Debt Ceiling or Platinum Option?

debtceiling

Let me be blunt: if the Republicans threaten to not raise the debt ceiling unless the Democrats agree to spending cuts, they are the functional equivalent of terrorists, holding a gun to the head of the economy and demanding the President give in to their demands.

Here’s why: If the US cannot make payments on money it owes, then our credit rating crashes, our bonds become more expensive, the budget would be made much harder to balance and we could dive into another global recession.  You don’t make that a bargaining chip.   The President’s biggest first term mistake was to allow himself to be suckered into bargaining on the debt ceiling, thinking he could get a deal.   He cannot repeat that mistake.

Note: Congress has already voted to spend this money.   It’s not like the President wants to increase debt and Congress doesn’t.   This is money the Republican House has voted to spend – it’s a debt they’ve approved.  For them to not raise the debt ceiling or to blame the President for the higher debt is objectively wrong.   That’s why for the good of the country the President cannot negotiate around the debt ceiling.   He should work to make it that neither party ever can.

Don’t get me wrong – there should be real talk on deficit and debt reduction.   We need to take a hard look at demographic change and the long term sustainability of so-called “entitlements.”   The Republicans are not all wrong in this discussion.  You just don’t threaten the life of the US economy in order to get your way.

GOP leaders have publicly stated they want to use the debt ceiling as leverage, holding the global economy hostage unless the Democrats give into their demands

GOP leaders have publicly stated they want to use the debt ceiling as leverage, holding the global economy hostage unless the Democrats give into their demands

Last time this came up many people thought that perhaps the President could use the 14th amendment to unilaterally raise the debt ceiling.   Coming just before an election year with the Republicans sure to start impeachment hearings by claiming that would be a misuse of that power, that was an option the President could not risk.   But his legal team should seriously consider it, the political conditions have changed.

There is also the so-called platinum option.   The President does not have the power to print money, only the Federal Reserve can do that.   But there is power given to the Secretary of the Treasury:

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.

Should the Treasury issue a trillion dollar coin like this?

Should the Treasury issue a trillion dollar coin like this?  What if Monty Burns steals it?

You see why laws are so complex – if you don’t word them right you can leave enormous loopholes.   The purpose of this law is to make it possible for the Treasury to issue platinum collector coins.    But what if the Secretary of the Treasury minted a $1 trillion dollar platinum coin and deposited it with the federal reserve?   And what if he threatened to keep doing so until the debt ceiling limit was raised?   That would keep us from reaching the debt ceiling and thus avoid default.

That might risk inflation – minting trillion dollar coins adds greatly to the money supply.  But the Treasury secretary could make clear that those coins would be withdrawn in response to a raising of the debt ceiling.   Better would be to abolish the debt ceiling issue — it’s insane to make it possible for a manufactured crisis to threaten the world economy — and at the same time rewrite the  above law so the loophole is closed.

If Congress votes to spend money, they are voting to borrow enough money to spend what they want.   There should be no secondary ‘debt ceiling’ vote.   The platinum option is probably too absurd to be used, but when the global economy is being held hostage it might be necessary.

The President must address this issue forcefully in his State of the Union speech

The President must address this issue forcefully in his State of the Union speech

The President must make this an issue in the State of the Union address – he must call the Republicans out as recklessly threatening the country by holding the debt ceiling hostage as a way to gain leverage.   He must take control of this issue, and put the Republicans on the defensive.   This should be the first shot in the 2014 campaign – if the Republicans purposefully crash the economy, the public should make them pay.     He shouldn’t call them terrorists (though I think that’s what they’d be doing), but he has to crystallize the issue for the country and show leadership.

At the same time he must offer real negotiations on the budget and show his good faith.  But those two issues must not be linked, it may take longer to reach a budget compromise and that’s OK.    The President wants his legacy to be putting the US on the path to fiscal responsibility, not sky high deficits.  The Republicans know it.   Risking the economy on a phony issue is insane.

As the debt ceiling deadline nears, if the GOP tries to play that game the White House should seriously explore and discuss options like the 14th amendment or the platinum coin.   Given the dynamics in 2011 I think the President was right to go with the sequestration — it actually set the Democrats up for a big win on the fiscal cliff.   But for the sake of the country he can’t allow Congress to hold the US economy hostage in order to try to get their way.  It’s un-American.

