish, solicitous of Israel's right wing, hostile toward Arabs, and they played a big role in committing the United States to a disastrous war in Iraq. That's just reality, and the mere fact that many neocons are Jewish doesn't give them a magic shield that protects them from criticism.

There's nothing anti-Semitic in Dowd's column. She just doesn't like neocons, and she doesn't like the fact that so many of the neocons responsible for the Iraq debacle are now advisors to Mitt Romney's campaign. Pretending that this makes her guilty of hate-mongering toward Jews is reprehensible.

Did the Fed's "Expectations Channel" Announcement Work? Maybe Not.

| Sun Sep. 16, 2012 10:35 AM PDT

A couple of days ago I wrote a post suggesting that Scott Sumner may have had less influence on Thursday's Fed announcement than many in the blogosphere think.1 Roughly speaking, I had two reasons in the back of my mind for saying this:

  1. Most of the commentary contained a built-in assumption that the Fed's action was sort of a mini version of NGDP targeting, which Sumner has been crusading for. But it's really not. It's an attempt to use future guidance to affect market expectations. That's a component of NGDP targeting, but nothing more. If I spend years crusading for more energy efficient houses and you then decide to replace your windows, that doesn't mean I influenced you just because new windows happen to be a component of my energy efficient housing plan. You probably knew about the benefits of UV-coated windows already. (And that goes double if you're a world expert in energy efficient housing.)
  2. A lot of bloggers learned about NGDP targeting (and the expectations channel) from Scott Sumner. I certainly did. But it's a leap to think that just because we were influenced by Sumner, this means that Ben Bernanke and the Fed's economists were influenced by Sumner. Maybe they were, maybe they weren't. I don't know, and neither does anyone else in the blogosphere. But Michael Woodford, who is indisputably influential on this subject, says point blank that Sumner's blog didn't affect him. That's not surprising: like Ben Bernanke, he's been studying this stuff all his life. He already knew it.

In my original blog post, I admitted that I felt sort of churlish for pointing this stuff out. But Robert Waldmann, who would probably not object to being labeled a bit churlish now and again, writes that there may be an even bigger problem here. Regardless of who influenced the Fed to try out expectations management, it doesn't seem to have worked:

We have new relevant evidence on the effectiveness of QEIII as forward guidance about future short term rates. Medium term rates are expected average short term rates plus a risk premium. If there is more certainty that short term rates will be very very low, both terms should decline.

[From a later post]: From Wednesday close (before the announcement) until Friday close (latest data) the 5 year rate changed 0.00%....Now I admit that my approach of focusing on changes over 48 hours and then declaring the matter settled is not the same as the approach of Michael Woodford, the leading advocate of the focus on the expectations channel. In his huge paper, he analysed transaction by transaction data and only looked at the day of the announcement....To claim that the question is still open, however, would require those who stress the importance of the expectations channel to argue that a statistical method is perfectly fine when it gives them results of the sign they like (although always of trivial magnitude) but invalid when it gives the answer they don't like.

To be as rude as possible, if they don't admit they were wrong (and I was right about the potential on Wednesday for further future guidance) their reasoning is like the argument that defence spending creates jobs but ARRA spending doesn't.

By Woodford's rules, the debate is over and he lost.

Basically, Waldmann is saying that if the expectations channel works, medium-term and long-term interest rates should have declined immediately after the Fed announcement on Thursday. But they didn't. The forward guidance enthusiasts were wrong.

Personally, I'd be a little more charitable. One of the problems with the Fed's announcement was that it was extremely weak. Yes, it tried to provide future guidance by promising open-ended action, but (a) the action was fairly modest, (b) the Fed didn't really make any concrete promises about how long it would continue its QE program, and (c) there's an election coming up and there's really no telling how long Ben Bernanke will be in charge of such decisions anyway. It's hardly any wonder that the bond markets had a muted response.

Of course, this is a fundamental problem with expectations management: it only works (even in theory) if investors are absolutely convinced that the Fed (a) can do what it says and (b) will do what it says. That's pretty hard to pull off, and it's one of the reasons that the blogosphere should probably be a little more skeptical than it is on the topic of both NGDP targeting and expectations management in general. For more on this subject, Mark Thoma has some sensible comments here.

