Yes, the Platinum Coin means that our political system is hopeless
If you don't know about the Platinum Coin, i envy you, but not for long because i'm about to 'splain it to you.
I can't even believe that we're here talking about this. I really can't. You see, back at the end of 2012, we had a "Fiscal Cliff" (please assume scare quotes around all use of this phrase going forward). And as i've described here before, that Fiscal Cliff was the last time that Obama was going to have any leverage with the House Republicans. Because if nothing was going to be done, the Bush Tax cuts were going to expire and automatic cuts to the military were going to happen. And Republicans didn't want those things to happen. So Obama should have been able to demand a few things in return for preventing those things from happening.
The right way to do it was to wait until after we went over the cliff, wait till everyone was in a panic about these things happening, and then say "Ok, i want A, B, and C in return for not letting all the tax cuts expire and not letting all the military cuts happen." "C", by the way, was eliminating this debt ceiling nonsense once and for all. But that didn't happen. Obama aggressively pursued a weak-sauce compromise before we went over the cliff, and got very little in return. And more importantly, kicked "B" (the sequestration cuts) down the road three months, which coincides with when we'll reach our next debt ceiling. So he's coming into this new crisis with no ammo to fight with.
Now, what is this debt ceiling business? Congress passes laws. Those laws direct the government on how much money to spend, and on what. The Treasury department pays for that spending, and if the spending costs more than we have in revenue (e.g. taxes), it borrows the difference. Separately, we have a law that sets the maximum amount we can borrow. So you can see the disconnect here. If Congress doesn't want the government to spend more than X dollars, it shouldn't pass laws telling the government to spend more than X dollars.
This is important, because the perception a lot of people seem to have is that the Obama administration is out there spending all this money on its own accord, and that's not the case at all. Obama doesn't get to decide how much money to spend. Congress does. Obama (or his Treasury Secretary) just has to pay for it.
So it's very weird that we have this debt ceiling that Congress votes on separately from their spending bills. But we do, and Congress has routinely increased the limit when we reach it (usually after a little grandstanding). But the last time this came up, the Republicans refused to vote to increase it unless concessions were made, and the Obama administration complied. Now they are doing so again, and this time the Obama administration is saying they won't comply. If anyone has faith in Obama's steely resolve on this though, i'll just point you to the Fiscal Cliff agreement.
Remember, raising the debt ceiling isn't about increasing spending. It's about paying for things you already bought. Congress bought stuff on the credit card and now they won't let Timothy Geithner pay the bill.
If we don't pay our bills, our economy will collapse. This isn't like the Fiscal Cliff where we really could (and should) have went over it with some minor disruptions here and there. This will be a signal to the entire world that our Treasury bonds are not guaranteed. Treasury bonds are where people put money when the economy is risky or fragile. They are the risk-free choice. If suddenly that safety net is gone, then nowhere is safe, and we are in economic free-fall. Every investor pulls their money out of everything and stuffs it under their mattress, and every business in America is out of capital. That means layoffs, recession, disaster.
So Obama has two choices to avoid economic collapse: agree to Republican demands and agree to major cuts to Medicare and Social Security (and, by the way, agree to them again the next time we reach the debt limit and every time after that. Because once you show that you can be pushed around this way, it's no longer an outrageous one-off thing; it's a regular occurrence), or find some way to circumvent the debt limit.
In the "circumvent" column are a few possibilities, all tenuous, but the one that is gaining momentum is the Platinum Coin. Due to an obscure law, the Treasury is allowed to mint coins and assign values to them. So the idea is that the Treasury mints a coin, stamps $1 trillion on it, and then deposits it at the Fed and withdraws regular money to pay its debts.
Remember, again, the Obama administration can't do anything they want with that coin. Biden can't take it to Hooters. The government can only spend money on things that Congress has approved. So this can only be used to pay our existing obligations.
Also, and this really seems to be difficult for some people to grasp, but you don't need the coin to be made out of $1 trillion worth of platinum, any more than your $20 bill is made out of $20 of paper and cotton.
Now we get to the title of my post. It's really the only reason i'm going through this agonizing explanation. But Bob Somerby at the Daily Howler raises an important point here. This debate is between people who are "in the know", so to speak. People who understand that the debt ceiling crisis is absurd, and so the Platinum Coin works as an equally absurd response for someone with no other options (and some, including some liberals, who think it's too crazy or wouldn't stand up in court). But as the Howler points out, if Obama actually did this, the average person would assume that Obama was coining money and spending it of his own accord.
Somerby wonders why liberals are wasting time coming up with crazy counter-strategies to the Republicans' crazy strategies. Why find some absurd solution? Why not go to the public and say "Here's the facts. Go yell at your Republican congresscritter!"
In all these discussions, we continue to be struck by the dog that doesn't yelp or howl. We see no one wondering how Obama might persuade the public that the debt limit has to be raised.
And he's absolutely right. But i put it to you that even if Democrats had the necessary infrastructure in place to get a message out to the public (and they are woefully inadequate in that regard), and even if it worked and they were able to explain all the intricacies of the debt ceiling and they got the public on their side... it still wouldn't make a difference.
First, we just had an election. People in Congress right now are feeling pretty safe; an election two years from now isn't going to be a pressing concern.
Second, the Republicans in the House are pretty safe no matter how close we are to an election. Democrats won the popular vote in the House by more than half a million votes in the last elections, and yet the Republicans still have a 54% majority in the House. It's said that Democrats would have to win the popular vote by a 7% margin to regain the House. That's because of gerrymandering. These Republicans are safe. They can't be kicked out. So they've got nothing to be afraid of.
So that means (legal) chicanery and gimmicks are our only hope.
By fnord12 | January 11, 2013, 3:55 PM | Liberal Outrage