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  1. #1 by lbwoodgate on January 4, 2013 - 13:42

    “We need to take a hard look at demographic change and the long term sustainability of so-called “entitlements.” The Republicans are not all wrong in this discussion.”

    Yes but we must keep in mind that there have been several changes put on the backs of those least able to afford a reduction in entitlements like raising the eligibility age for SS to 67 and increasing Medicare premiums. What needs to be done and in large part has been done by the Obama administration is to reduce overall health care costs by prosecuting health care professionals and suppliers who pad their bills, prescribe unnecessary treatments and questionable prescriptions while also allowing the U.S. government to negotiate prescriptions drugs as every other civilized society has to get the best economical cost for needed drugs.

    Republicans however listen way too much to the corporate leaders in health care, health insurance and Big Pharma and pretend that the problem lies more with Romney’s view of too many “moochers and takers”.

    • #2 by Scott Erb on January 4, 2013 - 13:51

      Yes, and compared to the rest of the world we do not treat our retirees well. But they’re part of the 47% so….. I wish Americans would actually learn about the rest of the world. So many believe that things are better here, people are richer here and people are freer here. That’s not true!

  2. #3 by pino on January 4, 2013 - 15:09

    Let me be blunt: if the Republicans threaten to not raise the debt ceiling unless the Democrats agree to spending cuts, they are the functional equivalent of terrorists, holding a gun to the head of the economy and demanding the President give in to their demands.

    Ahh yes, the gentle tolerant left.

    What about Obama’s call to engage in more civil discourse?

    Terrorists?
    Guns to heads?

    Jeepers.

    • #4 by Scott Erb on January 4, 2013 - 16:11

      I’m stating a fact. If either party would be so reckless as to risk the entire global economy to get leverage in negotiating budget cuts, they would be un-American, even traitorous. Some things are just wrong – risking the country’s economic collapse to try to win a few spending cuts would be contemptible. I’m stating a fact, Pino. It would be like terrorism. It’s holding the economy hostage. Rather than complain about the words used, can you prove me wrong? I think you know you can’t. Make an argument, don’t just complain that you don’t like the words used.

      • #5 by pino on January 4, 2013 - 22:35

        I’m stating a fact, Pino. It would be like terrorism. It’s holding the economy hostage.

        There is no arguing or debating with that belief. You’re on your own on this one.

      • #6 by Scott Erb on January 5, 2013 - 05:50

        In other words, you can’ deny my point. You have no counter argument. Here is what you cannot deny: To use the debt ceiling to try to force the Democrats to comply is to threaten economic crisis if the Republicans don’t get their way. That is the GOP saying “if you don’t give in to us, we’ll cause economic crisis, maybe collapse.” That is taking the economy hostage – the equivalent of terrorism. You can’t deny it. You know you can’t. Don’t dance and weave, Pino. You know I’m right. Admit it. If you can’t make a counter argument, that proves it. It’s not “belief,” it’s a clear argument that you cannot counter.

      • #7 by pino on January 5, 2013 - 13:02

        In other words, you can’ deny my point.

        Not at all.

        My point is that I’m not going to debate you when you refer to one side as terrorists. When you say things like that you lose any credibility on the subject you may have had.

      • #8 by Titfortat on January 6, 2013 - 14:00

        Calling people terrorists seems like an American pastime. It seems if people disagree with your positions and fight back they are ultimately all terrorists. As much as I usually disagree with Pino, I agree with him on that point. I do wonder if he follows his own logic though.

  3. #9 by elizjamison on January 5, 2013 - 11:34

    “The president must make this an issue in the State of the Union address – he must call the Republicans out as recklessly threatening the country by holding the debt ceiling hostage as a way to gain leverage. He must take control of this issue, and put the Republicans on the defensive. This should be the first shot in the 2014 campaign – if the Republicans purposefully crash the economy, the public should make them pay.”

    Very informative post – I wish I knew more about these issues to understand what you’re talking about so that I can form my own opinion about it.

    I want to comment on the language of the post and am using the above quote as my example. I feel sad that we are using terms like “Call the Republicans out” and “holding..hostage” and “purposefully crash…” and “make them pay”. This language sounds so extreme – and I just can’t believe that either party would purposefully crash our economy. Why would we do that to ourselves? Is it really a matter of making someone pay?

