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So it’s official – neither the Mint nor the Treasury will do the Platinum Coin Option:
The U.S. Treasury Department will not mint a high-value platinum coin to avert the debt ceiling, according to an official statement from the Obama administration obtained by the Huffington Post on Saturday.
“Neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit,” the statement reads.
Well, that settles that. Since using the 14th Amendment gambit was rejected by the White House back in December, this leaves no “easy out” from the debt limit standoff.
I suspect that it was discovered that Billmon et al were right about the political optics of this: The platinum coin is something the GOP can use to mock Obama and the Dems and to perhaps fire up the base for a replay of 2010 next year. In fact, they were already doing so. Removing the Platinum Coin from the picture deprives the GOP of their efforts to repaint the picture from the hostage-taking scenario that will cause the Republicans to lose big in 2014 should they actually pull the trigger.
The Republicans know this and are frantically trying to argue around this by pretending that they really aren’t holding anything hostage. But as David Weigel points out, this isn’t working:
After all, if you nab some 12-year old scion of a millionaire, and threaten to do something bad to them unless you get $1 million, you’re taking a hostage. The fact that the 12-year old will eventually age and die of natural causes doesn’t mean you’re not forcing somebody’s hand. But Republicans realize that they’re blamed when they demand these cuts, so they’re trying to shift the Overton Window and claim that whiny Democrats are just pitching a fit. The reframing is not working so far.
Let’s just hope now that the political wonks are right and the Republicans can be made by their Wall Street patrons to back off. Otherwise, we’re doomed.
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I can’t find it now, my web search skills having failed me for the nonce, but I seem to recall that the White House, in addition to rejecting the 14th amendment option, also specifically nixed the Platinum Coin option when it came up in July of 2011. Do any of you remember any such thing?
It’s why I think that they’ve known the legal issues for the PCO since at least 2011, and since I don’t think those haven’t changed much if at all since then, the only reasons I can think for their not having shot down the Coin at the same time they shot down the 14th back last month is that a) they weren’t sure yet about the political optics of the coin, or b) they weren’t expecting PCO discussion to be taken up again by guys like Krugman, as opposed to staying strictly in the blogosphere.
Billmon says the objections to the PCO aren’t legal ones so much as political ones:
My ass. What are the optics of billmon kissing it?
If this is a game of Chicken, President Obama just threw the steering wheel out of the car. It was a choice of political strategy not to leave the issue hanging out there.
Next wild idea to push on the blogosphere: If the US defaults, can creditors use the 14th amendment to hold individual Members of Congress personally liable for the debts of the US government? The analogy is “piercing the corporate veil” in cases of corporate dishonesty.
As I said, Obama would never take this “out” -or another such option- if you gave it to him for free. There are two reasons:
A) He actually wants to cut social security and medicare. This will be his Reaganite “bipartisan” triumph. Removing the Republican’s leverage on the budget gives him no excuse to carry out this “reform” of entitlements.
B) Coin seigniorage, on such a scale, conflicts with the fundamental rules of capital-ISM. In Capitalism, money is king. The political system regardless of any democratic pretenses is a creature of -and must obey- the financial system. When the government spends money into the economy (by deficit spending) for whatever its reasons for doing so, good or bad, it is only allowed to do so by borrowing money from large lenders – ie, mostly from banks here and abroad. The banks don’t actually have this money, mind you, but they have a super power. They create money by wishing hard and spitting into their palms. Then in the fullness of time the US Government must pay back the imaginary money with interest. It should be clear to anyone with a grasp of English better than or equal to 5 year old, why Platinum Coin Seigniorage was never going to be deployed by the Obama administration as a “silver bullet-except its made of platinum” to combat the Republican Party’s terrorist style hostage taking. It would upset the very rich, mostly white people whom President Obama has been trying so very hard to impress. Their power is wrapped up in the illusion that they must agree to financing the government’s operations – that they are the indispensable class. Apparently, they don’t care if the Republicans stick up the government now and then, but Obama thinks they would find his taking away of their power to enslave the government and all its citizens to be an act of unforgivable gaucherie.
Why no platinum coin? Probably because the Fed, the Treasury, and the WH weren’t able to find a way to use it to benefit the .01%, and the President wanted to assure them he certainly wouldn’t be using on behalf of the rest of us.
