Ugh. Do I have to write about this again? Apparently.
Let’s be clear. Hitting the debt ceiling is a seriously stupid idea. The debt ceiling was never intended to be a debt control measure. It does not, in fact, limit the amount of debt we can run up, only the amount we can pay to creditors for things we’ve already authorized. Here’s Ezra Klein on what will happen if we crash the debt ceiling.
The choices [the government] will face quickly become stark. It can cover interest on the debt, Social Security, Medicare, Medicaid, defense spending, education, food stamps and other low-income transfers, and a handful of other programs, but doing all that will mean defaulting on everything — really, everything — else. The FBI will shut down. The people responsible for tracking down loose nukes will lose their jobs. The prisons won’t operate. The biomedical researchers won’t be funded. The court system will close its doors. The tax refunds won’t go out. The Federal Aviation Administration will go offline. The parks will close. Food safety inspections will cease.
This is the difference between a debt-ceiling shutdown and a government shutdown. As Shai Akabas, a research at the Bipartisan Policy Center, puts it, “in a government shutdown, the government is shutting down future obligations. With the debt ceiling, They’ve already obligated the money. They owe these people the payments now, and they can’t make them.”
This means businesses that have already done work for the Feds won’t be paid and will have to lay off workers. It means government agencies — prisons, for example — will not be able to contract basic things like food and electricity because they don’t have the money. A government shutdown is something that can be prepared for and dealt with. It’s not even clear that we have the ability to selectively pay our bills.
That’s to say nothing of the hit the economy would take because of the uncertainty (Remember uncertainty? That think we’ve been blaming for the slow economy?) and the wallop our government would take in the bond market. We’ve already had one downgrade. A second debt ceiling hit could raise the interest rates at which people will loan us money. And every point of interest rate hike is a $160 billion hit on the budget. That’s a bigger impact than all the spending cuts and tax hikes anyone has discussed. “Giving in” on raising the debt ceiling is like giving in on not burning your own house down.
I just wanted to get out of the way before I address the $1 trillion coin yet again. This is the idea that we should mint a $1 trillion coin to pay our debts. The typical liberal response to criticism of the coin idea is “well, the platinum coin may be dumb but hitting the debt ceiling is really dumb”. I know that. I just wrote several paragraphs about that. No one is seriously disputing that.
But here’s the thing: the debt ceiling foolishness does not make the trillion dollar coin a good idea.
I know that should go without saying, but it apparently does. Last week, the trillion dollar coin was a fringe idea we snickered about. Today, it’s being taken seriously by people who should know better. The platinum coin idea is being defended by heavyweights like Laurence Tribe, who argues that because the law does not expressly forbid the coin idea, it could be legal (although the former Mint Director disagrees. And Paul Krugman has written a third op-ed in support of the idea in which he calls on the treasury secretary to wear a clown suit. Metaphorically. I hope. Actually, I don’t. Geithner wearing a clown suit would be the most productive thing he’s done in four years.
The thing is that, even we posit that the trillion dollar coin is legal and doable, the platinum coin problem runs into many of the same fucking problems as a debt ceiling crisis. Klein again:
Imagine a Japanese bond trader who hears we’re now running our government off of a trillion-dollar coin created through a loophole in the law. Is there any way that trader is going to keep lending to America at near-riskless rates? The result might be better than default, but it won’t be good.
That, of course, involves pretending that the platinum coin would not precipitate a gigantic legal and constitutional battle that will bring about they very economic chaos it is designed to prevent. I’m really glad that someone from Harvard thinks the platinum coin is legal. God knows we can’t decide what to do in this country until Laurence Fucking Tribe weighs in. But no matter what opinion anyone has on the coin’s legality, this does not mean the everyone in America is obligated to accept it. Somebody won’t and they will fight it in court. Of course, I’m sure the ensuing legal battle will be blamed on Republicans for daring to oppose Obama. That will be a great comfort while we’re all out of work.
The trillion dollar platinum is an absurdity wrapped in a legislative incongruity inside a farce. It is the logical extension of an utterly illogical legislative process that only becomes more irrational with each passing day. Each partisan battle has become stupider than the last. Silly loopholes are exploited for bargaining power, and the resulting stalemates are generally solved with a temporary patch that solves the immediate problem by creating a bigger one down the road. When the bigger problem arrives, naturally the other side seeks an even sillier loophole, resulting in an even more temporary patch.
We are now approaching the era of permanent fiscal crisis.
The Great Platinum Coin Caper is everything that is wrong with Washington: a stupid partisan maneuver that erodes the institutions of our government for no gain other than an immediate political win. The only good thing that can be said about it is that the President seems to be too sensible to actually consider doing it. Nonetheless, the fact that intelligent people like Professor Krugman are even discussing this debacle, much less endorsing it, is a depressing reminder of just how nasty and short-sighted our nation’s capital has become.
The more I read these pro-coin articles, the more I think this is really about giving the middle finger to the GOP. The Left has long wanted Obama to have a temper tantrum to match the hysterics that the GOP sometimes descends to (ignoring that Obama doesn’t have to have a temper tantrum because they’re always having one on his behalf). This isn’t about economics. This isn’t about the economy. And it’s certainly not about the debt. It’s about winning one from those damned GOP bastards by some bit of trickeration. It’s about saying, “Ha-ha! Got you!”
It won’t work. Even if it works, it won’t work. The only way to get out of the debt ceiling crisis is either for the GOP to come to their senses or for Obama to give into their faux demands and pretend to cut spending.
You know, it’s January. We are nine days into this year. I’m going to call it right now. The platinum coin will be the Official Stupidest Fucking Thing I Blogged About in 2013. It just shows that the vener of “reasonableness” that the Left has cloaked themselves with in recent years is just that, a veneer. The minute the wind turns, they turn just as idiotic as a talk radio host on meth.
Update: You know, it might advance the debate a bit if the liberals would acknowledge, for once, the Senate’s failure to have a vote on a budget bill for three years. That’s where this problem got its initial start.
Update: Douthat nails it.