    I am frustrated with the language of both liberals and conservatives. Each makes it sound as if the other side is out to kill America. It makes no sense to me.

    • #10 by Scott Erb on January 5, 2013 - 12:10

      I admit I have some emotion on this – I can’t believe anyone would want to use the debt ceiling as bargaining leverage. I do not consider myself overly partisan – one of my political heroes is Republican Olympia Snowe who retired from the Senate because of the partisanship – and a lot of acrimony directed against her by the right wing of the GOP. I believe the two sides have to reach compromises that will probably not be acceptable to the extremes.

      I think we do need to cut deficits and get on a sustainable budgetary path. I think the Republicans have some good ideas, but there is an extremist core that is too powerful. I honestly think Boehner wanted to compromise but couldn’t. We need a strong conservative party and a strong liberal party. So while I’m a bit angry about this issue, I do not think most Republicans truly want to hold the economy hostage.

      • #11 by elizjamison on January 5, 2013 - 12:44

        I think you hit it when you said there’s an “extremist core that is too powerful”. If everyone would just stop and think…And yes, we do need both sides to be strong and smart.

    • #12 by pino on January 5, 2013 - 13:06

      I want to comment on the language of the post and am using the above quote as my example. I feel sad that we are using terms like “Call the Republicans out” and “holding..hostage” and “purposefully crash…” and “make them pay”. This language sounds so extreme

      Not only is the language abusive and insulting, it’s coming from the side that most often calls for civility in politics. It’s the democrat president that has made a point of the rhetoric.

      Truly ironic.

      • #13 by Norbrook on January 5, 2013 - 22:06

        Would you like some cheese to go with your whine? In case you’ve forgotten, and apparently you have, the last time the Republicans pulled this stunt, it resulted in a downgrading of the country’s credit rating. In other words, we ended up paying more interest. Now, they’re saying they’re going to do it again, even though they know what the consequences are. So, they’re using the old routine of “we must destroy the village to save it.” Maybe terrorist isn’t the right term, how about “f***ing idiots?” Does that work for you?

      • #14 by pino on January 7, 2013 - 15:56

        Would you like some cheese to go with your whine?

        Yes please.

        But on a more serious, and useful, subject, if you are going to complain about language and messaging, then you ought to pay attention to language and messaging.

        In case you’ve forgotten, and apparently you have, the last time the Republicans pulled this stunt, it resulted in a downgrading of the country’s credit rating.

        The rating was downgraded not because of the shenanigans of the debt ceiling, but because the solution didn’t do enough to fix out troubles. If anything, the republicans compromised too much and didn’t get the deal that we needed.

  4. #15 by bruce on January 5, 2013 - 21:58

    It seems to me that the whole notion of debt ceiling is kind of foolish. If the Congress makes laws (with the President) to spend x trillion, and tax x-y trillion that implies a larger deficit. For the congress to mandate spending and inadequate tax to fund the spending, but then preclude borrowing is again foolish. Doesn’t the separation of powers imply the executive must choose which law to execute. That said borrowing in the executive purview, especially given the 14th amendment.

    • #16 by Rob F on January 7, 2013 - 16:42

      Legal scholars are divided on whether the 14th Amendment makes the debt ceiling unconstitutional. (WP quotes some legal scholars’ opinions).

      IANAL, but FWIW, if Obama ignored the debt ceiling, and that action was challenged all the way to SCOTUS, I think that SCOTUS would probably strike the debt ceiling down or perhaps throw the case out on a technicality (like standing or political question grounds).

  5. #17 by Scott Erb on January 7, 2013 - 16:06

    You don’t like the word terrorist, fine – let’s remove that. For the good of the country President Obama has to insist that neither party should ever be able to risk global economic crisis by refusing to finance the money they already voted to spend. The President must not negotiate on this, and must politically make it very clear that no party should be able to say “give us what we want or we bring down the economy.” It was wrong to negotiate before, and he must not do it again. He has the State of the Union address to claim this issue. HOWEVER, there should be real negotiations about the budget and how to move forward. The Republicans should not be shut out, they have the House and need to be taken seriously. But to threaten economic collapse unless they get what they want? No President can accept that, for the good of the country.

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