But sure, blame it on the Republicans, who would use it to say mean things about Obama. Which of course would be way worse than holding on to a bargaining chip, exercising a bold vision, or not offering hostages to a government shutdown.
“If this is a game of Chicken, President Obama just threw the steering wheel out of the car. It was a choice of political strategy not to leave the issue hanging out there.”
+1
Purposely creating a corner to pretend to be in.
It was a good cocktail party idea, but billmon’s right, in the end minting a high value coin would have been a big political loser.
The bottom line is that Obama wants to cut entitlements and blame it on the GOP. Given that goal, minting the TDC would be the dumbest thing he could do.
But, his delay in killing it has allowed a lot of people to realize that sovereign money is an alternative to borrowed money when it comes to covering deficits. If we could have paid our bills with sovereign money while the debt limit was on, why not pay them that way anyhow? Why pay $250 billion per years in interest? People are starting to think that way.
I love that the discussion happened, wigwam, and it was hilarious to see the idea called ‘hilarious’ by different alleged economists who didn’t understand it in any even. More hilarious than WHAT, lol? This?
My main regret was that so many who opined about it were uninformed, and that now…some can blame Republicans for tanking it. Or should I say: ‘fear of Republican reactions and mockery’.
The important thing is that THE BIG LIE that we must borrow to pay our bills has now been exposed. The possibility of paying the nation’s bills with sovereign money has been opened up. That genie will not go back into its bottle. No way!
Is this another, no matter what Obama and his minions do it’s the Repugs fault diary? If the Repugs weren’t so devious and mean Hussein The Magnificent would lead us to the Promised Land.
Look, OG, enough of your bullshit. It wasn’t the minting of the coin; it was the threat of minting the coin. And it was given up as a bargaining tool — for NOTHING in return.
AND, it was given up because O wants to cut SS and Medicare. He doesn’t want leverage. He wants to be “forced” to do it.
So give it a rest, please.
Bullshit, PW.
That IS a good point. However, I doubt it will get much coverage in the corporate media, which is owned by those who profit off of borrowing and betting.
Inch by inch and row by row
Gonna make this garden grow
All it takes is a rake and a hoe
And the rain…come tumblin’ down…
;o)
X 2, econobuzz.
Yep. There always is the brake pedal.
I don’t comment on FDL much anymore. One reason is that there is a core of individuals — whom I respect and with whom I share values — who don’t seem to understand that the election is OVER. Our job now is not to cover for this asshole in the WH, it’s to push him from the left — toward progressive outcomes.
Enough with the ridiculing of the Rs. They’re all assholes. We know that. But, there’s an asshole in the WH who needs to be reined in.
If this clown had revealed where he was going when he ran — both times — he would be selling peanuts in front of Wrigley Field. (Oh, I know, if I had only listened to him closely … BULLSHIT. He fucking lied.)
Protecting him and justifying his stupid shit is not worthy of this blog.
But, as always, YMMV.
This will be my last comment for a long while.
I hope you reconsider, econobuzz, even though I agree with most everything you say here. For me, wwe still need to offer counter-arguments and encourage accountability…for those who still defend this president.
What leverage we have now is a mystery to me, but telling the truth as we see it’s important, imo.
Why don’t you read the piece before bashing it? C’mon, what are you, an intellectual chicken? Bawk bawk bawk!
So explaining political reality = “protecting” someone you don’t like?
Buh-bye, and please take a whole bunch of others with you!
The only hen cluckclucking here is you. I read the piece. I analyzed his thoughts. He is not describing some objective reality, he is describing only his own personal fear, which I’ll grant you certainly must feel “real” to him. Any dipshit who argues policy based on fear and “what will the neighbors think” optics deserves my scorn — and yours for that matter, though you deem it improper in some henny penny fashion. And I’ll thank you to quit attempting to insult me personally, apparatchik.
Why are some people so amazingly intolerant of voices and viewpoints besides their own?
According to your explanation, Obama decided against the coin because the the GOP was going to use it “to mock Obama and the Dems and to perhaps fire up the base for a replay of 2010 next year.”
Give it a rest. The eleventy-dimnsional chess explanation that apologizes for Obama because the mean old Republicans made him do it deserves a stake in its heart.
