“An Inane Idea”: With A Trillion Dollar Coin, President Obama Can Fight Dumb With Silly
A trillion dollar platinum coin? Really? Has our politics really reached a point where such an obviously inane idea is gaining traction? Well, yes. When your capitol has become Clowntown, U.S.A., you sometimes need to fight bad ideas with silly ones.
The idea, if you haven’t heard, is for President Obama to defuse the forthcoming debt ceiling crisis Republicans are busily manufacturing by directing the Treasury to mint a platinum coin worth $1 trillion. With an extra trillion on the books, the debt ceiling would no longer be an issue. While the Federal Reserve ordinarily is in charge of printing money, there’s a law on the books allowing the Treasury secretary to produce platinum coinage of whatever value s/he sees fit.
Sure, the purpose of the law was to permit the Treasury to issue commemorative coins. But so what? The purpose of the debt ceiling wasn’t to give one party the leverage for a global, economic hostage crisis. Were the debt ceiling not raised, the Washington Post’s Ezra Klein writes, “the damage to the economy would be tremendous, and it would occur at every level, from individuals looking for a loan to buy a house to hedge funders trying to play the markets.” His full article on what happens if we breach the debt ceiling is worth a read.
So when one political party is acting like a political version of a James Bond villain (“Give in to my demands or I will wreck the world economy!”) maybe the answer is for the president to channel his inner Dr. Evil (“One trillion dollars.”)
Again, it all sounds silly but some very serious folks are lining up behind it, including the New York Times’s Paul Krugman, who has a Nobel Prize lying around his office. New York Rep. Jerrold Nadler is also a fan. And despite some suggestions that none of this is legal because it’s not what the law was intended for, Philip Diehl, a former director of the Mint, told Klein that it’s perfectly legal.
So is it a silly idea? Yes. But Republican extremists have brought us into an age of political asymmetrical warfare, passing off crazy, dangerous ideas as serious. Why should the president unilaterally disarm on that front?
By: Robert Schlesinger, U. S. News and World Report, January 9, 2013
“The Real Deficit Argument”: Only Politics Of A Very Degraded Kind Can Keep Us From Moving Forward
Should our politicians dedicate themselves to solving the problems we face now? Or should they spend their time constructing largely theoretical deficit solutions for years far in the future to satisfy certain ideological and aesthetic urges?
This is one of the two central choices the country faces at the beginning of President Obama’s second term. The other is related: Will the establishment, including business leaders and middle-of-the-road journalistic opinion, stand by silently as one side in the coming argument risks cratering the economy in an effort to reverse the verdict of the 2012 election? Yes, I am talking about using the debt ceiling as a political tool, something that was never done until the disaster of 2011.
My first questions are, admittedly, loaded. They refer to a difference of opinion we need to face squarely.
It is entirely true that in the wake of two budget agreements, in 2011 and the just-passed deal on the “fiscal cliff,” we have not reduced the deficit enough. The issue is: How much is enough?
Contrary to all the scare talk you keep hearing, Robert Greenstein, president of the Center on Budget and Policy Priorities, notes that we could put the deficit on a sustainable path for the next 10 years with one more deficit-reduction package equal to about $1.2 trillion, plus the resulting interest savings.
By sustainable, I mean keeping the debt from growing as a share of gross domestic product and holding it at around 73 percent of GDP for the next decade. This is a more than reasonable number by international standards. To put it in perspective: According to the International Monetary Fund, in 2011 Canada’s debt was at 85 percent of GDP, Germany’s was at 81.5 percent — and Greece’s was at 163.3 percent.
Holding the debt ratio in the low 70s is well within our sights. It could be achieved through a combination of $600 billion in cuts and $600 billion in additional revenue through tax reform — or through modest taxes on carbon or on financial transactions. (Okay, for now, I am dreaming on the last two, but they are still good ideas.) The cuts could be made without wrecking Medicare, Medicaid or Social Security, and without eviscerating government’s capacity to invest in the future.
We could then shelve our deficit obsession for a while and confront the problems that should be center-stage over the next few years: restoring shared economic growth, spurring the creation of good jobs, dealing with gun violence, reforming immigration laws, improving our education system, and taking steps on climate change.
But there is the other side of this debate, pushed not only by conservatives but also by a deficit-reduction industry that sees the only test of seriousness as a willingness to slash Medicare, Medicaid and Social Security for those who will retire 10, 20 or 30 years from now. They want to be able to admire nice predictions on a computer screen that show the debt dropping to 60 percent of GDP.
There is no objection in principle to discussing the modest changes that could improve the long-term stability of Social Security. But when it comes to health-care cost projections, there is so much we don’t know that it is truly foolish to make decisions now for, say, 2040.
Health-care cost inflation has been dropping. We can’t be sure how sustainable this trend is, but economists who study the matter think the cost curve may be bending downward for the longer run. The Affordable Care Act contains measures that could further restrain health expenditures.
