There's a Solution to the Debt Fight That Could Avert Catastrophe -- Why Is Everyone Ignoring It?
Continued from previous page
Felix Salmon wrote on Reuters' blog that “tools like the 14th Amendment or even crazier loopholes like coin seignorage would be signs of the utter failure of the US political system and civil society,” and claimed that it could lead to “the loss of America’s status as a safe haven and a reserve currency.” But he never bothered to explain why avoiding a debt ceiling crisis would make us less trustworthy in the eyes of the world than Congress' inability to govern, never mind all the theatrics around the non-question of whether it will pay off its debts.
Think Progress blogger Matt Yglesias dismissed coin seignorage as “an idea that’s circulating in Modern Monetary Theory circles” that, in his view, is “legally mistaken.” But he didn't bother to explain why. He later updated his post with a note: “I now think this might be legal after all, provided the coin is made of palladium.” He was likely referring to a law passed last year authorizing the mint to produce palladium coins, but it specifies a face-value of $25 for the coins. (A response to both Yglesias and Salmon's post can be found here.)
The idea of minting a few trillion-dollar coins to skirt the debt ceiling is certainly unprecedented, and it's possible that Yglesias is right and there is some legal issue of which proponents of the idea are unaware. Perhaps it's accurate to call it a “radical” proposal. But all of that needs to be viewed in the context of what are, today, considered relatively “mainstream” positions – positions that are reported and analyzed daily by the Washington Post and the New York Times.
Consider the debt ceiling debate itself: Congress has the power to authorize any amount of spending and raise any amount of tax revenues it wants, and it chose to spend $1.5 trillion more this year then it will take in in taxes. Many of those holding up the debt ceiling were members of Congress when the budget passed – some voted for it. That debt has already been incurred, and now the hard-right flank of the GOP – the party of purported “fiscal responsibility” – is threatening to simply stiff our creditors, despite the fact that doing so would not only cause extreme economic pain on “Main Street,” it would also send the deficit skyrocketing.
Some within the “suicide caucus” are brazen enough to claim, beyond all reason, that nothing much would happen if the U.S. government were in fact to default. A Democratic president has offered them a deal that is well to the right of where even Republican voters stand, but they are steadfast in their opposition to it. Eighty Republican members of the House have also vowed to oppose an alternative crafted by their own party's leaders.
While the debt ceiling has been raised without fuss under both Democratic and Republican presidents, today it's considered an acceptable conservative position for a minority to insist on gutting popular safety-net programs like Social Security and Medicare – programs overwhelming majorities of Americans across the political spectrum support – in exchange for a “deal” on something everyone knows will happen eventually. (The debt ceiling needs to be raised under every budget proposal, including Rep Paul Ryan's, R-Wisconsin, draconian plan.)
And the sheer insanity of cutting spending -- taking money out of people's pockets – in the midst of the worst economic downturn to hit the country in generations has become so mainstream that it is now a bipartisan position with which virtually every “serious” pundit agrees. Perhaps a headline appearing this week in the satirical news outlet the Onion
captured this political moment best: “Congress Continues Debate Over Whether Or Not Nation Should Be Economically Ruined.”