Obama nixed the coin because he intends to use the “debt limit standoff” as a vehicle to cut social programs and protect empire spending and corporate subsidies.
There’s plenty of blame on both sides. It is silly to persistently and consistently make excuses for the Democrats while demonizing the Republicans. Reality beckons, grab it.
Exactly. The game is to create a crisis that needs a solution–in this case that means passing a “Grand Bargain” in order to get one political faction to agree to raise the debt ceiling.
But the debt ceiling isn’t the real problem here. It is a manufactured crises that’s being used to force through legislation that would be impossible to pass if not for the specter of shutting down the government. So of course the coin won’t be minted.
Which is why it’s surprising that it didn’t get explicitly torpedoed last month at the same time that the 14th Amendment gambit got torpedoed, being that it was brought up in 2011 just as the 14th was. Then again, Mike Castle himself apparently wasn’t aware of the PCO as recently as two weeks ago, and he co-wrote the bill that made it possible.
I didn’t want to believe it at first, but when I saw the RNCC spending lots of time and money demagoguing the issue, I realized that Billmon was right about this.
I provided reality, you just don’t like what it’s telling you. C’est la vie.
Ah, but who steps on it first? And what are the costs?
Heh. Neither you nor econobuzz will ever leave MyFDL and you know it.
Get Josh Barro interested and maybe he can get Greg Walden to write a bill outlawing it — that would give it a lot of press.
Like many have said, Obama did this for his own reasons.
He wants to cut Social Security so bad that he has dishonestly associated it with the defict. He has made it clear he intends to deal with the “deficit crisis” by cutting the safety net. He has also made it clear that he has no plans to seek cuts in empire spending and corporate welfare.
But according to you, the Republicans say “boo” and he gives into them and we’re supposed to get all hyper about it because somehow it is the Republican’s fault.
You provide “reality”? What a comedian you are.
In January 2009, Jane Hamsher busted and Obama’s cheek-by-jowl efforts with Pete Peterson to
strengthencut entitlements. At a party at George Will’s house, Obama declared that he’s a conservative and that he wants to make “entitlement reform” a hallmark of his presidency. His only problem is to get the voters to blame the GOP.From that perspective, he must totally hate the platinum-coin option, which gives him an alternative to capitulation. That must have bummed his entire week. And, to make matters worse, this afternoon he made it clear that he is running from that option by personal choice; no reasons were given. He didn’t argue that it was unconstitutional. He didn’t argue that it would cause inflation. He merely said that he wasn’t going to consider it.
But, sovereign money is now a meme that is in the national conversation. Whenever someone says, “we can’t afford it.” The question: “Why not mint a platinum coin?” will be lurking in the background.
We’ve let the genie of sovereign money out of the bottle. It ain’t going back.
“… the GOP can use to mock Obama and the Dems and to perhaps fire up the base for a replay of 2010…”
The problem in 2010 was not that the fired up Republican base came out in droves. The problem was that disappointed Obama voters stayed home.
Now that Obama is done negotiating with himself and conceding ground he doesn’t have to, he will be “forced” to negotiate with the Republicans and give them the safety net cuts they all so desperately want.
Republicans will successfully pin that tail on the donkey and disgusted democrats will again stay home leading to a repeat of 2010.
The Democratic congress critters have only one way to escape: disavow Obama’s treachery. Otherwise, they’ll sink with him. But the only sinking he’ll do is a black mark on his legacy. They’ll lose their jobs. That’s a heavy price to pay for loyalty to this sainted leader.
I agree with those that don’t believe it is the political optics, but it is that it means one of the two big opportunities to cut our earned benefits would be ripped away. And ripped away forever, not to be revisited again during Obama’s presidency. I’m even cynical enough to think that ripping that weapon from the crazies would cause this administration much pain.
Here’s the thing, it hasn’t removed our weapon to make his goals impossible.
IOW, the President may blame the Platinum Coin for political optics, but it has also ripped the hostage illusion to threads and eliminated the political optics for that. It was made very clear to anyone paying attention that there is no gun to their head to make any cuts. Now we just have to make our elected representatives to understand that.
