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In the midst of the increasingly heated discussion over the Platinum Coin Option, a big fat data point has appeared favoring the option’s legality and feasibility — namely, at least one congressional Republican is desperate to ban it before Obama can use it:
Rep. Greg Walden (R-Ore.) is introducing legislation that would ban President Barack Obama and the U.S. Treasury from minting platinum coins to avert the debt ceiling standoff.
Walden’s defense of his bill is somewhat bizarre: He claims that it’s a way to protect the debt ceiling and thus keep the government from avoiding paying down its debts, when in fact the existence of the debt ceiling means that the government would be forced not to pay its debts and obligations, and therefore is a violation of the Fourteenth Amendment.
Even worse for Walden and his fellow Republicans, his legislation does something that the Republicans have taken great pains to avoid doing, which is to tacitly admit that the Platinum Coin Option is both legal and possible. Walden’s bill would make excellent court-of-law ammunition in defense of the legality of the Platinum Coin Option.
To paraphrase Paul Krugman: Release the Kraken Mint the Coin!
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Talk about an ad homineim attack! Just because it’s a Republican who is opposed to this idea of a magical coin that will somehow save us from this latest crisis of capitalism does not give the idea itself any credence.
Even hicks can spot hokum.
It won’t work. G’head! Deposit the trillion dollar magical coin. Still won’t save this system. It’s doomed. Doesn’t work. Bad for the planet. All that.
Take off the Red-Blue glasses. Jeez.
Meanwhile, Josh Barro crows over having accidentally stampeded a congressional Republican into crafting anti-coin legislation:
Did you read Walden’s bill? He has no idea what the PCO is, aside from its being something that known liberals like Krugman and Josh Barro favor.
If you don’t have red-blue glasses, you’re pretty screwed at a 3-D movie. ;-)
Opponents of the $1T coin option: Can you defeat any of Josh Barro’s arguments for it here?
I’m particularly interested in those folks who think that the 14th Amendment Option is a stronger gambit; he thinks otherwise.
The Republicans are trying to box Obama into a corner, no mystery there. It’s Politics 101.
When Obama himself rules out the idea of a $1T coin, surely you will write about that also?
We know that Obama hates it, because it blows his cover for doing what he wants to do and blaming it on the GOP. The PCO puts Obama in a helluva spot. He’s been working cheek-by-jowl with Pete Peterson to impose austerity under the guise of “strengthening” entitlements because the GOP made him do it. Or something like that.
The existence of the PCO makes it clear that the debt limit does not conflict with the 14th Amendment and that any attempt to use the 14th Amendment option would violate 31USC3101(b), which Obama agreed to and signed into law less than two years ago.
He ruled it out during the last go-round, but the calls for it weren’t as strong – or coming from as many ‘very serious people’ – as they are now.
But I’m interested in which gambit is the strongest – coin or 14th. Most commentators I’ve seen say the 14th, but Barro sez the coin.
Explain, please.
Certainly. The platinum-coin option gives the executive branch a way to pay the bills without borrowing. Therefore, the debt limit (31USC3101(b)) does not need to be raised in order for the bills to get paid and there should be no questioning of the U.S. debt as forbidden by Amendment 14.
The current debt limit, 31USC3101(b), is a federal law that Obama agreed to and signed to end the 2011 debt-limit crisis. It forbids running the federal debt about roughly $14T. The 14th Amendment option involves breaking that law and claiming that it, 31USC3101(b), violates the 14th Amendment by forcing the questioning of the public debt of the United States, which it clearly does not because of the platinum-coin options. Obama can’t simply say: “I refuse to pay the nation’s bills because the use of anything freshly issued money is against my neoliberal religion.”
The strongest gambit is the one Obama picks and I predict that he will reject the coin.
Guess that’s because the GOP heard that Treasury was going put on the front side the images of Milton Friedman, Ronald Reagan, Alan Greenspan, and John Ryan lined up like Mt. Rushmore. And on the reverse side the quote “You know, Paul, Reagan proved that deficits don’t matter.”
