A few weeks ago, Paul Krugman discussed the ONE TRILLION DOLLAR deficit, and why it doesn’t mean that much. But today, there has been a lot more of the ONE TRILLION DOLLAR idea, but in a different (platinum) form that could solve the debt ceiling charade. The charade is the idea that the Republican party (specifically the GOPs in the House of Representatives) could use the procedure by which the debt ceiling is raised (allowing for greater borrowing by the US government to pay for spending Congress has already authorized). Short and simple, if the debt ceiling is not raised, the US government will default on its debt, which would be unprecedented, since it is a manageable debt that is growing currently due to the weak economy, but is not anywhere near unsustainable (if you want proof, look at the cost, measured by Treasury yields, now at record lows).
The GOP threat, which they used to extract cuts in spending back in 2011 (never mind that we are still trying to get out of the Lesser Depression), is that if there are not more spending cuts, they will hold hostage the credit of the US government by threatening to force a US debt default if their demands are not met. Obama has rightly promised not to negotiate about the debt ceiling (although he already did, trying to get its resolution in the fiscal stupidity bomb, aka the fiscal cliff, negotiations). However, given the way the fiscal stupidity bomb negotiations with, no one believes Obama anymore about that.
So, then, what are his options? He could argue that the 14th amendment does not allow for a voluntary default, but he already said he won’t use this tool (he is a terrible negotiator, and an amazingly weak president by his own choosing). However, he could mint a ONE TRILLION DOLLAR platinum coin. Joe Weisenthal explains:
“In the section of the law which specifically relates to the Treasuries ability to create money (coins and bills) section K says this: (k) The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.In other words, when it comes to platinum coins, the Secretary (who is currently Tim Geithner) has discretion on the designs, specifications, quantities, and denominations of platinum coinage.”
That coin would then be deposited with the Federal Reserve in the US government’s bank account and could be used to make the payments already authorized by Congress and take the wind out of the sails of the “Somali pirates of debt default” that is today’s GOP. With the precedent already established it would make the GOPs hostage taking pointless (since it is just paying for spending they authorized and produces the same effect, without actually issuing bonds in excess of the debt ceiling).
If Obama were a good negotiator, which he is not, he would use this option as a way to resolve the debt ceiling crisis in advance by stating that the die is already cast for the ONE TRILLION DOLLAR coin (please submit in the comments whose face should appear on it, my vote is for Joe Biden in aviator glasses). In exchange for the abolition of the debt ceiling, Obama could offer to change the language in the law to remove the ability of the Treasury to issue ONE TRILLION DOLLAR platinum coins, as Josh Barro argued today:
“And then he should offer to sign a bill revoking his authority to issue platinum coins — so long as that bill also abolishes the debt ceiling. The executive branch will give up its unwarranted power to print if the legislative branch will give up its unwarranted restriction on borrowing to cover already appropriated obligations.”
When it comes down to it, the debt ceiling is stupid. It limits the ability of the Treasury to borrow to pay for spending already appropriated by the Congress and the use of the debt ceiling by the GOP demonstrates a disgusting willingness to use the full faith and credit of the United States as nothing more than a political bargaining chip. It would be an act of suicidal cynicism if the GOP actually went through on their threat to force a US default (yet I don’t doubt their willingness to do just that, knowing the House GOPs suicidal cynicism). Let’s get rid of this archaic relic before it becomes an everyday tool of political mayhem ($5 doesn’t buy my undivided attention, Robert!).