Is it either sensible or humane to decide in 2013 on the basis of such limited knowledge to toss future seniors and low-income Medicaid recipients under the bus? Health-care costs are something we must keep working on. We can buy time for this difficult undertaking by getting the deficit down to a sustainable level.
And that brings us to the debt ceiling. The central weakness of a largely helpful fiscal cliff deal is that it did not save us from a debt-ceiling fight. It would be colossally stupid — there is no other word — to derail an economic recovery that is slowly but steadily taking hold with another battle over a silly provision in our law. Will all the respectable people who know this sit on the sidelines and let it happen, or will they speak out now?
We are finally on a promising path. Only politics of a very degraded kind can keep us from moving forward.
By: E. J. Dionne Jr., Opinion Writer, The Washington Post, January 6, 2013
“Ideology Displacing Facts”: Simpson-Bowles “Spending Problem” Voodoo Economics Ignores The Lack Of “Crowding Out”
Alan Simpson and Erskine Bowles – co-founders of the corporate lobby Campaign to Fix the Debt – were on Meet the Press this morning. I couldn’t drag myself to watch it because I am sick and tired of hearing every oligarch’s favorite lackeys argue that the national debt is a reason to gut the welfare state. Which is exactly what they were doing this morning:
“Yes, the president has taken some steps forward on the entitlement programs, but has he done enough? Absolutely not,” Bowles said.
But they and their disciples couldn’t be more wrong. The U.S. government has no “spending problem” from a macroeconomist’s point of view. Of course, the country can’t indefinitely continue to borrow more than it earns, but the idea that we must somehow tackle debt by cutting spending — and do it right now — is voodoo economics of the highest order.
For spending to be an immediate problem, it would have to be problematic. And the primary reason that government spending is problematic is due to “the crowding out effect.”
I could find some haughty economist to quote on the issue, but for simplicity’s sake here’s Wikipedia:
“…crowding out is a phenomenon occurring when expansionary fiscal policy causes interest rates to rise, thereby reducing investment spending.”
Yet interest rates are rock bottom and aren’t expected to rise anytime soon, and demand for U.S. Treasury bonds remains high.
Thus, government spending appears to be having no averse effect on financial markets, which, according to Treasury yields, actually seem to think that lending the U.S. government money is a wise idea. The debt “crisis” is only caused by a “spending problem” when one considers government spending to be an issue from an ideological standpoint.
If Simpson and Bowles were serious about tackling the debt without completely undermining the economy, they’d advocate higher taxes on those that can afford to pay more. Corporations are awash with cash, and capital is taking a larger slice of the pie than ever. But aggregate demand is lagging, and to undermine social safety nets would further weaken it. Sound economic policy would, therefore, have the rich finance deficit reduction — if it must be done in this fragile economy.
By: Samuel Knight, Washington Monthly Political Animal, January 6, 2013
“This Is On Congress”: The Debt Ceiling Isn’t President Obama’s Problem, It’ The GOP’s Problem
Obama and Dems have vowed not to negotiate with the GOP over the debt ceiling. This morning, I asked what “not negotiating” would look like in the real world, and whether it’s even possible. But another question may be even more relevant: Do Republicans really have the leverage in the debt ceiling fight they think they have?
Some Republicans are now coming out and acknowledging that the GOP may not be in a strong position in the debt ceiling battle, after all. Here’s Newt Gingrich, on Morning Joe today, telling Republicans that a debt ceiling fight is a “loser” for them:
“They’ve got to find, in the House, a totally new strategy. Everybody’s now talking about, ‘Oh, here comes the debt ceiling.’ I think that’s, frankly, a dead loser. Because in the end, you know it’s gonna happen. The whole national financial system is going to come in to Washington and on television, and say: ‘Oh my God, this will be a gigantic heart attack, the entire economy of the world will collapse. You guys will be held responsible.’ And they’ll cave.”
And here’s the Wall Street Journal editorial page, warning against it in similar terms:
Mr. Obama will say Republicans are risking national default and recession, most of Wall Street will echo him, and the Treasury will maneuver to apply maximum political pressure — for example, by claiming it can’t pay Social Security benefits. We’ll support efforts to cut spending and reform entitlements, but the political result will be far worse if Republicans start this fight only to cave in the end. You can’t take a hostage you aren’t prepared to shoot.
This gets right to the heart of the matter, which is this: Are Republicans really prepared to let the country go into default and take the blame for crashing the economy? Sure, maybe some Tea Party Republicans are, but if GOP leaders aren’t, and the next compromise can be passed through the House with mostly Democratic votes, then all of a sudden the GOP position doesn’t look so strong, after all.
