Barrons---A Scandal-Driven Market

Bullish article in a strange way, me I'm undecided and a lot in cash.

http://online.barrons.com/article/SB500014240...84358.html

The IRS scandal has Republicans shifting into full Inspector Clouseau mode. They are convinced they are on the scent of something foul that will tie President Obama directly to the suppression of the Tea Party movement during the 2012 general election campaign. In the meantime, their former top-most concern, the sluggish economy, has been pushed onto the shoulder of the legislative highway. As a consequence, sequestration, effective since March, shall stand, slowing growth in gross domestic product and consequently engendering continued, aggressive quantitative easing by the Fed, no matter that some Fed governors are conflicted by the policy.

In other words, as long as congressional Republicans are distracted from legislating by the juiciest Democratic scandal in decades, fiscal austerity will continue to reign on Capitol Hill, meaning that it's full-bull ahead.

Love the GOP or hate it, you can't fault the party for strongly suspecting that the bare-knuckled Obama presidential campaign orchestrated the IRS's harassment of Tea Party groups. Republicans, after all, know from dirty tricks. They are the party of the late Lee Atwater, who is celebrated as the father of gutter politicking.

One veteran Republican fundraiser told me that he and his colleagues are asking themselves, "What would Lee have done if he had been running Obama's 2012 campaign?" The implication here is that Obama's team was cast in Atwater's mold. This line of "reasoning" gives rise to strong suspicions that the Obama team enlisted the IRS to crack down on Tea Party groups seeking to form tax-exempt public-interest entities known in the tax code as 501(c)(4) organizations.

Recall that Obama's campaign team as long ago as 2010 was obsessed to the verge of paranoia by the Tea Party and the threat its credo of smaller government and fewer taxes posed to its own credo of tax and spend. The movement seemed to be gathering momentum -- and lots of money. The IRS harassment, revealed this month in an audit by its inspector general, arguably crimped the movement's grass-roots fundraising.

OBAMA CAMPAIGN GENERALS Jim Messina and David Axelrod in 2012 began using "Tea Party" as a pejorative adjective, coupled with the noun "extremists," in campaign pronouncements. This was a strategy they first employed in the 2010 mid-terms to brand Republicanism as a dangerous philosophy. Atwater would have approved.

Last week's IRS hearing by the House Committee on Oversight and Government Reform raised even more suspicion that gutter politicking was at the root of the IRS harassment of Tea Party organizations during the 2012 election. Doug Shulman, who was the IRS commissioner at the time, admitted visiting the White House 118 times in two years, probably more than any other IRS commissioner in history. When asked for the reasons for his visits, he could recall only the one time he took his children to a White House Easter-egg hunt. Shulman is far too young to claim this was a senior moment.

Democratic senators had been complaining in letters to Shulman about 501(c)(4) groups since 2012. Though they did not differentiate between Republican groups and Democratic groups, a reasonable person would have concluded that they were taking aim at the Tea Party.

With so many suspicions and unanswered questions, expect more hearings and less legislating, which for now looks like good news for the bull.