He cannot do it without Congress. He cannot do it without Democrats. It is up to us to make it very clear to every Democrat in Congress that it doesn’t matter to us that this is being caused by the big bad Republicans. That we have not missed that the President has thrown away two weapons that ended this AND that they threw away their advantage in the cliff negotiations. Any Democrat who votes to cuts Social Security, Medicare, the VA or any other earned benefit to appease the Republicans AND the White House in this charade will have it hung around their neck like a flaming tire beacon in the next election (and not just by us, but by those big bad Republicans and the Obama administration knows this). But yes, the left will be doing it, too. And social media campaigns are very cheap. There is NO way the Democrats do not get blamed for this. PERIOD.
Exactly. Willful refusal to exercise the platinum-coin option doesn’t take that option away. It has already turned “capitulation” into “cooperation,” regardless of which way he squirms.
The contempt of Democratic Party loyalists for progressives who vote for third parties knows no bounds. If you voted for Jill Stein, you’re an absolute piece of shit for risking a Romney administration. However, when Obama and the Dems chooses to risk a second Great Depression by playing chicken with the GOP over the debt ceiling, that’s just dandy, because the GOP would be blamed for the catastrophe while the platinum coin would make the Dems look bad. It’s OK for them to risk throwing millions of people out of work. Why? Because they’re Democratic Party politicians, and that makes it all right.
I’d say ‘so many people are’ exasperated, not simply intolerant, by the reflexive framing you often give for Oboma’s actions and even worse, non-actions, too many categories to even list.
It took over two hours to get any posts to boot up here this morning, so I cruised around my usual haunts, and few extra. But this excerpt from a piece by Lambert Strether at NC about Krugman on Bill Moyers says it pretty succinctly:
So how many years ago did Oboma appoint arch-austerians Simpson and Bowles to head his Catfood Commission? How many times has he lied to the public that the government’s economic realities are like a household budget, therefore, yada, yada….? His part in creating the stupid Fiscal Cliff, tra la la…my question is as Lambert’s:
When will you and ‘so many others’ allow yourselves to comprehend that this president serves the Plutocracy, is manifestly advancing neoliberalism (TPP, ack!) as fast and hard as he can while pretending to be benighted by Republicans???
And of course I’m not leaving FDL; I was encouraging econobuzz NOT to leave. Remember, the Notable Lefty LOTE-vote advisers told us that after O was re-elected, we’d hold his feet to the fire, lol! Never understood the meme, but…I guess I’ll help when I can. For a lot of us and our families, this safety net and the waning of the social contract shit’s personal, PW.
Because it didn’t actually solve our problems!
It’s so bizarre for me to be defending the Administration on this one I don’t know how to handle it :)
Repeat again and again and again:
The ‘debt ceiling’ is a manufactured crisis. It isn’t real. There is no spoon. The tooth fairy doesn’t exist. And it certainly isn’t the President’s job to fix the matter (that would be Congress, for those who are unsure about budgetary responsibilities). Furthermore, Congress has NEVER not raised the debt ceiling. There is way too much corporate welfare on the line for that to happen. The GOP in Congress would fold like a cheap suit if the government was shut down for more than about 30 seconds because they didn’t increase the debt to pay the defense contractors and the agribusiness firms and the bank bailouts and the drug war…
Well, iirc, Ezra quoted Treasury as being unwilling to mint it, and Bernanke as unwilling to play ball with it, but that may be Ezra being a scribe for the Prez. But yes, it’s great that da Coin has widened the discussion a whale of a lot.
@ yellowsnapdragon: yes.
Obama supporters in 2011: Barack HAD to agree to the spending cuts. There were no other options. What did you want him to do, Firebaggers? Let the GOP throw us into default and cause another Great Depression?
Obama supporters in 2013: Barack is willing to play chicken with the GOP over the debt ceiling! There are other options, but they could make the Dems look bad, so he threw them out the window. We’re sure the GOP won’t throw us into default, and even if they did, the resulting Great Depression would lead to a Democratic landslide. Hooray for Barack! Hooray for Barack!
Wigwam, I personally agree with you that raising awareness that we’re not bankrupt as a country – that we can invest resources in the public commons – is valuable. I also personally would shift from issuing debt to directly printing currency to fund the government’s needs in time periods when expenses exceed revenue. I think that would both be more efficient and be more transparent.
I just want to make sure you see as you’ve been exploring different perspectives on money and debt and inflation and so forth that there are two mutually exclusive perspectives with regards to government spending you’ve addressed.