And so maybe the question of what “not negotiating” on the debt ceiling looks like has a simpler answer than you might think: The White House just treats this as Congress’ problem. You can see that framing already in this comment from the White House today (emphasis mine): ”It is quite clear that the economy will be better if Congress does its job and does what it routinely has done historically which is raise the debt limit without problem.”
It’s true that in one way, the White House will inevitably be negotiating on the debt ceiling, in the sense that it will be engaged in talks over the sequester, tax reform, and spending cuts that Republicans will insist must be resolved before they agree to raise it. But as Ezra Klein notes, this doesn’t necessarily mean the White House has to be held hostage over the debt ceiling, and it’s really quite possible that in the end, Republicans will opt to agree to a somewhat balanced deal rather than risk taking the blame for cratering the economy.
After all, John Boehner is already on record saying that not raising the debt ceiling will cause financial disaster. The pressure on Republicans not to let this happen will be intense. For the GOP, blowing up the economy will mean nothing short of political Armageddon. Can you name a single prominent Republican in any position of influence who is willing to say the GOP should allow the country to default, rather than accept a deal that doesn’t gut entitlements?
I understand the pessimism on the left that the White House will ultimately give away too much. But things seem to be shifting: Now even prominent Republicans are giving away the game, admitting that the GOP doesn’t have the leverage here that it claims to have.
This is on Congress. If Republicans are willing to force a choice between destroying the economy and gutting popular social programs, let them wallow in that winning message. If they’re willing to tank the economy to get what they want — after taking a shellacking in the election and proving so dysfunctional that they could not pass tax cuts for everyone but the ultra-wealthy without substantial Democratic help — then it’s on them. Just leave it there.
BY: Greg Sargent, The Plum Line, The Washington Post, January 4, 2012
“Misleading The People”: The Deeper Problem With Media Acceptance Of Republican Irresponsibility
Alarms are going up all over the progressive commentariat about the early signs of Beltway complacency–particularly in the MSM–about Republicans threats to wreak holy havoc on the economy by taking the debt limit hostage to their spending demands (more for the Pentagon, less for everything else).
TNR’s Alec MacGillis, quoting WaPo’s Greg Sargent extensively, lays out the complaint most efficiently:
It is striking to what degree the Washington establishment has come to normalize Republican hostage-taking of the debt limit, to see it as a predictable and almost natural element of the political landscape. Greg Sargent argues convincingly why this is a problem, noting that the debt ceiling must be raised to pay for past spending, and should not be used as a chip in negotiating future budgets: “In the current context, conservatives and Republicans who hold out against a debt limit hike are, in practical terms, only threatening the full faith and credit of the United States — and threatening to damage the economy — in order to get what they want. Any accounts that don’t convey this with total clarity — and convey the sense that this is a normal negotiation — are essentially misleading people. It’s that simple.”
What bears stating even more strongly, though, is how far we’ve come from 2011, when the Washington establishment viewed the Republicans’ threat of credit default as the utterly brazen and unprecedented step that it was. Even those who supported the gambit recognized it as a newly deployed weapon.
I agree with all that, and with MacGillis’ assessment of early media coverage of the debt limit fight as just another episode of the usual partisan follies.
But there is a deeper problem that makes adequate media treatment of GOP posturing very difficult: an inability to grasp and explain the underlying radicalism of conservative doctrine on federal domestic spending. Exhibit One, of course, was the frequent refusal to understand the fundamental change in the role of the federal government that was the object of the Ryan Budget, particularly its first iteration. And rarely did major MSM writers and gabbers bother to suggest that immediate implementation of the Ryan Budget via the budget reconciliation process would have been the predictable result of an election where Romney won and Republicans won control of the Senate.
But Exhibit Two, and far more relevant today, is the baseline for conservative positioning on the debt limit, the Cut, Cap and Balance Pledge, signed by Mitt Romney himself in 2011 and championed by the powerful House Study Committee, to which 165 Republicans in the 112th Congress belonged (there’s no updated list for the 113d, but there’s no reason to think the RSC has lost its grip on the House GOP Caucus).
I’ve gone through this a number of times over the last two years, but will once again post the basics of the CCB proposal:
1. Cut – We must make discretionary and mandatory spending reductions that would cut the deficit in half next year.
2. Cap – We need statutory, enforceable caps to align federal spending with average revenues at 18% of Gross Domestic Product (GDP), with automatic spending reductions if the caps are breached.
3. Balance – We must send to the states a Balanced Budget Amendment (BBA) with strong protections against federal tax increases and a Spending Limitation Amendment (SLA) that aligns spending with average revenues as described above.
And the whole idea of this proposal (and the specific subject of the CCB Pledge) is to make any vote for a debt limit increase strictly contingent on all three planks of the proposal, which means a radical and permanent reduction in federal spending, far beyond anything contemplated in the Ryan Budget.
By: Ed Kilgore, Contributing Writer, Washington Monthly Political Animal, Jabuary 4, 2013
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