It only gives him the authority to pay the bills that Congress has authorized and mandated. He can’t arbitrarily decide to spend; he still has to go through Congress to get appropriations. It allows him to retire debt and finance new debt without hitting the debt ceiling.
But it also prevents a shock doctrine approach to Congress. Which is what, I believe, you are arguing.
Exactly. Article 1 Section 9 Clause 7:
That gives Congress an iron grip on the purse. But, and this is important, appropriations only grant permission to withdraw money from the Treasury. They do not put the money there. Article 1 Section 8 provides three ways to put money there:
* Taxation [Clause 1]
* Borrowing [Clause 2]
* The coining of money [Clause 3].
So the platinum-coin option is about using Clause 3 while the GOP have Clause 2 blocked. But, I’d like to see us continue to use whatever mix of borrowing and coining the experts at the Treasury and/or the Fed deem economically most efficient. Currently that ratio is about 99 to 1. I suspect that the opposite would be more efficient.
The ratio of borrowing to coining, aside from the platinum coin issuance, is not determined by the experts at the Treasury and/or the Fed. Coinage and the amount of currency that can be issued are limited by law.
Also, I suspect that the experts would tend to lean away from option 3 just because of their training and the history of government finance over their careers.
I suspect part of the fallacy is trying to create a system that operates by itself without human prudence. It halfway works that way, which gives Congress the illusion that they can escape responsibility.
I’d say that lacking Red/Blue glasses enables one to better appreciate the illusion which is the movie!
Good one!
Now appearing at the Huffinton Post:
http://www.huffingtonpost.com/2013/01/07/trillion-dollar-coin-solution_n_2426333.html
The seminal publication was here on January 3, 2011 by Beowulf. But he first mentioned it in on July 6, 2010 in the last paragraph of a comment at Brad De Long blog. Letsgetitdone, being an MMTer, immediately recognized the significance and encouraged beowulf to write it up in a fuller format, which ultimately led to that January 2011 article.
Letsgetitdone posted a full history here about a month ago.
Most likely because there will be a lot of unpleasant questions he will face.
http://my.firedoglake.com/letsgetitdone/2013/01/08/the-small-ball-trillion-dollar-coin-seigniorage-exception/#comment-3
Exactly. 31USC5112(k) blows a hole in the boogey-man story by which Obama and Peterson, who work together cheek-by-jowl, seek to bamboozle Americans into accepting Greek-style austerity.
More importantly, if he quits pearl clutching and uses High value PCS in the $60 T range he can take the debt entirely off the table over a period of years, and even in the first week he can pay down intragovernmental and Fed-held debt by by $6.5 T or so, reducing the debt-to-GDP ratio by about 40%, and also have money to cover deficit spending already appropriated. That would transform the political context of debate over government programs. Suddenly we could afford anything we wanted to accomplish public purposes. The issues would be over whether a program would be effective and whether it would be inflationary, not over whether we could afford this or that.
The current debate over the $1 T coin could be the first step towards accomplishing this transformation; or if Barro’s incredible stupid swap proposal is followed, the Administration might trade in the PCS capability for repeal of the debt ceiling law; a trade of something (the capability) for nothing (a bill that is a dead letter if high value PCS is used). If they did that; then they wuld condemn us to debt instrument financing of deficits for the foreseeable future.
Wigwam, I have to make a couple of changes to that post. Cullen Roche discovered two earlier comments mentioning PCS, the first by beowulf (Carlos Mucha) and the second by Ramanan, preceding the July comment.
The first mention of it in a post, was also here on November 12, 2010, when in a piece on the debt ceiling focused on the 14th amendment, I quoted extensively from a comment beowulf had made at New Deal 2.0 on a post by Marshall Auerback on the 14th amendment option. Beo’s January 3rd post was the first to present the legal basis of the law in detail and to focus on the PCS idea. I followed with another post here on January 5, 2011, reviewing beowulf’s post and expanding on the implications. Over the period of the past 2 years I must have 50 or 60 posts dealing with the subject and you must have at least 10, starting in the first 6 months of 2011 before the mainstream picks it up with Felix Salmon’s post in the middle of July, quickly followed by Matt Yglesias’s first post on the subject.