The MMT perspective says that debt/deficits don’t matter. This is important, because arguing that the government will save money by not issuing debt assumes that the levels of government spending do matter. Obviously, only one of those propositions can be true.
It’s also interesting to note that the Establishment, however exactly you want to define that, is precisely the power that has significantly reduced interest costs over the past few years. In practice, the Fed and Treasury have been using precisely the substance of the PCS option (Fed monetization of Treasury cash flow needs) – they just still maintain the technical process where Treasury issues debt to the public, then the Fed buys that debt from the public. This is why there’s no need for an actual $100 trillion platinum coin. The Fed is already monetizing the government’s cash flow needs!
Just like the only reason mortgages are being written at such high valuations is because the government is backstopping the entire mortgage industry, the only reason the ‘public’ (primary dealers) are buying treasury securities at such high prices (low interest rates) is because the Fed is backstopping the entire market for treasuries.
“…the resulting Great Depression would lead to a Democratic landslide …”
Don’t get your hopes up.
It may lead to a substantial edge in votes cast but it won’t be enough to overcome the GOP gerrymander of legislative districts.
What everyone said: Obama actually wants to cut entitlements and blame it on the GOP
He gave up the cliff as a crisis and now he NEEDS THIS CRISIS IN ORDER TO CUT SOCIAL SECURITY and MEDICAID.
No crisis, government as usual, no grand bargain. This way he gets TWO crisis (remember the looming two month sequester — can’t cut defense, it is only bigger than the next 17 countries in the world’s combined) to take a hack to our “entitlements” that we have been paying for for our whole working lives.
EVERYONE: IT IS EVERY SINGLE WORKING AMERICAN WHO IS HURT BY “chaining” the CPI .. everyone. At the time that a person retires, their initial benefits will also be lower .. it does just hurt over time, it hurts from day 1 of retirement.
“FIX” Social Security: Raise the income cutoff slightly — say to $150,000. Easiest fix.
“FIX” Medicare. Force the government to perform drug price negotiation.
“FIX” Obama and the Democratic party — hey, two out of three ain’t bad.
Yep. I think the optics of cutting SSMM look a lot worse than the optics of minting a new coin.
I usually agree with you pw but this time I think you are off a bit
claiming obama took the platinum coin out of the discussion as a tool to add pressure on the gop is a little backwards
what it really does is give him a reason to “negotiate” where there was no reason while the coin was on the table
he is manipulating the debate so he can appear to lose while getting what he actually wants, which is the deconstruction of our social safety net
think;
wolf dressed as a sheep
They say that sometimes, but then later qualify it with comments about the amount of slack in the economy, etc.
To me, it’s way more complicated than that. IMHO, the structure of the deficit matters more than its size. For example, a trillion-dollar deficit that involved no taxes and only a trillion dollars of government spending would be a disaster on many fronts. Similarly, a deficit that collected every dollar in the country as tax and spent that plus another trillion would be equally diasterous.
Also it depends on who gets taxed and what the money gets spent on, in short, the multipliers make a big difference. For example, the Bush tax cuts added 30 cents to the GDP for every dollar of tax decrease, while the payroll tax holiday added $1.30 to the GDP for every dollar of tax decrease — at least that what Mark Zandi predicted in his 2008 written testimony to Congress. BTW, here are Zandi’s multipliers sorted according to size:
Accelerated Depreciation 0.27
Make Bush Income Tax Cuts Permanent 0.29
Cut Corporate Tax Rate 0.30
Make Dividend and Capital Gains Tax Cuts Permanent 0.37
Extend Alternative Minimum Tax Patch 0.46
Nonrefundable Lump-Sum Tax Rebate 1.02
Across the Board Tax Cut 1.03
Refundable Lump-Sum Tax Rebate 1.26
Payroll Tax Holiday 1.29
Issue General Aid to State Governments 1.36
Increase Infrastructure Spending 1.59
Extend Unemployment Insurance Benefits 1.64
Temporarily Increase Food Stamps 1.73
Notice that items that mostly affect the wealthy have small multipliers, while those affect the rest of us have multipliers that are about five times as large. And, yes, many MMTers do bring multipliers into the conversation when they talk about deficits.