1The backstory behind all this is long and complicated, and if you have no idea what I'm talking about here, I apologize. But it's just too convoluted to explain in a sentence or two. On the bright side, your life will be no poorer if you just skip the whole thing.

UPDATE: Sorry to add even more to this, but Matt Yglesias emailed me a comment that suggests I should clear something up. Michael Woodford thinks that using the expectations channel should immediately reduce long-term interest rates. Market monetarists like Scott Sumner think it should raise long-term interest rates because it raises expectations of future economic growth. I started this post with a comment about Sumner's influence on the Fed, which might have made it sound like Robert Waldmann was responding to Sumner. He wasn't. He was responding to Woodford.

So who's right? I think it's hard to tell. Waldmann uses the Wednesday closing rate vs. the Friday close for 5-year T-notes. By that measure, nothing changed. Sumner uses the 10-year T-note, which was up about 6%. If, instead of the Wednesday close, you use the rate just before the Fed announcement as the starting point, both rates are up.

So either (a) the market monetarists are right, (b) nobody is right because rates didn't change, or (c) there's too much noise to tell. Take your pick.

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Ten Fun Facts About the Values Voter Summit

| Sun Sep. 16, 2012 9:21 AM PDT

Tod Kelly on his visit to this week's Values Voter Summit: "Surprisingly nutty, even with expectations going in." And he's got a few clips to prove it:

1. By the tally I kept, the number of times I heard Main Floor Speakers not named Paul Ryan mention Barack Obama: 157. Number of times I heard Main Floor Speakers not named Paul Ryan mention Mitt Romney: 5.

2. Most of the votes for Democrats in Presidential elections come either from people on welfare, or people committing voter fraud. (Gary Bauer, American Values President)

3. The Obama administration has begun secretly plotting with the Organization for Islamic Cooperation. They have begun to “brainwash” FBI and other security agents to be receptive to the messages of Islam, so that Sharia law speech laws can be enforced unchallenged after Obama’s reelection. (Michele Bachmann, US Rep-MN)

....5. Planned Parenthood is an organization created for the purpose of killing off the white race. (Rep. Tim Huelskamp, US Rep-KS)

....7. The Obama administration is planning to make illegal all churches and synagogues, and put in jail any Americans that attend them. This will happen this January, “March at the latest.”  (Kamal Saleem, Debunked Ex-Terrorist Impersonator)

There's more at the link, including the VVS crowd's surprising reaction to Ronald Reagan. Tod promises more VVS-related detail in future posts.

No, "Jumping the Gun" Was Not Romney's Big Problem After the 9/11 Attacks

| Sat Sep. 15, 2012 6:56 PM PDT

Jonah Goldberg today:

The establishment-press position is that Mitt Romney outrageously jumped the gun in his condemnation of the Obama administration’s response to the attacks on our embassies....I understand and can respect the opposing point of view, by the way. I don’t think it’s ridiculous to argue that Romney jumped the gun. I do think, however, the obsession with the issue is beyond ridiculous.

I'm not surprised that conservatives are trying so hard to change the subject here, but we shouldn't let them. For the record, then: the unseemly haste of Romney's comment following the 9/11 attacks on the embassy in Cairo was, at best, a distant third of three reasons that most of us were so disgusted with him. Remember, this is what Romney said:

It’s disgraceful that the Obama administration’s first response was not to condemn attacks on our diplomatic missions, but to sympathize with those who waged the attacks.

There are two big problems with this:

  1. It's a lie. The embassy statement Romney is referring to was issued several hours before the attack. It was not a response to the attacks.
  2. It's scurrilous to suggest that Obama "sympathized" with the attackers. There was nothing in the embassy statement that suggested any kind of sympathy, and the actual first response from the Obama administration very clearly condemned the attacks.

