Platinum Coins and Other Amusing Distractions
The real purpose of the trillion-dollar-coin idea might be too obvious to need stating: It’s another thing to argue about instead of attending to the actual problem. I don’t want to be a bore about this. It’s an interesting and above all entertaining idea. But it’s only one of many possible amusing distractions, so it might be a mistake to concentrate on it exclusively.
We already knew that the debt ceiling doesn’t impose a hard deadline. We’ve hit it already, and the Treasury is using various accounting maneuvers to keep on spending anyway. Its estimate of how long that can go on, if tested, will likely prove conservative. After these maneuvers, there’ll be more maneuvers. When the spending finally has to stop, that doesn’t mean default, because debt interest can be protected. Or the Treasury can keep borrowing regardless, citing the 14th Amendment, pushing the issue to the courts, which I’m willing to bet wouldn’t rule to put the country into default. Or it can mint ultra-high-value coins, the current fave topic. Or it can more mundanely issue IOUs, following Califormia’s example.
Assuming the confusion doesn’t cause the U.S. to default by accident, the biggest cost in all this is damage to the country’s reputation. (Remember “soft power”? I recall being told this was a main reason to vote for Obama back in 2008.) Why so little concern over the country’s making itself a laughing stock? Imagine our reaction to stories of fiscal cliffs, debt ceilings and minting coins worth 7 percent of gross domestic product if we were reading about Argentina or Italy. I doubt there’d be much desire to study the mechanics of the platinum-coin strategy, or the legality of the IOU maneuver, or whatever. We’d just laugh at countries incapable of governing themselves. And we’d be right.
My colleague Josh Barro, like many others, seems enchanted by the platinum-coin proposal. He argues for its use if worse comes to worst and the alternative is default -- and he does so sensibly, once you accept the terms of this ridiculous discussion. But I think he understates the costs, and aspects of his logic trouble me.
It’s no small thing for the Treasury to start printing money at its own initiative, and the mere promise that this would be temporary and reversed in due course lacks credibility. This is a technique that, once learned, would be difficult to unlearn.
As a remedy, Barro suggests a deal: Abolish the debt ceiling in return for closing the platinum-coin loophole. That would be a good result, I agree: a mutual reduction-of-absurdity pact. The question is why Republicans would agree to it. Barro says it’s because they’re scared of the inflationary consequences of coin-minting.
The trouble is, he also says that they're babies. Can the judgment of babies be relied on? If they were scared of damaging the economy, we wouldn’t be in this position to begin with. I think they’d be happy to let President Barack Obama issue his coins and then attack him for it. (And, by the way, if Obama weren’t more interested in defeating his political enemies than in stabilizing fiscal policy, he wouldn’t have promised at the outset not to negotiate over the ceiling. He’d have said, let’s use this as an opportunity to agree on a medium-term plan for fiscal consolidation, presented said plan, and started negotiating.)
Barro also says the 14th Amendment maneuver is the more dangerously radical option, partly because its legality is in greater doubt and partly because ...
unlike the coin, it couldn't be unwound. Any bad precedent set by minting the coin could be addressed by repealing the president's authority to mint coins of unlimited denomination. The 14th Amendment route would have the president assert a major new claim of executive power that would be difficult to reverse.
Regarding the coins, what can be repealed can be unrepealed. The precedent would be set. And the 14th Amendment route hardly assets a major new claim of executive power. It’s simply a way to vitiate the debt-ceiling mechanism, which Barro wants to abolish in any case.
I know, of course, I’m falling victim to the same taking-this-nonsense-seriously syndrome I’m complaining about. It’s catching. Until I read another of Barro'’s observations:
Here are my responses to the most common objections we are getting to the platinum coin proposal, in increasing order of persuasiveness:
1. “That's silly/zany/juvenile!" This is probably true, but it's not a dispositive objection. Republican intransigence over the debt ceiling is juvenile. There is no particular reason that the president should not use a juvenile strategy in response.
How’s that for diminished expectations? When I read this, Monty Python’s Ministry of Silly Walks came instantly to mind. I pictured John Cleese, on being asked why he lifts his feet above his head with every stride, saying, “There is no particular reason not to … and it’s much less silly than many of the alternatives.”
We need a man like that in the White House.
(Clive Crook is a columnist and editorial writer for Bloomberg View.)