Obama is a radical conservative who tries to fob himself off as a Blue Dog and/or a would-have-been moderate Republican.
The availability of the platinum-coin option turns “capitulation” into “cooperation.” Obama can’t blame the GOP this time. It’s now widely known that he has another option besides capitulation.
There’ll be blame enough to go around. And it’s going to include Democrats who side with Obama and the GOP.
A needed and good comment… thank you.
Many good and needed comments made I think — Thank you.
It is easy to be a Big D at this site — the D tilt is cemented in.
It is Jan 2013 — to now still be pushing and selling Obama and D junk is doing what? It is plain to see this is now about doing “something” despite what B.H.Obama(D) has done/not done since Jan,20,2009. Since 2010. Since 11/10/2012.
What Obama has done/is doing to B.Manning.
Has Obama has now done to uncounted innocent human beings.
What Obama still seeks/is seeking to do to innocent human beings.
POTUS Obama picked Alan Simpson.To peddle/sell sought Obama(D) WH attack(s) on SS.
What is not plain to see in this being so and why Obama did it?
This Plat Coin Option is/was a tool POTUS Obama(D)(DINO)(Wall St,/Big Banks)(M-I-C) has now needlessly tossed away with USG negotiations about USG money politics still in play.
Why did POTUS Obama do so? What was/is gained/kept in place doing so?
Please note > 1st ‘Has-’ should be ‘As-’ in sentence @line # 6
Three comments:
First, the last option to avoid the debt ceiling isn’t gone. The Treasury can sell consols. Consols are securities that pay interest in perpetuity, but don’t have a maturity date for repayment of principal. Since the principal is never due consols don’t count against the debt ceiling. So, if the plutocrat wannabe in the WH wants to avoid the debt ceiling he still can. However, I think he wants to shut down the government and blame the Republicans if he doesn’t get a debt ceiling deal he likes.
Second, it’s frequently said that the Platinum Coin isn’t a solution to our problems. That’s true, especially in its Trillion Dollar Coin (TDC) form. However, a $60 T coin would begin to solve our problems by putting the austerity advocates out of business, so to speak. New post on that here: http://my.firedoglake.com/letsgetitdone/2013/01/14/make-em-do-it-i-still-choose-using-high-value-platinum-coin-seigniorage-to-end-austerity/
Third, I think the Platinum Coin Seigniorage option was taken off the table because Obama was unwilling to use a PCS that would have made a difference. Had he used the $60 T PCS option, paid down 40% of the debt subject to the limit in the first week, and ceased any new debt issuance, Republican insistence on spending cuts would have been highlighted as needless and irrational soon enough and real Democrats would have won the whole game. The trouble is that Obama’s not a real Democrat and his game is different. His game is to make the world safe for plutocracy, and to gradually boil the democracy frog.
Yeah, we’re in agreement there. In fact, I would take out the also personally. That’s the only thing that matters to me.
That’s why I’m maintaining my focus that the whole seigniorage option is irrelevant. Doing it in a small way doesn’t change anything and doing it in a big way doesn’t ensure that the resources are allocated in a productive manner.
And even discussing it gives credence to the framing that the debt is a present problem in need of an immediate solution.
IMHO, our problem can be described in simpler terms that nevertheless agree with our collective, and way-too-complicated understandings thus far;
Obama, indeed all of Washington, and our government are committed to supporting the status quo at all costs.
Any ‘solution’ that might be discovered, invented, understood, offered-up, by We The People, will be denied, mis-represented, put-down, fought, refused, in short, what we want is beside the point.
It does not matter that We The People know the truth, Washington is committed to the lie and there’s no tactical way for us to change their committment to the lie.
The way things will change is when their plans fail on their own, we cannot warn them away from their foolishness, we cannot offer them help, they must fail of their own accord and that failure will result in new opportunities for change.
The issue is that as much as things obviously must change, the 1%, and their representatives in Washington do not want anything to change, and so they will keep trying to put Humpty-Dumpty back together again, no matter what we say or do.
It doesn’t help that they find ways to make their insane activities profitable.
The 1% have gone berserk with power and will not stop their looting of our country until their insane behavior hurts them, right now, the things they are doing hurt only others.
I believe they will cause themselves damage before they are through, and that’s when things will change.
Until then we’re just talking to ourselves.