Later, of course, Romney denounced the anti-Islam video at the heart of the current riots, thus taking exactly the same stand as both the embassy and the Obama administration. So when he issued his statement late on the evening of 9/11, he knew perfectly well that the embassy statement hadn't been issued in response to the attacks and he knew perfectly well that he agreed with the sentiments in the statement anyway. That's what made his response so odious. The fact that he was so eager to score cheap political points was just a small added fillip.

In-Person Voter Fraud: Not Really a Matter of Opinion

| Sat Sep. 15, 2012 4:00 PM PDT

After running a story about voter access laws last Sunday, the New York Times got some complaints from readers about its he-said-she-said treatment of whether voter fraud is a serious problem. Margaret Sullivan, the Times' public editor, asked the reporter and editor of the piece for their views:

The national editor, Sam Sifton, rejected the argument. “There’s a lot of reasonable disagreement on both sides,” he said. One side says there’s not significant voter fraud; the other side says there’s not significant voter suppression. “It’s not our job to litigate it in the paper,” Mr. Sifton said. “We need to state what each side says.”

Mr. Bronner agreed. “Both sides have become very angry and very suspicious about the other,” he said. “The purpose of this story was to step back and look at both sides, to lay it out.” While he agreed that there was “no known evidence of in-person voter fraud,” and that could have been included in this story, “I don’t think that’s the core issue here.”

This is a pretty remarkable response. I don't have a problem with giving both sides some air time, but by far the main focus of the voter access battle is stringent photo ID laws — and the only real justification for stringent photo ID laws is that it stops in-person voter fraud. (That is, the kind of fraud where people show up in person at a polling place and pretend to be someone they aren't. Even in theory, photo ID laws can't stop any other kind of fraud.) This means that the existence of in-person voter fraud is exactly the core issue. If you don't address the truth of that claim, you simply haven't done a good job of informing your readership.

And apparently Bronner knows this. He agrees that there's no known evidence of in-person voter fraud. So why on earth would he not make that clear in a story about voter ID laws? This wouldn't require him to take a stand on the laws themselves, only to point out to readers in his own voice that in-person voter fraud basically doesn't exist. They can then draw their own conclusions about whether voter ID laws are a good idea anyway and what the motivation for them is.

There are plenty of gray areas in the fight over voter access, which includes things like early voting hours, voter roll purging, and so forth. But on the specific subject of voter ID laws there are two clear facts: (a) the primary justification for the laws is in-person voter fraud, and (b) in-person voter fraud doesn't exist. Anyone writing about the subject is doing a disservice if they don't acknowledge this.

Yet Another Study Suggests that Cutting Tax Rates Doesn't Boost Economic Growth

| Sat Sep. 15, 2012 9:38 AM PDT

Do lower tax rates produce higher economic growth? The evidence in favor of this theory has always been thin, especially when tax rates are fairly modest, as they are in the United States. Everyone agrees that taxes produce deadweight losses, but those losses are fairly small and are often offset by the benefits that a strong central government provides to an economy. When you net everything out, low tax rates don't seem to have a big effect.

But this is in the news yet again, since Mitt Romney promises that his tax plan will be revenue neutral because his tax cuts will supercharge the economy and thus produce extra revenue to make up for his tax reductions. So the Congressional Research Service took another look at this question for the period 1945-2010, and the results are pretty gloomy for the supply siders and their dynamic scoring methods. Low tax rates appear to be associated with:

  • Higher investment
  • Lower savings
  • But no change in growth rates

None of these three results were statistically significant, but a fourth result was: lower top marginal tax rates mostly benefit the rich, leading to much higher income inequality. The study found similar results for capital gains tax rates. All the charts are below and the full study is here.

One caveat: Generally speaking, marginal tax rates were high from 1945-1980 and low from 1980-2010. So the CRS results might just be an artifact of the fact that growth was higher during the postwar period and lower during the post-Bretton Woods era. In other words, it might have nothing to do with tax rates. But of course, that's the point. Nobody thinks that raising taxes is actively good for the economy, except to the extent that it helps balance the federal budget. The question is whether there's any evidence that lowering taxes boosts economic growth. And there really doesn't seem to be.