January 8, 2013
We’ve crossed over into Bizarro Wonk World, where the nonsensical is clever and crazy is sane. Maybe it was bound to happen given the state of our politics and the string of artificial crises we’ve staggered through, but the notion of another showdown about the debt ceiling has taken the discussion about our fiscal policy to the level of the absurd. Exhibit A is the growing chatter on the internet and from TV talking heads about the Treasury minting a trillion dollar platinum coin to avoid a debt-ceiling debacle.
As that crisis nears, our newly sworn in House of Representatives is out of session until January 14 and our newly sworn in Senate doesn't return until January 22. And why not? Now that we’ve come through a 13th hour resolution to the fraught fiscal cliff negotiations, we've got more than a month to go before our next self-inflicted calamity hits.
For now, our political leaders can just stake out their early negotiating positions and wait for the deadline, estimated to be mid-February, to maximize their leverage on the debt limit. The president insists he won’t negotiate for an increase. “One thing I will not compromise over is whether or not Congress should pay the tab for a bill they’ve already racked up,” Obama reiterated on Saturday. “If Congress refuses to give the United States the ability to pay its bills on time, the consequences for the global economy could be catastrophic.” For his part, House Speaker John Boehner has said he won’t back away from the approach he used in 2011, demanding a dollar in spending cuts for each dollar the debt limit is raised – because, hey, it worked so well for the economy and the markets then. After interviewing the Speaker, The Wall Street Journal’s Stephen Moore suggests that the so-called Boehner Rule might result in “a series of monthly debt-ceiling increases.” Because why wait a couple of months for a new crisis when you can have one every few weeks?
In the absence of any detailed proposals from political leaders for resolving our looming fiscal predicament, the pundit class is left kicking around only slightly less absurd solutions. The coin idea, advanced in July 2011 by Cullen Roche’s Pragmatic Capitalism and still weirdly titillating to econ geeks, would take advantage of a once-obscure loophole in the law that allows the Treasury to mint legal tender platinum coins in any denomination for collectors. Before he leaves office, Treasury Secretary Timothy Geithner could order a $1 trillion coin made and then deposit it at the Federal Reserve to temporarily finance government spending.
Business Insider’s Joe Weisenthal has been banging the drum on the platinum coin, along with Bloomberg’s Josh Barro, who wrote about it here, here and here. UBS’s Art Cashin mentioned it on CNBC. Stephen Colbert tackled the idea on his show. Even PIMCO's Bill Gross has entered the discussion, suggesting a slight wrinkle to the concept: using 100 $10 billion coins instead.
Members of Congress have joined in, too. Democratic Rep. Jerrold Nadler told Capital New York: "It sounds silly but it's absolutely legal. And it would normally not be proper to consider such a thing, except when you're faced with blackmail to destroy the country's economy, you have to consider things." The idea has gained enough momentum that, potential constitutional questions aside, Rep. Greg Walden (R-Ore.) on Monday announced he would introduce a bill to prevent such a coin from being struck.
“Some people are in denial about the need to reduce spending and balance the budget,” Walden said in a news release. “This scheme to mint trillion dollar platinum coins is absurd and dangerous, and would be laughable if the proponents weren’t so serious about it as a solution.”
Proponents of the coin idea are serious, and they aren’t. They admit they are fighting stupid with silly. As Paul Krugman, who has also endorsed the coin idea, explained it, if Republicans really want to hold the global economy hostage in order to cut spending, even rational observers might as well float an idea that’s almost as outlandish:"It’s easy to make sententious remarks to the effect that we shouldn’t look for gimmicks, we should sit down like serious people and deal with our problems realistically. That may sound reasonable — if you’ve been living in a cave for the past four years. Given the realities of our political situation, and in particular the mixture of ruthlessness and craziness that now characterizes House Republicans, it’s just ridiculous — far more ridiculous than the notion of the coin.
"So if the 14th amendment solution — simply declaring that the debt ceiling is unconstitutional — isn’t workable, go with the coin.”
Using the debt ceiling as leverage again is playing with fire – a technical default could crater the U.S. economy and have global repercussions – at a time when the American people are tired of getting burned. A new Gallup poll finds that 77 percent of Americans say that the way Washington is working is “causing serious harm” to the country, a number that’s in line with Congress’ dismal 18 percent approval rating.
It isn’t just liberals like Krugman criticizing the Republican’s debt ceiling threats. Newt Gingrich has called the strategy a “dead loser,” suggesting the Republicans instead threaten to shut down the government by not passing a continuing resolution on the budget. “The House has no obligation to pass a CR, a continuing resolution, on the president’s terms. It has no obligation to pass a sequester on the president’s terms,” Gingrich said Sunday on Meet the Press. “I think those are both much better fights than a debt ceiling. The debt ceiling guarantees a crisis. It guarantees that the markets will all cave in on Republicans, and Republicans in the end will give up.”
Boehner and other Congressional Republicans have given little indication they’ll heed that advice. But it’s still early. In the new Gallup poll, 52 percent of Americans said they are optimistic that our politics will improve over the next 10 years. If only Congress and the president could give them some reason for that optimism.
This article was updated at 9 p.m. on January 8.