The Republicans in Congress are at it again, threatening a government shutdown in order to get a Democratic President to do what they want. Remember the fun and excitement of the federal government shutdown in 1995 when President Clinton wouldn’t do what Newt Gingrich wanted and he followed through with his threat to shutdown the government? It was wild and exciting times here in Arizona! With the Grand Canyon National Park closed for business Governor Fife Symington threatened to use the Arizona National Guard to take over the park by force if necessary an re-open it. The Pentagon warned the head of the Arizona National Guard against the use of force and raised the possibility that if necessary the guard would be federalized and brought under the control of the White House. The governor decided to carry out his bluff and, accompanied by the Speaker of the House, fifty unarmed National Guard troops, twenty-five state Park Department employees, and other people, traveled to the canyon. When Symington’s group arrived, Symington beat on the park gates in front of the media. The park remained closed anyway, until Newt relented and passed a budget funding the government.
Well, they’re at it again. Stung by their failure to use the poor and middle class as hostages to protect the tax cuts for millionaires and billionaires, Republicans in the House and Senate are threatening the need to raise the debt limit to extract revenge with demands that Social Security, Medicare and Medicaid all be “put on the table” for spending cuts. House Speaker John Boehner re-emphasized today that he plans to use the debt limit as a chance to force President Barack Obama to cut spending. Sen. John Cornyn of Texas, the Republican whip in the Senate wrote in an op-ed in the Houston Chronicle: “It may be necessary to partially shut down the government in order to secure the long-term fiscal well being of our country”. Shut down the government for it’s own good??? A government shutdown would throw our economy back into recession and rock global financial markets. And these are the same guys who voted routinely to raise the debt limit under George W Bush, with no questions asked, to fund his wars of “regime change” and tax cuts for the rich.
And then there’s that pesky Constitution. The Constitution stipulates that all federal government spending originate from the House of Representatives. So it is the House that has authorized current spending but now wants to say it won’t authorize the borrowing needed to cover the checks they wrote? The 14th Amendment to the Constitution says “the validity of the public debt of the United States . . . shall not be questioned“. (full text via Wikipedia) Some have interpreted this as giving the President the authority to ignore Congress’s inaction to raise the debt limit and continue to issue new bonds to cover the Government’s obligation. What the Constitution and 14th Amendment does is explicitly dictate that the executive branch of the government (which includes the Treasury and the President) is obligated to carry out all appropriations authorized by the Congress. What it doesn’t say is what happens if a Congress is crazy enough to tell the President and Treasury to spend the amount it has told them to spend, but then doesn’t give them the authority to borrow as much as needed in order to carry out that spending.
Well, some politicians and pundits such as Josh Barro at Bloomberg and Business Insider’s deputy editor Joseph Weisenthal have suggested an alternative: for the U.S. Mint to make $1 Trillion Platinum coins. It works like this: The Treasury Department has a bank account at The Federal Reserve. When the Treasury writes a check it is “cashed” at the Fed. When the Treasury needs money it sells bonds in an auction, and the proceeds of those bonds go into the account. So the U.S. Treasury simply instructs the U.S. Mint to issue a platinum coin with a face value of $1 Trillion and then deposit it in its bank account at the Federal Reserve, and voila! The U.S. Government now has $1 Trillion more in it’s bank account to cover its checks. Stuff it Speaker Boehner, you’re now irrelevant.
But wait, some critics cry – that would lead to hyper inflation! If that $1 Trillion was immediate pumped into the U.S. economy, sure. But it wouldn’t. It’s the same as when Congress votes to raise the debt limit by $1 Trillion – the Treasury auctions off bonds to raise the money, deposits the proceeds into its Federal Reserve Bank account, and gradually spends it to cover spending authorized by the U.S. Congress. But wait, some critics cry – a $1 Trillion coin would destroy the value of the U.S. dollar! Nope, same as the first argument – if the government just started printing $1 trillion bills, declared them legal tender, and then dropped them into banks across the country, yes, the buying power of a single dollar bill would be zilch. But because the coin isn’t a direct injection into the economy, but rather a stopgap that lets the government continue to spend on various services, you don’t have that inflationary effect.
Is this idea of a $1 Trillion platinum coin a crazy, silly idea? Yes, of course it is – but so is the idea of Congress authorizing spending and then not giving the President the means to carry it out! How crazy is the idea of some hard core, highly partisan politicians threatening to destroy the good faith and reputation of the United States Government and its debt, threaten to destroy the U.S. economy and global financial system just to force the duly elected President and Democratic Senate majority to accept their terms, and their terms only? That isn’t democracy, that’s hostage taking – and the hostages are we the American people. Many argue that since the Constitution does explicitly say that the President and Treasury is obligated to carry out the spending authorized by Congress, the President has the authority to tell the Treasury to ignore the debt limit and simply instruct the Treasury to sell enough bonds to have the funds to pay for what Congress has instructed them to pay for. But that would lead to a Constitutional crisis with the Supreme Court called in to resolve, in addition to all the economic carnage. The $1 Trillion coin is but one proposal to avoid all that until Congressional Republicans come to their senses.
President Obama and Democratic Congressional leaders have said they will not negotiate with Republicans on the debit limit. They need to stand their ground! Does a long term solution addressing our deficits and debt need to happen? Absolutely! Congressional Republicans and Democrats and the White House need to sit down and find common sense compromise to their positions to reach a “grand bargain” with the framework of the Simpson-Bowles Deficit Reduction Plan as a starting point. Our deficit and debt financial situation is the result of failure to address the problem by many years of Republican and Democratic Presidents, it is the result of failure to address the problem by many years of Republican and Democratic Congresses. It needs to now be addressed by this Democratic President, this Republican House, and this Democratic Senate. But not through the threat a Constitutional crises, not through questioning the validity and of the public debt of the United States and good faith of our government, and not through the threat of a global economic crisis. If that is what it takes they ALL should resign and let voters elect responsible leaders who do have the honesty and integrity to work together and to compromise for the good of our country and our future generations.
No negotiation over raising the debt limit. Congress wrote those checks, Congress needs to cover those checks.